PLANO, Texas (11/19/08)--Credit union CEOs' confidence took its greatest plunge in four years during the week after the presidential election, says a Southwest Corporate FCU survey. The corporate's Credit Union CEO Confidence Survey skidded 14.72 points since the last survey in third quarter, to 10.50--the lowest reading since the survey began four years ago. The drop followed a seven-point increase in CEO confidence during third quarter's survey, which occurred before the nation's financial and economic crisis picked up speed. In the November Special Edition survey, CEOs expressed pessimism across the board and registered the lowest marks in survey history for current conditions and conditions in six months for both credit union and member financial conditions categories. Expectations for credit union financial condition and member financial condition six months from now dropped 22 points. Anticipation for loan demand in six months dropped by more than 20 points to zero from the last survey. The confidence index measures CEOs' feelings on six key issues:
* Members' current financial condition; * Credit union's current financial condition; * Members' financial condition six months from now; * Credit union's financial condition six months from now; * Loan demand at the credit union in six months; and * Share deposit growth at the credit union in six months.
The corporate said that $49 million asset KBR Heritage FCU, Houston, which serves a single sponsor from one on-site location, has seen a flood of deposits from the financial market turmoil and from the sponsor company's belt-tightening. The credit union is concerned about possible overcapitalization. "Members have been bringing in funds from other institutions, because they see that credit unions have avoided many of the problems others are facing," Mary Hawk, KBR Heritage president, told the corporate. In the past two months, the credit union's share base increased $4.2 million, "but we're not making loans. I have 16% capital," Hawk, said. According to Brian Turner, Southwest Corporate's director of advisory services, most credit unions are watching net margins narrow, overhead expenses increase and net incomes slide, but he also noted credit unions have experienced some insulation. "Credit unions are in a much stronger position than their financial counterparts in terms of credit quality and capitalization," Turner said. "Most anticipate traditionally strong share growth first quarter 2009, yet are concerned about loan growth over the next few quarters. With the high cost of liquidity, more credit unions might have to rely on additional investment portfolio income to successfully traverse the first half of 2009," he said. Turner advised credit unions not to let recent financial crises cause them to avoid lending or investment activities. "Conventional fixed-rate real estate loans continue to demonstrate strong relative value without requiring a compromise in underwriting standards," he said. "Reasonable expectations for 2009 earnings should clearly be discussed with boards, taking into account the current environment but also recognizing that as the economy recovers in late 2009, confidence, outlook and earnings again will return." He said many institutions are waiting it see what happens in the months after President-elect Barack Obama's inauguration. "That will set the tone for how quickly recovery might begin," Turner added.