Feb. 23, 2015


  • Since most Credit Unions are Less than 100 million in shares, How do smaller credit unions compare to the larger credit unions. And are there uniqueness of each for these ratios?
  • The graphs bring this entire article to life. Comparing the larger asset size credit unions with the smaller ones brings valuable perspective. Also, it is good to know where these ratios should be for those of us new to the FI world. Thank you!
  • A better presentation because of the graphs, but a total copy from an article written in 2011 by Lydia Cole from Creditunions.com. Who is the editor here? http://www.creditunions.com/articles/15-ratios-every-board-member-should-know-part-1/
  • Thank you for your feedback, Anonymous. My name is Rebecca and I was the editor on both pieces. As you observed, they have the same format. We've found these "ratio" articles are quite popular with readers and have published several iterations with different readers in mind. The longer ones, like Lydia's, are so comprehensive in nature that some of the newer, more focused content can overlap. However, we strive to offer something new and different in all our content — like the graphs in this article — to attract not only new readers but also those who have been with us for a while, like you. Thanks for reaching out to CreditUnions.com, and I hope you keep reading and commenting.
    Rebecca Wessler
  • This article caught my attention and was intrigued by the efficiency ratio, in particular the concept of this being a ratio that all CU staff should know and understand how it is calculated. This ratio has been part of our scorecard for 7 years. We find that staff must always be reminded of what this measures, how it is calculated and that "a lower ratio is better". This year we are changing the components of the scorecard by taking a more granular approach to improving the efficiency ratio through specific activities. So far, when this has been shared with different groups, the light bulb has gone off and in a few short weeks, we are seeing a measureable impact towards the goals that have been set. At a high level, the pure efficiency ratio is understood. But to engage the staff and move the needle, the ratios need to be understandable and tangible for the general population. I look forward to the remaining installments and the feedback from the readers.
  • I think these ratios are great for evaluating the financial "sustainability" of the credit union, and really are the four main ratios used for bank performance. However, since credit unions have a unique mandate, one of the top four should be a "member benefit" ratio such as loans/shares etc
  • Thank you for your thoughts on this, this is the first installment of a series of articles where we profile various benchmarks that are relevant to credit unions and their employees. Please see the link below to learn more about Callahan’s unique credit union measurement metric, Return of the Member (ROM), which is all about quantifying how well credit unions are serving their members. http://www.creditunions.com/articles/callahan-return-of-the-member-rom-index-quantifies-member-value/ Additionally, we will be breaking out our ROM scoring system in an upcoming article so make sure to keep an eye out.
    Sam Taft
  • I disagree on the efficiency ratio. While promulgated by regulators, this ratio doesn’t tell whether income or expenses are the cause, it promotes leverage, and ignores the mission of credit unions as compared to banks. It is particularly misleading for small credit unions that may not seek as high of a return and give more back to its members. Not to say it does not have value when benchmarking an institution as a whole - rather that in isolation as one of the main “four metrics” it is a very poor metric.
    Brian K
  • Just checking. I don't think Mr. Taft has correctly calculated the efficiency ratio. I believe it should be operating expenses minus interest expense divided by total income? Also it's probably important to point out that for non-interest income and return on average assets, the numerator should be income annualized. I hope I'm correct here.
    Mark Overfield
  • Mark, Thanks for your comments. You are correct about the annualizing of non-interest income and ROA and the corrections have been made. Sam Taft
    Sam Taft