After growing $64 billion in the previous 18 months, credit union investments actually declined in the 3rd Quarter, falling $6.9 billion to $216 billion. A number of factors contributed to this steep decline.
First of all, credit union loan growth accelerated rapidly over the 3rd Quarter. A strong increase in mortgage loans and used auto loans led to an increase of $13.5 billion in new loans. At the same time, share growth was minimal at 1% for the quarter. With a lack of share inflow to fund these increasing loan balances, credit unions were forced to decrease their short-term investment holdings by $7.1 billion. Given these trends, credit unions should see an increase in interest income since they yield on average 6.9% on loans compared to 2.7% on investments.
The following chart demonstrates the sharp change in investments over the past two quarters.