Georgia: Will U.S. money add confidence in banks?

At least two locally owned banks are considering taking part in the Treasury Department’s rescue program.

But officials of both Northwest Georgia Bank and FSGBank say they will submit their applications for funds only after careful examination.

“We meet every day to talk about it,” said Rodger B. Holley, president and chief executive of First Security Group Inc., the parent company of FSGBank.

Mr. Holley described the process of researching the program, saying he and the bank’s officers are working to see how it will affect earnings and capital, doing “forecasting out three to five years to see how it is going to impact us.”

Within the last week, three of the largest regional banks in the Chattanooga market — First Horizon National Corp., SunTrust Banks Inc. and Regions Financial Corp. — announced they had been approved for a chunk of the $125 billion in stock purchases made available through the federal government’s $700 billion bailout program.

The money is intended to boost consumer and business confidence and will be available for lending and investments, with some banks even talking about using it to acquire other banks, Mr. Holley said.

For FSGBank, the money would be insurance for the next few years, since the bank already has plenty of money to lend and grow without any help from the government, Mr. Holley said.

“Nobody knows how long the downturn is going to last or how deep it is going to go,” he said. “I think that for us, we are looking at it more as a confidence booster and an insurance policy.”

But even as banks the likes of First Tennessee and SunTrust announce participation in the program, some officials worry about a lingering stigma that could be associated with taking part in the Troubled Asset Recovery Program.

When he first heard of the money available through the rescue package, Wes Smith, chairman and chief executive officer of Northwest Georgia Bank, said he dismissed any idea of accessing the funds because he believed it was solely for troubled banks.

“Of course, we are not a troubled bank,” Mr. Smith said.

He said he reconsidered, however, after hearing the government wanted all healthy banks to participate. Also, when the plan was passed, the rescue package applied only to larger banks, but now Mr. Smith said his bank could be eligible.

“This thing is so fluid, it changes everyday,” Mr. Smith said.

Under the guidelines of the capital purchase program, Northwest Georgia Bank would be eligible for between $5 million and $15 million, and for FSGBank, the amount would be between $10 and $30 million.

For customers of Northwest Georgia Bank, a $15 million influx of cash would allow the bank to increase its lending. The standards for borrowing would stay the same, he said, but the amount of loans the bank could make would increase.

Officials at Chattanooga-based CapitalMark Bank & Trust, which recently announced a stock split and capital raise, said the bank most likely would not be seeking money from the program.

“It doesn't appear TARP would provide the level of capital we feel we will need to fund our growth strategy,” said Craig Holley, the bank’s president and chief executive. “However, as we learn more about the program it is possible that we could participate.”

First Volunteer Bank officials have decided not to participate in the program, said Todd M. Wanner, the bank’s chief financial officer. He said that while the capital purchase program is a good one that will help many banks, First Volunteer is well-capitalized.

“We look forward to getting back to business as usual and have no need for government assistance,” Mr. Wanner said.