Q3 2020 YTD operational efficiency & effectiveness ratings of U.S. credit unions

by Greg Hoeg, Hoeg & Company, Ltd.

Hoeg & Company, Ltd. has completed its review of the U.S. Credit Union Industry for Q3 2020 YTD and named the 50 most Operationally Efficient and 50 most Operationally Effective institutions nationally.  The review included 5,224 credit unions operating in the U.S. and measured their performance in terms of how efficiently they managed their operations and how effectively they built and maintained quality business portfolios.  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 quality of 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
  • Operational Effectiveness – A measure of the quality of the business portfolio each credit union has built in terms of its bottom-line potential compared to industry best performers 

Hoeg & Company developed the ratings by applying Efficient Frontier Analysis (EFA), a concept from investment portfolio theory used to identify best performing investment portfolios, to credit union operational measures.  The evaluation is objective, using publicly available data reported in credit union financial statements (Call Reports) available from the National Credit Union Administration* and with no input from the Credit Unions themselves. The ratings are scored 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 – Q3 2020 YTD 

The U.S. Credit Union Industry in Q3 2020 YTD 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, interest rate declines and stimulus payment related activity.  Now, as signs of a possible lessening of the pandemic are starting to be seen, the credit union industry must determine how to adjust again.

In such an environment competitive success for credit unions in providing benefits and services to members is largely dependent on having a portfolio of business that maximizes positive bottom-line results through low interest costs and/or managing business operations very efficiently.

Best Performers 

The most Operationally Efficient credit unions nationally tended to be larger than the average of all U.S. credit unions in terms of assets and generated larger than average net incomes in the first three quarters of 2020.  In terms of size, as measured by number of offices and employees, the most efficient credit unions are smaller than the national average.  This combination of low resource levels and high business volumes, as a group for the top 50, have resulted in superior operational efficiency.  Unfortunately, these most efficient credit unions were, as a group and individually, all well below the industry average for effectiveness in building and maintaining quality business portfolios, thus countering much of the benefit gained by being operationally efficient.

50 Most Operationally Efficient U.S. Credit Unions – Q3 2020 YTD
Rank Institution Name City State Operational Efficiency Rating Business Effectiveness Rating
1 CRIERS Monroe Township NJ 100.00 61.68
2 CHEVRON Oakland CA 98.82 71.84
3 FEDCO Jefferson City MO 98.10 64.63
4 UNION CONGREGATIONAL New York NY 95.43 75.31
5 SHAW-ROSS EMPLOYEES MIAMI FL 95.06 58.26
6 STATE FARM Bloomington IL 94.49 60.02
7 BUCKS COUNTY EMPLOYEES Doylestown PA 94.28 60.07
8 PASSAIC POLICE PASSAIC NJ 94.18 53.57
9 N.J.T. EMPLOYEES Waldwick NJ 93.84 57.74
10 SCHLUMBERGER EMPLOYEES Sugar Land TX 93.83 76.38
11 MERCK EMPLOYEES RAHWAY NJ 92.97 59.59
12 BYKOTA Brooklyn NY 91.97 75.97
13 LUFTHANSA EMP. EAST MEADOW NY 91.84 61.10
14 FIELDALE BALDWIN GA 91.46 54.24
15 HEARD A.M.E. ROSELLE NJ 91.06 70.40
16 LIVE LIFE STERLING HEIGHT MI 91.01 78.77
17 PARAMOUNT BAPTIST CHURCH Washington DC 91.00 46.68
18 SPRINGFIELD FIREFIGHTERS Springfield IL 90.85 79.00
19 MCKEESPORT CONGREGATIONAL McKeesport PA 89.55 24.75
20 CHOPTANK ELECTRIC COOP EMPLOY DENTON MD 89.45 75.09
21 LANGSTON BAG CO. EMPLS. SAV. ASSN. MEMPHIS TN 89.38 36.17
22 APCO EMPLOYEES BIRMINGHAM AL 89.38 66.59
23 ARKANSAS FARM BUREAU Little Rock AR 89.35 78.25
24 CALIFORNIA LITHUANIAN Santa Monica CA 89.35 64.56
25 ALDERSON FCI Alderson WV 89.00 52.91
26 W. VIRGINIA STATE CONVENTION Hilltop WV 88.48 78.04
27 FOURTH WARD amite LA 88.09 75.57
28 WORKMEN’S CIRCLE INCORPORATED Savannah GA 87.92 62.89
29 WCLA OLYMPIA WA 87.58 72.12
30 COBURN Beaumont TX 87.44 76.36
31 ST. MICHAELS CRAIG CO 87.35 62.41
32 MEAD COATED BOARD Phenix City AL 87.04 63.81
33 FAITH COOPERATIVE Dallas TX 86.57 71.21
34 MINGO COUNTY EDUCATION Williamson WV 86.56 65.81
35 EMPIRE FINANCIAL JACKSON NJ 86.44 82.34
36 FROID FROID MT 86.28 82.19
37 TRINITY BAPTIST CHURCH FLORENCE SC 86.21 80.83
38 EMPLOYEES ESTHERVILLE IA 86.20 76.36
39 DIRECTORS CHOICE ALBANY NY 86.07 61.80
40 CHURCHILL COUNTY FALLON NV 86.05 71.72
41 LONG BEACH FIREMEN S Long Beach CA 85.87 60.35
42 GOYA FOODS EMPLOYEES Jersey City NJ 85.78 72.60
43 M.W.P.H. GRAND LODGE OF ILLINOIS CHICAGO IL 85.63 81.72
44 CONNECTICUT STATE EMPLOYEES HARTFORD CT 85.63 69.70
45 SM MISSION KS 85.51 70.91
46 SELF RELIANCE NY New York NY 85.50 58.44
47 ST. LOUIS NEWSPAPER CARRIERS fenton MO 84.98 66.68
48 ST. JOSEPHS PARISH BUFFALO Buffalo NY 84.89 73.64
49 MOOG EMPLOYEES EAST AURORA NY 84.71 76.84
50 ITALO-AMERICAN Glendale NY 84.58 73.45

The most Operationally Effective credit unions, those building and maintaining the highest quality books of business for bottom-line results, also tended to experience better than average levels of operational efficiency.  These credit unions also are, as a group, larger in size than the average of U.S. credit unions in terms of assets and net income.  In terms of number of offices and employees they are also larger than the industry average, unlike the most operationally efficient credit unions for Q3 2020 YTD.  This combination of resources for the most effective credit unions may indicate that these credit unions are providing a more thorough and higher quality service to their members, thus attracting and retaining 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 these most effective credit unions are contributing to strong bottom-line results both operationally and strategically.

50 Most Operationally Effective U.S. Credit Unions – Q3 2020 YTD
Rank Institution Name City State Operational Efficiency Rating Business Effectiveness Rating
1 CHAVES COUNTY SCHOOL EMPLOYEES Roswell NM 73.23 99.99
2 COLUMBUS METRO Columbus OH 66.71 99.99
3 ST. PAUL SAINT PAUL MN 66.29 99.98
4 ALABAMA TEACHERS GADSDEN AL 64.52 99.98
5 TIPPECANOE LAFAYETTE IN 66.66 99.98
6 MOBILOIL Beaumont TX 67.15 99.96
7 ARDENT PHILA PA 66.16 99.95
8 SIERRA CENTRAL YUBA CITY CA 68.45 99.95
9 SUN EAST ASTON PA 67.91 99.94
10 DOWNEAST Baileyville ME 67.70 99.92
11 EXTRA WARREN MI 69.61 99.92
12 EATON EMPLOYEES EDEN PRAIRIE MN 52.26 99.91
13 MEMBERS CHOICE ASHLAND KY 66.27 99.91
14 SACRAMENTO Sacramento CA 71.43 99.91
15 BELLWETHER COMMUNITY MANCHESTER NH 64.83 99.91
16 OUR MOTHER OF MERCY PARISH HOUSTON Houston TX 66.31 99.91
17 MERIDIAN MISSISSIPPI ANG MERIDIAN MS 71.77 99.90
18 LOUP EMPLOYEES GONZALES LA 71.66 99.89
19 IRON COUNTY COMMUNITY HURLEY WI 68.59 99.89
20 POTLATCH NO 1 LEWISTON ID 67.33 99.87
21 CLIFTY CREEK EMPLOYEES MADISON IN 66.51 99.86
22 FIRST FLORIDA Jacksonville FL 67.71 99.86
23 MINI-CASSIA EMPL. Burley ID 58.53 99.85
24 OMNI COMMUNITY BATTLE CREEK MI 70.87 99.83
25 GOVERNMENTAL EMPLOYEES LA CROSSE WI 67.45 99.82
26 NORSTAR Britton SD 69.02 99.82
27 IQ VANCOUVER WA 68.13 99.81
28 ASCEND TULLAHOMA TN 69.24 99.81
29 FRIENDLY Aliquippa PA 70.00 99.81
30 METRUM COMMUNITY CENTENNIAL CO 69.36 99.79
31 INTERSTATE UNLIMITED Jesup GA 70.91 99.78
32 MIDDLE TENNESSEE COOKEVILLE TN 70.38 99.78
33 UNIWYO Laramie WY 65.94 99.78
34 GOOD SAMARITAN SIOUX FALLS SD 70.64 99.76
35 PFD FIREFIGHTERS CREDIT UNION INC. Portsmouth VA 67.11 99.76
36 DORT FINANCIAL GRAND BLANC MI 68.11 99.76
37 COASTHILLS Santa Maria CA 65.07 99.75
38 GUARDIAN Montgomery AL 67.79 99.75
39 PATTERSON PUMP TOCCOA GA 71.01 99.73
40 GUADALUPE PARISH Antonito CO 70.43 99.73
41 KRATON BELPRE BELPRE OH 67.23 99.72
42 MOBILE POSTAL Mobile AL 66.55 99.72
43 PLANITES Chicago IL 63.15 99.72
44 L. A. MISSION SAN FERNANDO CA 69.73 99.72
45 NORTHLAND AREA OSCODA MI 64.72 99.71
46 VIA CREDIT UNION Marion IN 67.34 99.70
47 BREWTON MILL BREWTON AL 65.07 99.69
48 MISSION San Diego CA 68.02 99.66
49 ACU ABILENE TX 72.29 99.66
50 FORT PECK COMMUNITY Fort Peck MT 62.73 99.65

Worst Performers

Those 50 credit unions that most underperformed the industry in terms of Operational Efficiency for the first three quarters of 2020 also all underperformed in operational effectiveness.  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, number of personnel and number of offices and produced negative net income.  It is noteworthy that only one of these credit unions has a positive net income for the first three quarters of 2020.  It appears that the group’s weak operational efficiency performance is likely due to a lack of economies of scale.

The 50 credit unions in Q3 2020 YTD that most underperformed the industry in Operational Effectiveness had mixed results in terms of individual credit union operational efficiency performance with 12 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, offices and employees. As a group, these least effective credit unions had negative net income, with 18 achieving positive net income. 

Conclusion

Ultimately, institutional size matters to credit union success in economically difficult times such as the industry experienced thus far in 2020.  Orienting a credit union’s operations toward building and maintaining a quality book of business tends to carry with it operational efficiency, whereas achieving operational efficiency does not appear to assure operational effectiveness.  Although management’s instinctual response to harsh economic conditions might be to hunker down and cut costs, the data shows that focusing on effectively building and maintaining a quality book of business to be the best strategy for credit unions in dealing with challenging times

 

*Hoeg & Company, Ltd. uses only data provided by the National Credit Union Administration in the analysis and rating of credit unions and makes no claims as to the accuracy or completeness of such data.

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