2013 Governmental Affairs Conference ALSCU presentation on FLORIDA
LSCU Florida GAC App Available for: • iPhone • iPad • Android
WELCOME Patrick La Pine President/CEO, League of Southeastern Credit Unions
Credit Unions in the 113th Congress Ryan Donovan Sr. Vice President of Legislative Affairs Credit Union National Association
State Legislative Outlook Darrick McGhee Director of Legislative Affairs Executive Office of Governor Rick Scott
2012 Florida Lawmaker of the Year Rep. Jason Brodeur (R-Sanford) District 28
2012 PAC Awards PAC Totals for 2012 CUPAC $266,342.70
LSCU Fed PAC $102,843.42 LSCU Political Action Committees
Honor Roll Credit Union
Distinction given to a credit union in which the CEO/president/Manager must become either a Congressional Club member and board members and/or all senior staff must become either an Ambassadors or Capitol Club member.
Achieva Credit Union Campus USA Credit Union Community South Credit Union Envision Credit Union First Commerce Credit Union Floridacentral Credit Union Florida West Coast Credit Union FSU Credit Union Gold Coast FCU
LSCU Political Action Committees
GTE Financial FCU IBM Southeast Employees FCU Members First CU of Florida Miami Postal Service Credit Union State Employees Credit Union Suncoast Schools FCU Tropical Financial Credit Union University Credit Union
Chairman’s Award Presented to the credit union that raised the highest percentage over their state and federal goal based on asset size. Under 50 Million in Assets
1st Place Fed PAC
274% Tallahassee~Leon FCU
LSCU Political Action Committees
1st Place CUPAC
230% Jacksonville Firemen’s CU
Chairman’s Award Presented to the credit union that raised the highest percentage over their state and federal goal based on asset size. 50 to 100 Million in Assets
1st Place Fed PAC
678% Florida West Coast Credit Union
LSCU Political Action Committees
1st Place CUPAC
190% Community South Credit Union
Chairman’s Award Presented to the credit union that raised the highest percentage over their state and federal goal based on asset size. 100 to 500 Million in Assets
1st Place Fed PAC
728% First Commerce Credit Union
LSCU Political Action Committees
1st Place CUPAC
608% First Commerce Credit Union
Chairman’s Award Presented to the credit union that raised the highest percentage over their state and federal goal based on asset size. Over 500 Million in Assets
1st Place Fed PAC
330% Community First Credit Union
LSCU Political Action Committees
1st Place CUPAC
159% Achieva Credit Union
Chapter Leadership Award Presented to the chapter that raised the highest amount above their goal for the PACs.
396% Tallahassee Chapter
LSCU Political Action Committees
President’s Award
Presented to the credit union that raised the most money overall
$52,241.50 Suncoast Schools FCU
LSCU Political Action Committees
Thank you for your support of LSCU PACs in 2012!
Looking forward to an even better 2013!!! LSCU Political Action Committees
Florida’s Financial Outlook The Honorable Jeff Atwater Chief Financial Officer State of Florida
Grassroots Advocacy and Political Action Marian Johnson Vice President, Political Strategy Florida Chamber of Commerce
2012 Election Briefing January 18, 2013 Florida Fertilizer & League of Southeastern Credit Union Agrichemical Association March 19, 2013
Today’s Briefing •Statewide Tracking •Some 2012 Election Facts
•A Look Ahead to 2014 Ballot •Ethics & Elections
www.FloridaChamber.com www.FloridaChamber.com
DIRECTION: RIGHT/WRONG 70 60 50 40 30 20 10 0
Right
Wrong
How do you feel things in Florida are going, are things generally headed in the right direction or have things gotten off on the wrong track?
www.FloridaChamber.com www.FloridaChamber.com
Consumer Confidence vs. R/W
www.FloridaChamber.com www.FloridaChamber.com
What Voters are Saying‌ 30
27
25
14
20 15
12 5
10 5
3
0 Jobs/Ecomony
Education
Health Care
State Spending
www.FloridaChamber.com www.FloridaChamber.com
Immigration
0
www.FloridaChamber.com www.FloridaChamber.com Mar-13
Jan-13
Nov-12
Sep-12
Jul-12
May-12
Mar-12
Jan-12
Nov-11
Sep-11
Jul-11
May-11
Mar-11
Jan-11
Nov-10
Sep-10
Jul-10
May-10
Mar-10
Jan-10
Nov-09
Sep-09
Jul-09
May-09
Mar-09
Jan-09
Nov-08
What Voters are Saying‌
60
50
40
30
20
10 Jobs/Econ Education Prop Ins Prop Taxes Heath Care Bal Budget
Favorability - President 70 60 50 40
53 45
30
Favorable
20
Unfavorable
10
Undecided
0
www.FloridaChamber.com www.FloridaChamber.com
2
Favorability -- Governor Scott 60 50 40
41
30 20 10
Favorable Unfavorable
0
www.FloridaChamber.com www.FloridaChamber.com
Favorability -- Charlie Crist 70 62
60 50
48
40
41
51
37
36 25 20
20 13
51
44 43
30
10
56
55
53
Favorable Unfavorable 54
11
13
25 13
32
32
17
17
45 40
45 39
45 40
50 46 40
50
50
36
35
13
12
34
27 17
15 9
15
15
11
52
12
32 14
0
March 2013
www.FloridaChamber.com www.FloridaChamber.com
50
40
30
20
10
0 Aug-… Nov-… Feb-… May… Aug-… Nov-… Feb-… May… Aug-… Nov-… Feb-… May… Aug-… Nov-… Feb-… May… Aug-… Nov-… Feb-… May… Aug-… Nov-… Feb-… May… Aug-… Nov-… Feb-… May… Aug-… Nov-… Feb-… May… Aug-… Nov-… Feb-… May… Aug-… Nov-… Feb-…
Jeb Bush Favorability
80
70
60 65 64
54 54
41 40 57 52
44
37
55
35
30
63 68
59 62 62
41 35 36 36
28
62
56 53
30
www.FloridaChamber.com www.FloridaChamber.com 60
29
61
40 35
27
57
Favorable
March 2013
58
36
31
25
Obama Job Approval 60 50
40 30 20 10
52:45:3
Approve Disapprove Don't Know
0
March 2013
www.FloridaChamber.com www.FloridaChamber.com
Job Performance – Gov. Scott 60
50
54
47 47 46
40
48 44
35
20 11 7
8
11
47
42 42
43
10
10
47
Approve Disapprove Undecided
30
10
46 43
47 48
11 6
0
March 2013
www.FloridaChamber.com www.FloridaChamber.com
0
www.FloridaChamber.com www.FloridaChamber.com Sep-12 Nov-12 Jan-13 Mar-13
Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12
10
Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11
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Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10
Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09
Sep-07 Nov-07 Jan-08 Mar-08 May-08 Jul-08
Legislature Job Approval
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44:36:20
40
30
20
Approve Disapprove
Contributions 2012 Cycle 110 Senate Candidates: $21,777,648 354 House Candidates: $31,571,620 1,114 Committees & Parties: $230,474,966
(Includes 17M FDP – 51.4M RPOF) Total of above: $283,824,234
www.FloridaChamber.com www.FloridaChamber.com
Florida CUPAC 2011-12 Total Contributions $494,932.84*
Total Expenditures $586,372.04* * Division of Elections Reports
www.FloridaChamber.com www.FloridaChamber.com
Senate & House – 160 Districts •55 elected or re-elected without opposition or elected in primary -- Senate – 10; House – 45 •10 open primaries •Four new candidates elected by simply qualifying • 59 Freshmen Legislators – 44 House; 15 Senate
www.FloridaChamber.com www.FloridaChamber.com
Florida Senate 1990 -- 2014 30 25 23
20 15 10
25
15
15
26
27
28 26 26
23 20 20
17
25
26
21 19 17
14 14
14
13
14 12
Republicans Democrats
5 0
www.FloridaChamber.com www.FloridaChamber.com
Florida House 1990 -- 2014 90 80 70 60 50 40 30 20 10 0
74
72
71 63 57
46
49
77
81
84
79
76
81
76
61 59 48
43
39
36
41
44
44 39
www.FloridaChamber.com www.FloridaChamber.com
Republicans Democrats
Election Facts - House •Republicans picked up three Democratic seat •HD 7 Beshears; •HD 69 Peters and •HD 120 Raschein •Democrats picked up four Republican seats •HD 68 (Brandes Seat) •and defeated Harrison, •Nehr and Dorworth
5 of 7 total and All Democratic pickups
www.FloridaChamber.com www.FloridaChamber.com
Why Grassroots? #29 (Dorworth) 49.9%
McCain +6 50.1%
Scott +10R –42% 146 -- 73,820
D – 34%
#63 (Shawn) 49.5%
McCain -7.4 50.5%
Scott -4.3 728 – 66,342
R – 34% D –41% .60 // $11.50 +
#65 (Nehr) 47.1%
McCain +3 52.9%
Scott +5 4,810 -- 82,206
R -- 41%
D – 32%
#67 (Hooper) 53.1%
McCain -1 46.9%
Scott -3 3,555 – 63,327
R – 36%
D – 37%
#69 (Peters) 52.3%
McCain -4 47.7%
Scott -5 3,587 -- 76,741
R – 37.7% D – 37.4%
www.FloridaChamber.com www.FloridaChamber.com
Why Grassroots?
Access Or Influence www.FloridaChamber.com www.FloridaChamber.com
The 2014 Ballot Governor (Scott) Attorney General (Bondi) Chief Financial Officer (Atwater) Agriculture Commissioner (Putnam) All 27 Congressional 20 State Senate Districts – Even numbered Seats All 120 House Districts Constitutional Amendments (24) Local Candidates & Issues
www.FloridaChamber.com www.FloridaChamber.com
2013-2014 Term Limited No Senators Term Limited 15 House Members Term Limited (10 Reps & 5 Dems) Republicans Marti Coley (HD05) Eddy Gonzalez (HD 111) Doug Holder (HD 74) Ed Hooper (HD 67) Seth McKeel (HD 40)
Bryan Nelson (HD 31) Jimmy Patronis (HD 06) Steve Precourt (HD 44) Rob Schenck (HD 35) Will Weatherford (HD 38)
Democrats Joe Gibbons (HD 100) Betty Reed (HD 61) Elaine Schwartz (HD 99) Perry Thurston (HD 94) Jim Waldman (HD 96)
www.FloridaChamber.com www.FloridaChamber.com
2013-2014 Term Limited Marti Coley (HD05) -- R Jimmy Patronis (HD 06) --R Bryan Nelson (HD 31) -- R Rob Schenck (HD 35) -- R Will Weatherford (HD 38) -- R Seth McKeel (HD 40) -- R Steve Precourt (HD 44) -- R Betty Reed (HD 61) -- D Ed Hooper (HD 67) -- R Doug Holder (HD 74) -- R Perry Thurston (HD 94) -- D Jim Waldman (HD 96) -- D Elaine Schwartz (HD 99) -- D Joe Gibbons (HD 100) -- D Eddy Gonzalez (HD 111) -- R
www.FloridaChamber.com www.FloridaChamber.com
2012 Election Briefing January 18, 2013 Florida Fertilizer & Agrichemical Association mjohnson@flchamber.com
Legislative & Regulatory Update
Federal Legislative Update
Taxation Maintaining the credit union tax exemption is the top legislative priority this year in Washington. While there is not likely to be legislation that would be specifically aimed at the credit union exemption, we must be vigilant in this time of tax reform uncertainty. We are monitoring all of the current Ways & Means work groups and whatever recommendations come from those groups. Most lawmakers during CUNA GAC felt that our tax exemption was not at risk, however, we remain at high alert as the bankers are continuing their grassroots push to end the exemption.
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Member Business Lending HR 688 by Rep. Ed Royce (R-CA) was filed to increase the member business lending cap from 12.25% of a CU’s assets to 27.5% of their assets. If passed, the legislation would conservatively create 150,000 new jobs nationally and provide $14 billion in new business capital in the first year alone. Unlike legislation the banks have pushed, such as a $30 billion payout to community banks for business lending last year, this would cost the American taxpayers nothing. Currently, there are 75 cosponsors on the House bill, including 5 from Florida: Reps. Brown (FL-5), Hastings (FL-20), Miller (FL-1), Posey (FL-8), and Young (FL-13). Like last year, the banks are continuing their push against this legislation utilizing letters and all mediums of advertisement. Their only argument is the same tired one they make time and again. No Senate companion bill has been filed yet, but we expect it to be soon. 46
Examination Process Last Congress, legislation was filed that would give credit unions access to the information used by examiners to make their decisions in an exam. The legislation codified certain examination policy guidelines and establishes an ombudsman at the Federal Financial Institution Examination Council (FFIEC) where credit unions could raise concerns with their exam. Further, it established an appeals process before an independent administration law judge. While no legislation has been filed as of yet, we expect there to be similar legislation to last year’s bill shortly. Once filed, we will be asking for our Congressional members to cosponsor the legislation and begin a push to help improve the examination process for credit unions.
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Supplemental Capital Current law (not regulation) requires credit unions to maintain 7% net worth to be “well capitalized� and that only retained earnings constitute net worth for credit unions. All other depository institutions are permitted to accept some form of alternative capital. HR 719 by Rep. Peter King (R-NY) permits the NCUA to allow credit unions to accept supplemental forms of capital, under the following conditions; it must not alter the cooperative ownership structure of the credit union; supplemental capital must be uninsured and subordinated to other claims against the credit union; and it authorizes the NCUA to set maturity limits and to restrict supplemental capital to credit unions that are sufficiently capitalized and well managed. Currently, there are 2 Florida cosponsors of the 19 on the bill. They are Reps. Posey (FL-8) and Miller (FL-1). There is currently no Senate companion.
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Privacy Notices HR 749 by Rep. Blaine Luetkemeyer (R-MO) is legislation filed that would amend the Gramm-Leach-Bliley Act to exempt from its annual privacy notice requirement any financial institution that has not changed its policies and practices with regard to disclosing nonpublic personal information from those disclosed in the most recent disclosure sent to consumers. This would eliminate duplicative privacy notices being sent year after year, saving our credit unions a significant amount of money, while still offering protection to our members. The privacy notices would still be available at branches and online. This bill was passed by the House in November of last year, but there was no Senate companion and it died after that. The bill again passed the House just last week by a voice vote. While there is currently no Senate companion, one is expected shortly. There are 73 cosponsors, 7 of which are from FL, the most from any state.. They are Reps. Bilirakis (FL-12), Hastings (FL-20), Miller (FL-1), Nugent (FL-11), Ross (FL-15), Wasserman Schultz (FL-23) and Wilson (FL-24). 49
Cybersecurity & Data Breach Credit unions are strictly regulated with regard to data security and notification of data breaches to affected members. According to the Gramm-Leach-Bliley Act (GLBA), credit unions are subject to regulations, rules and letters issued by the National Credit Union Administration (NCUA), Federal Financial Institutions Examination Council (FFIEC) and Department of the Treasury regarding the safe keeping of data and breach notification. When merchant data breaches occur, credit unions and other financial institutions bear the cost of the breach by covering the cost of the fraud, blocking transactions, reissuing cards, and monitoring consumer accounts. They also bear the reputational costs associated with data breaches because they are not able to disclose the source of the breach. Merchants are not required to reimburse financial institutions for the cost of breaches that occur at their businesses, and credit unions are not permitted to disclose the source of a data breach. As a result, credit unions bear both actual costs and reputational costs when merchant data breaches affect their members. The League continues to monitor any legislation that pertains to cybersecurity for its implications to credit unions. 50
Cybersecurity & Data Breach Also, President Obama signed a Cybersecurity Executive Order on February 20, 2013. The primary goals of the Executive Order are to (a) improve communication between private companies and the federal government about emerging cyber threats and (b) safeguard the nation's critical infrastructure against cyber attacks by developing and implementing baseline cybersecurity standards. Critical infrastructure refers to those systems and assets, both physical and virtual, so vital to our nation that any cyber attacks upon them would have a debilitating impact on national security, economic security, and/or public health or safety. The Executive Order relies heavily on a voluntary program that encourages private companies operating critical infrastructure to adopt baseline cybersecurity standards, which the federal government will develop with industry assistance.
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2013 Florida Issues Agenda
Legislative Tracking • In Florida, we utilize an online service known as LobbyTools to track legislation. LobbyTools is your one stop shop of all the happenings in and around the legislative process. • You can tag bills by number, subject, keyword and statute. • Every evening you get an email telling you actions on all the bills you have tagged. • LobbyTools also sends out daily calendars, daily news, and other alerts as necessary.
Legislative Tracking •
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You can set up folders on different topics or have general tracking folders. Each folder can have its own alerts.
You can input meetings directly into your calendar from LobbyTools.
Legislative Tracking •
Each committee has its own page, as does each lawmaker.
•
The Current, LobbyTools news source, tracks news related to lawmakers, committees, as well as bills, and puts them in one place.
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You can also export information to make labels, send emails, etc.
Legislative Tracking • LobbyTools is an extremely effective tool for keeping up with legislative activity, particularly during the legislative session when things change from minute to minute. • LobbyTools allows our staff to quickly act on legislative, amendments, and other activities that require immediate attention. • While access to the full functions are limited, we can offer free subscriptions to The Current, LobbyTools daily political news briefing. Let us know and we will send you an invite.
Public Deposits For the past three legislative sessions, a bill has been filed in both the House and the Senate which would grant credit unions the ability to accept public deposits. In 2011, the legislation passed its first committee stop by a very close vote. In 2012, the legislation failed in its first committee stop by one vote. This year, the bill was positioned better than previous sessions because our biggest roadblock, the Senate banking chairman, was no longer the biggest impediment. However, the amount of legislators who sit on bank boards and receive compensation is still an issue. When the bill was brought up for a hearing in the House last Wednesday with over fifty bankers in attendance, the sponsor, Rep. Bill Hager (R-Boca Raton) asked for the bill to be temporarily postponed. The Senate bill, SB 918 by Sen. Rene Garcia (RHialeah) was then put on the Senate Banking & Insurance committee agenda last Thursday and temporarily postponed. The bill is still in play and the Senate bill very well may be placed on the agenda in the Banking & Insurance agenda this Wednesday.
Taxation While the threat of legislation being filed on the issue of credit union taxation is unlikely, there has been a threat to the taxation each time the bill for public deposits has been filed. However, with the public deposits bill temporarily postponed in both bodies, an amendment to tax credit unions for the “privilege” of becoming a QPD and accepting taxpayer dollars has not yet been filed. However, the LSCU team will remain diligent and continue to closely monitor any legislation that could potentially threaten the credit union’s tax exemption.
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Foreclosure Issues Legislation has been filed that attempts to expedite the foreclosure process in both chambers. The Senate bill, SB 1666 by Sen. Jack Latvala (R-St. Petersburg) allows for a retired judge or justice to be temporarily reemployed as assigned by the Chief Justice of the FL Supreme Court, to help with the backlog of foreclosure cases, while this language is not in the House bill, HB 87 by Rep. Kathleen Passidomo (R-Naples). While this would not be as big a step as nonjudicial foreclosure would, it would certainly be helpful in clearing up some of the foreclosure backlog and is a step in the right direction. Our largest concern with the two bills is that they both include a provision to change the statute of limitations to obtain a deficiency judgment from five years to one year. While the House sponsor is willing to compromise on two years, the Senate sponsor has been fairly adamant about keeping it one year. We will continue to work with the Senate sponsor to help him see the draconian nature of going from 5 to 1 year, and remain hopeful that he will compromise. There are also several other bills that have been filed and while they are not expected to go anywhere, we will closely monitor any and all legislation relating to foreclosures. 59
Data Breach Current Florida law does not provide a remedy to card issuers should a merchant fail to properly maintain access devices to personal information. It should be the responsibility of a retailer to ensure their access devices and systems are maintained with proper security provisions, as well as all security protocols are followed. Changes to interchange could remove one argument from opponents, but private rights of action as the enforcement could remain an issue for Republicans who view it as a new avenue of lawsuits for plaintiff’s attorneys. While there is not yet legislation filed this session, the LSCU team continues to educate lawmakers about the issue and will advocate for legislation that protects card issuers and financial institutions from data breaches caused by the failure of a retailer to maintain security protocols to access devices.
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Regulatory Update
LSCU Regulatory
Examination Survey
Earlier this year, CUNA and leagues nationwide conducted surveys to identify credit union experiences during their recent examinations. The results indicate that credit unions are generally pleased with the process. However, details in the surveys show there is ample room for improvement. Positive survey responses indicate that: • 60% of CEOs are satisfied with exam results while 25% remain dissatisfied. • A majority of CEOs said the exam was helpful to their credit union. • Examiners were viewed as being well informed about safety and soundness issues and most consumer regulations. • NCUA Regional and State Supervisory Offices were considered more responsive to credit union issues. 62
LSCU Regulatory
Examination Survey
While the survey results were largely positive, improvements are needed in the examination process. In the view of respondents the process must be improved because: • A 25% dissatisfaction rating among credit unions is considered high. • Combined NCUA/State Agency examinations resulted in lower ratings than individual NCUA or State exams. • A number of CEOs view the number of DoRs issued as excessive. • An overwhelming number of CEOs report that examination requirements are taxing the limits of credit union regulatory resources. • CEOs are unhappy with the misuse of “best practices” by examiners. 63
LSCU Regulatory
Examination Survey
4,804 member credit unions were invited to participate with 32% of the population or 1,531 credit unions responding to survey requests. Details of the survey include: • CHARTER TYPE. The credit union mix by charter type was about even with 48% having state charters and 52% federal credit union charters. • ASSETS. Credit unions of all sizes completed the survey, however, only 43% of responding credit unions have assets less than $25 million. • FIELD OF MEMBERSHIP. 46% of responding credit unions were more likely to have a community FOM and 27% were less likely to serve single common bonds, and 27% were also not likely to serve multiple common bonds. 64
LSCU Regulatory
Examination Survey
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LSCU Regulatory
NCUA Priorities 2013
NCUA MBL & TDR Guidance – Based on a June 11, 2013 effective date that removes references to credit ratings from its regulations (required by the Dodd-Frank Act), NCUA announced plans to issue further guidance (“enhancing clarity”) on MBLs, TDRs and how to assess investments. As of now the NCUA: • Issued a Feb. “Supervisory Letter to CUs” on MBL waivers (13-CU-02). • Is finalizing further CU information on TDRs with a release this spring. • Is aiming for “a May release” of further guidance on what the credit ratings regulation means and what NCUA examiners will be looking for during future examinations. 66
LSCU Regulatory
NCUA Priorities 2013
Loan participations (and CUSOs) – Proposed in 2011, NCUA has put together a working group industry professionals with expertise to develop a regulation that addresses the agency’s participation concerns without doing damage to the market. Concentration levels are a concern to the agency but the original limits proposed won’t be in the final regulation. We know: • A rewritten regulation revising the current loan participation rules is expected later in 2013. • NCUA is revisiting changes to the CUSO regulation (also proposed in 2011) but CUSO regulatory amendments are not high on the NCUA priority list at this time. 67
LSCU Regulatory
NCUA Priorities 2013
NCUA Issues Letter to CUs Providing 2013 Exam Goals – Seeking to provide increased clarity to its examiners and more consistency in examination practices with credit unions, NCUA is making supervisory performance a key goal in 2013. NCUA Chairman Debbie Matz in a January letter to credit unions (13-CU-01) called for improving the capacity of NCUA and credit unions to manage: • Operational Risk (Technology and Internal Controls) • Balance Sheet Risk (Interest Rate, Liquidity, and Concentration Risk) • Risk in Less Established Products (Private Student Loans)
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LSCU Regulatory
CFPB 2013
CFPB Announces Implementation Plan for New Mortgage Rules The CFPB announced a plan it will implement over the next year focusing on the mortgage industry’s compliance with new consumer protections that go into effect in January 2014. These rules include:
• Ability to Repay Rule – Effective: January 10th • Mortgage Servicing Rules – Effective: January 10th • Disclosure & Delivery of Appraisals – Effective: January 18th
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LSCU Regulatory
CFPB 2013
Kansas Senator Re-introduces CFPB Leadership Plan Sen. Jerry Moran (R-Kansas) has re-introduced a bill (S. 205) that would replace the director's position at the Consumer Financial Protection Bureau with a five-member panel. LSCU supports the move from a single director arrangement to a multi-member panel. The League further believes the panel should include seats dedicated to credit union industry representatives, state or federal credit union regulatory agencies, and a state consumer financial agency representative. 70
LSCU Regulatory
FinCen 2013
The Financial Crimes Enforcement Network's (FinCEN's) new Currency Transaction Report (CTR) and Suspicious Activity Report (SAR) have been accepted through the E-Filing system since March, 2012. The BSA E-Filing System will continue to accept submissions of “legacy” or older forms until March 31st. • Credit unions may continue to electronically file either the “legacy” or new forms, or any combination thereof until April 1st. • Note: On April 1, 2013, all credit unions MUST begin using the new FinCEN forms for reporting purposes. 71
Custom Performance Reports • Each quarter, I email a CPR about your credit union to your CEO • CPRs are an excellent tool that can be used to understand how your credit union stacks up to other credit unions in your asset peer group in Florida, Region III, and nationally. The NCUA’s Financial Performance Reports only compares you to your asset peers nationally. And, I’m sure you know that a few states never saw a decline in real estate prices. In fact, North Dakota has continued to set highs for real estate prices. • Being a native born son of the Flickertail state, I can say that real estate prices are the good news. The bad news….you have to live in North Dakota. 72
Custom Performance Reports Key Questions To Ask About Shares 1. Are there any significant differences between your credit union's share composition and that of the peer groups? What is it? Why? 2. If there are any significant differences in dividend rates vs. the rates charged by the average credit union in the peer group, explain why this might be be the situation. 3. Does the change in your Cost of Funds correspond to the change in the Peer Groups'? 4. How has the change in your share portfolio effected your cost of funds? And some very useful graphs such as:
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NCUA Assessments and Insurance Premiums • Of course, your CPAs and examiners will tell you that you can’t accrue for something until you know exactly how much it is going to be. GAAP rules. That seems like a gap in common sense. • So I suggest that you set up an accrual for painting the building. The amount should be strikingly close to what nine bp of your projected insured shares in June. I suggest that you accrue 1/9th of this amount per month. When September rolls around you decide the building actually doesn’t need painting and we have accrued enough money to pay nine bp for the corporate assessments.
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Interest Rate Expectations • The Fed says it doesn’t expect to touch shortterm rates until it sees the unemployment rate fall to 6.5% or lower, as long as inflation forecasts remain near its 2% target.
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Share Guarantee Expired •
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NCUA Letter 12-CU-03 reminded credit unions that the higher corporate insurance limits (over $250,000) would expire at the end of the year. This was done to reduce uncertainty about the safety of deposits in corporate credit unions when liquidity and credit concerns had impacted the credit markets. Your credit union should evaluate current corporate holdings and make adjustments (perform appropriate due dilligence) necessary to meet your risk tolerance. NCUA Letter 12-CU-14 referenced the above letter and also makes mention that the Dodd-Frank unlimited insurance on all noninterest-bearing transactions accounts would also cease on 12.31.2012. This can affect some of your members and their accounts with your credit union.
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Liquidity • NCUA Letter 12-CU-10 alerted credit unions to have plans in place for liquidity with the impending closing of US Central Bridge. The Central Liquidity Facility’s (CLF) role as an emergency liquidity provider was going to change. If you wanted to use the CLF, you would need to directly join. • Also, on July 24, 2012, the NCUA issued a proposed rule on “Maintaining Access to Emergency Liquidity”
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Economic Outlook Since consumer spending accounts for about 70 percent of the nation’s gross domestic product (GDP), the recovery will continue to sputter along. Household spending remains constrained and faces strong headwinds that include a weak labor market, modest income growth, lower housing wealth, and tight credit. 82
Economic Outlook There were several worldwide and domestic economic events that have harmed economic growth. 1.) In 2010 we had the Deepwater Horizon Disaster. In 2011, the earthquake and Tsunami in Japan created disruptions to the supplies of many items used throughout the world economy. In 2012 we had severe droughts in the central U.S. and then Super Storm Sandy hit the Northeast with a nasty Halloween surprise! 2.) The Arab Spring created upheavals in the oil markets. Gasoline, which was selling for a little over $3 a gallon at the end of 2010, had risen to more than $4 a gallon by May. The more it costs consumers to fill up their gas tanks, the less they have to spend on consumer items. And, it is still continuing!
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Economic Outlook 3.) Although housing prices have stabilized, a trillion in housing wealth has evaporated making consumers nervous and not allowing them to use their house as an ATM. 4.) The European debt crisis! Various countries Portugal, Ireland, Italy, Greece, and Spain (PIIGS) are scaling back promises they have made to their citizens. Even though, the Eurozone has entered a recession for the second time in three years, it doesn’t seem likely that Europe will have a melt down.
84
Economic Outlook • The big worry last year was that Greece would collapse under its debts, upend Europe’s markets and set off a global financial crisis. • Greece’s government bonds soared 97% as the debt crisis eased. • However, Europe’s economy remains in a slump. The 17 countries that share the euro currency recently slid into their second recession in three years. • Unemployment rate has reached a new high of 11.8%. 85
Economic Outlook • Milton Friedman taught us that “Inflation is always and everywhere a monetary phenomenon in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.” • However, in todays economy, it would be difficult to spark and sustain inflation with so many unemployed and underemployed workers, empty stores and offices and underused factories.
86
Economic Outlook • The Fed’s beige book report on the economy says a large number of cyclical industries are either gaining momentum or at least in the case of auto business holding on to most of the acceleration they had built earlier in 2012. • Housing is strengthening. Construction is picking up in 11 or the 12 Fed districts. • Tourism is strong. • Haven’t seen impacts from the payroll tax increases for all or increases in tax rates for Americans making more than $450,000.
87
Gross Domestic Product 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% -8.0% -10.0%
88
15,500 14,500
Dow Jones Industrial Average
13,500 12,500 11,500 10,500 9,500 8,500 7,500
89
Consumer Borrowing (Billions of dollars; Seasonally adjusted) $2,900 $2,800 $2,700 $2,600 $2,500 $2,400 $2,300 $2,200
90
Economic Outlook • Over the past 12 months, average hourly earnings have risen 2.1%. • Consumer prices have risen 1.7%.
91
Economic Outlook • The unemployment rate is 7.7%, still too high, but at least it is headed in the right direction! One very encouraging number is the average workweek in February increased to 34.5 hours. This metric was 34.7 when the economy peaked in 2006! As that number gets higher, employers increase their hiring! • Our largest trading partner the Eurozone’s unemployment rate is 10.5% - ouch! Spain’s unemployment rate is the highest in 18 years at 24.4% and Standard and Poor’s downgraded their credit rating two more notches after a two notch drop earlier in 2012. • The labor department revised estimates upward for all of 2012 by 335,000. 92
Economic Outlook • This means that the economy added about 180,000 jobs a month last year vs. the 151,000 originally estimated! • It typically requires job gains of at least 150,000 to bring down the unemployment rate though that rate is falling as more Baby Boomers retire, reducing the number of people looking for work. 10,000 baby boomers are retiring each day! • 236,000 private sector jobs were created in February.
93
600 500 400 300 200 100 0 -100 -200 -300 -400 -500 -600 -700 -800 -900
Jobs Creation/Losses
94
Unemployment Rate USA
Florida
13.0% 12.0% 11.0% 10.0% 9.0% 8.0% 7.0% 6.0% 5.0% 4.0% 3.0%
95
96
The Office of Federal Housing Enterprise Oversight (OFHEO) estimates and publishes quarterly house price indexes for single-family, detached properties using data on conventional conforming mortgage transactions obtained from the Federal Home Loan Mortgage Corporation (Freddie Mac) and the Federal National Mortgage Association (Fannie Mae). 97
Quarterly house price indexes (HPI) are reported for the nation, the nine U.S. Census divisions, the 50 states, and the District of Columbia. The HPI for each geographic area is estimated using repeated observations of housing values for individual single-family residential properties on which at least two mortgages were originated and subsequently purchased by either Freddie Mac or Fannie Mae since 1975. 98
The use of repeat transactions on the same physical property units helps to control differences in the quality of the houses comprising the sample used for statistical estimation. For this reason, the HPI is described as a “constant quality� house price index.
99
Real Estate Prices
USA
Florida
California
Arizona
40% 30% 20% 10% 0% -10% -20% -30%
100
The following seven graphs have been developed by downloading and analyzing current and historical Call Report Data from the NCUA.
101
Delinquent Loans to Loans USA
Florida
3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00%
102
Net Charge-Offs USA
Florida
2.50% 2.00% 1.50% 1.00% 0.50% 0.00%
103
USA
ROAA
Florida
1.00% 0.50% 0.00% -0.50% -1.00% -1.50% -2.00%
104
Auto Loan Growth USA
Florida
5.00% 4.00% 3.00% 2.00% 1.00% 0.00% -1.00% -2.00% -3.00% -4.00% -5.00%
105
Real Estate Loan Growth USA
Florida
4.00% 3.00% 2.00% 1.00% 0.00% -1.00% -2.00%
106
Membership Growth USA
Florida
1.50% 1.00% 0.50% 0.00% -0.50% -1.00% -1.50%
107
Savings Growth USA
Florida
8.00% 6.00% 4.00% 2.00% 0.00% -2.00%
-4.00% -6.00%
108