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DALLAS – Credit union CEO confidence in the economy took a nose dive and dropped to the lowest levels in more than a year and a half of measurements despite a brief rise during the early summer. A growing number of CEOs have a negative outlook on their CU’s financial condition six months from now, according to the Credit Union CEO Confidence survey, conducted by Southwest Corporate FCU. Measurements showed a decrease across the board with the exception of loan demand at CUs six months from now. That number grew modestly from 30.09 in June to 30.13 in September. Expectation for share deposit growth reflected the sharpest decline, falling from 19.50 in June to 7.62 in September. Overall, recent gasoline and heating oil prices have outweighed any other economic news for consumers, the survey said. Loan growth in the second and third quarter combined will approach an annualized rate of 14% to 15% while share growth was only around 5%, the survey noted. This has put a sizeable drain on liquidity, a phenomenon most have not experienced for the past three years, according to Brian Turner, manager of advisory services for Southwest Corporate’s Investment Service division. In September, Southwest Corporate surveyed 531 CU CEOs, of which 152 responded. The CU CEO Confidence Index is a compilation of responses measuring CU CEOs’ feelings on six key issues: members current financial conditions; CU’s current financial condition; members financial condition six months from now; CU’s financial condition six months from now; loan demand at the CU in six months; and share deposit growth at the credit union in six months. “The strong loan growth brought on by the auto manufacturers’ employee discount program has enabled many credit unions to reach their annual loan growth targets four months before the end of the year,” Turner said. “I would imagine the many managers aren’t expecting to retain third quarter growth rates over the next six months.” Turner noted that there also continues to be upward pressure on cost of funds. Since June, 2004, overnight rates have risen 275 basis points but credit unions’ cost of funds have only increased about 10 to 15 basis points. Many are concerned about maintaining future net interest margins, Turner said. Another factor is that for the year, loan growth in the second and third quarter combined will approach an annualized rate of 14% to 15% while share growth was only around 5%, according to the survey. While this has put a sizeable drain on liquidity, a phenomenon most have not experienced for the past three years, Turner projects that the marginal difference in loan and share growth rates will diminish over the six months. Robert Hayes, CEO of the $69 million Access Credit Union in Amarillo, Texas says it is getting hard to find economic news that he can feel good about. “That light at the end of the tunnel seems mighty dim,” Hayes said, adding he believes that the debt ratio for many consumers is too high. “People are getting to the max of what they can borrow,” Hayes said. “For so long, the economy has been carried by consumer spending, but I don’t think they will be able to shoulder the burden much longer.” Hayes said “the soaring cost of gasoline is taking a toll as well.” “Some consumers are stuck with cars that guzzle gas, but they are finding they can’t trade down because there is no market for SUVs,” Hayes said. “I’m not saying it is the end of the world but there is some major adjustments coming.” More information on the CU CEO Confidence survey can be found at www.swcorp.org. [email protected]

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