Q3 Investment Trends: Total Growth of $6B as Shares Remain Above Historical Norms

Source: Callahan & Associates

Total credit union investments increased 0.9%, or $6.3 billion, over the three months since June 30, 2021 and finished the quarter at $707.4 billion. This small increase was a rebound from last quarter’s 0.3% drop, which snapped a six-quarter pandemic-spanning streak of increasing investment balances. Cash balances fell 1.1% since June, the second straight quarter of declines after increasing dramatically throughout 2020 and early 2021. Credit unions put this cash to work both through accelerating consumer lending channels and by increasing investments in securities and certificates. These higher-yielding investment balances increased 2.2% over the third quarter.

Net liquidity increased in the third quarter as share balances expanded more than loan balances in dollar terms. Loans grew by $30.3 billion since June, led by first mortgage and auto, which increased 3.1% and 2.4%, respectively, over the period. First mortgages have driven loan growth for the past 18 months following record purchase and refinance originations, but plummeting loan-to-share ratios are starting to pressure credit unions to hold more of these real estate loans on balance sheets over selling them to secondary markets. Auto lending has been overshadowed by the success of first mortgage loans, but this business is thriving, particularly in the used vehicle space. Still, credit unions added an even greater $35 billion to deposit totals since June, and this liquidity increase funneled into investments.