Credit unions entered 2026 with many of the same advantages that have long defined the movement: member trust, local market knowledge, and a clear focus on relationship-based financial services. But the operating environment has become less forgiving. Funding pressures, changing rate expectations, increased credit scrutiny, fraud exposure, and third-party risk are reshaping how leaders think about growth, profitability, and resilience.
The current environment is not defined by a single challenge. Rather, credit unions are managing several interrelated pressures at once. Loan demand remains uneven. Deposit competition continues to affect cost of funds. Cybersecurity and vendor disruptions are putting operational resilience under a brighter spotlight. All of these factors result in a market that rewards disciplined balance sheet management, clearer risk ownership, and practical investment in technology.
Margin Expansion Is Becoming Harder to Sustain
For many institutions, recent margin improvement has been supported by asset repricing as lower-rate loans originated in prior years roll off or refinance into higher-yielding balances. That benefit, however, is increasingly being offset by funding costs. Certificate specials, wholesale funding, and liquidity competition are placing renewed pressure on earnings, even where asset yields continue to improve.
This dynamic is shifting the margin conversation from simple rate sensitivity to funding durability. Credit unions are evaluating whether deposit pricing models remain aligned with member behavior and liquidity needs. Some institutions continue to use single-rate savings structures, while others rely on tiered pricing across money market accounts, time deposits, or rewards products. There is no universal answer, but the direction is clear: pricing decisions are becoming more strategic, and continue to be closely tied to liquidity planning.
Liquidity Is Constraining Some Lending Strategies
The most direct pressure point for some credit unions is not capital, but cash. Institutions with strong capital positions may still face limits on loan growth when member deposits are not sufficient to fund demand. This is particularly evident in mission-driven lending models, including community development and affordable housing strategies, where loan demand can exceed the pace of core deposit growth.
As liquidity pressures build, credit unions are exploring a wider range of funding and balance sheet options. These include reciprocal deposit platforms, excess share insurance arrangements, loan participations, securitizations, and, for eligible institutions, subordinated debt or secondary capital. Each option carries its own accounting, regulatory, pricing, and execution considerations. The practical challenge is determining which tools fit the institution’s business model before liquidity becomes a constraint.
Credit Risk Is Moving Back Into Focus
Delinquencies and charge offs have improved in some portfolios after recent peaks, but many leaders remain cautious. Allowance levels, coverage ratios, and product-level profitability are receiving more attention as institutions consider whether reserves appropriately reflect risk in the current environment.
CECL has made this discussion more complex. Comparing reserve coverage across peers can be difficult because portfolios vary widely by concentration, duration, borrower profile, and loss history. A credit union with a large commercial portfolio, a heavy indirect auto book, or a mission-driven mortgage strategy may have very different reserve needs from a similarly sized peer.
As a result, leaders are moving beyond single peer benchmarks and placing more emphasis on portfolio composition, underwriting discipline, and enhanced documentation.
Credit cards and unsecured consumer products also deserve close attention. When reserves rise quickly for a particular product, the issue moves from accounting into a strategic question about pricing, underwriting, member value, and long-term profitability.
Fraud & Cyber Risk Are Operational Issues, Not Just Technology Issues
Fraud losses are rising across multiple payment channels, including Automated Clearing House (ACH) transfers, account takeover, new account activity, check fraud, wire activity, and member-to-member transfers. Peer experience suggests that newer payment capabilities do not automatically create the largest loss exposure if controls are strong and usage parameters are clear. In some cases, traditional channels continue to create greater loss pressure than real-time or digital payment products.
Staffing models are under pressure as well. Some credit unions maintain dedicated fraud teams, while others distribute responsibilities across risk, cards, operations, and compliance. The most effective model will depend on scale and complexity, but the need for coordinated monitoring, member education, clear escalation paths, and technology-enabled detection is increasing.
Cybersecurity incidents involving major third-party providers are also reinforcing an important lesson: members often do not distinguish between a credit union and its vendors when a service disruption affects them. Vendor resilience, recovery timelines, claim processing, documentation, and contingency planning have become member experience issues. Credit unions should be prepared to gauge whether critical partners can restore services quickly, communicate clearly, and support member obligations during an outage.
Interest Rate Risk Requires More Targeted Decisions
Rate uncertainty remains central to asset-liability management. Some institutions are evaluating whether to extend duration, pull forward investment purchases, or use derivatives to protect earnings if rates decline. Others remain cautious because of their asset-sensitive or liability-sensitive positions. The key is whether a particular strategy fits the institution’s specific balance sheet and risk profile.
For some credit unions, transaction-level tools such as back-to-back swaps may offer a way to meet borrower demand for fixed-rate structures while managing interest rate exposure. These strategies require governance, expertise, borrower sophistication, and careful documentation, but they may become more relevant as institutions seek flexibility without taking uncompensated long-term rate risk.
Practical Priorities for Credit Union Leaders: How Forvis Mazars Can Help
The next phase of credit union performance will likely be shaped by management discipline rather than broad market momentum. Leaders can help strengthen readiness by focusing on several practical priorities: refining deposit and loan pricing strategies, testing liquidity plans under realistic stress scenarios, enhancing allowances for credit losses (ACL) documentation, reviewing vendor concentration and recovery expectations, investing in fraud controls, and aligning rate risk strategies with balance sheet position.
Credit unions remain well positioned to meet member needs, but the path forward requires a clear-eyed view of risk, funding, and operational resilience. Institutions that connect strategy, data, governance, and execution may be better prepared to protect earnings, serve members, and make informed decisions in a market that continues to change.
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