EVERETT — Cascade Financial Corp. earned $2.5 million in the last quarter of 2008 as government aid helped it increase its lending to counter mounting losses in the weakening housing market, the company reported Tuesday.
The profit — down from $4 million a year ago — came after the parent company of Cascade Bank posted a $6.6 million loss in the third quarter.
“Cascade is surviving the downturn in the economy better than many of our peers,” Carol Nelson, the bank’s president and chief executive officer, said in a statement.
For 2008, Cascade’s net income was $2.1 million. That’s down from $15.5 million in 2007.
The bank’s nonperforming loans increased by $24.6 million to $40.3 million in the fourth quarter, mainly due to the sluggish housing market. That was offset by an increase in profitable loans. Cascade’s loan portfolio increased by $45.2 million in the quarter. Its largest growth was in single-family mortgages.
On Nov. 24, Cascade raised $39 million from the U.S. Treasury Department. The department’s capital purchase program taps the $700 billion bailout that Congress authorized to help banks ease lending and stabilize operations.
“The additional capital infusion enabled us to provide increased credit to businesses and consumers in our market area,” Nelson said.
Everett-based Cascade is the only bank in Snohomish County that has secured capital from the Treasury. Cascade has 21 branches in Snohomish, King and Skagit counties.
Frontier Bank in Everett has applied for the Treasury’s program; it’s yet to get an answer.
Cascade didn’t get the new capital free.
The government got 38,970 shares of Cascade’s preferred stock paying 5 percent interest annually for five years and 9 percent thereafter. It also got a warrant to purchase 863,442 shares of the company’s common stock at a rate of $6.77 per share.
The additional capital should give the bank flexibility and strength to prepare for future opportunities, Nelson said.
Cascade also increased its checking account balances during the fourth quarter. The bank had total deposits worth a little more than $1 billion at the end of December. That was up from $905 million a year ago.
The bank hasn’t engaged in subprime mortgage lending, and its $1.26 billion loan portfolio doesn’t contain any such loans, according to filings with the U.S. Securities and Exchange Commission.
Nonetheless, the bank has taken hits from the mortgage crisis that mainly stemmed from risky home loans.
Cascade suffered a loss of $6.6 million in the third quarter ended on Sept. 30 mainly due to the government’s takeover of Fannie Mae and Freddie Mac. The bank had invested in the preferred stock of the mortgage giants when it was considered profitable and safe. The stock lost most of its value following the government’s takeover.
The bank remains well capitalized under government regulations.
Cascade’s stock on Tuesday closed at $3.35 per share, up 23 cents or 7.37 percent.
Reporter Yoshiaki Nohara: 425-339-3029 or ynohara@heraldnet.com.
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