A side‑by‑side look at earnings performance helps put those differences into context.

CREDIT UNION VS. BANK EARNINGS MODEL
FOR U.S. CREDIT UNIONS AND BANKS | DATA AS OF 12.31.2025
SOURCE: CALLAHAN & ASSOCIATES

Strategic Insights

• Credit unions return value to their member-owners; banks return value to shareholders. For this reason, credit unions consistently run a return on assets well below their banking peers. That’s by design, not distress. In the fourth quarter, it was 43 basis points smaller, 0.79% versus 1.22% for banks.
• Higher rates are rewarding efficiency. Banks’ lower operating expense ratios give them more room to protect ROA as funding costs rise, whereas credit unions continue to absorb higher expenses to maintain pricing, service, and access for members.
• The net interest margin spread and the income tax exemption together help credit unions rely less on non-interest income, which, in turn, allows them to give back more to members in the form of lower fees, better rates on lending and savings products, patronage dividends, and more.
• The cooperative model prioritizes working with members on account challenges rather than offsetting costs through fees. Higher provision expenses indicate a greater willingness to extend credit to borrowers with weaker credit and less ability to repay, absorbing more risk to expand access even as household balance sheets tighten. That’s important during economic cycles when banks tend to pull back toward lower‑risk borrowers to preserve profitability.
• Credit unions use their tax-exempt status to return value to members, but the benefits of credit unions to local economies extend beyond membership perks. According to America’s Credit Unions, the federal credit union tax status in 2023 was valued at $2.9 billion, yet credit unions generated more than $297 billion in economic impact through personal financial support, small‑business lending, job creation, and more. That’s more than $100 generated for every $1 “lost” in tax revenue. What’s more, the mere presence of credit unions in local markets presents $10.5 billion in benefits for non‑members.

Don’t stop here. Dig deeper into the credit union earnings model with a look at how a changing rate environment impacts credit unions of different sizes in different ways. Read more in “One Industry. Different Earnings Models,” available exclusively for Callahan clients in the Callahan Client Portal. Read it today.

The post How Today’s Market Is Stress-Testing Credit Union And Bank Earnings Models appeared first on CreditUnions.com.

The latest credit union performance data is available now through Callahan’s FirstLook program, and Financial Performance Week on CreditUnions.com gives readers a look at the latest trends and their impact on your cooperative.

Backed by fresh Call Report data and Callahan’s peer-driven benchmarks, this week’s coverage goes beyond surface-level results to examine the forces reshaping balance sheets, member behavior, and long-term sustainability. The Callahan analyst team has been hard at work connecting 2025 performance outcomes to the strategic decisions credit unions will face in 2026, highlighting where pressure is building, where resilience is emerging, and what leaders should be watching most closely as conditions evolve.

In the days ahead, keep your eyes peeled for:

• How a declining interest rate environment could impact the credit union earnings model.
• Our two-part series on prices, including how affordability pressures are stifling household budgets and the direct impact that’s having on member behavior and the credit union bottom line.
• A look at the latest shifts in asset quality and one big, uncomfortable question: Are credit unions ready?

What about your credit union? What industry performance metrics are you keeping an eye on? Let us know how these trends are impacting your members and your credit union, and we might feature your story on CreditUnions.com.

The post The Numbers That Matter Most To Credit Unions appeared first on CreditUnions.com.

As credit union leaders turn their calendars deeper into 2026, the effects of interest rate changes are becoming more important. Rapidly rising rates the past few years have allowed credit unions to reprice their portfolios to a more favorable earnings position.

The structure of a credit union’s earnings model is central to how an institution fares in this changing environment. Credit unions that can capitalize on earnings-model flexibility during times of solid revenue growth typically are better positioned to weather storms in the future.

Net Interest Margin

At the center of that transition is the net interest margin. The primary driver of earnings in the past few quarters is also most directly affected by shifting interest rates. At 3.40%, margins remain at the industry’s highest level in the past two decades. In fact, margins outpace the operating expense ratio (as a percentage of average assets) by 27 basis points, continuing the largest and longest sustained gap of the past two decades.

CREDIT UNION MARGINS AND OPERATING COSTS
FOR U.S. CREDIT UNIONS
SOURCE: CALLAHAN & ASSOCIATES

During a downward interest rate cycle, however, loans tend to reprice faster than shares, particularly for credit unions with higher concentrations of variable-rate or shorter duration assets.

Operating Expenses

Operating expenses tend to adjust slowly to external forces, as they’re driven by staffing, branch networks, and technology investments that typically don’t feel the immediate impacts of monetary policy shifts. Historically, operating expense ratios have not declined meaningfully during rate-cut cycles.

During the past few years, operating expense ratios have grown at a remarkably steady rate, generally tracking the pace of inflation nationally, which has been elevated. If margins start to contract, finding efficiency returns on the technical investments of the past few years will grow in importance.

Non-Interest Income

Non-interest income (NII) has steadily declined as a share of average assets in the past several years, most recently falling to 1.08%. As margins diminish, NII re-enters the earnings conversation as a stabilizing force. Unlike the net interest margin, NII is less directly tied to repricing dynamics and more influenced by member behavior, product penetration, and scale, a distinction that matters as earnings stability becomes harder to maintain through rates alone.

NON-INTEREST INCOME
FOR U.S. CREDIT UNIONS
SOURCE: CALLAHAN & ASSOCIATES

Credit unions that face a compressing net interest margin might wish to investigate greater income-stream diversification through CUSOs, interchange, secondary sales, or other routes.

Join Callahan’s Non-Interest Income Survey. Understanding where your non-interest income comes from, and how it compares to peers, is critical. Tap into a unique, non-public dataset built through voluntary data sharing and gain detailed insights that go far beyond what is available in the 5300 Call Report. Learn more today.

Looking forward to the rest of 2026, the earnings conversation ultimately converges on balance sheet flexibility. Credit unions will reshape portfolios in response to falling rates, as lower rates bring opportunities for cheaper financing and refinancing.

The challenge facing credit unions is not unfamiliar, but this environment is where the cooperative model shines —  when member focus is no longer a philosophy, but a financial choice.

Ready To Read The Full Story? Callahan clients can access the full version of this article right now on the client portal. Read it today. Not yet a client but looking for expert insights to help you adapt to change, develop your organization’s leaders, and stay at the forefront of industry trends? Connect with our team to learn more. 

The post Flexibility In The Earnings Model Matters More As Rates Turn appeared first on CreditUnions.com.

The prospect of a return to 0% interest rates is more enticing than ever for would-be borrowers. After all, rising rates have dampened affordability in the United States. However, are ultra-low rates really in the best interest of the U.S. economy?

As of early February, the federal funds target range set by the Federal Reserve was 3.5% to 3.75%. The Trump Administration is pressuring the Fed to reduce interest rates in hopes of spurring the economy. Traditional thinking also holds that lower rates reduce monthly housing payments, improving affordability and helping Americans afford homes.

But will this work as promised?

A closer examination of the past few times the Federal Reserve has drastically lowered interest rates suggests the central bank is smart to proceed with caution.

The Impact Of 0% Rates On The U.S. Mortgage Market

Following both the Great Recession and the COVID-19 pandemic, policymakers were concerned that lending would completely stall as the economy cratered. In response, the Federal Reserve lowered the benchmark federal funds rate to 0%, deploying what is known as a zero interest rate policy (ZIRP).

Low rates and a cratered housing market made homes more affordable during the initial recovery following the Great Recession; however, affordability has been falling since 2013. Low rates fueled mortgage demand, which in turn boosted housing demand. Unfortunately, structural supply constraints — including chronic underbuilding following the Great Recession, restrictive zoning in many high-demand markets, and rising construction and labor costs — limited the market’s ability to respond to that demand and home values rose sharply. Pandemic-era migration patterns further intensified regional housing pressures. Together, these forces amplified price increases in a housing market already constrained on the supply side, putting homeownership out of reach for a growing share of would-be borrowers.

MEDIAN HOME SALES PRICE
FOR U.S. HOUSES
SOURCE: FEDERAL RESERVE

According to data on housing affordability from the National Association of Realtors, the median U.S. family income in 2025 was only 1% higher than the qualifying income needed to purchase a median-priced home, signaling a tight market for would-be buyers. By comparison, prior to 2020, the Housing Affordability Index regularly exceeded 160, indicating that the typical family earned far more than was required to qualify for a median-priced home. Increases in home prices are reflected in not only the income of home buyers but also their ages, with first-time homebuyers today more likely to be in their 40s than 20s. What’s more, data from NAR shows the share of first-time buyers has dropped to an all-time low of 21%.

The increase in age of first-time homebuyers coupled with the decline in first-timers as a percentage of total homebuyers has contributed to a K-shaped recovery and negatively impacted perceptions of the U.S. economy, contributing to financial nihilism and low consumer confidence.

The Impact Of 0% Rates On U.S. Credit Unions

Low interest rates have impacted borrowers’ relationship with mortgages, and such changes in borrowers’ behavior have far-reaching consequences.

During both 0% interest rate periods, loans per member rose. In fact, credit union members now hold 20% more products with credit unions than they did before the most recent low-interest rate era. As rates go up, however, the lock-in effect pushes members to hold onto their mortgages, further reducing housing inventory, inflating prices, and shutting out would-be homebuyers.

During this period, yield on loans and investments fell from all-time highs to lows that only recently started to turn around. The low-yield environment pushed credit unions to tap alternative revenue streams, such as other operating income or mortgage sales to the secondary market.

Despite the disruption to their earnings model, credit unions have managed to maintain a healthy return on assets and continue serving members. That resilience underscores the central lesson of past rate-cut cycles: Ultra-low rates might feel like a boost to affordability, but they can create unintended challenges that ripple through housing markets, lenders, and the members credit unions serve.

This is an excerpt from a Callahan Exclusive Client Content. Callahan clients can access the full version of this article right now on the client portal. Read it today.

The post Will Ultra-Low Interest Rates Improve Housing Affordability? appeared first on CreditUnions.com.

Performance data through Sept. 30 paints the picture clearly. Loan growth reached 4.6%, share growth climbed to 5.2%, and member growth — after more than two years of deceleration — finally began to bend upward again at 2.0%. Even the median credit union, contending with changing demographics and intensified competition, held its ground with membership falling just 0.5%.

Notably, all this growth occurred without leaning on indirect lending, which remained essentially flat at 0.1% even as direct member engagement continued to rise.

Saving patterns further reinforced this engagement trend. Member share balances grew faster than the U.S. national savings rate. The types of share products reflect a membership keen on saving. Certificates and money markets carried more weight —  46.6% of total shares — even as members kept term lengths short and flexible.

On the lending side, the rebound was even more pronounced. Total originations jumped 17.7%, led by a surge in first mortgages, which accounted for 54.3% of real estate originations. Refinance activity climbed to 33% of total originations, its highest level since early 2022. Meanwhile, auto lending shrank slightly, declining 0.9% on balance sheets, reflecting tariffs, affordability pressures, and deliberate pullbacks from indirect channels.

Of course, numbers only tell half the story. The direct impact credit unions have on the lives of individual members is evident everywhere, including in these success stories:

• DuGood FCU offers 0% tool loans to trade-school students.
• Lake Trust guides new entrepreneurs through business-readiness training.
• Hello Credit Union partners with United Way’s 211 helpline to support families in crisis.
• Wright-Patt Credit Union reshapes access to affordable housing in Dayton.
• New Orleans Firemen’s FCU deploys 100% LTV mortgages to counter systemic barriers.

These aren’t anecdotes — they’re the operating system of cooperative finance.

Risk metrics held their own as well. Delinquency plateaued at 0.94% of total loans, with most categories dropping below where they were a year earlier. Charge-offs declined to 0.76%, reinforcing member resilience despite rising costs. Commercial real estate loans remain an area to monitor, with delinquency at 1.08%, high relative to the past five years but still manageable relative to historical norms.

Earnings were a standout. Total revenues reached $112 billion year-to-date, powered by higher loan yields and stable funding costs. The gap between the net interest margin and the operating expense ratio widened to 27 basis points, the largest opening in more than two decades, as more balance sheets shifted toward higher-yielding, member-driven lending. Operating expenses continue to rise — now at 3.11% of assets — but current margins offer rare strategic breathing room.

Technology trends added another layer of optimism in the third quarter. Credit unions aren’t using AI to shrink their workforce; they’re using it to sharpen the human edge. Marine Credit Union is applying AI to strengthen underwriting and risk modeling, whereas Premier America is using simulated dialogues to train branch staff in empathy, rapport, and confidence — proof that technology can amplify connection rather than replace it.

Capital remains robust, with net worth at 11.3%, supported by declining unrealized losses and strong earnings. Liquidity tightened somewhat as cash balances fell to 7.7% of assets, but available credit lines of $574 billion offer wide runway for funding if demand spikes.

The through-line across all of this is simple: credit unions perform best when conditions are hardest. Banks might excel in calm weather, but cooperatives are built for turbulence — for furloughs, sudden expenses, rising rates, and members who need someone to stand in their corner.

In a volatile year, credit unions didn’t chase the spotlight. They kept the lights on. And that steady glow continues to guide the communities they serve.

Trendwatch 3Q25 Is Available On-Demand

Callahan & Associates takes a look at third quarter credit union performance trends, exploring where the movement stands today and where opportunities lie for tomorrow.

Watch Now On-Demand

The post Credit Unions Steady The Wheel In A Wobbly Year appeared first on CreditUnions.com.

Operating expenses at U.S. credit unions have been on the rise as cooperatives reward staff, invest in technology, and pay for strategic guidance. Unfortunately, this has come at the expense of stronger earnings.

Operating expense has jumped nearly 7% annually in the past five years. It has risen as a percentage of average assets for 13 consecutive quarters as inflation makes its mark on employee compensation, office operations, and professional services. Smaller credit unions, which typically do not benefit as much from returns of scale, have been hit particularly hard.

Currently, the rise in the net interest margin has more than offset the rise in operating expense; however, net interest margins are currently benefitting from the elevated interest rate environment. If rates come down, expect net interest margins to drop, too.

OPERATING EXPENSE RATIO
FOR U.S. CREDIT UNIONS
SOURCE: Callahan & Associates

Increased spending is not inherently bad — in fact, strong operations are a crucial part of quality member service. Credit unions must invest in their operations to remain competitive in the marketplace and give members the financial experience they deserve. The key, however, is efficient expenses. Are the increased costs generating proportional returns and value for members?

U.S. INFLATION AND CREDIT UNION OPERATING EXPENSES
FOR U.S. CREDIT UNIONS
SOURCE: Callahan & Associates

Diving Into OpEx Trends

Inflation peaked at 7% in 2021 and has hovered around 3% since 2023. Today, rising prices have trickled into compensation, travel, office costs, and more, yet the efficiency ratio — calculated as operating expenses divided by operating income — at U.S. credit unions improved for the first two quarters of 2025 and stood at 70.79% as of June 30. Although this is promising, a rate cut from the Fed would dig into interest income and erode the efficiency ratio.

OPERATING EXPENSE COMPOSITION
FOR U.S. CREDIT UNIONS
SOURCE: Callahan & Associates

At 52.6%, employee compensation and benefits constitute the majority of a credit union’s expenses. To retain and reward experienced talent, credit unions have increased average salaries 7.8% per year for the past 10 years.

A happy staff is one of the keys to superior member service, but in addition to monetary compensation, it is important to provide appropriate resources, which come at a cost, too. In the past decade, costs for professional and outside services have risen faster than other expenses and comprise more of the operating expense budget with each passing year. Investing in these services, particularly new technologies, is essential. It would be costly, inefficient, or downright impossible for a credit union to provide many of them in-house, yet they are necessary in today’s competitive, commoditized financial services market. What’s less necessary is physical office space. Although office operation costs have remained fairly flat the past few years, office occupancy has declined. This is likely the result of post-pandemic adjustments in response to realigned office space needs.

In addition to the right tools, the right messaging goes a long way in winning over members. Although educational and promotional budgets comprise a small part of operating expenses, their impact can be outsized. Getting the word out about a credit union’s purpose is one way to draw in existing as well as potential new members and efficiently deepen relationships down the road.

Bottom Line

Unchecked operating expenses hurt a credit union’s ability to grow and return maximum value to members, yet keeping up with currents needs and expectations comes at a cost. Whether today’s investments pay off will depend on how well credit unions can leverage new resources to deliver meaningful benefits for members.

For now, credit unions must ensure investments in necessary services don’t constrain their ability to fulfill their member-driven missions. It’s a difficult balance, but credit unions have a secret weapon: their purpose. If they can clearly communicate why they exist, consistently deliver on that promise, and prove themselves to be trusted financial partners, they can build lasting loyalty rooted in strategy and service.

The post Unpacking The Surge In Credit Union Operating Expenses appeared first on CreditUnions.com.

While real estate originations rose 30.8% compared to 1Q24, a seemingly impressive year-over-year gain, they dropped by 13.6% compared to the final three months of 2024. That decline was largely due to first mortgage and commercial originations, as other real estate originations — mainly HELOCs — grew 2.1%.

What drove these shifts in lending? First quarter data suggests it may be the result of changing member behaviors in the face of new market dynamics and economic headwinds.

Quarterly Loan Originations
For U.S. Credit Unions | Data as of 3.31.2025

1. Consumer Lending Gets A Boost

Consumer loan originations jumped 4.4% quarter-over-quarter, reflecting the needs of members and their relationship with their credit union.

While members increased total credit card balances by 3.7% year-over-year, utilization declined by almost a full percentage point since the fourth quarter of 2024. However, this is somewhat typical of the first quarter, as spending is usually lower after the frenzy of the holiday season, and more members spend cash as tax returns are deposited into their accounts.

Vehicle purchases also played a role boosting consumer loan originations. U.S. car sales saw a bump in March from consumers rushing to dealerships to get ahead of tariffs, but credit unions were not the only lender to benefit. Auto manufacturers’ lending departments and other finance companies linked to the dealership gained market share in the first quarter. These companies — eager to move inventory quickly — offer low-cost financing that many consumers can’t pass up.

Auto loan balances held by credit unions declined slightly year-over-year, meaning the industry is not quite originating enough auto loans to replace the amount of paydowns on existing loans.

YTD Auto Origination Market Share by Lender Type
Data as of 3.31.2025 | Source: Experian

2.Real Estate Loans Reflect Changing Market Dynamics

In the first quarter, credit unions increased HELOC balances, while first mortgages were stagnant. On the commercial side, real estate lending is up significantly year-over-year, driven by new approaches to commercial lending.

Members continued to pursue more HELOCs, as they’ve come to rely on recent increases in home equity to take out credit. The home purchase market remained quiet in the first quarter, and refinances were rare, due in part to the Federal Reserve’s “higher for longer” approach to interest rates. In light of this, credit unions originated more adjustable rate and balloon/hybrid mortgages compared to the first quarter of 2024, as more members might be expecting mortgage rates to drop.

On the commercial side, real estate loans are still a specialized loan product for credit unions. Commercial originations cooled off in the first quarter after an active end to 2024, but are still up 62.4% year-over-year.

Members are increasingly considering credit unions when looking for a lender for a large commercial loan. This growth reflects how credit unions are building out their commercial lending teams, and some are acquiring banks to capture the talent and expertise of proven commercial lenders.

Total HELOC Balances and Utilization
For U.S. Credit Unions | Data as of 3.31.2025

3.Earnings On The Upswing

How do these changes influence the income statement? Advantageously, it appears.

The 30-year fixed rate mortgage averaged 6.83% during the first quarter, 20 basis points higher than the fourth quarter. More pandemic-era loans are being paid down and replaced by higher-yielding loans on credit union balance sheets. This caused the average loan yield for credit unions to reach 5.97% in 1Q25, up 14 basis points from year-end.

Further, consumer loans typically carry a higher interest rate than those backed by real estate, and consumer originations reported the most growth in 1Q25.

Member borrowing behavior is in transition, shaped by economic constraints and shifting priorities. The modest rebound in real estate originations — driven primarily by home equity loans — signals that members are still leveraging their homes, but not necessarily moving or refinancing. Meanwhile, consumer loan originations have taken the spotlight despite credit unions struggling to maintain market share in auto lending. The growth in commercial lending suggests new opportunities to meet members’ needs but also increased complexity. For credit unions, understanding and adapting to these changing borrowing patterns will be essential for staying relevant in a shifting economic environment.

The post 3 Ways The Balance Sheet Is Adjusting To New Borrowing Habits appeared first on CreditUnions.com.

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How Does Your Asset Quality Compare? Book a free 1:1 session to benchmark your credit union against two to three peer groups of your choice. You’ll receive a detailed report with key insights to guide your team’s decision-making. With Callahan, it’s never been easier to leverage industry data to assess credit union performance, uncover new opportunities, and strengthen your strategic initiatives. Book now.

The post Credit Union Asset Quality In 1Q 2025 appeared first on CreditUnions.com.

The following Market Snapshot and Two-Year Financial Statement can equip readers with the tools needed to evaluate the trends that shaped the first quarter and beyond. 

Credit Union Performance Reports

Callahan’s Market Snapshot and Two-Year Financial Statement equip credit union leaders with the tools they need to be more informed stewards of members’ money during these changing times.

Want a closer look? Download the full report here.

Quarterly Performance Webinar

The Latest Insights – Available On Your Schedule: Despite a shifting economic picture, credit unions continue to step up for members in uncertain times. Here’s how the industry performed during the first quarter and what that means for the months ahead. Watch it now. 

Quarterly Performance Coverage

5 Takeaways From Trendwatch: With economic uncertainty on the horizon, credit union members are moving money into lower-term deposits and paying down debt, helping to boost margins and lower delinquency across the industry. Read More 

Seeing The Big Picture: Understanding the first-quarter macroeconomic landscape and what credit unions need to know to position themselves for the months to come. Read more 

Consumer Lending Gets A Turn In The Spotlight: Overall loan originations are up from one year ago but down slightly from the end of 2024. Here’s how a jump in consumer lending could boost the balance sheet. Read More 

Credit Union Savers Favor Flexibility Over Returns: Members are changing the way they deposit their money, saving more and opting for lower-yielding, more liquid account types. Read More 

Eye On Asset Quality: Consumers’ budgets are tight and inflation remains high, but delinquencies and charge-offs have plateaued – good news for asset quality. Read More 

Let’s Review Your  Performance Together. Join Callahan for a complimentary 1:1 session to analyze your performance reports using key insights from Trendwatch 1Q25. We’ll benchmark your credit union against two to three peer groups of your choice and provide a detailed report of our findings at the end of the session to help your team make informed strategic decisions. Request now.

See You Next Quarter! CreditUnions.com updates this page with the freshest FirstLook credit union data every quarter, so don’t forget to come back for insights into the second quarter of 2025.

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