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Banks get cash infusion

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Monday, December 01, 2008

PORTLAND As of mid-November, three Oregon banks are in line to get a federal infusion of cash.

Portland-based Umpqua Bank will get a $214 million cash infusion after selling that amount in preferred stock to the U.S. Treasury. Pending shareholder approval this month, Capital Pacific Bancorp in Portland will get $4 million. The Commerce Bank of Oregon will receive an undetermined amount from its parent company’s $1.4 billion Treasury investment. Zions Bancorporation owns Commerce.

The $250 billion Capital Purchase Program is meant to bolster healthy banks so they can lend more  and stimulate the economy. The feds are only investing in banks capable of paying it back, which has analysts scrambling to find out which banks didn’t make the cut, experts say.

“Behind the scenes almost every bank in the Northwest is applying for it,” says Ron Farnsworth, chief financial officer at Umpqua. “But they may apply and not get it, and that’s the investor’s concern.”  Umpqua’s stock value went up more than 20% since the announcement.

Concern has been raised about banks hoarding the cash. Participants must pay a 5% dividend on the shares issued to the government for the first five years of the investment, then 9% after that.

“There’s a lot of concern that banks have turned off the spigot,” says Capital Pacific CEO Mark Stevenson. “Even to their existing clients.”

Both Umpqua and Capital Pacific say they intend to lend the money to Oregon businesses immediately. 

JASON SHUFFLER


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