Cascade Financial Reports Profits for 2002 Rise 44%; Record Net Income Increased to $8.1 Million or $1.22 Per Share.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. 28, 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 2002 profits with strong asset quality, good deposit growth and improving efficiencies. For the year ended December December: see month. 31, 2002, Cascade's net income increased 44% to $8.1 million, or $1.22 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 $5.6 million, or $0.87 per diluted share, in 2001. In its first full year with a commercial bank charter, Cascade's return on equity increased 286 basis points to 15.49% and return on assets Return on assets (ROA) Indicator of profitability. Determined by dividing net income for the past 12 months by total average assets. Result is shown as a percentage. ROA can be decomposed into return on sales (net income/sales) multiplied by asset utilization (sales/assets). increased 28 basis points to 1.05%. "In each of the past two years, we've we've Contraction of we have. we've have increased earnings more than 40% by focusing on customer service and improving operations at every level. The positive impact on our tangible results are mirrored in, and fostered by the cultural changes achieved over this time period," 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. . "Cascade's 86 year heritage of serving the Everett, Snohomish County and East King County communities has not changed, but we've quickened the pace, raised standards and embraced teamwork (product, software, tool) Teamwork - A SASD tool from Sterling Software, formerly CADRE Technologies, which supports the Shlaer/Mellor Object-Oriented method and the Yourdon-DeMarco, Hatley-Pirbhai, Constantine and Buhr notations. to improve service and shareholder returns." 2002 Financial Highlights (year ended 12/31/02 compared to 12/31/01) -- Net income increased 44% to $8.1 million and EPS increased 40% to $1.22. -- Return on average equity increased 286 basis points to 15.49%. -- Return on average assets rose 28 basis points to 1.05%. -- The efficiency ratio improved 584 basis points to 54.3%. -- Business loans grew to 26% of the total loan portfolio compared to 21%. -- Asset quality remained strong with nonperforming loans at 0.17% of total loans. -- Allowance for loan losses grew to 1.24% of total loans compared to 1.09%. -- Initiated quarterly cash dividends with a $0.05 per share payment in October. -- Revenues increased 22% to $30.1 million. 4th Quarter Financial Highlights (quarter ended 12/31/02 compared to 12/31/01) -- Fourth quarter profits increased 30% to $2.2 million, or $0.32 per share. -- Opened 15th Branch in November 2002. -- ROE A fictitious surname used for an unknown or anonymous person or for a hypothetical person in an illustration. A lawsuit is generally named for the persons who are parties to it. increased 144 basis points to 15.47%. -- ROA ROA See: Return on assets ROA See: Right of accumulation ROA See return on assets (ROA). increased to 1.07% from 0.89%. "Continuing growth in commercial lending and expansion in core deposits are part of the successful formula we are implementing to become a high-performing commercial bank," said Nelson. "In 2002, we continued to emphasize business, construction, and commercial real estate lending. The bank converted to a commercial charter in 2001, and our loan portfolio mix has made tremendous progress toward reflecting that of a commercial bank. In the current economic environment, we anticipate continued strong returns, albeit at a more moderate pace, over the next few years. Provided there is no further deterioration de·te·ri·o·ra·tion n. The process or condition of becoming worse. in the local economy, we believe a long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. earnings growth rate of 10 to 15% is achievable." Operating Results For the year 2002, net interest income increased 20% to $24.1 million on a net interest margin expansion of 43 basis points to 3.44%. Net interest margin expanded as the bank replaced higher rate Federal Home Loan Bank (FHLB FHLB Federal Home Loan Bank ) advances with lower cost deposits and as new assets were booked with attractive yields. Total revenues (net interest income before provision for loan losses plus non-interest income) grew 22% to $30.1 million compared to $24.7 million in 2001. The provision for loan losses increased 38% to $1.9 million in 2002 compared to $1.4 million in 2001. "Our loan portfolio continues to perform well, with few delinquencies. We continue to build reserves to reflect the changing nature of our portfolio and the current economic environment in our market area," noted Lars Johnson, Chief Financial Officer. Other operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. increased 22% to $4.0 million in 2002, compared to $3.3 million in 2001. Total gains on sales of securities, loans and real estate were $2.2 million compared to $1.3 million in 2001. Total 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. in 2002 increased 10% to $16.3 million, with overhead costs overhead costs see fixed costs. rising only 6% to $15.7 million. In 2002, the bank incurred 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 on FHLB advances of $648,000, compared to $20,000 a year ago, as strong deposit growth facilitated replacement of these higher cost funds. As a result of strong top-line growth and moderate expense growth, Cascade's efficiency ratio improved to 54% in 2002 compared to 60% in 2001. Since Cascade carries no intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. on its balance sheet, the recently implemented Financial Accounting Standard 142 regarding amortization of goodwill had no impact on 2002 earnings. Asset Management Total assets increased 6% to $804 million at December 31, 2002, compared to $762 million a year ago. Investment securities increased 34% to $209 million from $156 million a year ago. The growth in the investment portfolio, which consists of U.S. Treasuries U.S. Treasury Created in 1798, the United States Department of the Treasury is the government (Cabinet) department responsible for issuing all Treasury bonds, notes and bills. Some of the government branches operating under the U.S. Treasury umbrella include the IRS, U.S. and Government Agency bonds, continued to offset reductions in the residential loan portfolio. "Business and construction loans continue to grow both absolutely and as a percent of our portfolio in 2002. Growth on the commercial side was offset by a drop in residential and multifamily loans Multifamily loans Loans usually represented by conventional mortgages on multi-family rental apartments. held in our portfolio. Refinancing Refinancing An extension and/or increase in amount of existing debt. activity remains strong with mortgage rates at 40-year lows. Reductions in residential loan balances reflect the continuing wave of refinancings and our practice of selling 30 and 15 year fixed rate loans as we originate o·rig·i·nate v. 1. To bring into being; create. 2. To come into being; start. them," said Nelson. The business loan portfolio increased by 14% to $142 million. Construction loans were up 11%, while residential loans decreased by approximately 20% and multifamily loans down 14%. Total loans were down 5% to $556 million. The following summary reflects Cascade's success in growing its business and real estate construction loans and diversifying its loan portfolio:
Type of loans % of % of % of
12/31/2002 Loans 12/31/2001 Loans 12/31/2000 Loans
----------------------------------------------------------------------
($ in thousands)
Business $142,275 26% $125,342 21% $97,018 17%
Real Estate
Construction 84,228 15% 75,932 13% 51,195 9%
Home Equity and
Consumer 49,331 9% 58,381 10% 64,204 12%
Commercial Real
Estate 63,108 11% 62,938 11% 59,558 11%
Residential 122,560 22% 152,706 26% 170,947 31%
Multifamily 94,245 17% 109,733 19% 111,490 20%
----------- ----- ----------- ----- ----------- ------
Total Loans $555,747 100% $585,032 100% $554,412 100%
----------------------------------------------------------------------
Credit Quality "We continue to see strong performance in our loan portfolio with relatively low net charge-offs. Our loan portfolio continues to outperform Outperform An analyst recommendation meaning a stock is expected to do slightly better than the market return. Notes: Exact definitions vary by brokerage, but in general this rating is better than neutral and worse than buy or strong buy. national and state averages on most measures of credit quality," said Johnson.
Credit Quality Comparisons 12/31/02 9/30/02 12/30/01
--------------------------
Nonperforming Loans/Total Loans
CASB 0.17% 0.34% 0.34%
National Peers -- 1.07% 0.96%
Washington State Peers -- 1.55% 1.59%
Net Charge-offs / Total Loans
CASB 0.24% 0.03% 0.07%
National Peers 0.47% 0.49%
Washington State Peers 0.28% 0.15%
Allowance for loan losses/ Nonperforming
Loans
CASB 719% 358% 315%
National Peers -- 144% 162%
Washington State Peers -- 94% 87%
Allowance for loan losses/Total Loans
CASB 1.24% 1.21% 1.09%
National Peers -- 1.53% 1.55%
Washington State Peers -- 1.46% 1.39%
Peers are commercial banks with assets between $500 million and $1
billion. Most recent peer data available is as of 9/30/02.
Source: www.fdic.gov.
Liabilities and Capital Management Cascade's deposits increased 21% from a year ago to $510 million, with increases in all deposit categories due to successful marketing programs to generate core deposits. Deposit growth led to a 13% reduction in FHLB advances, which were $198 million at year-end. 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 $57 million, or $8.74 per share, at December 31, 2002, up 19% from $48 million, or $7.70 per share, at December 31, 2001. 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 (including trust preferred securities) at quarter-end was 8.29% compared to 7.57% a year ago. 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 85 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, Marysville, Mukilteo, Smokey Point, Issaquah, Clearview, Woodinville, Lake Stevens, and Bellevue. The company will host a conference call on January 29, 2003, at 10 a.m. PST PST Paroxysmal supraventricular tachycardia, see there . 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 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, 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, 2001.
FINANCIAL HIGHLIGHTS
INCOME STATEMENT
(Dollars in thousands, except per share amounts)
Three Months Ended Twelve Months Ended
December 31, December 31,
% %
2002 2001 Change 2002 2001 Change
-----------------------------------------------------
(unaudited)(unaudited) (unaudited)(unaudited)
Net interest
income $6,699 $5,879 14% $26,024 $21,403 22%
Provision for
loan losses 400 540 -26% 1,895 1,370 38%
------------------------------------ --------------
Net interest
income after
provision for
loan losses 6,299 5,339 18% 24,129 20,033 20%
Other income
Gain on
sale of
loans 310 222 40% 697 563 24%
Gain on
sale of
securities 157 202 -22% 1,076 430 150%
Gain on
sale of
real
estate 76 - 427 265 61%
Service
fees 389 451 -14% 1,609 1,893 -15%
Other non-
interest
income 96 46 109% 230 171 35%
------------------------ ----------------------
Total other
income 1,028 921 12% 4,039 3,322 22%
------------------------- ----------------------
Total income 7,327 6,260 17% 28,168 23,355 21%
Operating
expenses 4,035 3,753 8% 15,673 14,844 6%
FHLB advance
prepayment
fees 79 - 648 20
------------------------ ----------------------
Total other
expense 4,114 3,753 10% 16,321 14,864 10%
Net income
before tax 3,213 2,507 28% 11,847 8,491 40%
Income tax
expense 1,058 853 24% 3,775 2,874 31%
------------------------- ----------------------
Net income $2,155 $1,654 30% $8,072 $5,617 44%
========================= ======================
EARNINGS PER SHARE INFORMATION
Earnings per
share, basic $0.33 $0.27 22% $1.26 $0.92 37%
Earnings per
share, diluted 0.32 0.26 23% 1.22 0.87 40%
Weighted average
number of shares
outstanding:
Basic 6,473,519 6,180,962 5% 6,398,170 6,116,259 5%
Diluted 6,656,623 6,482,210 3% 6,609,158 6,456,770 2%
PERFORMANCE MEASURES
Return on equity 15.47% 14.03% 15.49% 12.63%
Return on average
assets 1.07% 0.89% 1.05% 0.77%
Efficiency ratio 53.24% 55.19% 54.29% 60.13%
Net interest margin 3.41% 3.23% 3.44% 3.01%
BALANCE SHEET Dec. 31, Dec. 31,
2002 2001 %
(Dollars in thousands except per share (unaudited) (audited) Change
amounts)
Cash and due from banks $9,640 $8,535 13%
Interest bearing deposits 10,955 3,087 255%
Securities held to maturity 49,078 5,989 719%
Securities available for sale 159,897 150,338 6%
Loans, net 546,677 576,226 -5%
Premises and equipment, net 9,261 8,620 7%
Other assets 18,645 9,218 102%
------------ -----------
Total assets $804,153 $762,013 6%
============ ===========
Deposits $509,850 $419,980 21%
FHLB advances 197,500 226,500 -13%
Securities sold under repurchase
agreements 20,569 49,792 -59%
Other liabilities 9,594 8,064 19%
------------ -----------
Total liabilities 737,513 704,336 5%
Trust preferred securities 10,000 10,000 0%
Stockholders' equity
Common stock & paid in capital 11,548 10,484 10%
Treasury stock (1,347) (972) 39%
Retained earnings 45,438 38,012 20%
Accumulated comprehensive gain 1,001 153 554%
------------ -----------
Total stockholders' equity 56,640 47,677 19%
------------ -----------
Total liabilities and equity $804,153 $762,013 6%
============ ===========
Book value per common share $8.74 $7.70 14%
Capital/asset ratio (Tier 1) 8.29% 7.57%
Average assets $771,855 $728,390 6%
Average earning assets 755,435 710,113 6%
Average equity 52,103 44,496 17%
ASSET QUALITY
Non-performing loans (NPLs) $956 $1,999 -52%
Net loan charge-offs (annual) 1,327 408 225%
Allowance of loan losses 6,872 6,304 9%
Real estate owned 461 430 7%
Non-performing loans/total loans 0.17% 0.34%
Net loan charge-offs/total loans 0.24% 0.07%
Allowance of loan losses/NPLs 719% 315%
Allowance for loan losses/total loans 1.24% 1.09%
Non-performing assets/total assets 0.18% 0.32%
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