PITTSFIELD — The Greylock Federal Credit Union's net income dropped in 2015, but the financial institution's regulatory net worth — a key measure of financial strength — improved over 2014.
Net income, or total earnings, at the county's largest credit union fell from $5.37 million to $3.25 million last year, according to Greylock's annual report.
But the credit union's regulatory net worth increased from 9.4 percent to 9.7 percent, which improved Greylock's "well-capitalized" rating that is determined by the National Credit Union Administration, the industry's regulatory body. Greylock's regulatory net worth was 8.76 percent in 2013. The regulatory minimum is 7 percent.
Regulatory net worth is determined by viewing a financial institution's capital — the difference between total assets and liabilities — as a percentage of its assets to find a net worth ratio.
"What I see is a good, solid year," said Greylock President and CEO John L. Bissell. "We came in where we thought we would."
The decease in net income occurred because Greylock budgeted $2 million more for loan losses in 2015 than in 2014, he said. That account increased from $1.3 million in 2014 to $3.65 million last year.
A loan loss provision is an account that financial institutions set up annually to protect themselves against what they have identified as troubled loans, according to Greylock Executive Vice President and CFO Michael R. Stoddard.
The funds are taken out of total income, and based on estimates of a financial institution's losses over the previous two years, Stoddard said. He said the funding Greylock budgeted for loan losses in 2015 was a more normal level than it had been in 2014.
"What's happening is that banks' earnings are a little bit inflated because they are able to drain down their loan loss reserve a little bit," Stoddard said. "What you're going to start seeing in the industry now is that level flatten out. So the level that we did (in 2015) was probably more normalized."
Under this scenario, Bissell said Greylock knew its total earnings would be less last year.
"We budgeted for 2015 knowing that total income was going to be less," he said. "We budgeted (for) $3 million in net income so the $3.25 million we produced was better than budgeted. It wasn't a surprise at all. It was exactly what we predicted.
Greylock has budgeted $4.2 million in total income for 2016, Bissell said.
Despite last year's drop in total income, Greylock's total assets increased by $4.2 million in 2015 to $1.079 billion. Greylock assumed the Berkshire Federal Credit Union's $12 million in assets when the two entities merged in October.
Greylock's loan growth of $30 million was its highest since 2010, and was spread out across most major categories, primarily auto lending. Deposits grew by $2.2 million, the first increase since 2010.
The number of Greylock's member/owners grew to 75,473, the highest total in the credit union's 80-year history. Greylock also remained the area's largest mortgage lender with 20 percent of the Berkshire County market. The credit union's core account relationships expanded as 2,600 more members brought active checking accounts to Greylock last year.
"Given the market share we already have that's a really tremendous number," Bissell said, referring to the core account relationships.
The credit union also introduced free budgeting assistance and credit counseling for a members through its relationship with GreenPath, a national nonprofit.
Greylock also opened a new branch in Lenox in 2015, the credit union's 11th full-service branch office.
Contact Tony Dobrowolski at 413 496-6224.