Credit unions posted healthy non-interest income numbers for the first three quarters of 2011, reporting $9 billion in total non-interest income, 2.2% more than the same period in 2010.
A myriad of new regulations on the financial services industry in the last few years, including Regulation E and the CARD Act, has changed the way financial institutions can run their business. Perhaps the most significant of these changes, the Durbin Amendment, thrust non-interest income into the limelight in 2011. Faced with lower returns on debit and credit card swipes, banks and credit unions looked for ways to make up that revenue loss. This change comes at a time of historically low interest rates on loans, the major source of income for a credit union. The Durbin Amendment went into effect in October, so the jury is still out on what the full effects will be.
On the 5300 Call Report, non-interest income is comprised of two major categories. The first is fee income (account 131), which includes segments such as overdraft fees, ATM fees, and credit card fees. The second is other operating income (account 659), comprised of dividends from the NCUSIF, unconsolidated CUSO income, and income or loss from selling real estate loans on the secondary market, among others.
The $9 billion in total non-interest income at the end of the third quarter, when net income was $6.4 billion, was comprised of 58% fee income and 42% other operating income. It is interesting to note the growth of other operating income over the last five years. In 2006, the spread between fee income and other operating income as a percentage of total non-interest income was 34%, with fee income making up 67% and other operating income making up 33%. However, in the last five years, the spread has been reduced to only 16%. Non-interest income has always made up a significant portion of total income, and this year was no exception. It accounted for 23.2% of total income, and 1.28% of average assets.
Non-interest income has posted significant growth year-over-year, with a brief slowdown in 2010 due to the aforementioned regulations, some of which were enacted in 2009. Growth has returned, with credit unions reporting a 2.2% growth in non-interest income, despite fee income declining 1.9%. The fee income loss was offset by the growth of other operating income, which grew by 8.2%, primarily as a result of credit unions selling their mortgage loans to other lenders.
The 5300 Call Report only separates non-interest income into the two major categories but there are many segments that make up that figure. Callahan & Associates’ annual non-interest income survey delves into the details and breaks down what makes up the two broad categories.
For detailed data, participate in Callahan & Associates' 2012 Non-Interest Income Survey.