Callahan & Associates found that credit unions have generated $10.7 billion in noninterest income this year as of the third quarter–the highest amount reported since third-quarter 2009 and 18% more than the first nine months of 2011.
Callahan also saw a total of $4.9 billion in other operating income at credit unions for the first nine months of 2012–a 30.3% increase in comparison to the first nine months of 2011. As a percentage of total noninterest income, credit unions’ other operating income grew from 39.8% for the first nine months of 2010 to 45.8% for the first nine months of 2012. Two states in particular demonstrated exceptional other operating income growth over the two-year period,: Massachusetts, with 60.3%, and Missouri, with 41.3%.
“The fact that other operating income is primarily responsible for the overall increase in noninterest income reflects the cooperative spirit of the credit union industry,” said Jay Johnson, executive vice president at Callahan. “Instead of taking extreme cost-cutting measures, credit unions found other ways to return value to the member.”
Other operating income refers mainly to interchange income, consolidated income generated from CUSOs, and income derived from selling mortgages on the secondary market, explained Andrew Bolton, senior industry analyst at Callahan.
Bolton said credit unions’ interchange income and mortgage sales on the secondary market have been key drivers of 2012’s uptick in noninterest income.
“The primary reason for the increase is the record mortgage activity we’ve been seeing, and a lot of those mortgages are being sold,” he said. “Interchange income from higher transactional volumes is helping to push it up as well.”
Credit unions’ post-Bank Transfer Day membership growth had a hand in the interchange income surge, Bolton noted.
“The addition of new members in the past year has led to 3 million new credit union checking accounts, and a lot of those account holders are using their debit cards,” he said.
The firm also announced that fee income, which is mainly composed of overdraft, ATM and credit card fees, rose from $5.1 billion as of third-quarter 2011 to $5.5 billion as of the third-quarter 2012.