Cascade’s net interest margin (NIM) was stable at 5.34% for the second quarter of 2007 unchanged from the linked-quarter. This stabilization occurred after three successive quarters where the NIM had fallen an average of 17 basis points per quarter, largely caused by declining deposit balances held by real estate related business customers.
Yields on earning assets during the second quarter of 2007 were higher at 8.39% compared to 8.31% in the immediately preceding quarter and 7.95% in the year ago quarter. Higher yields were largely offset by an increase in overall cost of funds which continues to be pressured by pricing competition and the flat yield curve environment. The average cost of funds paid on interest bearing liabilities for the second quarter of 2007 was 4.09% as compared to 4.00% in the preceding quarter and 3.05% for the year ago quarter. Looking forward,
management expects the NIM may continue to ease as a result of ongoing competitive pricing pressures and a persistent flat yield curve that can affect both rate and mix of funding sources.
The NIM can also be affected by factors beyond market interest rates, including loan or deposit volume shifts and/or aggressive rate offerings by competitor institutions. Cascade’s financial model indicates a relatively stable interest rate risk profile within a reasonable range of rate movements around the forward rates currently predicted by financial markets. Because of its relatively high proportion of non-interest bearing funds, Cascade’s NIM is most adversely affected in the event short term market rates fall to a very low level. See cautionary “Forward Looking Statements” below and Cascade’s Form 10-K report for further information on risk factors including interest rate risk.
NON-INTEREST INCOME AND EXPENSE:
Non-Interest Income for the second quarter of 2007 was $5.3 million, 20.9% above the year ago period and as compared to $5.5 million on a linked-quarter basis which included $.6 million in one time gain items. For the second quarter of 2007, residential mortgage originations totaled $51.5 million, down 4.3% from the year ago period and up 21.0% from the linked-quarter. Related net mortgage revenue was $.8 million, unchanged from the year ago period and compared to $.7 million for the prior quarter.
Non-Interest Expense for the second quarter of 2007 increased 14.4% compared to the second quarter of 2006, primarily due to the effect of annual merit salary increases as well as increased staffing levels to support Cascade’s infrastructure and ongoing growth goals. The current quarter non interest expense was slightly below that of the immediately preceding quarter.
NAME CHANGE OF FARMERS & MERCHANTS:
Farmers & Merchants, a Bank of the Cascades Company, will be known as Bank of the Cascades starting in July 2007, one year after a successful merger of the two entities. In addition to retaining excellent employees and first-rate services, the merger has brought expanded products and services, increased lending capabilities and additional
outreach in the Idaho communities that Farmers & Merchants serves. For the past year we have been operating as one company and now we will be operating as one company under one name,” said Mike Mooney, president, Idaho Region for Bank of the Cascades. “Our employees remain committed to delivering the best in banking for our customers. Our exceptional service, customer accounts and branch locations all remain the same.”
BUSINESS STRATEGY:
Operating in some of the fastest growing markets in the nation, Cascade Bancorp (headquartered in Bend, Oregon) and its wholly-owned subsidiary, Bank of the Cascades, operates in Oregon and Idaho markets. In terms of banking growth markets, Cascade ranks as the top community bank footprint in the Northwest and among the top ten banks in the nation1. Cascade has a business strategy that focuses on delivering the best in community banking for the financial well-being of customers and shareholders. The Bank implements its strategy by combining outstanding service, competitive financial products, local expertise and advanced technology applied for the convenience of customers. Founded in 1977, Bank of the Cascades offers full-service community banking through 33 branches in Central Oregon, Southern Oregon, Portland/Salem and Boise/Treasure Valley. The Bank has been rated among the top performing banks in the nation for the ninth consecutive year by Independent Community Bankers of America, as well as being named the 2007 top community bank in the Northwest by US Banker Magazine. The Bank is honored to be among the top 40 “Best 100 Companies to Work For in Oregon, 2007,” compiled by Oregon Business Magazine. For further information on Bank of the Cascades, please visit our web site at http://www.botc.com.
FORWARD LOOKING STATEMENTS
This release contains forward-looking statements that are subject to risks and uncertainties. Such risks and uncertainties may include but are not necessarily limited to fluctuations in interest rates, inflation, government regulations and general economic conditions, and competition within the business areas in which Cascade is conducting its operations. For a discussion of factors, which could cause results to differ, please see Cascade’s reports on Forms 10-K and 10-Q as filed with the Securities and Exchange Commission and Cascade’s press releases. When used in this release, the words or phrases such as “will likely result in”, “management expects that”, “will continue”, “is anticipated”, “estimate”, “projected”, or similar expressions, are intended to identify “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”). Readers should not place undue reliance on the forward-looking statements, which reflect management’s view only as of the date hereof. Cascade undertakes no obligation to publicly revise these forward-looking statements to reflect subsequent events or circumstances. This statement is included for the express purpose of protecting Cascade Bancorp and PSLRA’s safe harbor provisions.
The ability of Cascade to predict results or the actual effect of future plans and strategies is uncertain, and actual results may differ. You can obtain documents filed by Cascade free of charge at the website maintained by the SEC at www.sec.gov. In addition, you may obtain documents filed with the SEC by Cascade Bancorp free of charge by contacting: Investor Relations, Cascade Bancorp, 1100 NW Wall St., PO Box 369, Bend, OR 97701 (541) 385-6205.
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1 Projected MSA population growth 2005-2010, weighted by bank deposits; Includes all public banks with assets $2B - $10B (ex-M&A targets); Source SNL Financial LC / ESRI |
