FDIC Federal Register Citations

From: Boyd Lindquist
Sent: Wednesday, November 05, 2008 11:48 AM
To: Comments
Subject:

To Whom It May Concern:

RIN 3064-AD35 – Proposed FDIC Premium Increase for Brokered Deposits

As an Industrial Loan Bank we are prohibited from offering demand deposit accounts.  The only alternatives are interest bearing accounts.  At inception we conducted an aggressive marketing program to gather deposits.  This approach produced a small number of accounts as we have no retail banking operations and a single location.  DTC brokered deposits are a cost effective source of funds and one of the few alternatives we have to fund the bank.  The DTC deposits are more stable than retail funds as there is no provision for early withdrawals other than death of the account holder. 

It is interesting that DTC deposits would prevent a run on the bank as depositors could not withdraw funds until maturity.  Brokered deposits are an important source of liquidity particularly in the present distressed economic environment.

The 10% brokered deposit threshold and the 20% growth threshold are not signs of abuse.  Some banks may have good market segmentation or find competitors exiting the marketplace.  It would appear that as long as a bank maintains a good CAMEL rating and is meeting the needs of its customers that they should not be penalized.  It would appear that prudent lending to stimulate the economy is a government goal.  The proposed penalty on brokered deposits will have a negative impact on lending to small businesses and consumers.

Regulators and rating agencies will view the 10% threshold as a cap, not a guideline.

We are of the opinion the increase in deposit insurance premiums will have a negative impact on our cost of funds that will impact capital and limit our ability to grant quality loans.

Boyd Lindquist
President & CEO
Republic Bank, Inc.