The Influence of Loans Weights on the Profitability of Credit Unions

Our main research objective is to study the influence of different decisions inherent to the weights given to some types of loans on the profitability of credit unions. The choice of weight given to mortgages and other types of loans can have a determining impact on a loan portfolio’s return and on the risk associated with it. This justifies our study, since a decrease in credit unions profitability would cause a drop in their capital and lead their managers to adjust it, sometimes not in an optimal way. Only few studies having been carried out on these financial institutions and on their loan and asset portfolio structural change. In order to reach our research objectives, we carried out statistical analyses and panel regressions by using biannual data from a large sample of credit unions in the United States. The results of our analysis enable us to conclude that the increase of the first mortgage loans weight is a profitable strategy, however granting risky loans would have a negative effect on credit unions profitability.