The FDIC expects the cost of bank failures to grow to about $100 billion over the next four years.
It is the first time the agency has required prepaid insurance fees. The idea behind it is for banks to spread the costs over three years rather than paying a one-time fee that would deplete their capital reserves.
Unlike a one-time fee, the prepaid premiums won’t affect banks’ earnings “during these difficult times,’’ FDIC chairwoman Sheila Bair said before the vote.
The new premiums were proposed by the FDIC in late September and opened to public comment.
They come atop a special emergency fee that took effect at midyear, estimated to have brought in about $5.6 billion.
The early payment will be “manageable’’ for Southern Arizona Community Bank in Tucson, said its chief executive John P. Lewis. His institution has been paying an average of around $25,000 per quarter for regular insurance premiums, plus about $70,000 this year for the special fee.
The $70,000 “is a little rough on a community bank,’’ Lewis said in a telephone interview. “It would push some banks over the edge.’’
The three-year prepay is likely to cost Southern Arizona Community roughly $300,000 but will work out under the plan to about $9,000 a month, he said - against a cash balance now at $9.5 million.
Untouched will be the bank’s net profits expected at around $500,000 this year and $750,000 in 2010.
Daniel Blanton, chief executive of Southeastern Bank Financial Corp. and Georgia Bank & Trust of Augusta, said his bank’s assessments doubled from 2008 to 2009, and the FDIC’s special fee this year made the number even higher. Compared with those costs, he said, the impact of prepayment is minimal.
“The cost is just the earning capacity of that money I paid in advance - and in this [low interest rate] environment that’s not very dramatic,’’ Blanton said by phone.
The deposit insurance fund stood at $10.4 billion at the end of June - already its lowest point since 1992 - and since has fallen into deficit.
That hasn’t occurred since the savings-and-loan crisis of the late 1980s and early 1990s.
Still, depositors’ money is guaranteed - up to $250,000 per account - by the FDIC.
Many smaller banks have protested the insurance assessments. They complain that they had nothing to do with the excesses of big Wall Street banks, reckless mortgage lending, and risky investments that precipitated the financial crisis but are being forced to pay to help clean up the mess.
The FDIC established an exemption process for banks that demonstrate that the prepaid premiums would “significantly’’ diminish their cash or “otherwise create extraordinary hardship.’’ The payment covering the three years is due on Dec. 30.
Banks deemed to qualify for the exemption will be contacted by Nov. 23 by the agency, but only a small number are expected to be eligible, FDIC staff said.
