Small Credit Union Workshop February 9, 2012 APCO Employees CU Birmingham, AL
Introduction and Overview
• • • •
Greetings Staff Introductions Agenda for the Day Housekeeping
Cooperative Initiatives Department • Laura Vann – VP, Cooperative Initiatives – laura.vann@lscu.coop or 205-437-2181
• Amber Tynan, Executive Director, Southeastern CU Foundation – amber.tynan@lscu.coop or 850-558-1154
• Adena Whitman, Director, Member Relations – adena.whitman@lscu.coop or 205-887-1446
• David LeNoir, Member Relations Specialist – david.lenoir@lscu.coop – or 251-656-6408
• April Ales, Member Relations Specialist – april.ales@lscu.coop – or 850-558-1038
• Judy Scott, Member Relations Specialist – judy.scott@lscu.coop or 850-212-2584
Agenda - Birmingham 8:30 9:15
Introduction and State of Credit Unions 2012 Compliance Overview Scott Morris, LSCU Director of Compliance 10:30 Break 10:45 Limit Your Losses…for Your Credit Union and for Your Members Jim Warren, CEO, Tyndall FCU and Bill Spearman, CUNext 12:15 Lunch with Lee Taylor, Young & Free Alabama – Listerhill CU 1:15 Lending Panel Lending Panel, featuring Mike Ivey, Tuscaloosa CU, Stacie Reeves, Shoreline CU and Marquetta Cantrell, Rocket City FCU 2:45 Break 3:00 Exam and Supervision Update - Lisa Bills-Terrell, Economic Development Specialist, NCUA Office of Small CU Initiatives
ECONOMIC AND CREDIT UNION FORECAST
The Economy – One Wild Ride!
Economic Outlook • In January, 2012, amid positive economic indicators, a CBS News/New York Times survey showed that for the first time in nearly a year, more Americans said the economy was improving than said it was getting worse. There was still widespread pessimism over the condition and direction of the economy, but less than there had been in previous months.
Economic Outlook
8
Economic Outlook • In December, employers added 200,000 jobs and the unemployment rate fell to 8.5%, the lowest in nearly three years. • Data was released on February 3rd showing that the economy grew 243,000 new jobs in January. The economy is growing stronger, however there are still too many Americans that need a job. And, until the housing sector stabilizes the economy will continue its erratic growth forward. • The unemployment rate dropped to 8.3%, still too high but at least it is headed in the right direction!
9
Economic Outlook • • • • • •
Home sales and home building are expected to stabilize during 2012 after sliding steeply the past five years during the worst decline since the Great Depression. The recovery will be slow and house prices are still expected to fall but the housing market is starting to stabilize because of low prices and record low interest rates. JPMorgan Chase’s Jamie Dimon, said in early January, 2012 that housing is near its bottom but could stay there a year. Prices on average have fallen about a third since 2006. Housing’s outlook is brightening with signs of a better economy. U.S. existing-home sales rose for the third straight month in December, finishing 2011 with a modest overall increase in sales from the year before, according to the National Association of Realtors.
10
Economic Outlook
11
Economic Outlook •
•
• •
•
Consumer borrowing surged in November by $20.4 billion, the Federal Reserve said on January 9th. That's the largest monthly gain in a decade. The third straight monthly increase in overall borrowing marks a departure from the more thrifty habits practiced during and immediately after the recession, when credit tumbled and the savings rate climbed. Borrowing has increased in six of the past nine months. Europe's debt crisis could slow U.S. growth. A recession in Europe could dampen demand for U.S. exports and weaken financial markets. The Fed's borrowing report covers auto loans, student loans and credit cards. It excludes mortgages, home equity loans and other loans tied to real estate.
12
Economic Outlook
13
Economic Outlook • Delinquent loans-to-loans nationally are now 16 basis points lower than during the fourth quarter of 2010. • Alabama’s credit unions have mirrored and exceed the national drop with a reduction of 24 basis point during the same period. These rates are still too high and must also be judged with net charge-offs, but these reductions are a welcome sign that we’ve turned the corner.
14
Economic Outlook
15
Economic Outlook • The net charge-off rate nationally has declined by 23 basis points since the fourth quarter of 2010. • Alabama’s credit unions have mirrored the national drop and are now 12 basis points lower during the same period. • Alabama’s rate is still too high, but is headed in the right direction after two very tough years.
16
Credit Union Forecast Credit union savings balance growth is expected to remain at 5% for the next two years. Despite rising disposable incomes, savings balance growth will remain below its 5year average of 6.3%. Currently, members are paying off debt rather than saving any additional surplus funds due to the large interest rate differential between loan and deposit interest rates.
Credit Union Forecast CUNA economists project a modest rebound in credit union loan balance growth in 2012 as the economy and consumer confidence slowly recovers. Auto loans, credit card loans and purchase mortgage loans will be strong growth areas.
Credit Union Forecast Credit quality will continue to improve in 2012. Overall loan delinquency and charge-off rates will fall as job growth picks up. Provisions for loan losses will also decline as credit unions shift from building their allowance for loan loss account to maintaining the current level.
Credit Union Forecast Credit union return on assets will recover to 0.75% in 2012. We expect NCUA assessments to come in at 11 basis points of average assets in 2012.
Credit Union Forecast Capital-to-asset ratios have stabilized at 10%. For the first time since the start of the great recession in 2007, capital contributions will outpace asset growth, raising net worth ratios
Credit Union Forecast (December 2011) Actual Results
5Yr Avg
2010
Quarterly Results/Forecasts
2011:1
2011:2
2011:3
2011:4
Annual Forecasts
2011
2012
Growth rates: Savings growth
6.3%
4.5%
3.2%
0.0%
1.0%
0.2%
4%
5%
Loan growth
4.3%
-1.5%
-1.3%
0.9%
0.8%
0.5%
1%
3%
Asset growth
5.9%
3.3%
2.7%
0.3%
1.0%
0.4%
4%
5%
Membership growth
1.3%
0.7%
0.4%
0.2%
0.2%
0.2%
1.0%
1.0%
79.5%
72.2%
69.1%
69.7%
69.5%
69.7%
69.7%
68.4%
Delinquency rate
1.31%
1.75%
1.70%
1.60%
1.60%
1.50%
1.60%
1.35%
Net chargeoff rate*
0.83%
1.14%
1.00%
0.90%
0.90%
0.80%
0.90%
0.70%
0.40%
0.39%
0.73%
0.79%
0.43%
0.85%
0.70%
0.85%
10.7%
10.1%
9.9%
10.1%
10.1%
10.3%
10.3%
10.6%
Liquidity: Loan-to-share ratio** Asset quality:
Earnings: Return on average assets (ROA)** Capital adequacy: Net worth ratio**
Challenges for SAS Credit Unions 1. Regulatory Burden. Three or fewer full-time employees operate over one-quarter of United States credit unions and over one thousand credit unions have one or fewer fulltime employees.
Challenges for SAS Credit Unions 2. Back-Office Redundancies. Survival rests on spending more time interacting with members and less time dealing with back-office tasks such as payroll, data processing, and accounting system management.
Challenges for SAS Credit Unions 3. Succession Planning. Finding qualified directors who will accept the risk of oversight responsibility is becoming difficult.
Challenges for SAS Credit Unions 4. Corporate Credit Union Issues. Small credit unions are concerned about permanent depletion of corporate capital. Without it, they would not be able to bear the burden of costs that are normally associated with corporate stabilization efforts and would be driven out of business
The greatest thing in the world is not so much where we stand as in what direction we are moving. -- Johann Wolfgang Von Goethe
The Secret to Success What are the keys to ensuring the future success of small credit unions? – seek increased credit union collaboration and cooperation in any area we can – innovate and employ new products and services – uncover new efficiencies to drive down our costs
The Secret to Success What are the keys to ensuring the future success of small credit unions? – continue to tell our story and demonstrate our positive impact on members and society. – help lawmakers understand exactly how we support their constituents – remain relevant to our members and demonstrate that relevancy every day
Who We Are The Southeastern CU Foundation is dedicated to serving Alabama and Florida credit unions through its efforts of charity, community, and cooperation. A non-profit organization, the SECUF was formed through the combination of the existing three foundations of the former Alabama and Florida leagues.
What We Do Promote financial education to benefit credit union members, students, and the public at large. – High School Scholarship Program – NEFE Train-the-Trainer Workshops – NCUF Financial Education Campaign – April 4, 2012 Financially Fit Day
Help credit unions implement programs within their communities that fulfill their social responsibility to make financial services affordable and accessible to all members, including those of modest means, or to areas in financial distress. – NCUF Grant Assistance
What We Do Provide professional development grants to assist credit union employees and volunteer leaders with the training to achieve professional excellence. – Scholarships available to many LSCU/CUNA and CUES events.
Assist with raising funds for the CU4Kids program which funds hospital equipment, research, special patient needs and health education for children. – More than $360,000 raised in both Alabama and Florida for the CU4Kids Program supporting our nine (9) CMN Hospitals.
What We Do Offer financial relief to credit unions, their employees, members, and their communities in the wake of disasters such as hurricanes, tornadoes, etc. – In 2011, over $98,400.09 to CU employees, volunteers and members with immediate and long-term needs affected by the April 2011 tornadoes, – Over $12,000 granted in Chapter Project Matches for rebuilding affected areas, – $50,000 donated to the American Red Cross of Central Alabama to help affected communities rebuild their lives, and – Over $285,000 raised to support the relief needs of the disaster in 2011. – Currently working with our credit unions and their employees in the Birmingham area with disaster needs related to January 2012 tornadoes.
New Projects for 2012 – All Children’s Playground The LSCU and SECUF and their credit unions are joining forces with the Republican National Convention to upgrade and revitalize a playground at All Children’s Hospital in St. Petersburg. The project will show the credit union philosophy of “People helping People” in action. Leading up to the 2012 Republican National Convention in August, credit unions will work with the Republican National Convention to convert an existing playground space into a rehabilitative playground featuring specially designed equipment to assist special needs children and those recovering from traumatic injuries through “play therapy.” SECUF has committed to raise $300,000 to support this project.
New Projects for 2012 – College Internship Program SECUF’s College Internship Program is designed to fund an intern up to $3,500 for small asset sized credit unions throughout our chapter areas while encouraging interest in the credit unions movement to groom our future leaders. The program will also feature a social component where selected recipients will designate two (2) hours per week to updating their social networks related to the credit unions difference. This not only equips our small asset sized credit unions with added resources to implement new programs for their members, but also builds awareness of the uniqueness of our CU industry amongst today’s youth. More information coming soon!
For more information about the Southeastern Credit Union Foundation and its projects, please contact: Amber R. Tynan at amber.tynan@lscu.coop or 866.231.0545 x1154.
Small Credit Union Workshop February 9, 2012 APCO Employees CU Birmingham, AL