LOST PINES, Texas–Credit unions here were offered strategies and ideas for adjusting their balance sheets as rates remain on a slow decline.
After noting that few could have predicted a year earlier when Catalyst Corporate held its Strategic Summit how 2025 would play out—most especially the “sheer rate of change”—Mike McGinnis, SVP/CIO with the corporate, observed during this year’s meeting that there has been similar change in the investment markets and balance sheets.
Forecasts around the credit cycle and the uptick in delinquencies and charge-offs have been borne out, he noted, saying credit unions have done a good job reallocating resources in response.
The most effective responses, however, he said, have come in adjustments made to lending to be more reactive to the market and to credit pressures. Unfortunately, predictions around a softening in lending have also proven to be spot-on, leading to a buildup in liquidity.
The Economy
When it comes to the economy, McGinnis said President Trump’s tariffs have led to both positives (an onshoring of approximately $1.3 trillion) and negatives (many U.S. businesses have been hit hard), while the resiliency of the consumer has proven to be a “pleasant surprise,” even as some economists cite a “K-shaped economy” in which one group of consumers is on the rise and others—a larger group—fall behind.
And, as anyone with a 401(k) likely knows, McGinnis said the equity markets continue to perform very well, which has been an additional piece of good news for many.
McGinnis said he has been surprised at how “stubborn” the Fed has been in lowering the federal funds rate, even as markets have priced in three rate cuts for 2026, and noted many credit unions are sitting on a considerable amount of cash, which will be a challenge if they don’t move those funds into investments as rates come down.
Making Investing Easier
“We’ve been investing in a lot of resources to make the investing process very easy for credit unions,” he said. “We have totally upgraded the SimpliCD platform. One of the cool features of that is you can set it to get notifications of any term above a certain rate, which makes it very easy to get some of the most competitive rates out there.”
For credit unions that are block buyers, he said Catalyst Corporate will tailor something specifically for them.
“We’ve also invested heavily in our broker-dealer,” McGinnis said, adding that its bond trading platform is designed to give credit unions instant access to the bond markets.
It has made similar investments in its loan participation platform, which has approximately 1,100 users and has done more than $4 billion in participations to date. Catalyst Corporate has also partnered with CU Business Group to facilitate even more participation opportunities.
Rethinking Derivatives
“Whenever there is volatility, managing your interest rate risk profile can be challenging,” McGinnis said. “Sometimes it also presents an opportunity. One of the tools that is quickly growing in usage by credit unions is derivatives. Catalyst over the last handful of years has ramped up the resources we have available for those of you that are actively in the derivative markets. We have access to some very competitive counterparties for credit unions and help counsel them on the strategy. That can have a positive impact on the balance sheet. This is the perfect time as rates come down to use derivatives so when rates go back up you ride that back up.”
