ARLINGTON, Va.—Despite economies of scale that come with size, it is federally insured CUs under $1 billion in assets that
have shown the greatest improvement in operating expense efficiency since the recession.
That is one finding from NAFCU’s new quarterly CU Operating Expense Report, recently introduced by the trade association.
Chief Economist and Director of Research Curt Long told CUToday.info that credit unions within four asset-class ranges below $1 billion are faring best at cost-cutting since the economy started its nosedive.
“These asset-class credit unions have cut their expenses quite a bit since 2008,” he said. “Credit unions above $1 billion in assets showed the least improvement, with many remaining relatively flat when it comes to operating efficiency ratio” he said.
CUs below $50 million reduced their operating expense ratio to 3.58% from 4.19% (-0.61 BP difference) through Q2 2014; those $50 million to $100 million dropped to 3.66% from 4.29% (-0.63 BP); $100 million to $500 million fell to 3.60% from 4.17% (-0.57 BP); and shops from $500 million to $1 dipped to 3.35% from 3.93% (-0.58 BP).
Credit unions above $1 billion dropped to $2.69%from $3.05% (-0.36 BP).
Across the board the greatest cuts came in the areas of employee compensation and professional and outside services.
Long added that overall, “Credit unions have improved efficiency throughout the recession, which speaks to their prudent business model. Going forward, the challenge will be to keep costs low in the face of an expanding regulatory burden and rapid changes in technology.”
The new report, Long noted, helps credit unions grasp how they stack up against other credit unions.
"With the increasingly competitive marketplace, credit unions are more interested than ever in tracking their expenses and assessing how they stand within their peer groups," said Long. "This report offers unique member data that allows credit unions to monitor their expenses and demonstrate to their boards and members how they are keeping expenses in check."
Culled from 5300 data, the report shows annual and quarterly operating expense trends, percentile ranking against other credit unions, peer group average comparison and contributions to a member credit union's total operating expense.
Digging through the data Long noticed that many of the credit unions that had the biggest improvement in percentile ranking were not high-growth CUs.
“While this is not true of all CUs that significantly improved in percentile ranking, it is true of many,” he explained. “Their loan growth was less than average—which to me says these credit unions are not in a growth phase compared with peers.”