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Just like any other expenses facing banks, the increased Federal Deposit Insurance Corp. premiums on insurance will have to be absorbed, according to a panel of bank presidents and chief executive officers.

Jim Stewart, president of West One Bank, said his organization holds yearly planning meetings to determine how the bank will absorb the increased FDIC insurance premiums along with any other bank program. It's another thing that must be factored into the return on the bank's investment, he said.Echoing that sentiment was Dale O. Gunther, president of the Bank of American Fork, who said his small bank faces the same challenge and that everyone involved with the bank must try to hold costs down.

Ross E. Kendell, president and chief executive officer of Key Bank of Utah, said the banking industry is helping itself by not allowing the prime lending rate to go down much in an effort to build extra margins to cover the increased cost of the insurance.

The question of FDIC insurance premiums was part of a meeting of the Mountain States Chapter of Robert Morris & Associates, a national organization of commercial lenders, in the Marriott Hotel.

Asked if they are using compensation plans for commercial lenders in banks, Stewart said he believes in incentive plans, but they are difficult to establish and keep going because of the balance necessary between maintaining volume of loans and having a quality portfolio.

Gunther said his bank has a bonus program, but it is based on the profitability of the bank. Who gets the bonuses is a subjective decision, he said. Gunther said that two years ago the bank established goals based on profitability and service and bonuses are paid on the goals achieved.

Kendell said although bonus programs are imperfect, they are better than nothing. "It helps bring into focus the challenges for the year, but one drawback of the bonus program is employees expecting them rather than considering them being made for superior performance."

When asked about lending institutions competing with banks, Stewart said credit unions greatly affect banks because, in Utah, credit unions have the third-highest activity in the country. He said banks are more heavily regulated than other types of lending institutions, and he wants banks to be given the same "playing field."

Gunther said banking has been a mainstay in the American economic system and will continue that way in the future, but that doesn't mean there aren't challenges. "We have to be smarter and work harder and find ways to compete," he said.

Kendell said the banking industry has changed dramatically in the past 30 years and bankers are capable of adapting to changing conditions.