DALLAS- — The election of Barack Obama did not inspire optimism, at least not for Southwest Corporate members who responded to a November special edition CEO confidence survey, taken the week immediately after the election. The index took its greatest plunge from one survey to the next, skidding 14.72 points to its lowest mark-10.50-since the survey began four years ago.
The drop followed a seven-point increase in CEO confidence for the third-quarter survey just two months ago, which captured feedback prior to a flurry of September announcements of financial institution failures, stock market losses and government assistance.
The confidence index is a compilation of responses measuring credit union CEOs' feelings on six key issues. CEOs were pessimistic across the board, registering the lowest marks in survey history for credit union and member financial conditions, both now and six months into the future.
Most notable was the substantial decrease in expectations for credit union financial condition and for member financial condition six months from now, each dropping around 22 points. Anticipation for loan demand in six months dropped from the last survey by more than 20 points to zero.
The $49 million single-sponsor KBR Heritage Federal Credit Union in Houston, which operates from one on-site location, is experiencing some typical credit union "collateral damage" as a result of financial market turmoil and belt-tightening moves by the sponsor company. The credit union has experience a flood of new deposits, fueling overcapitalization concern.
"Members have been bringing in funds from other institutions, because they see that credit unions have avoided many of the problems others are facing," said KBR Heritage FCU President Mary Hawk.
"They are concerned about the stock market and their 401(k)s and want to know that their funds are insured at the credit union. The last two months, my share base has increased $4.2 million, but we're not making loans. I have 16% capital now."
The credit union's sponsor-company recently put an internal expansion project on hold, initiated a hiring freeze, eliminated nonessential employee travel and postponed raises for a minimum of six months, Hawk said.
"With knowledge of those actions, members are really skittish about the possibility of layoffs," she added.
Turner advised credit unions not to let the emotion of recent financial crises cause them to step away from lending or investment activities.
"Conventional, fixed-rate real estate loans continue to demonstrate strong relative value without requiring a compromise in underwriting standards," he said. "Reasonable expectations for 2009 earnings should clearly be discussed with boards, taking into account the current environment but also recognizing that as the economy recovers in late 2009, confidence, outlook and earnings again will return."
Hawk hopes for an earlier economic turnaround. "I think a lot of people are waiting to see what happens the first few months following Obama's inauguration," she said. "That will set the tone for how quickly recovery might begin."
A total of 196 responses were received out of 845 CEOs polled for the survey, a 23% response rate. Additional details, including survey historical data, are available at Southwest Corporate's website (www.swcorp.org).
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