CU "Health" Scores Take Tumble, Glatt Firm Finds
A North Carolina firm, Glatt Consulting LLC, which tracks financial data, announced Friday it will begin publishing its industry "HealthScores" and one key finding is a noteworthy second quarter drop in overall CU conditions.
"While the credit union community has seen improvement in scores on credit quality, efficiency and expense management, there have been significant declines in earnings and growth which is combining to drive down the aggregate score," said Tom Glatt Jr., head of the Wilmington, N.C., firm.
The latest statistics drawn from the firm's research--covering such areas as capital, asset quality and liquidity--show an overall 2.38% HealthScore ranking in the second quarter, a 1.70% drop from the first quarter and a sharp 6.74% decline from the same period a year ago.
The Glatt firm computes its composite HealthScore data for client CUs and now for industry distribution on a 5-point scale with 5 as most healthy and 0 as least healthy.
Glatt, who is the son of the ex-president/CEO of Realtors FCU, said his firm will begin circulating its HealthScore report on a wider scale starting next week "based now on very challenging conditions tied to the corporate situation, the assessments and the tough economic climate in many parts of the country."
Echoing others on NCUA's delay in issuing its corporate restructure rules, Glatt said that while allowing more time is commendable since "the industry deserves a solid response," there is an unfortunate side effect for CUs and the corporate system.
"There is this fear of uncertainty of what happens until the next meeting and the delay just adds to it," he said.
The second quarter HealthScore data, he said, does show that while throttling asset growth has helped some CUs minimize net worth degradation and slow the decline in net worth scores, "the strategy may be having a negative impact on public perception regarding the value of credit union relationships."
Indeed, "a number of community/social media posts show an increase in complaints regarding credit union interest rates, a primary tool used for growth management," said Glatt, whose firm counsels a group of large CUs on financial strategy and mergers.