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Yellen Optimism Didn’t Play Out in CU Confidence Survey
Tuesday, November 17, 2015 6:35 AM

Federal Reserve Chair Janet Yellen’s recent announcement that the U.S. economy is “performing well”—and that an interest rate move in December is a “live possibility”—flies in the face of results of Catalyst Corporate’s Third Quarter Credit Union CEO Confidence Survey. The overall confidence index fell 2.57 points from the previous quarter, with every survey category losing ground except one.

The largest quarterly declines in CEO confidence related to their members’ financial condition. Optimism regarding Members’ Current Financial Condition slid almost four (3.91) points to 23.18 quarter-over-quarter. Similarly, CEO expectations for their Members’ Financial Condition in Six Months retreated 3.56 points to 26.10 in the most recent survey.

“The decline in confidence related to members’ financial condition surprises me,” said Steven Houle, vice president of Catalyst Strategic Solutions' Advisory Service. “Household wealth continues to improve when considering home values and the stock market,” he continued, noting that according to the S&P/Case-Shiller National Home Price Index, the value of existing family homes has been rising at an annual rate of 6.3 percent since 2012, and the stock market has recovered nicely since the middle of August.

“I’d have to think this sentiment might be short-lived, especially after Friday’s strong nonfarm payroll report, which reported job gains of 271,000,” Houle said. “Generally speaking, I think credit unions will finish 2015 with very good earnings numbers, and should turn in much the same next year.”

CEO sentiment regarding expectations for their own Credit Union’s Financial Condition in Six Months also dropped, although with less vigor than the outlook for their members, from 41.91 in the second quarter survey to 40.41 in the third quarter. The one positive change in the current survey was in CEOs’ assessment of their Credit Union’s Current Financial Condition. That gauge inched up ever-so-slightly quarter-over-quarter from 35.05 to 35.26.

Expectations were down in the third quarter survey for both loan demand (by 2.07 points) and share deposit growth (by 4.47 points) over the next six months.

Kay Stewart, president and CEO of the $147 million-in-assets North East Texas Credit Union in Lone Star, Texas, offered explanation for a cautious evaluation of the economy in her area.

“Janet Yellen is not tied to the oil and gas industry like we are,” she said. “One of our sponsor companies is U.S. Steel. When oil and gas prices are down, it creates a domino effect that impacts not only the people at the plant, but also the truckers, pipe fitters, welders, and on down the line. We are doing fine now, but if oil prices remain low, it will hurt the whole area.”

Catalyst Corporate’s quarterly confidence survey, started more than a decade ago, was sent to 2,107 credit union CEOs across the nation in October 2015; 274 credit union professionals responded, for a response rate of 13 percent.

Using a scale ranging from negative (-100) to positive (+100), respondents registered their confidence levels in six key areas to create an overall index, as well as a snapshot of present-day feelings and future expectations. The areas CEOs were asked to evaluate are:

  • Current financial condition of members
  • Current financial condition of credit union
  • Anticipated financial condition of members in six months
  • Anticipated financial condition of credit union in six months
  • Anticipated loan demand at the credit union in six months
  • Anticipated share deposit growth at the credit union in six months

A graph charting survey responses for the last four quarters can be found in the Member Feedback section under the Communication tab at