Credit Union Community Hits Highest Ever HealthScore

Trend Chart

Wilmington, NC (June 11, 2019) – Credit union strategy consulting firm Glatt Consulting Group, Inc. announced today that the Credit Union Industry HealthScore, a composite score measuring the health and performance of US-based credit unions, reached an all-time high score of 6.041. The current HealthScore, calculated using 1st quarter 2019 data, represents a 1.6% year-over-year score improvement. Credit unions performed better in 12 of 17 HealthScore categories, though potential challenges in the areas of loan and membership growth may be emerging.

The Credit Union Industry HealthScore measures overall credit union health, which is calculated by scoring/grading credit union performance across 17 different key ratios. Grading is based on a 10-point scale, with 0 reflecting poor performance and 10 reflecting exceptional performance. The Credit Union Industry HealthScore has been calculated and published by Glatt Consulting since 2009.

Driving Score Growth

In addition to attaining the highest ever HealthScore, credit unions continued their unprecedented run of year-over-year performance improvement. Scores have improved year-over-year for 21 straight quarters, with 12 of 17 of the score components showing positive gains. Notable score drivers include Return on Assets, Efficiency, Delinquencies, Charge-Offs, and Loans to Assets. In addition, credit unions continue to show improvement in Borrowers to Members, which indicates effectiveness in member relationship development and is directly correlated with the improvements in scores referenced above.

Q1 Observations

While credit unions are managing expenses well relative to current income, they may have a difficult time maintaining that positive relationship going forward given two emerging score issues: Q1 score declines of 10.37% and 3.20% respectively for loan growth and membership growth. Should score declines for these two components continue over the coming quarters, score declines for income and efficiency may materialize, and the trend of decline in operating expense scores will continue. This will put pressure on the HealthScore overall and could break the streak of year-over-year score improvement.

Top Performers

The industry’s highest scoring credit union in the 1st quarter, with a score of 9.06, was Little Rock Fire Department Federal Credit Union based in Little Rock, Arkansas (http://lrfdfcu.virtualcu.net). The credit union holds assets of $13M and serves approximately 764 members. The credit union is a reflection of the strength typical of credit unions serving firefighters. Such credit unions out-performed the industry overall with an average HealthScore of 6.23 vs. the industry score of 6.041. Firefighters are apparently a sound field of membership.

Also of note is Eastman Credit Union based in Kingsport, Tennessee (https://www.ecu.org). Eastman, with a Q1 score of 8.529, is the top-scoring credit union with assets over $1B. The credit union is also a perennial top performer with a historical average score of 8.03. They serve 228,017 members.

Summary HealthScore Data

With regard to score trends, 12 of the 17 HealthScore components saw year-over-year score gains. They are:

  1. Net Worth: Up 1.93%
  2. Solvency Evaluation: Up 2.38%
  3. Return on Average Assets: Up 9.81%
  4. Efficiency: Up 5.56%
  5. Delinquent Loans to Total Loans: Up 3.19%
  6. Net Charge-Offs to Average Loans: Up 1.23%
  7. Texas: Up 0.30%
  8. Loans to Assets: Up 6.35%
  9. Deposits Per Member: Up 1.69%
  10. Loans Per Member: Up 5.08%
  11. Borrowers Per Members: Up 2.78%
  12. Asset Growth: Up 0.77%

Components that saw a year-over-year decline in score include:

  1. Operating Expenses to Average Assets: Down 3.39%
  2. Cash and Short-Term Investments to Assets: Down 2.60%
  3. Regular Shares to Total Shares and Borrowings: Down 1.13%
  4. Loan Growth: Down 10.37%
  5. Membership Growth: Down 3.20%

About Glatt Consulting Group

Glatt Consulting Group, Inc. is a credit union consulting company based in Wilmington, NC. Founded in 2006, Glatt Consulting specializes in aiding credit unions in areas including strategy, organizational structure, governance, and leadership development.

In the News: CU Journal Reports on Muni Deposits

News on a Chalkboard

We were included as source in a recent CU Journal article on credit union acceptance of municipal deposits. In many cases the language used in many state laws pertaining to municipal deposits was interpreted to mean that credit unions were excluded from accepting such deposits. A number of states are working to clarify via updates to banking laws that credit unions can indeed be the recipients of municipal deposits. The CU Journal article covers the current state of the legislative effort, and the strategies driving credit unions to seek such deposits. Read it here (subscription required):

https://www.cujournal.com/news/liquidity-crunch-pushes-credit-unions-to-make-play-for-public-funds

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View the Latest HealthScore Trends

Glatt consulting’s trend chart page has been updated to include Q4 2018 financial data. The trend charts illustrate year-over-year score changes for our overarching credit union HealthScore, and for each of the 17 component scores making up the HealthScore. You’ll find charts on the main GC website at https://www.glattconsulting.com/healthscore/healthscore-trends.

Interested in receiving a complementary report on your own credit union? Subscribe here.


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HealthScore Update: 20th Straight Quarter of Improved Health and Performance

GC Q42018 HealthScore Update Header Image. Photo by Isaac Smith on Unsplash

Wilmington, NC (March 13, 2019) – Credit union strategy consulting firm Glatt Consulting Group, Inc. announced today that the Credit Union Industry HealthScore, a composite score measuring the health and performance of US-based credit unions, improved on a year-over-year basis for the 20th straight quarter. The current HealthScore, calculated using 4th quarter 2018 data, sits as 5.862 and represents a 3.2% year-over-year score improvement. The continued consolidation of poorly performing credit unions into healthy credit unions, along with overall industry improvements in return on assets, financial efficiency, membership and loan growth, contributed to score gains.

The Credit Union Industry HealthScore measures overall credit union health, which is calculated by scoring/grading credit union performance across 17 different key ratios. Grading is based on a 10-point scale, with 0 reflecting poor performance and 10 reflecting exceptional performance. The Credit Union Industry HealthScore has been calculated and published by Glatt Consulting since 2009.

Driving Growth

Credit unions have been on an unprecedented run of year-over-year performance improvement supported in large part by consistent membership growth coupled with loan growth (scores improved by 5.69% and 7.07% respectively). Historically membership growth has been a lagging metric for credit unions, and though it remains the industry’s second-lowest scoring component of the 17 making up the HealthScore, scores are at the upper end of the historical range. Although new industry growth has pressured scores for charge offs (scores for charge offs were in decline from 2016 through the first quarter of 2018), charge off scores seem to have turned a corner, having improved for three straight quarters.

Of Note

One score to note that has been in decline for 6 straight quarters is the score for Cash and Short-Term Investments to Assets. This ratio is an indicator of the level of cash and liquid assets available to meet share withdrawals or additional loan demand. As loans have grown, and as credit unions have shifted assets from lower yielding short-term investments to loans, this score has gone down. This has generally been beneficial for credit unions, with the tradeoff in lower scores for the ratio being higher scores for Return on Assets.

Top Performer

The industry’s highest scoring credit union in the fourth quarter, with a score of 8.97, was Churchill County Federal Credit Union based in Fallon, NV (https://www.myccfcu.org). The credit union holds assets of $49.8M and serves approximately 2,590 members.

The credit union is a reflection of the strength of Nevada overall, which boasts the highest average HealthScore of all of the states. The Nevada HealthScore average is 6.81. The state’s current level of performance is much improved as compared to recession-era data. The state reached a low-point in the fourth quarter of 2010 with an average HealthScore of 4.51.

Summary HealthScore Data

With regard to score trends, 13 of the 17 HealthScore components saw year-over-year score gains. They are:

  1. Net Worth: Up 1.95%
  2. Solvency Evaluation: Up 1.72%
  3. Return on Average Assets: Up 24.48%
  4. Efficiency: Up 17.52%
  5. Delinquent Loans to Total Loans: Up 4.09%
  6. Net Charge-Offs to Average Loans: Up 1.86%
  7. Texas: Up 0.53%
  8. Loans to Assets: Up 6.19%
  9. Deposits Per Member: Up 1.97%
  10. Loans Per Member: Up 5.16%
  11. Borrowers Per Members: Up 2.57%
  12. Loan Growth: Up 7.07%
  13. Membership Growth: Up 5.69%

Components that saw a year-over-year decline in score include:

  1. Operating Expenses to Average Assets: Down 2.46%
  2. Cash and Short-Term Investments to Assets: Down 6.46%
  3. Regular Shares to Total Shares and Borrowings: Down 0.07%
  4. Asset Growth: Down 14.15%

A HealthScore data report, including the top 20 credit unions by HealthScore, is available for download here.

About Glatt Consulting Group

Glatt Consulting Group, Inc. is a credit union consulting company based in Wilmington, NC. Founded in 2006, Glatt Consulting specializes in aiding credit unions in areas including strategy, organizational structure, governance, and leadership development.

We’re happy to serve as a resource on articles related to overarching industry performance, and we welcome your use of the trend material, properly credited to Glatt Consulting. If you have questions about this quarter’s report or CU industry trends overall, contact the firm at media@glattconsulting.com or (888) 217-5988.

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Photo by Isaac Smith on Unsplash

Q4 2018 HealthScore Reports Sending Soon

We’re crunching Q42018 HealthScore numbers for every credit union and for the industry as a whole. Subscribers should be receiving their reports starting tomorrow, Friday, March 8. Would you like to subscribe? Reports for credit union board members and executives are complementary. Learn more and/or subscribe here: https://www.glattconsulting.com/healthscore/report-subscriptions