Gastonia-based Citizens South Banking Corp. has paid back $20.5 million in government bailout money, after joining a new federal program designed to boost small business lending.

Like other large and small banks, Citizens South took money from the Troubled Asset Relief Program in December 2008 to shore up its balance sheet at the height of the financial crisis. It used the investment to create a residential mortgage program to assist consumers and homebuilders, garnering attention from The Washington Post and NBC Nightly News.

Now it's repaying TARP using $20.5 million from the U.S. Treasury's Small Business Lending Fund, which was created to spur more lending to cash-strapped small businesses. The program allows Citizens South to avoid increases in TARP dividends that come after five years and to potentially reduce its dividend payments if the bank ramps up lending, chief financial officer Gary Hoskins said Friday.

Under the SBLF program, Citizens South will still pay dividends to the government. Initially it will make quarterly dividend payments of 4.84 percent, but it's looking to lower that to 1 percent by mid-2012 by increasing its small business lending by 10 percent or more, Hoskins said. Citizens South has about $126 million in small business loans outstanding. Under TARP, it was making 5 percent dividend payments.

"We believe our participation in the SBLF program will further permit us to help our economy and our communities by focusing our lending efforts on small business loans in an effort to assist in creating jobs," Citizens South CEO Kim Price said.

Under its special residential mortgage program, Citizens South said it originated more than $11.9 million in loans. It paid the government $1.9 million in dividend payments under TARP.

Citizens South, with about $1.1 billion in assets, has 21 branches in the Charlotte area and northern Georgia.