A day after Congress grilled executives of some of the nation’s largest banks about how they were using federal money received from the Troubled Assets Relief Program (TARP), Iowa lawmakers this morning were seeking similar answers from the state’s bankers.

Iowa Superintendent of Banking Tom Gronstal and Tom Stanberry, chairman and CEO of West Bancorporation Inc. and current chair of the Iowa Bankers Association, provided an overview to the Joint Government Oversight Committee about how Iowa banks are responding to the financial crisis.

Executive compensation was among the topics that legislators delved into. Under the rules for banks receiving TARP funds, each of the top 15 executives in each institution will be limited to annual salaries of $500,000 or less.

“For most Iowa state-chartered banks, the top 15 people collectively didn’t make $500,000,” Gronstal told the committee.

Only three Iowa-chartered banks and one federal thrift institution in Iowa have received TARP funds so far of the more than 350 approved nationally, and several Iowa banks that were approved have subsequently turned down the funds because of the cost, he said. On an after-tax basis, the 5 percent interest that banks will pay the U.S. Treasury for the funds equates to approximately 7.75 to 8 percent, he said, in addition to significant compliance costs.

West Bank, which in December received $36 million in TARP funds, will need to generate $159 million in new loans this year in order to reach its targeted return on equity and generate the $2.8 million in annual pretax dollars it needs to repay the government, Stanberry said.

“So what we’ll be focusing on is a need to generate new loans,” he said. “But we’re not seeing a lot of growth outside of our core customers.”

When asked whether banks are working with businesses that are struggling financially, Stanberry said companies that show they are making a “good-faith effort to survive” by taking steps such as laying off employees or other cost-cutting measures “will find their current bank will work with them. We’re working with our customers.”

And how are the banks doing financially? Gronstal, who oversees 39 state bank examiners, said only 15 of Iowa’s 319 state-chartered banks have the lowest safety and soundness ratings that indicate they’re in financial trouble. “They’re all subject to additional scrutiny by both our examiners and federal regulators,” he said, “and at this point it appears to me they’ll all be able to work through their problems.”