SCHEDULE 14A
(Rule 14a-101)

INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934
(Amendment No. )

Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]

Check the Appropriate Box:

[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12

CASCADE FINANCIAL CORPORATION
(Name of Registrant as Specified in Its Charter)
----------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[x] No fee required

[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

[ ] Fee paid previously with preliminary materials:

[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:

Cascade Financial Corporation logo

March 30, 2005

Dear Shareholder:

You are cordially invited to attend the Annual Meeting of Shareholders of
Cascade Financial Corporation (the "Company") to be held at the Everett Golf
and Country Club, 1500 52nd Street SE, Everett, Washington, at 6:30 p.m. on
Tuesday, April 26, 2005.

The enclosed Notice of Annual Meeting and Proxy Statement describe the formal
business to be transacted at the meeting. During the meeting, we will also
report on the operations of the Company, and its bank subsidiary, Cascade Bank.
Directors and officers of the Company will be present to respond to appropriate
questions from shareholders.

Detailed information concerning our activities and operating performance during
the fiscal year ended December 31, 2004 is contained in the Annual Report to
Shareholders.

Your vote is important. Whether or not you are able to attend, it is important
that your shares be represented at the Annual Meeting. Accordingly, we ask
that you please sign, date and return the enclosed proxy card at your earliest
convenience, or vote your shares by internet or telephone as described in the
following materials.

We look forward to seeing you at the meeting.

Sincerely,

/s/ David W. Duce /s/ Carol K. Nelson
- ---------------------- -------------------------------------
David W. Duce Carol K. Nelson
Chairman of the Board President and Chief Executive Officer

Enclosure

2828 Colby Avenue, Everett, WA 98201
425-339-5500 or 800-326-8787
www.cascadebank.com

CASCADE FINANCIAL CORPORATION
NOTICE OF ANNUAL MEETING
OF SHAREHOLDERS

TIME 6:30 p.m., Pacific Standard Time, on Tuesday,
- ---- April 26, 2005.

PLACE Everett Golf and Country Club
- ----- 1500 52nd Street SE
Everett, Washington

ITEMS OF BUSINESS 1. To elect four directors, one to hold office until the
- ----------------- 2007 Annual Meeting of Shareholders and three to hold
office until the 2008 Annual Meeting of Shareholders;
and

2. To take action on any other business that may
properly be considered at the meeting or any
adjournment thereof.

RECORD DATE You may vote at the meeting if you were a shareholder of
- ----------- record at the close of business on March 15, 2005.

VOTING BY PROXY If you cannot attend the Annual Meeting, you may vote
- --------------- your shares over the internet or by telephone, or by
completing and promptly returning the enclosed proxy card
in the envelope provided. Internet and telephone voting
procedures are described in the General Information About
the Meeting and Voting section on page 1 and on the proxy
card provided to you.

ANNUAL REPORT Cascade Financial Corporation's December 31, 2004 Annual
- ------------- Report, which is not part of the proxy soliciting
material, is enclosed.

By Order of the Board of Directors,

/s/ Lars H. Johnson
-------------------
Lars H. Johnson
Secretary

This Notice of Annual Meeting, Proxy Statement and accompanying proxy card
are being distributed on or about March 30, 2005.

CASCADE FINANCIAL CORPORATION
2828 Colby Avenue
Everett, Washington 98201

---------------------

PROXY STATEMENT
Annual Meeting of Shareholders
April 26, 2005

We are providing these proxy materials in connection with the solicitation
by the Board of Directors of Cascade Financial Corporation (the "Company") of
proxies to be voted at the Company's Annual Meeting of Shareholders to be held
on April 26, 2005, and at any adjournment of the meeting.

GENERAL INFORMATION ABOUT THE MEETING AND VOTING
------------------------------------------------

Who may vote at the meeting?
- ----------------------------

The Board of Directors of the Company (the "Board") has set March 15,
2005, as the record date for the meeting. If you were the owner of Company
common stock at the close of business on March 15, 2005, you may vote at the
meeting. You are entitled to one vote for each share of common stock you held
on the record date.

How many shares must be present to hold the meeting?
- ----------------------------------------------------

A majority of the Company's outstanding common shares as of the record
date must be present at the meeting in order to hold the meeting and conduct
business. Abstentions are counted as present and entitled to vote for purposes
of determining a quorum. On the record date, there were 9,572,448 shares of
Company common stock outstanding. Shares are counted as present at the meeting
if you:

* Are present and vote in person at the meeting; or
* Have voted by internet or telephone; or
* Have properly submitted a proxy card.

What proposals will be voted on at the meeting?
- -----------------------------------------------

The only proposal scheduled to be voted on at the meeting is the election
of four directors, one to hold office until the 2007 Annual Meeting of
Shareholders, and three to hold office until the 2008 Annual Meeting of
Shareholders.

How many votes are required to approve the proposals?
- -----------------------------------------------------

The affirmative vote of a plurality of the votes cast at the meeting is
required for the election of directors.

How are votes counted?
- ----------------------

You may either vote "FOR" or "WITHHOLD" authority to vote for each nominee
for the Board of Directors. If you withhold authority to vote for the election
of directors, your shares will not be voted with respect to the director or
directors identified. If you just sign and submit your proxy card without
voting instructions, your shares will be voted "FOR" each director nominee.

-1-

If you hold your shares in street name and do not provide voting
instructions to your broker, your shares will not be voted on any proposal on
which your broker does not have discretionary authority to vote. This is
called a "broker non-vote." Shares held by brokers who do not have
discretionary authority to vote on a particular matter and who have not
received voting instructions from their customers are not counted or deemed to
be present or represented for the purpose of determining whether shareholders
have approved that matter, but they are counted as present for the purpose of
determining a quorum at the Annual Meeting.

How does the Board recommend that I vote?
- -----------------------------------------

The Board recommends that you vote your shares "FOR" each of the director
nominees.

How do I vote my shares without attending the meeting?
- ------------------------------------------------------

If you are a shareholder of record or hold shares through a Cascade stock
plan, you may vote by granting a proxy. For shares held in street name, you
may vote by submitting voting instructions to your broker or nominee. In any
circumstance, you may vote:

* By Internet or Telephone - If you have internet or telephone access, you
may submit your proxy by following the voting instructions on the proxy
card. If you vote by internet or telephone, you do not need to return
your proxy card.

* By Mail - You may vote by mail by signing and dating your proxy card and
mailing it in the envelope provided. You should sign your name exactly as
it appears on the proxy card. If you are signing in a representative
capacity (for example, as guardian, executor, trustee, custodian, attorney
or officer of a corporation), you should indicate your name and title or
capacity.

Internet and telephone voting facilities will close at 11:59 p.m., Eastern
Time, on April 25, 2005.

How do I vote my shares in person at the meeting?
- -------------------------------------------------

If you are a shareholder of record and prefer to vote your shares at the
meeting, you should bring the enclosed proxy card or proof of identification.
You may vote shares held in street name at the meeting only if you obtain a
signed proxy from the record holder (broker or other nominee) giving you the
right to vote the shares.

Even if you plan to attend the meeting, we encourage you to vote in
advance by internet, telephone or proxy card so your vote will be counted
even if you later decide not to attend the meeting.

What does it mean if I receive more than one proxy card?
- --------------------------------------------------------

It generally means you hold shares registered in more than one account.
To ensure that all your shares are voted, sign and return each proxy card.

May I change my vote?
- ---------------------

Yes. If you vote by mail, you may later change your vote and revoke your
proxy card by:

* Sending a written statement to that effect to the Secretary of the Company
on or before April 12, 2005;

* Voting by internet or telephone at a later date;

* Submitting a properly signed proxy card with a later date; or

* Voting in person at the Annual Meeting.

-2-

PROPOSAL 1 - ELECTION OF DIRECTORS
----------------------------------

Directors and Nominees
- ----------------------

The Board is divided into three classes approximately equal in size. The
members of each class are usually elected to serve three-year terms with the
term of office of each class ending in successive years. However, since
Richard L. Anderson was appointed to the Board in 2004, the Company's Bylaws
require that he stand for election at the 2005 Annual Meeting. To keep the
classes of directors approximately equal, the Company's Corporate Governance
and Nominating Committee recommends that Mr. Anderson be initially elected to
a two-year term ending in 2007. David W. Duce, Carol K. Nelson and David R.
O'Connor are the directors whose terms expire at this Annual Meeting and who
have been nominated for re-election to the Board to serve until the 2008 Annual
Meeting or until their successors are elected and qualified. All nominees are
currently directors.

All the nominees have consented to being named as a nominee in this Proxy
Statement and have indicated a willingness to serve if elected. However, if any
nominee becomes unable to serve before the election, the shares represented by
proxies may be voted for a substitute nominee designated by the Board, unless a
contrary instruction is indicated on the proxy card. Set forth hereafter is a
short biographical summary of each director and the first date they served as a
director for either the Company or prior to formation of the Company in 1994,
Cascade Bank.

NOMINEE FOR DIRECTOR FOR TWO-YEAR TERM ENDING 2007
--------------------------------------------------

RICHARD L. ANDERSON, C.P.A. Director since 2004
- ---------------------------

Richard L. Anderson, age 50, is a certified public accountant and managing
shareholder with Hascal, Sjoholm & Company, P.S., a firm with which he has been
employed since 1976. This firm is the largest locally owned certified public
accounting firm in Snohomish County, serving businesses and families since
1948. He is a member of the Downtown Everett Rotary and has served board
positions with a wide range of civic and community groups, including the
Greater Everett Community Foundation, Everett Public Facilities District,
Compass Health, the Everett Public Library, Arts United, and Big Brothers/Big
Sisters of Snohomish County, among others. Mr. Anderson earned his Bachelor of
Arts Degree in Business Administration with an emphasis in accounting from
Washington State University and earns continuing professional education credits
in numerous topics sponsored by the American Institute of Certified Public
Accountants and the Washington Society of CPAs. He resides in Everett,
Washington. Mr. Anderson serves as a member of the Audit and Finance
Committee.

NOMINEES FOR DIRECTORS FOR THREE-YEAR TERMS ENDING 2008
-------------------------------------------------------

DAVID W. DUCE Director since 1991
- -------------

David W. Duce, age 45, has been a practicing attorney with the Everett law
firm of Duce Bastian Peterson since 1985. He was elected Chairman of Cascade
Financial Corporation's Board of Directors in May 2004 and serves as Chair of
the Executive Committee. Mr. Duce previously served as Vice Chair of the
Company and Chair of the Company's Compensation and Personnel Committee. Mr.
Duce received his Juris Doctor degree Magna Cum Laude from Pepperdine
University School of Law in 1984. Mr. Duce is a past chairman of the
Professional Negligence Section of the Washington State Trial Lawyers
Association and is an arbitrator for Snohomish County Superior Court.

-3-

CAROL K. NELSON Director since 2001
- --------------

Carol K. Nelson, age 48, was appointed Chief Executive Officer of the
Company commencing May 1, 2002. She has served as President of the Company and
President and Chief Executive Officer of the Bank since February 2001. She was
previously Senior Vice President and Northern Region Executive of Bank of
America from 1996 to 2001. Ms. Nelson holds a Bachelor's degree in Business
Finance and a Master's degree in Business Administration from Seattle
University. Ms. Nelson is the immediate past Chair of the Board of United
Way of Snohomish County and chaired the 1999 Community Campaign. She serves
on the Board of Directors of the Boys and Girls Club of Snohomish County,
Washington Bankers Association, the Washington Roundtable, the Washington State
Major League Baseball Stadium Public Facilities District, and the Executive
Advisory Board of the Albers School of Business and Economics at Seattle
University. She is a past President of the Puget Sound Council of Camp Fire
Boys and Girls. Ms. Nelson also serves as Vice Chair of the Company's
Executive Committee and as a member of the Bank's Loan Committee.

DAVID R. O'CONNOR Director since 1997
- -----------------

David R. O'Connor, age 59, has been a co-owner of Mobile Country Club in
Everett, Washington since 1993. He was co-owner of O'Connor & Oehler
Construction, Inc. from 1974 to 1996 and continues in his development business.
Mr. O'Connor is a member of the Manufactured Housing Communities of Washington.
Mr. O'Connor serves as a member of the Company's Compensation and Personnel
Committee, the Corporate Governance and Nominating Committee and Executive
Committee. He chairs the Bank's Loan Committee. Mr. O'Connor was a founding
director of American First National Bank, which was acquired by Cascade Bank in
1997.

THE BOARD RECOMMENDS A VOTE FOR THESE NOMINEES.

DIRECTORS CONTINUING IN OFFICE UNTIL 2006
-----------------------------------------

DWAYNE R. LANE Director since 1995
- --------------

Dwayne R. Lane, age 69, is the owner of two automobile dealerships in
Everett and one in Arlington, Washington. He has owned these dealerships for
over 10 years. Mr. Lane is active in community affairs. He served 12 years as
an Everett Port Commissioner and was a board member for Olympic Bank and
Providence Hospital. Mr. Lane serves as a member of the Company's Compensation
and Personnel Committee.

DENNIS R. MURPHY, PH.D. Director since 1991
- -----------------------

Dennis R. Murphy, age 63, is Dean of the College of Business and Economics
and Professor of Economics at Western Washington University in Bellingham,
Washington, a position he has held since 1983. He served on the board of the
Northwest Medical Bureau, where he chaired the Audit and Finance Committee, the
Audit and Finance Committee of Western Washington University Foundation and the
Regence Blue Shield Advisory Board. He is an immediate past member of the
Whatcom Chamber of Commerce and Industry board and serves on the board of Jr.
Achievement. He is past president of the United Way of Whatcom County and the
Rotary Club of Bellingham. Dr. Murphy chairs the Audit and Finance Committee
and serves as a member of the Executive Committee.

RONALD E. THOMPSON Director since 1991
- ------------------

Ronald E. Thompson, age 55, is the President of Windermere Commercial,
Windermere Property Management and Turnkey Repair and Maintenance Divisions of
Windermere Real Estate/Realty Brokerage, Inc. in Everett, Washington. He has
been employed at Windermere Real Estate/Realty Brokerage, Inc. since 1984. The
company provides full service commercial real estate brokerage, property

-4-

management and property maintenance services. He is a past president of the
Snohomish County-Camano Association of Realtors, a past state director of the
Washington Association of Realtors and has served on the Board of Directors of
the Mount Baker Council Boy Scouts of America, Providence Hospital Foundation's
Board and the Everett Golf and Country Club. He received his Bachelor's degree
in Business Administration from the University of Washington. Prior to his 25
plus years in real estate, he was a commercial banker. Mr. Thompson serves as
the current Chair of the Corporate Governance and Nominating Committee, and is
also a member of the Audit and Finance Committee, Loan Committee, and Executive
Committee.

G. BRANDT WESTOVER Director since 1986
- ------------------

G. Brandt Westover, age 44, is Senior Vice President and Complex Manager
for UBS Financial Services, Inc. in Seattle, Washington, a position he has held
since 2003. Prior to this position, Mr. Westover was a corporate vice
president and branch manager for UBS-Paine Webber in Bellevue, Washington from
1996 to 2002. He received his Bachelor's degree in Business Administration
from the University of Washington and graduated from the Wharton School's
Securities Institute advanced course work program. Mr. Westover is a past
trustee of the University of Washington Alumni Association. He is also active
with many charitable and community organizations including the Boys and Girls
Club and Issaquah Little League. Mr. Westover serves as Vice Chair of the
Board and the Compensation and Personnel Committee, and is a member of the
Executive Committee, and the Corporate Governance and Nominating Committee.

DIRECTORS CONTINUING IN OFFICE UNTIL 2007
-----------------------------------------

JANICE E. HALLADAY Director since 1999
- ------------------

Janice E. Halladay, age 61, is a retired bank executive. Ms. Halladay was
previously employed by Pioneer Bank in Lynnwood, Washington for 20 plus years
and served as Senior Vice President of Operations from 1987 to 1993. She is a
graduate of the School for Executive Development. She was subsequently
employed by Moss Adams LLP, a regional accounting firm from 1997 to 2000. She
is currently a member of the Board of Directors of the Northwest Service Area
of the Providence Health System where she is a member of the Executive
Committee and Chair of the Quality Care Committee, and serves as a member of
the Camping Board of Stewards of the Pacific Northwest Conference of the
Methodist Church. Ms. Halladay serves as Chair of the Company's Compensation
and Personnel Committee, as a member of the Company's Corporate Governance and
Nominating Committee and Executive Committee, and as a member of the Bank's
Loan Committee.

HENRY M. ROBINETT Director since 1997
- -----------------

Henry M. Robinett, age 74, is a general partner of Boyden, Robinett &
Associates, LP, a real estate partnership involved in residential building,
development and investments, a position he has held since 1990. He is a retired
Marine Corp Officer, and holds a Bachelor's degree in General Education from
the University of Omaha. Mr. Robinett is a National Director Emeritus in the
Navy League of the United States; Lions Club International Melvin Jones Fellow;
Director, Snohomish County Economic Development Council; and Director,
Snohomish Affordable Housing Group. He previously served as a Director of the
Everett Chamber of Commerce, USO Puget Sound, General Hospital Foundation,
Snohomish County-Camano and Washington State Board of Realtors, and Snohomish
County Airport Commission. Mr. Robinett serves as a member of the Audit and
Finance Committee and as Vice Chair of the Bank's Loan Committee. Mr. Robinett
was a founding director of American First National Bank in 1984, which was
acquired by Cascade Bank in 1997.

CRAIG G. SKOTDAL Director since 2001
- ----------------

Craig G. Skotdal, age 31, is President of Skotdal Real Estate, a property
development, investment and management company based in Everett, Washington, a
position he has held since 1996. Mr. Skotdal graduated from Stanford University
and from the University of Washington's business management program. Mr.
Skotdal serves on the board of the Downtown Everett Association and actively
supports urban revitalization projects that promote economic development, smart

-5-

growth, and quality of life. Mr. Skotdal serves as a member of the Audit and
Finance Committee and as a member of the Corporate Governance and Nominating
Committee.

Independence of Directors
- -------------------------

NASDAQ listing standards (the market on which the Company's stock trades)
require that a majority of the board of directors of each listed company must
be independent as defined under NASDAQ rules.

The Board of the Company has concluded that Richard L. Anderson, David W.
Duce, Janice E. Halladay, Dwayne R. Lane, Dennis R. Murphy, David R. O'Connor,
Henry M. Robinett, Ronald E. Thompson, Craig G. Skotdal, and G. Brandt Westover
qualify as independent directors under the NASDAQ established criteria.

Board Committees and Meetings
- -----------------------------

During the year ended December 31, 2004, the Board held seven regular
meetings. The Board has an Executive Committee, an Audit and Finance
Committee, a Compensation and Personnel Committee, a Loan Committee, and a
Corporate Governance and Nominating Committee.

Executive Committee. The Executive Committee consists of the CEO, the
Chair and Vice Chair of the Board, and Chairs of the other committees, and has
authority to generally act for the full Board.

Audit and Finance Committee. The Audit and Finance Committee is
responsible to the Board for the areas of audit and compliance, asset and
liability management, risk assessment and technology management. The Committee
operates under a charter approved by the Board. The Audit and Finance
Committee Charter is attached as Appendix A to this Proxy Statement. The
Committee is responsible for the appointment, compensation, and oversight of
the external auditor. The Committee provides direction and oversight to the
internal audit department and reviews the examination of the Bank by federal
regulatory authorities. The Committee also reviews the financial statements and
filings. The current members of the Audit and Finance Committee are
"independent" directors within the meaning of both the NASDAQ and Securities
and Exchange Commission (SEC) rules. The Board has determined that Dennis R.
Murphy and Richard L. Anderson are "audit committee financial experts" as
defined under SEC rules.

Compensation and Personnel Committee. The Compensation and Personnel
Committee is responsible for establishing and reviewing the compensation and
employee benefit policies of the Company and the Bank. The Committee approves
compensation of executive officers, and recommends the granting of stock
options. The Committee operates under a charter approved by the Board. The
Company will provide a copy of the charter to shareholders upon request.

Loan Committee. The Loan Committee reviews and approves loans in excess
of the limits established for the Management Loan Committee. Included in that
review are all extensions of credit to borrowers whose aggregate borrowing
levels exceed the limits placed on the Management Loan Committee. The Loan
Committee also reviews loans that do not conform to the Loan Policy.

Corporate Governance and Nominating Committee. The Corporate Governance
and Nominating Committee reviews and assesses the composition of the Board and
oversees an annual evaluation of the Board and its committees; assists in
identifying potential candidates for directors; recommends candidates for
director; and provides leadership with respect to corporate governance of the
Company. The Committee is responsible for establishing criteria for director
eligibility; procedures for nominating directors, including director
nominations from shareholders and timelines for the nomination process; as well
as nominating the Chair and Vice Chair of the Board. Only independent directors
serve on this Committee. The Committee operates under a charter approved by the

-6-

Board. The charter is posted on the Company's website at www.cascadebank.com.
The Company will also provide a copy of the charter to shareholders upon
request.

The Board and its committees may retain outside advisors as they determine
necessary to fulfill their responsibilities. All committees report their
activities to the full Board.

Each Board member attended at least 75% of the aggregate meetings of the
Board and of the Committees on which he or she served that were held during the
period for which he or she was a Board or Committee member.

The following table summarizes the membership of the Board and each of its
committees, as well as the number of times each committee met during 2004.

Corporate
Governance
Audit and Compensation and
Board Executive Finance and Personnel Loan (*) Nominating
----- --------- --------- ------------- -------- ----------

Richard L. Anderson Member Member
David W. Duce Chair Chair
Janice E. Halladay Member Member Chair Member Member
Dwayne R. Lane Member Member
Frank M. McCord** Member Member
Dennis R. Murphy Member Member Chair
Carol K. Nelson Member Vice Chair Member
David R. O'Connor Member Member Member Chair Member
Henry M. Robinett Member Member Vice Chair
Craig G. Skotdal Member Member Member
Ronald E. Thompson Member Member Member Member Chair
G. Brandt Westover Vice Chair Member Vice Chair Member

Number of Meetings
Held in 2004 7 2 7 6 50 5

(*) The Loan Committee is a committee of the Bank only.
(**) Frank McCord's term expires April 26, 2005, and he is not standing for
re-election.

The directors of the Company also serve as directors of Cascade Bank, the only
operating subsidiary of the Company. Cascade Bank has parallel committees and
committee assignments.

Nomination Process
- ------------------

The Corporate Governance and Nominating Committee (the "Governance
Committee") is the nominating committee of the Board. The Governance Committee
is governed by the Company's Articles of Incorporation and Bylaws with respect
to the nominations. The Governance Committee is responsible for selecting
nominees for election to the Board. The Governance Committee will consider
nominations from shareholders, provided that such nominations are received by
the Company's Secretary in accordance with the Articles of Incorporation, the
Bylaws, and the date set in the prior year's Proxy Statement for the Annual
Meeting of Shareholders.

-7-

The Governance Committee will perform the following duties with respect to
director nominations: (a) consider the criteria for identifying and selecting
individuals who may be nominated for election to the Board; (b) determine the
slate of nominees for election to the Board; (c) as the need arises, fill
vacancies and actively seek individuals qualified to become Board members; and
(d) consider shareholder nominations for the Board when properly submitted in
accordance with the Company's Articles of Incorporation and Bylaws.

The Governance Committee will consider candidates for the Board who are
recommended by its members, other Board members, shareholders and management,
as well as those identified by a third party search firm the Company may retain
to assist in identifying and evaluating possible candidates. The Committee
evaluates candidates recommended by shareholders in the same manner that it
evaluates other candidates. The Committee's evaluations will be based upon
several criteria, including their broad-based business and professional skills
and experiences; commitment to representing the long-term interests of
shareholders; an inquisitive and objective perspective; the willingness to take
appropriate risks; leadership ability; personal and professional ethics;
personal integrity and judgment; and practical wisdom and sound judgement.
Candidates should have reputations, both personal and professional, consistent
with the Company's image and reputation.

At a minimum, the majority of directors on the Board should be
"independent," not only as that term may be legally defined, but also without
the appearance of any conflict in serving as a director. In addition,
irectors must have time available to devote to Board activities and to enhance
their knowledge of the banking industry. Accordingly, the Governance Committee
seeks to attract and retain highly qualified directors who have sufficient time
to attend to their substantial duties and responsibilities to the Company.

The Governance Committee will utilize the following process for
identifying and evaluating nominees to the Board. In the case of incumbent
directors whose terms of office are set to expire, the Governance Committee
will review such directors' overall service to the Company during their term,
including the number of meetings attended, level of participation and quality
of performance. In the case of new director candidates, the members of the
Governance Committee will be polled for suggestions as to potential candidates
that may meet the criteria above, discuss candidates suggested by Company
shareholders and may also engage, if the Board deems appropriate, a
professional search firm. To date, the Board and the Governance Committee have
not engaged professional search firms to identify or evaluate potential
nominees but may do so in the future, if necessary. The Governance Committee
will then meet to discuss and consider these candidates' qualifications and
then choose a candidate by majority vote.

Directors' Compensation
- -----------------------

As of December 31, 2004, the Chair of the Board receives a retainer at the
rate of $36,000 per year plus 100 shares of the Company's common stock. As an
annual retainer, the Chair of the Audit and Finance Committee receives $28,800,
the Chair of Compensation and Personnel Committee receives $21,000, the Chair
of the Loan Committee receives $18,000, and the Chair of the Corporate
Governance and Nominating Committee receives $18,000. Each of the above
mentioned chairs also receives 100 shares of the Company's common stock. All
members of the Loan Committee receive an additional $8,400 per annum. All
other outside directors of the Company are paid a retainer of $12,000. Any
director that serves on two committees is paid an additional $1,200 per year.
Under the Directors Bonus Program, outside directors individually qualify for
an annual bonus equal to .025% of the Company's net income. For the year ended
December 31, 2004 a total of $2,696.16 was paid to each outside director under
the Program.

Under the Company's 1997 Elective Equity Plan and 2002 Equity Compensation
Plan, directors could elect to receive shares of the Company's stock in lieu of
receiving cash compensation for the year. Those plans were replaced by the 2003
Long Term Stock Incentive Plan, which was approved at the 2002 Annual Meeting
of Shareholders.

-8-

Compensation and Personnel Interlocks and Insider Participation
- ---------------------------------------------------------------

No member of the Compensation and Personnel Committee is an executive
officer or former officer of the Company, with the exception of Frank M.
McCord, who served as the Chief Executive Officer of the Company from 1990 to
2002, and as the Chief Executive Officer of Cascade Bank from 1990 to 2001. Mr.
McCord served as an independent consultant to the Company from May 1, 2003 to
April 30, 2004, for which he received a consulting fee of $110,000. Since
April 30, 2004, Mr. McCord has not served as an employee or consultant to the
Company or its subsidiary, Cascade Bank. No executive officer of the Company
served on the board of directors of any entity whose executive officers
included a director of the Company.

Standards of Conduct
- --------------------

The Board has adopted Standards of Conduct for employees, officers and
directors, which includes a "code of ethics" as defined by Item 406 of the
Regulation S-K and applies to the Company's Chief Executive Officer and Chief
Financial Officer, as well as all other employees. The Company will provide a
copy of the Standards of Conduct to shareholders upon request.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------

Persons and groups who beneficially own more than 5% of the Company's
common stock are required to file certain reports with the Securities and
Exchange Commission ("SEC") and to provide a copy to the Company disclosing
such ownership. Based on such reports, the following table sets forth, as of
February 15, 2005, certain information as to those persons who were beneficial
owners of more than 5% of the outstanding shares of common stock. Management
knows of no persons other than those set forth below who beneficially owned
more than 5% of the outstanding shares of common stock at February 15, 2005.

The following table shows the number of shares of the Company's common
stock beneficially owned at February 15, 2005 by the Company's directors and
nominees for director, executive officers identified in the Summary
Compensation Table and all directors and executive officers as a group. The
address of each person, except as set forth below, is the same as the Company's
principal office.

% of
Number of Shares Shares
Name Beneficially Owned (1) Outstanding
- -------------------------------------------------------------------------------
Beneficial Owners of more than 5%:
- ----------------------------------
Arthur W. Skotdal, Andrew P.
Skotdal and Craig G. Skotdal
c/o Douglas A. Schafer
Schafer Law Firm
P.O. Box 1134
Tacoma, WA 98401 704,895 7.4%

Directors:
- ----------
David W. Duce 43,520 (2) *
Janice E. Halladay 20,013 *
Dwayne R. Lane 62,123 *
Frank M. McCord 315,584 3.3%
Dennis R. Murphy 30,173 *

-9-

% of
Number of Shares Shares
Name Beneficially Owned (1) Outstanding
- -------------------------------------------------------------------------------
Carol K. Nelson ** 116,176 1.2%
David R. O'Connor 116,427 (3) 1.2%
Henry M. Robinett 25,235 *
Craig G. Skotdal 704,895 (4) 7.4%
Ronald E. Thompson 46,771 *
G. Brandt Westover 34,315 *
Richard L. Anderson 4,762 *

Executive Officers:
- -------------------
Steven R. Erickson 54,646 *
Robert G. Disotell 140,907 1.5%
Lars H. Johnson 67,430 *
Debbie E. McLeod 13,416 *

All executive officers and Directors
as a group (19 persons) 1,866,503 19.5%

* Less than 1% of shares outstanding.
** Also an executive officer of the Company and the Bank.

(1) In accordance with Rule 13d-3 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), a person is deemed to be the beneficial
owner, for purposes of this table, of any shares of common stock if he or
she has voting and/or investment power with respect to such security. The
table includes shares owned by spouses or other immediate family members
in trust, shares held in retirement accounts or funds for the benefit of
the named individuals, and other forms of ownership over which shares the
persons named in the table possess voting and/or investment power. Shares
held in accounts under the Company's ESOP as of December 31, 2004 are
included in the above table as follows: Ms. Nelson: 896; Mr. McCord:
12,204; Mr. Erickson: 10,973; Mr. Johnson: 997; and Ms. McLeod: 347; all
executive officers and directors as a group: 36,970. Shares held under
the Bank's 401(k) plan as of December 31, 2004 are included as follows:
Mr. Disotell: 14,286; Mr. Erickson: 4,704; Mr. Johnson: 2,645; Mr. McCord:
19,699; and Ms. Nelson: 196. These amounts do not include the remaining
shares held by the Bank's 401(k) plan for which Messrs. McCord, Westover,
and Johnson act as trustees. The amounts shown also include the following
amounts of common stock which the following individuals have the right to
acquire within 60 days of February 15, 2005 through the exercise of stock
options granted pursuant to the Company's stock option plans: Mr.
Erickson: 20,623; Ms. Halladay: 10,070; Mr. Johnson: 60,038; Ms. McLeod:
12,173; Ms. Nelson: 109,272; Mr. O'Connor: 4,922; Mr. Skotdal: 6,445; all
executive officers and directors as a group: 245,588.

(2) Includes 412 shares held by Mr. Duce's five children, and 2,276 shares
held by a testamentary trust of which Mr. Duce is trustee.

(3) Includes 33,141 shares held by a trust in which Mr. O'Connor has a
pecuniary interest.
(4) Includes 243,442 shares held by Mr. Skotdal's brother of which Mr. Skotdal
has the authority to vote, 194,932 shares held by a limited liability
company in which Mr. Skotdal has a pecuniary interest, and 13,107 shares
held by Mr. Skotdal's father which Mr. Skotdal has the authority to vote.

-10-

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
-------------------------------------------------

Based upon a review of reports and written representations furnished to
it, the Company believes that during fiscal year 2004, all filings with the
Securities and Exchange Commission by its executive officers and directors
complied with requirements for reporting ownership and changes in ownership
of the Company's common stock pursuant to Section 16(a) of the Securities
Exchange Act of 1934, except for Robert G. Disotell who, due to an oversight,
did not file timely a report for shares sold from the Company's 401(k) Plan.
The report was promptly filed upon discovery of the oversight.

EXECUTIVE COMPENSATION
----------------------

The following Summary Compensation Table sets forth the compensation
earned by the Company's Chief Executive Officer and the four other most highly
compensated executive officers who were serving as such as of December 31, 2004
(collectively, the "Named Officers") and each of whose aggregate compensation
for calendar 2004 exceeded $100,000 for services rendered in all capacities to
the Company and its subsidiaries for that year.

Summary Compensation Table
--------------------------
Long-Term
Annual Compensation Compensation
Awards
---------------------------------------- ----------------
Securities All Other
Other Annual Underlying Compensation (4)
Name and Position Year Salary Bonus (1) Compensation (2) Options (#) (3)
- -------------------------------------------------------------------------------------------------------------------------------

Carol K. Nelson
President and Chief Executive
Officer of the Company and the
Bank (5) 2004 $220,500 $357,175 --- 12,092 $ 6,841
2003 210,000 208,620 --- 16,250 7,523
2002 200,000 304,720 --- 12,500 10,697

Robert G. Disotell
Executive Vice President of
the Bank-Chief Credit Officer 2004 $ 99,282 $ 32,500 --- 6,100 $ 5,635
2003 96,176 25,000 --- 8,125 5,770
2002 92,475 25,500 --- 6,250 5,345

Steven R. Erickson
Executive Vice President of the
Bank-Real Estate Lending 2004 $106,686 $ 61,250 --- 6,100 $ 4,833
2003 100,631 64,250 --- 8,125 5,492
2002 88,340 65,000 --- 8,750 7,719

Lars H. Johnson
Executive Vice President and
Chief Financial Officer of the
Bank and Treasurer/Secretary of
the Company 2004 $133,467 $ 45,000 --- 8,500 $ 6,752
2003 128,400 50,000 --- 11,250 7,323
2002 123,000 40,000 --- 8,750 8,375

-11-

Debbie E. McLeod
Executive Vice President-Retail
Banking 2004 $ 96,100 $ 50,000 --- 6,100 $ 6,595
2003 91,638 45,000 --- 8,125 5,782
2002 87,125 40,000 --- 6,250 3,468

(1) Bonus totals for 2004 and 2003 include awards attributed to the years
ended December 31, 2004 and December 31, 2003. Bonus totals for 2002
include awards attributed to the year ended December 31, 2002, except for
Carol K. Nelson. Ms. Nelson's 2002 bonus includes $212,050 attributable
to the twelve-month period from July 1, 2001 to June 30, 2002 and $92,700
attributable to the six-month period from July 1, 2002 to December 31,
2002.

(2) Does not include perquisites which did not exceed the lesser of $50,000 or
10% of salary and bonus.

(3) Option grants for all years are adjusted for 5-for-4 stock split that was
effective December 19, 2003.

(4) All Other Compensation for calendar year 2004 includes the following: for
Ms. Nelson, employer contribution to 401(k) Plan of $6,000 and ESOP
contribution of $841; for Mr. Erickson, employer contribution to 401(k)
Plan of $4,152 and ESOP contribution of $681; for Mr. Disotell, employer
contribution to 401(k) Plan of $5,111 and ESOP contribution of $524; for
Mr. Johnson, employer contribution to 401(k) Plan of $6,000 and ESOP
contribution of $752, and for Ms. McLeod, employer contribution to 401(k)
Plan of $6,000 and ESOP contribution of $595. (ESOP contributions include
the reallocation of the unvested amounts forfeited by departing Plan
participants.)

(5) Ms. Nelson became Chief Executive Officer of the Company on May 1, 2002.
She previously served as Chief Operating Officer of the Company. She
continues to serve as President and Chief Executive Officer of the Bank.

Employment Agreement. The Bank entered into an employment agreement with
Carol K. Nelson on January 24, 2001, which was effective February 19, 2001. The
agreement was amended and extended on July 23, 2003. Ms. Nelson's current base
salary (which is subject to annual review) is $231,500 for 2005. She is
entitled to participate in employee benefit plans and other fringe benefits
applicable to executive personnel. The three-year term of the agreement may be
extended annually for an additional year. The employment of Ms. Nelson is
terminable at any time for cause as defined in the agreement, and she may be
terminated without cause in which case she would continue to receive
compensation otherwise payable over the remaining term of the agreement. The
agreement provides for payment of bonuses each year based on the amount of the
Bank's net profit before taxes. The agreement also provides for the payment of
severance benefits to Ms. Nelson in the event of her termination of employment
following a change in control of the Company or the Bank. If the termination is
within 12 months after the change in control, such benefits would include (i) a
severance benefit equal to three times Ms. Nelson's annual compensation and
bonus for the prior year, or if the termination occurs more than 12 months
after a change in control, such a benefit would include (ii) Ms. Nelson's
annual compensation and bonuses for the balance of the term of the agreement,
or two times the amount of her then current year base salary and bonus,
whichever is greater, and subject to reduction to avoid any "excess parachute
payment" for federal income tax purposes.

Change in Control Agreements. The Bank has entered into Change of Control
/Severance Agreements with Robert G. Disotell, Steven R. Erickson, Lars H.
Johnson, Debbie E. McLeod and three other executive officers who are not
included in the above table. These agreements generally provide that within
twenty-four months after a change of control, if an executive is terminated
other than for cause or for good reason (as such terms are defined in the
agreements), such executive will generally be entitled to receive a severance
payment equal to two times the executive's annual compensation. The agreements

-12-

generally define a change in control as the acquisition of all or a substantial
part of the Company or the Bank, the merger of the Company or the Bank into
another company that is the surviving company, the sale of substantially all of
the assets of the Company or the Bank to another company, or a hostile
acquisition of substantially all of the stock of the Company or the Bank.

Option Grants in Last Fiscal Year. The following table sets forth
information concerning the grant of stock options to Carol K. Nelson, Steven
R. Erickson, Robert G. Disotell, Lars H. Johnson, and Debbie E. McLeod during
the year ended December 31, 2004.

Option Grants
-------------

Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation for
Individual Grants Option Term
- --------------------------------------------------------------------------------------------------------------------
Number of % of Total
Shares Options
Underlying Granted to Exercise
Options Employees Price Expiration
Name Granted (*) in Period ($/Share) Date 5% 10%
- --------------------------------------------------------------------------------------------------------------------

Carol K. Nelson 12,092 9.8% $19.90 3/23/14 $151,331 $383,504
Steven R. Erickson 6,100 4.9 19.90 3/23/14 76,342 193,464
Robert G. Disotell 6,100 4.9 19.90 3/23/14 76,342 193,464
Lars H. Johnson 8,500 6.9 19.90 3/23/14 106,378 269,582
Debbie E. McLeod 6,100 4.9 19.90 3/23/14 76,342 193,464

(*) Options granted vest 10% after the first year of grant, 20% per annum in
years 2 through 4, and 30% at the end of the fifth year. Options were
granted under the Company's 2003 Stock Option Plan, and have an exercise
price equal to the fair market value of the common stock on the date of
grant. The dollar gains under these columns result from calculations
required by the SEC rules and are not intended to represent or anticipate
future price appreciation of the common stock of the Company. It is
important to note that options have value to the listed executive only if
the stock price increases above the exercise price shown in the table
during the effective option period. In order for the listed executive to
realize the potential values set forth in the 5% column and the 10% column
in the table, the price per share of the Company's common stock would be
approximately $32.42 and $51.62. Although not required under the terms of
the Company's 2003 Stock Option Plan, options granted in 2004 will become
immediately exercisable in the event of a change in control of the
Company.

Option Exercise/Value Table. The following information is presented for
the Chief Executive Officer and the other Named Officers with respect to
options exercised during the fiscal year ended December 31, 2004, and remaining
unexercised at the end of 2004.

Aggregated Option Exercises in Last Fiscal Year
and Year-End Option Values
-----------------------------------------------
Number of Securities $ Value of Unexercised In-the-
Shares Value Underlying Unexercised Money Options at Fiscal Year-
Acquired on Realized Options at Year-End End (2)
Name Exercise (#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------

Carol K. Nelson --- --- 108,062 70,279 $2,031,566 $1,321,245

-13-

Steven R. Erickson --- --- 18,263 28,386 343,344 533,657
Robert G. Disotell --- --- 7,012 18,962 131,826 356,486
Lars H. Johnson --- --- 43,688 56,999 821,334 1,071,581
Debbie E. McLeod --- --- 10,313 23,912 193,884 449,546

(1) The value realized on exercised options is calculated on the difference
between the strike price of the options and the price at the close of
business of the Company's stock on the date of exercise.
(2) The value of unexercised in-the-money options is calculated using a fair
market value of $18.80 as of December 31, 2004, based on the last known
trade, less the strike price on those options. Options have been adjusted
for stock dividends.

EQUITY COMPENSATION PLAN INFORMATION
------------------------------------

The following table sets forth information regarding outstanding options
and shares reserved for future issuance under the equity compensation plans as
of February 15, 2005.

Number of Shares Number
to be Issued of shares
Upon Exercise Weighted Average Remaining
of Outstanding Exercise Price Available for
Options of Outstanding Future Issuance
Plan Category (in thousands) Options (in thousands)
- -------------------- ---------------- ---------------- ---------------
Equity compensation
plans approved by
shareholders-1992
and 1997 Plans 471 $ 5.16 --

Equity compensation
plans approved by
shareholders-2003 Plan 199 15.86 551

Equity compensation
plans not approved by
shareholders -- -- --

Total 670 $ 9.13 551

2003 Long Term Stock Incentive Plan
- -----------------------------------

The 2003 Long Term Stock Incentive Plan allows for the grant of incentive
stock options and non-qualifying stock options to all officers, directors and
employees of the Company and its subsidiaries.

The Plan is administered by the Compensation and Personnel Committee.
During 2004, options to purchase a total of 123,592 shares were granted to
select employees under the Plan. As of December 31, 2004, options to purchase
a total of 551,275 shares remain available (of the original split adjusted
750,000 shares) for issuance under the Plan.

REPORT OF THE COMPENSATION AND PERSONNEL COMMITTEE
--------------------------------------------------

Under rules established by the SEC, the Company is required to provide
certain data and information in regard to the compensation and benefits
provided to the Company's Chief Executive Officer and other executive officers
of the Bank and Company. The Compensation and Personnel Committee's duties are

-14-

to establish and administer policies that govern executive compensation for the
Company. The Committee evaluates the individual performance of the President
and Chief Executive Officer, the Chief Financial Officer, and other senior
level officers and reviews compensation policies for all senior management.
The committee receives input from the President on the other executive
officers' performance and has final authority to set individual compensation
levels.

The executive compensation policies of the Company are designed to reflect
the attainment of short-term and long-term financial performance goals and to
enhance the ability of the Company to attract and retain qualified executive
officers. The Committee considers a variety of subjective and objective
factors in determining the compensation package for individual executives.
These factors include the performance of the Company overall, the
responsibilities assigned to each executive, and the performance of each
executive in their assigned areas of oversight.

Base Salary. The Company's compensation plan involves a combination of
salary and cash bonuses tied to short-term performance. Salary levels are
designed to be competitive within the banking industry based on a peer group
analysis of Pacific Northwest financial institutions. Given the Company's
performance and size, the Committee concluded that the base salaries of the
reviewed executive officers were adjusted appropriately for 2004.

Bonus Programs. An incentive bonus plan is in effect for the executive
officers of the Company that is designed to compensate for performance. The
plan for the President is based upon the profitability of the Company as
established within her employment contract. The plan for all other executive
officers is based upon the attainment of certain negotiated goals including
Company and line of business profitability; loan levels and credit quality;
expense management; as well as leadership and teamwork. Performance is
evaluated by the President (and reviewed by the Compensation and Personnel
Committee) quarterly, with 70% of any award paid at the end of each quarter and
the remaining 30% at the end of the year.

Deferred Compensation Plan. In December 2004, the Board adopted the
Cascade Bank Deferred Compensation Plan. The purpose of this Plan is to
provide specified benefits to a select group of management or highly
compensated employees who contribute materially to the continued growth,
development and business success of Cascade Bank. The Plan was adopted to
meet conditions of a provision in the Merger Agreement with Issaquah
Bancshares. The Plan permits the participants who are selected by the
Committee to elect to defer up to 25% of their base salary and up to 50% of
any bonus annually with benefits payable at normal retirement age or in other
special circumstances outlined in the Plan. The Plan also permits Company
ontributions. Participant contributions are fully vested on the date of
contribution; any Company contributions are subject to a vesting schedule set
by the Committee, which may differ from participant to participant. Deferred
amounts accrue interest at a rate equal to The Wall Street Journal prime rate
plus 1%, not to exceed 10%. Currently, there is only one participant in the
Plan for whom a $15,000 Company contribution was made in 2004. This
contribution was made to fulfill a commitment made in the Merger Agreement with
Issaquah Bancshares and was fully vested upon date of award. The Committee is
considering to what extent other executives may be permitted to participate in
the Plan. To date, no decision has been made.

Option Grants. The Committee selects employees who will receive stock
options and determines the number to be granted. Stock options are designed to
provide long-term incentives for key employees. These grants were made at
current market prices under the rules of the 2003 Long-Term Incentive Plan
adopted by the shareholders.

Compensation of the Chief Executive Officer. As of May 1, 2002, Carol K.
Nelson was appointed Chief Executive Officer of Cascade Financial Corporation.
Previously, Ms. Nelson was President and Chief Operating Officer of Cascade
Financial and President and Chief Executive Officer of Cascade Bank, titles
which she retains. For the year ended December 31, 2004, Ms. Nelson's base
salary was $220,500. In addition, pursuant to her employment contract, as
amended on January 27, 2004, Ms. Nelson was paid a bonus based upon the
Company's net profit before tax. For the year ended December 31, 2004, Ms.
Nelson received a bonus of $357,175.

-15-

In addition, for the year ended December 31, 2004, Ms. Nelson was awarded
options to purchase 12,092 shares of stock, which reflected the attainment of
specific performance criteria established by the Compensation and Personnel
Committee, including but not limited to leadership, profitability, regulatory
examination ratings and investor relations. These options were granted at
current market prices under the rules of the 2003 Long Term Stock Incentive
Plan. The Committee believes that Ms. Nelson's compensation is appropriate
based upon the Company's overall performance.

COMPENSATION AND PERSONNEL COMMITTEE

Janice E. Halladay, Chair
Dwayne R. Lane
Frank M. McCord
David R. O'Connor
G. Brandt Westover

REPORT OF AUDIT AND FINANCE COMMITTEE
-------------------------------------

The Audit and Finance Committee ("Audit Committee") represents and assists
the Board in its oversight of the integrity of the Company's financial
reporting; the independence, qualifications and performance of the Company's
independent auditors, and the performance of the internal auditor; and the
Company's compliance with legal and regulatory requirements. The Audit
Committee consists of five members listed below, each of whom is an independent
director under NASDAQ listing standards and, in accordance with SEC and NASDAQ
requirements, meets additional independence standards applicable to audit
committee members. Dennis R. Murphy, Ph.D. and Richard L. Anderson, C.P.A.
qualify as "audit committee financial experts" within the meaning of that term
as defined by the Securities and Exchange Commission pursuant to Section 407 of
the Sarbanes-Oxley Act of 2002.

The Company's management is responsible for preparing the Company's
financial statements and the overall reporting process, including the Company's
system of internal controls. The Audit Committee is directly responsible for
the compensation, appointment and oversight of the Company's independent
registered public accounting firm, Moss Adams LLP. The auditors report
directly to the Audit Committee and are responsible for auditing the financial
statements and expressing an opinion on the conformity of the audited financial
statements with generally accepted accounting principles. The Audit Committee
also meets privately in separate executive sessions periodically with
management, the internal auditors and the independent auditors.

In this context, the Audit Committee has held discussions with management
and the independent auditors. Management represented to the Audit Committee
that the Company's consolidated financial statements were prepared in
accordance with generally accepted accounting principles, and the Audit
Committee has reviewed and discussed the audited financial statements with
management and the independent auditors.

The Audit Committee has discussed with the independent auditors the
matters required to be discussed by Statement on Auditing Standards No. 61
(Communication With Audit Committees), as amended. The independent auditors
provided to the Audit Committee the written disclosures and letter required by
Independent Standards Board Standard No. 1 (Independence Discussions with Audit
Committees) and discussed with the auditors their independence.

Based on the considerations above, the Audit Committee recommended to the
Board, and the Board has approved, the inclusion of the audited financial
statements in the Company's Annual Report on Form 10-K for fiscal 2004 for
filing with the Securities and Exchange Commission. The Audit Committee has
selected Moss Adams LLP as the Company's independent auditors for fiscal 2005.
Audit and any permitted non-audit services provided to the Company by Moss
Adams LLP are pre-approved by the Audit Committee.

-16-

AUDIT AND FINANCE COMMITTEE

Dennis R. Murphy, Ph.D. Chair
Richard L. Anderson, C.P.A.
Henry M. Robinett
Craig G. Skotdal
Ronald E. Thompson

SHAREHOLDER RETURN PERFORMANCE GRAPH
------------------------------------

The following graph compares the Company's cumulative shareholder return
on its common stock with the return on the Nasdaq (U.S. Stock) Index and a peer
group of the Nasdaq's Financial Index. Total return assumes (i) the
reinvestment of all dividends and (ii) the value of the investment in the
Company's common stock and each index was $100 at the close of trading on
December 31, 1999.

[GRAPH] Comparison of Five Year Cumulative Total Return*

12/31/99 12/31/00 12/31/01 12/31/02 12/31/03 12/31/04
Cascade Financial
Corporation 100.00 79.27 80.73 124.38 252.34 244.79
Nasdaq (Composite)
Index 100.00 60.71 48.64 32.83 49.23 53.45
Nasdaq OTC Bank
Index 100.00 114.67 126.23 132.33 171.42 190.26

*Assumes that the value of the investment in the Company's common stock and
each index was $100 on December 31, 1999, and that all dividends were
reinvested.

-17-

TRANSACTIONS WITH MANAGEMENT AND OTHERS
---------------------------------------

Certain transactions involving loans, deposits, credit cards and sales of
commercial paper, certificates of deposit and other money market instruments
and certain other banking transactions occurred during 2004 between the Bank
and certain directors or executive officers of the Company and its
subsidiaries, members of their immediate families, corporations or
organizations of which any of them is an executive officer or partner or of
which any of them is the beneficial owner of 10% or more of any class of
securities, or associates of the directors, the executive officers or their
family members. The transactions were made in the ordinary course of business
on substantially the same terms, including interest rates and collateral, that
prevailed at the time for comparable transactions with other persons and did
not involve more than the normal risk of collectibility or present other
unfavorable features.

INDEPENDENT AUDITORS
--------------------

The Board has selected Moss Adams LLP, Certified Public Accountants, as
independent auditors for the Company for the fiscal year ending December 31,
2005. Representatives of Moss Adams LLP are expected to be present at the
Annual Meeting, will have the opportunity to make a statement if they desire,
and are expected to be available to respond to appropriate questions.

Audit and Non-Audit Fees
- ------------------------

The following table presents fees for professional audit services rendered
by Moss Adams LLP for the audit of the Company's annual financial statements
for the fiscal year ended December 31, 2004, and fees billed for other services
rendered.

The aggregate fees billed to the Company by Moss Adams LLP for 2004 were
as follows:

Fiscal Year Ended
December 31, 2004
-----------------
Audit Fees $165,517
Audit-related Fees 50,505
Tax Fees 16,325
Total Fees $232,347

OTHER INFORMATION
-----------------

Shareholder Communications with the Board
- -----------------------------------------

To contact members of the Board, individually or collectively, on any
subject, please address that communication to:

Lars H. Johnson, Corporate Secretary
Cascade Financial Corporation
2828 Colby Avenue
Everett, WA 98201

The Corporate Secretary will acknowledge the receipt of the communication;
inform the shareholder concerning the distribution of that communication; and
when any action (if requested) would be reviewed by the Board and/or the
relevant functional committee. The Corporate Secretary will notify the
shareholder of any action taken by the Board in reference to the shareholder's
request.

-18-

While the Company does not have a formal policy regarding attendance by
members of the Board at the Company's Annual Meetings of Shareholders, it has
always encouraged its directors to attend and expects to continue this informal
policy. Shareholders are encouraged to interact with the directors at that
time. Ten directors attended the 2003 Annual Meeting, which was held May 4,
2004 at the Everett Golf and Country Club.

Expenses of Solicitation
- ------------------------

The Company will bear the costs of soliciting proxies, including the
reimbursement to record holders of their expenses in forwarding proxy materials
to beneficial owners. Directors, officers and regular employees of the
Company, without extra compensation, may solicit proxies personally or by mail,
telephone, facsimile or electronic mail.

Shareholder Proposals and Director Nominations
- ----------------------------------------------

In order to be eligible for inclusion in the Company's proxy materials for
the 2006 Annual Meeting of Shareholders, any shareholder proposal to take
action at such meeting must be received at the Company's executive offices at
2828 Colby Avenue, Everett, Washington 98201 no later than November 15, 2005.
Any such proposal shall be subject to the requirements of the proxy rules
adopted under the Exchange Act.

Shareholders wishing to submit recommendations for director candidates
must provide the following information in writing to the attention of the
Secretary of the Company by certified or registered mail:

* The name, address, and biography of the candidate, including such person's
written consent to being named in the Proxy Statement as a nominee and to
serving as a director, if elected, and certain information regarding the
shareholder giving such notice;

* The name, address, and phone number of the shareholder or group of
shareholders making the recommendation; and

* With respect to common stock beneficially owned by the shareholder or
group of shareholders making the recommendation, and to the extent any
shareholder is not a registered holder, proof of the number of shares
held.

To be considered by the Corporate Governance and Nominating Committee for
the 2006 Annual Meeting of Shareholders, a director candidate nomination must
be received by the Secretary by December 31, 2005.

The notice with respect to business proposals to be brought before the
Annual Meeting must state the shareholder's name, address and the number of
shares of common stock held, and briefly discuss the business to be brought
before the Annual Meeting, the reasons for conducting such business at the
Annual Meeting and any interest of the shareholder in the proposal.

MISCELLANEOUS
-------------

The Company's December 31, 2004 Annual Report is being sent to
shareholders of record as of March 15, 2005, together with this Proxy
Statement.

The Company will furnish to shareholders without charge a copy of its Form
10-K for the fiscal year ended December 31, 2004, as filed with the Securities
and Exchange Commission, upon receipt of a written request addressed to Cascade
Financial Corporation, 2828 Colby Avenue, Everett, WA 98201. Reports, proxy
statements and other information filed by the Company are also available on the
internet at the SEC's World Wide Web site at http://www.sec.gov.

-19-

The Board knows of no other matters to be presented at the Annual Meeting.
If any other business properly comes before the Annual Meeting or any
adjournment thereof, the proxies will vote on that business in accordance with
their best judgment.

By Order of the Board of Directors,

/s/ Lars H. Johnson
--------------------
Lars H. Johnson
Secretary

-20-

APPENDIX A

CASCADE FINANCIAL CORPORATION
AUDIT AND FINANCE COMMITTEE CHARTER
-----------------------------------

The purpose of the Audit and Finance Committee (the "Committee") is to assist
the Board of Directors (the "Board") in fulfilling its oversight
responsibilities by reviewing the systems of internal controls which management
and the Board have established, reviewing the financial information which will
be provided to the shareholders and others, selecting and reviewing the
performance and assuring the independence of independent accountants, and
overseeing the Company's accounting and financial reporting processes and the
audits of the Company's financial statements.

COMPOSITION
- -----------

The Committee is comprised of not fewer than three outside Directors who meet
the NASDAQ requirements and the SEC requirements for audit committee
independence.(i) Members of the Committee have a degree of independence that
will assure that any relationship with the corporation will not interfere with
their independence from management.

All members of the Committee shall be able to read and understand fundamental
financial statements, including a balance sheet, income statement and cash flow
statement. At least one member of the Committee shall have past employment
experience in finance or accounting, requisite professional certification in
accounting, or any other comparable experience or background which results in
the individual's financial sophistication, including being or having been a
chief executive officer, chief financial officer or other senior officer with
financial oversight responsibilities.

Upon recommendation of the Board chair, the Board shall approve the chair and
members of the Committee. Each appointed Committee member may be removed by
the Board at any time.

SPHERE OF RESPONSIBILITIES
- --------------------------

The Committee is responsible to the Board for the areas of audit and
compliance, asset and liability management, investments, risk assessment, and
technology management.

External
- --------

Be directly responsible for the appointment, compensation, retention and
oversight of the work of the accounting firm engaged for the purpose of
preparing or issuing an audit report. Such firm will report directly to the
Committee.

Review the effectiveness of the independent audit effort, including approval
of the scope of, and fees charged in connection with, the annual audit,
quarterly reviews and any non-audit services being provided. Review and
report to the Board the engagement of the external auditor, including fees.

Obtain on an annual basis a formal written statement from the external
auditor delineating all relationships between the accountants and the
Company consistent with Independence Standards Board Standard No. 1, and
review and discuss with the accountants all significant relationships the
external auditors have with the Company which may affect their independence.
The Audit Committee will actively engage in a dialogue with the auditor with
respect to any disclosed relationships or services that may impact the
objectivity and independence of the auditor, and recommend that the Board
take appropriate action to oversee the independence of the outside auditor.

Monitor, evaluate, and report to the Board on any changes in accounting
practice or standards.

Appendix A - Page 1

Review all external audit findings; meet with the external auditors as
appropriate.

Recommend for implementation any corrective actions that might be required
or desired as a result of the audit.

Review the financial statements and any reports or other financial
information submitted to any governmental body or the public.

Internal
- --------

Review annually this Committee Charter for adequacy and recommend any
changes to the Board.

Engage the internal auditors ("IA"). Review the IA's performance.

Review and approve the audit schedule and any revisions to the schedule.

Review the reports relating to all audits and reviews undertaken by the IA.

Review and monitor the implementation of management's responses to audit
findings.

Review the adequacy of internal controls including computerized information
systems controls and security. Review any management letters or internal
control reports prepared by the independent accountants or the Company's
internal auditors and responses to prior management letters, and review with
the independent accountants the Company's internal financial controls.

Recommend changes to policies, practices, and procedures relating to
findings of internal audits.

Assess the needs of the internal audit function and provide support levels
appropriate to that need.

Establish procedures for: (1) the receipt, retention, and treatment of
complaints received by the Company regarding accounting, internal
accounting controls, or auditing matters; and (2) the confidential anonymous
submission by employees of concerns regarding questionable accounting or
auditing matters.

General
- -------

Review and resolve any significant disagreement among management and the
independent accountants.

Review with the independent accountants, internal audit and management the
extent to which changes or improvements in financial or accounting
practices, as approved by the Committee, have been implemented.

Engage and determine funding for such independent advisers and counsel as
the Committee determines are necessary or appropriate to carry out its
functions hereunder. The company will provide appropriate funding to the
Committee, as determined by the Committee, for payment of: (1) compensation
to the independent auditors for services approved by the Committee; (2)
compensation to any outside advisors retained by the Committee; and (3) the
ordinary administrative expenses of the Committee.

Appendix A - Page 2

Meetings
- --------

The Committee shall meet in person or telephonically at least quarterly and
in addition at the discretion of chairperson or upon the request of a
majority of the members, or upon unanimous written consent as determined by
the Committee or its chairperson. In addition, the Committee will meet at
any time that the independent auditor believes communication to the
Committee is required. The chairperson shall set meeting agendas. At all
meetings, a majority of the total number of members shall constitute a
quorum.

- -------------------
(i) Independent Audit Committee Members

The new rules specify the relationships that disqualify a director from being
considered "independent" for purposes of serving as a member of an issuer's
audit committee. A director will not be considered "independent" for purposes
of serving on an audit committee if, among other things, he or she has:

been employed by the corporation or its affiliates in the current or past
three years;

accepted any compensation from the corporation or its affiliates during
the current or any of the past three fiscal years (except for board
service, retirement plan benefits, or nondiscretionary compensation);

an immediate family member who is, or has been in the past three years,
employed by the corporation or its affiliates as an executive officer;

been a partner, controlling shareholder or an executive officer of any
for-profit business to which the corporation made, or from which it
received, payments (other than those which arise solely from investments
in the corporation's securities) that exceed five percent of the
organization's consolidated gross revenues for that year, or $200,000,
whichever is more, in any of the past three years;

been employed as an executive of another entity where any of the company's
executives serve on that entity's compensation committee;

been employed, or had an immediate family who was employed, by the
company's outside auditor or otherwise worked on such audit during any of
the past three years; or

participated in the preparation of the financial statements of the company
or its subsidiaries at any time during the past three years.

Appendix A - Page 3

REVOCABLE PROXY
CASCADE FINANCIAL CORPORATION

ANNUAL MEETING OF SHAREHOLDERS
April 26, 2005

The undersigned hereby appoints the official proxy committee consisting of
all of the members of the Board of Directors of Cascade Financial Corporation
("Corporation"), Everett, Washington, with full powers of substitution, to act
as attorneys and proxies for the undersigned, to vote all shares of Common
Stock of the Corporation which the undersigned is entitled to vote at the
Annual Meeting of Shareholders, to be held at the Everett Golf & Country Club,
Everett, Washington, on April 26, 2005 at 6:30 p.m., and at any and all
adjournments thereof, as follows.

Address Change/Comments (Mark the corresponding box on the reverse side)
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Fold and Detach Here

You can now access your Cascade Financial Corporation account online.

Access your Cascade Financial Corporation shareholder account online via
Investor ServiceDirect(r) (ISD).

Mellon Investor Services LLC, Transfer Agent for Cascade Financial Corporation,
now makes it easy and convenient to get current information on your shareholder
account.

* View account status * View payment history for dividends

* View certificate history * Make address changes
* View book-entry information * Obtain a duplicate 1099 tax form
* Establish/change your PIN

Visit us on the web at http://www.melloninvestor.com
For Technical Assistance Call 1-877-978-7778 between 9am-7pm
Monday-Friday Eastern Time

- -------------------------------------------------------------------------------

Please Mark Here for Address Change or Comments [ ] SEE REVERSE SIDE

THIS PROXY WILL BE VOTED AS DIRECTED, OR IF NO DIRECTION IS INDICATED, WILL BE
VOTED "FOR" THE PROPOSAL.

Proposal 1. The election as directors of all nominees listed below (except as
marked to the contrary below).

FOR WITHHOLD FOR ALL
ALL ALL EXCEPT
(01) Richard L. Anderson __ __ __
(02) David W. Duce | | | | | |
(03) Carol K. Nelson |__| |__| |__|
(04) David R. O'Connor

INSTRUCTION: To withhold authority to vote, mark "FOR ALL EXCEPT" and write the
nominee's name on the line below.

- ---------------------------------------------

This proxy will be voted as directed, but if no instructions are specified,
this proxy will be voted "for" the proposals stated. If any other business is
presented at the meeting, this proxy will be voted by those named in this proxy
in their best judgment. At the present time, the Board of Directors knows of
no other business to be presented at the meeting. This proxy also confers
discretionary authority on the Board of Directors to vote with respect to the
election of any person as director where the nominee is unable to serve or for
good cause will not serve, and matters incident to the conduct of the Annual
Meeting.

This Proxy is solicited by the Board of Directors
- -------------------------------------------------

Should the undersigned be present and elect to vote at the Annual Meeting or at
any adjournment thereof and after notification to the Secretary of the
Corporation at the Annual Meeting of the shareholder's decision to terminate
this proxy, then the power of said attorneys and proxies shall be deemed
terminated and of no further force and effect.

The undersigned acknowledges receipt from the Corporation, prior to the
execution of this proxy, of the Notice of the Annual Meeting of Shareholders,
the Proxy Statement, and the 2004 Annual Report to Shareholders.

Dated: , 2005
----------------

- ------------------------- -------------------------
Print Name of Shareholder Print Name of Shareholder

- ------------------------- -------------------------
Signature of Shareholder Signature of Shareholder

Please sign exactly as your name appears on the envelope in which this card was
mailed. When signing as attorney, executor, administrator, trustee or
guardian, please give your full title. If a corporation, please sign in full
corporate name by the president or other authorized officer. If a partnership,
please sign in partnership name by authorized person. For joint accounts, only
one signature is required.

PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.

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Fold and Detach Here

Vote by Internet or Telephone or Mail
24 Hours a Day, 7 Days a Week
Internet and telephone voting is available through 11:59 PM Eastern Time
the day prior to annual meeting day.

Your Internet or telephone vote authorizes the named proxies to vote your
shares in the same manner as if you marked, signed and
returned your proxy card.

Internet OR Telephone OR Mail
- ------------------------------- ---------------------- ---------------
http://www.proxyvoting.com/casb 1-866-540-5760 Mark, sign and
Use the internet to vote Use any touch-tone date your proxy
your proxy. Have your proxy telephone to vote your card and return
card in hand when you access proxy. Have your proxy it in the
the web site. card in hand when you enclosed postage
call. -paid envelope.

If you vote your proxy by Internet or by telephone,
you do NOT need to mail back your proxy card.