Canadian Western Bank has entered into an agreement with a group of underwriters led to issue 2.6 million preferred units on a bought deal basis for total proceeds of $65 million, the bank said Thursday.

The units each consist of one Non-Cumulative 5-Year Rate Reset Preferred Share, Series 3 (in the capital of the bank with an issue price of $25 a share, and 1.78 common share purchase warrants. Each warrant will be exercisable at a price of $14 to purchase one common share in the capital of the bank for five years.

The bank has also granted the underwriters, led by Genuity Capital Markets, an option to purchase, on the same terms, up to an additional 390,000 preferred units. The maximum gross proceeds raised under the public offering would be $74.75 million should this option be exercised in full.

CWB has also received commitments from institutional investors, including Fairfax Financial Holdings Ltd. and certain pension fund clients of Alberta Investment Management Corp., to purchase 5.4 million preferred units by way of a private placement for total proceeds of $135 million. The private placement preferred units will consist of one Series 3 Preferred Share and 1.7857 warrants. The warrants will have the same terms at those issued under the public offering.

The private and public offerings are subject to a number of conditions, including the concurrent closing of the other, the bank says. The private placement is also subject to the approval of the Minister of Finance.

The Series 3 Preferred Shares yield 7.25% annually, payable quarterly, an initial period ending April 30, 2014. Thereafter, the dividend rate will reset every five years at a level of 500 basis points over the then five-year Government of Canada bond yield. Holders of Series 3 Preferred Shares will, subject to certain conditions, have the option to convert their shares to Non- Cumulative Floating Rate Preferred Shares, Series 4 on April 30, 2014 and on April 30 every five years thereafter. Holders of the Series 4 Preferred Shares will be entitled to a floating quarterly dividend rate equal to the 90-day Canadian Treasury Bill Rate plus 500 basis points.

CWB says the Series 3 and Series 4 are anticipated to qualify as Tier 1 capital for the bank and the closing date will be subject to the timing of the approval from the Minister of Finance.

“We are very pleased to announce this agreement, as execution will significantly augment the bank’s already strong balance sheet and provides considerable flexibility to pursue accretive growth opportunities,” says Larry Pollock, CWB’s president and CEO.

The bank also confirmed that its first quarter financial results “will be generally consistent with the bank’s fiscal 2009 performance target ranges published in December 2008. Management also expects to be in line with analysts’ consensus earnings estimate for the first quarter of 39¢ per diluted common share.”

The bank’s results will be released on March 5.