Glatt Consulting Reports Decline in Credit Union Industry HealthScore

The Glatt Consulting Credit Union Industry HealthScore declined from 2.446 in the first quarter of 2013 to 2.402 in the second quarter. The score also declined in year-over-year comparisons to the second quarter of 2012, which suggests continued industry challenges in key areas of financial performance. Though well removed from the lowest historical score calculated during the latest recession (2.148 in Q1 2009), recent scores – including Q2 2013 – nonetheless remain below the industry average score of 2.420 (6/02 to 6/13).

Glatt Consulting’s HealthScore scoring process is based on best-practice performance thresholds for eleven different key credit union metrics. Individual credit union performance is analyzed against performance thresholds for each metric, a process which results in metric-specific health scores ranging from 0 to 5 with 5 reflecting exceptional health and 0 reflecting poor health. These scores are then averaged to arrive at an overall health score for the institution. Using these institution-specific scores, the process is repeated to arrive at scores for the industry itself, which are then reported as in this release. Additional details available here.

General Performance Trends

Quarter-to-quarter score comparisons between Q1 and Q2, 2013 show a 1.76% decline in the overall industry score, driven by lower scores for efficiency, operating expense, delinquency, asset growth, and membership growth. On a positive note, scores for net worth, return on assets, charge off, deposit relationships, and loan relationships showed improvement.

Many of the changes quarter-to-quarter, positive and negative, were driven by common seasonal influences impacting asset and membership growth. For example, credit unions commonly purge membership roles of dormant accounts in the fourth quarter, leading to overly positive growth scores in the subsequent first quarter. By the second quarter, the positive trend is reversed as growth ratios fail to keep up with the “inflated” first quarter growth numbers. This same trend is common to asset growth, as well. Holiday spending commonly depletes deposit balances in the fourth quarter, and, when replenished in the first quarter, results in overly positive growth ratios. Those growth ratios then fall in subsequent quarters.

For this reason, period-over-period comparisons provide better perspective regarding underlying performance trends. When comparing the overall health score from the same period during the prior year, in this case comparing Q2 2012 to Q2 2013, second quarter scores show a decline of 1.77%. This overall decline is driven by lower scores for return on assets, efficiency, loan-to-share, asset growth, and membership growth.

The greatest score decline was for efficiency, which measures the relationship between operating expenses and income. Efficiency often fluctuates between positive and negative changes, though given legislative/regulatory decisions impacting non-interest income, tight margins due to the low level of interest rates, and seemingly perpetual increases in operating expenses the “normal” trend has been continuous negative scores.

As with the quarter-to-quarter comparison, however, there are positive trends to note. Net worth, delinquency, charge off, and deposit relationship scores have all maintained the trend of period-over-period improvement that started in mid-2010, and scores for loan relationships have maintained a similar trend dating back to the final quarter of 2011.

Additional Score Notes and Trends

Score Distribution

Nearly 50% of all credit unions possess scores ranging from 2.0 to 2.9, and more than 77% possess scores equal to or less than 2.29. Only 23% possess scores of 3.0 or greater. Further score distributions are illustrated in the table below.

Peer Group Score Ranges
0-.9 1-1.9 2-2.9 3-3.9 4-4.9 5.0
Peer 1 80 452 214 12 1 0
Peer 2 43 650 694 125 8 0
Peer 3 8 499 1386 334 25 0
Peer 4 1 85 475 214 17 0
Peer 5 0 56 518 469 21 0
Peer 6 0 1 101 274 55 0
Total 132 1743 3388 1428 127 0

The highest health score is 4.727, while the lowest is 0.18. These scores are held by credit unions in Ohio and Illinois, respectively.

Peer Group Health

Peer group 6, designating the largest credit unions by assets, remains substantially above average in every score category while Peer Group 1, the smallest of credit unions by assets, remains below average in all but the efficiency category. Further peer group breakdowns are illustrated in the table below.

HealthScore Net Worth ROAA Efficiency Expense Charge Off Delinquency Deposits Loans Loan to Share Member Growth Asset Growth
All 2.402 3.031 1.868 0.675 2.864 3.185 2.892 3.685 2.813 2.150 0.909 2.355
Peer 1 1.659 3.003 1.439 0.696 2.643 2.506 1.689 1.094 0.798 1.735 0.829 1.822
Peer 2 2.068 2.982 1.445 0.586 2.787 2.844 2.476 2.945 1.958 1.893 0.665 2.172
Peer 3 2.383 3.020 1.573 0.490 2.918 3.272 3.050 4.044 2.849 1.830 0.746 2.421
Peer 4 2.655 3.011 2.056 0.616 2.842 3.537 3.273 4.506 3.573 2.322 0.971 2.497
Peer 5 2.885 3.047 2.515 0.769 2.848 3.528 3.433 4.716 4.097 2.956 1.251 2.580
Peer 6 3.334 3.311 3.710 1.794 3.318 3.633 3.615 4.935 4.622 3.158 1.805 2.775

State Health

Guam, a US territory, has the highest overall health score of 3.318, followed by New Mexico and North Dakota, which both possess scores over 3.0. The lowest score of 1.582 is held by the US Virgin Islands, also a US territory, followed by Delaware, with a score of 1.993.


For questions or discussion, contact Glatt Consulting at (888) 217-5988.

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