July 26, 2010 -- When ordinary borrowers miss a minimum scheduled payment, whether on a mortgage or credit card balance, banks tend to get impatient. Any number of unpleasant outcomes, including foreclosure proceedings, can ensue.
But when a bailed-out bank skips a minimum scheduled payment to the United States Treasury? They end up in a chart buried in a 282-page government report.
Some 105 financial institutions, including many small community banks, as of the end of June have missed scheduled dividend payments totaling about $160 million, according to a report presented to Congress July 21 by the Office of the Special Inspector General for the Troubled Asset Relief Program, or TARP.
You can find the full list of banks behind in their payments here, starting on page 71.
One bank, Westminster, Calif.-based Saigon National Bank, has missed six consecutive quarterly dividend payments totaling $117,700. Loc Huynh, senior vice president of Saigon National, the only federally chartered Vietnamese community bank in the country, insisted that red tape is preventing the institution from making its payments.
"We're willing to pay but not allowed to because the [Office of the Comptroller of Currency] won't let us."
Pressed as to why the OCC, a federal entity created specifically to charter and oversee the country's banks, would prevent a bank from repaying funds provided by the Department of the Treasury, Huynh would not elaborate out of concern of upsetting the regulator. "It's kind of sensitive so I don't want to dwell on it, but the result of it is we are willing to pay but we're not being allowed to."
OCC spokesman Kevin Mukri declined to discuss individual banks but said the institutions must comply with numerous state and federal rules and regulations, including minimum capital and reserve levels set by regulators to ensure "safety and soundness." The banks can be ordered to stop making dividend payments.
"In this climate … regulators are making sure these minimum capital standards are maintained because that's how a bank operates safely and soundly," he said.
Kristine Belisle, a spokeswoman for TARP Inspector General Neil Barofsky, had no comment.
No bank owed more in missed payments than First BanCorp in San Juan, Puerto Rico. It was mentioned in Barofsky's report as having missed four quarterly payments totaling $20 million as of June 30. But just two weeks ago, after the report was finalized, First BanCorp signed an agreement with the Treasury allowing the bank to renegotiate the terms of its TARP infusion, ultimately converting into common stock upon meeting certain conditions.
Created in fall 2008 in response to the financial crisis, the TARP eventually grew to become 13 separate taxpayer funded financial system support programs, seven of which are now closed or winding down. All told, through the end of June, TARP has resulted in the expenditure or planned expenditure of $3.7 trillion. Around half of that total is flowing into the financial system from the Federal Reserve. The Treasury pledged $800 billion, while the Federal Deposit Insurance Corporation is kicking in $300 billion. A mix of other federal agencies committed $800 billion.
Treasury has pumped nearly one-half trillion into banks by way of perhaps the best known TARP program, the Capital Purchase Program. Via the CPP, Treasury directly bought preferred stock in a number of banks technically deemed healthy, to increase the capital base of healthy banks and shore up confidence in the system as a whole.
Many large banks, such as Goldman Sachs and Bank of America, have long ago repaid TARP debts, and have since claimed they never needed the bail out to begin with. The Treasury has thus far spent or committed $498.3 billion. It has gotten principal repayments of $201.5 billion. It has also recouped $15.7 billion just in interest, dividends and other income, or in gambling parlance, the vig.
While Saigon National is the only bank to have missed six quarterly payments, the most possible, eight banks -- Anchor BankCorp Wisconsin, Inc., Blue Valley Ban Corp., Commonwealth Business Bank, Lone Star Bank, OneUnited Bank, Pacific Capital Bancorp, Seacoast Banking Corporation of Florida/Seacoast National Bank and United American Bank -- have missed five in a row.
In addition to First BanCorp, four banks owe dividend payments totaling more than $10 million. They are: First Banks, Inc. ($16 million); Sterling Financial Corporation/Sterling Savings Bank ($15.2 million); Popular, Inc ($11.7 million) and Pacific Capital Bancorp ($11.3 million).
If a TARP recipient misses six quarterly payments in a row, Treasury intervenes to appoint two directors to its board.
With 90 closures nationwide so far this year, the pace of bank failures far outstrips that of 2009, already a brisk year for shutdowns. By this time last year, regulators had closed 45 banks. The pace has accelerated as banks' losses mount on loans made for commercial property and development.
It's unclear how many of the banks that have skipped payments will eventually be closed.