The nation's 10 largest credit unions fared well last summer, generating $638 million in net income during the three months that ended Sept. 30, up 23.1% from 2016's third quarter despite higher loan loss provisions.

The NCUA quarterly statements for the credit unions with the largest total assets reflected the slowdown in mortgage lending and increase in car lending seen in earlier reports.

The analysis by CU Times also showed a major gain in net interest income, despite loan loss provisions of $478.5 million for the three months ending Sept. 30, 24.2% higher than in 2016's third quarter. For the nine months, income was reduced by $1.3 billion in loan loss provisions, up 26% from a year ago.

The composition and ranking of the Top 10 was unchanged from June. At No. 1 was Navy Federal Credit Union, Vienna, Va. ($83.7 billion in assets, 7.4 million members). At No. 10 was Star One CU, San Jose, Calif. ($9.5 billion in assets, 101,004 members).

The Top 10 had 15.8 million members at the end of the third quarter, up 9% from a year earlier. The gains ranged from Pentagon Federal Credit Union's 11% gain to 1.6 million members to Security Service Federal Credit Union's 2% gain to 752,128 members.

Their combined net worth grew 12% to $24.1 billion, as assets grew 9% to $226.6 billion. As a result, their net worth ratios stood at 10.62% on Sept. 30, up from 10.49% on June 30 and 10.33% a year earlier. All remained “well capitalized” in both periods under the NCUA classification.

The credit unions originated $9.4 billion in real estate loans in the three months that ended Sept. 30, up 5.9% from 2016's third quarter. Other loan originations rose 6.1% to $17.2 billion.

To understand the sharp increase in net income from 2016's third quarter to those generated during the three months that ended Sept. 30, here are some major income contributors:

Loans granted rose 6% to $26.6 billion.
Total interest income rose 17.1% to $2.3 billion.
Total interest expense rose 13.6% to $501.5 million.
Provision for loan losses rose 24.2% to $478.5 million.
Net interest income rose 16.1% to $1.4 billion.
Fee income rose 28.3% to $216.9 million.
Other operating income rose 4.2% to $434.5 million.
Pay and benefits rose 12% to $689.6 million.
Other noninterest expense rose 4.7% to $678.9 million.

Navy Federal had the largest increase in its net worth ratio. It stood at 12.16% Sept. 30, up from 11.27 a year earlier. It also tied with Seattle's BECU for the largest increase in real estate originations: 15%.

Navy Federal also had the biggest increase in fee income generated during the three months. It rose 42% to $128.9 million. It also led in keeping a lid on its noninterest expenses (excluding pay). Its non-employee operating expenses fell 1% to $338.3 million for the three months.

State Employees' Credit Union, Raleigh, N.C. ($37.1 billion in assets, 2.3 million members), based in the South's vale of humility, had the largest increase in net interest income, 27%, aided in part by tying with Security Service for the lowest increase in its provision for loan losses: 6%.

Net income increases for the third quarter were led by SECU of Raleigh, which generated $68.3 million in profits during the three months that ended Sept. 30, up from $29.9 million during 2016's third quarter. A major contributor was its 29% gain in net interest income for the quarter, also the best among the Top 10. During the three months its loans netted $192.8 million.

PenFed, Alexandria, Va. ($22.8 billion in assets, 1.6 million members) had the largest increase in its portfolio of home equity loans and other second mortgages. It rose 19% to $2.3 billion. PenFed also had the largest increase in its allowance for loan losses, which rose 48% to $78.9 million.

BECU, Seattle ($17.6 billion in assets, 1.1 million members) had the largest increase in employee compensation and benefits, and overall employment levels for the third quarter and the nine months. Expenses ascended 30% to $142.8 million for the nine months, while the number of full-time workers rose 16% to 1,851 and part-time workers flew up 30% to 57. Pay and benefits rose 28% to $37.9 million for the three months ending Sept. 30.

BECU also led with a 28% increase in total loans granted during the third quarter, which were $2.3 billion. While real estate originations grew 10% to $966.3 million, other loans grew 42% to $1.3 billion during the three months. BECU generated $2.8 billion in real estate loans in the nine months, up 15%. BECU also recorded a $4.9 million one-time gain during the quarter.

SchoolsFirst Federal Credit Union ($13.9 billion in assets, 779,810 members) based in Santa Ana, Calif., had the biggest increase in its new car loan portfolio, which rose 32% to $753.8 million as of Sept. 30. For the first nine months of 2017, it led the pack in total loans granted. They rose 18% to $2.6 billion. It was tops in originations because it was tops in non-real estate loans, which rose 25% to $1.5 billion for January through September.

Golden 1 Credit Union, Sacramento, Calif. ($11.3 billion in assets, 902,074 members) had the largest increase in its car loan portfolio. It rose 28% to $4.4 billion from a year ago. Golden 1 also led in used car loans, which rose 26% to $1.9 billion.

Golden 1 had the largest decrease in net income earned during the three months ending Sept. 30. Net income fell 12% to $19.8 million. A major factor was a $14.7 million loan loss provision for the quarter. The 147% increase from 2016 was the largest in the group. Golden 1 also had the largest decrease in other operating income, which fell 11% to $15.2 million.

First Tech Federal Credit Union, Mountain View, Calif. ($11.1 billion in assets, 500,874 members) was first in wallet for credit card growth, with its balance rising 27% to $278 million. It also led with first mortgages, which rose 21% to $4.7 billion, and total assets, which rose 19% to top $11 billion. First Tech's loan loss provisions have nearly doubled in the last year to reach $23.7 million for the first nine months of 2017, including just under $10 million for the third quarter.

Alliant Credit Union, Chicago ($10 billion in assets, 380,714 members) led the group for its 79% increase in noninterest income generated during the quarter, $14.5 million, and its 25% gain in operating expenses (excluding pay) which were $17.9 million. It also had the largest nine-month increase in noninterest income, which rose 55% to $29.6 million.

Security Service Federal Credit Union, San Antonio, Texas ($9.6 billion in assets, 752,128 members) was the only credit union in the Top 10 to report a drop in employee compensation and benefits. It fell 2% to $94.4 million for the nine months. Its full-time staff was 1,687 in September, down by 13 from a year earlier. Part-time staff was 95, down from 112 in September 2016.

For the three months, Security Service's third-quarter noninterest income fell 7% to $34.7 million as it recorded a $4.4 million one-time expense. Pay and benefits fell 5% to $30.3 million. For the three months that ended Sept. 30, Alliant and Security Service tied with a 35% drop in non-real estate loan originations. Alliant's were $449.5 million, and Security Service's were $708.6 million.

Star One Credit Union had the biggest drop in loans granted. For the nine months ending Sept. 30, the Silicon Valley credit union originated $785 million in loans, down 36% from a year earlier. Real estate loan originations fell 46% to $539.7 million, the biggest drop in that category among the Top 10. Star One also had the biggest drop for the quarter as real estate originations fell 44% to $205.6 million in the three months ending Sept. 30.

Instant Insights /

Top 10 Credit Unions Net Higher Income

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