Mutual thrifts are gaining some ground on their stockholder-owned brethren in income from service fees.
According to an analysis by American Banker, fee income as a percentage of assets at mutual institutions jumped by one third, on average, from the start of 1992 to through September 1995.
The main reason is that many mutuals started to offer checking accounts.
"Mutuals are definitely looking to increase their transactional account volume," said E. Lee Beard, president and chief executive of First Federal Savings in Hazleton, Pa., but it's "not strictly for the fees."
Rather, he said, the object is 'the total relationship ... with the customer" that such accounts can help to provide.
Surveys by two consumer groups this week criticized banks' fee structures and lauded those of small thrifts and credit unions. What the surveys did not say, however, is that mutual and stock thrifts have been ratcheting up their once-low fees significantly in recent years.
Banks have increased their fee/asset ratios by nearly a one quarter since the beginning of 1992, but thrifts have increased them more.
Call report data from Austin, Tex.-based Sheshunoff Information Services shows that small stock thrifts raised their fee/asset ratio by nearly three-quarters, from 0.23% at the start of 1992 to 0.39% last September. The rise was from 0.15% to 0.20% for mutuals and from 0.42% to 0.56% for community banks.
Over-$3 billion banks and thrifts charge less in fees as a percentage of assets. Large thrifts, most of which are publicly held, reported a 50% jump from the start of 1992, although they still lagged behind the smaller stock thrifts. Large banks' fee income was 0.49% of their assets on average last September, versus 0.40% in 1992.
What's driving the change among thrifts is the increased competition in the mortgage origination business. As thrifts struggled to compete with mortgage bankers, interest income declined, forcing them to find a new source to help the bottom line.
"We've started to charge for things that in the past we may have given away for free," said C. William Landefeld, president of Citizens Savings Bank, Normal, Ill. "Some of the old stable areas that used to generate income aren't there anymore, or aren't as big a provider as they were before."
The numbers also reflect a growing change in mutuals' attitude toward fees.
Historically, mutuals have charged lower and fewer fees than stock thrifts and banks. In large part, that's because most fees are assessed on checking accounts, which traditional thrifts have not offered in the past.
Also, because mutuals are in theory owned by their depositors, they don't face the same quarterly earnings pressure as stock companies.
With changes in the industry during the past few years, however, thrifts have begun to offer checking accounts and other new services to draw in more customers.
"They're realizing that in order to be competitive, they've got to be better retailers," said Anita Newcomb, managing director of Professional Bank Services in Washington. "To be better retailers, they have to offer their customers more products and broader relationships."
