WILMINGTON, N.C.–The Credit Union Industry “HealthScore” has posted a 22nd consecutive quarter of year-over-year increases.
The HealthScore created by Glatt Consulting Group showed a score of 6.006 in the metrics devised by the company for the second quarter of this year.
The current HealthScore, calculated using 2nd quarter 2019 data, represents a 1.25% year-over-year score improvement. Credit unions performed better in 13 of 17 HealthScore categories, Glatt Consulting said.
“Despite the strength of the overall HealthScore, the continuing decline in scores for both Loan Growth and Membership Growth present challenges that may extend to other categories in the future,” the company said in announcing its analysis.
According to Glatt Consulting, the Credit Union Industry HealthScore measures overall credit union health, which is calculated by scoring/grading credit union performance across 17 different key ratios. Grading is based on a 10-point scale, with 0 reflecting poor performance and 10 reflecting exceptional performance. The Credit Union Industry HealthScore has been calculated and published since 2009.
‘Unprecedented Run’
“Credit unions continued their unprecedented run of year-over-year performance improvement. Industry HealthScores have now improved year-over-year for 22 straight quarters, with 13 of 17 of the score components showing positive gains,” Glatt Consulting said. “Some notable score drivers include Return on Assets, Efficiency, Asset Growth, and Cash & Short-Term Investments, which posted year-over-year growth for the first time in two years. It will be interesting to see how the Cash & Short-Term Investments component performs in the coming quarters with the flattening yield-curve environment that currently exists.”
Other Observations
Among other observations made by Glatt Consulting following the most recent data:
- Loan Growth and Membership Growth once again experienced year-over-year weakness with scores down 20.95% and 7.36% respectively versus Q2 2018. “Continued weakness in these two components would likely result in the eventual declines of other components such as Income and Efficiency. The continued strength in Loans Per Member and Borrowings Per Member could help insulate credit unions from the effects of declines in Loan and Membership Growth in the short-term. However, any prolonged weaknesses in these two membership components would eventually present a myriad of operational challenges.”
- The industry’s highest scoring credit union in the 2nd quarter, with a score of 9.12, was Churchill County Federal Credit Union based in Fallon, Nev. The $51-million CU has 2,800 members, and it regained the top spot in Q2 after having the highest HealthScore for both the third and fourth quarters of 2018.
- Once again, Eastman Credit Union based in Kingsport, Tenn. is the top-scoring credit union with assets over $1 billion, with a Q2 score of 8.53, followed closely by Redwood Credit Union based in Santa Rosa, Calif. with a score of 8.5. The two credit unions are perennial top performers, Glatt Consulting said.
Other Trends
Thirteen of the 17 HealthScore components saw year-over-year score gains, including:
- Net Worth: Up 1.88%
- Solvency Evaluation: Up 2.67%
- Return on Average Assets: Up 13.54%
- Efficiency: Up 7.12%
- Delinquent Loans to Total Loans: Up 1.51%
- Net Charge-Offs to Average Loans: Up 1.74%
- Cash and Short-Term Investments to Assets: Up 1.92%
- Loans to Assets: Up 4.74%
- Deposits Per Member: Up 1.64%
- Loans Per Member: Up 4.25%
- Borrowers Per Members: Up 2.28%
- Asset Growth: Up 2.21%
Components that saw a year-over-year decline in score include:
- Operating Expenses to Average Assets: Down 3.95%
- Regular Shares to Total Shares and Borrowings: Down 1.46%
- Loan Growth: Down 20.95%
- Membership Growth: Down 7.36%