Rising federal interest rates are intensifying competition for low-cost deposits, pushing up funding costs and compressing margins across the credit union industry. After peaking at 1.07% in 2021, credit union return on assets (ROA) is projected to fall to 0.80% this year.
“You can’t grow loans as quickly when deposit rates are rising,” says Mark Zook, President and CEO of MAPS Credit Union. “That margin compression is driving ROA deterioration. These are fairly unprecedented times.”
Despite these pressures, forward-thinking credit unions are focusing on what they can control—expenses—to stabilize and improve ROA.
What’s Putting Pressure on ROA
Economic forecasts shifted dramatically last year, and several headwinds remain:
- Rising delinquencies: Reached 1.02% in Q4 2025, up from 0.85% the prior year
- Higher charge-offs: Net charge-offs climbed to 0.80%, the highest level since 2014
- Elevated interest rates: Loan growth continues but has slowed as higher rates dampen demand
Adding to the pressure, the CFPB is targeting overdraft and NSF fees, threatening a key source of noninterest income. “Reducing NSF income significantly changes the business model,” Zook notes. “Combined with rising charge-offs and portfolio yield pressure, it creates a challenging environment.”
While credit unions remain better positioned than banks—with only 3% uninsured deposits—leaders are navigating unfamiliar territory, with limited precedent for this type of downturn.
Where Credit Unions Can Make an Impact
While interest rates and regulations are out of credit unions’ control, expense management is not. Repricing loan portfolios may boost revenue, but often comes with higher credit risk—an unattractive trade-off in today’s environment.
Workforce reductions can deliver short-term savings, but they undermine morale, service quality, and the values that differentiate credit unions.
Instead, many credit unions are turning their attention to one of their largest controllable expenses: employee healthcare costs.
A Proven Lever for Improving ROA
Employee benefits consistently rank among a credit union’s top expenses. Through CU Benefits Alliance, credit unions are collaborating nationwide to reduce healthcare costs while improving benefit quality.
By pooling their favorable risk—rather than subsidizing higher-risk industries—Alliance members have reduced benefit costs by 20–30%. For Workers Credit Union, that translated into a 24% increase in ROA.
Mid Oregon Credit Union, one of the highestROA credit unions in the country, credits participation in CU Benefits Alliance as a key contributor. “We grow nearly twice the asset growth rate and more than double the membership growth rate of the average credit union,” says CEO Kevin Cole. “Being part of The Alliance is a strong contributor.”
How Alliance Members Strengthen ROA
CU Benefits Alliance credit unions collaborate in three primary ways:
1. Lower healthcare costs
Traditional plans spread risk across all industries. Alliance members pool exclusively with other credit unions, reducing healthcare costs by an average of 27% while paying only for actual claims incurred.
2. Improve benefit quality
Each credit union maintains control of plan design, tailoring networks to top regional providers and offering enhancements like wellness programs and medical travel benefits.
3. Attract and retain top talent
Low-cost, high-quality benefits reduce employee contributions without sacrificing value—strengthening recruitment, retention, and service continuity. “It’s a very strong benefits package,” says Cole. “And that helps us attract and retain the best talent.”
Better Benefits. Stronger ROA.
Market volatility may persist, but credit unions don’t have to accept shrinking margins as inevitable.
“Medical insurance becomes a much easier expense to manage,” says MAPS’ Zook. “You’re not weakening your organization—you end up with better benefits for less money.”