dear clients and colleagues,dear clients and colleagues, at the start of each year, bancography...
TRANSCRIPT
Dear Clients and Colleagues,
At the start of each year, Bancography prepares its annual outlook for the financial services industry, examining deposit, demographic, and economic trends across the U.S. This year’s edition reprises many charts from prior years’ studies (archived at www.bancography.com/bancographyoutlook.html for comparison), but repeat readers will notice new exhibits addressing branch open and close patterns and the economic environment.
The exhibits herein reflect the 2012 FDIC and NCUA branch statistics, as well as 2012 demographics and forecasts, and reveal some interesting trends to consider in your strategic planning efforts.
As you review the report, give a call with any questions.
Thanks, as always, for your confidence in Bancography.
3
• Most data are presented in two groups:
– For the 30 largest metropolitan areas in the United States– For the 30 top-ranking markets on the specific attribute, among all
U.S. metros with at least 500,000 residents; this threshold impounds 102 metros
• The top 30 metros encompass:
– 45% of U.S. residents and 49% of U.S. deposits
• The 102 metros with population > 500,000 encompass:
– 66% of U.S. residents and 69% of U.S. deposits
• Need information on a market that’s not in the study or a measure that’s not included? Just give us a call and we’ll send the statistics you need.
DETAILS
4
• Data include both banks and credit unions.
• All data are as of June 30 in the year indicated.
• Note that substantial corporate and public funds deposits at large main offices can skew deposit statistics. To counter this, all calculations truncate individual branch deposits at $250M, i.e., any branch that owns more than $250M in deposits is given credit for only $250M in the deposit summary calculations. The resulting statistics offer a plausible estimate of retail and small business deposits.
• Note also that large office balance variances tend to smooth over time, so the four year trend graphs may be more useful than the one year graphs.
• All demographics are from EASI Demographics, June, 2012.
SOURCES, NOTES, ETC.
NATIONAL DEPOSIT GROWTH TRENDS
Since the ‘flight to quality’ boon that followed the 2008 economic crisis, consumer and small business deposit growth has remained low, though 2012 saw some rebound from the lows of 2010 and 2011. In contrast, institutional balances increased substantially in 2011 and 2012 as large corporations parked cash in financial institutions, hesitant to invest in a slow economy.
5
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
2006 2007 2008 2009 2010 2011 2012
% Deposit change, total
% Deposit change, retail / small business
-2%
0%
2%
4%
6%
8%W
ashi
ngto
n
San
Anto
nio
Hous
ton
Dalla
s
Balti
mor
e
Pitts
burg
h
Min
neap
olis
Portl
and
Bost
on
Seat
tle
Denv
er
Mia
mi
Phoe
nix
Orla
ndo
Detro
it
St. L
ouis
Las
Vega
s
Phila
delp
hia
Atla
nta
Cinc
inna
ti
San
Dieg
o
Clev
elan
d
New
Yor
k
Tam
pa
Sacr
amen
to
Chic
ago
Kans
as C
ity
Los
Ange
les
San
Fran
cisc
o
Rive
rsid
e
2011 - 2012
2010 - 2011
DEPOSIT CHANGE (%), TWO YEAR COMPARISONTop 30 MSAs
Almost all of the top 30 MSAs posted greater deposit growth in 2012 than in 2011, and only Riverside showed a decline over the past year. As in 2011, three of the four fastest growing markets were in Texas, and four of the top 10 along the Northeast corridor. The two large Pacific Northwest metros both ranked well, too. 6
-$2
$0
$2
$4
$6
$8
$10
$12
$14W
ashi
ngto
nN
ew Y
ork
Hous
ton
Dalla
sBo
ston
Mia
mi
Phila
delp
hia
Seat
tlePi
ttsbu
rgh
Balti
mor
eM
inne
apol
isDe
troit
San
Anto
nio
Atla
nta
Chic
ago
Phoe
nix
Denv
erSt
. Lou
isPo
rtlan
dLo
s An
gele
sSa
n Di
ego
Orla
ndo
Cinc
inna
tiCl
evel
and
Tam
paLa
s Ve
gas
Sacr
amen
toKa
nsas
City
San
Fran
cisc
oRi
vers
ide
$ Bi
llion
s
2011 - 2012
2010 - 2011
DEPOSIT CHANGE ($B), TWO YEAR COMPARISONTop 30 MSAs
$15B
In absolute terms, the large markets in the Northeast corridor continued to show the greatest deposit gains, capturing six of the top ten spots. Three large Sun Belt metros (Houston, Dallas, Miami) all ranked among the top six markets. 7
$0.0
$1.0
$2.0
$3.0
$4.0
$5.0
$6.0
$7.0
$8.0
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%Au
stin
, TX
Prov
o, U
T
Char
lest
on, S
C
Was
hing
ton
San
Anto
nio
Hous
ton
El P
aso,
TX
Salt
Lake
City
, UT
Durh
am, N
C
Okla
hom
a Ci
ty, O
K
Colo
rado
Spg
s, C
O
Gran
d Ra
pids
, MI
Omah
a, N
E-IA
Rale
igh,
NC
Dalla
s
Balti
mor
e
Sprin
gfie
ld, M
A
Portl
and,
ME
Pitts
burg
h
Ogde
n, U
T
Brid
gepo
rt, C
T
Poug
hkee
psie
, NY
Nas
hvill
e, T
N
Colu
mbu
s, O
H
Min
neap
olis
Portl
and,
OR
Littl
e Ro
ck, A
R
Bost
on
Tucs
on, A
Z
Seat
tle
% Deposit growth
Deposit change ($B)
DEPOSIT CHANGE (%)Top 30 MSAs among all metros with population > 500,000
Many smaller metros posted deposit gains comparable to the top large markets, with the top gainers scattered across the country in markets as diverse as Austin, Provo, and Charleston. Contractions in state employment were evident, as fewer state capitals ranked highly than in prior years – though Austin, Salt Lake City, Oklahoma City, and Raleigh maintained top 15 positions.
$12.5B
8
DEPOSIT CHANGE (%), 2008 – 2012Top 30 MSAs
Over the past four years, Texas and Northeast corridor markets captured seven of the top eight growth spots. In contrast, the long-term performance shows the severe impact of the housing slowdown in once high-flying markets (Las Vegas, Riverside, Phoenix, Atlanta). A revival in manufacturing has moved Midwest metros such as Detroit, Cleveland, and Cincinnati upward in the rankings.
-10%
-5%
0%
5%
10%
15%
20%
25%
30%W
ashi
ngto
n
San
Anto
nio
Hous
ton
Bost
on
Dalla
s
Portl
and
Balti
mor
e
Phila
delp
hia
Min
neap
olis
St. L
ouis
New
Yor
k
Pitts
burg
h
Denv
er
Cinc
inna
ti
Seat
tle
Mia
mi
Orla
ndo
Kans
as C
ity
San
Fran
cisc
o
Phoe
nix
Detro
it
San
Dieg
o
Tam
pa
Sacr
amen
to
Clev
elan
d
Chic
ago
Atla
nta
Los
Ange
les
Rive
rsid
e
Las
Vega
s
9
-$4
$0
$4
$8
$12
$16
$20
$24
$28
$32
$36
$40N
ew Y
ork
Was
hing
ton
Bost
on
Dalla
s
Hous
ton
Phila
delp
hia
Mia
mi
San
Fran
cisc
o
Los
Ange
les
Chic
ago
Min
neap
olis
Balti
mor
e
St. L
ouis
San
Anto
nio
Seat
tle
Pitts
burg
h
Portl
and
Denv
er
Detro
it
Cinc
inna
ti
Phoe
nix
San
Dieg
o
Atla
nta
Kans
as C
ity
Orla
ndo
Tam
pa
Clev
elan
d
Sacr
amen
to
Las
Vega
s
Rive
rsid
e
$ Bi
llion
s
DEPOSIT CHANGE ($B), 2008 – 2012Top 30 MSAs
$65B
Large markets in the Northeast corridor showed the highest absolute deposit gains over the past four years, but two large Texas metros and two major California metros also ranked among the top ten, with Chicago and Miami rounding out that top group. 10
DEPOSIT CHANGE (%), 2008 – 2012Top 30 MSAs among all metros with population > 500,000
A longer-term view shows that many of the fastest growing markets were in the South or Southwest, including the five largest MSAs in Texas. State capitals fare better than in the one year view, confirming the impact of recent employment declines in the public sector.
10%
15%
20%
25%
30%
35%Br
idge
port,
CT
Rale
igh,
NC
Aust
in, T
X
Was
hing
ton
San
Anto
nio
Harri
sbur
g, P
A
Okla
hom
a Ci
ty, O
K
El P
aso,
TX
Hous
ton
Jack
son,
MS
Durh
am, N
C
Bost
on
Dalla
s
Mel
bour
ne, F
L
Littl
e Ro
ck, A
R
Omah
a, N
E-IA
Prov
o, U
T
Nas
hvill
e, T
N
Wor
cest
er, M
A
Sprin
gfie
ld, M
A
Wic
hita
, KS
Portl
and,
OR
Portl
and,
ME
Balti
mor
e
Albu
quer
que,
NM
Poug
hkee
psie
, NY
Bato
n Ro
uge,
LA
Gran
d Ra
pids
, MI
Phila
delp
hia
Hartf
ord,
CT
11
12
• The maps on the next two pages show deposit growth and unemployment rates by state. Note the high correlation between the two statistics. Driven by expanding energy production, North Dakota and adjoining states in the upper Midwest show the nation’s lowest unemployment rates and also the highest deposit growth. Other states with strong energy economies (Texas, Alaska, Montana) also fared well on both dimensions.
• Conversely, states with high unemployment such as California, Illinois, and several Southeast states suffered corresponding low deposit growth.
DEPOSIT GROWTH AND UNEMPLOYMENT
DEPOSIT GROWTH BY STATE
13
UNEMPLOYMENT RATE BY STATE
Source Bureau of Labor Statistics14
UNEMPLOYMENT AND DEPOSIT GROWTH
R² = 0.50
-2%
0%
2%
4%
6%
8%
10%
12%
3% 4% 5% 6% 7% 8% 9% 10% 11%
Depo
sit g
row
th, 2
011
-201
2
2012 Average Unemployment
The correlation between unemployment and deposit growth is also evident in the best fit regression line in the graph above, where each point represents one of the 50 states. On average, every one percentage point reduction in unemployment increases deposit growth by 0.7 percentage points.
15
UNEMPLOYMENT AND DEPOSIT GROWTH
Given the relationship between employment levels and deposit growth, statewide trends provide valuable insights. The chart shows the Dec 2011 and Dec 2012 unemployment rates for each state. Green bars show improvement from the top (2011) to the bottom of the bar (2012 ); red bars indicate backsliding from bottom (2011) to top (2012). Nevada and Florida showed the greatest improvement in the past year, but unemployment levels remain at troubling levels in both states. 16
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%N
D NE
SD IA WY OK VT HI UT KS LA VA MN
MT
NH TX N
M ID AK WI
MD
MO OH MA DE AL AR ME
WV
WA TN CO AZ PA FL KY IN NY SC OR DC MS
GA CT IL MI
NC NJ
CA NV RI
Unem
ploy
men
t rat
e
17
• As large banks wrestled with financial troubles and image issues over the past four years, credit unions and community banks outgrew those firms. National banks rebounded somewhat in 2011, and joined credit unions with the top growth rates in 2012, confirming that brand differentiation now requires more than simply a “we’re not them” message.
• Table classification definitions– National: Bank of America, Wells Fargo, Chase, Citibank– Super-regional: operating in 10+ states, or spanning multiple regions, such as Key, US Bank and SunTrust– Regional banks: operating in four to nine mostly contiguous states within a single region of the country,
usually 200+ branches, e.g., Associated Bank, Synovus and Union Bank– Super-community banks: serving only one to three states; also includes most of institutions in the 100 – 150
branch tier, e.g., FNB Pennsylvania, Prosperity Bank and Wesbanco– Community banks: deposits less than $1B, geographically compact franchise
DEPOSIT GROWTH BY INDUSTRY TIER
BRANCH DEPOSIT GROWTH
The median deposit change among mature (open at least five years) freestanding branches last year was $850m. That statistic has hovered between flat and $1M over the past six years, confirming the difficulty of generating deposit growth once a branch leaves its startup phase. The $3M point offers a good boundary for demarcating top-tier performance as in most years, about one in four branches surpasses that level in deposit growth.
18
0%
5%
10%
15%
20%
25%
30%
35%
$0
$200
$400
$600
$800
$1,000
$1,200
2007 2008 2009 2010 2011 2012
Median deposit change, mature branches ($000s)
% Branches with deposit change > $3M
BRANCHING ACTIVITY OF U.S. BANKS
The inventory of branches in the U.S. has declined by almost 2,000 units over the past three years, including a decline of 750 units in 2012. However, the pace of new branch opens revived from 2011 lows last year – even as the pace of closes increased by a greater degree.
19
-2,000
-1,000
0
1,000
2,000
3,000
4,000
5,000
6,000
2005 2006 2007 2008 2009 2010 2011 2012
Total opensTotal closesNet opens
BRANCHING ACTIVITY OF U.S. BANKS
The industry’s 750 unit branch decline was rooted in a limited number of institutions, mostly regional and national banks. Just six banks accounted for half of the total unit decline, and the 17 banks that closed 15 or more branches (net of opens) accounted for more than 80% of the industry’s aggregate branch loss. Most of these institutions pared smaller branches; the average deposits of the closed branches generally falls well below the industry’s $47M average and $36M median branch size.
20
THE SCOPE OF U.S. BRANCH NETWORKS
In about two-thirds of the top 30 metros, the average size of the market leaders’ branch networks has declined over the past four years (2008 - 2012); in about one-third it has increased. For this study, the market leaders are defined as the owners of the five largest networks by number of branches. Most of the increases occurred in high growth metros on the west coast, where branch concentration levels are lower. The largest contractions occurred in older markets and in markets that saw significant merger activity.
21-35
-30
-25
-20
-15
-10
-5
0
5
10
Rive
rsid
ePo
rtlan
dSe
attle
Los
Ange
les
San
Dieg
oSa
n Fr
anci
sco
Mia
mi
Clev
elan
dKa
nsas
City
Was
hing
ton
Las
Vega
sSa
cram
ento
Min
neap
olis
St. L
ouis
Denv
erOr
land
oBa
ltim
ore
Phoe
nix
Bost
onPi
ttsbu
rgh
Cinc
inna
tiSa
n An
toni
oAt
lant
aHo
usto
nDe
troit
Tam
paCh
icag
oPh
ilade
lphi
aDa
llas
New
Yor
k
Aver
age
four
yea
r cha
nge,
top
five
bran
ch n
etw
orks
THE SCOPE OF U.S. BRANCH NETWORKS
While the statistics on the preceding page (replicated here as the light blue bars) indicate that in many markets the market leaders are willing to compete with fewer branches, the chart below illustrates that the magnitude of the changes – expansions or contractions – remains minimal relative to the absolute scope of the leaders’ current networks (shown as dark blue bars).
22
-50
0
50
100
150
200
250
300
Rive
rsid
e
Portl
and
Seat
tle
Los
Ange
les
San
Dieg
o
San
Fran
cisc
oM
iam
i
Clev
elan
d
Kans
as C
ity
Was
hing
ton
Las
Vega
s
Sacr
amen
to
Min
neap
olis
St. L
ouis
Denv
er
Orla
ndo
Balti
mor
e
Phoe
nix
Bost
onPi
ttsbu
rgh
Cinc
inna
ti
San
Anto
nio
Atla
nta
Hous
ton
Detro
it
Tam
pa
Chic
ago
Phila
delp
hia
Dalla
s
New
Yor
k
Average four year change, topfive branch networls
Average size, top five branchnetworks, 2012
492
BRANCHING ACTIVITY OF U.S. BANKS, 2011 – 2012
About 88% of U.S. banks left their branch networks unchanged last year. Of those banks that adjusted their network size, slightly more reduced branches than added branches. But as in the prior year, the statistics were close, with roughly the same number of institutions choosing to grow versus shrink their branch networks. The lack of a clear direction likely reflects the broad differences in regional economies, market growth, and institution health across the industry.
0% 20% 40% 60% 80% 100%US banks: Branch network activity, 2011 - 2012
Reduced 457No change 6,350Added 437
23
PROJECTED HOUSEHOLD GROWTH, 2012 - 2017Top 30 MSAs
As the economy recovers, household growth is reviving, especially in markets that suffered severe slowdowns during the recession (Las Vegas, Phoenix, Riverside). Three of the ten fastest growing large metros are in Texas, and nine of the top ten are located west of the Mississippi River, with Washington, DC the lone exception.
24
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%Sa
n An
toni
o
Orla
ndo
Las
Vega
s
Phoe
nix
Hous
ton
Dalla
s
Rive
rsid
e
Portl
and
Was
hing
ton
Seat
tle
Denv
er
Tam
pa
Atla
nta
Sacr
amen
to
Bost
on
San
Fran
cisc
o
San
Dieg
o
Mia
mi
Kans
as C
ity
Balti
mor
e
Min
neap
olis
Los
Ange
les
Phila
delp
hia
New
Yor
k
Chic
ago
St. L
ouis
Clev
elan
d
Cinc
inna
ti
Detro
it
Pitts
burg
h
PROJECTED HOUSEHOLD GROWTH, 2012 - 2017Top 30 MSAs among all metros with population > 500,000
Warm weather locales dominate the list of fastest-growing metros, with five Texas markets and four markets in the Carolinas ranking among the top 30 MSAs by household growth forecast. The Rocky Mountain region is well represented, too, by three markets in Utah and four markets elsewhere in the region. In contrast, only two markets from the Northeast reach the list, with Lancaster and Harrisburg, Pennsylvania in positions 25 and 30.
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%Sa
n An
toni
o
Aust
in, T
X
Rale
igh,
NC
Prov
o, U
T
New
Orle
ans
Orla
ndo
Las
Vega
s
Phoe
nix
Colu
mbi
a, S
C
Ogde
n, U
T
Bake
rsfie
ld, C
A
El P
aso,
TX
Hous
ton
Char
lest
on, S
C
Cape
Cor
al, F
L
Dalla
s
Bois
e, ID
Rive
rsid
e
Rich
mon
d, V
A
Tucs
on, A
Z
Nas
hvill
e, T
N
Durh
am, N
C
Augu
sta,
GA
Salt
Lake
City
Lanc
aste
r, PA
Char
lotte
, NC
Colo
rado
Spg
s
Portl
and,
OR
Albu
quer
que
Harri
sbur
g, P
A
25
PROJECTED HOUSEHOLD GROWTH, 2012 - 2017
The Pacific Northwest, Texas, and the south Atlantic coastal states show the highest household growth forecasts over the next five years. In contrast, note the low forecasts along the Mississippi River Valley, through much of the upper Midwest, and across the Appalachian regions.
26
AGE DISTRIBUTION
California and much of the Rocky Mountain region feature younger household bases, as do the major metros of the Northeast corridor. The household base skews older in the upper Midwest, as well as in coastal retirement communities. The coastal retirement phenomenon is not exclusive to warm climes; note the areas in Maine, northern Michigan, and on the Washington and Oregon coasts. 27
MEDIAN HOUSEHOLD INCOMETop 30 MSAs among all metros with population > 500,000
The Northeast corridor dominates the list of most affluent metros, and numerous California MSAs rank well, too. The top-ranking Midwest and Northwest markets fall a level below the Northeast and West coast leaders, and the median income in the top-ranking Southern market, Raleigh, falls 30% below that of Washington.
$50,000
$55,000
$60,000
$65,000
$70,000
$75,000
$80,000
$85,000
$90,000
$95,000W
ashi
ngto
nBr
idge
port,
CT
San
Jose
, CA
Oxna
rd, C
ASa
n Fr
anci
sco
Poug
hkee
psie
, NY
Bost
onHa
rtfor
d, C
TBa
ltim
ore
Min
neap
olis
Seat
tleW
orce
ster
, MA
New
Yor
kHo
nolu
lu, H
ISa
n Di
ego
New
Hav
en, C
TOd
gen,
UT
Chic
ago
Denv
erRa
leig
h, N
CPh
ilade
lphi
aSa
cram
ento
Mad
ison
, WI
Salt
Lake
City
, UT
Aust
in, T
XLo
s An
gele
sDe
s M
oine
s, IA
Prov
o, U
TAl
bany
, NY
Virg
inia
Bea
ch
28
DEPOSITS PER HOUSEHOLDTop 30 MSAs
The largest, long established metros such as Washington, New York, Boston, San Francisco, and Los Angeles show higher deposits per household than newer markets such as Orlando, Phoenix, Las Vegas and Riverside – San Bernardino.
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000W
ashi
ngto
n
New
Yor
k
Bost
on
San
Fran
cisc
o
Los
Ange
les
Mia
mi
Chic
ago
Phila
delp
hia
Pitts
burg
h
San
Dieg
o
St. L
ouis
Seat
tle
Balti
mor
e
Hous
ton
Clev
elan
d
Kans
as C
ity
Detro
it
Min
neap
olis
Dalla
s
Tam
pa
Denv
er
Sacr
amen
to
Cinc
inna
ti
San
Anto
nio
Atla
nta
Portl
and,
OR
Orla
ndo
Phoe
nix
Las
Vega
s
Rive
rsid
e
29
DEPOSITS PER HOUSEHOLDTop 30 MSAs among all metros with population > 500,000
Income translates directly into deposits; note the high overlap between the highest-income markets on the prior pages and the top deposits per household markets in the graph above; five markets rank in the top ten on both measures.
$0
$10,000
$20,000
$30,000
$40,000
$50,000
$60,000
$70,000
$80,000
$90,000
$100,000Br
idge
port,
CT
Rale
igh,
NC
San
Jose
. CA
Was
hing
ton
Harri
sbur
g, P
AN
ew Y
ork
Bost
onSa
n Fr
anci
sco
Hono
lulu
, HI
Los
Ange
les
Mad
ison
, WI
Salt
Lake
City
, UT
Hartf
ord,
CT
Mia
mi
Chic
ago
Phila
delp
hia
Poug
hkee
psie
, NY
Oxna
rd, C
AOg
den,
UT
Sprin
gfie
ld, M
AAl
bany
, NY
Pitts
burg
hN
ew H
aven
, CT
Knox
ville
, TN
San
Dieg
oPr
ovid
ence
, RI
St. L
ouis
Portl
and,
ME
Brad
ento
n, F
LAl
lent
own,
PA
30
INCOME DISTRIBUTION
Affluence is concentrated in major metros, especially along the Northeast corridor from Washington, DC to Boston. Chicago, Minneapolis and parts of Texas, California, and the Pacific Northwest rank highly, too; while the South and Appalachian regions remain among the least affluent areas.
31
AGGREGATE INCOME GROWTH, 2012 – 2017Top 30 MSAs among all metros with population > 500,000
The rate of aggregate income growth impounds the rate of household growth, the projected level of affluence and the aging of the household base. Aggregate income is projected to grow fastest in economically strong states such as Texas and the Rocky Mountain region, which combine to hold all but one of the top 11 spots.
25%
27%
29%
31%
33%
35%
37%
39%
41%Au
stin
, TX
McA
llen,
TX
Cape
Cor
al, F
L
El P
aso,
TX
Bois
e, ID
Prov
o, U
T
Colo
rado
Spg
s
Ogde
n, U
T
Salt
Lake
City
San
Anto
nio
Denv
er
Char
lest
on, S
C
Albu
quer
que
Des
Moi
nes,
IA
Phoe
nix
Mad
ison
, WI
Brad
ento
n, F
L
Rale
igh,
NC
Portl
and,
OR
Min
neap
olis
Rive
rsid
e
Portl
and,
ME
Orla
ndo
Oxna
rd, C
A
Nas
hvill
e, T
N
Seat
tle
Tucs
on, A
Z
Bake
rsfie
ld, C
A
Omah
a, N
E
Mod
esto
, CA
32
BRANCH CONCENTRATION
Long-established markets in the Northeast and Midwest are more concentrated, with one branch for every 900 – 1,000 households. California and other Western metros remain less concentrated; many contain only one branch for every 1,500 households.
US overall
0
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000Ri
vers
ide
Las
Vega
s
Sacr
amen
to
Phoe
nix
San
Dieg
o
Los
Ange
les
Min
neap
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San
Fran
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pa
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it
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Seat
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New
Yor
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ton
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ndo
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delp
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Was
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on
St. L
ouis
Clev
elan
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Cinc
inna
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Pitts
burg
h
Kans
as C
ity
33
DEPOSITS PER BRANCHTop 30 MSAs
The top markets in terms of deposits per branch reach that status through a combination of high affluence or low to moderate branch concentration. The largest average branch size is thus found in markets that rank highly on both attributes (San Francisco, Los Angeles). In Washington and New York, affluence is high enough to offset severe branch concentration.
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
San
Fran
cisc
o
Los
Ange
les
Was
hing
ton
New
Yor
k
San
Dieg
o
Bost
on
Mia
mi
Sacr
amen
to
Min
neap
olis
Seat
tle
Phila
delp
hia
Detro
it
Tam
pa
Chic
ago
Las
Vega
s
San
Anto
nio
Balti
mor
e
Dalla
s
Rive
rsid
e
Atla
nta
Denv
er
Hous
ton
Phoe
nix
St. L
ouis
Portl
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OR
Pitts
burg
h
Clev
elan
d
Orla
ndo
Kans
as C
ity
Cinc
inna
ti
$M
34
DEPOSITS PER BRANCHTop 30 MSAs among all metros with population > 500,000
With their greater aggregate wealth, large markets capture most of the top spots in a ranking of deposits per branch. San Jose, Raleigh, Honolulu , Ogden, and Oxnard – all high income communities – lead a group of mostly coastal smaller markets that reach top rankings. 35
$0
$20
$40
$60
$80
$100
$120
$140
San
Jose
. CA
Rale
igh,
NC
San
Fran
cisc
o
Los
Ange
les
Hono
lulu
, HI
Was
hing
ton
New
Yor
k
Ogde
n, U
T
Oxna
rd, C
A
San
Dieg
o
Bost
on
Mia
mi
Brid
gepo
rt, C
T
Sacr
amen
to
Bake
rsfie
ld, C
A
Mel
bour
ne, F
L
Albu
quer
que,
NM
Min
neap
olis
Hartf
ord,
CT
Fres
no, C
A
Harri
sbur
g, P
A
Tucs
on, A
Z
Seat
tle
Phila
delp
hia
Prov
iden
ce, R
I
Mod
esto
, CA
Detro
it
Salt
Lake
City
, UT
Tam
pa
Chic
ago
$M
36
• Although most economic indicators are trending positively, the pace of the recovery varies by region. In economically healthier areas, lending demand is reviving. While this is certainly beneficial to the financial institutions in those regions, bankers must reestablish sales momentum to capitalize on the recovery. Lenders conditioned to sluggish demand and organizations that relentlessly focused on problem assets may find it difficult to return to sales mode without some level of internal reconfiguration. Bank executives must clearly set a tone that the institution’s primary mission has shifted from balance sheet repair back to portfolio growth.
• Further, reviving loan demand could bring about liquidity challenges for the first time since before the recession. The institutions that are best attuned to the economic conditions of their markets will stand the best chance of capitalizing when loan demand returns to historic norms. But keep in mind that as loan to deposit ratios rise, maintaining adequate liquidity will likely demand a higher cost of funds than the industry enjoys today.
ADVICE FOR THE YEAR AHEAD
37
• Indicators for consumer lending remain mixed: consumer credit has rebounded to all time high levels, but mortgage and home equity balances continue to decline. But the ratio of owners’ equity to real estate value is now at its highest level since 2007, so home-owning consumers may soon feel more assured in assuming additional leverage, i.e., raising home equity balances.
• The housing sector continues to improve in terms of new and existing home sales, average sales prices, and inventory levels. However, the historic low-rate environment may have conditioned consumers to view any mortgage rate above 5% as untenably high, so any substantive increase in rates could counteract the present positive trends. In markets that enjoyed excessive pre-recession housing development, the resulting inventory overhang will keep prices moderate, and bankers can build enduring relationships by helping first-time homebuyers capitalize on the opportunity.
ADVICE FOR THE YEAR AHEAD
38
• In long established markets, branch closures and consolidations may create opportunities for community banks and credit unions to purchase or lease sites at favorable terms. But in less concentrated markets, market leaders continue to add branches and the cost of keeping pace may prove prohibitive. In such markets, smaller institutions may be better served pursuing only specific corridors rather than marketwide branching, or focusing on specific, non-retail lines of business such as wealth management or business banking.
• At the height of the financial crisis, some industry analysts predicted a ‘meltdown’ in commercial real estate on a par with the housing crisis that occurred during the past four years. But commercial real estate declines never reached the magnitude of the housing downturn, and as a result, the cost of potential branch sites – both freestanding and in strip shopping centers – remains near historic norms. Still, store closures by troubled retailers (e.g., Best Buy, Barnes and Noble) could adversely affect specific shopping centers, and bankers must carefully evaluate the long term viability of the stores anchoring shopping centers that hold proposed branch sites.
ADVICE FOR THE YEAR AHEAD
39
• The FDIC closed 51 banks in 2012, down from 92 in 2011 and about 150 in 2009 and 2010. If the downward trend continues, not only will there be fewer growth opportunities; but the price for FDIC-assisted transactions will likely increase. Thus, banks seeking to grow quickly will need to turn to open-bank acquisitions, or purchases of branch ‘carve outs’ from other banks looking to strategically exit certain markets.
• Even as the industry continues to debate the role of the branch in the long term future, it remains the near exclusive channel for sales origination in the immediate term. Effective banks must continue to expand their networks within target markets to provide both awareness and consumer convenience. However, with the economic recovery just beginning to gain traction in many markets, new branch balance growth may lag historic norms. This underscores the importance of judicious branching; adding branch capacity only incrementally, and employing service models that keep occupancy and staff costs to a minimum during the start up phase of new branches.
ADVICE FOR THE YEAR AHEAD
