Higher FDIC Premiums Hurt Small Banks

 |  Includes: CLFC, HRZB, IAT, PFBC, RKH
by: Judy Weil

The FDIC may run down its deposit insurance fund as more banks fail, but it always has the Fed's balance sheet to tap. It won't run out of money to cover deposits. Still, bank failures cost money, and banks paying premiums to insure deposits are now having to up their FDIC deposit insurance payments. It might not be a big problem for larger banks, but it could be for smaller regional banks.

From Horizon Financial Corp.'s FQ2’09 conference call: (OTCPK:HRZB)

Dennis Joines, President and COO:

Also impacting [growth in overhead] was a $170,000 increase in the FDIC insurance expense recognition compared to the prior quarter. Our one-time assessment credit for previous payments into the system was depleted at the end of June. So we will still have this expense moving forward.

From Preferred Bank's Q3’08 conference call: (NASDAQ:PFBC)

Ed Czajka, SVP, CFO:

FDIC insurance premiums have increased as well. So that’s really primarily the major difference between the two quarters.

From Center Financial Corp.'s Q3’08 conference call: (NASDAQ:CLFC)

Lonny Robinson, EVP, CFO:

There is proposal out there to raise the FDIC insurance approximately 7 basis points... I'm assuming that’s going to go through from that standpoint… As far as next year, we can basically assume it’s going to probably more than double.