Academic journal article ABA Banking Journal

The Headache: What Are You Doing about Return of Deposit Insurance Premiums?

Academic journal article ABA Banking Journal

The Headache: What Are You Doing about Return of Deposit Insurance Premiums?

Article excerpt

With the return of deposit insurance premiums, banks in coming months will be paying for coverage for which most haven't had to pay for some time. Actual charges will hit different institutions at different points, depending on their age and past payment history. But in time all banks will once again be writing FDIC a check.

A Pass the Aspirin prescriber asked how other banks are preparing themselves, and this is how three responded. Do you have ideas too? Send them to scocheo@sbpub.com, and we'll post them, along with these, on www.passtheaspirinplus.com

Remedy 1

[ILLUSTRATION OMITTED]

Robert R. Jones III, president and CEO, United Bank, $403.5 million-assets, Atmore, Ala.

We have taken several measures to mitigate the impact.

First is a thorough understanding of the new calculations.

Second, and in a related vein, is our effort at evaluating our balance sheet management. This we are doing to avoid unnecessary ballooning of deposits at the end of each quarter, which would increase premiums.

Third, while it is always important, now credit quality has an additional element. Because past dues are included in the calculations, we are incorporating some of the costs into our internal pricing for divisional performance. This should help bring a better focus to our market presidents and our branch managers. …

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