The Bottom-Line Impact of Credit Union Loan Participations
By deploying 10% of excess capital in loan participations, credit unions could boost return on assets (ROA) by nearly 50% and return on equity (ROE) by 40%. Technology developments are making it easier for credit unions to evaluate loan participation pools and partners, as well as to purchase, originate, monitor and service the loans. The emergence of loan participation platforms will spur involvement among a greater number of institutions.
The analysis of industry data reveals that:
- Purchased participation loans originated by credit unions increased by 61% between 2014 and 2017 as a percentage of total loans outstanding.
- Loan participation composition has shifted from commercial to consumer.
- Credit unions purchasing loan participations increased their loan-to-share ratio by nearly 7 percentage points over the past four years, in contrast to an increase of less than 2 percentage points among credit unions that haven’t purchased participations.
Download the report today to read insights from credit unions currently active in participations, ROA models, participation pitfalls, and the future outlook on participations.