Credit Union 'Health' Takes A Turn For The Better

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WILMINGTON, N.C.-One company is reporting that the health of credit unions is improving, after hitting an all-time low.

Glatt Consulting last week said its "Credit Union Industry HealthScore" for Q1 2011 increased to 2.466, a 8.99% change from Q4 2010 and a 1.98% change from Q1 2010. In the company's model, the industry's highest score over the last 10 years, 3.321, came in Q1 2001; the lowest in the last 10 years was Q4 2010s score of 2.263.

How The Score Works

Glatt Consulting's Credit Union Industry HealthScore seeks to create a composite score reflecting overall industry health and is based on a five-point scale, with 5 being the most healthy and 0 being the least healthy. The score components include Earnings, Capital, Growth, Member Relationship, Liquidity, Asset Quality, and Efficiency.

Strengthening component scores for earnings, member relationships, expense management, operational efficiency, asset quality, and net worth all contributed to the solid HealthScore improvement over the prior quarter, according to Glatt Consulting.

'Continues To Be A Drag'

"In contrast to improvements in general growth score components, however, the score component reflecting member growth continues to be a drag on overall credit union health," the company said. "It appears that despite the favorable press associated with the recent banking sector crises, the credit union community has not been able to turn positive public opinion into widespread credit union membership growth."

Glatt Consulting said an "additional concern" is the continued pressure on lending. Lending component scores dropped from Q4 2010 to Q1 2011, "reflecting the shrinking credit union community loan portfolio."

"Though the earnings score component shows gains, lending trends and fee income legislation may reverse earnings score improvements, and with it individual credit unions' abilities to effectively compete," Glatt Consulting said in a statement.

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