The U.S. Treasury Department announced Tuesday it will invest $110 million in W.T.B. Financial Corp., the corporate parent of Washington Trust Bank.
Washington Trust President Jack Heath said the privately held Spokane bank will use the money to make loans and expand, possibly by buying other, weaker banks, or their assets.
He said the money will be expensive – the interest rate works out to about 6.65 percent – but for banks that need capital to grow in a tight credit environment, Treasury is the only game in town.
“We think there are going to be some humungous opportunities out there to expand our footprint,” Heath said, noting that Washington Trust has coveted an Oregon state charter for some time.
“That’s a real priority for us,” he said.
He said the bank made 102 home mortgage loans worth a total $22 million in January, twice its volume in January 2008, and wants to be able to do more.
Heath said Washington Trust earned a profit in 2008 and had about $240 million in capital at the end of the year. But with so much uncertainty, he added, Washington Trust officials sought the Treasury money to build a “bulletproof” capital position.
Heath said the capital will also reassure the many Washington Trust customers whose deposits far exceed the $250,000 insured by the Federal Deposit Insurance Corp.
The Treasury money comes with strings attached: no dividends to shareholders for three years, and no executive compensation of more than $500,000.
“For us, that won’t be an issue,” Heath said.
Washington Trust was one of 42 banks in the country awarded a total of nearly $1.2 billion Tuesday under Treasury’s Capital Purchase Program, a subset of the Troubled Asset Relief Program that so far has infused $195.3 billion into 359 financial institutions. Washington Trust was the only Northwest bank to receive funds in the latest round.
Sterling Financial Corp. in December received $303 million in TARP money.