Membership's Make-up And CU’s Fee Structure Drive Income Stream

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MIAMI — Financial FCU CEO Judith Brown said that her credit union is a non-interest income leader thanks to members' acceptance of limited use of the "F" word: fees.

The $54-million, 12,000-member credit union serves employees of Bloomingdales, Macy's, Office Depot and several newspapers, and Brown noted that there wasn't any particular strategy behind Financial's success with non-interest income, as much as its success was a result of the member population it serves.

Financial Federal reported $2.016 million in non-interest income in 2010.

"We serve a lot of people that work for the stores and are medium- to low-income young people," said Brown. "They bounce a lot of checks; they use the overdraft protection. But we've always had a lot of fee income, and at one time I think we charged more than other people charged-but I don't think that's the case anymore, since we haven't raised our fees in [10] years."

Brown noted that while Financial FCU does have a formal fee structure in place, the credit union only assesses "punitive fees," such as overdraft protection and NSF fees. On savings accounts, "we ask them to keep $50 in their savings, and if they go below that we do charge them a little fee each month," she said. "We've found that they'd rather pay the fee and be able to take the money out than not."

Many of FFCUs members, said Brown, understand that the credit union is a business and even as a not-for-profit it must make money to survive. "If we don't have to handle you're account with NSF, we're not charging anything," she said.

As loan volumes have declined, Brown noted that the credit union has come to rely on that fee income. "We used to run 50 to 60% loaned out," she said. "If we didn't put out loans, we had investment income and they usually equaled about the same amount, interest wise, so it didn't bother us too much. Now, like everybody else, we're really struggling."

At year-end, FFCU's loan-to-share ratio was approximately 30%.

Brown added that, "We'd like not to be known as the credit union with the most fees. We would like to change our fee structure, but only for the good. But right now we would not be able to."

With the potential changes to interchange on the horizon, Brown said she is unsure how the small CU will be affected. But she noted that banks will also be affected by those changes, and that could be a boon to credit unions.

"The banks, I think, are going to go into a big fee structure soon-especially the very large ones," she said. "And that's going to be an opportunity for credit unions. We have to look at it and be very careful that if we add fees, that they are going to be a lot less than the banks. We still need to give our members the best deal."

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