Q2 Releases 2026 State of Commercial Banking Report

Key Terms

margin compression financial

A decline in the share of revenue a company keeps as profit after costs and expenses, caused by higher input costs, lower selling prices, or rising overhead. Think of it like a sandwich losing filling: even if the top and bottom (sales) stay the same, there's less meat left to eat. Investors watch margin compression because it reduces cash available for growth, dividends and debt payments and can signal worsening competitiveness or pressure on future earnings.

net interest margins (nim) financial

Net interest margin (NIM) is a measure of how much profit a bank or lending company earns from its core business of borrowing and lending: it’s the difference between interest received on loans and interest paid on deposits, expressed as a percentage of earning assets. Think of it as the profit gap per dollar lent — a wider gap means the lender keeps more of each interest dollar, which signals stronger core profitability and can drive earnings and share value for investors.

credit spreads financial

Credit spreads are the extra yield investors require to hold debt (bonds or loans) that has a higher risk of not being repaid compared with a safer benchmark, typically government bonds. They matter because wider spreads act like a risk surcharge or insurance premium—raising borrowing costs, reducing the market value of existing debt, and signaling deteriorating credit conditions, so investors watch them to judge market risk and potential losses.

fraud financial

Fraud is the intentional deception or misrepresentation of facts designed to produce an unfair or illegal financial gain, such as falsifying records, hiding losses, or making false statements about performance. Investors care because fraud erodes trust, can rapidly destroy shareholder value and trigger fines or legal action; spotting warning signs is like noticing smoke before a fire—early detection helps avoid large losses and sudden shocks to a portfolio.

enterprise resource planning (erp) technical

Enterprise resource planning (ERP) is a type of software that helps a business organize and manage its core activities—such as finance, supply chain, manufacturing, and human resources—within a unified system. It acts like a central hub that brings together different parts of a company, making operations more efficient and providing better data for decision-making. For investors, ERP systems can signal how well a company integrates and manages its resources, impacting overall performance and growth prospects.

instant payment rails financial

Instant payment rails are the infrastructure and rules that let money move immediately between bank accounts or payment apps any time of day, often within seconds. Think of them like a nonstop highway for funds that eliminates waiting periods, which matters to investors because faster payments speed up cash flow, reduce credit and liquidity risk, enable new business models and fee opportunities, and can change how payment services and banks earn and retain customers.

digital banking financial

Digital banking is a way of managing financial services and transactions entirely online, often through websites or mobile apps, without visiting a physical bank branch. It allows users to check balances, transfer money, and pay bills conveniently from their devices. For investors, digital banking highlights how financial services are becoming more accessible and efficient, shaping the future landscape of banking and payment systems.

m&a financial

M&A, short for mergers and acquisitions, involves one company combining with or purchasing another company to grow, streamline operations, or gain competitive advantages. For investors, M&A activity can signal potential for increased value, new opportunities, or changes in market dynamics, making it an important factor to watch in the business landscape.

New findings show rising client expectations and increasing pricing pressure as banks and credit unions navigate margin compression, digital modernization, and heightened competition

AUSTIN, Texas--(BUSINESS WIRE)-- Q2 Holdings, Inc. (NYSE:QTWO), a leading provider of digital transformation solutions for financial services, today announces its State of Commercial Banking January 2026 report. Key findings from the annual report reveal major trends in the commercial banking industry, as well as the challenges and opportunities banks and credit unions will face in the coming year.

As businesses navigate continued economic uncertainty, they increasingly expect their financial institutions to provide faster payments, real-time access to data, and seamless integration with the systems they rely on to run their operations. Q2’s analysis shows that commercial clients are prioritizing efficiency, visibility, and control. At the same time, liquidity has recovered across the industry, lowering funding costs. The increased liquidity relative to loan demand is intensifying competition, compressing margins, and raising the stakes for how financial institutions price, structure, and manage commercial relationships.

“Q2 PrecisionLender data shows that liquidity growth has outpaced loan demand across the industry, intensifying competition and driving an erosion of credit spreads,” said Q2 Principal Strategic Business Advisor Gita Thollesson. “As spreads narrow and excess liquidity builds, pricing discipline and relationship-level insight have become critical. The data confirms that financial institutions must be more precise in how they price, structure, and prioritize commercial relationships to protect margins and compete effectively in this environment.”

The report is based on findings from Q2 PrecisionLender’s proprietary database for the 2025 calendar year. It reflects actual commercial relationships (loans, deposits, and other fee-based business) from more than 130 banks and credit unions in the United States, ranging in size from small community banks to top 10 U.S. institutions. In addition to their variance in size, these institutions are also geographically diverse, with borrowers in all 50 states. This report also references data from Q2’s Centrix Positive Pay solution, as well as published industry research and economic data from several public sources, such as the FDIC and the Federal Reserve.

Key Takeaways from the Report:

1. Liquidity recovers, enabling deposit cost reductions and stronger net interest margins (NIM). Industry deposits have fully recovered from the liquidity crisis and have reached record levels, and financial institutions have offered competitive pricing to shore up deposits, absorbing higher costs as a means of stemming outflows and growing balances.
2. After a slow start, loan demand has rebounded and pipelines have grown. Early-year uncertainty about new tariffs kept capital investment in check, suppressing loan demand. With greater clarity, corporates have stepped up borrowing, and lenders are seeing fuller pipelines.
3. Competitive climate has intensified as spreads narrow across the market. The industry’s liquidity growth has outpaced the recovery in loan demand, resulting in a supply-demand imbalance, and increased competitive pressure has led to an erosion of credit spreads.
4. Fraud risk isn’t creeping up; it's sprinting. Fraud is becoming more prevalent and sophisticated, and banks and credit unions are responding by developing layered defenses, using AI, and breaking down data silos to detect and stop threats earlier and resolve issues more efficiently.
5. Bank deals are now technology plays as well as balance-sheet plays. In the current favorable regulatory environment, many financial institutions are looking to mergers and acquisitions (M&A) to help them scale and improve efficiency. Platform modernization, fintech integration, and AI-enabled capabilities are essential to realizing value after the deal.
6. Commercial banking continues to focus more on business efficiency. Enterprise resource planning (ERP)/accounting system integrations remain one of the most requested capabilities, instant payment rails keep gaining share, and digital banking for small business is evolving into business hubs.

Q2’s commercial banking insights align with the company’s broader commitment to helping financial institutions compete and grow through modern digital solutions. Through its commercial banking suite, Q2 enables banks and credit unions to streamline onboarding, support advanced payments and treasury workflows, and deliver personalized experiences that meet the complex needs of today’s business customers.

Click here to download the 2026 State of Commercial Banking report.

For additional insights from the report, listen to the related episodes on The Purposeful Banker podcast, and watch the recording of Q2’s annual State of Commercial Banking webinar.

To learn more about how Q2 delivers simple, smart, end-to-end banking and lending solutions for commercial financial institutions, visit https://www.q2.com/commercial.

About Q2 Holdings, Inc.

Q2 is a leading provider of digital transformation solutions for financial services, serving banks, credit unions, alternative finance companies, and fintechs in the U.S. and internationally. Q2 enables its financial institution and fintech customers to provide comprehensive, data-driven digital engagement solutions for consumers, small businesses and corporate clients. Headquartered in Austin, Texas, Q2 has offices worldwide and is publicly traded on the NYSE and NYSE Texas under the stock symbol QTWO. To learn more, please visit Q2.com. Follow us on LinkedIn and X to stay up to date.

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MEDIA CONTACT

Carly Baker

Q2 Holdings, Inc.

+1 210-391-1706

Carly.baker@q2.com

Source: Q2 Holdings, Inc.