Credit unions post solid increases in profitability for 2021 – but larger ones leaving smaller behind

Credit unions posted solid financial results for 2021 with return on average assets (ROAA) and net worth both exceeding the numbers posted the previous year, the federal credit union regulator said Monday.

In releasing fourth-quarter 2021 financial results, the National Credit Union Administration (NCUA) said ROAA – often called the basic yardstick of profitability for financial institutions – was at 107 basis points (bp) for 2021, up from 70bp the previous year.

However, much of the higher performance, the agency indicated, was concentrated in larger credit unions. About two-thirds of credit unions have assets under $100 million, according to NCUA numbers. However, net worth for those credit unions as a group declined last year, with those with $10 million or less in assets (1,039 total) seeing a net worth decline of 11.3%.

At the opposite end, the number of credit unions with assets of at least $1 billion increased to 404 at year-end, up from 370 at year-end 2020. These 404 credit unions – which held $1.5 trillion in assets (74% of all credit union assets), and 89.4 million members – saw their net worth balloon by 15.4%.

The agency pointed out that the median ROAA across all federally insured credit unions was 50 basis points. However, that’s still better than 2020, when the median ROAA was only 40bp.

Net worth among all credit unions, according to the agency, increased by 11.1% in 2021 to $211.6 billion. However, the NCUA said net worth as a percentage of assets (the aggregate net worth ratio) stood at 10.26% in the fourth quarter of 2021, down from 10.32% a year earlier.

In other numbers, NCUA reported that:

  • Net income for federally insured credit unions at year-end totaled $20.9 billion at an annual rate, up $8.9 billion, or 74.6%, from the previous year. The increase was driven by non-interest income, which increased 12.7% to $26.6 billion. The NCUA said that was “largely due to growth in other operating income.” Interest income fell by 2.0% over the year to $59.0 billion.
  • The aggregate net interest margin grew by 5% over the year to $50.6 billion at an annual rate in the fourth quarter of 2021.
  • Total assets rose by 11.7% to $2.06 trillion at year-end; total memberships grew to 129.6 million, an increase of 5.3 million from the year before.
  • Total loans outstanding increased 8% to $1.26 trillion. Loan quality improved as well: the delinquency rate was at 49bp at year-end, down 11bp from a year earlier. The net charge-off ratio was 26bp, down from 45bp in 2020.
  • The number of credit unions decreased, again, in 2021, dropping to 4,942 from 5,099 at year-end 2020. The NCUA noted that the year-over-year decline “is consistent with long-running industry consolidation trends.”

Credit Union Assets, Shares and Deposits Grow in Fourth Quarter