By David Savoie, president / CEO, LaCorp
Credit unions are expected to experience moderate loan growth in 2026 as members focus on paying down debt and increasing savings. The combination means your credit union is likely to have extra liquidity on your hands this year.
Make your capital work for you
Driving higher returns can be hindered by poor returns on overnights. Every dollar sitting in a low-yield overnight account represents opportunity cost. To stay competitive, it is essential to optimize your portfolio and overnights with top rates among corporates.
When you miss out on opportunities to invest your liquid dollars, you are losing money you could have made for the best returns to your members. The impact on your ROA affects your competitive position, your ability to pay competitive member dividends and your capacity to invest in technology and services.
Why liquidity remains a challenge
Several forces are converging to suppress loan growth, from rising student loan delinquencies and tight auto lending conditions to a housing market frozen by mortgage rate lock-ins. Members who refinanced mortgages at 3% aren’t eager to trade them in for a 6.2% rate.
On the auto lending side, vehicle prices remain elevated, and many members are keeping their cars longer rather than taking on new debt. Meanwhile, deposits are flowing in. Members are being cautious, building emergency funds and reducing discretionary spending. This is wise for your members and creates liquidity challenges for credit unions trying to deploy capital productively.
The member dividend dilemma
Surplus liquidity creates pressure on your ability to pay competitive rates. If you’re paying 3% on savings but only earning 1% on excess cash, the math doesn’t work.
Some credit unions respond by reducing dividend rates, risking member dissatisfaction and prompting members to move their money elsewhere. Others maintain dividend rates to stay competitive, accepting compressed margins as the cost of member loyalty. A more sustainable strategy is to address the root cause by ensuring your extra funds are earning solid, market-leading returns. For example, some specialized money market accounts are currently yielding well above 3.7%, providing a much-needed buffer for those margins.
Strategic capital solutions
Identify your excess liquidity and consider your deployment strategies. Working with a corporate partner can provide access to a broader suite of lending and investment solutions. Through a jointly owned CUSO, Primary Financial, credit unions nationwide are heightening their liquidity position. Investment options, from overnight Money Market Maximizer accounts to bullet and structured CD’s, provide choices that match your credit union’s specific liquidity profile and risk tolerance.
How to plan for the unknown and constraints
Credit union loan growth is expected to remain below the long-run average of 7% for 2026. This makes active liquidity management essential for maintaining financial performance.
The credit unions navigating this environment most successfully are treating liquidity management as a strategic priority rather than a tactical afterthought.
They’re also recognizing that regulatory concentration limits, such as the NCUA’s 704.8(k) rule currently under review, can create artificial constraints that drive funds outside the credit union system. Staying informed about regulatory developments and advocating for sensible rules that support efficient capital deployment benefits the entire credit union movement.
What you need to do now
Every basis point matters when you’re managing excess capital. The difference between actively managing that liquidity and letting it sit idle can mean tens to hundreds of thousands of dollars in earnings.
At LaCorp, we specialize in helping credit unions turn liquidity challenges into opportunities for improving financial performance. To take advantage of the best yields on money market accounts or discuss your options, contact LaCorp at (800) 421-7030 or visit our website.
About the Author
David Savoie is the CEO of LaCorp. A CPA and former NCUA examiner, he provides strategic guidance to credit unions on navigating regulatory constraints and optimizing institutional capital.