Cascade Financial First Quarter Profits Increase 25%; Asset Quality Remains Strong as Business Portfolio Expands.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 22, 2003 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 2003, as business lending expanded 22% and revenues grew 12%. Net income rose 25% to $2.3 million, or $0.34 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 $1.8 million, or $0.28 per diluted share for the same quarter last year. "We launched 2003 with our tenth consecutive quarter of record earnings, fueled by strong commercial business growth and continuing 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. . "We have built a first-class commercial banking team, and our branch and service expansion activities are helping us gain market share and generate strong profits. Our strong first quarter performance puts us well on the way to achieving our stated goal of growing earnings per share by 10% to 15% annually." 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. economy continues to underperform UnderperformAn analyst recommendation that means a stock is expected to do slightly worse than the market return. Also known as market underperform, moderate sell, or weak hold. the nation, impacted by the residual affects of the recession, deployment of approximately 20,000 troops and layoffs in the aerospace and high-tech high-tech also hi-tech adj. Informal Of, relating to, or resembling high technology. high-tech Adjective same as hi-tech Adj. 1. sectors. "We anticipate the local economy will continue to present a challenge through the balance of 2003. While the local business lending climate is growing increasingly competitive, we believe our strong business banking team and enhanced service Enhanced service is service offered over commercial carrier transmission facilities used in interstate communications, that employs computer processing applications that act on the format, content, code, protocol, or similar aspects of the subscriber's transmitted information; delivery is the reason for our continuing success in the local market," Nelson noted. Cascade Financial Corporation will review 2002 results and 2003 initiatives at 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 Tuesday: see week. , May 6, at 6:30 p.m. at the Everett Golf & Country Club. All current shareholders and interested investors are invited to meet members of the Cascade Bank team and learn more about the company. First Quarter 2003 Financial Highlights (quarter ended 3/31/03 compared to 3/31/02) -- Net income increased 25% to $2.3 million, or $0.34 per diluted share. -- Return on average equity increased to 16.2%, compared to 15.3% in 1Q02. -- Return on average assets grew to 1.13% from 0.98% in the first quarter a year ago. -- Deposits grew 22% to $536 million at March 31, 2003. -- Business loans accounted for 27% of the total loan portfolio compared to 22% a year ago. -- Allowance for loan losses grew to 1.28% of total loans from 1.15% a year ago. -- Asset quality remained strong with nonperforming loans just 0.23% of total loans. March 31 Quarterly Operating Results Revenues (net interest income before provision for loan losses plus non-interest income) grew 12% to $8.3 million, compared to $7.4 million in the first quarter of 2002. Net interest income grew 4% to $6.7 million from $6.5 million in the first quarter a year ago. The provision for loan losses decreased to $375,000 from $700,000 in the March quarter a year ago due to the continuing strong performance of the loan portfolio. Net interest income after loan loss provision increased 10% to $6.4 million in the first quarter, compared to $5.8 million a year ago. The current low interest rate environment led to loan refinancing Refinancing An extension and/or increase in amount of existing debt. and modifications, as well as calls on investment securities and accelerated repayments, and resulted in a 78 basis points (bp) drop in the yield on earning assets Earning Assets Any income-earning asset owned by a company. Notes: These assets are generally interest-bearing accounts, bonds, and securities available for sale. See also: Asset, Asset Valuation, Earnings, Net Interest Margin . That drop was partially offset by a 65 bp drop in the bank's cost of funds Cost of Funds The interest rate paid on an outstanding loan. Notes: Money isn't free! Cost of funds is the cost of borrowing money. See also: Interest Rate Cost of funds Interest rate associated with borrowing money. . The lower spread combined with the purchase of $10 million of bank owned life insurance (BOLI BOLI Bank-Owned Life Insurance BOLI Bureau of Labor and Industries ), which replaces interest income with non-interest income, resulted in a small decline in our 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 ). NIM was 3.38% during the quarter compared to 3.46% in the first quarter of 2002. Other (non-interest) income in the first quarter of 2003 increased 66% to $1.6 million from $1.0 million in the first quarter last year, while operating (non-interest) expenses increased 16% to $4.6 million from $4.0 million in the first quarter of 2002. The largest increase in 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. was a net increase in 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 of $337,000. Salaries and employee benefits increased 16%, reflecting the new branch opened last November November: see month. and the new service center launched in January January: see month. . "We continue to invest in our branch network and our service delivery capacity to provide a differentiated service Differentiated Service is a design pattern for business services and software, in which the service varies automatically according to the identity of the consumer and/or the context in which the service is used. level and foster customer loyalty," Nelson noted. "Our customers love our centralized cen·tral·ize v. cen·tral·ized, cen·tral·iz·ing, cen·tral·iz·es v.tr. 1. To draw into or toward a center; consolidate. 2. service center that is intended to ensure every call is answered by an individual and that no one is ever trapped in endless voicemail See voice mail. loops." Cascade's first quarter efficiency ratio was 55.1% compared to 53.5% in the first quarter a year ago. Federal Home Loan Bank (FHLB FHLB Federal Home Loan Bank ) prepayment fees increased expenses during the quarter and also added about five percentage points to the efficiency ratio. Cascade's first quarter return on equity rose to 16.16% from 15.33% in the first quarter a year ago and its return on average assets improved to 1.13% from 0.98% a year ago. Credit Quality "The loan portfolio continues to show solid credit quality, with nonperforming loans to total loans remaining at a very modest 23 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 an even more modest 19 bp," Johnson noted. With $14,000 in net recoveries in the quarter, the allowance for loan losses increased to $7.3 million, or 1.28% of total loans and 551% of nonperforming loans at the end of the quarter. At March 31, 2002, the allowance for loan losses totaled $6.5 million, or 1.15% of total loans and 234% of nonperforming loans. Asset Management Total assets increased 9% to $832 million at March 31, 2003, compared to $764 million a year ago. Investment securities increased to $236 million from $167 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 the end of 2002, we invested $10 million in BOLI, a universal life insurance program that provides tax deferred income and employee benefits," Johnson said. "The insurance products are highly rated, provide very competitive yields for the bank, and offer an attractive benefit for senior managers and key employees." "The resources we've we've Contraction of we have. we've have devoted to building our commercial banking team continue to generate strong growth in total commercial lending," Nelson stated. At March 31, 2003, commercial lending, including commercial real estate, business lending and real estate construction, grew 19% to $309 million or 55% of total loans, compared to $260 million or 46% of the total loan portfolio a year ago. "While residential loan originations The examples and perspective in this article or section may not represent a worldwide view of the subject. Please [ improve this article] or discuss the issue on the talk page. were up over 80%, we chose to sell most of these loans into the secondary market, which contributed to non-interest income. In keeping with our strategy of selling 15 and 30 year (fixed-rate) originations, residential loans declined to $120 million, or 21% of total loans at quarter end, compared to $143 million or 25% of total loans a year ago."
Percent of Portfolio
Types of Loans March 31, Dec. 31, March 31,
2003 2002 2002
----------- ---------- ----------
Business 27.1% 25.6% 22.3%
Real Estate Construction (net) 15.6% 15.1% 12.7%
Commercial Real Estate 11.8% 11.4% 11.0%
----------- ---------- ----------
Total Commercial 54.5% 52.1% 46.0%
Home Equity and Consumer 7.8% 8.9% 9.8%
Residential 21.1% 22.0% 25.3%
Multifamily 16.6% 17.0% 18.9%
----------- ---------- ----------
Total Loans 100.0% 100.0% 100.0%
----------- ---------- ----------
Liabilities and Capital Management Cascade's deposits at the end of the first quarter increased 22% from a year ago to $536 million, as the bank's very effective branch network continued to bring in deposits from new and existing customers. Low-cost deposit growth led to a 12% reduction in FHLB advances, which were $192 million at March 31, 2003 compared to $219 million a year ago. 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 $58 million, or $8.97 per share, at March 31, 2003, up 19% from $49 million, or $7.82 per share, at March 31, 2002. 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 trust preferred securities, at quarter-end was 8.15% compared to 7.79% a year ago. 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's vision is to be the preferred community bank whose employees build relationships to deliver financial solutions with exceptional service. The bank has been locally managed for more than 87 years and has an "Outstanding" Community Reinvestment Act Community Reinvestment Act (CRA) Enacted by Congress in 1977, the CRA encourages banks to help meet the credit needs of their communities for housing and other purposes, particularly in neighborhoods with low or moderate incomes, while maintaining safe and sound operations. rating for serving the credit needs of the local community. 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, Mukilteo, Smokey Point, Issaquah, Clearview, Woodinville, Lake Stevens, and Bellevue. The company will host a conference call on April 23, 2003, 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 ). To access the call, please visit www.cascadebank.com. This document may contain 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 area, 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, 2002.
CASCADE FINANCIAL CORPORATION FINANCIAL HIGHLIGHTS
Three Months Ended
Income Statement March 31, Dec. 31 March 31,
($ in thousands, except per share 2003 2002 2002
amounts) ---------- ---------- -----------
(Unaudited)(Unaudited)(Unaudited)
Total interest income $12,748 $13,051 $13,373
Total interest expense 6,018 6,352 6,919
---------- ---------- -----------
Net interest income before provision
for loan losses 6,730 6,699 6,454
Provision for loan losses 375 400 700
---------- ---------- -----------
Net interest income after provision
for losses 6,355 6,299 5,754
Non-interest income
Gain on sale of loans 205 310 118
Gain on sale of securities 765 157 33
Service fees 425 389 402
Gain on sale of real estate 41 76 376
Bank owned life insurance 148 86 8
Other 31 10 35
---------- ---------- -----------
Total non-interest income 1,615 1,028 972
Non-interest expense
Salary and employee benefits 2,485 2,160 2,141
Occupancy 613 593 602
Data processing 71 69 60
Marketing 111 156 80
Other non-interest expenses 872 1,057 987
Debt prepayment fees 442 79 105
---------- ---------- -----------
Total non-interest expense 4,594 4,114 3,975
Income before Federal income taxes 3,376 3,213 2,751
Federal income taxes 1,072 1,058 903
---------- ---------- -----------
Net earnings $2,304 $2,155 $1,848
========== ========== ===========
Earnings per share, basic $0.35 $0.33 $0.29
Earnings per share, diluted $0.34 $0.32 $0.28
Weighted average basic shares
outstanding 6,499,663 6,473,519 6,296,989
Weighted average diluted shares
outstanding 6,701,693 6,656,623 6,529,829
PERFORMANCE MEASURES
Return on equity 16.16% 15.47% 15.33%
Return on average assets 1.13% 1.07% 0.98%
Efficiency ratio 55.05% 53.24% 53.53%
Net interest margin 3.38% 3.41% 3.46%
Total yield on earning assets 6.44% 6.62% 7.22%
Total cost of funds 3.36% 3.56% 4.01%
Net interest spread 3.08% 3.06% 3.21%
CASCADE FINANCIAL CORPORATION FINANCIAL HIGHLIGHTS
BALANCE SHEET March 31, Dec. 31, March 31,
($ in thousands) 2003 2002 2002
------------------------------------
(Unaudited) (Audited) (Unaudited)
Cash and due from banks $10,154 $9,640 $8,384
Interest bearing deposits 969 10,955 14,990
Investment securities 235,927 208,975 166,719
Total Loans
Business 153,615 142,273 125,970
R/E Construction 88,402 84,229 72,119
Home Equity and Consumer Loans 44,416 49,331 55,667
Commercial Real Estate 67,028 63,108 62,239
Residential 119,701 122,561 142,902
Multifamily 94,341 94,245 106,900
------------ --------- -------------
Total loans 567,503 555,747 565,797
Deferred loan fees (2,257) (2,198) (2,387)
Allowance for loan losses (7,261) (6,872) (6,533)
------------ --------- -------------
Loans, net 557,985 546,677 556,877
Premises and equipment 9,014 9,261 8,378
Bank Owned Life Insurance 10,754 10,619 546
Other assets 6,827 8,026 7,990
------------ --------- -------------
Total assets $831,630 $804,153 $763,884
============ ========= =============
Liabilities
Deposits
Checking accounts $54,092 $54,570 $49,316
Savings & money market accounts 118,174 113,951 117,074
Certificates of deposit 363,340 341,329 274,316
------------ --------- -------------
Total Deposits 535,606 509,850 440,706
FHLB advances 192,000 197,500 218,500
Securities sold under agreement to
repurchase 25,906 20,569 36,635
Accrued expenses and other
liabilities 9,823 9,594 8,940
------------ --------- -------------
Total liabilities 763,335 737,513 704,781
------------ --------- -------------
Trust preferred securities 10,000 10,000 10,000
Stockholders' equity
Common stock & paid-in capital 11,750 11,548 10,872
Retained earnings 47,416 45,438 39,862
Treasury Stock (1,355) (1,347) (1,225)
Accumulated comprehensive gain
(loss) 484 1,001 (406)
------------ --------- -------------
Total stockholders' equity 58,295 56,640 49,103
------------ --------- -------------
Total Liabilities and equity $831,630 $804,153 $763,884
============ ========= =============
CASCADE FINANCIAL CORPORATION FINANCIAL HIGHLIGHTS
At or for the three months
ended
===============================
OTHER FINANCIAL HIGHLIGHTS March 31, Dec. 31, March 31,
($ in thousands, except per share 2003 2002 2002
amounts) ---------- --------- ----------
Book value per common share $8.97 $8.74 $7.82
Capital/asset ratio (Tier 1) 8.15% 8.16% 7.79%
Average assets $824,425 $803,382 $763,385
Average earning assets 798,937 783,950 747,341
Average equity 57,756 55,313 48,688
ASSET QUALITY
Nonperforming loans $1,317 $956 $2,793
Real estate owned 231 461 854
Allowance for loan losses 7,261 6,872 6,532
Net quarterly charge-offs (recoveries) (14) 387 472
Nonperforming loans/total loans 0.23% 0.17% 0.49%
Allowance for loan losses/total loans 1.28% 1.24% 1.15%
Allowance for loan losses/
nonperforming loans 551% 719% 234%
Nonperforming assets/total assets 0.19% 0.18% 0.48%
Net loan charge offs/total loans 0.00% 0.07% 0.08%
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