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.