Lending & Credit Risk Commercial Lending Member Business Lending Portfolio Risk & CECL

A closer look at where credit stress is building for credit unions

Kate Randazzo

May 29, 2026

0 min read

Rising losses after a credit stress lull

Recent industry data shows rising delinquencies, increasing charge-offs, and higher provision expense across multiple loan categories. While today's conditions are nowhere near the levels experienced during the Great Recession, the direction of the trends is noteworthy. More importantly, the pressure is not concentrated in one segment of the portfolio. Instead, signs of stress are appearing across consumer, commercial, and real estate lending.

During a recent Abrigo webinar, Dean Rohne, principal in the Financial Institutions Group at Doeren Mayhew, examined industry trends and discussed how credit unions can better understand and monitor emerging risk. His message was straightforward: The industry is seeing a meaningful shift in credit conditions, and institutions that understand where risk is building will be better positioned to manage it.

Credit performance is moving away from recent norms

One challenge in evaluating current credit risk is that many credit union leaders naturally compare today's performance to the unusually strong years that followed the pandemic. However, Rohne suggested taking a longer view. Looking beyond the pandemic helps remove the distortion created by stimulus programs, elevated savings balances, and excess liquidity that temporarily suppressed delinquency and losses.

The same pattern appears in charge-off data. Net charge-offs across credit unions have increased from historical levels that generally hovered around 40 to 50 basis points to levels closer to 80 basis points today. Provision expense has also increased significantly as institutions adjust reserves to reflect changing portfolio performance.

These trends matter because they directly affect profitability. Higher losses require larger provisions, which put pressure on earnings and increase uncertainty around forecasting and budgeting. More importantly, they signal that the industry is operating in a different credit environment than it was just a few years ago.

You might also like this resource: “A banker’s guide for CECL compliance and backtesting.”

Download

Credit cards are often the first place stress appears

Among consumer lending products, credit cards are showing some of the clearest signs of pressure. Credit card delinquency has climbed to levels not seen for several years, with losses following a similar trajectory. While every institution's portfolio will differ, the trend is significant because credit cards frequently serve as an early indicator of borrower stress.

When household budgets tighten, consumers often rely more heavily on revolving debt. Eventually, higher balances, elevated interest costs, and competing financial obligations can begin to affect repayment performance.

Because of this dynamic, credit card portfolios often deteriorate before other segments of the consumer portfolio show meaningful weakness. Rising credit card delinquency may be providing an early signal about broader pressures affecting members.

For credit unions, monitoring these trends can offer valuable insight into how consumer financial health is evolving across the membership base.

Used auto, commercial, and real estate portfolio challenges

Industry delinquency rates for used vehicles have remained elevated, generally hovering around 1.0% to 1.1% in recent years. While rising delinquency is concerning on its own, many institutions are also facing a second challenge: increased loss severity.

Vehicle values surged during and immediately after the pandemic, creating unusually favorable conditions for lenders. In many cases, repossessed vehicles retained enough value to significantly reduce losses. That dynamic has shifted.

As used vehicle values normalize, some borrowers who are deeply underwater on their loans are choosing to surrender vehicles. When collateral values have declined, the resulting loss can be substantially larger than what institutions experienced just a few years ago.

For credit unions with significant auto concentrations, understanding both delinquency trends and collateral value trends is becoming increasingly important. A portfolio may appear manageable based solely on delinquency metrics while still producing larger-than-expected losses when defaults occur.

Commercial lending

Commercial loan delinquency across credit unions has approached or exceeded 1% in recent periods, while business bankruptcy filings have increased nationally. Taken together, these indicators suggest that some business borrowers are facing growing financial strain.

The challenge with commercial portfolios is that deterioration can develop gradually before becoming visible through traditional delinquency reporting. That makes proactive monitoring especially important. Credit unions should evaluate risk ratings, industry concentrations, geographic exposure, borrower performance, and emerging trends that could affect repayment capacity.

As Rohne noted during the webinar, effective credit risk management requires more than reviewing delinquency reports. It requires identifying potential weaknesses before they become actual losses.

Real estate

Real estate lending presents a different story. Delinquencies are increasing across the industry, yet many credit unions have not experienced a corresponding increase in losses. In many cases, strong property values and borrower equity have helped limit loss severity. The question is whether those conditions will continue.

Future performance will depend heavily on local market conditions, housing supply, and property values. Markets with persistent housing shortages may continue to support collateral values even if delinquencies rise. Other markets could experience greater pressure if economic conditions weaken or home prices soften.

This is one reason why broad national statistics only tell part of the story. Credit unions should understand how local economic conditions influence the specific risks within their own real estate portfolios.

Understanding the story behind the numbers

Delinquency rates and charge-offs are important, but they rarely tell the complete story. Credit unions should examine portfolio performance through multiple lenses, including credit score migration, vintage analysis, concentration analysis, loan-to-value trends, debt-to-income ratios, and changes in underwriting quality. These tools help institutions identify where risk is changing and why.

For example, a portfolio may show stable delinquency today while credit scores across the borrower base are steadily deteriorating. Likewise, a particular loan vintage may be driving losses while newer originations perform well. Understanding those distinctions can lead to more informed lending decisions and stronger reserve estimates.

This analysis becomes especially valuable when supporting CECL assumptions. Institutions that can clearly explain where losses are occurring, what is driving them, and how conditions are changing are often better positioned to support their allowance methodology.

As Rohne described it, credit unions should focus on telling their "credit risk story" using data that explains both current performance and future expectations. The objective is to build the monitoring, reporting, and governance processes necessary to identify emerging risks early and respond effectively. Institutions that understand where risk is building today will be in a stronger position to manage tomorrow's challenges.

This blog was developed with the assistance of ChatGPT, an AI large language model. It was reviewed and revised by Abrigo's subject-matter expert for accuracy and additional insight.

Learn what credit unions are missing in CECL and stress testing.

Blog