71 st Annual Field Meeting

Size: px

Start display at page:

Download "71 st Annual Field Meeting"

Ashley Anderson
5 years ago
Views:

1 71 st Annual Field Meeting Williamsport FEDERAL RESERVE BANK OF PHILADELPHIA

2 Banking Trends and Supervisory Update William Spaniel Senior Vice President and Lending Officer

3 Overview Third District Banking Conditions Earnings performance Liquidity and non-core funding dependence Commercial real estate (CRE) in the Third District Current expected credit loss (CECL) and impact to community banking organizations Regulatory updates

4 Third District Banking Conditions * The charts on the following slides uses call report data as of 2016Q1 and 2016Q2 (when possible). The universe of community banks in this analysis consist of commercial banks with less than $10 billion in assets. This report utilizes a 10 percent capped mean, or winsorized mean, to compute the average district and national ratios, unless otherwise identified.

5 Third District Community Banks Earnings Performance 4.50% 4.25% 4.00% 3.75% 3.50% 3.25% 3.00% 2.75% 2.50% Net Interest Margin Third District Nation

6 Third District CRE Highlights Generally, Third District community banks have experienced stronger CRE growth than community banks throughout the nation Overall, Third District community banks are reporting improvements in asset quality metrics In the Third District, higher noncurrent loans are reported within the CRE and construction and land development (C&LD) portfolios when compared to the nation Third District metrics have recovered significantly since the Great Recession Examination staff focuses on compliance with supervisory guidance and reviewing CRE, high volatility CRE, and C&LD loans

7 Third District Community Banks CRE Concentrations Based on Bank Size* 350% 310% 300% 279% 250% 236% 200% 150% 154% 150% 100% 113% 70% 119% 94% 96% 50% 0% 40% 32% 20% 18% 23% 24% 11% 16% 8% 8% < $100MM $100MM to $500MM $500MM to $1B $1B to $10B CLD Multi-Family OO NFNR Other NFNR Total CRE * This graph uses median concentrations for each of the asset categories and will therefore not compute to the total CRE exposure.

8 Third District Community Banks Overall CRE Loan Composition* 100% 90% 80% 34% 34% 38% 39% 41% 41% 40% 39% 44% 39% 70% 60% 50% 40% 37% 35% 34% 36% 37% 38% 37% 36% 32% 34% 30% 20% 10% 0% 5% 4% 5% 5% 7% 8% 10% 13% 14% 20% 25% 27% 23% 20% 15% 13% 12% 12% 10% 7% Q22016 CLD Multi Family OO NFNR Other NFNR * This graph includes categorical CRE loans as a percentage of total CRE loans within the Third District at each time interval.

9 Current Expected Credit Loss (CECL)

10 CECL Model FASB issued ASU CECL recognizes expected credit losses on financial instruments Applies to all banks, savings associations, and holding companies Effective for SEC filers in 2020 and for other entities in 2021 Regulators issued a joint statement on the New Accounting Standard on Financial Instruments Federal Reserve issued supervisory (SR) letter

11 Preparing for CECL Review existing allowance model, systems, and practices and leverage as appropriate Engage all relevant business lines in planning and implementation efforts Identify and collect historical data to estimate life of loan expected losses Discuss plans with auditors, industry peers, and regulators

12 Regulatory Updates

13 Banking Agencies Efforts to Reduce Regulatory Burden Interagency efforts to alleviate regulatory burden Use of evaluation in lieu of appraisal for real estate related financial transactions Proposal to reduce Call Report requirements for small financial institutions FAST Act changes Extended examination cycle for institutions under $1 billion Annual privacy notice under Regulation P Community bank exemption for certain mortgage rules Economic Growth and Regulatory Paperwork Reduction Act Review Process Regulators continue to address comments based on 2014 and 2015 outreach meetings

14 Regulatory Updates Consumer Financial Protection Bureau s pending proposed rules Prepaid cards Mortgage servicing Payday lending/title loan proposal Federal Reserve 2016 efforts Off-site loan review during examinations Expectations for relying on work of insured depository institution regulators

15 Banking Trends and Supervisory Update William Spaniel Senior Vice President and Lending Officer

16 Report on Economic and Financial Developments Gary A. Wagner * Regional Economic Advisor * The views expressed today are my own and not necessarily those of the Federal Reserve Bank of Philadelphia or the Federal Reserve System.

17 PRESENTATION OUTLINE GDP and near-term outlook (4 slides) Employment (7 slides) Housing conditions (6 slides) Migration and income trends (4 slides) Monetary policy update (3 slides)

18 GROWTH AND FORECAST FOR U.S. REAL GDP Quarterly (SAAR): 2005:Q1-2017:Q3 Annualized quarterly growth rate (SAAR) 4% 2% 0% -2% -4% -6% -8% 2016:Q2 = 1.1% Date Forecast 2016:Q3 2.6% 2016:Q4 2.3% 2017:Q1 2.3% 2017:Q2 2.3% 2017:Q3 2.1% Jan 2006 Jan 2008 Jan 2010 Jan 2012 Jan 2014 Jan 2016 Jan 2018 GDP SPF Forecast Source: BEA via Haver Analytics Quarters plotted: 2005:Q1-2017:Q3

19 GDP GROWTH BY SECTOR OVER LAST 4 QUARTERS Black lines indicate historical averages from 1980:Q1 to 2016:Q2 Annualized quarterly growth (SAAR) 5% 0% 2.6% 2.9% 4.0% 5.3% 5.9% 1.7% -5% -10% Real GDP Consumption Investment Exports Imports Government Source: BEA via Haver Analytics Last quarter included: 2016:Q2 Black lines indicate sector averages from 1980:Q1 to 2016:Q2

20 GDP AND GDP PLUS GROWTH Quarterly (SAAR): 2012:Q1-2016:Q2 Annualized quarterly growth rate (SAAR) 6% 5% GDP Plus GDP 4% 3% 2% 1% 0% 1.1% 0.7 % -1% Jan 2012 Jan 2013 Jan 2014 Jan 2015 Jan 2016 Sources: BEA and FRB Philadelphia via Haver Analytics Quarters plotted: 2012:Q1-2016:Q2

21 FRB PHILADELPHIA PARTISAN CONFLICT INDEX Higher values indicate more political disagreement Index: 1990= Jan 2000 Jan 2005 Jan 2010 Jan 2015 Source: FRB Philadelphia Months plotted: Jan 2000 to Jun 2016

22 Employment

23 CHANGE IN MONTHLY U.S. PAYROLL EMPLOYMENT Black lines indicate annual averages (in thousands) Change in payroll employment (thousands, SA) Aug 2016: Jan 2011 Jan 2012 Jan 2013 Jan 2014 Jan 2015 Jan 2016 Source: BLS via Haver Analytics Months plotted: Jan Aug 2016 Black lines indicate annual averages.

24 CHANGE IN QUARTERLY PA PAYROLL EMPLOYMENT Black lines indicate annual average quarterly change (in thousands) Change in payroll employment (thousands, SA) :Q2: Jan 2011 Jan 2012 Jan 2013 Jan 2014 Jan 2015 Jan 2016 Source: BLS via Haver Analytics Quarters plotted: 2011:Q1-2016:Q2 Black lines indicate annual averages.

25 ANNUAL EMPLOYMENT GROWTH BY SECTOR U.S. and Pennsylvania (excludes mining & logging) Total Total Private Construction Manufacturing Trade, Trans & Utilities Information Financial Prof & Bus Services Education & Health Services Leisure & Hospitality Government -1% 0% 1% 2% 3% 4% US PA Source: Calculations from BLS via Haver Analytics. Last month included: US (Jul 2016); PA (Jul 2016)

TRI-STATE METRO AREA EMPLOYMENT GROWTH Year-over-year percentage change (3-month moving average) A = Allentown-Bethlehem-Easton MSA B = Altoona MSA C = Atlantic City-Hammonton MSA D =

26 TRI-STATE METRO AREA EMPLOYMENT GROWTH Year-over-year percentage change (3-month moving average) A = Allentown-Bethlehem-Easton MSA B = Altoona MSA C = Atlantic City-Hammonton MSA D = Bloomsburg-Berwick MSA E = Camden Metro Division F = Chambersburg-Waynesboro MSA G = Dover MSA H = East Stroudsburg MSA I = Erie MSA J = Gettysburg MSA K = Harrisburg-Carlisle MSA L = Johnstown MSA M = Lancaster MSA N = Lebanon MSA O = Montgomery-Bucks-Chester County MD P = Newark Metro Division Q* = New York-New Jersey-White Plains MD R = Ocean City MSA S = Philadelphia-Delaware County MD T = Pittsburgh MSA U = Reading MSA V* = Salisbury MSA W = Scranton-Wilkes-Barre-Hazelton MSA X = State College MSA Y = Trenton MSA Z = Vineland-Bridgeton MSA AA = Williamsport MSA AB* = Wilmington Metro Division AC = York-Hanover MSA AD* = Youngstown-Warren MSA * Also includes counties not shown on map. Source: Calculations from BLS data via Haver Analytics.

27 TOTAL NUMBER OF WELLS IN PENNSYLVANIA By well type, (2016 data through July) Number of Wells Conventional Unconventional Source: PA Dept. of Environmental Protection Years plotted: (2016 data through July)

28 PENNSYLVANIA ACTIVE UNCONVENTIONAL WELLS 2011 Active Wells Source: PA Dept. of Environmental Protection

29 PENNSYLVANIA ACTIVE UNCONVENTIONAL WELLS 2016 Active Wells Source: PA Dept. of Environmental Protection

30 Housing conditions

31 YEAR-OVER-YEAR STATE HOME PRICE GROWTH Core Logic Index, 3-month moving average (nominal) Source: Calculations from Core Logic Last month included: Jun 2016

32 FORECLOSURE ACTIVITY As a share of all active loans (maximum and most recent values labeled) Percentage of active loans (seasonally adjusted) 8% 7.5 % 6% 4% 3.5 % 3.8 % 3.4 % 3.4 % 2% 1.8 % 1.4 % 1.1 % 0% US DE NJ PA Source: McDash-HMDA via RADAR Months plotted: Jan Jul 2016 Jan 2000 Jan 2005 Jan 2010 Jan 2015

33 REO ACTIVITY As a share of all active loans (maximum and most recent values labeled) Percentage of active loans (seasonally adjusted) 1.5% 1.4 % 1.3 % 1.0% 1.0 % 1.0 % 0.5% 0.7 % 0.6 % 0.0% Source: McDash-HMDA via RADAR Months plotted: Jan Jul 2016 US DE NJ PA Jan 2000 Jan 2005 Jan 2010 Jan 2015

34 TRI-STATE AREA HOME PRICE GROWTH Year-over-year, Core Logic index (3-month moving average) Source: Calculations from Core Logic data. Last month included: Jun 2016

35 TRI-STATE AREA NON-DISTRESSED HOME PRICE GROWTH Year-over-year, Core Logic index (3-month moving average) Source: Calculations from Core Logic data. Last month included: Jun 2016

36 HOMEOWNERS WITH NEGATIVE EQUITY Maximum values compared to current values Percentage of homes (not seasonally adjusted) Current (2016:Q2) Maximum 35% 30% 31.4% 25% 20% 21.0% 19.9% 15% 10% 12.1% 12.5% 9.4% 12.1% 10.2% 5% 0% US PA Bloomsburg MSA Williamsport MSA Source: Zillow Maximum dates are as follows: US 2012:Q1; PA 2012:Q1; Bloomsburg MSA 2011:Q2; Williamsport MSA 2012:Q1

37 Migration Trends

38 TRI-STATE MIGRATION PATTERNS USING IRS DATA Percentage Change in Number of Tax Returns, (base year = 2007) Source: Calculations from Internal Revenue Service data.

39 AGI CHANGE FROM TOTAL MIGRATION Percentage change in total adjusted gross income, (base year = 2007) Source: Calculations from Internal Revenue Service data.

40 AGI CHANGE FROM OUT-OF-STATE MIGRATION Percentage change in total adjusted gross income, (base year = 2007) Source: Calculations from Internal Revenue Service data.

TOP ORIGINS AND DESTINATIONS BY STATE To/from Pennsylvania, 2007-2014 (base year = 2007) Total

41 TOP ORIGINS AND DESTINATIONS BY STATE To/from Pennsylvania, (base year = 2007) Total inflow = $38.3 Total outflow = $43.0 Source: Calculations using data from the Internal Revenue Service.

42 Monetary Policy

43 U.S. PCE INFLATION Year-over-year (seasonally adjusted) Year-over-year percent change (seasonally adjusted) 4% 3% 2% 1% 2.0 % 1.6 % 0.8 % 0% -1% -2% PCE PCE Core FOMC Target Jan 2000 Jan 2005 Jan 2010 Jan 2015 Source: BEA via Haver Analytics Months plotted: Jan Jul 2016

44 DOT PLOT COMPARISON March 2016 vs June 2016 Percent Mar 2016 Projections Jun 2016 Projections Source: FOMC Projections, March 2016 and June 2016

45 MARKET-IMPLIED PROBABILITY OF A RATE HIKE Based on CME Fed Funds Futures Contracts (as of Sep. 2, 2016) Probability 100% 80% 60% 59.0 % 40% 40.1 % 36.0 % 20% 0% Sep Nov Dec Mar 2016 Apr 2016 May 2016 Jun 2016 Jul 2016 Aug 2016 Sep 2016 Source: Bloomberg Days plotted: Mar. 7, Sep. 2, 2016 Shading represents FOMC meeting dates.

46 SUMMARY Private forecasters expect GDP growth to accelerate in the second-half of 2016 and to return to around 2% next year Excluding energy-related industries, employment growth continues to be steady in the nation and in our region Home price growth will likely be below average in the nearterm in regions with larger REO volumes to clear Recent migration trends point to slower growth for many of our communities

47 Report on Economic and Financial Developments Gary A. Wagner * Regional Economic Advisor * The views expressed today are my own and not necessarily those of the Federal Reserve Bank of Philadelphia or the Federal Reserve System.

48 71 st Annual Field Meeting Williamsport FEDERAL RESERVE BANK OF PHILADELPHIA

49 MORTGAGE DELINQUENCY RATES Bloomsburg-Berwick MSA Percentage of active loans (Seasonally Adjusted): maximum and most recent observation labeled 5% 4% 4.8 % 4.1 % 3% 3.2 % 2.6 % 2% 1.8 % 1.5 % 1.6 % 1.5 % 1% 1.4 % 1.4 % 0% Jan 2000 Jan 2005 Jan 2010 Jan 2015 Source: McDash-HMDA via RADAR Months plotted: Jan Mar DPD 60DPD 90DPD Foreclosure REO

50 MORTGAGE DELINQUENCY RATES Williamsport MSA Percentage of active loans (Seasonally Adjusted): maximum and most recent observation labeled 4% 4.1 % 3% 3.1 % 2% 1.6 % 2.3 % 1.7 % 1.2 % 1% 0.8 % 0.6 % 1.1 % 0% 30DPD 60DPD 90DPD Foreclosure REO Source: McDash-HMDA via RADAR Months plotted: Jan Jun 2016 Jan 2000 Jan 2005 Jan 2010 Jan 2015

51 TOP ORIGINS AND DESTINATIONS BY COUNTY Bloomsburg-Berwick MSA, change in total AGI, to/from outside of the MSA, OUTFLOW WITHIN STATE OUT-OF-STATE Destination Total AGI (000 USD) Average AGI (USD) Destination Total AGI (000 USD) Average AGI (USD) Luzerne County, PA 66,023 35, Northumberland County, PA 61,457 38, Lycoming County, PA 14,981 33, Union County, PA 14,544 56, Schuylkill County, PA 7,467 35, Total Outflow 200,734 37,464 Total Outflow - - INFLOW WITHIN STATE OUT-OF-STATE Origin Total AGI (000 USD) Average AGI (USD) Origin Total AGI (000 USD) Average AGI (USD) Northumberland County, PA 66,759 39,690 Maricopa County, AZ ,167 Luzerne County, PA 59,513 32, Lycoming County, PA 17,238 34, Union County, PA 10,453 42, Schuylkill County, PA 9,072 35, Total Inflow 202,735 36,509 Total Inflow ,167 Source: IRS

52 TOP ORIGINS AND DESTINATIONS BY COUNTY Williamsport MSA, change in total AGI, to/from outside of the MSA, OUTFLOW WITHIN STATE OUT-OF-STATE Destination Total AGI (000 USD) Average AGI (USD) Destination Total AGI (000 USD) Average AGI (USD) Clinton County, PA 44,651 31,489 Harris County, TX 2,170 74,828 Northumberland County, PA 31,517 32,933 Travis County, TX ,150 Union County, PA 19,841 43,321 Ector County, TX ,600 Columbia County, PA 10,497 31,713 Monroe County, NY ,400 Centre County, PA 10,368 35,875 Hillsborough County, FL ,652 Total Outflow 209,473 32,766 Total Outflow 12,360 40,130 INFLOW WITHIN STATE OUT-OF-STATE Origin Total AGI (000 USD) Average AGI (USD) Origin Total AGI (000 USD) Average AGI (USD) Clinton County, PA 45,886 32,636 Harris County, TX 2, ,545 Northumberland County, PA 28,749 32,266 Maricopa County, AZ 1,039 43,292 Union County, PA 16,030 39,580 Sweetwater County, WY ,833 Centre County, PA 9,868 35,117 Essex County, NJ ,956 Columbia County, PA 9,598 33,796 Mesa County, CO ,091 Total Inflow 199,249 33,663 Total Inflow 6,941 43,381 Source: IRS

71 st Annual Field Meeting

71 st Annual Field Meeting Hershey FEDERAL RESERVE BANK OF PHILADELPHIA Banking Trends and Supervisory Update William Spaniel Senior Vice President and Lending Officer Overview Third District Banking Conditions