Exhibit 99.1
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 UP 12% IN 2004;
STRONG LOAN GROWTH CONTINUES, CREDIT QUALITY REMAINS OUTSTANDING
Everett, WA - January 25, 2005 - Cascade Financial Corporation (Nasdaq: CASB),
parent company of Cascade Bank, today reported that profits grew 12.4% in 2004
and 12.9% in the fourth quarter. Loan and core deposit growth remained strong,
through both internal generation and the acquisition of Issaquah Bancshares,
Inc., the parent company of Issaquah Bank, in June. Net income was $10.8
million in 2004, with diluted earnings per share growing to $1.16, compared to
$9.6 million and $1.13 the previous year. Excluding merger-related costs
incurred in the second quarter of 2004, earnings per share were $1.20 in the
year, compared to $1.13 in 2003. In the quarter ended December 31, 2004, net
income increased 12.9% to $2.8 million, or $0.29 per diluted share, compared to
$2.5 million, or $0.29 per share in the fourth quarter a year ago. Earnings
per share are adjusted to reflect the issuance of 1.26 million shares of common
stock as part of the consideration for acquiring Issaquah Bancshares.
2004 Highlights
- ---------------
* Net income increased 12.4% over 2003.
* Net interest income grew 17.3%.
* Revenues increased 12.8% to $37 million.
* Return on tangible equity improved to 16.2% and return on equity was 13.2%.
* Total loans grew 39.8% from a year ago, with a focus on higher-yielding
commercial credits.
* Credit quality remained strong, with nonperforming loans improving to 0.07%
of total loans at year-end.
* The cost of funds decreased, with checking accounts showing strong growth.
* Checking service fees grew considerably, while gains on the sale of loans
and securities dropped substantially.
"The past year was one of tremendous growth for Cascade, both through organic
growth and our acquisition of Issaquah Bancshares," stated Carol K. Nelson,
President and CEO. "We have focused on growing higher-yielding business and
commercial real estate loans and funding them with lower-cost deposits, and we
have maintained our excellent asset quality. As a result, Cascade is a
stronger institution than it was a year ago, and we have the tools in place to
continue our improvements in 2005."
Operating Results
- -----------------
"Our efforts to reduce long-term interest rate risk, combined with additional
Sarbanes-Oxley expenses, the suspension of the Federal Home Loan Bank of
Seattle's fourth quarter dividend, and costs associated with our acquisition of
Issaquah Bancshares made for a challenging 2004," Nelson said. "The interest
rate swaps we entered into in the third quarter will likely continue to mute
earnings growth until interest rates move up from current levels. Once rates
begin climbing, the strong fundamentals of our business, which include solid
loan growth, excellent credit quality and a commitment to efficient operations,
should allow us to achieve our long-term goal of 10-15% earnings per share
growth in 2005."
Revenues grew 12.8% to $37.1 million in 2004, from $32.9 million the previous
year. In the fourth quarter, revenues rose 20.2% to $9.9 million, compared to
$8.2 million in the last quarter of 2003.
"The two components of revenue, net interest income and non-interest income,
both showed considerable gains in the fourth quarter," stated Lars Johnson, EVP
and CFO. "Net interest income was also up for the year, but non-interest
income declined as our gains on sale of loans and securities were only $738,000
in 2004, compared to $2.6 million in the previous year. In addition, net
interest income was hindered in both the three- and twelve-month periods by a
couple of issues: our entry into interest rate swaps that limited our exposure
to rate movements, and our hesitancy to grow the securities portfolio in
anticipation of short-term rate hikes."
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Cascade Financial - 2004 Profits
January 25, 2005
Page Two
Net interest income grew 17.3% in the year to $32.4 million, compared to $27.6
million in 2003, reflecting a higher asset base and a shift in the mix of both
loans and deposits. Other income was $4.7 million in 2004, compared to $5.3
million in 2003, as a 46.3% increase in checking and service fees only
partially offset the dramatic decline in gains on sales of loans and
securities. Other expense grew 14.6% to $20.3 million in 2004, from $17.8
million last year, reflecting the merger expenses, internal growth, and
increased costs associated with regulatory compliance.
In the quarter ended December 31, 2004, net interest income was up 18.8% to
$8.7 million, from $7.3 million last year. Other income totaled $1.2 million
in the fourth quarter of 2004, compared to $887,000 a year earlier, reflecting
a 35.3% improvement in checking and service fees, offsetting the decline in
gain on sale of loans and securities. Other expenses were up 25.8% to $5.5
million in the quarter, from $4.4 million in the fourth quarter of last year,
due to costs associated with operating the two Issaquah Bank branches.
Balance Sheet Management
- ------------------------
"Business banking and commercial real estate lending remain a focal point, with
strong production throughout 2004 and a solid pipeline as we enter 2005,"
Nelson said. "While the Issaquah acquisition brought us high-quality
commercial loans and low-cost deposits, we continued to grow Cascade Bank's
balance sheet organically in the same manner."
Total loans increased 39.8% to $807 million at year-end, compared to $577
million at the end of 2003. The majority of new loans were internally
generated, although $101 million in loans were acquired with Issaquah
Bancshares. Total assets increased 23.0% to $1.1 billion at December 31, 2004,
compared to $885 million a year ago, again partially due to the additional
assets from Issaquah Bank.
Commercial loans grew 64.7% to $578 million, compared to $351 million a year
ago. The three components of the bank's commercial loan portfolio each
increased sizably over the past year, with commercial real estate growing by
113.1%, real estate construction loans growing 71.2%, and business loans
growing by 42.9%. At year-end, commercial loans represented 71.7% of total
loans, up from 60.8% of the portfolio a year ago. Multifamily loans grew by
5.9%, but decreased to 11.5% of total loans, from 15.1% at the end of last
year. Residential and other consumer loans declined slightly, dropping to
16.8% of total loans, from 24.0% a year ago.
Deposits have grown by 27.9% to $722 million, compared to $564 million at the
end of last year. Checking balances have grown by 78.9% and savings and money
market accounts have grown by 29.8%, reflecting a 45.5% increase in core
deposits. Time deposits have grown in dollars, but now represent 60.5% of
total deposits, down from 65.3% a year ago.
"Our focus on adding higher-yielding, commercial credits funded by low-cost
deposits has helped us to lower interest rate risk and expand our net interest
margin slightly," Johnson said. Securities available for sale have declined by
34.5% from a year ago to $124 million, and total securities have decreased by
22.0% to $216 million. Net interest margin improved to 3.44% in 2004, from
3.35% the previous year. In the fourth quarter, the net interest margin was
3.41%, compared to 3.45% in the final quarter of 2003.
Primarily due to the issuance of stock associated with the Issaquah Bank
acquisition, stockholders' equity grew 50.5% to $96.3 million, from $64.0
million at the end of last year. Book value per share was $10.07 at year-end
2004, compared to $7.76 a year earlier. Due primarily to the creation of
intangible assets in connection with the acquisition of Issaquah Bancshares,
tangible book value was $7.44, compared to $7.78 at the end of 2003.
Credit Quality
- --------------
"Credit quality remains exceptionally strong, with non-performing loans
declining despite our larger loan portfolio, which contains more higher-
yielding commercial credits than we had a year ago," Nelson said. "Net charge-
offs were actually cut in half from 2003."
At year-end 2004, nonperforming loans (NPLs) were $532,000, down dramatically
from $1.9 million a year ago. NPLs were 0.07% of total loans at December 31,
2004, compared to 0.33% of loans a year ago. Based on management's evaluation
of credit quality, the annual provision for loan losses decreased to $675,000
in the year, including $150,000 in the fourth quarter, compared to $1.3 million
and $300,000, respectively, in 2003. Cascade's allowance for loan losses was
$9.6 million at quarter-end, or 1.19% of total loans and well in excess of
nonperforming loans.
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Cascade Financial - 2004 Profits
January 25, 2005
Page Three
Performance Measures
- --------------------
Cascade's return on tangible equity (ROTE) improved to 16.2% in the year,
compared to 15.8% a year ago. ROTE grew to 16.4% for the fourth quarter of
2004, from 15.8% last year. Management uses ROTE, a non-GAAP performance
measure, to eliminate the goodwill created by the merger, and believes that
this provides a more consistent comparison with pre-merger performance. Return
on GAAP equity (ROE) was 11.9% in the quarter and 13.2% in 2004, compared to
15.8% in both periods a year ago. Return on assets (ROA) was 1.09%, compared
to 1.13% in 2003, and ROA was 1.04% in the fourth quarter, compared to 1.14%
last year. The efficiency ratio was 54.7% in 2004, versus 53.9% a year ago,
and 56.2% in the quarter ended December 31, 2004, compared to 53.7% in the
fourth quarter of 2003.
Conference Call
- ---------------
Carol Nelson and Lars Johnson will host a conference call on Wednesday, January
26, at 10:00 am PST (1:00 pm EST). 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 11018161#.
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 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 for a proper
understanding of the financial results of Cascade Financial Corporation, as
they provide 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
demand for Cascade's products and services, particularly quality commercial
loans, the continued successful integration of Issaquah Bank, loan delinquency
rates, the ability to attract low-cost deposits, management's ability to
minimize interest rate exposure and the impact of interest rate movements,
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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Cascade Financial - 2004 Profits
January 25, 2005
Page Four
CONSOLIDATED FINANCIAL HIGHLIGHTS
- ---------------------------------
(Dollars in thousands except Three Months Ended Twelve Months Ended
per share amounts) December 31, Change December 31, Change
2004 2003 2004 2003
INCOME STATEMENT ------------------ -------------------
- ---------------- (Unaudited) (Unaudited)
Interest income $ 15,093 $ 12,577 20.0% $ 55,316 $ 50,363 9.8%
Interest expense 6,395 5,254 21.7% 22,919 22,753 0.7%
--------- --------- --------- ---------
Net interest income 8,698 7,323 18.8% 32,397 27,610 17.3%
Provision for loan losses 150 300 -50.0% 675 1,275 -47.1%
--------- --------- --------- ---------
Net interest income after provision 8,548 7,023 21.7% 31,722 26,335 20.5%
Other income
Gain on sale of loans 29 107 -72.9% 228 855 -73.3%
Gain on sale of securities - 46 N/A 510 1,790 -71.5%
Checking service fees 555 439 26.4% 2,069 1,415 46.2%
Other service fees 197 117 68.4% 704 480 46.7%
BOLI 165 149 10.7% 566 598 -5.4%
Gain/(loss) on sale of real estate (17) - N/A 82 48 70.8%
Other non-interest income 239 29 724.1% 588 120 390.0%
--------- --------- --------- ---------
Total other income 1,168 887 31.7% 4,747 5,306 -10.5%
Total income 9,716 7,910 22.8% 36,469 31,641 15.3%
Compensation expense 3,094 2,471 25.2% 11,483 9,617 19.4%
Other operating expenses 2,451 1,938 26.5% 8,452 7,253 16.5%
Merger expenses - - NA 356 - NA
FHLB advance prepayment fees - - NA 26 863 -97.0%
--------- --------- --------- ---------
Total other expense 5,545 4,409 25.8% 20,317 17,733 14.6%
Net income before tax 4,171 3,501 19.1% 16,152 13,908 16.1%
Income tax expense 1,347 999 34.8% 5,367 4,309 24.6%
--------- --------- --------- ---------
Net earnings $ 2,824 $ 2,502 12.9% $ 10,785 $ 9,599 12.4%
========= ========= ========= =========
EARNINGS PER SHARE INFORMATION
- ------------------------------
Earnings per share, basic $ 0.30 $ 0.30 1.20 1.17
Earnings per share, diluted 0.29 0.29 1.16 1.13
Weighted average number of
shares outstanding:
Basic 9,560,593 8,236,650 8,952,493 8,184,455
Diluted 9,869,402 8,561,834 9,276,232 8,461,503
PERFORMANCE MEASURES
- --------------------
Return on equity 11.90% 15.77% 13.22% 15.81%
Return on tangible equity 16.40% 15.77% 16.24% 15.81%
Return on average assets 1.04% 1.14% 1.09% 1.13%
Efficiency ratio 56.20% 53.70% 54.70% 53.87%
Net interest margin 3.41% 3.45% 3.44% 3.35%
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Cascade Financial - 2004 Profits
January 25, 2005
Page Five
BALANCE SHEET December 31, 2004 September 30, 2004 December 31, 2003 Annual
- ------------- (Unaudited) (Unaudited) (Unaudited) Change
Cash and due from banks $ 11,692 $ 15,537 $ 13,011 -10.1%
Interest bearing deposits 1,337 1,663 1,060 26.1%
Securities held to maturity 91,339 95,340 86,719 5.3%
Securities available for sale 124,276 129,996 189,747 -34.5%
--------- --------- ---------
Total securities 215,615 225,336 276,466 -22.0%
Loans
Business 292,117 271,988 204,446 42.9%
Real estate construction 107,431 109,901 62,742 71.2%
Commercial real estate 178,704 170,450 83,856 113.1%
Multi-family 92,372 92,387 87,212 5.9%
Home equity/consumer 30,125 32,239 33,163 -9.2%
Residential 105,975 107,769 105,565 0.4%
--------- --------- ---------
Total Loans 806,724 784,734 576,984 39.8%
Deferred loan fees (2,695) (2,870) (2,179) 23.7%
Loan loss reserve (9,563) (9,435) (7,711) 24.0%
--------- --------- ---------
Loans, net 794,466 772,429 567,094 40.1%
Premises and equipment, net 12,824 12,923 8,587 49.3%
Real estate owned 868 891 474 83.1%
Bank owned life insurance 16,650 11,506 11,162 49.2%
Other assets 9,251 8,439 7,366 25.6%
Goodwill and intangibles 26,252 25,892 - NA
--------- --------- ---------
Total assets $1,088,955 $1,074,616 $ 885,220 23.0%
========= ========= =========
Deposits
Checking accounts 112,564 113,173 62,927 78.9%
Money market and savings accounts 172,584 173,963 132,986 29.8%
Certificates of deposit 436,760 423,277 368,401 18.6%
--------- --------- ---------
Total deposits 721,908 710,413 564,314 27.9%
FHLB advances 228,000 230,000 200,000 14.0%
Securities sold under repurchase agreement 20,902 20,886 39,911 -47.6%
Jr. Subordinated Deb. (TPS) 15,454 10,341 10,212 51.3%
Other liabilities 6,441 7,951 6,826 -5.6%
--------- --------- ---------
Total liabilities 992,705 979,591 821,263 20.9%
Stockholders' equity
Common stock & paid in capital 37,422 37,136 12,003 211.8%
Retained earnings 59,975 58,817 52,109 15.1%
Accumulated comprehensive gain/loss (1,147) (928) (155) 640.0%
--------- --------- ---------
Total stockholders' equity 96,250 95,025 63,957 50.5%
Total liabilities and equity $1,088,955 $1,074,616 $ 885,220 23.0%
========= ========= =========
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Cascade Financial - 2004 Profits
January 25, 2005
Page Six
ADDITIONAL INFORMATION December 31, 2004 September 30, 2004 December 31, 2003
- ---------------------- (Unaudited) (Unaudited) (Unaudited)
Book value per common share $ 10.07 $ 9.94 $ 7.76
Common stock outstanding 9,559,822 9,565,502 8,241,288
Capital/asset ratio
(Tier 1, inc. Jr. Subordinated Deb.) 10.26% 9.80% 8.37%
Average assets $1,083,470 $1,044,062 $ 876,262
Average earning assets 1,020,513 983,528 850,520
Average equity 94,806 91,668 63,627
Average tangible equity 68,896 65,757 63,627
Cash dividend per share $ 0.08 $ 0.07 $ 0.07
Total equity $ 96,250 $ 95,025 $ 63,957
Less goodwill and intangibles 26,252 25,892 -
Tangible equity $ 69,998 $ 69,133 $ 63,957
Tangible book value per share $ 7.32 $ 7.23 $ 7.76
Tangible capital/asset ratio
(ex. Jr. Subordinated Deb.) 6.59% 6.59% 7.22%
December 31, 2004 September 30, 2004 December 31, 2003
(Unaudited) (Unaudited) (Unaudited)
ASSET QUALITY
- -------------
Non-performing loans $ 532 $ 1,151 $ 1,921
Non-performing loans/total loans 0.07% 0.15% 0.33%
Net loan charge-offs (ytd) $ 218 $ 196 $ 436
Net loan charge-offs/total loans (ytd) 0.03% 0.02% 0.08%
Allowance for loan losses $ 9,563 $ 9,435 $ 7,711
Allowance for loan losses/NPLs 1798% 820% 401%
Allowance for loan losses/total loans 1.19% 1.20% 1.34%
Real estate owned $ 868 $ 891 $ 474
Non-performing assets/total assets 0.13% 0.19% 0.27%
-0-
Note: Transmitted on Business Wire on January 25, 2005 at 1:00 p.m. PST.