Page 3 - US Market Performance Report 1Q 2018

1376 Stoneridge Circle | Escondido, CA 92029 | 800.228.5038 | www.dbmkt.com
Report Data Sources
The following data sources were used in the creation of this report:
• US Census
• Pew Research
• US Department of Labor, Bureau of Economic Analysis • Freddie Mac
• FDIC
• NCUA
Methodology Notes
March-ending 2017-2018 credit union growth trends were used to project from year- ending 2017 totals to estimate year-ending 2018. This was done with both FDIC and NCUA call report totals.
Report Purpose
The purpose of this report is to create an accurate market situational awareness for the credit union industry, focusing on credit union performance and highlighting economic trends that likely have the most immediate impact on the use of retail nancial services, like employment, income, consumption and in ation. Population counts and age are also reviewed.
Executive Summary
The US population is becoming more dominated by the Millennials, currently aged
22 to 37. Their economic and political ascendance will overshadow the fact they are the second largest generation, following the younger Gen Z, currently aged 4 to 21. With Gen Z adding 4+ million adults annually, joining the almost 75 million Millennials, rst time household formation will accelerate, putting demands on housing and potentially child care, if these generations follow historical fertility rates, which to-date they have not. Regardless, this coming of age segment of the population will also likely be attracted to the not-for-pro t value offered by credit unions.
While the credit union’s market share has been increasing, they are still an industry dominated by banking, each of whose Top 4 individually total more assets than the entire credit union industry. Banking is much more top-heavy than credit unions, with the Top 10 banks controlling the majority of banking assets. As of March 2018, it was the Top 158 credit unions that had a majority of industry assets.
But the imbalance that is of greatest concern is membership growth. The Top 300 credit unions by assets had 90% of the almost 4.7 million net member change over the last year. Over the last seven years, March-ending, about 52% of all credit unions had negative membership growth. Among the Top 300 by Assets, less than 8% had negative membership growth in this seven year time period. Mergers do play a part in this imbalance, with 48% of the Top 300 having conducted at least one merger in the last seven years, compared to 14% of the Non-Top 300.
The growth in potential membership is also a challenge for smaller credit unions. In the last seven years, potential membership has doubled, from 1.45 billion to 2.90 billion. About 61% of all credit unions had either no or negative potential membership growth in this time period. The Top 300 grew their potential membership by 134% in the last seven years, representing 55% of all potential membership growth and 27% of all potential members. The Non-Top 300 grew their potential membership by 76% in this seven year time frame.
While a 2.90 billion potential membership is a signi cant overlap with a 328 million US population, Data Based Marketing believes the potential membership count is greatly understated. Only one credit union in the nation reports having a potential membership equal to the entire US, while many of the largest credit unions have af liated non-pro t associations that provide a path to membership with no geographic limit, requiring just a small one-time membership fee.
The economic data suggests an over-indebted consumer base, with consumption growing faster than income. In fact, real income growth has been at, leading to a savings rate that is dropping to near Great Recession levels. Consumer debt growth is predictably slowing and should continue to do so unless real wages increase.
Durable goods consumption, at near record proportions of GDP, should be a leading indicator to lending trends, with a particular focus on vehicles, household furnishings and goods and recreational vehicles. Healthcare expenses are likely to rise to
equal or exceed housing and utilities expenses, which will also reduce the ability
to purchase durable goods. Transportation services also appear vulnerable to a slowdown.
In ation is not evenly distributed nationwide, with the West trending higher. Mortgage rates have proportionately risen faster than other loans. Term savings account rates are rising fastest on the deposit side.
Banks continue to consolidate at faster rates than credit unions. Banks also continue to reduce their branch count, while credit unions have a nominal increase.
Page 1