Year-Over-Year Improvement in Credit Union Health

Glatt Consulting’s Credit Union Industry HealthScore has been updated to included data from the second quarter of 2014. The score is now at 2.541, a -0.67 decline from the previous quarter’s score of 2.558 but a 1.65% improvement over Q2 2013’s score of 2.500.

About the HealthScore

The Credit Union Industry HealthScore is a composite financial performance score reflecting the financial health of US-based credit unions. 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.

The HealthScore is published quarterly and is used by Glatt Consulting, individual credit unions, and media professionals alike to track, report on, and respond to industry-wide trends affecting credit union health.

Q2 Score Strengths

Improvements in the HealthScore were driven by highly positive changes in scores for lending-related metrics, including Loan Relationships, Delinquencies, and Charge-Offs. With regard to the Loan Relationship score in particular, Q2’s figure eclipsed Q1’s score, which at the time was the highest positive year-over-year %change since 2006.

As for the Delinquency score, while it slipped slightly from Q1’s score (which was also at a decade-high) it nonetheless improved 3.25% over Q2 2013. The charge-Off score improved by 2.59%. The combined results suggest that portfolio quality remains strong.

Given the strength and growth in lending it should come as no surprise that the Loan-to-Share score also saw a notable year-over-year jump. The year-over-year improvement of 6.91% was the largest such increase in more than a decade, and the 4th straight positive score change.

Finally, two more areas of strength include Net Worth and Deposit Relationships. Scores for both improved yet again over the same period the prior year (Given that we are seeing growth in Net Worth scores without the prod of a fully-implemented capital rule, is it worth stating again that the proposed rule was a touch heavy handed?)

Q2 Score Weaknesses

There are a few score weaknesses to note. Return on Asset scores declined again over the same period the prior year, marking the sixth straight period of decline (It appears the decline is flattening out. In fact, given the loan growth and improved credit quality noted above, it is likely that the score will turn positive in 2014. Here’s hoping!).

The underlying net income trends influencing ROAA scores also impact Efficiency scores as Efficiency measures expenses against income. Like ROAA, Efficiency scores declined for the sixth straight period but also like ROAA the decline is flattening out. Even though the decline in score represents a weakness, the “flattening out” of the decline is a welcome trend as any given credit union cannot compete strongly from a position of financial inefficiency.

Another long-standing weakness is the consistent decline in the Membership Growth score. As with ROAA and Efficiency scores, the Membership Growth score saw its sixth year-over-year decline. As we noted last month, since the first quarter of 2004 the industry experienced year-over-year Membership Growth score improvements only eleven times. The remaining 31 quarters rated negative changes in score.

52% of credit unions had negative Q2 membership growth.As we have noted in numerous HealthScore releases, membership growth industry-wide has been decidedly positive in terms of total numbers. Our score, however, is not an indication of overall industry growth nor a reflection of total members served. Rather, it is an indication of membership growth at individual credit unions. For the second quarter, 3,405 out of 6,560 scored credit unions, or 52.7%, experienced negative negative membership growth. This is a troubling trend.

Score Data

The following tables and charts are included in order to allow for individual assessment of industry health and score trends.

Score Table

The following table illustrates score trends dating back to 2003. Click to view/download.

Q2 2014 HealthScore Trend Chart
Q2 2014 HealthScore Trend Chart


%Change Table

The following table includes year-over-year %change in scores. Table cells in red indicate score declines. The presentation of data in this format provides a visual representation of how many problem areas credit unions had to manage during and after the recession. Click to view/download.

Q2 2014 %Change Year-Over-Year
Q2 2014 %Change Year-Over-Year


%Change Charts

The following charts reflect year-over-year %change in scores over time. Chart lines in negative territory indicate a year-over-year decline in score. Click to view/download.

Q2 2014 HealthScore Trend Charts: %Change Year-Over-Year
Q2 2014 HealthScore Trend Charts: %Change Year-Over-Year


Custom Reporting

We offer credit unions a customized HealthScore report designed to provide credit union leaders insight into how their credit union’s performance compares to various segments of the credit union community.

In addition, we will also run custom reports for credit unions, vendors, and media professionals. Our custom reports have been used by credit unions to identify potential merger partners, isolate growing markets, track local competitors, and to track strategic performance. Vendors have used our reports to define target markets based on degrees of credit union health. Media professionals have used our reports to track general industry health, and the impact of proposed regulations on industry health.

Custom reporting is offered for a nominal fee, with fees determined by project scope. Contact Glatt Consulting to discuss custom reports for your organization.

Photo Credit: “Images Money” by is licensed under CC BY 2.0

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