How to profit from your next deposit study

The pandemic created the largest amount of excess liquidity in history. The credit union industry has never been more flush with excess cash. Loan demand remains weak. And margins are now at all-time lows.

Amid this perfect storm, a core deposit study might just be the best yielding investment for your credit union today, assuming the information is used strategically. That may be a controversial statement given that most deposit study requests are prefaced with, “Regulators are asking for one.” But think about the current realities outlined above and the opportunity cost of not knowing your deposit base as well as you could.

How might your strategic decisions at your next asset/liability committee meeting be different If you could gain greater insights into your member deposit base? Many credit unions are debating whether to put “excess” cash to work in the bond portfolio or fixed-rate loans to fortify their earnings stream and help offset 2022 margin pressure. Why the concern? Liquidity risk? Interest rate risk? Net economic value? All the above? Regardless of the concerns, the best place to start is by gaining a clear understanding of how “core” your deposits are—specifically the recent surge deposits. This knowledge will bring confidence and serve as a catalyst that leads to optimal cash deployment strategies. Therein lies the powerful return on investment of a deposit analysis.

 

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