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CEO Confidence in Economy Slips
Friday, November 22, 2013 7:00 AM

After three consecutive quarters on the rise, credit union CEOs’ confidence in the economy took a hit. The confidence index in Catalyst Corporate FCU’s Third Quarter 2013 Credit Union CEO Confidence Survey declined to 24.02 (on a scale ranging from -100 as negative to 100 as positive) from 27.46 in the second quarter survey. The Present Situation Index decreased to 23.42 from 25.44. The Expectations Index also fell to 24.32 from 28.48.

Some of the discontent likely was the result of the 16-day partial shutdown of the federal government, which was 10 days old when the confidence survey began. Several respondents commented on the shutdown. For example: “The economy and our member's financial stability were moving right along, and then, the government shutdown and the debt ceiling debate. A large percentage of our population is linked to the military and other federal government agencies. So, we are not as optimistic about the future until Congress moves forward.” Another respondent commented: “A lot hangs in the balance with the U.S. Government. With the weak leadership in D.C., it could all go south quickly and not be good for the consumer.”

In the third quarter survey, credit union CEOs’ assessment of their members’ current financial condition dropped to 16.59 from 21.14 the previous quarter. Likewise, expectations for members’ financial condition in six months fell to 21.27 from 28.17 last quarter – the largest decline in the most recent survey.

Sentiment regarding credit union financial condition was less severe, with the needle notching upward half a point on their institution’s current financial condition to 30.32 from 29.80 last quarter. Their appraisal of conditions six months down the road was less favorable, however, falling to 33.56 from 35.28.

Outlook for loan demand and share deposit growth in six months also was more pessimistic, both worsening by about four points from the previous quarter.

“The decline in the confidence index is not surprising given the vast discrepancies in loan and share growth within the industry,” said Brian Turner, Catalyst Strategic Solutions’ director and Chief Strategist. “Larger credit unions ($500 million or more in assets) continue to realize the lion’s share of the industry’s growth, even though they account for only seven percent of the number of institutions. Through the third quarter, estimated loan growth in larger credit unions surpassed nine percent. The industry overall is experiencing a 5.5 percent increase, indicating the remaining 93 percent of credit unions have been more challenged in attracting loans.”

“The survey appears to represent the thoughts of the ‘93 percent,’” Turner continued. “Whereas the outlook for consumer spending next year is positive, loan production will continue to challenge most credit unions. The Mortgage Bankers Association forecasts a 33 percent decline in mortgage loan originations next year, with refinancing applications dropping below 40 percent of total applications. This means credit unions must experience a significant increase in consumer loans to produce growth results next year – a goal most credit union managers have trouble viewing optimistically.”

The six-question survey, conducted quarterly since 2004, was sent to 1,343 credit union CEOs nationwide on October 10; 224 responded, for a response rate of 16.68 percent. The survey cutoff date was October 31. Additional details, including graphs with the survey’s historical data, are available at www.catalystcorp.org/surveys.aspx.