Howard Milstein, the chairman and chief executive of New York Private Bank and Trust Corp., does not see patience as a virtue.
Eager to apply for government capital, Mr. Milstein was frustrated to learn that Subchapter S corporations would not be included in the first two rounds of the Treasury Department's Troubled Asset Relief Program. So in November, the $15 billion-asset parent of Emigrant Bank switched its tax structure, dropping its designation as an S Corp in favor of the more common C Corp status.
"I like to get things done, because anything can happen if you wait," Mr. Milstein said in an interview Wednesday.
New York Private sought a cash infusion in the fall, during the application period for privately held banks. It received $267 million last Friday, nearly a week before S Corp companies even got the opportunity to apply for government capital. (See related story.)
"We wanted to make sure we were in a position to get it for sure and get it sooner," Mr. Milstein said.
Despite his urgency, the company was not strapped for capital. Its total risk-based capital ratio was 11.51% at the end of the third quarter, according to data from the Federal Deposit Insurance Corp. (Regulators require a minimum of 10% for a company to be considered well capitalized.)
"We are in a season when you can't have too much capital," Mr. Milstein said.
The company lost $75 million in the third quarter, after writing off its $80 million investment in Freddie Mac stock. Its third-quarter nonaccrual loans nearly doubled from a year earlier, to $303 million.
With the capital boost, Mr. Milstein said Emigrant plans to increase lending, particularly commercial and one-to-four-family residential real estate loans. Its mortgage originations grew 18.5% last year, to $800 million, he said.
Emigrant is also interested in doing business with the FDIC as the agency sells off banks and thrifts that fail. The ideal target, Mr. Milstein said, "provides value and has opportunities for synergies in either operations or geography."
(The company's last acquisition was in 1992, and it was an assisted deal for the $7 billion-asset Dollar Dry Dock Bank in New York.)
Mr. Milstein said he is not overly concerned Congress may attach new strings to Tarp funding. Since the largest banks in the country took the government's money, he figures they are sure to fight any onerous terms that lawmakers try to add. "They are in a position to make sure this continues to make business sense."
Mr. Milstein also said he has no regrets about the change in tax status and no plans to switch back now that the program has been extended to S Corps.
Though the company could have waited for S Corps to be included in Tarp, converting to a C Corp is fairly simple, said Walter G. Moeling 4th, a partner in the law firm of Bryan Cave LLP in Atlanta. The main difference is taxation — S Corps taxes are passed through to be paid by their shareholders.
Mr. Moeling said he knew of only one other S Corp that made the switch to a C Corp structure so it could apply for Tarp funding sooner, the $427 million-asset CornerstoneBank in Atlanta. Bank officials did not return phone calls to discuss the switch.
Mr. Moeling said others may end up switching, especially if they plan on being acquirers. Since S Corps are limited to 100 shareholders, acquisitions generally must be paid for in cash and can be tricky, he said.
"It is a change in strategy," he said. "But there are going to be a lot opportunities to combine here."