Nationally, non-interest income makes up nearly 30% of total credit union income, a significant portion that many credit unions look to maximize without inundating members with fees.
This week, CreditUnions.com features articles showing how credit unions are driving non-interest income, from PIN fees to secondary market sales.
The University of Iowa Community Credit Union is no stranger to finding new ways to boost non-interest income and lower its cost of doing business. But the most interesting strategy it has adopted is one that is not only unique to its market but rarely found anywhere else.
Contrary to standard credit union operating procedure, UICCU charges its members $1 for point-of-sale PIN transactions as well as those made at a foreign ATM. The practice isn’t new, and it’s longevity is one marker of its success: the 140,000-member institution, which has 14 branches clustered in the Iowa City/Cedar Rapids area, introduced the fee soon after it launched its debit card 20 years ago.
Learn more about how this Iowa credit union increased its interchange revenue by 41% over four years in A Strategy To Build Non-Interest Income One Transaction At A Time, by Callahan contributor Susan Levi Wallach.
Non-interest income comprising fee income, other operating income, and gains/losses from various investments can be tricky to maximize without raising fees. Some credit unions boost NII through sales of mortgages to the secondary market and unconsolidated gains from investments in CUSOs.
See how CUSOs and sales to secondary markets affect non-interest income in this week’s Graphic Of The Week, Clear Connections Emerge Between CUSO Activity And Diversified Earnings by Callahan Analyst Liz Furman.
At all U.S. credit unions, net interest income covers approximately 91.5% of total operating expenses. However, net interest income at individual institutions fluctuates based on economic factors such as the rate environment.
When rates come down there’s a general tendency for margins to squeeze, says Steve Murray, CFO at Members 1st Federal Credit Union. The longer they are down the more they get squeezed, so we’re constantly looking for other means of income to supplement the ebb and flow of the net-interest margin and net-interest income.
To augment its net interest income income, Members 1st operates insurance and mortgage settlement CUSOs as well as an investment services group through which it earns non-interest income in the form of insufficient funds, courtesy pay, interchange fees, and other general fees.
And for more than 15 years, the credit union has originated mortgages specifically to sell on the secondary market and earn non-interest income. Learn more about this strategy in Sell Mortgages. Reap Non-Interest Income. by Callahan Associate Editor, Erik Payne.
Warren Federal Credit Union is rewarding its members for swiping things, in this case their debit cards at the rate of five cents a transaction.
The 54,771-member institution launched its Earn 5 rewards account last October. It’s one of five free checking programs the credit union offers, and one of only two that offers rewards. The other one offers up to 2% interest, but that doesn’t serve the many members who don’t maintain significant balances but do use their debit cards a lot.
To see how the debit payback program builds member interest and non-interest income, read Hype The Swipes To Boost NII by Callahan Senior Writer, Marc Rapport.
Credit unions posted a 7.1% year-over-year increase in loan interest income at year-end 2015 and a 6.1% increase in total interest income. To see a breakdown of the industry’s earnings performance in fourth quarter 2015 read Earnings By The Numbers (4Q 2015)