The largest revenue generator in Altura's non-interest arsenal is NSF activity, responsible for 36% of 2006′s nontraditional income, nearly $10 million. The credit union enjoys a strongly positioned checking product, even growing checking deposits during the past few months while many credit unions have struggled.

Courtesy pay leads the NSF revenue list, available to members in good standing with direct deposit. The credit union's fees are fairly competitive in Southern California: overdraft protection is $3 per transfer, courtesy pay is $30 per item, and returned items are $25 each.

Oddly enough, one of the community charter credit union's former occupational groups–teachers–is responsible for more NSFs than you might think.

"To speak frankly, for teachers who are not working in the summer, courtesy pay is a good benefit for some of them," she said.

Interchange income is the credit union's second leading source of nontraditional income, responsible for 22% of 2006′s gains, or $6 million. Strong card usage fuels the revenue stream, and Wilcox said the key to getting members to use cards is to get them in their hands and make them easy to use.

A service that allows members to make past due loan payments by phone for a small fee saw 48% growth last year. While it isn't a significant source of income, it's convenient and members like it, and every little bit helps, Wilcox said. Successful CUSOs Require Strategic Thinking

Like many credit unions that jumped on the mortgage bandwagon, Altura's Patrion Mortgage CUSO was a significant revenue producer the past few years, but due to decreasing net interest margins, lost a bit of luster in 2006. The credit union doesn't keep many mortgages in its portfolio, and like most credit unions, has seen a significant reduction in profit margins from sales to the secondary market.

Yet, despite all the doom and gloom, Patrion Mortgage is still profitable.

Why? Because Altura retains servicing on the loans. The credit union enjoys all the typical advantages from loan servicing efforts, like steady cash flow and the opportunity to cross-sell to members. But what makes this revenue stream different is the way the credit union budgets servicing income. Rather than track income as it comes in, Altura pays mortgage servicing rights forward, so to speak.

"If I book a loan today, not only am I recording all the upfront revenue, I'm also immediately posting that future value for servicing the loan, which can be as high as 80 basis points on the loan. That's a pretty good source of revenue, depending upon the size of your portfolio. Basically, what you're creating is a stream of revenue that closely mirrors the servicing revenue you receive. There are certain assumptions that go into recording a mortgage servicing right, like a review of payment history," Wilcox said.

Altura uses a third-party vendor to value and track mortgage servicing rights on a quarterly basis, which Wilcox said keeps financials on track and auditors appeased. A new CUSO will continue to cash in on mortgage activity by providing escrow services to members. Amerit Escrow is "still in the start-up phase," Wilcox said, but scored 12 escrows in its first month of operation. The CFO said she thinks the new affiliate, with a steady stream of interoffice referrals, will break even within its first year. "When the member is going through another escrow company and wants the loan closed ASAP, the escrow company may not necessarily be on the same page. We're a firm believer in managing and monitoring our service levels to members. Our mortgage affiliate already has good service levels, and by controlling the service provided in escrow, it will increase those service levels even further," Wilcox said.

Participation in CU Business Partners, a CUSO owned by Telesis Community Credit Union, has resulted in significant gains in business loans for Altura, boosting interest and non-interest income, and providing a growing stream of patronage dividends.

Growth has been impressive. In less than three years, Altura has built up a commercial lending portfolio of $35 million, and about $13 million in business loans. And, CU Business Partners provides participation loan opportunities, too: Altura has participated on loans from other credit unions, and has participated out some of their own.

"It was really nice to work with them to get our business lending up and running. We just didn't have the infrastructure or expertise to begin that process. Not to say that somewhere down the line we wouldn't want to do it on our own, but they've certainly helped us learn and grow along the way," she said. New Focus on Expense Reduction

With so many successful revenue streams in place, Altura is now focusing on an area where it has historically struggled: non-interest expense. The credit union worked hard to reduce expenses in 2005, and while incredibly successful, still racked up a whopping $42.9 million in non-interest expenses. Numbers increased slightly in 2006, to $44.7 million. "We know we're a high cost provider, so when you look our net numbers, they're not as pretty. Thank goodness we're so good at generating non-interest income," Wilcox said with a laugh.

An aggressive branching strategy is partially to blame, as Altura has invested brick and mortar in new suburban communities in southwest Riverside County, one of California's fastest growing regions.

To offset these costs, the credit union launched an aggressive effort to increase efficiency and "trim the fat" in 2005, Wilcox said. The credit union exceeded its goal, trimming $4.8 million off its budgeted expenses that year.

The usual suspects were targeted first–office supplies, marketing, and the elimination of unnecessary positions. Renegotiations with service providers were a big contributor as well. The credit union replaced its debit and credit card interchange vendor, and worked with WesCorp to develop a relationship pricing agreement. Altura uses the corporate for many services, including item processing and imaging, and was considering signing up for more.

"I said, 'we're a valued client of yours, is there any room to consider discounted pricing based on our participation in other products?' WesCorp put together a bid based on our numbers and volume," she said.

While WesCorp's discounts were very small per transaction, it represented considerable value when multiplied by Altura's volume of business.

In exchange, the credit union outsourced consumer loan payment processing, signing a lock box agreement with WesCorp. Not only was Altura able to make more efficient use of staff resources, it avoided having to replace an aging TWS machine…a looming expense the institution had been dreading.

Ultimately, Altura's non-interest income and lowered operating costs have resulted in continued ROA growth, which Wilcox said she is thankful for in an interest environment with an inverted yield curve.

"We look at some of our peers who are showing zero or negative ROA, and it's really been a challenge for them. Hopefully, the interest environment will become more friendly and things will get easier; but for now, we'll continue to think of creative ways to come up with non-interest income," she said. –[email protected]