Q1 2022 HealthScore Update

This quarter’s industry HealthScore came in at 6.215, a decrease of .920% over Q1 2021. This is the first quarter showing a year-over-year decrease since Q1 2020.

Part of the drop is due to continued declines in scores for asset growth and cash/short-term investments. This makes sense given the inflation factors driving consumers to spend more of their saved funds on goods and services. On related note, the score for deposits-per-member, while still improving, has seen its rate of improvement slow considerably as compared to recent quarters. See the year-over-year percent changes in scores in the table below.

Credit Union HealthScore: Year-Over-Year Percent Change in Scores

Since the pandemic thaw consumers have increased debt – which we see reflected in the loan growth and loans-per-member scores. Both scores continue to strengthen year-over-year as does the score for borrowers-per-members. Credit unions are giving more loan dollars to a greater percentage of members.

We still haven’t seen the predicted declines in scores for delinquencies and/or charge-offs. In fact we continue to see scores for each component improve year-over-year, but given rising rates and increased debt loads the trend may shift in the next quarter or two. Take a look at the Consumer Debt Service Payments chart on FRED for additional fodder for conversation.

You’ll find the source chart here: https://fred.stlouisfed.org/series/CDSP. Nothing alarming, but additional evidence that consumers are using more of their funds for debt payments.

One last note regarding this quarter’s scores. Remember that a score of 5 indicates average performance per credit union industry history dating back to the year 2000. I always pay attention to scores below 5, and for this quarter scores for ROA, efficiency, loans-to-assets, loan growth, and membership growth all remain below the benchmark. See the table below which shows actual industry scores.

Credit Union HealthScore: Historical Scores

A good academic conversation to have in the board room is what the industry might look like with sustained low growth and earnings potentially combined with degrading credit quality. If you want some assistance driving that conversation let me know. We frequently join board meetings for brief industry trend updates and discussions.

On a personal note my son and I just climbed Mt. Kilimanjaro in Tanzania, Africa. Mt. Kilimanjaro is the largest free-standing mountain in the world with an elevation of 19,341 feet above sea level. Definitely the hardest physical challenge I’ve ever faced. I’m still processing the lessons from the climb and hope at some point to write a little bit about the experience and what I learned from it on our GC blog.

Uhuru Peak, Mt. Kilimanjaro, Tanzania May, 2022

What I can share is that before the climb I was aware of my Risk Type Compass. Risk Type Compass is a psychometric assessment that captures the ways in which adults behave in risk-orientated situations. Three measures are provided by the Risk Type Compass:

  • Risk Type: an individual’s disposition towards risk.
  • Risk Attitude: an individual’s risk preference across five risk domains.
  • Risk Tolerance: an individual’s overall capacity and tolerance for risk taking.

Given the Kilimanjaro effort it should’t be a surprise to find that my risk type tends toward adventurousness and my risk tolerance is defined as high risk – which includes not only recreational activities such as mountain climbing but also reputational and financial risk-taking among others.

We are certified to administer Risk Type Compass assessments so if you are interested in learning about how we assess teams to aid organizations in better understanding team risk profiles let us know. We’d love to walk you through a few sample reports and show you how the assessment results can be used to strengthen team dynamics around risk.

Tom Glatt
Glatt Consulting Group, Inc.

A Little More

Want to discuss the utilization of Risk Type Compass assessments at your credit union? Let us know!

Remember that HealthScore subscriptions are free for credit union professionals and volunteers! Subscribe here.

Citations and Sources
Risk Type Compass Copyright: Psychological Consultancy Limited
Featured image photo by Jr Korpa on Unsplash

Published by Tom Glatt Jr

Owner of Glatt Consulting - Distinctive Strategy Consulting for Credit Union Leaders.

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