Oct. 16, 2006


  • Thank you for your comment. I agree that no single ratio adequately characterizes the extent to which a credit union fulfills the needs of its members.
    Paul Seizert, author
  • Mr. Seizert writes a great article but misapplies the appropriate logic. The "efficiency ratio " has an unerlying assumption that all institutions are striving to a) minimize expenses and b) maximize income. While "a" is hopefully true for all institutions; "b" (maximizing income) is not a"given" for a not for profit credit union. If a CU is functioning properly it will be providing member-owners with higher savings rates,lower loan rates and fewer fees - all of which serve to reduce the denominator in the efficiency ratio equation! In fact, in a perfect "theoretical world" a stable, well capitalized CU would be entirely justified in having an efficiency ratio of 100% - where net revenue exactly equals operating expenses - comprendez? CU's are a uniquely different way of thinking; we seriously err and confuse when we look to "banking" models and ratios to give meaning to our existence. Brings to mind the comparison of an apple with an ....
    jim blaine