Credit Union Loan Rate Determinants During the Post-2009 Expansion

Credit union deposits have grown substantially in recent years. Given that, an increasing number of consumers and small businesses are joining credit unions as members. This study investigates the determinants of credit union loan rates during a period of economic expansion in the United States using fourth quarter 2015 data for 5,942 credit unions. Five different interest rate categories are analyzed using nine potential loan rate determinants. The results indicate that credit union loan rates tend to be lower when economies of scale exist, while high ratios for net charge-offs and operating costs cause interest rates to increase. Opposite of what is expected, unemployment rates positively impact credit unions loan rates. A possible explanation for this outcome is that elevated loan delinquency rates accompany a weak labor market. Greater default risks then result in higher interest rates