90
Banking Trends of the South Central States Zimri Hunt, May 2016
Banking Trends of the South Central States
Zimri Hunt, May 2016
Disclaimer
1
Certain information included in this presentation speaks only as of a particular date or dates included in this presentation. The information in the presentation may have become out of date. The Federal Home Loan Bank of Dallas does not undertake an obligation, and disclaims any duty, to update any of the information in this presentation. The risks, uncertainties, and factors that could affect the Federal Home Loan Bank of Dallas and its financial results are discussed more fully in the Federal Home Loan Bank of Dallas’ reports filed with the Securities and Exchange Commission, which are available on www.fhlb.com
The data, scenarios and valuations provided to you in this presentation are for informational purposes only and are provided as an accommodation and without charge and are not intended for further distribution. The data, scenarios and valuations are estimates only and may not represent the actual or indicative terms at which new (or economically equivalent) transactions could be entered into or the actual or indicative terms at which existing (or economically equivalent) transactions could be prepaid, terminated, liquidated, assigned or unwound. The scenarios and valuations were derived using proprietary pricing models and estimates and assumptions about relevant future market conditions and other matters, all of which are subject to change without notice. The scenarios and valuations were prepared without specific information about your institution’s balance sheet composition, hedging strategies or financial assumptions and plans, any of which may affect the relevance of these valuations to your own analysis.
The Federal Home Loan Bank of Dallas makes no representations or warranties about the accuracy or suitability of any information in this presentation. This presentation is not intended to constitute legal, accounting, investment or financial advice or the rendering of legal, accounting, consulting, or other professional services of any kind. You should consult with your accountants, counsel, financial representatives, consultants and/or other advisors regarding the extent these scenarios and valuations may be useful to you and with respect to any legal, tax, business and/or financial matters or questions.
Agenda
I. Introduction
II. Selected Market Factors Impacting Banks
III. Banking Trends
IV. FHLB Products
2
Introduction to the FHLBank System
FHLBank System Overview
4
LA
FHLBank System
5
FHLBanksOffice ofFinance
AdvancesMembers
Investors / Dealers
DebtSecurities
FHLBank System
Collateral
Proceeds
Procures Funding
• Office of Finance issues FHLB debt to global investors
• AAA-rated debt securities
• Eleven FHLBanks are jointly and severally liable for consolidated obligations
FHLB System
• Eleven FHLBanks
• Cooperatives owned by members
• Government-sponsored enterprises (GSEs) organized under an act of Congress (Federal Home Loan Bank Act of 1932)
• Regulated by the Federal Housing Finance Authority
Serves members & communities
• Stable source of funding to support residential mortgage lending & related community investment
• Services that enhance liquidity, assist in asset/liability management, and enable more effective interest rate risk management
• Grants and favorably priced advance programs targeted specifically to the needs of low- to moderate-income communities
Source of Graphics: Nounproject.com
Own FHLB Capital Stock
The Bank’s primary goal is to provide credit and other services to help members fund housing, promote small business and small agri-business growth, and support economic and community development loans in their communities.
Selected Market Factors Impacting Banking
• Gross Domestic Product (GDP)• U.S. Housing Market• Employment• Commodities
Gross Domestic Product (GDP)
• Size of the Economy
• Total dollar value of all goods and services produced over a specific time period
• GDP for US = $17.2 trillion for 2014*
7* Source: US Bureau of Economic Analysis (BEA)
What was Louisiana’s Gross Domestic Product (GDP) and which country’s GDP was closest to Louisiana’s?
1) Ireland
2) New Zealand
3) Costa Rica
4) Bulgaria
8Source: US Bureau of Economic Analysis (BEA), CIA The World Factbook, Worldbank
GDP?
What country’s Gross Domestic Product (GDP) is closest to Louisiana’s GDP for 2014?
1) Ireland ~$250 Billion
2) New Zealand ~$186 Billion
3) Costa Rica ~$74 Billion
4) Bulgaria ~$132 Billion
9Source: US Bureau of Economic Analysis (BEA), CIA The World Factbook, Worldbank, U.S. Census, Central Statistics Office Ireland (www.cso.ie)
Ireland
Entity Population GDP
Republic of Ireland ~4.61 million ~$250 Billion
Louisiana ~4.65 million ~$252 Billion
Louisiana Gross Domestic Product
10
53%37%
10%
$251.7 Billion2014 GDP
ServicesGoods
Source: US Bureau of Economic Analysis
• Louisiana GDP ranked 23rd in U.S.
• From 2010 to 2014:
– 2% Compounded Annual Growth Rate (CAGR)
– Growth in primarily financial, insurance, and real estate related services (+3.0%), and primarily construction goods (+0.8%)
– Decline in mining (-1.5%), manufacturing (-1.2%), and government (-1.1%)
1.1%
3.0%1.9%
5 Yr Chg
5 Yr Chg
5 Yr Chg
Government
11
U.S. Housing Market Trends
U.S. Housing Market Supply
Past year: 4½ - 6 months of supply
12Source: US Bureau of Census, Federal Reserve Bank of St. Louis
6.1 Months Avg
7.8 Months
4.4 Months
Housing Prices: Initial Peak to 4Q15
13
# State
Peak to
4Q15 # State
Peak to
4Q15
1 DC 40.7% 1 NV -27.7%
2 ND 36.2% 2 FL -20.9%
3 CO 32.4% 3 AZ -18.5%
4 TX 29.2% 4 CA -18.0%
5 SD 17.0% 5 RI -16.7%
6 OK 15.8% 6 CT -16.0%
7 NE 13.6% 7 MD -15.2%
8 WV 12.5% 8 NJ -14.3%
9 LA 11.0% 9 DE -13.4%
10 IA 10.5% 10 IL -12.9%
Top Ten Increase Top Ten Decrease
# State
Peak to
4Q15
1 NV -27.7%
2 FL -20.9%
3 AZ -18.5%
4 CA -18.0%
5 RI -16.7%
6 CT -16.0%
7 MD -15.2%
8 NJ -14.3%
9 DE -13.4%
10 IL -12.9%
Top Ten Decrease
Initial Peak
Trough
Current
Increase
Decrease
Time
Ho
usi
ng
Pri
ce In
dex
2007* 2011* 2015
*For Approximately 70%
Source: Federal Housing Finance Agency
(100)
(94)
(111)Louisiana Index
Housing Price Indices, Louisiana Metros Initial Peak to 4Q15
14
Baton Rouge: 5.4%Alexandria 7.7%
Houma-Thibodaux: 6.5%New Orleans-Metairie: 2.8%
Hammond: 6.3%
Monroe: 10.4%
Lafayette: 8.9%
Shreveport-Bossier City: 6.1%
Lake Charles: 16.9%
Source: Federal Housing Finance Agency, All Transactions, Metro
Increased 2014 Renter Household Formation in Metro Areas
15
Bossier: 681
Rapides:
478
Calcasieu:
956
Lafayette:
1,291
East Baton Rouge:
2,308
Ascension:
744
Terrebonne:
954
Lafourche:
519
Orleans:
1,602
Tangipahoa:
409
Source: US Census. Renter household formation calculated as renter units occupied paying rent minus renter units occupied paying rent from prior period.
Louisiana Population Age Composition
16
28.0%
20.9%
27.7%
18.0%
5.4%
27.0%
21.7%
26.1%
19.7%
5.5%
<19
Years Old
20-34
Years Old
35-54
Years Old
55-74
Years Old
>75
Years Old
2010 2014Source: US Census/American FactFinder. Data shown for the state of Louisiana.
Millennials Boomers
30-Year vs. 15-Year Mortgage Rates
17
0
20
40
60
80
100
120
0
1
2
3
4
5
6
7
8
9
Rate
Sp
read
(bp
s)M
ort
gag
e R
ate
(%
)
30-Year
(left)
15-Year
(left)
30-15 Year Rate Spread
(bps, right)
Source: Federal Reserve Bank of St. Louis
Effective Fed Funds Rate
18
0
5
10
15
20
25
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014
2016
Rate
(%
)
Source: Federal Reserve Bank of St. Louis, FOMC
March 2016 FOMC Dot Plot and Projection Inflation
19Source: March 2016 FOMC SEP
Employment
0
2
4
6
8
10
12
Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep Mar Sep
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Louisiana US
Unemployment Rate
21Source: BLS. Seasonally-adjusted. http://www.laworks.net/Downloads/LMI/WorkforceInfoReview_2015.pdf
Hurricane
Katrina
Global
Financial Crisis
U.S.
2%
8%
6%
Louisiana
Comparison: Peak State Unemployment in 4Q 2010 v 4Q 2015
22
December 2010 December 2015
2.1%
Dec-10 Dec-15 Chg
Louisiana 7.9 5.8 -2.1
Arkansas 8.2 4.7 -3.5
Mississippi 10.3 6.8 -3.5
New Mexico 7.3 6.6 -0.7
Texas 7.8 4.6 -3.2
US 9.3 5.0 -4.3Source: BLS. Table numbers seasonally adjusted.
State Unemployment Rates
23
December 2015
Source: BLS. Seasonally-adjusted.
U.S. = 5.0%
LA
Unemployment Rates
24
December 2015
1.1%
Dec-15
Compared
with US
Louisiana 5.8 0.8
Arkansas 4.7 -0.3
Mississippi 6.8 1.8
New Mexico 6.6 1.6
Texas 4.6 -0.4
US 5.0 -
0.8%
Dec-15
Compared
with US
Louisiana 5.8 0.8
Arkansas 4.7 -0.3
Mississippi 6.8 1.8
New Mexico 6.6 1.6
Texas 4.6 -0.4
US 5.0 -
Source: BLS. Table numbers seasonally adjusted.
. .
U.S. = 5.0%
Unemployment Rates
25
December 2015
1.1%
Dec-15
Compared
with US
Louisiana 5.8 0.8
Arkansas 4.7 -0.3
Mississippi 6.8 1.8
New Mexico 6.6 1.6
Texas 4.6 -0.4
US 5.0 -
0.8%
0.4%
0.3%
1.8%
TX
AR
MS
U.S. = 5.0%
Source: BLS. Table numbers seasonally adjusted.
..
Dec-15
Compared
with US
Louisiana 5.8 0.8
Arkansas 4.7 -0.3
Mississippi 6.8 1.8
New Mexico 6.6 1.6
Texas 4.6 -0.4
US 5.0 -
State Unemployment Rates
26
12-Month Change,
December 2015
Source: BLS. Seasonally-adjusted.
LA
State Unemployment Rates by County
27
12-Month Change,
December 2015
Dec-14 Dec-15 Chg
Louisiana 6.9 5.8 -1.1
Arkansas 5.6 4.7 -0.9
Mississippi 6.8 6.8 0.0
New Mexico 6.4 6.6 0.2
Texas 4.5 4.6 0.1
US 5.6 5.0 -0.6
Dec-14 Dec-15 Chg
Louisiana 6.9 5.8 -1.1
Arkansas 5.6 4.7 -0.9
Mississippi 6.8 6.8 0.0
New Mexico 6.4 6.6 0.2
Texas 4.5 4.6 0.1
US 5.6 5.0 -0.6
1.1%
Source: BLS. Table numbers seasonally adjusted.
Employment Change in Natural Resources and Mining
http://beta.bls.gov/maps/cew/US?period=2015-Q3&industry=1011&pos_color=blue&neg_color=orange&Update=Update&chartData=3&ownerType=5&distribution=Quantiles
Source: BLS 28
Oil and Gas Extraction & Employment
29
Significant Shale Plays in Louisiana & Surrounding States
Highest Employment ConcentrationOil & Gas Extraction Industry
Note: Does not include all shale plays such as Tuscaloosa (LA) & Barnett (TX)
Source: BLS, US Census, EIA
State Unemployment Rates by County
30
12-Month Change,
December 2015
Source: BLS. Table numbers seasonally adjusted.
Dec-14 Dec-15 Chg
Louisiana 6.9 5.8 -1.1
Arkansas 5.6 4.7 -0.9
Mississippi 6.8 6.8 0.0
New Mexico 6.4 6.6 0.2
Texas 4.5 4.6 0.1
US 5.6 5.0 -0.6
1.1% 0.9%
0.0%
0.1%TX
AR
MSDec-14 Dec-15 Chg
Louisiana 6.9 5.8 -1.1
Arkansas 5.6 4.7 -0.9
Mississippi 6.8 6.8 0.0
New Mexico 6.4 6.6 0.2
Texas 4.5 4.6 0.1
US 5.6 5.0 -0.6
Commodities
31
Louisiana Oil & Gas Wells
32
Oil WellsGas Wells
Source: U.S. Energy Information Administration (EIA) https://www.eia.gov/state/maps.cfm?src=home-f3
NorthLouisiana
South Louisiana
Louisiana Oil & Gas
33
Selected PetroleumNatural Gas
Source: EIA https://www.eia.gov/state/maps.cfm?src=home-f3
LNG Import/Export Terminals
Louisiana Rig Count
34Source: Baker Hughes
Rig
Co
un
t
Land, North LA
Offshore, South LA
Offshore, South LA
Land, North LA
Inland Water,South LA
Land,South LA
Significant Regional Shale Plays Rig Count
35
Eagle Ford (TX)
Haynesville (LA, AR & TX)
Permian (TX & NM)
0
100
200
300
400
500
600
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Rig
Co
un
t
Source: EIA
Significant Regional Shale Plays Production
36
Eagle Ford
Haynesville
Permian
0
100
200
300
400
500
600
700
800
900
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
bb
l/d
Eagle Ford
Haynesville
Permian
0
1,000
2,000
3,000
4,000
5,000
6,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Mcf
/d
Eagle Ford
Haynesville
Permian
-
500
1,000
1,500
2,000
2,500
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Th
ou
san
d b
arr
els
/day
Eagle Ford
Haynesville
Permian
0
2,000
4,000
6,000
8,000
10,000
12,000
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Mcf
/day
Crude Natural Gas
Pro
du
ctio
n p
er
Rig
Tota
l P
rod
uct
ion
Source: EIA
Natural Gas and West Texas Intermediate (WTI) Prices
37
$-
$4
$8
$12
$16
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
USD
/MM
Btu
Source: Bloomberg
$-
$40
$80
$120
$160
Jan
-07
Oct
-07
Jul-
08
Ap
r-09
Jan
-10
Oct
-10
Jul-
11
Ap
r-12
Jan
-13
Oct
-13
Jul-
14
Ap
r-15
Jan
-16
WTI (price/barrel, left axis)
Natural Gas (NG1) West Texas Intermediate (WTI)
WTI versus U.S. Dollar (2005 – Current)
38
10
40
70
100
130
160
65 75 85 95 105
WTI
(CL1
)
U.S. Dollar (DXY)
What do you think the price of oil will be in one year?
• Less than $30 per Barrel
• $30 - $45 per Barrel
• $45 - $60 per Barrel
• Greater than $60 per Barrel
39
$0
$40
$80
$120
$160
Jan-07 Oct-07 Jul-08 Apr-09 Jan-10 Oct-10 Jul-11 Apr-12 Jan-13 Oct-13 Jul-14 Apr-15 Jan-16
WTI (price/barrel, left axis)
?
Source: Baker Hughes, Bloomberg, EIA
EIA expects WTI prices to remain below $40/barrel until mid-2017 – but the market-implied confidence band is wide
40Source: EIA
Louisiana’s Top Seven Agricultural Commodities
41http://www.ers.usda.gov/data-products/farm-income-and-wealth-statistics/charts-and-maps-about-your-state.aspx
Source: USDA, Top cash receipt by state, 2014
Louisiana’s top seven comprise 84% of total agricultural commodity receipts, and bordering states also specialize in these.
Louisiana Arkansas Mississippi Texas
Soybeans
Broilers
Corn
Rice (8th) (15th)
Cane for Sugar - - -
Cattle & Calves
All other animals and products (15th) (17th) (12th)
Selected Commodity Prices
42Source: Bloomberg
Soybeans
Corn
$0
$300
$600
$900
$1,200
$1,500
$1,800
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16
USD
/bu
Rice
USD (right axis)
60
70
80
90
100
110$0
$5
$10
$15
$20
Jan-12 Jan-13 Jan-14 Jan-15 Jan-16
USD
/cw
t
Stro
nge
r U
SDW
eak
er
USD
Commercial Banking Trends
Commercial Banks Chartered in Louisiana and Adjacent States
44Source: Call report data from SNL
Size LA AR MS TX
$0MM~$1B 102 91 68 395
$1B~$5B 10 7 3 39
$5B~$20B 1 4 3 9
>$20BN 1 3
Grand Total 113 102 75 446
Commercial Banks (count)
Size LA AR MS NM TX
$0MM~$1B 26.6 20.3 21.3 7.9 96.5
$1B~$5B 19.7 12.1 4.9 5.6 73.6
$5B~$20B 19.4 42.5 34.4 79.1
>$20BN 22.7 122.5
Grand Total ($B) 65.7$ 75.0$ 83.3$ 13.4$ 371.7$
Commercial Banks Total Assets (in $B)
Louisiana Commercial Bank Assets Continued to Grow
45MS total assets include Whitney
AR, 9.8%
LA, 11.9%
MS, 4.5%
TX, 8.8%
U.S. Commercial Banks, 5.1%
0%
2%
4%
6%
8%
10%
12%
2006 2008 2010 2012 2014
Compounded Annual Asset Growth Rate
CAGR – compounded annual growth rate for bank assets using 2005 as the base year for calculation.Source: Call report data from SNL
$0
$100
$200
$300
$400
$500
$600
$700
2005 2007 2009 2011 2013 2015
$ B
illio
ns
Total Assets
TX
MS
LA
AR
Commercial Banking Trends: Loans
Commercial Banks Loan Growth
47
$-
$50
$100
$150
$200
$250
$300
$350
$400
2005 2007 2009 2011 2013 2015
$ B
illio
ns
Total Loans and Leases Growth
TX
MS
LA
AR
AR, 9.7%
LA, 13.6%
MS, 4.9%
TX, 8.5%
U.S., 4.6%
0%
2%
4%
6%
8%
10%
12%
14%
16%
2006 2009 2012 2015
Loans and LeasesCompounded Annual Growth Rate
Source: Call report data from SNLCAGR – compounded annual growth rate for bank assets using 2005 as the base year for calculation.
Louisiana Commercial Banks Loans and Leases
48
$-
$10
$20
$30
$40
$50
2005 2007 2009 2011 2013 2015
$ B
illio
ns
Louisiana Commercial Banks Total Loans and Leases CAGR: 13.6%
$-
$5
$10
$15
$20
$0MM~$1B $1B~$5B $5B~$20B
LA
$ B
illio
ns CAGR: 20.0% CAGR: 22.3%
2015 20052005 20152015
CAGR: 7.1%
Source: Call report data from SNL
2005
CAGR – compounded annual growth rate for bank assets using 2005 as the base year for calculation.
CAGR of total loans and leases for all US commercial banks with assets less than $1B was 6%, $1B-$5B was 8.7%, $5B-$20B was 8.4% and for commercial banks with assets greater than $20B was 8.4%.
Louisiana Total Loans and Leases by Asset Size Group
Loan Composition of Louisiana versus U.S. Commercial Banks
49
29.6% 30.3%
24.2% 24.5%
17.0%22.2%
6.9%
9.2%6.4%
3.2%7.9%6.5%
4.7%3.0%3.2% 1.1%
US Commercial BanksAssets < $20B
Louisiana
AgMultifamilyConsumer
Other
Construction
C&I
1-4 Family
CRE
Source: Call report data from SNL
LA, 77%US, 71%
Louisiana Commercial Banks Loan Trends by Type
50
US < $20BN, 8.4%
Louisiana, 16.1%
0%
4%
8%
12%
16%
2006 2008 2010 2012 2014
CA
GR
%
Commercial and Industrial (C&I)
US <$20B, 7.0%
Louisiana, 11.8%
0%
4%
8%
12%
16%
2006 2008 2010 2012 2014
CA
GR
%
1-4 Family Mortgage LoansLouisiana, 14.8%
US < $20B, 10.0%
0%
4%
8%
12%
16%
2006 2008 2010 2012 2014
CA
GR
%
Commercial Real Estate Loans
Source: Call report data from SNL, U.S. Bank metrics are for institutions with less than $20 billion in assets.
$0
$5
$10
$15
$20
$25
$30
$35
$40
2005 2007 2009 2011 2013 2015
$ B
illio
ns
Louisiana Loan Composition
Commercial and Industrial (C&I)
1-4 Family Loans
Commercial Real Estate (CRE)
Commercial Banks Non-Performing Loans (NPL) to Loans Ratio
51Source: Call report data from SNL
Non-Performing Loans (NPL) to Loans ratio Nonaccrual and restructured loans as a percent of total loans and leases.Excludes IBERIABANK
AR, 2.3%
LA, 1.5%
MS, 1.7%
TX, 0.9%
US, 1.7%
0%
1%
2%
3%
4%
2005 2007 2009 2011 2013 2015
NP
L to
Lo
ans
%
$0MM~$1B, 1.5%
$1B~$5B, 1.7%
0%
1%
2%
3%
4%
2005 2007 2009 2011 2013 2015
Louisiana By Asset Size
$0MM~$1B, 1.7%
$1B~$5B, 1.4%
0%
1%
2%
3%
4%
2005 2007 2009 2011 2013 2015
US by Asset Size
NP
L to
Lo
ans
%
NP
L to
Lo
ans
%
Commercial Banking Trends: Deposits
Commercial Banks Total Deposits
53
$-
$100
$200
$300
$400
$500
2005 2007 2009 2011 2013 2015
$ B
illio
ns
Total Deposits
TX
MS
LA
AR
AR, 9.7%
LA, 11.8%
MS, 4.7%
TX, 9.1%
US, 6.5%
0%
2%
4%
6%
8%
10%
12%
14%
2006 2009 2012 2015
DepositsCompounded Annual Growth Rate (CAGR)
Source: Call report data from SNL
CAGR – compounded annual growth rate for bank assets using 2005 as the base year for calculation.
Louisiana Commercial Banks Deposits
$-
$5
$10
$15
$20
$25
$0MM~$1B $1B~$5B $5B~$20B
LA
$ B
illio
ns CAGR: 17.9% CAGR: 22.0%
2005 20152015 20052005 2015
$-
$20
$40
$60
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
$ B
illio
ns
Louisiana Commercial Banks Total Deposits
CAGR: 6.0%
Source: Call report data from SNL
CAGR: 11.8%
CAGR of deposits for all US commercial banks with assets less than $1B was 6.1%, $1B-$5B was 9.3%, $5B-$20B was 10.6% and for commercial banks with assets greater than $20B was 10.1%.
Louisiana Deposits by Asset Size Group
54
Commercial Banks Loan to Deposit
55
AR, 72.9%
LA, 72.5%
MS, 70.4%
TX, 63.8%
US, 75.2%
50%
55%
60%
65%
70%
75%
80%
85%
90%
2005 2007 2009 2011 2013 2015
Loan
to
De
po
sit
Rat
io %
Source: Call report data from SNL
Commercial Banks Net Income
$- $50
$100 $150 $200 $250 $300 $350
$0MM~$1B $1B~$5B $5B~$20B
LA
$ M
illio
ns
CAGR: 19.3%CAGR: 22.1%
2005 2015 2005 2005 2015
CAGR: 7%
* $5B ~ $20B represents income from IBERIABANK; spike was performance from 2009 Source: Call report data from SNL
AR MS NM
CAGR: 10.2%
CAGR: 1.9%
CAGR: 2.5%
05 150515 05 15 $-
$1,000
$2,000
$3,000
$4,000
$5,000
TX
$ M
illio
ns
CAGR: 5.7%
1505 $-
$250
$500
$750
$1,000
LA
$ M
illio
ns
CAGR: 12.3%
20152005
2015
CAGR – compounded annual growth rate for bank assets using 2005 as the base year for calculation.
CAGR of net income for all US commercial banks with assets less than $1B was 4.2%, $1B-$5B was 6.0%, $5B-$20B was 7.7% and for commercial banks with assets greater than $20B was 6.74%.
Louisiana Net Income by Asset Size Group
56
Commercial Banking Trends: Performance
Commercial Banks Net Interest Margin (NIM), ROAA, ROAE
58Source: Call report data from SNL
AR, 3.9%
LA, 4.0%
MS, 3.9%
TX, 3.6%
US, 3.7%
3.0%
3.5%
4.0%
4.5%
5.0%
2005 2007 2009 2011 2013 2015
NIM
%
AR, 0.97
LA, 1.10
MS, 0.93
TX, 1.21
US, 1.12
0.0
0.5
1.0
1.5
2005 2007 2009 2011 2013 2015
RO
AA
%
Net Interest Margin (NIM) ROAA%
AR, 8.39
LA, 10.19
MS, 8.42
TX, 9.90US, 8.74
0
5
10
15
20
2005 2007 2009 2011 2013 2015
RO
AE
%
ROAE %
Commercial Banks Yield on Loans & Cost of Funds
59
AR, 5.6%
LA, 5.8%
MS, 5.6%
TX, 5.7%
US, 5.3%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
2005 2007 2009 2011 2013 2015
Source: Call report data from SNL
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
7.0%
8.0%
9.0%
2005 2007 2009 2011 2013 2015
AR 0.50%
LA 0.42%MS 0.41%
TX 0.34%
US 0.45%
Yield on Loans Cost of Funds
Commercial Banks Efficiency
60
AR, 69.0%
LA, 67.9%
MS, 70.7%
TX, 67.1%
US, 69.3%
60%
62%
64%
66%
68%
70%
72%
74%
2005 2007 2009 2011 2013 2015
Effi
cien
cy R
atio
%
Source: Call report data from SNL
Efficiency Ratio: Noninterest expense, less amortization of intangible assets, divided by net interest income on a fully taxable equivalent basis and noninterest income.
Mo
re E
ffic
ien
tLe
ss E
ffic
ien
t
Risk Based Capital
61
AR, 14.30%
LA, 13.79%
MS, 13.35%
TX, 14.32%
US, 13.98%
12%
13%
14%
15%
16%
17%
2005 2007 2009 2011 2013 2015
Aggregates include currently defunct, merged or institutions that moved out of state.
Source: Call report data from SNL
Thrift TrendsSavings Banks and Saving and Loan Associations
Thrifts Chartered in Louisiana and Adjacent States
63Source: Call report data from SNL
Thrift refers to Savings Banks and Savings and Loan Associations.
Asset Size LA AR MS TX
$0MM~$1B 18 1 4 29
$1B~$5B 3
> $5B 1
Grand Total 18 1 4 33
Asset Size LA AR MS TX
$0MM~$1B 4.16 0.08 0.50 9.91
$1B~$5B 6.32
> $5B 71.13
Grand Total 4.16$ 0.08$ 0.50$ 87.36$
Thrifts Total Assets (in $B)
Thrifts (Count)
Louisiana Thrift Assets
64
$0
$1
$2
$3
$4
$5
2005 2007 2009 2011 2013 2015
$ B
illio
ns
Total Assets Thrifts Assets < $1B
LA, 2.6%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
3.5%
2006 2008 2010 2012 2014
CA
GR
%
Compounded Annual Asset Growth RateThrifts Assets < $1B
CAGR – compounded annual growth rate for bank assets using 2005 as the base year for calculation.
Source: Call report data from SNL
US, 3.1%
Louisiana
Thrifts Loans
65
LA, 4.9%
US Assets <$1B , 3.3%
0%
1%
2%
3%
4%
5%
2006 2008 2010 2012 2014
CA
GR
%
Thrifts Loans Growth Assets < $1B
$0
$1
$2
$3
$4
2005 2007 2009 2011 2013 2015
$ B
illio
ns
Total LoansThrifts Assets < $1B
US, 3.3%
58.0% 57.0%
20.9%5.1%
10.8%
5.6%
5.0%19.9%
US Thrifts Assets < $1B LA
Loan Composition
ConsumerOther
C&IMultifamily
ConstructionCRE
1-4 Family
Loan Category US Thrifts Louisiana Difference
1-4 Family 58.0% 57.0% -1%
CRE 0.6% 20.9% 20%
Construction 5.1% 10.8% 6%
C&I 5.6% 5.0% -1%
Consumer 19.9% 2.9% -17%
Multifamily 5.6% 2.2% -3%
Other 5.13% 1.13% -4%
Total 100.0% 100.0% 0%
Louisiana
Source: Call report data from SNL
Thrifts Total Deposits and Loan to Deposit Ratio
66Source: Call report data from SNL
CAGR – compounded annual growth rate for bank assets using 2005 as the base year for calculation.
LA, 2.5%
-1%
0%
1%
1%
2%
2%
3%
3%
4%
4%
2006 2008 2010 2012 2014
CA
GR
%
Thrifts Deposits Growth Assets <$1B
$0
$1
$2
$3
$4
2005 2007 2009 2011 2013 2015
$ B
illio
ns
DepositsThrift Assets <$1B
LA, 94
US Assets < $B , 83
-
20
40
60
80
100
120
2005 2007 2009 2011 2013 2,015
Loan
to
Dep
osi
t R
atio
%
Average Loan to Deposit Ratio
US, 3.4%
US, 83
Louisiana
Thrifts Net Income
67
LA, 7.6%
US Assets < $B , 3.3%
-15%
-10%
-5%
0%
5%
10%
2006 2008 2010 2012 2014
CA
GR
%
Net Income Growth Assets <$1B
$0
$5
$10
$15
$20
$25
$30
2005 2007 2009 2011 2013 2015
$ M
illio
ns
Net Income
US, 3.3%
Louisiana
Source: Call report data from SNL
Thrifts NIM, ROAA, ROAE, Efficiency
68
LA, 3.7%
0%
1%
2%
3%
4%
5%
2005 2007 2009 2011 2013 2015
Net Interest Margin %
LA, 0.7%
US Assets < $B , 1.4%
0%
1%
2%
3%
4%
2005 2007 2009 2011 2013 2015
ROAA %
LA, 5.1%
US Assets < $B , 5.3%
0%
2%
4%
6%
8%
2005 2007 2009 2011 2013 2015
ROAE %
LA, 76.7%
US Assets < $B , 82.3%
0%
20%
40%
60%
80%
100%
2005 2007 2009 2011 2013 2015
Efficiency Ratio %
US, 1.4%
US, 5.3%
US, 82.3%
US, 3.3%
Source: Call report data from SNL
Thrifts Yield, Cost of Funds, and Risk Based Capital
69
LA, 0.8%
0%
2%
4%
6%
8%
2005 2007 2009 2011 2013 2015
Cost of Funds %
LA, 5.5%
0%
2%
4%
6%
8%
2005 2007 2009 2011 2013 2015
Yield on Loans and Leases %
LA, 33.2%
0%
10%
20%
30%
40%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Risk Based Capital %
US, 4.8%
US, 0.7%
US, 30.0%
Source: Call report data from SNL
FHLB Dallas Products Summary
FHLB Dallas Product Matrix
71
Products
Advances
Letters of Credit
MPF
SNAP,
HAVEN
HELP
AHP
CIP/EDP
Community Investment
Products
FHLB Dallas has a range of products that helps member financial institutions improve their liquidity position, risk management, and social goals.
FHLB Dallas Advance Offerings Can Be Customized
72
Fixed
Floating
Bullet
Amortizing
Fixed-Term
CallableLIBOR
FHLB DNTerm Rate
Principal
StructuredOvernight to 30yr
Strategies• Enhance liquidity• Fund growth and/or seasonal needs• Assist in asset/liability management
• Matched-funding• Plug maturity gaps
• Manage interest rate risk• Support community investment initiatives• Other
Advances can be structured with other options and/or features (prepay, caps, callable, swaps, etc.)
FHLB Advances
Rates
Capped Advance
Symmetrical PrepaymentAdvance
• Provides flexibility and potential benefits when prepaying advances in a rising rate environment
• Ability to prepay below par and earn credit• Fixed-rate, fixed-term and amortizing
Discount Note Floating Rate Advance
• Floating Rate Advance linked to FHLB Discount Notes• Primary rate resets: 8-week, 13-week, 26-week• Maturity 1 – 10 years• Ability to prepay without fee on each reset date with 2 business days advance notice
Forward-Starting Advance
• Lock in a rate today for an advance that settles in the future• Prepare for deposit outflows due to increasing rates• Replace brokered CD funds with more competitively priced Bank funds• Prepare for loan growth
Expander Advance
• Lock-in access to future funding at today’s rate• Replace higher cost funding or deposit runoff, or fund future loan growth• Ability to exercise the expander option in whole or in part, but may not exceed the
expander amount• Fixed-rate, fixed-term non-amortizing; minimum of $1 million; terms: 1–10 years
Laddered FundingStrategy
• Create a virtual amortizing structure by originating a series of small advances with different maturities
• Ability to secure long-term liquidity while mitigating interest rate risk by creating decision points at each advance maturity
• Simple to originate, structure, and manage• Provides the ability to protect spreads, profitability, and competitiveness
Capped Floating Rate, Non-Amortizing Advance
• Better manage interest rate risk and control funding costs in a rising rate environment• Manage the re-pricing and basis risk of a loan or investment portfolio with a cap tied
to 1- or 3-month LIBOR
Selected FHLB Dallas Advance Products & Strategies
73
Prepay?
Maturity DateRate Reset Dates (+13 Weeks)
OriginationDate
Prepay?
Expanded Advance
$
MaturityExpander Option Date
Time
Maturity(in Years)
Bal
ance
($) Amortizing vs. Laddering
Enhanced NIM
No change Rates Rates
Fee
Credit
Submit Letter ofCredit Application
Beneficiary(Public Unit Depositor)
FHLB DallasDeposit Public
Unit Funds
Issue Letter of Credit
FHLB Dallas Direct Standby Letter of Credit (LOC)
Benefits to Public Unit Depositors:
Payment on presentment without court action
Fixed and defined values High credit quality (Aaa / AA+)
FHLB Dallas LOCs provide a low-cost, easily manageable method of securingpublic unit deposits without the administrative cost of pledged securities.
FHLB LOCs Provide Benefits to Members and Public Unit Depositors
LOCs as Collateral
Low cost and easy to manage Values are fixed and defined, not subject to fluctuations Transform illiquid assets to a source of liquidity
(Use blanket lien or loan collateral to collateralize public unit deposits)
Member Bank
74
Mortgage Partnership Finance Program
• In 1997, the Mortgage Partnership Finance (MPF®) Program was created as an alternative to traditional GSE mortgage purchase and securitization programs
– Members retain a portion of the credit risk and receive fees for doing so, while transferring the interest rate and funding risk to the FHLBanks
– 9 of 11 FHLBanks participate in the MPF Program
– As the “MPF Provider,” FHLB Chicago provides administrative and operational support for participating FHLBanks and Members
• Fund 15- to 30-year conventional conforming and government-guaranteed fixed-rate mortgage loans secured by owner-occupied 1-4 family residential and single family 2nd
homes – no ARMs
– Loans credit-enhanced to double-A equivalent
• Participating Financial Institutions (PFIs) originate, close, sell and/or, if desired, service fixed-rate residential mortgage loans
• The FHLBank manages the liquidity, interest rate and pre-payment risks of the loans while the PFI manages the credit risk of the loans
• Traditional risk sharing products require the PFI to share the credit risk associated with the residential mortgage loans with its FHLBank
75Source: FHLB Office of Finance and
Product Benefits for the Member
76
Best Execution Pricing
• Access best execution pricing
from FHLB
• Note rate ranges and
extensions give Member
flexibility
• Lock loans online via eMPF or
call the Helpdesk
Fund Loans More Quickly and Easily
• Choose funding date online
via eMPF
• Receive funds the next day
• Send the custody documents
in one week
Best
Execution
Pricing
Relinquish
Unwanted
Risks
Fund Loans
More Quickly
and Easily
Retain
Relationships
and Processes
Dedicated
Helpdesk for
Members
Relinquish Unwanted Risks
• Selling under MPF efficiently
transfers:
• Interest rate risk
• Prepayment risk
Retain Relationships and Processes
• Member controls the open-
to-close file flow: Member
underwrites, funds, and closes
each loan on own terms
• Option to keep or release the
servicing rights
• Member chooses how to
manage borrower
relationships
Questions?
77
Thank you
78
Zimri Hunt – Director Member Solutions
(214) 441-8506*
Member Services Desk
844.FHL.BANK
Kevin Kogucz – Senior Sales Manager
(214) 441-8420*
Russ Guess – Sales Manager
(214) 441-8655*
* Or toll-free at 844.FHL.BANK
Primary Contacts
Appendix: Selected Advances Products & Strategies
The Symmetrical Prepayment feature provides flexibility and potential benefits when advances are prepaid in a rising-rate environment, and only costs one extra basis point in the borrowing rate.
80
Symmetrical Prepayment Advance
Rates Decrease
Rates Increase
Value of Advance Borrowing for the Member
Increases
Decreases
Prepay fee
Prepay credit
The Symmetrical Prepayment feature provides flexibility and potential benefitswhen prepaying advances in a rising rate environment.
• Liquidity and flexibilityExample: Deposit run-off is slower than scenario; unwind advances at a profit
• Cost-effective• Good feature to have in a rising-rate environment
• Structure• Fixed-rate, Fixed-term or Principal Amortizing• Maturity Terms: 1 – 10 years• Minimum Size: $1 million
81
Why have the Symmetrical Prepayment feature?
Discount Notes (DN)-Linked Advance
82
Structure principal payments down as and when needed
Term Rate
Principal
FHLB ADVANCES
Call the borrowing partially or fully on any reset date
DN: A market based rate which is historically lower than LIBOR
Maturity Date
Rate Reset Dates (+13 Weeks)
Prepay?
OriginationDate
Prepay?
Discount Note Floating Rate Advance Structures
83
8 Week 13 Week 26 Week
Rate Resets Every 8 Weeks Every 13 Weeks Every 26 Weeks
Maturity Terms 1 to 10 years
Minimum Initial Transaction Size None
Settlement One day following the origination
AvailabilityContact Member Services at 1.844.FHL.BANK
by 9:30 a.m. CT, Tuesdays and Thursdays*
Prepayments without FeeFull or partial prepay on each reset day with
at least 2 business days’ advance notice
*If a holiday falls on a Tuesday or Thursday, FHLBanks Office of Finance discount note auctions are typically held on the preceding business day in which funding requests will be accepted. Also, if an auction does not occur or discount notes are not issued on any given determination date, the auction rate for that date will be the estimated rate at which the Bank could have issued such discount notes as calculated by the Bank in its sole discretion.
Forward-Starting Advance
Take advantage of the current low-interest rate environment by locking in a rate today for an advance that settles in the future.
• Prepare for future deposit outflows due to increasing rates• Replace brokered CD funds with more competitively priced FHLB Dallas funds• Prepare for loan growth• Match-fund and hedge against future rate increases• Manage the impact of rising rate scenarios on net interest margin • Lock-in value in an historically low-rate and a flat-yield curve environment• Lock-in rates today to renew future maturing advances• Structure: Fixed-rate, fixed-term and principal-amortizing (PRAM); settlement available for up
to 3 years; no minimum size up to 10 years, $5 million minimum when a) terms beyond 10 years b) includes symmetrical prepayment feature
OriginateAdvance
(Lock-in Rate)
SettleAdvance
(Funds Dispersed)Advance Matures
(Pay Off Advance)Forward-Starting Advance
84
Maturity(1 – 10 Years)
• Replace higher cost funding or deposit runoff
• Fund future loan growth or mortgage extension
• Support interest rate risk management strategies
Expander Advance
Expander Option Date(3 Months – 5 Years)
Original Advance
Expander Option
Same Rate
$
85
• Lock-in access to future funding at today’s rate
• Ability to exercise the expander option in whole or in part of the expander amount
• Structure: Fixed-rate, fixed-term non-amortizing, minimum size: $1 million, maturity terms: 1 Year – 10 Years
Laddered Advance Funding Strategy
86
How it works• Create a virtual amortizing structure by
originating a series of small advances with different maturities
• Ability to secure long-term liquidity while mitigating interest rate risk by creating decision points at each advance maturity
• Principal and interest due at maturity• Optional prepayment
Benefits• Simple to originate, structure, and manage• Provides the ability to protect spreads,
profitability, and competitiveness• Align liability and risk appetites
Manage risk of a fixed-rate loan portfolio in a rising-rate environment using Laddered advances strategy.
Maturity(in Years)
Long Term Advance
Bal
ance
($
)
Laddering Advances
Funding for Expected Prepay Environment
87
We need to make a choice of prepayment profile to use laddered funding
Funding for the Base Case Prepay Environment
Funding for the Faster Prepay Environment Funding for the Slower Prepay Environment
Mortgages have both amortization and prepaymentsdriving the outstanding balances
Funding for Base and Lower Prepay Environment
88
Time
If the prepayment profile is slower, then
$100
2 5
Outstanding Balance
Funding for Base and Lower Prepay Environment
89
Time
Use the option to expand the outstanding balance of the Expander advance
Expander
$100
2 5
Outstanding Balance
