Professional sports thinking has it that the best defense is agood offense. Brian Daskalovitz feels much the same way aboutmortgage lending and its related feeincome.

Daskalovitz, accounting services manager for FedChoice FederalCredit Union in Lanham, Md., is planning for flat financial growthin 2014. He also believes that rising interest rates will dampenany further mortgage refis, slicing into the $350 million creditunion's noninterest income.

To combat the anticipated income decline, Daskalovitz saidFedChoice is ramping up its mortgage loan efforts in the newyear.

“We've tried to stay out of this area because rates were at rockbottom,” said Daskalovitz of the credit union's $10 millionmortgage loan portfolio. “We anticipate rates moving up, so we'replanning to expand our mortgage lending program.”

Mortgage lending comprises about 10% of the credit union's loanportfolio, the accounting manager said. Through more aggressivemarketing and sales, the Maryland credit union hopes to double itsmortgage portfolio in 2014.

FedChoice is not alone in its thinking. Fearing the decline infees, credit unions across the country are looking for ways toreplace what may be significant lost income from mortgageorigination and sales fees, as well as other sources of noninterestincome.

“Noninterest income makes up roughly 30% of revenues forall credit unions, but the distribution varies greatly from creditunion to credit union,” said Dwight Johnston, chief economist for the California and NevadaCredit Unions Leagues in Ontario, Calif. “The 30% figure ishistorically on the high side.”

NCUA statistics bear this out. Total noninterest income peakedat $14.6 billion for fourth-quarter 2012, or about 30% of totalincome for federally insured credit unions, according to NCUAspokesperson John Fairbanks. Of that figure, fee income totaled $7billion for the same period, also a record. Average noninterestincome since 2009 has been about $7 billion for all types, or about15% of credit unions' total income, he said.

Rising rates definitely mean that mortgage refis will decline,Johnston stressed, resulting in lower levels of related fee income.Larger credit unions with significant mortgage portfolios will feelthe hit, but may have the resources to compensate in otherareas.

Conversely, many credit unions with less than $100 million inassets and not as deeply involved in mortgages may slide by withonly minimal damage, the economist said.