Mr. Rohit Chopra and the Consumer Financial Protection Bureau (CFPB) are working hard to bring down fees that are not justified (i.e. junk). In fact, in its Fall 2023 issue of Supervisory Highlights, the CFPB reported that its work has already resulted in refunds of over $140 million to consumers.

The 49 banks listed on page 5, however, have annualized service fees as a percent of savings and transaction deposits (T&SD) of 0.90% or higher. That’s well above the national average of 0.19%.

Not All Bank Service Fees are Junk Fees

The 49 banks listed on page 5 have annualized service fees as a percent of savings and transaction deposits (T&SD) of 0.90% or higher. That’s well above the national average of 0.19%. To make this list more consumer-friendly, we made some minor adjustments from last quarter (JRN 40:28).

First, we eliminated Zero-Star Silvergate Bank, LaJolla, CA, even though its service fees, at 23.5% of T&SD, are head and shoulders above the rest. Since Silvergate is in the process of winding itself down, we saw no need to include it here.

We also eliminated all Bankers Banks, which as their name implies, serve banks, rather than consumers and businesses. This provided us with 49 banks that, as of June 30, 2023, charged 0.9%, or more, in  service fees (annualized) as a percent of T&SD, that you, our readers, might actually bank with.

There are a few banks that made substantial improvements over first quarter. Before we get into the others, we’d like to give them props.

For example, 5-Star First State Bank, Noble, OK, lowered its annualized service fee income as a percent of T&SD from 1.18% at March 31, 2023 to 0.96% at June 30th. How? During the second quarter, First State Bank saw its T&SD balances jump 18%. Its service fee income did NOT rise in tandem. When annualized, service fee income was little changed from the Q1.

First State Bank may still be on this list, but it makes up for it by organizing a food pantry to help fill the food insecurity problem (which is profound) in and around Noble.

Another, 5-Star Lincoln Federal Savings Bank of Nebraska’s service fee income dropped from 1.11% in the first quarter all the way down to 0.83% (and off of page 5) at the end of June. Lincoln FSB witnessed a small increase in its T&SD (1.2%). But a rather large decrease in service fee income is what brought this one off of page 5. Good job.

Since its centennial anniversary in 2006, Lincoln FSB has been a proud partner of the Make-a-Wish® Foundation of Nebraska. It hosts an annual golf tournament to make dreams come true for children with life-threatening medical conditions.

The improvement of 3-Star Peoples Bank of Kankakee County, Bourbonnais, IL may not be quite as impressive as some of the others, but we still want to mention it. In addition to its service fee percentage dropping from 1.02% to 0.95% in the second quarter, it also gives back to its community.

Peoples Bank is still run by the same family that founded it in 1962. Employees at the bank say that giving back to Kankakee County is in their DNA. Last year, the bank contributed over $118 thousand and  over 1,000 volunteer hours to local causes.

When banks use their profits to benefit their communities, it makes service fees a bit more palatable, especially when those service fees are decreasing. The following banks, however, reported notable increases in service fee income (as a percent of T&SD) during Q2.

Let’s start with 2-Star Alamerica Bank, Birmingham, AL, which has been struggling for much of its 23 year existence. Alamerica has been operating under an FDIC enforcement action, with prescribed required minimum capital ratios (CRs), since 2014. As a result, its CRs are actually quite good.

However, in spite of relatively high service fees, the bank has not posted a profit in years. Another area of concern is loan quality. Alamerica reports a significantly higher percent of nonperforming loans than its peers. The cause behind its increase in service fee ratio, though, was not an increase in fees, but a 15% drop in deposits during the second quarter. Times are tough for this tiny bank.

4-Star CBW Bank, Weir, KS has a much longer history than Alamerica. Established in 1892 as Citizens Bank of Weir, the bank was necessary to fill the needs of coal miners that were flocking to the newly formed town of Weir (established in 1872).

After the turn of the last century, however, that population influx began to reverse. The population of Weir, Kansas peeked at about 3,000 in 1900. In 2000, an estimated 13% of the remaining population was living below the poverty line. By 2020, Weir’s population had dropped below 600 residents.

Things were looking pretty bleak. Then, in the past year, total assets at CBW Bank grew by 46%. Its deposits grew even more (60%).  Service charge income would naturally grow as well. But after just $94,000 earned in service fees in Q1, CBW Bank’s second quarter service fee income was nearly quadruple that at $367,000, bringing its total for the first half of 2023 to $461,000.

Unfortunately, only the largest banks are required to itemize service charges, so we cannot say exactly where these fees came from. Also notable, is that some service fees are justifiable.

Mr. Rohit Chopra and the Consumer Financial Protection Bureau (CFPB) are working hard to bring down fees that are not justified (i.e. junk). In fact, in its Fall 2023 issue of Supervisory Highlights, the CFPB reported that its work has already resulted in refunds of over $140 million to consumers.