Kitsap Bank continues Westsound merger, declines government loan
June 11, 2009 · 4:43 PM
Kitsap Bank has continued its takeover of Westsound Bank, designating Aug. 15 as the time when the action will be complete.
At the same time, the bank declined to participate in a $21 million government loan program designed to strengthen successful banks and streamline their operations.
The program, called TARP, originates from the U.S. Treasury and is intended to increase banks’ expansion options.
“We determined that TARP funding was not necessary and just not a fit for us,” said Kitsap Bank President Jim Carmichael. “We were gratified that through our close working relationship with the FDIC they agreed that Kitsap Bank was more than able to step up to the Westsound transaction on our own, and we are very capable of moving forward without taxpayer funding.
“When TARP began last year it was a good program,” Carmichael said. “The intention was to make banks stronger, and allow them some additional funding. But it turns out that the government has the right to change the rules of the agreement at any time. We decided that we didn’t need the money, which was going to cost us $2 million in interest.”
Carmichael said only two decisions have been made as to the disposition of Westsound’s branches or its 90 employees.
Before these are decided, there is appraisal data needed from the FDIC about the bank’s assets.
For now, Kitsap Bank has decided to close one branch, in Federal Way, and keep the branch in Sequim open since it is on the opposite side of town from the community’s Kitsap Bank branch.
Carmichael would not comment about Westsound’s coverted downtown Port Orchard branch, which is less than a mile from the main Kitsap Bank headquarters.
“We’ll have to wait and see what the FDIC says,” Carmichael said. “In some cases having a smaller branch nearby makes sense.”
Westsound had about 7,000 accounts, a combination of checking, savings and money market accounts.
Kitsap Bank VP Shannon Childs said the conversion of these accounts will be automatic, with no action required by the customer.
As the transition continues, customers will receive all statements from Kitsap Bank, and their checks will be replaced — even if the bank will honor the old printed checks for the foreseeable future.
Childs said the transition had been smooth up to now, with only a few minor setbacks.
“We’ve done this before when we took over Mariner Bank a few years ago,” she said. “We have experience, so it’s been a trouble-free process. And we want to make the transition as smooth as we possibly can.”
Even if Kitsap Bank could put the $21 million loan for which it qualifies to good use, it could send the wrong message to the public, which has become aware of irresponsible behavior by banks and other financial institutions.
“We could have used this money to expand or buy other banks,” Childs said. “But we realized that we didn’t need it, and that we can make it on our own.”
Kitsap Bank assumed all of the deposits and bank operations of Westsound Bank of Bremerton at 9 a.m. May 11.
At that point, nine Westsound locations opened as branches of Kitsap Bank, and have conducted business as usual since then.
At the time bank officials estimated that it would take about 90 days to finalize the conversion, a process that is now on schedule according to Childs.