How To Leverage Data For Better Strategic Planning

Strategic planning gives credit union management teams the opportunity to come together and formulate a plan to guide their institution. Such engagements have mostly moved into the virtual realm; however, the importance of this melding of minds cannot be understated. Incorporating peer analysis is an ideal way to kick-start a strategic conversation and enhance the impact of planning. After all, equipped with current, verified financial data, leaders can more easily spot weaknesses to correct as well as identify areas on which to capitalize.

Here are a few key ratios and high-level areas to start your discussion.

Growth Trends

Membership Growth: A credit union’s business strategy is a major driver of its member growth. More effective strategies for a given marketplace typically yield stronger member growth. The board’s philosophy toward service levels, delivery channels, product pricing, and breadth of services also influence member growth.

Additionally, member growth is a great litmus test for evaluating the introduction of new products and services by a credit union.

Asset Quality

Delinquency Ratio: The delinquency ratio measures the credit risk of a loan portfolio. It is a forecaster of future loan losses; therefore, unusual increases or decreases generally affect future earnings. The level of delinquency a credit union can sustain is a function of several factors, including loan income, credit risk management, and loan loss management. Risk-based pricing is often accompanied by higher delinquency, but credit unions typically compensate for that higher delinquency by charging higher interest rates and in turn, achieving higher loan yields.

Ratios relative to asset quality are top-of-mind for credit union leaders as we measure the short and long-term impacts of COVID-19.

Business Model

Loan-To-Share Ratio: A credit union’s loan and deposit acquisition performance drives its loan-to-share ratio. Unless liquidity is an issue, most credit unions concentrate on building the loan portfolio rather than focus on deposits.

A credit union’s operations — sales culture, marketing, product development, risk management, etc. — generally influences loan growth more than deposit growth. Non-operational factors, such as membership demographics, are what tend to influence deposit growth.

A higher loan-to-share ratio typically indicates greater profitability, and in broader terms, is an indication of how efficiently a credit union is leveraging its deposit portfolio to achieve stronger performance and create member value.

Productivity And Member Relationships

Members Per Employee (FTE): The members per employee ratio measures the productivity of a credit union’s employee base. In theory, a higher ratio means a credit union is more productive, but other factors also play a part.

When examining the ratio, credit unions should also consider product penetration rates, members per branch location, the geographic distribution of the membership, and field of membership requirements. Strategic factors that impact the ratio include organizational goals — sales versus service models — growth, and product and technology development.

How To Get Started With Data

Callahan & Associates’ Peer-to-Peer software contains hundreds of pre-built financial graphs and tables to assist in strategic planning. Knowing where to start and choosing what to analyze can be daunting, but that shouldn’t stop teams from putting together a relevant financial analysis presentation.

Request a custom Strategic Planning Trend Report.

We’ll show you the ins and outs of Peer-to-Peer while creating a custom scorecard for your credit union to use during your next planning session of board meeting.

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