Ward-Smith's consulting team initiated the high performance tracking system nine years ago as a method of measuring effectiveness of credit union performance on a nation-wide basis. "It's simply a standard for seeing which credit unions are really connecting with members by getting members to do more banking with them," he said.

But while Ward-Smith is pleased that the percentage of high performing credit unions has risen, the industry still has a great distance to go.

"The not-so-good news is this still only reflects 6% of all U.S. credit unions. We still see far too many on the down-slope side of the performance chart."

Ward-Smith said he had no direct evidence of a reason the number of high performing credit unions rose last year, except to speculate that more credit union executives and boards might be realizing that the key to the strongest and most sustainable growth is not to simply keep adding members but to better serve and incorporate the members the CU already has.

But he also noted that accounting changes, such as purging CU roles of inactive members could have artificially moved some CUs onto the list.

Credit unions should strive to become high performing CUs because, Ward-Smith said, those that do are generally far healthier financially than those who do not. According to his figures, high performing credit unions outperform other credit unions by a wide margin in account connections with members–twice the checking accounts, and three-to-four times the members using other deposit and credit accounts.

High performing credit unions also have deposit and credit balances twice as high as those of non-HPCU members. In addition, fully 20% of members of high performing credit unions hold credit union credit cards; other credit unions have only 6% of their members holding these accounts and the average credit card balance among the HPCU members is more than twice that of the non-HPCU members.

"This again just confirms the tremendous advantage of cooperatives. The more members use the credit union and its services, the more effective it becomes…so that credit unions that do more business with members are able, in turn, to do more for members," Ward-Smith said.

So, if there are demonstrable benefits to being a high performing credit union, what prevents more credit unions from achieving that status?

Ward-Smith contends that the biggest shift required to become a high performing credit union is a change in thinking. A credit union has to self-consciously make the decision that its highest priority will be finding out what their members' financial needs are and setting about to meet them. "A big chunk of this is just awareness," Ward-Smith said. "There is so much emphasis on asset size and on the number of members that credit unions can just lose sight of how they are supposed to be helping the members they already have!" Ward-Smith pointed out that the only universally accepted industry standard for measuring credit unions, the NCUA's CAMEL rating, does not measure achievement of any sort. It is totally focused on the security of funds in the share insurance fund, he said. In addition, as the regulator for federally chartered credit unions and administrator of the share insurance fund, NCUA has a great deal of power to set the agenda for credit unions, Ward-Smith said. None of the lines on the quarterly 5300 report, for example, ask credit unions to report how many different relationships they have with their members, he noted.

"To some extent, on a day to day level, credit unions can fall into a way of working to please the regulator instead of becoming aware of what they need to do to strengthen their relationships with their members," he said. Qualities of High Performing Credit Unions

There are numerous benefits for CUs which manage to increase and strengthen their overall relationship with their members and so become high performing credit unions, Ward-Smith said.

o Fee income: high performers have more than twice the fee income of those which are not: $67 per-member per year versus $34 per member per year.

While only a minority of CUs have high performing profiles, one of out five (20% of all) members across the country enjoy the added benefits that HP credit unions provide (credit unions return excess earnings to members as added banking features and benefits).

Although high performing credit unions have operating expenses and employee-to-member ratios are higher among high performing CUs, reflecting more of their service-to-members advantage. But even with much higher expense ratios, their year-end net earnings are much higher.

While it's true that larger credit unions generally have an economy-of-scale advantage to ease their high performing achievement (almost half the largest CUs in the country hold high performing status), it's the smaller high performing credit unions that show the possibilities, and the benefits, of performing well with members. Well over half the high performing CUs on this year's list have fewer than 20,000 members. –[email protected]