Credit Unions Are Already Cutting Overdraft Fees

Callahan’s year end non-interest income survey provides a snap shot of the industry before Reg E changes take effect.


The 5300 Call Report requires credit unions to report two non-interest income accounts: fee income (account 131) and other operating income (account 659). Callahan & Associates' year end 2009 non-interest income survey provides a better understanding of the specific components that comprise these accounts by requiring credit unions to breakdown the accounts into several categories; notably, credit and debit card interchange income, non-sufficient funds charges and courtesy pay, real estate fees, and ATM surcharges, among others.

More than 150 credit unions participated in the 2009 survey. Collectively these credit unions represent 20% of credit union assets and nearly 20% of non-interest income. Fifty participants currently hold more than $1 billion in assets. Respondents averaged $1.1B in assets with a range of $8.6B to $15.0M. The 2008 results from the second quarter survey are shown as a point of reference. This is not a direct comparison as the survey respondents vary; however, the groups are comparable in terms of percentage of industry assets and non-interest income.

Non-Interest Income Survey Results
Non-Interest Income Survey Results
Source: Callahan & Associates' Non-Interest Income Survey

The data from the 2009 survey indicates credit unions may already be moving away from NSF and Courtesy Pay income despite the fact Regulation E doesn't go into effect until June of this year.

Participants in Callahan & Associates June 2008 non-interest income survey reported 29.6% of their total non-interest income came from overdraft fees, while participants in the December 2009 survey reported their overdraft fee income only made up 27.4% of their total non-interest income. Despite the decrease, the dollar amount of overdraft fee income has most likely not declined; the shift in the percentage is likely a result of growth in separate components of the non-interest income mix, such as real estate related fee income.

Because of the shift, the largest source of non-interest income is now interchange income from debit and credit cards. This represents more than 31.4% of respondents' total non-interest income, up from the 27.1% reported by respondents in 2008.

Key survey categories, other than overdraft income, also grew relatively between June 2008 and December 2009. Both debit card interchange and credit card interchange grew as a percentage of non-interest income from 17.8% to 19.3% and from 9.3% to 12.1% respectively. The survey group in 2008 had fewer participants and larger absolute amounts of interchange fees than the 2009 survey group, so shifts in composition between the groups might partially reflect growth in other categories.

Real estate fees grew the most radically between surveys. Participants in the 2008 survey reported real estate related fees only represented 4.9% of their total fee and other operating income. In the 2009 survey, respondents reported real estate related fees represented 11.8% of their total non-interest income. The refinancing boom undoubtedly contributed to this increase, but it also may be a reflection of the increased involvement of larger credit unions in real-estate lending.

If you are interested in participating in future non-interest income surveys, please contact Mark Reed.