Three or more small, struggling banks have halted the dividend payments they owe to the U.S. government after tapping the Troubled Asset Relief Program, the Wall Street Journal reported.
Pacific Capital Bancorp, which received $180.6 million from the Treasury Department in November, said it suspended dividend payments on its common and preferred stock as it scrambled to save roughly $8 million per quarter, the Journal reported.
Pacific Capital has posted net losses of $49.7 million since taking the taxpayer-funded capital, the Journal added.
Seacoast Banking was also among the banks ceasing their TARP-related dividends, according to the Journal. Seacoast blamed the turmoil in the banking sector and a need to sure-up its balance sheet, the Journal said.
Treasury spokeswoman Meg Reilly confirmed to the Journal that "a number of banks" that received the TARP cash are no longer paying dividends to the government.
"Treasury respects the contractual rights of [TARP recipients] to make decisions about dividend distributions, and that banks are best positioned to decide how to manage their own capital base," Reilly told the paper.
The TARP's Capital Purchase Program has injected about $200 billion into more than 600 U.S. banks since October, the Journal noted. The government received preferred shares that can yield an annual dividend of 5 percent for the first five years, followed by 9 percent per year until the capital is repaid, the report said.
The dividends are meant to be paid each quarter and were designed to ensure that taxpayer money saw a return on investment.