Mission Drift or Strategic Expansion? Non-Core Lending, Risk, and Capital in US Credit Unions

This study investigates credit unions’ expansion into non-core lending and its association with risk and financial resilience. Using US credit union call report data from 1994 to 2024, we measure the share of purchased loans, lease receivables, and loans held for sale in non-core lending. We document robust conditional, within-credit-union associations that point to a clear risk trade-off. Credit unions with higher non-core exposure grow faster in terms of loans and membership but exhibit weaker financial buffers, including lower net worth ratios and weaker economic solvency, alongside higher delinquency. Decomposition tests indicate that loans held for sale are most strongly associated with adverse buffer and asset quality patterns, while purchased loans and lease receivables display smaller and less uniform relationships. Scale interactions suggest that these associations are generally weaker for larger institutions for both membership and assets. Post-COVID estimates indicate that the baseline relationships are broadly stable, while the growth link is becoming stronger.

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Publication Details

Journal
Risks
Published
2026-02-02
DOI
https://doi.org/10.3390/risks14020032
Primary Topic
Banking stability, regulation, efficiency
Type
article
Field-Weighted Citation Impact
0.00
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article

Mission Drift or Strategic Expansion? Non-Core Lending, Risk, and Capital in US Credit Unions

Ting Cao, Changjie Hu, Zhu Chen
Risks
Banking stability, regulation, efficiency
article

Mission Drift or Strategic Expansion? Non-Core Lending, Risk, and Capital in US Credit Unions

Ting Cao, Changjie Hu, Zhu Chen
article en

Abstract

This study investigates credit unions’ expansion into non-core lending and its association with risk and financial resilience. Using US credit union call report data from 1994 to 2024, we measure the share of purchased loans, lease receivables, and loans held for sale in non-core lending. We document robust conditional, within-credit-union associations that point to a clear risk trade-off. Credit unions with higher non-core exposure grow faster in terms of loans and membership but exhibit weaker financial buffers, including lower net worth ratios and weaker economic solvency, alongside higher delinquency. Decomposition tests indicate that loans held for sale are most strongly associated with adverse buffer and asset quality patterns, while purchased loans and lease receivables display smaller and less uniform relationships. Scale interactions suggest that these associations are generally weaker for larger institutions for both membership and assets. Post-COVID estimates indicate that the baseline relationships are broadly stable, while the growth link is becoming stronger.

RisksVol. 14(2)
Niagara University (US), Southwestern University of Finance and Economics (CN), MacEwan University (CA)
Openalex Percentile: Top 72%
Banking stability, regulation, efficiency
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