A CU Times analysis found credit union net income in the fourth quarter fell from the highs of the third quarter as non-interest income eroded and loan loss provisions rose.
CU Times analyzed 4,294 Call Reports in Callahan's Peer Suite as of Wednesday morning, representing about 99% of credit union assets.
CU Times estimated net income for credit unions in the three months ending Dec. 31 was 0.74% of the quarter's average assets, up from 0.43% ROA a year earlier and down from 0.93% in the third quarter.
Ratios produced from the early sample tend to hold (although the third-quarter ROA was revised up from the initial 0.91% estimate), but to look at changes over time in amounts, CU Times looks at results for the 10 largest credit unions by assets.
The Top 10, which account for nearly 20% of the movement's assets, earned $917.9 million (ROA 0.81%) in the fourth quarter down from 0.44% ROA a year earlier and 0.97% in the third quarter.
The main support for the quarter's ROA was continuing record high net interest income. For the Top 10, the net income margin was 3.99% in the fourth quarter, up from 3.76% a year earlier and about the same as the third quarter.
For all credit unions, net interest income was about 3.50% in the fourth quarter, up from 3.18% a year earlier and 3.39% in the third quarter.
Non-interest income has fallen. For the Top 10 it was about 0.97% of average assets in the fourth quarter, down from 1.08% a year earlier and 0.96% in the third quarter.
As usual, expected credit losses had big changes quarter to quarter.
For the Top 10, those provisions were 1.21% of average assets in the fourth quarter, down from 1.47% a year earlier and up slightly from 1.21% in the third quarter. For all credit unions, the provisions were about 0.66% of average assets for the fourth quarter, down from 0.75% a year earlier and up from 0.60% in the third quarter.
Overhead expenses were relatively stable for the Top 10, but increased significantly for other credit unions.
For all credit unions, payroll expenses were an estimated 1.68% in the fourth quarter, up from 1.60% a year earlier and 1.59% in the third quarter. Other expenses were an estimated 3.23% in the fourth quarter, up from 3.11% a year earlier and 3.03% in the third quarter.
Fourth-quarter loan production for the largest credit unions fell slightly from the third quarter because of a drop in car loans and other non-real estate consumer loans.
Originations of non-real estate consumer loans, which includes car loans, personal loans and credit cards, was $19.1 billion in the three months ending Dec. 31 for the Top 10, down $2.6 billion, or 12%, from the third quarter.
First mortgage production had been lagging HELOCs and other second liens in past years, but this year first mortgages grew faster than second liens, and faster than most other loan categories, which is significant because they account for more than a third of total loans.
Commercial lending had the biggest percentage gain in origination volume from the third quarter to the fourth for the Top 10, but first mortgages led for the full 12 months.
The Top 10's production of commercial loans was $923 million in the three months ending Dec. 31, up $243 million (+36%) from the third quarter.
For the quarter, Top 10 first mortgages, second mortgages and consumer loans each grew 12%.
For the year, first mortgage originations rose 18% to $30.6 billion among the Top 10, while consumer loans grew 9% and commercial loans grew 7%.
Top 10 production for first mortgages lagged the national growth rate for the year (+22%), but exceeded it for the quarter (+30%), according to the Mortgage Bankers Association's Jan. 21 forecast. National growth from the third quarter to the fourth was 3.7%.
Loan quality worsened over the quarter. Compared with a year earlier, delinquencies rose as net charge-off rates fell.
For all credit unions, the net charge-off rate for the three months ending Dec. 31 was 0.83%, up from 0.73% in the third quarter. Despite higher charge-offs over the quarter, the 60-day-plus delinquency rate rose from 0.94% on Sept. 30 to 1.02% on Dec. 31. It stood at 0.97% a year earlier.
The net charge-off rate for the full 12 months was 0.78% for all credit unions and 1.59% for the Top 10. Navy Federal's massive credit card portfolio accounts for much of the difference.
Top 10 delinquencies were 1.62% on Dec. 31, up from 1.55% a year earlier and 1.44% in September.
Contact Jim DuPlessis at Jim.DuPlessis@arc-network.com.
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.