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The cease and desist order identified items in a routine regulatory exam completed in February 2009. Patricia Moss, president and CEO, said that the issues identified in the regulatory order largely reflect actions already well underway by the board of directors and management.
Under the agreement, the bank agreed to certain measures to improve its capital position, maintain liquidity ratios, reduce its level of non-performing assets, and reduce its loan concentrations in certain portfolios, improve management practices and to assure that its allowance for loan losses is maintained at an appropriate level.
In consenting to the order, the bank did not concede the findings or admit to any of the assertions therein but it did agree to adopt and implement a corrective program to address certain deficiencies noted in the examination.
Among the corrective actions required are for the bank to maintain above-normal capital levels. The Federal Deposit Insurance Corporation (FDIC) usually requires that a bank maintain a tier one leverage ratio of 5% in order to receive the highest capital adequacy category, 'well-capitalized'. However, regulators are requiring the bank to maintain a tier one leverage ratio of at least 10% beginning 150 days from the issuance of the order.
The bank must also develop and adopt a plan to maintain the minimum risk-based capital requirements for a 'well-capitalized' bank, including a total risk-based capital ratio of at least 10%. In an effort to increase capital Cascade Bancorp is currently evaluating the availability of potential private investors.
The bank is also required to ensure the level of the allowance for loan and lease losses is maintained at appropriate levels to safeguard the book value of the bank's loans and leases, and to reduce the amount of non-performing loans.
The board of directors and management have implemented initiatives to meet these requirements which have resulted in increased reserve levels for the bank, said Cascade Bancorp. To ensure it has appropriately addressed its credit portfolio, the bank retained KPMG to perform an independent review of the loan portfolio and of the bank's risk classification of loans.
The order further requires the bank to develop a plan to reduce delinquent loans and a plan to reduce loans to borrowers in the commercial real estate sector. The order also requires development of a written three-year strategic plan and a plan to preserve liquidity. The regulators have stipulated a primary liquidity ratio of at least 15%.
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