Member Advantage

Third Quarter 2017

View Print Version


José R. González


Last month, I had the honor of speaking at both the NJBankers’ Senior Management Conference and the Independent Bankers Association of New York State’s Annual Convention. These two organizations are vital to community banking in New Jersey and New York, and their annual gatherings provide important platforms to exchange ideas, discuss key industry issues and develop the strategies that keep local lending thriving across the region. Our team always appreciates the opportunity to present at these events, as we believe they allow us another way in which to engage our members to ensure that they are getting the most value out of their
FHLBNY membership.

The daily availability of our advances is the greatest value of membership in our cooperative. We are able to provide our members with the liquidity they need to optimize their balance sheets, build their infrastructure and achieve their strategic goals. The benefits of this support can be found within this newsletter, as we discuss how members can navigate through the challenges presented by reduced deposit growth, increased competition from traditional and non-traditional sources, enhancements in technology and shifting demographics to find opportunities for growth.


We are here to help our members facilitate their business plan and strategic objectives, leveraging FHLBNY membership so that we are able to achieve success together. Membership in our cooperative also allows us to work with our members to ensure that others are able to succeed, in a more immediate and direct manner. We see this in our Affordable Housing Programs, which support the creation of quality housing for those who need it most, benefitting communities across our region. But most recently, we have seen it in our Disaster Relief Funding, which our members can put to use to support recovery efforts in those very same communities following the devastating effects of hurricanes Harvey, Irma and Maria.

On September 28, we made $1 billion in Disaster Relief Funding available to our members to help rebuild communities in FEMA-designated disaster areas in Puerto Rico, the U.S. Virgin Islands, Florida, Texas and the Southeast. These funds are available through our Community Lending Programs (CLP) to be used as both immediate gap financing and longer-term funding to restore homes and businesses.


José R. González
President and Chief Executive Officer




New industry-altering technologies and evolving consumer demographics, coupled with a difficult operating environment, are impacting our business landscape. Driver for growth and innovation, competition for retail deposits is a growing concern, and regulation continues to challenge traditional business models. The FHLBNY consistently monitors the operating environment of our district and across the nation, including our members’ behavior and industry best practices, so we can offer the products and services members rely on to help turn current business challenges into future opportunities.

The Deposit Challenge

Loan demand continues to grow as the economy improves. History has shown that members’ assets tend to grow more quickly than deposits. However, this was not the case post-crisis when the majority of our members experienced a surge in deposits from customers seeking a safe haven for their money. Today, sustaining adequate deposit growth is becoming increasingly more difficult, largely due to game- changing post-crisis regulation that has created heightened competition for retail deposits. Large banks are now subject to the Liquidity Coverage Ratio (LCR), which compels them to compete for retail deposits like never before. Mid-size and smaller financial institutions are impacted by the effects of this regulation because they now face fiercer competition for retail deposits, which threatens their liquidity and compromises their interest rate risk positions.

chart - Deposit Market Share 2017

Earlier this year, we surveyed our membership to garner their outlook on the deposit landscape. The results showed that many members do not expect significant deposit growth over the next several years. Accordingly, many members expect the main challenges in deposit competition to come from larger banking institutions – particularly those who leverage technology as a means to adapt to changing demographics. Results also showed that members plan to compete for deposit share by offering competitive rates, aggressively investing in technology and selectively expanding their footprint.



Millennials – those born between 1980 and 2000 – represent the largest generation in history, with a population estimated at over 90 million. Millennials have already entered the workforce, with more joining every day. While you might see this population segment as a potential opportunity to gain deposit share and grow loans, this younger generation generally has two important challenges driving their financial decisions: (1) they are burdened with student debt, and (2) their earnings have remained relatively flat over the years. A significant portion of this group came of age and graduated college at or around the time of the financial crisis, where they faced high unemployment, limited job opportunities or were forced to make alternate career choices. With their career progression stunted and being burdened by student loan debt, it is understandable why many are postponing milestones in life such as marriage, children and purchasing a home.

chart - Gen Z workforce

Although Millennials receive the most attention in the press, Generation Z, the demographic cohort following Millennials, will represent 31 percent of the workforce by 2025. This generation will reach approximately 85 million by the year 2020 in the U.S. alone. Generation Z’s financial situation will be largely influenced by their account of the “Great Recession” and how it affected their families. This cohort witnessed their parents’ and/or older siblings’ economic struggle and employment challenges, and as a result, developed a natural distrust towards traditional financial institutions.

Both demographic cohorts value the use of technology to build relationships, on both a personal level and when conducting business as a consumer. Technology is prevalent in every aspect of their lives, and they are accustomed to the convenience, speed and efficiency it offers.

As Millennials and Generation Z come of age, their influence will shape the economy and housing market of the future. Ramping up and improving mobile delivery systems will continue to be a focal point for potential growth to attract and retain this demographic.


Undeniably, technology platforms are transforming the way people bank, from making loans to managing deposit accounts. It is estimated that more than 50 percent of mortgage loans originated are underwritten by non-depository or Fintech (financial technology) companies.

Large banks have found a variety of ways to manage technological innovation in the financial sector, be it acquisitions, partnerships, and even in-house development. In stark contrast, the majority of local community lenders invest less than 0.20 percent of their assets on improving technology – quite a disparity despite the rise of Fintech being a key differentiator.

It appears we are at the early stages for technological innovation in financial services. Large financial institutions are also heavily investing in technologies that include machine learning and cloud computing to automate operations. Fintech has greased the wheels of finance, automating decision-making and reducing the costs of transactions, offering consumers speed and efficiency like never before.


Although the pace of technological evolution can be overwhelming, it is imperative that mid-size and smaller financial institutions embrace the shift and find ways to invest in technology to meet customer needs and remain competitive.

While it may not be necessary to acquire a Fintech company or build a branch on every corner to capture more market share, there are ways members can augment their business strategies. More and more members are offering their customers multi-channel distribution options by investing in user-friendly mobile platforms and/or online depositories, and by forming partnerships with existing Fintech and/ or branch networks that are already equipped to accommodate tech savvy consumers.

Several members are using one or more of the following three approaches to strengthen their technology-based platforms.

› READ MORE     




Since our last edition, five members joined the FHLBNY cooperative:
» Horizon Healthcare Services
» Kingstone Insurance Company
» New Jersey Manufacturers Insurance Company
» Nova UA Federal Credit Union
» Western World Insurance Company


The FHLBNY looks forward to connecting with our members and business associates in person at the following upcoming events. Please visit the Upcoming Events section on our website.

2017 Director Elections
Ballots must be received at the FHLBNY by 5:00 p.m. ET on Monday, November 6.
Participate in our annual election process.




Explore the FHLBNY’s corporate headquarters as a resource for your next business meeting, and the Education Programs the FHLBNY can easily provide as an educational segment to your agenda.

Capital Markets and Member Services - captioned

Contact your Calling Officer today to schedule your visit and tour.
We look forward to hosting you.

Phone: (212) 441-6700




Related Links

Latest Issues

First Quarter 2019
Leverage Your Membership in 2019

Third Quarter 2018
Board Election Updates and Solutions for Balance Sheet Management in a Rising Rate Environment