Aug. 7--Local bankers say they are being squeezed by increases in Federal Deposit Insurance Corp. fees levied this year and are worried about the impact of future increases on earnings.

The FDIC's board of directors approved the increases in large part to help replenish the Deposit Insurance Fund, which regulators fear would be depleted with the increasing number of bank failures. The agency insures deposits at more than 8,200 banks and savings associations around the country and the fund doles out money to depositors at financial institutions that fail.

Mark Secor, chief financial officer at Horizon Bank, said the bank has paid $1.35 million to the fund as of June 30, compared to $258,000 in the same period last year. Peoples Bank Chief Executive Officer David Bochnowski said the bank has paid 2,300 percent more money on deposit insurance this year compared to last year. The corporate parent of First Midwest Bank has paid more than $6 million for the insurance so far this year, up from $251,000 the same period in 2008.

Profit for all three companies was down in the second quarter compared to the first quarter.

Indiana Bankers Association Executive Director Joe DeHaven said the fee increases are also the result of expiring credits that banks used to defer payments to the fund. DeHaven said most of his members have an issue with the timing of the increases because of the difficult economic conditions.

"If you have these things happening simultaneously, there's no offset to income," DeHaven said. "It's causing a reduction of net profit. It is literally taking money right out of the system ... to pay for the insurance coverage."

In addition to raising the quarterly fee banks pay for deposit insurance based on risk earlier this year, the FDIC approved a one-time emergency fee of 20 cents per every $100 deposits that a bank holds. The FDIC will tap institutions for a fee at the end of the third quarter using a formula derived from a bank's total assets and Tier 1 capital, which includes equity capital and disclosed reserves.

Secor anticipated that the amount Horizon will spend in September on this assessment and quarterly fee would be about $663,000, which is what the bank spent in June.

He added that although banks understand they have to pay the insurance, the end result is that the fees may be passed on to customers. Dow Jones reported last week that large banks such as Wells Fargo and Fifth Third Bancorp were passing the costs of premium increases along to business or commercial customers.