California United Bank turns down $8.3 million

California United Bank, the lender to small and mid-size businesses that won approval for $8.3 million from the Treasury, doesn’t want the money.

The restrictions, costs and possible uncertainties outweigh the potential benefits of the bank’s participation, the Encino lender said Monday. The bank has sufficient capital, Chief Executive David I. Rainer said in the statement.

The bank’s decision stands out as more than 200 regional lenders, insurers and financial companies have applied for Troubled Asset Relief Program funds totaling at least $82 billion, according to Bloomberg data. Analysts said they expected more banks to refuse the government money because it comes with restrictions.

“It will not surprise me if banks that have healthy capital ratios, that have been approved for TARP, decide to reject it because they see the terms and conditions are going to change and could be too onerous for those recipients,” said Gerard Cassidy, an analyst at RBC Capital Markets in Portland, Maine.

Restrictions on dividend payments and executive pay, along with forced lending, could prove burdensome to banks, he said.

The U.S. can unilaterally amend any part of TARP agreement, including raising the dividend it’s being paid for preferred shares and requiring caps on executive compensation, said David Baris, executive director for the American Assn. of Bank Directors, in a Nov. 3 letter to Treasury Secretary Henry M. Paulson.