Everett, WA – April 3, 2008 – Cascade Financial Corporation (NASDAQ: CASB), parent company of Cascade Bank, today announced that due to an increase in nonperforming loans and as a precautionary measure in light of the current economic environment, it expects to record a provision for loan losses in the first quarter of 2008 of $2.4 million and intends to charge off $1.5 million. As a result of the larger than normal provision, Cascade expects to report earnings for the first quarter ended March 31, 2008, of between $0.19 and $0.23 per share.
“While the Bank’s underlying business remains strong, the recent slowdown in the residential development and construction market has led to an increase in nonperforming loans which makes it prudent to strengthen our reserve position at this time,” stated Carol K. Nelson, president and CEO.
In the first quarter of 2008, nonperforming loans are expected to increase by approximately $16 million, primarily as a result of deterioration in two lending relationships described below. Nonperforming loans are estimated to be 1.5% of total loans.
The first lending relationship is limited to three loans totaling $11.6 million originated in 2005 to a well established Snohomish County based real estate developer, secured by first deeds of trust on two separate residential real estate developments totaling 466 acres in Snohomish County. Loan to value on these properties range from 51% to 73%, based on recent appraisals. The loans are personally guaranteed. As mentioned in the 2007 10-K filing, these properties were subject to a purchase and sale agreement; however, since those sales have not been consummated the loans have been placed on nonaccrual status.
The second lending relationship originated in 2007 as an $11.2 million commitment to finance the purchase of 46 lots and to construct 12 single family residences at a loan to value of 80%. As sales in this development have not materialized as originally projected, the $5.6 million outstanding balance on this loan has been capped and added to nonaccrual status. This loan is to a well established Pierce County based residential real estate builder and is secured by a first deed of trust on 46 lots in a larger subdivision in Snohomish County. The loan is personally guaranteed.
The addition of these loans to nonaccrual status reversed approximately $700,000 in interest accruals for the quarter.
“While we are disappointed in these additions to nonperforming loans, we believe the risk management practices and monitoring systems in place at Cascade will help to mitigate further deterioration in the portfolio,” said Rob Disotell, Chief Credit Officer.
“We believe that by strengthening our allowance for loan losses we are taking quick and decisive action to address these issues as rapidly as we can based on the current information available to us,” Nelson added. “Even with this action our first quarter results are expected to show that Cascade remains well positioned to pursue its strategies for growth over the long term.”
Cascade has not originated any subprime loans and holds no collateralized debt obligations in its investment portfolio.
The company expects to report first quarter earnings following the close of business on April 22, 2008.
About Cascade Financial
Established in 1916, Cascade Bank, the only operating subsidiary of Cascade Financial Corporation, is a state chartered commercial bank headquartered in Everett, Washington. Cascade Bank has proudly served the Puget Sound region for over 90 years and operates 20 full service branches in Everett, Lynnwood, Marysville, Mukilteo, Shoreline, Smokey Point, Issaquah, Clearview, Woodinville, Lake Stevens, Bellevue, Snohomish and North Bend. Cascade Bank currently operates a loan production office in Burlington, Washington and will expand its service in Skagit County by opening a full service branch in May 2008.
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