PLANO, Texas (3/5/12)--Credit union CEOs are significantly more optimistic about the economic environment today than they were one year ago, according to results of Catalyst Corporate FCU's CU CEO Confidence Survey.
The fourth quarter 2011 confidence index of 26.81 is nearly 16 points higher than the fourth quarter 2010 index. Historically, the index has ranged from a high of 47.40 (2004 fourth quarter) to a low of 7.90 (2009 first quarter) during the survey's eight-year history.
The survey registers credit union CEO confidence on a scale from -100 to 100 in six areas. Questions are designed to capture a snapshot of CEO state of mind and future expectations.
CEOs are asked to evaluate:
- Current financial condition of members;
- Current financial condition of the credit union;
- Anticipated financial condition of members in six months;
- Anticipated financial condition of the credit union in six months;
- Anticipated loan demand at the credit union in six months; and
- Anticipated share deposit growth at the credit union in six months.
CEOs were more optimistic about their own institutions' financial positions in this year's survey. In the 2010 fourth quarter survey, CEOs registered the lowest reading in the survey's history (15.53) for that category. One year later, CEOs' optimism was 25 points higher (40.20). Executives also see more improvement on the horizon, with responses driving an even more positive mark (43.75) in the 2011 fourth quarter survey for credit union financial condition in six months.
Other survey measurements reveal optimism across the board, said Catalyst. Although still a relatively low score, CEO assessment of their members' current financial condition jumped 13 points from -0.42 a year ago to 12.85 in 2011 fourth quarter. Likewise, CEO marks for members' anticipated financial condition in six months increased from 9.11 to 23.54 year over year.
CEO expectations for loan demand are up by 14 points from fourth quarter 2010. Expectations for share-deposit growth also increased seven points over the same time last year.
The employment sector--with reports from the Labor Department indicating improvement in the unemployment rate from 9.1% to 8.3% since June--is buoying the optimism, according to Brian Turner, director and chief strategist of Catalyst Strategic Solutions.
"Given the depth of despair felt over the past year, it is not surprising to see overall improvement in the CEO index--both from the institutions' and the members' perspectives," said Turner. "In addition to the declining unemployment rate, the rate of decline in home prices is slowing, stock prices appear to be improving, and members are considering replacement of their aging vehicles." He cited statistics from Polk Research, noting the average age of U.S. cars on the road reached a record high of 10.8 years in January, helping auto sales rebound to an annualized unit pace of nearly 13 million.
Credit card use also increased, particularly during the past two quarters, Turner said. "Rising usage suggests that consumers are again willing to open their wallets and spend a few dollars, he added. "Unfortunately, over the past few years, credit union market share of consumer loans has drifted downward from 9.6% to 9%. So, either credit union members are not the current spenders, or the industry is missing the boat when it comes to marketing consumer loans."
If credit unions want to see continued improvement, they should consider expanding efforts to attract and retain members in the appropriate demographics for these loans, Turner said.
Loans haven't been an issue in Hobbs, N.M., where loan growth increased 40% in 2010. "With gas prices going up, I expect that trend to continue," said Jeff Bruce, Lea Community CU president/CEO. "This is pick-up (truck) country, and members have come in and asked me to calculate how much they can save by buying a vehicle that gets better gas mileage."
Lea Community CU, with $34 million in assets and a charter that serves a county with a population of 100,000, is located in an area that has a strong local economy. "There are a number of energy-related businesses, and the unemployment rate is only 4%," Bruce said. "Anyone who wants a job can pretty much get one."
The improved confidence index may have another explanation. Bruce noted that "people are ready for a mental switch from the doom and gloom of the past several years, and many credit union CEOs have said, 'Let's lead the way.'"
Surveys were sent in January to 1,736 CEOs of Catalyst Corporate and Western Bridge Corporate FCU member credit unions. The response rate was 18.7%.