Editor's Note: The financial figures reported in this story and Credit Union Times Dec. 17, 2014 print issue will not match those posted online by the NCUA. CU Times partnered with Callahan & Associates to analyze the NCUA's call report data and further enhance the figures using Calllahan methodology.
Small credit unions often struggle to generate a high return on assets, but the $47 million Southwest Financial Federal Credit Union, based in Dallas, was one of the exceptions that disproved that rule.
Southwest Financial was one of several small credit unions that rose to top in the highest operating ROA category, according to data analyzed by the Washington-based Callahan & Associates for CU Times.
In fact, of the Top 10, only one credit union had more than $100 million in assets. Click on the chart above to expand.
In creating its list from NCUA's 5300 Call Report data, Callahan analysts defined ROA as annualizing the ratio of net interest income + fee income + other operating income – operating expenses, then dividing the number by average assets. Additionally, the computation does not include non-operating gains or stabilization expenses.
The numbers were tapped for the year ending on June 30, 2014.
The calculations yielded some impressive gains, especially among smaller credit unions. Few were more pleased, in fact, than Southwest Financial President/CEO Melanie Kennedy, who achieved an operating ROA of 4.29%, topping the list.
"Last year I would have told you I had hoped my ROA would be positive," Kennedy said. "I budgeted for a .75 ROA and it just continued to grow, grow, grow."
Southwest Financial's 4.29% ROA was .10% higher than the $22.5 million RAFE Federal Credit Union in Riverside, Calif., which took second place, and 1.62% higher than the $34.5 million PSTC Employees Federal Credit Union in Upper Darby, Pa., which was number 20 on Callahan's list.
Kennedy credited growth both in loans and fee income – specifically courtesy pay fees – as the secret to her credit union's ROA success. She also said that moving to a sales and service culture several years ago has helped drive growth.
"We've grown a lot over the past few years merely by asking for the business," Kennedy said. "We have changed our employee pay structure to encourage them to take the time necessary to get to know the members and what they might want or need. And we've been very successful at it."
In June, the credit union boasted a $35 million loan portfolio spread across multiple products. That figure increased to its current level of $38 million in outstanding loans as of October 31.
Loans grew by 23% in 2013, and are on track to grow at a similar level this year, she said.
Fee income also has continued to grow. As of June 30, fee income totaled $665,000 and by Oct. 31 that number had jumped to $1.1 million.
"I am nervous to say that we have found the secret sauce, but we appear to have a good recipe," Kennedy said.
Read more about how small credit unions achieve big ROA numbers and other top financial performers in the Dec. 17, 2014 issue of Credit Union Times. The issue covers several financial reporting categories, including auto, credit card, mortgage, business and student loan growth, ROE, efficiency ratio, membership growth and more.
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