System Signals — Q2 2026

Signal 1: Loan Growth Accelerated, Led by Real Estate Lending

Loans grew 1.96% in the quarter, against 0.49% in Q1. Loan growth picks up from the first quarter to the second every year, so the fair comparison is with other second quarters: 1.66% last year and 1.04% the year before. Q1 itself was an ordinary first quarter, a little under the 0.52% of Q1 2025.

Real estate lending accounts for most of the growth. Home and commercial property loans were 74% of the quarter's increase and 95% of the year's, and are now 58% of the loan book. Vehicle balances are 0.4% above a year ago. Loans granted in the first half ran 12% ahead of the first half of 2025.

Cash from the first quarter was lent or invested. Cash fell $31.5 billion in the quarter, while loans rose $34.0 billion and investments $9.2 billion. Shares grew 0.20%, the most in a second quarter since 2021. Borrowings rose 4.9%; they rose 3.1% in Q2 2025 and then fell for three quarters.

We do not read this as a funding gap. Over the year shares grew 5.2% and loans 4.9%. Cash is level with last June and investments are 7.4% higher. The Q2 2025 edition read the same seasonal pattern as a funding gap reopening; deposits then outgrew loans for the rest of the year. Q1's worry, deposits arriving without loans to absorb them, has eased and not gone: investments grew faster than loans.

Real estate was 95% of the year's loan growth.

What to watch

• Watch: Real estate's share — 58% of loans and rising; the series has tracked consumer credit more closely than property
• Favorable: Second-half loan growth — it has slowed after the second quarter in each of the last three years; if it does not, cash and investments are there to fund it
• Watch: Borrowings — they rose in Q2 2025 too, then fell; a second consecutive rise would be new

Signal 2: Delinquency Is Higher Than a Year Ago, and the Increase Is Outside Cards and Vehicles

The 60+ day delinquency ratio rose to 0.96% from 0.85%. It has risen in each of the last five second quarters, so the sequential move says little. Against other second quarters it reads 0.84% in 2024, 0.91% in 2025 and 0.96% now, the highest June reading since the series begins in 2019. The climb off this year's Q1 low was 12 bps, against 11 bps last year.

Delinquency climbed off its low at about the same pace as the 2025 path, from a higher starting point, which answers the Q1 report's question of whether it would climb faster. That puts a year-end reading above last December's 1.03% if the second half follows last year's.

Delinquent card and vehicle balances were $5.6 billion at June, against $5.6 billion a year earlier, while total delinquent balances rose $1.7 billion, so the whole increase is in the rest of the book. The Call Report's collateral schedule, which the release does not carry, places it in home loans and commercial real estate; a Breakdown will take that up. We have described rising delinquency in this series as a consumer-credit development, the Q1 edition by name, and for the last year it has not been one.

Net charge-offs have not followed delinquency up: 0.78% annualized for the half, against 0.79% a year ago. Earlier editions read that as losses deferred. With card and vehicle delinquency flat, another reading is that the loans now falling behind are secured and lose less, and the Breakdown will test it.

The reserve build stopped. Half-year provisions were $6.8 billion and so were net charge-offs; a year ago provisions exceeded charge-offs by $253M. The allowance covers 60+ day delinquent loans 1.37 times, down from 1.45. Against all loans it is 1.32%, from 1.31%. Whether lower coverage is thin depends on what secures the delinquent loans, which is the same question again.

By tier, the over-$10B cohort has the highest rate, 1.27%, and it has barely moved in three Junes: 1.23%, then 1.25%. The year's rise is in the $1B–$10B tier, to 0.83% from 0.76%, on 53% of the system's loans.

Card and vehicle delinquency is where it was a year ago. The increase is in the rest of the book.

What to watch

• Watch: The second-half climb — delinquency rose 12 bps from June to December last year; a repeat ends this year above 1.03%
• Watch: The reserve build — provisions equal to charge-offs hold the allowance level; coverage is 1.37 times against 1.45
• Watch: The $1B–$10B tier — the year's rise sits here, 7 bps, not in the largest institutions

Signal 3: Quarterly Margin Highest Since 2019; Half-Year Returns Still Down at the Smallest Credit Unions

The half-year net interest margin annualized to 3.46%, and ROAA to 0.90%, the best first half since 2021. A half-year figure blends two quarters. The second quarter alone ran a margin of 3.52% and a return of 0.98%, against 3.44% and 0.83% in the first. The margin is the widest of any quarter since the series begins in 2019, and the quarter's net income, $6.1 billion, the largest.

Against a year earlier, the margin's gain is narrowing. The quarter's margin was 15 bps above Q2 2025's; Q1's was 21 bps above Q1 2025's. For the half, interest income rose 6% from a year ago and interest expense fell 2%. Noninterest expense rose 7%, faster than the 5% growth in assets.

By size, every tier but the smallest improved. From smaller to larger, the four larger tiers return 0.80%, 0.81%, 0.88% and 1.06% for the half, each higher than a year ago, as each already was at Q1. Credit unions under $100M return 0.43%, against 0.76% a year ago. They are the only tier earning less than they did.

The Q1 report found that tier returning an annualized 0.13% while its loans shrank. Its loans grew 0.67% in the quarter, but they have grown in every second quarter of the last six years and grew 0.82% last year, and last year's turn did not hold: the tier contracted in the two quarters before this one. Its half-year return implies a second quarter far stronger than the first. The first quarter's figure is still unexplained. Institutions that merged or closed during the quarter take their year-to-date income out of the tier's total, and the release cannot separate that from an improvement. As the Q1 report found, the smallest credit unions earn less than a year ago while the larger tiers earn more.

The quarter's margin was the widest in the series, while a tier holding more than half the charters and 3% of assets earned less than a year ago.

What to watch

• Favorable: The margin's direction — 3.52% for the quarter, above the 3.40% the Q1 report set as its test; the gain on a year ago narrowed from 21 bps to 15
• Watch: The smallest tier's full year — 0.43% for the half against 0.76%; the year-end figure shows whether Q1 was the outlier
• Watch: Charter count — 155 fewer than a year ago; the count does not separate mergers from other exits

How These Signals Connect

Loan growth came back and the quarter had the widest margin the series has recorded, but loan growth was concentrated in real estate, and the earnings gains excluded the smallest asset tier. Real estate was most of the quarter's loan growth and nearly all of the year's (Signal 1). The four larger tiers earn more than a year ago, and the smallest earns less (Signal 3). Meanwhile the delinquency that is rising is secured by real estate, not the consumer credit this series has been describing (Signal 2).

We read the loan book's shift toward property as what ties the three together: it is where the growth is and, by the Call Report's collateral schedule, where the new delinquency is. The second half tests two things: whether loan growth slows after the second quarter as it has in each of the last three years, and whether delinquency follows last year's path from a higher starting point.

Cycle Positioning: CCPI and CUFSI

The Credit Cycle Position Indicator and the Credit Union Financial Stress Index are not reported this cycle. The Q1 report said we expected to restore both in Q2. They are not restored: the composite build still cannot be reproduced from the release this report is built on, and QuarterCall Research does not publish index readings it cannot reproduce from source. Both return when it can.