Stop treating your L/S ratio like the economy did it. It’s the aggregate result of your lending decisions.

The industry loan-to-share ratio dropped to 81.5% this quarter, and most credit union leadership teams have the same response: “The economy is soft,” “Members aren’t borrowing,” “We’re not the only ones dealing with this.”

They’re not wrong. But they’re also not thinking like operators.

The loan-to-share ratio isn’t something that happens to you. It’s something you decide, one lending call at a time. When a CEO looks at a ratio of 81.5% and treats it as bad luck instead of a strategic choice, they’re abdicating responsibility for the most important number on the balance sheet.

Here’s the math: the industry is running at 81.5%. That means the top quartile of credit unions is running materially higher, and the bottom quartile is running lower. Everyone operates in the same economy. Everyone has the same member base potentially. But they make different decisions about lending risk, pricing, underwriting, and growth appetite — and those decisions compound into very different L/S ratios.

The credit unions at 85%+ aren’t luckier. They’re making different choices.

What Your L/S Ratio Actually Measures

Your loan-to-share ratio is the scoreboard for your collective lending decisions. Every loan you make (or don’t make) moves it. Every member you approve (or deny) affects it. Every product category you lean into (or pull back from) shows up in it.

So when a credit union is sitting at 80% and the industry average is 81.5%, the gap isn’t “the market isn’t lending.” The gap is “we chose not to.”

Maybe that choice was right. Tight credit standards? Disciplined risk appetite? Conservative balance sheet management? All legitimate reasons to run a lower ratio.

But most credit unions don’t articulate it that way. They articulate it as “we can’t find good loans” or “demand is weak” — which frames the ratio as something external, something the economy did to them.

That’s a credibility problem. Because it suggests the credit union doesn’t understand its own balance sheet and isn’t making intentional lending decisions.

Why Your Ratio Decision Matters to Growth

A credit union running at 81.5% has unused lending capacity. That capacity is capital. You can use it to:

 

• • Grow the loan portfolio and generate more net interest income

• • Build deeper member relationships by lending to more segments

• • Invest in new lending infrastructure (mortgage, small business, etc.)

• • Absorb new member relationships and fund their financial needs

• • Compete for share in a market where other credit unions are lending more aggressively

The credit unions doing any of those things are winning. The ones treating a low L/S ratio as a symptom rather than a choice are sitting on unused capital and calling it prudent.

Here’s the operator question: if your ratio is below peer average and your risk profile is comparable, why are you holding that capital? What is it doing for you?

If the answer is “we’re being careful,” that’s fine — but it’s a strategy choice with a cost. If the answer is “we can’t find good loans,” that’s a different problem. That’s a lending infrastructure problem, not a balance sheet problem.

What Leadership Should Rethink

 

• • Define your target L/S ratio before the next quarter closes. Not the industry average. Your target. What ratio makes sense for your credit union’s risk appetite, member base, and growth strategy? Make it explicit.

• • Audit every lending decline in the last 90 days. What loans did you turn down? Why? Did those declines move you toward or away from your target ratio? If you’re below target and turning down good loans, your underwriting process is broken.

• • Stop blaming the economy for your ratio. The economy is the same for everyone. Your ratio is the result of your choices. Own that.

• • Use your ratio as a strategic lever. If you want to grow lending, you need capacity. If your ratio is low, you have it. If you want tighter risk, you have it. The ratio is the tool — it’s your job to decide what you’re building with it.

The Bottom Line

An 81.5% loan-to-share ratio isn’t good or bad. It’s your decision made visible. The credit unions running higher are making a bet on growth, underwriting discipline, and member lending appetite. The ones running lower are making a bet on caution. Both are legitimate strategies. But pretending your ratio is something that happened to you instead of something you chose is the strategy that never works.