Credit unions with high loan to share ratios often find they achieve
lower yields on investments. With so much money tied up in loans,
these credit unions have little wiggle room if their investments
are not sufficiently liquid. Typically, the answer to that issue
is investing in overnight funds and other short-term investments,
which pay lower yields than those with longer terms.
The table below examines the 10 credit unions over $50 million
in assets with over 80% loan to share ratios that have the highest
average yield on investments. On average, these credit unions achieve
returns that are almost two percentage points higher than average
investment yield for credit unions over $50 million.
These 10 credit unions arrived at the same end, but it seems they
have not followed the same path in order to get there. Some credit
unions relied on borrowings to help lengthen their investment durations,
whereas other credit unions applied prudent investment policy with
what they had. Each individual credit union's capability to simultaneously
excel in both its loan to share ratio and its investment yield depends
on its unique situation and willingness and ability to take risks.