A Balance Sheet Snapshot: What 2025’s Final Quarter Trends Signal for 2026
As we close out 2025 and look ahead to the opportunities in 2026, I thought it would be helpful to reflect on recent balance sheet trends. The current market environment has prompted notable shifts across most credit unions. Overall, loan generation has been lower than the levels seen in the past two years, and while some have maintained loan balances, many institutions have experienced some contractions in their portfolios. For credit unions that have experienced growth, the increases have often been concentrated in targeted products—specifically, adjustable-rate HELOCs and unsecured loans. This trend aligns with the recent uptick in national consumer debt ratios.
At the same time, interest rates on consumer loans have remained relatively steady for credit unions and the broader banking sector. While consumer loans tend to be less sensitive to market fluctuations, rates are expected to gradually decrease over time as competition intensifies, provided market expectations hold. However, the recent increase in loan delinquencies is a concern for many credit unions. This may be influencing some institutions to keep rates higher, especially if management anticipates further increases in delinquencies amid ongoing labor market uncertainty.
Toward the end of the year, we have started to see a shift in growth toward mortgage products, particularly adjustable-rate mortgages (ARMs). While mortgage rates have come down from their peak earlier in the year, they still maintain higher-than-average spreads over the 10-year U.S. Treasury. Members with higher rate mortgages are closely monitoring even small rate decreases, eager for opportunities to lower their monthly payments. Historically, significant market rate declines have triggered refinancing booms, but lately, even moderate changes are motivating homeowners to refinance.
To address softer loan demand, credit unions are allocating more available funds to certificates and agency securities in pursuit of higher yields and extended duration, safeguarding earnings in the event rates continue to decline.
On the funding side, regular share and draft accounts have remained relatively stable for most credit unions. Despite the lower rate environment pressuring deposit rates downward, many rate-sensitive members are rolling their maturing accounts into new certificates to take advantage of still-attractive yields. As a result, the deposit mix remains more heavily weighted toward term deposits compared to the prior zero-rate environment. These yields, while lower than last year’s, continue to draw member interest.
With budgets for the new year already prepared, it’s important to remember that they are estimates of anticipated growth. As you begin the year, I encourage you not only to use your budget, but to also actively forecast your evolving balance sheet throughout the year. This will provide clearer insights into real-time growth and allow you to better align earnings expectations as the year progresses.
From my observations, every credit union has a unique balance sheet. While it's valuable to understand broader growth trends, it's even more critical to assess the specific growth potential of your own institution.
Melissa Scott serves as Vizo Financial’s vice president of ALM services. In this role, she is responsible for managing and providing ALM reporting, modeling, validation and consulting services to credit unions. She is also responsible for providing ongoing training, support and education for ALM users, management and their board of directors. She also holds the designation of certified public accountant (CPA) and is a member of the North Carolina Association of Certified Public Accountants.