Data for March 31, 2020 - Callahan & AssociatesData for March 31, 2020. Call Date: May 14, 2020. TrendWatch1Q 2020 “We’re Built For This”

Data for March 31, 2020Call Date: May 14, 2020

TrendWatch 1Q 2020“We’re Built For This”

Welcome!

When you join the event, you should automatically be connected to the audio broadcast with your computer. To listen by phone, please dial +1-415-655-0003, then input the access code 667 687 101.

To help you follow along with TrendWatch, earlier today we sent the presentation slides for the event to the email address you used to register for TrendWatch. We will also send you a copy of slides after the event.

Slide Link

Today’s slides can be found online at:

http://bit.ly/1Q-20

http://bit.ly/1Q-20

We Encourage Questions!!!

Use the Q&A box located on the right side of the screen to type your comments or questions.

Fund Name 30-Day Yield*

Ultra-Short Duration Portfolio

1.31Short Duration Portfolio

2.00*The yields reflect the 30-day Effective Yield (net of fees/expenses) as of May 13, 2020.

To learn more about how these institutional investment

options may benefit your credit union, contact

or visit

Are You Seeking CompetitiveInvestment Options?

mailto:[email protected]

http://www.trustcu.com/

10

Today’s Lineup

1Q 2020 Credit Union Results – “We’re Built for This”Jon Jeffreys, President & CEO, Callahan & AssociatesJay Johnson, Chief Collaboration Officer, Callahan & Associates

Navigating Today’s EnvironmentDoug Fecher, President & CEO, Wright-Patt CUJulie Renderos, EVP & CFO, Suncoast CU

About Wright-Patt Credit Union

• Headquartered in Beavercreek, Ohio

• Over $5.2B in assets

• More than 400,000 members

• 959 employees

• 32 branch locations

About Suncoast Credit Union

• Headquartered in Tampa, Florida

• Over $11.0B in assets

• More than 887,000 members

• 1,849 employees

• 69 branch locations

Credit Union Perspectives

• Describe the first 4 months of the year for your credit union

Unprecedented Times

The credit union industry is stronger than in 2007

12/31/2007 03/31/2020

Assets $769.5B $1,663.3BCapital $91.6B $193.4BCapital Ratio 11.9% 11.6%Total Delinquency 0.85% 0.63%Coverage Ratio 86.2% 142.6%Opex Ratio 3.34% 3.16%Loan-to-Share 83.3% 81.0%

Source: Callahan’s Peer-to-Peer Analytics

Member relationships are also stronger than in 2007

12/31/2007 03/31/2020 Change

Members 88.5M 123.1M +34.6M

Average Member Relationship $13,128 $19,756 +$6,628

Share Draft Penetration 45.2% 60.0% +14.8 pp

Credit Card Penetration 14.3% 17.6% +3.3 pp

Auto Penetration 17.1% 21.2% +4.1 pp


1Q20 Credit Union Results

• Credit unions are taking proactive measures to serve members as the impact of the COVID-19 crisis continues to evolve

• Consumers are taking advantage of low credit union interest rates to refinance existing loans and make purchases

Share, capital, and investment growth accelerates year-over-year; Loan growth slows

As of 03/31/2020 12-mo. Growth2020

12-mo. Growth 2019

Assets $1,663.3B 9.2% 6.3%Loans $1,131.4B 6.7% 7.9%Shares $1,396.6B 8.4% 5.8%Investments $451.4B 14.3% 1.4%Capital $193.4B 10.4% 9.7%Members 123.1M 3.8% 4.0%


248.4 258.8 270.4 281.8 294.5 305.5

29.7 28.9 27.4 27.7 25.0 23.9

2.9%

3.8%4.0% 4.1% 3.8%

3.4%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

0

50

100

150

200

250

300

350

1Q15 1Q16 1Q17 1Q18 1Q19 1Q20

Thou

sand

s

FT & PT Employees and Annual Total Employee GrowthData as of 03.31.20

Full-Time Employees Part-Time Employees Total Employee Growth


Over 325,000 essential employees are serving members

Lending

• Record first quarter loan originations are driven by growth in mortgage refinancings

• Consumer lending rises versus 2019 despite the economic uncertainty

Loan originations surge from a slow start last year to set a record for first quarter originations

$89.3 $99.6 $113.7 $117.9 $111.5 $141.0

20.5%

11.6%14.2%

3.7%

-5.4%

26.5%

-10.0%

-5.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

$0

$20

$40

$60

$80

$100

$120

$140

$160

1Q15 1Q16 1Q17 1Q18 1Q19 1Q20

Billi

ons

YTD Loan Originations and Annual GrowthData as of 03.31.20

Total Loan Originations Annual Growth


1st mortgages account for 36% of 1Q originations as lending increases in all categories versus 1Q 2019


$26.2 $26.7 $31.1 $30.7 $26.0 $51.2

$5.1 $6.1 $7.2 $7.5 $7.6

$8.3$58.0$66.8

$75.4 $79.7$77.9

$81.7$89.3$99.6

$113.7 $118.0$111.5

$141.0

$0

$20

$40

$60

$80

$100

$120

$140

$160

1Q15 1Q16 1Q17 1Q18 1Q19 1Q20

Billi

ons

YTD Loan OriginationsData as of 03.31.20

1st Mortgages Other Real Estate Consumer

4.8%

26.5%

96.7%

Mortgage production increases 97% at credit unions as low rates spur members to refinance; Market share at 1Q high

$26.2 $26.7 $31.1 $30.7 $26.0 $51.2

7.5% 7.6%

8.6%9.0%

8.0%

9.1%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

$0

$10

$20

$30

$40

$50

$60

1Q15 1Q16 1Q17 1Q18 1Q19 1Q20

Billi

ons

First Mortgage Originations & Market ShareData as of 03.31.20

1st Mtg Orig. Market Share

Mortgage Bankers AssociationSource: Callahan’s Peer-to-Peer Analytics

Fixed rate mortgage lending more than doubles as interest rates reach record lows


$18.8 $17.9 $20.7 $19.8 $16.5 $37.5

$4.5 $5.7$7.0 $7.5

$6.4

$9.7

$2.8 $3.0$3.4 $3.4

$3.1

$3.8

$26.2 $26.7$31.1 $30.7

$26.0

$51.2

$0

$10

$20

$30

$40

$50

$60

1Q15 1Q16 1Q17 1Q18 1Q19 1Q20

Billi

ons

YTD 1st Mortgage Originations ($) By TypeData as of 03.31.20

Fixed Balloon ARM

19.0%7.5%

73.5%24.8%

11.8%

63.4%

Growth slows in loan balances despite record originations

$731 $809 $895 $983 $1,060 $1,131

10.5% 10.8% 10.7%9.7%

7.9%

6.7%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

$0

$200

$400

$600

$800

$1,000

$1,200

1Q15 1Q16 1Q17 1Q18 1Q19 1Q20

Billi

ons

Total Loans and Annual GrowthData as of 03.31.20

Total Loans Outstanding YOY Growth


7.9%

7.7%

7.3%

8.5%

8.1%

7.9%

6.7%

5.7%

4.4%

-0.4%

2.6%

11.2%

-2% 0% 2% 4% 6% 8% 10% 12%

Total

Credit Card

Used Auto

New Auto

Other RE

1st Mtg

12-Mo. Growth in Loan Balances by Product Data as of 03.31.20

2020

2019

1st mortgage growth accelerates over the past year as other categories slow



$9.7$12.6

$15.7 $14.6

$4.7

$11.5

-$5

$0

$5

$10

$15

$20

1Q15 1Q16 1Q17 1Q18 1Q19 1Q20

Billi

ons

3-Mo. Growth in Loan Balances by ProductData as of 03.31.20

1st Mort. Other RE Used Auto New Auto Credit Card Other Loans

Growth in 1st mortgages over first 3 months of 2020 tops total loan balance increase

Credit unions continue to extend credit to members

28%

29%

29%

30%

30%

31%

31%

32%

32%

33%

33%

$0

$50

$100

$150

$200

$250

1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19 3Q19 1Q20

Billi

ons

Total Lines of Credit and Credit Card UtilizationData as of 03.31.20

Unfunded Commitments Credit Cards Outstanding Utilization


Net charge-offs tick up; Delinquency improves slightly

0.30%

0.50%

0.70%

0.90%

1.10%

1.30%

1.50%

1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19 3Q19 1Q20

Asset Quality Ratio: Net Charge-Off Ratio + Delinquency Ratio Data as of 03.31.20

Net Charge-Off Ratio Delinquency Ratio Asset Quality Ratio


Savings

• Share balances grow 8.4% over past 12 months, led by share certificates

• Regular shares and share draft balances post the largest increase in the first quarter of 2020

$997 $1,064 $1,153 $1,218 $1,288 $1,397

4.3%

6.7%

8.4%

5.6% 5.8%

8.4%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

$0

$200

$400

$600

$800

$1,000

$1,200

$1,400

$1,600

1Q15 1Q16 1Q17 1Q18 1Q19 1Q20

Billi

ons

Total Share Balances and Annual GrowthData as of 03.31.20

Share Balances YOY Growth


Total share balances increase $108 billion annually, the largest change since 2003

Certificate growth remains the fastest growing deposit type over the past year

5.8%

3.9%

5.8%

0.2%

1.4%

18.0%

8.4%

4.6%

11.3%

6.6%

4.7%

16.0%

0% 5% 10% 15% 20%

Total Shares

Regular Shares & Dep.

Share Drafts

MMA

IRA/Keogh

Share Certificates

12-Mo. Growth in Share Balances by ProductData as of 03.31.20

1Q20

1Q19


Regular shares and share drafts account for 71% of share balance growth in the first 3 months of 2020


$34.1 $35.3

$46.2 $44.5

$53.6

$61.0

-$10

$0

$10

$20

$30

$40

$50

$60

$70

1Q15 1Q16 1Q17 1Q18 1Q19 1Q20

Billi

ons

3-Mo. Growth in Share Balances by ProductData as of 03.31.20

Reg. Shares Share Drafts MM SharesIRA/KEOGH Share Certificates Other

Credit unions report largest quarterly liquidity increase on record


$30.5

-$21.3 -$19.1

-$11.6

$29.8

-$26.5 -$23.6

-$6.3

$48.9

-$11.4 -$8.2

$6.5

$50.1

-$40

-$30

-$20

-$10

$0

$10

$20

$30

$40

$50

$60

1Q17 3Q17 1Q18 3Q18 1Q19 3Q19 1Q20

Billi

ons

Net Liquidity ChangeData as of 03.31.20

Quarterly Annual

* Net liquidity from shares= $ share growth - $ loan growth

After steadily increasing for the past six years, loan-to-share ratio falls versus 1Q 2019

73.3%76.0%

77.7%80.7%

82.3%81.0%

50.0%

55.0%

60.0%

65.0%

70.0%

75.0%

80.0%

85.0%

90.0%

1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19 3Q19 1Q20

Loan-to-Share RatioData as of 03.31.20



• How have prior crises prepared your team to respond to the past few months? What is different in this situation?

• What has Suncoast learned in navigating through crisis situations that shapes how you support your members and employees?

• How do you keep an eye on longer-term goals while managing the short-term challenges?

Earnings & Capital

• ROA declines 43 basis points driven by a tighter net interest margin and increased provision expense

• Total revenue increases 6.6% annually as loan interest income continues to rise

• Net worth ratio remains strong at 11.0%

Rise in loan and other operating income more than offsets decline in investment income

$8.5 $9.3 $10.0 $11.2 $12.8 $13.9

$1.1 $1.2 $1.4$1.6

$2.1 $1.9

$1.7 $1.8 $2.0$2.1

$2.1 $2.2

$1.9$2.0

$2.2$2.8

$2.6$3.0

$13.2 $14.3$15.5

$17.7$19.7

$21.0

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

18.0%

$0

$5

$10

$15

$20

$25

1Q15 1Q16 1Q17 1Q18 1Q19 1Q20

Billi

ons

Total Revenue and Annual GrowthData as of 03.31.20

Loan Income Investment Income Fee IncomeOther Operating Income YOY Growth


Income from investments decreases 9.0% year-over-year while interest from loans is up 8.4%

1.18%1.53%

0.57%0.98%

4.69%4.94%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19 3Q19 1Q20Yield on Investments Cost of Funds Yield on Loans

Yield AnalysisData as of 03.31.20


The net interest margin is 21 basis points below the operating expense ratio, the largest gap since 4Q16

3.08% 3.08%3.04%

3.09%3.12%

3.16%

2.82%2.87% 2.89%

3.03%

3.17%

2.95%

2.60%

2.70%

2.80%

2.90%

3.00%

3.10%

3.20%

3.30%

3.40%

1Q15 1Q16 1Q17 1Q18 1Q19 1Q20

Net Interest Margin vs. Operating Expense RatioData as of 03.31.20

Operating Expense Ratio Net Interest Margin


26 bps

21 bps

$0.8

$1.1

$1.4

$1.7 $1.6$1.7

$2.2

$0.0

$0.5

$1.0

$1.5

$2.0

$2.5

1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19 3Q19 1Q20

Billi

ons

Quarterly Provision for Loan & Lease LossesData as of 03.31.20


Provision expense increases as credit unions prepare for COVID-19 impact

$7.0$7.5

$8.0$9.1 $9.3

$10.2

$0

$2

$4

$6

$8

$10

$12

1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19 3Q19 1Q20

Billi

ons

Allowance for Loan & Lease LossesData as of 03.31.20

Allowance for Loan Losses


Allowance for loan losses exceeds $10 billion for first time

Coverage ratio 50 percentage points higher than entering the Great Recession

139.8%130.4% 130.5%

141.1%152.4%

142.6%

119.8% 125.4%112.6%

91.5% 87.9% 91.9%

0%

20%

40%

60%

80%

100%

120%

140%

160%

180%

1Q15 3Q15 1Q16 3Q16 1Q17 3Q17 1Q18 3Q18 1Q19 3Q19 1Q20

Coverage RatioData as of 03.31.20


ROA falls sharply driven by decreasing net interest margin and a 26% increase in provision for loan loss

0.78% 0.75% 0.71%

0.90%0.95%

0.52%

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

1Q15 1Q16 1Q17 1Q18 1Q19 1Q20

ROAData as of 03.31.20


Smaller income gains and increased provision expenses push ROA down

As of 03.31.2020 As of 03.31.2019 12-mo. Change (bps)

Interest Income/Avg. Assets 3.81% 3.99% -18

Interest Expense/Avg. Assets 0.86% 0.82% +4

Net Interest Margin 2.95% 3.03% -8

Non-Interest Income/Avg. Assets 1.26% 1.43% -17

Non-Interest Expense/Avg. Assets 3.16% 3.09% +7

Provision for Loan Losses 0.53% 0.43% +10

ROA 0.52% 0.95% -43


$126.8 $135.5 $145.0 $156.1 $169.8 $183.0

$7.0$7.5

$8.0$9.1

$9.3$10.210.8% 10.8% 10.7% 10.9%

11.1% 11.0%

11.3% 11.3% 11.1% 11.2%11.6% 11.6%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0%

12.0%

$0

$50

$100

$150

$200

$250

1Q15 1Q16 1Q17 1Q18 1Q19 1Q20

Billi

ons

Net Worth and AllowanceData as of 03.31.20

Net Worth Allowance Net Worth Ratio Capital Ratio


Credit union capital exceeds $193 billion as of March 31st


• WPCU uses a 3-stakeholder model that takes into account members, employees and the credit union. How has this model helped your team make decisions over the past few months?

• How do you think WPCU’s focus on purpose and impact will help distinguish it in this environment?

Lessons from the Great Recession & Looking Forward

Credit unions originate the second highest full year loan volume in their history

$255.6 $253.8$271.9

$250.8$262.4

$0

$50

$100

$150

$200

$250

$300

2007 2008 2009 2010 2011

Annual loan originations for all US Credit Unions as of December 31

Source: Callahan’s Peer to Peer Software

Billi

ons

CU real estate loan modifications help nearly 65,000 members stay in their homes

$4.3 $5.3 $5.9 $6.7 $7.5 $7.7 $8.4 $8.8 $9.4 $9.8$0.72$0.91

$0.98$1.05

$1.14 $1.19$1.26 $1.26

$1.32 $1.35

$0

$2

$4

$6

$8

$10

$12

3Q2009

4Q2009

1Q2010

2Q2010

3Q2010

4Q2010

1Q2011

2Q2011

3Q2011

4Q2011

Billi

ons

Data as of December 31 for all U.S. Credit Unions

$ Modified First Mtgs $ Modified Other RESource: Callahan’s Peer to Peer Software

Provision for loan loss expense falls 50% from 2009 peak$1

.37

$1.6

2

$1.8

8

$2.0

7

$2.2

5

$2.6

7

$2.2

2

$3.2

2

$7.0

7

$9.60

$7.1

2

$4.7

0

1.12%

0.50%

0.00%

0.20%

0.40%

0.60%

0.80%

1.00%

1.20%

$0

$2

$4

$6

$8

$10

$12

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Provision Expense PLL/Avg. Assets

Data as of December 31, 2011 for all U.S. Credit Unions


Billi

ons

2011 – The Best Year Ever for Credit Union Addition to Reserves

$5.8 $5.9 $5.9 $5.8 $5.8$4.8

-$0.2 -$0.3

$4.6$6.4

$1.5

$2.0

$1.9

-$1.0

$0.0

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

$7.0

$8.0

$9.0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Net Income Data as of December 31

Net Income After NCUSIF NCUA Insurance Reserve Expenses

$6.6B

$8.3 B

$1.2B


Billi

ons

Total capital, including the ALL, nears $109 billion

11.5% 11.5% 10.7% 9.9% 10.1% 10.2%

0%

2%

4%

6%

8%

10%

12%

14%

2006 2007 2008 2009 2010 2011

Data as of December 31 for all U.S. Credit Unions

11.9% 11.9%11.2%

10.8% 11.0% 11.2%



• What do you hope that your members and communities say about your credit union when this crisis is over?

Closing Thoughts…

The next couple of years are likely to be challenging for credit unions and members

We expect lower revenue because of lower interest rates and reduced feesWe expect delinquency and charge offs to go up, leading to higher provision expensesROA will likely go down and maybe even negative for a time

All challenges come to an end. The most probable scenario is that credit unions have a couple of challenging years then bounce back.

Every day we help members brings us one day closer to it being over

The Opportunity

This may be the opportunity of a lifetime to be part of the solution to get members and communities back on their feet

The Federal Credit Union Act passed in the midst of the Great Depression.

We are built and designed for times like this.

Now is our time to serve and distinguish ourselves in the eyes of the members and communities we serve!

Sponsored by:

Tell us what you thought!

Please answer our post-event survey.

One lucky survey respondent will win a Starbucks gift card.

Documents

Data for March 31, 2020 - Callahan & AssociatesData for March 31, 2020. Call Date: May 14, 2020. TrendWatch1Q 2020 “We’re Built For This”