The debit card interchange cap will cost the $11.5 billion BECU between $35 and $45 million in 2014.
Speaking as part of a panel at the 2013 American Credit Union Mortgage Association Conference in Las Vegas, BECU Vice President of Treasury Mike Quamma said the drop in interchange income is so significant, his 826,000-member institution must take it into consideration when pricing mortgages and other loan products. (Read more ACUMA onsite coverage on page 3.)
BECU became subjected to the cap in the third quarter of 2012 when it exceeded $10 billion in assets. According to the Dodd-Frank Act’s Durbin Amendment, which mandated the cap, debit card issuers with fewer than $10 billion in assets are exempt.
That leaves just four credit unions subjected to the cap: the $54 billion Navy Federal Credit Union of Vienna, Va.; the $27 billion State Employees’ Credit Union of Raleigh, N.C.; the $16 billion Pentagon Federal Credit Union of Arlington, Va.; and BECU.
According to BECU’s financial performance reports posted on the NCUA’s website, the credit union experienced a dip in net income during the second half of 2012. After annualized net income gains of 16% and 8.5% in the first and second quarters of 2012, net income dropped 0.7% as of Sept. 30 and dropped another 1% as of Dec. 31.
Total non-interest income did not decrease on an annualized basis during the second half of the year, however. Non-interest income increased 2.6% as of Sept. 30 and another 3.5% as of Dec. 31, which was similar to increases during the third and fourth quarters of 2011.
Taking a closer look at BECU’s 5300 call reports, the credit union reported increases in both fee income and other operating income during the first half of 2013 compared to 2012. As of June 30, 2013, BECU reported year-to-date fee income of a little more than $60 million, and year-to-date other operating income of a little more than $38 million. During the same period in 2012, fee income was just under $55 million and other operating income was nearly $34 million. By year-end, fee income was $115.5 million and other operating income was $73.4 million, according to BECU’s Dec. 31, 2012 call report.
However, losses from the applied cap may not yet be apparent in BECU’s financials. Quamma said 2014 will be the first full year the credit union will feel the pinch of the cap.
Quamma also said at the conference that if the Federal Reserve sets a lower cap, BECU could see a $55 million drop in income.
“Right now we have a lot of good numbers so if this has to happen, it’s better than it happen now than at another time,” he said