The Size Divide — Q3 2025

The Profitability–Risk Inversion

The over-$10B tier returned 0.84% on assets — the best of any cohort — while charging off 1.28% of loans, nearly three times the rate of the smallest tier. Both numbers are the highest in the table. Ordinarily you expect the opposite: the safest book earns the steadiest return, not the highest. Here the largest credit unions run a high-yield, high-loss model and still out-earn everyone else, because scale lets them absorb the losses and keep the spread.

What Drives It

The mechanism is portfolio mix. The largest credit unions are the most concentrated in consumer credit — indirect auto and credit cards — which carries both the highest yields and, in this part of the cycle, the fastest-rising losses. That combination produces the inversion: the yield shows up in NIM (3.60% for the over-$10B tier, second-highest) and in ROAA, while the losses show up in a 1.28% charge-off rate and a 1.36% delinquency rate. The mid-tiers make the contrast clean — the $1B–$10B cohort runs the lowest delinquency in the system (0.78%) on a more balanced book and still earns 0.81%: clean credit, steady return.

The smallest tier complicates any neat "bigger is riskier" reading. Credit unions under $100 million carry the system's second-highest delinquency (1.03%) — not the lowest — but on a conservative book: their charge-offs are the lowest of any cohort (0.46%), and they earn a respectable 0.83% on a fat 3.77% margin. Their constraint is not credit quality; it is scale, and it surfaces elsewhere (see The Cohort Earnings Divergence). The genuinely squeezed earner this quarter is the $500M–$1B tier, at 0.68% — caught between small-CU margins and large-CU costs.

Why It Matters: Concentration Risk

The inversion matters to the Share Insurance Fund more than to any single balance sheet. A 1.36% delinquency rate at a $40 million credit union is a local problem; the same rate across the two dozen institutions that hold the largest share of system assets is a concentration problem. The fund's exposure scales with asset size, so the cohort carrying the most credit risk is also the one whose trouble would cost the fund the most — the point the NCUA board made when it flagged the rise in large, low-rated credit unions (see the September 2025 Board Digest).

Connecting the Lines

This is the structural backdrop to the headline credit numbers. The system's 60+ day delinquency reached 0.95% in Q3 — one quarter from breaching 1% — and the over-$10B cohort is what pulls the average up (see System Signals — Q3 2025). The size divide is not a story about small credit unions failing; it is about the largest ones carrying a profitable but credit-heavy model into a normalizing cycle, with the fund's exposure riding along.