We’ve opted to shine a light on five credit unions at the top of our most recent Credit Union Industry HealthScore metric. These “Top 5” institutions show impressive health and strength that far outpaces their industry peers. We think you’ll be surprised; not all of them are billion-dollar-plus credit unions. In fact, one of them barely tops $100M. Read on for details.
Defining Health
Before we delve into the Top 5, let us explain how we define credit union health. To determine the ranking, we utilized our Credit Union Industry HealthScore, a composite financial performance score reflecting credit union financial health. The HealthScore system calculates overall credit union health by scoring/grading credit union performance across eleven different key ratios: 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. Glatt Consulting publishes the score quarterly and we use it to track, report on, and respond to industry-wide trends affecting credit unions. The overarching score allows us to quickly define credit unions with very balanced, strong, financial performance, and the component scores help us to identify contributing factors driving that performance.
The Top 5
Here are the five healthiest credit unions:
| Name | Location | Assets | HealthScore |
|---|---|---|---|
| Average | 4.563 | ||
| Kemba Financial | Ohio | $915M | 4.636 |
| Oklahoma | Oklahoma | $109M | 4.545 |
| Sandia Area | New Mexico | $505M | 4.545 |
| Redwood | California | $2.4B | 4.545 |
| Boeing Employees | Washington | $12.7B | 4.545 |
The incredible disparity in score between the credit unions in the Top 5 versus the industry is impressive. Taking the overall score as our first point of comparison, the current HealthScore (updated to include 3rd quarter 2014 credit union performance data) is 2.527. The average score for Top 5 credit unions as noted in the table is 4.563 — a substantial difference. What makes these credit unions so much “healthier” than the average credit union? The answer is the performance each has maintained across every metric included in our score calculation. The table below highlights the differences in component scores and, in the process, showcases their well-above-average performance.
| Credit Union | NW | RA | EX | EF | CO | DQ | LN | DE | LS | AG | MG |
|---|---|---|---|---|---|---|---|---|---|---|---|
| (Industry) | 3.411 | 1.935 | 2.883 | 0.983 | 3.288 | 2.952 | 2.942 | 3.745 | 2.477 | 2.067 | 1.119 |
| Kemba Financial | 5.000 | 5.000 | 4.000 | 3.000 | 4.000 | 5.000 | 5.000 | 5.000 | 5.000 | 5.000 | 5.000 |
| Oklahoma | 5.000 | 5.000 | 3.000 | 4.000 | 4.000 | 4.000 | 5.000 | 5.000 | 5.000 | 5.000 | 5.000 |
| Sandia Area | 4.000 | 5.000 | 4.000 | 5.000 | 5.000 | 5.000 | 5.000 | 4.000 | 4.000 | 5.000 | 4.000 |
| Redwood | 5.000 | 5.000 | 4.000 | 5.000 | 5.000 | 4.000 | 5.000 | 5.000 | 5.000 | 4.000 | 3.000 |
| Boeing Employees | 4.000 | 5.000 | 4.000 | 5.000 | 4.000 | 5.000 | 5.000 | 5.000 | 5.000 | 4.000 | 4.000 |
Table Key:
- NW: Net Worth performance score
- RA: Return on Average Assets performance score
- EX: Operating Expense performance score
- EF: Efficiency performance score
- DQ: Delinquency performance score
- CO: Charge-Off performance score
- LN: Loan Relationships performance score
- DE: Deposit Relationships performance score
- LS: Loan-to-Share performance score
- AG: Asset Growth performance score
- MG: Membership Growth performance score
In reviewing the scores in the table above, it is of course obvious that these credit unions outperform the industry in all areas, but two areas in particular stand out: Efficiency and Membership Growth. It would appear that a key to the successes these credit unions are enjoying is that each has consistent, substantial membership growth, and each is very financially efficient. (It may be helpful to point out that in the case of efficiency, we are measuring the relationship between expenses and income, illustrating how much an institution spends to make $1 in revenue.) Each of these credit unions scores very highly in terms of efficiency, meaning that they spend much less to earn $1 than most other credit unions. This may be a function of tight expense control, healthy margins, market dynamics, highly effective sales, or something else. Regardless of the cause, these credit unions are managing their money, income and expense, exceptionally well.
One might argue that in order to be so efficient these credit unions may not be treating their members and/or their employees fairly. For example, they could be charging high fees to drive “excessive” revenue, or may pay staff poorly by comparison to peers. Perhaps these credit unions have resorted to such tactics, but we do not believe this is the case. Institutions that mistreat their customers, members in the case of credit unions, will see the depth and value of their consumer relationships wither — not to mention experience stagnation in new customer growth in — which would diminish income and ultimately draw down efficiency. Each of the Top 5 credit unions has performed at a high level for many years, leading us to believe that if they were “taking advantage,” their performance would not have sustained for as long as it has.
Of course the credit unions listed above are not perfect. They likely have not excelled in everything they do or have done, but given their performance they must be doing something right. Perhaps it is wise to give them a look and dig into the details of what they offer, and how they offer it. In the first table we included links to these credit unions. Check them out!
Interested in your own credit union’s HealthScore? We offer custom reports for a nominal charge. Order your report today.