PLANO, Texas — While CEOs are seeing a number of positive growth signs within credit unions, their outlook on the overall economy may be headed in a different direction — and part of the reason may be Washington.
After three consecutive quarters on the rise, credit union CEOs' confidence in the economy declined, according to
The confidence index 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.
The survey's finding comes at a time when CU annual loan growth rate reached 6.7%, the highest mark for credit unions in 4.5 years; 4.8% capital growth boosted the capital-to-asset ratio to 10.4%; and loan-to-share ratio reached 70%, according to CUNA Mutual Group's November Trends Report.
Catalyst indicated that some of the CEO discontent with the economy resulted from the 16-day partial shutdown of the federal government, which was 10 days old when the confidence survey began, with a number of execs sharing their viewpoints: "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 CEO stated that much 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."
But it was not just concern about the government that led to the confidence hit, the survey revealed. 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.
Apparently CEOs are more concerned over the membership's immediate future than the CU's, with their outlook for their own institution's current financial condition up a half a point to 30.32 from 29.80 last quarter. But they are pessimistic about six months down the road, with their appraisal of conditions falling to 33.56 from 35.28.
CEOs do not expect loan and share growth to pick up in six months, seeing demand here 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 7% of the number of institutions. Through the third quarter, estimated loan growth in larger credit unions surpassed 9%. The industry overall is experiencing a 5.5% increase, indicating the remaining 93% of credit unions have been more challenged in attracting loans.
"The survey appears to represent the thoughts of the '93%,'" 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% decline in mortgage loan originations next year, with refinancing applications dropping below 40% 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 was sent to 1,343 credit union CEOs nationwide on Oct. 10; 224 responded, for a response rate of 16.68%.
