U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 2003
Commission file number 0-25286
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
CASCADE FINANCIAL CORP. 401(k) Salary Deferral and Profit Sharing Plan
B. Name of the issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Cascade Financial Corporation
2828 Colby Avenue
Everett, Washington 98201
THE PLAN IS SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974,
AS AMENDED ("ERISA"). IN ACCORDANCE WITH ITEM NO. 4 OF REQUIRED
INFORMATION, THE PLAN FINANCIAL STATEMENTS AND SCHEDULES ATTACHED HERETO ARE
PREPARED IN ACCORDANCE WITH THE FINANCIAL REPORTING REQUIREMENTS OF ERISA.
CASCADE FINANCIAL CORPORATION
401 (k) SALARY DEFERRAL AND
PROFIT SHARING PLAN
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS
and
FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
CONTENTS
- --------
PAGE
REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS
Moss Adams LLP 1
KPMG LLP 2
FINANCIAL STATEMENTS
Statements of net assets available for benefits 3
Statements of changes in net assets available for benefits 4
Notes to financial statements 5-10
SUPPLEMENTAL SCHEDULE
Schedule H, Line 4i - schedule of assets (held at end of year)
- December 31, 2003 11
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Administrative Committee
Cascade Financial Corporation
401(k) Salary Deferral and Profit Sharing Plan
We have audited the accompanying statements of net assets available for
benefits of Cascade Financial Corporation 401(k) Salary Deferral and Profit
Sharing Plan (Plan) as of December 31, 2003, and the related statement of
changes in net assets available for benefits for the year then ended. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audit. The financial statements of Cascade Financial Corporation 401(k)
Salary Deferral and Profit Sharing Plan as of December 31, 2002 were audited
by other auditors whose report dated June 27, 2003, expressed an unqualified
opinion on those statements.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States of America). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2003, and the changes in net assets available for benefits for the
year then ended, in conformity with accounting principles generally accepted in
the United States of America.
Our audit was performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets
(held at end of year) at December 31, 2003 is presented for purposes of
additional analysis and is not a required part of the basic financial
statements, but is supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. The supplemental schedule is the
responsibility of the Plan's management. The supplemental schedule has been
subjected to the auditing procedures applied in the audit of the basic
financial statements at December 31, 2003 and, in our opinion, is fairly stated
in all material respects in relation to the basic financial statements taken as
a whole.
/s/ MOSS ADAMS, LLP
Everett, Washington
June 24, 2004
Report of Independent Registered Public Accounting Firm
The Participants and the Plan Administrator
Cascade Financial Corp. 401(k) Salary
Deferral and Profit Sharing Plan:
We have audited the accompanying statement of net assets available for benefits
of Cascade Financial Corp. 401(k) Salary Deferral and Profit Sharing Plan
(Plan) as of December 31, 2002 and the related statement of changes in net
assets available for benefits for the year then ended. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2002, and the changes in net assets available for benefits for the
year then ended, in conformity with U.S. generally accepted accounting
principles.
/s/ KPMG, LLP
Seattle, Washington
June 27, 2003
CASCADE FINANCIAL CORPORATION
401(k) SALARY DEFERRAL AND PROFIT SHARING PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31,
2003 2002
ASSETS ------------------------
Participant directed investments at fair value
Money market funds $ 24,742 $ 82,779
Common stock of Cascade Financial Corporation 2,394,876 1,161,810
Mutual funds 1,996,106 1,315,930
Common commingled trust fund 411,476 470,238
Loans to participants 93,658 98,695
--------- ---------
4,920,858 3,129,452
Receivables
Sponsor - 77,201
Participants - 11,969
--------- ---------
- 89,170
NET ASSETS AVAILABLE FOR BENEFITS $4,920,858 $3,218,622
========= =========
3 See accompanying notes to financial statements.
CASCADE FINANCIAL CORPORATION
401(k) SALARY DEFERRAL AND PROFIT SHARING PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED
DECEMBER 31,
2003 2002
-----------------------
ADDITIONS TO NET ASSETS AVAILABLE FOR
BENEFITS ATTRIBUTED TO
Investment income
Interest and dividends $ 30,156 $ 50,560
Net appreciation (depreciation) in fair value
of investments
Common stock of Cascade Financial Corporation 1,228,231 427,869
Mutual funds 439,854 (431,062)
--------- ----------
Total investment income 1,698,241 47,367
--------- ----------
Contributions
Sponsor 171,506 77,201
Participants 437,759 378,224
Rollover 42,374 -
--------- ----------
651,639 455,425
--------- ----------
Total additions, net 2,349,880 502,792
DEDUCTIONS FROM NET ASSETS AVAILABLE FOR
BENEFITS ATTRIBUTED TO BENEFITS PAID
TO PARTICIPANTS 647,644 557,230
--------- ----------
Net increase (decrease) in net assets
available for benefits 1,702,236 (54,438)
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of year 3,218,622 3,273,060
--------- ----------
End of year $4,920,858 $3,218,622
========= ==========
See accompanying notes to financial statements. 4
CASCADE FINANCIAL CORPORATION
401(k) SALARY DEFERRAL AND PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
Note 1 - Description of Plan and Basis of Presentation
- ------------------------------------------------------
The following description of the Cascade Financial Corporation 401(k) Salary
Deferral and Profit Sharing Plan (Plan) provides only general information.
Participants should refer to the Plan document for a more complete description
of the Plan's provisions.
General - The Plan is a defined contribution plan established for employees of
Cascade Financial Corporation (Sponsor) who are at least 18 years of age. The
Plan is subject to the Employee Retirement Income Security Act of 1974 (ERISA).
Administration - The Sponsor has appointed an administrative committee to
oversee the Plan. Prior to December 2002, ING National Trust served as Trustee
of the Plan and ING-Aetna Financial Services administered the Plan. Effective
December 2002, Circle Trust Company serves as the Trustee and the Plan is
administered by NW Plan Services, Inc.
Eligibility, contributions and participants accounts - All nonunion employees
of the Sponsor who are age 18 or older are eligible to participate in the Plan
after completing one hour of service, and become eligible for employer
contributions immediately following completion of one year of service. To
complete one year of service, as defined by the Plan, a participant must
complete at least 1,000 hours of service within that year.
Accounts are established for each participant and include the participant's
contributions (including those rolled over from another qualified plan or
trust), allocations of employer matching contributions, any discretionary
contributions from the Sponsor and earnings thereon. Annual Sponsor matching
contributions and discretionary contributions are determined by the board of
directors of the Sponsor. No discretionary contributions were made in 2003 or
2002.
During 2003 and 2002, participants were able to contribute from 1% to 60% of
their pretax compensation, subject to limits established under the Internal
Revenue Code (IRC). Participants may also contribute amounts representing
distributions from other qualified plans. The Sponsor's 2003 matching
contribution is 50 cents for each dollar contributed up to $6,000. During
2002, the Sponsor's matching contribution was 50 cents for each dollar
contributed up to 5% of the participants eligible compensation to a maximum
of $5,500. The employee must be employed as of the last day of the Plan year
to be eligible for employer matching or discretionary contributions.
Participants have the option of directing their account balance in 1%
increments into any one or more of the Plan's investment fund options.
The Sponsor contributions are made in cash and allocated to a participant's
account balance in accordance with the participant's contribution elections.
The Plan currently offers common commingled trust funds, mutual funds and
Sponsor common stock as investment options for participants.
5
CASCADE FINANCIAL CORPORATION
401(k) SALARY DEFERRAL AND PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
Note 1 - Description of Plan and Basis of Presentation (continued)
- ------------------------------------------------------------------
Participant accounts are valued daily based on quoted market prices.
Participants may change their investment elections and make transfers
between investment options daily.
The Plan provides for various investment fund options which in turn invest
in a combination of stocks, bonds and other investment securities. Investment
securities, in general, are exposed to various risks, such as interest rate,
credit and overall market volatility risks. Due to the level of risk associated
with certain investment securities, it is reasonably possible that changes in
the values of investment securities will occur in the near term and that such
changes could materially affect the amounts reported in the statement of net
assets available for benefits.
Vesting - Participants are immediately vested in their contributions and
earnings thereon. Vesting of the Sponsor's contribution and earnings thereon is
based on years of credited service of participants. The following schedule sets
forth the vesting schedule:
Years of Vesting Vested
Service Percent
- --------------------------- -------
Less than 2 0
At least 2 but less than 3 20
At least 3 but less than 4 40
At least 4 but less than 5 60
At least 5 but less than 6 80
6 or more 100
Participants become fully vested at the age of 65, upon the participant's death
or upon permanent disability.
Forfeitures of nonvested Sponsor contributions are used to reduce future
Sponsor contributions. Unallocated forfeitures totaled $5,645 and $11,715
at December 31, 2003 and 2002, respectively. Subsequent to year-end 2003 and
2002, Sponsor contributions were reduced by $0 and $11,600, respectively, as a
result of forfeited nonvested account balances.
Participant loans - Participants may borrow from the vested portion of their
account balance a minimum of $1,000 up to a maximum equal to the lesser of
$50,000 or 50% of their vested account balance. New loan terms range from one
to five years. Previous loans for primary residences were made up to fifteen
years. Loans are secured by the remaining vested balance in the participant's
account and bear interest at prime plus 1%. At December 31, 2003 interest
rates range from 5.0% to 10.50%. Principal and interest are paid ratably
through semi-monthly payroll deductions. As of December 31, 2003, loans mature
through 2009.
6
CASCADE FINANCIAL CORPORATION
401(k) SALARY DEFERRAL AND PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
Note 1 - Description of Plan and Basis of Presentation (continued)
- ------------------------------------------------------------------
Payment of plan benefits - In 2003 distributions were paid in a single lump
sum. In 2002 lump sum and installment distributions were permitted. With
approval of the Sponsor, early withdrawals may be paid by the Plan to those
employees experiencing a financial hardship, as defined by the Plan.
Plan expenses - Expenses of the Plan are paid by the Sponsor and, therefore,
are not included in the accompanying financial statements of the Plan. During
2003 the Sponsor paid Plan expenses of approximately $17,000.
Plan termination - Although it has not expressed any intent to do so, the
Sponsor has the right under the Plan to discontinue its contributions at any
time and to terminate the Plan subject to the provisions of ERISA. Should the
Plan be terminated at some future date, all participants would become fully
vested in their account balances.
Excess contributions - Excess contributions represent amounts withheld from
participants in excess of IRC limitations that were refunded to participants
subsequent to year-end.
Note 2 - Summary of Significant Accounting Policies
- ---------------------------------------------------
Basis of presentation and accounting - The Plan financial statements are
presented on the accrual basis of accounting.
Investments - The investment in the Sponsor's common stock, which is traded on
the NASDAQ Small Cap Market under the symbol CASB, is valued at the last
reported sales price before the end of the Plan year. The investments in mutual
funds are stated at fair value based on quoted market prices. Loans to
participants are valued at their unpaid principal value.
The Capital Preservation Fund is a common commingled trust fund. The investment
is recorded at contract value, which approximates fair value. The effective
yield of the Capital Preservation Fund was 4.49% and 5.79%, respectively, for
the years ended December 31, 2003 and 2002, respectively.
Net appreciation (depreciation) of investments includes both realized and
unrealized gains and losses. Purchases and sales of investments are recorded on
a trade-date basis. Interest is recorded when earned. Dividends are recorded on
the dividend date.
Benefit payments - Benefits are recorded when paid.
7
CASCADE FINANCIAL CORPORATION
401(k) SALARY DEFERRAL AND PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
Note 2 - Summary of Significant Accounting Policies (continued)
- ---------------------------------------------------------------
Use of estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires the plan administrator to make estimates and assumptions that affect
the reported amounts of assets and liabilities and changes therein, and
disclosure of contingent assets and liabilities. Actual results could differ
from those estimates.
Note 3 - Tax Status
- -------------------
The Internal Revenue Service has determined and informed the Sponsor by a
letter dated June 14, 2004, that the Plan and related trust are designed
in accordance with applicable sections of the IRC. The Plan has been amended
since receiving the determination letter. However, the plan administrator
believes that the Plan is designed and is currently being operated in
compliance with the applicable requirements of the IRC.
Note 4 - Party In Interest Transactions
- ---------------------------------------
Certain Plan assets are invested in cash held by the Trustee and the Sponsors'
common stock, and therefore these transactions qualify as party in interest
transactions.
8
CASCADE FINANCIAL CORPORATION
401(k) SALARY DEFERRAL AND PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
Note 6 - Investments
- --------------------
The following table presents the assets held for investment purposes at
December 31:
Investment Value
2003 2002
Money market funds ---------- -----------
Circle Trust Liquidity Fund $ 24,203 $ 82,779
American Cash Management 539 -
Common stock
Cascade Financial Corporation 2,394,876 1,161,810
Mutual and common commingled trust funds
Davis NY Venture, Large Cap Fund 918,767 919,859
CTC Capital Preservation Fund 411,476 470,238
Van Kampen, Large Cap, Growth & Income Fund 225,631 146,112
Growth Fund of America, Large Cap Growth Fund 163,630 71,172
Alger, Mid Cap Growth & Income Fund 109,929 82,959
Stock Fund
First Eagle SoGen Overseas, Foreign Equity 109,548 24,353
PIMCO, Real Return Bond Fund 107,949 -
PIMCO, Small Cap Value Fund 96,614 45,751
American, U.S. Government Securities Fund 91,263 -
Lord Abbott, Mid Cap Fund 73,623 -
Van Kampen, Equity & Income Fund 67,434 25,724
AIM, Small Cap Growth Fund 28,026 -
American, Fundamental Investors Fund 2,041 -
American, New Perspective Fund 1,651 -
Total 4,827,200 3,030,757
Loans to participants 93,658 98,695
--------- ---------
Total investments $4,920,858 $3,129,452
========= =========
9
CASCADE FINANCIAL CORPORATION
401(k) SALARY DEFERRAL AND PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
Note 7 - Reconciliation of Financial Statements to the Annual Return Report of
Employee Benefit Plan (Form 5500)
- ------------------------------------------------------------------------------
The following is a reconciliation of the changes in net assets available for
Plan benefits per the financial statements to the Form 5500 for the year ended
December 31, 2002:
2002
--------
Net decrease per financial statements $(54,438)
Plus
Contributions receivable, December 31, 2001 90,992
Excess contributions payable, December 31, (2,127)
2002 --------
Net decrease per Form 5500 $ 34,427
========
10
CASCADE FINANCIAL CORPORATION
401(k) SALARY DEFERRAL AND PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
SUPPLEMENTAL SCHEDULE
- ---------------------
CASCADE FINANCIAL CORPORATION
401(k) SALARY DEFERRAL AND PROFIT SHARING PLAN
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2003
(c)
DESCRIPTION OF
INVESTMENT
INCLUDING
MATURITY
DATE, RATE
(b) OF INTEREST,
IDENTITY OF ISSUER, COLLATERAL, (e)
BORROWER, LESSOR, PAR OR (d) CURRENT
(a) OR SIMILAR PARTY MATURITY VALUE COST** VALUE
- -------------------------------------------------------------------------------
* Circle Trust Liquidity Fund Money Market $ 24,203
American Cash Management Money Market 539
Davis NY Venture Large Cap Fund 918,767
Gartmore Morley CTC Capital Preservation Fund 411,476
Van Kampen Large Cap, Growth & Income Fund 225,631
Growth Fund of America Large Cap Growth Fund 163,630
Alger Mid Cap Growth Fund 109,929
First Eagle SoGen Overseas Foreign Equity Stock Fund 109,548
PIMCO Real Return Bond Fund 107,949
PIMCO Small Cap Value Fund 96,614
American U.S. Government Securities Fund 91,263
Lord Abbott Mid Cap Value Fund 73,623
Van Kampen Equity & Income Fund 67,434
AIM Small Cap Growth Fund 28,026
American Fundemental Investors Fund 2,041
American New Perspective Fund 1,651
* Cascade Financial Corporation Common Stock 2,394,876
Various participants Loans to participants -
interest at 5.0% to 10.50%
maturing through 2009 93,658
$4,920,858
* Party-in-interest as defined by ERISA
** Cost omitted with respect to partiicpant directed transactions under an
individual account plan
11
CASCADE FINANCIAL CORPORATION
401(k) SALARY DEFERRAL AND PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
SIGNATURE
---------
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
trustees (or other persons who administer the employee benefit plan) have duly
caused this annual report to be signed on its behalf by the undersigned
hereunto duly authorized on this 24th day of June, 2004.
Cascade Financial Corporation 401(k)
Salary Deferral and Profit Sharing Plan
Date: June 24, 2004 By: /s/ Lars H. Johnson
------------------------------
Lars H. Johnson
Chief Financial Officer
12
CASCADE FINANCIAL CORPORATION
401(k) SALARY DEFERRAL AND PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 AND 2002
EXHIBIT INDEX
-------------
The following documents are filed as part of this report:
Exhibit No. Exhibit
- ----------- -----------
23.1 Consent of Independent Registered Public
Accountants - Moss Adams LLP
23.2 Consent of Independent Registered Public Accounting
Firm - KPMG LLP
13