COVID-19 impact & trends update on overdraft services

In an effort to gain a better understanding of the impact coronavirus has had on the performance of banks and credit unions over the past several months, we evaluate a variety of metrics for our community bank and credit union clients to determine the overall success of their overdraft programs. Based on the Year-Over-Year data from April to August in 2019 and 2020, we found some key areas that have been affected since the pandemic began.

First, due in large part to a decrease in program utilization—caused by such things as the economic slowdown and stay-at-home orders—transaction volume showed a decline of approximately 16 percent by the end of April. In May, volume decreased by as much as 55 percent. As a result, overall NSF/overdraft income was greatly impacted. Initially, in April it declined by 40 percent and then fell to 50 percent in May. Another area of concern we identified was the impact on fees. In May, refunds and waives increased by as much as 51 percent.

However, beginning in August we started to see improvements in all these areas. Income started to recover as data for the month indicated an increase of 20 percent over the May results. Likewise, data for transaction volume, program utilization, as well as waived and refunded fees revealed that client institutions were beginning to see improved results.

When will NSF/OD income return to normal?

As community banks and credit unions continue to face the challenge of maintaining pre-pandemic revenue levels, we are often asked about when to expect a full recovery. Based on an analysis of Call Report data for more than 6,000 financial institutions through the end of June, the average decrease in income for all banks was 34 to 36 percent; for credit unions income decreased an average 28 percent.


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