Small lender tells Treasury: thanks, but no thanks

By Anurag Kotoky

BANGALORE (Reuters) - As the world debates the huge sums of taxpayer money being spent on banks, Sussex Bancorp (SBBX.O), a small New Jersey-based lender, has a different problem -- it wouldn't know how to spend the additional capital it was offered by the U.S. Treasury.

Earlier on Tuesday, the company said its board had decided not to participate in the U.S. Treasury's Capital Purchase Program (CPP).

"Frankly I don't know what we would have done with additional capital at this point, because there is not much loan demand out there," Chief Executive Donald Kovach told Reuters in an interview.

Sussex Bancorp had got approval in December to receive $9.9 million in additional capital by selling preferred stock to Treasury as part of the CPP.

"The customers are not flocking to our doors to borrow, and that was an issue we had to face," Kovach said.

Sussex Bancorp's customers are mostly small or medium-sized businesses that are struggling with their own problems, and they are hesitant to borrow, CEO Kovach said by phone.

The company was established in 1975 by several local businessmen and is a community lender, providing commercial loans and lines of credit to businesses.

The U.S. Treasury said last month it has invested about $236 billion in bank preferred stock since mid-October, including the Capital Purchase Program and one-off bank rescues.