In the most recent survey, CEO confidence in their members'current financial condition and future financial condition (sixmonths from now) increased by 4.13 points and 1.17 points,respectively, over 4^th Quarter 2012 survey levels.

However, CEO confidence in their own institution's financialcondition – both current and future – decreased by 1.99 points and.18 points, respectively, over marks from the previous quarter.

“Credit union executives see member finances improving as aresult of declining unemployment, a protracted low interest rateenvironment and practically no inflation,” said Brian Turner,Catalyst Strategic Solutions' director and chief strategist.

“Although wages remain flat and job growth continues to be weak– keeping job security a concern – the consumer has been branchingout a little more with their spending, which certainly helpseconomic growth,” Turner said in the report released Thursday.

Turner added that tight marginal spreads between asset yieldsand cost of funds continue to challenge most credit unions' netinterest margins.

Because only two NCUA peer groups experienced loan growth in2012, the remaining groups – which represent 69% of all creditunions – have elevated surplus cash and a greater reliance oninvestment portfolio income, the economist said.

“With an outlook that reflects a continuation of the low rate environment for two to three more years, CEOs don'tsee these challenges for their institutions going away anytimesoon,” Turner said.

Max Villaronga, CEO of the $45 million Alamo FCU in San Antonio, said he believes improvement in jobgrowth and wage increases above pre-2008 levels in some creditunion micro-environments may be driving the optimism regardingtheir members' financial conditions.

However, he said his assessment remains more neutral.

“This is a drastically different economic environment than we'veever experienced before. Looking ahead six months is not enough topredict which direction the economy will head,” Villarongasaid.

“Inflation is close to zero. That makes the Fed nervous, whichdrives consumers' tentative behavior. Federal and state spendinghave propped up other sectors. I think we are looking at alonger-term correction,” the Texas credit union executive said.

Regarding Alamo's outlook, Villaronga said with higher couponloans and investments maturing, the credit union's portfoliore-pricing has created tighter margins.

“As a result, we are required to increase loan production by 30to 40% without sacrificing loan quality. That's huge in anenvironment where most small credit unions have flat loan growth,”he said.

The overall Confidence Index in the most recent survey inched upby just half a point over 4^th Quarter 2012. Similarly,CEO expectations for loan demand and share deposit growth sawrelatively little movement from the previous report.

Fourteen hundred Catalyst Corporate member credit union CEOsreceived the survey, and 266 responded, for a rate of 19%.

Additional details, including graphs with the survey'shistorical data, are available on Catalyst's website.