U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
MARK ONE:
(x) Annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934 (NO FEE REQUIRED)
For the fiscal year ended December 31, 2004
OR
( ) Transition report pursuant to Section 15(d) of the Securities
Exchange Act of 1934
For the Transition period From to
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Commission file number 0-25286
A. Full title of the plan and the address of the plan, if different from
that of the issuer named below:
CASCADE FINANCIAL CORP. 401(k) Salary Deferral and Profit Sharing Plan
B. Name of the issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Cascade Financial Corporation
2828 Colby Avenue
Everett, Washington 98201
THE PLAN IS SUBJECT TO THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF
1974, AS AMENDED ("ERISA"). IN ACCORDANCE WITH ITEM NO. 4 OF REQUIRED
INFORMATION, THE PLAN FINANCIAL STATEMENTS AND SCHEDULES ATTACHED HERETO
ARE PREPARED IN ACCORDANCE WITH THE FINANCIAL REPORTING REQUIREMENTS OF
ERISA.
CASCADE FINANCIAL CORPORATION
401(k) SALARY DEFERRAL AND
PROFIT SHARING PLAN
REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
and
FINANCIAL STATEMENTS
DECEMBER 31, 2004 AND 2003
CONTENTS
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PAGE
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 1
FINANCIAL STATEMENTS
Statement of net assets available for benefits 2
Statement of changes in net assets available for benefits 3
Notes to financial statements 4-8
SUPPLEMENTAL SCHEDULE
Schedule H, Line 4i - schedule of assets (held at end of year)
- December 31, 2004 9
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Administrative Committee
Cascade Financial Corporation
401(k) Salary Deferral and Profit Sharing Plan
We have audited the accompanying statements of net assets available for
benefits of Cascade Financial Corporation 401(k) Salary Deferral and Profit
Sharing Plan (Plan) as of December 31, 2004 and 2003, and the related statement
of changes in net assets available for benefits for the years then ended. These
financial statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States of America). Those standards require
that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 2004 and 2003, and the changes in net assets available for
benefits for the years then ended, in conformity with accounting principles
generally accepted in the United States of America.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of assets
(held at end of year) at December 31, 2004 is presented for purposes of
additional analysis and is not a required part of the basic financial
statements, but is supplementary information required by the Department of
Labor's Rules and Regulations for Reporting and Disclosure under the Employee
Retirement Income Security Act of 1974. The supplemental schedule is the
responsibility of the Plan's management. The supplemental schedule has been
subjected to the auditing procedures applied in the audits of the basic
financial statements at December 31, 2004 and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
/s/ MOSS ADAMS, LLP
Everett, Washington
June 14, 2005
1
CASCADE FINANCIAL CORPORATION
401(k) SALARY DEFERRAL AND PROFIT SHARING PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31,
----------------------
2004 2003
ASSETS -------- --------
Participant directed investments at fair value
Money market funds $ 11,789 $ 24,742
Common stock of Cascade Financial Corporation 2,388,014 2,394,876
Mutual funds 2,825,648 1,996,106
Common commingled trust fund at contract value 473,654 411,476
Loans to participants 79,389 93,658
--------- ---------
NET ASSETS AVAILABLE FOR BENEFITS $5,778,494 $4,920,858
========= =========
See accompanying notes. 2
CASCADE FINANCIAL CORPORATION
401(k) SALARY DEFERRAL AND PROFIT SHARING PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED
DECEMBER 31,
-----------------------
2004 2003
ADDITIONS TO NET ASSETS AVAILABLE FOR -----------------------
BENEFITS ATTRIBUTED TO
Investment income
Interest and dividends $ 41,264 $ 30,156
Net appreciation (depreciation) in fair value
of investments
Common stock of Cascade Financial Corporation (60,343) 1,228,231
Mutual funds 317,337 439,854
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Total investment income 298,258 1,698,241
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Contributions
Sponsor 213,163 171,506
Participants 539,922 437,759
Rollover 85,737 42,374
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838,822 651,639
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Total additions, net 1,137,080 2,349,880
DEDUCTIONS FROM NET ASSETS AVAILABLE FOR
BENEFITS ATTRIBUTED TO BENEFITS PAID
TO PARTICIPANTS 279,444 647,644
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Net increase in net assets available
for benefits 857,636 1,702,236
NET ASSETS AVAILABLE FOR BENEFITS
Beginning of year 4,920,858 3,218,622
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End of year $5,778,494 $4,920,858
========= =========
3 See accompanying notes.
CASCADE FINANCIAL CORPORATION
401(k) SALARY DEFERRAL AND PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
Note 1 - Description of Plan and Basis of Presentation
- ------------------------------------------------------
The following description of the Cascade Financial Corporation 401(k) Salary
Deferral and Profit Sharing Plan (Plan) provides only general information.
Participants should refer to the Plan document for a more complete description
of the Plan's provisions.
General - The Plan is a defined contribution plan established for employees of
Cascade Financial Corporation (Sponsor) who are at least 18 years of age. The
Plan is subject to the Employee Retirement Income Security Act of 1974 (ERISA).
Administration - The Sponsor has appointed an administrative committee to
oversee the Plan. Circle Trust Company serves as the Trustee and the Plan is
administered by NW Plan Services, Inc.
Eligibility, contributions and participants' accounts - All nonunion employees
of the Sponsor who are age 18 or older are eligible to participate in the Plan
after completing one hour of service, and become eligible for employer
contributions immediately following completion of one year of service. To
complete one year of service, as defined by the Plan, a participant must
complete at least 1,000 hours of service within that year.
Accounts are established for each participant and include the participant's
contributions (including those rolled over from another qualified plan or
trust), allocations of employer matching contributions, any discretionary
contributions from the Sponsor and earnings thereon. Annual Sponsor matching
contributions and discretionary contributions are determined by the board of
directors of the Sponsor. No discretionary contributions were made in 2004 or
2003.
Participants are able to contribute from 1% to 60% of their pretax
compensation, subject to limits established under the Internal Revenue Code
(IRC). Participants may also contribute amounts representing distributions
from other qualified plans. The Sponsor's matching contribution is 50 cents
for each dollar contributed up to $6,000. The employee must be employed as of
the last day of the Plan year to be eligible for employer matching or
discretionary contributions.
Participants have the option of directing their account balance in 1%
increments into any one or more of the Plan's investment fund options. The
Sponsor contributions are made in cash and allocated to a participant's
account balance in accordance with the participant's contribution elections.
The Plan currently offers a common commingled trust fund, mutual funds and
Sponsor common stock as investment options for participants.
Participant accounts are valued daily based on quoted market prices.
Participants may change their investment elections and make transfers between
investment options daily.
4
CASCADE FINANCIAL CORPORATION
401(k) SALARY DEFERRAL AND PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
Note 1 - Description of Plan and Basis of Presentation (continued)
- ------------------------------------------------------------------
The Plan provides for various investment fund options which in turn invest in a
combination of stocks, bonds and other investment securities. Investment
securities, in general, are exposed to various risks, such as interest rate,
credit and overall market volatility risks. Due to the level of risk associated
with certain investment securities, it is reasonably possible that changes in
the values of investment securities will occur in the near term and that such
changes could materially affect the amounts reported in the statement of net
assets available for benefits.
Vesting - Participants are immediately vested in their contributions and
earnings thereon. Vesting of the Sponsor's contribution and earnings thereon is
based on years of credited service of participants. Effective January 1, 2004,
the Plan was amended to change the vesting schedule from a six-year vesting
schedule to the following five-year vesting schedule:
Years of Vesting Vested
Service Percentage
-------------------------- ----------
Less than 1 0
At least 1 but less than 2 20
At least 2 but less than 3 40
At least 3 but less than 4 60
At least 4 but less than 5 80
5 or more 100
Participants become generally fully vested at the age of 65, upon the
participant's death or upon permanent disability.
Forfeitures of nonvested Sponsor contributions are used to reduce future
Sponsor contributions. Unallocated forfeitures totaled $11,785 and $5,645 at
December 31, 2004 and 2003, respectively. Subsequent to year-end 2004
and 2003, Sponsor contributions were reduced by $11,785 and $5,645,
respectively, as a result of forfeited nonvested account balances.
Participant loans - Participants may borrow from the vested portion of their
account balance a minimum of $1,000 up to a maximum equal to the lesser of
$50,000 or 50% of their vested account balance. New loan terms range from
one to five years. Loans are secured by the remaining vested balance in
the participant's account and bear interest at prime plus 1%. At December 31,
2004 and 2003, interest rates range from 5.0% to 10.5%. Principal and interest
are paid ratably through semi-monthly payroll deductions. As of December 31,
2004, loans mature through 2009.
Payment of Plan benefits - Distributions are paid in a single lump sum. With
approval of the Sponsor, early withdrawals may be paid by the Plan to
those employees experiencing a financial hardship, as defined by the Plan.
5
CASCADE FINANCIAL CORPORATION
401(k) SALARY DEFERRAL AND PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
Note 1 - Description of Plan and Basis of Presentation (continued)
- ------------------------------------------------------------------
Plan expenses - Expenses of the Plan are paid by the Sponsor and, therefore,
are not included in the accompanying financial statements of the Plan. During
2004 and 2003, the Sponsor paid Plan expenses of approximately $19,000 and
$17,000, respectively.
Plan termination - Although it has not expressed any intent to do so, the
Sponsor has the right under the Plan to discontinue its contributions at any
time and to terminate the Plan subject to the provisions of ERISA. Should
the Plan be terminated at some future date, all participants would become fully
vested in their account balances.
Note 2 - Summary of Significant Accounting Policies
- ---------------------------------------------------
Basis of presentation and accounting - The Plan's financial statements are
presented on the accrual basis of accounting.
Investments - The investment in the Sponsor's common stock, which is traded on
the NASDAQ Small Cap Market under the symbol CASB, is valued at the last
reported sales price before the end of the Plan year. The investments in
mutual funds are stated at fair value based on quoted market prices. Loans to
participants are valued at their unpaid principal value.
The Capital Preservation Fund is a common co-mingled trust fund. The investment
is recorded at contract value, which approximates fair value. The effective
yield of the Capital Preservation Fund was 3.65% and 4.49%, respectively, for
the years ended December 31, 2004 and 2003, respectively.
Net appreciation (depreciation) of investments in the statement of changes in
net assets available for benefits includes both realized and unrealized gains
and losses. Purchases and sales of investments are recorded on a trade-date
basis. Interest is recorded when earned. Dividends are recorded on the dividend
date.
Benefit payments - Benefits are recorded when paid.
Use of estimates - The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of America
requires the plan administrator to make estimates and assumptions that affect
the reported amounts of assets and liabilities and changes therein, and
disclosure of contingent assets and liabilities. Actual results could
differ from those estimates.
Note 3 - Tax Status
- -------------------
The Internal Revenue Service has determined and informed the Sponsor by a
letter dated June 14, 2004, that the Plan and related trust are designed in
accordance with applicable sections of the IRC. The Plan has been amended since
receiving the determination letter. However, the plan administrator believes
that the Plan is designed and is currently being operated in compliance with
the applicable requirements of the IRC.
6
CASCADE FINANCIAL CORPORATION
401(k) SALARY DEFERRAL AND PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
Note 4 - Party In Interest Transactions
- ---------------------------------------
Certain Plan assets are invested in a money market fund held by the Trustee in
2003 and the Sponsors' common stock in 2004 and 2003, and therefore these
transactions qualify as party in interest transactions.
Note 5 - Investments
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The following table presents the assets held for investment purposes at
December 31:
Investment Value
-----------------------
2004 2003
Money market funds -----------------------
Circle Trust Liquidity Fund $ - $ 24,203
American Cash Management 11,789 539
Common stock
Cascade Financial Corporation 2,388,014 2,394,876
Mutual and common co-mingled trust funds
Davis NY Venture, Large Cap Fund 1,130,983 918,767
CTC Capital Preservation Fund 473,654 411,476
Van Kampen, Large Cap, Growth & Income Fund 322,121 225,631
Growth Fund of America, Large Cap Growth Fund 257,589 163,630
Alger, Mid Cap Growth & Income Fund
Stock Fund 152,729 109,929
First Eagle SoGen Overseas, Foreign Equity 167,062 109,548
PIMCO, Real Return Bond Fund 174,271 107,949
PIMCO, Small Cap Value Fund 154,526 96,614
American, U.S. Government Securities Fund 124,336 91,263
Lord Abbott, Mid Cap Fund 140,578 73,623
Van Kampen, Equity & Income Fund 134,133 67,434
Columbia, Acorn Fund Class A 51,283 -
AIM, Small Cap Growth Fund - 28,026
American, Fundamental Investors Fund - 2,041
American, New Perspective Fund 16,037 1,651
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Total 5,699,105 4,827,200
Loans to participants 79,389 93,658
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Total investments $5,778,494 $4,920,858
========= =========
7
CASCADE FINANCIAL CORPORATION
401(k) SALARY DEFERRAL AND PROFIT SHARING PLAN
NOTES TO FINANCIAL STATEMENTS
Note 6 - Subsequent Event
- -------------------------
During 2004, the Sponsor acquired Issaquah Bancshares, Inc., whose employees
participated in the Issaquah Bank 401(k) Savings Plan through December 31,
2004. Effective January 1, 2005, the participant accounts of the Issaquah Bank
401(k) Savings Plan totaling $928,154 were transferred into the Plan.
8
SUPPLEMENTAL SCHEDULE
- ---------------------
CASCADE FINANCIAL CORPORATION
401(k) SALARY DEFERRAL AND PROFIT SHARING PLAN
SCHEDULE H, LINE 4i - SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2004
(c)
DESCRIPTION OF
INVESTMENT
INCLUDING
MATURITY
DATE, RATE
(b) OF INTEREST,
IDENTITY OF ISSUER, COLLATERAL, (e)
BORROWER, LESSOR, PAR OR (d) CURRENT
(a) OR SIMILAR PARTY MATURITY VALUE COST** VALUE
- --- ------------------------- ------------------------- ------ ----------
American Cash Management Money Market $ 11,789
Davis NY Venture Large Cap Fund 1,130,983
Gartmore Morley CTC Capital Preservation
Fund 473,654
Van Kampen Large Cap, Growth & Income
Fund 322,121
Growth Fund of America Large Cap Growth Fund 257,589
Alger Mid Cap Growth Fund 152,729
First Eagle SoGen Overseas Foreign Equity Stock Fund 167,062
PIMCO Real Return Bond Fund 174,271
PIMCO Small Cap Value Fund 154,526
American U.S. Government Securities
Fund 124,336
Lord Abbott Mid Cap Value Fund 140,578
Van Kampen Equity & Income Fund 134,133
American New Perspective Fund 16,037
Columbia Acorn Fund Class A 51,283
* Cascade Financial
Corporation Common Stock 2,388,014
Various participants Loans to participants -
interest at 5.0% to 10.50%
maturing through 2009 0 79,389
---------
$5,778,494
=========
* Party-in-interest as defined by ERISA
** Cost omitted with respect to participant directed transactions under an
individual account plan
9
CASCADE FINANCIAL CORPORATION
401(k) SALARY DEFERRAL AND PROFIT SHARING PLAN
SIGNATURE
---------
The Plan. Pursuant to the requirements of the Securities and Exchange Act of
1934, the trustees (or other persons who administer the employee benefit plan)
have duly caused this annual report to be signed on its behalf by the
undersigned hereunto duly authorized.
Cascade Financial Corporation 401(k)
Salary Deferral and Profit Sharing Plan
Date: June 22, 2005 By: /s/ Lars H. Johnson
------------------------------
Lars H. Johnson
Chief Financial Officer
10
CASCADE FINANCIAL CORPORATION
401(k) SALARY DEFERRAL AND PROFIT SHARING PLAN
EXHIBIT INDEX
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The following documents are filed as part of this report:
Exhibit No. Exhibit
- ----------- -----------
23.1 Consent of Independent Registered Public
Accountants - Moss Adams LLP
11