Two Louisiana banks — Citizens Bank & Trust Company in Covington and Patterson State Bank — are among nearly three dozen nationwide that have opted not to pay dividends to the U.S. Treasury Department’s Capital Purchase Program, part the fed’s Troubled Asset Relief Program, widely known as “the bank bailout.” The number of financial institutions that chose not to pay dividends on the federal investment jumped from 19 in the second quarter to 34 in the third quarter, which represents 5 percent of the 646 banks and thrifts that received CPP funds.
According to bank research firm SNL Financial, Citizens Bank & Trust, with total assets of $125 million, was loaned $2.4 million in CPP funds earlier this year. As of August, it had made $20,000 in dividend payments. Patterson State Bank ($226 million in total assets) has also payed only $20,000 in dividends on its $3.7 million TARP infusion.
Ninety-eight banks have failed this year, and the escalating number of banks not paying their TARP dividends is, according to some analysts, an ominous sign. Matthew Wurtzel at thedeal.com writes:
[I]f banks are skipping the payments to preserve capital as seems to be the excuse, what does that say about their health? Wasn’t the Treasury supposed to review their health before giving them money? It would be interesting to see if there were any TARP recipients now on the Federal Deposit Insurance Corp.’s troubled bank list. However, we’ll likely never know because the FDIC keeps that list under lock and key out of fear that publishing it would prompt runs on banks.