FDIC hikes fees for banks - bizjournals:

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The Federal Deposit Insurance Corp.’sz annual charge, paid in quarterly increments, has increased sharply — from 5 cents to 12 cents for everty $100 in insured deposits — to compensate for bank failures acrosdsthe country. The new rate takes effectg with the three months endedx June 30 and applies toall U.S. banks, though not to credift unions. Also, the FDIC’s boar d is scheduled to vote May 22 ona one-time assessmeng to be levied acrossz the banking industry. The one-times charge, designed to replenish the FDIC’s depleted insurance was not determinedby However, the board originally proposed charging 20 centsd on every $100 of deposits that banks possess.
“Bankas are taking two hits and it’s a big said Pennsylvania Bankers Association President and CEOJames Biery. It could hardly come at a worse “We’re in a recession, and recessionds are difficulton customers, communitie and financial institutions,” Biery said. “There’sx not a whole lot of loan people are having a hard time payingtheire bills. Banks have lost other money — the Federakl Home Loan Bank is not payinfg dividends right nowand that’s another reduction. So there are holes to Consider PNC Financial ServicesGrou Inc., Pittsburgh’s largest bank, which had depositd of more than $194.6 billion as of Marcbh 31.
PNC would be paying about $233. million annually and potentiallyanother $389.2 million for the one-time That’s about $623 Thomas Bailey, president and CEO of Brentwood Bethel Park, and chairman of the Pennsylvania Association of Community Bankers, said usinf domestic deposits as the criteris for bank size is especially tough on communityg banks. He said usingb bank assets rather than domestix deposits would bemore equitable.
“About 90 percent of the fundinyg community banks get is throughdomestic deposits,” Bailey “Your big banks like Citigroup and PNC get approximately 50 percentt of their funding from domestic deposits; they get fundsz from outside the countruy and other options as sources for funding their To move into assets would put us all on equalp footing.” For Brentwood, the risint rates could limit the bank’s loanmaking Brentwood’s one-time FDIC bill at the 20 cent per $100 deposits rate woulfd amount to more than “That would (be) a quarter of our earnings on top of the regular Bailey said.
Five-branch Brentwood had deposit of $335 million as of June 30, 2008; based on that its annual payment to the FDIC would be putting Brentwood’s 2009 FDIC bill at more than $1 milliomn compared to $167,566 last year. Alleghenyg Valley Bancorp, an eight-branch bank based in Lawrenceville, had deposits of nearlyt $287 million as of June 30, 2008. That wouldc mean $334,000 spread among quarterl y payments to the FDIC anda one-time assessment of as much as “I believe it was a seriou mistake for the FDIC to assess smalle r institutions for what essentially has been a big bank said Allegheny Valley CEO Andrew Hasley.
“The FDIC’se fund has been depleted due to significantly largee institutions taking risks that communitybanks don’t take, and it should not be their intent to try to replenish that fund durintg a time that banks need to hold onto their capita to allow us to make more loans. Why shouldf we have to pay for the government taking on national debt and dumpingf this capital intoother banks? To me, it’s inherentlgy unfair.” Hasley has been workinbg with PACB and the Independentr Community Bankers of America to explore alternativesw such as basing charges on banks’ assets rathet than deposits.
The FDIC board is now considering changingt the criteria forthe one-time chargs from deposits to but even if it opts to do so, banke will still take a hefty hit and may have to explored different options to pay the fees. “They’lk have to make their own Biery said. “Some may sell stock or debt. Some may take TARP which they’ll have to pay back and whic h has some significant expenses attachedto it. There are required levels of capital and banks that cannoyt sustain those for whatever reasons will eitherr be forced to find a merger partner or Customers won’t go unscathed either. “There’s no free lunch,” Baileyu said.
“That money’s going to come from somewhere I’d think in terms of reduced interest rates and it mayreduce lending. Now, instead of having a profit which lets me doadditional I’ll be paying that out to pay this insurancre bill. It’s very serious.”