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Fed Policies and Their Impact. Community Bank Day Princeton, NJ. Jim Reber ICBA Securities. Made possible by our generous sponsors. New Fed Roster. Before: Chairman Ben Bernanke Dove Governor Sarah Bloom Raskin Dove Esther George, Kansas City Hawk

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  1. Fed Policies and Their Impact Community Bank Day Princeton, NJ Jim Reber ICBA Securities Made possible by our generous sponsors
  2. New Fed Roster Before: Chairman Ben Bernanke Dove Governor Sarah Bloom Raskin Dove Esther George, Kansas City Hawk James Bullard, St. Louis Moderate Charles Evans, Chicago Dove Eric Rosengren, Boston Dove
  3. New Fed Roster After: Vice-Chair Stanley Fischer* Wild Card Governor LaelBrainard* Dove (?) Narayana Kocherlakota, Minneapolis Dove Richard Fisher, Dallas Hawk Sandra Pianalto, Cleveland Moderate Charles Plosser, Philadelphia Hawk *Yet to be confirmed Net Change: Slightly more hawkish
  4. New Fed Roster More work to be done Looking for replacement for Gov. Raskin Looking for replacement for Gov. Stein Cleveland Pres. Pianalto has announced intention to retire
  5. Say What? March 19 FOMC Press Release “The Committee currently judges that there is sufficient underlying strength in the broader economy to support ongoing improvement in labor market conditions.” “In determining how long to maintain the current 0 to 1/4 percent target range for the federal funds rate, the Committee will assess progress -- both realized and expected --toward its objectives of maximum employment and 2 percent inflation.” “The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.”
  6. 10-Year Treasury NoteMarch 19
  7. Projected Inflation http://www.federalreserve.gov/monetarypolicy/fomccalendars.htm
  8. FOMC Aggregate Fed Funds Target
  9. March 31 Speech “This extraordinary commitment is still needed and will be for some time, and I believe that view is widely shared by my fellow policy makers.” “It is clear to me that the U.S. economy is still considerably short of the two goals assigned to the Federal Reserve by the Congress. The first of those goals is maximum sustainable employment... Most of my colleagues on the Federal Open Market Committee and I estimate that the unemployment rate consistent with maximum sustainable employment is now between 5.2 percent and 5.6 percent.” “Earlier this month, the Fed reiterated its overall commitment to maintain extraordinary support for the recovery for some time to come. This commitment is strong, and I believe the Fed's policies will continue to help sustain progress in the job market.”
  10. 10-Year Treasury NoteMarch 31
  11. Unemployment Rate
  12. Inflation Rate
  13. Fed Funds Futures 12-31-13 04-25-14
  14. Fed’s Balance Sheet
  15. Was QE3 Successful?
  16. Recent MBS Issuance
  17. April 30 Highlights Dropped Treasury purchases to $25B/month Dropped MBS purchases to $20B/month Reaffirmed intent to keep rates accommodative for a “considerable time”
  18. 10-Year Treasury NoteApril 30
  19. GDP 1Q 2014
  20. Treasury Rates 2014
  21. Typical Portfolio 3-31-13
  22. Typical Portfolio 3-31-14
  23. Key Portfolio Metrics 3-31-13 3-31-14 Average Book Price 102.96 102.61 Tax-Equivalent Yield 2.61% 2.61% Effective Duration 2.9 3.8 Effective Duration +200 4.6 4.7 Net Unrealized G/(L) 1.89% (0.82%)
  24. Yields vs. Durations
  25. SBA Lending Opportunities Arne Monson Holtmeyer & Monson
  26. Great Time to Be an SBA Lender Make more loans in your local markets Mitigate bank leverage & concentration risk Mitigate collateral risk via SBA guaranty Gain profit potential from non-interest fee income
  27. Secondary Market Sale Benefits Eliminate prepayment risk Servicing income stream Recycle loanable funds Invisible to borrower
  28. Holtmeyer & Monson Lender Services Provider since 1982 Consultants to banks and small businesses Over 400 clients ICBA Preferred Service Provider
  29. Member Advantages Reasonable and competitive fee structure 10% discount of lender fees H & M contributes royalty fees to ICBA NO NET COST TO BANK
  30. Thank You Intended for institutional investors only. Although the information included in this report has been obtained from sources we believe to be reliable, we do not guarantee its accuracy. All opinions expressed in this report constitute the judgments as of the dates indicated and are subject to change without notice. This report is for informative purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any product. The accuracy of the financial projections is dependent on the occurrence of future events which cannot be assured; therefore, the actual results achieved during the projection period may vary from the projections. Member FINRA/SIPC. Jim Reber jreber@icbasecurities.com 800-422-6442
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