October marks the two-year anniversary of the creation of the Troubled Asset Relief Program, or TARP. The $700 billion program was created to save the U.S. financial sector from obliteration — or something like that. And whether or not it worked is a debate we'll stay away from for now. What we do know is that the number of institutions missing their quarterly dividend payments to the Treasury continues to rise.

According to a recent report by the Treasury Department, 115 banks and thrifts did not make their August 16 dividend payment; that's compared with 91 in May and 74 deferrals in February. The 115 institutions who failed to pay their August dividends received $3.6 billion in TARP funds, or about 1.8 percent of the $204.9 billion disbursed to the more than 700 institutions under the Capital Purchase Program, according to SNL Financial, which compiles the Treasury data.

At the end of August, six banks each had missed six dividend payments, and one bank, Saigon National Bank of Westminster, Calif., missed all seven payments that have been due so far. The bank accepted about $1.5 million in TARP funds, according to SNL Financial. The terms of the CPP say that failure to pay six dividend periods gives the Treasury the right to elect two directors to the institution's board. It seems unlikely the Treasury will take time to do that at Saigon Bank since it's noted that it will focus on delinquent institutions who have accepted over $25 million in TARP funds.

The good news, it seems, is that the institutions struggling to make their TARP payments are small banks rather than large, national banks. Of the 123 banks that have missed at least one TARP dividend payment, the smallest had just $22 million in assets in the second quarter of 2010 while the largest had $54 billion in assets in the same period. The largest, CIT Group, filed for bankruptcy last year and later re-organized. According to the SNL report, CIT's preferred TARP shares were eliminated in the reorganization. Oh, and the “new” CIT Group is now run by former Merrill Lynch CEO John Thain.