On January 16, 2009, in exchange for an aggregate purchase price of $26,380,000, Washington Banking Company issued and sold to the United States Department of the Treasury pursuant to the TARP Capital Purchase Program the following: (i) 26,380 shares of the Company's newly designated Fixed Rate Cumulative Perpetual Preferred Stock, Series A, no par value per share, and liquidation preference $1,000 per share ($26,380,000 liquidation preference in the aggregate) and (ii) a warrant to purchase up to 492,164 shares of the Company's common stock, no par value per share, at an exercise price of $8.04 per share, subject to certain anti-dilution and other adjustments. The Warrant may be exercised for up to ten years after it is issued.

The issuance and sale of the preferred stock and warrant are exempt from the registration requirements of the Securities Act of 1933, as amended, pursuant to
Section 4(2) of the Securities Act.

In connection with the issuance and sale of the Company's securities, the Company entered into a Letter Agreement including the Securities Purchase Agreement - Standard Terms, dated January 16, 2009, with the United States Department of the Treasury (the "Agreement"). The Agreement contains limitations on the payment of quarterly cash dividends on the Company's Common Stock in excess of $0.065 per share, and on the Company's ability to repurchase its Common Stock. The Agreement also grants the holders of the Series A Preferred Stock, the Warrant and the Common Stock to be issued under the Warrant registration rights and subjects the Company to executive compensation limitations included in the Emergency Economic Stabilization Act of 2008. Participants in the TARP Capital Purchase Program are required to have in place limitations on the compensation of Senior Executive Officers. On January 16, 2009, the Company's three named executive officers, John L. Wagner, Richard A. Shields and Joseph W. Niemer, executed and delivered a Waiver of Executive Compensation Agreement whereby the executive releases the Company from any and all obligations to pay compensation prohibited by Section 111 of the Emergency Economic Stabilization Act of 2008 or any regulations promulgated thereunder and waives any present or future claims against the Company for any changes to executive's regular, bonus, or incentive compensation or benefit related arrangements, agreements or policies and any other changes required to be made to comply with the terms of the TARP Capital Purchase Program.

The Series A Preferred Stock will bear cumulative dividends at a rate of 5% per annum for the first five years and 9% per annum thereafter, in each case, applied to the $1,000 per share liquidation preference, but will only be paid when, as and if declared by the Company's Board of Directors out of funds legally available therefor. The Series A Preferred Stock has no maturity date and ranks senior to our Common Stock with respect to the payment of dividends and distributions and amounts payable upon liquidation, dissolution and winding up of the Company.

On January 13, 2009, the Company's shareholders approved an amendment to the Company's Restated Articles of Incorporation increasing the number of authorized shares of preferred stock to 26,380 and designating such shares as the Series A Preferred Stock. The amendment was filed with the Secretary of State of the State of Washington on January 13, 2009.

Copies of the Agreement, Warrant, Articles of Amendment to the Company's Restated Articles of Incorporation and form of Series A Preferred Stock Certificate are included as exhibits to this Form 8-K and are incorporated by reference into Items 1.01, 3.02, 3.03 and 5.03 hereof. The form of Waiver executed by the Company's named executive officers is included as an exhibit to

(d) Exhibits.

         3.1          Articles of Amendment to Restated Articles of Incorporation
         4.1          Form of Stock Certificate for Series A Preferred Stock
         4.2          Warrant to purchase up to 492,164 shares of Common Stock, issued January
                      16, 2009
         10.1         Letter Agreement, dated January 16, 2009, including Securities Purchase
                      Agreement-Standard Terms, between the Company and the United States
                      Department of the Treasury
         10.2         Form of Senior Executive Officer Waiver
         99.1         Press Release announcing closing of the investment by the United States
                      Department of the Treasury under the TARP Capital Purchase Program dated
                      January 16, 2009