The fragility of the economy's recovery and the Federal Reserve's reluctance to raise rates has knocked credit union CEOs' confidence in their institutions' future down a couple notches, according to Catalyst Corporate Federal Credit Union's first quarter 2015 Credit Union CEO Confidence Survey.
The survey's overall confidence index fell from 32.64 in Q4 2014 survey to 30.22 in the most recent survey, the lowest mark in five quarters. The assessment regarding credit union and member financial condition, one of six measured in the survey, dropped from 39.55 to 32.16 – a decline of 7.39 percentage points – from the previous quarter.
“I think the uncertainty of when the Fed will raise rates, and by how much, has many in the market somewhat apprehensive,” Catalyst Strategic Solutions Advisory Service Vice President Steven Houle said. “Obviously, when the Fed does increase rates, higher costs for mortgages and car loans likely will follow. Considering how fragile the economic recovery is already, the big question on the minds of credit union CEOs is how consumers and credit union members will react. What will be their appetite for borrowing?”
Catalyst Corporate's quarterly confidence survey – started a decade ago – was sent to 2,159 credit union CEOs across the nation in April 2014. Of that number, 200 credit unions responded, a 9.26% response rate.
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 evaluated included current financial condition of members and the credit union, anticipated financial condition of members and the credit union in six months, anticipated credit union loan demand in six months and anticipated credit union share deposit growth in six months.
Interestingly, CEO confidence ranked lower among respondents from higher-asset credit unions than those from lower-asset institutions. Share deposit growth and loan demand expectations each moved less than one percentage point from the previous quarter.
“Smaller credit unions may have a better sense of their membership activity and, thus, feel more confident in what they are seeing,” Debra McConnell, president/CEO of the $21.5 million in assets Alhambra Credit Union in Phoenix, Ariz., said. “No one knows what members will do when rates start rising, but if there is a gradual increase, borrowing may continue since consumers have postponed those needed purchases.”
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