Callahan’s Return Of The Member [ROM] Index Quantifies Member Value

The ability to create shared member value differentiates credit unions from other financial services providers.


Credit unions are financial organizations that serve their member-owners as opposed to shareholders. They are not profit-driven and as such can maximize member value at the expense of the bottom line (keeping in mind some net income is necessary for future product and capital investments). The industry prides itself on offering superior rates, products, and services. But how can credit unions quantify such member value?

ROM provides a comprehensive scoring system of member value that looks beyond the traditional safety and soundness issues covered by NCUA’s CAMEL scoring and other regulator examinations.

Because credit unions continually strive to improve their member service — whether by offering new products, competitive rates, or more services — Callahan’s Return of the Member (ROM) measure attempts to capture a more comprehensive view of member value and weighs aspects such as:

  • Are the credit union’s loan rates lower or deposit rates higher than its competitors?
  • How many products and services does the credit union offer?
  • How many members are using these products?

The History Of ROM

Credit unions serve more than 92.5 million members. That's more than 30% of the U.S. population. As credit unions continue to grow in membership and gain in popularity as an alternative to for-profit financial services providers, they need a way to demonstrate the tangible benefits of credit union ownership.

The (ROM) index came about when a credit union board of directors asked its CEO to explain a $1 million drop in net income over a year. The drop is the result of the credit union increasing its dividend payments to its members, the CEO explained. The net operating results were distributed differently — the members, not the credit union, received the earnings — but the year was still satisfactory. The board continued to stress, “How do you measure member return?” Enter the Return of the Member index.

In 1996, Callahan & Associates, a credit union research and consulting firm based in Washington, DC, developed a holistic scoring system that looks beyond the traditional safety and soundness issues covered by NCUA’s CAMEL scoring and other examinations. ROM scoring uses data from the 5300 Call Report to provide an assessment of member value.

ROM calculation uses 5300 Call Report data to capture a holistic view of a member’s relationship with the credit union and focuses on three core functions: savings, lending, and product usage.

The Core Components Of ROM

ROM attempts to capture all aspects of a member’s relationship with the credit union, and Callahan has altered and reweighed this member-value metric over the years to reflect the evolution of the credit union industry and the ever-changing Call Report. ROM calculation considers three core credit union functions: savings (via the return to the savers metric), lending (via the return to the borrowers metric), and product usage (via the member service usage metric). ROM rank takes into account a credit union's performance in comparison to its asset-sized peer group.

Return To The Savers

The first component of the Return of the Member analysis is Return to the Savers. It measures how well a credit union is providing deposit services to its members. In addition to measuring the average dividends paid, this number also takes into account the change in average share balance, the number of share accounts per member, and the three-year share growth of the credit union. The change in average share balance highlights credit unions that are attracting shares. Individual weights of each component include:

  • Dividends / Income (25%) — What portion of income does a credit union pay back to its members? This is generally referred to as the payout ratio..
  • Average Dividends Paid (25%) — What is the average dividend at the credit union? This is calculated by taking the total dividends and interest paid on deposits paid by the credit union divided by total shares at the credit union.
  • Change In Average Share Balance Per Member (15%) — Are members increasing their savings balance at their credit union? A greater increase yields a higher score.
  • Three-Year Compound Share Growth (20%) — What is the member response to savings offerings over the last three years? The three-year window provides a longer-term view of saving trends at the credit union and can smooth any aberrant results caused by one-time events.
  • Number Of Share Accounts Per Member (15%) — How are members responding to the savings products that the credit unions offers? Not only is this a measure of how many products offered, but also whether each of them are attractive for the member to use at the credit union and not go elsewhere.

Return To The Borrowers

The lending component, Return to the Borrowers, recognizes credit unions were created to provide credit to their members at a reasonable cost. The index rewards those credit unions that offer a lower rate on loans, but it also considers the historical growth in lending and the variety of products offered to its members. In recent years, credit unions have started to sell more loans to the secondary market. To accommodate credit unions becoming more involved in the secondary market, Callahan added the loan servicing portfolio as a component of the score. By retaining servicing, credit unions are able to maintain closer relationships with their members. To ensure this activity is reflected in the member relationship, each credit union’s mortgage servicing portfolio is added to outstanding loans when calculating the loan-to-share ratio. Individual weights of each component include:

  • (Loans + Servicing Portfolio – Purchased Participations) / Shares Ratio (includes mortgage servicing) (30%) — How well is the credit union converting savings back into loans? With this also being a measure of liquidity, this can also measure the credit union’s capacity to provide more loans.
  • Yield On Average Loans (20%) — Which credit unions are offering the lowest overall yield? Lower loan rates can drive product growth and increase value to the members.
  • Number Of Loan Accounts Per Member (10%) — Is the credit union providing a variety of loan services? Are these services attractive enough to gain usage by the membership?
  • Three-Year Compound Loan Growth (15%) — What is the member response to the lending programs at the credit union over the past three years? Trends seen here provide a longer-term view of loan growth at the credit union and not solely a snapshot of a quarterly or annual result.
  • Amount Of Loans Granted Per Member YTD (15%) — How much in loans did the credit union distribute during the past year to its membership?  As a major gauge of loan activity, this can provide a key view of current lending trends at the credit union.
  • Growth In Average Loan Balance Per Member (10%) — How are the members using the credit union's consumer lending programs? Increased balances indicate more product usage and can be a metric of how members are valuing loan products.

Member Service Usage

The final component is Member Service Usage. This component measures how efficiently a credit union provides and promotes services to its members. The leaders in this category are those credit unions that have a high number of core account relationships with their members. The penetration rates are a key metric as to how members value the credit union’s product offerings. Do members consider the credit union their primary financial institution (PFI) or are they looking elsewhere for their other financial needs? Moreover, measuring productivity of employees by calculating the amount of revenue generated per dollar of salary and benefit expense helps to capture the staff involvement in member activity. There is a positive correlation between member activity and the amount of income generated per employee as credit unions with a more active membership base are more likely to use the credit union as their PFI and generate more revenue. Individual weights of each component included:

  • Number Of Share Draft Accounts / Members (20%) — Do members consider the credit union to be the primary financial institution? The PFI is most often defined as the institution the member has their checking account with.
  • Number Of Auto Loan Accounts / Members (15%) — Auto lending is traditionally a core expertise of credit unions and accounts for approximately 40% of the average credit unions loan portfolio. Are members using the credit union to finance their auto purchases?
  • Number Of Credit Card Accounts / Members (15%) — How much has the credit union penetrated the membership for credit cards?  Rates and reward programs generally drive this metric.
  • Number of First Mortgages / Members (15%) — Does the credit union provide a large percentage of members with mortgages? Mortgages are a very sticky product and are a good measure of how involved members are with the institution.
  • Fee Income / Members (10%) — What amount of fees does the average member incur at the credit union? High levels of fee income generally decrease member value.
  • Three-Year Compound Member Growth (15%) — Is the credit union bringing in new members? Attractive rates and products attract new members.
  • $ Total Income/$ Salary and Benefit (10%) — How effective is the credit union staff at generating income from member activity? The higher the ratio, the more effective the credit union is at generating revenue with its current staff level. This often reflects deeper member relationships.

ROM ranks credit union performance according to asset-sized peer groups.

How To Calculate ROM

A value between 1 and 100 is assigned to each credit union, depending on its performance in the three core ROM areas. The primary credit union's final score is a combination of the weighted average of the percentile ranking for each ratio. Credit unions with a score of 100 are considered leaders in providing services to their members.

Sample ROM Score Metrics

Components Percentile Rank Weight Final Score
Return to Savers 100 30% 30
Return to Borrowers 100 35% 35
Member Service Usage 100 35% 35
Total Raw ROM Score     100

An Example: ABC Credit Union

The first ratio in the savings component of ROM is dividends to income. ABC Credit Union, a $1 billion institution, has a dividends-to-income ratio of 9.59%. Rather than use that ratio, we take the percentile rank of this number within ABC's peer group. Below is an example using ABC's Return to the Savers (ROS).

Return To The Savers Calculation

ABC Credit Union

ABC's Values   Percent Rank In Peer Group Assigned Weight Weighted Score
Dividends/Income 9.59% 55.2% x25% =13.82
Average Dividends Paid 0.57% 64.5% x25% =16.14
Change in Average Share Balance -2.24% 22.7% x15% =3.42
Number of Share Accounts Per Member 2.32 90.3% x20% =18.06
3-Year Share Growth 2.08% 65.4% x15% =9.81
ROM Raw Score       61.25

*Raw score of 61.25 equates to percentile rank of 74.68

The raw score of 61.25 represents ABC Credit Union's weighted score in the first of the three core areas. This weighted score is then ranked as a percentile versus all other peer credit unions for a final ROS score of 74.68. The same kind of calculation is used to determine ABC's scores in the Return to the Borrowers and the Member Service Usage components. The weightings for those can be seen above. After running through similar calculations with those, an example of the total ROM score calculation is now provided.

Total Return Of The Member

ABC Credit Union

ABC's Values Percentile Rank Assigned Weight Final Score
Return to Savers 74.68 x30% =22.4
Return to Borrowers 80.52 x35% =28.2
Member Service Usage 88.19 x35% =30.9
ROM Raw Score     81.45

*Final score of 81.45 equates to percentile rank of 94.09.

How Do You Compare?

What is your ROM score? Find out the value of your member return in this Callahan metric developed especially for credit unions. Contact Callahan to see where your credit union ranks.



What Does A 81.45 Raw Score Mean?

The raw score of 81.45 represents ABC Credit Union's weighted score for ROM. This raw score is then ranked as a percentile versus all other peer credit unions for a final ROM score of 94.09. ABC Credit Union's ROM score indicates it is performing well above the average score of 50. Therefore, ABC is performing better than 94% of the credit unions in its peer group.

There are still areas for improvement, however. ABC ranked in the 80.52 percentile in Return to Borrowers. This might indicate ABC is offering less competitive loans rates to its members, leading to lower penetration rates. On the other hand, ABC performed much better than its peers in Member Service Usage, scoring a 88.19.

The drive for increasing member value is generally to promote growth, leading to the ability to add more products and services while giving more back to the members in the form of better rates. This cycle benefits both the member and the credit union.

Does Higher Member Value Yield Greater Credit Union Performance?

Do credit unions with higher Return of the Member scores perform better than those with lower scores? When analyzing the top performers in Return of the Member, it is safe to assume the credit unions at the top of the list will be strong performers in the metrics included in the various ROM components. How do they fare when looking at other criteria? The below group was formed using those credit unions with $1 billion plus in assets as of December 31, 2016.

  12-Month Loan Growth 12-Month Share Growth Net Interest Margin ROA Operating Exp./ Avg. Assets Delinquency Ratio
Top 10 Percentile 15.67% 13.45% 2.67% 1.25% 2.61% 0.51%
Middle 10 Percentile 11.28% 9.24% 2.82% 0.85% 3.16% 0.55%
Difference 4.39% 4.21% -0.15% 0.40% -0.55% -0.04%

Source: Peer-to-Peer Analytics by Callahan & Associates.

Within that asset group, those credit unions that scored in the top 10 percentile of ROM were compared to those who were in the 45 to 55 percentile range. Why is the group ranked higher in ROM performing much better in other areas? Providing high member value creates a virtuous cycle of performance as credit unions provide products and services that maximize member welfare while increasing the probability that members fully use the offerings of the financial institution.

Callahan’s ROM scoring system was not designed to be the final word on credit union performance. However, it is intended to be an important measure of the economic return created for individual members relative to other credit unions of similar size given available public data.




Dec. 11, 2019



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