There are numerous benchmarks to measure how efficiently a credit union manages its operations. Some focus solely on interest income and expenses, while others concentrate on the non-interest side of a business. The efficiency ratio of choice for me examines the relative size of non-interest expenses (commonly known as OpEx) compared to the sum of net interest income, fee income, and other operating income — excluding provision expenses.
By using net interest income in the denominator, we can account for changes in interest rates on both the income and expense side of the business. Additionally, we add in the primary non-interest income components — fee and other operating income — to round out the reach of this benchmark. The result is a metric that provides insight into an institution’s operational income and expense structure.
As of Sept. 30, 2016, the average efficiency ratio for the credit union industry was 73.6%, a slight improvement from a year ago when it stood at 73.9%. With efficiency, the lower the number, the better. Another way to read or interpret 73.6% is to put it in context of what it’s measuring; for example, on average, credit unions spent $0.74 (rounded up) to earn $1 of revenue.
Below is a table of the leaders in efficiency for credit unions with more than $50 million in assets.
CREDIT UNION EFFICIENCY
FOR U.S. CREDIT UNIONS >$50 MILLION IN ASSETS | DATA AS OF 09.30.16
© Callahan & Associates | www.creditunions.com
|
|
Credit Union |
State |
Assets |
Efficiency Ratio
(Excluding PLL) |
Operating Expense
/Average Assets |
ROA |
|
1 |
Long Beach Firemen’s |
CA |
$178,386,667 |
36.5% |
0.58% |
1.34% |
|
2 |
APCO Employees |
AL |
$2,737,384,832 |
37.2% |
0.38% |
0.80% |
|
3 |
Employees |
IA |
$88,985,474 |
37.3% |
1.10% |
2.18% |
|
4 |
CommunityWide |
IN |
$393,267,162 |
37.3% |
1.47% |
1.12% |
|
5 |
Southern |
TX |
$92,706,378 |
37.6% |
1.21% |
1.30% |
|
6 |
California Lithuanian |
CA |
$113,334,945 |
40.7% |
0.63% |
1.18% |
|
7 |
Dawson Co-op |
MN |
$144,381,738 |
41.6% |
1.13% |
1.88% |
|
8 |
Merck Employees |
NJ |
$1,974,000,706 |
42.3% |
0.20% |
0.39% |
|
9 |
ACIPCO |
AL |
$148,249,923 |
42.4% |
1.21% |
2.16% |
|
10 |
NCPD |
NY |
$730,234,623 |
42.4% |
0.55% |
0.97% |
Source: Peer-to-Peer Analytics by Callahan & Associates.
How Do You Compare?
Want to know where your credit union ranks in terms of efficiency against local and national peers of a similar size? Contact us to find out.
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