Annualized non-interest income growth describes the change in this type of revenue stream from the same quarter one year earlier. Credit unions can use this metric to evaluate how the growth rate has changed over time. They can also contrast the growth of non-interest income against the growth rate of interest income, and compare the metric across multiple credit unions to gain insight into fee practices. In 2010, non-interest income grew 4.0% for all U.S. credit unions, which is down from the 8.9% growth reported in 2009. Non-interest income is important for credit unions, especially with the potential of decreased fee income because of the Durbin Amendment.
Non-interest income is any revenue that a credit union earns outside of its core activity of taking in shares and making loans. It consists of fee income (fees charged for services provided by the credit union, such as overdraft protection and ATM fees) and other operating income (which can include items such as credit card or debit card interchange income and income received from selling real estate loans on the secondary market). Non-interest income is an important item to monitor because it generally diversifies a credit union’s sources of revenue.
The growth rate of non-interest income can vary across time and across various cooperative institutions. These variations are influenced by strategic decisions and positioning within the institution, competitive forces, time, and member dynamics. For example, a credit union that introduced a new fee income category during the past year might temporarily have a higher rate of non-interest income growth than a credit union that introduced a similar program several years ago. Strategic factors that impact the ratio include the credit union’s fee philosophy, the marketing and market penetration efforts, and the credit union’s CUSO plans. A credit union operating in a competitive environment might need to alter its fee practices to compete more effectively.