By Linda Shen and Alison Vekshin

March 5 (Bloomberg) -- U.S. Bancorp and Northern Trust Corp. will return funds from the Treasury’s Troubled Asset Relief Program, according to Representative Barney Frank.

The banks didn’t immediately confirm whether they’d repaid any of the federal money.

Frank, a Massachusetts Democrat and chairman of the House Financial Services Committee, said during a news conference that Northern Trust returned $1.6 billion. He didn’t say whether U.S. Bancorp, the biggest lender based in Minnesota, had formally applied to return its TARP money.

“It shows that things are beginning to stabilize,” Frank said in an interview on CNBC television. “The more money that comes back in the Treasury, the better I like it.”

U.S. Bancorp cut its dividend yesterday and said it wanted to give back the capital obtained from the federal program “as soon as prudently possible.” Spokesman Steve Dale declined to comment on whether the bank had returned any TARP money.

One reason for the dividend cut was “it accelerates our company’s ability to repay the $6.6 billion of TARP capital, something we intend to do as soon as possible with the approval of our regulators,” Dale said.

Calls to Northern Trust’s spokesman Doug Holt and Treasury spokesman Isaac Baker weren’t immediately returned.

Louisiana bank is first to return TARP funds

Iberiabank Corp., which received $90 million in December, says recent changes to the program would leave it disadvantaged if it kept the money

NEW YORK (CNNMoney.com) -- Iberiabank Corp. became the first bank to pull out of the government's bailout program Friday, saying it would be returning the $90 million it received from the government in early December under the Troubled Asset Relief Program.

The Lafayette, La., bank said it will buy back the 90,000 class A shares held by the Treasury, plus a pro-rated dividend accrual of $575,000. That will make Iberiabank the first institution to return TARP funds, according to a Treasury spokesman.

TARP has helped provide stability to the banking system overall but recent changes would put IBERIA (IBKC) at a disadvantage, said Daryl Byrd, the bank's chief executive.

"We believe recent actions, interpretations, and commentary regarding various aspects of the program places our company at an unacceptable competitive disadvantage," said Byrd in a statement.

Due to highly publicized losses at larger institutions such as Citigroup (C, Fortune 500) and Bank of America (BAC, Fortune 500), Congress has tightened restrictions on recipients of TARP funding, noted Andy Stapp, senior analyst with investment research firm B. Riley & Co.

"A lot of these small-cap banks remain profitable, and it just doesn't make much sense for the government to try to dictate the way they should operate their business," said Stapp, adding "I think you'll see more banks returning TARP money."

Earlier this week several congressmen, including Sen. John Kerry, D-Mass., expressed outrage at Chicago-based Northern Trust (NTRS, Fortune 500), a relatively unscathed bank which received $1.6 billion through the TARP program in November, for throwing a lavish party for clients at a golf tournament.

"Absolutely, some banks regret taking TARP. The enormous amount of mistrust the government has created in banks is something we've never seen," Chris Kelly, head of capital markets at law firm Jones Day, told CNNMoney.com when discussing Northern Trust earlier this week.

TCF to give back TARP funds

TCF Financial is giving the U.S. Treasury back the $361 million in TARP funds it got late last year because new strings attached make it a less attractive deal, the bank said Monday.

Wayzata-based TCF Financial filed a notice with the Treasury department to pay the funds back, pending approval from its primary regulator, the Office of the Comptroller of the Currency.

"Over time, they've changed the deal," said TCF CEO Bill Cooper, referring to Congress's decision to place restrictions on dividends, employee bonuses and executive compensation.

TCF isn't the first to give back TARP funds, though it's certainly on the leading edge of what might become a trend. On Friday, Layfayette, La.-based IberiaBank Corp. said it intended to pay back the $90 million in TARP funds it received in December.

TCF received its TARP funds in mid-November. The funds work like a loan: banks received an initial infusion of capital but are required to pay it back, with interest, over time. TCF Financial will have paid roughly $6 million in interest even though it held on to the money for only about four months, Cooper said.

Cooper said TCF was "strongly encouraged" by the government last fall to take the TARP funds. The money was to be made available only to healthy banks.

"We did it to be a good citizen and we didn't want to be identified as one of the banks that couldn't get it," Cooper said. "Now they are saying everyone who took the money is a weak bank. That has an impact on people wanting to do business with you."

TCF is well capitalized even without the TARP funds and the strings now attached far outweigh the benefits, Cooper said.

S.Y. Bancorp Decides Not to Participate in the Treasury

S.Y. Bancorp Decides Not to Participate in the Treasury Department’s Capital Purchase Program

S.Y. Bancorp, Inc. (NASDAQ: SYBT), parent company of Stock Yards Bank & Trust Company, with offices in the Louisville metropolitan area, Indianapolis and Cincinnati, today announced that it has declined to participate in the Treasury Department’s Capital Purchase Program (CPP). Last month, the Company reported that it had received preliminary approval for an investment of approximately $43 million in preferred equity stock.

Already well-capitalized under regulatory standards, the Company completed a $30 million public offering of trust preferred securities in December 2008, which further strengthened its capital position as of December 31, 2008.

Commenting on the announcement, David Heintzman, Chairman and Chief Executive Officer, said, "Although we are gratified to have been approved for the CPP, which is available only to sound institutions, we believe it is in the best interests of our shareholders to decline participation. The program’s restrictions on possible future dividend increases, the dilution that could result from the associated warrants, and the uncertainty surrounding some details of the program, represent unnecessary burden and risks for the Company and its shareholders. Considering our strong capital base, which has been further enhanced by our successful trust preferred offering last month, we believe the company remains well positioned to support the banking and lending needs of customers today and our growth over the longer term."

Louisville, Kentucky-based S.Y. Bancorp, Inc., with $1.653 billion in assets as of September 30, 2008, was incorporated in 1988 as a bank holding company. It is the parent company of Stock Yards Bank & Trust Company, which was established in 1904.

This report contains forward-looking statements under the Private Securities Litigation Reform Act that involve risks and uncertainties. Although S.Y. Bancorp’s management believes the assumptions underlying the forward-looking statements contained herein are reasonable, any of these assumptions could be inaccurate. Therefore, there can be no assurance the forward-looking statements included herein will prove to be accurate. Factors that could cause actual results to differ from those discussed in forward-looking statements include, but are not limited to: economic conditions both generally and more specifically in the markets in which S.Y. Bancorp and its subsidiaries operate; continued economic slowdown and continued public stock market volatility; competition for S.Y. Bancorp’s customers from other providers of financial services; government legislation and regulation, which change from time to time and over which S.Y. Bancorp has no control; changes in interest rates; material unforeseen changes in liquidity, results of operations, or financial condition of S.Y. Bancorp’s customers; and other risks detailed in S.Y. Bancorp’s filings with the SEC, all of which are difficult to predict and many of which are beyond the control of S.Y. Bancorp.