Liquidity is like oxygen — you don’t notice it when it’s there, but you panic when it runs low. For credit unions, liquidity is the lifeline that keeps lending flowing, obligations met, and opportunities seized. Mismanage it, and even a profitable credit union can find itself gasping for air.
Fun Fact #1: Credit Unions Aren’t Immune to Liquidity Crunches
In 2023, several mid-sized credit unions faced short-term funding gaps despite strong net worth ratios. Why?
- Aggressive loan growth drained cash faster than deposits grew.
- Investment maturities were too far out to cover sudden needs.
- Emergency borrowing was more expensive than planned.
The Balancing Act
Credit union liquidity management must juggle:
- Member Loan Demand — Lending is your main revenue engine, but it consumes liquidity.
- Deposit Flows — Volatile in an age of online rate shopping.
- Investment Maturities — Long-term investments can lock up funds when flexibility is needed.
- Regulatory Requirements — NCUA expects you to have contingency funding plans ready.
Example from the Field
A $900M credit union launched a popular 5-year fixed mortgage campaign. Demand exceeded expectations, and within 18 months the loan-to-share ratio hit 92%. When a local employer closed and members withdrew deposits, the credit union had to borrow from the Central Liquidity Facility at higher-than-anticipated rates — cutting annual net income by 20%.
Fun Fact #2: “Excess” Liquidity Can Be a Silent Profit Killer
Holding too much idle cash earns next to nothing, dragging down return on assets (ROA). The sweet spot is enough liquidity to handle volatility — but not so much that it starves income.
CPA Insight: Liquidity Planning is Scenario Planning
We run models to answer:
- What happens if loan demand spikes 15% in a quarter?
- How quickly can investments be liquidated without losses?
- If deposits drop 5% in 60 days, what’s the cost of emergency funding?
This transforms liquidity from a static number into a dynamic readiness plan.
Five Keys to Smart Liquidity Management
- Monitor Daily — Cash and liquidity ratios should be tracked like vital signs.
- Align Investment Maturities — Stagger terms to avoid liquidity lock-ups.
- Maintain Multiple Funding Sources — Don’t rely solely on member deposits.
- Stress Test Withdrawals — Assume “bad month” deposit outflows and plan accordingly.
- Integrate with Strategic Planning — Tie liquidity targets to lending and growth goals.
Fun Fact #3: Liquidity is as Much About Relationships as Ratios
Having pre-arranged lines of credit with corporate credit unions, banks, or the CLF means you can move faster than competitors in a pinch.
The Strategic View
Liquidity isn’t just about survival — it’s about agility. Well-managed liquidity allows you to:
- Fund high-yield lending opportunities quickly.
- Handle unexpected deposit withdrawals without panic.
- Maintain member trust through consistent service.
Our Role in Liquidity Management
We help credit unions:
- Model liquidity under multiple economic scenarios.
- Optimize investment ladders for both yield and access.
- Build board-ready contingency funding plans that satisfy NCUA examiners.
Call to Action:
📌 Let’s make liquidity your competitive edge. With a CPA-led liquidity strategy, your credit union can stay ready, responsive, and revenue-focused — no matter the market.