2020 ratings of U.S. credit unions – business quality & operational efficiency

by Greg Hoeg, Hoeg & Company, Ltd.

Hoeg & Company, Ltd. has completed its review of the U.S. Credit Union Industry for Business Quality and Operational Efficiency in 2020 and named the 50 credit unions with the best Business Quality and the 50 most Operationally Efficient institutions nationally. The review included 5,197 credit unions operating in the U.S. and measured their performance in terms of how effectively they built and maintained quality business portfolio and how efficiently they managed their operations. In other words, the review measured how much “bang for the buck” each institution got from what it spent on its business operations and the book of business it manages.

  • Operational Efficiency – A measure comparing each credit union to industry best performers in terms of the total cost of their business operations relative to the value of the revenue those operations generate, given their book of business
  • Business Quality – A measure of how effectively each credit union acquires and maintains a quality business portfolio in terms of its bottom-line value potential compared to industry best performers 

Hoeg & Company developed the ratings using Efficient Frontier Analysis (EFA), a method used in investment portfolio analysis to identify best performing investment portfolios, applied to credit union operational measures. The evaluation is objective, using publicly available data reported in credit union Call Reports available from the National Credit Union Administration* and with no input from the credit unions themselves. The ratings scale from 0 (worst) to 100 (best).

The result is an accurate set of measures of how effectively and efficiently each credit union manages its business resources and operations compared to industry best performers.

Industry Situation – 2020

The U.S. Credit Union Industry in 2020 experienced possibly the most challenging economy since the great depression as a result of the COVID 19 pandemic and its related economic shutdown.  This was particularly difficult for credit unions in dealing with customer service challenges, loan payment deferrals, increased member withdrawals, continuing low interest rates and stimulus payment related activity. Now, as we see signs of a possible lessening of the pandemic, the credit union industry must determine how to adjust again.

In such an environment, competitive success in providing attractive products and services to credit union members is largely dependent on each credit union’s ability to maintain a portfolio of business aligned with positive bottom-line results and/or managing its operations at low cost.

Best Performers – Operational Efficiency

The most Operationally Efficient credit unions nationally tended to be larger than the average of all U.S. credit unions in terms of assets (about 1.8 times the industry average) and generated smaller than industry average net incomes (approximately 71% of the industry average) for 2020. In terms of size as measured by number of offices and employees, the most efficient credit unions are smaller than the national average for both measures. This combination of low resource levels and high business asset size, as a group for the top 50 Operationally Efficient credit unions, have likely resulted in superior scale economies for these credit unions. Unfortunately, these most efficient credit unions were, as a group, well below the industry average for effectiveness in building and maintaining quality business portfolios, although several individually were above the industry average Business Quality rating. This weakness in Business Quality appears to have countered much of the benefit gained by being operationally efficient and may be a factor in the below industry average for net income for the group average.

50 Most Operationally Efficient U.S. Credit Unions – 2020
Rank Institution Name City State CU NUMBER Operational Efficiency Rating Business Effectiveness Rating
1 INTER-AMERICAN Brooklyn NY 16285 100.00 63.86
2 FIRST FRONTIER Lynbrook NY 24270 100.00 18.88
3 FEDCO Jefferson City MO 64397 96.35 81.40
4 PASSAIC POLICE Passaic NJ 12227 94.32 62.97
5 SHAW-ROSS EMPLOYEES Miami FL 67327 92.30 70.55
6 BUCKS COUNTY EMPLOYEES Doylestown PA 65411 91.93 72.77
7 STATE FARM Bloomington IL 1273 91.86 72.49
8 MERCK EMPLOYEES Rahway NJ 1454 91.35 71.20
9 N.J.T. EMPLOYEES Waldwick NJ 9723 91.23 68.58
10 CHEVRON Oakland CA 24326 91.12 95.72
11 SCHLUMBERGER EMPLOYEES Sugar Land TX 67625 90.56 98.37
12 LIVE LIFE Fraser MI 7927 89.92 99.64
13 FIELDALE Baldwin GA 67385 89.53 64.58
14 LUFTHANSA EMP. East Meadow NY 20341 88.87 72.00
15 I.M. DETROIT DISTRICT Detroit MI 62167 88.69 82.44
16 ALDERSON FCI Alderson WV 10520 88.25 61.61
17 MCKEESPORT CONGREGATIONAL Mckeesport PA 1992 87.71 29.91
18 CALIFORNIA LITHUANIAN Santa Monica CA 64834 87.41 77.96
19 WHITE ROCK Philadelphia PA 23037 87.41 62.91
20 1ST BERGEN Hackensack NJ 24810 86.62 99.70
21 WCLA Olympia WA 68328 86.52 88.04
22 CHOPTANK ELECTRIC COOP EMPLOY Denton MD 20656 86.38 93.77
23 WORKMEN’S CIRCLE INCORPORATED Savannah GA 67892 86.11 76.61
24 APCO EMPLOYEES Birmingham AL 62728 85.42 79.02
25 CAPITAL AREA TAIWANESE Boyds MD 22652 85.31 58.41
26 MEAD COATED BOARD Phenix City AL 18192 84.87 74.09
27 LONG BEACH FIREMEN S Long Beach CA 67921 84.35 71.99
28 SELF RELIANCE NY New York NY 7217 84.10 66.14
29 FAITH COOPERATIVE Dallas TX 12859 83.83 85.89
30 ST. LOUIS NEWSPAPER CARRIERS Fenton MO 63055 83.61 75.83
31 STAR ONE Sunnyvale CA 68465 83.59 82.58
32 SM Mission KS 13941 83.54 82.14
33 DIRECTORS CHOICE Albany NY 68420 83.54 72.39
34 PUTNAM SCHOOL EMPLOYEES Eleanor WV 21107 83.26 85.79
35 ASBURY Washington DC 5227 83.20 89.47
36 GOYA FOODS EMPLOYEES Jersey City NJ 23678 83.18 89.55
37 TEXAS LEE Houston TX 18218 83.04 70.34
38 CONNECTICUT STATE EMPLOYEES Hartford CT 65728 82.99 79.39
39 MOOG EMPLOYEES East Aurora NY 15669 82.88 92.28
40 CHURCHILL COUNTY Fallon NV 11824 82.84 87.05
41 BYKOTA Brooklyn NY 20419 82.66 85.27
42 ST. JOSEPHS PARISH BUFFALO Buffalo NY 3306 82.52 87.13
43 DELAWARE RIVER & BAY AUTH EMP New Castle DE 16769 82.43 71.44
44 COBURN Beaumont TX 60409 81.86 90.58
45 TELCOE Little Rock AR 24202 81.85 91.91
46 EMPLOYEES Estherville IA 63299 81.73 90.36
47 ST. MICHAELS Craig CO 11340 81.63 61.70
48 LAFAYETTE Rockville MD 619 81.62 93.27
49 EMPIRE FINANCIAL Jackson NJ 22344 81.39 99.33
50 FIRST UNITY Mccomb MS 24859 81.12 96.75

Best Performers – Business Quality

The credit unions that have achieved the best Business Quality, those building and maintaining the highest quality books of business in terms of their potential for generating favorable bottom-line results, also tended to achieve levels of operational efficiency close to that of the industry average. In other words, these highest business quality credit unions do not appear to have sacrificed operational efficiency relative to the Industry as a whole. These credit unions with the best quality books of business are, as a group, smaller in size than the average of U.S. credit union in terms of assets (about 35% of the industry average), but generate a much higher levels of net income on average (approximately 1.3 times as much). In terms of number of offices and employees, they are also considerably smaller than the industry average in 2020. This combination of resources for the most effective credit unions may indicate that they are targeting select products and/or services designed to attract and retain a higher quality book of business. The ability of these credit unions to excel at building quality business portfolios while operating at competitive levels of operational efficiency means they are contributing to strong bottom-line results both operationally and strategically for the benefit of their members.  

Note that although all the credit unions shown in the table show a 100.00 rating for Business Quality, there was a differentiation in the ratings that was beyond two decimal places in significance shown in the table.

50 Best Business Portfolio Quality U.S. Credit Unions – 2020
Rank Institution Name City State CU NUMBER Operational Efficiency Rating Business Effectiveness Rating
1 DIAMOND VALLEY Evansville IN 14135 62.23 100.00
2 TEACHERS Oklahoma City OK 65774 61.19 100.00
3 TRUNORTH Ishpeming MI 6332 62.16 100.00
4 MEMBERS Winston Salem NC 60002 63.78 100.00
5 GATEWAY Clarksville TN 68171 60.75 100.00
6 PLUS  Las Vegas NV 86756 58.61 100.00
7 ALLEGHENY LUDLUM BRACKENRIDGE Brackenridge PA 4095 55.73 100.00
8 NORTH FRANKLIN Malone NY 21026 66.68 100.00
9 GOLDEN VALLEY Manteca CA 11652 64.67 100.00
10 SUSQUEHANNA VALLEY Camp Hill PA 18242 61.39 100.00
11 TEAMSTERS LOCAL 92 Canton OH 19430 60.61 100.00
12 NATCHEZ EDUCATORS Natchez MS 24896 68.32 100.00
13 EMBARRASS VERMILLION Aurora MN 4708 65.69 100.00
14 TEXSTAR Kenedy TX 17953 62.05 100.00
15 SHREVEPORT POLICE Shreveport LA 6048 70.68 100.00
16 GREATER WATERTOWN Watertown CT 660 51.19 100.00
17 CASCADE CENTRAL Hood River OR 68352 52.86 100.00
18 PRIORITY Russellville AR 18353 57.32 100.00
19 THE SOUTHERN Fayetteville GA 68638 63.29 100.00
20 OCEAN COUNTY EMPLOYEES Toms River NJ 18759 61.73 100.00
21 ACADIAN Lafayette LA 6898 58.83 100.00
22 PAMCEL COMMUNITY Pampa TX 8858 56.97 100.00
23 STRIP STEEL COMMUNITY Weirton WV 8418 65.40 100.00
24 SEVIER COUNTY SCHOOLS Sevierville TN 23060 64.17 100.00
25 TEAM FINANCIAL Houston TX 20147 64.06 100.00
26 1ST COOPERATIVE Cayce SC 24627 65.86 100.00
27 YUMA COUNTY Yuma CO 6424 65.97 100.00
28 FLORIDA A & M UNIVERSITY Tallahassee FL 187 77.36 100.00
29 PACIFIC CASCADE Eugene OR 14545 62.36 100.00
30 LEXINGTON MA Lexington MA 14750 57.25 100.00
31 GREATER NEVADA Carson City NV 68228 64.64 100.00
32 CENTRAL MISSOURI COMMUNITY Warrensburg MO 60383 59.26 100.00
33 ROCKLAND EMPLOYEES Spring Valley NY 15080 64.70 100.00
34 EDUCATIONAL Miami FL 176 63.47 100.00
35 SHELBY COUNTY Memphis TN 14733 61.65 100.00
36 PINAL COUNTY Casa Grande AZ 9099 62.07 100.00
37 SAVANNAH POSTAL Savannah GA 67364 55.36 100.00
38 HAVERHILL FIRE DEPARTMENT Haverhill MA 67710 59.29 100.00
39 KNOXVILLE LAW ENFORCEMENT Knoxville TN 11533 62.38 100.00
40 TECHNICOLOR Burbank CA 8230 61.50 100.00
41 WACO Waco TX 6368 60.30 100.00
42 VICKSWOOD Vicksburg MS 24876 59.11 100.00
43 SEAGOVILLE Seagoville TX 6008 61.91 100.00
44 RACINE MUNICIPAL EMPLOYEES Racine WI 66622 61.80 100.00
45 INNOVATIONS Panama City FL 7783 64.09 100.00
46 NORRISTOWN BELL Blue Bell PA 68297 61.20 100.00
47 GENERAL ELECTRIC EMPLOYEES Milford CT 4043 60.82 100.00
48 UMICO New Hartford NY 3313 55.20 100.00
49 NEW COVENANT DOMINION Bronx NY 24784 61.66 100.00
50 WUFFACE Richmond IN 15028 60.54 100.00

Worst Performers

Those 50 credit unions that most underperformed the industry in terms of Operational Efficiency for 2020 also underperformed in Business Quality as a group, with eight individual credit union exceptions. It is noteworthy that, as a group, these credit unions were significantly smaller than the typical credit union in the industry in terms of assets (approximately 2% of the industry average), number of personnel and number of offices, but produced net income that averaged slightly above the industry average. Only ten of these credit unions reported negative net income for the year 2020.  The group’s weak operational efficiency performance is likely due to a lack of economies of scale.

The 50 credit unions during 2020 that most underperformed the industry in Business Quality had mixed results in terms of individual credit union operational efficiency performance with 15 performing better than the industry average. As a group, these credit unions were much smaller than the typical institution in the industry in terms of assets (9% of the industry average), offices and employees. As a group, these lowest business quality credit unions, had and average positive net income (approximately 66% that of the industry average) with only 9 reporting negative net income for the year. 

Conclusion

In 2020, operationally smaller than average credit unions, those with fewer employees and offices, out-performed the rest of the industry in maintaining quality business portfolios and operating efficiently. It appears that these credit unions made decisions that had them target operational efficiency or business quality to achieve superior performance. Although not mutually exclusive, the industry’s best performers in one area generally did not excel in the other. In such unusually difficult and unpredictable times as experienced in 2020 from the COVID 19 economic shutdown, success for credit unions appeared to have come from focusing on a strength to rely on and to assure members benefited as a result.

The challenge for U.S. Credit Unions in 2021 will no doubt be identifying how to maintain its 2020 performance strength, business quality or operational efficiency, while improving the other to better assist it members to capture the benefits of the anticipated post-pandemic economic recovery. 


Should you have questions on the ratings or want access to the full list of all U.S. Credit Union Ratings for 2020, please contact Hoeg & Company, Ltd. at www.HoegCo.org, www.HoegCompany.com or gjhesq@hoegco.org.

Greg Hoeg

Greg Hoeg

Mr. Hoeg’s expertise includes strategic planning, operations improvement, organization design, competitive analysis and performance measurement/benchmarking. Corporate & consulting experience:  VP, Insurance - J.D. Power  Chief Administrative Officer ... Web: www.HoegCo.org Details