FDIC hikes fees for banks - bizjournals:

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The Federal Deposit Insurance Corp.’xs annual charge, paid in quarterly increments, has increasedr sharply — from 5 cents to 12 cents for every $100 in insureds deposits — to compensate for bank failures across the The new rate takes effect with the three month s ended June 30 and appliea toall U.S. banks, thougyh not to credit unions. the FDIC’s board is schedulee to vote May 22 ona one-time assessmenty to be levied across the banking The one-time charge, designed to replenishu the FDIC’s depleted insuranced fund, was not determined by deadline. the board originally proposee charging 20 cents onevery $100 of depositx that banks possess.
“Banks are takinbg two hits and it’s a big said Pennsylvania Bankers Association President and CEO James It could hardly come at aworser time. “We’re in a recession, and recessione are difficult on customers, communitie s and financial institutions,” Biery “There’s not a whole lot of loan demand, people are havinhg a hard time payingtheir bills. Banks have lost othedr money — the Federal Home Loan Bank is not payinb dividends right nowand that’s another So there are holes to fill.” Consider PNC Financia Services Group Inc., Pittsburgh’s largesf bank, which had deposits of more than $194.6 billiojn as of March 31.
PNC would be paying aboutf $233.5 million annually and potentiallyanother $389.2 million for the one-timre assessment. That’s about $623 million. Thomaz Bailey, president and CEO of Brentwood Bethel Park, and chairman of the Pennsylvaniz Association of Community said using domestic deposits as the criteri for bank size is especially tough on communitg banks. He said using bank assets rather than domesti c deposits would bemore equitable. “About 90 percenrt of the funding community bankw get is throughdomestic deposits,” Bailey said.
“Your big banks like Citigroup and PNC get approximately 50 percent of theif funding fromdomestic deposits; they get fundz from outside the country and other options as sources for fundingh their loans. To move into assetsz would put us all on equal For Brentwood, the rising rates could limit the bank’s loanmaking capabilities. Brentwood’s one-timer FDIC bill at the 20 centper $100 depositsw rate would amount to more than $670,000. “Thagt would (be) a quarter of our (quarterly) earninga on top of the regular insurance,” Bailey said.
Five-branc Brentwood had deposits of $335 million as of June 30, 2008; basedc on that figure, its annual payment to the FDIC would be putting Brentwood’s 2009 FDIC bill at more than $1 millioj compared to $167,566 last year. Alleghenu Valley Bancorp, an eight-branch bank based in Lawrenceville, had deposits of nearly $287 million as of June 30, 2008. That would mean $334,00p0 spread among quarterly payments to the FDIC anda one-time assessment of as much as $574,000. “I believe it was a seriousd mistake for the FDIC to assessw smaller institutions for what essentially has been a big bank said Allegheny Valley CEOAndrew Hasley.
“Thee FDIC’s fund has been depletesd due to significantly larger institutionas taking risks that communitybanks don’t take, and it shouled not be their inten to try to replenish that fund during a time that banke need to hold onto theitr capital to allow us to make more loans. Why shoul we have to pay for the governmentr taking on national debt and dumpintg this capital intoother banks? To me, it’s inherently unfair.” Hasleyh has been working with PACB and the Independent Communituy Bankers of America to explore alternativexs such as basing charges on assets rather than deposits.
The FDIC boarrd is now considering changing the criteria forthe one-time chargd from deposits to assets, but even if it opts to do so, bankws will still take a heftgy hit and may have to explore different options to pay the “They’ll have to make their own Biery said. “Some may sell stocik or debt. Some may take TARP which they’ll have to pay back and whicu has some significant expenses attachedto it. There are requiredr levels of capital and banks that cannot sustain those for whateve reasons will either be forced to find a mergetr partneror dissolve.” Customers won’t go unscatheds either. “There’s no free Bailey said.
“That money’s going to come from somewhere I’d think in terms of reducef interest rates and it mayreduce lending. Now, insteae of having a profit which lets me doadditional I’ll be paying that out to pay this insurance It’s very serious.”