Deadbeat Banks Fail to Pay TARP Dividends

NEW YORK (TheStreet) -- Thirty-three banks missed their August dividend payments to the Treasury Department for money granted through the Troubled Asset Relief Program, or TARP.

TARP began almost a year ago with some arm-twisting from the Treasury Secretary at the time, former Goldman Sachs(GS) Chief Executive Officer Henry Paulson. He told nine of the largest U.S. banks, including Bank of America(BAC), Citigroup(C), JPMorgan Chase(JPM), Wells Fargo(WFC), Morgan Stanley(MS) and Goldman Sachs, they had to accept billions of dollars in support from the government even if they didn't need it.

While many big banks have already repaid TARP in full, it's clear the banks that have deferred their dividend payments are still short of capital.

For the four largest companies missing TARP dividend payments, the total deferred was an estimated $41.6 million. The biggest bank was New York-based CIT Group(CIT), which is negotiating with creditors to avoid filing for bankruptcy. CIT received $2.3 billion in government money in December. The bank would represent the first significant loss to TARP.

CIT Group had a ratio of tangible common equity to total assets of 4.17% as of June 30, but many companies on the list had far lower levels of common equity.

Skipped Payments (in Millions of Dollars) Source: SNL Financial

First BanCorp(FBP) of San Juan, Puerto Rico, is the second-biggest company that deferred its August payment, which amounted to $5 million. The company, which had $20 billion in assets as of June 30, lost $78 million in the second quarter, as it suffered the ill effects of the recession and joblessness in Puerto Rico and Florida. While the company's nonperforming-asset ratio climbed to 6.54% as of the end of June, First BanCorp's regulatory capital ratios were relatively strong. The tier 1 leverage ratio was 9.12% and the total risk-based capital ratio was 14.35%, far exceeding the 5% and 10% levels required for most banks to be well-capitalized under regulatory guidelines.

Still, Fitch Ratings downgraded First BanCorp's long-term issuer-default rating Tuesday to "B-" from "BB," expressing concern about the company's tangible common equity ratio, though "regulatory capital levels have remained adequate to date."

California had 11 companies on the list, more than any other state or territory. The largest in the state to miss its August TARP dividend was UCBH Holdings(UCBH) of San Francisco, which put off paying $3.7 million. The company's tangible common equity ratio was just 1.52% and its nonperforming-asset ratio was 6.69%. Its main subsidiary, United Commercial Bank, was the biggest bank included in TheStreet.com's list of undercapitalized banks and thrifts as of June 30.