Earnings By The Numbers (2Q17)

Total operating revenue has increased 8.8% over the first six months of 2016. This continued the recent trend of accelerating revenue growth for credit unions.

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Total operating revenue reached $31.7 billion in the first half of the year; that’s an increase of 8.8% over the first six months of 2016. This continued the recent trend of accelerating revenue growth for credit unions.

Interest income totaled $23.1 billion for the first six months of the year, representing annual growth of 9.7%. Non-interest income grew at a slower 5.8%. Relatively strong fee income growth of 7.4% as opposed to other operating income growth of 5.7% drove second quarter NII.

The industry’s income composition so far in 2017 remains consistent with previous years. Net loan income accounted for 63.9% of total revenue at $20.3 billion through the first six months of the year.

Comparatively, investment income grew faster than any other component of the earnings pie. Its growth rate picked up 56 basis points and jumped from 8.4% at mid-year 2016 to 8.9% at mid-year 2017.

As interest rates gradually rise, the margin at credit unions across the country likewise slowly improves. The net interest margin for the industry has increased 5 basis points over the past 12 months and was up 10 basis points over June 30, 2015.

Credit unions once again posted gains in efficiency, thanks in part to a keen eye trained on expense management. As such, the operating ratio decreased 3 basis points year-over- year to 3.06%. Despite gradual improvements to expense management and earnings growth, the 7.6% growth in assets outpaced the 6.9% increase in net income. As such, return on assets remained flat at 0.77% as of June 30, 2017.

Click the graphs below to enlarge and then continue reading to see how Purdue Federal Credit Union leverages a variety of strategies to fill its revenue streams.

The average member relationship for the credit union industry increased 4.5% year-over-year to $18,149 per member, on average, as of June 30, 2017.



Purdue Federal Credit Union leverages a variety of strategies to fill its revenue streams.

CFO Brian Musser says the credit union increased commercial loans by 30% in 2015 and 15% in 2016. Approximately 90% of that is in real estate.

We’re in a college town and are doing a booming business with people investing in housing rental properties, Musser says.

In addition to interest income, Musser also uses his credit union’s mortgage portfolio to boost income with swap transactions that experienced derivative specialists handle at the credit union’s investment advisor.

That helps offset the interest rate risk the credit union has taken on by holding more of its mortgages in its own portfolio instead of selling them, not an inconsequential decision at a financial cooperative that boasts more than 25% of its local market’s first mortgage business.

According to Musser, Purdue Federal has added approximately $1.5 million to its coffers since it got permission from the NCUA to do derivative trading on its portfolio. The credit union also has begun hedging interest rate locks and expects to add 3 basis points to ROA doing that.

Lastly, high penetration equals high interchange income. Purdue Federal boasted a second quarter 2017 credit card penetration rate of 50.14%, the highest among the nation’s community-chartered credit unions. For comparison, the average for all credit unions was 17.40%.

The Indiana credit union’s share draft penetration rate of 72.39% also was much higher than the national average of 56.72%. The result: more than $8 million a year in interchange income.

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Strategy Performance 2Q 2017

Credit unions are indeed having an outstanding 2017 right on the heels of a very strong 2016 and 2015. Eliminating barriers and connecting with members distinguishes credit unions from other financial institutions and makes the movement stronger than it’s ever been. Learn what the industry’s most successful credit unions are doing in this issue of Strategy Performance.


September 1, 2017

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