Q1 Credit Union Investment Trends: Loan Portfolios Challenged to Keep Pace, Investments Exceed $700B

Source: Callahan & Associates

A third round of stimulus payments combined with the seasonal spike in share inflows translated to annual deposit growth of 22.7%. From year-end 2020, share balances rose 6.4%, compared to 4.3% quarterly growth a year ago. Given the scale and atypical growth drivers that transformed credit union balance sheets over the last 12 months, it is important to contextualize this growth and recognize how different segments of the balance sheet are changing in relation to one another given the base effect and the impact of COVID-19 a year ago.

Following the dramatic gains in the deposit portfolio, investment balances rose accordingly. On a quarterly basis, total investments surged 16.4% from December to March (up by $98.9 billion), totaling $700.8 billion at quarter-end. Continuing recent trends, the combination of a limited supply of short-term bonds, modest yields and a persistent uncertainty about deposit retention assumptions translated to quarterly cash balance growth of 23.4% from December, and 81.9% year-over-year. Investments in securities and certificates expanded at a slower, yet historically strong linked quarter pace of 11.7% as investment officers worked double-time to put money to work.