The loan-to-share ratio is an insightful measure of a credit union’s liquidity. Driven by lending volume and deposit acquisition, the ratio represents a balancing act between two sides of the balance sheet.
On the one side, loan growth speaks for credit union operations, such as culture, marketing, and risk management. On the other side, deposit growth speaks to external factors, such as membership demographics. Generally, a higher loan-to-share ratio indicates a credit union is taking on higher risk for a greater profit.
In the second quarter of 2018, U.S. credit unions reported an average loan-to-share ratio of 82.9%. This is the highest rate since December 31, 2008 — when it was 83.2% — and is 16.1 percentage points higher than when the ratio bottomed out in the third quarter of 2013. Since 2013, loan balances at credit unions have increased 66.8%; deposits, in the meantime, have increased 32.6%.
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