Back To Regional Map
Bill Kennedy, CFO
Department of Interior FCU ($146.9M, Washington, DC)
Avoiding another government shutdown in 2014 was huge. Although there appears to be plenty of opportunity to lend, where that lending demand is coming from causes concern. Sure you can make auto loans, but the competition forces those rates to be lower than 3%. Sure you can make real estate loans, but can you match interest rate risk on the funding side? If you are funding using your member deposit base, how comfortable or secure is that? What are the penalties for early withdrawal on certificates if you're paying above market to offset longer duration loans? What's going to happen if the short end of the treasury curve moves up 100 basis points? What about 200 basis points? How long can fixed income folks hang on with such measly savings yields over the past five-plus years? Is there already disintermediation of funds going to the stock market? I believe the biggest issue regarding the economy is on the deposit side of the house. Not the loan side.
The Erie, PA, economy remains fairly resilient in spite of hundreds of jobs leaving the local General Electric Plant. The jobs are moving to Texas, largely because it is a right to work state and Pennsylvania is not. The unemployment rate in our area is consistent with the national unemployment rate. Erie is and has been slowly migrating from a manufacturing to a service industry base. Many of the local plants that previously manufactured for General Electric have diversified their product lines to be more resilient to fluctuations in the General Electric supply chain. The Erie area has a huge treasure in Lake Erie and Presque Isle State Park. We're home to the tall ship Flagship Niagara and many other service-related attractions. We're proud of our city and all it has to offer, and our tourism industry is growing. We're developing our Bayfront area to be tourist friendly and large enough to attract national conventions at our Bayfront Convention Center. The Erie Insurance Arena was recently renovated and expanded to attract more national talent and provide a high-quality concierge atmosphere. We have four universities, two being state schools. Our biggest concern is how to prevent brain drain, we we're trying to stimulate business growth in the economy and create local jobs that our graduates will be able to secure upon graduation. Commercial loans in our area are increasing at a faster rate than consumer loans, which we believe is a positive trend for job growth in the coming year.
Evan Clark, CEO
Department of Commerce FCU ($329.9M, Washington, DC)
The mortgage lending market has slowed dramatically with the increase in rates. We are going to redesign our website to better-optimize it and make it more mortgage centric. We are not seeing much deposit growth even though our deposit rates are in the top five across all terms. The reason: Fed-driven performance of the stock market. The S&P increased 29.6% last year. It's difficult to sell a 2.45% five-year CD versus that kind of return. I suspect the equity market will continue to be strong even as the Fed continues the tapering of its securities purchases, and deposit growth for the credit union will again be subdued throughout much of 2014. Our membership growth numbers have been outstanding, but not because of the bash the banks nonsense that is promulgated by much of the credit union industry. We're pounding the pavement and recruiting new members. We hired two additional business development people, and our three-person team is doing a great job of recruiting. Net interest margins will continue to be tight because short-term rates won't be going up until 2016 at the earliest. The Fed is afraid of deflation and rightfully so. Look at the PPI numbers for the past two months, they were negative year-over-year. I feel sorry for those credit unions that were depending on income from mortgage loan sales to drive the bottom line. That game is over. The key for the next two years will be emphasizing efficiency and driving down operating expenses. It will be a challenging next two years.
Evan Clark, President/CEO
Falls Catholic Credit Union ($39.5M, Cuyahoga Falls, OH)
Local market conditions are slow. Jobs are low paying, so both husband and wife have to work. Many cannot find work and simply tell us to come get their car. There are no manufacturing jobs and the few service jobs are low paying. People are trying to start businesses on their own or get side jobs. Real estate values have not bounced back at all, which has dried up the home equity loan business. Auto dealers are now trying to get the regular and the subprime business or lease with a lower payment. This makes getting car loans difficult, too. I do NOT see things getting any better over the next few years since the government seems intent on stifling recovery efforts. The constant barrage of new regulations is an extra burden on time and money at the credit union, and I see no let up from that trend. The credit union is staying afloat, but, as in any business, we are innovating.
Mortgage lending volumes have slowed considerably with the recent increase in long-term rates and the end of the refinancing wave. Mortgage lending for new home purchases has increased slightly. Home equity application volumes have been steadily increasing. Members still need to borrow so they are turning to the home equity products because there is no longer an option to generate cash through refinancing. New car auto volumes have been steady all year and we expect auto appliactions to continue to increase in 2014. New car applications have been slow; there is not much used car inventory in the marketplace, so people have been holding onto vehicles longer. These older vehicles will need to be replaced, which should help drive new car sales. Unsecured funding has been flat and is expected to be flat in 2014 as members chose to pay off high cost debt as opposed to saving.
Joseph Marzullo, CEO
Washington Area FCU ($60.8M, Washington, PA)
Marcellus Shale, energy, education, health care.
Conditions are strong in the Columbus, OH, market. Unemployment is at 7.2%, but the issue is attracting skilled workers; if an individual has marketable skills, they are easily employed. For the most part, we see loan demand continuing in the 8-10% growth range, particularly in auto. Further, we think consumers will continue to pay down credit card debt. For the most part, this is a vibrant community and we believe our economic outlook is good.
"Uncertainty" would best describe the 2014 outlook. No one knows the true effects of the ACA act, including premiums and taxes on the already-insured public and their employers. Will people have less disposable income? Pretty likely. Will employees receive raises in 2014? Very unlikely. Will the actual, and true, number of Americans employed rise? Hope so, but doubt it. The stock market rose in 2013 as investors clamored for somewhere to put their money and earn a respectable return. Wall Street is no longer based on the expectation of future earnings; it is based more so on the growth of stock value (i.e., Amazon.com). This is not going to end well. Maryland enjoys some prosperity because of the federal government. If federal and state government is forced to downsize because of a decreased tax base, the state will feel it. Clearly, the rich are getting richer, the poor are getting poorer, and the middle class is moving toward the latter. It is difficult to imagine 2014 will be better than 2013.
Michell Fallis, CFO
VacationLand Federal Credit Union ($155.7M, Sandusky, OH)
There is moderate economic growth in consumer loans, particularly auto lending, and there is lower loan growth in the mortgage market. Business lending is becoming more competitive with moderate growth.
The local market is very competitive — in an approximate 25-mile radius, there are more than 40 bank and credit union branches. Businesses are furloughing or laying off employees either temporarily or for a specified period of time to cut expenses. January and February are normally slow but pick up as the weather changes. The mortgage market now is slow to dead; hopefully it will gain ground in the spring.
Economic conditions in our market remain challenging. After years of decline in our manufacturing employment, we have had to deal with employment loss and wage stagnation from our local government and school employee population in the past couple years. Fortunately, we have a health care sector that has held relatively stable. Going forward, there are both positive and negative signs for growth, and what you see depends on whether you are a "glass half-empty" or a "glass half-full" person. We have added to our travel and tourism base, which will benefit us as the overall economy continues its slow recovery. Education and local government have stablized and manufacturing has made some gains, albeit small. We remain hopeful that the resilient residents of our community will weather the storm and emerge stronger as we move into 2014 and beyond.
Back To Regional Map