Community Depository Institutions Advisory Council Meeting Federal Reserve Bank of New York 33 Liberty Street, New York, New York October 14, 216 Agenda 11: am Presentations to the Council Members: o National Economic Outlook (Richard Peach, Macroeconomic and Monetary Studies) o Regional Economic Outlook (Jason Bram, Regional Analysis) 12:3 pm Discussion of questions posed by the Board of Governors over lunch
Community Depository Institutions Advisory Council Discussion Questions October 14, 216 Meeting Federal Reserve Bank of New York 1. Current Banking Conditions: What is the Council s view of the current condition of, and the outlook for, loan markets and financial markets generally? Please describe any significant changes in the creditworthiness of applicants for loans, loan demand, and lending standards in general. a. Small Business Lending: Has credit availability for, and demand for credit from, small businesses changed significantly? Have lending standards for these borrowers changed? b. Commercial Real Estate Lending: Have there been any changes in the Council s view of challenges in the commercial real estate market since the beginning of the year? How are commercial real estate loans performing compared to your expectations? c. Construction Lending: What is the Council s view of the availability of credit for construction and development projects? Have Council members seen any changes in the demand for construction loans since the beginning of the year? d. Home Mortgage Lending: What changes have you seen in the mortgage market since the beginning of the year? Is a trend developing among community banks to increase, decrease, or cease home mortgage originations, and if so, what are the likely causes for and effects of this trend? e. Consumer Lending: What changes have you seen in consumer lending? f. Agricultural Lending: Have there been any changes in agricultural lending? g. Deposits: Have Council members seen any changes in local deposit markets?
3 2. Economic Discussion: a. Overall Economic Conditions: How do Council members assess overall economic conditions in their regions? b. Particular Indicators: i. Inflation: Are the prices of products and services rising more or less quickly (or declining more) than in the recent past? Are the prices for the products and services you purchase rising more or less quickly? ii. iii. iv. Housing: How have house prices changed in recent months? Have there been any changes in housing activity overall in your region? Labor Markets: How have the labor markets in which you operate changed in recent months? In particular, assess the degree of job loss (how much and in which industries). What changes to wages have Council members observed in the past year? Consumer Confidence: Is the Council seeing signs of improved consumer confidence? What is the outlook for consumer credit losses? 3. Innovation and Community Banking: What are the most important innovations currently affecting banking practices, business models, and lines of business for both community banks and their competitors outside the banking system, which are popularly known as fintechs? What challenges for compliance with safety and soundness, anti money laundering, or consumer protection regulations are presented when community banks adopt innovations or partner with fintechs? What are the barriers, such as costs or regulatory concerns, for community banks seeking to meet the needs of their customers through innovations or fintech partnerships? 4. Examination Practices: Have Council members experienced problems with recent examinations? In particular, have examination practices constrained access to credit by creditworthy borrowers? What steps can be taken to address the Council s concerns? 5. Regulatory Matters and the Future of Banking: How are recent changes in the regulatory landscape affecting community depository institutions ability to continue to provide services to their customers? What has been the effect on the industry generally? 6. Additional Matters: Have any other matters affecting community depository institutions emerged that Council members want to present at this time?
US Macro Overview October 14, 216
Four Quarter Percent Change 6 5 4 3 2 1-1 -2-3 -4-5 2 22 24 26 28 21 212 214 216 Source: Bureau of Economic Analysis Growth of Real GDP Four Quarter Percent Change 6 5 4 3 2 1-1 -2-3 -4-5 1 Note: Shading shows NBER recessions.
Nominal Trade-Weighted Value of US$ and Rig Count Active Oil Rigs 18 16 Rig Count (left axis) Index 14 14 12 1 8 6 4 2 Broad Trade Weighted Exchange Value of US $ (right axis) 12 1 8 211 212 213 214 215 Source: Federal Reserve Board and Baker Hughes 6 2 Note: Shading shows NBER recessions.
Y/Y % Change 6 5 Aggregate Weekly Hours Worked Y/Y % Change 6 5 4 3 Goods-Producing Industries Private Service-Providing Industries 4 3 2 2 1 1-1 -1 212 213 214 215 216 3 Source: Bureau of Labor Statistics Note: Shading shows NBER recessions.
Labor Market Indicators Percent 68 Percent 12 66 64 Labor Force Participation Rate (Left Axis) 1 8 62 6 6 58 Unemployment Rate (Right Axis) Employment-Population Ratio (Left Axis) 4 2 56 2 22 24 26 28 21 212 214 216 Source: Bureau of Labor Statistics, via Haver Analytics 4 Note: Shading shows NBER recessions.
4.5 4 3.5 3 2.5 2 1.5 1.5 6.5 6.2 5.9 5.6 5.3 12-month Percent Change Personal Saving Rate and Energy Price Index Energy Price Index Personal Saving Rate Personal Saving Rate (left axis) Real Personal Consumption Expenditures Sources: Bureau of Economic Analysis and Bureau of Labor Statistics via Haver Analytics 12-month Change (left axis) Energy Price Index (right axis) 5 214 215 216 Monthly Percent Change (Annualized) Monthly Change (right axis) 1 8 6 4 2-2 -4 25 23 21 19 17 5 Note: Shading shows NBER recessions.
Household Liabilities/Disposable Personal Income Ratio 1.4 1.2 1.8.6.4.2 Ratio 1.4 1.2 1.8.6.4.2 195 196 197 198 199 2 21 Source: Federal Reserve Board 6 Note: Shading shows NBER recessions.
Consumer Debt by Credit Score % Change Year to Year % Change Year to Year 3 3 25 2 3 rd Quintile 4 th Quintile 25 2 15 1 5 2 nd Quintile 15 1 5-5 -5-1 1 st Quintile 5 (Highest) Quintile (Lowest) -1-15 -15 2 22 24 26 28 21 212 214 216 Source: FRBNY Consumer Credit Panel 7 8 Note: Includes Student Loans
Percent 7 Aggregate Homeownership Rate* Percent 7 68 68 66 66 64 Contribution to Decline by Age of Household Head: 64 62 6 1965 1971 1977 1983 1989 1995 21 27 213 Source: Census Bureau Under 35: 23.7% 35 to 44: 35.4% 45 to 54: 29.1% 55 to 64: 11.7% 65 plus:.9% *Owner occupied housing units divided by total occupied housing units. 8 62 6
Housing Starts and Existing Homes Sales Per Capita Units.3.25.178 (average over 1968-23) Existing Home Sales Units.3.25.2.2.15.15.1 Housing Starts.1.5.9 (average over 1968-23) 1968 1978 1988 1998 28 Source: BLS, Census Bureau, NAR.5 9 Note: Shading shows NBER recessions.
Credit Score at Mortgage Origination: All First Mortgages Credit Score Credit Score 8 8 75 Median 75 7 65 6 55 1 th Percentile 25 th Percentile About 35 4 Million People 7 65 6 55 5 5 1999 21 23 25 27 29 211 213 215 1 Source: FRBNY / Consumer Credit Panel Note: Shading shows NBER recessions.
Transition of Mortgage Accounts from 3-6 Days Late Percent 6 Percent 6 5 To Current 5 4 4 3 3 2 2 1 To 9+ Days Late 1 2 21 22 23 24 25 26 27 28 29 21 211 212 213 214 215 216 11 Source: FRBNY Consumer Credit Panel
Real Business Fixed Investment 4Q % Change 15 1 5-5 -1-15 4Q % Change 15 1 5-5 -1-15 -2 2 22 24 26 28 21 212 214 216 Source: Bureau of Economic Analysis -2 12 Note: Shading shows NBER recessions.
Equipment Investment Spending and Capacity Utilization Real Business Investment in New Equipment (% Change Year to Year) Real Business Investment in New Equipment (% Change Year to Year) 3.% 2.% Quarterly data 198Q1 216Q2 3.% 2.% 1.% 1.%.%.% -1.% -2.% 216 Q2: (75., -.2) -1.% -2.% -3.% -3.% 6 65 7 75 8 85 9 Manufacturing Capacity Utilization (Percent of Capacity) Source: Federal Reserve Board, Bureau of Economic Analysis 13
Real Government Consumption and Gross Investment 4 Quarter % Change 4 Quarter % Change 1 1 8 6 4 2-2 State & Local (Right Axis) 8 6 4 2-2 -4-6 Federal (Left Axis) -8 2 22 24 26 28 21 212 214 216 Source: Bureau of Economic Analysis -4-6 -8 14 Note: Shading shows NBER recessions.
PCE Deflator 12 Month % Change 12 Month % Change 5 5 4 3 Total PCE FOMC Objective 4 3 2 2 1 Core PCE 1-1 -1-2 2 22 24 26 28 21 212 214 216 Source: Bureau of Economic Analysis, via Haver Analytics -2 15 Note: Shading shows NBER recessions.
CPI Inflation: Core Goods and Core Services 12 Month % Change 12 Month % Change 5 5 4 3 2 Core Services 4 3 2 1 Total Core CPI 1-1 -2 Core Goods -1-2 -3-3 2 22 24 26 28 21 212 214 216 16 Source: Bureau of Labor Statistics Note: Shading shows NBER recessions.
Rental Vacancy Rate and Rent of Primary Residence Percent 12 11 12 Month % Change 5 Rent of Primary Residence (Right Axis) 4 1 3 9 8 7 Rental Vacancy Rate (Left Axis) 2 1 6 2 22 24 26 28 21 212 214 216-1 Source: Census Bureau, BLS 17 Note: Shading shows NBER recessions.
Dollar Exchange Rate and Nonoil Import Prices 12 Month % Change 12 Month % Change 3 1 2 1-1 -2 Nonoil Import Prices (Right Axis) Dollar (Left Axis) -3 2 22 24 26 28 21 212 214 216 Source: Federal Reserve Board, Bureau of Labor Statistics via Haver Analytics 8 6 4 2-2 -4-6 -8-1 18 Note: Shading shows NBER recession and dollar is Board s trade-weighted measure.
Reference Charts 19
Personal Consumption Expenditures: Health Care Price Index 12 Month % Change 12 Month % Change 4.5 4.5 4 3.5 3 2.5 2 1.5 1.5 17% of total PCE deflator 19% of core PCE deflator 4 3.5 3 2.5 2 1.5 1.5 1995 1997 1999 21 23 25 27 29 211 213 215 Source: Bureau of Economic Analysis 2 Note: Shading shows NBER recessions.
TIPS Based Inflation Expectations Percent 4 Percent 4 5-1 Years 3 2 September 29: 1.45 3 2 1 1 1 1 25 27 29 211 213 215 21 Source: Federal Reserve Board Note: Carry-adjusted
Bank Assets: Domestically and Foreign Chartered Banks % Change Year-to-Year % Change Year-to-Year 25 25 2 Commercial and Industrial Loans 2 15 (Left Axis) 15 1 5-5 -1-15 -2 Commercial Real Estate Loans (Left Axis) Residential Real Estate Loans (Right Axis) -25 25 27 29 211 213 215 1 5-5 -1-15 -2-25 Source: Federal Reserve Board 22 Note: Shading shows NBER recessions.
Percent 7 65 Labor Share of National Income and Unemployment Rate Labor Share of National Income (Left Axis) Unemployment Rate (Right Axis) Rate 12 1 8 6 4 2 6 1955 1959 1963 1967 1971 1975 1979 1983 1987 1991 1995 1999 23 27 211 215 Source: Bureau of Economic Analysis, Bureau of Labor Statistics 23 Note: Shading shows NBER recessions.
Household Formations 2 Year Avg. Change 2 Year Avg. Change 2 15 1 5-5 Total (Left Axis) -1 1999 21 23 25 27 29 211 213 215 Source: Bureau of the Census Owner (Right Axis) Renter (Left Axis) 18 16 14 12 1 8 6 4 2-2 -4-6 -8 24 Note: Shading shows NBER recessions.
Single Family Housing Market 12 Month % Change Months 25 13 2 15 1 5-5 -1-15 Single Family House Price Index (Left Axis) Normal Range for Months Supply -2 2 22 24 26 28 21 212 214 216 Source: CoreLogic, National Association of Realtors, via Haver Analytics Months Supply (Right Axis) 12 11 1 25 Note: Shading shows NBER recessions. 9 8 7 6 5 4 3
Overview of the Regional Economy Presentation to the Community Depository Institutions Advisory Council (CDIAC) Jason Bram, Research Officer October 14, 216 The views expressed here are those of the presenter and do not necessarily represent the views of the Federal Reserve Bank of New York or the Federal Reserve System.
The Second Federal Reserve District CDIAC Members FEDERAL RESERVE BANK OF NEW YORK 2
Overview of Regional Conditions Most of the regional economy has fared well, led by New York City; in contrast, Puerto Rico s economy remains depressed. Northern New Jersey s economy has registered tepid growth. New York City continues to boom as other industries, most notably tech, pick up the slack of a sluggish finance sector. Job growth in the Buffalo & Rochester metros is looking considerably stronger than preliminary estimates. Housing markets remain mixed with New York City and metro Buffalo out-performing. Recent business surveys indicate some negativity about current conditions in the region. FEDERAL RESERVE BANK OF NEW YORK 3
State Coincident Indexes Three-Month Change Ending August 216 Down more than 1% Down.6% to 1% Down.1% to.5% Unchanged Up.1% to.5% Up.6% to 1% Up more than 1% Source: Federal Reserve Bank of Philadelphia 4
Regional Economic Activity Index of Coincident Economic Indicators (CEI) 14 Index (Dec27=1) 13 12 Aug 11 New York City 1 New York State 9 New Jersey 8 27 28 29 Shading indicates NBER recession 21 211 212 213 214 215 216 217 Source: Federal Reserve Bank of New York
Private-Sector Employment Seasonally Adjusted Index 12 Index (Dec27=1) Aug 116 112 18 Sep 14 New York City 1 United States 96 92 New York State New Jersey Puerto Rico 88 27 28 29 Shading indicates NBER recession 21 211 212 213 214 215 216 217 Source: Bureau of Labor Statistics and Moody's Economy.com
Employment Trends in and around NYC 215 Private-Sector Job Growth Strong Moderate Modest Little or None Declining Orange Ulster Dutchess Putnam Fairfield Westchester Sussex Rockland Passaic Warren Morris Essex Bergen Bronx Queens Nassau Suffolk Union Kings Hunterdon Somerset Middlesex Monmouth Source: Bureau of Labor Statistics and Moody s Economy.com. 7
The New York City Premium Average Earnings Per Worker in NYC as a Percent of the U.S. Average % of U.S. Average 19 17 New York City 215 15 13 Note: Ratio is based on nominal earnings of wage and salary workers in New York City and the nation. 11 197 1974 1978 1982 1986 199 1994 1998 22 26 21 214 218 Source: U.S. Bureau of Economic Analysis (earnings); U.S. Bureau of Labor Statistics (total employment); FRBNY staff calculations.. 8
NYC Finance and Securities Sectors Share of NYC Employment and Earnings 4% Finance Ex-Securities Securities 3% 2% 1% % 1972 1987 21 27 215 1972 1987 21 27 215 Source: Bureau of Labor Statistics (QCEW). 9
NYC Tech and Securities Employment Thousands 2 Thousands of Jobs +12, 15 Securities Employment 21 to 215 +53, 1 Technology Employment 5 Shading indicates NBER recession Technology Employment Computer manufacturing Electronic shopping Software publishing Data processing, hosting, etc. Internet/web search portals Computer systems design Scientific R&D services 199 1992 1994 1996 1998 2 22 24 26 28 21 212 214 216 Source: Bureau of Labor Statistics and Moody s Economy.com, FRBNY staff calculations. 1
Buffalo MSA Payroll Employment Incorporating Estimates Based on QCEW 57 Thousands 565 Estimated Level 56 555 55 545 54 212 213 214 215 216 Source: U.S. Bureau of Labor Statistics and Moody s Economy.com., FRBNY Staff Calculations 11
Rochester MSA Payroll Employment Incorporating Estimates Based on QCEW 54 Thousands Estimated Level 535 53 525 52 515 212 213 214 215 216 Source: U.S. Bureau of Labor Statistics and Moody s Economy.com; FRBNY Staff Calculations. 12
Puerto Rico Payroll Employment Incorporating Estimates Based on QCEW 96 Thousands 94 92 Estimated Level 9 88 212 213 214 215 216 Source: U.S. Bureau of Labor Statistics and Moody s Economy.com; FRBNY Staff Calculations. 13
Home Prices CoreLogic Home Price Index, Seasonally Adjusted 12 Index (Mar26=1) Not for distribution without checking with Regional Analysis 11 Upstate NY 1 NYC Metro 9 New York State Aug 8 Downstate NY 7 United States 6 26 27 28 29 Shading indicates NBER recession 21 211 212 213 214 215 216 217 Source: CoreLogic Home Price Index (including distressed sales) 14
Home Prices CoreLogic Home Price Index, Seasonally Adjusted 12 Index (Mar26=1) Not for distribution without checking with Regional Analysis 11 1 NYC Metro 9 Westchester Aug 8 Rockland Fairfield 7 United States 6 26 27 28 29 Shading indicates NBER recession 21 211 212 213 214 215 216 217 Source: CoreLogic Home Price Index (including distressed sales) 15
Home Prices CoreLogic Home Price Index, Seasonally Adjusted 12 Index (Mar26=1) Not for distribution without checking with Regional Analysis 11 1 NYC Metro 9 Kingston Metro Aug 8 7 United States Dutchess Metro 6 26 27 28 29 Shading indicates NBER recession 21 211 212 213 214 215 216 217 Source: CoreLogic Home Price Index (including distressed sales) 16
Home Prices CoreLogic Home Price Index, Seasonally Adjusted 12 Index (Mar26=1) Not for distribution without checking with Regional Analysis 11 1 9 8 Hudson United States Bergen Essex Union Aug 7 Passaic 6 26 27 28 29 Shading indicates NBER recession 21 211 212 213 214 215 216 217 Source: CoreLogic Home Price Index (including distressed sales) 17
Home Prices CoreLogic Home Price Index, Seasonally Adjusted 16 Index (Mar26=1) Not for distribution without checking with Regional Analysis Brooklyn 14 Manhattan 12 Queens Borough 1 Nassau County Aug 8 Suffolk County United States 6 26 27 28 29 Shading indicates NBER recession 21 211 212 213 214 215 216 217 Source: CoreLogic Home Price Index (including distressed sales) 18
Home Prices CoreLogic Home Price Index, Seasonally Adjusted 13 Index (Mar26=1) Not for distribution without checking with Regional Analysis 12 Buffalo 11 Upstate NY 1 Rochester Albany 9 Aug 8 7 United States 6 26 27 28 29 Shading indicates NBER recession 21 211 212 213 214 215 216 217 Source: CoreLogic Home Price Index (including distressed sales) 19
Current Economic Conditions FRBNY Business Surveys, Current Conditions 6 Diffusion Index 4 2 Empire State Manufacturing Survey Sep -2 Business Leaders Survey -4-6 27 28 29 Shading indicates NBER recession Superstorm Sandy 21 211 212 213 214 215 216 217 Source: Federal Reserve Bank of New York 2