Exhibit 99
Cascade Financial Corporation The Cereghino Group
Contacts: Lars Johnson Corporate Investor Relations
Chief Financial Officer Becky Pendleton Reid
425.339.5500 206.762.0993
www.cascadebank.com www.stockvalues.com
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NEWS RELEASE
CASCADE FINANCIAL ACHIEVES 19% INCREASE IN 2003 PROFITS
GROWTH IN COMMERCIAL BANKING BUSINESS CONTRIBUTES TO RECORD YEAR PERFORMANCE
Everett, Washington-January 27, 2004 - Cascade Financial Corporation (NASDAQ:
CASB), parent company of Cascade Bank, today reported record profits for the
fourth quarter and year ended December 31, 2003, with improving margin and 10%
asset growth contributing to a 19% increase in net income. In 2003, net income
increased to $9.6 million, or $1.13 per diluted share, compared to $8.1 million
or $0.98 per diluted share in 2002. In the fourth quarter of 2003, net income
grew 16% to $2.5 million, or $0.29 per diluted share, compared to $2.2 million,
or $0.26 per share in the fourth quarter of 2002. Per share results have been
adjusted to reflect the 5-for-4 stock split on December 19, 2003.
"We achieved our financial targets for the year by delivering excellent service
to an expanding customer base, improving profitability and maintaining solid
asset quality," said Carol K. Nelson, President and CEO. "The structural and
cultural changes we've implemented over the past three years, including
converting to a commercial bank, establishing new performance incentives and
new customer service offerings are fostering a cycle of success throughout the
bank."
Conference Call
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The company will host a conference call on January 28, 2004, at 10:00 a.m. PT
(1:00 p.m. ET) to discuss 2003 financial results. Investment professionals may
dial in at 303-262-2130 and other interested parties may listen at
www.cascadebank.com.
2003 Financial Review and Operating Highlights
- ----------------------------------------------
Revenues increased 9.5% to $32.9 million
Net income increased 19% to $9.6 million
EPS increased 16.1% to $1.13
Return on average equity rose to 15.81% from 15.49% in 2002
Return on average assets grew to 1.13% from 1.05% in 2002
The efficiency ratio improved to 53.87% from 54.29% a year ago
Business loans grew 43.7% to $204 million and account for 35% of the portfolio
Asset quality remained strong with nonperforming loans at 0.33% of total loans
Allowance for loan losses grew to 1.34% of total loans
"Our financial performance continues to improve steadily, reflecting the higher
yielding business loans in our portfolio and the productivity improvements
generated from past initiatives. Earnings for the year were also aided by
gains on sale of loans and securities in the first three quarters of the year.
In the fourth quarter, growth in net interest income and service fees more than
offset the decline in gain on sale of assets," said Lars Johnson, Chief
Financial Officer. "We remain committed to delivering shareholder value as
outlined in our financial targets below."
Annual Financial 2002 2003 2006
Performance and Targets Actual Actual Target
----------------------- ------ ------ ------
Return on Average Assets 1.05% 1.13% > 1.10%
Return on Average Equity 15.49% 15.81% 16% - 18%
Annual Growth in EPS 40.23% 16.10% 10% - 15%
NPL/Loans 0.17% 0.33% < 1.00%
Efficiency Ratio 54.29% 53.87% < 55%
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CASB Profits Rise 19% in 2003
January 27, 2004
Page Two
2003 Operating Result
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Total revenues (net interest income before provision for loan losses plus
noninterest income) grew 9.5% to $32.9 million in 2003. Net interest income
before provision increased 6.1% to $27.6 million in 2003 compared to $26.0
million a year ago. Other (noninterest) income grew 31% in 2003 to $5.3
million compared to $4.0 million in 2002. Service revenues from checking and
other fee-based sources grew 18% in the year, contributing 36% of noninterest
income for the year. This revenue source reflects the expanding base of
customer accounts, with net new checking accounts growing by 15%. Noninterest
income also benefited from the shift of assets into bank-owned life insurance
(BOLI) and gains on sale of loans and securities.
"The low interest rate environment that facilitated gains on the sale of loans
and securities also put pressure on our interest rate spreads throughout most
of the year. Nonetheless, we saw an improvement in net interest margin (NIM)
at the end of the year," Johnson noted. Fourth quarter NIM improved to 3.45%
from 3.25% in the third quarter and 3.41% in the fourth quarter a year ago.
For the full year, NIM was 3.35% compared to 3.44% in 2002. "Excluding the
effect of the shift of $10 million in assets into BOLI, our net interest margin
was level for the year. In addition, there were no prepayments on Federal Home
Loan Bank (FHLB) borrowings during the quarter, although those made in prior
quarters also helped contribute to the improvement in fourth quarter net
interest margin."
Continuing solid performance of the loan portfolio facilitated a lower
provision for loan losses of $1.3 million in 2003, compared to $1.9 million in
2002. "We maintain the allowance for loan losses at a level sufficient to
provide for losses based on management's evaluation of known and inherent risks
in the portfolio and its past performance," Johnson said. The provision for
loan losses increased the total allowance for loan losses to $7.7 million, or
401% of nonperforming loans and 1.34% of total loans at December 31, 2003.
Operating expenses including Federal Home Loan Bank advance prepayment fees in
2003 increased 9% to $17.7 million compared to $16.3 million in 2002, with
compensation expenses up 9% reflecting the increase in commercial lending
staff. Cascade's efficiency ratio (operating expense divided by total
revenues) improved 42 basis points to 53.87% in 2003 compared to 54.29% a year
ago. Return on average equity in 2003 improved to 15.81% from 15.49% in 2002.
Return on average assets rose to 1.13% in 2003 compared to 1.05% in the
previous year.
4Q03 Results
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Net income in 4Q03 grew 16% to $2.5 million, or $0.29 per diluted share,
compared to $2.2 million, or $0.26 per diluted share in the fourth quarter a
year ago. Fourth quarter 2003 revenues increased 6% to $8.2 million from $7.7
million in 4Q02. Fourth quarter 2003 net interest income before provision grew
9% to $7.3 million from $6.7 million in 4Q02. Other income declined 14% to
$887,000 with lower gains on sale of securities and loans partially offset by a
43% increase in checking and other service fees over the fourth quarter a year
ago. The provision for income tax declined slightly in the quarter to 29% of
pre-tax income from 32% in prior quarters. The adjustment was related to the
permanent tax difference associated with tax-exempt BOLI income, and brought
the full year tax rate down to 31%.
Asset Management
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Total assets increased 10% to $885 million at December 31, 2003, compared to
$804 million a year earlier. Total loans grew 4% to $577 million with ongoing
strength in the business and commercial real estate sector. Investment
securities increased to $276 million from $209 million a year ago.
"Business and commercial real estate lending generated double digit growth in
2003, and these segments of our portfolio continue to grow in importance on our
balance sheet," said Nelson. The business loan portfolio increased by 44% to
$204 million, accounting for 35% of total loans. The commercial real estate
loan portfolio grew 33% to $84 million, accounting for 15% of the portfolio,
compared to year-ago levels. Real estate construction loans dropped to $63
million, or 11% of total loans, as developers quickly sold their housing
inventory into a robust market. Despite strong originations, residential loans
dropped 14% to $106 million, as the bank continued to sell virtually all its 15
and 30 year fixed rate loans into the secondary market. Multifamily loans
declined 8% to $87 million at year-end as the refinance wave crested in 2003.
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CASB Profits Rise 19% in 2003
January 27, 2004
Page Three
Deposit growth continued to be very strong in 2003 with total deposits
increasing 11% to $564 million from $510 million at the end of 2002. Checking
account balances increased 15% to $63 million, savings and money market account
balances grew 17% to $133 million and time deposit balances rose 8% to $368
million. "The growth in checking accounts reflects the increase in small
business relationships we are building," Nelson added.
Credit Quality
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Credit quality remained strong, although nonperforming loans ticked up to $1.9
million, or 0.33% of total loans as of December 31, 2003, compared to $956,000,
or 0.17% of total loans a year ago. "We had three residential properties move
to noperforming status this quarter and all of these properties are well-
secured," said Johnson. The ratio of nonperforming assets to total assets was
0.27% at the end 2003 compared to 0.18% one year ago. Net charge-offs in 2003
were modest at $436,000, or 0.08% of total loans, compared to $1.3 million, or
0.24% of total loans in 2002.
About Cascade Financial
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Established in 1916, Cascade Bank, the only operating subsidiary of Cascade
Financial Corporation, is a state chartered commercial bank headquartered in
Snohomish County, Washington. Cascade Bank operates 15 full service offices,
located in Everett, Lynnwood, Marysville, Mukilteo, Smokey Point, Issaquah,
Clearview, Woodinville, Lake Stevens and Bellevue. Cascades' newest branch is
scheduled to open in Snohomish in May 2004. In June 2003, Washington CEO
magazine ranked Cascade Bank the number one medium sized "Best Companies to
Work For" in Washington State.
This release contains certain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995 (PSLRA), including
statements about the financial condition, results of operations, future
financial targets and earnings outlook of the Company. The forward-looking
statements 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 rates, changes in portfolio composition, the bank's ability to
attract quality commercial business, interest rate movements and the impact on
margins such movement may cause, changes in the demographic make-up of the
Company's market, fluctuation in demand for the Company's products and
services, the Company's ability to attract and retain qualified people,
regulatory changes, competition with other banks and financial institutions,
and other factors. For a discussion of factors that could cause actual results
to differ, please see the Company's reports on Forms 10-K and 10-Q as filed
with the Securities and Exchange Commission. Words such as "targets,"
"expects," "anticipates," "believes," other similar expressions or future or
conditional verbs such as "will," "may," "should," "would," and "could" are
intended to identify such forward-looking statements. Readers should not place
undue reliance on the forward-looking statements, which reflect management's
view only as of the date hereof. The Company 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 the Company under PSLRA's safe harbor provisions.
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January 27, 2004
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CONSOLIDATED FINANCIAL HIGHLIGHTS
INCOME STATEMENT
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(Dollars in thousands except per Three Months Ended Twelve Months Ended
share amounts) December 31, December 31,
Unaudited) 2003 2002 2003 2002
--------- --------- --------- ----------
Net interest income $ 7,323 $ 6,699 9.3% $ 27,610 $ 26,024 6.1%
Provision for loan losses 300 400 -25.0% 1,275 1,895 -32.7%
--------- --------- --------- ----------
Net interest income after provision 7,023 6,299 11.5% 26,335 24,129 9.1%
Other income
Gain on sale of loans 107 310 -65.5% 855 697 22.7%
Gain on sale of securities 46 157 -70.7% 1,790 1,076 66.4%
Checking service fees 439 259 69.5% 1,415 1,007 40.5%
Other service fees 117 130 -10.0% 480 602 -20.3%
BOLI 149 64 132.8% 598 86 595.3%
Gain/(loss) on sale of real estate - 76 NM 48 427 -88.8%
Other noninterest income 29 32 -9.4% 120 144 -16.7%
--------- --------- --------- ----------
Total other income 887 1,028 -13.7% 5,306 4,039 31.4%
Total income 7,910 7,327 8.0% 31,641 28,168 12.3%
Compensation expense 2,471 2,173 13.7% 9,617 8,793 9.4%
Other operating expenses 1,938 1,862 4.1% 7,253 6,880 5.4%
FHLB advance prepayment fees - 79 NM 863 648 33.2%
--------- --------- --------- ----------
Total other expense 4,409 4,114 7.2% 17,733 16,321 8.7%
--------- --------- --------- ----------
Net income before tax 3,501 3,213 9.0% 13,908 11,847 17.4%
Income tax expense 999 1,058 -5.6% 4,309 3,775 14.1%
--------- --------- --------- ----------
Net income $ 2,502 $ 2,155 16.1% $ 9,599 $ 8,072 18.9%
========= ========= ========= =========
EARNINGS PER SHARE INFORMATION
Earnings per share, basic $ 0.30 $ 0.27 14.1% $ 1.17 $ 1.01 16.2%
Earnings per share, diluted $ 0.29 $ 0.26 12.8% $ 1.13 $ 0.98 16.1%
Weighted average number of
shares outstanding:
Basic 8,236,650 8,091,899 8,184,455 7,997,713
Diluted 8,561,834 8,320,779 8,461,503 8,261,448
NM: Not Meaningful
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CASB Profits Rise 19% in 2003
January 27, 2004
Page Five
BALANCE SHEET
(Dollars in thousands except per share amounts)
(Unaudited)
Dec. 31, Sep. 30, Dec. 31, Annual
2003 2003 2002 Change
-------- -------- ------- ------
Cash and due from banks $ 13,011 $ 9,880 $ 9,640 35.0%
Interest bearing deposits 1,060 9,795 10,955 -90.3%
Securities held to maturity 86,719 88,671 49,388 75.6%
Securities available for sale 189,747 171,123 159,897 18.7%
------- ------- -------
Total securities 276,466 259,794 209,285 32.1%
Loans
Business 204,446 198,003 142,273 43.7%
Real estate construction 62,742 71,145 84,229 -25.5%
Commercial real estate 83,856 78,733 63,108 32.9%
Multifamily 87,212 84,873 94,245 -7.5%
Home equity/consumer 33,163 34,168 49,331 -32.8%
Residential 105,565 106,580 122,561 -13.9%
------- ------- -------
Total loans 576,984 573,502 555,747 3.8%
Deferred loan fees (2,179) (2,210) (2,198) -0.9%
Loan loss reserve (7,711) (7,642) (6,872) 12.2%
------- ------- -------
Loans, net 567,094 563,650 546,677 3.7%
Premises and equipment, net 8,586 8,543 9,261 -7.3%
Bank owned life insurance 11,162 11,029 10,619 5.1%
Other assets 7,841 7,153 8,026 -2.3%
------- ------- -------
Total assets $885,220 $869,844 $804,463 10.0%
======= ======= =======
Deposits
Checking accounts 62,927 61,163 54,570 15.3%
Money market and
savings accounts 132,986 137,355 113,951 16.7%
Certificates of deposit 368,401 356,135 341,329 7.9%
------- ------- -------
Total deposits 564,314 554,653 509,850 10.7%
FHLB advances 200,000 192,000 197,500 1.3%
Securities sold under
repurchase agreement 39,911 40,588 20,569 94.0%
Trust preferred securities 10,212 10,310 10,310 -1.0%
Other liabilities 6,826 9,840 9,594 -28.9%
------- ------- -------
Total liabilities 821,263 807,391 747,823 9.8%
Stockholders' equity
Common stock & paid in capital 12,003 11,840 11,349 5.8%
Retained earnings 52,109 50,189 44,290 17.7%
Accumulated comprehensive
gain/loss (155) 424 1,001 NM
------- ------- -------
Total stockholders' equity 63,957 62,453 56,640 12.9%
------- ------- -------
Toal liabilities and
stockholder's equity $885,220 $869,844 $804,463 10.0%
NM=Not Meaningful
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January 27, 2004
Page Six
FINANCIAL HIGHLIGHTS Three Months Ended Twelve Months Ended
(Dollars in thousands except December 31, December 31,
per share amounts) 2003 2002 2003 2002
(Unaudited) ---------------------- -----------------------
PERFORMANCE MEASURES
Return on average equity 15.77% 15.47% 15.81% 15.49%
Return on average assets 1.14% 1.07% 1.13% 1.05%
Efficiency ratio 53.70% 53.24% 53.87% 54.29%
Net interest margin 3.45% 3.41% 3.35% 3.44%
ADDITIONAL INFORMATION
Book value per common share $ 7.76 $ 6.99 $ 7.76 $ 6.99
Capital/Asset Ratio
(including TPS) 8.38% 8.32% 8.38% 8.32%
Average assets $ 876,262 $ 803,382 $ 849,778 $ 771,855
Average earning assets $ 850,520 $ 783,950 $ 824,422 $ 755,435
Average equity $ 63,627 $ 55,313 $ 60,766 $ 52,103
Shares outstanding at
period end 8,241,288 8,105,150 8,241,288 8,105,150
Dec. 31, Sep. 30, Dec. 31,
2003 2003 2002
-------- -------- --------
ASSET QUALITY
Nonperforming loans $1,921 $1,209 $ 956
Nonperforming loans/total loans 0.33% 0.21% 0.17%
Net loan charge-offs (ytd) $ 436 $ 234 $1,327
Net loan charge-offs/total loans 0.08% 0.04% 0.24%
Allowance for loan losses $7,711 $7,642 $6,872
Allowance for loan losses/NPLs 401% 632% 719%
Allowance for loan losses/ total loans 1.34% 1.33% 1.24%
Real estate owned $ 474 $ 356 $ 461
Nonperforming asset/total assets 0.27% 0.18% 0.18%
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Note: Transmitted on Business Wire on January 27, 2004 at 1:xx p.m.