RALEIGH, N.C. State Employees CU, one of just three credit unions restricted by enactment of the Durbin amendment, said the provision limiting fees on debit transactions cost it about $40 million in lost revenue in 2012.
The lost revenue was the result of the provision capping fees debit transactions for card issuers over $10 billion in assets to between 22 cents and 24 cents per transaction, down from an average of 44 cents beforehand. Jim Blaine, president of SECU, said he expects to make up some of the lost revenue by increasing volume of debit transactions, but not all of it.
The $25.5 billion credit union, the nation’s second largest, was one of just three credit unions, along with Navy FCU and Pentagon FCU, which came under the Durbin amendment cap. A fourth credit union, Washington’s BECU, now with $11 billion in assets, will be joining them this year.
Blaine said the lost debit revenue was not the reason for the credit union’s 38%, or $75 million, decline in net income for 2012. The credit union’s $120.8 million in net income amounts to an ROA of 0.47%, down from 0.83% in 2011.
Blaine said the main reason for the lower net income for 2012 was lower growth, 7.5% for 2012, compared to 10.4% for 2011.
He said his credit union assiduously manages to 7% net worth, NCUA’s minimum to be qualified as “well-capitalized” (it was 7.4% at year-end) and he decried the aim of credit union executives who manage to build high net income and ROA. “That money belongs to the members,” Blaine told the Credit Union Journal today.
Blaine was adamant that too much emphasis among credit unions managers is being put on building net income and ROA. “That kind of thinking will be the death of the cooperative movement,” he stated. He insisted that after sufficient capital is accumulated to satisfy the regulators and provide for potential problems, then as much of a credit union’s net income as possible should be returned to members in the form of lower loan rates or higher savings rates, or other means.