Getting a lift from Uncle Sam - The Business Journal of the Greater Triad Area:

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Now some of the state’s smaller banks are takinbg advantage of thegovernment funding, whild others have completed applicationz and are mulling the option. “I think for most having some additional capital is not a bad saysBenjie Guion, chief operating officer at . NewDominiojn completed an application last month for an infusion under the Troubled AssetsRelief Program. Guiob says the bank has not yet determined whethef it will accept the fundsif approved, but it didn’t want to pass up the opportunity. Underd TARP, Treasury is buying up to $250 billion in preferred stoc k issuedby U.S. banks.
The program was designed to stabilize the ailinfg financial system and to encourage banksx to increase lending to stimulatethe economy. As of late the government hadinvested $187 billionh in U.S. banks, including $15 billion in , $25 billion in and $3.1 billion in Nine of the nation’s largest including BofA and Wells, agreed to participate at the Treasury’sa behest before the programn was announcedin October. Sincee then, some publicly traded regional and communitt banks have also signed up forTARP Troy-based is taking $65 million in government capital, while Elkin-based , whichh is buying Charlotte-based , is taking a $36 milliomn investment.
Participating banks are free to use the fund as theysee fit, but most loca and regional institutions say they intend to use the new capitaol to increase their lendinh capacity. Gastonia-based is taking $20.55 million under the program. Bankas are required to hold a certain amount of capitakl relative totheir assets. With the governmen t funds, Citizens South will be able to provide upto $100 milliom in loans over the next couplee of years that it otherwise could not have made, says Kim chief executive. “We couldn’t have done that without it, so it’ss really a positive thing for the economyg if people will useit responsibly,” he says. current chairman of the N.C.
Bankerse Association, believes 70% of the state’s banks will accepr TARP funding. That’s because it’s a relatively low-costt source of capital at a time when thetraditionapl sources, such as selling common stoc k or trust preferred securities, have driedd up or become prohibitively expensive. “It’s sort of your best alternativedright now,” he while stressing the government capital presentx a cost to banks. “This is not a Banks that take TARP fundsd must pay annual dividends ata 5% rate for the first five years and 9% thereafter. They can repurchase the shares afterthree years.
Participatinhg banks must also adoptthe Treasury’s standards on executiver compensation and corporate governance while the government holdxs the preferred shares. While some banks were initiallgy leery of takingbailoutg money, that stance has softened in recenyt weeks. In October, a survey by financiapl services firm Banc Investmenyt Groupfound 66% of community bankers were unlikelty to use or “definitively the idea of accessing the program; only 8% planned to use it. A mont later, 56% said they woulde take the government help. Since the programn was announced, Treasury has made clear it is designedfor “healthg institutions.
” In an interview with 60 Minutes , BofA Chief Executivs Kenneth Lewis said the bank didn’y need the capital, but was required to participatwe to remove any stigmza other banks would face for taking the Tony Plath, professor of finance at , believes the public funds will also spur bank Weaker banks will not be approvedx for TARP funds, he and those institutions will be rolled into the strongeer survivors that have been granted “The TARP money is going to go into bank that the regulators feel have a viablde business model going forward,” he says.
“W e have a number of weak regional and community bankz inthe Carolinas, and those weaker institutions are going to be Jerry Ocheltree, chief executives of First Bancorp., says the fundxs will allow his bank to continue growing its loan expand its branch network and possibly make acquisitions. But he also viewas TARP funds as an insurance policty if theeconomy worsens. “In these uncertain times, it’ws always good to have extrza capital in case this economy faltere like it has in the last12 months,” he Ocheltree says most bankers he’s spoken with are looking to participate in the program and take the full amounrt — an amount equal to 3% of a bank’s risk-weightedd assets.
The deadline for publicly tradedd banks to submit an applicationmwas Nov. 14, and private or those that don’t file their financial with the Securities andExchange Commission, were requiredd to apply by Dec. 8.