Margins Fall Among All Financial Institutions, Credit Unions Feel Impact

Declining margins depressed earnings for the nation’s financial institutions in the 1st quarter as interest rates remained at record lows. The net interest margin for credit unions fell to 3.33%, 45 basis points lower than the average bank.

 
 

Declining margins depressed earnings for the nation’s financial institutions in the 1st quarter as interest rates remained at record lows. The net interest margin for credit unions fell to 3.33%, 45 basis points lower than the average bank. In addition to a higher net interest margin, banks generate a substantially larger amount of fee and other operating income, which helped the banking industry to a 1.38% ROA in the 1st quarter versus 0.90% for credit unions.

Reversing a long-term trend, banks and thrifts have actually outgrown credit unions on a percentage basis over the last 12 months, although credit unions continue to offer more competitive savings and loan rates.

Banks and thrifts continued to manage more assets with fewer employees, however this can be easily attributed to economies of scale. The average bank/thrift, at over $1 billion in assets is over 15 times larger than the average credit union at around $67 million in assets.

As of March 31, 2004
Institution Type # of Institutions Assets (billions) 12-Month Asset Growth Return on Assets Core Capital Ratio Assets per Employee (millions) Loans-to-Shares/Deposits
Credit Unions
9,488
641
7.7%
0.90%
10.7%
3.0​2
69.9%
Banks
7,712
7,818
8​.6%
1.38%
7.9%
4.22
85.2%
Thrifts
1,404
1,559
10.7%
1.21%
9.6%
5.58
111.0%
Source: FDIC and Callahan & Associates
 

 

 

May 31, 2004


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