St. Thomas based Merchants Commercial Bank has refused a $1.2 million investment from the U.S. Treasury, saying the bailout money was not needed and involved a commitment to rules that could be changed down the road.

The bank’s board of directors turned down the Treasury’s offer in a unanimous vote, said Tom Bolt, General Counsel for the bank.

The money was offered last month through the federal Capital Purchase Program, which invests in healthy banks to help them continue lending money.

When Merchants Commercial Bank was approved for the money, local shareholders and customers told bank officials to not take it. Bolt said that one investor told him, “If you’re going to pay Uncle Sam interest on the money, pay it here locally.”

Bank officials said that they are certain they can raise any money the bank needs through local investors. Also, they said turning down the money keeps them out of a program that has an evolving set of rules.

The Capital Purchase Program is part of the Troubled Asset Relief Program. The initiatives are part of the $700 billion financial system bailout bill passed by Congress in October.

Through those programs, the Treasury has made more than 400 investments ranging in size from $640,000 to $25 billion. Two other banks with interest in the U.S. Virgin Islands, Banco Popular de Puerto Rico and First Bank Puerto Rico have received money under the program.

Merchants Commercial Bank applied last year, before it had decided whether to accept any money from the program.  The banks President and CEO James Crites received a letter in mid-January stating it had received preliminary approval for a $1.2 million investment.

Crites noted that in the contract, the Treasury reserved the right to make changes to the program. “That raised some red flags to us,” he said. He said the bank did not want to get into a game where the rules might change.

The bank president said the bank has enough money to be considered well capitalized by regulatory standards. Although the bank is expanding and could need more money down the road, he said he’s confident that the money could be raised within the Territory.