credit union association of the dakotas 2012 annual summit june 28, 2012 the economy and credit...
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![Page 1: Credit Union Association of the Dakotas 2012 Annual Summit June 28, 2012 The Economy and Credit Union Operations Mike Schenk Vice President, Economics](https://reader030.vdocuments.us/reader030/viewer/2022032723/56649d025503460f949d4ff2/html5/thumbnails/1.jpg)
Credit Union Association of the Dakotas2012 Annual SummitJune 28, 2012
The Economy and Credit Union Operations
Mike SchenkVice President, Economics & Statistics
Credit Union National AssociationTelephone: 608-231-4228 Facsimile: 608-231-4924
E-Mail: [email protected]
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Macro Economics
Three big goals:1. 2. 3.
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Gross Domestic ProductPercent Changes - $2005. Source: BEA
2010Q4 2011Q1 2011Q2 2011Q3 2011Q4 2012Q1
2.3
0.4
1.3
1.8
3.0
1.9Cons. +2.7%Govt. -3.9%Invest.+6.3%Exports +7.2%Imports +6.1%Prices +2.4%
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Changes in Non-Farm Employment
(Thousands)
110
220 2
46
251
54
84 9
6
85
202
112
157
223
275
259
143
77
69
Jan Mar May Jul Sep Nov Jan Mar May
Source: BLS. In thousands
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Consumer Confidence
64
.8
72
.0
63
.8
66
.0
61
.7
57
.6
59
.5
45
.2
46
.4
40
.9
55
.2
64
.8
61
.5
71
.6
69
.5
68
.7
64
.9
25
50
75
Jan Mar May Jul Sep Nov Jan Mar May
Source: Conference Board.
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Jan-11
Feb-11
Mar-
11
Apr-11
May
-11
Jun-11
Jul-1
1
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-
12
Apr-12
1.64
% 2.12
%
2.65
% 3.06
% 3.43
%
3.51
%
3.61
%
3.76
%
3.90
%
3.55
%
3.45
%
3.00
%
2.93
%
2.89
%
2.65
%
2.30
%
Inflation: YOY Change in CPISource: BLS
Headline
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Economic Trends
• Growing but pace is slowing and rate is low• Labor markets improving but trend is problematic• Consumer confidence low and shaky• Inflation largely in check• Big risks remain
– Europe• Exports• Banks
– US Budget• Big budget cuts looming• Bush tax cuts, payroll tax cut, extended unemployment benefits end
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0
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
(Perc
ent)
Recession Fed Funds 10-Yr. Tsy.Source: Federal Reserve & CUNA E&S.
Market Interest Rates1960 to 2012
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Household Finances• Recovering:
–Debt burden falling–Stock market “up”– Improving ability to spend–Some obvious demand backlogs
• But still room for further improvement:–Debt burden still high–Home prices in a long, slow bottom–Labor markets have a long way to go
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0%
20%
40%
60%
80%
100%
120%
140%
79Q1 85Q1 91Q1 97Q1 03Q1 09Q1
Recessions
Mortgage Debt
Non-mortgage Debt
Source: FRB Flow of Funds -Consumer & Mortgage Debt.
Household Debt(As a Percent of Disposable Household Income)
• Household debt has declined markedly, in part due to deleveraging (pay-downs) and in part due to defaults. However, debt-to-income ratios remain elevated by historical standards.
• Near-record low interest rates and massive refinancings have translated to lower debt payment burdens. This means that even though debt-to-income ratios are elevated, debt payment burdens are now very close to all-time lows.
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2008 2009 2010 2011 2012
0.0%
-0.5
%
-2.9
%
-5.7
%
-6.4
%
-5.5
%
-7.7
%
-10.
1%
-10.
6%
-11.
7%
-12.
3% -11.
4%
-12.
0%
-14.
4%
-15.
8%
-14.
9%
-14.
5%
-15.
6%
US Home Prices vs. December 2007Source: FHFA All Transactions Index
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Total Vacant Housing Units For Sale(Thousands)
1,161
1,063
1,1801,1881,141
1,410
1,353
1,1971,2241,214
1,2441,2431,249
1,411
1,3111,2731,261
1,321
1,3751,3881,370
1,481
1,5661,580
1,729
1,935
2,100
2,179
2,0372,074
2,179
2,277
2,169
2,2272,230
2,114
1,916
1,985
2,080
1,9961,968
1,934
2,052
1,863
1,653
1,990
1,300
1,945
1,782
00 01 02 03 04 05 06 07 08 09 10 11 12
• Vacant homes• Foreclosures• Shadow inventory
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Dec-0
7
Mar
-08
Jun-
08
Sep-0
8
Dec-0
8
Mar
-09
Jun-
09
Sep-0
9
Dec-0
9
Mar
-10
Jun-
10
Sep-1
0
Dec-1
0
Mar
-11
Jun-
11
Sep-1
1
Dec-1
1
Mar
-12
124
126
128
130
132
134
136
138
140
US Non-Farm Employment TrendsMillions – Source: BLS
138
129
133
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Consumer Confidence
0
25
50
75
100
125
150
80 83 86 89 92 95 98 01 04 07 10
0
2
4
6
8
10
12
14
16
18
20
Source: Conference Board.
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Percentage of Workers who Expect to Retire After Age 65
(Source: Employee Benefit Research Institute and Mathew Greenwald & Associates Retirement Confidence Surveys)
1996 2001 2006 2011
11.0%
16.0%
25.0%
36.0%
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Economic Outlook
Slow growth continuing2012=2.60% 2013=3.00%
Inflation worries take a back seat2012=2.00% 2013=2.00%
Unemployment declines – but very slowly2012=8.00% 2013=7.50%
Fed funds flat2012=0.10% 2013=0.25%
Very little change in long rates 2012=2.15% 2013=2.75%
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2007 2008 2009 2010 2011 2012
6.5 6.7 1.2
-1.2
1.2 2.4
3.9
8.9 9.2
3.7
4.6
7.3
12-Month Loan Growth
US Dakotas
<$5 Mil $5-$20 $20-$100 > $100
-1.4 -0.7
0.7 3.3
-3.3
5.2
8.39.3
12-Month Loan GrowthAs of 1st Qtr. 2012
By CU Size
US Dakotas
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2007 2008 2009 2010 2011 2012
5.1 6.9 10.3 4.4 5.2 6.7
9.59.0
12.2
8.0
11.9 12.1
12-Month Savings Growth
US Dakotas
<$5 Mil $5-$20 $20-$100 > $100
1.7 4.0 6.0 7.5
3.0
8.2
12.912.3
12-Month Savings GrowthAs of 1st Qtr. 2012
By CU Size
US Dakotas
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2007 2008 2009 2010 2011 2012
83.4 83.2 76.3 72.2 69.4 66.4
79.5 79.7 77.574.5
70.867.9
Loan-to-Savings Ratios
US Dakotas
<$5 Mil $5-$20 $20-$100 > $100
54.6 52.6 57.3 67.8
63.1 61.2
69.7 68.1
Loan-to-Share RatiosAs of 1st Qtr. 2012
By CU Size
US Dakotas
Liquidity Trends
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2007 2008 2009 2010 2011 2012
26.3 32.0 31.6 33.1 32.5 33.0
16.5
35.6
29.931.6
33.531.9
Long-term Assets as a % of Total Assets
US Dakotas
<$5 Mil $5-$20 $20-$100 > $100
5.7 14.9 25.1 34.5
11.113.3
22.4
38.2
Long-term Assets as a % of Total Assets
As of 1st Qtr. 2012By CU Size
US Dakotas
Interest Rate Risk Trends
Long-Term Assets = RE > 5yrs + Investments > 3yrs + NCUSIF deposit + fixed assets
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2007 2008 2009 2010 2011 2012
0.93
1.37
1.821.75
1.60
1.44
0.96 0.991.08
0.93
0.710.65
60+ Day Dollar Delinquencies as a % of Total Loans
US Dakotas
<$5 Mil $5-$20 $20-$100 > $100
2.80
1.65
1.311.45
1.60
1.030.84
0.52
60+ Day Dollar Delin-quencies as a % of Total
LoansAs of 1st Qtr. 2012
By CU Size
US Dakotas
Long-Term Assets = RE > 5yrs + Investments > 3yrs + NCUSIF deposit + fixed assets
Asset Quality Trends
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2007 2008 2009 2010 2011 2012
0.51
0.84
1.211.14
0.91
0.79
0.27 0.260.32 0.31
0.230.15
Net Chargeoffs as a % of Av-erage Loans
US Dakotas
<$5 Mil $5-$20 $20-$100 > $100
2.80
1.65
1.311.45
1.60
1.030.84
0.52
Net Chargeoffs as a % of Average Loans
As of 1st Qtr. 2012Annualized - By CU Size
US Dakotas
Long-Term Assets = RE > 5yrs + Investments > 3yrs + NCUSIF deposit + fixed assets
Asset Quality Trends
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2007 2008 2009 2010 2011 2012
0.64
0.310.18
0.50
0.68
0.83
0.850.80
0.530.48
0.75
0.91
Net Income as a % of Average Assets
US Dakotas
<$5 Mil $5-$20 $20-$100 > $100
-0.19
0.170.41
0.900.46
0.610.70
1.03
Net Income as a % of Av-erage Assets
As of 1st Qtr. 2012By CU Size
US Dakotas
Earnings Trends
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2007 2008 2009 2010 2011 2012
87.376.4
61.6 64.176.3 76.1
96.6 94.3
72.777.3
96.690.9
Percent of CUs with Positive Earnings
US Dakotas
<$5 Mil $5-$20 $20-$100 > $100
56.770.1
83.394.9
92.9
82.8
93.8100.0
Percent of CUs with Posi-tive Earnings
As of 1st Qtr. 2012By CU Size
US Dakotas
Earnings Trends
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2007 2008 2009 2010 2011 2012
11.410.9
9.9 10.1 10.2 10.0
11.311.1
10.1 10.09.8 9.7
Net Worth as a % of Assets
US Dakotas
<$5 Mil $5-$20 $20-$100 > $100
15.613.1
11.09.8
16.3
10.29.5 9.6
Net Worth as a % of AssetsAs of 1st Qtr. 2012
By CU Size
US Dakotas
Solvency Trends
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2007 2008 2009 2010 2011 2012
98.6 98.0 94.7 95.0 95.2 94.3
97.7
98.9
93.2
90.9
92.0
90.9
Percent of CUs with Net Worth as a % of Assets > 7%
US Dakotas
<$5 Mil $5-$20 $20-$100 > $100
95.1
93.393.9
95.4
85.7
89.7
93.8
92.3
Percent of CUs with Net Worth as a % of Assets >
7%As of 1st Qtr. 2012
By CU Size
US Dakotas
Solvency Trends
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Credit Union OutlookMore deleveraging: Loans2012 = 4% 2013 = 6%More saving (and some transfers)2012 = 5% 2013 = 5%Modestly lower delinquency:2012 = 1.35% 2013 = 1.00%Net chargeoffs drifting down:2012 = 0.81% 2013 = 0.65%Bottom-line (ROA) improvements:2012 = 0.90% 2013 = 0.90%