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The Federal Deposit Insurance Corp.’s annual charge, paid in quarterly increments, has increasedr sharply — from 5 centas to 12 cents forevery $100 in insured deposits — to compensate for bank failures acrossd the country. The new rate takeds effect with the three months ended June 30 and appliees toall U.S. banks, though not to credit Also, the FDIC’s board is scheduledc to vote May 22 ona one-time assessment to be leviedd across the banking industry. The one-time designed to replenish the FDIC’s depleted insurance was not determinedby deadline. However, the boarfd originally proposed charging 20 cents onevery $100 of depositse that banks possess.
“Banke are taking two hits and it’es a big impact,” said Pennsylvania Bankersx Association President and CEOJames Biery. It coulr hardly come at a worse time. “We’ree in a recession, and recessions are difficult on communities andfinancial institutions,” Biery said. “There’s not a whols lot of loan demand, people are having a hard time payingtheie bills. Banks have lost other money — the Federal Home Loan Bank is not payinvg dividends right nowand that’ another reduction. So there are holes to fill.” Consider PNC Financial ServicesGroupp Inc., Pittsburgh’s largest bank, which had deposits of more than $194.
6 billion as of March 31. PNC would be payingb about $233.5 million annually and potentiallyanother $389.2 milliomn for the one-time assessment. That’s about $623 Thomas Bailey, president and CEO of Brentwood Bank, Bethel Park, and chairman of the Pennsylvania Association ofCommunityt Bankers, said using domestic depositsa as the criteria for bank size is especially tough on community banks. He said using bank assetzs rather than domestic deposits would bemore equitable.
“Abouty 90 percent of the funding community banks get is throughgdomestic deposits,” Bailey “Your big banks like Citigroup and PNC get approximatelgy 50 percent of their funding from domesticx deposits; they get funds from outsided the country and other options as sources for fundinf their loans. To move into assets woulc put us all onequao footing.” For Brentwood, the rising rates could limit the bank’ws loanmaking capabilities. Brentwood’s one-time FDIC bill at the 20 centper $100 deposits rate woulds amount to more than “That would (be) a quarter of our (quarterly) earningsw on top of the regulaf insurance,” Bailey said.
Five-branch Brentwood had deposits of $335 million as of June 30, based on that figure, its annual paymengt to the FDIC would be $402,000, puttinvg Brentwood’s 2009 FDIC bill at more than $1 milliobn compared to $167,566 last year. Allegheny Valley Bancorp, an eight-branch bank baserd in Lawrenceville, had deposits of nearlyu $287 million as of June 30, 2008. That would mean $334,000p spread among quarterly payments to the FDIC anda one-timde assessment of as much as “I believe it was a serious mistakw for the FDIC to assess smallert institutions for what essentially has been a big bank issue,” said Alleghent Valley CEO Andrew “The FDIC’s fund has been depleted due to significantly larger institutionsd taking risks that community bankw don’t take, and it should not be theifr intent to try to replenish that fund during a time that bankds need to hold onto their capital to allows us to make more Why should we have to pay for the governme ng taking on national debt and dumping this capital into othe r banks?
To me, it’s inherently Hasley has been working with PACB and the Independent Community Bankerds of America to explore alternatives such as basin charges on banks’ assets rather than deposits. The FDIC boarde is now considering changing the criteria forthe one-timwe charge from deposits to assets, but even if it opts to do so, bankxs will still take a hefthy hit and may have to explore different options to pay the fees. “They’ll 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 which has some significant expenses attachedto it.
There are required levelsa of capital and banks that cannot sustain those for whateverf reasons will either be forcef to find a merger partnereor dissolve.” Customers won’t go unscathed either. “There’ds no free lunch,” Bailey said. “That money’sw going to come from somewhere I’d think in terms of reduced interesty rates and it mayreduce lending. Now, instead of having a profit which lets me doadditional lending, I’ll be paying that out to pay this insurances bill. It’s very serious.
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Wednesday, January 23, 2013
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