By Boris Ladwig, The Republic
bladwig@therepublic.com
Some local banks that have been approved to receive federal bailout dollars have not yet decided whether to take them, partially because they fear governmental entanglements.
Others don't plan to apply because they see no economic benefit.
Columbus-based Indiana Community Bancorp has received preliminary approval to receive $21.5 million from the U.S. Treasury to participate in the Treasury Capital Purchase Program. ICB has until Dec. 17 to complete the documentation process with the Treasury.
The Treasury is pumping the money into healthy banks to ease the lending crunch and get the economy back on track. But the funds come with stipulations, such as restrictions on executive compensation.
"Preliminary approval of our application based on feedback from our primary regulator reflects confidence in Indiana Bank & Trust," said John K. Keach Jr., chairman and chief executive officer.
Keach said ICB would evaluate what kind of strings would be attached to any money the corporation would receive and will then determine whether participation is in the corporation's best interest.
ICB intends to make the money available to small businesses and the retail community - not use it for acquisitions, said Keach.
Irwin Financial
Embattled Irwin Financial Corp. also has applied for funds, though a spokesman said he could not provide details due to a pending application with the Securities and Exchange Commission concerning an effort to raise $50 million in a stock offering.
"Since we do not know enough details of the program at this point, we are unsure as to whether we will participate," said Chief Information Officer Matt Souza.
IFC has racked up losses of about $150 million through the last two quarters and has seen its stock price fall about 80 percent this year as it goes through painful restructuring meant to refocus on small-business and community banking.
The Columbus-based corporation plans to raise $50 million in a rights offering, and has secured $37 million in standby commitments, including $25 million from Cummins Inc., in case it cannot raise the full amount.
A rights offering allows existing shareholders to purchase shares at a reduced price to retain their percentage of company ownership.
How many shares IFC will issue will depend on the price at which they will be sold. IFC expects to set the price once the SEC approves the registration statement IFC has filed.
Jackson County Bank
Jackson County Bank President and CEO David Geis said the privately held bank has not applied for any bailout funds but had not made a final decision.
Although details about the bailout for private corporations still are being revealed, Geis said that given JCB's good loan demand and financial health, the bank's management is leaning toward not participating in the bailout.
Geis said he has no question that JCB would be approved if it applied, but he said that the bank is well capitalized and can issue loans without problems and therefore has no near-term need for the federal funds.
Geis also said that participating in a program that would require private borrowers to pay a 6.5-interest rate makes little sense given the current interest rate environment.
JCB will continue to evaluate bailout-related conditions as they are being revealed, Geis said, but at this point the corporation believes participation would provide no economic benefit to stockholders.
Fifth Third Bancorp
Fifth Third Bancorp has been approved to receive $3.4 billion and plans to use the funds primarily to increase lending.
However, Debra DeCourcy, vice president and director of corporate communications, said Fifth Third also agreed to receive the funds to allow the corporation to purchase other banks and to have additional reserves if the economy deteriorates further.
Chairman, President and CEO Kevin T. Kabat said about a month ago in the third-quarter earnings statement that the corporation had not participated in any of the risky investments - subprime lending, credit default swaps, collateralized debt obligation - underlying the financial crisis.
Fifth Third officials said the corporation's recent acquisition of the failing Bradenton, Fla.-based Freedom Bank was unrelated to the participation in the Capital Purchase Program.
Federal Deposit Insurance Corp., the government agency that insures bank deposits, had made the determination that Freedom Bank was failing and contacted financial institutions, including Fifth Third, to see if they wanted to bid on the bank, DeCourcy said.
Fifth Third had been looking at purchasing the assets of Freedom Bank before it agreed to participate in the Capital Purchase Program, she said.
However, she said that the Freedom Bank purchase is an example of the kind of action that the Treasury funds could facilitate, as the acquisition resulted in consumers of a failing bank gaining access to Fifth Third's services without any interruption.
Centra Credit Union has not applied to participate in the bailout, a spokeswoman said.
Salin Bank could not be reached.