Federally insured credit unions enjoyed a smashing 2012, with record earnings of $8.5 billion, according to data released by the National Credit Union Administration (NCUA).
Credit unions reported $8.5 billion in net income for 2012, a 36.1% increase from the $6.3 billion reported in 2011. The increase came largely from reductions in loan loss reserves, a positive sign of improving economic conditions.
The industry's return on average assets ratio, an important measure of industry earnings, stayed constant at 86 basis points in the fourth quarter. Residential lending played a key role in the industry's 2012 success: first mortgage loans increased 5.7% for the year to reach $246.3 billion.
‘Credit unions had a pivotal year in 2012,’ says NCUA Board Chairwoman Debbie Matz. ‘The industry generated record earnings, assets crossed the $1 trillion mark, and membership grew by more than 2 million. The industry net worth ratio rose to 10.44 percent, and delinquencies fell again. Credit union lending also grew by 4.6 percent, meaning more people got the loans needed to buy homes, purchase cars and go to school.
‘There are many reasons to be optimistic about the credit union industry's future,’ Matz adds. ‘But because of today's low interest rates, we also continue to keep a close eye on fixed-rate mortgages, which remain elevated as a share of assets and could pose a long-term risk for the industry.’
Membership in federal credit unions grew from 91.8 million at the end of 2011 to 93.8 million at the close of 2012, an increase of 2.2% for the year. Industry consolidation also continued throughout 2012. The number of federally insured credit unions fell by 275 in 2012, from 7,094 to 6,819 institutions.