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Investments By The Numbers (1Q18)

Credit union investments shift in a rising rate environment.

 
 

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DEPOSITS MEMBERS MORTGAGES CREDIT CARDS LENDING INVESTMENTS AUTO LENDING EARNINGS EFFICIENCY

As of March 31, 2018, U.S. credit unions held $379.6 billion in investments. That’s up 6.9% from the fourth quarter of 2017 but down 3.3% from this time last year.

The increase in total investments for the quarter followed past cyclical trends of growth in the first three months of the year. Share balances followed a similar quarterly trend. They rose 3.8% from year-end and were up 5.6% year-over-year. That's not surprising as deposit inflows are the largest in the first quarter of the year.

Total credit union assets reached a record high of $1.4 trillion — a quarterly increase of 2.7%. Loan balances grew 1.5% since Dec. 31.

Total credit union investments reached $379.6 billion as of March 31, 2018. That’s a quarterly increase of 6.9%.

Investments and cash for all U.S. credit unions increased $24.6 billion in the first quarter. Credit unions allocated that primarily to cash at other financial institutions (Fed balances) as well as cash at corporate credit unions. The former rose 25.1% quarterly, from $66.2 billion to $82.8 billion, and increased its share of the portfolio 3.2 percentage points. The latter expanded 34.5% quarterly, increasing from $18.4 billion to $24.8 billion, with its share of the portfolio growing 1.3 percentage points.

 

 

Balances in cash equivalents grew 18.1% over the past three months. That’s the third-largest quarterly balance growth in the investment portfolio. Collectively, agency MBS and debt remained the largest non-cash investment vehicles. They accounted for 42.2% of the portfolio in the first quarter, which was down 2.9 percentage points from year-end 2017.

Agencies and cash at financial institutions (Fed funds) make up over 77% of the industry’s investment portfolio.

The average credit union yield on investments across U.S. credit unions rose 13 basis points from the fourth quarter and reached 1.79% as of March 31. This is the highest level recorded since Dec. 30, 2010, when it was 1.96%. Total credit union annualized investment income expanded 11.9% quarterly, 22.7% annually, and drove higher the yield on investments throughout 2017 and into the first three months of 2018.

Credit unions' yield on investments increased to an eight-year record high in the first quarter.

Credit unions across the nation benefited from the Fed increasing rates three times in 2017 and twice in 2018. More rate hikes are projected, and priced into the market, for the remainder of the year. As the fed funds rate ticks up across the year, expect to see cost of funds increase as financial institutions reprice deposit and loan products to adjust for the new operating environment.

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July 23, 2018

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