Exhibit 99
Cascade Financial Corporation The Cereghino Group
Contacts: Carol K. Nelson, CEO Corporate Investor Relations
Lars Johnson, CFO www.stockvalues.com
425.339.5500 206.762.0993
www.cascadebank.com
NEWS RELEASE
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CASCADE FINANCIAL SECOND QUARTER NET INCOME JUMPS 41%, EPS GROWS 28%;
TOTAL LOANS UP 18% AND DEPOSITS INCREASE 14%
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Everett, WA - July 19, 2005 - Cascade Financial Corporation (Nasdaq: CASB),
parent company of Cascade Bank, today reported that net income grew 41% in the
second quarter and 29% in the first half of 2005, fueled by robust loan growth
and continued solid credit quality. Earnings per diluted share increased 28%
in the quarter and 15% year-to-date, reflecting the additional shares issued to
acquire Issaquah Bancshares in the second quarter of 2004.
Net income was $3.2 million, or $0.33 per diluted share in the quarter ended
June 30, 2005, compared to $2.3 million, or $0.26 per share in the second
quarter of 2004. For the six-month period ended June 30, net income was $6.3
million, or $0.64 per diluted share, compared to $4.9 million, or $0.55 per
share in the first six months of last year. Second quarter 2004 results
include one month of income and expense from Issaquah Bank, as well as $550,000
in merger-related expenses, net of tax.
Second Quarter Highlights
- -------------------------
* Earnings per diluted share increased 28%.
* Net income increased 41% over the second quarter of 2004.
* Revenues were up 20% from a year ago to $10.8 million.
* Other income increased 40%, reflecting solid increases in checking and
service fees.
* Return on tangible and GAAP equity improved to 18.2% and 13.3%,
respectively.
* Total loans grew 18% from a year ago, with an emphasis on higher-yielding
commercial credits.
* Credit quality remained strong: nonperforming assets were 0.14% of total
assets at quarter-end.
* High Performance Checking (HPC) program contributed to a 40% increase in
checking deposits.
"Loan demand has remained strong as the economy in Northwest Washington has
continued to improve, particularly business and real estate lending," stated
Carol K. Nelson, President and CEO. "The rollout of our High Performance
Checking program also contributed to our success, with checking balances
increasing 40% from a year ago, helping to lower our cost of funds."
Balance Sheet Management
- ------------------------
Total loans have increased 18% over the last year to $861 million, compared to
$727 million at June 30, 2004, with the three components of the commercial loan
portfolio all showing robust growth. Real estate construction loans were up
53% from a year ago, while business loans grew by 28% and commercial real
estate loans increased 27% from the end of June last year. As a result, total
commercial loans grew by 32% to $653 million, and now represent 76% of total
loans, compared to 68% a year ago. Lower-yielding consumer and residential
loans both declined slightly, while multifamily loans decreased more
substantially due to a loan sale.
"Towards the end of the second quarter, we sold $21 million in multifamily
loans to diversify risk by lowering our concentration of commercial real
estate loans," Nelson said. "In addition, selling these adjustable rate
mortgages with an average duration of 2.5 years helped to reduce our exposure
to higher short-term rates as we have replaced them with prime-based loans.
While investor demand for such loans remains strong, we will continue to
evaluate potential loan sales to help maintain a balanced portfolio."
"Loan generation has remained strong throughout the first half of the year,"
added Lars Johnson, EVP and CFO. "As a result, we have decreased our
investment portfolio by 13% over the last year to help fund our loan growth.
Over the last couple of years, we have increasingly relied on deposits as a
funding source, and will continue to aggressively seek out low-cost deposits
to decrease our borrowing costs."
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Cascade Financial - 2Q05 Profits Up 41%
July 19, 2005
Page Two
"The High Performance Checking program is definitely having an impact," Nelson
said. "Checking account balances have grown to $134 million, compared to $96
million at the end of June last year. At the same time, relatively low-cost
savings and money market accounts have grown by 12%, while time deposits are
up only 9%, reflecting our efforts to shift our liability mix and improve our
net interest margin."
Over the last year, total deposits grew 14% to $791 million, compared to $695
million at the end of June 2004. Time deposits now represent 59% of total
deposits, down from 62% at June 30, 2004. In the second quarter, total
deposits increased by $9 million despite the closure of a trust account with a
$30 million balance, which was expected to remain in the bank for only a brief
period.
Stockholders' equity increased by 12% to $101 million at quarter-end, compared
to $90 million at the end of the second quarter last year. Book value per
share was $10.57 at June 30, 2005, compared to $9.45 a year ago. Due to the
creation of intangible assets associated with last year's acquisition, tangible
book value was $7.83 at the end of the second quarter, compared to $7.48 a year
ago.
Operating Results
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"Our focus on adding quality prime-based loans and low-cost deposits
contributed to our improved earnings during the second quarter," Nelson said.
"Revenues increased by 20% for the quarter to $10.8 million. While the loan
sale contributed to that revenue increase, 17% growth in net interest income
and a 53% climb in checking fees also played significant roles."
Net interest income before provision for loan losses totaled $9.2 million in
the second quarter of 2005, compared to $7.8 million a year earlier,
reflecting the larger asset base and the shift to higher-yielding credits in
the loan portfolio. Other income grew 40% to $1.7 million, compared to $1.2
million in the second quarter of last year. The gain on sale of loans was
$434,000, while checking and service fees totaled nearly $1 million, compared
to $82,000 and $670,000, respectively, a year ago. These increases offset the
absence of gain on sale of securities during the quarter, which was $112,000
in the second quarter of 2004.
"Despite $229,000 in costs associated with the launch of our HPC program,
noninterest expense increased a modest 9% from a year ago to $5.8 million,
from $5.3 million in the second quarter of 2004," Nelson said. "The lack of
acquisition expenses was more than offset by the costs of the Issaquah Bank
operations for all three months, compared to only one month in the second
quarter of 2004, and the opening of our Snohomish branch in the third quarter
of 2004."
For the first half of 2005, revenues increased 21% to $21.2 million, compared
to $17.5 million in the same period a year ago, with both components showing
sizable increases. Net interest income grew 18% to $17.9 million from $15.1
million a year ago, while other income grew 40% to $3.3 million, compared to
$2.3 million in the first half of 2004. Checking and service fees increased by
57% to $2.0 million year-to-date, while gains on asset sales, including loans,
securities and real estate, declined to $510,000 in the six-month period.
Asset Quality
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"We have maintained our strict underwriting standards as we have grown our
portfolio and shifted our loan mix to higher-yielding commercial credits,"
Nelson said. "While nonperforming loans ticked up slightly from a year ago,
credit quality remains strong and net charge-offs were a nominal $40,000 in the
quarter."
At quarter-end, nonperforming loans (NPLs) were $1.3 million, compared to
$702,000 a year ago. NPLs were 0.16% of total loans at June 30, 2005, versus
0.10% of loans a year prior. Nonperforming assets, which includes Other Real
Estate Owned as well as NPLs, were $1.7 million, representing 0.14% of total
assets at quarter end, compared to $1.6 million, or 0.15% of total assets at
June 30, 2004.
"Reflecting the continued loan growth, our provision for loan losses was
$250,000 in the quarter, up $100,000 from a year ago and well in excess of net
charge-offs," Johnson said. "Our allowance for loan losses now stands at $9.9
million, representing 1.15% of total loans and 737% of NPLs. Given our low
loan loss experience and current assessment of the quality of our loan
portfolio, we are comfortable with our coverage level at this time."
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Cascade Financial - 2Q05 Profits Up 41%
July 19, 2005
Page Three
Net Interest Margin & Interest Rate Risk
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"Our net interest margin has remained quite stable despite continued interest
rate increases and the cessation of dividend payments on stock in the Federal
Home Loan Bank of Seattle," Johnson said. "In addition, competition on both
sides of the balance sheet continues to exert pressure on spreads. We continue
to emphasize adding prime-based loans and checking and money market accounts to
improve our net interest income."
The net interest margin was 3.38% in the second quarter of 2005, compared to
3.34% in the preceding quarter and 3.46% in the second quarter of 2004. The
sequential-quarter increase can primarily be attributed to a 20 basis point
increase in the yield on earning assets, compared to a 17 basis point increase
in the cost of interest-bearing liabilities.
1Q04 2Q04 3Q04 4Q04 1Q05 2Q05
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Asset yield 5.88% 5.78% 5.89% 5.90% 5.97% 6.17%
Liability cost 2.75% 2.60% 2.70% 2.80% 2.94% 3.11%
Spread 3.13% 3.18% 3.19% 3.10% 3.03% 3.06%
Margin 3.45% 3.46% 3.48% 3.41% 3.34% 3.38%
"Our interest rate risk model indicates that our margin and net interest income
are only slightly exposed to continued increases in short-term rates, with a 1%
rise in rates projected to add 1% to net interest income," Johnson said. "Net
interest income has benefited from having loans as a greater portion of our
earning assets, and a larger portion of prime-based and higher-yielding credits
in our loan portfolio. On the liability side of the balance sheet, the growth
in checking accounts and the maturity of high-coupon FHLB advances help
mitigate the increased interest expense on CDs and other deposits. We
anticipate that our margin will remain in the 3.30% - 3.50% range in the near
term."
Performance Measures
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Return on equity (ROE) improved to 13.3% in the second quarter, from 12.3% a
year ago, and was 13.0% for the six-month period, compared to 13.9% in the
first half of 2004. Management also uses return on tangible equity (ROTE),
a non-GAAP performance measure, to eliminate the goodwill created by the
merger, and believes that this provides a more consistent comparison with
pre-merger performance. Cascade's ROTE improved to 18.2% for the second
quarter and 17.9% year-to-date, compared to 14.2% and 14.7%, respectively,
a year ago. Return on assets (ROA) increased to 1.12% for the quarter, from
0.97% last year, and to 1.11% for the six-month period, up from 1.06%, a year
ago. The efficiency ratio also improved for both the quarter and six-month
period. The efficiency ratio was 53.4% for the quarter and 53.5% year-to-date,
compared to 58.7% and 55.8%, respectively, last year.
Conference Call
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Carol Nelson and Lars Johnson will host a conference call on Wednesday, July
20, at 10:00 am PDT (1:00 pm EDT). Interested investors may listen to the call
live or via replay at www.cascadebank.com. Investment professionals are
invited to dial (303) 262-2140 to participate in the live call. A telephone
replay of the call will be available for three weeks at (303) 590-3000, using
passcode 11033116#.
About Cascade Financial
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Established in 1916, Cascade Bank, the only operating subsidiary of Cascade
Financial Corporation, is a state chartered commercial bank headquartered in
Snohomish County, Washington. Cascade Bank operates 17 full service offices,
located in Everett, Lynnwood, Marysville, Mukilteo, Smokey Point, Issaquah,
Clearview, Woodinville, Lake Stevens, Bellevue and Snohomish. Issaquah Bank,
a division of Cascade Bank, operates offices in Issaquah and North Bend.
In July 2004, US Banker magazine ranked Cascade #39 out of the Top 200 Publicly
Traded Community Banks with less than $1 billion in assets, based on three-year
average return on equity. In October, the same publication named President and
CEO Carol Nelson one of the 25 Most Powerful Women in Banking.
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Cascade Financial - 2Q05 Profits Up 41%
July 19, 2005
Page Four
CONSOLIDATED FINANCIAL HIGHLIGHTS
- --------------------------------- Three Months Ended Six Months Ended
INCOME STATEMENT June 30, June 30,
2005 2004 2005 2004 Change
(Dollars in thousands, ---------------------- ------------------ ------
except per share amounts (Unaudited) (Unaudited)
Interest income $ 16,666 $ 13,096 27.3% $ 32,266 $ 25,705 25.5%
Interest expense 7,515 5,250 43.1% 14,341 10,557 35.8%
--------- --------- --------- ---------
Net interest income 9,151 7,846 16.6% 17,925 15,148 18.3%
Provision for loan losses 250 150 66.7% 495 375 32.0%
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Net interest income
after provision for loan losses 8,901 7,696 15.7% 17,430 14,773 18.0%
Other income
Gain on sale of loans 434 82 429.3% 464 144 222.2%
Gain on sale of securities - 112 NA 13 381 -96.6%
Checking fees 767 503 52.5% 1,543 944 63.5%
Service fees 207 167 24.0% 420 307 36.8%
Gain/(loss) on sale of real estate - 23 NA 33 99 -66.7%
Bank owned life insurance 190 133 42.9% 378 267 41.6%
Other 69 168 -58.9% 416 198 110.1%
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Total other income 1,667 1,188 40.3% 3,267 2,340 39.6%
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Total income 10,568 8,884 19.0% 20,697 17,113 20.9%
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Compensation expense 3,012 2,675 12.6% 6,180 5,308 16.4%
Other operating expenses 2,691 1,992 35.1% 5,076 3,799 33.6%
FHLB prepayment fees 73 - NA 73 26 180.8%
Merger related expenses - 633 NA - 633 NA
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Total other expense 5,776 5,300 9.0% 11,329 9,766 16.0%
Net income before tax 4,792 3,584 33.7% 9,368 7,347 27.5%
Income tax expense 1,577 1,300 21.3% 3,082 2,489 23.8%
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Net income $ 3,215 $ 2,284 40.8% $ 6,286 $ 4,858 29.4%
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EARNINGS PER SHARE INFORMATION
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Earnings per share, basic $ 0.34 $ 0.27 26.2% $ 0.66 $ 0.58 14.0%
Earnings per share, diluted $ 0.33 $ 0.26 27.7% $ 0.64 $ 0.55 15.4%
Weighted average number of shares outstanding
Basic 9,573,176 8,583,163 11.5% 9,574,720 8,438,534 13.5%
Diluted 9,831,085 8,915,706 10.3% 9,854,265 8,789,473 12.1%
Three Months Ended Six Months Ended
June 30, June 30,
2005 2004 2005 2004
PERFORMANCE MEASURES ----------------------- ------------------
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Return on equity 13.27% 12.26% 13.04% 13.90%
Return on tangible equity 18.16% 14.23% 17.87% 14.67%
Return on assets 1.12% 0.97% 1.11% 1.06%
Efficiency ratio 53.39% 58.67% 53.46% 55.84%
Net interest margin 3.38% 3.46% 3.36% 3.43%
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Cascade Financial - 2Q05 Profits Up 41%
July 19, 2005
Page Five
BALANCE SHEET Annual
- ------------- June 30, 2005 December 31, 2004 June 30, 2004 Change
(Dollars in thousands ------------- ----------------- ------------ ------
except per share amounts) (Unaudited) (Unaudited) (Unaudited)
Cash and due from banks $ 19,041 $ 11,692 $ 15,694 21.3%
Interest bearing deposits 1,523 1,337 663 129.7%
Securities held to maturity 93,734 91,339 90,789 3.2%
Securities available for sale 131,715 124,276 168,450 -21.8%
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Total securities 225,449 215,615 259,239 -13.0%
Loans
Business 341,352 292,117 266,025 28.3%
R/E construction 137,945 107,431 90,204 52.9%
Commercial real estate 173,362 178,704 136,873 26.7%
Multifamily 70,865 92,372 92,016 -23.0%
Home equity/consumer 32,423 30,125 33,665 -3.7%
Residential 104,748 105,975 108,331 -3.3%
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Total loans 860,695 806,724 727,114 18.4%
Deferred loan fees (3,107) (2,695) (2,350) 32.2%
Allowance for loan losses (9,891) (9,563) (9,471) 4.4%
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Loans, net 847,697 794,466 715,293 18.5%
Premises and equipment 12,907 12,824 12,714 1.5%
Real Estate Owned 331 868 919 -64.0%
Bank owned life insurance 16,979 16,650 11,391 49.1%
Other assets 8,688 9,211 9,214 -5.7%
Goodwill 26,204 26,292 25,928 1.1%
Total assets $1,158,819 $1,088,955 $1,051,055 10.3%
========= ========= =========
Deposits
Checking accounts $ 134,074 $ 112,564 $ 95,941 39.7%
Savings and money market accounts 191,022 172,584 170,113 12.3%
Certificates of deposit 465,521 436,760 429,244 8.5%
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Total deposits 790,617 721,908 695,298 13.7%
FHLB advances 223,000 228,000 211,500 5.4%
Securities sold under agreement to repurchase 21,046 20,902 37,272 -43.5%
Jr. Sub. Deb. (Trust Preferred Securities) 15,693 15,454 10,080 55.7%
Other liabilities 7,249 6,441 6,791 6.7%
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Total liabilities 1,057,605 992,705 960,941 10.1%
Stockholders' equity
Common stock and paid in capital 37,994 37,422 36,974 2.8%
Retained earnings 63,942 59,975 55,721 14.8%
Accumulated comprehensive gain/(loss) (722) (1,147) (2,581) -72.0%
--------- --------- ---------
Total stockholders' equity 101,214 96,250 90,114 12.3%
Total liabilities and stockholders' equity $1,158,819 $1,088,955 $1,051,055 10.3%
========= ========= =========
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Cascade Financial - 2Q05 Profits Up 41%
July 19, 2005
Page Six
ADDITIONAL INFORMATION June 30, 2005 December 31, 2004 June 30, 2004
- ---------------------- ------------- ----------------- -------------
(Dollars in thousands, (Unaudited) (Unaudited) (Unaudited)
except per share amounts)
Book value per common share $ 10.57 $ 10.07 $ 9.45
Common stock outstanding 9,580,034 9,559,822 9,531,855
Capital/asset ratio (including
Jr. Subordinate Deb.) 10.09% 10.26% 9.19%
Capital/asset ratio (Tier 1) 8.07% 8.04% 7.50%
Average assets $1,148,387 $1,083,470 $ 943,337
Average earning assets 1,081,868 1,020,513 908,388
Average equity 97,047 94,806 74,609
Average tangible equity 70,829 68,896 67,280
Cash dividend per share $ 0.08 $ 0.08 $ 0.07
Total equity $ 101,214 $ 96,250 $ 90,114
Less: goodwill and intangibles 26,204 26,252 25,928
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Tangible equity 75,010 69,998 64,186
Tangible book value per share $ 7.83 $ 7.32 $ 7.48
Tangible capital/asset ratio (excluding
Jr. Subordinate Deb.) 6.62% 6.59% 6.26%
ASSET QUALITY June 30, 2005 December 31, 2004 June 30, 2004
- ------------- ------------- ----------------- -------------
Nonperforming loans (NPLs) $ 1,342 $ 532 $ 702
Nonperforming loans/total loans 0.16% 0.07% 0.10%
Net loan charge-offs (recoveries)/qtr $ 40 $ 22 $ (5)
Net charge-offs/total loans 0.00% 0.00% 0.00%
Allowance for loan losses/total loans 1.15% 1.19% 1.30%
Allowance for loan losses/nonperforming loans 737% 1798% 1349%
Real estate owned $ 331 $ 868 $ 919
Nonperforming assets/total assets 0.14% 0.13% 0.15%
This press release contains supplemental financial information determined by
methods other than in accordance with Accounting Principles Generally Accepted
in the United States of America ("GAAP"). These measures include return on
tangible equity, tangible book value per share and tangible capital to asset
ratio. Cascade's management uses these non-GAAP measures in its analysis of
the company's performance. These measures exclude the average and ending
balances of acquisition-related goodwill and intangibles in determining average
tangible shareholders' equity. Banking and financial institution regulators
also exclude goodwill and intangibles from shareholders' equity when assessing
the capital adequacy of a financial institution. Management believes the
presentation of the financial measure excluding the impact of these items
provides useful supplemental information that is essential for a proper
understanding of the financial results of Cascade Financial Corporation, as
they provide a method to assess management's success in utilizing the company's
tangible capital. This disclosure should not be viewed as a substitute for
results determined to be in accordance with GAAP, nor is it necessarily
comparable to non-GAAP performance measures that may be presented by other
companies.
Safe Harbor Statement
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This document contains forward-looking statements that are subject to risks and
uncertainties that could cause actual results to differ materially from those
projected. Those factors include, but are not limited to: continued strong
demand for Cascade's products and services, the ability to attract low-cost
deposits and commercial loans, expectations for the net interest margin,
maintaining asset quality, management's ability to minimize interest rate
exposure and the impact of interest rate movements, the ability to attract
and retain qualified people, and other factors. For a discussion of factors
that could cause actual results to differ, please see the Company's publicly
available Securities and Exchange Commission filings, including its Annual
Report on Form 10-K for the fiscal year ended December 31, 2004.
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Note: Transmitted on Business Wire on July 19, 2005 at 1:00 p.m. PDT.