The latest results from the Southwest Corporate Federal Credit Union CEO Confidence Survey showed that CEO confidence is at its lowest level in five years.
The overall CEO confidence index fell from 10.5 in November of 2008 to 7.9 this April. CEOs also lowered marks for their certainty in their own institution's financial condition by 13 points and by 10 points for their position in six months.
Kirk Kordeleski, president/CEO of Bethpage Federal Credit Union in Bethpage, N.Y., said that he doesn't find the results surprising.
“This is the most challenging economy many of us CEOs have seen in our career. You add to that all the bad news that's been coming out over the past few months and the issues with the corporates and you get a very negative outlook.”
CEOs' confidence in members' current financial conditions also declined from 3.33 points to negative 5.37. The outlook on members' financial condition in six months also fell further into the negative to negative 10.59 from negative 10.46.
In Berkeley, Calif., Gary Bell, CEO of Cooperative Center Federal Credit Union, said that his credit union participated in the survey and his responses were more on the optimistic side. Cooperative Center serves a group of education and health services industry SEGs, which hasn't been hit as hard by the economy.
Jerry Haley, president of USA 1 Credit Union in Matteson, Ill., said that while his members are still struggling, he does have increased confidence that members are starting to get the message about financial literacy and responsibility.
“What we have seen in the first quarter of this year is that the teaching and education we have continually done on not bouncing checks and incurring fees is starting to get through.”
The combination of education and the economy making people very aware of their spending habits has caused a marked decrease in NSF and courtesy pay income for the credit union so far in 2009.
At Bethpage, Kordeleski said that the decline in CEOs' confidence in members is accurate. With members struggling with job loss and cut backs at work Kordeleski said Bethpage has allotted a large allowance for loan losses and is projecting more charge-offs.
“You can't be a financial institution right now and not be nervous. Even though 92% of people on Long Island are still employed, they're experiencing cut backs and are very nervous. They probably still have another year to go with this too.”
Bell said for Cooperative Center delinquencies have actually been leveling off for the credit union, but it has been more of a result of opening communication between the credit union and members and cleaning up their collections process.
The credit union started implementing new policies this time last year, and in a recent board meeting, reported 40 total delinquent loans past 60 days compared to 130 delinquent loans this time last year.
Loan demand was another area where projections declined for the next six months. The index declined to negative 3.75 from zero.
Kordeleski said that he is looking at extraordinary growth through at least July for refinancing. Most of the refinancing loans the credit union sells into the secondary market, but they are still very profitable for the credit union, he said.
Dennis Cutter, president/CEO of Numerica Credit Union in Spokane, Wash. said that he is seeing a strong response for refinancing as well and that the credit union's confidence decreased with the WesCorp and U.S. Central conservatorships. “It blew the wind out of our sails.” he said.
A positive result from the survey was that share deposit growth expectations for the next six months climbed 15.38 points from the last survey.
In a press release, Brian Turner, Southwest Corporate's director of advisory services, said, “The good news is that early signs indicate the downward trend in the economy is beginning to slow. Many market economist project higher interest rates by the end of this year, which will continue-and possibly accelerate-over the next few years.”
Kordeleski shared Turner's optimism that the economy is approaching a bottom right now.
“We're all waiting for the unemployment numbers to slow, but I hope to see a bottom-not the end of this-but a bottom, sometime soon.”
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