US banks' overdraft fee income declined in the first quarter, hitting a three-year low.
Overdraft fee income dropped to $1.36 billion in the first quarter from $1.41 billion in the fourth quarter of 2023, the lowest level since at least the first quarter of 2021. Overdraft fee income has steadily declined since the fourth quarter of 2021, except for a couple of quarters, due to increased regulatory and competitive pressure.
ATM and maintenance service fees also declined during the quarter, sinking total service charges and fees on consumer deposits as a proportion of operating revenue to 1.13%, higher than only the first quarter of 2023 at 1.10%.
Consumer deposit fee income
Woodforest National Bank continued to have the highest consumer deposit fee income as a proportion of operating revenue at 22.4%. Still, the bank has been bringing in less deposit fee income recently, down 6.5% year over year. Woodforest was one of only three banks reporting deposit fees making up double-digit percentages of operating revenue. The other two were Gate City Bank and International Bank of Commerce Oklahoma.
Community banks tend to rely on deposit fee income more than larger banks. Only one bank on the list, Arvest Bank, had over $10 billion in assets.
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Of the nine banks that reported year-over-year declines in deposit fee income as a proportion of operating revenue, BankPlus' decline was the largest at 22.0%.
Despite the overall downward trend in the industry, half of the top 20 banks reported a year-over-year increase in consumer deposit fees as a proportion of operating revenue. The First Bank, a subsidiary of The First Bancshares Inc., posted the biggest uptick at 45.8%. VeraBank NA trailed at 7.6% and First State Community Bank at 7.5%.
Declining deposit fees
The "big three" banks — JPMorgan Chase & Co., Wells Fargo & Co. and Bank of America Corp. — topped the list of 20 banks with the most deposit fee income, though all three brought in less deposit fees year over year.
Of the top 20 banks with the most deposit fee income, all but five fell year over year. Santander Bank NA posted the biggest drop at 28.4%, followed by Truist Financial Corp. at 26.6% and KeyCorp at 25.7%. Four more banks posted double-digit declines during the year.
BMO Bank NA posted the highest increase in fee income year over year at 63.3%
