Credit Union HealthScore Decline First Since 2013

Performance hampered by drops in loan growth and earnings scores
 
 
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Credit Union

Industry:
Banking

Location:
Wilmington - North Carolina - US

WILMINGTON, N.C. - July 2, 2020 - PRLog -- The current credit union industry HealthScore, updated to include 1st quarter 2020 credit union performance data, is 5.939. The latest score represents a 1.7% year-over-year decline, the first such decline since the fourth quarter of 2013. Driving the score decline were major drops in loan growth, membership growth, return on assets, and efficiency scores – four of the seventeen component scores making up the overall HealthScore. The quarter's results end a historic streak of 24 straight quarters of year-over-year HealthScore improvement.

::Component Score Details

Credit unions saw year-over-year declines in 9 of the 17 HealthScore components, most notably in loan growth which declined 32.57% year-over-year. The loan growth score itself now sits at 1.65, the fourth lowest in 18 years of HealthScore reporting. It is also the largest year-over-year decline since the third quarter of 2010. The nine scores with year-over-year declines are as follows:

Return on Assets: -15.93
Operating Expenses: -1.47
Efficiency: -11.45
Delinquent Loans: -1.68
Texas: -0.12
Regular Shares to Total Shares and Borrowings: -1.42
Loans to Assets: -1.28
Loan Growth: -32.57
Membership Growth: -17.37

While there were eight scores with positive year-over-year improvement, the level of improvement was generally small – with two exceptions: cash and short term investments, and asset growth. Year-over-year score changes for these two metrics were 8.97% and 5.79% respectively. Both trends make sense when factoring in the low loan growth rates noted earlier, and consumers hedging personal risk by migrating funds to insured credit union accounts. The eight scores with year-over-year improvement are as follows:

Net Worth: 0.48
Solvency: 1.00
Charge Offs: 0.51
Cash and Short Term Investments: 8.97
Deposits per Member: 3.8
Loans per Member: 2.09
Borrowers per Membership: 0.51
Asset Growth: 5.79

Regardless of how the COVID recession resolves itself over the coming months, it clearly looks like challenging times for credit unions. Consider that the percentage of credit unions scoring below five, our benchmark average, increased by 2.06% (an additional 89 credit unions) from the first quarter in 2019. It should be noted that generally a score of '5' is considered average or baseline for each of our 17 metrics.

In addition, the total number of credit unions scoring below 3.5, typically a threshold that, depending on the motivating score factors, results in increased regulatory scrutiny, increased from 38 to 52.

For charts related to this release visit: https://glattconsulting.com/2020/07/01/credit-union-healt...

For additional information about the HealthScore visit: https://glattconsulting.com/healthscore/healthscore-compo...

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Tags:Credit Union
Industry:Banking
Location:Wilmington - North Carolina - United States
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