The Funding Gap — Q2 2026
The Second-Quarter Pattern
Every second quarter in the series repeats one sequence. First-quarter inflows lift shares: 2.8% in Q1 2024, 3.1% in Q1 2025 and 2.7% in Q1 2026. Shares then stall while lending opens: they fell 0.4% in Q2 2024 and grew 0.1% in Q2 2025 and 0.2% in Q2 2026, while loans grew 1.0%, 1.7% and 2.0% in the same quarters. A ratio of more than twenty to one, the figure that opened this thread a year ago, is the arithmetic of a small denominator: share growth near zero makes any ordinary lending quarter read as a gap.
Same Shape Each Year: the chart shows quarter-over-quarter growth in loans, assets and shares from Q3 2023 to Q2 2026. Shares rise in each first quarter and flatten in each second; loans do the reverse, and neither line has changed its shape in four years.
Source: NCUA Call Report, Q2 2026 · release v2026.2.27 · QuarterCall
Over the Year
Year-over-year comparison takes the season out. Shares grew 5.2% from Q2 2025 to Q2 2026 and loans 4.9%, so the loans-to-shares ratio fell 24‱, to 82.9%. Each year-end reading has fallen as well: 85.2% at Q4 2023, 84.0% at Q4 2024 and 83.2% at Q4 2025. Borrowings follow. System borrowings were $78.9B at Q2 2026, 12.4% lower than a year earlier and 42% below their Q4 2023 peak of $136.3B. The 4.9% rise in the quarter repeats the 3.1% rise of Q2 2025, which the second half of 2025 more than reversed.
Lower Each Year: the table gives the loans-to-shares ratio and total borrowings at each quarter-end, with the quarter's loan and share growth. The ratio peaks in second and third quarters and ends each year below the last; borrowings rise in second quarters and fall over the year.
Loans to Shares and Borrowings by Quarter, Q3 2023–Q2 2026 (all federally insured credit unions)
| Quarter | Loans / shares | Borrowings | Loan growth QoQ | Share growth QoQ |
|---|---|---|---|---|
| ’23-Q3 | 84.8% | $129.4B | 1.8% | -0.1% |
| ’23-Q4 | 85.2% | $136.3B | 0.8% | 0.3% |
| ’24-Q1 | 82.8% | $132.1B | -0.1% | 2.8% |
| ’24-Q2 | 84.0% | $123.3B | 1.0% | -0.4% |
| ’24-Q3 | 84.3% | $121.9B | 0.8% | 0.4% |
| ’24-Q4 | 84.0% | $96.5B | 0.9% | 1.3% |
| ’25-Q1 | 81.8% | $87.4B | 0.5% | 3.1% |
| ’25-Q2 | 83.1% | $90.1B | 1.7% | 0.1% |
| ’25-Q3 | 83.7% | $87.9B | 1.3% | 0.6% |
| ’25-Q4 | 83.2% | $83.0B | 1.1% | 1.7% |
| ’26-Q1 | 81.5% | $75.2B | 0.5% | 2.7% |
| ’26-Q2 | 82.9% | $78.9B | 2.0% | 0.2% |
Where the Lending Runs Ahead
Loans-to-shares rises with size. Credit unions over $10B in assets (n=25; 27.7% of system assets) lent 85.2% of their shares at Q2 2026, and the $1B–$10B tier (n=446; 51.8%) 85.2%, while the under-$100M tier (n=2,439; 3.0%) lent 59.9%. Quarterly loan growth was fastest in the $500M–$1B tier, at 2.6%, and slowest under $100M, at 0.7%; the two largest tiers grew 2.2% and 1.9%. Tier growth is same-store, each institution against its own prior quarter, grouped by its tier at quarter-end. The two largest tiers have the highest loans-to-shares ratios, so they have the least share funding relative to their loans.
Size Sets the Ratio: the table lists each asset-size tier at Q2 2026 with its count, share of system assets, loans-to-shares ratio and same-store loan growth in the quarter.
Loans to Shares and Loan Growth by Asset-Size Tier, Q2 2026
| Tier | n | Share of assets | Loans / shares | Loan growth QoQ |
|---|---|---|---|---|
| Under $100M | 2,439 | 3.0% | 59.9% | 0.7% |
| $100M–$500M | 1,028 | 9.6% | 72.9% | 2.1% |
| $500M–$1B | 277 | 8.0% | 80.7% | 2.6% |
| $1B–$10B | 446 | 51.8% | 85.2% | 2.2% |
| Over $10B | 25 | 27.7% | 85.2% | 1.9% |
The 2025 Expectation Did Not Hold
The Funding Gap — Q2 2025 (September 20, 2025) read that quarter's gap as the end of deleveraging. It expected soft deposit growth to push the funding mix back toward wholesale borrowing and the margin to give ground, and it named second-half deposit growth near 1% a quarter as the line that would keep the gap closed. A year later, that expectation has not held: deposit growth came back above that line, borrowings kept falling instead of rising, and the margin widened instead of giving ground. Share growth was 0.6% in Q3 2025, 1.7% in Q4 2025 and 2.7% in Q1 2026, borrowings fell in each of those quarters, and interest expense for the first half of 2026 was $21.0B, 2.2% below the first half of 2025 on a balance sheet 5.0% larger. Interest expense took 32.8% of interest income in the first half of 2026, down from 35.6% a year earlier and 38.1% two years earlier, and the net interest margin, annualized from the half, widened 18‱ year over year, to 3.5%. Cash and deposits stood at $220B at Q2 2026, against $224B a year earlier. The deleveraging that the earlier installment saw approaching its floor ran for another year.
Funding Cost Fell: the table compares the first half of each year since 2024: interest expense, interest income, the share of income that expense consumed and the annualized margin. Interest expense took a smaller share of interest income in the first half of 2026 than in either earlier first half; the report does not price the marginal funding dollar.
First-Half Interest Expense and Interest Income, 2024–2026 (year to date, June 30)
| Half ending | Interest expense | Interest income | Expense / income | NIM (ann.) |
|---|---|---|---|---|
| ’24-Q2 | $21.4B | $56.1B | 38.1% | 3.0% |
| ’25-Q2 | $21.5B | $60.4B | 35.6% | 3.3% |
| ’26-Q2 | $21.0B | $64.1B | 32.8% | 3.5% |
What Settles It
Expectation H-2026Q2-breakdowns-funding-01. We expect system borrowings at Q4 2026 to be below their Q4 2025 level of $83.0B. Likely (70–85%). Settles with the Q4 2026 data; made in October 2026, before the quarter ends. Baseline: no change from Q4 2025 calls this not borne out. A reading below would be consistent with a third year of lending funded by shares; a reading at or above would be consistent with the wholesale turn the 2025 installment expected, arriving a year late. Rationale: borrowings fell through the second half of 2024 and of 2025, shares outgrew loans over the past year, and cash and deposits stand at $220B.
Connecting the Lines
This installment continues the Funding Gap thread opened by The Funding Gap — Q2 2025 (September 20, 2025), and it records that the earlier reading did not hold. It sits beside Signals — Q2 2026 (October 5, 2026), which reports the quarter's loan growth and the widest margin in the series. The thread now asks whether a second-quarter gap ever lasts the year; in three years of data it has not.
- Growth rates are not seasonally adjusted; that the second-quarter gap is seasonal is read from four years of the same quarterly sequence, not from a seasonal model.
- Borrowings are the Call Report's total borrowings; the report does not separate advances from other borrowings or price either, so what the marginal funding dollar costs is not measured.
- Interest expense covers shares and borrowings together; a cost of shares alone was not computed.
- Tier figures are aggregates of the institutions in each tier at June 30, 2026; tier loan growth is each institution against its own prior quarter, excludes institutions that left the data, and no tier is compared across years.
- The data end at Q2 2026; the expectation on Q4 2026 borrowings is the report's call, not a measurement.
QuarterCall publishes analysis of publicly available NCUA Call Report data. Nothing here is investment, financial, or membership advice.