Credit unions have many yardsticks against which to measure success, and one standard industry benchmark is financial performance against “high-performing” credit unions.
The challenge is that what exactly “high-performing” means can vary amid the wide variety of sizes and types of credit unions in the marketplace. How can a credit union measure success when industry averages simply aren’t useful as comparison?
The study outlines a methodology and approach designed to enable credit union management teams to assess financial performance in meaningful ways. In the report, Sollenberger answers the following research questions:
1. What constitutes “high performance” compared with others?
2. How do you measure your institution?
3. Against what institutions do you measure your credit union?
Click here to download the extended companion whitepaper which delves into more detail than the final report below. This will be particular interesting to those with a financial background (i.e. those who love numbers will love this version!) .
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CUs have been underperforming competition for over 10 years now and a significant reason why is “metrics”-or-what are the right metrics? ROE not ROA. Market Share not loan to share. Efficiency ratio. The right Capital dollars, not the right Capital Ratio. for perspective, if CUs had focused as described above, we wouldnt have had the degree of participation in indirect lending and sub prime lending as we’ve seen. we would also be alot closer to knowing what the right brand/marketing/advertising/cross selling tactics are.
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I agree with Peter that CUs should focus more on ROE, market share, and the efficiency ratio. I’d suggest focusing on membership and asset growth too. I don’t believe that indirect lending or sub-prime lending are necessarily bad, or unprofitable, but they are much more challenging to do well than standard mortgage and car lending.
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The financial stability of the company can be measure through ROE or Return on Investment. If the invested capital had gained the expected return. Along with it the Financial Accounting Standards Board, or FASB, has just come up with new standards of accounting for businesses that are heavily leveraged with subprime mortgage debt. Essentially, they are making it acceptable for companies heavily invested in the questionable asset to write them off as having long-term value, and get cash advances for them, but in reality they are toxic mortgage assets. Written off is to charge an asset amount to expense or loss, in order to reduce the value of that asset and one’s earnings. Basically, what this boils down to is that companies that got bad investments (because they didn’t want to do something traditional, like sell something to customers that want what they sell) get to fix their books so that what is known to be bad is good. I’d give a heck of a cash advance to find out where FASB gets their logic.
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