Institutions big and small have already seen debit interchange decline thanks to the Durbin rules and the CFPB is clearly focused on overdrafts, which represents a huge chunk of credit union non-interest income. There is, too, money from mortgage refinance business coming off the table as that pipeline runs dry.
Credit Union Journal spoke with five CU execs to get their reactions the challenges they face regarding preserving—and possibly growing—non-interest income.
1. Signature Swipes Drive Debit
The potential for debit interchange continuing to drop has the St. Joseph, Mich.-based Honor CU focused on a new checking product that drives signature-based debit transactions.
Benefits Checking pays 5% APY on balances up to $5,000. But to get the high rate members must perform at least 12 signature debit transactions each month, plus take e-statements and have one monthly direct deposit. CEO Scott McFarland said the extra signature swipes should help offset what is expected to be an eventual marked decline in what credit unions, even below the $10 billion Durbin threshold, receive on each debit transaction.
"We are seeing a lot of interest in the checking account," said the CEO of the $550 million shop. "In the first 30 days we've seen 150 new accounts, and that is without much marketing."
2. Regulation Killing Revenue
The CFPB's focus on overdrafts has Texell CU concerned about the future of its non-interest income.
"If they make changes that significantly impact overdrafts, that impacts a lot of my non-interest income," said CEO Tony Hale.
To counter potential CFPB moves, and to adjust to increasing regulation that is impacting financial institutions' revenue streams—such as the new debit interchange rules—the $225 million Temple, Texas-based CU is focusing on its new insurance agency and has sights set on additional revenue opportunities.
"We are looking at investments...all these ancillary products that fold well into the core mission of the credit union," said Hale. "If the government is going to spend all their time finding all the things we should not be doing to make money, eventually we will run out of ways to make money."
3. Bring Insurance Programs In-House
Like many credit unions, declining refinance business has Heritage Family CU in Rutland, Vt., looking for new revenue opportunities.
"We have a financial services program that offers members investment and insurance products, and we are looking at possibly bringing in-house the home and auto insurance programs," said Matt Levandowski, SVP of retail at the $355-million-asset institution. "We partner with someone on those offerings now, but we think we can generate even more revenue if we handle the business ourselves."
4. Ready for Refi Boon to Bust
The Tampa, Fla.-based GTE Financial feels its non-interest income stream won't be dramatically impacted by a drop in refi business because the CU had been preparing for that business to dry up all along.
SVP/COO Aaron Bresko said the $1.7 billion credit union has kept its eyes on new purchase business throughout the refi boon, and has a steady stream of new originations. "We focus on first-time homebuyers and we are always driving in new members, which adds to our opportunities."
5. High Loan to Share Cuts Concerns
Tri-Town Teachers FCU in Westport, Conn., admits threats to non-interest income are not a tremendous concern to the $17 million CU.
John Coniglio, assistant manager, explains why: "Our loan-to-share ratio is at about 95%. The majority of our revenue comes from loans."
Coniglio said the credit union enhances its revenue streams by working through the state league to offer Invest In America's Sprint and TurboTax programs to members.