Several Bay Area banks have missed at least one repayment for their TARP bailouts — but the nonpayments in some cases are due more to bureaucratic tangles than banking deadbeats.

The federal government provided numerous banks with taxpayer-funded bailouts through the Troubled Asset Relief Program, or TARP, to help them ward off economic shocks.

Oakland-based Community Bank of the Bay, which was approved in late 2008 for $1.7 million in TARP cash, now has borrower's remorse.

"Taking the TARP money was the worst business decision I ever made," said Brian Garrett, chief executive officer of Community Bank of the Bay. "Federal regulators advised us to take the TARP money. They told us if we didn't we would be viewed as a bad bank."

Banks that took the cash were obliged to pay dividends to the U.S. Treasury as part of the repayment. However, an estimated 91 banks nationwide deferred making the payments that were due in May, according to SNL Financial, a Virginia-based market research firm that compiled federal data about the missed payments.

Community Bank, San Francisco-based Presidio Bank and Palo Alto-based Private Bank of the Peninsula were among the banks that wanted to make the dividend payments on schedule. The three banks say they wanted, and were able, to make the payment, but state rules barred the efforts.

The state Department of Financial Institutions allows dividend payments for state-chartered banks if the companies meet several criteria. Among the requirements:

  • Shareholder equity must be adequate, as defined by state rules, following the dividend payment.

  • The bank must be "well-capitalized" following the dividend payment.

  • Performance trends must be deemed "positive" by state regulators.

    Plus, the banks must obtain shareholder approval — every quarter — if they wish to repay the federal government.

    Richmond-based Mechanics Bank took no TARP cash. CEO Steve Buster is blunt about his bank's decision to say "no thanks" to the feds.

    "We have no regrets for not taking TARP," Buster said. "We did not need the money. Because we did not take TARP, we were not tarnished. We're delighted we didn't take the money."

    Presidio Bank, while not able to make a recent payment, said it is pleased it obtained its taxpayer-funded cash, according to Steve Heitel, Presidio's chief executive officer.

    "There is a process and some administrative effort involved in making the payment," Heitel said. "But we are glad we took the money. We have been excellent stewards of the government's money."

    Presidio Bank has produced $20 million to $30 million in new loans since it received $10.8 million in TARP cash in 2009, Heitel estimated.

    San Jose-based Heritage Bank of Commerce received about $40 million in TARP funds, said Dan Kawamoto, chief administrative officer with the bank. Heritage Bank's branches are primarily in Santa Clara County, although it also has branches in Danville, Fremont, Pleasanton and Walnut Creek.

    "We decided to defer the TARP dividend payments to preserve our resources," Kawamoto said. "We continue to see uncertainties in the economy."

    Heritage says that if it harbors the cash, the bank will be able to more readily scout for new customers.

    "We wanted to have these resources available to be able to lend into our marketplaces," Kawamoto said.

    "The government dangled that carrot out there, and a lot of banks needed some form of capital," said Bob Adkins, director of the performance group with Community Bank Ventures, a banking consultancy.

    "There are a lot of mixed feelings about taking the TARP money," said Hans Schroeder, portfolio manager with the San Francisco office of Green Street Capital.

    Contact George Avalos at 925-977-8477.