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Posted December 10, 2008 | Copyright © The Northern Virginia Daily
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Banks approved for federal assistance
Two out-of-town banks with a significant local presence have said they will participate in a government capital infusion plan aimed at increasing available credit to businesses and consumers.
The parent companies of BB&T and United Bank have received preliminary approval to receive up to $3.1 billion and $197.3 million, respectively, under the U.S. Treasury Department's Capital Purchase Program, part of the broader Troubled Asset Relief Program.
In exchange for its investment, Treasury will receive shares of the banks' preferred stock at a 5 percent dividend for the first five years. The rate will increase to 9 percent in years six through 10 if the shares are not redeemed.
In the case of United Bank, the deal is subject to shareholder approval, as United currently does not issue preferred stock.
United, which is headquartered in Washington, D.C., and Charleston, W.Va., acquired The Marathon Bank in mid-2007. It has branch offices in Strasburg, Woodstock, Front Royal and Winchester.
BB&T, based in Winston-Salem, N.C., has 19 locations between New Market and Winchester.
Meanwhile, Timberville-based Farmers & Merchants Bank has said it will not participate in CAP.
"Given our strong capital ratios, deposit growth and access to alternative sources of funding, we continue to extend credit and conduct business as usual," President and CEO Dean Withers says in a statement. "We believe that our conservative lending principles have served us well in these difficult economic times."
"While we do have some exposure to real estate development activities," Withers adds, "we have avoided the sub-prime mortgage activities that have been so prominent in the news recently."
-- Daily Staff Report
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