At year-end, the number of credit unions with a loan to share ratio over 100%
surged from 350 in 2003 to 458. This upward trend is largely due to inflow of
loan production created by the economic environment.
Recently, there has been a movement by many credit union managers to push this
ratio upward, beyond the 100% mark. In other words, an increasing number of
credit unions are positioning themselves as “loan shops.”
New England Federal Credit Union (VT) with over $490 million in assets has
made its mission to simply “provide credit to its membership.” This year, the
credit union pushed its loan to share ratio over 100% to 107% by maintaining
its strong mortgage production and decreasing secondary sales.
“We do everything possible to service our membership by granting loans,” said
Tim Mashrick, senior financial analyst. “It is more profitable than depositing
funds in our investment portfolio. Plus, its more efficient for New England
to borrow since it helps keeps us within our ALM guidelines.”
The loan to share ratio for the credit union industry finished at 74.4% for
the year compared to 71.1% in 2003.
- With low rates and a flattening yield curve, loan volume continued to surge,
as real estate loans led the way with 14.9% growth and auto loans grew
- 12-month share growth was 5.4% with the largest component, share drafts,
increasing by 11.1%. Share certificate balances rose by $8.5 billion or 7.0%, indicating a movement in longer-term holdings for the membership.
With short-term rates on the rise, share volume should rebound and pick-up
some ground on loans. However, in 2005, the loan to share ratio will most likely
continue to rise as rates linger at historical lows and managers base their
strategy around loan production.
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