A proposed increase in premiums imposed on banks by the Federal Deposit Insurance Corp. (FDIC) would cost Iowa’s banks more than $100 million in added fees over the next 12 months, said John Sorensen, president and CEO of the Iowa Bankers Association.

Last week the FDIC board of directors voted to amend the restoration plan for the Deposit Insurance Fund, adding a special assessment of an additional 20 basis points on deposits in addition to an average 7 basis-point increase that most banks expected. The plan is designed to replenish the insurance fund, which has been tapped repeatedly in the past year due to bank failures.

“It’s dramatic,” said Sorensen, who in January had estimated the statewide impact to banks at $42 million prior to the special assessment. “You’re going to see an approximate doubling of the regular premium, and then you’ll have the 20 basis points above that.” A bank with $115 million in assets that paid $131,000 in premiums in 2008, for instance, would pay $300,000 in premiums over the next year, he said. Sorensen estimated that collectively, Iowa banks would end up paying more than $100 million in additional FDIC premiums if the plan is approved.

“I think for many banks (the FDIC premiums) could amount to 20 to 50 percent of their annual earnings,” he said. “We’re all in favor of continuing a strong and industry-funded insurance fund, but the question is, is now the time to do this as they’re trying to extend additional lending to our communities?”

Sorensen said the bankers association is working on a letter to the FDIC during the public comment period, which ends on April 2. “We are also working on a task force with the American Bankers Association to see what options we may have for spreading this over a longer period of time,” he said. At its meeting Friday, the FDIC board had also lengthened the period for replenishing the Deposit Insurance Fund from five years to seven.

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