Stressed about the legislative assault on overdraft fees?

Most bankers probably are.

At 44.5% of all banks and credit unions, overdraft income exceeds net income, Nicholas J. Ketcha Jr., an executive managing director at the consulting firm FinPro Inc., told bankers at his company's annual conference Thursday in Mountain Lakes, N.J.

He said that the political pressure to drastically limit such fees is intensifying and that community banks – which have much to lose – are failing to effectively respond to the rhetoric in Washington.

"I've always said overdraft protection programs were a timebomb waiting to go off," said Ketcha, a former director of supervision at the Federal Deposit Insurance Corp. "Well, that timebomb went off."

The legislators are latching on to statistics showing that overdraft and insufficient funds fees have been increasing, he said. In the past decade or so, overall revenue from these sources has doubled, from $18 billion in 1999 to $36.7 billion in 2008, according to information Ketcha provided. This year the revenue is projected to grow by another $1.9 billion.

But further analysis shows the revenue is actually flat as a percentage of transaction deposit balances, Ketcha said. And the revenue is declining as a percentage of total deposit balances.

He said bankers need to make sure their legislators get that.

Though legislation limiting overdraft fees has yet to pass, the blowback is already making an impact.

Some agencies are already applying the proposed rules at exams and factoring the results into their conclusions.

Ketcha said he knows of one bank that saw its Camels score downgraded on the "management" component over issues related to its overdraft protection program.