EVERETT — Cascade Financial Corp. became the first local institution to announce its participation in the government’s capital purchase program.
Everett-based Cascade will accept a $39 million investment from the U.S. Treasury, the maximum allowable based on 3 percent of its assets, President and CEO Carol Nelson said.
“This is a very positive thing for Cascade,” she said. “The government is lending the money to help improve our economy.”
In return for the money, the government will get preferred stock in Cascade with a 5 percent coupon for five years and a 9 percent coupon thereafter. It will also get warrants to purchase Cascade common stock at an amount to be determined. The warrants will expire in 10 years.
The money is part of the government’s plan to get more money working in the economy. Some $250 billion was set aside for the government to invest in banking institutions and provide money to be lent by bank customers.
Half of the money was spoken for by eight major banking institutions. The rest was intended for smaller institutions such as Cascade.
Nelson said the effective 5 percent rate for the money is “a very low rate” and that the money Cascade will receive from the Treasury “should support our future growth for some time.”
She stressed that the money was made available to “healthy” banks with the intention of improving the amount of money they have to lend to businesses and consumers. Not all banks will qualify, she said.
“This investment significantly enhances our capital position,” Nelson said, noting it will help the bank take advantage of “strategic opportunities that meet our disciplined criteria.”
Nelson said the bank is well-capitalized based on government regulations. But she added that the government investment in the bank will increase its risk-based capital ratio from about 10 percent to 13 percent.
Not all banks have agreed to participate in the Treasury Department’s Troubled Assets Relief Program, which was launched last month, saying they don’t need the money. The deadline to apply is Nov. 14.
Cascade’s assets were stretched when the government took over Fannie Mae and Freddie Mac, making the preferred stock of the mortgage giants essentially worthless. Cascade had invested millions in the preferred stock, which before the mortgage crisis was considered safe and lucrative.
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