One question we frequently entertain is whether the HealthScore really indicates “health.” One way to address the question is to compare the scores of credit unions that have failed, as defined by conservatorship and/or liquidation, to those of the industry overall. In this post we do just that, charting average industry scores and those of conserved credit unions. We certainly see a difference. Perhaps you will too.
Chart: Conserved vs Industry HealthScores
The chart below compares industry average HealthScores to the average scores of credit unions conserved and/or liquidated in 2015.
Without the broader picture of health trends illuminated by our HealthScore, some might assume that these credit unions were simply victims of the recession. In one way they were, of course, but you no doubt note in the chart that these credit unions consistently underperformed on average well before the recession. In other words, they entered into the recession at a low level of health.
The recession certainly marked a turning point for these credit unions, but whereas industry health began to improve post-recession, health for these credit unions deteriorated further from their below-average levels. It is not a surprise that these credit unions were conserved given the history of “unhealthy” performance.
While our HealthScore may not “predict” future health, we can state with certainty that credit unions maintaining a low score are at a competitive disadvantage if not at greater risk for failure. A below average score should be a wakeup call that sparks internal dialogue and debate regarding strategic expectations and focus. If it is okay that scores are low, there better be a sound reason behind such acceptance.
Get Your Report
If you do not already receive a HealthScore report for your credit union, we welcome the opportunity to add you to our distribution list. The PDF report, which includes your credit union’s scores as well as scores for leading national, state, and local credit unions, is absolutely free for credit union leaders. Visit our HealthScore report order page for additional details and an order form.
Photo Credit: “Fire” by Mike Poresky is licensed under CC BY 2.0