As the Federal Reserve plans to implement new rules to regulate banks’ service charges, an article titled TCF Risks Backdraft on Overdraft Fees today in the Journal mentioned five banks that have had high levels of service charges as a percentage of noninterest income. In this post, lets take a look some of the fees and charges that makeup part of the noninterest income.
1. TCF Financial (NYSE:TCB)
Based in Wayzata,MN, TCF operates in Minnesota, Illinois, Michigan, Colorado, Wisconsin, Indiana and Arizona.The current yield is 1.40%.
In 2Q, 2009 fees and services accounted for $77.5 M of the total non interest income of $156.4M. So service charges exceed 50% of non interest income. It represents an increase of 35.9% from 1Q2009 “primarily due to an increased number of checking accounts and related fee income”. Last year service charges were 54% of non interest income. Though the number of new checking accounts may have increased, the total service charges are high.
2. Huntington Bancshares (NASDAQ:HBAN)
In 2Q, 2009 total non interest income increased $26.8 million, or 11%, from 1Q,2009 to $265.9M. Out of this service charges on deposit accounts was $75.4M. This was a $5.5 million, or 8%, increase from previous quarter reflecting higher personal service charges, primarily NSF charges. Other income include brokerage and insurance income, trust services,electronic banking, etc. Last year service charges accounted for 44% of non interest income.
3. Fifth Third Bancorp (NASDAQ:FITB)
Of the non interest income of $2.6 B service charges on deposits amounted to $162M or 11%. Last year for the same period it was just 2%. Electronic payment processing fees also jumped from 4% last year to 9% in 2Q,2009. Retail service charges increased 20% from 1Q,2009.
4. Regions Financial (NYSE:RF)
The Total non interest income was $1.1 B. Service charges, up $19 million or 7 percent, benefited from a higher level of customer transactions, new account growth, and seasonal factors.
5. Associated Banc-Corp (ASBC)
Out of the total noninterest income of $101.9M , service charges on deposit accounts was $29.6M or 29%. Last year service charges were 41% of noninterest income.
As bank profits come under more pressure in the current recession, many banks will raise the fees on various types of accounts or institute new types of fees for services to generate additional revenue. If the Obama administration’s proposal to set up a consumer financial protection agency becomes successful, then high service fees, overdraft fees, etc. imposed by banks on customers may be targeted.
Related Research Paper: FDIC Study of Bank Overdraft Programs
Key Point from the FDIC study: “The banks earned an estimated $1.97 billion in NSF-related fees in 2006, representing 74 percent of the $2.66 billion in service charges on deposit accounts reported by these banks in their Reports of Conditions and Income (Call Reports) .”