Cascade Financial Achieves 19% Increase in 2003 Profits; Growth in Commercial Banking Business Contributes to Record Year Performance.Business Editors EVERETT Everett. 1 City (1990 pop. 35,701), Middlesex co., E Mass., an industrial suburb of Boston, on the Mystic River; settled c.1643, set off from Malden 1870, inc. as a city 1892. , Wash.--(BUSINESS WIRE)--Jan. 27, 2004 Cascade A connected series of devices or images. It often implies that the second and subsequent device takes over after the previous one is used up. For example, cascading tapes in a dual-tape backup system means the second tape is written after the first one is full. Financial Corporation (Nasdaq:CASB CASB Cost Accounting Standards Board CASB Colorado Association of School Boards CASB Canadian Aviation Safety Board CASB Catalogs and Surveys Branch CASB Chinese Association at Stony Brook CASB Council for the Advancement of Small Business ), parent company of Cascade Bank, today reported record profits for the fourth quarter and year ended December December: see month. 31, 2003, with improving margin and 10% asset growth contributing to a 19% increase in net income. In 2003, net income increased to $9.6 million, or $1.13 per diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. share, compared to $8.1 million or $0.98 per diluted share in 2002. In the fourth quarter of 2003, net income grew 16% to $2.5 million, or $0.29 per diluted share, compared to $2.2 million, or $0.26 per share in the fourth quarter of 2002. Per share results have been adjusted to reflect the 5-for-4 stock split on December 19, 2003. "We achieved our financial targets for the year by delivering excellent service to an expanding customer base, improving profitability and maintaining solid asset quality," said Carol K. Nelson, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . "The structural and cultural changes we've we've Contraction of we have. we've have implemented over the past three years, including converting to a commercial bank, establishing new performance incentives and new customer service offerings are fostering a cycle of success throughout the bank." Conference Call The company will host a conference call on January January: see month. 28, 2004, at 10:00 a.m. PT (1:00 p.m. ET) to discuss 2003 financial results. Investment professionals may dial in at 303-262-2130 and other interested parties may listen at www.cascadebank.com. 2003 Financial Review and Operating Highlights -- Revenues increased 9.5% to $32.9 million -- Net income increased 19% to $9.6 million -- EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. increased 16.1% to $1.13 -- Return on average equity rose to 15.81% from 15.49% in 2002 -- Return on average assets grew to 1.13% from 1.05% in 2002 -- The efficiency ratio improved to 53.87% from 54.29% a year ago -- Business loans grew 43.7% to $204 million and account for 35% of the portfolio -- Asset quality remained strong with nonperforming loans at 0.33% of total loans -- Allowance for loan losses grew to 1.34% of total loans "Our financial performance continues to improve steadily, reflecting the higher yielding business loans in our portfolio and the productivity improvements generated from past initiatives. Earnings for the year were also aided by gains on sale of loans and securities in the first three quarters of the year. In the fourth quarter, growth in net interest income and service fees more than offset the decline in gain on sale of assets," said Lars Johnson, Chief Financial Officer. "We remain committed to delivering shareholder value as outlined in our financial targets below."
Annual Financial 2002 2003 2006
Performance and Targets Actual Actual Target
------ ------ ---------
greater
than
Return on Average Assets 1.05% 1.13% 1.10%
Return on Average Equity 15.49% 15.81% 16%-18%
Annual Growth in EPS 40.23% 16.10% 10%-15%
less than
NPL/Loans 0.17% 0.33% 1.00%
less than
Efficiency Ratio 54.29% 53.87% 55%
2003 Operating Results Total revenues (net interest income before provision for loan losses plus noninterest income) grew 9.5% to $32.9 million in 2003. Net interest income before provision increased 6.1% to $27.6 million in 2003 compared to $26.0 million a year ago. Other (noninterest) income grew 31% in 2003 to $5.3 million compared to $4.0 million in 2002. Service revenues from checking and other fee-based sources grew 18% in the year, contributing 36% of noninterest income for the year. This revenue source reflects the expanding base of customer accounts, with net new checking accounts growing by 15%. Noninterest income also benefited from the shift of assets into bank-owned life insurance (BOLI BOLI Bank-Owned Life Insurance BOLI Bureau of Labor and Industries ) and gains on sale of loans and securities. "The low interest rate environment that facilitated gains on the sale of loans and securities also put pressure on our interest rate spreads throughout most of the year. Nonetheless, we saw an improvement in net interest margin (NIM nim 1 tr. & intr.v. nimmed, nim·ming, nims Archaic To steal; pilfer. [Middle English nimen, to take, from Old English niman; see ) at the end of the year," Johnson noted. Fourth quarter NIM improved to 3.45% from 3.25% in the third quarter and 3.41% in the fourth quarter a year ago. For the full year, NIM was 3.35% compared to 3.44% in 2002. "Excluding the effect of the shift of $10 million in assets into BOLI, our net interest margin was level for the year. In addition, there were no prepayments Prepayments Payments made in excess of scheduled mortgage principal repayments. on Federal Home Loan Bank (FHLB FHLB Federal Home Loan Bank ) borrowings during the quarter, although those made in prior quarters also helped contribute to the improvement in fourth quarter net interest margin." Continuing solid performance of the loan portfolio facilitated a lower provision for loan losses of $1.3 million in 2003, compared to $1.9 million in 2002. "We maintain the allowance for loan losses at a level sufficient to provide for losses based on management's evaluation of known and inherent risks in the portfolio and its past performance," Johnson said. The provision for loan losses increased the total allowance for loan losses to $7.7 million, or 401% of nonperforming loans and 1.34% of total loans at December 31, 2003. Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. including Federal Home Loan Bank advance prepayment Prepayment 1. The payment of a debt obligation prior to its due date. 2. The excess payment over a scheduled debt repayment amount. Notes: 1. Examples include deferred expenses such as rent and early loan repayments. 2. fees in 2003 increased 9% to $17.7 million compared to $16.3 million in 2002, with compensation expenses up 9% reflecting the increase in commercial lending staff. Cascade's efficiency ratio (operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. divided by total revenues) improved 42 basis points to 53.87% in 2003 compared to 54.29% a year ago. Return on average equity in 2003 improved to 15.81% from 15.49% in 2002. Return on average assets rose to 1.13% in 2003 compared to 1.05% in the previous year. 4Q03 Results Net income in 4Q03 grew 16% to $2.5 million, or $0.29 per diluted share, compared to $2.2 million, or $0.26 per diluted share in the fourth quarter a year ago. Fourth quarter 2003 revenues increased 6% to $8.2 million from $7.7 million in 4Q02. Fourth quarter 2003 net interest income before provision grew 9% to $7.3 million from $6.7 million in 4Q02. Other income declined 14% to $887,000 with lower gains on sale of securities and loans partially offset by a 43% increase in checking and other service fees over the fourth quarter a year ago. The provision for income tax declined slightly in the quarter to 29% of pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta income from 32% in prior quarters. The adjustment was related to the permanent tax difference associated with tax-exempt tax-ex·empt adj. 1. Not subject to taxation, as the capital or income of a philanthropic organization. 2. Producing interest that is exempt from income tax: tax-exempt bonds. n. BOLI income, and brought the full year tax rate down to 31%. Asset Management Total assets increased 10% to $885 million at December 31, 2003, compared to $804 million a year earlier. Total loans grew 4% to $577 million with ongoing strength in the business and commercial real estate sector. Investment securities increased to $276 million from $209 million a year ago. "Business and commercial real estate lending generated double digit Noun 1. double digit - a two-digit integer; from 10 to 99 integer, whole number - any of the natural numbers (positive or negative) or zero; "an integer is a number that is not a fraction" growth in 2003, and these segments of our portfolio continue to grow in importance on our balance sheet," said Nelson. The business loan portfolio increased by 44% to $204 million, accounting for 35% of total loans. The commercial real estate loan portfolio grew 33% to $84 million, accounting for 15% of the portfolio, compared to year-ago levels. Real estate construction loans dropped to $63 million, or 11% of total loans, as developers quickly sold their housing inventory into a robust market. Despite strong originations, residential loans dropped 14% to $106 million, as the bank continued to sell virtually all its 15 and 30 year fixed rate loans into the secondary market. Multifamily loans Multifamily loans Loans usually represented by conventional mortgages on multi-family rental apartments. declined 8% to $87 million at year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. as the refinance Refinance 1. When a business or person revises their payment schedule for repaying debt. 2. Replacing an older loan with a new loan offering better terms. Notes: When a business refinances they typically extend the maturity date. wave crested The highest part of a wave. See also crest; wave. in 2003. Deposit growth continued to be very strong in 2003 with total deposits increasing 11% to $564 million from $510 million at the end of 2002. Checking account balances increased 15% to $63 million, savings and money market account balances grew 17% to $133 million and time deposit balances rose 8% to $368 million. "The growth in checking accounts reflects the increase in small business relationships we are building," Nelson added. Credit Quality Credit quality remained strong, although nonperforming loans ticked up to $1.9 million, or 0.33% of total loans as of December 31, 2003, compared to $956,000, or 0.17% of total loans a year ago. "We had three residential properties move to nonperforming status this quarter and all of these properties are well-secured," said Johnson. The ratio of nonperforming assets Nonperforming asset An asset that is not effectively producing income, such as an overdue loan. nonperforming asset An asset that produces no income. to total assets was 0.27% at the end 2003 compared to 0.18% one year ago. Net charge-offs in 2003 were modest at $436,000, or 0.08% of total loans, compared to $1.3 million, or 0.24% of total loans in 2002. About Cascade Financial Established in 1916, Cascade Bank, the only operating subsidiary An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity and rolling stock. of Cascade Financial Corporation, is a state chartered commercial bank headquartered in Snohomish County, Washington Snohomish County is a county located in the U.S. state of Washington. It is named after the Snohomish tribe. Since 2000, the county's population has grown from 606,024 to 686,300 residents (2007 figures), making it one of the fastest-growing in the state, ranking third in overall . Cascade Bank operates 15 full service offices, located in Everett, Lynnwood Lynnwood, city (1990 pop. 28,695), Snohomish co., W central Wash., a residential and industrial suburb of Seattle; inc. 1959. Aerospace parts, communications and electrical equipment, electronic components, precious metal jewelry, and scales and balances are among , Marysville Marysville is the name of several places. Locations Australia
John Stevens, 1749–1838, b. New York City, was graduated from King's College (now Columbia Univ.) in 1768. and Bellevue Bellevue (bĕl`vy  ).1 City (1990 pop. 30,982), Sarpy co., E Nebr., a suburb of Omaha, on the Missouri River; inc. 1855. . Cascades' newest branch is scheduled to open in Snohomish Snohomish can refer to:
Washington, town (1991 pop. 48,856), Sunderland metropolitan district, NE England. Washington was designated one of the new towns in 1964 to alleviate overpopulation in the Tyneside-Wearside area. CEO magazine ranked Cascade Bank the number one medium sized "Best Companies to Work For" in Washington State. This release contains certain forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. within the meaning of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 (PSLRA PSLRA Private Securities Litigation Reform Act PSLRA Public Service Labour Relations Act (Canada) ), including statements about the financial condition, results of operations, future financial targets and earnings outlook of the Company. The forward-looking statements 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, impact of the current national and regional economic recession on small business loan demand in the Puget Sound Puget Sound (py `jĕt), arm of the Pacific Ocean, NW Wash., connected with the Pacific by Juan de Fuca Strait, entered through the Admiralty Inlet and extending in two arms c. area, loan delinquency delinquencyCriminal behaviour carried out by a juvenile. Young males make up the bulk of the delinquent population (about 80% in the U.S.) in all countries in which the behaviour is reported. rates, changes in portfolio composition, the bank's ability to attract quality commercial business, interest rate movements and the impact on margins such movement may cause, changes in the demographic make-up Make-up The amount of deficiency when a cash flow or capital item is deficient. For example, an interest make-up relates to the interest amount above a ceiling percentage. of the Company's market, fluctuation Fluctuation A price or interest rate change. in demand for the Company's products and services, the Company's ability to attract and retain qualified people, regulatory changes, competition with other banks and financial institutions, and other factors. For a discussion of factors that could cause actual results to differ, please see the Company's reports on Forms 10-K and 10-Q as filed with the Securities and Exchange Commission. Words such as "targets," "expects," "anticipates," "believes," other similar expressions or future or conditional verbs such as "will," "may," "should," "would," and "could" are intended to identify such forward-looking statements. Readers should not place undue reliance on the forward-looking statements, which reflect management's view only as of the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" . The Company undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances CIRCUMSTANCES, evidence. The particulars which accompany a fact. 2. The facts proved are either possible or impossible, ordinary and probable, or extraordinary and improbable, recent or ancient; they may have happened near us, or afar off; they are public or . This statement is included for the express purpose of protecting the Company under PSLRA's safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions.
CONSOLIDATED FINANCIAL HIGHLIGHTS
INCOME STATEMENT
(Dollars in thousands except per share amounts)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2003 2002 2003 2002
--------- ---------- ---------- ----------
Net interest
income $7,323 $6,699 9.3% $27,610 $26,024 6.1%
Provision for
loan losses 300 400 -25.0% 1,275 1,895 -32.7%
--------- ---------- ---------- ----------
Net interest
income after
provision 7,023 6,299 11.5% 26,335 24,129 9.1%
Other income
Gain on sale
of loans 107 310 -65.5% 855 697 22.7%
Gain on sale
of securities 46 157 -70.7% 1,790 1,076 66.4%
Checking
service fees 439 259 69.5% 1,415 1,007 40.5%
Other service
fees 117 130 -10.0% 480 602 -20.3%
BOLI 149 64 132.8% 598 86 595.3%
Gain/(loss)
on sale of
real estate - 76 NM 48 427 -88.8%
Other noninterest
income 29 32 -9.4% 120 144 -16.7%
--------- ---------- ---------- ----------
Total other
income 887 1,028 -13.7% 5,306 4,039 31.4%
Total income 7,910 7,327 8.0% 31,641 28,168 12.3%
Compensation
expense 2,471 2,173 13.7% 9,617 8,793 9.4%
Other operating
expenses 1,938 1,862 4.1% 7,253 6,880 5.4%
FHLB advance
prepayment fees - 79 NM 863 648 33.2%
--------- ---------- ---------- ----------
Total other
expense 4,409 4,114 7.2% 17,733 16,321 8.7%
--------- ---------- ---------- ----------
Net income
before tax 3,501 3,213 9.0% 13,908 11,847 17.4%
Income tax
expense 999 1,058 -5.6% 4,309 3,775 14.1%
--------- ---------- ---------- ----------
Net income $2,502 $2,155 16.1% $9,599 $8,072 18.9%
========= ========== ========== ==========
EARNINGS PER SHARE
INFORMATION
Earnings per
share, basic $0.30 $0.27 14.1% $1.17 $1.01 16.2%
Earnings per
share, diluted $0.29 $0.26 12.8% $1.13 $0.98 16.1%
Weighted average number
of shares
outstanding:
Basic 8,236,650 8,091,899 8,184,455 7,997,713
Diluted 8,561,834 8,320,779 8,461,503 8,261,448
NM: Not Meaningful
BALANCE SHEET
(Dollars in thousands except share amounts)
(Unaudited)
Annual
Dec. 31, Sep. 30, Dec. 31, Change
2003 2003 2002
--------- --------- --------- ------
Cash and due from banks $13,011 $9,880 $9,640 35.0%
Interest bearing deposits 1,060 9,795 10,955 -90.3%
Securities held to maturity 86,719 88,671 49,388 75.6%
Securities available for sale 189,747 171,123 159,897 18.7%
--------- --------- ---------
Total securities 276,466 259,794 209,285 32.1%
Loans
Business 204,446 198,003 142,273 43.7%
Real estate construction 62,742 71,145 84,229 -25.5%
Commercial real estate 83,856 78,733 63,108 32.9%
Multifamily 87,212 84,873 94,245 -7.5%
Home equity/consumer 33,163 34,168 49,331 -32.8%
Residential 105,565 106,580 122,561 -13.9%
--------- --------- ---------
Total loans 576,984 573,502 555,747 3.8%
Deferred loan fees (2,179) (2,210) (2,198) -0.9%
Loan loss reserve (7,711) (7,642) (6,872) 12.2%
--------- --------- ---------
Loans, net 567,094 563,650 546,677 3.7%
Premises and equipment, net 8,586 8,543 9,261 -7.3%
Bank owned life insurance 11,162 11,029 10,619 5.1%
Other assets 7,841 7,153 8,026 -2.3%
--------- --------- ---------
Total assets $885,220 $869,844 $804,463 10.0%
========= ========= =========
Deposits
Checking accounts 62,927 61,163 54,570 15.3%
Money market and savings
accounts 132,986 137,355 113,951 16.7%
Certificates of deposit 368,401 356,135 341,329 7.9%
--------- --------- ---------
Total deposits 564,314 554,653 509,850 10.7%
FHLB advances 200,000 192,000 197,500 1.3%
Securities sold under repurchase
agreement 39,911 40,588 20,569 94.0%
Trust preferred securities 10,212 10,310 10,310 -1.0%
Other liabilities 6,826 9,840 9,594 -28.9%
--------- --------- ---------
Total liabilities 821,263 807,391 747,823 9.8%
Stockholders' equity
Common stock & paid in capital 12,003 11,840 11,349 5.8%
Retained earnings 52,109 50,189 44,290 17.7%
Accumulated comprehensive
gain/loss (155) 424 1,001 NM
--------- --------- ---------
Total stockholders' equity 63,957 62,453 56,640 12.9%
--------- --------- ---------
Total liabilities and
stockholders' equity $885,220 $869,844 $804,463 10.0%
========= ========= =========
NM=Not Meaningful
FINANCIAL HIGHLIGHTS
(Dollars in thousands except per share amounts)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
2003 2002 2003 2002
--------------------- ---------------------
PERFORMANCE MEASURES
Return on average
equity 15.77% 15.47% 15.81% 15.49%
Return on average
assets 1.14% 1.07% 1.13% 1.05%
Efficiency ratio 53.70% 53.24% 53.87% 54.29%
Net interest margin 3.45% 3.41% 3.35% 3.44%
ADDITIONAL INFORMATION
Book value per common
share $7.76 $6.99 $7.76 $6.99
Capital/Asset Ratio
(including TPS) 8.38% 8.32% 8.38% 8.32%
Average assets $876,262 $803,382 $849,778 $771,855
Average earning
assets $850,520 $783,950 $824,422 $755,435
Average equity $63,627 $55,313 $60,766 $52,103
Shares outstanding at
period end 8,241,288 8,105,150 8,241,288 8,105,150
Dec. 31, Sep. 30, Dec. 31,
2003 2003 2002
-------- -------- --------
ASSET QUALITY
Nonperforming loans $1,921 $1,209 $956
Nonperforming
loans/total loans 0.33% 0.21% 0.17%
Net loan charge-offs
(ytd) $436 $234 $1,327
Net loan charge-
offs/total loans 0.08% 0.04% 0.24%
Allowance for loan
losses $7,711 $7,642 $6,872
Allowance for loan
losses/NPLs 401% 632% 719%
Allowance for loan
losses/total loans 1.34% 1.33% 1.24%
Real estate owned $474 $356 $461
Nonperforming
asset/total assets 0.27% 0.18% 0.18%
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