Due to the stimulus packages designed to help families during the pandemic, credit unions have seen a steep increase in deposits. But higher volumes of deposits bring on a new challenge; namely, finding new investment opportunities that allow credit unions to deploy their excess liquidity into higher earning assets.
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When it comes to portfolio diversification strategies, there are no one-size-fits-all solutions that could meet the needs of every credit union. In general, however, a credit union must be efficient and innovative in order to address specific challenges and achieve optimal portfolio diversification.
According to CUNA, many credit unions have reported rising liquidity and lower loan origination volumes over the past few months. As this trend is expected to continue particularly due to the current government relief programs as well as a higher number of people looking for a safe place to keep their money, it could negatively affect the overall profitability of many credit unions.