Cascade Financial posts loss, discloses other struggles

Cascade Financial of Everett reported another hefty quarterly loss Wednesday, but the struggling bank's troubles ran deeper than its financial results.

The parent company of Cascade Bank disclosed that two longtime directors — who succeeded just three months ago in placing several allies on the company's board — have quit, citing "fundamental differences" with management.

Cascade also said it had agreed with state and federal regulators on steps to restore the bank's financial health. The agreement, called a consent order, restricts certain lending decisions, bars dividend payments and requires the bank to bolster its capital levels and purge bad loans from its books, among other actions.

The two departing directors, developer Craig Skotdal and retired auto dealer Dwayne Lane, also criticized the consent order in their resignation letters, saying it would "impose unreasonable and untenable conditions."

Earlier this year, an investor group led by Skotdal and including Lane successfully pressured Cascade management into adding three new directors of their choosing to Cascade's board. The group controlled five votes on the company's 15-member board.

The Skotdal family, through various entities, owns 9.3 percent of Cascade's stock, making them the company's largest shareholder.

But in a letter dated July 16, Skotdal said he had "fundamental differences with the CEO and a majority of board members that cannot be reconciled." Along with his concerns over the then-proposed consent order, he continued, "I am not willing to serve as a director under these circumstances."

Asked about the reasons for his departure, Skotdal declined to elaborate.

The developments overshadowed Cascade's second-quarter results. The company lost $24.2 million, or $2.02 per common share after accounting for preferred stock; that compares to a $32.1 million ($2.69 per common share) loss in the first quarter, and a $21.4 million ($1.82 per common share) loss in the second quarter of 2009.

Nonperforming assets, consisting mainly of bad loans and repossessed real estate, edged lower to $110.3 million, or 6.6 percent of total assets. A net $11.7 million in soured loans was charged off in the second quarter, down from $31.2 million in the first quarter.

Drew DeSilver: 206-464-3145 or ddesilver@seattletimes.com