May 14, 2026—Each quarter Callahan & Associates presents Trendwatch, offering a high-level view of the credit union landscape and emerging industry trends. The webinar explores broader themes and delivers insights that can be applied to your credit union’s market, strategy, and growth priorities.
On Tuesday, May 12, Jon Jeffreys, CEO of Callahan & Associates, delivered the firm’s Q1 2026 outlook. Credit unions entered the year in a strong position, achieving improved profitability despite persistent economic headwinds. Stable net interest margins, elevated yields, easing funding costs, and five-year-high capital levels have strengthened the industry’s resilience. At the same time, members remain under pressure from rising costs in key areas, reshaping liquidity needs and borrowing patterns.
A Resilient Macro Backdrop
An economic update was presented by Jason Haley, Chief Investment Officer, ALM First. Jason believes markets have shrugged off geopolitical noise, buoyed by AI-driven infrastructure spending and historically low unemployment claims. The S&P 500 continues testing all-time highs, even as oil prices climb amid Iran tensions. Inflation lingers stubbornly, however, keeping the Federal Reserve on the sidelines—market pricing now anticipates a “perma-hold” on rates.
For credit unions, this translates to a supportive, yet cautious environment. Earnings remain constructive, but vigilance around rate policy, consumer sentiment, and energy costs is essential. Discipline in balance sheet management will separate outperformers from the pack.
Members Seek Liquidity Amid Pressure
Alix Paterson, Chief Strategy and Transformation Officer at Callahan, presented key trends for the first quarter of 2026. Signs of household financial stress are mounting: Gallup data shows cost of living as the top concern, consumer sentiment at multi-year lows, and homebuying sentiment broadly negative. Loan-to-Share declined as members increase liquidity. Money market accounts are now leading share growth, surpassing certificates, with a clear shift toward shorter maturities as members maintain flexibility. And average share balances per member are climbing, signaling deepening relationships and trust in cooperatives as a safe harbor. Membership grew by 2.7 million over the past year, though smaller credit unions lag, highlighting scale’s growing edge.
Lending Shifts Toward Real Estate Strength
Loan growth ticked up to 4.7%, fueled by robust real estate originations (up 14% YTD). First mortgages, HELOCs, and commercial real estate drove the surge, with adjustable-rate mortgages gaining traction in a high-rate world. Secondary market sales remain a vital tool for liquidity and non-interest income.
Consumer lending shows cracks—new autos declined 2%, indirect lending waned, and credit card utilization eased—but used autos and cards held steady. Credit unions maintained steady market share in key categories, even as rivals chipped away at auto originations.
Earnings Power Fuels Strategic Flexibility
ROA rose to 0.85%, propelled by a 22 bps NIM expansion to 3.46%—the widest margin-over-expenses gap in decades. Loan yields hit 6.13%, revenue scaled new highs, and provisioning eased versus last year. Reserves remain robust, buffering elevated delinquencies (now improving but still above cycle lows).
Larger credit unions are pulling away, generating more revenue per member than peers. Non-interest income dipped slightly, underscoring the need for fee innovation amid deposit shifts.
Leadership Imperative: Position for the Cycle Ahead
TrendWatch 1Q26 reveals an industry with tailwinds in earnings and member loyalty, but headwinds in consumer strain and uneven growth. Credit unions that lean into liquidity products, real estate prowess, and relationship depth will thrive.
The opportunity for leaders is to build on what’s already working while continuing to invest in digital access, targeted lending, and member education. Staying close to what your members are experiencing day to day can help guide smarter decisions.