What Does Growth Mean?
Created by Steven J. Berkowitz | Research Assistant: Claude AI
May 26, 2026
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The strategic question before credit union leaders is deceptively simple: what does growth mean? First-quarter 2026 data shows membership growth at 1.81 percent, a multi-year low, while loan growth reached 5.13 percent and share growth settled at 4.66 percent. Loans and shares are growing two to three times faster than membership. This divergence tells a precise story: credit unions are deepening relationships with existing members faster than they are acquiring new ones. The industry holds record capital strength, a net worth ratio above 11 percent, and the regulatory environment is becoming more favorable. The conditions for growth investment are strong. The question is whether leaders have defined where growth will come from and built the strategy to pursue it.
This week’s newsletter examines growth through four strategic lenses: the performance data that reveals the current state, primary financial institution status as the new benchmark for sustainable growth, regulatory deregulation as an operational enabler, and technology infrastructure as a direct growth driver. Three deep dives then examine capital and growth strategy, member experience and generational dynamics, and competitive positioning. Each section explains why the topic matters and provides specific actions to consider.
STRATEGIC INSIGHTS
Q1 2026 Data Reveals a Structural Shift in the Credit Union Growth Model
New performance data covering the first quarter of 2026 shows that federally insured credit unions grew membership at 1.8 percent, a continuation of a multi-year deceleration. Loan growth reached 5.1 percent and share growth settled at 4.7 percent as of March 31, meaning loans and shares expanded two to three times faster than membership. The data identifies a structural shift in how credit unions grow: existing members are deepening their financial relationships while new member acquisition loses momentum. Two forces drive this pattern. First, consumers increasingly spread financial activity across multiple providers, making it more difficult for any institution to capture the primary financial relationship. Second, many credit unions have reduced participation in indirect auto lending, a channel that historically generated member volume at scale but often produced shallow engagement. The result is an industry whose balance sheet grows while its member base grows slowly. Credit union boards that do not distinguish between these two types of growth risk misreading the institution’s strategic position and underinvesting in the member acquisition and engagement strategies that will matter in the decade ahead.
Why This Matters: A widening gap between membership growth and balance sheet growth is a strategic signal that demands board-level examination. Institutions that grow through deepening relationships with a stagnant or slowly expanding membership base are drawing from a diminishing pool. Leaders who address both dimensions of growth, acquiring members and converting them into primary financial relationships, position the institution for durable long-term performance.
Actions to Consider: Establish board-level metrics that separately track membership growth, wallet share penetration, and balance sheet growth and evaluate each against defined targets. Analyze the composition and engagement depth of new member acquisition over the past 24 months to determine which channels produce members who deepen their relationships and which produce transactional members who disengage after a single product.
Source: Callahan and Associates, May 2026 https://creditunions.com/blogs/where-have-all-the-members-gone/
Primary Financial Institution Status Becomes the Central Metric for Sustainable Growth
Research from the Blend 2026 Credit Union Roundtable, based on structured conversations with senior technology and lending leaders from eleven financial institutions convened in Chicago, identified primary financial institution status as a more durable measure of growth than raw membership counts. Participants reported that only approximately 37 percent of members at a typical credit union have direct deposit established, the single most reliable indicator that a member has made the institution the center of their financial life. The engagement proxies that predict long-term member value include direct deposit enrollment, bill pay usage, and the number of active services per household. At institutions where these measures remain low, loan and share growth may reflect product transactions rather than genuine relationships. The roundtable identified the account opening stage as the highest-leverage moment for capturing direct deposit, noting that institutions that secure this enrollment at onboarding convert new members into primary members at substantially higher rates than those who pursue it later through outreach programs. A member who opens an account and sets up direct deposit on the same day is fundamentally different in long-term value from a member who opens an account and never transfers their paycheck.
Why This Matters: A credit union that counts members without measuring primary financial institution penetration may be building a portfolio of shallow relationships that generate short-term balance sheet activity but limited long-term loyalty or advocacy. Institutions whose growth strategy targets primary financial institution status produce members who bring their deposits, loans, and referrals over time and who are far less likely to migrate to a fintech or megabank when rates fluctuate.
Actions to Consider: Establish direct deposit enrollment rate, bill pay usage, and services per household as standard board-level reporting metrics alongside loan growth and membership totals. Redesign the new member onboarding process to capture direct deposit enrollment at the earliest possible point and assign a measurable quarterly improvement target for onboarding-stage enrollment rates.
Source: Blend, May 18, 2026 https://blend.com/blog/thought-leadership/credit-union-roundtable-insights-2026/
NCUA Deregulation Project May Free Resources for Growth Investment
The National Credit Union Administration’s Deregulation Project’s latest proposals include removal of prescriptive third-party servicing requirements for indirect vehicle loans under 12 CFR Part 701.21(h). The cumulative effect of the Deregulation Project spans record retention requirements, surety and guaranty regulations, public unit share rules, and member disclosure requirements. Each removed or simplified requirement reduces the administrative cost of compliance and frees institutional resources, including staff time, technology capacity, and management attention, for growth-oriented activities. Credit unions that systematically track each round of the Deregulation Project can quantify the compliance cost savings available to them and direct those resources toward identified growth priorities such as technology investment, product development, or member acquisition programs. The Deregulation Project is ongoing, with additional rounds expected through the second half of 2026. Institutions that engage only reactively will miss both the compliance relief and the strategic reinvestment opportunity it creates.
Why This Matters: Regulatory compliance historically absorbs staff capacity and institutional resources that could otherwise support growth. As the NCUA removes prescriptive requirements, credit unions gain operational flexibility that can be explicitly redirected toward growth priorities. Leaders who treat deregulation as a passive windfall rather than an active strategic resource will not capture its full growth-enabling value.
Actions to Consider: Assign compliance staff to conduct a cost analysis of requirements removed or simplified across all eight Deregulation Project rounds, estimating the staff hours and operational costs relieved. Present findings to the board with a proposal for redirecting captured capacity toward specific, measurable growth initiatives.
Source: National Credit Union Administration, May 2026 https://ncua.gov/news/events/2026/comments-deregulation-project-proposals-due-may-26
Core Banking Modernization Advances as a Direct Enabler of Member Growth
A major federally chartered financial institution announced this week a commitment to replace its legacy core banking system with a cloud-native unified platform supporting real-time payments and smart contract technology. The migration will include deployment of FedNow instant payment capability and an integrated product suite built on member data. The institution framed the transformation as a direct response to member expectations for integrated, always-on financial experiences. Core banking modernization has emerged as a growth strategy as much as a technology upgrade for credit unions. Institutions on legacy batch-processing cores cannot deliver the frictionless digital onboarding, real-time payment capability, or personalized product recommendations that drive both member acquisition and primary financial institution conversion. The decision to replace the core entirely, rather than add technology layers on top of aging infrastructure, reflects a judgment that incremental investment cannot close the capability gap with modern competitors. The announcement arrives as credit unions across the sector evaluate whether their current technology platforms can support the growth strategies their boards have approved.
Why This Matters: Legacy core banking infrastructure is a direct constraint on growth outcomes. Institutions whose technology cannot support instant payments, personalized communication, or seamless digital account opening compete at a structural disadvantage for members who have experienced modern financial platforms. Core modernization is a capital decision with a direct connection to membership growth, primary financial institution conversion, and long-term competitive relevance.
Actions to Consider: Commission a technology readiness assessment that maps the current core platform’s capabilities against the requirements for real-time payments, FedNow integration, personalized member engagement, and frictionless digital onboarding. Present findings to the board as a governance-level input to the multi-year capital and growth strategy.
Source: PR Newswire / Thought Machine, May 21, 2026 https://www.prnewswire.com/news-releases/us-senate-federal-credit-union-to-transform-its-banking-platform-with-thought-machines-unified-stack-302778142.html
DEEP DIVES
Capital and Growth Strategies
Credit unions enter the second quarter of 2026 from a position of financial strength that the industry has rarely enjoyed. The net worth ratio stood at 11.26 percent in the fourth quarter of 2025, up from 11.07 percent the year prior. Net income rose 21 percent year over year in 2025. Total system assets reached $2.43 trillion. These are not incremental improvements. They represent a capital cushion that gives credit union boards the freedom to invest in growth rather than manage through constraint. The question is not whether the capital exists to support growth investment. It is whether institutions are using that capital with a defined and deliberate growth strategy.
The first-quarter 2026 performance data from Callahan and Associates paints an interesting picture. Membership growth at 1.81 percent marks a sustained deceleration. Loan growth at 5.13 percent and share growth at 4.66 percent remain healthy, but both metrics reflect deepening relationships with existing members rather than expansion of the membership base itself. Institutions that rely on existing member depth to drive balance sheet growth are drawing from a resource that shrinks as members age, relocate, or consolidate their financial lives elsewhere. Deposit competition remains intense. Fintechs continue to compete aggressively for new account openings. The withdrawal from indirect auto lending channels that historically generated member volume has not yet been replaced by a comparably effective acquisition strategy at most institutions.
The NCUA Deregulation Project provides a partial but genuine answer. As prescriptive regulatory requirements fall away, compliance costs decrease and institutional capacity increases. Boards that treat this relief as an operational windfall without directing it toward explicit growth priorities miss the strategic opportunity. The correct response is to quantify the relief, present it to the board as reallocable capacity, and assign it to growth initiatives that have defined metrics and ownership. This is how capital strength and regulatory relief combine into a growth investment program rather than a drift toward comfortable stagnation.
Why This Matters: Capital strength provides the capacity to invest in growth but does not guarantee growth outcomes. Credit unions that hold strong capital positions but lack explicit growth strategies risk allowing that strength to sustain the status quo rather than build the institution for the next decade. The combination of record capital, favorable regulatory conditions, and a demonstrable need to accelerate member acquisition and engagement creates a strategic moment that prepared boards will seize.
Actions to Consider: Request a board presentation from senior management that defines the institution’s explicit growth strategy for the next 24 months, including numeric targets for membership growth, primary financial institution penetration, and loan and share portfolio expansion. Quantify compliance cost savings across all active rounds of the NCUA Deregulation Project and present a board proposal for redirecting that capacity toward specific growth priorities with measurable outcomes. Evaluate whether the institution’s current capital position supports an accelerated investment in technology, geographic expansion, commercial lending capability, or strategic merger activity to broaden the member base and competitive footprint.
Source: Callahan and Associates, May 2026 https://creditunions.com/blogs/where-have-all-the-members-gone/
Source: National Credit Union Administration, May 2026 https://ncua.gov/news/events/2026/comments-deregulation-project-proposals-due-may-26
Member Experience and Generational Shifts
The Blend 2026 Credit Union Roundtable, which gathered senior technology and lending leaders from eleven financial institutions, produced one of the most direct assessments of the member experience gap available this year. The central finding is not that credit unions lack the desire to serve members well. It is that the systems, processes, and technology platforms through which members experience the institution fall short of what modern members encounter at fintech platforms and large banks. The gap has a measurable consequence: credit unions lose mortgage originations to competitors among members who already hold deposit relationships with them. Members who have chosen the credit union for their deposits then choose a fintech or bank for their home loan because the lending experience is faster, cleaner, and more transparent. This is a growth failure rooted in experience design, not in rates or product terms.
The direct deposit enrollment figure is the most actionable data point from the roundtable: only approximately 37 percent of members at a typical credit union have direct deposit established. This single metric defines whether a member has made the institution their financial home or treats it as one of several providers they use transactionally. Institutions whose onboarding processes do not systematically capture direct deposit at the moment of account opening face a structural disadvantage in converting members into primary financial relationships. The roundtable identified bill pay adoption and active services per household as companion metrics that, together with direct deposit, define the depth of the member relationship. These metrics exist and can be tracked, but most institutions do not report them at the board level.
The announcement of a comprehensive core banking transformation at a major federally chartered financial institution this week illustrates the technology dimension of this challenge. The institution explicitly connected its decision to replace the legacy core with a requirement to deliver integrated, always-on experiences that members expect. Smart contracts, FedNow real-time payments, and personalized product delivery are not features that legacy batch-processing cores can support at the speed and consistency that growth requires. For credit unions that serve younger members, this technology gap is generational in its consequence. Members who form financial relationships in their twenties and thirties with institutions that meet them where they are digitally tend to remain. Those who encounter friction at critical moments, account opening, loan application, payment setup, tend to migrate toward platforms that remove it.
Why This Matters: Member experience quality is a growth metric, not merely a satisfaction score. Institutions that deliver seamless digital onboarding, fast loan decisions, and personalized communication convert new members into primary financial relationships at higher rates and retain them longer. Closing the experience gap with fintechs is the most direct path to improving primary financial institution penetration and generating the referral-based member growth that the credit union model is designed to produce.
Actions to Consider: Conduct a member-perspective audit of the digital account opening and loan application experiences, measuring the number of steps, time to completion, and drop-off rate at each stage. Establish direct deposit enrollment rate as a quarterly key performance indicator reported to the board, with a defined improvement target and an assigned operational owner. Evaluate the current technology platform’s ability to support personalized, real-time member communications at key lifecycle moments and identify specific capability gaps that require vendor engagement or system investment.
Source: Blend, May 18, 2026 https://blend.com/blog/thought-leadership/credit-union-roundtable-insights-2026/
Source: PR Newswire / Thought Machine, May 21, 2026 https://www.prnewswire.com/news-releases/us-senate-federal-credit-union-to-transform-its-banking-platform-with-thought-machines-unified-stack-302778142.html
Competitive Positioning
Two developments this week define the competitive terrain that credit union growth strategies must address. The first is the data breach reported by Credit Union Times involving a federally insured financial institution where ransomware attackers accessed unencrypted member files in June 2025 and member notification was not issued until May 2026, a gap of nearly eleven months. The second is the formal recommendation by America’s Credit Unions that the NCUA restructure the Consumer Assistance Center intake process so that routine member service disputes are resolved directly with the institution before federal escalation. These events appear to address separate challenges, but they share a single competitive thread: member trust.
Credit unions compete for members on the basis of trust, mission, and relationship. The cooperative ownership structure and the member-first mandate are the core competitive differentiators of the credit union model. When a breach of member data goes undisclosed for months, or when a member’s service complaint requires federal intervention because the institution did not resolve it directly, the differentiation credit unions claim in the marketplace weakens. Fintechs and megabanks can exploit these failures not because they deliver better mission-aligned service, but because they invest heavily in frictionless experiences that mask service gaps. Credit unions whose growth strategy rests on trust and relationship must protect and deliver on both. Every member interaction that reinforces the cooperative value proposition is a growth asset. Every failure is a growth liability.
The competitive environment in 2026 is not static. First-quarter data confirms that consumers increasingly distribute financial activity across multiple providers. Fintech platforms capture new account openings and mortgage originations. The largest banks invest technology resources that no individual credit union can match in absolute scale. In this environment, competitive positioning for credit unions must be built on genuine delivery of the member-first experience the cooperative model promises. The America’s Credit Unions recommendation to reform the complaint intake process, if adopted, would shift the resolution conversation back to the institution and away from the federal regulator. This is both a regulatory preference and a competitive preference: institutions that resolve member disputes directly demonstrate the relationship quality that megabanks and fintechs consistently fail to deliver. Member service resolution capability is a competitive growth tool when it is executed well.
Why This Matters: Competitive positioning for credit unions in 2026 is not primarily a product or pricing competition. It is a trust and experience competition. Every data security failure, unresolved member complaint, or digital experience gap reduces the credit union’s competitive advantage relative to fintech and bank alternatives. Protecting and strengthening that advantage is a growth strategy, not a risk management exercise.
Actions to Consider: Conduct a competitive analysis comparing the institution’s digital account opening, loan application experience, and member complaint resolution process against the leading fintech alternatives available to members in the same market, and assign measurable improvement goals. Review data security controls with specific attention to encryption standards and incident response and notification timelines, and present a current-state assessment to the board. Establish a member satisfaction feedback system at key transaction points, including account opening, loan funding, and service contact, and report trends to the board quarterly as a growth indicator.
Source: Credit Union Times, May 22, 2026 https://www.cutimes.com/amp/2026/05/22/membersource-cu-breach-exposes-unencrypted-data-of-22000-persons/
Source: America’s Credit Unions, May 22, 2026 https://www.americascreditunions.org/news-media