Credit Cycle Watch — Q4 2025

FINASENSE Research · March 19, 2026

Data: Q4 2025 Fed Funds: 3.64% · 10Y: 4.18% · 2Y: 3.47%

Data through December 31, 2025 . This report synthesizes findings from the FINASENSE Credit Cycle Position Indicator (CCPI) and Credit Union Financial Stress Index (CUFSI), both computed from the same underlying NCUA 5300 Call Report data that drives all FINASENSE analysis.

Credit Cycle Watch — Q4 2025

Elevated stress on credit quality — but the cycle has stopped accelerating: The two FINASENSE indices tell complementary stories this quarter. The **CUFSI stress index reads 59 (Elevated)**, its level held up almost entirely by **Credit Quality** — the dominant pillar at **+1.70σ** as delinquency, charge-offs, and non-accruals all run well above their own history. Yet the **CCPI sits at −0.05 (Late Cycle)**, not Contraction: delinquency momentum is still building, but charge-offs, provisioning, and loan growth are not confirming it. Meanwhile capital remains a thick buffer (**−0.69σ**) and earnings have *improved* into an offset (**−0.42σ**) rather than deteriorating. The reading is elevated stress in *level*, against a cycle that has stopped broadly *accelerating*.

CCPI: Cycle Position

The Credit Cycle Position Indicator measures direction and momentum — the velocity and acceleration of four credit-sensitive metrics — not absolute level. At −0.05 it sits in Late Cycle: past the deep Contraction of 2023 (which peaked at +0.32 in Q4 2023), through a brief relapse in Q2 2025 (+0.15), and back to a near-neutral reading.

What keeps the composite near zero is that only one of the four components points to deterioration. Delinquency is accelerating — its acceleration is the quarter's strongest single signal — but net charge-offs are flat, provision expense is easing, and loan growth is still supportive. One deteriorating component is the signature of a late cycle, not a contracting one.

No Results

CUFSI: Stress Index

Where the CCPI reads momentum, the CUFSI reads level — how far the system sits from its own history, mapped to a 0–100 scale where 50 is average. At 59 (Elevated) it is up modestly from Q3 (58.3) but well below its dataset high of 65.75 (Q4 2023).

The Elevated reading is a one-pillar story. Credit Quality carries it at +1.70σ, and has risen every quarter of 2025 (+1.26 → +1.45 → +1.54 → +1.70). Concentration (+0.35σ) and Liquidity (+0.31σ) add mild stress. Everything else offsets: Capital Adequacy sits at −0.69σ on a thick net-worth buffer, and — contrary to the cycle's usual worry — Earnings Coverage has strengthened into a −0.42σ offset, improving every quarter of 2025 (+0.03 → −0.42) as margins outran provisioning. Strip out Credit Quality and the system would read below its historical average.

No Results

Cohort Divergence

A caveat on resolution: the CUFSI is computed from system-wide aggregated totals — there is no per-cohort version. A single large credit union's move can offset thousands of small ones, so a system reading can mask where stress actually sits. That dispersion is the subject of dedicated work: credit-quality stress concentrates in the largest institutions (The Size Divide), while earnings compression bites hardest at the smallest (Cohort Earnings Divergence). Read those alongside this system-level reading.

What This Means for the Cycle

The swing factor is delinquency. It is the one CCPI component still accelerating, and the core of the Credit Quality pillar that holds the CUFSI elevated. Should charge-offs and provisioning begin to confirm the delinquency trend, the CCPI would turn back toward Contraction and the stress reading would broaden beyond a single pillar. Should delinquency momentum fade instead — which a still-supportive loan-growth signal and a thick capital buffer would favor — the system settles back toward its historical norm, the path the CCPI's Late Cycle reading currently leans toward. This describes the arithmetic of the two indicators, not a forecast.

This report is provided for informational and educational purposes only and does not constitute investment, legal, regulatory, or examination advice, nor should it be relied upon as the basis for any decision.

FINASENSE is not affiliated with the National Credit Union Administration (NCUA). Financial data is sourced from NCUA 5300 Call Report filings as submitted by individual credit unions and is not guaranteed as to accuracy or completeness. Ratio definitions and account classifications reference the NCUA Financial Performance Report (FPR) Chart of Accounts. All aggregation, analysis, and derived metrics are independently computed by FINASENSE and may differ from NCUA-published figures. Interpretations reflect the views of FINASENSE and not those of the NCUA.

This report does not consider the specific circumstances of any individual credit union and is not tailored advice. FINASENSE has no financial relationship with, and receives no compensation from, any institution referenced.

All information is provided "as is," without warranty of any kind, and FINASENSE disclaims liability for any decisions made in reliance on this report. Historical metrics are not indicative of future financial condition. This report is proprietary to FINASENSE, a publication of IP Foundries, LLC (Arizona), and may not be reproduced, distributed, or reused without prior written consent.