Credit Unions Increase Liquidity through Borrowing

June 2006 data shows credit union borrowings at an all time high. Credit unions are meeting increased loan demand by tapping into longer term maturity vehicles to meet liquidity needs.


Credit union lending has increased at a significant rate since the refinance boom began in 2003. This increase in lending, coupled with a sluggish share growth rate, has led to the highest loan-to-share ratio in 10 years, at 80.49%. Credit unions are now looking for other sources of liquidity to satisfy their lending needs and have turned to borrowings. At an all time high, credit union borrowings reached $19.4 billion as of June 2006, which translates to 2.73% of total assets.

Borrowing Type Distribution

The majority of borrowings are in other notes and interest payable. As of June 2006, 55% of the industry’s borrowing composition came from this category, a jump of 10 percentage points from one year ago. This jump led to a decreasing use of lines of credit. While it is not possible to determine the sources of borrowings from the 5300 Call Report data, corporate credit unions report lending $5.9 billion to credit unions as of June, or 30.4% of credit union borrowings. In addition, 961 credit unions report being a member of a FHLB.

Slightly Longer Maturities

During the past 12 months, credit unions have shifted slightly towards longer maturing borrowings. With the flat yield curve, it is natural to see increased use of borrowings with longer maturities. This corresponds with the greater usage of other notes, which generally carry longer terms. As the yield curve has flattened, credit unions have taken advantage of the decreased risk of borrowing long term.

To see how your credit union is performance against the latest data trends, visit schedule a complimentary demo of Callahan and Associates’ Peer-to-Peer Financial Analysis Software.




Sept. 18, 2006


  • As the real estate market begins to cool, it will be interesting to see how it affects the borrowing rates -- and whether there are other serious consequences that we'll all have to brace for.
  • The anonymity of this writer intrigues me.
  • While it is tempting to extend the duration of the liabilities during a flat yield curve environment, I believe this strategy will backfire as the Fed has ended its rate tightening cycle and the probability of the Fed's reversal increases daily as we are seeing inflation diminish and slower growth. In fact, it is the duration of ASSETS that should be extended.