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Cascade Bancorp Reports Operating Results (10-Q/A)

August 24, 2010 | About:
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10qk

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Cascade Bancorp (CACB) filed Amended Quarterly Report for the period ended 2010-03-31.

Cascade Bancorp has a market cap of $15 million; its shares were traded at around $0.5336 with and P/S ratio of 0.1. CACB is in the portfolios of Ruane Cunniff of Ruane & Cunniff & Goldfarb Inc, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Cascade reported a first quarter 2010 net loss of ($11.3 million) or ($0.40) per share which is lower than the prior quarter s net loss of ($70.2 million) or ($2.50) per share. The quarterly loss was primarily due to an elevated loan loss provision expense to offset charge-offs and to increase our reserve for credit losses to approximately $61.0 million or 4.16% of gross loans compared to approximately $59.3 million or 3.83% at December 31, 2009. NPA s were stable at $160.7 million compared to $161.0 million for the linked-quarter and delinquent loans just 0.58% of gross loans compared to 0.65% at December 31, 2009. Net charge-offs were $12.0 million for the first quarter of 2010 down from $43.5 million for the linked-quarter. Net interest income was down $0.7 million for the first quarter of 2010 as compared to the linked-quarter, primarily due to reduced interest and loan fee income because the loan portfolio declined $82.0 million or 5.3% from the linked-quarter and was down 24.3% compared to the year-ago period. This decline reflects the slower economy, the level of charge-offs and management s actions to strategically reduce outstanding loans to mitigate credit risk going forward and to preserve capital. Non-interest income decreased $0.3 million when compared to the linked-quarter and was $1.8 million below the year ago quarter primarily due to decreases in service charges and mortgage revenue. Non-interest expense when compared to the linked-quarter was down by $12.6 million or 42.5% because the linked-quarter included higher OREO related expenses, certain costs of debt extinguishment and expenses related to our unsuccessful public capital raise in that period. In addition, salaries and benefits cost were down $0.5 million or 5.6% from the prior quarter. As compared to the year ago quarter, noninterest expenses were up by $0.6 million primarily due to FDIC insurance expense of approximately $2.7 million for the quarter compared to $1.1 million for the year-ago quarter, which was offset by a decrease in salaries and benefit costs of $0.9 million.

At March 31, 2010, Cascade s loan portfolio was approximately $1.5 billion, down $79.4 million and $466.9 million when compared to the linked-quarter and a year-ago, respectively. Loans have declined primarily due to reduced demand owing to economic contraction, an increase in loan charge-offs and management s strategic loan reduction program which has resulted in lower loan portfolio risk exposure and thereby helped to support regulatory capital ratios. The loan reduction plan has included select loan sales and loan participations as well as non-renewal of mainly transaction only loans where the Company does not consider itself to be the customer s primary bank based upon the overall balance of its banking and deposit relationship with the customer.

First quarter provisioning expense of $13.5 million exceeded net charge-offs of $12.0 million thereby increasing reserves for credit losses to $61.0 million or 4.16% of loans. The Bank increased its level of pooled and unallocated reserves in response to risk rating changes and uncertainty as to current and prospective economic conditions. In prior quarters provision expense and charge-offs had been primarily due to deteriorating appraised values on collateral dependent loans especially in the residential land development portfolio. The Bank has successfully sold several non-performing loans and OREO properties in the past two quarters at or near its carrying value. While this and other evidence seems to indicate that appraised values are beginning to stabilize, no assurance can be given that valuations may not decline further because nearly all sales of such properties are perceived by buyers as distressed and so subject to such pricing pressure.

On August 3, 2010, the Company determined that it would restate its unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2010 primarily related to the reserve for loan losses and loan loss provision (see explanatory note on page 2 of this Amendment). As a result of the restatement, the March 31, 2010 reserve for loan losses increased to $60.1 million from the previously reported $51.5 million. The loan loss provision for the three months ended March 31, 2010 decreased from $25.9 million to $13.5 million. This restatement is related to an examination by banking regulators of the Bank that commenced on March 15, 2010 and is related to the reserve for loan losses and loan loss provision. In connection with the examination, the regulators provided additional information to the Company on July 29, 2010 which resulted in management refining and enhancing its model for calculating the reserve for loan losses by considering an expanded scope of information and augmenting the qualitative and judgmental factors used to estimate potential losses inherent in the loan portfolio.

Non interest checking balances were down due to economic, seasonal and customer migration. This was largely offset by an increase in NOW accounts due to higher public fund balances. The Bank s internet listing service deposits at March 31, 2010 were approximately $190.5 million, relatively unchanged from $191.6 at December 31, 2009 and $77.9 million a year ago. Such deposits are sourced by posting time deposit rates on an internet site where institutions seeking to deploy funds contact the Bank directly to open a deposit account.

Net loss for the first quarter of 2010 was ($11.3 million) or ($0.40) per share, compared to a net loss of ($70.2 million) or ($2.50) per share for the linked-quarter and net loss of ($3.9 million) or (0.14) per share for the year ago period. The quarterly loss was primarily due to an elevated loan loss provision expense to offset charge-offs and an increase in the reserve for credit losses to 4.16% of gross loans compared to 3.83% at December 31, 2009. Compared to the linked-quarter, net interest income decreased $3.6 million for the quarter ended March 31, 2010 mainly due to lower loan balances and interest reversed and foregone on non performing loans. Linked-quarter non-interest income was down primarily due to a decrease in mortgage revenue and non-interest expense increased $0.6 million for the quarter ended March 31, 2010, primarily due to an increase in FDIC insurance expense and other expenses, offset by a reduction in staffing expenses for the period.

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