Some banks not eager to seek bailout funds - Dallas Business Journal:

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One of the last groupz of banks to have rules writtemn for how they could get at some ofthe government’es bailout funds appear hesitant to take the Banks structured as S corporations, a corporate structure namedd for the rules that governj how they are taxed, only got the termd of their Troubled Asset Relief Programk deal in mid-January. Cynthia Blankenship, vice chairmanj of in Grapevine, was in the front linez on Capitol Hill battlingv for TARP access in her capacity as chairmah of the industry groupof Now, she says, her bank isn’t going to apply. “It’xs pretty expensive capital,” she said.
“If you really had a new line of loan demandd that you could leverage that cost of equity then it wouldmake sense.” Additionally, the stringsd that Congress is likely to attach to the TARP fundas is slowing down some banks, said Petee Weinstock, a banking specialist at Hunton & Williame law firm. Legislation pending in Congress could forcer banks tolend money. The troublw is, “the people you want to loan money don’t want to borrow and the people who want moneyyou don’gt want to lend to,” Weinstock Blankenship says that many communityh bank execs are thinking twice about TARP.
, D-FW’s biggesg bank structured as anS corp, declined to The next largest institutions, Legacy Texa s Bank and , didn’t respond to Colonial Savings, the area’sx fourth largest S corp, said it won’ty apply. In an e-mailed statement, the Fort Worth bank said it has plentifupl capital and capacity to make loans to the right customers withoutgovernment help. S corp banks have untilp Feb. 13 to apply. in Irviny has decided to apply forabout $18 millionm in TARP funds. The which specializes in loans to Asian hotelowners nationally, can put the governmentt money to work immediately, said Sushi Patel, chief lending officer.
“From our perspective, since we’rre such a profitable bank, it makes sense to fill our coffersw and get back to he said. The additional funds mean State Bank can do more business in 2009, Patel said. S corp banks tend to be smalp institutions and can have only a limitecd numberof shareholders. They don’t pay corporatwe income tax, but their shareholders must personally pay tax on their shares ofthe bank’s About 2,500 of the nation’s 8,009 banks are S S corp banks can’t issur preferred stock, which is part of what the government took from big bankxs at the beginning of the process.
Instead, S corp banksd that want access to the Troubledc Asset Relief Program will issue subordinated debt andpay 7.7% per year for the firsyt five years, and 13.8% aftefr that. Those rates are higher than the 5% dividen required with the preferred stock coming from banks structured under Ccorporation rules, but the S corp debt is