The Cohort Earnings Divergence — Q1 2026
The Split
The pattern across the asset-size ladder is close to monotonic: the larger the credit union, the higher the return on assets, with the smallest tier sitting in a category of its own.
CAMELS Metrics by Asset-Size Cohort, Q1 2026 (income ratios annualized)
| Cohort | CUs | Total Assets | ROAA | NIM | NCO Ratio | Delinq. (60+) | Loan Gr. (QoQ) |
|---|---|---|---|---|---|---|---|
| Under $100M | 2,466 | $74.3B | 0.13% | 3.73% | 0.44% | 0.93% | -1.10% |
| $100M–$500M | 1,036 | $239.1B | 0.74% | 3.64% | 0.49% | 0.76% | 0.36% |
| $500M–$1B | 282 | $203.3B | 0.73% | 3.50% | 0.57% | 0.71% | 0.95% |
| $1B–$10B | 442 | $1,291.6B | 0.81% | 3.25% | 0.64% | 0.73% | 1.50% |
| Over $10B | 24 | $675.7B | 1.04% | 3.79% | 1.37% | 1.12% | 4.48% |
Source: NCUA Call Report, Q1 2026 · release v2026.2.27 · QuarterCall
The under-$100M tier returned 0.13% on assets. The next tier up, $100M–$500M, returned 0.74% — more than five times as much — and the curve keeps climbing to 1.04% for the 24 institutions above $10 billion. A 91 basis point gap separates the smallest cohort from the largest. A gap that size separates a credit union that can fund its growth from its own earnings from one that cannot.
Margin and Credit Losses
The smallest credit unions' annualized NIM is 3.73%, second only to the largest tier's 3.79% and well above the $1B–$10B cohort's 3.25%. That width is consistent with what small institutions tend to hold: simple, relationship-priced loan books and low-cost core deposits, a mix that gains when funding costs ease, as they did this quarter.
Credit losses are the lowest of any cohort. The under-$100M tier charged off 0.44% of loans on an annualized basis, barely a third of the 1.37% the over-$10B tier absorbed, and its 60+ day delinquency of 0.93% sits below the largest tier's 1.12%. We read the low losses as consistent with conservative underwriting and close knowledge of members.
A cohort with the system's second-widest margin and its lowest losses therefore earns almost nothing, so what its assets earn is lost further down the income statement.
Scale
Below the margin and credit losses, the largest remaining line of the income statement is operating expense, which this report does not measure. A 3.73% margin and a 0.44% loss rate leave ample room for a healthy return unless operating costs consume nearly all of it, and we read the smallest tier's return as a sign that they do.
Many of a credit union's costs barely change with its size: core systems, examinations, audit, compliance, insurance and a minimum staff cost roughly the same whether a credit union holds $40 million in assets or $400 million. Spread across a small balance sheet, those costs swallow the margin; spread across a large one, they leave most of it as profit. We read the ROAA curve's steady rise with size as fixed-cost absorption more than a difference in credit or pricing.
The loan trend makes the gap harder to close. The under-$100M tier's loans contracted 1.1% in the quarter, extending a run of negative loan growth the larger tiers have not shared; the over-$10B cohort grew loans 4.5% in the same quarter. Loan growth is how a small institution reaches scale, adding earning assets to spread the same fixed costs over. A shrinking loan book raises the cost of running the institution per dollar of loans instead, and leaves the tier's wide margin applied to less each quarter.
Consolidation
If every one of these credit unions earned zero, the system ROAA would barely move: the under-$100M tier holds a small share of total assets, so its earnings do not threaten the system.
The pressure shows in the number of credit unions instead. The system held 4,250 federally insured credit unions at quarter-end, down 161 from a year earlier, an annual decline of about 3.6%, almost all of it in the smallest tiers. A credit union that can neither earn nor grow its way to scale can merge into one that already has it, and we read the falling count as that consolidation under way. The count is net: this report does not separate mergers from other changes or test their link to earnings.
A 0.13% return on a clean book and a strong margin points away from credit or pricing, the problems a better loan product could address, and toward scale, which organic growth rarely supplies at this size.
Connecting the Lines
This breakdown develops Signal 3 (Record Margins, and a Cohort Earning Nothing) from the Q1 2026 System Signals, and it reframes the loan-growth weakness noted in the Q1 2026 Ledger. System loan growth of 0.5% was uneven: the large tiers grew while the smallest tier shrank, the same divergence the earnings split shows.
The seasonal credit relief of Q1 (Signal 1) gives the smallest tier some room without changing the arithmetic: a margin this wide and losses this low would ordinarily produce far more than 0.13%, and we read the shortfall as scale that organic growth is no longer supplying.
- Return on assets, net interest margin and the charge-off rate are annualized from the first quarter alone.
- The report shows no operating-expense figure; it reaches the scale explanation by ruling out margin and credit losses.
- The under-$100M figures are the tier's aggregate; a single small credit union's return can sit well above or below it.
- The fall in the number of credit unions is a net count; the report does not separate mergers from other changes or test their link to earnings.