Data for June 30, 2015

Transcription

1 Data for June 30, 2015 Call Dates: August 19 & 20, 2015 Supported by: Bill Clark/CQ Roll Call File Photo

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8 Data for June 30, 2015 Call Dates: August 19 & 20, 2015 Supported by: Bill Clark/CQ Roll Call File Photo

9 Agenda Economic Outlook Dwight Johnston, Chief Economist, California & Nevada Credit Union Leagues 2Q 2015 Credit Union Trends & Key Issues Big and Small Credit Unions Alike Show Growing Success Chip Filson, Chairman, Callahan & Associates Jay Johnson, Executive Vice President, Callahan & Associates Pursuing Performance Spencer Pratt, Executive Vice President, Leaders Credit Union 9

10 Dwight Johnston Chief Economist, California & Nevada CU Leagues D.J. s ECONOMIX

11 Nonfarm Payrolls Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15

12 Payroll growth could slow - but in a good way Payroll growth 245k average for past 12 months U.S. needs only 75k to 100k to stay even 8.2 million unemployed; 5.2 million job openings Millions are still unemployed location, location, location Many areas and job sectors reporting difficulty in finding basic skill workers What this means the real labor market is tightening; Expect monthly payroll gains do drop to k in months ahead upside is higher wages

13 Retail Sales & Confidence - Consumers confident but reluctant to spend Jan-05 CONCCONF MOM Index RSTA YOY Jan-06 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jul

14 Total vehicle sales Where is plateau for auto sales? Feb-99 Aug-99 Feb-00 Aug-00 Feb-01 Aug-01 Feb-02 Aug-02 Feb-03 Aug-03 Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-07 Aug-08 Feb-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15

15 Dramatic shift in borrowing

16 Strategic considerations Millennials paying for cars, student loans, and higher rents Not much left for credit card purchases and c.c. debt Will be prospects for home ownership later Who/what is your target market?

17 Housing new issues to surface if rates rise Rate jump in 2013 put the brakes on the housing market in many pricey areas prices virtually flat for more than a year Could be worse this time around as many areas already unaffordable On the other hand If rates rise, lack of supply could become an even bigger factor who will want to give up a 3.75% mortgage? Rents are climbing ownership now cheaper in some areas Growth in rentals bodes well for housing long-term if renters can save enough for down payments

18 Fed action still a toss-up Fed says they have no firm plan Believe them Most data, especially job numbers, say the Fed should begin the normalization process Disinflation/deflation fears could keep Fed on the sidelines Fed s # 1 reason to go Get it over with

19 General outlook still good for rest of 2015 into 2016 Consumers should ramp up spending on continued slump in gas prices Housing activity improving despite tight supply bodes well for construction higher rates a modest risk now Payroll gains very good Wages could catch up Fed likely to tighten in September unless China story continues to hit stock market Best guess: Rates should trend higher but global disruptions still a factor

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21 GET YOUR DAILY DOSE Economic Updates for the Credit Union Community Visit TRUSTCU.COM to Sign-Up 21

22 Recent headlines underscore U.S. economic momentum (The Wall Street Journal, July 15, 2015) (MarketWatch, August 18, 2015 ) (Fortune, August 13, 2015) (The Wall Street Journal, August 18, 2015) (CNN Money, August 18, 2015) (Bloomberg, August 3, 2015) (The Wall Street Journal, August 18, 2015)

23 U.S. Credit Union Key Indicators As of 6/30/15 12-mo. Growth 2Q mo. Growth 2Q 2014 Assets $1.18T 6.0% 4.5% Loans $755.0B 10.7% 9.8% Shares $1.00T 5.1% 3.4% Investments $367.6B -3.0% -3.8% Capital $134.2B 6.5% 7.5% Members 102.5M 3.4% 2.9% Source: Callahan s Peer-to-Peer Analytics

24 Loan originations reach an all-time high through the second quarter Credit unions originate the highest ever amount of loans for the first six months of the year, reaching $200 billion YTD First mortgage originations experience double digit growth and market share reaches a new high for the first half of the year Members are borrowing the highest amounts ever from credit unions

25 Year-to-date total loan originations rise 20.3% versus June 2014, led by first mortgage Billions $250 $200 $150 $100 $50 $0 $176.6 $8.1 $92.6 $9.5 $66.4 YTD Loan Originations Data as of June 30 $166.4 $8.1 $106.4 $10.6 $41.4 $200.2 $8.8 $117.3 $12.3 $ MBL Consumer Other RE First Mortgage Source: Callahan s Peer-to-Peer Analytics

26 Growth in outstanding loans accelerates; three loan categories show double digit growth 1st Mtg Other RE New Auto Used Auto MBL Credit Card Total Loans -0.8% 12-Mo. Growth in Loans Outstanding Data as of June % 9.8% 10.0% 13.2% 11.5% 12.6% 13.1% 6.9% 8.4% 10.7% 9.8% 19.6% 16.9% 2Q15 2Q14-5.0% 0.0% 5.0% 10.0% 15.0% 20.0% 25.0% Source: Callahan s Peer-to-Peer Analytics

27 22 states post double-digit YOY balance sheet loan growth State Loan Growth Loans Outstanding (millions) June 2015 Loans Outstanding (millions) June 2014 Idaho 21.8% $5,138.3 $4,293.1 Colorado 20.5% $13,193.8 $11,332.2 Alaska 17.7% $6,538.8 $5,554.8 Delaware 15.6% $986.7 $858.0 New Hampshire 15.5% $5,125.6 $4,439.8 Utah 15.3% $13,790.3 $11,959.4 Virginia 14.4% $84,173.2 $73,587.0 Wisconsin 13.7% $22,218.4 $19,559.8 Nevada 13.5% $1,052.3 $1,985.1 Iowa 13.2% $9,983.7 $8,826.7 Source: Callahan s Peer-to-Peer Analytics

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29 Billions First mortgage market share reaches a new mid-year high of 8.5% in 2015 $70 $60 $50 $40 $30 $20 $10 $0 4.4% YTD First Mortgage Originations & Market Share Data as of June % 7.3% 6.8% 8.4% 8.5% $31.4 $33.9 $56.3 $66.4 $41.4 $ % 8% 7% 6% 5% 4% 3% 2% 1% 0% 1st Mtg Orig. Market Share Source: Callahan s Peer-to-Peer Analytics, Mortgage Bankers Association

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31 Credit union auto lending market share tops 16.3%, its highest June level since 2Q % 16.0% 15.0% 15.0% 14.2% Auto Market Share Data as of June % 14.4% 15.7% 16.3% 14.0% 13.0% 12.0% 11.0% 10.0% Auto Market Share Source: AutoCount Data from Experian Automotive; Callahan & Associates

32 Members usage of credit union loan products is on the rise 19.0% 18.0% Loan Product Penetration Rates* Data as of June % 17.0% 16.0% 15.0% 14.0% 13.0% 16.7% 14.5% 16.1% 14.8% 15.9% 15.0% 16.3% 15.5% 17.0% 16.2% 16.7% * Loan Product Penetration Rate = % of members holding a loan account Credit Card Auto Source: Callahan s Peer-to-Peer Analytics

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34 Loan originations per member are at an alltime second quarter high of $1,953 $2,000 Loan Originations Per Member Data as of June 30 $1,953 $1,800 $1,600 $1,475 $1,400 $1,200 $1, Source: Callahan s Peer-to-Peer Analytics

35 The loan-to-share ratio is at its highest level since December 2009 (76.1%) 80.0% 78.0% 76.0% 74.0% 72.0% 70.0% 68.0% 66.0% 64.0% 62.0% 60.0% 72.9% 69.5% Loan-to-Share Ratio Data as of June % 67.4% 71.6% 75.4% Source: Callahan s Peer-to-Peer Analytics

36 Billions Increases in loan balances continue to outpace that of shares 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 $60 $50 $40 $30 $20 $10 $0 -$10 -$20 -$30 -$40 $48 $52 $43 $47 $39 $42 Annual Net Liquidity Change Data as of June 30 $37 $44 $41 $29 $26 $19 $11 -$3 -$14 -$18 * Net liquidity from shares = $ share growth - $ loan growth Loan growth outpacing share growth -$28 -$29 -$25 -$26 -$23 Source: Callahan s Peer-to-Peer Analytics

37 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 The est. total price risk for all investments (HTM & AFS) is not only decreasing but also negligible 3.00% 2.00% 1.00% 0.00% -1.00% -2.00% -3.00% 0.58% 0.25% Price Risk Data as June % 1.19% -0.85% -2.13% 0.14% 0.07% Price Risk as a % of Net Worth Price Risk as a % of Investments Source: Callahan s Peer-to-Peer Analytics

38 Higher loan paydown rate in 2015 indicates credit unions have stronger ability to reprice new assets based on their projected higher loan cash flows 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 44.9% Paydown Rate on Loans Data as of June % 40.5% 39.4% 38.0% 37.3% 35.3% 36.9% 39.8% 40.3% 36.2% 37.6% Source: Callahan s Peer-to-Peer Analytics

39 Share balances hit $1 trillion as member relationships continue to grow Share growth is accelerating versus 2014 Core deposits are driving total share growth The average member relationship reaches a new high

40 Billions Share balances surpass $1 trillion as members direct more savings to credit unions 1200 Historical Share Balances For all U.S. Credit Unions $735 $823 $1,001 $ $503 $ $103 $201 $307 $403 0 Source: Callahan s Peer-to-Peer Analytics, CUNA Mutual

41 Billions Share growth is on the rise with balances up $48.5 billion since June Mo. Change and Growth in Outstanding Share Balances Data as of June 30 $70 $60 $50 $40 6.6% 5.4% 7.7% 5.3% 3.9% 5.1% 9% 8% 7% 6% 5% $30 $20 $10 $0 $47.5 $41.3 $61.8 $46.0 $35.8 $ % 3% 2% 1% 0% 12-Mo. $ Change in Outstanding Share Balances 12-Mo. % Change in Outstanding Share Balances Source: Callahan s Peer-to-Peer Analytics

42 Strong core deposit growth fuels growth in total shares Regular Shares Share Drafts MMA IRA/Keogh Share Certs. Total Shares -2.4% YOY Growth by Share Product Type Data as of June % -1.3% 0.0% 3.9% 4.5% 5.1% 3.9% 6.8% 7.8% 8.4% 9.1% -5% 0% 5% 10% 2Q15 2Q14 Source: Callahan s Peer-to-Peer Analytics

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44 Average member relationship increased 4.0% from a year ago $18,000 $17,000 $16,000 $15,000 $15,022 $15,259 Average Member Relationship* Data as of June 30 $15,658 $16,039 * Average Member Relationship = (Loans+Shares-MBL)/Members $16,472 $17,131 $14,000 $13,000 $12,000 $11,000 $10, Source: Callahan s Peer-to-Peer Analytics

45 Does asset size determine growth rates?

46 Loan and share growth continue to rise in % Loan Growth vs Share Growth Data as of June % 10.7% 10.0% 8.0% 6.0% 4.8% 5.1% 4.0% 2.0% 0.0% Loan Growth Share Growth Source: Callahan s Peer-to-Peer Analytics

47 All asset peer groups posted double-digit growth in YTD loan originations versus the first half of 2014 Total YTD Loan Origination YOY Growth by Asset Peer Group Data as of June 30, 2015 Credit Unions under $250M Credit Unions $250M-$500M Credit Unions $500M-$1B Credit Unions over $1B YOY Growth in YTD Loan Originations 10.4% 17.9% 19.0% 23.5% Source: Callahan s Peer-to-Peer Analytics

48 Highest YOY loan origination growth comes from credit unions in the smallest asset class Distribution Percentile Whisker Plot of Loan Origination Growth Data as of June 30, % 75% 25% 5% Source: Callahan s Peer-to-Peer Analytics

49 There is no statistically significant relationship between asset size and key growth metrics Correlation Coefficient Table Data as of June 30, 2015 Loan Origination Growth Loan Growth Share Growth Member Growth Total Income Growth Assets ROA Correlation between asset size of a credit union and key growth and financial metrics is close to zero R value A rule of thumb: interpreting positive R vales and up Very strong positive relationship to Strong positive relationship Total positive correlation (R=1) to Moderate positive relationship to Weak positive relationship to No or negligible relationship No correlation (R=0) Source: Callahan s Peer-to-Peer Analytics

50 Example: Scatter plot shows that the correlation between assets and loan origination growth is null Scatter Plot Data as of June 30, 2015 Note: Extreme outliers for both categories are not shown in the picture but included in the leastsquare trend-line calculation. R = A least-squares trend line for all U.S. credit unions Source: Callahan s Peer-to-Peer Analytics

51 Leaders Credit Union Spencer Pratt Executive Vice President Leaders Credit Union Jackson, Tennessee As of June mo. Growth Assets $255.4M 13.4% Loans $213.2M 17.5% Shares $209.9M 12.1% Members 36, % Branches 6 Loans/Shares 101.6% ROA 1.31% Net Worth/Assets 12.6%

52 Millions Strong Historical Performance: Compound Annual Asset Growth Rate of 13.3% vs. Industry Average of 6.5% $300 $250 $200 $150 $100 Total Assets Data as of June 30 $86.9 $99.1 $108.3 $124.8 $130.1 $142.2 $170.3 $208.8 $225.3 $255.4 $50 $ Total Assets Source: Callahan s Peer-to-Peer Analytics

53 Leaders Credit Union Driving Philosophies Institution-wide goal to be relevant to our members Ability and willingness to leverage capital; actively pursue qualified opportunities Strive to deliver member value in areas overlooked by other financial institutions Drive growth via marginal improvements across multiple product lines and operating areas

54 Pursuing Performance Actively Building Member Relationships Front-line staff trained to identify opportunities Delivering value to new members through relationship pricing model Established call center to proactively engage members and pursue loan recapture Dedicated employee to manage and develop SEG relationships

55 Pursuing Performance Savings and Loan Product Innovation Internally Inspired 80/20 purchase mortgage product (80% 1 st / 20% 2 nd ) $4 million since product was launched in July 2014 Externally Inspired 5% 1-year CD

56 Pursuing Performance Excelling in Core Competencies Lending Started indirect lending program in 2008 Leveraged expertise by establishing CUSO to support other credit unions indirect lending programs Offer indirect lending consulting and assistance to four other credit unions Promote lending growth by increasing efficiencies, and consolidating back-office decisioning process Extended hours for better business

57 Proactively Seek Member Feedback The mobile app is easy to use and runs super smoothly Also, the electronic check deposit is the fastest I've seen, it's just as fast as in-branch deposits. So glad I switched to Leaders! I am so grateful for Leaders and the many benefits extended to me. This credit union treats members like family! I love the fact of not being just a number The different services they offer out-weighs those of regular banks This had to have been the best experience I've ever had with handling a loan. Love the fact that each time I walk in I'm personally greeted

58 Credit unions are finding new ways to increase income Year-over-year income growth soars, growing 7.1% since June 2014 Return on assets remains steady at 0.82% Net worth rises, reaching 11.4% in June 2015

59 Billions Income at credit unions growing 7.1% yearover-year despite steady interest rates $27.5 Total Income & YOY Income Growth Data as of June % 8.0% $ % $26.5 $26.0 $25.5 $ % -0.4% 2.1% 4.0% 2.0% 0.0% $24.5 $ % -2.7% $25.4 $24.7 $24.9 $24.8 $25.3 $ % -4.0% Total Income YOY Income Growth Source: Callahan s Peer-to-Peer Analytics

60 Net interest margin continues to move off all-time low but remains below operating expense ratio 3.30% 3.20% 3.10% 3.00% 2.90% 3.25% 3.17% 3.04% 3.14% Net Interest Margin vs. Operating Expense Ratio Data as of June % 2.96% 3.09% 3.07% 3.10% 2.80% 2.70% 2.77% 2.82% 2.84% 2.60% Operating Expense Ratio Net Interest Margin Source: Callahan s Peer-to-Peer Analytics

61 Other operating income grows on mortgage and interchange activity; fee income declines Non-Interest Income as a % of Avg. Assets Data as of June % 1.40% 1.20% 1.00% 0.80% 0.60% 0.40% 0.20% 0.00% 1.35% 1.38% 1.26% 1.26% 1.26% 1.30% 0.49% 0.54% 0.63% 0.68% 0.61% 0.68% 0.77% 0.72% 0.72% 0.70% 0.65% 0.62% Fee Income Other Operating Income Source: Callahan s Peer-to-Peer Analytics

62 Return on assets at 0.82% is still leading to higher capital levels 1.00% Return on Assets Data as of June % 0.60% 0.40% 0.79% 0.87% 0.86% 0.82% 0.82% 0.20% 0.45% 0.00% Source: Callahan s Peer-to-Peer Analytics

63 As net worth and capital ratios continue to rise 12% 10% Net Worth and Total Capital Data as of June % 11.1% 11.0% 11.2% 11.4% 11.5% 1.0% 1.0% 0.8% 0.7% 0.6% 0.6% 8% 6% 4% 9.9% 10.2% 10.2% 10.5% 10.8% 10.9% 2% 0% Net Worth Additional Capital Source: Callahan s Peer-to-Peer Analytics

64 Small credit unions median value for net income growth is comparable to that of mid-sized credit unions Distribution Percentile Whisker Plot of Net Income Growth Data as of June 30, % 75% 25% 10% Source: Callahan s Peer-to-Peer Analytics

65 Recovering payday loan borrower gives thanks for Exodus Lending On average borrower from a payday lender will pay an annual interest rate of 573% Exodus Lending, a 501(c)(3), is a substitute for payday lender focused on bringing financial education, freedom, and stability to payday borrowers Working with Holy Trinity Lutheran Church, Lutheran Social Service, and Sunrise Bank. Provides short-term loans Requires every borrower to have a form of income and a bank account Exodus adds $25 to borrowers bank accounts for every $100 they put away, not to exceed $400 Hopes to provide 100 loans in Source: StarTribune

66 Americans are struggling to raise funds, 50% cannot raise $2,000 in 30 days

67 Unbanked and Underbanked in the US

68 The Diversity of Economic Organizations is a vital reality of the US Capitalistic System

69 In the beginning no regulator and now it s all regulation The social mission in 1934 was people of small means ; Two-page (2) law with no regulation (or regulator) for safety and soundness. Over the years, the social mission eroded to being listed as findings in the preamble of H.R ( 1998) with a change to people of modest means. The current law has no provisions for enforcement of the social mission and the number of pages allocated to safety and soundness by a regulator is nearly 100%.

70 Second quarter 2015 foreshadows a record breaking year for credit unions Members relationships continue to grow Increasing auto and mortgage market share Record breaking loan originations Rising core deposits contribute to a growing loan portfolio Total income is growing, passing its highest second quarter total since 2010

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73 Tell us what you thought! Please answer our post event survey. One lucky survey respondent will win a Starbucks gift card. 73