Community Resiliency of Bank Branch Networks

This is a look at the resiliency of bank branch networks for holding companies with $1 billion or more in deposits. The Community Resiliency Estimate provided by the US Census department is defined as:

Community resilience is the capacity of individuals and households to absorb, endure, and recover from the health, social, and economic impacts of a disaster such as a hurricane or pandemic.  When disasters occur, recovery depends on the community’s ability to withstand the effects of the event. In order to facilitate disaster preparedness, the Census Bureau has developed new small area estimates, identifying communities where resources and information may effectively mitigate the impact of disasters. 

Using the Census Resilience estimates by county and tract, along with the Statement of Deposits for branch data from the FDIC, a deposit weighted score was calculated for each branch as the product of the branch deposits and the resiliency score for the county in which the branch is located. Next, the branch scores were normalized for the bank. Finally, a score for the holding company was calculated using the weighted score of the holding company’s banks.

The table below shows the results by holding company. As states and municipalities remain in flux on closing and opening their local economies, a bank’s branch network will be impacted based upon the resiliency of the local market to react to the COVID-19 pandemic and the relative risk amongst banks will differ based upon the geography of their networks.

A final note behind the methodology:

— Branches within a holding company were excluded if the county, the resiliency score and/or the service type of branch (non-full service beanches are excluded).

— Assigning resilience by county to a branch is less precise than assigning resilience based upon the local branch market area. A better measure could be calculated by analyzing the branch markets by tract and assigning the weighted score by tract.

— County are assigned scores as follows: 0 = Population with Zero Risk Factors; 1.5 Population with 1 to 2 Risk Factors; 3 = Population with 3 or more Risk Factors

US Unemployment by County (April 2020 Preliminary)

Here’s a look at the 14 month trend in unemployment in descending order by April 2020 unemployment rate (preliminary) .

The maps shows where the high unemployment rates cluster.

COVID-19, Economic Cost , Outcomes and Beliefs

The Federal Reserve of St Louis has an interesting working paper, “Scarring Body and Mind: The Long-Term Belief-Scarring Effects of COVID-19” , that takes a look at the economic costs and impacts from mitigating bankruptcies and changes in behavior.

The key statements from the paper are :

  • A policy that avoid most permanent separation of workers from capital could generate a much larger benefit than originally thought, that could easily be 180% of annual GDP, in present value.
  • … policies that help prevent depreciation or obsolescence, even if it has only modest immediate effects on output, can have substantial long-run benefits, an order of magnitude larger than the short-run benefit that policy makers typically consider.
  • Take the example of a restaurant, Its kitchen may still be in use but its dining area is unproductive capital , on which it is earning zero return. A key question is then whether that capital is gone for good.
  • What sound policy might avoid is the prospect that, after seeing how fragile our economy is to pandemic, firms will be scarred and will never think about tail risk in the same way again.

As a working paper, the paper is technical but still a thoughtful read in how to frame and quantify the economic and policy decisions in light of COVID-19 and similar long-tail events.

Cash Availability by Industry May 2 – June 6 Small Business Pulse Survey

Here’s a quick look at Cash Availability of small businesses according to the US Census Small Business Pulse Survey.

The trend shows improving cash conditions since May 2nd when the survey first started. This would be consistent with intervention by the Treasury and the SBA programs supporting small businesses , for example, PPP.

COVID-19 Trends and Bank Branch Deposits — Top 100

In the process of working on some branch deposit data, I thought it might be interesting to look at the largest US banks’ branch network and how their branches are distributed according to the rate of growth of COVID-19 cases.

The analysis below shows the percentage of branches in counties which are seeing accelerating rates of COVID-19. The acceleration is calculated from the 3 day change from June 10 to June 7th compared to the 3 day change of June 9 to June 6th. The analysis also shows the branch deposit dollars in those accelerating counties.

A few caveats on the data: only full service branches were included in the analysis; the branch deposit and location data is the latest SOD data provided from the FDIC reflecting deposits as of June 2019. The June 2020 data will likely not be available until Q4 of 2020; branches that do not have valid counties or calculated COVID-19 rates were excluded.; COVID-19 data provided by the NY Times.

The table shows that certain banks are more at-risk based upon their served geographies and how COVID-19 is trending. While outside the scope of this simple analysis, it would be interesting to explore impacts on customer retention and service in highly impacted areas with closed or reduced full service branches. With no access to the local brick and mortar branch, would customers have a higher propensity to switch to a competitor because of a superior online product/service?

State Coincident Indexes

A visualization showing impact of COVID19 on economic indexes.

The Federal Reserve Bank of Philadelphia produces a monthly coincident index for each of the 50 states. The indexes are released a few days after the Bureau of Labor Statistics (BLS) releases the employment data for the states.

Working from Home at Least One Full Day per Week

Firms Expect Working from Home to Triple (Federal Reserve Atlanta)

Firms Expect Working from Home to Triple

To summarize, our survey indicates that, compared to before the pandemic, the share of working days spent at home by full-time workers will triple after the pandemic. Our results also say that this shift will happen across major industry sectors. These changes in the location of work are also likely to exert powerful effects on the future of cities and the demand for high-rise office space (more on that next month).

Working from Home at Least One Full Day per Week