Clarification: David F. Bolger owns 12.3% of Cascade Bancorp. The figure counted only his personal holdings. Including shares held by companies he controls, the stake is 28.8%, and it would rise to 50% as a result of the proposed investment.

 Cascade Bancorp Inc.'s biggest investor may throw the Bend, Ore., company a lifeline.

David F. Bolger disclosed in a Securities and Exchange Commission filing last week that he is in talks to inject $25 million into the $2.4 billion-asset Cascade. The investment would raise his stake from 12.3% to roughly 50%.

As the former chairman of F&M Holding Co. of Boise, Idaho, which Cascade bought three years ago, Bolger is familiar with the banking company and its markets. Analysts said his imprimatur might help Cascade raise the rest of the $50 million to $100 million they estimate it needs to cover losses on a souring portfolio of construction loans.

"It is a compelling argument to say, 'Our largest investor is putting in $25 million,' " said Tim Coffey, an equity analyst for FIG Partners LLC in San Francisco. "This is a man who knows the Idaho market and where a substantial part of that loan book is located."

Much is at stake for Cascade. Like other Pacific Northwest banking companies, it has been hard hit by losses on residential project loans in Oregon and Idaho — markets that have suffered ripple effects from California's housing slowdown.

Matthew T. Clark, an analyst with KBW Inc.'s Keefe, Bruyette & Woods Inc., said the company could fall below the regulatory thresholds for "well capitalized" this quarter, especially if it does not receive a capital infusion.

At yearend the company had a total risk-based capital ratio of 10.19% and a Tier 1 risk-based capital ratio of 8.92%.

Cascade did not return calls. A representative from Bolger's company, Two-Forty Associates in Ridgewood, N.J., said he would not discuss the potential investment.

Bolger, 76, has real estate holdings throughout the country. In the 1990s he served on the boards of the life and health insurer Universal Holdings Corp. and Deotexis Inc., a blank check company that acquired a patent for controlled-release chemical delivery systems.

Nearly all of the $147 million in cash and stock that Cascade paid for F&M went to him.

Cascade still faces a chicken-and-egg issue. It has said its application for funds under the Treasury Department's Troubled Asset Relief Program "may be conditioned on the company's receipt of private-equity capital." Similarly, Bolger's investment is contingent on Cascade's raising additional capital from other private sources and a government infusion.

"It's not a done deal. That is the most important point," Clark said.

"It gives you some confidence that there is a chance to add capital. But there is still a fair amount of uncertainty."

In its annual SEC filing in March, Cascade said its bank subsidiary was undergoing an annual regulatory exam.

"If as a result of that exam the bank is downgraded to 'adequately capitalized' by regulatory standards, the bank may no longer be eligible to receive funds through the Tarp program," Cascade warned.

If Cascade cannot raise capital from Tarp or other sources, the company said, it may take steps to preserve capital, such as slowing or reducing lending, selling certain assets, increasing loan participations, or some combination thereof.

In recent years residential construction projects in Oregon surged as people from California left the state for more affordable living or bought second homes with equity from a California house. As California home prices began falling, buyers could no longer sell their homes to buy in Oregon nor could they pull additional equity out.

Hence, like others in the area, Cascade has seen its nonperforming assets pile up. At the end of 2008 its ratio of nonperforming assets to total loans was 7%, compared with 2.33% a year earlier.

Last year Cascade lost $135 million, after earning $30 million in 2007. Analysts said they expect it to lose another $100 million this year and next.

In February the Federal Deposit Insurance Corp. temporarily restricted Cascade from accepting additional brokered deposits until its annual regulatory exam was completed.

However, Cascade is less reliant on high-yielding deposits than others in its market.

"Cascade has a big portion of non-interest-bearing deposits, with 85% of its deposits being core," Coffey said.

"That makes them more attractive."

Though specific terms of the proposed deal with Bolger have not been released, analysts expect Cascade would need to raise an additional $10 million from another private source.

They said it is unclear if the company would receive the full 3% of risk-weighted assets, or $65 million, that it has applied for under Tarp, or if the Treasury would just match what was raised.

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