Today's lending environment is unique, with rates rising more quickly than many of us have experienced in our careers and inflation at 40-year highs. At the same time, longer-term trends such as automation and artificial intelligence are helping lenders use technology to make better credit decisions more efficiently. This specific moment in time presents both challenges and opportunities for credit union leaders and the members they serve.

A Full Throttle Challenge

One of the common challenges we've seen since COVID began is institutions opening all their lending valves and waiting for production. For much of the past two years, liquidity has been high across the industry and consumer borrowing was down. This caused many credit unions to chase consumer loans, and subsequently loan yields, down to the floor.

After the Fed began raising rates in March 2022, those low loan rates began garnering more attention from consumers. With their lending throttles fully open, some institutions filled up their balance sheets quickly with below market rate loans. The lending volumes increased so quickly, and institutions were so hungry for loans, that some leaders may not have even recognized they were mispricing assets until after the fact. This creates a very challenging dynamic in the short run, especially if the institution is required to sell those mispriced assets at a loss to generate liquidity.