ALEXANDRIA, Va.-Credit unions continued to chop loan reserves and prune their expenses in the first half of the year by slashing cost of funds-the dividends they pay to members-to maintain the record net income of the past two years.
The Golden 1 CU, the nation's seventh largest credit union, boosted its net income for the first six months compared to last year by 29%, or $12.4 million, by reducing provisions for loan losses again and by reducing cost of funds by 61%, or $9.3 million, according to the mid-year financial report filed with NCUA. The Golden 1's $55 million net gave California's second-biggest CU a 1.35% ROA for the first half.
Kansas' CommunityAmerica CU boosted its first-half net by $1.76 million-all of it from a $2.8 million reduction in cost of funds. Community America reported $11.5 million in first half net, more than the $10.1 million for all of last year.
MidFlorida Credit Union increased its first half net by $3.5 million to $11.1 million, including a $2.3 million (32%) cut in cost of funds.
The trend comes as the average credit union payout has plunged on all savings products to record lows, according to CUNA. CUNA's monthly survey shows credit unions paid record low rates at May 31 for regular shares (0.3%); share drafts/checking (0.3%); one-year CDs (0.9%) and money market accounts (0.4%), erasing any advantage credit unions traditionally claim over bank rates.
Word Of Caution
Credit unions across the country boosted earnings as a result of reduced dividend payouts in the first half. A number of analysts, however, are cautioning credit unions to prepare now for potential increases in rates (see related stories, page 8).
Other credit unions reporting improved numbers: Georgia's Delta Community CU reduced its cost of funds for the first six months by 30%, or $4 million; Illinois' Alliant CU cut its payout 24%, or $9.5 million; Florida's VyStar CU by 18%, or $4.5 million; New Hampshire's St. Mary's Bank by 48%, or $2.4 million; New York's Teachers FCU by 10% or $2.5 million; and Virginia CU by 19%, or $2 million.
