The Bank of Florida says it is withdrawing its application for federal bailout money, the latest indication that the financial sector considers the new conditions for accepting the payout to be an unacceptable trade-off.

Goldman Sachs, Wells Fargo, and Northern Trust are among the major financial institutions that are on the record insisting they will give back Troubled Asset Relief Program funds as soon as they can arrange the logistics. Several smaller banks are of the same mind, including Minnesota-based TCF Financial Corp., Louisiana’s Iberiabank, and Pulaski Bank and Trust.

“TARP has evolved and changed significantly since we submitted our application in late 2008,” says Michael McMullan, president and CEO of Bank of Florida. “At that time, we understood the program to be targeted at healthy institutions that were in a position to help lead the economic recovery in their respective markets, instead of what is now perceived to be a government bailout of weaker financial institutions.”

For Bank of Florida, the new conditions for firms that receive federal assistance — which include intense scrutiny of potential acquisitions, executive compensation, and other high-profile expenses — outweigh the advantages of taking the money. “With the increasing level of uncertainty associated with this government program, we feel that withdrawing our application is in the best interest of our shareholders, and better positions our company in the long term by remaining independent of any government-assisted capital,” says McMullan.

He asserts that Bank of Florida is in the top 35% of publicly traded commercial U.S. banks in tangible-equity-to-tangible-assets ratio, and in the top 20% in terms of tangible equity plus loan loss reserves as a percentage of tangible assets. “We believe we have the capital to continue to weather this economic storm,” he adds.

In announcing his decision to give back Capital Purchase Program funds, Iberiabank CEO Daryl Byrd said: “When we decided to accept funds under this program, we believe we were the type of healthy bank that could employ the funds in the manner consistent with the goals initially set out by Congress and the Treasury in supporting the expansion of credit to the markets we serve. We believe recent actions, interpretations, and commentary regarding various aspects of the program places our company at an unacceptable competitive disadvantage.”

 

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