Cascade Financial's First Quarter Profits up 19%; Strong Loan Growth Continues.

EVERETT, Wash. -- Cascade Financial Corporation (Nasdaq:CASB), parent company of Cascade Bank, today reported that net income grew 19% in the first quarter of 2005. Revenues increased 23% from a year ago, while loan and deposit generation remained strong. Net income was $3.1 million in the quarter ended March 31, 2005, with earnings growing to $0.31 per diluted share, compared to $2.6 million, or $0.30 per diluted share in the first quarter of 2004. E[acute accent]Earnings per share are adjusted to reflect the issuance of 1.26 million shares of common stock as part of the consideration for acquiring Issaquah Bancshares, the parent company of Issaquah Bank, in June of last year. While the acquisition added $101 million in loans and $106 million in deposits, organic growth has also been very strong. In the first quarter of 2005, Cascade generated $39 million in new loans, reflecting a 40% increase since March 31, 2004, and 19% annualized growth.

E[acute accent]First Quarter Highlights

E[acute accent]--Net income increased 19% over first quarter 2004.

E[acute accent]--Net interest income grew 20%, other income increased 39%.

E[acute accent]--Revenues advanced 23% to $10.4 million.

E[acute accent]--Return on tangible equity improved to 17.6% and return on equity was 12.8%.

E[acute accent]--Total loans grew 40% from a year ago and 19% on an annualized basis, with a focus on higher-yielding commercial credits.

E[acute accent]--Total assets increased 28% to $1.1 billion compared to $897 million a year ago.

E[acute accent]--Credit quality remained strong, with nonperforming loans dropping to 0.09% of total loans at quarter-end.

E[acute accent]--Total deposits increased 34% with checking deposits growing 73%.

E[acute accent]--Checking service fees grew considerably, while gains on the sale of loans and securities dropped substantially.

E[acute accent]"Loan demand remains strong, particularly business, commercial real estate and construction lending," stated Carol K. Nelson, President and CEO. "Loans have grown 40% in the last year, with the large majority being generated internally. Growing checking deposits by 73% has helped fund our growth, as well as mitigate the impact of rising short-term rates. We are carrying that momentum forward. Our higher-yielding, largely adjustable-rate loan portfolio and focus on gathering core deposits positions us for continued success as interest rates continue to rise."

E[acute accent]Operating Results

E[acute accent]"A continued focus on fundamentals contributed to our top-line growth," Nelson said. "Net interest income increased by $1.5 million, reflecting our larger asset base and the on-going shift to higher-yielding credits in our loan portfolio. We also posted 39% noninterest income growth with minimal asset sales due to growth in checking fees. Gains on sale of loans, securities and real estate were just $75,000 in the quarter, compared to $407,000 a year ago. Checking fees, meanwhile, grew to $776,000, from $440,000 in the first quarter last year. Growing core deposits, and the fees associated with them, remain a key part of our strategy." E[acute accent]Revenues grew 23% in the first quarter to $10.4 million, from $8.5 million a year ago, with net interest income and noninterest income, the two components of revenue, both growing significantly. Net interest income grew 20% to $8.8 million, compared to $7.3 million in the first quarter of 2004, while other income increased to $1.6 million, from $1.2 million last year. E[acute accent]Largely due to the additional costs associated with operating the two Issaquah Bank branches and Cascade's new Snohomish branch, other operating expenses increased 24% to $5.6 million in the quarter, compared to $4.5 million in the first quarter of last year. "Operating expenses for the balance of 2005 will also be impacted by higher marketing expenses as we roll out a new sales campaign designed to increase checking accounts," Nelson said.

E[acute accent]Balance Sheet Management

E[acute accent]Total loans increased 40% in the last year to $845 million, compared to $605 million at March 31, 2004, and $807 million at year-end 2004. The three components of the commercial loan portfolio showed dramatic growth in the last year. Commercial real estate loans more than doubled, real estate construction loans grew 67%, and business loans grew 40%. As a result, total commercial loans grew by 64% to $616 million, and now represent 73% of total loans, compared to 62% a year ago. Multifamily loans showed minimal growth, while consumer and residential loans both declined slightly. E[acute accent]"The majority of our growth has been internally generated, although the acquisition of Issaquah contributed to our increase in total loans and the shift in our portfolio mix," Nelson said. "The same can be said of our funding sources, as we have continued to gather core deposits in addition to the $106 million acquired in the Issaquah transaction. In the first quarter of 2005 alone, total deposits increased by $60 million, although roughly half of those deposits are from one trust account, and will likely be in the bank for only a short while." E[acute accent]Over the last year, deposits grew 34% to $782 million, compared to $584 million at the end of March 2004. Checking balances have grown by 73% and savings and money market accounts have grown by 37%. Although time deposits have grown by $95 million in the past twelve months, they now represent 60% of total deposits, down from 64% at the end of the first quarter last year. E[acute accent]"Our ongoing efforts to shift our asset mix toward commercial loans have given us the portfolio of a profitable community commercial bank," Nelson said. "We remain focused on minimizing our reliance on time deposits, and our new High Performance Checking Program is a key component of that strategy." E[acute accent]Stockholders' equity has increased by 45% to $97 million, compared to $67 million at the end of the first quarter last year, largely due to the issuance of stock associated with the Issaquah Bancshares acquisition. Book value per share was $10.12 at quarter-end, compared to $8.05 at March 31, 2004. Due to the creation of intangible assets in connection with the acquisition, tangible book value was $7.38 at the end of the first quarter, compared to $8.05 a year ago. During the quarter, the corporation repurchased 42,000 shares of its stock to offset the exercise of stock options.

E[acute accent]Net Interest Margin & Interest Rate Risk

E[acute accent]The net interest margin declined to 3.34%, versus 3.40% a year ago. On a linked-quarter basis, the yield on earning assets increased 8 basis points to 5.97% for the quarter ended March 31, 2005, while the cost of interest-bearing liabilities rose 18 basis points to 2.94%. E[acute accent]"Pricing competition remains fierce on both sides of the balance sheet against the backdrop of rising short-term rates," said Lars Johnson, EVP and CFO. "The purchase of $5 million of Bank Owned Life Insurance reduced the margin by 2 basis points. The net interest margin was also impacted by the termination of two interest rates swaps totaling $50 million. We entered into the swaps in the third quarter last year to mitigate our exposure to rising rates, and in March, our overall risk exposure had declined to a point where we could terminate these hedges." The rates paid on the swaps exceeded the rate received by an average of 140 basis points as of March 2, 2005. E[acute accent]"In the second quarter, the benefits of terminating the interest rate swaps, growing checking deposits, and the maturity of high-coupon FHLB advances should enhance our margin," Johnson added. "However those enhancements may be offset by the increased competition for deposits as short term rates continue to rise. We anticipate the net interest margin will be in the range of 3.30% - 3.50%."

E[acute accent]Asset Quality

E[acute accent]"We have done an excellent job of managing credit risk while growing the commercial loan portfolio significantly and shifting our loan mix," Nelson said. "Credit quality remains strong, with nonperforming loans improving from a year ago, when the numbers were still very good." E[acute accent]At quarter-end, nonperforming loans (NPLs) were $767,000, down from $1.5 million a year ago. NPLs were 0.09% of total loans at March 31, 2005, compared to 0.25% of loans a year prior. Net charge-offs were $127,000 in the quarter, compared to $14,000 in the first quarter last year. E[acute accent]"Our provision for loan losses was $245,000 in the quarter, nearly double net charge-offs," Johnson said. "Although our credit quality remains strong, our portfolio has grown considerably in the past year. We will continue to evaluate the allowance for loan losses on a quarter-by-quarter basis, but we are comfortable with our coverage at this time." Cascade's allowance for loan losses was $9.7 million at quarter-end, or 1.15% of total loans and well in excess of nonperforming loans.

E[acute accent]Performance Measures

E[acute accent]Cascade's return on tangible equity (ROTE) improved to 17.6% in the first quarter, compared to 15.8% a year ago. Management uses ROTE, a non-GAAP performance measure, to eliminate the goodwill created by the merger, and believes that this provides a more consistent comparison with pre-merger performance. Return on GAAP equity (ROE) was 12.8% in the quarter, compared to 15.8% a year ago. Return on assets (ROA) was 1.10%, compared to 1.16% in the first quarter of 2004. The efficiency

ratio was 53.5% in the quarter ended March 31, 2005, versus 52.8% a year earlier.

E[acute accent]Conference Call

E[acute accent]Carol Nelson and Lars Johnson will host a conference call on Wednesday, April 20, at 10:00 am PDT (1:00 pm EDT). Interested investors may listen to the call live or via replay at www.cascadebank.com. Investment professionals are invited to dial [phone] to participate in the live call. A telephone replay of the call will be available for three weeks at [phone], using passcode 11027152#.

E[acute accent]About Cascade Financial

E[acute accent]Established in 1916, Cascade Bank, the only operating subsidiary of Cascade Financial Corporation, is a state chartered commercial bank headquartered in Snohomish County, Washington. Cascade Bank operates 16 full service offices, located in Everett, Lynnwood, Marysville, Mukilteo, Smokey Point, Issaquah, Clearview, Woodinville, Lake Stevens, Bellevue and Snohomish. Issaquah Bank, a division of Cascade Bank, operates offices in Issaquah and North Bend. Cascade will open its newest branch in the Silver Lake neighborhood of Everett in May 2005. E[acute accent]In July 2004, US Banker magazine ranked Cascade #39 out of the Top 200 Publicly Traded Community Banks with less than $1 billion in assets, based on three-year average return on equity. In October, the same publication named President and CEO Carol Nelson one of the 25 Most Powerful Women in Banking. In March 2005, The Snohomish County Business Journal named Nelson the 2005 Executive of the Year.

E[acute accent]This press release contains supplemental financial information determined by methods other than in accordance with Accounting Principles Generally Accepted in the United States of America ("GAAP"). These measures include return on tangible equity, tangible book value per share and tangible capital to asset ratio. Cascade's management uses these non-GAAP measures in its analysis of the company's performance. These measures exclude the average and ending balances of acquisition-related goodwill and intangibles in determining average tangible shareholders' equity. Banking and financial institution regulators also exclude goodwill and intangibles from shareholders' equity when assessing the capital adequacy of a financial institution. Management believes the presentation of the financial measure excluding the impact of these items provides useful supplemental information that is essential for a proper understanding of the financial results of Cascade Financial Corporation, as they provide a method to assess management's success in utilizing the company's tangible capital. This disclosure should not be viewed as a substitute for results determined to be in accordance with GAAP, nor is it necessarily comparable to non-GAAP performance measures that may be presented by other companies.

E[acute accent]Safe Harbor Statement

E[acute accent]This document contains forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those projected. Those factors include, but are not limited to: continued strong demand for Cascade's products and services, including the ability to attract low-cost deposits and commercial loans, the continued successful integration of Issaquah Bank, maintaining asset quality, management's ability to minimize interest rate exposure and the impact of interest rate movements on the net interest margin, the ability to attract and retain qualified people, and other factors. For a discussion of factors that could cause actual results to differ, please see the Company's publicly available Securities and Exchange Commission filings, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2004.

CONSOLIDATED FINANCIAL HIGHLIGHTS
---------------------------------
INCOME STATEMENT                  Three Months Ended
(Dollars in thousands
except per share amounts)    March 31,  December 31, March 31,  Annual
                               2005        2004        2004     Change
                            ----------  ----------  ----------
                           (Unaudited) (Unaudited) (Unaudited)

Interest income            $   15,600  $   15,093  $   12,609    23.7%
Interest expense                6,826       6,395       5,307    28.6%
                            ----------  ----------  ----------
Net interest income             8,774       8,698       7,302    20.2%
Provision for loan losses         245         150         225     8.9%
                            ----------  ----------  ----------
Net interest income after
 provision                      8,529       8,548       7,077    20.5%
Other income
   Gain on sale of loans           30          29          62   -51.6%
   Gain on sale of
    securities                     12           -         269   -95.5%
   Checking fees                  776         555         440    76.4%
   Other service fees             212         197         142    49.3%
   BOLI                           188         165         134    40.3%
   Gain/(loss) on sale of
    real estate                    33         (17)         76   -56.6%
   Other non-interest
    income                        349         239          30  1063.3%
                            ----------  ----------  ----------
Total other income              1,600       1,168       1,153    38.8%

Total income                   10,129       9,716       8,230    23.1%

Compensation expense            3,159       3,094       2,632    20.0%
Other operating expenses        2,394       2,451       1,809    32.3%
FHLB advance prepayment
 fees                               -           -          26  -100.0%
                            ----------  ----------  ----------
Total other expense             5,553       5,545       4,467    24.3%
                            ----------  ----------  ----------
Net income before tax           4,576       4,171       3,763    21.6%
Income tax expense              1,505       1,347       1,189    26.6%
                            ----------  ----------  ----------

Net earnings               $    3,071  $    2,824  $    2,574    19.3%
                            ==========  ==========  ==========

EARNINGS PER SHARE INFORMATION
Earnings per share, basic  $     0.32  $     0.30        0.31     2.8%
Earnings per share,
 diluted                         0.31        0.29        0.30     4.1%
Weighted average number of
 shares outstanding:
   Basic                    9,574,296   9,560,593   8,250,880
   Diluted                  9,874,799   9,869,402   8,619,193

PERFORMANCE MEASURES
Return on equity                12.82%      11.90%      15.79%
Return on tangible equity       17.58%      16.40%      15.79%
Return on average assets         1.10%       1.04%       1.16%
Efficiency ratio                53.53%      56.20%      52.83%
Net interest margin              3.34%       3.41%       3.40%



BALANCE SHEET           March 31,   December 31,    March 31,  Annual
                          2005          2004          2004     Change
                     -----------------------------------------
(Dollars in thousands  (Unaudited)   (Unaudited)   (Unaudited)
 except per share
 amounts)

Cash and due from
 banks                 $   15,962    $   11,692      $  8,076    97.6%
Interest bearing
 deposits                      44         1,337         9,008   -99.5%
Securities
   Securities held-
    to-maturity            95,311        91,339        87,267     9.2%
   Securities
    available- for-
    sale                  135,401       124,276       169,393   -20.1%
                        ----------    ----------      --------
Total securities          230,712       215,615       256,660   -10.1%
Loans
   Business               301,085       292,117       214,816    40.2%
   Real estate
    construction          125,275       107,431        75,070    66.9%
   Commercial real
    estate                189,218       178,704        85,534   121.2%
   Multifamily             94,623        92,372        92,380     2.4%
   Home
    equity/consumer        30,133        30,125        31,250    -3.6%
   Residential            105,009       105,975       106,355    -1.3%
                        ----------    ----------      --------
   Total loans            845,343       806,724       605,405    39.6%
   Deferred loan
    fees                   (2,873)       (2,695)       (2,123)   35.3%
   Loan loss reserve       (9,681)       (9,563)       (7,922)   22.2%
                        ----------    ----------      --------
Loans, net                832,789       794,466       595,360    39.9%
Premises and
 equipment, net            12,720        12,824         8,649    47.1%
Real estate owned             256           868         1,000   -74.4%
Bank owned life
 insurance                 16,814        16,650        11,277    49.1%
Other assets                8,672         9,211         7,323    18.4%
Goodwill and
 intangibles               26,217        26,292             -       NA
                        ----------    ----------      --------
Total assets           $1,144,186    $1,088,955      $897,353    27.5%
                        ==========    ==========      ========

Deposits
   Checking accounts      115,577       112,564        66,953    72.6%
   Money market and
    savings accounts      200,382       172,584       146,167    37.1%
   Certificates of
    deposit               465,838       436,760       370,869    25.6%
                        ----------    ----------      --------
Total deposits            781,797       721,908       583,989    33.9%
FHLB advances             221,000       228,000       190,000    16.3%
Securities sold under
 repurchase agreement      20,869        20,902        38,034   -45.1%
Jr. subordinated deb.
 (TPS)                     15,302        15,454        10,213    49.8%
Accrued interest and
 other liabilities          8,422         6,441         8,545    -1.4%
                        ----------    ----------      --------
Total liabilities       1,047,390       992,705       830,781    26.1%

Stockholders' equity
   Common stock &
    paid in capital        37,677        37,422        12,155   210.0%
   Retained earnings       61,464        59,975        54,104    13.6%
   Accumulated other
    comprehensive
    income (loss)          (2,345)       (1,147)          313  -849.2%
                        ----------    ----------      --------
Total stockholders'
 equity                    96,796        96,250        66,572    45.4%

Toal liabilities and
 equity                $1,144,186    $1,088,955      $897,353    27.5%
                        ==========    ==========      ========



ADDITIONAL INFORMATION          March 31,   December 31,   March 31,
                                  2005          2004          2004
                             -----------------------------------------
(Dollars in thousands except   (Unaudited)   (Unaudited)   (Unaudited)
 per share amounts)

Book value per common share    $    10.12    $    10.07    $     8.05
Common stock outstanding        9,566,844     9,559,822     8,266,432
Capital/asset ratio (Tier 1,
 inc. Jr. subordinated deb.)         7.68%         8.04%         8.56%
Average assets                 $1,117,880    $1,083,470    $  883,796
Average earning assets          1,052,860     1,020,513       858,792
Average equity                     96,148        94,806        65,217
Average tangible equity            69,913        68,896        65,217
Cash dividend per share        $     0.08    $     0.08    $     0.07

Total equity                   $   96,796    $   96,250    $   66,572
Less: goodwill and
 intangibles                       26,217        26,252             -
                                ----------    ----------    ----------
Tangible equity                $   70,579    $   69,998    $   66,572
                                ==========    ==========    ==========

Tangible book value per
 share                         $     7.38    $     7.32    $     8.05
Tangible cap/asset ratio (ex.
 Jr. subordinate deb.)               6.31%         6.59%         7.42%

                                 March 31,   December 31,   March 31,
                                   2005          2004          2004
                             -----------------------------------------
                               (Unaudited)   (Unaudited)   (Unaudited)
ASSET QUALITY
Nonperforming loans            $      767    $      532    $    1,521
Nonperforming loans/total
 loans                               0.09%         0.07%         0.25%
Net loan charge-offs (ytd)     $      127    $      218    $       14
Net loan charge-offs/total
 loans                               0.02%         0.03%         0.00%
Allowance for loan losses      $    9,681    $    9,563    $    7,922
Allowance for loan
 losses/NPLs                         1262%         1798%          521%
Allowance for loan
 losses/total loans                  1.15%         1.19%         1.31%
Real estate owned              $      256    $      868    $    1,000
Non-performing asset/total
 assets                              0.09%         0.13%         0.28%