Credit Unions Concurrently Achieve High Loan to Share Ratios and High Investment Yields

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.

 
 

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.

 

 

 

Oct. 13, 2003


Comments

 
 
 
  • Interesting info to whet our appetites, but where's the main course? How did these CU's arrive at their respective destinations? How do their investment policies differ from the norm allowing them to excel? This article didn't answer any of those questions. Is there a more in-depth article coming? ptucker@pccu.com
    Anonymous
     
     
     
  • Interesting info to whet our appetites, but where's the main course? How did these CU's arrive at their respective destinations? How do their investment policies differ from the norm allowing them to excel? This article didn't answer any of those questions. Is there a more in-depth article coming? tserdman@wctc.net
    Anonymous
     
     
     
  • Would like to see more on prudent use of borrowings.
    Anonymous
     
     
     
  • A more in-depth article to follow up is a great idea. Keep an eye out for one in the coming weeks! - Jill Richardson, Corporate Associate, Callahan & Associates, Inc.
    Anonymous
     
     
     
  • What kind of investment instruments are they using?
    Anonymous
     
     
     
  • How did they do it?
    Anonymous
     
     
     
  • How did they do it?
    Anonymous