The Credit Union Lending Tool That Deserves Another Look
By Paul Garrigues, Chief Financial Officer at Amplify Credit Union
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Like many financial institutions, Amplify Credit Union has spent the past few years challenging assumptions about how we grow (and balance) our lending portfolio. While consumer lending is credit unions’ bread-and-butter, we focus on residential and commercial real estate lending. This allows us to leverage the people, systems, and markets needed to excel in those programs while offering innovative products at competitive pricing. Now, those two programs represent over 90% of our total lending portfolio.
And we’re not going it alone. Amplify believes in growth through partnerships, so offering investment opportunities to other credit unions is nothing new. But we’ve observed credit unions’ hyperfocus on their local communities can cause them to miss out on national opportunities to boost their earnings without adding a ton of risk.
Key message: Loan participation remains an untapped resource for over half of credit unions, with many small credit unions potentially benefitting significantly from a loan investment strategy.
Need to Know:
- Loan participation doesn’t require credit unions to originate loans. It’s an investment, similar to purchasing a U.S. Treasury security or a mortgage-backed security. It’s another way to earn interest income.
- Loan participation unlocks new markets for regional credit unions. Many financial institutions operate in markets where demand for residential or commercial loans is modest, and participation allows those credit unions to grow their loan portfolio through higher demand markets.
- Your team can always review the portfolio before investing. Once a credit union submits a letter of intent as a buyer, they can see our collateral information, our borrower information, and can conduct a full review of our underwriting standards. If your team lacks experience to evaluate certain loan types, there are independent firms that can conduct due diligence on your behalf.
- Loan participation can be a stable investment, even during times of rate volatility. Products like hybrid ARMs, one of the core products in Amplify’s loan participation portfolio, offer longer-term earning assets with less interest rate risk than a standard 30-year fixed rate residential real estate loan. Participations are also sold with representations and warranties, giving your organization limited recourse in the event of early payoffs or defaults.
- You don’t need to spend millions to participate. Amplify offers investors packages as low as $50,000, and you can customize your investment with the types of loan products you need for your desired loan portfolio mix (consumer loans, commercial loans, residential real estate loans).
The Loan Participation Market Is Still Untapped
While loan participation is not a new concept in credit union management, the real estate boom of the early 2020s may have overshadowed its significance for a lot of financial leaders.
According to my team’s analysis of recent National Credit Union Administration (NCUA) call report data, the majority of credit unions don’t invest in loan participation at any level.
- 43.3% of credit unions reported loan participation activity in 2024
- 44.4% of credit unions reported loan participation activity in 2025
That means over half of the credit unions in the country have not explored loan participation as an option in the last two years. And with a wide range of lending products available to investors, loan participations can often offer a more predictable option for growing interest income.
Key insight: Even if you’re starting from scratch, there are plenty of entities capable of helping you build out your participation portfolio. Third-party brokers are a great resource for credit unions seeking more managed experiences, while credit unions with established portfolios can offer a direct option for those more experienced.
Loan Participation Is Not Just for the “Big Guys”
When I speak with executives at other credit unions, one common misconception about loan participation I encounter is the idea of minimum investments. Most credit unions who are new to loan participation would prefer to start small, not take on $10 million in loan investments their first day in the market.
You can start small. Amplify can (and does) prepare multi-million-dollar packages with some of our commercial loan products, but our smallest participation package currently sits at $50,000. And this time of year, we often work with credit unions who are looking to offset loan production underperformance in certain categories with participations to fill loan production shortfalls.
Key insight: Treating loan participation as an option only available to the largest credit unions is a mistake. Additional analysis of NCUA call report data by our team showed that nearly one-quarter of credit unions (21.5%) nationwide produced no residential real estate loans in 2025, making them an excellent candidate to consider investing in residential real estate loan participations.
Loan Participation Outsources the Risk
Let’s linger on that note for a second. If you are one of the 1,200 credit unions who doesn’t originate your own residential mortgages, you may be hesitant to enter the loan participation market. Maybe you’re worried about credit risk, interest rate risk, or maybe it seems like a bigger jump than you’re ready for.
It’s important to remember this process offers full transparency to prospective investors.
Once our investors sign a letter of intent, they or their due diligence firm can review the following documents before entering into a participation agreement:
- Loan terms and conditions
- Collateral valuation
- Borrower information
- Underwriting standards and practices
Key insight: That means before they add a dollar to their books, Amplify’s potential investors know our historical delinquency rate is 0.36%. Our detailed underwriting process is keenly focused on the credit risk of every loan we originate, whether for our portfolio or for a participation sale. Investors in our loan participations can see for themselves if our portfolio aligns with their standards and values before committing to any loan participation purchase.
Loan Participation Offers a National Boost to Regional Lending
As a credit union looking to connect with potential participation investors, my team at Amplify pays close attention to the NCUA’s regular call report data. One of our favorite reports is the NCUA Quarterly U.S. Map Review, which allows us to track state-specific loan-to-share ratio trends in our industry. According to their Q1 data, the mean loan-to-share ratio was 68% nationwide.
While there is no standardized goal for credit unions, most experts would agree that an optimized balance sheet maintains an 80-90% loan-to-share ratio with a balanced mix of consumer, residential loans, and member business loans. This means there are many credit unions who could benefit from increasing their loan to share ratio by 12-22 points if they decided to redeploy funds currently invested in lower yielding marketable securities and funds on deposit into loan participation investments.
Here is a short list of the states with lowest loan-to-share ratios:
- Delaware (43%)
- New Jersey (49%)
- Pennsylvania (51%)
- Connecticut (54%)
Bottom line: When reviewing those numbers, what stands out to me is the idea that we can turn a regional problem into a national solution. For example, the median ratio for credit unions in New Jersey suggests the average credit union could improve their loan portfolio diversity and earnings potential by investing in loan participations. Those credit unions should consider using their excess liquidity to invest in participations from other markets with more robust residential real estate lending demand.
