Exhibit 99
Cascade Financial Corporation The Cereghino Group
Contacts: Carol K. Nelson, CEO Corporate Investor Relations
Lars Johnson, CFO www.stockvalues.com
425.339.5500 206.762.0993
www.cascadebank.com
NEWS RELEASE
===============================================================================
CASCADE FINANCIAL'S NET INCOME INCREASES 28% IN THIRD QUARTER;
POSTS STRONG LOAN GROWTH WHILE MAINTAINING SOLID CREDIT QUALITY
Everett, WA - October 19, 2004 - Cascade Financial Corporation (Nasdaq: CASB),
parent company of Cascade Bank, today reported a 28% increase in quarterly
profits primarily due to 37% loan growth, funded largely by a growing core
deposit base. Net income was $3.1 million for the quarter ended September 30,
2004, compared to $2.4 million a year ago. Earnings per diluted share rose 10%
to $0.32, from $0.29 in the third quarter last year, adjusted to reflect the
June issuance of 1.2 million shares as part of the consideration for acquiring
Issaquah Bancshares.
For the nine-month period, net income grew 12% to $8.0 million, representing
$0.87 per diluted share, compared to $7.1 million, or $0.84 per share in the
same period last year. The YTD 2004 EPS number includes $0.04 per share of
merger related expenses, and four months of Issaquah Bank's operations.
Third Quarter 2004 Highlights
- -----------------------------
* Net income increased 28% over the third quarter of 2003.
* Announced a 14% increase in the quarterly cash dividend to $0.08 per share.
* Return on tangible equity improved to 18.9%.
* Total loans grew 37% from a year ago, with emphasis on higher-yielding
commercial credits.
* Asset quality remained strong, with nonperforming loans at 0.15% of total
loans.
* Checking and other service fees grew dramatically, gain on sale of loans and
securities dropped substantially.
* CEO Carol K. Nelson was named one of the 25 Most Powerful Women in Banking by
US Banker magazine.
"The integration of Issaquah Bank has gone well, marked by exceptionally high
customer and employee retention," stated Carol K. Nelson, President and CEO.
"Our profitability has improved dramatically with net income up 28% over a year
ago, and earlier this month we announced an increase in our cash dividend to
share that success with our shareholders."
Balance Sheet Management
- ------------------------
Total loans increased 37% to $785 million at the end of the third quarter,
compared to $574 million a year ago. More than half of Cascade's $211 million
loan growth was internally generated at Cascade, while the remainder resulted
from the Issaquah transaction. Total assets increased 24% to $1.1 billion at
September 30, 2004, compared to $870 million a year ago, partially due to the
additional assets from Issaquah Bank.
"The acquisition helped to ramp up our commercial lending business and added to
our core deposit base," Nelson said. "We have carried that momentum forward
and continued to shift our balance sheet organically as well. Loan production
was outstanding in the third quarter, particularly in commercial lending, and
the pipeline remains strong. Our focus on growing these higher-yielding assets
and lowering our cost of funds has helped us to expand our net interest margin
slightly."
Commercial loans, including commercial real estate, business, and real estate
construction loans, grew 59% to $552 million, compared to $348 million a year
ago. Each category showed meaningful growth, with commercial real estate
growing by 117%, construction loans growing 55%, and business loans growing by
37%. Commercial loans now account for 70% of total loans, up from 61% of the
portfolio a year ago. Multifamily loans grew by 9%, but have decreased to 12%
of total loans, from 15% at the end of September last year. Residential and
other consumer loans showed a minimal decline, but dropped to 18% of total
loans, from 25% a year ago.
Deposits have grown by 28% over the last year to $710 million, compared to $555
million at the end of the third quarter last year. Checking balances have
grown by 85% and savings and money market accounts have grown by 27%,
reflecting a 45% increase in core deposits. Time deposits have grown by 19%,
but now represent 60% of total deposits, down from 64% a year ago.
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Cascade Financial - 3Q04 Profits
October 19, 2004
Page Two
"In addition to utilizing new customer deposits, we have continued to reduce
our securities portfolio to fund our loan growth," said Lars Johnson, EVP and
CFO. "This strategy allows us to capitalize on high loan demand while reducing
our exposure to rising interest rates." Securities available for sale have
declined by 24% from a year ago to $130 million, and total securities have
decreased by 13% to $225 million.
Net interest margin was 3.48% in the third quarter of 2004, compared to 3.25% a
year ago. Year-to-date, the net interest margin improved to 3.45%, from 3.32%
in the first nine months of 2003. "We entered into two interest rate swaps in
the third quarter, which reduce our exposure to a rise in short-term interest
rates as the Federal Reserve continues on its tightening path," Nelson said.
"At the same time, the swaps had a modest negative impact on net income and our
net interest margin. We remain flexible and will continue to evaluate our
hedging strategy to maximize profitability in the near-term, without
sacrificing long-term success."
Largely due to the issuance of stock associated with the Issaquah Bank
acquisition, stockholders' equity grew 52% to $95.0 million, from $62.5
million at the end of the third quarter last year. Book value per share was
$9.94 at September 30, 2004, compared to $7.59 a year earlier. Tangible book
value was $7.23, compared to $7.59 at the end of the third quarter of 2003, due
primarily to the creation of intangible assets in connection with the
acquisition of Issaquah Bank.
Credit Quality
- --------------
"Credit quality remained strong, even as we replaced lower-yielding single
family mortgages with higher-yielding loans," Nelson said. "We maintain strict
underwriting standards and constantly monitor our portfolio to tackle potential
issues before they become problematic." At September 30, 2004, nonperforming
loans (NPLs) were $1.2 million, flat from a year ago despite the increased loan
base. NPLs were 0.15% of total loans at September 30, 2004, compared to 0.21%
of loans a year ago. Based on management's evaluation of credit quality, the
provision for loan losses decreased to $525,000 in the first nine months of the
year, including $150,000 in the third quarter, compared to $975,000 and
$300,000, respectively, in 2003. Cascade's allowance for loan losses was $9.4
million at quarter-end, or 1.20% of total loans and 820% of nonperforming
loans.
Operating Results
- -----------------
Net interest income grew 25% to $8.6 million in the third quarter of 2004,
compared to $6.9 million a year ago, reflecting a higher asset base and a shift
in the asset mix. A 58% increase in checking and service fees was offset by a
73% decline in gain on sale of loans and securities. As a result, other income
was $1.2 million in the quarter, compared to $1.4 million last year. Other
expense grew 16% to $5.0 million, from $4.3 million in the third quarter of
2003, primarily due to the addition of the Issaquah Bank employees.
Revenues grew 19% to $9.8 million in the third quarter, from $8.2 million a
year ago. Year-to-date, revenues are up 10% to $27.3 million, compared to
$24.7 million in the first nine months of 2003.
For the nine-month period, net interest income was up 17% to $23.7 million,
from $20.3 million in the first three quarters of 2003, reflecting an increase
in interest income and a decline in interest expense. As in the quarter-to-
quarter comparison, checking account and service fees were up dramatically in
the nine-month period, but offset by sizable decreases in gains on sale of
loans and securities. As a result, other income decreased by 19% to $3.6
million for the first nine months of 2004, compared to $4.4 million a year ago.
Other expenses were up 11% to $14.8 million year-to-date, compared to $13.3
million in the nine-month period last year.
Performance Measures
- --------------------
Cascade's return on tangible equity (ROTE) improved significantly to 18.9% in
the quarter ended September 30, 2004, compared to 15.5% a year ago. ROTE grew
to 16.2% for the nine-month period, compared to 15.9% a year ago. Return on
assets (ROA) improved to 1.19%, from 1.11% in the third quarter a year ago.
For the nine-month period, ROA was 1.11%, compared to 1.13% last year. On a
quarter-to-quarter basis, the efficiency ratio improved to 51.1% from 52.9% a
year ago. For the nine-month period, the efficiency ratio was 54.2%, versus to
53.9% a year ago.
"We have kept operating expenses in line as we have integrated Issaquah,"
Nelson said. "As a result, our third quarter performance ratios all showed
improvement, excluding ROE, which was impacted by the increased capital base
associated with the transaction." Return on GAAP equity (ROE) was 13.5% in the
quarter and 13.8% for the first nine months of 2004, compared to 15.5% and
15.9%, respectively, a year ago.
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Cascade Financial - 3Q04 Profits
October 19, 2004
Page Three
Conference Call
- ---------------
Carol Nelson and Lars Johnson will host a conference call on October 20, 2004,
at 10:00 am PDT (1:00 pm EDT). Interested investors may listen to the call
live or via replay at www.cascadebank.com. Investment professionals are
invited to dial (303) 262-2140 to participate in the live call. A telephone
replay of the call will be available for three weeks at (303) 590-3000, using
passcode 11010038#.
About Cascade Financial
- -----------------------
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 16 full service offices,
located in Everett, Lynnwood, Marysville, Mukilteo, Smokey Point, Issaquah,
Clearview, Woodinville, Lake Stevens, Bellevue and Snohomish. Issaquah Bank, a
division of Cascade Bank, operates offices in Issaquah and North Bend.
In 2003, Washington CEO magazine ranked Cascade Bank the #1 medium sized "Best
Company to Work For" in Washington State. In July 2004, US Banker magazine
ranked Cascade #39 out of the Top 200 Publicly Traded Community Banks with less
than $1 billion in assets, based on three-year average return on equity. In
October, the same publication named President and CEO Carol Nelson one of the
25 Most Powerful Women in Banking.
This press release contains supplemental financial information determined by
methods other than in accordance with Accounting Principles Generally Accepted
in the United States of America ("GAAP"). These measures include return on
tangible equity, tangible book value per share and tangible capital to asset
ratio. Cascade's management uses these non-GAAP measures in its analysis of
the company's performance. These measures exclude the average and ending
balances of acquisition-related goodwill and intangibles in determining average
tangible shareholders' equity. Banking and financial institution regulators
also exclude goodwill and intangibles from shareholders' equity when assessing
the capital adequacy of a financial institution. Management believes the
presentation of the financial measure excluding the impact of these items
provides useful supplemental information that is essential to a proper
understanding of the financial results of Cascade Financial Corporation as it
provides a method to assess management's success in utilizing the company's
tangible capital. This disclosure should not be viewed as a substitute for
results determined to be in accordance with GAAP, nor is it necessarily
comparable to non-GAAP performance measures that may be presented by other
companies.
Safe Harbor Statement
- ---------------------
This document contains forward-looking statements 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, continued strong
loan demand in Cascade's operating market, the continued successful integration
of Issaquah Bank, management's ability to minimize interest rate exposure, loan
delinquency rates, the ability to continue to attract quality commercial
business, interest rate movements, fluctuation in demand for the company's
products and services, the 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 for the fiscal
year ended December 31, 2003.
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October 19, 2004
Page Four
CONSOLIDATED FINANCIAL HIGHLIGHTS
- ---------------------------------
Three Months Ended Nine Months Ended
INCOME STATEMENT September 30, September 30,
(Dollars in thousands, 2004 2003 2004 2003
except per share numbers) ------------------------ -----------------------
(Unaudited) (Unaudited)
Interest income $ 14,518 $ 12,506 16.1% $ 40,223 $ 37,786 6.4%
Interest expense 5,967 5,660 5.4% 16,525 17,499 -5.6%
--------- --------- --------- ---------
Net interest income 8,551 6,846 24.9% 23,698 20,287 16.8%
Provision for loan losses 150 300 -50.0% 525 975 -46.2%
--------- --------- --------- ---------
Net interest income
after provision for loan losses 8,401 6,546 28.3% 23,173 19,312 20.0%
Other income
Gain on sale of loans 55 275 -80.0% 199 748 -73.4%
Gain on sale of securities 129 405 -68.1% 510 1,745 -70.8%
Checking fees 569 374 52.1% 1,513 975 55.2%
Service fees 201 114 76.3% 508 363 39.9%
Gain/(loss) on sale of real estate - - NA 99 48 106.3%
Bank owned life insurance 134 155 -13.5% 401 450 -10.9%
Rent & other income 150 30 400.0% 349 90 287.8%
--------- --------- --------- ---------
Total other income 1,238 1,353 -8.5% 3,579 4,419 -19.0%
--------- --------- --------- ---------
Total income 9,639 7,899 22.0% 26,752 23,731 12.7%
Compensation expense 3,083 2,341 31.7% 8,390 7,147 17.4%
Other operating expenses 1,922 1,846 4.1% 6,355 5,315 19.6%
FHLB prepayment fees - 146 -100.0% 26 863 -97.0%
--------- --------- --------- ---------
Total other expense 5,005 4,333 15.5% 14,771 13,325 10.9%
Net income before tax 4,634 3,566 29.9% 11,981 10,406 15.1%
Income tax expense 1,531 1,133 35.1% 4,020 3,310 21.5%
--------- --------- --------- ---------
Net income $ 3,103 $ 2,433 27.5% $ 7,961 $ 7,096 12.2%
========= ========== ========= =========
EARNINGS PER SHARE INFORMATION
- ------------------------------
Earnings per share, basic $ 0.33 $ 0.30 9.8% $ 0.91 $ 0.87 4.5%
Earnings per share, diluted $ 0.32 $ 0.29 10.4% $ 0.87 $ 0.84 4.2%
Weighted average number of
shares outstanding:
Basic 9,540,663 8,213,898 16.2% 8,770,054 8,168,245 7.4%
Diluted 9,835,923 8,512,400 15.5% 9,098,496 8,447,661 7.7%
PERFORMANCE MEASURES
- --------------------
Return on equity 13.54% 15.54% -12.9% 13.76% 15.87% -13.3%
Return on tangible equity 18.94% 15.54% 21.9% 16.18% 15.87% 1.9%
Return on assets 1.19% 1.11% 7.2% 1.11% 1.13% -1.8%
Efficiency ratio 51.13% 52.85% -3.3% 54.15% 53.93% 0.4%
Net interest margin 3.48% 3.25% 7.1% 3.45% 3.32% 4.1%
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October 19, 2004
Page Five
BALANCE SHEET September 30, 2004 December 31, 2003 September 30, 2003 Year-Over-Year
(Dollars in thousands) ------------------ ----------------- ------------------ Change
(Unaudited) (Unaudited) (Unaudited) --------------
Cash and due from banks $ 15,537 $ 13,011 $ 9,880 57.3%
Interest bearing deposits 1,663 1,060 9,795 -83.0%
Securities held to maturity 95,340 86,719 88,671 7.5%
Securities available for sale 129,996 189,747 171,123 -24.0%
--------- --------- ---------
Total Securities 225,336 276,466 259,794 -13.3%
Loans
Business 271,988 204,446 198,003 37.4%
R/E construction 109,901 62,742 71,145 54.5%
Commercial real estate 170,450 83,856 78,733 116.5%
Multifamily 92,387 87,212 84,873 8.9%
Home equity/consumer 32,239 33,163 34,168 -5.6%
Residential 107,769 105,565 106,580 1.1%
--------- --------- ---------
Total loans 784,734 576,984 573,502 36.8%
Deferred loan fees (2,870) (2,179) (2,210) 29.9%
Allowance for loan losses (9,435) (7,711) (7,642) 23.5%
--------- --------- ---------
Loans, net 772,429 567,094 563,650 37.0%
Premises and equipment 12,923 8,587 8,543 51.3%
Real Estate Owned 891 474 356 150.3%
Bank owned life insurance 11,506 11,162 11,029 4.3%
Other assets 8,439 7,366 6,797 24.2%
Goodwill and intangibles 25,892 - - n/a
--------- --------- ---------
Total assets $1,074,616 $ 885,220 $ 869,844 23.5%
========= ========= =========
Deposits
Checking accounts 113,173 62,927 61,163 85.0%
Savings and money market accounts 173,963 132,986 137,355 26.7%
Certificates of deposit 423,277 368,401 356,135 18.9%
--------- --------- ---------
Total deposits 710,413 564,314 554,653 28.1%
FHLB advances 230,000 200,000 192,000 19.8%
Securities sold under agreement to repurchase 20,886 39,911 40,588 -48.5%
Junior Subordinated Debt (TPS) 10,341 10,212 10,310 0.3%
Other liabilities 7,951 6,826 9,840 -19.2%
--------- --------- ---------
Total liabilities 979,591 821,263 807,391 21.3%
Stockholders' equity
Common stock and paid in capital 37,136 12,003 11,840 213.6%
Retained earnings 58,817 52,109 50,189 17.2%
Accumulated comprehensive gain/(loss) (928) (155) 424 -318.9%
--------- --------- ---------
Total stockholders' equity 95,025 63,957 62,453 52.2%
--------- --------- ---------
Total liabilities and equity $1,074,616 $ 885,220 $ 869,844 23.5%
========= ========= =========
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Cascade Financial - 3Q04 Profits
October 19, 2004
Page Six
ADDITIONAL INFORMATION
- ----------------------
(Dollars in thousands, September 30, 2004 December 31, 2003 September 30, 2003
except per share numbers) ------------------ ----------------- ------------------
(Unaudited) (Unaudited) (Unaudited)
Book value per common share $ 9.94 $ 7.76 $ 7.59
Common stock outstanding 9,560,502 8,241,288 8,231,143
Capital/asset ratio (including Sub. Deb.) 9.80% 8.38% 8.33%
Average assets $1,044,062 $ 876,262 $ 839,846
Average earning assets $ 983,528 $ 850,520 $ 865,399
Average equity $ 91,668 $ 63,627 $ 62,058
Average tangible equity $ 65,550 $ 63,627 $ 62,058
Cash dividend per share $ 0.07 $ 0.07 $ 0.06
Total equity $ 95,025 $ 63,957 $ 62,453
Less goodwill and intangibles $ 25,892 - -
--------- --------- ---------
Tangible equity $ 69,133 $ 63,957 $ 62,453
========= ========= =========
Tangible book value per share $ 7.23 $ 7.76 $ 7.59
Tangible cap/asset ratio (excluding Sub. Deb.) 6.59% 7.22% 7.18%
ASSET QUALITY
- -------------
Nonperforming loans (NPLs) $ 1,151 $ 1,921 $ 1,209
Nonperforming loans/total loans 0.15% 0.33% 0.21%
Nonperforming assets/total assets 0.19% 0.27% 0.18%
Net loan charge-offs (recoveries) in the quarter $ 186 $ 231 $ 234
Net charge-offs/total loans (%) 0.02% 0.04% 0.04%
Allowance for loan losses/nonperforming loans 820% 401% 632%
Allowance for loan losses/total loans 1.20% 1.34% 1.33%
-0-
Note: Transmitted on Business Wire on October 19, 2004 at 1:00 p.m. PDT.