Data Trends in Branching

Suzanne McGann, Functional AnalystJanet Lee, Industry Analyst

Callahan & Associates

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Data Trends in Branching

Suzanne McGann, Functional AnalystJanet Lee, Industry Analyst

Callahan & Associates

Agenda

• Differences in Reporting Requirements: Banks vs. Credit Unions

• Trends in Credit Unions and Banks’ Branching

• Trends in Deposits and Market Share

• Let’s Do a Case Study!

• Dive into our new BranchAnalyzer

Differences in Reporting Requirements:

Banks vs. Credit Unions

How do credit unions and banks report their branch and deposit data?

- When: Annually (data as of June; data is available around September)

- Where: FDIC’s The Summary of Deposits The Summary of Deposits (SOD) is an annual survey of branch office

deposits for all FDIC-insured institutions. - What: Branch and deposit information, including:

Bank name Branch name Branch service type Branch number Branch address Deposits by branch

Banks

How do credit unions and banks report their branch and deposit data?

- When: Quarterly- Where: NCUA’s Credit Union Branch Information- What: Branch information, including:

Credit Union name Branch name Branch Type (Branch office/Corporate office) Main office (Yes/No) Address and phone number

Credit Unions

Trends in Credit Unions and Banks’ Branching

Future of branches..?

The Buffalo News, June 7 ,2014

Gensler

The Financial Brand, February 5, 2014

WSJ, March 31,2013

Business Insider, October 27, 2015

Banks* are closing branches…

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 201570,000

75,000

80,000

85,000

90,000

95,000

100,000

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

92,043

94,752

97,27499,163 99,550

98,519 98,19397,340

96,33994,725

93,283

Number of Bank Branches Number of Banks

Number of Banks and Bank BranchesData as of June 30

*Banks include both commercial banks and savings institutions

The effect of branch closures on local residents and communities

Inconvenience and costs

Financial exclusion

Limited choice in accessing finance

Branch Closure

Financial institution-free counties

• There are 22 U.S. counties that have neither banks nor credit unions.State County Total Population in the County in 2014

AK ALEUTIANS EAST 3,360AK DENALI 1,921AK HOONAH ANGOON 2,082AK LAKE AND PENINSULA 1,631AK WADE HAMPTON 8,010AK YUKON KOYUKUK 5,547AK ALPINE 1,116GA ECHOLS 4,003HI KALAWAO 89

MT PETROLEUM 485NV ESMERALDA 822NV STOREY 3,912ND SIOUX 4,422ND SLOPE 765SD BUFFALO 2,077SD MELLETTE 2,100TX BORDEN 652TX KENEDY 400TX KING 262TX LOVING 86UT DAGGETT 1,117WI MENOMINEE 4,522

A total of 22 counties 49,381

While the number of CUs is declining, the number of branches remains stable

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 201510,000

12,000

14,000

16,000

18,000

20,000

22,000

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

20,172 20,47220,975 21,187 21,443 21,461 21,451 21,425

20,955 20,935 21,021

Number of Credit Union Branches Number of Credit Unions

Number of CUs and CU BranchesData as of June 30

Top 10 states with the highest number of credit union branches

Rank State Number of CU Branches as of June 2015

CU Deposit Market Share as of June 2015

1 Texas 1,664 9.4%

2 California 1,598 10.4%

3 New York 1,060 4.2%

4 Michigan 1,055 18.4%

5 Pennsylvania 1,037 9.3%

6 Florida 996 9.1%

7 Ohio 811 7.2%

8 Illinois 668 5.1%

9 Wisconsin 641 14.7%

10 North Carolina 625 10.9%

10 Year CAGR in number of branches

CUs Under $20M

CUs $20M-$100M

CUs $100M-$250M

CUs $250M-$500M

CUs $500M-$1B

CUs Over $1B

10 Year CAGR in # Branches

0.7% 2.0% 2.7% 2.7% 4.0% 4.8%

10 Year CAGR in Number of CU Branches by Asset SizeData as of June 30 for All Credit Unions that Are Active Today

CUs Under $20M

CUs $20M-$100M

CUs $100M-$250M

CUs $250M-$500M

CUs $500M-$1B

CUs Over $1B

10 Year CAGR in # Branches

-6.2% -2.2% 0.0% 1.7% 4.2% 9.5%

10 Year CAGR in Number of CU Branches by Asset SizeData as of June 30 for All Credit Unions that Have Existed

Number of credit union branches by asset size – for all credit unions that are active today

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150

1,000

2,000

3,000

4,000

5,000

6,000

CUs Under $20M CUs $20M-$100M CUs $100M-$250MCUs $250M-$500M CUs $500M-$1B CUs Over $1B

Number of CU Branches by Asset SizeData as of June 30

Trends in Deposits and Market Share

Share balances close in on $1 trillion as members direct more savings to credit unions

$0

$200,000,000,000

$400,000,000,000

$600,000,000,000

$800,000,000,000

$1,000,000,000,000

$1,200,000,000,000

102568089497

201276209123306713591999

403195074908

503109569586

610516579910

735259909220822732345267

922109276339999499296576

Historical Share BalancesFor all U.S. Credit Unions

$100B increase every

two years since 2009

Credit Union Share Balances as of June 2015

$999,499,756,400

Share growth is on the rise with balances up $46.9 billion since June 2014

2010 2011 2012 2013 2014 2015$0

$10

$20

$30

$40

$50

$60

$70

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

$47.5 $41.3 $61.8 $46.0 $31.1 $46.9

6.6%

5.4%

7.7%

5.3%

3.4%

4.9%

12-Mo. Change and Growth in Outstanding Share BalancesData as of June 30

12-Mo. $ Change in Outstanding Share Balances 12-Mo. % Change in Outstanding Share Balances

Billi

ons

Loan-to-share ratio is rising at credit unions

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

76.0% 75.4%

Loan-to-Share RatioData as of June 30

While change in net liquidity from share growth is still negative, it improved from a year ago

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015-$40,000,000,000

-$30,000,000,000

-$20,000,000,000

-$10,000,000,000

$0

$10,000,000,000

$20,000,000,000

$30,000,000,000

$40,000,000,000

$50,000,000,000

-$19,232,741,271

.0-

$22,552,938,495.0

$7,542,763,847.0$2,830,958,254.

0

$34,567,530,906.0

$46,287,838,142.0$37,404,514,582

.0$39,542,911,596

.0

$8,717,179,630.0

-$30,922,371,080

.0

-$26,933,649,741

.0

Change in Net Liquidity from Share GrowthData as of June 30

Since 2007, cost of funds has declined

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

1.79%

3.11%

0.58%

Cost of FundsData as of June 30

Strong core deposit growth fuels growth in total shares

Total Shares

Share Certs.

IRA/Keogh

MMA

Share Drafts

Regular Shares

-4% -2% 0% 2% 4% 6% 8% 10%

3.4%

-2.4%

-1.3%

4.5%

6.8%

7.8%

4.9%

-0.1%

-1.5%

3.7%

8.5%

8.7%

YOY Growth by Share Product TypeData as of June 30

2Q152Q14

The percentage of members with a credit union checking account is on the rise

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 20150.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

43.4%

54.7%

Share Draft PenetrationData as of June 30

Regular share is the largest component of credit unions’ share portfolio

13.9%

36.4%

22.8%

19.1%

7.7%

Credit Unions’ Share Portfolio as of June 2015

Share Drafts Regular Shares & Deposits Money Market SharesShare Certificates IRA/Keogh Accounts

Core deposits are a becoming a larger part of credit unions’ share portfolio

$0

$200,000,000,000

$400,000,000,000

$600,000,000,000

$800,000,000,000

$1,000,000,000,000

$ Share Drafts $ Regular Shares & Deposits $ Money Market Shares$ Share Certificates $ IRA/KEOGH Accounts

13.9%

36.4%

22.8%

19.1%

7.7%

9.0%

32.8%

18.7%

28.4%

11.1%

Historical Share CompositionData as of June 30

Money market deposits make up a half of banks’ share portfolio

14.2%

45.9%

20.8%

15.8%

3.2%Banks’ Share Portfolio as of June 2015

Demand Deposits Money Market DepositsOther Savings Deposits (excluding MMDAs) Total Time DepositsOther

Credit unions’ share growth lags that of banks

2008 2009 2010 2011 2012 2013 2014 20150.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

5.7%

4.9%

1.5%

5.2%

All Credit Unions in U.S. All Banks in U.S.

Annual Share GrowthData as of June 30

Credit union deposit market share has gradually declined since 2010

2008 2009 2010 2011 2012 2013 2014 20157.0%

7.5%

8.0%

8.5%

9.0%

9.5%

8.9%9.0%

9.3%9.1% 9.1%

8.9%8.7%

8.6%

Credit Union Deposit Market ShareData as of June 30

Top 10 states with the highest credit union deposit market share

Rank State Credit Union Deposit Market Share as of June 2015

YOY Change in Deposit Market Share

1 Alaska 29.8% -0.9%

2 District Of Columbia 24.6% 3.0%

3 Idaho 24.0% 1.6%

4 Washington 22.7% -0.8%

5 New Mexico 21.6% 0.5%

6 Hawaii 21.5% -0.5%

7 Oregon 21.4% -0.1%

8 Vermont 19.6% -0.8%

9 Michigan 18.4% 0.7%

10 New Hampshire 17.7% -1.0%

States that reported over 1ppt increase in credit union deposit market share

ID

NDMN

WI

IA

3.2 ppts

3.0 ppts

1.7 ppts

1.6 ppts

1.0 ppt

1.0 ppt

Let’s do a case study!

10 states with the highest # of bank branch closures – opportunities for credit unions?

State Number of Bank Closures June 2014 – June 2015

Total Number of Bank Branches as of June 2015

1 California 325 7,100

2 Texas 320 6,730

3 Florida 306 5,388

4 Pennsylvania 210 4,394

5 Michigan 209 2,743

6 South Carolina 208 1,324

7 Illinois 195 4,628

8 New York 186 5,262

9 Georgia 148 2,482

10 Ohio 143 3,839

Top 10 counties with the highest # of bank branch closures

County State Number of Bank Closures June 2014 – June 2015

Total Number of Bank Branches as of June 2015

1 Cook IL 80 1,518

2 Los Angeles CA 72 1,792

3 Harris TX 52 1,002

4 Dallas TX 42 646

5 Maricopa AZ 37 845

6 Tarrant TX 34 451

7 Miami-Dade FL 31 688

8 New York NY 30 693

9 Orange CA 30 683

10 San Diego CA 29 608

Case Study: Tarrant, TX

• County with the 6th highest number of bank branch closures (34) over the past year

• Total number of banks: 63• Total number of bank branches: 451• Total number of credit unions: 36• Total number of credit union branches: 81• Total deposits: $39.5 million• Total population: 1.9 million• Unemployment rate: 5.3% • Credit union deposit market share: 12.1%

How to benchmark your branch footprint using our new BranchAnalyzer

AR

Attend a Live BranchAnalyzer Training! Sign up here: http://www.callahan.com/branchanalyzer-training/

Questions?

Tell us what you think!

Please take our post-event survey. One lucky survey respondent will win a Starbucks gift card!

Thank You!

Janet Lee, Industry AnalystSuzanne McGann, Functional Analyst

202-223-3920 jlee@callahan.com

smcgann@callahan.com