Cascade Financial (CASB)

[jeriko]

From the November 10-Q regarding TARP Capital Purchase Program (CPP):
On July 20, 2010, the Board of Directors of the Bank stipulated to the entry of a Consent Order with the FDIC and the Washington State DFI, effective July 21, 2010 (the “Consent Order”). Under the terms of the Consent Order, the Bank cannot pay any cash dividends or make any payments to its stockholders without the prior written approval of the FDIC and the Washington DFI.
The Consent Order will remain in effect until modified or terminated by the FDIC and the Washington State DFI.

However, there can be no assurance that full compliance will be achieved. As a result, the Corporation and the Bank could become subject to further restrictions or penalties. Full satisfaction of the Consent Order will depend in part on raising a significant amount of additional capital to satisfy the Bank’s capital ratio requirements. The Corporation’s ability to raise additional capital will depend on conditions in the capital markets at that time, which are outside of its control, and on the Bank’s financial performance. The Corporation will not be able to increase the Bank’s capital ratios pursuant to the Consent Order by November 18, 2010. On the date the Consent Order was signed, the Board of Directors explained to the FDIC and the Washington State DFI representatives that market forces governing capital availability might not allow realization of the targeted capital ratios within the stipulated timeframes in spite of the efforts of the Board of Directors and management. The regulators acknowledged that the timeframes might not be achievable, but expected the directors and management to make good faith efforts to achieve the required ratios. Notwithstanding this, we may be subject to additional regulatory orders and/or restrictions due to the Corporation’s inability to increase the Bank’s capital ratios by the required timeframe. Further, should the Bank’s asset quality continue to erode and require significant additional provision for loan losses, resulting in additional future net operating losses at the Bank, the Bank’s capital levels will further decline, requiring the raising of more capital than the amount currently required to satisfy the Consent Order.

Item 5. Other information

On October 21, 2010, the Corporation announced that it had successfully completed a series of balance sheet restructuring transactions which would immediately put the Corporation and the Bank in an improved financial position including increased capital ratios and increased net interest margin. The transactions included the restructuring of the Bank’s securities portfolio, prepayment of $80 million in FHLB advances, modification of $159 million of fixed rate FHLB advances into lower cost floating rate advances to reduce current interest expense and the purchase of $159 million in interest rate caps designed to protect both the net interest margin and stockholders’ equity from potential future rising interest rates.