Strictly Private & Confidential
Prepared for:
Strategic Considerations For Growth MindedCredit Unions
Peter Duffy
May 19, 2016
Managing Director(212) 466‐[email protected]
Moss Adams CU Conference‐ Portland, Or.
This presentation, and the oral or video presentation that supplements it, have been developed by and areproprietary to Sandler O'Neill & Partners, L.P. and were prepared exclusively for the benefit and internal use of therecipient. Neither the printed presentation nor the oral or video presentation that supplements it, nor any of theircontents, may be reproduced, distributed or used for any other purpose without the prior written consent of SandlerO'Neill & Partners, L.P.
The analyses contained herein rely upon information obtained from the recipient or from public sources, the accuracyof which has not been verified, and cannot be assured, by Sandler O'Neill & Partners, L.P. Moreover, many of theprojections and financial analyses herein are based on estimated financial performance prepared by or inconsultation with the recipient and are intended only to suggest reasonable ranges of results. Finally, the printedpresentation is incomplete without the oral or video presentation that supplements it.
Sandler O’Neill & Partners, L.P. prohibits employees from offering, directly or indirectly, favorable research, a specificrating or a specific price target, or offering or threatening to change research, a rating or a price target to a companyas consideration or inducement for the receipt of business or compensation. The Firm also prohibits researchanalysts from being compensated for their involvement in, or based upon, specific investment banking transactions.
Sandler O'Neill & Partners, L.P. is a limited partnership, the sole general partner of which is Sandler O'Neill & PartnersCorp., a New York corporation. Sandler O'Neill & Partners, L.P. is a registered broker‐dealer and a member of theFinancial Industry Regulatory Authority. Sandler O'Neill Mortgage Finance L.P. is an indirect subsidiary of SandlerO'Neill & Partners Corp.
This material is protected under applicable copyright laws and does not carry any rights of publication or disclosure.
GENERAL INFORMATION AND LIMITATIONS
2
Our Business Lines
(1) Does not combine the results of advisors which have merged until the date such merger was completed Source: SNL Financial
308 Employees, Including 49 PartnersNew York Atlanta Boston Chicago San Francisco
Balance Sheet Management
• 82 Professionals
• Core expertise in analysis / strategy for securities, loans, deposits and wholesale funding
• MBS, CMO, Agency, Corporates, ABS & CMBS Sales/Trading
• Interest Rate Products desk focused on strategy, execution and monitoring of interest rate derivatives, repo, brokered CD’s, sweep MMDA and FHLB advances
• Holistic approach to balance sheet strategy with Asset / Liability Management focus
Equity Sales & Trading
• 30 Professionals
• Market maker in more than 400 stocks
• Relationships with key institutional investors, with particular focus on buyers of financial institution securities
• Facilitator of share repurchase programs
Research
• 33 Professionals
• 17 Research Analysts covering 305 financial services companies
• 8 Sectors Covered
‐ Banks & Thrifts
‐ Specialty Finance
‐ eFinance
‐ Insurance
‐ Broker/ Dealers
‐ Asset Management
‐ REITs
‐ Mortgage REITs
Sandler O’Neill + Partners, L.P.
Capital Markets
• 8 Professionals
• Flexibility in capital issuance: Equity, Fixed Income
• Leading financial institutions market strategist
• Leader in capital offerings with proceeds of $205.0 billion since 2007
• Managed more bank and thrift equity offerings (135) than any other investment bank since 2009¹
• Managed more subordinated debt offerings for banks under $25 billion in assets (22) than any other investment bank since 2014
Recapitalizationand AdvisoryServices Group
• 5 Professionals• Provide advice
related to recaps and restructurings, M&A, capital raising and other advisory services, primarily to the middle market
Investment Banking
• 76 Bankers
• Leading M&A Advisor
‐ 2015 YTD #1 by number of deals in all financial services (38) and #1 in banks & thrifts (27)
‐ 2014 #1 by number of deals in all financial services (74) and banks & thrifts (59)
MortgageFinance
• 14 Professionals
• Advise on sale, securitization and acquisition for all bank asset classes
• Portfolio analytics and valuation
Conversions
• Conversions: 9 dedicated professionals
• Leading advisor for conversion offerings ‐ 108 offerings since 1995 with proceeds of over $17 billion
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• Invited to visit the NCUA Board, Capital Markets, Office of Examination and Insurance, including:
Working Group for Supplemental Capital Panel Participant‐ discussing IRR Balance sheet hedgingRBC‐ both before and after the rule (includes modeling session)
• Invited multiple times to the US Treasury and FDIC/OCC/FRB
• Have conducted 3,000+ Senior Management/BOD/Conference sessions for CUs since 2001.
• Our clients say we have kept them ahead of the change that has been and is occurring. What change?
Sandler O’Neill and Credit Unions
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Sandler O’Neill & Credit Unions‐
• Advised:
• CUs and NCUA regarding the issues emanating from the “Tale of Two Cities”, the bifurcation of credit unions (2005 CUES “On‐Line column)
• CUs and NCUA of a “credit bubble” in the US and CUs. (August, 2004, “How Consumer’s Debt Affect CUs”; November, 2005, “We’ve Built A House of Cards”)
• Losses in CCUs would likely exceed $10B
• CUs would likely face new capital requirements & subtraction of the NCUSIF deposit from CU capital. (January, 2011, “Running On Empty” client note)
• Large CUs would likely be included in Federal Reserve “stress test”
• CUs would likely see “S” added to CAMEL
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Sandler O’Neill & Credit Unions‐
• Advised:
• One or more of the largest banks would aggressively market for and price core deposits as a way to satisfy regulation related to LCR/NSFR; thus further eroding margins for all.
• Has not happened, yet.
• Recent American Banker article: “NSFR would require about 30 of the country’s biggest banks to adjust their balance sheets…”
• Regulation by three agencies: the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency.
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Considerations Influencing Growth and Earnings
Regulatory Trends‐ standardization of regulation, supervision, capitaltreatment and insurance fund for banks and CUs
Credit Union access to supplemental capital
Economy of Scale‐ implications for: the value proposition, asset andearnings growth, ability to comply with current/new regulations
Merger Trends/Considerations‐ the most un‐level “playing field”…thecompetitive implication resulting from a lack of meaningful CU mergers while banks raise capital and add scale thru acquisition
Balance Sheet Management‐Margin, Capital, Liquidity and IRR‐ balancesheet solutions for generating incremental earnings
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From “Only the Paranoid Survive” by Andrew S. Grove; Intel Corporation
“…a strategic inflection point is a time in the life of a business when its fundamentals are about to change. That change can mean an opportunity to rise to new heights. But it may just as likely signal the beginning of the end…..”
• Is consolidation the new inflection point for “banking”?
• The difference in your CU between today and 5 years from now?
Economy of Scale And Banking’s Next Inflection Point?
Source:
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Regulatory Trends and Considerations
The “do‐nothing” Congress did plenty with Dodd‐Frank; and most of it isshaking up the business model of banks and credit unions…more so for credit unions.
Only when the dots are connected, is the trend clear…
…the US Treasury Blueprint for a Modernized Financial Regulatory Structure (“Blueprint”) is for real and Congress is enabling disruptors into the consumer finance business at the expense of banks and CUs.
The business is at an inflection point and the dots are not being connected!
* Dodd‐Frank 2300 pages; July, 2010 includes CFPB. Glass Steagal‐ 37 pages
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The Blueprint And “Federal Charter Convergence”
Commercial banks, thrifts and CUs, above an asset size, have evolved andare difficult to distinguish from each other.Treasury recommended to: 1. Establish a “business conduct regulator” for consumer protection.2. Eliminate the federal commercial bank, federal thrift and federal CU charters and replace with the FIDI charter.
These recommendations have been implemented: CFPB establishedOTS merged into OCCAll of the major new & proposed regulations for CUs standardize your supervision with banks
US Treasury
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First Mortgages / Total Loans‐ Convergence
Notes: (1) All institutions screened for Total Assets between $100 million and up to Navy FCU at year end (2) Trend data reflects annual averages(3) First Mortgages for Banks defined as Total 1‐4 Family Loans
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015Banks 37.3% 37.0% 37.2% 37.1% 36.6% 35.9% 35.6% 34.9% 34.4% 33.0% 32.6% 31.5% 30.5% 29.9% 30.5% 31.1% 31.4% 33.6% 31.4% 31.4% 26.7%Credit Unions 21.2% 20.6% 20.9% 21.8% 24.0% 25.0% 24.5% 26.2% 27.6% 29.0% 29.1% 29.4% 30.1% 31.6% 33.5% 34.7% 36.3% 38.8% 38.7% 38.1% 37.4%Difference 0.16% 0.16% 0.16% 0.15% 0.13% 0.11% 0.11% 0.09% 0.07% 0.04% 0.03% 0.02% 0.00% -0.02 -0.03 -0.04 -0.05 -0.05 -0.07 -0.07 -0.11
Banks
Credit Unions
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
Year
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• “Congress established the FCU charter…to make credit available to people of small means through a national system of cooperative credit. Over time…the field of membership, has become less meaningful. Some credit unions have arguably moved away from their original mission of making credit available to people of small means, and in many cases they provide services which are difficult to distinguish from other depository institutions.”
• U.S. Treasury Blueprint for a Modernized Financial Regulatory Structure, March 2009, page 159.
The “Blueprint’s” View of CU’s Mission
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“The Blueprint”‐ still alive
GAO‐“Congress could consider consolidating the number of federal agenciesinvolved in…depository institutions…transferring the remaining…consumer protection authorities over large depository institutions to CFPB…”
improve efficienciesbetter hold regulators accountableeliminate overlap and inconsistencies of supervision for like institutions, products and services
FINANCIAL REGULATION: Complex and Fragmented Structure Could Be Streamlined to Improve Effectiveness. Report to Congressional Requesters. GAO‐16‐175.
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• “(What) we don't want to see emerge (is) the development of multiple sets of standards, multiple guidance.“Deputy Treasury Secretary Sarah Bloom Raskin
• “Financial services companies should conduct thorough reviews of their business partners…"Who are their third‐party service providers, who are the contractors of these providers?" Maria Filipakis, executive deputy superintendent of capital markets;
The New York State Department of Financial Services.
Cyber Security Coordination, Standardization
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2015‐• 480 CUs $500M+ in assets (72% of industry assets).
– ~40 “single sponsor”– Most want a level field with banks on MBL, capital and FOM
• The remaining 5,609 (28% of industry assets) are not seeking regulations on par with banks
• Common interest to both groups is maintaining the federal tax exemption; neither are enjoying regulatory relief or parity with banks
Bifurcation of CUs More Pronounced Each Year Since 1998
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Walmart :‐Walmart has 11,053 stores welcoming 250 million visitors per week and seeks millions of checking accounts and no interchange income.‐Walmart generated $470+ billion overall sales in 2014.
‐Apple Pay, Google, PayPal, USPS, Lending Tree, Lending Club, OnDeck.
Goldman Sachs added $16B in deposits via acquisition of GE Capital deposits…part of a broader strategy by Goldman to collect more low‐cost deposits it can then lend out to clients across each of its businesses…
American Banker April 16, 2015; USA Today, May 28, 2015.
Walmart Company records
“Disruptors” Have Access to Bank/CU Customers And Access To Capital
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• Join them & have them join you
A Strategy For Dealing with “Disruptors”?
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The Credit Union Paradox
“A Tale of Two Cities” and regulatory trends combine with market facts to create a paradox for CUs:
What is the regulatory regime, capital adequacy rule and the trade association structure ……capable of dealing effectively with:
“above an asset size” CUs are difficult to distinguish from banks but easyto distinguish from small CUs?
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The Pending NCUSIF Challenge
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• US Treasury has said:
• “The Share Insurance Fund counts the 1 percent deposit as its reserves. (But) credit unions count the 1 percent deposit as an asset on their own books, which makes their reported net worth higher than it would be than if they had expensed the deposit. This treatment results in……double counting”
The Pending NCUSIF Challenge
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NCUA’s 2016‐2017 Annual Performance Plan‐ Legislative Priorities
The legislative priorities:
1. “Providing NCUA with vendor authority…achieves parity with other federal regulators
2. “Restoring NCUA’s access to back‐up liquidity…re‐establishing NCUA’s borrowing authority ($30 billion)…revising the FCUA…modernize the CLF.”
3. “Improving NCUA’s ability to manage the NCUSIF…”
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NCUA Proposes Insurance Premium Change; NCUSIF Cap Raise
NCUA has proposed to Congress “an FDIC‐like” approach to insurance premium calculation:
assets minus equity‐ borrowings are counted as part of the insurance basis
“CAMELS‐ based” premiums to encourage sound lending and operations
raise the NCUSIF cap to >2% from 1.35%‐ would require assessments that leave the balance sheet
“Net Worth Assuming NCUSIF Fund Improvements White Paper” Sept, 2013
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U.S. Treasury Blueprint for Regulatory Reform
Will credit union’s face both a deduction of the NCUSIF deposit from net worth and assessments to increase the reserve level?
Will the FASB changes to CECL compound the capital impact?
We are discussing FDIC’s CAMELS based approach to insurance with our clients.
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Regulatory Trends and Considerations
Credit Unions increasingly want to understand:
How will the Blueprint be completed?
How can we improve earnings and liquidity while building capital?
What merger opportunities exist for my CU (can/should we buy a bank)?
What does “raising” capital look like and what does it mean to my strategic plan?
What role does supplemental capital play in the successful execution of M&A?
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• Is consolidation the new inflection point for “banking”?
• The difference in your CU between today and 5 years from now?
Economy of Scale And Banking’s Next Inflection Point?
Source:
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• $500M
• $1B
• $5B
• What is the minimum scale required…tomorrow?
What Is The Scale Required To Be Competitive and Compliant?
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Fee Income / Gross Income‐ CUs more reliant
Fee Income as a percent of gross income 2000 – 2015
Source: SNL DataSource
Notes: (1) All institutions in second chart screened for Total Assets between $100 million and $74 billion. (2) Trend data reflects annual averages
Institution Type 2000 2015
Credit Unions Mean: 8.22% Mean: 16.00%Median: 7.48% Median: 15.14%
Banks & Thrifts Mean: 9.79% Mean: 6.15%Median: 6.65% Median: 5.11%
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• Of the 12,035 FIs in America, majority are barely profitable/unprofitable without fees
• The lack of profitability raises safety and soundness questions across a wide spectrum:– Lack of talent in key positions, across multiple institutions– Lack of adequate modeling & analytic capability – Strategic risk‐ “stretching” to overcome both intense competition & perceived
charter weakness (no federal tax exemption for banks/no enhanced regulatory powers for CUs)
– Security risk related to BSA, AML, privacy data and cyber ‐
Commoditization and Lack Of Profit Increases Potential For Risk and Limits Growth
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• November, 2014‐North Dade Community Development FCU‐ $5.6M assets.FINCEN‐ “BSA violations were so serious…may have put entire US financial system at risk”. Transactions with Central America, Middle East; totaled $2B+.
• WSJ; June 3, 2015‐“Treasury Scrutinizes Credit Unions”‐ confidential report cites increased vulnerability to potential money laundering (money service bureaus).
• CU Times; December 11, 2015‐“JP Morgan Hackers Go Undetected For Years”. Helping Other People Excel FCU, $250,000 assets.
• Regulators face a daunting challenge supervising 6210 banks and CUs with assets less than $100M
Regulators Have Too Many FIs To Supervise?
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• 2016 investment in cyber defense:
• JP Morgan‐ $500M
• Bank of America‐ $400M
• January, 2016‐ 6210 banks and credit unions with assets less than $500M.
• Boston Globe; “Small banks face the greatest risk from hackers”; March 24, 2016.
• SNL
Cyber Defense Is Expensive
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• There is significant excess capacity in the U.S. banking system
• Consolidation is a key catalyst for improving efficiency and profitability
• Likely the only exit strategy for those that can’t overcome revenue challenges and an increasing cost burden
• While Congress enables more lenders
The Rationale For Consolidation Remains Very Much Intact…
# of banks Population Pop./Banks
US 12038 banks & CUs 313 mil. 38,035
U.K.¹ 152 + 35 CUs 62.3 mil. 333,155
Japan 204 127.7 mil. 625,980
Canada 19 34.6 mil. 1,821,053
Germany 36 81.7 mil. 2,269,444
France 23 65.3 mil. 2,839,130
Spain 15 46.2 mil. 3,080,000
China 249 1,339 mil. 5,377,510
Mexico 13 112.3 mil. 8,638,462
Brazil 13 192.4 mil. 14,800,000
Historical Efficiency Ratio (%)
1) Includes all banks incorporated in the United Kingdom.Source: FDIC, FSA, SNL Financial, Sandler O’Neill. & Partners, L.P.
56.058.060.062.064.066.068.070.0
1990Q1
1991Q2
1992Q3
1993Q4
1995Q1
1996Q2
1997Q3
1998Q4
2000Q1
2001Q2
2002Q3
2003Q4
2005Q1
2006Q2
2007Q3
2008Q4
2010Q1
2011Q2
2012Q3
2013Q4
Median LT Avg
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Who are the buyers, who are the sellers?
Of the 12,035 banks and credit unions—Assets greater than $1B‐ 905Assets $100M‐$1B‐ 4,920
“When the bell rings, it will be a buyer’s market. I want to be ready.”
Credit Unions Banks & Thrifts
Asset Range Assets ($M) % of Assets # of CusAvg. Asset Size
($M) Assets ($M) % of Assets # of BanksAvg. Asset Size
($M)< $100M 109,404 9% 4,539 24 97,631 1% 1,671 58
$100M ‐ $1B 401,875 33% 1,300 308 1,125,011 7% 3,620 310$1B ‐ $3B 334,878 27% 203 1617 660,244 4% 397 1,663$3B ‐ $5B 110,461 9% 27 3809 309,349 2% 81 3,819$5B ‐ $74B 275,241 22% 23 11967 2,313,055 14% 149 15,523>$74B 11,779,701 72% 25 471,188
SNL. Excludes Corporate Credit Unions. 5,943 banks and 6092 credit unions.
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• Average asset size of an acquired bank in the 2 years before the bubble‐$520M
• Average asset size of an acquired bank since the credit bubble‐ $185M
• 731 total bank acquisitions since 2006
Bank industry consolidation pace is accelerating
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Historical Transaction Information
Note: Includes all announced nationwide bank and thrift deals with disclosed deal valueSource: SNL Financial, as of April 15, 2016
Number of Transactions Transaction Volume ($bn)
Median Transaction Value ($mm) 5 Day Market Premium (%)
427
315
235 235
194
224241
230
258234
115
64
110 100
132153
179 173
44
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016YTD
288.5
68.7
93.8
40.4
16.9
72.4
130.8
29.2
105.6
71.4
31.8
1.3 10.0 17.0 12.8 14.4
18.8 26.6 6.6
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016YTD
24.6
22.5
20.221.4
13.9
25.4
31.7
27.8
25.2
27.5
13.5
7.3
10.0
15.8
18.7
25.4
31.329.7
21.7
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016YTD
24.8
30.132.8
37.433.6
25.4 24.826.8
24.3
35.2
39.3
35.2
60.2
49.347.0
36.3
31.233.3
30.9
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016YTD
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Large, growth minded CUs want to acquire but are frustrated by:• Lack of access to Tier 1 capital
• Systemic lack of accountability‐ “The (BASEL)survey indicated that certain weaknesses in the Boards…are more common in financial cooperatives …than in banks. Examples included a lack of both fit‐and‐proper requirements…” (does CMP change the dynamic?)
• Targets that won’t merge (a conflict of interest with member “owners”)
• Systemic lack of support for consolidation because only the acquirer benefits, all other system participants have “something to lose”
• Basel Committee on Banking Supervision; Consultative Document. Guidance on the application of the Core principles for effective banking supervision to the regulation and supervision of institutions relevant to financial inclusion. 31 March 2016
CU Merger/Consolidation‐Irresistible Force Versus Immovable Objects
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• Should we be a buyer or seller?
• Growth and earnings below average for 3+ years…what must we do differently to reverse this trend and what will it cost?
• “It’s either scale or niche, but its difficult to niche a commodity that demands scale.”
• The best time to strike a deal is before everyone else figures out its time to sell
• Large banks and CUs are considering the various “speed bump” implications:the incremental compliance costs associated with the $10B milestone is estimated to be $17M (17% of a 1% ROA).
Strategic Consideration
CU Industry M&A Activity
At 2000, there were 9546 CUs with assets less than $100M…
…95% are still below $100M or have been liquidated/merged.
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Federally Insured Credit Unions
Source: SNL DataSource
$0
$50,000
$100,000
$150,000
$200,000
3,000
5,000
7,000
9,000
11,000
13,000
15,000
17,000
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Tota
l Ass
ets
(in th
ousa
nds)
Num
ber o
f Cre
dit U
nion
s
Year
Number of Credit Unions vs. Total Assets
Number of Credit Unions Total Credit Union Assets
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• From 2006‐2015, 2138 CUs have been merged or liquidated.• The average asset size each year since 2006 ranges from $9M‐$37M.
• 238 CUs merged/liquidated in 2015 (fewer than each of the last 3 years). The largest merged CU in 2015 was $336M.
• Through February, there have been 30 CU mergers in 2016.
CU merger activity down in 2015‐16; targets remain tiny.
NCUA and CUToday
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• Could New BSA/AML, CMP Guidance Hit Credit Unions?• By Heather Anderson; March 03, 2016
• “It’s logical to assume all FFIEC members, which include the NCUA, mayadopt a similar matrix”
• NCUA is required to update maximum CMPs by June, and Chairman Matz plans to include the update in the June 16 board meeting.
• Ralph Sharpe, currently a Washington‐based compliance attorney with Venable, who was formerly the OCC’s director of enforcement and compliance.
Pieces Are Falling In Place
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Large CUs Strategic Considerations
41
• We have been discussing with CUs and their boards considerations regarding capital:
• The Capital Discussion‐ 9 Considerations and An Act of Congress… …most of the 9 considerations are left out of CU discussion.
Discussion includes: supplemental capital; what is it and how does it work, what is the cost?
CUs, Capital and Alternative Capital
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• Changes in rates from 2013 to now
• The curve is continuing to flatten as we see the spread between the 2 and 10 Year Treasury compressing
Interest Rate Environment
Index 2013 2014 2015 2/1/16
Fed Funds Target 0.25% 0.25% 0.50% 0.50%
2 Year Treasury 0.33% 0.53% 0.72% 0.80%
10 Year Treasury 2.49% 2.48% 2.15% 1.95%
2‐10 Year Treasury Spread 2.16% 1.95% 1.43% 1.15%
Bank Margins
Source: Bloomberg quarterly averages for each year
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Next Steps?
1. Discuss ideas for incremental income and IRR
2. “The Capital Discussion”
3. Strategic Considerations Regarding Economy of Scale and Merger Due Diligence.
4. Board of Directors Discussion
5. Competitive Analysis
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ROAA and ROAA less Fees – CUs $100M+ Assets
Source: SNL DataSource
Notes: (1) All Credit Unions screened for Total Assets between $100 million and up to Navy FCU at year end(2) ROAA less fees excludes fee income
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015ROAA 1.24%1.18%1.06%0.95%0.84%0.98%0.79%0.77%0.70%0.65%0.66%0.71%0.67%0.20%0.14%0.41%0.57%0.70%0.60%0.62%0.60%ROAA Less Fees 0.63%0.54%0.40%0.27%0.15%0.26%0.03%0.00% -0.13 -0.26 -0.32 -0.31 -0.38 -0.86 -0.85 -0.54 -0.33 -0.18 -0.17 -0.10 -0.22
ROAA
ROAA Less Fees
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
Med
ian
(%)
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ROAA and ROAA less NII – Banks $100M+ Assets
Source: SNL DataSource
Notes: (1) All Banks screened for Total Assets between $100 million and up to Navy FCU at year end (2) ROAA less fees excludes noninterest income.
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015"ALL" Banks 1.18% 1.14% 1.20% 1.15% 1.05% 1.04% 0.99% 1.11% 1.10% 1.09% 1.12% 1.05% 0.91% 0.40% 0.16% 0.41% 0.60% 0.85% 0.84% 0.88% 0.96%Banks ROA Less Fees 0.52% 0.48% 0.54% 0.48% 0.43% 0.43% 0.31% 0.37% 0.29% 0.33% 0.35% 0.31% 0.22% -0.01% -0.17% -0.04% 0.10% 0.22% 0.22% 0.28% 0.28%
"ALL" Banks
Banks ROA Less Fees
-0.4%
-0.2%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
Med
ian
(%)
46
• The February 1, 2016 American Banker featured 2 articles describing the role of activist investors encouraging lower performing banks to sell themselves.
• Consolidation will continue to accelerate as strong performers add scale and efficiencies through both organic growth and merger.
• The most efficient credit unions will soon consider the lack of willing and viable merger candidates a material competitive threat
Irresistible Force Versus Immovable Objects‐ Accountability Wins Out
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• 1934‐1942‐ CUs were housed under the old Farm Credit Administration.
• 1942‐1947‐ FDIC was the designated federal regulator for CUs but member shares were not insured.
• 1948‐1970‐ the Bureau of Credit Unions was housed under; Federal Security Administration and then the Department of Health, Education and Welfare.
• 1970 NCUA was statutorily established as a separate, independent regulator and with its own insurance fund (NCUSIF). In 1979, NCUA became a member of the FFIEC.
Historical Perspective: CU Regulatory Supervision
