Efficiency Ratio

Credit unions manage expenses despite economic challenges.


Corporate writedowns, NCUSIF stabilization expenses, low interest rates, and other non-operating gains are putting pressure on credit unions' bottom lines. Expense management is now essential to generate positive results. However, rather than slash expenses, which could have a negative impact on members, credit unions are operating more efficiently. 

The efficiency ratio quantifies how well a credit union is using its expenses by measuring how much the credit union has to spend in order to generate $1 of revenue. The metric is similar to the operating expense ratio, and a lower value is better. Additionally, the formula's multiple variables provide credit unions with a range of strategic options to influence the ratio’s outcome. For more on the ratio’s definition and to see industry and peer group averages, read How to Examine the Efficiency Ratio.

Leaders in Efficiency Ratio
Data as of June 30, 2010 | Credit Unions over $20M in Assets
Rk Credit Union St Efficiency Ratio Yield on Earning Assets Annualized Oper. Exp. / Avg Assets Total Assets
1 SOUTHERN TX 23.23% 6.25% 1.22% $53,634,598
2 SM KS 28.19% 4.48% 0.74% $57,843,421
3 WORKMEN'S CIRCLE GA 28.59% 4.87% 0.87% $43,675,483
4 LUFTHANSA EMPLOYEES NY 29.50% 3.63% 0.41% $90,921,327
5 PROGRESSIVE NY 30.69% 6.46% 1.41% $607,283,782
6 WHITEFISH MT 30.77% 4.29% 0.78% $1,191,549,038
7 STAR ONE CA 32.18% 3.57% 0.72% $5,240,381,871
8 AIR LINE PILOTS ASSOCIATION IL 32.35% 3.22% 0.50% $192,305,724
9 GLENDALE AREA SCHOOLS CA 32.92% 3.74% 0.88% $301,349,690
10 CAPROCK SANTA FE TX 33.20% 7.06% 2.10% $31,203,225
Source: Callahan's 2011 Credit Union Directory



Oct. 25, 2010


  • The table is what it is: an industry leader table.

    Both reader comments illustrate exactly why we encourage credit unions to create very customized peer groups for analysis instead of broad industry or even national asset-based groups as used often by examiners, etc. Not meaningless, just not a very telling single lens to evaluate performance.

    We call it strategic benchmarking and it is why we created our Peer to Peer credit union analysis software for credit unions over a decade ago. There are a range of ways CU executives use Peer – from stakeholder/staff reporting to identifying best practice to properly framing performance with the examiner.

    Strategic benchmarking is about creating different peer groups based on credit unions that have a similar loan composition, similar FOM foundation, similar geographic/economic trends, similar retail delivery expense strategy (# of branches or employees to member, etc). There is no one "right" way to benchmark and gauge performance success/opportunities but having multiple lenses is far better than burring your head in the sand or relying solely on macro indicators. There are countless peer group possibilities.

    Hope this helps some. The leader table here is food for thought. Definitely helpful to understand and I guarantee there are relevant business model stories within some of these CU that are applicable to most CUs. But, no argument, it is even more helpful to compare your own performance to your own peers.
    Scott Patterson (Callahan)
  • While I don't put a great deal of emphasis on peer assessments due to the different business models for different credit unions, I do try to understand those differences and learn from areas where we are similar or where their uniqueness is something I can use. To dismiss the value of studying them because they are "very, very unique" (a pretty blanket statement - what's your supporting info?) suggests that someone is missing an opportunity to improve.
    Rob Givens
  • These credit unions are very very unique and specialized and its a waste of time to try and understand and learn from them.