Credit unions generated about $5.8 billion in net income in the second quarter, or an annualized 1.17% of average assets. It was better than the record ROA of 1.04% in the first quarter.

Since at least the fourth quarter of 2014, NCUA data showed quarterly ROA reached or exceeded 1% only two other times: 1.07% in 2018′s third quarter and 1.00% in 2019′s third quarter.

"This is probably the best quarter credit unions have ever had, but maybe it doesn't feel that way," Callahan CEO Jon Jeffreys said.

The second-quarter ROA was far above the 0.80% forecast jointly in June by CUNA and CUNA Mutual Group. That forecast and a 0.85% ROA forecast for the year was premised on loan balances growing 5% and savings 15% this year, and net interest margins narrowing.

Callahan's report showed those trends holding through the second quarter, but credit unions are selling loans at a record pace and reclaiming loan loss provisions made in early 2020 with the onset of the COVID-19 pandemic.

At the time, credit union executives acted conservatively in the face of unprecedented economic reversals by making a record $8.5 billion in loan loss provisions last year, expecting loan delinquencies to spike.

Callahan analyst William Hunt said those delinquencies never appeared, and loan quality is at record levels, so executives are taking another look at their provisions.

"Credit unions have started to pull back and convert that into earnings," Hunt said.

The trend started to appear in the fourth quarter, but in the second quarter, provisions went into the positive territory for the first time ever on a movement-wide basis. About 20% of credit unions reversed provisions in the quarter, and about 30% recorded a zero on the provision line.

Even after doing so, loan loss allowances are still twice outstanding delinquencies, he said.

Income has also been bolstered by higher growth in consumer loans. Interchange income on debit and credit card transactions showed strong sequential growth in both the first and second quarters based on a Callahan survey encompassing about 10% of credit union assets.

Callahan's Trendwatch report also showed:

• First mortgages were $80.9 billion, up 2% from a year earlier and up 8.2% from the first quarter.
• Other real estate was $12.6 billion, up 56% from a year earlier and up 43.2% from the first quarter.
• Commercial loans were $11.9 billion, up 47% from a year earlier and up 20.2% from the first quarter.
• Consumer loans, including credit cards and automobile loans, were $101.2 billion, up 27% from a year earlier and up 14.7% from the first quarter.