FDIC hikes fees for banks - bizjournals:

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The Federal Deposit Insurance Corp.’s annual paid in quarterly increments, has increased sharplhy — from 5 cents to 12 cents for evert $100 in insured deposits — to compensate for bank failuresa acrossthe country. The new rate takes effect with the threew months ended June 30 and applies toall U.S. though not to credit unions. Also, the FDIC’s boarrd is scheduled to vote May 22 ona one-time assessment to be levied across the banking The one-time charge, designed to replenish the FDIC’ depleted insurance fund, was not determined by deadline. the board originally proposed charging 20 cents onevery $100 of deposits that banks possess.
“Banks are takingg two hits and it’s a big said Pennsylvania Bankers Association President and CEOJames Biery. It could hardly come at a worses time. “We’re in a and recessions are difficulton customers, communitiesx and financial institutions,” Biery said. “There’sa not a whole lot of loan people are having a hard time payingtheir bills. Banksw have lost other money — the Federal Home Loan Bank is not payingg dividends right nowand that’s another reduction. So there are holes to Consider PNC Financial ServicesGroup Pittsburgh’s largest bank, whicjh had deposits of more than $194.6 billion as of Marcg 31.
PNC would be paying about $233.5 milliom annually and potentiallyanother $389.2 million for the one-time assessment. That’s aboutt $623 million. Thomas Bailey, president and CEO of Brentwoof Bank, Bethel Park, and chairman of the Pennsylvaniaq Association ofCommunity Bankers, said using domesticc deposits as the criteria for bank size is especiallt tough on community banks. He said using bank assets rathed than domestic deposits would bemore “About 90 percent of the fundin community banks get is through domestic deposits,” Bailey said.
“Your big bankzs like Citigroup and PNC get approximatelty 50 percent of their funding from domestic they get funds from outsidew the country and other options as sources for fundinftheir loans. To move into assets woulds put us all on equal For Brentwood, the rising rates could limir the bank’s loanmaking capabilities. Brentwood’ s one-time FDIC bill at the 20 cent per $100 depositsx rate would amount to morethan “That would (be) a quarter of our (quarterly) earningx on top of the regulaer insurance,” Bailey said.
Five-branch Brentwood had deposits of $335 million as of June 30, based on that its annual payment to the FDIC wouldcbe $402,000, putting Brentwood’s 2009 FDIC bill at more than $1 milliomn compared to $167,566 last year. Allegheny Valley Bancorp, an eight-branch bank baser in Lawrenceville, had deposits of nearly $287 million as of June 30, 2008. That woule mean $334,000 spread among quarterly payments to the FDIC anda one-timd assessment of as much as “I believe it was a seriousa mistake for the FDIC to assesse smaller institutions for what essentially has been a big bank said Allegheny Valley CEO Andreaw Hasley.
“The FDIC’s fund has been depletedd due to significantly larger institutions taking risks that communitybankds don’t take, and it shoulrd not be their intent to try to replenishb that fund during a time that banks need to hold onto theire capital to allow us to make more Why should we have to pay for the governmenf taking on national debt and dumping this capitak into other banks? To me, it’sd inherently unfair.” Hasley has been workingh with PACB and the Independent Communithy Bankers of America to explore alternativesa such as basing charges on assets rather than deposits.
The FDIC board is now considering changing the criteria forthe one-time chargee from deposits to assets, but even if it opts to do so, banksx will still take a hefty hit and may have to explorw different options to pay the fees. “They’ll have to make theirt own decisions,” Biery said. “Some may sell stock or Some may take TARP which they’ll have to pay back and which has some significanrt expenses attached to it. There are requiref levels of capital and bank that cannot sustain those for whatever reasons will eithe be forced to find a merger partnetror dissolve.” Customers won’t go unscathed “There’s no free lunch,” Bailety said.
“That money’s going to come from somewhere I’d think in terms of reducec interest rates and it mayreducew lending. Now, instead of having a profit which lets me doadditional lending, I’ll be paying that out to pay this insurancre bill. It’s very serious.”