The HealthScore system calculates overall credit union health by scoring/grading credit union performance across eleven different key ratios including Net Worth, ROAA, Operating Expense, Efficiency, Charge-Off, Delinquency, Loans, Deposits, Loan-to-Share, Asset Growth, and Membership Growth. Grading is based on a five-point scale, with 0 reflecting poor health and 5 reflecting exceptional health.
Score declines were driven primarily by lower scores for return on assets, credit union efficiency, asset growth and membership growth. Despite these declines, scores improved for all lending categories as compared to the same period the prior year, including scores for delinquency and charge-off. Score improvements indicate healthy growth in member loan relationships and the quality of loans on credit union books.
Glatt Consulting is often called upon to aid credit unions in strategy development, including merger strategy. The HealthScore system was developed in 2008 as a means to quickly identify and rank the overall “health” of potential merger candidates on behalf of client credit unions. The use of the HealthScore system has since been expanded to support client engagements outside of merger strategy, including as a reference tool for client strategy planning and assessment, CEO performance evaluation criteria, market expansion, and more.
An updated industry HealthScore is published every quarter for industry review and discussion.
Additional HealthScore Results and Observations
Individual credit union HeathScore results vary widely. The highest score for the quarter is 4.636, a result shared by two credit unions located in California and Oregon, respectively. The lowest score of 0.273 is shared by six credit unions in locations including New York, Illinois, Michigan and New Jersey.
Smaller credit unions continue to score lower overall than larger credit unions.
With regard to the underlying ratios feeding the HealthScore system, Glatt Consulting notes a few disconcerting trends:
Despite strong overall growth in total members, 55% of credit unions saw zero or negative net membership growth. Membership growth clearly remains an industry problem.
27% of all credit unions had negative Return on Average Assets.
40% of all credit unions had negative loan growth.
The average efficiency ratio for all credit unions is approximately 91%, meaning that it costs the average credit union $.91 to earn each $1 in revenue.
Credit unions also saw a negative 3.9% change in total credit unions from 12/31/12 to 12/31/13, a rate of decline that has been generally consistent in recent years.
As has been the case in quarters past, positive growth and efficiency is being driven predominantly by larger credit unions.
To discuss HealthScore trend data, including requests for custom HealthScore reports, please contact Glatt Consulting at (888) 217-5988. Additional release data available at: