PLANO, Texas (8/30/13)--Credit union CEOs' expectations for increased loan demand have doubled the past 12 months, according to Catalyst Corporate FCU's most recent CU CEO Confidence Survey. The second quarter 2013 measurement rose 4.2 points over the first quarter report and surged year-over-year nearly 13 points.
Although Tom Farrar, president/CEO of the $4.8 million asset Printing Office Employees CU (POE CU) in Los Angeles, would like to see loan demand rise, he views the fact that his members aren't borrowing as positive in some ways. "I sincerely hope loan demand will increase over the next six months," Farrar said. "There's a lot of talk about the economy improving. We're not seeing that here," he told Catalyst Corporate.
POE's field of membership revolves around the printing industry, Farrar said, and all of the credit union's select employee groups have experienced downsizing.
"It's tough on the members and on the credit union," he said. "However, the overall financial condition of my members is improving, not because of the economy, but because of lessons learned in the downturn. People are making progress in turning around bad credit scores. That's why they're not taking out loans."
Farrar said POE CU's members may soon loosen their purse-strings a bit. In the meantime, the credit union is well-capitalized and will continue to ride out the storm, he said.
Brian Turner, Catalyst Strategic Solutions' director and chief strategist, offered his analysis of CEOs' increased optimism for loan demand.
"During the first half of 2013, consumer sentiment improved just enough to see overall annualized loan growth increase to about 4%, aided by a sizeable increase in auto sales during the first quarter," Turner said. "This helped to push the industry's vehicle loan growth upward to about 9%, and mortgage loans increased 4% during the same timeframe. Both increases are welcome improvements over the doldrums of the past three years."
Most of the loan growth continues to reside in the industry's largest peer group, $500 million or more in total assets, Turner said. "This group, which represents about 94% of the industry's assets, but less than 7% of the number of credit unions, experienced a 9% increase in loans. This indicates that the remaining 93% of the credit unions collectively experienced a 6% decline in loans--mostly from institutions with less than $150 million in assets. The good news is that the rate of decline is half the rate experienced during the first quarter of 2013 for these credit unions."
Turner questioned whether some of the loan growth for the first half of the year might be associated with heightened consumer loan demand that typically occurs in summer or early fall. "If the association is significant, the 4% annualized growth rate may be unsustainable over the second half," he said. "There is early evidence that consumer spending is cooling off again after hitting a 3% increase during the first quarter."
Catalyst's overall CU CEO Confidence Index remained virtually unchanged for the second quarter in a row, increasing less than 0.25 point over last quarter. Other survey results show a 2.7-point increase in CEOs' confidence in members' future financial condition (in six months) and a 2.6-point decrease in confidence for their own credit union's future financial condition (in six months). Expectations for share deposit growth fell for the second consecutive quarter by about two points.
Catalyst Corporate's quarterly survey measures CEO confidence in the economy in six key areas:
The survey questionnaire was sent to 1,356 CEOs of Catalyst Corporate member credit unions in July. Responses totaled 201 or a 14.8% response rate. Additional details, including graphs with the survey's historical data, are available under Links & Forms/Surveys on Catalyst's website. Use the link.