How To Leverage Data For Better Strategic Planning

Incorporating peer analysis is an ideal way to enhance the impact of planning season.

 
 

Strategic planning season brings with it grand expectations for credit union management teams to formulate a plan that guides their institution to success over the coming months.

Every institution approaches strategic planning differently. Some go on retreats with their management teams and boards; others stay close and engage a broader group of managers. Some hire consultants to provide guidance and perspectives on a range of issues; others rely on in-house talent to assemble content and shepherd the planning experience.

Regardless of the approach to or location of planning sessions, incorporating peer analysis is an ideal way to enhance the impact of strategic planning. After all, with current, accurate financial data at hand, for themselves as well as peers, credit unions can correct weaknesses and identify areas on which to capitalize.

Callahan & Associates’ Peer-to-Peer software contains hundreds of pre-built financial graphs and tables to assist in strategic planning. Knowing where to start and choosing what to analyze can be daunting, but that shouldn’t stop teams from putting together a relevant financial analysis presentation. That’s why Callahan has compiled 36 benchmarks covering six high-level areas of credit union financial performance to steer strategic planning in the right direction.

Here, check out select metrics from the high-level areas, then look below to learn more about other benchmarks and areas of interest.

Growth Trends

Membership Growth

A credit union’s business strategy is a major driver of its member growth.

More effective strategies for a given marketplace typically yield stronger member growth. The board’s philosophy toward service levels, delivery channels, product pricing, and breadth of services also influence member growth. Additionally, member growth is a great litmus test for evaluating the introduction of new products and services by a credit union.

MEMBERSHIP GROWTH

FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.19
© Callahan & Associates | CreditUnions.com

Other Growth Trend Ratios To Consider:

  • Share Growth
  • Loan Growth

Asset Quality

Delinquency Ratio

The delinquency ratio measures the credit risk of a loan portfolio. It is a forecaster of future loan losses; therefore, unusual increases or decreases generally affect future earnings.

The level of delinquency a credit union can sustain is a function of several factors, including loan income, credit risk management, and loan loss management. Risk-based pricing is often accompanied by higher delinquency, but credit unions typically compensate for that higher delinquency by charging higher interest rates and in turn, achieving higher loan yields.

A low delinquency rate, on the other hand, can imply a credit union’s underwriting policies are too conservative. Credit unions should evaluate this ratio in conjunction with their loan-to-share ratio, loan loss ratio, and ROA.

DELINQUENCY RATIO

FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.19
© Callahan & Associates | CreditUnions.com

Other Asset Quality Ratios To Consider:

  • First Mortgage Delinquency
  • Other RE Delinquency
  • Auto Delinquency
  • Credit Card Delinquency
  • Annual Net Charge-Offs

 

A Strategic Planning Report Tailored For Your Credit Union

2020 is just around the corner. As you prep and plan to have strategic conversations with your team start with a custom Strategic Planning Trend Report from Callahan. This report will be tailored to your credit union’s size, location, business strategies, and areas of strategic focus – and packed with historical data and visualizations that track your progress and compare you with relevant peers.

Request Your Report

Business Model

Loan-To-Share Ratio

A credit union’s loan and deposit acquisition performance drives its loan-to-share ratio. Unless liquidity is an issue, most credit unions concentrate on building the loan portfolio rather than focus on deposits.

A credit union’s operations — sales culture, marketing, product development, risk management, etc. — generally influences loan growth more than deposit growth. Non-operational factors, such as membership demographics, are what tend to influence deposit growth.

A higher loan-to-share ratio typically indicates greater profitability, and in broader terms, is an indication of how efficiently a credit union is leveraging its deposit portfolio to achieve stronger performance and create member value.

LOANS/SHARES

FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.19
© Callahan & Associates | CreditUnions.com

Other Business Model Ratios To Consider:

  • Interest Income/Average Assets
  • Interest Expense/Average Assets
  • Net Interest Margin
  • Non-Interest Income/Average Assets
  • Operating Expenses/Average Assets
  • Provision For Loan Loss/Average Assets
  • Return On Assets
  • Earnings Model
  • Net Worth Ratio
  • Risk-Based Capital Ratio

Productivity And Member Relationships

Members Per Employee (FTE)

The members per employee ratio measures the productivity of a credit union’s employee base. In theory, a higher ratio means a credit union is more productive, but other factors also play a part.

When examining the ratio, credit unions should also consider product penetration rates, members per branch location, the geographic distribution of the membership, and field of membership requirements. Strategic factors that impact the ratio include organizational goals — sales versus service models — growth, and product and technology development.

MEMBERS PER EMPLOYEE (FTE)

FOR U.S. CREDIT UNIONS | DATA AS OF 03.31.19
© Callahan & Associates | CreditUnions.com

Other Productivity And Member Relationship Ratios To Consider:

  • Assets Per Employee (FTE)
  • Loan Originations Per Employee (FTE)
  • Loan Originations Per Member
  • Income Per Employee (FTE)
  • Salary And Benefits Per Employee (FTE)
  • Revenue Per Salary And Benefits
  • Share Draft Penetration
  • Auto Penetration
  • Credit Card Penetration
  • Yield On Loans
  • Yield On Investments
  • Average Loan Balance
  • Average Share Balance

Other High Level Areas To Consider

  • Loan Portfolio Composition
  • Deposit Portfolio

Analyzing performance against peers using the ratios above helps leaders make better decisions during strategic planning. All 36 of them are available in the strategic planning packet in Callahan’s Peer-to-Peer software.

If you’re a Callahan client, click here to gain access to these ratios.

If you’re not a Callahan client, click here to learn about gaining access to these ratios and others with Peer-to-Peer.

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Aug. 26, 2019


Comments

 
 
 
  • I am interested in having a deep understanding on the ratios that are provided by NCUA (5300 report). Is there a resource that familirizes me with the ratios, thier meaning and impact, as well as the standard of each ratio for a financially healthy credit union. I am looking to pay for this service out of pocket and the CU will not be paying. Thanks. Sherry
    Sherry Javad