It’s been a while since I’ve discussed Cascade Bancorp in these pages. I guess I had pretty much written it off a while back when the stock went under $2 and the FDIC presented the bank with a cease-and-desist order requiring it to raise capital.
However, I still believe it is a good barometer of the local real estate debacle as well as the regional economy and the company announced a few interesting developments today.
First, the company’s earnings, or lack thereof, continue to be plagued by the difficulties in the real estate market. Here are a few highlights of the report:
-Remarkably, the bank has now lost over two-thirds of its book value over the past twelve months alone as loan charge-offs grew nearly 250% over the past year.
-A bit of good news: non-performing assets generally appear to be leveling out at the bank.
-Bad news under the good news surface: Commercial real estate delinquencies (now the single largest segment of the bank’s loan portfolio) rose roughly 75% over the past three months.
This sudden and disturbing rise in commercial delinquencies may be signaling the “next shoe to drop” for the bank and the Central Oregon economy.
Commercial real estate here in Bend followed residential into bubble mode and may now be following it into the painful flip-side of bubble economics: the mean-reverting bust. If this is, indeed, the case we should not expect the local economy to meaningfully recover any time soon.
The company also announced today its first step in meeting the demands of the FDIC cease-and-desist order. An investor group has pledged to purchase $65 million in CACB stock at no more than 87 cents-per-share. To put this in perspective, the company’s total market capitalization is currently about $25 million. If this deal were to close today this means these new investors would immediately take ownership of over 70% of the bank.
However, the FDIC has required the bank to raise at least $150 million leading to even more dramatic dilution for existing shareholders. This commitment then is merely a baby step along the seemingly steep path of solvency and independence for Bank of the Cascades. Its survival in its current form is still very much in question.