At a time when many banks are struggling with rising losses and dwindling cash levels, the Federal Deposit Insurance Corp. is ready to sharply hike the insurance fees paid by banks, which are fuming.
Bankers, particularly those from smaller institutions, have been vocal with their displeasure over the fee increases which could total several million dollars for each of them and which they said will burden even the healthiest.
“It’s a fairly significant charge for us,” said David Malone, chief executive of Community Bank in Pasadena. “It’s not going to cause us to lose money, but it’s a rather significant chunk.”
The Independent Community Bankers of America, a trade group representing 5,000 small financial institutions, has launched a campaign to persuade the FDIC to back off. But the agency finds itself in a quandary.
As the number of bank failures has surged, the insurance fund has taken a significant hit and has fallen below its legally required minimum. The failure of Pasadena-based IndyMac Bancorp in July alone cost the FDIC more than $10 billion. What’s more, the FDIC estimates that additional bank failures over the next five years will cost the insurance fund $65 billion.
In order to replenish the fund, the FDIC has proposed a temporary fee increase, to be assessed Sept. 30, that will bring in $15 billion to the fund this year. That comes on top of an already approved increase.
Currently, banks pay as little as 12 cents per $100 of deposits into the insurance fund. That fee could go as high as 16 cents under the already approved increase, while the temporary fee could add an additional 20 cents. Add the two together and a small bank with just $1 billion in deposits could see its annual fees rise to nearly $4 million from about $1 million.
All in all, banks are expected to pay $27 billion into the fund this year after contributing just $3 billion in 2008.
David Barr, an FDIC spokesman, said the agency had tried to raise the rates in the past, but was unable to because of a restriction on fee increases when the fund was above the statutory minimum.
“For many years the FDIC attempted to change the way banks pay deposit insurance,” he said. Now, “we’re in a situation we were trying to avoid.”
The temporary fee increase is currently in a public comment period until April 2, after which time the FDIC board will consider whether to adopt it permanently.
Taking a Break
Robert Rodriguez, the well-regarded chief executive of First Pacific Advisors LLC, surprised investors last week with the announcement that he plans to take a one-year sabbatical from the West L.A. investment firm starting in January.
Portfolio managers Thomas Atteberry, Dennis Bryan and Rikard Ekstrand will take over the day-to-day portfolio management duties for Rodriguez’s two managed funds, the $753 million FPA Capital and the $2.8 billion FPA New Income funds. First Pacific manages more than $8 billion in five mutual funds.
The 60-year-old Rodriguez, who has been with the firm for 25 years and won numerous accolades, expects to resume his role as managing partner when he returns in 2011.
Rodriguez was not made available for an interview, but in a release he said he plans to take a step back from the tumultuous investment environment to gain a greater perspective. During his time off, Rodriguez plans to spend more time with his family and friends.
“The truth of the matter is he’s been thinking about this for a while,” said spokesman Tucker Hewes.
Active Investor
Shamrock Capital Advisors Inc., a Burbank investment firm run by Roy Disney, has urged the board of a Santa Ana collectibles company to put itself up for sale.
In a March 6 letter, Shamrock, which owns 9 percent of Collectors Universe Inc., said the company has suffered from poor strategic direction and should seek a buyer in order to restore shareholder value. Shares of the company, which closed March 12 at $3.72 are off more than 60 percent in the past year and 90 percent from their all-time high of $36.82 in 2000.
“The current stock price is nothing more than a reflection of the board’s inability to provide adequate oversight of the strategic planning process required to create
long-term shareholder value,” said Shamrock Managing Director Dennis Johnson in the letter.
Collectors Universe has not publicly responded to Shamrock’s demands and did not answer calls for comment.
C-Suite News
Nara Bancorp Inc., the L.A. holding company for Nara Bank, announced that Chong-Moon Lee will return as chairman of the company after stepping down in May to pursue his philanthropic work and to travel.
Staff reporter Richard Clough can be reached at [email protected] or at (323) 549-5225, ext. 251.
