7 minutes
A practical framework for long-term stability and growth
Credit unions are operating in one of the most complex financial environments of the past decade. After years of balance sheet expansion supported by low interest rates, institutions are now adjusting to a very different reality—one defined by higher deposit costs, slower loan repricing, shifting liquidity dynamics, pressure on investment portfolios, and heightened supervisory focus on interest rate and liquidity risk.
As NCUA Chairman Kyle Hauptman has noted, sensitivity to both market risk and liquidity risk remains a key supervisory priority as credit unions adapt to a higher-rate environment following an extended period of balance sheet growth.
For executive leadership and finance teams, improving performance today is no longer just about growing assets. It is about structure, discipline, and intentional balance sheet design.
At its core, the strategic question facing every credit union remains deceptively simple: Should we lend, should we invest, or should we hold liquidity? The right answer depends entirely on how the balance sheet is built—and how well it is positioned to perform across the full rate cycle.
1. Balance Sheet Optimization Is Now a Structural Necessity
Margins remain under pressure across the industry. Elevated deposit pricing, loan repricing lags, liquidity shifts, and legacy investment decisions continue to compress earnings. In this environment, even small improvements in yield or efficiency can have an outsized impact on Return on Assets.
Performance today is not driven by volume alone. It is driven by structure.
For CEOs and CFOs, this means taking a hard look at how assets and liabilities are working together. Are there underperforming assets quietly weighing on results? Is duration aligned with rate expectations and liquidity needs? Are returns adequate for the risk being assumed? And is capital being deployed in the most efficient way possible?
Thoughtful balance sheet repositioning can add meaningful basis points without increasing risk—but only when decisions are deliberate and grounded in disciplined analysis.
2. Liquidity Must Be Strategic, Not Idle
Liquidity remains essential, but excess liquidity has a cost. Holding too much suppresses earnings, while reaching too aggressively for yield introduces unnecessary risk. The objective is not simply more liquidity—it is optimized liquidity.
That requires stress-tested funding plans, diversified sources of funding, intentional maturity laddering, and ongoing asset-liability modeling. When managed well, liquidity should do more than sit on the balance sheet. It should support earnings, reduce volatility, preserve flexibility, and protect capital.
The key leadership question is not whether liquidity is important. It is whether current liquidity levels are strategic—or whether they are quietly diluting ROA.
3. Investment Decisions Shape Long-Term Stability
Traditional, bond-heavy investment strategies performed well in declining rate environments. Today’s volatility and duration risk demand a more thoughtful approach.
Executive teams are increasingly evaluating investments through a risk-adjusted return lens, with greater attention to diversification, concentration risk, accounting treatment, and downside protection. The guiding question has evolved.
It is no longer, “Is this permissible?” It is now, “Is this allocation optimized for our earnings and risk profile?”
When investment portfolios are structured intentionally, they can improve net income, strengthen capital formation, reduce concentration exposure, and enhance long-term resilience.
4. ROA Efficiency Determines Strategic Flexibility
For leadership teams, ROA is more than a performance metric—it defines what the institution can afford to do.
Improved ROA creates room to offer competitive loan rates, reduce member fees, invest in technology, strengthen capital, and manage growth more effectively. The interest rate environment fundamentally changes how these trade-offs are evaluated.
In higher-rate environments, cash yields become more attractive, but spread advantages often narrow. In lower-rate environments, excess liquidity can materially dilute earnings while spread opportunities widen. Understanding where the institution sits in the cycle—and positioning accordingly—matters.
The real conversation is not cash versus investments. It is how to balance liquidity resilience, capital strength, and earnings efficiency across changing rate conditions.
5. Managing Rising Benefit Costs With Financial Discipline
Employee benefits now represent nearly 30% of total employer compensation costs, and for many credit unions, these expenses continue to rise faster than revenue.
When benefit obligations are funded entirely from operating cash flow, institutions can experience earnings volatility, liquidity strain, and a mismatch between long-term liabilities and short-term funding. For finance teams, this becomes a balance sheet issue—not simply an HR concern.
Key questions include whether asset duration aligns with long-term benefit obligations, whether benefit costs are compressing operating leverage, and whether long-term liabilities should be funded more strategically. Addressing these issues can smooth expense pressure and improve financial predictability over time.
6. Community Impact And Financial Strength Can Coexist
Serving the community remains central to the credit union mission, but charitable giving does not have to come at the expense of financial performance.
Under NCUA rules, Charitable Donation Accounts allow credit unions to create dedicated investment pools that generate earnings to offset charitable expenses while aligning giving with long-term strategy. When structured properly, these accounts can support ROA, diversify investment allocations, strengthen community positioning, and enable sustainable long-term commitments.
Mission and margin are not mutually exclusive—when approached intentionally.
The Enduring Strategic Choice: Lend, invest, or Hold Liquidity
Every executive team must continually revisit the balance between lending, investing, and holding liquidity. Lending offers higher yield potential and member impact but introduces credit and concentration risk. Investing provides diversification and predictable cash flows but brings market and interest rate exposure. Liquidity delivers flexibility and funding optionality but can dilute ROA if overused.
There is no universal right answer. The optimal mix depends on capital strength, risk tolerance, loan demand, deposit stability, rate outlook, and the rigor of internal modeling.
A Final Perspective for Executive Leadership
Improving financial performance in today’s environment is not about dramatic shifts. It is about disciplined balance sheet architecture.
That means making intentional allocation decisions, optimizing liquidity, managing expenses with foresight, structuring investments with risk awareness, and continuously modeling and stress-testing outcomes.
For CEOs, CFOs, and finance teams, the objective is clear: Design a balance sheet that performs—not just survives—across the full rate cycle.
Small structural changes can create meaningful financial impact. We partner with credit unions to evaluate, structure and implement funding solutions that strengthen long-term financial performance.
Explore how TruStage® Executive Benefits can help credit union leaders navigate the 6 Market Realities and learn more about our solutions at: https://www.trustage.com/exec-benefits or reach out today: 1-800-356-2644.
TruStage® is the marketing name for TruStage Financial Group, Inc., its subsidiaries, and affiliates. Certain brokered insurance products from various insurers may be offered through CUNA Mutual Insurance Agency, a subsidiary of TruStage Financial Group. Each insurer is solely responsible for the financial obligations under the policies and contracts it issues. For more information, contact your Executive Benefits Specialist at 800.356.2644.
Securities and advisory services, when presented, are offered through LPL Financial (LPL), a registered investment advisor and broker dealer (MemberFINRA/SIPC). Certain insurance products may be offered through LPL or its licensed affiliates. Registered representatives of LPL offer products and services as part of the executive benefits plans at TruStage. These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of TruStage Financial Group Inc. Securities and insurance offered through LPL or its affiliates are: Not Insured by NCUA or Any Other Government Agency | Not Credit Union Guaranteed | Not Credit Union Deposits or Obligations | May Lose Value
Danielle Scodellaro is a registered representative of LPL Financial, offering products and services as part of the executive benefit plans at TruStage™, a company that specializes in the design, implementation, financing and ongoing administrative support of supplemental executive benefit programs (SERPs) specifically tailored to credit unions. She has worked in the financial services industry since 2011 and began her career at TruStage™M in 2015. She has worked within the Executive Benefits department assisting with sales and service, until taking on her new role as an executive benefits specialist.
Prior to joining the organization, Danielle worked as a financial planning assistant with Private Wealth Practice of Ameriprise Financial Services. In that role, she worked with an advisor to create holistic financial plans and reviews. She has also worked as a retail banker, helping individuals and small business owners manage daily finances and banking needs.
Danielle graduated from the University of Wisconsin-Madison with a Bachelor’s degree in international studies and political economics. She holds FINRA Series 6, 7, 63 and 66 securities registrations with LPL Financial, the Certified Financial Planner® designation, the Chartered Financial Consultant® designation, as well as life, health, and annuities licenses.
