Bankers are increasingly asking themselves whether taking government funds is a good deal — and coming up with more reasons not to.

Restrictions on pay and dividends are one thing, but healthy banks are more troubled by the change they perceive in the Treasury Department's Capital Assistance Program. What was billed last fall as a way to spur healthy banks to lend more is now seen as assistance for weak banks.

"The complete spirit of this deal changed," said Blake Chatelain, the president and chief executive of Red River Bancshares Inc. in Alexandria, La. "Every bank's concern was that the public would understand it was for healthy banks to improve the economy. Along the way the entire spirit of the deal changed to, if you are taking the money from the government then you did something wrong and we are going to control you."

The $5.4 billion-asset Iberiabank Corp. in Lafayette, La., is the first banking company in the country to announce it is giving back the money it received from the Treasury.

"We have gotten the message that if you took" government funds "you are open to all kinds of changes to the way you do business," said Daryl G. Byrd, Iberia's CEO. "We don't think that would be good for our shareholders or the community we serve."

Chicago's Northern Trust Corp. on Friday sent Rep. Barney Frank a letter saying it would repay its $1.6 billion after a storm of negative publicity last week tied to the sponsorship of a golf tournament.

Rusty Cloutier, the president and CEO of the $1 billion-asset MidSouth Bancorp Inc. in Lafayette, said he is meeting with government officials in Washington next week and plans to pose one question: "Do they really want the community banks to be partners with them to help solve the problem they've got, or is this money just for bad banks?"

Depending on the answer, his company might return the $20 million in government capital it received, he said. "My bank is saying, 'Look, if you-all are saying this is for troubled banks, that's not us. We're in good shape.' So if that's the message, we'll just send them a check."

When the program was set up, it required banks to hold the government investment for a minimum of three years. It also required banks to raise an equivalent amount of private capital before redeeming the Treasury's preferred shares. But Congress removed both obstacles in the stimulus act.

Now repaying the government hinges mainly on regulatory approval, said Jerry Blanchard, a partner at the law firm Bryan Cave LLP in Atlanta.

"If your capital would fall to a level your regulator thinks is unwise, you won't get approval. You have to be strongly capitalized" to give the money back.

Some community banks that were approved for the Capital Assistance Program — and initially planned to take it — changed their minds before completing the paperwork.

Red River is one of them. The $700 million-asset bank was approved for $16 million, agreed to accept $10 million, and is now not taking any.

Oak Financial Corp. in Byron, Mich., is another. Oak declined a $20 million investment on Friday, and among the reasons Patrick Gill, the $840 million-asset company's president and CEO, gave in a press release was, "We became increasingly concerned with the constraints, both existing and proposed, of the program and with the excessive political posturing surrounding it."

Banker views may depend, in part, on loan demand in their markets. Greg Bryant is the president and CEO of the $450 million-asset Bay Cities Bank, a subsidiary of Florida Business Bank Group in Tampa. He said his bank, which got $9.5 million in government capital on Friday, can use the funds to meet local loan demand. "Most of our reservations came … from what we don't know: The Treasury has the ability to change their mind."

Steve Brown, the president and CEO of Pacific Coast Bankers' Bank in San Francisco, said bankers are particularly worried they might be forced to stop paying dividends. "All of these 'un-American' activities are really starting to frost bankers," he said.

However, while many community bankers are talking about giving the money back, Mr. Brown said that, given the economy, many may not be able to follow through on the threat. "I think most people will stay with their" CAP investment, he said. "But if private capital shows up, I think [it will] start getting paid back quickly."

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