51%
This will help you understand how the current economy and consumer behavior is impacting your financial institution (FI) compared to other similar FIs.
• We know you are planning and need
current actionable insights to plan for the
unknown in 2021.
• Most FIs are making important decisions
without good macro-to-micro data about the
industry and their business.
2021 brings a wave of change.
(thank goodness!)
Deposits grew twice as fast as loans in 2020 compared to the median growth of the three years prior. The growth rates for both deposits and loans were significantly higher than the preceding three years.
Middle market banks and large credit unions saw the biggest gains.
What 2020 can tell us about 2021
The playing field isn’t level for
community financial institutions.
STATE OF THE FINANCIAL INSTITUTION INDUSTRY:
Takeaways for financial institutions
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The Kasasa advantage: Kasasa partners outperformed peers
Monitoring industry trends to make better strategic decisions: a 2020 retrospective.
Between 3 and 6 years of deposit growth happened in 12 months.
This is due to consumers pulling their money out of the stock market, the stimulus package, and an overall reduction in consumer spending.
Total deposits for the first half of 2020 grew at 22.3%, up 6x compared to the previous three years. Loans grew at 14.9% or triple that of the previous three years. That’s a tremendous increase!
1. 2020 at a glance
2. 2021 indicators
3. The Kasasa advantage
Cautious optimism is buoyed by strong
economic markers.
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Resurgent consumer demand leads an apparent economic recovery. Although the pandemic isn’t over, there are reasons to think that a recovery is underway.
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Non-interest income can make or break a
balance sheet.
Smaller institutions struggle to offset falling margins due to less robust streams of non-interest revenue.
Declining margins, low rates, and mounting competition will drive a renewed focus on efficiency ratios. Cutting expenses. Raising revenue. Familiar challenges, but with little in the way of new solutions.
TAKEAWAY 1
TAKEAWAY 2
TAKEAWAY 3
Many institutions pulled back on their marketing, uncertain of where the pandemic-constrained economy
was heading.
The explosion in digital media consumption created lots of ad inventory.
TAKEAWAY 1
TAKEAWAY 2
TAKEAWAY 3
Takeaways for financial institutions
About Kasasa
Middle market institutions have healthy enough non-interest income to remain comfortable, despite low rates and falling yields.
Marketing spend will rebound in 2021.
Fee-based income could boost margins.
But it’s a bitter pill.
Everyone wants a better efficiency ratio.
Kasasa’s mission is to partner with locally owned financial institutions, who in turn help consumers and their communities. Our clients depend on us for accurate, strategic insights to help them perform so highly (it’s a mutual admiration society).
Source: FDIC and NCUA Call Reports; represents median results of all member institutions with valid results across fielded reporting periods using a longitudinal analysis. * Average growth from 2014-19 equals compounded annual rate. † FDIC institutions are only required to report Marketing & Advertising expense greater than $100,000 that exceed 7% of other noninterest expense.
Source: FDIC and NCUA Call Reports, represents median results of all member institutions as of Q4 2020.
Source: FDIC & NCUA Call Reports; represents median results of all member institutions as of Q4 2020. Loans equals total loans and lease financing receivables (net of unearned income). Revenue equals net interest income plus noninterest income.
Sources: 1 FDIC and NCUA Call Reports; represents median results of all member institutions with valid results across fielded reporting periods using a longitudinal analysis. * Average growth from 2014-19 equals compounded annual rate. † FDIC institutions are only required to report Marketing & Advertising expense greater than $100,000 that exceed 7% of other noninterest expense. 2 The Harris Poll on behalf of Ad Age, February 23-25, 2021
Source: FDIC and NCUA Call Reports; represents aggregate results of all member institutions. * FDIC institutions are only required to report interchange amounts greater than $100,000 that exceed 7% of other noninterest income. Note: percentages not totaling 100% are due to rounding.
Source: FDIC and NCUA Call Reports; represents aggregate results of all member institutions.
Source: FDIC and NCUA Call Reports; represents median results of all member institutions and Kasasa banking clients with at least one product as of Q4 2020. Loans equals total loans and lease financing receivables (net of unearned income). Revenue equals net interest income plus noninterest income.
While no single consumers can “fix” a struggling loan-to-deposit ratio or wobbly balance sheet, it is possible to create sustainable growth by attracting account holders who see you as their primary financial institution.
Kasasa partners outperformed peers in NIM and generate a greater share of revenue from non-interest income.
Tactics and messages will need to work harder to reach the best audience in a competitive market.
Over the years, revenue from services and fees has declined steadily.
Falling yields will pressure revenue portfolios to refocus on service and fee-based models.
Services and fees may increase revenue, but can cost customers.
Megabanks, flush with cash, will emerge from the pandemic strong and poised to grow again.
Source: FDIC and NCUA Call Reports as of Q4 2000, Q4 2010 and Q4 2020.
Source: FDIC and NCUA Call Reports; represents median results of all member institutions and Kasasa banking clients with at least one product as of Q4 2020.
The big winners in the Paycheck Protection Program (PPP) were banks larger than $1B in assets and credit unions larger than $500M in assets.
Many institutions pulled back on their marketing, uncertain of where the pandemic-constrained economy was heading.
The Kasasa model is based on establishing deep relationships with highly engaged consumers.
Many community financial institutions think that megabanks are a distant threat and too big to worry about.
These massive banks are snatching consumers left and right — in a world where consumers bank mostly online, the concept of ”the branch down the street” loses much of its appeal.
There are ways to build deeper relationships with consumers, earn their loyalty, and truly compete with the mega banks.
Smaller institutions need to pursue new sources of non-interest income and expand relationships with existing account holders.
The explosion in digital media consumption created lots of ad inventory.
Marketing spend will increase as institutions seek to capitalize on post-pandemic growth opportunities. Ideally this will help even the playing field with larger financial institutions.
This situation offers an opportunity for financial institutions to expand their marketing reach.
Business lending boomed; consumer lending declined.
Yields suffered as loan-to-deposit ratios tumbled. Community financial institutions sought relief from the economic storm.
Marketing expenses cratered.
This report only includes data who spend more than 7% of their expenses on marketing and are required to report it.
Kasasa partners saw higher than average performance in loans, revenue growth, NIM, and their share of revenue from non-interest income.
1. 2020 at a glance
2. 2021 indicators
3. The Kasasa advantage
