Savings bank

USAA Federal Savings Bank of San Antonio ends 7-straight quarterly loss streak

USAA Federal Savings Bank’s pandemic loss streak is over.

The San Antonio financial institution posted a profit of $30 million in the three months ended March 31, breaking seven straight quarters of red ink. He lost $858 million during that time.

USAA Bank lost $323.9 million in 2020 and $386.5 million in 2021 – only the second time in its history that it has lost money in consecutive years. The first was in its first two full years of operation in 1984 and 1985, when the institution was a fraction of the size it is today.

The bank, with $118.3 billion in assets, returned to profitability with just under $1.48 billion in revenue last quarter. A year ago, it lost $78.9 million on about $1.36 billion in revenue.

“USAA Bank continues to demonstrate strong capital and liquidity positions that ensure our financial strength and allow us to serve our members when they need us most,” a spokesperson said in an emailed statement. . “In the first quarter of 2022, we continued to see improvement in our core business driven by expanding net interest margins, strong asset quality and disciplined expense management. We expect the positive trends to continue.

In a February interview, Chief Financial Officer Michael Moran cited a “number of problems” for losses in 2020 and 2021. They began after the Federal Reserve cut interest rates to near zero in March. 2020 to combat the economic upheaval caused by the coronavirus pandemic. .

Declining loan volumes, soaring deposits and historically low interest rates have all had a negative impact on the bank’s results. The bank had $37.8 billion in loans on its books at the end of last quarter, down $1.9 billion – nearly 5% – from a year ago. Deposits soared more than $9 billion — or about 11% — to $91.5 billion.

The bank’s costs skyrocketed in 2020 and 2021. It has spent heavily on technology systems, hiring and compensation to improve its business. Salaries and benefits rose more than $100 million, or 20%, to $634 million in the first quarter.

The bank also had to strengthen its risk management and regulatory compliance after regulators imposed penalties for alleged breaches of banking regulations.

In March, the Financial Crimes Enforcement Network, or FinCEN, and the Office of the Comptroller of the Currency imposed a combined fine of $200 million on USAA Bank. FinCEN reported that it failed to accurately report thousands of suspicious transactions by its customers, including those using personal accounts for apparent criminal activity.

The bank only had to pay $140 million because FinCEN agreed to credit the OCC’s $60 million fine. The bank’s spokesman said the fine was mostly included in 2021 year-end results, with the rest included in the first quarter.

These fines came after others in recent years.

In 2020, the OCC fined the bank $85 million for “violations of the law” that were “part of a pattern of misconduct.” The bank has neither admitted nor denied violating banking laws.

And in 2019, the Consumer Financial Protection Bureau ordered the bank to pay a $3.5 million fine and $12 million in restitution to settle charges of violating banking laws.

The bank cut its workforce by 90 employees in March due to falling demand for home loans. It had 15,949 full-time employees as of March 31.

Service fees are soaring

USAA Bank’s revenue increased by $120 million last quarter, a change of 8% from a year ago, mainly due to an increase of nearly $101 million in revenue non-interest income, also called commission income.

Revenue from “fee for service” soared to $128 million, a 158% increase from the first quarter of 2021, when it was $49.7 million. The USAA Bank spokesman attributed the jump to higher interest rates on the value of its mortgage servicing rights.

The bank’s revenue from “fee for service” rose about $16 million, or 35%, to $62 million in the first quarter. The bank charges a variety of fees – from $29 on a stop order to $45 for an international wire transfer to $5 for a returned item.

This fee includes the $2 the bank charges a customer each time they withdraw from a non-USAA ATM after 10 withdrawals in a monthly statement cycle.

Later this year, the bank intends to end this $2 ATM fee. Customers may still be charged fees by other companies for using ATMs outside of USAA Bank’s network, it said in a statement posted on its website last month.

It also said it would stop charging the $29 insufficient funds fee, known as the NSF fee, for each declined or returned unpaid transaction when an account’s available balance is not sufficient to pay the transaction.

“We are continuously evaluating and committed to providing products and services to enable members to manage their financial security,” Ryan Bailey, head of retail banking at USAA Bank, said in the statement.

The bank does not charge overdraft fees, per its depository agreement and disclosures.

Elimination of NSF charges

USAA Bank is jumping on the bandwagon of banks waiving some fees.

“This is a nationwide trend started by a few big banks and now spreading everywhere, although some banks are only dropping part of it and being very careful about how and when to charge it,” he said. said Kenneth Thomas, Miami-based banking analyst and president of Community Development Fund Advisors.

“This is a priority consumer issue, especially for the Consumer Financial Protection Bureau, where they’re all over banks’ ‘junk fees’,” he added.

In January, the CFPB said it would use its powers to reduce “abusive junk fees charged by banks and financial firms”.

Some of the nation’s biggest banks — including Bank of America and Wells Fargo — had already revealed that month that they were waiving NSF fees and some overdraft fees. The Pew Charitable Trusts called it “a watershed month to strengthen consumer protection”.

Last week, Frost Bank – the largest regional bank based in San Antonio – revealed that it plans to eliminate NSF fees in the coming months.

Additionally, Frost is waiving some overdraft fees — expanding a feature it introduced last year to no longer assess customers’ fees when they overdraw their checking accounts by up to $100 — as long as they have monthly direct deposits of at least $500. Frost intends to expand this year to include all consumer customers.

The changes will cost Frost $3.4 million to $3.6 million in fee revenue per year, he said.

A spokeswoman for USAA Bank would not say how much the lower fees would cost the bank, calling it “proprietary” information.

It generated nearly $172.3 million in management fees last year, ranking it 51st among banks, according to the website. Chase Bank tops the list, charging $699 million in service fees.

Source link