Dec 31, 2025 2:48:52 PM
2025 was a milestone year at Accolade Advisory. We refreshed our brand, integrated talent and a proven loan risk model from a long-time vendor, saw broad adoption of our Loan Pricing & Profitability service, and minted new collaboration agreements with several credit union service organizations- all while sharing our knowledge and experience at events across the country and continuously welcoming new credit union partners to our services. Here are five real problems we helped solve in 2025 and the practical lessons any credit union can apply.
1) Leveraging Capital: Who doesn’t like more income?
Credit unions measure success in many ways: membership growth, financial inclusion, community impact. But a strong capital position underpins all of it. Highly capitalized credit unions can be more flexible in their risk appetites because excess capital serves as a backup plan should something go wrong.
Many credit unions, however, operate with capital levels that far exceed what is needed for the size of their balance sheet. They have the financial capacity to support more loans or investments than their current deposit base allows. Unused capital can dull strategic decision-making.
In our role as a fiduciary investment adviser and balance sheet strategists, we routinely manage arbitrage and leverage strategies to generate income for credit unions by artificially growing the balance sheet (i.e., borrowing money to purchase investments). These strategies are managed within the credit union’s overall risk framework and typically involve diluting the capital ratio (to some point above an established minimum), leveraging some portion of excess borrowing capacity, and modifying the credit union’s liquidity profile.
The goal is not growth for growth’s sake. A disciplined leverage strategy is fundamentally about using capital in a way that supports member value, strengthens financial performance, and preserves long-term optionality.
2) Overcoming the Constraints of “Simple CECL”
Like many credit unions, one of our partners saw a significant uptick in credit losses on consumer loans originated in the post-pandemic stimulus era (2022-2023). They tightened underwriting and nearly shut down lending below a specific credit score threshold, resulting in substantially improved charge-offs and delinquencies. As their losses improved, they came to suspect that their reserves were overfunded due to the conventions of using broad, call report-based pools for a WARM CECL calculation.
While it is well within the realm of management’s discretion to tune the allowance based on qualitative and environmental factors, we wanted to provide supporting evidence based on the credit union’s data. We stitched together approximately 100 individual charge-off workbooks into a master data set, creating a credit-tier level loss rate for each loan type with a 6-year look back. By dividing the analysis into smaller pools, we were able to demonstrate that the migration towards lower risk loans merited holding a substantially lower allowance.
3) Capital Restoration through Loan Participation Sales
We were engaged to help a credit union navigate a challenging situation: previous management had made some bad loans with unfavorable terms for the credit union. The resulting drain on profitability took the CU’s net worth ratio to the brink. In situations like this, shrinking the balance sheet can be a necessary step to restore capital strength within required timeframes, although it’s not a desirable long-term strategy.
Our team identified a nearby credit union that was interested in purchasing a portion of the performing lower-risk loans. By applying our loan pricing and credit loss analytics we were able to recommend a transaction structure that was fair to both parties and preserved member value. To further strengthen the institution’s future prospects, we also spent time with the new management team, walking through key profitability and balance sheet concepts that would support better decision-making going forward.
As a result, the credit union improved its capital position and regained momentum. Leadership can now shift its focus away from crisis management and toward building a sustainable future for its members.
4) Merger Guidance: Supporting the “Sell-Side” Board
Earlier in the year, we were engaged by a credit union board that was evaluating a potential merger with a larger institution. The board was presented with enormous spreadsheets, extensive slide decks, and pages of legal documents prepared by the acquiring credit union. Despite having all this information, they still felt uncertain about the implications for their members, employees, and the long-term sustainability of their institution. They needed an independent financial perspective, someone who could represent their interests and provide clarity amid the complexity.
Accolade does not position itself as a credit union M&A broker. Our focus has always been on supporting a diverse and thriving credit union ecosystem, ensuring that institutions of all sizes have the tools and guidance to succeed. But when a board faces a potential merger, we step in to provide independent, mission-aligned guidance.
In this engagement, we evaluated the strategic fit of the merger from multiple angles: financial, operational, and cultural. We developed pro forma financial and ALM analyses, conducted detailed reviews of both credit unions’ loan portfolios to assess credit risk and concentration exposure, and highlighted operational differences that could impact integration and ongoing performance. We also participated in negotiation discussions, helping the board anticipate challenges as leaders of a larger and structurally different institution. Where the acquirer’s team presented discounted cash flow models and regulatory assumptions, we provided independent validation and feedback to ensure the board could rely on the numbers.
Ultimately, our work gave the board confidence and clarity. They were able to make an informed decision that prioritized their members, preserved the institution’s mission, and positioned the credit union for long-term success. This engagement reinforced the value of independent, unbiased financial guidance in situations where boards face complex strategic choices.
5) Key Man Risk: Death by Spreadsheets
Not long ago we were asked to help a credit union that held a large and complex investment portfolio managed by one person. That person became unexpectedly unavailable, leaving both management and the board to pick up the pieces. All of the bond accounting for the credit union was calculated by internally generated spreadsheets without controls or documentation. In the absence of the key staff member, the remaining management staff was spending up to 3 weeks trying to close the books.
By leveraging our investment accounting service, we are targeting to have the closing entries for their investment portfolio reduced to less than one day. This frees up an enormous amount of bandwidth for the credit union to focus on serving their membership. We also plan on simplifying and streamlining their investment strategy in our capacity as a fiduciary to better align with their balance sheet.
Thank You
We are grateful for the partnerships with our credit union clients and the opportunity to help them grow their impact within their communities. Here’s to more member value, more strategic clarity, and more resilient balance sheets in the year ahead.