Who is represented in the peer ratios?
The peer published by Cornerstone Credit Union League represents all federally insured credit unions in the United States. Peer statistics are typically presented by asset size and provide an opportunity to compare various aspects of the credit union operation to results from credit unions of similar size.
Should peer information be considered when making decisions?
A review of peer provides valuable information. However, it is worthwhile to note that peer information should not be the only consideration when making decisions about your credit union’s future. First of all, peer statistics typically lag the market so the most current results may be three months or older. This means the peer averages, especially those that respond to the market environment, may be out of date and not reflective of current times. Second, because they are presented as a range of assets, your credit union may be toward the top or bottom of the range so a review of another grouping may be beneficial. Typically the more defined the range, the more valuable the peer information becomes.
Do peer ratios reflect ideal outcomes?
Typically they do not. Remember that peer and good are not synonyms. While other credit unions may have similar results, there are systemic outcomes we know to be ideal on an annual basis and that should be our goal when assessing the credit union’s financial condition.
What other sources should be used when making financial decisions?
Credit unions have numerous avenues of information to use when making financial decisions. Years ago, NCUA issued a Letter that addressed levels of capital, earnings, and asset quality and how they were perceived in the CAMEL Rating process. The regulator has issued guidance concerning appropriate levels of liquidity and interest rate risk. We have peer information, regulatory guidelines, and economic results to consider. All are valuable in the decision making process.
What is the definition of industry standard when discussing ratio results?
An industry standard reflects the reasonable result in a specific area (earnings, asset quality, capital,) regardless of current challenges or the economic or regulatory environment. Internal factors, external factors, and economic factors all play a part in a credit union’s financial results. The industry standard may not be considered a CAMEL code 1 level and it may not align with peer results. It simply reflects what the industry knows to be satisfactory results year after year in that specific area. The reality is that all credit unions cannot attain a “code 1” level of operation all the time.
NOTE: The Strategic Assessment Initiative (“SAI”) only allows access to certain third party organization’s data and contact information via linked websites. The content of such third party organizations is not within Cornerstone League’s (“Cornerstone”) control, and Cornerstone cannot and will not take responsibility or have liability for the accuracy, content, completeness, legality, or reliability of the information provided by third party organizations on SAI. Links to such third party organizations’ websites and their content are not to be taken as an endorsement by Cornerstone of any third party organization, or any products promoted, offered or sold on the third party organization website. Cornerstone cannot and does not take responsibility for the collection or use of personal data from any third party organization. Information and content on SAI should not be considered as a substitute for advice from a legal or financial professional. Contact an attorney or other financial professional should you have any legal or financial questions.
The Strategic Assessment Initiative (SAI) is designed to provide an opportunity for credit unions to perform a self-diagnosis of their organization predicated upon their current financial condition, most recent state or federal examination, and results from independent audits.
