All told, government and agency securities remain the dominant choice for credit union investment portfolios and comprise 55.5% of total investments (including cash) as of the end of the third quarter. This is up from 54.6% last quarter and 52.9% one year ago. The surge in new pandemic-era deposits have remained on balance sheets and have shown little sign of being withdrawn. As a result, credit unions are slowly repurposing these cash balances into loans and higher-yielding securities. Although mutual funds only comprise 1.04% of current portfolios, this is 31 basis points higher than their 0.73% share in September of 2020.

Industry Yield Up for Second Straight Quarter

The average yield on investments increased 3 basis points to 0.88% in the third quarter. This was the second straight quarterly increase after consistently falling since the third quarter of 2019. The modest rise in yield can be attributed to credit unions swapping cash for higher-yielding investments. Credit unions brought in $1.5 billion in revenue from interest on their investment balances between July and September, up 6.1% from totals through the second quarter. Still, despite recent changes, credit unions have been more or less unwilling to reallocate their liquid cash balances, as longer-term securities haven't been particularly appealing from a yield perspective. This trend has combined with prolonged low interest rates to keep investment yields well below the historical norm.

Instant Insights /

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

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