Kansas credit unions see 2013 gains in assets and loans, but profit declines

The regulator of Kansas credit unions said the industry ended 2013 with more assets and loans, but lower profitability.

The Kansas Department of Credit Unions said the combined assets of state-chartered credit unions was $4.91 billion at the end of last year, compared with $4.69 billion at the end of 2012. That was a 4.6 percent increase.

Loans last year increased by $283.9 million – or 9.3 percent – to $3.34 billion, KDCU said.

The average delinquency ratio also fell slightly to 0.92 percent compared with 0.95 percent at the end of 2012.

Despite the gains in assets and loans, profitability fell in 2013. KDCU said the return on average assets was 0.76 percent compared with 0.95 percent at the end of 2012.

Michael Baugh, KDCU’s financial examiner administrator, said Monday that he thinks the decline in ROAA is largely due to continued low interests rates and soft loan demand, particularly at smaller credit unions – despite the overall year-over-year growth.

“I think part of it is margins are still extremely tight,” he said. “We’re starting to see interest rates creep up a little bit but they are still essentially flat.”

He said a lot of credit unions’ main sources of income comes from interest on loans and interest earned through investments, rates of which are also low.

Many small Kansas chartered credit unions – and half of the Kansas-chartered credit unions have assets less than $10 million – are trying but having difficulty growing their loan portfolios to offset the effects of low interest rates.

“If you are having difficulty making loans, that kind of drives ROAA,” Baugh said. “Even though I think the economy is recovering, income is slow to turn around for some.”

Fee income is another revenue source for credit unions, but most limit the number and amounts of fees they charge because of their member-service philosophy, he said.

“A lot of credit unions don’t derive income from fee income,” Baugh said.

The report also noted that at the end of the year there were 77 state-chartered credit unions compared with 79 the year before.

Baugh said mergers between credit unions outside the Wichita area last year resulted in two fewer credit unions at the end of 2013.