The Quiet Shift in Credit Union Treasury Management
Something interesting has been happening in the credit union world over the past 18 months. Institutions that historically parked excess reserves in money markets, agency bonds, and short-term CDs are exploring a category most never considered: fixed annuities.
Why? The math has changed.
The average credit union held roughly 32% of assets in investments at the end of 2025, according to NCUA call report data. For a $400 million institution, that's $128 million earning — in many cases — less than it should.
The Problem with "Safe" Investments
Let's be direct about what's happening with traditional credit union investments:
Money Markets are yielding 4.0–4.5% today. Decent, but fully exposed to Fed rate cuts. When the Fed moved rates down 50 bps in late 2024, money market yields followed within weeks. There's no floor.
Agency Securities carry interest rate risk that's bitten plenty of institutions. Remember the 2022–2023 unrealized loss crisis? Credit unions holding longer-duration agencies watched their portfolios drop 15–20% in market value. The bonds paid out at par eventually, but the NCUA examination conversations were uncomfortable.
CDs and Term Deposits at other institutions are safe, but you're lending your reserves to a competitor. And the rates rarely beat what a well-structured annuity can deliver.
What Fixed Annuities Actually Offer
A Multi-Year Guaranteed Annuity (MYGA) is straightforward: you deposit funds with a rated insurance carrier, and they guarantee a fixed interest rate for a set period — typically 2 to 7 years.
Here's what makes this compelling for credit unions:
- 100% principal protection — not subject to market fluctuations
- Guaranteed rates locked for the full term, regardless of what the Fed does
- Tax-deferred growth — no annual tax drag on earnings
- Competitive yields — rates vary by carrier and term, but MYGAs from A-rated carriers have consistently offered premiums over comparable CDs and Treasuries
- Flexible structuring — depending on your charter type, there are pathways to incorporate guaranteed-rate insurance products into your investment strategy
That last point matters. The regulatory landscape for credit unions and insurance-based products varies by charter type and state. Working with an advisor who understands both the investment side and the credit union compliance side is essential.
A Real Scenario
Consider a $300 million credit union with $45 million in excess reserves currently earning 4.2% in a money market.
If they moved $15 million into a 5-year MYGA earning even 100 basis points more than their money market, that's $150,000 in additional annual income — guaranteed for the full term, not projected. Over five years, that's $750,000 in additional earnings with no market risk to the credit union.
The remaining $30 million stays liquid for operations and contingencies. No concentration risk, no liquidity crunch.
Why Now
We're likely near a rate cycle peak. The institutions that lock in guaranteed rates today will look smart in 18 months when money market yields have compressed. The ones that stay fully variable will watch their investment income shrink quarter over quarter.
This isn't speculation — it's the same dynamic that played out in 2019–2020 and 2007–2008. Credit unions that had locked in fixed rates outperformed their peers through the downturn.
Getting Started
The first step is understanding your true liquidity needs vs. what you're holding "just in case." Most credit unions we work with discover they have 20–40% more investable reserves than they thought.
If you're exploring fixed annuity options for your credit union, schedule a briefing with our team. We'll walk through the numbers specific to your institution.