Living Off of Fees

KEY WEST, Fla. – (January 24, 2008) This week’s large rate cut by the Federal Reserve is expected to prompt a similar cut in home equity, car and other short-term loan rates, making it increasingly difficult for credit unions to earn a return on these types of loans. The move is expected to increase the pressure to boost non-interest income–fees–to make up the difference, according to attendees at the Pennsylvania CU League’s CEO Summit.

Several executives said without non-interest income they would have no net income, at all. "Without fee income, most of our credit unions wouldn’t have any net income," Pat Mahaney, president of the Delaware CU League, told The Credit Union Journal.

In fact, an NCUA official told the Mid-Altantic CEOs that fee income now exceeds the spread credit unions earn on their assets as a contributor to the bottom line. At the end of the third quarter in 2007, credit union were earning 86 basis points from fees, but only 75 basis points on their return in assets, according to Scott Hunt, associate regional director for NCUA.suite. (CU Times)