Published: Friday, June 26, 2009
Cascade Financial Corp. troubled by bad loans
EVERETT -- Cascade Financial Corp. warned investors Thursday that it expects to report a quarterly loss of as much as $21 million next week as it continues to set aside money to deal with bad loans.
"We wanted to make sure we're providing some advance warning of some negative things," said Carol Nelson, president and CEO of Cascade, the holding company for Everett-based Cascade Bank.
Nelson noted that continued declines in the housing market and the stock market have hurt the bank's balance sheet. She said Cascade will set aside about $15 million to deal with expected bad loans for the second quarter. It also will report a $12 million charge for a loss of goodwill.
Cascade's stock price fell 17.6 percent on the news, falling 46 cents a share to a close of $2.15.
Nelson said the reduction in goodwill is an accounting requirement that represents the loss in value in Issaquah Bank, which Cascade bought in 2004. Nelson said the $12 million write-off does not affect Cascade's liquidity or the amount of money it has for operations.
Cascade is expected to announce its second quarter earnings Monday. Nelson said the bank will report a loss ranging between $19 million and $21 million, including the $12 million loss of goodwill. It lost $4.8 million during the first three months of the year.
Because of the continued poor economy, the bank's board of directors will suspend the one-cent-per-share quarterly dividend, Nelson said. "We expect to return to paying a quarterly cash dividend as soon as market conditions improve," she said.
Nelson said she thought a suspended dividend was prudent because it would allow the bank to continue to conserve its capital.
She noted that Snohomish County continues to see declines in the housing market, although homes sales have improved a bit recently. Home sales for the year so far are down 40 percent from a year ago, Nelson said.
She said that 25 percent of the sales this year have been properties in foreclosure with very depressed prices.
The bank has evaluated expected loan losses for the past three months and decided to set aside $15 million to handle them, Nelson said. She added that the bank still has enough money to be considered well capitalized under government regulations. And she said the bank is not anticipating any layoffs.
"We're very lean," she said of the bank's staff. "From a capital perspective, we're in good shape. We'll continue to deal with these loan issues until we can improve our profitability."
"We wanted to make sure we're providing some advance warning of some negative things," said Carol Nelson, president and CEO of Cascade, the holding company for Everett-based Cascade Bank.
Nelson noted that continued declines in the housing market and the stock market have hurt the bank's balance sheet. She said Cascade will set aside about $15 million to deal with expected bad loans for the second quarter. It also will report a $12 million charge for a loss of goodwill.
Cascade's stock price fell 17.6 percent on the news, falling 46 cents a share to a close of $2.15.
Nelson said the reduction in goodwill is an accounting requirement that represents the loss in value in Issaquah Bank, which Cascade bought in 2004. Nelson said the $12 million write-off does not affect Cascade's liquidity or the amount of money it has for operations.
Cascade is expected to announce its second quarter earnings Monday. Nelson said the bank will report a loss ranging between $19 million and $21 million, including the $12 million loss of goodwill. It lost $4.8 million during the first three months of the year.
Because of the continued poor economy, the bank's board of directors will suspend the one-cent-per-share quarterly dividend, Nelson said. "We expect to return to paying a quarterly cash dividend as soon as market conditions improve," she said.
Nelson said she thought a suspended dividend was prudent because it would allow the bank to continue to conserve its capital.
She noted that Snohomish County continues to see declines in the housing market, although homes sales have improved a bit recently. Home sales for the year so far are down 40 percent from a year ago, Nelson said.
She said that 25 percent of the sales this year have been properties in foreclosure with very depressed prices.
The bank has evaluated expected loan losses for the past three months and decided to set aside $15 million to handle them, Nelson said. She added that the bank still has enough money to be considered well capitalized under government regulations. And she said the bank is not anticipating any layoffs.
"We're very lean," she said of the bank's staff. "From a capital perspective, we're in good shape. We'll continue to deal with these loan issues until we can improve our profitability."
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