At least three Sacramento-area banks have applied for a shot of capital as part of the government's plan to spur lending.

If the Treasury approves the request, Community Business Bank, Granite Community Bank and Community 1st Bank stand to receive more than $11 million collectively, increasing their lending capacity by roughly $120 million.

Whether that money can be shuttled quickly to borrowers to revive the economy, however, is another matter.

To a man, local bankers interviewed this week said they already have plenty of money to lend. But they don't intend to relax their standards, and most said the downturn is drying up the pool of qualified borrowers, particularly among small businesses.

The result: fewer loans going out the door.

"Banks are saying, 'How are we going to get repaid?'" said John DiMichele, president and CEO of Community Business Bank, based in West Sacramento.

Publicly traded banks regulated by the Securities and Exchange Commission must decide today whether to apply for the Treasury's Capital Purchase Program, part of the $700 billion financial rescue plan passed by Congress.

Banks approved for the program still may choose to decline the investment, which comes with several strings.

Among banks headquartered in the four-county Sacramento region, only American River Bank faces today's deadline. President and CEO David Taber had no comment Thursday on whether his bank would apply.

Banks are deciding carefully whether to apply partly out of concern for their reputation, several local bankers said.

The Treasury has indicated it won't invest in troubled banks, so it would look bad for a bank to apply and not get approved. On the other hand, not applying for the investment could be seen as a sign that a bank expects to be rejected.

The Chico-based parent of Tri Counties Bank went so far as to issue a news release Thursday saying that it is strong and will not be participating in the program.

"It's a very sensitive issue," said Tom Meuser, chief executive of Placerville-based El Dorado Savings Bank.

Since last month, when the Treasury program was announced, Meuser has said his bank isn't interested. El Dorado Savings is already heavily capitalized and has enjoyed a surge in both deposits and loans – primarily 15-year mortgages – in recent months, according to federal filings.

All three of the local banks that have announced they are applying for the Treasury program are relatively young institutions. New banks generally must raise money after a few years of growth in order to keep expanding. The government's terms are more attractive than what they are likely to get from private investors.

Mark Lund, president and CEO of Roseville-based Community 1st Bank, said the government investment would allow his bank to keep growing but wouldn't necessarily increase the pace at which it lends money.

Community 1st does most of its business with small local firms. Lund said his loan applications have dropped 30 to 40 percent in the last several months. And while his underwriting standards haven't changed, the bad economy means he has to turn down more prospective borrowers.

"People that qualified a year ago don't qualify today," he said.

At least a few sectors of the economy are generating brisk lending, bankers said. Many farmers, for instance, are flush from two years of relatively high crop prices and able to borrow to buy new equipment, said Kent Steinwert, president and CEO of Lodi's Farmers & Merchants Bank of Central California.

Call The Bee's Jim Downing, (916) 321-1065.