HealthScore Data Shows Long-Term Issues at Small Conserved Credit Union

Melting Ice Cubes

The National Credit Union Administration (NCUA) conserved Bethex Federal Credit Union last September, and ultimately liquidated the credit union on December 18, 2015. While the credit union’s long-time service as a community development financial institution was lauded, HealthScore trends shows the credit union faced a constant struggle to achieve stable financial health. 

Bethex Federal Credit Union HealthScore trends.
Bethex Federal Credit Union HealthScore trends.
Some may suggest that the Bethex liquidation is but more proof that small credit unions cannot survive in today’s competitive, more highly-regulated world. This view is not accurate. Small credit unions can survive, if not thrive in the world we find ourselves in today. Our proof? The many small credit unions scoring in the highest tiers of our HealthScore distribution. In the top 20 alone we find two small credit unions, one $12M and the other $17M, keeping company with the likes of BECU, Redwood, Randolph-Brooks, and other large and routinely top-performing credit unions (Bethex was $12M in assets).

So what is the issue here, if not the size of the credit union? One of the notable takeaways from the Bethex experience is that a credit union’s mission cannot undermine financial health and long-term viability – otherwise the very people the credit union purports to serve will ultimately be left with nothing of substantial value in the end. To us it appears that this is what happened here. The credit union did not balance what it hoped to do for members with its financial reality – or at least with an eye to its long-term financial health. As a result, the credit union is no longer, its assets having been purchased via liquidation by a billion-dollar credit union serving a membership of more than 80,000.

Perhaps different choices could have been made at certain points during the long history of the credit union that could have preserved its philosophy while strengthening its health. Here’s 15 years worth of a selection of key ratios. What choices would you have considered, and at what point would you have acted differently – if at all?

Credit Union Ratios
Cycle Date Net Worth Return on Average Assets Operating Expense to Average Assets Efficiency Delinquent Loans to Total Loans Net Charge Offs to Average Loans
09/30/2015 5.58 -8.02 11.19 117.13 13.53 12.55
06/30/2015 5.75 -10.85 10.85 101.95 15.35 18.96
03/31/2015 4.93 -20.56 9.91 114.38 10.82 37.6
12/31/2014 11.24 -4.91 10.84 125.23 17.44 1.32
09/30/2014 8.88 -7.57 11.21 156.37 17.87 1.63
06/30/2014 8.62 -11.01 11.86 160.97 16.54 2.69
03/31/2014 11.51 -7.21 11.02 148.77 9.13 2.68
12/31/2013 12.88 -1.83 9.36 102.29 6.67 2.94
09/30/2013 13.04 -0.87 9.08 90.14 7.77 0.91
06/30/2013 12.69 -1.24 9.14 104.68 6.04 1.27
03/31/2013 9.37 0.33 7.82 95.96 3.71 3.97
12/31/2012 9.05 1.42 7.54 79.71 4.36 1.43
09/30/2012 10.04 1.6 8.05 79.15 3.32 1.49
06/30/2012 11.85 2.14 8.41 73.8 2.2 2.45
03/31/2012 11.35 3.09 7.74 66.19 2.96 2.31
12/31/2011 11.01 3.98 7.74 58.72 2.51 2.47
09/30/2011 11.13 2.89 8.49 64.83 2.27 2.88
06/30/2011 12.9 3.01 9.27 65.01 1.96 3.16
03/31/2011 10.29 4.32 9.32 60.99 3.06 0.18
12/31/2010 9.35 0.98 9.81 78.62 2.08 2.06
09/30/2010 11.01 0.96 11.01 80.74 2.63 2.31
06/30/2010 7.98 0.8 11.44 82.29 3.24 3.67
03/31/2010 8.72 3.05 11.08 74.09 4.37 0.14
12/31/2009 8 0.97 11 78.94 1.92 2.67
09/30/2009 7.14 -0.67 11.61 82.25 4.26 3.48
06/30/2009 7.67 0.67 11.94 76.36 6.31 1.07
03/31/2009 6.95 -1.17 13.11 72.81 6.32 3.13
12/31/2008 6.2 -0.12 10.96 92.45 5.96 2.89
09/30/2008 6.74 -0.24 11.47 94.3 7.49 -0.11
06/30/2008 7.28 0.71 11.98 94.37 6.6 0.01
03/31/2008 6.61 0.26 11.44 97.76 7.17 0.87
12/31/2007 6.71 0.4 11.78 86.52 3.83 3.09
09/30/2007 7.55 0.6 12.56 87.94 5.18 1.57
06/30/2007 7.07 1.36 12.19 86.48 3.48 1.35
03/31/2007 7.2 1.81 11.57 81.45 2.12 -0.75
12/31/2006 6.66 0.21 11.91 86.35 1.17 3.36
09/30/2006 6.49 -0.68 11.71 87.67 2.79 2.74
06/30/2006 7.13 0.23 11.31 92.53 2.24 4.46
03/31/2006 7.02 0.11 10.28 97.12 3.96 4.11
12/31/2005 8.16 0.28 12.16 93.43 3.46 2.42
09/30/2005 9.81 0.23 12.76 94.18 3.1 1.88
06/30/2005 9.58 0.2 11.91 97.51 3.18 4.3
03/31/2005 9.7 1.07 11.7 91.44 3.35 1.2
12/31/2004 10.37 0.18 12.27 94.86 2.5 1.55
09/30/2004 10.96 0.4 12.19 92.34 2.41 3.26
06/30/2004 10.21 0.5 11.82 92.92 3.11 1.72
03/31/2004 9.82 0.64 12.22 91.64 2.49 0.39
12/31/2003 10.31 -2.08 11.51 88.47 1.99 6.61
09/30/2003 11.87 -0.38 11.47 96.75 6.73 2.39
06/30/2003 10.88 -0.63 10.97 97.4 7.91 1.59
03/31/2003 10.3 -1.26 10.95 96.45 7.15 3.79
12/31/2002 11.17 -6.27 14.25 170.99 6.42 3.06
09/30/2002 10.59 -1.56 11.74 108.23 7.74 4.73
06/30/2002 10.19 -2.36 11.22 120.36 7.15 0.93
12/31/2001 12.49 0.03 11.2 89.65 4.5 4.91
06/30/2001 14.18 0.32 10.42 92.6 5.74 6.39
12/31/2000 17.08 1.37 8.21 79.56 4.47 6.08

For additional industry and regulator articles on the subject of Bethex we suggest the following:

Photo Credit: “Melting Ice Cubes” by Steven Depolo is licensed under CC BY 2.0

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