MADISON, Wis.—Credit union liquidity has risen over the last year but remains close to the lowest ratio in credit union history, TruStage reported.
Cash plus investments as a percent of assets rose from 24.4% in August 2023, to 25.4% in August 2024 w,hich is only slightly above the record low of 23.1% reported in December 2018, according to TruStage’s latest Trends Report.
“This one percentage point rise in liquidity is due to credit unions building up their investment portfolio as loan growth slows (3.4% year over year) in the face of stronger deposit growth (4.9% year over year),” said TruStage Chief Economist Steve Rick. “Today members are building up their savings to spend on goods and services.”
The average credit union member increased their total credit union deposits by $504 over the last year, from $13,420 in August 2023, to $13,942 in August 2024.
“Savings per member grew 3.8% during the last year, above the 2.6% long-run average. And with new members adding 1.1% to total memberships and deposits, we arrive at the 4.9% deposit growth,” Rick stated in the report.
Year-to-date savings balances grew 3.9% in 2024, significantly below the past 23-year average of 5.7%, but above the 0.7% reported in 2023. And when adjusted for the 1.7% year-to-date inflation, real savings balances are growing 2.2%.
“Better year-to-date savings growth has crashed head-on with a 2.0% year-to-date loan growth rate, pushing down the loan-to-asset ratio to 70.4%, which is above the long run average of 64% but below the 71.4% pace set one year ago,” Rick said. “This pattern is not good for credit union net interest margins as fewer assets are placed in higher-yielding loans and more dollars placed into lower yielding investments. But with the Federal Reserve expected to lower short-term interest rates by another 25 basis points later this year, credit union net interest margins could widen as funding costs fall faster than asset yields.”