Cascade Financial First Quarter Profits Increase 12%; Commercial Expansion Brings 40% Growth in Business Loans, 24% Rise in Demand Deposits.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)--April 20, 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 first quarter of 2004, which were fueled by the expansion of its commercial banking enterprise. Business loans increased 40%, commercial real estate loans grew 28% and demand deposits increased 24% from year ago levels. Net income rose 12% to $2.6 million, or $0.30 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 $2.3 million, or $0.28 per diluted share for the same quarter last year. All per share results reflect the 5-for-4 stock split paid December December: see month. 19, 2003. "The highlight for the quarter, in addition to another record for earnings, was our agreement to acquire Issaquah Bancshares," 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. . "Acquiring Issaquah Bancshares enhances our commercial banking franchise and establishes us as the #1 independent bank in the Issaquah market, one of the fastest growing communities in the greater Seattle Seattle (sēăt`əl), city (1990 pop. 516,259), seat of King co., W Wash., built on seven hills, between Elliott Bay of Puget Sound and Lake Washington; inc. 1869. area. Issaquah Bank brings a substantial commercial loan portfolio, which has been assembled as·sem·ble v. as·sem·bled, as·sem·bling, as·sem·bles v.tr. 1. To bring or call together into a group or whole: assembled the jury. 2. by a skilled team of commercial lenders Whilst nearly all lenders offer loans on a commercial basis the term commercial lender has differed meanings around the world.
On February February: see month. 11, Cascade announced the signing of a definitive agreement to acquire closely-held adj. 1. owned by a relatively few shareholders; - of business organizations; as, a closely-held corporation s>. Adj. 1. closely-held - owned by a relatively few shareholders; "a closely-held corporation" Issaquah Bancshares Inc., a $128 million asset institution and parent of Issaquah Bank, in a stock and cash transaction valued at approximately $32 million. In addition to increasing Cascade's assets to over $1.0 billion, it will add two banking offices in the fast-growing adj. 1. tending to spread quickly; - used mostly of plants. Adj. 1. fast-growing - tending to spread quickly; "an aggressive tumor" strong-growing, aggressive Eastside Adj. 1. eastside - of the eastern part of a city e.g. Manhattan; "the eastside silk-stocking district" east - situated in or facing or moving toward the east market of King County. First Quarter 2004 Financial Highlights (quarter ended 3/31/04 compared to 3/31/03) -- Net income increased 12% to $2.6 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. grew 9% to $0.30 per diluted share. -- The bank's efficiency ratio improved to 52.83% from 55.05%. -- Revenue from checking account fees grew 55%. -- Book value per share increased 16% to $8.05. -- Deposits grew 9% to $584 million, while demand deposits increased 24%. -- Business loans accounted for 35% of the total loan portfolio compared to 27%. -- Allowance for loan losses grew to 1.36% of average total loans from 1.29%. -- Asset quality remained strong with nonperforming loans just 0.26% of average total loans. March 31 Quarterly Operating Results First quarter revenues (net interest income before provision for loan losses plus noninterest income) increased to $8.5 million compared to $8.3 million in the first quarter of 2003. Net interest income grew 9% to $7.3 million from $6.7 million in the first quarter a year ago, with a 12% decline in interest expense more than offsetting a 1% drop in interest income. Net interest margin was 3.40% in the first quarter of 2004 compared to 3.38% for the same quarter a year ago. The provision for loan losses decreased to $225,000 from $375,000 in the March quarter a year ago due to the continuing strong credit performance of the loan portfolio. Net interest income after loan loss provision increased 11% to $7.1 million in the first quarter compared to $6.4 million a year ago. With significantly lower levels of gains from loan and securities sales, noninterest income declined 29% to $1.2 million from $1.6 million. Gains from sale of loans and securities totaled $331,000 in the first quarter compared to $970,000 in the first quarter of 2003. Service fees on checking accounts, however, increased 55% to $440,000 from $284,000 a year ago, as new services were introduced and the number of accounts grew. First quarter operating (noninterest) expenses dropped 3% to $4.5 million from $4.6 million in the first quarter of 2003, with a sharp drop in debt 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 more than offsetting higher compensation and overhead costs overhead costs see fixed costs. . "Last year, we took advantage of the sharp drop in interest rates to prepay pre·pay tr.v. pre·paid, pre·pay·ing, pre·pays To pay or pay for beforehand. pre·pay  ment n. some of our higher coupon Federal Home Loan
Bank (FHLB FHLB Federal Home Loan Bank ) advances, incurring in·cur tr.v. in·curred, in·cur·ring, in·curs 1. To acquire or come into (something usually undesirable); sustain: incurred substantial losses during the stock market crash. 2. $442,000 in debt prepayment fees. In the first quarter of 2004 prepayment fees were only $26,000," said Lars Johnson, CFO See Chief Financial Officer. . Salaries and employee benefits increased 6% and other overhead expenses increased 9%, reflecting additions to the lending staff. Cascade's first quarter efficiency ratio improved to 52.83% compared to 55.05% in the first quarter a year ago, primarily due to lower FHLB prepayment fees this quarter. Cascade's first quarter return on equity was 15.79% compared to 16.16% in the first quarter a year ago and its return on average assets improved to 1.16% from 1.13% a year ago. Credit Quality "The loan portfolio continues to show solid credit quality, with nonperforming loans to average total loans remaining at a very modest 26 basis points and 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 at 28 basis points," Johnson noted. With only $14,000 in net charge-offs in the quarter, the allowance for loan losses increased to $7.9 million, or 1.36% of average total loans and 521% of nonperforming loans at the end of the quarter. At March 31, 2003, the allowance for loan losses totaled $7.3 million, or 1.29% of average total loans and 551% of nonperforming loans. Balance Sheet Management Total assets increased 8% to $897 million at March 31, 2004, compared to $832 million a year ago. Investment securities increased 9% to $257 million from $236 million a year ago. The growth in the investment portfolio, which consists of Government Agency bonds and mortgage-backed securities Mortgage-backed securities (MSBs) Securities backed by a pool of mortgage loans. , continued to offset reductions in the residential loan portfolio. At March 31, 2004, commercial lending, including commercial real estate, business lending and real estate construction, grew 22% to $375 million or 62% of total loans, compared to $309 million or 54% of the total loan portfolio a year ago. Residential and other consumer loans dropped 16% and accounted for 23% of the total portfolio compared to 29% as of March 31,2003. Liabilities and Capital Management Cascade's deposits at the end of the first quarter increased 9% from a year ago to $584 million, with checking deposits, money market and savings accounts Savings Account A deposit account intended for funds that are expected to stay in for the short term. A savings account offers lower returns than the market rates. Notes: increasing 24%. "This year, we introduced a strong relationship pricing structure designed to reward our top-tier customers with attractive rates on their liquid savings dollars. The popularity of this program is helping our branch network continue to build low-cost deposits," said Nelson. Stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. was $67 million, or $8.05 per share, at March 31, 2004, up 14% from $58 million, or $6.96 per share, at March 31, 2003. Capital ratios continue to be above the well-capitalized guidelines guidelines, n.pl a set of standards, criteria, or specifications to be used or followed in the performance of certain tasks. established by regulatory agencies regulatory agency Independent government commission charged by the legislature with setting and enforcing standards for specific industries in the private sector. The concept was invented by the U.S. . The corporation's Tier 1 capital/asset ratio, which includes junior subordinated debentures subordinated debenture An unsecured bond with a claim to assets that is subordinate to all existing and future debt. Thus, in the event that the issuer encounters financial difficulties and must be liquidated, all other claims must be satisfied before , at quarter-end was 8.75% compared to 8.25% a year ago. Issaquah Bancshares Acquisition Update "We remain on track to complete the acquisition of Issaquah Bancshares and close the transaction at the end of June, pending regulatory approval and approval of the shareholders of Issaquah Bancshares," said Nelson. "We expect to take a one-time merger charge of approximately $925,000, which is slightly higher than originally estimated due to higher legal and accounting fees than initially projected. This merger charge will affect our second quarter reported net income. We estimate that annual costs savings and revenue enhancements revenue enhancement An increase in revenues, especially by way of increased taxes. Revenue enhancement includes reducing taxpayer deductions and eliminating tax credits. will be approximately $960,000 in 2005." Issaquah Bancshares has scheduled a special meeting for its shareholders to vote on the transaction on May 24, 2004. Conference Call and Annual Meeting The company will host a conference call on April 21, 2004, at 10:00 a.m. PDT PDT abbr. Pacific Daylight Time PDT Pacific Daylight Time PDT n abbr (US) (= Pacific Daylight Time) → hora de verano del Pacífico PDT , (1:00 p.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT ). Interested investors may listen to the call live at www.cascadebank.com, or www.fulldisclosure.com. Institutional investors Institutional Investor A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions. can access the call via CCBN's password-protected event management site, StreetEvents (www.streetevents.com), or by dialing 617-847-8708 and requesting the Cascade Financial conference call. Replay of the call will be available through Wednesday, April 28, 2004, at 617-801-6888, passcode 88461496. The call will also be archived on the web at www.cascadebank.com. Cascade Financial Corporation will hold its Annual Shareholders' Meeting shareholders' meeting n. a meeting, usually annual, of all shareholders of a corporation (although in large corporations only a small percentage attend) to elect the Board of Directors and hear reports on the company's business situation. on Tuesday, May 4, at 6:30 p.m. at the Everett Golf & Country Club. All current shareholders and interested investors are invited to attend and meet members of the Cascade Bank team and learn more about the company. 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, Marysville, Mukilteo, Smokey Point, Issaquah, Clearview, Woodinville, Lake Stevens and Bellevue. Cascade's newest branch is scheduled to open in Snohomish in June 2004. In June 2003, Washington CEO magazine ranked Cascade Bank the number one medium sized "Best Companies to Work For" in Washington State. This document contains 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. 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, 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, the
consummation CONSUMMATION. The completion of a thing; as the consummation of marriage; (q.v.) the consummation of a contract, and the like.2. A contract is said to be consummated, when everything to be done in relation to it, has been accomplished. of the pending merger with Issaquah Bancshares and the company's ability to successfully integrate the acquired bank into its operations, loan delinquency delinquency Criminal 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, the bank's ability to continue to attract quality commercial business, interest rate movements, 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, 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 Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the fiscal year ended December 31, 2003.
CONSOLIDATED FINANCIAL HIGHLIGHTS
INCOME STATEMENT
(Dollars in thousands except per share amounts)
(Unaudited)
Three Months Ended
March 31, Dec. 31, March 31, Annual
2004 2003 2003 Change
----------- ------------------------------
Interest income $ 12,609 $ 12,577 $ 12,748 -1.1%
Interest expense 5,307 5,254 6,018 -11.8%
---------- ---------- ----------
Net interest income 7,302 7,323 6,730 8.5%
Provision for loan losses 225 300 375 -40.0%
---------- ---------- ----------
Net interest income
after provision for
losses 7,077 7,023 6,355 11.4%
Noninterest income
Gain on sale of loans 62 107 205 -69.8%
Gain on sale of
securities 269 46 765 -64.8%
Checking service fees 440 439 284 54.9%
Other service fees 142 117 141 0.7%
Gain on sale of real
estate 76 - 41 85.4%
Bank owned life
insurance 134 149 148 -9.5%
Other 30 29 31 -3.2%
---------- ---------- ----------
Total noninterest income 1,153 887 1,615 -28.6%
Noninterest expense
Salary and employee
benefits 2,632 2,471 2,485 5.9%
Other noninterest
expenses 1,809 1,938 1,667 8.5%
Debt prepayment fees 26 - 442 -94.1%
---------- ---------- ----------
Total noninterest expense 4,467 4,409 4,594 -2.8%
Income before Federal
income taxes 3,763 3,501 3,376 11.5%
Federal income taxes 1,189 999 1,072 10.9%
---------- ---------- ----------
Net earnings $ 2,574 $ 2,502 $ 2,304 11.7%
========== ========== ==========
EARNINGS PER SHARE
INFORMATION
Earnings per share, basic $ 0.31 $ 0.30 $ 0.28 10.0%
Earnings per share, diluted 0.30 0.29 0.28 8.6%
Dividends per share 0.07 0.07 0.04 75.0%
Weighted average number of
shares outstanding:
Basic 8,250,880 8,236,650 8,124,579
Diluted 8,619,193 8,561,834 8,377,116
BALANCE SHEET
(Dollars in thousands except per share amounts)
(Unaudited)
March 31, Dec. 31, March 31, Annual
2004 2003 2003 Change
----------------------------------------
Cash and due from banks $ 8,076 $ 13,011 $ 10,154 -20.5%
Interest bearing deposits 9,008 1,060 969 829.6%
Securities held to maturity 87,267 86,719 31,554 176.6%
Securities available for sale 169,393 189,747 204,373 -17.1%
-------- --------- --------
Total securities 256,660 276,466 235,927 8.8%
Loans
Business 214,816 204,446 153,615 39.8%
R/E construction 75,070 62,742 88,402 -15.1%
Commercial real estate 85,534 83,856 67,028 27.6%
Multifamily 92,380 87,212 94,341 -2.1%
Home equity and consumer 31,250 33,163 44,416 -29.6%
Residential 106,355 105,565 119,701 -11.1%
-------- --------- --------
Total loans 605,405 576,984 567,503 6.7%
Deferred loan fees (2,123) (2,179) (2,257) -5.9%
Allowance for loan losses (7,922) (7,711) (7,261) 9.1%
-------- --------- --------
Loans, net 595,360 567,094 557,985 6.7%
Premises and equipment, net 8,649 8,587 9,014 -4.0%
BOLI 11,277 11,162 10,754 4.9%
Other assets 8,323 7,840 6,827 21.9%
-------- --------- --------
Total assets $897,353 $885,220 $831,630 7.9%
======== ========= ========
Deposits
Checking accounts $ 66,953 $ 62,927 $ 54,092 23.8%
Money market and savings
accounts 146,167 132,986 118,174 23.7%
Certificates of deposit 370,869 368,401 363,340 2.1%
-------- --------- --------
Total deposits 583,989 564,314 535,606 9.0%
FHLB advances 190,000 200,000 192,000 -1.0%
Securities sold under
agreement to repurchase 38,034 39,911 25,906 46.8%
Junior subordinated
debentures payable 10,213 10,212 10,000 2.1%
Accrued expenses and other
liabilities 8,545 6,826 9,823 -13.0%
-------- --------- --------
Total liabilities 830,781 821,263 773,335 7.4%
Stockholders' equity
Common stock & paid-in
capital 12,155 12,003 11,550 5.2%
Retained earnings 54,104 52,109 46,261 17.0%
Acc. other comprehensive
gain (loss) 313 (155) 484 -35.3%
-------- --------- --------
Total stockholders' equity 66,572 63,957 58,295 14.2%
-------- --------- --------
Total liabilities and equity $897,353 $ 885,220 $831,630 7.9%
======== ========= ========
FINANCIAL HIGHLIGHTS
(Dollars in thousands except per share amounts)
(Unaudited)
Three Months Ended
March 31, Dec. 31, March 31, Annual
2004 2003 2003 Change
----------- ----------- ------------------
PERFORMANCE MEASURES
Return on average equity 15.79% 15.77% 16.16%
Return on average assets 1.16% 1.14% 1.13%
Efficiency ratio 52.83% 53.70% 55.05%
Net interest margin 3.40% 3.45% 3.38%
ADDITIONAL INFORMATION
Book value per common share $ 8.05 $ 7.76 $ 6.96 15.7%
Capital/Asset Ratio
(including Jr. Sub. Deb.) 8.75% 8.49% 8.25% 6.1%
Average assets 883,796 876,262 824,425 7.2%
Average earning assets 858,792 850,520 798,937 7.5%
Average equity 65,217 63,627 57,756 12.9%
Shares outstanding at period
end 8,266,432 8,241,288 8,373,551 -1.3%
Mar. 31, Dec. 31, Mar. 31,
2004 2003 2003
----------- ----------- -----------
ASSET QUALITY
Nonperforming loans $ 1,521 $ 1,921 $ 1,317 15.5%
Nonperforming loans/average
total loans 0.26% 0.34% 0.23%
Net loan charge-offs
(recoveries) $ 14 $ 231 $ (14)
Net loan charge-offs/total
loans 0.00% 0.04% 0.00%
Allowance for loan losses $ 7,922 $ 7,711 $ 7,261 9.1%
Allowance for loan
losses/NPLs 521% 401% 551%
Allowance for loan
losses/average total loans 1.36% 1.36% 1.29%
Real estate owned $ 1,000 $ 474 $ 231
Nonperforming asset/total
assets 0.28% 0.27% 0.19%
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