Q4 2021 HealthScore Update

This quarter’s HealthScore came in at 6.229, an increase of 2.43% over Q4 2020. This is the seventh straight quarter showing year-over-year improvement. If you are familiar with the HealthScore model then you’ll remember that a score of five represents average performance. The industry, therefore, is doing quite well overall.

Here are a few notable items to point out from this quarter’s report.

Industry Scores

After rising above the 5 threshold in Q3, Return on Assets (ROA, RA in the chart) and Efficiency (EF) scores once again fell below the five threshold. Despite the fact that asset growth rates are absolutely lower than when stimulus funds flooded credit union balance sheets, the industry still has strong asset growth. This is part of the reason for the lower ROA scores. Efficiency, however, measures expenses relative to income. The lower efficiency score indicates higher costs. Inflation anyone?

Continued Asset Growth (AG) – the score was 6.38 – and the somewhat weaker ROA score again placed pressure on the Net Worth (NW) score. While credit unions remain well capitalized with an overall score of 8.23 for Net Worth, the Net Worth score did decline for the seventh straight quarter. Something to pay attention to.

Lending remains a challenge for the industry overall, though not for every credit union. Stellar performers are certainly growing loans at impressive rates, but for the industry the Loan Growth (LG) score remains well below the five threshold. That said, we do see incremental positive changes to the Loan Growth score. Q4 was the 4th straight quarter of improved year-over-year performance. But make no mistake, lending competition is fierce. Add competitive pressure to the outlook for higher interest rates and continued supply chain challenges and it’s possible we’ll see a leveling off of year-over-year improvements.

Scores for Delinquent Loans to Total Loans (DL) and Net Charge Offs to Average Loans (CO) continue to coast at historic highs, meaning extremely low portfolio risk. We’ve only seen one industry-wide decline in delinquency scores since before 2016 – which occurred in the first quarter of 2020. We haven’t seen a decline in charge off scores since the first quarter of 2018. That’s quite a run. Will that trend continue? The elements are there to change the dynamic to the negative, from higher rates to increased costs for members and member businesses, among others.

Thinking about ROA, if the positive credit quality environment changes to the negative, and we continue to face higher costs in the industry, it will be difficult for credit unions on the edge of the five threshold to maintain competitiveness. Credit unions that score below 3.5 overall would be the first credit unions likely to succumb to this kind of environment.


Kudos to this quarter’s top performer! Alabama’s Sycamore FCU, with assets of $43M and 2,400 members, had the highest aggregate HealthScore this quarter of 9.03. Very impressive performance. A close second is last quarter’s leader Police & Fire FCU out of Pennsylvania.

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And a Little More

The table below, excerpted from our HealthScore report, shows the year-over-year percent change for the HealthScore overall and for each component score. Interesting trends. Let us know if you have questions!

HealthScore Report Year-Over-Year %Changes

Photo by Jr Korpa on Unsplash

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