As filed with the Securities and Exchange Commission on March 28, 1997
Registration No. 333-____
- ------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM S-4
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933

Cascade Financial Corporation
(Exact name of registrant as specified in its charter)

Delaware 6035 91-0167790
- ------------------------------ ------------------ ----------------
State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Identification No.)
Classification Code
Number

2828 Colby Avenue
Everett, Washington 98201
(206) 339-5500
------------------------------------------------------------------
(Address, including ZIP code, and telephone number, including area
code, of Registrant's principal executive office)

John F. Breyer, Jr., Esq.
Aaron M. Kaslow, Esq.
Breyer & Aguggia
1300 I Street, N.W., Suite 470 East
Washington, D.C. 20005
(202) 737-7900
------------------------------------------------------------
(Name and address, including ZIP code, and telephone number,
including area code, of agent for service)

with copies to:
Glen P. Garrison, Esq.
Keller Rohrback
1201 Third Ave., Suite 3200
Seattle, Washington 98101
-----------------------------------
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration
Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [ ]

CALCULATION OF REGISTRATION FEE
- ------------------------------------------------------------------------------
Title of Proposed Proposed Amount
Each Class Amount Maximum Maximum Aggregate of
of Securities to be Offering Price Offering Registration
to be Registered Registered(1) Per Unit(2) Price(2) Fee(2)
- ------------------------------------------------------------------------------
Common Stock, $.01
par value 768,000 $13.15 $5,103,430 $1,547
- ------------------------------------------------------------------------------
(1) Represents the estimated maximum number of shares of common stock, par
value $.01 per share, issuable by Cascade Financial Corporation.
("Cascade") upon consummation of the acquisition of AmFirst
Bancorporation ("AmFirst") by Cascade.
(2) Pursuant to Rules 457(f)(2) and 457(c), the registration fee for the
Cascade common stock is based on the book value of AmFirst common stock,
$1.00 par value per share, on December 31, 1996 ($5,103,430), and
computed based on the estimated maximum number of such shares (388,213),
including shares issuable upon the exercise of outstanding employee and
director stock options, that may be exchanged for the securities being
registered.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933, as amended, or until the
Registration Statement shall become effective on such date as the Commission,
acting pursuant to said Section 8(a), may determine.

[Cascade logo]

_____, 1997

Dear Shareholder:

You are cordially invited to attend a Special Meeting of Shareholders of
Cascade Financial Corporation ("Cascade"), the holding company for Cascade
Bank, to be held at the company's main office at 2828 Colby Avenue, Everett,
Washington on _______, ______, 1997 at _:00 _.m., local time.

The Notice of Special Meeting of Shareholders and Prospectus/Joint Proxy
Statement that appear on the following pages describe the formal business to
be transacted at the meeting. The primary purpose of the meeting is to
consider and vote upon a proposal to approve the Agreement and Plan of Mergers
(the "Merger Agreement") dated as of February 6, 1997 between Cascade and
Cascade Bank, and AmFirst Bancorporation ("AmFirst") and its wholly-owned
subsidiary, American First National Bank. The Merger Agreement provides that
AmFirst will be merged with a wholly-owned subsidiary of Cascade, which will
then be merged into Cascade with Cascade as the surviving corporation. As
soon as practicable thereafter, American First National Bank will be merged
into Cascade Bank, resulting in Cascade Bank as the surviving bank. Directors
and officers of Cascade, as well as representatives of KPMG Peat Marwick LLP,
Cascade's independent auditors, will be present to respond to any appropriate
questions shareholders may have.

The Merger Agreement provides that upon consummation of the merger all
outstanding shares of common stock of AmFirst will be converted into shares of
common stock of Cascade. You are urged to review carefully the
Prospectus/Joint Proxy Statement, which contains a more complete description
of the terms of the merger.

The Board of Directors of Cascade has unanimously approved the Merger
Agreement and recommends that the shareholders vote FOR the approval of the
Merger Agreement. Approval of the Merger Agreement requires the affirmative
vote of a majority of the outstanding shares of Cascade common stock.

It is very important that your shares be represented at the Special
Meeting, regardless of whether you plan to attend in person. A failure to
vote, either by not returning the enclosed proxy or by checking the "Abstain"
box thereon, will have the same effect as a vote against approval of the
Merger Agreement. To assure that your shares are represented in voting on
this very important matter, please sign, date and return the enclosed proxy
card in the enclosed postage-prepaid envelope whether or not you plan to
attend the meeting. If you do attend, you may, if you wish, revoke your proxy
and vote your shares in person at the meeting.

The merger is an important step for Cascade and its shareholders. On
behalf of the Board of Directors, I urge you to vote FOR approval of the
Merger Agreement.

Sincerely,

/s/ Frank M. McCord

Frank M. McCord
Chairman of the Board and
Chief Executive Officer

CASCADE FINANCIAL CORPORATION
2828 Colby Avenue
Everett, Washington 98201
(206) 339-5500
___________________

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on ____ __, 1997
___________________

NOTICE IS HEREBY GIVEN THAT a Special Meeting of Shareholders of Cascade
Financial Corporation ("Cascade") will be held at the company's main office at
2828 Colby Avenue, Everett, Washington, on _____, ______, 1997 at _:00 _.m.,
local time, for the following purposes:

(1) To consider and vote upon a proposal to approve the Agreement and
Plan of Mergers, dated as of February 6, 1997 (the "Merger Agreement"),
between Cascade and its wholly-owned subsidiary, Cascade Bank, and AmFirst
Bancorporation ("AmFirst") and its wholly-owned subsidiary, American First
National Bank, a copy of which is attached as Appendix A to the accompanying
Prospectus/Joint Proxy Statement, under the terms of which (i) AmFirst will
merge with and into a wholly-owned subsidiary of Cascade, which will then be
merged into Cascade, and (ii) each outstanding share of common stock of
AmFirst will be converted into shares of Cascade common stock in accordance
with the terms of the Merger Agreement.

(2) To consider and vote upon a proposal to approve an amendment to
Cascade's Certificate of Incorporation increasing the number of authorized
shares of common stock from 5,000,000 to 8,000,000 shares.

(3) To consider and vote upon a proposal to adopt the Cascade Financial
Corporation 1997 Stock Option Plan.

(4) To consider and act upon such other matters as may properly come
before the meeting or any adjournments or postponements thereof.

Any action may be taken on the foregoing proposal at the meeting on the
date specified above or on any date or dates to which, by original or later
adjournment, the meeting may be adjourned. Shareholders of record at the
close of business on ____ __, 1997 are the shareholders entitled to vote at
the meeting and any adjournments thereof. The affirmative vote of the holders
of a majority of the outstanding shares of Cascade common stock is required
for approval of the Merger Agreement.

You are requested to fill in and sign the enclosed form of proxy, which
is solicited by the Board of Directors, and to mail it promptly in the
enclosed envelope. The proxy will not be used if you attend the meeting and
vote in person.

BY ORDER OF THE BOARD OF DIRECTORS

/s/ Russell E. Rosendal

RUSSELL E. ROSENDAL
SECRETARY

Everett, Washington
___ __, 1997

Your vote is important regardless of the number of shares you own. Whether or
not you expect to attend the meeting, please sign, date and promptly return
the accompanying proxy card using the enclosed postage-prepaid envelope. If
for any reason you should desire to revoke your proxy, you may do so at any
time before it is voted at the meeting.

[AmFirst logo]

____ __, 1997

Dear Shareholder:

You are cordially invited to attend a Special Meeting of Shareholders of
AmFirst Bancorporation ("AmFirst"), the holding company for American First
National Bank (the "Bank"), to be held at ________________, Everett,
Washington on ____ __, 1997 at ___ _.m., local time.

The attached Notice of Special Meeting of Shareholders and
Prospectus/Joint Proxy Statement describe the formal business to be transacted
at the meeting. At the Special Meeting, shareholders will be asked to
consider and vote upon a proposal to approve the Agreement and Plan of Mergers
(the "Merger Agreement") dated as of February 6, 1997 between Cascade
Financial Corporation ("Cascade") and Cascade Bank ("Cascade Bank"), and
AmFirst and the Bank. The Merger Agreement provides that AmFirst will be
merged with a wholly-owned subsidiary of Cascade, which will then be merged
into Cascade. As soon as practicable thereafter, the Bank will be merged into
Cascade Bank, with Cascade Bank as the surviving bank.

Upon consummation of the merger, each outstanding share of AmFirst common
stock (excluding any dissenting shares and certain shares held by Cascade and
AmFirst) will be converted into the right to receive approximately 1.925
shares of Cascade common stock, subject to certain adjustments, in a
transaction that is generally tax-free for federal income tax purposes, all as
more fully discussed in the accompanying Prospectus/Joint Proxy Statement.
The last reported sale price of Cascade common stock on the Nasdaq SmallCap
Market ("CASB") on _____ __, 1997 was $____ per share.

You are urged to review carefully the enclosed Prospectus/Joint Proxy
Statement, which contains a more complete description of the terms of the
merger.

The Board of Directors of AmFirst has unanimously approved the Merger
Agreement and recommends that the shareholders vote FOR the approval of the
Merger Agreement. Approval of the Merger Agreement requires the affirmative
vote of two-thirds of the outstanding shares of AmFirst common stock.

On behalf of the Board of Directors, I recommend that you vote FOR
approval of the Merger Agreement.

Sincerely,

/s/ Thomas H. Rainville

Thomas H. Rainville
Chairman, Chief Executive Officer
and President

AMFIRST BANCORPORATION
6920 Evergreen Way
Everett, Washington 98203
___________________

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on ____ __, 1997
___________________

NOTICE IS HEREBY GIVEN THAT a Special Meeting of Shareholders of AmFirst
Bancorporation ("AmFirst") will be held at _________________, Everett,
Washington, on _____________, ___________, 1997, at _____ __.m., local time,
for the following purposes:

(1) To consider and vote upon a proposal to approve the Agreement and
Plan of Mergers, dated as of February 6, 1997 (the "Merger Agreement"),
between Cascade Financial Corporation ("Cascade") and its wholly- owned
subsidiary, Cascade Bank, and AmFirst and its wholly-owned subsidiary,
American First National Bank, a copy of which is attached as Appendix A to the
accompanying Prospectus/Joint Proxy Statement, under the terms of which (i)
AmFirst will merge with and into a wholly-owned subsidiary of Cascade, which
will then be merged into Cascade with Cascade as the surviving corporation,
and (ii) each outstanding share of common stock of AmFirst will be converted
into shares of Cascade common stock in accordance with the terms of the Merger
Agreement.

(2) To consider and act upon such other matters as may properly come
before the meeting or any adjournments or postponements thereof.

Any action may be taken on the foregoing proposal at the meeting on the
date specified above or on any date or dates to which, by original or later
adjournment, the meeting may be adjourned. Shareholders of record at the
close of business on ____ __, 1997 are the shareholders entitled to vote at
the meeting and any adjournments thereof. The affirmative vote of the holders
of two-thirds of the outstanding shares of AmFirst common stock is required
for approval of the Merger Agreement.

AmFirst shareholders have the right to dissent from the merger and obtain
payment of the fair value of their shares of AmFirst common stock under the
applicable provisions of Washington law. Further information regarding voting
rights and the business to be transacted at the Special Meeting is given in
the accompanying Prospectus/Joint Proxy Statement. A copy of the applicable
Washington statutory provisions is set forth in Appendix B to the accompanying
Prospectus/Joint Proxy Statement and a summary of such provisions is set forth
under "THE MERGER -- Dissenters' Rights."

BY ORDER OF THE BOARD OF DIRECTORS

/s/ Marlee M. Fowler

MARLEE M. FOWLER
SECRETARY

Everett, Washington
________ __, 1997

JOINT PROXY STATEMENT
OF
CASCADE FINANCIAL CORPORATION
AND
AMFIRST BANCORPORATION
----------------------
PROSPECTUS
OF
CASCADE FINANCIAL CORPORATION
Up to 768,000 Shares of Common Stock

This Prospectus/Joint Proxy Statement is being furnished by Cascade
Financial Corporation("Cascade") to the holders of Cascade common stock, par
value $.01 per share ("Cascade Common Stock"), in connection with the
solicitation of proxies by the Board of Directors of Cascade (the "Cascade
Board") for use at a special meeting of Cascade shareholders to be held on
____ __, 1997, and at any adjournments or postponements thereof (the "Cascade
Special Meeting"). This Prospectus/Joint Proxy Statement is first being
mailed to shareholders of Cascade on or about ____ __, 1997.

This Prospectus/Joint Proxy Statement is also being furnished by AmFirst
Bancorporation ("AmFirst") to the holders of AmFirst common stock, par value
$1.00 per share ("AmFirst Common Stock"), in connection with the solicitation
of proxies by the Board of Directors of AmFirst (the "AmFirst Board") for use
at a special meeting of AmFirst shareholders to be held on ____ __, 1997 and
at any adjournments or postponements thereof (the "AmFirst Special Meeting,"
and, together with the Cascade Special Meeting, the "Meetings"). This
Prospectus/Joint Proxy Statement is first being mailed to shareholders of
AmFirst on or about ____ __, 1997.

At the Meetings, shareholders of Cascade and AmFirst will consider and
vote upon proposals to approve the Agreement and Plan of Mergers dated as of
February 6, 1997 (the "Merger Agreement") by and between Cascade and its
wholly-owned subsidiary, Cascade Bank ("Cascade Bank"), and AmFirst and its
wholly-owned subsidiary, American First National Bank (the "Bank") pursuant to
which, among other things, AmFirst would be merged with and into a
wholly-owned subsidiary of Cascade (the "Merger").

Upon consummation of the Merger, each outstanding share of AmFirst Common
Stock (excluding any dissenting shares and certain shares held by Cascade and
AmFirst) will be converted into the right to receive approximately 1.925
shares of Cascade Common Stock, subject to certain adjustments. The last
reported sale price of Cascade Common Stock on the Nasdaq SmallCap Market
("CASB") on _____ __, 1997 was $_____ per share. For a more detailed
description of the terms of the Merger, see "THE MERGER."

Cascade has filed a registration statement on Form S-4 (the "Registration
Statement") pursuant to the Securities Act of 1933, as amended (the
"Securities Act"), with respect to up to 768,000 shares of Cascade Common
Stock to be issued pursuant to the Merger Agreement. This Prospectus/Joint
Proxy Statement also constitutes the prospectus of Cascade filed as part of
the Registration Statement.
----------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/JOINT
PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------------------
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS, SAVINGS ACCOUNTS,
OR OTHER OBLIGATIONS OF A DEPOSITORY INSTITUTION AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR
ANY OTHER GOVERNMENTAL AGENCY OR INSTRUMENTALITY.

This Prospectus/Joint Proxy Statement does not cover any resale of the
securities to be received by shareholders of AmFirst upon consummation of the
proposed transaction, and no person is authorized to make any use of this
Prospectus/Joint Proxy Statement in connection with any such resale.

The date of this Prospectus/Joint Proxy Statement is _____, 1997.

No person is authorized to give any information or to make any
representation not contained in this Prospectus/Joint Proxy Statement, and, if
given or made, such information or representation should not be relied upon as
having been authorized. This Prospectus/Joint Proxy Statement does not
constitute an offer to sell or a solicitation of an offer to purchase a
security, or a solicitation of a proxy, in any jurisdiction in which, or to
any person to whom, it would be unlawful to make such offer or solicitation.

Neither the delivery of this Prospectus/Joint Proxy Statement nor any
distribution of the securities made under this Prospectus/Joint Proxy
Statement shall, under any circumstances, create any implication that there
has been no change in the affairs of Cascade or AmFirst or in the information
set forth herein since the date of this Prospectus/Joint Proxy Statement.

AVAILABLE INFORMATION

Cascade is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "SEC" or the "Commission"). Such
reports, proxy statements and other information can be inspected and copied at
the public reference facilities maintained by the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the
following regional offices of the Commission: 7 World Trade Center, Suite
1300, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60621. Copies of such material also can be obtained from
the Commission's Public Reference Section at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates and from the
Commission's home page on the World Wide Web at http://www.sec.gov. In
addition, materials filed by Cascade are available for inspection at the
offices of The Nasdaq Stock Market, 1735 K Street, N.W., Washington, D.C.
20006.

This Prospectus/Joint Proxy Statement constitutes part of a Registration
Statement on Form S-4 (File No. 333-_____) filed by Cascade with the
Commission under the Securities Act. This Prospectus/Joint Proxy Statement
omits certain of the information contained in the Registration Statement in
accordance with the rules and regulations of the Commission. Reference is
hereby made to the Registration Statement and related exhibits for further
information with respect to Cascade and the Cascade Common Stock. Statements
contained herein concerning the provisions of any document are not necessarily
complete and, in each instance, where a copy of such document has been filed
as an exhibit to the Registration Statement or otherwise has been filed with
the Commission, reference is made to the copy so filed. Each such statement
is qualified in its entirety by such reference.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by Cascade with the Commission pursuant to
the Exchange Act are incorporated in this Prospectus/Joint Proxy Statement by
reference:

1. Cascade's Annual Report on Form 10-K for the year ended June 30,
1996;

2. Cascade's Quarterly Reports on Form 10-Q for the quarters ended
September 30, 1996 and December 31, 1996; and

3. Cascade's Current Report on Form 8-K filed February 14, 1997.

All documents filed by Cascade pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the
Cascade Special Meeting shall be deemed to be incorporated by reference herein
and to be a part hereof from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or

-ii-
PAGE

superseded for purposes hereof to the extent that a statement contained herein
or in any other subsequently filed document that also is, or is deemed to be,
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part hereof.

As described above, this Prospectus/Joint Proxy Statement incorporates by
reference documents that are not presented herein or delivered herewith.
These documents (other than exhibits to such documents that are specifically
incorporated by reference into the text of such documents) are available,
without charge, to each person, including any beneficial owner, to whom a copy
of this Prospectus/Joint Proxy Statement is delivered, upon written or oral
request to Mr. Russell Rosendal, Secretary, Cascade Financial Corporation,
2828 Colby Avenue, Everett, Washington 98201 (telephone number: (206)
339-5500). In order to ensure timely delivery of the documents, any request
should be made by _______, 1997.

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

All information contained or incorporated by reference in this
Prospectus/Joint Proxy Statement with respect to Cascade has been supplied by
Cascade, and AmFirst is relying upon the accuracy of that information. All
information contained or incorporated by reference in this Prospectus/Joint
Proxy Statement with respect to AmFirst has been supplied by AmFirst, and
Cascade is relying upon the accuracy of that information.

-iii-

TABLE OF CONTENTS

Page
----
Available Information . . . . . . . . . . . . . . . . . . . ii
Incorporation of Certain Documents by Reference . . . . . . ii
Summary . . . . . . . . . . . . . . . . . . . . . . . . . . vi
Selected Historical and Pro Forma Financial Data. . . . . . xi
Comparative Per Share Data. . . . . . . . . . . . . . . . . xv
Comparative Market Price Data . . . . . . . . . . . . . . . xv
The Meetings. . . . . . . . . . . . . . . . . . . . . . . . 1
Cascade Special Meeting. . . . . . . . . . . . . . . . 1
AmFirst Special Meeting. . . . . . . . . . . . . . . . 2
The Merger. . . . . . . . . . . . . . . . . . . . . . . . . 3
General; Exchange Ratio. . . . . . . . . . . . . . . . 3
Effective Date of the Merger . . . . . . . . . . . . . 4
Exchange of AmFirst Stock Certificates . . . . . . . . 4
Background of the Merger . . . . . . . . . . . . . . . 5
Reasons for the Merger and Recommendations of the
Boards of Directors . . . . . . . . . . . . . . . . . 6
Interests of Certain Persons in the Merger . . . . . . 8
Certain Federal Income Tax Consequences. . . . . . . . 9
Conduct of Business Pending the Merger . . . . . . . . 9
Conditions to Consummation of the Merger . . . . . . . 10
Regulatory Requirements. . . . . . . . . . . . . . . . 10
No Solicitation. . . . . . . . . . . . . . . . . . . . 11
Termination Fee. . . . . . . . . . . . . . . . . . . . 11
Dissenters' Rights . . . . . . . . . . . . . . . . . . 12
Amendment; Waiver; Termination . . . . . . . . . . . . 13
Resale of Cascade Common Stock . . . . . . . . . . . . 14
Accounting Treatment . . . . . . . . . . . . . . . . . 14
Expenses . . . . . . . . . . . . . . . . . . . . . . . 14
Management and Operations After the Merger. . . . . . . . . 14
Pro Forma Financial Information . . . . . . . . . . . . . . 16
Businesses of the Parties to the Merger . . . . . . . . . . 23
Cascade and Cascade Bank . . . . . . . . . . . . . . . 23
AmFirst and the Bank . . . . . . . . . . . . . . . . . 23
Voting Securities of Cascade and Principal Holders Thereof. 24
Voting Securities of AmFirst and Principal Holders Thereof. 25
Description of Cascade Capital Stock. . . . . . . . . . . . 26
Common Stock . . . . . . . . . . . . . . . . . . . . . 26
Preferred Stock. . . . . . . . . . . . . . . . . . . . 27
Comparison of Shareholders' Rights. . . . . . . . . . . . . 27
Payment of Dividends . . . . . . . . . . . . . . . . . 27
Size of Board of Directors . . . . . . . . . . . . . 28
Classified Board of Directors . . . . . . . . . . . . 28
Cumulative Voting . . . . . . . . . . . . . . . . . . 28
Removal of Directors . . . . . . . . . . . . . . . . 29
Vacancies on the Board of Directors . . . . . . . . . 29
Special Meetings of Shareholders and Action Without
a Meeting . . . . . . . . . . . . . . . . . . . . . . 29
Advance Notice Requirements for Nominations of
Directors and Presentation of New Business at
Meetings of Shareholders. . . . . . . . . . . . . . . 29
Approval of Mergers, Consolidations, Sale of
Substantially All Assets and Dissolution. . . . . . . 30
Restrictions on 10% Beneficial Ownership . . . . . . . 31

-iv-

Page
----
Dissenters' Appraisal Rights . . . . . . . . . . . . . 31
Indemnification of Officers and Directors and
Limitation of Liability . . . . . . . . . . . . . . . 31
Amendment of Certificate of Incorporation and Bylaws . 32
Amendment to Cascade's Certificate of Incorporation . . . . 33
Adoption of 1997 Stock Option Plan. . . . . . . . . . . . . 33
Administration of the Option Plan. . . . . . . . . . . 34
Shares Subject to the Option Plan. . . . . . . . . . . 34
Option Price . . . . . . . . . . . . . . . . . . . . . 34
Terms of Options . . . . . . . . . . . . . . . . . . . 34
Federal Income Tax Consequences of Non-Qualified
Options . . . . . . . . . . . . . . . . . . . . . . . 35
Federal Income Tax Consequences of Incentive Stock
Options . . . . . . . . . . . . . . . . . . . . . . . 35
Alternative Minimum Tax. . . . . . . . . . . . . . . . 36
Adoption of the Option Plan. . . . . . . . . . . . . . 36
Certain Information Concerning Cascade. . . . . . . . . . . 36
Legal Opinions. . . . . . . . . . . . . . . . . . . . . . . 36
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Other Matters . . . . . . . . . . . . . . . . . . . . . . . 37
Shareholder Proposals . . . . . . . . . . . . . . . . . . . 37

Appendix A - Agreement and Plan of Mergers
Appendix B - Chapter 13 of the Washington Business Corporation Act
Appendix C - Financial Information for Cascade
Appendix D - Financial Information for AmFirst
Appendix E - Cascade Financial Corporation 1997 Stock Option Plan

-v-

SUMMARY

The following summary of certain information relating to the Merger is
not intended to be complete and is qualified by reference to, and should be
read in conjunction with, the more detailed information appearing elsewhere in
this Prospectus/Joint Proxy Statement, including the Appendices hereto, and
the documents incorporated herein by reference.

The Parties to the Merger

Cascade and Cascade Bank. Cascade is a savings and loan holding company
incorporated under the laws of the State of Delaware. The business of Cascade
consists primarily of holding 100% of the capital stock of Cascade Bank. At
December 31, 1996, Cascade had total assets of $348.1 million, total deposits
of $225.3 million and stockholders' equity of $21.2 million. The principal
executive offices of Cascade are located at 2828 Colby Avenue, Everett,
Washington 98201 and its telephone number is (206) 339-5500.

Cascade Bank is a federally chartered savings bank and is regulated by
the Office of Thrift Supervision (the "OTS") and by the Federal Deposit
Insurance Corporation ("FDIC"), as the insurer of its deposits. Cascade
Bank's deposits are insured up to applicable limits under the Savings
Association Insurance Fund ("SAIF") of the FDIC. Cascade Bank's principal
business consists of attracting savings deposits from the general public and
originating loans for the purchase or construction of residential real estate.
To a lesser extent, Cascade Bank originates multi-family residential,
commercial real estate, and other real estate loans. At December 31, 1996,
Cascade Bank conducted its business from eight full service offices,
consisting of five in Snohomish County, two in King County, and one in Skagit
county, and from a mortgage origination office in Whatcom County.

See "SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA" and "BUSINESSES OF
THE PARTIES TO THE MERGER -- Cascade and Cascade Bank." Additional
information concerning Cascade is included in Appendix C and in the Cascade
documents incorporated by reference herein. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."

AmFirst and the Bank. AmFirst is a bank holding company incorporated
under the laws of the State of Washington. The business of AmFirst consists
primarily of holding 100% of the capital stock of the Bank. At December 31,
1996, AmFirst had total assets of $71.1 million, total deposits of $64.9
million, and total stockholders' equity of $5.1 million. AmFirst maintains
its principal office at 6920 Evergreen Way in Everett, Washington 98203 and
its telephone number is (206) 353-1243.

The Bank is a national bank regulated by the Office of the Comptroller of
the Currency ("OCC") and the FDIC. Generally, customer deposit accounts in
the Bank are insured by the FDIC's Bank Insurance Fund for up to a maximum of
$100,000. The Bank offers a full line of commercial banking services and
originates commercial, real estate and installment loans. The Bank conducts
business from two full service offices in Everett and one in each of Mukilteo
and Snohomish, Washington.

See "SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA," "BUSINESSES OF
THE PARTIES TO THE MERGER -- AmFirst and the Bank." Additional information
concerning AmFirst is included in Appendix D.

Cascade Special Meeting

Place, Time and Date; Purpose. The Cascade Special Meeting will be held
on ______, _____, 1997 at _:00 _.m., local time, at Cascade's main office at
2828 Colby Avenue, Everett, Washington, for the purpose of considering and
voting upon a proposal to approve the Merger Agreement attached hereto as
Appendix A. At the Cascade Special Meeting, holders of Cascade Common Stock
also will be asked to consider and approve (i) the amendment

-vi-

of Cascade's Certificate of Incorporation to increase the number of authorized
shares of Cascade Common Stock and (ii) Cascade's 1997 Stock Option Plan. See
"THE MEETINGS -- Cascade Special Meeting -- Place, Time and Date" and "--
Purpose."

Record Date; Shares Entitled to Vote. The Cascade Board has fixed the
close of business on ______, 1997 as the record date (the "Cascade Record
Date") for determining shareholders entitled to notice of and to vote at the
Cascade Special Meeting. Only those holders of shares of Cascade Common Stock
of record on the Cascade Record Date will be entitled to notice of and to vote
at the Cascade Special Meeting. Each share of Cascade Common Stock will be
entitled to one vote. Shareholders who execute proxies retain the right to
revoke them at any time prior to being voted at the Cascade Special Meeting.
At the Cascade Record Date, there were __________ shares of Cascade Common
Stock outstanding and entitled to be voted at the Cascade Special Meeting.
See "THE MEETINGS -- Cascade Special Meeting -- Record Date; Shares Entitled
to Vote."

Vote Required. Approval of the Merger Agreement and the amendment of the
Certificate of Incorporation requires the affirmative vote of the holders of a
majority of the outstanding shares of Cascade Common Stock. Approval of the
1997 Stock Option Plan requires the affirmative vote of a majority of the
shares of Cascade Common Stock represented in person or by proxy and entitled
to vote on the proposal. At the Cascade Record Date, the directors and
executive officers of Cascade and their affiliates beneficially owned _______
shares of Cascade Common Stock, which represents _____% of the shares entitled
to be voted at the Cascade Special Meeting. All of the directors and
executive officers of Cascade have indicated their intention to vote their
shares for the approval of the Merger Agreement. See "THE MEETINGS -- Cascade
Special Meeting -- Vote Required."

A failure to vote, either by not returning the enclosed proxy or by
checking the "Abstain" box thereon, will have the same effect as a vote
against approval of the Merger Agreement.

AmFirst Special Meeting

Place, Time and Date; Purpose. The AmFirst Special Meeting will be held
on __________, _________, 1997 at _____ __.m., local time at _____________,
Everett, Washington, for the purpose of considering and voting upon a proposal
to approve the Merger Agreement attached hereto as Appendix A. See "THE
MEETINGS -- AmFirst Special Meeting -- Place, Time and Date" and "-- Purpose."

Record Date; Shares Entitled to Vote. The AmFirst Board has fixed the
close of business on _______, 1997 as the record date (the "AmFirst Record
Date") for determining shareholders entitled to notice of and to vote at the
AmFirst Special Meeting. Only those holders of shares of AmFirst Common Stock
of record on the AmFirst Record Date will be entitled to notice of and to vote
at the AmFirst Special Meeting. Each share of AmFirst Common Stock will be
entitled to one vote. Shareholders who execute proxies retain the right to
revoke them at any time prior to being voted at the AmFirst Special Meeting.
At the AmFirst Record Date, there were _______ shares of AmFirst Common Stock
outstanding and entitled to be voted at the AmFirst Special Meeting. See "THE
MEETINGS -- AmFirst Special Meeting -- Record Date; Shares Entitled to Vote."

Vote Required. Approval of the Merger Agreement requires the affirmative
vote of the holders of two-thirds of the outstanding shares of AmFirst Common
Stock. At the AmFirst Record Date, the directors and executive officers of
AmFirst and their affiliates beneficially owned ________ shares of AmFirst
Common Stock, which represents ____% of the shares entitled to be voted at the
AmFirst Special Meeting. Simultaneous with the execution of the Merger
Agreement, all of the directors of AmFirst entered into an agreement with
Cascade pursuant to which each director agreed to vote his shares for approval
of the Merger Agreement. See "THE MEETINGS -- AmFirst Special Meeting -- Vote
Required."

A failure to vote, either by not returning the enclosed proxy or by
checking the "Abstain" box thereon, will have the same effect as a vote
against approval of the Merger Agreement.

-vii-

The Mergers; Exchange Ratio

The Merger Agreement provides for the merger of AmFirst with and into a
wholly-owned subsidiary of Cascade, which will then be merged into Cascade.
As soon as practicable thereafter, the Bank will be merged into Cascade Bank.
As a result of the mergers, AmFirst and the Bank will cease to exist and
Cascade and Cascade Bank will succeed to all of the assets and liabilities of
AmFirst and the Bank, respectively. See "THE MERGER -- General; Exchange
Ratio."

Upon consummation of the Merger, each outstanding share of AmFirst Common
Stock (excluding any shares held by shareholders who perfect their dissenters'
rights of appraisal ("Dissenting Shares") and any shares of stock held by
Cascade or AmFirst, other than in a fiduciary capacity or in satisfaction of a
debt previously contracted (together with the Dissenting Shares, "Excluded
Shares")) will be automatically converted into the right to receive
approximately 1.925 shares of Cascade Common Stock, subject to certain
adjustments ("Exchange Ratio"). Each holder of AmFirst Common Stock who would
otherwise be entitled to a fractional share of Cascade Common Stock will
receive cash in lieu thereof determined by multiplying such fraction by
$16.00. Upon completion of the Merger, shareholders of AmFirst will no longer
own any stock in AmFirst.

AmFirst shareholders should note that the market price of the Cascade
Common Stock they receive will continue to be subject to changes in market
value and may, therefore, have a market value as of the date they receive
certificates for their shares (or such shares are otherwise made available to
them) that is less than, or greater than, the value of such stock at the
consummation of the Merger. For a more detailed discussion of the calculation
of the number of shares of Cascade Common Stock to be received in exchange for
AmFirst Common Stock, see "THE MERGER -- General; Exchange Ratio."

Recommendation of the Cascade Board

The Cascade Board has unanimously approved the Merger Agreement as
advisable and in the best interests of Cascade and the Cascade shareholders
and recommends that the shareholders of Cascade vote FOR approval of the
Merger Agreement.

For a discussion of the circumstances surrounding the Merger and the
factors considered by the Cascade Board in making its recommendation, see "THE
MERGER -- Background of the Merger" and "-- Reasons for the Merger and
Recommendations of the Boards of Directors -- Cascade." Approval of the
Merger Agreement by Cascade shareholders is a condition to consummation of the
Merger. See "THE MERGER -- Conditions to Consummation of the Merger."

Recommendation of the AmFirst Board

The AmFirst Board has unanimously approved the Merger Agreement as
advisable and in the best interests of AmFirst and the AmFirst shareholders
and recommends that the shareholders of AmFirst vote FOR approval of the
Merger Agreement.

For a discussion of the circumstances surrounding the Merger and the
factors considered by the AmFirst Board in making its recommendation, see "THE
MERGER -- Background of the Merger" and "-- Reasons for the Merger and
Recommendations of the Boards of Directors -- AmFirst." Approval of the
Merger Agreement by AmFirst shareholders is required by law and is a condition
to consummation of the Merger. See "THE MERGER - - Conditions to Consummation
of the Merger." For a description of certain economic interests directors of
AmFirst may be deemed to have in the Merger, see "THE MERGER -- Interests of
Certain Persons in the Merger."

-viii-

Interests of Certain Persons in the Merger

Certain members of AmFirst's management and the AmFirst Board may be
deemed to have interests in the Merger in addition to their interests as
shareholders of AmFirst generally. These include, among other things,
provisions in the Merger Agreement relating to employment agreements and
appointments to the Cascade Board.

In connection with the consummation of the Merger, Thomas H. Rainville,
the President and Chief Executive Officer of AmFirst, will enter into a
non-competition agreement with Cascade and Cascade Bank pursuant to which Mr.
Rainville will receive $5,000 per month for 60 months.

Following the Effective Time, David Little, the President and Chief
Operating Officer of the Bank, and Marlee Fowler, the Chief Financial Officer
of the Bank, will enter into two-year employment agreements with Cascade Bank.

Cascade has agreed to appoint two members of the AmFirst Board, as
determined by Cascade, to the Boards of Directors of Cascade and Cascade Bank
effective as of the consummation of the Merger. The AmFirst directors who
will be appointed to the Board of Directors of Cascade and Cascade Bank are
expected to be ____________________ and ____________________.

See "THE MERGER -- Interests of Certain Persons in the Merger."

Effective Date of the Merger

Subject to the conditions to the obligations of the parties to complete
the Merger as set forth in the Merger Agreement, the "Effective Date" of the
Merger will occur on such date as Cascade notifies AmFirst in writing not less
than five days prior thereto, provided such date is not more than 30 days
after such conditions have been satisfied or waived. The "Effective Time" of
the Merger is the time on the Effective Date at which the Merger becomes
effective. Either Cascade or AmFirst may terminate the Merger Agreement if
the Effective Date does not occur on or before September 30, 1997.

Conditions to Consummation of the Merger

Consummation of the Merger is subject to, among other things: (i)
approval of the Merger Agreement by the holders of not less than two-thirds of
the outstanding shares of AmFirst Common Stock and by the holders of not less
than a majority of the outstanding shares of Cascade Common Stock; (ii)
receipt of all applicable regulatory approvals without any condition that, in
the opinion of Cascade, would deprive Cascade of the material economic or
business benefits of the Merger; (iii) receipt by Cascade and AmFirst of the
opinion of Breyer & Aguggia, dated as of the Effective Date, as to certain
federal income tax consequences of the Merger; (iv) David Little and Marlee
Fowler having entered into employment agreements with Cascade and Cascade
Bank; (v) David Little, Marlee Fowler and Thomas Rainville having entered into
a non-compete agreement with Cascade; (vi) each member of the AmFirst Board
having entered into an agreement with Cascade providing that such individual,
for a period of one year from the Effective Date, will not refer any customers
of the Bank to a financial institution other than Cascade Bank, participate in
the formation of a new financial institution in Snohomish County, Washington,
or solicit any employees of the Bank who become employees of Cascade; (vii)
receipt by Cascade of an agreement from each "affiliate" of AmFirst
restricting the sale of Cascade Common Stock received by such affiliate in the
Merger; (viii) the number of Dissenting Shares does not exceed 5% of the
outstanding shares of AmFirst Common Stock; and (ix) that the Merger will
qualify for pooling of interests accounting treatment. See "THE MERGER --
Conditions to Consummation of the Merger."

-ix-

Accounting Treatment

It is anticipated that the Merger will be accounted for as a pooling of
interests by Cascade under generally accepted accounting principles. See "THE
MERGER -- Conditions to Consummation of the Merger" and "-- Accounting
Treatment."

Regulatory Requirements

The Merger is subject to the receipt of prior approval from the OTS. An
application for approval of the Merger was filed with the OTS on _______,
1997. There can be no assurance that such approval will be obtained, and, if
obtained, that it will not impose conditions that, in the opinion of Cascade,
would deprive Cascade of the economic and business benefits of the Merger so
as to render it inadvisable in the judgment of Cascade to proceed with the
Merger. See "THE MERGER -- Regulatory Requirements."

Certain Federal Income Tax Consequences

Consummation of the Merger is conditioned, among other things, on receipt
by Cascade and AmFirst of an opinion of Breyer & Aguggia, special counsel for
Cascade, to the effect that the Merger will be treated as a reorganization
described in Section 368(a) of the Internal Revenue Code of 1986, as amended
(the"Code"). In accordance with this opinion, no gain or loss will be
recognized by a holder of AmFirst Common Stock who exchanges such stock solely
for Cascade Common Stock pursuant to the Merger. However, holders of AmFirst
Common Stock may recognize gain or loss by reason of cash received in lieu of
fractional shares.

Because certain tax consequences of the Merger may vary depending on the
particular circumstances of each shareholder, each AmFirst shareholder is
urged to consult his or her own tax advisor as to the specific tax
consequences to such holder of the Merger, including the specific application
and effect of state, local, foreign and other tax laws to such shareholder.

Dissenters' Rights

AmFirst shareholders have the right to dissent from the Merger and obtain
payment of the fair value of their shares of AmFirst Common Stock under the
provisions of Chapter 13 of the Washington Business Corporation Act ("WBCA").
A shareholder's failure to follow exactly the procedures specified in Chapter
13 of the WBCA will result in loss of such shareholder's dissenters' rights.
Accordingly AmFirst shareholders wishing to dissent from the Merger are urged
to read carefully "THE MERGER -- Dissenters' Rights" and the copy of Chapter
13 of the WBCA set forth in Appendix B to this Prospectus/Joint Proxy
Statement, and to consult with their own legal advisors. If AmFirst
shareholders perfect dissenters' rights with respect to more than 5% of the
outstanding shares of AmFirst Common Stock, Cascade may elect not to
consummate the Merger. See "THE MERGER -- Conditions to Consummation of the
Merger." Additionally, if shareholders perfect dissenters' rights with
respect to more than 10% of the outstanding shares of AmFirst Common Stock and
Cascade elects to consummate the Merger, the Merger will not qualify for
pooling of interests accounting treatment. See "THE MERGER -- Accounting
Treatment."

Comparison of Shareholders' Rights

The rights of stockholders of AmFirst are currently determined by
reference to the WBCA and AmFirst's Articles of Incorporation and Bylaws. On
the Effective Date, stockholders of AmFirst will become stockholders of
Cascade, and their rights as stockholders of Cascade will be determined by
reference to the Delaware General Corporation Law (the "DGCL") and Cascade's
Certificate of Incorporation and Bylaws. For a discussion of certain material
differences in the rights of shareholders of Cascade and AmFirst and an
explanation of certain possible antitakeover effects of certain provisions in
Cascade's Certificate of Incorporation and Bylaws, see "COMPARISON OF
SHAREHOLDERS' RIGHTS."

-x-
PAGE

SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA

The following tables set forth selected historical consolidated financial
data for Cascade and AmFirst and selected unaudited pro forma combined
financial data, giving effect to the Merger using the pooling of interests
method of accounting. This information should be read in conjunction with the
historical financial statements of Cascade and AmFirst, including the
respective notes thereto, and the unaudited pro forma financial information,
including the notes thereto, appearing elsewhere in this Prospectus/Joint
Proxy Statement and the documents incorporated by reference herein. See
"AVAILABLE INFORMATION," "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE,"
"PRO FORMA FINANCIAL INFORMATION" and Appendices C and D.

The Cascade historical consolidated financial statement data as of and
for the six months ended December 31, 1996 have been prepared on the same
basis as the historical information derived from audited financial statements,
and in the opinion of management, contain all adjustments, consisting only of
normal recurring accruals, necessary for the fair presentation of results of
operations for such periods.

The pro forma condensed combined selected financial data have been
prepared based on a 1.925 Exchange Ratio. Financial information for AmFirst,
which has a December 31 fiscal year end, has been adjusted to reflect a June
30 fiscal year end by adding the subsequent six month period and subtracting
the comparable preceding year interim results from the financial information
for the year ended December 31. The pro forma condensed combined selected
financial data is unaudited. Such data is intended for illustrative purposes
only and is not necessarily indicative of future results of operations or the
future financial position of the combined company or of the results of
operations and financial position of the combined company that would have
actually occurred had the Merger been in effect as of the dates or for the
periods presented.

-xi-

Cascade Financial Corporation
Consolidated Historical Selected Financial Data

At or For the At or For the
Years Ended Six Months
June 30, Ended December 31,
------------------------------------ ------------------
1992 1993 1994 1995 1996 1995 1996
---- ---- ---- ---- ---- ---- ----
(Dollars in thousands, except per share data)

Historical
Operating
Data:
Interest
income . . $18,893 $14,333 $16,545 $23,378 $24,776 $11,731 $12,817
Interest
expense. . 12,928 9,329 9,142 13,933 16,563 8,259 8,592
Net ------- ------- ------- ------- ------- ------- -------
interest
income. . 5,965 5,004 7,403 9,445 8,213 3,472 4,225
Provision
for
(recovery
of) loan
losses . . 1,140 100 495 (335) -- -- --
Net ------- ------- ------- ------- ------- ------- -------
interest
income
after
provision
for loan
losses . 4,825 4,904 6,908 9,780 8,213 3,472 4,225
Other
income . . 5,567 6,411 5,135 2,478 2,226 876 693
Other
expenses . 9,597 8,975 9,006 7,879 7,004 3,327 4,776
Income ------- ------- ------- ------- ------- ------- -------
before
Federal
income
taxes. . 795 2,340 3,037 4,379 3,435 1,021 142
Federal
income
taxes. . 271 802 1,033 1,489 1,167 347 48
Income ------- ------- ------- ------- ------- ------- -------
before
effect
of
accounting
change . 524 1,538 2,004 2,890 2,268 674 94
Cumulative
effect of
accounting
change . 1,001(1) -- -- -- -- -- --
------- ------- ------- ------- ------- ------- -------
Net income $ 1,525 $ 1,538 $ 2,004 $ 2,890 $ 2,268 $ 674 $ 94
======= ======= ======= ======= ======= ======= =======

Historical Per
Share Data:
Net income,
fully diluted NA $0.71 $0.91 $1.28 $0.99 $0.30 $0.04
Weighted
average
shares
outstanding
fully
diluted. NA 2,171,648 2,213,213 2,256,306 2,282,033 2,275,617 2,299,366

Historical
Financial
Condition
Data:
Total
assets . $171,995 $222,421 $258,049 $310,943 $334,431 $314,139 $348,050
Loans,
net. . . 119,212 156,960 183,839 216,609 233,612 225,107 266,700
Cash and
securi-
ties . . 27,216 23,127 65,794 83,484 90,635 77,779 70,751
Deposits. 147,363 166,143 181,131 199,938 218,063 201,949 225,306
Stock-
holders'
equity . 8,710 14,372 16,374 19,287 20,815 20,062 21,223

- -------------------
(1) Reflects cumulative effect of change in accounting for income taxes.

-xii-

AmFirst Bancorporation
Selected Historical Financial Data

At or For the
Years Ended
December 31,
----------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
(Dollars in thousands, except per share data)

Historical Operating Data:
Interest income . . . . . $ 3,219 $ 3,310 $ 3,678 $ 4,628 $ 5,258
Interest expense. . . . . 1,488 1,418 1,516 2,254 2,515
------- ------- ------- ------- -------
Net interest income . . 1,731 1,892 2,162 2,374 2,743
Provision for loan
losses . . . . . . . . . 63 49 6 27 151
------- ------- ------- ------- -------
Net interest income
after provision for
loan losses. . . . . . 1,668 1,843 2,156 2,347 2,592
Other income. . . . . . . 349 413 351 371 383
Other expenses. . . . . . 1,666 1,739 1,941 2,185 2,236
------- ------- ------- ------- -------
Income before Federal
income taxes . . . . . . 351 517 566 533 739
Federal income taxes. . . 78 135 157 120 165
------- ------- ------- ------- -------
Net income. . . . . . . . $ 273 $ 382 $ 409 $ 413 $ 574
======= ======= ======= ======= =======
Historical Per Share Data:
Net income, fully
diluted. . . . . . . . . $ 0.88 $ 1.23 $ 1.30 $ 1.28 $ 1.66
Weighted average shares
outstanding fully
diluted. . . . . . . . . 311,203 311,203 313,716 321,713 345,638

Historical Financial
Condition Data:
Total assets. . . . . . . $45,663 $48,261 $51,279 $65,781 $71,099
Loans, net. . . . . . . . 28,872 27,682 30,176 38,140 40,224
Cash and securities . . . 15,301 18,610 19,012 25,514 28,285
Deposits. . . . . . . . . 41,059 44,135 47,028 60,768 64,898
Stockholders' equity. . . 2,921 3,304 3,757 4,359 5,103

-xiii-

Cascade Financial Corporation
Pro Forma Condensed Combined Selected Financial Data (unaudited)

At or For the At or For the
Years Ended Six Months
June 30, Ended December 31,
------------------------ ------------------
1994 1995 1996 1995 1996
---- ---- ---- ---- ----
(Dollars in thousands, except per share data)
Historical Operating
Data:
Interest income . . . . $ 19,930 $ 27,461 $ 29,878 $ 14,228 $ 15,473
Interest expense. . . . 10,609 15,694 19,104 9,536 9,842
-------- -------- -------- -------- --------
Net interest income . 9,321 11,767 10,774 4,692 5,631
Provision for (recovery
of) loan losses. . . . 515 (319) 61 14 104
-------- -------- -------- -------- --------
Net interest income
after provision for
losses on loans. . . 8,806 12,086 10,713 4,678 5,527
Other income. . . . . . 5,544 2,856 2,597 1,054 880
Other expenses. . . . . 10,818 10,006 9,224 4,417 5,883
-------- -------- -------- -------- --------
Income before federal
income taxes . . . . . 3,532 4,936 4,086 1,315 524
Federal income taxes. . 1,166 1,631 1,311 413 135
-------- -------- -------- -------- --------
Net income. . . . . . . $ 2,366 $ 3,305 $ 2,775 $ 902 $ 389
======== ======== ======== ======== ========
Historical Per
Share Data:
Net income, fully
diluted. . . . . . . . $0.84 $1.15 $0.95 $0.31 $0.13
Weighted average
shares outstanding,
fully diluted. . . . . 2,812,500 2,862,831 2,924,927 2,900,449 2,969,116

Historical Financial
Condition Data:(1)
Total assets. . . . . . $307,708 $367,597 $399,296 $379,920 $418,223
Loans, net. . . . . . . 212,031 249,250 272,444 263,247 306,274
Cash and securities . . 85,469 105,427 114,702 103,292 97,987
Deposits. . . . . . . . 226,986 252,204 277,897 262,717 290,204
Stockholders' equity. . 19,891 23,217 25,309 24,421 25,715
_______________
(1) Transaction-related Expenses. Nonrecurring transaction-related expenses
anticipated to be recorded are included in the pro forma combined
statement of financial condition as of December 31, 1996. Nonrecurring
transaction-related expenses expected to be recorded by Cascade, in the
quarter the transaction closes, except the loan loss reserve which will
be recorded in the second calendar quarter of 1997, are summarized in the
following table (dollars in thousands):

Professional fees $150
Information
systems conversion 50
Pension payments 75
Additional loan loss reserves 650
----
925
Tax benefit (314)
----
Net charge $611
====
The effect of these costs have not been reflected in the pro forma
condensed combined statements of operations. See "MANAGEMENT AND
OPERATIONS OF CASCADE FOLLOWING THE TRANSACTION" for additional
information.

-xiv-

COMPARATIVE PER SHARE DATA

The following table sets forth selected comparative per share data for
Cascade on both a historical and pro forma combined basis and for AmFirst on
both a historical and pro forma equivalent basis giving effect to the Merger
using the pooling of interests method of accounting. Neither Cascade nor
AmFirst has paid cash dividends. Accordingly, no information is provided with
respect to pro forma combined or pro forma equivalent cash dividends. These
tables should be read in conjunction with the historical financial statements
of Cascade and AmFirst, including the respective notes thereto, and the
unaudited pro forma financial information, including the notes thereto,
appearing elsewhere in this Prospectus/Joint Proxy Statement and documents
incorporated by reference herein. See "AVAILABLE INFORMATION," "INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE," "PRO FORMA FINANCIAL INFORMATION" and
Appendices C and D. The pro forma information has been prepared to illustrate
a 1.925 Exchange Ratio. The actual Exchange Ratio is subject to adjustment as
described under "THE MERGER - General; Exchange Ratio" and may be different
than 1.925. The following information is not necessarily indicative of the
results of operations or combined financial position that would have resulted
had the Merger been consummated at the beginning of the periods indicated, nor
is it necessarily indicative of the results of operations of future periods or
future combined financial position.

At or For the Year Ended At or For the
June 30, Six Months Ended
1994 1995 1996 December 31, 1996
---- ---- ---- -----------------

Book value per share(1):
Cascade historical. . . $ 7.40 $ 8.55 $ 9.12 $ 9.23
AmFirst historical. . . 11.30 12.47 13.46 14.67
Pro forma combined. . . 7.07 8.11 8.65 8.66
AmFirst pro forma
equivalent . . . . . . 13.61 15.61 16.66 16.67

Net income per share(2):
Cascade historical. . . $0.91 $1.28 $0.99 $0.04
AmFirst historical. . . 1.16 1.32 1.52 0.85
Pro forma combined. . . 0.84 1.15 0.95 0.13
AmFirst pro forma
equivalent . . . . . . 1.62 2.22 1.83 0.25
_____________
(1) The pro forma combined book value per share of Cascade Common Stock is
based upon the historical total combined common stockholders' equity
for Cascade and AmFirst as of the dates indicated divided by total pro
forma common shares of the combined entities. The data presented is
based on fully diluted common shares outstanding. The pro forma
equivalent book value per share of AmFirst Common Stock represents the
pro forma combined book value of Cascade Common Stock multiplied by a
1.925 Exchange Ratio.
(2) The pro forma combined net income per share of Cascade Common Stock
(based on fully diluted net income and weighted average shares
outstanding) is based upon the combined historical net income for
Cascade and AmFirst for the periods indicated divided by the average
pro forma fully diluted common shares of the combined entities.
Historical net income for AmFirst, which has a December 31 fiscal year
end, has been adjusted to reflect a June 30 fiscal year by adding the
subsequent six month period and subtracting the comparable preceding
year interim results from the results for the year ended December 31.
The pro forma equivalent net income per share of AmFirst Common Stock
represents the pro forma combined net income per share multiplied by a
1.925 Exchange Ratio.

COMPARATIVE MARKET PRICE DATA

Cascade Common Stock is quoted on the Nasdaq SmallCap Market under the
symbol "CASB." There is no established trading market for AmFirst Common
Stock. The table below sets forth, for the calendar quarters indicated, the
high and low sales prices of Cascade Common Stock as reported on the Nasdaq
National Market and the high and low trading prices of AmFirst Common Stock
known to management of AmFirst. Neither Cascade nor
-xv-

AmFirst has paid cash dividends. The market for shares of AmFirst Common
Stock is highly illiquid and the shares are neither traded on an established
exchange nor listed on the Nasdaq Stock Market. Trades are generally
undertaken in private transactions. Thus, management of AmFirst does not have
knowledge of the prices paid in all transactions involving its shares and has
not necessarily verified the prices indicated in the table with both parties
to the relevant transaction.

Cascade AmFirst
Common Stock Common Stock
-------------- --------------
High Low High Low
---- --- ---- ---
Year Ended June 30, 1995:
First Quarter . . . . . . . . . . . $10.875 $9.625 $19.50 $19.00
Second Quarter. . . . . . . . . . . 11.25 9.625 21.00 20.00
Third Quarter . . . . . . . . . . . 12.25 10.50 21.50 20.50
Fourth Quarter. . . . . . . . . . . 13.625 10.875 21.50 21.00

Year Ended June 30, 1996:
First Quarter . . . . . . . . . . . 14.625 13.625 22.00 21.00
Second Quarter. . . . . . . . . . . 14.375 13.00 22.00 21.50
Third Quarter . . . . . . . . . . . 13.625 12.75 22.00 21.50
Fourth Quarter. . . . . . . . . . . 17.25 12.75 22.00 21.50

Year Ended June 30, 1997:
First Quarter . . . . . . . . . . . 17.50 14.125 22.50 22.00
Second Quarter. . . . . . . . . . . 17.50 14.375 22.50 22.00
Third quarter . . . . . . . . . . .
Fourth quarter (through
________, 1997) . . . . . . . . .

As of __________, 1997, the _________outstanding shares of Cascade Common
Stock were held by approximately _____ holders of record and the ________
outstanding shares of AmFirst Common Stock were held by approximately ___
holders of record.

The following table sets forth the closing price per share for Cascade
Common Stock and AmFirst Common Stock and the equivalent per share price for
AmFirst Common Stock on February 5, 1997, the last full trading day prior to
the public announcement of the execution of the Merger Agreement, and on
_____, 1997, which is the most recent date for which it was practicable to
obtain market price data prior to the printing of this Prospectus/Joint Proxy
Statement. Holders of AmFirst Common Stock are urged to obtain current market
quotations for shares of Cascade Common Stock.

February 5, 1997 , 1997
---------------- --------------
Closing price per share:
Cascade . . . . . . . . . . 17.50
AmFirst(1). . . . . . . . . 22.50
Equivalent pro forma per
share of AmFirst Common
Stock(2). . . . . . . . . 33.69

- -------------------
(1) There are no publicly available quotations of AmFirst Common Stock. The
market price per share of AmFirst Common Stock as of February 5, 1997 and
____ __, 1997, respectively, is the price paid for AmFirst Common Stock
in the last transaction in AmFirst Common Stock prior to such date for
which a price is known to management of AmFirst.
(2) Computed by multiplying the closing price per share of Cascade Common
Stock by a 1.925 Exchange Ratio.

-xvi-

THE MEETINGS

Cascade Special Meeting

Place, Time and Date. The Cascade Special Meeting will be held on
______, ________, 1997 at _:00 _.m., local time, at Cascade's main office at
2828 Colby Avenue, Everett, Washington. This Prospectus/Joint Proxy Statement
is being sent to holders of Cascade Common Stock and is accompanied by a form
of proxy that is being solicited by the Cascade Board for use at the Cascade
Special Meeting and any adjournments or postponements thereof.

Purpose. The purpose of the Cascade Special Meeting is (i) to consider
and vote upon a proposal to approve the Merger Agreement described herein,
providing for, among other things, the merger of AmFirst with and into a
wholly-owned subsidiary of Cascade, which will then be merged into Cascade,
and the issuance of shares of Cascade Common Stock to the shareholders of
AmFirst, (ii) to consider and vote upon a proposal to approve an amendment to
Cascade's Certificate of Incorporation increasing the number of authorized
shares of Cascade Common Stock from 5,000,000 shares to 8,000,000 shares,
(iii) to consider and vote upon a proposal to adopt the Cascade Financial
Corporation 1997 Stock Option Plan, and (iv) to act upon such other matters,
if any, as may properly come before the Cascade Special Meeting.

Record Date; Shares Entitled to Vote. The Cascade Board has fixed the
close of business on ________, 1997 as the Cascade Record Date for determining
shareholders entitled to notice of and to vote at the Cascade Special Meeting.
Only those holders of Cascade Common Stock of record on the Cascade Record
Date will be entitled to notice of and to vote at the Cascade Special Meeting.
Each share of Cascade Common Stock will be entitled to one vote. At the
Cascade Record Date, there were ______________ shares of Cascade Common Stock
outstanding and entitled to be voted at the Cascade Special Meeting.

Vote Required. A majority of the shares entitled to vote, represented in
person or by proxy, will constitute a quorum of Cascade shareholders at the
Special Meeting. Abstentions and broker non-votes (i.e., proxies from brokers
or nominees indicating that such person has not received instructions from the
beneficial owners or other persons entitled to vote shares as to a matter with
respect to which the brokers or nominees do not have discretionary power to
vote) will be considered present for purposes of determining whether a quorum
exists. Approval of the Merger Agreement and the amendment of the Certificate
of Incorporation require the affirmative vote of the holders of a majority of
the outstanding shares of Cascade Common Stock. Abstentions and broker non-
votes will have the same effect as votes cast against approval of the Merger
Agreement and the amendment of the Certificate of Incorporation. Approval of
the 1997 Stock Option Plan requires the affirmative vote of a majority of the
shares of Cascade Common Stock represented in person or by proxy and entitled
to vote on the proposal. Abstentions on the proposal to adopt the 1997 Stock
Option Plan will have the effect of a vote against such proposal. Broker
non-votes will not be included in vote totals and will have no effect on the
outcome of the vote.

At the Cascade Record Date, the directors and executive officers of
Cascade and their affiliates beneficially owned an aggregate of ______________
shares of Cascade Common Stock, which represents ____% of the shares entitled
to be voted at the Cascade Special Meeting.

Proxies. Holders of Cascade Common Stock may vote either in person or
by properly executed proxy. Shares of Cascade Common Stock represented by a
properly executed proxy received prior to or at the Cascade Special Meeting
will, unless such proxy is revoked, be voted in accordance with the
instructions indicated on such proxy. If no instructions are indicated on a
properly executed proxy, the shares covered thereby will be voted FOR the
proposal to approve the Merger Agreement, FOR the amendment of the Certificate
of Incorporation and FOR the adoption of the 1997 Stock Option Plan. Failure
to return the proxy card or to vote in person at the Cascade Special Meeting
will have the effect of a vote cast against the Merger Agreement. If any
other matters are properly presented at the Cascade Special Meeting for
consideration, including, among other things, a motion

to adjourn the Cascade Special Meeting to another time and/or place
(including, without limitation, for the purpose of soliciting additional
proxies), the persons named in the proxy and acting thereunder will have
discretion to vote on such matters in accordance with their best judgment;
provided, however, that no proxy which is voted against the proposal to
approve the Merger Agreement will be voted in favor of any such adjournment or
postponement. As of the date hereof, the Cascade Board knows of no such other
matters.

Any proxy given pursuant to this solicitation or otherwise may be revoked
by the person giving it at any time before it is voted by delivering to the
Secretary of Cascade, on or before the taking of the vote at the Cascade
Special Meeting, a written notice of revocation bearing a later date than the
proxy or a later dated proxy relating to the same shares of Cascade Common
Stock, or by attending the Cascade Special Meeting and voting in person.
Attendance at the Cascade Special Meeting will not in itself constitute
revocation of a proxy.

The proxy for the Cascade Special Meeting is being solicited on behalf of
the Cascade Board. The expense of soliciting proxies for the Cascade Special
Meeting will be borne by Cascade. All costs and expenses incurred in
connection with the Merger Agreement and the transactions contemplated thereby
are to be paid by the party incurring such expenses. Proxies will be
solicited principally by mail, but may also be solicited by the directors,
officers and other employees of Cascade in person or by a telephone, facsimile
or other means of communication. Such directors, officers and employees will
receive no compensation therefor in addition to their regular compensation,
but may be reimbursed for out-of-pocket expenses in connection with such
solicitation. Brokers and others who hold Cascade Common Stock on behalf of
another will be asked to forward proxy material and related documents to the
beneficial owners of such stock, and Cascade will reimburse them for their
expenses in doing so.

AmFirst Special Meeting

Place, Time and Date. The AmFirst Special Meeting will be held on
____________, __________, 1997 at ____ _.m., local time, at __________,
Everett, Washington. This Prospectus/Joint Proxy Statement is being sent to
holders of AmFirst Common Stock and is accompanied by a form of proxy which is
being solicited by the AmFirst Board for use at the AmFirst Special Meeting
and any adjournments or postponements thereof.

Purpose. The purpose of the AmFirst Special Meeting is (i) to consider
and vote upon a proposal to approve the Merger Agreement described herein,
providing for, among other things, the merger of AmFirst with and into a
wholly-owned subsidiary of Cascade, which will then be merged into Cascade,
and the conversion of shares of AmFirst Common Stock into shares of Cascade
Common Stock, and (ii) to act upon such other matters, if any, as may properly
come before the AmFirst Special Meeting.

Record Date; Shares Entitled to Vote. The AmFirst Board has fixed the
close of business on ____ __, 1997 as the AmFirst Record Date for determining
shareholders entitled to notice of and to vote at the AmFirst Special Meeting.
Only those holders of AmFirst Common Stock of record on the AmFirst Record
Date will be entitled to notice of and to vote at the AmFirst Special Meeting.
Each share of AmFirst Common Stock will be entitled to one vote. At the
AmFirst Record Date, there were _________ shares of AmFirst Common Stock
outstanding and entitled to be voted at the AmFirst Special Meeting.

Vote Required. A majority of the shares entitled to vote, represented in
person or by proxy, will constitute a quorum for the transaction of business
at the AmFirst Special Meeting. Abstentions and broker non-votes will be
considered present for purposes of determining whether a quorum exists.
Approval of the Merger Agreement requires the affirmative vote of the holders
of two-thirds of the shares of AmFirst Common Stock entitled to vote at the
AmFirst Special Meeting. Abstentions and broker non-votes will have the same
effect as votes cast against approval of the Merger Agreement.

At the AmFirst Record Date, the directors and executive officers of
AmFirst and their affiliates beneficially owned an aggregate of _________
shares of AmFirst Common Stock, which represents ______% of the shares

2
PAGE

entitled to be voted at the AmFirst Special Meeting. Simultaneous with the
execution of the Merger Agreement, all of the directors of AmFirst entered
into an agreement with Cascade pursuant to which each director agreed to vote
his shares for approval of the Merger Agreement.

Proxies. Holders of AmFirst Common Stock may vote either in person or by
properly executed proxy. Shares of AmFirst Common Stock represented by a
properly executed proxy received prior to or at the AmFirst Special Meeting
will, unless such proxy is revoked, be voted in accordance with the
instructions indicated on such proxy. If no instructions are indicated on a
properly executed proxy, the shares covered thereby will be voted FOR the
proposal to approve the Merger Agreement. Failure to return the proxy card or
to vote in person at the AmFirst Special Meeting will have the effect of a
vote cast against the Merger Agreement. If any other matters are properly
presented at the AmFirst Special Meeting for consideration, including, among
other things, a motion to adjourn the AmFirst Special Meeting to another time
and/or place (including, without limitation, for the purpose of soliciting
additional proxies), the persons named in the proxy and acting thereunder will
have discretion to vote on such matters in accordance with their best
judgment; provided, however, that no proxy which is voted against the proposal
to approve the Merger Agreement will be voted in favor of any such adjournment
or postponement. As of the date hereof, the AmFirst Board knows of no such
other matters.

Any proxy given pursuant to this solicitation or otherwise may be revoked
by the person giving it at any time before it is voted by delivering to the
Secretary of AmFirst, on or before the taking of the vote at the AmFirst
Special Meeting, a written notice of revocation bearing a later date than the
proxy or a later dated proxy relating to the same shares of AmFirst Common
Stock, or by attending the AmFirst Special Meeting and voting in person.
Attendance at the AmFirst Special Meeting will not in itself constitute a
revocation of a proxy.

The proxy for the AmFirst Special Meeting is being solicited on behalf of
the AmFirst Board. The expense of soliciting proxies for the AmFirst Special
Meeting will be borne by AmFirst. All costs and expenses incurred in
connection with the Merger Agreement and the transactions contemplated thereby
are to be paid by the party incurring such expenses. Proxies will be
solicited principally by mail, but may also be solicited by the directors,
officers and other employees of AmFirst in person or by telephone, facsimile
or other means of communication. Such directors, officers and employees will
receive no compensation therefor in addition to their regular compensation,
but may be reimbursed for out-of-pocket expenses in connection with such
solicitation. Brokers and others who hold AmFirst Common Stock on behalf of
another will be asked to forward proxy materials and related documents to the
beneficial owners of such stock, and AmFirst will reimburse them for their
expenses in doing so.

THE MERGER

The descriptions in this Prospectus/Joint Proxy Statement of the terms
and conditions of the Merger and related transactions are qualified in their
entirety by reference to the Merger Agreement, a copy of which is attached as
Appendix A to this Prospectus/Joint Proxy Statement and is incorporated herein
by reference.

General; Exchange Ratio

The Merger Agreement provides for the merger of AmFirst with and into a
wholly-owned subsidiary of Cascade, which will then be merged into Cascade.
As soon as practicable thereafter, the Bank will be merged with and into
Cascade Bank, with Cascade Bank surviving the Merger. The separate existence
of AmFirst and the Bank will cease upon completion of the mergers. While
Cascade and AmFirst believe that they will receive the requisite regulatory
approvals for the Merger, there can be no assurance that such approvals will
be received or, if received, as to the timing of such approvals or as to the
ability to obtain such approvals on satisfactory terms. See "-- Conditions to
Consummation of the Merger" and "-- Regulatory Requirements."
3
PAGE

Upon consummation of the Merger, each outstanding share of AmFirst Common
Stock (excluding any Excluded Shares) will be automatically converted into the
right to receive a number of shares of Cascade Common Stock equal to the net
book value per share of AmFirst multiplied by two and divided by $16.00. Each
holder of AmFirst Common Stock who would otherwise be entitled to a fractional
share of Cascade Common Stock will receive cash in lieu thereof determined by
multiplying such fraction by $16.00. Pursuant to the terms of the Merger
Agreement, all outstanding stock options under AmFirst's stock option plans
will be assumed by Cascade.

The "net book value" of AmFirst is defined in the Merger Agreement to
equal the total stockholders' equity of AmFirst as of December 31, 1996 plus
an amount equal to the aggregate exercise price of all options to acquire
shares of AmFirst Common Stock that are exercised after December 31, 1996 and
prior to the Effective Date. At December 31, 1996, AmFirst had total
stockholders' equity of $5,103,430 and there were outstanding options to
acquire a total of 56,805 shares of AmFirst Common Stock with an aggregate
exercise price of $1,027,530.

If, on the Effective Date, the aggregate core deposits of the Bank are
less than $40,000,000, the net book value of AmFirst used to calculate the
Exchange Ratio will be reduced by an amount equal to the difference between
$40,000,000 and the aggregate core deposits of the Bank on the Effective Date,
multiplied by 0.05. "Core deposits" is defined in the Merger Agreement to
include all deposits except for (i) deposits in amounts of $100,000 or more,
(ii) deposits by government entities or agencies, and (iii) brokered or money
desk deposits.

Assuming that no AmFirst options are exercised between December 31, 1996
and the Effective Date and that there is no adjustment as a result of a
decrease the Bank's core deposits, the Exchange Ratio will equal 1.925. If
all of the outstanding AmFirst options are exercised prior to the Effective
Date and there is no adjustment as a result of a decrease in the Bank's core
deposits, the Exchange Ratio will equal 1.974.

On ______, 1997, the most recent date for which it was practicable to
obtain information prior to the printing of this Prospectus/Joint Proxy
Statement, the closing price per share of Cascade Common Stock, as reported on
the Nasdaq SmallCap Market, was $_____. AmFirst shareholders should note,
however, that the market price of the Cascade Common Stock they receive will
continue to be subject to market fluctuations, as well as the future results
of operations and financial condition of Cascade, among other factors.

Effective Date of the Merger

Subject to the conditions to the obligations of the parties to complete
the Merger as set forth in the Merger Agreement, the Effective Date of the
Merger will occur on such date as Cascade notifies AmFirst in writing not less
than five days prior thereto, provided such date is not more than 30 days
after such conditions have been satisfied or waived. The Effective Time of
the Merger is the time on the Effective Date at which the Merger becomes
effective. Either Cascade or AmFirst may terminate the Merger Agreement if
the Effective Date does not occur on or before September 30, 1997.

Exchange of AmFirst Stock Certificates

As promptly as practicable after the Effective Date, Cascade will send or
cause to be sent to each holder of record of AmFirst Common Stock transmittal
materials for use in exchanging all of such holder's certificates representing
AmFirst Common Stock for a certificate or certificates representing the
Cascade Common Stock to which such holder is entitled and a check or checks
for such holder's fractional share interests, as appropriate. The transmittal
materials will contain information and instructions with respect to the
surrender and exchange of such certificates.

AMFIRST SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS.

Upon surrender of all of the certificates for AmFirst Common Stock
registered in the name of a holder of such certificates (or indemnity
satisfactory to Cascade and the exchange agent selected by Cascade, if any of
such certificates are lost, stolen or destroyed), together with a properly
completed letter of transmittal, such exchange agent will mail to such holder
a certificate or certificates representing the number of shares of Cascade
Common Stock to which such holder is entitled, and, where applicable, a check
for any fractional share interest (without interest).

All shares of Cascade Common Stock issued to the holders of AmFirst
Common Stock pursuant to the Merger will be deemed issued as of the Effective
Date. After the Effective Date, the stock transfer books of AmFirst will be
closed, and there will be no transfers on the transfer books of AmFirst of the
shares of AmFirst Common Stock that were outstanding immediately prior to the
Effective Date.

Background of the Merger

In June 1996, the Cascade Board directed management to revise its
strategic plan with the goal of seeking a higher level of earnings consistent
with other local financial institutions. Specifically, the Cascade Board
recommended broadening Cascade's focus from that of a real estate-based lender
to that of a community bank offering a wider range of consumer, commercial and
commercial real estate financing and other commercial banking services.
Consistent with this strategy, the Cascade Board considered acquiring a
commercial bank within Cascade's market area as a means of expanding its
product offerings and broadening its base of customers.

In the summer and fall of 1996, Cascade management began a process of
formulating and implementing its community banking strategy, which included
expanding its commercial real estate lending, more aggressively marketing
transaction accounts and developing small business banking and consumer
lending strategies.

In early November 1996, Frank McCord, Chairman of Cascade, contacted
AmFirst to discuss a possible business combination between AmFirst and
Cascade. Chairman McCord notified the Cascade Board at their November 1996
meeting of the discussions and the Cascade Board authorized continued
discussions with AmFirst. During the next several weeks, Cascade management
reviewed certain public, nonpublic, and regulatory information regarding
AmFirst, including its business strategy, financial condition and operating
performance. On December 3, 1996, Cascade sent a preliminary transaction
proposal to AmFirst indicating Cascade's interest in a possible business
combination.

Following receipt of Cascade's proposal, Thomas Rainville, Chairman of
AmFirst, contacted the AmFirst Board and notified them of receipt of the
proposal and contacted legal counsel regarding the AmFirst Board's duties with
regard to the proposal. The AmFirst Board then met and discussed Cascade's
proposal. In analyzing the proposal, the AmFirst Board considered the
exchange offered to AmFirst shareholders in relation to the market value, book
value and earnings per share of AmFirst Common Stock, and the results of
operations and prospects of AmFirst. Since the proposal involved an exchange
of AmFirst Common Stock for Cascade Common Stock, the AmFirst Board also
considered the recent performance of Cascade and Cascade's future prospects.
In this regard, the AmFirst Board considered carefully what business synergies
would result from the merger of a commercial bank (American First National
Bank), which provides funding primarily for businesses, with a savings bank
(Cascade Bank), which provides funding primarily for the purchase and
construction of residential real estate. The AmFirst Board concluded that the
merger would allow significantly larger market penetration of products
provided by the combined entities. After considering all of these factors,
the AmFirst Board felt it would be advantageous to AmFirst shareholders to
further pursue the proposal.

On December 11, 1996, AmFirst responded in writing to Cascade, raising
several issues such as board representation, stock options, and dividends.
After reviewing AmFirst's letter, Cascade management delivered a response to
AmFirst concerning the issues raised. Over the next several weeks, the
parties also continued discussions regarding tax issues, accounting issues,
and valuation. During this time AmFirst also delivered further information to
Cascade management for additional analysis.

During January 1997, Chairman McCord and Chairman Rainville of AmFirst
met several times to discuss pricing. During this time the parties agreed to
continue discussions based on AmFirst stockholders receiving a price of two
times AmFirst's book value, as calculated under generally accepted accounting
principles as of December 31, 1996, with Cascade to perform a full due
diligence upon the signing of a definitive merger agreement. Following these
negotiations and receipt of a formal offer from Cascade, Chairman Rainville
reported to the AmFirst Board the terms and conditions of the formal offer.
Discussion followed regarding whether AmFirst should obtain an independent
evaluation of the fairness of the consideration offered by Cascade and/or
whether AmFirst should approach other banks which might be interested in
acquiring AmFirst. In discussing valuation, the AmFirst Board noted that the
offer, which was approximately two times AmFirst's December 31, 1996 book
value, compared favorably to recent acquisitions and combinations of financial
institutions within the State of Washington. The AmFirst Board believed that
the value offered was fair and was concerned that if AmFirst solicited other
offers that Cascade would withdraw its offer. The AmFirst Board was also
convinced that local ownership would be in the best interests of the customers
of AmFirst and the employees of AmFirst in that the employees would have
greater job security due to Cascade's need for expertise in the commercial
banking area. After thoroughly discussing all of these factors, the AmFirst
Board approved the negotiation of a definitive Merger Agreement. During the
following weeks, the executive officers of Cascade and AmFirst and their
respective counsels engaged in numerous discussions to negotiate the terms of
a definitive merger agreement and related documents.

On January 21, 1997, the Cascade Board met to review the proposed
transaction outlined in the proposed definitive merger agreement. The Board
reviewed management's financial analysis of the proposed transaction and its
potential effects on stockholder value, consistent with the June 1996
directive to move towards a community banking strategy. The Board approved
the transaction, authorized the issuance of Cascade Common Stock as
consideration and authorized Cascade management to negotiate the final terms
of the Merger Agreement and all related agreements and to obtain regulatory
authority to consummate the Merger.

During the following days, Cascade management reviewed preliminary due
diligence material obtained from AmFirst and Cascade and AmFirst management
and their respective legal counsels finalized the terms of the Merger
Agreement and related documents.

On February 6, 1997, the AmFirst Board met again to review the Merger
Agreement and the terms of the proposed transaction. The AmFirst Board, along
with its counsel, Keller Rohrback, reviewed the Merger Agreement and
considered the potential benefit of the proposed merger to AmFirst and its
shareholders, taking into account the financial terms of the Merger, and the
terms of the Merger Agreement. At this meeting, the AmFirst Board unanimously
determined that the proposed transaction was fair to and in the best interest
of AmFirst and its shareholders, and therefore recommended the Merger
Agreement be submitted to AmFirst's shareholders for approval.

Reasons for the Merger and Recommendations of the Boards of Directors

Cascade. The Cascade Board believes that the terms of the Merger, which
are the product of arms length negotiations between representatives of Cascade
and AmFirst, are fair and in the best interests of Cascade and its
shareholders. In the course of reaching its determination, the Cascade Board
considered the terms of the Merger Agreement and the issues related thereto
and consulted with its accountants with respect to certain accounting aspects
of the transaction and with senior management regarding, among other things,
financial aspects of the transaction, operational and due diligence matters.

The Cascade Board did not obtain an independent valuation of the fairness
of the consideration offered by Cascade to the shareholders of AmFirst. In
connection with its consideration of the Merger, management provided the
Cascade Board with a comparison of the terms of the proposed transaction with
the terms of other pending and completed comparable transactions, a pro forma
analysis of the combined companies, and an analysis of the value of AmFirst.
The Cascade Board concluded, in light of the presentations made by management,
that (i) a fairness

opinion would not provide significant additional information not already
available to the Cascade Board; and (ii) the likely benefits of a fairness
opinion to Cascade's shareholders did not justify the cost to Cascade or its
shareholders of obtaining such an opinion.

Cascade believes there are significant revenue enhancements and cost
savings opportunities to be realized by combining the two companies. Prior to
merger negotiations, Cascade management was developing plans for a commercial
banking division. With the Merger, Cascade will be able to offer a full array
of commercial and consumer banking products and services to a larger market
much more quickly. With Cascade's more aggressive marketing programs Cascade
believes that the combined company can grow faster by cross-selling products
to current customers, and with more locations and an increased market
presence, add new customers faster than the two companies historically have
done separately. In addition to increased growth opportunities, a major
portion of AmFirst's investment securities can be reinvested in significantly
higher yielding assets such as home equity, consumer, and commercial real
estate loans. Furthermore, Cascade believes there are opportunities for cost
savings due to consolidation of corporate, financial, information processing
and risk-management functions, as well as personnel reductions.

Cascade management also analyzed the effect the Merger would have on
future earnings. Management used present and anticipated plans generated by
its asset/liability model as base line earnings forecasts. AmFirst earnings,
net of estimated cost savings and transaction costs, plus an estimated profit
growth based on increased efficiency and operating strategies were added to
the base line forecast to estimate earnings in future years. This analysis
indicated that Cascade's earnings per share would increase as result of the
Merger. This analysis is dependent upon various factors, a number of which
are beyond the control of Cascade. Factors that might cause a difference in
actual results include, but are not limited to: (i) expected cost savings
from the Merger cannot be fully realized or realized within the expected time
frame; (ii) revenues following the Merger are lower than expected; (iii)
competitive pressures among depository institutions increase significantly;
(iv) costs or difficulties related to the integration of the business of
Cascade and AmFirst are greater than expected; (v) general economic
conditions, either nationally or locally, are less favorable than expected;
and (vi) legislation or regulatory changes adversely affect the business in
which the combined company would engage. Accordingly, no assurances can be
given with respect to the ultimate impact the Merger will have on earnings.

In reaching its determination to approve the Merger Agreement, the
Cascade Board considered the following factors, which it deemed material: (i)
information concerning the business, market area, financial condition,
earnings, operations, asset quality and capital levels of AmFirst and
information concerning the two companies on a combined basis; (ii) the terms
of the Merger Agreement and the other documents related to the Merger; (iii)
the structure of the transaction as a tax-free reorganization, which was
desired by AmFirst; (iv) the availability of the pooling of interests method
of accounting, which does not require the recognition of goodwill which must
be written off as a charge against operations over time; (v) the terms of
other recent comparable combinations of banks and bank holding companies; and
(vi) current industry, economic and market conditions, which indicated
continuing consolidation and increasing competition in the banking and
financial services industries.

In considering the foregoing factors, the Cascade Board came to the
following conclusions:

-- The acquisition of AmFirst, which operates as a locally oriented
community bank, is consistent with Cascade's plan to adopt a
community banking strategy.

-- Because AmFirst operates in the same market area as Cascade,
Cascade should be able to recognize cost savings in connection
with the Merger.

-- AmFirst's management possesses the depth and experience in
commercial lending to help integrate AmFirst's commercial banking
business into Cascade.
7

-- AmFirst is large enough in relation to Cascade to provide Cascade
a sufficient base from which to expand AmFirst's product
offerings and to contribute meaningfully to Cascade's income, but
not so large as to make the combination of the two companies
difficult and costly.

The Cascade Board did not ascribe relative or specific weights to the
factors that it considered or the conclusions that it reached.

For the reasons set forth above, the Cascade Board has unanimously
approved the Merger Agreement as advisable and in the best interests of
Cascade and Cascade shareholders and recommends that the shareholders of
Cascade vote FOR the approval of the Merger Agreement.

AmFirst. The AmFirst Board, at its meeting held on February 6, 1997,
considered the Merger Agreement and determined it to be fair, and in the best
interests of, AmFirst and its shareholders, customers, and employees. In
reaching its determination, the AmFirst Board consulted with legal counsel
regarding the terms of the Merger Agreement and the legal duties of the
AmFirst Board and with senior management regarding financial aspects of the
transaction. The AmFirst Board did not obtain an independent valuation of the
fairness of the consideration offered to the shareholders of AmFirst. The
AmFirst Board considered that the value of the transaction, which was
approximately two times book value, compared favorably to other recent
acquisitions of financial institutions in the State of Washington. The
AmFirst Board concluded that, in light of these pricing multiples, the likely
benefits of a fairness opinion to AmFirst's shareholders did not justify the
cost of such an opinion.

In reaching its determination to approve the Merger Agreement the AmFirst
Board considered a number of factors. Below is a listing of the material
factors the AmFirst Board considered in their decision. The AmFirst Board did
not assign any specific or relative weight to the below listed factors.

-- The AmFirst Board considered the continuing consolidation and
increasing competition in the financial services industries and
concluded that AmFirst customers, employees and shareholders
would benefit from being part of a larger financial institution.

-- The AmFirst Board considered the terms of the Merger Agreement,
including that the Merger would generally be tax free to AmFirst
shareholders.

-- The AmFirst Board considered the financial condition and
operating results of Cascade. The AmFirst Board also considered
the relative liquidity of AmFirst Common Stock and Cascade Common
Stock.

-- The AmFirst Board considered that the combination of AmFirst and
Cascade would allow larger market penetration of products
provided by the combined entities.

For the reasons set forth above, the AmFirst Board has unanimously
approved the Merger Agreement as advisable and in the best interests of
AmFirst and AmFirst shareholders and recommends that the shareholders of
AmFirst vote FOR the approval of the Merger Agreement.

Interests of Certain Persons in the Merger

The directors and executive officers of AmFirst, together with their
affiliates, beneficially owned a total of _______ shares of AmFirst Common
Stock (representing ____% of all outstanding shares of AmFirst Common Stock)
as of the AmFirst Record Date. The directors and executive officers will
receive the same consideration in the Merger for their shares, including any
shares which they may acquire prior to the Effective Date pursuant to the
exercise of stock options, as the other shareholders of AmFirst. Certain
members of AmFirst's management and the

AmFirst Board have certain interests in the Merger as described below that are
in addition to their interest as shareholders of AmFirst generally. The
AmFirst Board was aware of these interests and considered them, among other
matters, in approving the Merger Agreement and the transactions contemplated
thereby.

Non-compete Agreement. In connection with the consummation of the
Merger, Thomas Rainville, President and Chief Executive Officer of AmFirst,
will enter into a five-year non-compete agreement with Cascade and Cascade
Bank, pursuant to which Mr. Rainville will receive $5,000 per month for a
period of 60 months. This agreement will restrict Mr. Rainville's ability to
own, manage, operate, join, control, finance or serve as a director, officer,
employee, consultant, partner, or stockholder of any business engaged in the
business of banking or that of owning or managing or controlling a bank or
banks in any county of Washington where the Cascade has an office or branch.

Employment Agreements. Following the Effective Time, David Little, the
President and Chief Operating Officer of the Bank, and Marlee Fowler, the
Chief Financial Officer of the Bank, will enter into two-year employment
agreements with Cascade Bank. Mr. Little will become an Executive Vice
President of Cascade and head the commercial banking division. Ms. Fowler
will assume an operations post with Cascade.

Appointments to the Cascade Board. Cascade has agreed to appoint two
members of the AmFirst Board, as determined by Cascade, to the Boards of
Directors of Cascade and Cascade Bank effective as of the Effective Time. The
AmFirst directors who will be appointed to the Boards of Directors of Cascade
and Cascade Bank are expected to be ___________ and ____________.

Certain Federal Income Tax Consequences

The following is a discussion of the material federal income tax
consequences of the Merger that are generally applicable to AmFirst
shareholders. This discussion is based on currently existing provisions of
the Code, existing regulations thereunder (including final, temporary or
proposed), and current administrative rulings and court decisions, all of
which are subject to change. Any such change, which may or may not be
retroactive, could alter the tax consequences described herein. The following
discussion is intended only as a summary of the material federal income tax
consequences of the Merger and does not purport to be a complete analysis or
listing of all of the potential tax effects relevant to a decision on whether
to vote in favor of approval of the Merger Agreement.

The Merger is expected to qualify as a reorganization under Section
368(a) of the Code. As parties to a reorganization, neither Cascade nor
AmFirst will recognize gain or loss as a result of the Merger. A holder of
AmFirst Common Stock who receives solely Cascade Common Stock in exchange for
AmFirst Common Stock will not recognize gain or loss upon such exchange. The
aggregate tax basis of the Cascade Common Stock received by such holder will
be equal to the aggregate tax basis of the AmFirst Common Stock surrendered
(excluding any portion of the holder's basis allocated to fractional shares)
and the holding period of the Cascade Common Stock will include the holding
period of the AmFirst Common Stock surrendered. A holder of AmFirst Common
Stock who receives cash in lieu of fractional shares of Cascade Common Stock
will be treated as having received such fractional shares pursuant to the
Merger and then as having exchanged such fractional shares for cash in a
redemption by Cascade. Any gain or loss attributable to fractional shares
generally will be capital gain or loss. The amount of such gain or loss will
be equal to the difference between the ratable portion of the tax basis of the
AmFirst Common Stock surrendered in the Merger that is allocated to such
fractional shares and the cash received in lieu thereof. Any such capital
gain or loss will constitute long-term capital gain or loss if the AmFirst
Common Stock has been held by the holder for more than one year at the
Effective Time.

Consummation of the Merger is conditioned upon the receipt by Cascade of
an opinion of Breyer & Aguggia, special counsel to Cascade, to the effect that
if the Merger is consummated in accordance with the terms set forth in the
Merger Agreement (i) the Merger will constitute a reorganization within the
meaning of Section 368(a) of the Code, and (ii) no gain or loss will be
recognized by AmFirst shareholders who exchange all of their
9

AmFirst Common Stock solely for shares of Cascade Common Stock (except for
cash received in lieu of fractional shares).

The opinion of counsel, which will be delivered on the Effective Date, is
filed as an exhibit to the Registration Statement, and the foregoing is only a
summary of such tax consequences as described in the opinion. An opinion of
counsel only represents counsel's best legal judgment, and has no binding
effect or official status of any kind, and no assurance can be given that
contrary positions may not be taken by the Internal Revenue Service (the
"IRS") or a court considering the issues. Neither AmFirst nor Cascade has
requested or will request a ruling from the IRS with regard to the federal
income tax consequences of the Merger.

The foregoing is a general summary of all of the material federal income
tax consequences of the Merger to AmFirst shareholders, without regard to the
particular facts and circumstances of each shareholder's tax situation and
status. Because certain tax consequences of the Merger may vary depending
upon the particular circumstances of each shareholder, each AmFirst
shareholder should consult his or her own tax advisor regarding such
shareholder's specific tax situation and status, including the specific
application and effect of state, local and foreign laws to such shareholder
and the possible effect of changes in federal and other tax laws.

Conduct of Business Pending the Merger

AmFirst and the Bank have agreed in the Merger Agreement not to take
certain actions without the prior approval of Cascade relating to their
operations pending consummation of the Merger. These actions include, among
other things, (i) issuing or selling any AmFirst Common Stock; (ii) paying any
dividends; (iii) incurring any indebtedness for borrowed money or becoming
liable for the obligations of any other entity other than in the ordinary
course of business; (iv) changing its lending, investment, liability
management or other material banking policies in any respect; (v) imposing any
lien on any share of stock held by AmFirst; (vi) entering into or amending any
employment agreements or any employee benefit plans or granting any salary
increases (other than in the ordinary course of business); (vii) disposing of
any material portion of its assets or acquiring any material portion of the
business or property of any other entity; (viii) amending its articles of
incorporation or bylaws; (ix) settling any claims involving any liability for
money damages in excess of $25,000; (x) entering into, terminating or changing
any material agreements, except for those agreements that may be terminated by
AmFirst without penalty upon not more than 60 days' prior written notice; (xi)
extending credit other than in accordance with existing lending policies; and
(x) changing the pricing structure of its deposit liabilities, other than in
the ordinary course of business. Moreover, AmFirst and the Bank are required,
among other things, to operate their businesses in the usual, regular and
ordinary course and to use their best efforts to preserve their business
relationships and to retain key employees.

Conditions to Consummation of the Merger

The obligations of AmFirst and Cascade to consummate the Merger are
subject to, among other things, the satisfaction of the following conditions:
(i) approval of the Merger Agreement by the holders of not less than two-
thirds of the outstanding shares of AmFirst Common Stock and by the holders of
not less than a majority of the outstanding shares of Cascade Common Stock;
(ii) receipt of all applicable regulatory approvals without any condition
that, in the opinion of Cascade, would deprive Cascade of the material
economic or business benefits of the Merger; (iii) no court or government or
regulatory authority having taken any action which enjoins or prohibits the
Merger; and (iv) receipt by Cascade and AmFirst of the opinion of Breyer &
Aguggia, dated as of the Effective Date, as to certain federal income tax
consequences of the Merger.

The obligations of Cascade are subject to the satisfaction or waiver of
certain additional conditions, including: (i) the delivery by AmFirst of
opinions of its legal counsel and certificates executed by certain of its
executive officers as to compliance with the Merger Agreement; (ii) the
accuracy of the representations and warranties, and compliance in all material
respects with the agreements and covenants of AmFirst; (iii) David Little and
Marlee Fowler having entered into employment agreements with Cascade Bank;
(iv) David Little, Marlee Fowler
10

and Thomas Rainville having entered into non-compete agreements with Cascade
and Cascade Bank; (v) each member of the AmFirst Board having entered into an
agreement with Cascade providing that such individual, for a period of one
year from the Effective Date, will not refer any customers of the Bank to a
financial institution other than Cascade Bank, participate in the formation of
a new financial institution in Snohomish County, Washington, or solicit any
employees of the Bank who become employees of Cascade; (vi) the absence of any
material adverse change in the financial position or results of operations of
AmFirst; (vii) the number of Dissenting Shares does not exceed 10% of the
outstanding shares of AmFirst Common Stock; (viii) receipt by Cascade of an
agreement from each "affiliate" of AmFirst restricting the sale of Cascade
Common Stock received by such affiliate in the Merger; and (ix) that the
Merger will qualify for pooling of interests accounting treatment.

The obligations of AmFirst are also subject to the satisfaction or waiver
of certain additional conditions, including: (i) the delivery by Cascade of
opinions of its legal counsel and certificates executed by certain of its
executive officers as to compliance with the Merger Agreement; and (ii) the
accuracy of the representations and warranties, and compliance in all material
respects with the agreements and covenants of Cascade.

Regulatory Requirements

The Merger is subject to prior approval by the OTS. An application for
approval of the Merger was filed with the OTS on ______, 1997.

The approval of any application merely implies satisfaction of regulatory
criteria for approval, which do not include review of the Merger from the
standpoint of the adequacy of the consideration to be received by, or fairness
to, shareholders. Regulatory approvals do not constitute an endorsement or
recommendation of the proposed Merger.

Cascade and AmFirst are not aware of any governmental approvals or
compliance with banking laws and regulations that are required for
consummation of the Merger other than those described above. Should any other
approval or action be required, it is presently contemplated that such
approval or action would be sought. There can be no assurance that any such
approval or action, if needed, could be obtained and, if such approvals or
actions are obtained, there can be no assurance as to the timing thereof. The
Merger cannot proceed in the absence of all requisite regulatory approvals.
See "-- Effective Date of the Merger," "-- Conditions to Consummation of the
Merger," and "-- Amendment; Waiver; Termination."

The Merger Agreement provides that if the Merger has not been consummated
by September 30, 1997, the Merger Agreement may be terminated by Cascade or
AmFirst. Since there is the possibility that regulatory approval may not be
obtained for a substantial period of time after approval of the Merger
Agreement by Cascade's and AmFirst's shareholders, there can be no assurance
that the Merger will be consummated by September 30, 1997. In addition,
should regulatory approval require any material change, a resolicitation of
shareholders may be required if regulatory approval is obtained after
shareholder approval of the Merger Agreement.

No Solicitation

AmFirst has agreed in the Merger Agreement that neither it nor any of its
subsidiaries will solicit, initiate or encourage inquiries or proposals with
respect to certain business combinations or furnish any nonpublic information
relating to or participate in any negotiations concerning any such business
combinations.

Termination Fee

As a condition and inducement to Cascade's entering into the Merger
Agreement and in consideration thereof, AmFirst has agreed to pay to Cascade a
termination fee under certain circumstances. A fee of $500,000 may be
demanded by Cascade in the event that (i) the Merger Agreement is terminated
because AmFirst and the
11

Bank do not use all reasonable efforts to consummate the Merger in accordance
with the terms of the Merger Agreement; (ii) AmFirst terminates the Merger
Agreement for any reason other than (a) with the mutual consent of Cascade,
(b) because of a material breach by Cascade that cannot be or has not been
cured within 30 days after written notice of such breach (but only if at such
time as AmFirst exercises its right to terminate the Merger Agreement Cascade
is not entitled to terminate the Merger Agreement either because of a material
breach by AmFirst, because the Merger has not been consummated by September
30, 1997 or because the shareholders of AmFirst failed to approve the Merger
Agreement or a required regulatory approval has been denied) or (c) because
the Merger has not been consummated by September 30, 1997; or (iii) Cascade
terminates the Merger Agreement as a result of AmFirst or the Bank having
committed a material breach that cannot be or has not been cured within 30
days after written notice of such breach.

A fee of $800,000 may be demanded by Cascade if the Merger is not
completed by August 5, 1999 and any of the following occurs: (i) a third party
acquires beneficial ownership of 25% or more of the then outstanding AmFirst
Common Stock; (ii) AmFirst, without the written consent of Cascade, enters
into or recommends to AmFirst stockholders an agreement with a third party
providing for certain actions (each an "Acquisition Transaction"), including a
merger or similar transaction involving AmFirst, the purchase, acquisition or
lease of substantially all of the assets of AmFirst or the purchase or other
acquisition of securities representing 10% or more of the voting power of
AmFirst; or (iii) a bona fide proposal to engage in an Acquisition Transaction
is made to AmFirst by a third party, and after such proposal is made either
AmFirst willfully breaches the Merger Agreement entitling Cascade to terminate
the Merger Agreement, AmFirst shareholders fail to approve the Merger
Agreement at the Special Meeting, the AmFirst Special Meeting is canceled
without the fault of Cascade, or the AmFirst Board withdraws or modifies in a
manner adverse to Cascade its recommendation to stockholders to approve the
Merger Agreement. This termination fee is intended to increase the likelihood
that the Merger will be consummated according to the terms set forth in the
Merger Agreement and may be expected to discourage competing offers to acquire
AmFirst from potential third party acquirors because the termination fee could
increase the cost of such acquisition. To the best of AmFirst's knowledge, no
event that would permit Cascade to demand payment of the termination fee has
occurred as of the date of this Proxy Statement.

Cascade has agreed to pay to AmFirst a termination fee of $500,000 in the
event that AmFirst terminates the Merger Agreement as a result of Cascade or
Cascade Bank having committed a material breach that cannot be or has not been
cured within 30 days after written notice of such breach.

Dissenters' Rights

In accordance with Chapter 13 of the WBCA (Chapter 23B.13 of the Revised
Code of Washington), AmFirst's shareholders have the right to dissent from the
Merger and to receive payment in cash for the "fair value" of their AmFirst
Common Stock. Under applicable Delaware law, Cascade shareholders will not
have any dissenters' rights.

If AmFirst shareholders perfect dissenters' rights with respect to more
than 5% of the outstanding shares of AmFirst Common Stock, Cascade may elect
not to consummate the Merger. Additionally, if AmFirst shareholders perfect
dissenters' rights with respect to more than 10% of the outstanding shares of
AmFirst Common Stock and Cascade elects to consummate the Merger, the Merger
will not qualify for pooling of interests accounting treatment. AmFirst
shareholders electing to exercise dissenters' rights must comply with the
provisions of Chapter 13 in order to perfect their rights. AmFirst and
Cascade will require strict compliance with the statutory procedures. The
following is intended as a brief summary of the material provisions of the
Washington statutory procedures required to be followed by an AmFirst
shareholder in order to dissent from the Merger and perfect the shareholder's
dissenters' rights. This summary, however, is not a complete statement of all
applicable requirements and is qualified in its entirety by reference to
Chapter 13 of the WBCA, the full text of which is set forth in Appendix B
hereto.

A shareholder who wishes to assert dissenters' rights must (a) deliver to
AmFirst before the AmFirst Special Meeting written notice of the shareholder's
intent to demand payment for the shareholder's shares if the Merger is
effected, and (b) not vote such shares in favor of the Merger. A shareholder
wishing to deliver such notice should hand deliver or mail such notice to
AmFirst at the following address:

AmFirst Bancorporation
6920 Evergreen Way
Everett, Washington 98203
Attn: Corporate Secretary

A shareholder who wishes to exercise dissenters' rights generally must
dissent with respect to all the shares the shareholder owns or over which the
shareholder has power to direct the vote. However, if a record shareholder is
a nominee for several beneficial shareholders some of whom wish to dissent and
some of whom do not, then the record holder may dissent with respect to all
the shares beneficially owned by any one person by notifying AmFirst in
writing of the name and address of each person on whose behalf the record
shareholder asserts dissenters' rights. A beneficial shareholder may assert
dissenters' rights directly by submitting to AmFirst the record shareholder's
written consent and by dissenting with respect to all the shares of which such
shareholder is the beneficial shareholder or over which such shareholder has
power to direct the vote.

A shareholder who does not deliver to AmFirst prior to the AmFirst
Special Meeting a written notice of the shareholder's intent to demand payment
for the "fair value" of the shares will lose the right to exercise dissenters'
rights. In addition, any shareholder electing to exercise dissenters' rights
must either vote against the Merger or abstain from voting.

If the Merger is effected, Cascade shall, within ten days after the
Effective Date of the Merger, deliver a written notice to all shareholders who
properly perfected their dissenters' rights. Such notice will, among other
things, (a) state where the payment demand must be sent and where and when
certificates for certificated shares must be deposited; (b) inform holders of
uncertificated shares to what extent transfer of the shares will be restricted
after the payment demand is received; (c) supply a form for demanding payment;
and (d) set a date by which Cascade must receive the payment demand, which
date will be between 30 and 60 days after notice is delivered.

A shareholder wishing to exercise dissenters' rights must at that time
file the payment demand and deliver share certificates as required in the
notice. Failure to do so will cause such person to lose his or her
dissenters' rights.

Within 30 days after the Merger occurs or receipt of the payment demand,
whichever is later, Cascade shall pay each dissenter with properly perfected
dissenters' rights Cascade's estimate of the "fair value" of the shareholder's
interest, plus accrued interest from the Effective Date of the Merger. With
respect to a dissenter who did not beneficially own AmFirst shares prior to
the public announcement of the Merger, Cascade is required to make the payment
only after the dissenter has agreed to accept the payment in full satisfaction
of the dissenter's demands. "Fair value" means the value of the shares
immediately before the Effective Date of the Merger, excluding any
appreciation in anticipation of the Merger. The rate of interest is generally
required to be the rate at which Cascade can borrow money from other banks.
It is the current intention of Cascade to estimate the fair value of AmFirst
Common Stock to be $22.50 per share, which represents the price paid for
AmFirst Common Stock in the last transaction for which a price is known to
AmFirst management prior to the date on which the Merger Agreement was signed.

A dissenter dissatisfied with Cascade's estimate of the fair value may
notify Cascade of the dissenter's estimate of the fair value. If Cascade does
not accept the dissenter's estimate and the parties do not otherwise settle on
a fair value then Cascade must within 60 days petition a court to determine
the fair value.

In view of the complexity of Chapter 13 of the WBCA, shareholders of
AmFirst who may wish to dissent from the Merger and pursue appraisal rights
should consult their legal advisors.

Amendment; Waiver; Termination

Cascade may elect to modify the structure of the Merger; provided,
however, that Cascade shall not have the right to make any revision to the
structure of the Merger which (i) changes the amount or kind of consideration
which the AmFirst shareholders are entitled to receive or (ii) adversely
affects the tax treatment to AmFirst shareholders of receiving such
consideration. Prior to the Effective Date of the Merger, any condition of
the Merger Agreement may (to the extent allowed by law) be waived in writing
by the party benefitted by the provision or may be amended or modified by an
agreement in writing approved by the Boards of Directors of Cascade and
AmFirst. After approval of the Merger Agreement by the shareholders of
AmFirst, the Merger Agreement may not, without further approval of such
shareholders, be amended in any manner that would alter the amount or form of
consideration to be received by AmFirst shareholders in exchange for their
AmFirst Common Stock.

The Merger Agreement may be terminated at any time prior to the Effective
Date of the Merger, either before or after approval by the Cascade and AmFirst
shareholders, as follows: (i) by the mutual consent of the parties; (ii) by
either party if the other party has committed a material breach that cannot be
or has not been cured within 30 days after the giving of written notice of
such breach; (iii) by either party if the Closing Date shall not have occurred
by September 30, 1997; or (iv) by either party if the shareholders of Cascade
or AmFirst fail to approve the Merger Agreement or a required regulatory
approval has not been approved or has been denied.

Resale of Cascade Common Stock

The shares of Cascade Common Stock issuable to shareholders of AmFirst
upon consummation of the Merger have been registered under the Securities Act.
Such shares may be traded freely and without restriction by those shareholders
not deemed to be "affiliates" of AmFirst or Cascade as that term is defined in
the rules under the Securities Act. Cascade Common Stock received by those
shareholders of AmFirst who are deemed to be "affiliates" of AmFirst may be
resold without registration as provided for by Rule 145, or as otherwise
permitted under the Securities Act. Persons who may be deemed to be
affiliates of AmFirst generally include individuals or entities that control,
are controlled by or are under common control with, AmFirst, and may include
the executive officers and directors of AmFirst as well as certain principal
shareholders of AmFirst. In the Merger Agreement, AmFirst has agreed to use
its best efforts to cause each person who may be deemed to be an affiliate of
AmFirst to enter into an agreement with Cascade providing that such affiliate
will not sell, transfer, or otherwise dispose of the shares of Cascade Common
Stock to be received by such person in the Merger except in compliance with
the applicable provisions of the Securities Act and the rules and regulations
promulgated thereunder. This Prospectus/Joint Proxy Statement does not cover
any resales of Cascade Common Stock received by affiliates of AmFirst.

Accounting Treatment

It is expected that the pooling of interests method of accounting will be
used to reflect the Merger. As required by generally accepted accounting
principles, under pooling of interests accounting, as of the Effective Date of
the Merger, the assets and liabilities of AmFirst would be added to those of
Cascade at their recorded book values and the shareholders' equity accounts of
Cascade and AmFirst would be combined on Cascade's consolidated balance sheet.
On a pooling of interests accounting basis, income and other financial
statements of Cascade issued after consummation of the Merger would be
restated retroactively to reflect the consolidated combined financial position
and results of operations of Cascade and AmFirst as if the Merger had taken
place prior to the periods covered by such financial statements. In order for
the Merger to qualify for pooling of interests accounting treatment, among
other things, substantially all (90% or more) of the outstanding AmFirst
Common Stock must be exchanged for Cascade Common Stock.

The unaudited pro forma data contained in this Prospectus/Joint Proxy
Statement has been prepared using the pooling of interests method of
accounting to account for the Merger. See "PRO FORMA FINANCIAL INFORMATION."

Expenses

The Merger Agreement provides that Cascade and AmFirst will each pay
their own expenses in connection with the Merger Agreement and the
transactions contemplated thereby.

MANAGEMENT AND OPERATIONS AFTER THE MERGER

As a result of the Merger, the separate existence of AmFirst and the Bank
will cease and Cascade and Cascade Bank will succeed to all of the assets and
liabilities of AmFirst and the Bank, respectively. Cascade Bank, as the
surviving institution, will continue to be a federally chartered savings bank
subject to the regulation and supervision of the OTS.

The directors and officers of Cascade and Cascade Bank immediately prior
to the Effective Time of the Merger will continue as the directors and
officers of Cascade and Cascade Bank after the Effective Time of the Merger.
Pursuant to the Merger Agreement, Cascade has agreed to appoint two of the
current AmFirst directors to the Boards of Directors of Cascade and Cascade
Bank. The two AmFirst directors who are expected to be appointed are
_____________ and ___________. See "THE MERGER -- Interests of Certain
Persons in the Merger." David Little, the President and Chief Operating
Officer of the Bank, will become an Executive Vice President of Cascade and
head the commercial banking division and Marlee Fowler, the current Chief
Financial Officer of the Bank, will assume an operations post with Cascade,
pursuant to employment agreements for a term of two years. See "THE MERGER --
Interests of Certain Persons in the Merger." Other than the addition of the
directors and officers described above, no other changes to the Boards of
Directors of Cascade and Cascade Bank or in the officers of Cascade and
Cascade Bank are anticipated in connection with the Merger.

Following the Merger, Cascade intends to combine the operations of the
Bank into Cascade Bank. While final operating plans are not complete, Cascade
intends to introduce the Bank's commercial lending activities into most of
Cascade Bank's branches and Cascade Bank's mortgage products will be offered
at all of AmFirst's branches. Consumer and deposit products will be reviewed
for the best products for the combined customer base.

Cascade also intends to consolidate certain corporate functions and
computer and back office operations within six months of the Effective Date.
Cascade expects to recognize expense savings from this consolidation; however,
the extent to which such expense savings will be achieved is dependent upon
various factors, a number of which are beyond the control of Cascade,
including the regulatory environment, economic conditions and unanticipated
changes in business conditions. Accordingly, no assurances can be given with
respect to the ultimate level, composition or timing of expense savings to be
realized. Estimated cost savings have not been included in any of the
unaudited pro forma financial information included in this Prospectus/Joint
Proxy Statement.

Cascade intends to provide an additional $650,000 in loan loss provisions
as a charge to earnings. This additional loan loss provision is being
provided principally because a number of Cascade's credit administration,
valuation and asset management philosophies differ from those of AmFirst.
This determination was the result of the differences in the methodology of
establishing the adequacy of the allowance for loan losses. These additional
provisions are not necessarily an indication of actual losses.

PRO FORMA FINANCIAL INFORMATION

The following unaudited pro forma condensed combined financial statements
reflect consummation of the Merger. The following unaudited pro forma
condensed combined statement of financial condition as of December 31, 1996
combines the historical consolidated statements of financial condition of
Cascade and AmFirst as if the Merger had occurred on such date after giving
effect to certain pro forma adjustments described in the accompanying notes.
The following unaudited pro forma condensed combined statements of operations
are presented as if the Merger had been consummated at the beginning of the
earliest period presented. Financial information for AmFirst, which has a
December 31 fiscal year end, has been adjusted to reflect a June 30 fiscal
year end by adding the subsequent six month period and subtracting the
comparable preceding year interim results from the financial data as of
December 31. The Cascade historical consolidated financial statement data as
of and for the six months ended December 31, 1996 have been prepared on the
same basis as the historical information derived from audited financial
statements, and in the opinion of management, contain all adjustments,
consisting only of normal recurring accruals, necessary for the fair
presentation of results of operations for such periods. The pro forma
condensed combined financial statements have been prepared based on a 1.925
Exchange Ratio.

The unaudited pro forma condensed combined financial statements and notes
thereto reflect the application of the pooling of interests method of
accounting. See "THE MERGER -- Accounting Treatment." The unaudited pro
forma condensed combined financial statements included herein are not
necessarily indicative of the future results of operations or the future
financial position of the combined entities or the results of operations and
financial position of the combined entities that would have actually occurred
had the transactions been in effect as of the dates or for the periods
presented.

The unaudited pro forma condensed combined financial statements should be
read in conjunction with the separate historical consolidated financial
statements of Cascade and AmFirst, including the notes thereto, and the other
documents incorporated by reference herein. See Appendices C and D,
"AVAILABLE INFORMATION" and "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE."

Pro Forma Condensed Combined Statement of Financial Condition
December 31, 1996
(unaudited)

Pro Forma Pro Forma
Cascade AmFirst Adjustments Combined
------- ------- ----------- ---------
(In thousands)

Assets
Cash on hand and in banks $ 3,517 $ 4,018 $(275)(2a) $ 7,260
Interest earning deposits in
other institutions 371 2,200 2,571
Securities available
for sale 57,638 17,374 75,012
Loans held for sale, net 4,804 -- 4,804
Securities held to maturity 9,225 3,919 13,144
Loans, net 261,896 40,224 (650)(2a) 301,470
Real estate owned, net 639 -- 639
Premises and equipment,
at cost, net 6,149 1,724 7,873
Accrued interest receivable
and other 3,811 1,639 5,450
-------- ------- ----- --------
Total assets $348,050 $71,098 $(925) $418,223
======== ======= ===== ========

Liabilities and Stockholders'
Equity
Deposits $225,306 $64,898 $ $290,204
Federal Home loan bank
advances 72,159 -- 72,159
Securities sold under
agreements to repurchase 21,981 -- 21,981
Note payable -- 418 418
Deferred income taxes 1,352 79 (221) 1,210
Accrued expenses and other
liabilities 6,029 600 (93) 6,536
------- ------ ----- -------
Total liabilities 326,827 65,995 (314) 392,508

Stockholders' equity 21,223 5,103 (611)(2a) 25,715
------- ------ ---- --------
Total liabilities and
stockholders' equity $348,050 $71,098 $(925)(2a) $418,223
======== ======= ===== ========

See accompanying Notes to Pro Forma Condensed Combined Financial Statements.

Pro Forma Condensed Combined Statement of Operations
Year Ended June 30, 1994
(unaudited)
Pro Forma
Cascade AmFirst Combined
------- ------- ---------
(In thousands, except per share data)

Interest income:
Loans $13,878 $2,594 $16,472
Securities held to maturity 1,918 170 2,088
Securities available for sale 349 483 832
FHLB stock dividends 231 64 295
Interest-bearing deposits 169 74 243
-------- -------- ---------
Total interest income 16,545 3,385 19,930

Interest expense:
Deposits 7,708 1,410 9,118
FHLB advances 1,270 5 1,275
Securities sold under agreements
to repurchase 164 52 216
------- ------- --------
Total interest expense 9,142 1,467 10,609
------- ------- --------
Net interest income 7,403 1,918 9,321

Provision for loan losses 495 20 515
------- ------- -------
Net interest income after
provision for loan losses 6,908 1,898 8,806

Other income 5,135 409 5,544

Other expense 9,006 1,812 10,818
------- ------ -------
Income before Federal income tax 3,037 495 3,532

Federal income tax 1,033 133 1,166
------- ------ -------
Net income $ 2,004 $ 362 $ 2,366
======= ====== =======
Net income per share, primary $ 0.91 $ 1.16 $ 0.85
Net income per share, fully
diluted 0.91 1.16 0.84
Weighted average number of
shares:
Primary 2,198,519 311,318 2,797,806
Fully diluted 2,213,213 311,318 2,812,500

See accompanying Notes to Pro Forma Condensed Combined Financial Statements.

Pro Forma Condensed Combined Statement of Operations
Year Ended June 30, 1995
(unaudited)
Pro Forma
Cascade AmFirst Combined
------- ------- ---------
(In thousands, except per share data)

Interest income:
Loans $18,384 $ 3,202 $21,586
Securities held to maturity 4,477 191 4,668
Securities available for sale 213 546 759
FHLB stock dividends 182 42 224
Interest-bearing deposits 122 102 224
------ ----- ------
Total interest income 23,378 4,083 27,461

Interest expense:
Deposits 9,133 1,750 10,883
FHLB advances 3,196 11 3,207
Securities sold under agreements
to repurchase 1,604 -- 1,604
------ ----- ------
Total interest expense 13,933 1,761 15,694
------ ----- ------
Net interest income 9,445 2,322 11,767

Provision for (recovery of)
loan losses (335) 16 (319)
------ ----- ------

Net interest income after
provision for loan losses 9,780 2,306 12,086

Other income 2,478 378 2,856

Other expense 7,879 2,127 10,006

Income before Federal income tax 4,379 557 4,936
Federal income tax 1,489 142 1,631
------- ------- --------
Net income $ 2,890 $ 415 $ 3,305
======= ======= ========
Net income per share, primary $ 1.28 $ 1.32 $ 1.16
Net income per share, fully
diluted 1.28 1.32 1.15
Weighted average number of
shares:
Primary 2,254,697 314,944 2,860,964
Fully diluted 2,256,306 315,078 2,862,831

See accompanying Notes to Pro Forma Condensed Combined Financial Statements.

Pro Forma Condensed Combined Statement of Operations
Year Ended June 30, 1996
(unaudited)

Pro Forma
Cascade AmFirst Combined
------- ------- ---------
(In thousands, except per share data)

Interest income:
Loans $19,650 $4,004 $23,654
Securities held to maturity 3,616 203 3,819
Securities available for sale 1,098 711 1,809
FHLB stock dividends 264 53 317
Interest-bearing deposits 148 131 279
-------- --------- ---------
Total interest income 24,776 5,102 29,878

Interest expense:
Deposits 11,391 2,532 13,923
FHLB advances 3,937 9 3,946
Securities sold under agreements
to repurchase 1,235 -- 1,235
-------- -------- ---------
Total interest expense 16,563 2,541 19,104
-------- -------- --------
Net interest income 8,213 2,561 10,774

Provision for loan losses -- 61 61
-------- ------- --------
Net interest income after
provision for loan losses 8,213 2,500 10,713

Other income 2,226 371 2,597

Other expense 7,004 2,220 9,224
------- ------ -------
Income before Federal income tax 3,435 651 4,086
Federal income tax 1,167 144 1,311
------- ------ -------
Net income $ 2,268 $ 507 $ 2,775
======= ====== =======
Net income per share, primary $ 1.00 $ 1.54 $ 0.95
Net income per share, fully
diluted 0.99 1.52 0.95
Weighted average number of
shares:
Primary 2,279,098 329,334 2,913,066
Fully diluted 2,282,033 333,971 2,924,927

See accompanying Notes to Pro Forma Condensed Combined Financial Statements.

Pro Forma Condensed Combined Statement of Operations
Six Months Ended December 31, 1996
(unaudited)

Pro Forma
Cascade AmFirst Combined
------- ------- ---------
(In thousands, except per share data)

Interest income:
Loans $10,313 $2,017 $12,330
Securities held to maturity 275 113 388
Securities available for sale 2,055 429 2,484
FHLB stock dividends 163 30 193
Interest-bearing deposits 11 67 78
------ ------ -------
Total interest income 12,817 2,656 15,473

Interest expense:
Deposits 5,904 1,250 7,154
FHLB advances 2,133 -- 2,133
Securities sold under agreements
to repurchase 555 -- 555
----- ----- ------
Total interest expense 8,592 1,250 9,842
----- ----- ------
Net interest income 4,225 1,406 5,631

Provision for loan losses -- 104 104
----- ----- ------
Net interest income after
provision for loan losses 4,225 1,302 5,527

Other income 693 187 880

Other expense 4,776 1,107 5,883
----- ----- -----
Income before Federal
income tax 142 382 524
Federal income tax 48 87 135
--------- --------- ----------
Net income $ 94 $ 295 $ 389
========= ========== ==========
Net income per share,
primary $ 0.04 $ 0.86 $ 0.13
Net income per share,
fully diluted 0.04 0.85 0.13
Weighted average number
of shares:
Primary 2,296,976 343,259 2,957,750
Fully diluted 2,299,366 347,922 2,969,116

See accompanying Notes to Pro Forma Condensed Combined Financial Statements.

Notes to Pro Forma Condensed Combined Financial Statement of Financial
Condition and Statement of Operations

Note 1. Basis of Presentation

The pro forma condensed combined financial statements reflect the
issuance of up to 637,960 shares of Cascade Common Stock in exchange for
331,408 shares of AmFirst Common Stock based on a 1.925 Exchange Ratio.
Actual shares issued in the Merger will depend on the actual Exchange Ratio
and the number of shares of AmFirst Common Stock outstanding on the Effective
Date.

Note 2. Adjustments to Pro Forma Condensed Combined Statement of Financial
Condition and Statement of Operations

The pro forma adjustments reflected in the unaudited pro forma condensed
combined statement of financial condition and statements of operation of
Cascade including AmFirst as of December 31, 1996, and the three years ended
June 30, 1996 and the six months ended December 31, 1996, respectively, give
effect to the following adjustments:

(a) Transaction-related Expenses. Nonrecurring transaction-related expenses
anticipated to be recorded are included in the pro forma combined statement of
financial condition as of December 31, 1996. Nonrecurring transaction-related
expenses expected to be recorded by Cascade, in the quarter the transaction
closes, except the loan loss reserve which will be recorded in the second
calendar quarter of 1997, are summarized in the following table:

(dollars in thousands)

Professional fees $150
Information
systems conversion 50
Pension payments 75
Additional loan loss reserves 650
----
925
Tax benefit (314)
----
Net charge $611
====

The effect of these costs have not been reflected in the pro forma
condensed combined statements of operations. See "MANAGEMENT AND OPERATIONS
OF CASCADE FOLLOWING THE TRANSACTION" for additional information.

(b) Non-competition Agreement. In connection with the Merger, Thomas H.
Rainville, the Chairman, President and Chief Executive Officer of AmFirst,
will enter into a non-competition agreement with Cascade pursuant to which Mr.
Rainville will receive $5,000 per month for 60 months. The total amount of
the payments will be capitalized and amortized over the term of the agreement
and are not included in the pro forma condensed combined financial statements.
Mr. Rainville will become a general creditor of Cascade.

Note 3. Per Share Data

(a) Book Value Per Share. Cascade's book value per common share of $9.23 and
pro forma combined book value per common share of $8.69 as of December 31,
1996 were calculated using the following information, based on an Exchange
Ratio of 1.925:

Pro forma
Cascade including Amfirst
------- ------------------
Common Stock
outstanding:
Primary 2,296,976 2,957,750
Fully diluted 2,299,366 2,969,115

(b) Earnings Per Share. Primary and fully diluted net income per share for
the six months ended December 31, 1996 and the three years ended June 30, 1996
were calculated based on Cascade's weighted average primary and fully diluted
outstanding shares, combined with the outstanding AmFirst primary and fully
diluted shares multiplied by the Exchange Ratio of 1.925.

BUSINESSES OF THE PARTIES TO THE MERGER

Cascade and Cascade Bank

Cascade Bank was organized in 1916 as a mutual savings and loan
association, and since 1957 its deposits have been federally insured. On
September 15, 1992, Cascade Bank completed its conversion from a federal
mutual to a federal stock savings bank. Cascade, a Delaware corporation, was
organized in August 1994 for the purpose of becoming the holding company for
Cascade Bank. The reorganization was completed on November 30, 1994, on which
date Cascade Bank became the wholly-owned subsidiary of the Cascade. Prior to
completion of the reorganization, Cascade had no material assets or
liabilities and engaged in no business activities. Subsequent to the
acquisition of Cascade Bank, Cascade has engaged in no significant activity
other than holding the stock of Cascade Bank.

Headquartered in Everett, Washington, Cascade Bank conducts business from
eight full service offices, five in Snohomish County, two in King County and
one in Skagit County. Cascade Bank also has a mortgage origination office in
Whatcom counties. Cascade Bank's principal business activity is the
acquisition of deposits which are used to originate and service one- to
four-family residential, multi-family, and commercial real estate loans.
Cascade Bank also sells a portion of the long-term fixed rate residential
loans it originates. Cascade Bank seeks to control its interest rate risk by
generally retaining in its portfolio adjustable rate and balloon loans that
are funded with a combination of Federal Home Loan Bank of Seattle advances
and deposits from the local market area. At December 31, 1996, Cascade had
total assets of $348.1 million, total deposits of $225.3 million and
stockholders' equity of $21.2 million. The savings deposits of Cascade Bank
are insured by the FDIC under the SAIF.

Financial and other information relating to Cascade is set forth in
Appendix C and in Cascade's Annual Report on Form 10-K for the year ended June
30, 1996, and Quarterly Reports on Form 10-Q for the quarters ended September
30, and December 31, 1996, copies of which may be obtained from Cascade as
indicated under "AVAILABLE INFORMATION."

AmFirst and the Bank

AmFirst, a Washington corporation, was organized in 1991 for the purpose
of becoming the holding company for the Bank. AmFirst engages in no
significant activity other than holding the stock of the Bank. The Bank,
which was organized in 1984, is a locally oriented commercial bank servicing
the deposit and lending needs of businesses and individuals in the Snohomish
County market. The Bank's principal business is to originate loans for
general business purposes, on a secured and unsecured basis to small and
medium sized businesses. A portion of the Bank's loan portfolio is invested
in commercial real estate loans to local businesses. The Bank also makes
consumer loans such as home equity lines of credit, loans to purchase or
construct single family homes, and a variety

of secured and unsecured personal loans. The Bank funds its activities
principally through deposits from its business and individual customers. The
Bank also has access to FHLB-Seattle advances, reverse repurchase agreements
and Federal funds purchased from a regional commercial bank. At December 31,
1996, AmFirst had total assets of $71.1 million, total deposits of $64.9
million and stockholders' equity of $5.1 million. The deposits of the Bank
are insured by the FDIC under the BIF.

Financial and other information relating to AmFirst is set forth in
Appendix D.

VOTING SECURITIES OF CASCADE AND PRINCIPAL HOLDERS THEREOF

Persons and groups who beneficially own in excess of 5% of the
outstanding shares Cascade Common Stock are required to file certain reports
disclosing such ownership pursuant to the Exchange Act. Based on such
reports, the following table sets forth, as of the Cascade Record Date,
certain information as to those persons who were beneficial owners of 5% or
more of the outstanding shares of Cascade Common Stock. Management knows of
no persons other than those set forth below who beneficially owned more than
5% of the outstanding shares of Cascade Common Stock as of the Cascade Record
Date. The following table also sets forth, as of the Cascade Record Date,
information as to the shares of Cascade Common Stock beneficially owned by
each director, by the Chief Executive Officer of Cascade, by Cascade's named
executive officers who received salaries and bonuses in excess of $100,000
during the year ended June 30, 1996 and by all executive officers and
directors of Cascade as a group. The table also provides pro forma information
concerning the beneficial ownership of Cascade Common Stock by such persons
and 5% shareholders after giving effect to the issuance of 637,960 additional
shares of Cascade Common Stock in the Merger.

Amount and Percent
Nature of Percent of Shares
Beneficial of Shares Outstanding
Name Ownership(a) Outstanding Post-Merger
- ---- ------------ ----------- ------------
Beneficial Owners of 5%
or More
Frank M. McCord
Chairman of the Board, Chief
Executive Officer and Director 135,983(b) 6.5% 4.8%

Arthur W., Andrew P. and
Craig G. Skotdal
c/o Douglas A. Schafer
Schafer Law Firm
P.O. Box 1134
Tacoma, Washington 98401 124,240(c) 6.1 4.6

Directors
Paull H. Shin 3,438 * *
Joan M. Earl 1,625 * *
Dwayne Lane 10,159 * *
Gary L. Meisner 4,819 * *
David W. Duce 10,036 * *
G. Brandt Westover 8,668 * *
Dennis R. Murphy 12,481 * *
Ronald E. Thompson 22,496 1.1 *

(table continued on following page)

Amount and Percent
Nature of Percent of Shares
Beneficial of Shares Outstanding
Name Ownership(a) Outstanding Post-Merger
- ---- ------------ ----------- ------------

Named Executive Officers

Frank M. McCord** 135,983 6.5% 4.8%
C. Fredrick Safstrom** 39,714 1.9 1.4
Robert G. Disotell** 33,294 1.6 1.2

All Executive Officers

and Directors as a

Group (14 persons) 323,075(d)(e) 14.9 11.5
_______________
* Less than 1%.
** Also a director of Cascade and Cascade Bank.
(a) None of the persons listed in the table owned any shares of AmFirst
Common Stock as of the Cascade Record Date. Accordingly, the amount
of shares of Cascade Common Stock owned by such persons will not
change as a result of the Merger.
(b) Based on records maintained by Cascade and information from a
Schedule 13D filed by Mr. McCord on June 14, 1993. According to the
Schedule 13D, Mr. McCord exercises shared voting and investment
authority over these shares with his wife.
(c) Information concerning the shares owned by Arthur W. Skotdal, Andrew
P. Skotdal and Craig D. Skotdal as of February 27, 1997 was obtained
from a Schedule 13D dated March 14, 1997. According to this filing,
Arthur Skotdal has sole voting and dispositive power with respect to
22,000 shares and shared voting and dispositive power with respect to
102,240 shares and Andrew Skotdal and Craig Skotdal each have shared
voting and dispositive power with respect to 51,120 shares.
(d) Includes certain shares owned by spouses, or as custodian or trustee
for minor children, over which shares all officers and directors as a
group effectively exercise sole or shared voting and investment
power, unless otherwise indicated.
(e) Does not include 71,202 shares owned by Cascade's ESOP over which
shares the ESOP Committee, consisting of certain directors and
officers of Cascade, exercises partial investment power, or 28,700
shares owned by Cascade's 401(k) plan.

VOTING SECURITIES OF AMFIRST AND PRINCIPAL HOLDERS THEREOF

The following table sets forth, as of AmFirst Record Date, information as
to the shares of AmFirst Common Stock beneficially owned by each director, by
the Chief Executive Officer of AmFirst, and by all executive officers and
directors of AmFirst as a group. To the knowledge of AmFirst, no person owned
more than 5% of the outstanding shares of AmFirst Common Stock at the AmFirst
Record Date.
25

Number of Shares Percent of Shares
Name Beneficially Owned (1) Outstanding
- ---- ---------------------- -----------------

Directors
Thomas P. Cooper 12,411 3.7%
Thomas S. Eckstrom 15,094 4.5
Jack Heath 17,478 5.3
Paul Herring 8,340 2.5
Arnold R. Hofmann 4,896 1.2
David R. Little 10,933 3.3
David R. O'Connor 17,784 5.4
Thomas H. Rainville* 29,841 8.6
Hank Robinett 4,653 1.4
Harold F. Suchan 11,052 3.3

All Executive Officers and 140,862 37.5
Directors as a Group
(11 persons)
__________
* Mr. Rainville is also the President and Chief Executive Officer of
AmFirst.
(1) In accordance with Rule 13d-3 under the Exchange Act, a person is deemed
to be the beneficial owner, for purposes of this table, of any shares of
AmFirst Common Stock if he or she has voting and/or investment power
with respect to such security. The table includes shares owned by
spouses, 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. The amounts shown also include
the following amounts of AmFirst Common Stock which the indicated
individuals have the right to acquire within 60 days of the AmFirst Record
Date through the exercise of stock options granted pursuant to AmFirst's
stock option plans: Mr. Cooper, 1,312; Mr. Exkstrom, 1,312; Mr. Heath,
1,312; Mr. Herring, 1,312; Mr. Hofmann, 1,312; Mr. Little, 8,820; Mr.
O'Connor, 1,312; Mr. Rainville, 17,377; Mr. Robinett, 1,312; and all
executive officers and directors as a group, 44,410.

DESCRIPTION OF CASCADE CAPITAL STOCK

Cascade is authorized to issue 5,000,000 shares of Common Stock, $0.01
par value per share and 500,000 shares of preferred stock, par value $0.01 per
share. At the Cascade Record Date, ___________ shares of Cascade Common Stock
were issued and outstanding. Cascade Common Stock is listed for trading on
the Nasdaq SmallCap Market under the symbol "CASB." Each share of Cascade
Common Stock has the same relative rights and is identical in all respects
with every other share of Cascade Common Stock. The following summary does
not purport to be a complete description of the applicable provisions of the
Cascade Certificate of Incorporation and Bylaws or of applicable statutory or
other law, and is qualified in its entirety by reference thereto. See
"AVAILABLE INFORMATION."

Common Stock

Voting Rights. The holders of Cascade Common Stock possess exclusive
voting rights in Cascade. Each holder of Cascade Common Stock is entitled to
one vote for each share held of record on all matters submitted to a vote of
holders of Cascade Common Stock. Holders of shares of Cascade Common Stock
are not entitled to cumulate votes for the election of directors.

Dividends. The holders of Cascade Common Stock are entitled to such
dividends as the Cascade Board may declare from time to time out of funds
legally available therefor. Dividends from Cascade depend upon the receipt by
Cascade of dividends from Cascade Bank because Cascade has no source of income
other than dividends from Cascade Bank.

Liquidation. In the event of liquidation, dissolution or winding up of
Cascade, the holders of shares of Cascade Common Stock are entitled to share
ratably in all assets remaining after payment of all debts and other
liabilities of Cascade.

Other Characteristics. Holders of Cascade Common Stock do not have any
preemptive, conversion or other subscription rights with respect to any
additional shares of Cascade Common Stock which may be issued. Therefore, the
Cascade Board may authorize the issuance and sale of shares of capital stock
of Cascade without first offering them to existing shareholders of Cascade.
Cascade Common Stock is not subject to any redemption or sinking fund
provisions. The outstanding shares of Cascade Common Stock are, and the
shares to be issued in the Merger will be, fully paid and non-assessable.

Preferred Stock

Cascade's Certificate of Incorporation authorizes the Cascade Board to
issue from time to time one or more series of preferred stock with such
designations and preferences, relative, participating, optional and other
special rights and qualifications, limitations and restrictions thereon, as
permitted by law and as fixed from time to time by resolution of the Cascade
Board. Because of its broad discretion with respect to the creation and
issuance of any series of preferred stock without stockholder approval, the
Cascade Board could adversely affect the voting power of the holders of common
stock, and by issuing shares of preferred stock with certain voting,
conversion and/or redemption rights, could discourage any attempt to obtain
control of Cascade in any transaction not approved by the Cascade Board.

COMPARISON OF SHAREHOLDERS' RIGHTS

Cascade is incorporated under the laws of the State of Delaware and,
accordingly, the rights of Cascade's shareholders are governed by Cascade's
Certificate of Incorporation, Bylaws and the DGCL. AmFirst is incorporated
under the laws of the State of Washington and, accordingly, the rights of
AmFirst's shareholders are governed by AmFirst's Articles of Incorporation,
Bylaws and the WBCA.

Upon consummation of the Merger, shareholders of AmFirst will become
shareholders of Cascade, and, as such, their rights will be governed by
Cascade's Certificate of Incorporation, Bylaws and the DGCL. The following is
a summary of material differences between the rights of a Cascade shareholder
under Cascade's Certificate of Incorporation and Bylaws and under the DGCL, on
the one hand, and the rights of an AmFirst shareholder under AmFirst's
Articles of Incorporation and Bylaws and under the WBCA, on the other hand.
This discussion is not intended to be a complete statement of the differences
affecting the rights of shareholders and is qualified in its entirety by
reference to the governing law and the certificate or articles of
incorporation and bylaws of each corporation.

Payment of Dividends

Cascade. Under Delaware law, dividends may be paid either out of surplus
(defined as the excess of the net assets of the corporation over the stated
capital of the corporation) or, if there is no surplus, out of net profits for
the fiscal year in which the dividend is declared and/or the preceding fiscal
year.

AmFirst. Under Washington law, dividends may be paid only if, after
giving effect to the dividend, AmFirst will be able to pay its debts as they
become due in the ordinary course of business and AmFirst's total assets will
not be less than the sum of its total liabilities plus the amount that would
be needed, if AmFirst were to be dissolved at the time of the dividend, to
satisfy the preferential rights of persons whose right to payment is superior
to those receiving the dividend.

Size of Board of Directors

Cascade. Cascade's Certificate of Incorporation provides that its Board
of Directors shall consist of not less than five nor more than 25 members,
with the current number set at eight by the Bylaws of Cascade. The Bylaws of
Cascade provide that the Board of Directors may change the authorized number
of directors within the stated range. Changes in the size of the range may be
made by an amendment to Cascade's Certificate of Incorporation, which must be
approved by at least 80% of the outstanding shares entitled to vote. The
effect of such provisions may be to make it difficult for a person or entity
immediately to acquire control of Cascade through an increase in the number of
Cascade's directors and election of such person's or entity's nominees to fill
the newly created vacancies.

AmFirst. AmFirst's Articles of Incorporation provide that its Board of
Directors shall consist of not less than five nor more than 25 members, with
the current number fixed by resolution approved by a majority of the total
number of directors. The AmFirst Board may not increase the number of
directors to a number which (i) exceeds by more than two the number of
directors last elected by shareholders where such number was 15 or less, or
(ii) exceeds by more than four the number of directors last elected by
shareholders where such number was 16 or more. Changes in the size of the
stated range may be made by an amendment to AmFirst's Articles of
Incorporation, which must be approved by a majority of the outstanding shares
entitled to vote.

Classified Board of Directors

Cascade. Cascade's Certificate of Incorporation provides for a Board of
Directors divided into three classes, with members of each class of directors
being elected for a term of three years. A classified board is one in which a
certain number, but not all, of the directors are elected on a rotating basis
each year. This method of electing directors makes a change in the
composition of the Board of Directors, and a potential change in control of a
corporation, a lengthier and more difficult process. Since the terms of only
one-third of the incumbent directors expire each year, it requires at least
two annual elections for the shareholders to change a majority of the
directors. In the absence of the provisions of the Certificate of
Incorporation classifying the Board, all of the directors would be elected
each year.

AmFirst. AmFirst's Articles of Incorporation provide for a Board of
Directors divided into three classes, with members of each class of directors
being elected for a term of three years.

Cumulative Voting

Cascade. Cascade's Certificate of Incorporation eliminates cumulative
voting. Cumulative voting entitles each shareholder to cast a number of votes
in the election of directors equal to the number of such shareholders' shares
of common stock multiplied by the number of directors to be elected, and to
distribute such votes among one or more of the nominees to be elected. The
absence of cumulative voting rights limits the ability of minority
shareholders to obtain representation on the Cascade Board.

AmFirst. AmFirst's Articles of Incorporation eliminate cumulative
voting.

Removal of Directors

Cascade. Cascade's Certificate of Incorporation provides that at a
meeting of shareholders called expressly for that purpose, any director or the
entire Board of Directors may be removed for cause by a vote of the holders
of at least 80% of the shares then entitled to vote at such meeting. The
requirement that directors may be removed only upon an 80% vote and only for
cause makes it difficult for a person or entity immediately to acquire control
of the Cascade Board through the removal of existing directors and the
election of such person's or entity's nominees to fill the newly created
vacancies.

AmFirst. Pursuant to the WBCA, the shareholders of AmFirst may remove
one or more directors with or without cause at a meeting called for that
purpose if the number of votes cast to remove the director exceeds the number
of votes cast not to remove the director.

Vacancies on the Board of Directors

Cascade. The Certificate of Incorporation of Cascade provides that any
vacancy on the Board of Directors may be filled by the affirmative vote of
two-thirds of the remaining directors, and any director so appointed is to
hold office for a term expiring at the annual meeting of shareholders at which
the term of the class to which the director has been chosen expires.

AmFirst. AmFirst's Articles of Incorporation provide that the Board of
Directors may appoint persons to fill vacancies. A director elected to fill a
vacancy shall serve for the unexpired term of his predecessor. A director
appointed by reason of an increase in the number of directors may serve only
until the next election of directors.

Special Meetings of Shareholders and Action Without a Meeting

Cascade. The Certificate of Incorporation of Cascade provides that
special meetings of shareholders may be called by the board of directors or
holders of not less than 20% of the outstanding shares of stock. This
restriction on the calling of special shareholders' meetings may deter hostile
takeovers of Cascade by making it more difficult for a person or entity to
obtain immediate control of Cascade between one annual meeting and the next.
Pursuant to Cascade's Certificate of Incorporation, the power of shareholders
to take action by written consent is denied.

AmFirst. Pursuant to the WBCA, special meetings of shareholders may be
called at any time by the AmFirst Board or by any shareholder or shareholders
holding in the aggregate not less than one-tenth of all shares entitled to
vote at the special meeting. Pursuant to the WBCA, any action required or
permitted to be taken at a shareholders' meeting may be taken without a
meeting if a consent is signed in writing by all of the shareholders entitled
to vote on the action.

Advance Notice Requirements for Nominations of Directors and Presentation of
New Business at Meetings of Shareholders

Cascade. The Certificate of Incorporation of Cascade generally provides
that any shareholder desiring to make a nomination for the election of
directors or a proposal for new business at a meeting of shareholders must
submit written notice to Cascade at least 30 days and not more than 60 days in
advance of the meeting, together with certain information relating to the
nomination or new business. Failure to comply with these advance notice
requirements will preclude such nominations or new business from being
considered at the meeting. Management believes that it is in the best
interests of Cascade and its shareholders to provide sufficient time to enable
management to disclose to shareholders information about a dissident slate of
nominations for directors. This advance notice requirement may also give
management time to solicit its own proxies in an attempt to defeat any
dissident slate of nominations, should management determine that doing so is
in the best interest of shareholders

generally. Similarly, adequate advance notice of shareholder proposals will
give management time to study such proposals and to determine whether to
recommend to the shareholders that such proposals be adopted. In certain
instances, such provisions could make it more difficult to oppose management's
nominees or proposals, even if shareholders believe such nominees or proposals
are in their best interests.

AmFirst. The Articles of Incorporation of AmFirst provide that any
shareholder desiring to make a nomination for the election of directors must
submit such nomination in writing to AmFirst not less than 60 days prior to
the first anniversary of the date of the last meeting of shareholders called
for the election of directors. Such nomination must contain certain
information relating to the nomination. Nominations not made in accordance
with the Articles of Incorporation may be disregarded.

Approval of Mergers, Consolidations, Sale of Substantially All Assets and
Dissolution

Cascade. Cascade's Certificate of Incorporation requires the approval of
the holders of (i) at least 80% of Cascade's outstanding shares of voting
stock, and (ii) at least a majority of Cascade's outstanding shares of voting
stock, not including shares held by a "Related Person," to approve certain
"Business Combinations," except in cases where the proposed transaction has
been approved in advance by two-thirds of those members of the Cascade Board
who were directors prior to the time when the Related Person became a Related
Person. In the event the requisite approval of the Board were given, the
normal vote requirement of applicable Delaware law would apply, or, for
certain transactions, no shareholder vote would be necessary. The term
"Related Person" is defined to include any individual, corporation,
partnership or other entity which owns beneficially or controls, directly or
indirectly, 10% or more of the outstanding shares of voting stock of Cascade.
These provisions apply to any "Business Combination" which is defined to
include among other things: (i) any merger, reorganization, or consolidation
of Cascade or any of its affiliates with or into any Related Person; (ii) any
sale, lease, exchange, mortgage, transfer, or other disposition of all or a
substantial part of the assets of Cascade or any of its affiliates to any
Related Person (the term "substantial part" is defined to include more than
25% of Cascade's total assets); (iii) any sale, lease, exchange, or other
transfer by any Related Person to Cascade of any assets, cash or securities in
exchange for shares of Cascade's voting stock; (iv) the acquisition by Cascade
of any securities of the Related Person; (v) any reclassification of Cascade
Common Stock; and (vi) any agreement, contract or other arrangement providing
for any of the transactions described above. The increased shareholder vote
required to approve a Business Combination may have the effect of foreclosing
mergers and other business combinations which a majority of shareholders deem
desirable and place the power to prevent such a merger or combination in the
hands of a minority of shareholders.

Under Delaware law, absent this provision, business combinations,
including mergers, consolidations and sales of substantially all of the assets
of a corporation must, subject to certain exceptions, be approved by the vote
of the holders of a majority of the outstanding shares of common stock of the
corporation and any other affected class of stock. One exception under
Delaware law to the majority approval requirement applies to shareholders
owning 15% or more of the common stock of a corporation for a period of less
than three years. Such 15% shareholder, in order to obtain approval of a
business combination, must obtain the approval of two-thirds of the
outstanding stock, excluding the stock owned by such 15% shareholder, or
satisfy other requirements under Delaware law relating to board of director
approval of his or her acquisition of the shares of the corporation.

Cascade's Articles of Incorporation require Cascade's Board of Directors
to consider certain factors in addition to the amount of consideration to be
paid when evaluating certain business combinations or a tender or exchange
offer. These additional factors include: (i) the social and economic effects
of the transaction; (ii) the business and financial condition and earnings
prospects of the acquiring person or entity; and (iii) the competence,
experience, and integrity of the acquiring person or entity and its
management.

AmFirst. Pursuant to the WBCA, a plan of merger or share exchange must
be approved by each voting group entitled to vote separately on the plan by
two-thirds of all the votes entitled to be cast on the plan by that

voting group. Action by the shareholders of the surviving corporation on a
plan of merger is not required if certain conditions are met.

AmFirst's Articles of Incorporation require the AmFirst Board when
evaluating any offer of another party to make a tender or exchange offer for
any equity security of AmFirst, to merge or consolidate AmFirst with another
corporation or to purchase all or substantially all of the assets of AmFirst
to give consideration to the social and economic effects on the employees and
customers of AmFirst and on the communities in which AmFirst operates or is
located.

Restrictions on 10% Beneficial Ownership

Cascade. Cascade's Certificate of Incorporation provides that for a
period of five years from the date of completion of the conversion of Cascade
Bank from mutual to stock form (which occurred on September 15, 1992), no
person may offer to acquire the beneficial ownership of more than 10% of the
common stock of Cascade. All shares owned by any person in excess of 10% are
considered excess shares and will not be counted as shares entitled to vote.
In addition, Cascade's Certificate of Incorporation provides that after
September 15, 1997, any person or group acting in concert that acquires more
than 10% of the Cascade Common Stock without the prior approval of two-thirds
of the Cascade Board will have reduced voting power with respect to those
shares in excess of 10% of the outstanding shares of voting stock held by such
person. With respect to each vote in excess of 10% of voting power of the
outstanding shares held by such person, the holder shall be entitled to cast
only one-hundredth of a vote. This provision will deter any person or entity
from engaging in a "creeping" takeover of Cascade whereby such person or
entity accumulates shares of Cascade Common Stock in an effort to obtain
control and will encourage a potential acquiror to negotiate with the Cascade
Board and obtain approval to acquire a significant ownership stake in Cascade.

AmFirst. AmFirst has no similar provision in its Articles of
Incorporation or Bylaws.

Dissenters' Appraisal Rights

Cascade. Under the DGCL, appraisal rights are available for the shares
of any class or series of stock of a corporation that is a party to a merger
or consolidation, other than a merger of a parent corporation and a 90% or
more owned subsidiary. However, shareholders generally will not have
appraisal rights if the corporation's stock is listed on a national securities
exchange or the Nasdaq National Market or is held of record by more than 2,000
holders, or if shareholder approval is not required by the DGCL for the
corporate action. Shareholders of Cascade do not have appraisal rights in
connection with the Merger.

AmFirst. Under the WBCA, shareholders of AmFirst generally have
dissenter's appraisal rights in connection with (i) a plan of merger to which
AmFirst is a party; (ii) a plan of share exchange to which AmFirst is a party
as the corporation whose shares will be acquired; (iii) certain sales or
exchanges of all, or substantially all, of AmFirst's property other than in
the regular course of business; and (iv) amendments to AmFirst's Articles of
Incorporation effecting a material reverse stock split. However, shareholders
generally will not have such dissenters' rights if shareholder approval is not
required for the corporate action. Shareholders of AmFirst have dissenters'
rights in connection with the Merger. See "THE MERGER -- Dissenters' Rights."

Indemnification of Officers and Directors and Limitation of Liability

Cascade. Pursuant to Cascade's Certificate of Incorporation, Cascade
will indemnify the officers, directors, agents and employees of Cascade for
expenses, settlements, judgments and fines in suits which are not
stockholders' derivative suits if the person is successful on the merits or if
he or she acted in good faith, in a manner reasonably believed to be in, or
not opposed to, the best interests of the corporation, and in the case of a
criminal suit if he or she had no reasonable cause to believe his or her
conduct was unlawful. In the case of a stockholders' derivative

suit Cascade will indemnify any of the aforementioned persons for expenses if
such a person is successful on the merits or otherwise or if he or she acted
in good faith and in a manner reasonably believed to be in, or not opposed to,
the best interests of Cascade, but no such indemnification may be given if the
person is judged liable for negligence or misconduct in the performance of his
or her duty to Cascade, unless the court determines the person is fairly and
reasonably entitled to indemnification. In addition, Cascade's Certificate of
Incorporation provides that the directors of Cascade shall not be personally
liable for monetary damages to Cascade for certain breaches of their fiduciary
duty as directors, except for liabilities that involve a breach of the
director's duty of loyalty to Cascade or its shareholders, actions not in good
faith, intentional misconduct or a knowing violation of law by the director,
the authorization of illegal distributions or receipt of an improper personal
benefit from their actions as directors. This provision might, in certain
instances, discourage or deter shareholders or management from bringing a
lawsuit against directors for a breach of their duties even though such an
action, if successful, might have benefitted Cascade.

AmFirst. Pursuant to AmFirst's Bylaws, AmFirst will indemnify the
directors, officers, employees and agents of AmFirst for judgments, penalties,
fines, settlements and reasonable expenses in suits in which such person has
made a party by reason of the fact that such person is or was acting in such
capacity if (i) the individual acted in good faith, (ii) the individual
reasonably believed, in the case of conduct in the individual's capacity with
the AmFirst, that the individual's conduct was in the corporation's best
interests and, in all other cases, that the individual's conduct was at least
not opposed to the corporation's best interests, and (iii) in the case of any
criminal proceeding, the individual had no reasonable cause to believe the
individual's conduct was unlawful. No such indemnification may be given to a
director in connection with a shareholder's derivative action in which the
director is adjudged liable to AmFirst or in connection with a proceeding in
which the director was adjudged liable on the basis that the director
improperly received a personal benefit. In addition, AmFirst's Articles of
Incorporation provide that the directors of AmFirst shall not be personally
liable for monetary damages to AmFirst for conduct as directors except for
liabilities that involve intentional misconduct or a knowing violation of law
by the director, the authorization of illegal distributions to shareholders or
loans to directors, or participation in any transaction from which the
director personally received a benefit to which the director was not legally
entitled.

Amendment of Certificate of Incorporation and Bylaws.

Cascade. Cascade's Certificate of Incorporation may be amended by the
vote of the holders of a majority of the outstanding shares of Cascade Common
Stock, except that the provisions of the Certificate of Incorporation
governing (i) meetings of stockholders and cumulative voting, (ii) notice
requirements for nominations and proposals, (iii) the number, filling of
vacancies and staggered terms of directors, (iv) removal of directors, (v)
acquisition of capital stock, (vi) approval of certain business combinations,
(vii) evaluation of business combinations, (viii) indemnification of officers
and directors, (ix) elimination of directors' liability, (x) amendments to
bylaws, and (xi) the manner of amending the Certificate of Incorporation may
not be repealed, altered, amended or rescinded except by the vote of the
holders of at least 80% of the outstanding shares of Cascade. The Bylaws of
Cascade may be amended by a two-thirds vote of the Board of Directors or by
the holders of at least 80% of the outstanding shares of Cascade. This
requirement exceeds the majority vote of the outstanding stock that would
otherwise be required by Delaware law for the repeal or amendment of the
Certificate of Incorporation provision. This provision is intended to prevent
the holders of less than 80% of the outstanding stock of Cascade from
circumventing any of the foregoing provisions by amending the Certificate of
Incorporation to delete or modify one of such provisions. This provision
would enable the holders of more than 20% of Cascade's voting stock to prevent
amendments to Cascade's Certificate of Incorporation or Bylaws even if they
were favored by the holders of a majority of the voting stock.

AmFirst. AmFirst's Articles of Incorporation may be amended by a
majority of the outstanding shares of AmFirst Common Stock, except that
provisions of AmFirst's Articles of Incorporation relating to directors may
not be repealed or amended except by the affirmative vote of at least 80% of
the outstanding shares of AmFirst Common Stock. AmFirst's Bylaws may be
amended, altered or repealed by the AmFirst Board or by the affirmative vote
of a majority of shareholders.
32

AMENDMENT TO CASCADE'S CERTIFICATE OF INCORPORATION

On March 18, 1997, the Cascade Board authorized an amendment of Cascade's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock from 5,000,000 to 8,000,000. Cascade shareholders are being
asked to approve this proposed amendment. Approval of the Merger Agreement is
not contingent upon approval of the amendment of Cascade's Certificate of
Incorporation.

As of December 31, 1996, 2,052,929 shares of Cascade Common Stock were
issued and outstanding and 324,421 shares were reserved for issuance under
Cascade's stock option plan. Based on a 1.925 Exchange Ratio, Cascade
estimates that it will issue 637,960 shares in the Merger and that it will
reserve 109,349 shares for issuance under the AmFirst stock options that will
be assumed in connection with the Merger.

The Cascade Board of Directors believes that the proposed increase in
authorized shares is desirable so that, as the need may arise, Cascade will
have more flexibility to issue shares, without the expense and delay of a
special shareholders' meeting, in connection with possible future stock
dividends or stock splits, equity financings, future opportunities for
expanding the business through acquisitions, management incentive and employee
benefit plans and for other general corporate purposes. Cascade has no
current plans to issue shares for any purpose other than the Merger and shares
issued upon exercise of stock options granted to directors, officers and
employees under Cascade's stock option plans, including the 1997 Stock Option
Plan which Cascade shareholders are being asked to approve at the Cascade
Special Meeting, and the stock option plans of AmFirst that will be assumed in
connection with the Merger.

The increase in authorized Cascade Common Stock will not have any
immediate effect on the rights of existing shareholders. However, the Cascade
Board will have the authority to issue authorized Cascade Common Stock without
requiring future shareholder approval of such issuances, except as may be
required by applicable law or regulations. To the extent that the additional
authorized shares are issued in the future, they will decrease the existing
shareholders' percentage equity ownership and, depending upon the price at
which they are issued, could be dilutive to the existing shareholders. The
holders of Cascade Common Stock have no preemptive rights.

The increase in the authorized number of shares of Cascade Common Stock
and the subsequent issuance of such shares could have the effect of delaying
or preventing a change in control of Cascade without further action by the
shareholders. Shares of authorized and unissued Cascade Common Stock could
(within the limits imposed by applicable law) be issued in one or more
transactions which would make a change in control of Cascade more difficult,
and, therefore, less likely. Any such issuance of additional stock could have
the effect of diluting the earnings per share and book value per share of
outstanding shares of Cascade Common Stock, and such additional shares could
be used to dilute the stock ownership or voting rights of a person seeking to
obtain control of Cascade.

The Board of Directors believes that the amendment is in the best
interests of Cascade and its shareholders and, consequently, recommends a vote
"FOR" approval of the amendment to Cascade's Certificate of Incorporation.

ADOPTION OF 1997 STOCK OPTION PLAN

The Cascade Board adopted the Cascade Financial Corporation 1997 Stock
Option Plan ("Option Plan") on March 18, 1997, subject to approval by
Cascade's stockholders. Currently, no shares of Cascade Common Stock remain
available for the grant of options under Cascade's 1992 Stock Option and
Incentive Plan. The Board believes that continuation of Cascade's stock
option program is necessary in order to attract and retain the best available
personnel for positions of responsibility and to provide appropriate
incentives to such personnel to contribute to the success of Cascade. The
Option Plan will become effective upon adoption by the Cascade shareholders.
The following description of the Option Plan is qualified in its entirety by
reference to the complete text of the Option Plan, which is attached to this
Prospectus/Joint Proxy Statement as Exhibit E.

Administration of the Option Plan

The Option Plan is administered by a committee of the Cascade Board (the
"Committee"). The Committee consists of not less than two non-employee
members of the Board of Directors. In addition to determining who will be
granted options, the Committee has the authority and discretion to determine
when options will be granted and the number of options to be granted. In
making such determination, the Committee will consider those non-employee
directors, officers and employees who are expected to make significant
contributions to the long-term success of Cascade and Cascade Bank. With
respect to awards to officers and employees, the Committee also determines
which options are intended to qualify for special treatment under the Internal
Revenue Code ("Incentive Stock Options") or to be issued as options which are
not intended to so qualify ("Non-Qualified Stock Options"). The Option Plan
provides that all options granted to non-employee directors are Non-Qualified
Stock Options.

The Cascade Board may from time to time amend or terminate the Option
Plan in any respect. An amendment to the Option Plan may be subject to
shareholder approval if such approval is necessary to comply with any tax or
regulatory requirement. No amendment or termination may retroactively impair
the rights of any person with respect to an option.

Shares Subject to the Option Plan

Cascade has reserved an aggregate of 115,000 shares of Cascade Common
Stock for issuance pursuant to the exercise of stock options under the Option
Plan, which may be granted to officers, employees and non-employee directors.
Such shares may be treasury shares or authorized but unissued shares. The use
of authorized but unissued shares may dilute the interests of existing
shareholders.

In the event of a merger, consolidation, sale of all or substantially all
of the property of Cascade, reorganization, recapitalization,
reclassification, stock dividend, stock split, reverse stock split or other
distribution, to the extent permitted by Cascade, an appropriate and
proportionate adjustment shall be made in (i) the maximum number of shares
available, (ii) the number and kind of shares subject to outstanding options,
if any, and (iii) the price for each share.

Option Price

The exercise price of Non-Qualified Stock Options and Incentive Stock
Options may not be less than 100% of the fair market value of the shares of
Cascade Common Stock on the date of grant. Any Incentive Stock Option granted
to a person owning more than 10% of the outstanding Cascade Common Stock must
have an exercise price of at least 110% of fair market value on the date of
grant. The maximum aggregate fair market value (determined as of the date of
grant) of the shares to which Incentive Stock Options held by an individual
become exercisable for the first time during any calendar year may not exceed
$100,000.

Terms of Options

In general, the Committee has the discretion to fix the term of each
option granted to an officer or employee under the Option Plan, except that
the maximum term of each option is 10 years, subject to earlier termination as

provided in the Option Plan (five years in the case of Incentive Stock Options
granted to an employee who owns over 10% of the total combined voting power of
all classes of Cascade's stock). The Option Plan provides, however, that
unvested options will become immediately exercisable in the event of the
option holder's death or disability, or upon a change in control (as defined
in the Option Plan) of Cascade or Cascade.

Except in limited circumstances, an option may not be transferred other
than by will or by laws of descent and distribution and, during the lifetime
of the option holder, may be exercised only by such holder. If any option

expires or terminates for any reason without having been exercised in full,
the unpurchased shares subject to such option will be available again for
purposes of the Option Plan.

Federal Income Tax Consequences of Non-Qualified Options

An option holder who is granted a Non-Qualified Stock Option under the
Option Plan will not realize any income for Federal income tax purposes on the
grant of an option. An option holder will realize ordinary income for Federal
income tax purposes on the exercise of an option, provided the shares are not
then subject to a substantial risk of forfeiture within the meaning of Section
83 of the Code ("Risk of Forfeiture"), in an amount equal to the excess, if
any, of the fair market value of the shares of Cascade Common Stock on the
date of exercise over the exercise price thereof. If the shares are subject
to a Risk of Forfeiture on the date of exercise, the option holder will
realize ordinary income for the year in which the shares cease to be subject
to a Risk of Forfeiture in an amount equal to the excess, if any, of the fair
market value of the shares at the date they cease to be subject to a Risk of
Forfeiture over the exercise price, unless the option holder shall have made a
timely election under Section 83 of the Code to include in his income for the
year of exercise an amount equal to the excess of the fair market value of the
shares of Common Stock on the date of exercise over the exercise price. The
amount realized for tax purposes by an option holder by reason of the exercise
of a Non-Qualified Stock Option granted under the Option Plan is subject to
withholding by Cascade and Cascade is entitled to a deduction in an amount
equal to the income so realized by an option holder.

Provided that the option holder satisfies certain holding period
requirements provided by the Code, an employee will realize long-term capital
gain or loss, as the case may be, if the shares issued upon exercise of a Non-
Qualified Stock Option are disposed of more than one year after (i) the shares
are transferred to the employee or (ii) if the shares were subject to a Risk
of Forfeiture on the date of exercise and a valid election under Section 83 of
the Code shall not have been made, the date as of which the shares cease to be
subject to a Risk of Forfeiture. The amount recognized upon such disposition
will be the difference between the option holder's basis in such shares and
the amount realized upon such disposition. Generally, an option holder's
basis in the shares will be equal to the exercise price plus the amount of
income recognized upon exercise of the option.

Federal Income Tax Consequences of Incentive Stock Options

An Incentive Stock Option holder who meets the eligibility requirements
of Section 422 of the Code will not realize income for Federal income tax
purposes, and Cascade will not be entitled to a deduction, on either the grant
or the exercise of an Incentive Stock Option. If the Incentive Stock Option
holder does not dispose of the shares acquired within two years after the date
the Incentive Stock Option was granted to him or within one year after the
transfer of the shares to him, (i) any proceeds realized on a sale of such
shares in excess of the option price will be treated as long-term capital gain
and (ii) Cascade will not be entitled to any deduction for Federal income tax
purposes with respect to such shares.

If an Incentive Stock Option holder disposes of shares during the
two-year or one-year periods referred to above (a "Disqualifying
Disposition"), the Incentive Stock Option holder will not be entitled to the
favorable tax treatment afforded to incentive stock options under the Code.
Instead, the Incentive Stock Option holder will realize ordinary income for
Federal income tax purposes in the year the Disqualifying Disposition is made,
in an amount equal to the excess, if any, of the fair market value of the
shares of Cascade Common Stock on the date of exercise over the exercise
price.

An Incentive Stock Option holder generally will recognize long-term
capital gains or loss, as the case may be, if the Disqualifying Disposition is
made more than one year after the shares are transferred to the Incentive
Stock Option holder. The amount of any such gain or loss will be equal to the
difference between the amount realized on the Disqualifying Disposition and
the sum of (x) the exercise price and (y) the ordinary income realized by the
Incentive Stock Option holder as the result of the Disqualifying Disposition.

Cascade will be allowed in the taxable year of a Disqualifying
Disposition a deduction in the same amount as the ordinary income recognized
by the Incentive Stock Option holder.

Notwithstanding the foregoing, if the Disqualifying Disposition is made
in a transaction with respect to which a loss (if sustained) would be
recognized to the Incentive Stock Option holder, then the amount of ordinary
income required to be recognized upon the Disqualifying Disposition will not
exceed the amount by which the amount realized from the disposition exceeds
the exercise price. Generally, a loss may be recognized if the transaction is
not a "wash" sale, a gift or a sale between certain persons or entities
classified under the Code as "related persons."

Alternative Minimum Tax

For purposes of computing the alternative minimum tax with respect to
shares acquired pursuant to the exercise of Incentive Stock Options, the
difference between the fair market value of the shares on the date of exercise
over the exercise price will be an item of tax preference in the year of
exercise if the shares are not subject to a Risk of Forfeiture; if the shares
are subject to a Risk of Forfeiture, the amount of the tax preference taken
into account in the year the Risk of Forfeiture ceased will be the excess of
the fair market value of the shares at the date they cease to be subject to a
Risk of Forfeiture over the exercise price. The basis of the shares for
alternative minimum tax purposes, generally, will be an amount equal to the
exercise price, increased by the amount of the tax preference taken into
account in computing the alternative minimum taxable income.

Adoption of the Option Plan

Subject to approval by Cascade's shareholders, the Cascade Board adopted
the Option Plan to encourage stock ownership by employees and non-employee
directors of Cascade and its subsidiaries by issuing options to purchase
shares of Cascade Common Stock, thereby enabling such directors, officers and
employees to acquire or increase their proprietary interest in Cascade. The
Cascade Board has determined that the Option Plan is desirable, cost effective
and produces incentives that will benefit Cascade and its stockholders.
Moreover, the Cascade Board believes that the terms of the Option Plan are
consistent with the terms of similar stock compensation programs implemented
by other financial institutions in Cascade's peer group. The Board of
Directors recommends a vote "FOR" the adoption of the Option Plan attached as
Exhibit.

CERTAIN INFORMATION CONCERNING CASCADE

Information regarding the names, ages, positions and business backgrounds
of the executive officers and directors of Cascade, as well as additional
information, including executive compensation, and certain relationships and
related transactions, is incorporated by reference to Cascade's Annual Report
on Form 10-K for the year ended June 30, 1996 (which incorporates portions of
Cascade's Proxy Statement dated September 13, 1996). See "INCORPORATION OF
CERTAIN DOCUMENTS BY REFERENCE." Shareholders desiring copies of such
documents may contact Cascade at the addresses or phone numbers indicated
under "AVAILABLE INFORMATION" above.

LEGAL OPINIONS

The validity of the Cascade Common Stock to be issued in the Merger is
being passed upon for Cascade by Breyer & Aguggia, Washington, D.C. Breyer &
Aguggia will deliver an opinion concerning certain federal income tax
consequences of the Merger.

EXPERTS

The consolidated financial statements of Cascade Financial Corporation
and subsidiary as of June 30, 1995 and 1996, and for each of the years in the
three-year period ended June 30, 1996, have been included and incorporated by
reference herein in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere and incorporated
by reference herein, and upon the authority of said firm as experts in
accounting and auditing. The report of KPMG Peat Marwick LLP covering the
June 30, 1996 financial statements refers to a change in the method of
accounting for impaired loans.

The consolidated financial statements of AmFirst as of December 31, 1995
and 1996 and for the three years ended December 31, 1996, have been included
in this Prospectus/Joint Proxy Statement, in reliance upon the report of
Hascal, Sjoholm & Co., P.S., independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.

OTHER MATTERS

The Cascade Board is not aware of any business to come before the Cascade
Special Meeting other than those matters described above in this Prospectus/
Joint Proxy Statement. However, if any other matters should properly come
before the Cascade Special Meeting, it is intended that proxies in the
accompanying form will be voted in respect thereof in accordance with the
judgment of the person or persons voting the proxies.

The AmFirst Board is not aware of any business to come before the AmFirst
Special Meeting other than those matters described above in this Prospectus/
Joint Proxy Statement. However, if any other matters should properly come
before the AmFirst Special Meeting, it is intended that proxies in the
accompanying form will be voted in respect thereof in accordance with the
judgment of the person or persons voting the proxies.

SHAREHOLDER PROPOSALS

In order to be eligible for inclusion in the proxy materials of the
Cascade for this year's Annual Meeting of Shareholders, any shareholder
proposal to take action at such meeting must be received at Cascade's main
office at 2828 Colby Avenue, Everett, Washington no later than May 17, 1997.
Any such proposals shall be subject to the requirements of the proxy rules
adopted under the Exchange Act.

APPENDIX A

AGREEMENT AND PLAN OF MERGERS

AGREEMENT AND PLAN OF MERGERS, dated as of the 6th day of February 1997
(this "Agreement"), by and among CASCADE FINANCIAL CORPORATION the "Company"),
CASCADE BANK ("Cascade"), AMFIRST BANCORPORATION ("AmFirst") and AMERICAN
FIRST NATIONAL BANK (the "Bank").

RECITALS:

(A) THE COMPANY. The Company is a corporation duly organized and
existing in good standing under the laws of the State of Delaware, with its
principal executive offices located in Everett, Washington. The Company is a
registered savings and loan holding company under the Home Owners' Loan Act of
1933, as amended. As of the date hereof, the Company has 5,000,000 authorized
shares of common stock of $0.01 par value per share ("Company Common Stock")
and 500,000 shares of preferred stock of $0.01 par value per share ("Company
Preferred Stock") (no other class of capital stock being authorized), of
which 2,052,929 shares of Company Common Stock and no shares of Company
Preferred Stock are issued and outstanding.

(B) CASCADE. Cascade is a federal stock savings bank duly organized and
existing under the laws of the United States, with its principal executive
offices located in Everett, Washington. As of the date hereof, Cascade has
40,000,0000 authorized shares of common stock, par value $1.00 per share
("Cascade Common Stock") and 10,000,000 authorized shares of serial preferred
stock (no other class of capital stock being authorized), of which 100 shares
of Cascade Common Stock and no shares of serial preferred stock are
outstanding. All of the issued and outstanding shares of Cascade Common Stock
are owned by the Company.

(C) AMFIRST. AmFirst is a corporation duly organized and existing in
good standing under the laws of the State of Washington, with its principal
executive offices located in Everett, Washington. AmFirst is a registered
bank holding company with the Board of Governors of the Federal Reserve System
("Federal Reserve Board") under the Bank Holding Company Act of 1956, as
amended. As of the date hereof, AmFirst has 1,000,000 authorized shares of
common stock of $1.00 par value per share ("AmFirst Common Stock"), (no other
class of capital stock being authorized), of which 331,408 shares of AmFirst
Common Stock are issued and outstanding.

(D) THE BANK. The Bank is a national banking association duly organized
and existing under the laws of the United States, with its principal executive
offices located in Everett, Washington. As of the date hereof, the Bank has
232,925 shares of common stock of $5.00 par value per share ("the Bank Common
Stock") (no other class of capital stock being authorized) issued and
outstanding. All of the issued and outstanding shares of Bank Common Stock
are owned by AmFirst.

(E) VOTING AGREEMENT. As a condition and an inducement to the Company's
willingness to enter into this Agreement, each member of the board of
directors of AmFirst has entered into an agreement with the Company pursuant
to which, among other things, they have agreed to vote in favor of approval of
the transactions contemplated by this Agreement at the AmFirst Meeting (as
hereinafter defined).

(F) RIGHTS, ETC. Except as Previously Disclosed (as hereinafter
defined) in Schedule 4.01(C), there are no shares of capital stock of AmFirst
or the Bank authorized and reserved for issuance, neither AmFirst nor the Bank
has any Rights (as defined below) issued or outstanding and neither AmFirst
nor the Bank has any commitment to authorize, issue or sell any such shares or
any Rights, except pursuant to this Agreement. The terms "Rights" means
securities or obligations convertible into or exchangeable for, or giving any
person any right to subscribe for or acquire, or any options, calls or
commitments relating to, shares of capital stock. There are no preemptive
rights in respect of AmFirst Common Stock or Bank Common Stock.

A-1

(G) APPROVALS. The Board of Directors of each of AmFirst,
the Bank, the Company and Cascade has approved, at meetings of each of such
Boards of Directors, this Agreement and has authorized the execution hereof in
counterparts.

In consideration of their mutual promises and obligations, the parties
hereto adopt and make this Agreement and prescribe the terms and conditions
thereof and the manner and basis of carrying it into effect, which shall be as
follows:

I. THE MERGERS

1.01. THE CORPORATE MERGER. Subject to the provisions of this
Agreement, at the Effective Time (as hereinafter defined):

(A) THE CONTINUING CORPORATION. AmFirst shall be merged with and into a
wholly-owned subsidiary of the Company ("Merger Co.") pursuant to the terms
and conditions set forth herein and pursuant to the Plan of Merger attached
hereto as Exhibit A (the "Corporate Merger"). Upon consummation of the
Corporate Merger, the separate existence of AmFirst shall cease and Merger Co.
(the "Continuing Corporation") shall survive.

(B) RIGHTS, ETC. The Continuing Corporation shall thereupon and
thereafter possess all of the rights, privileges, immunities and franchises,
of a public as well as of a private nature, of each of the merging
corporations; and all property, real, personal and mixed, and all debts due on
whatever account, and all and every other interest, of or belonging to or due
to each of the corporations so merged, shall be deemed to be vested in the
Continuing Corporation without further act or deed; and the title to any real
estate or any interest therein, vested in each of such corporations, shall not
revert or be in any way impaired by reason of the Corporate Merger.

(C) LIABILITIES. The Continuing Corporation shall thenceforth be
responsible and liable for all the liabilities, obligations and penalties of
each of the corporations so merged, in accordance with applicable law.

(D) CERTIFICATE OF INCORPORATION; BYLAWS; DIRECTORS; OFFICERS. The
Certificate of Incorporation and Bylaws of the Continuing Corporation shall be
those of Merger Co., as in effect immediately prior to the Corporate Merger
becoming effective. The directors and officers of Merger Co. in office
immediately prior to the Corporate Merger becoming effective shall be the
directors and officers of the Continuing Corporation, together with such
additional directors and officers as may thereafter be elected, who shall hold
office until such time as their successors are elected and qualified.

1.02. THE BANK MERGER. As soon as practicable following the
Effective Time:

(A) THE CONTINUING BANK. The Bank shall be merged into Cascade pursuant
to the terms and conditions set forth herein and pursuant to the Plan of
Merger attached hereto as Exhibit B (the "Bank Merger" and, together with the
Corporate Merger, the "Mergers"). Upon consummation of the Bank Merger, the
separate existence of the Bank shall cease and Cascade (the "Continuing Bank")
shall survive.

(B) RIGHTS, ETC. The Continuing Bank shall thereupon and thereafter
possess all of the rights, privileges, immunities and franchises, of a public
as well as of a private nature, of each of the institutions so merged; and all
property, real, personal and mixed, and all debts due on whatever account, and
all and every other interest, of or belonging to or due to each of the
institutions so merged, shall be deemed to be vested in the Continuing Bank
without further act or deed; and the title to any real estate or any interest
therein, vested in each of such institutions, shall not revert or be in any
way impaired by reason of the Bank Merger.

(C) LIABILITIES. The Continuing Bank shall thenceforth be responsible
and liable for all the liabilities, obligations and penalties of each of the
institutions so merged, in accordance with applicable law.

A-2

(D) CHARTER; BYLAWS; DIRECTORS; OFFICERS. The Charter and Bylaws of the
Continuing Corporation shall be those of Cascade, as in effect immediately
prior to the Bank Merger becoming effective. The directors and officers of
Cascade in office immediately prior to the Bank Merger becoming effective
shall be the directors and officers of the Continuing Bank, together with such
additional directors and officers as may thereafter be elected, who shall hold
office until such time as their successors are elected and qualified.

1.03. EFFECTIVE DATE. Subject to the conditions to the obligations
of the parties to effect the Mergers as set forth in Article VI, the effective
date (the "Effective Date") of the Corporate Merger shall be such date as the
Company shall notify AmFirst in writing not less than five days prior thereto,
which date shall not be more than 30 days after such conditions have been
satisfied or waived in writing. Prior to the Effective Date, the Company and
AmFirst shall execute and deliver to the Secretary of State of the State of
Delaware, Articles of Merger in accordance with applicable law. The time on
the Effective Date at which the Corporate Merger becomes effective is referred
to as the "Effective Time."

II. CONSIDERATION

2.01. CORPORATE MERGER CONSIDERATION. Subject to the provisions of
this Agreement, at the Effective Time:

(A) OUTSTANDING MERGER CO. COMMON STOCK. The shares of common stock of
Merger Co. issued and outstanding immediately prior to the Effective Time
shall, on and after the Effective Time, remain as issued and outstanding
shares of Merger Co. Common Stock.

(B) OUTSTANDING AMFIRST COMMON STOCK. Each share (excluding (i) shares
("Dissenters' Shares") that have not been voted in favor of approval of this
Agreement and with respect to which dissenters' rights have been perfected in
accordance with Section 23B.13 of the Revised Code of Washington (the "RCW")
or (ii) shares held by AmFirst or any of its subsidiaries or by the Company or
any of its subsidiaries, in each case other than in a fiduciary capacity or as
a result of debts previously contracted ("Excluded Shares")) of AmFirst Common
Stock issued and outstanding immediately prior to the Effective Time shall
become and be converted into, by virtue of the Corporate Merger, automatically
and without any action on the part of the holder thereof, the right to receive
the number of shares of Company Common Stock (rounded to the nearest
one-thousandth) equal to the Net Book Value Per Share (as defined below) of
AmFirst multiplied by 2 and divided by $16.00 (the "Exchange Ratio").

(1) The "Net Book Value" of AmFirst shall be equal to the total
stockholders' equity of AmFirst as reflected in the Consolidated Statement of
Financial Condition of AmFirst as of December 31, 1996 and shall be increased
by an amount equal to the aggregate exercise price of all options to acquire
shares of AmFirst Common Stock that are exercised after December 31, 1996 and
prior to the Effective Date. If, on the Effective Date, the aggregate Core
Deposits (as defined below) of the Bank are less than $40,000,000, the Net
Book Value of AmFirst will be reduced by an amount equal to the difference
between $40,000,000 and the aggregate Core Deposits of the Bank on the
Effective Date, multiplied by 0.05. "Core Deposits" shall include all
deposits except for (i) deposits in amounts of $100,000 or more; (ii) deposits
by government entities or agencies; and (iii) brokered or money desk deposits.

(2) The "Net Book Value Per Share" of AmFirst shall be the Net Book
Value of AmFirst divided by the total number of shares of AmFirst Common Stock
issued and outstanding immediately prior to the Effective Time of the
Corporate Merger.

2.02. STOCKHOLDER RIGHTS; STOCK TRANSFERS. At the Effective Time,
holders of AmFirst Common Stock shall cease to be, and shall have no rights
as, stockholders of AmFirst, other than to receive the consideration provided
under this Article II, without interest. After the Effective Time, there
shall be no transfers

A-3

on the stock transfer books of AmFirst or the Continuing Corporation of the
shares of AmFirst Common Stock which were issued and outstanding immediately
prior to the Effective Time.

2.03. FRACTIONAL SHARES. Notwithstanding any other provision hereof,
no fractional shares of Company Common Stock and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued in the
Corporate Merger; instead, the Company shall pay to each holder of AmFirst
Common Stock who would otherwise be entitled to a fractional share an amount
in cash determined by multiplying such fraction by $16.00.

2.04 EXCHANGE PROCEDURES. As promptly as practicable after the Effective
Date, the Company shall send or cause to be sent to each former stockholder of
AmFirst of record immediately prior to the Effective Date transmittal
materials for use in exchanging such stockholder's certificates for Company
Common Stock for the consideration set forth in this Article II. The
certificates representing the shares of Company Common Stock into which shares
of such shareholder's AmFirst Common Stock are converted on the Effective
Date, any fractional share checks which such stockholder shall be entitled to
receive, and any dividends paid on such shares of Company Common Stock for
which the record date for determination of stockholders entitled to such
dividends is on or after the Effective Date, will be delivered to such
stockholder only upon delivery to an independent exchange agent selected by
the Company (the "Exchange Agent") of the certificates representing all of
such shares of AmFirst Common Stock (or indemnity satisfactory to the Company
and the Exchange Agent, in their judgement, if any of such certificates are
lost, stolen or destroyed). No interest will be paid on any such fractional
share checks or dividends to which the holder of such shares shall be entitled
to receive upon such delivery. Certificates surrendered for exchange by any
person constituting an "affiliate" of AmFirst for purposes of Rule 145 of the
Securities Act of 1933, as amended ("Securities Act"), shall not be exchanged
for certificates representing Company Common Stock until the Company has
received a written agreement from such person as specified in Section 5.18.

2.05 ANTI-DILUTION PROVISIONS. In the event the Company changes the
number of shares of Company Common Stock issued and outstanding prior to the
Effective Date as a result of a stock split, stock dividend, recapitalization
or similar transaction with respect to the outstanding Company Common Stock
and the record date therefor shall be prior to the Effective Date, the
Exchange Ratio shall be proportionately adjusted.

2.06 EXCLUDED SHARES; DISSENTERS SHARES. Each of the Excluded Shares
shall be canceled and retired at the Effective Time, and no consideration
shall be issued in exchange therefor. Dissenters' Shares shall be purchased
and paid for in accordance with Section 23B.13 of the RCW.

2.07 RESERVATION OF RIGHT TO RESERVE TRANSACTION. The Company may at
any time change the method of effecting the acquisition of AmFirst and the
Bank (including without limitation the provisions of this Article II) if and
to the extent it deems such change to be desirable; PROVIDED, HOWEVER, that no
such change shall (i) alter or change the amount or kind of consideration to
be issued to holders of AmFirst Common Stock as provided for in this Agreement
or (ii) adversely affect the tax treatment to AmFirst stockholders as a result
of receiving such consideration.

2.08 OPTIONS. At the Effective Time, by virtue of the Corporate Merger,
and without any action on the part of any holder of an option, each option
granted by AmFirst to purchase shares of AmFirst Common Stock ("AmFirst
Option") that is then outstanding and unexercised shall be converted into and
become an option to purchase Company Common Stock ("Company Option") on the
same terms and conditions as are in effect with respect to the AmFirst Option
immediately prior to the Effective Time, except that (i) each such Company
Option may be exercised solely for shares of Company Common Stock, (ii) the
number of shares of Company Common Stock subject to such Company Option shall
be equal to the number of shares of AmFirst Common Stock subject to such
Option immediately prior to the Effective Time multiplied by the Exchange
Ratio, the product being rounded, if necessary, up or down to the nearest
whole share, and (iii) the per share exercise price under each such Company
Option shall be adjusted by dividing the per share exercise price of the
AmFirst Option by the Exchange Ratio, and rounding up to the nearest cent.
The number of shares of AmFirst Common Stock which are issuable upon exercise
of Options as of the date hereof are Previously Disclosed in Schedule 2.08.

A-4

III. ACTIONS PENDING CONSUMMATION

Without the prior written consent of the Company, each of AmFirst and the
Bank shall conduct its and each of the AmFirst Subsidiaries' (as hereinafter
defined) business in the ordinary and usual course consistent with past
practice and shall use its best efforts to maintain and preserve its and each
of the AmFirst Subsidiaries' business organization, employees and advantageous
business relationships and retain the services of its and each of the AmFirst
Subsidiaries' officers and key employees, and each of AmFirst and the Bank
will not, and will cause each of the AmFirst Subsidiaries not to, agree to:

3.01. CAPITAL STOCK. Except for or as otherwise permitted in or
expressly contemplated by this Agreement or as Previously Disclosed in
Schedule 4.01(C), issue, sell or otherwise permit to become outstanding any
additional shares of capital stock of AmFirst, the Bank or any AmFirst
Subsidiary, or any Rights with respect thereto, or enter into any agreement
with respect to the foregoing, or permit any additional shares of AmFirst
Common Stock to become subject to grants of employee stock options, stock
appreciation rights or similar stock based employee compensation rights.

3.02. DIVIDENDS, ETC. Make, declare or pay any dividend on or in
respect of, or declare or make any distribution on, or directly or indirectly
combine, redeem, reclassify, purchase or otherwise acquire, any shares of its
capital stock or, other than as permitted in or contemplated by this
Agreement, authorize the creation or issuance of, or issue, any additional
shares of its capital stock or any Rights with respect thereto.

3.03. INDEBTEDNESS; LIABILITIES; ETC. Other than in the ordinary
course of business consistent with past practice, incur any indebtedness for
borrowed money, assume, guarantee, endorse or otherwise as an accommodation
become responsible or liable for the obligations of any other individual,
corporation or other entity.

3.04. LINE OF BUSINESS; OPERATING PROCEDURES; ETC. Change its
lending, investment, liability management or other material banking policies
in any material respect, except such changes as are directed by any regulatory
agency or are in accordance and in an effort to comply with Section 5.11, make
or commit to incur any further capital expenditures beyond those Previously
Disclosed in Schedule 3.04 other than in the ordinary course of business and
not exceeding $2,000 individually or $20,000 in the aggregate, or make or
commit to incur any discretionary expenditure other than in the ordinary
course of business consistent with past practice.

3.05. LIENS AND ENCUMBRANCES. Impose, or suffer the imposition, on
any shares of capital stock of any of the AmFirst Subsidiaries, or on any of
its or the AmFirst Subsidiaries' other assets, any lien, charge or
encumbrance, or permit any such lien, charge or encumbrance to exist.

3.06. COMPENSATION; EMPLOYMENT AGREEMENTS; ETC. Except as Previously
Disclosed in Schedule 3.06, enter into or amend any employment, severance or
similar agreement or arrangement with any of its directors, officers or
employees, or grant any salary or wage increase, amend the terms of any stock
option or increase any employee benefit (including incentive or bonus
payments), except normal individual increases in regular compensation to
employees in the ordinary course of business consistent with past practice.

3.07. BENEFIT PLANS. Except as Previously Disclosed in Schedule
3.07, enter into or modify (except as may be required by applicable law) any
pension, retirement, stock option, stock purchase, savings, profit sharing,
deferred compensation, consulting, bonus, group insurance or other employee
benefit, incentive or welfare contract, plan or arrangement, or any trust
agreement related thereto, in respect of any of its directors, officers or
other employees, including without limitation taking any action that
accelerates the vesting or exercise of any benefits payable thereunder.

3.08. CONTINUANCE OF BUSINESS. Dispose of or discontinue any portion
of its assets, business or properties, which is material to AmFirst and the
AmFirst Subsidiaries taken as a whole, or merge or consolidate

A-5
PAGE

with, or acquire all or any portion of, the business or property of any other
entity which is material to AmFirst and the AmFirst Subsidiaries taken as a
whole (except foreclosures or acquisitions by the Bank in a fiduciary
capacity, in each case in the ordinary course of business consistent with past
practice).

3.09. AMENDMENTS. Amend its Articles of Incorporation, Charter or
Bylaws.

3.10. CLAIMS. Settle any claim, litigation, action or proceeding
involving any liability for money damages in excess of $25,000 or restrictions
upon the operations of AmFirst or any AmFirst Subsidiary.

3.11 CONTRACTS. Except as previously disclosed on Schedule 3.11,
enter into, renew, terminate or make any change in any material contract,
agreement or lease, except in the ordinary course of business consistent with
past practice with respect to contracts, agreements and leases that are
terminable by it without penalty on more than 60 days prior written notice.

3.12. LOANS. Extend credit other than in accordance with existing
lending policies, except that the Bank shall not, without the prior written
consent of the Company, make any new loan or modify, restructure or renew any
existing loan to any borrower if the amount of the resulting loan, when
aggregated with all other loans or extensions of credit to such person (or
which would be required to be aggregated for loans to one borrower
limitations) would be in excess of $770,000.

3.13 DEPOSIT RATES. Change the pricing structure of its deposit
liabilities, except in the ordinary course of business consistent with past
practice.

IV. REPRESENTATIONS AND WARRANTIES

4.01. REPRESENTATIONS AND WARRANTIES OF AMFIRST AND THE BANK. Each
of AmFirst and the Bank hereby represents and warrants to the Company and
Cascade as follows:

(A) RECITALS. The facts set forth in the Recitals of this Agreement
with respect to it are true and correct.

(B) ORGANIZATION, STANDING AND AUTHORITY. It is duly qualified to do
business and is in good standing in the States of the United States and
foreign jurisdictions where the failure to be duly qualified, individually or
in the aggregate, is reasonably likely to have a Material Adverse Effect (as
hereinafter defined) on it. Each of AmFirst and the AmFirst Subsidiaries has
in effect all federal, state, local, and foreign governmental authorizations
necessary for it to own or lease its properties and assets and to carry on its
business as it is now conducted, the absence of which, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect on it.

(C) SHARES. With respect to AmFirst, the outstanding shares of it are
validly issued and outstanding, fully paid and nonassessable, and subject to
no preemptive rights. With respect to the Bank, except as Previously
Disclosed in Schedule 4.01(C), the outstanding shares of it are validly issued
and outstanding and fully paid. Except as Previously Disclosed in Schedule
4.01(C), there are no shares of capital stock or other equity securities of
AmFirst or the Bank outstanding and no outstanding Rights with respect
thereto.

(D) AMFIRST SUBSIDIARIES. AmFirst has Previously Disclosed in Schedule
4.01(D) a list of all the subsidiaries of AmFirst (each a "AmFirst Subsidiary"
and, collectively, the "AmFirst Subsidiaries"). Each of the AmFirst
Subsidiaries that is a national banking association is an "insured depository
institution" as defined in the Federal Deposit Insurance Act and applicable
regulations thereunder. No equity securities of any of the AmFirst
Subsidiaries are or may become required to be issued (other than to AmFirst or
a wholly-owned AmFirst Subsidiary) by reason of any Rights with respect
thereto. There are no contracts, commitments, understandings or arrangements
by which any of the AmFirst Subsidiaries is or may be bound to sell or
otherwise issue any shares of its capital

A-6

stock, and there are no contracts, commitments, understandings or arrangements
relating to the rights of AmFirst or the Bank, as applicable, to vote or to
dispose of such shares. All of the shares of capital stock of each AmFirst
Subsidiary held by AmFirst or a AmFirst Subsidiary are fully paid and
nonassessable and are owned by AmFirst or a AmFirst Subsidiary free and clear
of any charge, mortgage, pledge, security interest, restriction, claim, lien
or encumbrance. Each AmFirst Subsidiary is in good standing under the laws of
the jurisdiction in which it is incorporated or organized, and is duly
qualified to do business and in good standing in the jurisdictions where the
failure to be duly qualified is reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on it. Except as Previously
Disclosed in Schedule 4.01(D), AmFirst does not own beneficially, directly or
indirectly, any shares of any equity securities or similar interests of any
corporation, bank, partnership, joint venture, business trust, association or
other organization. The deposits of the Bank are insured by the Bank
Insurance Fund (the "BIF") of the Federal Deposit Insurance Corporation (the
"FDIC"). The Bank is a member in good standing with the FHLB of Seattle and
the Federal Reserve Bank of San Francisco. The term "AmFirst Subsidiary"
means any business entity five percent or more of the equity interests of
which are owned directly or indirectly by AmFirst.

(E) CORPORATE POWER. It and each of the AmFirst Subsidiaries has the
corporate power and authority to carry on its business as it is now being
conducted and to own all its material properties and assets.

(F) CORPORATE AUTHORITY. Subject to any necessary receipt of approval
by its stockholders referred to in Section 6.01, this Agreement has been
authorized by all necessary corporate action of it and is a valid and binding
agreement of it enforceable against it in accordance with its terms, subject
as to enforcement as to bankruptcy, insolvency and other similar laws of
general applicability relating to or affecting creditors' rights and to
general equity principles.

(G) NO DEFAULTS. Subject to the approval by its stockholders referred
to in Section 6.01, the required regulatory approvals referred to in Section
6.02, and the required filings under federal and state securities laws, and
except as Previously Disclosed in Schedule 4.01(G), the execution, delivery
and performance of this Agreement and the consummation by it of the
transactions contemplated hereby, does not and will not (i) constitute a
breach or violation of, or a default under, any law, rule or regulation or any
judgment, decree, order, governmental permit or license, or agreement,
indenture or instrument of it or of any of the AmFirst Subsidiaries or to
which it or any of the AmFirst Subsidiaries or its or their properties is
subject or bound, which breach, violation or default is reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on it,
(ii) constitute a breach or violation of, or a default under, its Articles of
Incorporation, Charter or Bylaws, or (iii) require any consent or approval
under any such law, rule, regulation, judgment, decree, order, governmental
permit or license or the consent or approval of any other party to any such
agreement, indenture or instrument, other than any such consent or approval,
which if not obtained, would not be reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on AmFirst.

(H) FINANCIAL REPORTS. Except as Previously Disclosed in Schedule
4.01(H), (i) as to AmFirst, its audited consolidated balance sheet as of
December 31, 1996, 1995, 1994, 1993 and 1992 and related consolidated
statements of income and changes in stockholders' equity and cash flows for
the years ended December 31, 1996, 1995, 1994, 1993 and 1992 and (ii) as to
the Bank, its call reports for the fiscal years ended December 31, 1996 and
1995, and all other financial reports filed or to be filed subsequent to
December 31, 1996, in the form or to be filed with the FDIC and the Office of
the Comptroller of the Currency ("OCC") (together, the "AmFirst Financial
Reports") did not and will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which
they were made, not misleading; and each of the balance sheets in or
incorporated by reference into the AmFirst Financial Reports (including the
related notes and schedules thereto) fairly presents and will fairly present
the financial position of the entity or entities to which it relates as of its
date and each of the statements of income and changes in stockholders' equity
and cash flows or equivalent statements in the AmFirst Financial Reports
(including any related notes and schedules thereto) fairly presents and will
fairly present the results of operations, changes in stockholders' equity and
cash flows, as the case may be, of the entity or entities to which it relates
for the periods set forth therein, in each case in accordance with generally
accepted accounting principles consistently applied during the periods

A-7

involved, except in each case as may be noted therein, subject to normal and
recurring year-end audit adjustments in the case of unaudited statements. The
amount of any obligation of AmFirst or the Bank with respect to any
employment, severance, retirement, deferred compensation or similar
arrangements where such obligation is contingent upon, triggered by or
accelerated by a change in control of AmFirst or the Bank is reflected in the
AmFirst Financial Reports as of December 31, 1996. There are no extraordinary
or nonrecurring gains or profits that were earned by AmFirst or the Bank after
September 30, 1996 that are reflected in the AmFirst Financial Reports as of
December 31, 1996.

(I) ABSENCE OF UNDISCLOSED LIABILITIES. None of AmFirst or the AmFirst
Subsidiaries has any obligation or liability (contingent or otherwise) that,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on it, except (i) as reflected in AmFirst Financial Reports
prior to the date of this Agreement, and (ii) for commitments and obligations
made, or liabilities incurred, in the ordinary course of its business
consistent with past practice since December 31, 1995. Since December 31,
1995, none of AmFirst or the AmFirst Subsidiaries has incurred or paid any
obligation or liability (including any obligation or liability incurred in
connection with any acquisitions in which any form of direct financial
assistance of the federal government or any agency thereof has been provided
to any AmFirst Subsidiary) which, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect on it.

(J) NO EVENTS. Except as Previously Disclosed on Schedule 4.01(J),
since December 31, 1995, no events have occurred which, individually or in the
aggregate, have had or are reasonably likely to have a Material Adverse Effect
on it.

(K) PROPERTIES. Except as reserved against in the AmFirst Financial
Reports, AmFirst and the AmFirst Subsidiaries have good and marketable title,
free and clear of all liens, encumbrances, charges, defaults, or equities of
any character, to all of the properties and assets, tangible and intangible,
reflected in the AmFirst Financial Reports as being owned by AmFirst or the
AmFirst Subsidiaries as of the dates thereof other than those that,
individually or in the aggregate, are not reasonably likely to have a Material
Adverse Effect on it, except those properties or assets sold or otherwise
disposed of in the ordinary course of business. All buildings and all material
fixtures, equipment, and other property and assets which are held under leases
or subleases by any of AmFirst or AmFirst Subsidiaries are held under valid
leases or subleases enforceable in accordance with their respective terms,
other than any such exceptions to validity or enforceability that,
individually or in the aggregate, are not reasonably likely to have a Material
Adverse Effect on AmFirst.

(L) LITIGATION; REGULATORY ACTION. Except as Previously Disclosed in
Schedule 4.01(L), no litigation, proceeding or controversy before any court or
governmental agency is pending which, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect on AmFirst or which
alleges claims under any fair lending law or other law relating to
discrimination, including, without limitation, the Equal Credit Opportunity
Act, the Fair Housing Act, the Community Reinvestment Act and the Home
Mortgage Disclosure Act, and, to the best of its knowledge, no such
litigation, proceeding or controversy has been threatened; and except as
Previously Disclosed in Schedule 4.01(L), neither it nor any of the AmFirst
Subsidiaries or any of its or their material properties or their officers,
directors or controlling persons is a party to or is subject to any order,
decree, agreement, memorandum of understanding or similar arrangement with, or
a commitment letter or similar submission to, any federal or state
governmental agency or authority charged with the supervision or regulation of
depository institutions or engaged in the insurance of deposits (together with
any and all agencies or departments of federal, state or local government
(including, without limitation, the OCC, the FHL Bank, the Federal Reserve
Board, the FDIC, the Internal Revenue Service, the Department of Revenue of
the State of Washington, the Securities Exchange Commission and any other
federal or state bank, or other financial institution, insurance and
securities regulatory authorities, the "Regulatory Authorities")) and neither
it nor any of the AmFirst Subsidiaries has been advised by any of such
Regulatory Authorities that such authority is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting)
any such order, decree, agreement, memorandum or understanding, commitment
letter or similar submission.

A-8

(M) COMPLIANCE WITH LAWS. Except as Previously Disclosed in Schedule
4.01(M), each of AmFirst and the AmFirst Subsidiaries:

(1) has all permits, licenses, authorizations, orders and approvals
of, and has made all filings, applications and registrations with,
all Regulatory Authorities that are required in order to permit it
to own its businesses presently conducted and that are material to
the business of AmFirst and the AmFirst Subsidiaries taken as a
whole; all such permits, licenses, certificates of authority, orders
and approvals are in full force and effect and, to the best of its
knowledge, no suspension or cancellation of any of them is
threatened; and all such filings, applications and registrations are
current;

(2) has received no notification or communication from any
Regulatory Authority or the staff thereof (i) asserting that any of
AmFirst or the AmFirst Subsidiaries is not in compliance with any of
the statutes, regulations or ordinances which such Regulatory
Authority enforces, which, as a result of such noncompliance in any
such instance, individually or in the aggregate, is reasonably
likely to have a Material Adverse Effect on AmFirst, (ii)
threatening to revoke any license, franchise, permit or governmental
authorization, which revocation, individually or in the aggregate,
is reasonably likely to have a Material Adverse Effect on AmFirst or
the AmFirst Subsidiaries, or (iii) requiring any of AmFirst or the
AmFirst Subsidiaries (or any of its officers, directors or
controlling persons) to enter into a cease and desist order,
agreement or memorandum of understanding (or requiring the board of
directors thereof to adopt any resolution or policy);

(3) is not required to give prior notice to any federal banking or
thrift agency of the proposed addition of an individual to its board
of directors or the employment of an individual as a senior
executive; and

(4) is in compliance in all material respects with all fair lending
laws or other laws relating to discrimination, including, without
limitation, the Truth in Lending Act, the Equal Credit Opportunity
Act, the Fair Housing Act, the Community Reinvestment Act and the
Home Mortgage Disclosure Act.

(N) MATERIAL CONTRACTS.

(1) Except as Previously Disclosed in Schedule 4.01(N), (and with a
true and correct copy of the document or other item in question
attached to such Schedule), neither AmFirst nor any AmFirst
Subsidiary is a party or subject to any of the following (whether
written or oral, express or implied):

(i) any agreement, arrangement or commitment (a) not made in
the ordinary course of business or (b) pursuant to which AmFirst or
any AmFirst Subsidiary is or may become obligated to invest in or
contribute capital to any AmFirst Subsidiary or any other entity;

(ii) any agreement, indenture or other instrument not disclosed
in the AmFirst Financial Reports relating to the borrowing of money
by AmFirst or any AmFirst Subsidiary or the guarantee by AmFirst or
any AmFirst Subsidiary of any such obligation (other than trade
payables or instruments related to transactions entered into in the
ordinary course of business by any AmFirst Subsidiary, such as
deposits, Fed Funds borrowings and repurchase agreements);

(iii) any contract containing covenants that limit the
ability of AmFirst or any AmFirst Subsidiary to compete in any line
of business or with any person or containing any restriction of the
geographical area in which, or method by which, AmFirst or any
AmFirst Subsidiary may carry on its business (other than as may be
required by law or any applicable Regulatory Authority);

A-9

(iv) any contract or agreement which is a "material contract"
within the meaning of Item 601(b)(10) of Regulation S-K promulgated
by the Securities and Exchange Commission ("SEC");

(v) any lease with annual rental payments aggregating $10,000
or more;

(vi) consulting agreement (other than data processing, software
programming and licensing contracts entered into in the ordinary
course of business) involving the payment of more than $10,000 per
annum;

(vii) any agreement with any executive officer or other key
employee of AmFirst or any AmFirst Subsidiary the benefits of which
are contingent, or the terms of which are materially altered or any
payments or rights are accelerated, upon the occurrence of a
transaction involving AmFirst or any of AmFirst Subsidiaries of the
nature contemplated by this Agreement;

(viii) any agreement with respect any executive officer of
AmFirst or any AmFirst Subsidiary providing any term of employment
or compensation guarantee extending for a period longer than one
year and for the payment of in excess of $50,000 per annum; or

(ix) agreement or plan, including any stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase
plan, any of the benefits of which will be increased, or the vesting
of the benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the value
of any of the benefits of which will be calculated on the basis of
any of the transactions contemplated by this Agreement.

(2) Except as Previously Disclosed on Schedule 4.01(N), no officer
or director of AmFirst or any "associate" (as such term is defined
in Rule 12b-2 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) of any such officer or director, has any
material interest in any material contract or property (real or
personal), tangible or intangible, used in or pertaining to the
business of AmFirst or any AmFirst Subsidiary.

(3) None of AmFirst or the AmFirst Subsidiaries is in default under
any contract, agreement, commitment, arrangement, lease, insurance
policy or other instrument to which it is a party, by which its
respective assets, business or operations may be bound or affected,
or under which it or any of its respective assets, business or
operations receives benefits, which default, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect on
AmFirst, and there has not occurred any event that, with the lapse
of time or the giving of notice or both, would constitute such a
default. Except as Previously Disclosed in Schedule 4.01(N),
neither AmFirst nor any AmFirst Subsidiary is subject to or bound by
any contract containing covenants which limit the ability of AmFirst
or any AmFirst subsidiary to compete in any line of business or with
any person or which involve any restriction of geographical area in
which, or method by which, AmFirst or any AmFirst Subsidiary may
carry on its business (other than as may be required by law or any
applicable Authority).

(O) REPORTS. Since January 1, 1994, each of AmFirst and the AmFirst
Subsidiaries has filed all reports and statements, together with any
amendments required to be made with respect thereto, that it was required to
file with (i) the FDIC, (ii) the OCC, (iii) the FHL Bank and the FHL Bank
System, (iv) the Federal Reserve Board and (v) any other applicable Regulatory
Authorities. As of their respective dates (and without giving effect to any
amendments or modifications filed after the date of this Agreement with
respect to reports and documents filed before the date of this Agreement),
each of such reports and documents, including the financial statements,
exhibits and schedules thereto, complied in all material respects with all of
the statutes, rules and regulations enforced or promulgated by the Regulatory
Authority with which they were filed and did not contain any untrue statement
of
A-10

a material fact or omit to state any material fact necessary in order to make
the statements made therein, in light of the circumstances under which they
were made, not misleading.

(P) NO BROKERS. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by it directly with the
other parties hereto and no action has been taken by it that would give rise
to any valid claim against any party hereto for a brokerage commission,
finder's fee or other like payment.

(Q) EMPLOYEE BENEFIT PLANS.

(1) Schedule 4.01(Q)(1) contains a complete list of all bonus,
deferred compensation, pension, retirement, profit-sharing, thrift
savings, employee stock ownership, stock bonus, stock purchase
restricted stock and stock option plans, all employment or severance
contracts, all personnel codes, practices, procedures, policies,
manuals, affirmative action programs and similar materials, all
medical, dental, health and life insurance plans, all other employee
benefit plans, contracts or arrangements and any applicable "change
of control" or similar provisions in any plan, contract or
arrangement maintained or contributed to by it or any of the AmFirst
Subsidiaries for the benefit of employees, former employees,
directors, former directors or their beneficiaries (the
"Compensation and Benefit Plans"). True and complete copies of all
Compensation and Benefit Plans, including, but not limited to, any
trust instruments and/or insurance contracts, if any, forming a part
thereof, and all amendments thereto have been supplied to the
Company.

(2) All "employee benefit plans" within the meaning of Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), other than "multiemployer plans" within the meaning of
Section 3(37) of ERISA ("Multiemployer Plans"), covering employees
or former employees of it and the AmFirst Subsidiaries (the "ERISA
Plans"), to the extent subject to ERISA, are in all material
respects in compliance with ERISA. Except as Previously Disclosed
in Schedule 4.01(Q)(2) each ERISA Plan which is an "employee pension
benefit plan" within the meaning of Section 3(2) of ERISA ("Pension
Plan") and which is intended to be qualified under Section 401(a) of
the Internal Revenue Code of 1986 (as amended, the "Code") has
received a favorable determination letter from the Internal Revenue
Service, and it is not aware of any circumstances reasonably likely
to result in the revocation or denial of any such favorable
determination letter or the inability to receive such a favorable
determination letter. Prior to the Effective Date, AmFirst and the
Bank shall deliver or make available to the Company the most recent
annual report (Form 5500 Series) and accompanying schedules of each
ERISA Plan as filed with the IRS or a written explanation of why
such annual report is not required. There is no material pending
or, to its knowledge, threatened litigation relating to the ERISA
Plans. Neither it nor any of the AmFirst Subsidiaries has engaged
in a transaction with respect to any ERISA Plan that could subject
it or any of the AmFirst Subsidiaries to a tax or penalty imposed by
either Section 4975 of the Code or Section 502(i) of ERISA in an
amount which would be material.

(3) No liability under Subtitle C or D of Title IV of ERISA has
been or is expected to be incurred by it or any of the AmFirst
Subsidiaries with respect to any ongoing, frozen or terminated
"single-employer plan," within the meaning of Section 4001(a)(15) of
ERISA, currently or formerly maintained by any of them, or the
single-employer plan of any entity which is considered one employer
with it under Section 4001(a)(15) of ERISA or Section 414 of the
Code (an "ERISA Affiliate"). Neither it nor any of the AmFirst
Subsidiaries presently contributes to a Multiemployer Plan, nor have
they contributed to such a plan within the past five calendar years.
No notice of a "reportable event," within the meaning of Section
4043 of ERISA for which the 30-day reporting requirement has not
been waived, has been required to be filed for any Pension Plan or
by any ERISA Affiliate within the past 12-month period.
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(4) All contributions required to be made under the terms of any
ERISA Plan have been timely made. Neither any Pension Plan nor any
single-employer plan of an ERISA Affiliate has an "accumulated
funding deficiency" (whether or not waived) within the meaning of
Section 412 of the Code or Section 302 of ERISA. Neither it nor
any of the AmFirst Subsidiaries has provided, or is required to
provide, security to any Pension Plan or to any single-employer plan
of an ERISA Affiliate pursuant to Section 401(a)(29) of the Code.

(5) Under each Pension Plan which is a single-employer plan, as of
the last day of the most recent plan year, the actuarially
determined present value of all "benefit liabilities," within the
meaning of Section 4001(a)(16) of ERISA (as determined on the basis
of the actuarial assumptions contained in the plan's most recent
actuarial valuation) did not exceed the then current value of the
assets of such plan, and there has been no material change in the
financial condition of such plan since the last day of the most
recent plan year.

(6) Neither it nor any of the AmFirst Subsidiaries has any
obligations for retiree health and life benefits under any plan,
except as set forth in Schedule 4.01(Q)(6). There are no
restrictions on the rights of it or any of the AmFirst Subsidiaries
to amend or terminate any such plan without incurring any liability
thereunder.

(7) Except as Previously Disclosed in Schedule 4.01(Q)(7), neither
the execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby will (i) result in any payment
(including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any
director or any employee of it or any of the AmFirst Subsidiaries
under any Compensation and Benefit Plan or otherwise from it or any
of the AmFirst Subsidiaries, (ii) increase any benefits otherwise
payable under any Compensation and Benefit Plan, or (iii) result in
any acceleration of the time of payment or vesting of any such
benefit.

(R) NO KNOWLEDGE. It knows of no reason why the regulatory approvals
referred to in section 6.02 should not be obtained.

(S) LABOR AGREEMENTS. Neither it nor any AmFirst Subsidiary is a party
to, or is bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is it
or any AmFirst Subsidiary the subject of a proceeding asserting that it or any
such subsidiary has committed an unfair labor practice (within the meaning of
the National Labor Relations Act) or seeking to compel it or such subsidiary
to bargain with any labor organization as to wages and conditions of
employment, nor is there any strike or other labor dispute involving it or any
AmFirst Subsidiary, pending or, to the best of its knowledge, threatened, nor
is it aware of any activity involving its or any AmFirst Subsidiary's
employees seeking to certify a collective bargaining unit or engaging in any
other organization activity.

(T) ASSET CLASSIFICATION. It has Previously Disclosed in Schedule
4.01(T) a list, accurate and complete in all material respects, of the
aggregate amounts of loans, extensions of credit or other assets of AmFirst
and the AmFirst Subsidiaries that have been classified by it as of November
30, 1996 (the "Asset Classification"); and no amounts of loans, extensions of
credit or other assets that have been classified as of November 30, 1996 by
any regulatory examiner as "Other Loans Specially Mentioned," "Substandard,"
"Doubtful," "Loss," or words of similar import are excluded from the amounts
disclosed in the Asset Classification, other than amounts of loans, extensions
of credit or other assets that were charged off by AmFirst or any AmFirst
Subsidiary prior to November 30, 1996.

(U) ALLOWANCE FOR LOAN AND LEASE LOSSES. The allowance for loan and
lease losses shown on the consolidated balance sheets of AmFirst included in
the September 30, 1996 AmFirst Financial Reports was, and the allowance for
possible loan losses to be shown on subsequent AmFirst Financial Reports, will
be, adequate in the opinion of the Board of Directors and management of
AmFirst, to provide for possible losses, net

A-12

of recoveries relating to loans previously charged off, on loans outstanding
(including accrued interest receivable) as of the date thereof.

(V) INSURANCE. Each of AmFirst and the AmFirst Subsidiaries has taken
all requisite action (including without limitation the making of claims and
the giving of notices) pursuant to its directors' and officers' liability
insurance policy or policies in order to preserve all rights thereunder with
respect to all matters that are known to AmFirst, except for such matters
which, individually or in the aggregate, are not reasonably likely to have a
Material Adverse Effect on it. Previously Disclosed in Schedule 4.01(V) is a
list of all insurance policies maintained by or for the benefit of AmFirst or
the AmFirst Subsidiaries or their directors, officers, employees or agents.

(W) STATE TAKEOVER LAWS; ARTICLES OF INCORPORATION. It has taken all
necessary action to exempt this Agreement and the transactions contemplated
hereby and thereby from, and this Agreement and the transactions contemplated
hereby are exempt from, (i) any applicable state takeover laws, and (ii) any
supermajority provisions or other provisions imposing special conditions on
business combinations contained in AmFirst's Articles of Incorporation.

(X) NO FURTHER ACTION. It has taken all action so that the entering
into of this Agreement and the consummation of the transactions contemplated
hereby (including without limitation the Merger), or any other action or
combination of actions, or any other transactions, contemplated hereby or
thereby do not and will not (i) require a vote of stockholders (other than as
set forth in Section 6.01), or (ii) result in the grant of any rights to any
person under the Articles of Incorporation, Charter or Bylaws of AmFirst or
any AmFirst Subsidiary or under any agreement to which AmFirst or any AmFirst
Subsidiary is a party, or (iii) restrict or impair in any way the ability of
the Company to exercise the rights granted hereunder.

(Y) ENVIRONMENTAL MATTERS.

(1) To its knowledge, it and each of the AmFirst Subsidiaries, the
Participation Facilities and the Loan/Fiduciary Properties (each as
defined below) are, and have been, in compliance with all
Environmental Laws (as defined below), except for instances of
noncompliance which are not reasonably likely, individually or in
the aggregate, to have a Material Adverse Effect on AmFirst.

(2) There is no proceeding pending or, to its knowledge, threatened
before any court, governmental agency or board or other forum in
which it or any of the AmFirst Subsidiaries or any Participation
Facility has been, or with respect to threatened proceedings,
reasonably would be expected to be, named as a defendant or
potentially responsible party (i) for alleged noncompliance
(including by any predecessor) with any Environmental Law, or (ii)
relating to the release or threatened release into the environment
of any Hazardous Material (as defined below), whether or not
occurring at or on a site owned, leased or operated by it or any of
the AmFirst Subsidiaries or any Participation Facility, except for
such proceedings pending or threatened that are not reasonably
likely, individually or in the aggregate, to have a Material Adverse
Effect on it or have been Previously Disclosed in Schedule
4.01(Y)(2).

(3) There is no proceeding pending or, to its knowledge, threatened
before any court, governmental agency or board or other forum in
which any Loan/Fiduciary Property (or it or any of the AmFirst
Subsidiaries in respect of any Loan/Fiduciary Property) has been, or
with respect to threatened proceedings, reasonably would be expected
to be, named as a defendant or potentially responsible party (i) for
alleged noncompliance (including by any predecessor) with any
Environmental Law, or (ii) relating to the release or threatened
release into the environment of any Hazardous Material, whether or
not occurring at or on a Loan/Fiduciary Property, except for such
proceedings pending or threatened that are not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect
on it or have been Previously Disclosed in Schedule 4.01(Y)(3).

A-13

(4) To its knowledge, there is no reasonable basis for any
proceeding of a type described in subparagraphs (2) or (3) above,
except as has been Previously Disclosed in Schedule 4.01(Y)(4).

(5) To its knowledge, during the period of (i) its or any of the
AmFirst Subsidiaries' ownership or operation of any of their
respective current properties, (ii) its or any of the AmFirst
Subsidiaries' participation in the management of any Participation
Facility, or (iii) its or any of AmFirst Subsidiaries' holding of a
security or other interest in a loan/ Fiduciary Property, there have
been no releases of Hazardous Material in, on, under or affecting
any such property, Participation Facility or Loan/Fiduciary
Property, except for such releases that are not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect
on it or have been Previously Disclosed in Schedule 4.01(Y)(5).

(6) To its knowledge, prior to the period of (i) its or any of the
AmFirst Subsidiaries' ownership or operation of any of their
respective current properties, (ii) its or any of the AmFirst
Subsidiaries' participation in the management of any Participation
Facility, or (iii) its or any of the AmFirst Subsidiaries' holding
of a security or other interest in a Loan/Fiduciary Property, there
were no releases of Hazardous Material in, on, under or affecting
any such property, Participation Facility or Loan/Fiduciary
Property, except for such releases that are not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect
on it or have been Previously Disclosed in Schedule 4.01(Y)(6).

(7) The following definitions apply for purposes of this Section
4.01(Y): "Loan/Fiduciary Property" means any property owned or
controlled by it or any of the AmFirst Subsidiaries or in which it
or any of the AmFirst Subsidiaries holds a security or other
interest, and, where required by the context, includes any such
property where AmFirst or any of the AmFirst Subsidiaries
constitutes the owner or operator of such property, but only with
respect to such property; "Participation Facility" means any
facility in which it or any of the AmFirst Subsidiaries participates
in the management and, where required by the context, includes the
owner or operator of such property, but only with respect to such
property; "Environmental Law" means (i) any federal, state and local
law, statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, legal doctrine, order, judgment,
decree, injunction, requirement or agreement with any governmental
entity, relating to (a) the protection, preservation or restoration
of the environment, (including, without limitation, air, water
vapor, surface water, groundwater, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural
resource), or to human health or safety, or (b) the exposure to, or
the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of
Hazardous Material, in each case as amended and as now in effect and
includes, without limitation, the Federal Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, the
Superfund Amendments and Reauthorization Act, the Federal Water
Pollution Control Act of 1972, the Federal Clean Air Act, the
Federal Clean Water Act, the Federal Resource Conservation and
Recovery Act of 1976 (including the Hazardous and Solid Waste
Amendments thereto), the Federal Solid Waste Disposal and the
Federal Toxic Substances Control Act, and the Federal Insecticide,
Fungicide and Rodenticide Act, the Federal Occupational Safety and
Health Act of 1970, each as amended and as now in effect, and (ii)
any common law or equitable doctrine (including, without limitation,
injunctive relief and tort doctrines such as negligence, nuisance,
trespass and strict liability) that may impose liability or
obligations for injuries or damages due to, or threatened as a
result of, the presence of or exposure to any Hazardous Material;
"Hazardous Material" means any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or
dangerous, or otherwise regulated, under any Environmental Law,
whether by type or quantity, and includes, without limitation, any
oil or other petroleum product, toxic waste, pollutant, contaminant,
hazardous substance, toxic substance, hazardous waste, special waste
or

A-14
PAGE

petroleum or any derivative or by-product thereof, radon,
radioactive material, asbestos, asbestos containing material, urea
formaldehyde foam insulation, lead and polychlorinated biphenyl.

(Z) TAX REPORTS. Except as Previously Disclosed in Schedule 4.01(Z),
(i) all reports and returns with respect to Taxes (as defined below) that are
required to be filed by or with respect to it or the AmFirst Subsidiaries,
including without limitation consolidated federal income tax returns of it and
the AmFirst Subsidiaries (collectively, the "AmFirst Tax Returns"), have been
duly filed, or requests for extensions have been timely filed and have not
expired, except to the extent all such failures to file, taken together, are
not reasonably likely to have a Material Adverse Effect on it, and such
AmFirst Tax Returns were true, complete and accurate in all material respects,
(ii) all taxes (which shall mean federal, state, local or foreign income,
gross receipts, windfall profits, severance, property, production, sales, use,
license, excise, franchise, employment, withholding or similar taxes imposed
on the income, properties or operations of it or the AmFirst Subsidiaries,
together with any interest, additions, or penalties with respect thereto and
any interest in respect of such additions or penalties, collectively the
"Taxes") shown to be due on AmFirst Tax Returns have been paid in full, (iii)
the AmFirst Tax Returns have been examined by the Internal Revenue Service or
the appropriate state, local or foreign taxing authority or the period for
assessment of the Taxes in respect of which such AmFirst Tax Returns were
required to be filed has expired, (iv) all Taxes due with respect to completed
and settled examinations have been paid in full, (v) no issues have been
raised by the relevant taxing authority in connection with the examination of
any of the AmFirst Tax Returns which are reasonably likely, individually or in
the aggregate, to result in a determination that would have a Material Adverse
Effect on it, except as reserved against in the AmFirst Financial Reports, and
(vi) no waivers of statutes of limitations (excluding such statutes that
relate to years under examination by the Internal Revenue Service) have been
given by or requested with respect to any Taxes of it or the AmFirst
Subsidiaries.

(AA) ACCURACY OF INFORMATION. The statements with respect to AmFirst and
the AmFirst Subsidiaries contained in this Agreement, the Schedules and any
other written documents executed and delivered by or on behalf of Company or
the Bank pursuant to the terms of this Agreement are true and correct in all
material respects, and such statements and documents do not omit any material
fact necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.

(BB) DERIVATIVES CONTRACTS. None of AmFirst or the AmFirst
Subsidiaries is a party to or has agreed to enter into an exchange-traded or
over-the-counter swap, forward, future, option, cap, floor or collar financial
contract or any other contract not included on the balance sheet which is a
derivative contract (including various combinations thereof) (each a
"Derivatives Contract") or owns securities that are referred to as "structured
notes" except for those Derivatives Contracts and structured notes Previously
Disclosed in Schedule 4.01(BB), including a list, as applicable, of any
AmFirst or AmFirst Subsidiary assets pledged as security for each such
Derivatives Contract.

(CC) ACCOUNTING CONTROLS. Each of AmFirst and the AmFirst
Subsidiaries has devised and maintained systems of internal accounting
controls sufficient to provide reasonable assurances that (i) all material
transactions are executed in accordance with management's general or specific
authorization; (ii) all material transactions are recorded as necessary to
permit the preparation of financial statements in conformity with generally
accepted accounting principles consistently applied with respect to banks or
any other criteria applicable to such statements, and to maintain proper
accountability for items; (iii) access to the material property and assets of
AmFirst and the AmFirst Subsidiaries is permitted only in accordance with
management's general or specific authorization; and (iv) the recorded
accountability for items is compared with the actual levels at reasonable
intervals and appropriate action is taken with respect to any differences.

(DD) DEPOSITS. Except as Previously Disclosed in Schedule 4.01(DD), none
of the Bank's deposits is a brokered deposit as defined in 12 CFR Section
337.6 or subject to any encumbrance, legal testament or other legal process,
and no portion of the deposits represents a deposit by any affiliate of the
Bank.
A-15
PAGE

(EE) MINUTE BOOKS. The minute books of AmFirst and the Bank contain
complete and accurate records of all meetings held and other corporate action
taken since January 1, 1992 by their respective stockholders, Boards of
Directors and committees thereof.

(FF) AFFILIATE TRANSACTIONS. Except as Previously Disclosed on Schedule
4.01(FF), no officer or director of AmFirst or the Bank or any "associate" of
such person has any material interest in any contract with AmFirst or any
AmFirst subsidiary or in any real or personal property used in the business of
AmFirst or any AmFirst Subsidiary. For the purposes of this section,
"associate" of a person means (i) any corporation or organization (other than
AmFirst or any AmFirst Subsidiary) of which such person is an officer or
partner or is, directly or indirectly, the beneficial owner of 10% or more of
any class of equity securities, (ii) any trust or other estate in which such
person has a substantial beneficial interest or as to which such person serves
as trustee or in a similar fiduciary capacity, and (iii) any relative or
spouse of such person, or any relative of such spouse, who has the same home
as such person.

(GG) LOAN PORTFOLIO. To the knowledge of AmFirst and the Bank:

(1) All evidences of indebtedness ("Loans") reflected as assets on
the books and records of AmFirst or the Bank are in all respects
legal, valid and binding obligations of the respective obligor named
therein and no such indebtedness is subject to any defenses which
have been or may be asserted, except for defenses arising from
applicable bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights generally and general principles of
equity.

(2) The Bank has good title to and is the sole owner of record of
each Loan or any participation interest shown as an asset on the
books and records of the Bank, free of any lien, encumbrance or
claim by any other person, except for Loans securing borrowings from
the FHLB-Seattle or Loans subject to repurchase obligations as
Previously Disclosed in Schedule 4.01(GG)(2).

(3) Except as Previously Disclosed in Schedule 4.01(GG)(3) all
Loans reflected as assets on the books and records of the Bank that
are primarily secured by an interest in real property are secured by
a valid and perfected first lien.

(4) Except as Previously Disclosed in Schedule 4.01(GG)(4), no
Loan, all or any part of which is an asset of the Bank was, as of
December 31, 1996, more than 30 days past due.

(5) Except as Previously Disclosed in Schedule 4.01(GG)(5), none of
the agreements pursuant to which the Bank has sold Loans or pools of
Loans or participation in Loans or pools of participations of Loans,
if any, contains any obligation to repurchase such Loans or
interests therein solely on account of a payment default by the
obligor on any such Loan.

(6) Previously Disclosed on Schedule 4.01(GG)(6) are all Loans by
AmFirst or the Bank to employees of AmFirst or the Bank. There are
no Loans to any employee, officer, director or other affiliate of
AmFirst or the Bank on which the borrower is paying a rate other
than that reflected in the note or the relevant credit agreement or
on which the borrower is paying a rate which was below market at the
time the Loan was made; and, except as Previously Disclosed in
Schedule 4.01(GG)(6), all such Loans are and were made in compliance
with all applicable federal laws and regulations.

4.02. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND CASCADE.

Each of the Company and Cascade hereby represents and warrants to AmFirst
and the Bank, as follows:
A-16

(A) RECITALS. The facts set forth in the Recitals of this Agreement
with respect to it are true and correct.

(B) CORPORATE AUTHORITY. Subject to the required regulatory approvals
referred to in Section 6.02, this Agreement has been authorized by all
necessary corporate action of it and is a valid and binding agreement of it
enforceable against it in accordance with its terms, subject as to enforcement
as to bankruptcy, insolvency and other similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.

(C) NO DEFAULTS. Subject to the approval by its stockholders referred
to in Section 6.01, the required regulatory approvals referred to in Section
6.02 and the required filings under federal and state securities' laws, the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby and thereby by it, do not and will not
(i) constitute a breach or violation of, or a default under, any law, rule or
regulation or any judgment, decree, order, governmental permit or license, or
agreement, indenture or instrument of it or of any of its subsidiaries or to
which it or any of its subsidiaries or properties is subject or bound, which
breach, violation or default is reasonably likely to have a Material Adverse
Effect on it, (ii) constitute a breach or violation of, or a default under,
its Certificate of Incorporation, Charter or Bylaws, or (iii) require any
consent or approval under any such law, rule, regulation, judgment, decree,
order, governmental permit or license, or the consent or approval of any other
party to any such agreement, indenture or instrument.

(D) FINANCIAL REPORTS. In the case of the Company, its Annual Report on
Form 10-K for the fiscal year ended June 30, 1996 and all documents filed or
to be filed under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, in
the form filed with the SEC (in each such case, the "the Company Financial
Reports"), did not and will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in light of the circumstances
under which they were made, not misleading; and each of the balance sheets in
or incorporated by reference into the Company Financial Reports (including the
related notes and schedules thereto) fairly presents and will fairly present
the financial position of the entity or entities to which it relates as of its
date and each of the statements of income and changes in stockholders' equity
and cash flows or equivalent statements in the Company Financial Reports
(including any related notes and schedules thereto) fairly presents and will
fairly present the results of operations, changes in stockholders' equity and
changes in cash flows, as the case may be, of the entity or entities to which
it relates for the periods set forth therein, in each case in accordance with
generally accepted accounting principles consistently applied to savings
associations and savings and loan holding companies during the periods
involved, except as may be noted therein, subject to normal and recurring
year-end audit adjustments in the case of unaudited statements.

(E) NO EVENTS. Since June 30, 1996, no events have occurred which,
individually or in the aggregate, have had or are reasonably likely to have a
Material Adverse Effect on it, except for the payment of the industry-wide,
one-time special assessment to recapitalize the Savings Association Insurance
Fund.

(F) SHARES AUTHORIZED. In the case of the Company, the shares of
Company Common Stock to be issued in exchange for shares of AmFirst Common
Stock upon consummation of the Corporate Merger in accordance with Article II
of this Agreement have been duly authorized and, when issued in accordance
with the terms of this Agreement, will be validly issued, fully paid and
nonassessable and subject to no preemptive rights.

(G) CORPORATE POWER. The Company and Cascade each has the corporate
power and authority to carry on its business as it is now being conducted and
to own all its material properties and assets.

(H) ACCURACY OF INFORMATION. The statements with respect to the Company
and Cascade contained in this Agreement, the Schedules and any other written
documents executed and delivered by or on behalf of the Company pursuant to
the terms of this Agreement are true and correct in all material respects, and
such statements and documents do not omit any material fact necessary to make
the statements contained therein, in light of the circumstances under which
they were made, not misleading.
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PAGE

(I) REGISTRATION OF COMMON STOCK. The Company Common Stock is
registered pursuant to Section 12 of the Exchange Act, and the Company has
been subject to the reporting requirements of Section 13 of the Exchange Act
for the past 12 months and has filed with the SEC all the reports required to
be filed pursuant thereto during such period.

V. COVENANTS

Each of AmFirst and the Bank hereby covenants to the Company and Cascade
and each of the Company and Cascade hereby covenants to AmFirst and the Bank,
that:

5.01. BEST EFFORTS. Subject to the terms and conditions of this
Agreement and to the exercise by its Board of Directors of such Board's
fiduciary duties, it shall use its best efforts in good faith to take
promptly, or cause to be taken promptly, all actions, and to do promptly, or
cause to be done promptly, all things necessary, proper or desirable, or
advisable under applicable laws, so as to permit consummation of the Mergers
as soon as practicable and to otherwise enable consummation of the
transactions contemplated hereby and shall cooperate fully with the other
parties hereto to that end.

5.02. REGISTRATION STATEMENT. The Company, in cooperation with
AmFirst, shall prepare and file with the SEC a Registration Statement with
respect to the shares of Company Common Stock to be issued in the Corporate
Merger. Such Registration Statement shall contain a Joint Proxy
Statement/Prospectus which shall serve as the proxy statement of AmFirst for
the AmFirst Meeting (as defined below), as the proxy statement of the Company
for the Company Meeting (as defined below) and as the prospectus of the
Company for the shares of Company Common Stock to be issued in the Corporate
Merger. The Company shall use its best efforts to cause the Registration
Statement to become effective.

5.03 AMFIRST MEETING. With respect to AmFirst, it shall call a special
meeting (the "AmFirst Meeting") of the holders of AmFirst Common Stock to be
held as soon as practicable for purposes of voting upon the transactions
contemplated hereby and AmFirst shall use its best efforts to solicit and
obtain the votes of the holders of AmFirst Common Stock in favor of the
transactions contemplated hereby and, subject to the exercise of its fiduciary
duties, the Board of Directors of AmFirst shall recommend approval of such
transactions by such holders. In connection with the AmFirst Meeting, the
Company and AmFirst shall cooperate in the preparation of the Joint Proxy
Statement/Prospectus and, with the approval of each of the Company and
AmFirst, which approvals will not be unreasonably withheld, the Joint Proxy
Statement/Prospectus will be mailed to the shareholders of AmFirst.

5.04 COMPANY MEETING. With respect to the Company, it shall call a
special meeting (the "Company Meeting") of the holders of Company Common Stock
to be held as soon as practicable for purposes of voting upon the transactions
contemplated hereby and the Company shall use its best efforts to solicit and
obtain the votes of the holders of Company Common Stock in favor of the
transactions contemplated hereby and, subject to the exercise of its fiduciary
duties, the Board of Directors of the Company shall recommend approval of such
transactions by such holders. In connection with the Company Meeting, the
Company and AmFirst shall cooperate in the preparation of the Joint Proxy
Statement/Prospectus and, with the approval of each of the Company and
AmFirst, which approvals will not be unreasonably withheld, the Joint Proxy
Statement/Prospectus will be mailed to the shareholders of the Company.

5.05. REGISTRATION STATEMENT EFFECTIVENESS. The Company will advise
AmFirst, promptly after the Company receives notice thereof, of the time when
the Registration Statement has become effective or any supplement or amendment
has been filed, of the issuance of any stop order or the suspension of the
qualification of the Company Common Stock for offering or sale in any
jurisdiction, of the initiation or threat of any proceeding for any such
purpose, or of any request by the SEC for the amendment or supplement of the
Registration Statement or for additional information.

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5.06. REGISTRATION STATEMENT COMPLIANCE WITH SECURITIES LAWS. When
the Registration Statement or any post-effective amendment or supplement
thereto shall become effective, and at all times subsequent to such
effectiveness, up to and including the date of the Meeting, such Registration
Statement and all amendments or supplements thereto, with respect to all
information set forth therein furnished or to be furnished by or on behalf of
AmFirst relating to AmFirst or the AmFirst Subsidiaries and by or on behalf of
the Company relating to the Company or its subsidiaries, (i) will comply in
all material respects with the provisions of the Securities Act and any other
applicable statutory or regulatory requirements, and (ii) will not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements contained therein not
misleading; PROVIDED, HOWEVER, in no event shall any party hereto be liable
for any untrue statement of a material fact or omission to state a material
fact in the Registration Statement made in reliance upon, and in conformity
with, written information concerning another party furnished by or on behalf
of such other party specifically for use in the Registration Statement.

5.07. PRESS RELEASES. AmFirst and the Bank will not, without the
prior approval of the Company, and the Company and Cascade will not, without
the prior approval of AmFirst, issue any press release or written statement
for general circulation relating to the transactions contemplated hereby,
except as otherwise required by law.

5.08. ACCESS; INFORMATION.

(1) Upon reasonable notice, AmFirst and the Bank shall afford the
Company and its officers, employees, counsel, accountants and other authorized
representatives, access, during normal business hours throughout the period up
to the Effective Date, to all of its and the AmFirst Subsidiaries' properties,
books, contracts, commitments and records and, during such period, AmFirst and
the Bank shall furnish promptly to the Company (i) a copy of each material
report, schedule and other document filed by AmFirst and the AmFirst
Subsidiaries with any Regulatory Authority, and (ii) all other information
concerning the business, properties and personnel of AmFirst and the AmFirst
Subsidiaries as the Company may reasonably request, including an examination
report by any Regulatory Authority, provided that no investigation pursuant to
this Section 5.08 shall affect or be deemed to modify or waive any
representation or warranty made by AmFirst or the Bank or the conditions to
the obligations of AmFirst and the Bank to consummate the transactions
contemplated by this Agreement; and

(2) The Company will not use any information obtained pursuant to
this Section 5.08 for any purpose unrelated to the consummation of the
transactions contemplated by this Agreement and, if this Agreement is
terminated, will hold all information and documents obtained pursuant to this
paragraph in confidence (as provided in Section 8.06) unless and until such
time as such information or documents become publicly available other than by
reason of any action or failure to act by the Company or as it is advised by
counsel that any such information or document is required by law or applicable
stock exchange rule to be disclosed, and in the event of the termination of
this Agreement, the Company will, upon request by AmFirst, deliver to AmFirst
all documents so obtained by the Company or destroy such documents and, in the
case of destruction, will certify such fact to AmFirst.

5.09. ACQUISITION PROPOSALS. In the case of AmFirst, without the
prior written consent of the Company, it shall not, and it shall cause the
AmFirst Subsidiaries not to, solicit, initiate or encourage inquiries or
proposals with respect to, or furnish any nonpublic information relating to or
participate in any negotiations or discussions concerning, any acquisition or
purchase of all or a substantial portion of the assets of, or a substantial
equity interest in, AmFirst or any of the AmFirst Subsidiaries or any merger
or other business combination with AmFirst or any of the AmFirst Subsidiaries
other than as contemplated by this Agreement; it shall instruct its and the
AmFirst Subsidiaries' officers, directors, agents, advisors and affiliates to
refrain from doing any of the foregoing; and it shall notify the Company
immediately if any such inquiries or proposals are received by, or any such
negotiations or discussions are sought to be initiated with, AmFirst or any of
the AmFirst Subsidiaries.

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5.10. BLUE-SKY FILINGS. In the case of the Company, it shall use its
best efforts to obtain all necessary state securities laws or "blue sky"
permits and approvals, provided that the Company shall not be required by
virtue thereof to submit to general jurisdiction in any state.

5.11. CERTAIN POLICIES OF AMFIRST AND THE BANK. In the case of each
of AmFirst and the Bank, it shall, at the Company's request: (i) modify and
change its loan, litigation and other reserve and real estate valuation
policies and practices (including loan classifications and levels of
reserves), and (ii) generally conform its operating, lending and compliance
policies and procedures, prior to the Effective Date so as to be consistent on
a mutually satisfactory basis with those of the Company and generally accepted
accounting principles; PROVIDED, HOWEVER, AmFirst and the Bank shall not be
required to take any such action set forth in (i) above until all regulatory
approvals set forth in Section 6.02 shall have been obtained. AmFirst's and
the Bank's representations, warranties and covenants contained in this
Agreement shall not be deemed to be untrue or breached in any respect for any
purpose as a consequence of any modifications or changes undertaken solely on
account of this Section 5.11.

5.12. STATE TAKEOVER LAW. In the case of AmFirst, AmFirst shall not
take any action that would cause the transactions contemplated by this
Agreement to be subject to any applicable state takeover statute and AmFirst
shall take all necessary steps to exempt (or ensure the continued exemption
of) the transactions contemplated by this Agreement from, or, if necessary,
challenge the validity or applicability of, any applicable state takeover law,
as now or hereafter in effect.

5.13. NO RIGHTS TRIGGERED. In the case of AmFirst, AmFirst shall
take all necessary steps to ensure that the entering into of this Agreement
and the consummation of the transactions contemplated hereby and thereby
(including without limitation the Merger) and any other action or combination
of actions, or any other transactions contemplated hereby or thereby do not
and will not (i) result in the grant of any rights to any person under the
Articles of Incorporation or Bylaws of AmFirst or under any agreement to which
AmFirst or any AmFirst Subsidiary is a party, or (ii) restrict or impair in
any way the ability of the Company and Cascade to exercise the rights granted
hereunder.

5.14. SHARES LISTED. In the case of the Company, it shall file with
the Nasdaq Stock Market a Notification Form for Listing of Additional Shares.

5.15. REGULATORY APPLICATIONS. In the case of the Company and
Cascade, (i) it shall promptly prepare and submit applications to the
appropriate Regulatory Authorities for approval of the Mergers, and (ii)
promptly make all other appropriate filings to secure all other approvals,
consents and rulings which are necessary for the consummation of the Mergers
by the Company and Cascade.

5.16 REGULATORY DIVESTITURES. In the case of AmFirst, effective on
or before the Effective Date, AmFirst and the AmFirst Subsidiaries shall cease
engaging in such activities as the Company shall advise AmFirst in writing are
not permitted to be engaged in by the Company under applicable law following
the Effective Date and, to the extent required by any Regulatory Authority as
a conditional approval of the transactions contemplated by this Agreement,
AmFirst shall divest any subsidiary engaged in activities or holding assets
that are impermissible for the Company on terms and conditions agreed to by
the Company.

5.17 CURRENT INFORMATION.

(a) During the period from the date of this Agreement to the Effective
Date, each of AmFirst, the Bank, the Company and Cascade shall, and shall
cause its representatives to, confer on a regular and frequent basis with
representatives of the other.

(b) AmFirst and the Bank shall promptly notify the Company of (i) any
material change in the business or operations of AmFirst,

A-20

the Bank or any AmFirst Subsidiary, (ii) any material complaints,
investigations or hearings (or communications indicating that the same may be
contemplated) of any Regulatory Authority relating to AmFirst, the Bank, or
any AmFirst Subsidiary, (iii) the initiation or threat of material litigation
involving or relating to AmFirst, the Bank or any AmFirst Subsidiary, or (iv)
any event or condition that might reasonably be expected to cause any of
AmFirst's or the Bank's representation or warranties set forth herein not to
be true and correct in all material respects as of the Effective Date or
prevent AmFirst or the Bank from fulfilling its or their obligations
hereunder; and in each case shall keep the Company informed with respect
thereto.

(c) The Company shall (i) promptly notify AmFirst of any event or
condition that might reasonably be expected to cause any of the Company's and
Cascade's representations or warranties set forth herein not to be true and
correct in all material respects as of the Effective Date, and (ii) notify
AmFirst immediately of any denial of any application filed by the Company or
Cascade with any Regulatory Authority with respect to this Agreement, and in
each case shall keep AmFirst and the Bank informed with respect thereto.

5.18 AFFILIATE AGREEMENTS. In the case of AmFirst, it will cause
each person who is an "affiliate" of AmFirst for purposes of Rule 145 under
the Securities Act (each an "Affiliate") to execute and deliver to the Company
on or before the mailing of the Joint Proxy Statement/Prospectus for the
AmFirst Meeting an agreement in the form attached hereto as Exhibit C
restricting the disposition of the shares of Company Common Stock to be
received by such person in exchange for such person's shares of AmFirst Common
Stock. Previously Disclosed on Schedule 5.18 is a list of Affiliates as of
the date hereof.

5.19 ENVIRONMENTAL ASSESSMENT. AmFirst, at its own cost and
expense, shall hire an outside consultant acceptable to the Company to
undertake to determine as soon as reasonably practicable but in any event
prior to the Effective Date whether or not there are any underground storage
tanks, asbestos, unreaformaldehyde, polychlorinated biphenyls, solid wastes or
hazard substances, as defined in the Model Toxics Control Act, CERCLA or any
other applicable Environmental Laws, present at or on any of the "other real
estate owned" of AmFirst or any AmFirst Subsidiary (excluding any one-to
four-family residential property with appraised value less than $150,000) or
at or on any of the branch or office facilities owned by AmFirst or any
AmFirst Subsidiary. Such investigation shall be conducted in a manner
reasonably satisfactory to the Company, and the results of such investigation
shall be set forth in a written report delivered to the Company prior to the
Effective Date. The scope and detail of such report shall be reasonably
satisfactory to the Company. It is understood that the investigation shall be
a "Phase I."

5.20 COMPANY BOARD OF DIRECTORS. In the case of the Company and the
Bank, they shall take such action as may be necessary to cause the size of the
Boards of Directors of the Company and the Bank to be increased by two persons
and to cause the appointment of two members of the Board of Directors of
AmFirst, as may be determined by the Company, to the Boards of Directors of
the Company and the Bank, effective as of the Effective Time.

5.21 POOLING OF INTERESTS. In the case of AmFirst and the Bank,
neither AmFirst nor the Bank shall take any action which with respect to
AmFirst would disqualify the Corporate Merger as a "pooling of interest" for
accounting purposes.

5.22 CONSENTS AND APPROVALS. In the case of AmFirst and the Bank,
they shall take such action as may be necessary, but without the incurrence of
substantial expense, to obtain any required consents from the lessor or
sublessor on each lease pursuant to which AmFirst or the Bank leases as lessee
real or personal property for the assumption of such lease by the Company or
Cascade.

5.23 EMPLOYEE BENEFITS. As soon as administratively practicable
following the Effective Date, employees of the Bank who are retained by
Cascade shall be entitled to participate in the same benefit plans as are
generally available to Cascade employees of similar rank and service.
Employees of the Bank who continue as Cascade employees following the
Effective Date shall be credited with prior years of service with the Bank for
purposes of eligibility and vesting (but not for the accrual of benefits)
under the Cascade benefit plans and there shall be no exclusion from health
insurance coverage as a result of pre-existing conditions to the extent such
conditions were covered under an AmFirst health insurance plan. Employees of
the Bank who continue as Cascade employees

A-21

shall also be credited with their unused vacation and sick leave balance
immediately prior to the Effective Date for use as a Cascade employee in
accordance with Cascade's policies on vacation and sick leave.

VI. CONDITIONS TO CONSUMMATION OF THE MERGERS

Consummation of the Mergers is conditioned upon:

6.01. SHAREHOLDER VOTE. Approval of the transactions contemplated
hereby by the requisite vote of the stockholders of AmFirst and the Company.

6.02. REGULATORY APPROVALS. Procurement by the Company of all
required regulatory consents and approvals by the appropriate Regulatory
Authorities and the expiration of the statutory waiting period relating
thereto; PROVIDED, HOWEVER, that no such approval or consent shall have
imposed any condition or requirement which, in the opinion of the Company,
would so materially adversely impact the economic or business benefits to the
Company of the transactions contemplated by this Agreement so as to render
inadvisable the consummation of the Mergers.

6.03. NO INJUNCTION. There shall not be in effect any order, decree
or injunction of any court or agency of competent jurisdiction that enjoins or
prohibits consummation of any of the transactions contemplated hereby.

6.04. LEGAL OPINION. AmFirst and the Bank shall have received an
opinion, dated the Effective Date, of Breyer & Aguggia, special counsel for
the Company and Cascade, in form reasonably satisfactory to AmFirst, which
shall cover the matters contained in Exhibit D hereto.

6.05. LEGAL OPINION. The Company shall have received an opinion,
dated the Effective Date, of Keller Rohrback, counsel for AmFirst and the
Bank, in form reasonably satisfactory to the Company, which shall cover the
matters contained in Exhibit E hereto.

6.06. OFFICER'S CERTIFICATE. (i) Each of the representations and
warranties contained herein of the Company and Cascade shall be true and
correct as of the date of this Agreement and upon the Effective Date with the
same effect as though all such representations and warranties had been made on
the Effective Date, except for any such representations and warranties made as
of a specified date, which shall be true and correct as of such date, and (ii)
each and all of the agreements and covenants of the Company and Cascade to be
performed and complied with pursuant to this Agreement on or prior to the
Effective Date shall have been duly performed and complied with in all
material respects, and AmFirst and the Bank shall have received a certificate
signed by the Chief Executive Officers and the Chief Financial Officers of the
Company and Cascade dated the Effective Date, to such effect.

6.07. OFFICERS' CERTIFICATE. (i) Each of the representations and
warranties contained herein of AmFirst and the Bank shall be true and correct
as of the date of this Agreement and upon the Effective Date with the same
effect as though all such representations and warranties had been made on the
Effective Date, except for any such representations and warranties made as of
a specified date, which shall be true and correct as of such date and except
as otherwise provided in Section 5.11, and (ii) each and all of the agreements
and covenants of AmFirst and the Bank to be performed and complied with
pursuant to this Agreement on or prior to the Effective Date shall have been
duly performed and complied with in all material respects, and the Company and
Cascade shall have received a certificate signed by the Chief Executive
Officers and the Chief Financial Officers of AmFirst and the Bank dated the
Effective Date, to such effect.

6.08. EFFECTIVE REGISTRATION STATEMENT. The Registration Statement
shall have become effective and no stop order or other order suspending the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been initiated or threatened by the SEC or any other
Regulatory Authority.

A-22

6.09. BLUE-SKY PERMITS. The Company shall have received all state
securities laws and "blue sky" permits necessary to consummate the Corporate
Merger.

6.10. TAX OPINION. The Company and AmFirst shall have received an
opinion from Breyer & Aguggia to the effect that (i) the Corporate Merger
constitutes a reorganization under Section 368 of the Code, and (ii) no gain
or loss will be recognized by stockholders of AmFirst who receive shares of
the Company Common Stock in exchange for their shares of AmFirst Common Stock,
and, in rendering their opinion, Breyer & Aguggia may require and rely upon
representations contained in certificates of officers of the Company, AmFirst
and others.

6.11. EMPLOYMENT AGREEMENTS. The Employment Agreements between the
Company, Cascade and David Little and Marlee Fowler substantially in the form
attached as Exhibit F shall have been duly executed and delivered by all
parties to such agreements.

6.12. NON-COMPETE AGREEMENTS. David Little, Marlee Fowler and Thomas
Rainville shall have entered into a non-compete agreement with the Company
substantially in the form of the Company's standard form of non-compete
agreement providing for a term of two years for Mr. Little and Ms. Fowler and
five years for Mr. Rainville and covering any county where the Company or Bank
has an office or a branch.

6.13. DIRECTOR AGREEMENTS. Each member of the Board of Directors of
the Bank shall enter into an agreement with Cascade providing that such
individual will not, for a period of one year from the Effective Date, (i)
refer any customers of the Bank to any financial institution other than
Cascade, (ii) participate or invest in the formation of a de novo financial
institution in Snohomish County, Washington, or (iii) solicit any employees of
the Bank who become employees of Cascade following the Effective Time.

6.14. ADVERSE CHANGE. During the period from December 31, 1995 to
the Effective Date, there shall not have been any material adverse change in
the financial position or results of operations of AmFirst or the Bank, nor
shall AmFirst or the Bank have sustained any loss or damage to its properties,
whether or not insured, that materially affects its ability to conduct its
business; and the Company shall have received a certificate dated the
Effective Date signed by the Chief Executive Officers of AmFirst and the Bank
to such effect.

6.15. DISSENTERS' RIGHTS. The number of Dissenters' Shares shall not
exceed in the aggregate five percent of the outstanding shares of AmFirst
Common Stock.

6.16. RECEIPT OF AFFILIATE AGREEMENTS. The Company shall have
received from each Affiliate of AmFirst the agreements referred to in Section
5.18.

6.17 POOLING LETTERS. The Company shall have received a letter
dated as of the Effective Date, in form and substance acceptable to the
Company, from KPMG Peat Marwick and AmFirst shall have received a letter dated
as of the Effective Date from Hascal, Sjoholm & Company, P.S., in form and
substance acceptable to the Company, to the effect that the Mergers will
qualify for pooling of interests accounting treatment.

PROVIDED, HOWEVER, that a failure to satisfy any of the conditions set
forth in the proviso following Section 6.02 or in Sections 6.05, 6.07, 6.11,
6.12, 6.13, 6.14, 6.15, 6.16 or 6.17 shall only constitute conditions if
asserted by the Company, and a failure to satisfy any of the conditions set
forth in Section 6.04 or 6.06 shall only constitute conditions if asserted by
AmFirst.

VII. TERMINATION

This Agreement may be terminated prior to the Effective Date, either
before or after receipt of required stockholder approvals:

A-23

7.01. MUTUAL CONSENT. By the mutual consent of the Company and
AmFirst, if the Board of Directors of each so determines by vote of a majority
of the members of its entire Board.

7.02. BREACH. By the Company or AmFirst, if its Board of Directors
so determines by vote of a majority of the members of its entire Board, in the
event of (i) a material breach by the other party of any representation or
warranty contained herein, which breach cannot be or has not been cured within
thirty (30) days after the giving of written notice to the breaching party of
such breach, or (ii) a breach by the other party of any of the material
covenants or agreements contained herein, which breach cannot be or has not
been cured within thirty (30) days after the giving of written notice to the
breaching party of such breach.

7.03. DELAY. By the Company or AmFirst, if its Board of Directors so
determines by vote of a majority of the members of its entire Board, in the
event that the Corporate Merger is not consummated by September 30, 1997.

7.04. NO STOCKHOLDER OR REGULATORY APPROVAL. By the Company or
AmFirst, if its Board of Directors so determines by a vote of a majority of
the members of its entire Board, (i) in the event that any stockholder
approval contemplated by Section 6.01 is not obtained at the AmFirst Meeting
or the Company Meeting, including any adjournment or adjournments thereof, or
(ii) in the event that written notice is received which states that any
required regulatory approval contemplated by Section 6.02 has not been
approved or has been denied.

7.05. DUE DILIGENCE REVIEW. By the Company in the event that (i) any
situation, event, circumstance or other matter shall come to the attention of
the Company during the course of the Company Due Diligence Review which the
Company shall, in a good faith exercise of its reasonable discretion, believe
(a) to be inconsistent in any material respect with any of the representations
and warranties of AmFirst or the Bank, (b) to be of such significance as to
have a Material Adverse Effect on the financial condition, prospects, results
of operations or business of AmFirst and the Bank, taken as a whole, or (c) is
a material deviation from the AmFirst Financial Reports, and (ii) the Company
notifies AmFirst of such matters within five (5) business days after the end
of the Company Due Diligence Review Period and such matters are not capable
of being cured or have not been cured within thirty (30) days after written
notice thereof to AmFirst. For purposes of this Section 7.05, (i) the
"Company Due Diligence Review" shall mean a review by the Company of AmFirst's
and the Bank's operations, business affairs, prospects and financial
condition, including without limitation, those matters which are the subject
of AmFirst's and the Bank's representations and warranties and (ii) the
"Company Due Diligence Review Period" shall mean a thirty (30) day period
beginning on the date of this Agreement. Notwithstanding anything in this
Section 7.05 contained or implied to the contrary, the Company Due Diligence
Review shall not limit, restrict or preclude the Company, at any time or from
time to time, from conducting such reviews or from exercising any rights
available to it hereunder as a result of the existence or occurrence prior to
the Company Due Diligence Review Period of any event or condition which was
not detected in the Company Due Diligence Review by the Company and which
constitutes a breach of any representation or warranty of AmFirst or the Bank
under this Agreement.

VIII. OTHER MATTERS

8.01. SURVIVAL. If the Effective Date occurs, all representations,
warranties, agreements and covenants contained in this Agreement shall not
survive the Effective Date. If this Agreement is terminated prior to the
Effective Date, the agreements and representations of the parties in Section
4.01(P), Sections 5.06, 5.08(2), 5.12 and 5.13, and Sections 8.01, 8.03, 8.04,
8.05, 8.06, 8.07, 8.09 and 8.11 shall survive such termination.

8.02. WAIVER; AMENDMENT. Prior to the Effective Date, any provision
of this Agreement may be (i) waived in writing by the party benefitted by the
provision, or (ii) amended or modified at any time (including the structure of
the transactions contemplated hereby) by an agreement in writing among the
parties hereto approved by their respective Boards of Directors and executed
in the same manner as this Agreement, except that, after the

A-24

vote by the stockholders of AmFirst, the amount and form of consideration to
be received by the stockholders of AmFirst for each share of AmFirst Common
Stock shall not thereby be decreased.

8.03. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original. This
Agreement shall become effective when one counterpart has been signed by each
party hereto.

8.04. GOVERNING LAW. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of Washington, except as
federal law may be applicable.

8.05. EXPENSES. Each party hereto will bear all expenses incurred by
it in connection with this Agreement and the transactions contemplated hereby.

8.06. CONFIDENTIALITY. Except as otherwise provided in Section
5.07(2), each of the parties hereto and their respective agents, attorneys and
accountants will maintain the confidentiality of all information provided in
connection herewith which has not been publicly disclosed.

8.07. NOTICES. All notices, requests and other communications
hereunder to a party shall be in writing and shall be deemed to have been duly
given when delivered by hand, telegram or telecopied (with confirmation) or
mailed by registered or certified mail (return receipt requested) to such
party at its address set forth below or such other address as such party may
specify by notice to the parties hereto.

If to the Company or Cascade to: Cascade Financial Corporation
2828 Colby Avenue
Everett, Washington 98201
Telecopy Number: (206) 259-8512
Attn: Frank McCord, Chairman & CEO

Copies to: Breyer & Aguggia
1300 I Street, N.W.
Suite 470 East
Washington, D.C. 20005
Telecopy Number: (202) 737-7979
Attn: John F. Breyer, Jr., Esq.

If to AmFirst or the Bank to: AmFirst Bancorporation
6920 Evergreen Way
Everett, Washington 98203-0185
Telecopy Number: (206) 348-4333
Attn: Thomas H. Rainville, Chairman,
President & CEO

Copies to: Keller Rohrback
1201 Third Avenue
Suite 3200
Seattle, Washington 98101
Telecopy Number: (206) 623-3384
Attn: Glen P. Garrison, Esq.

8.08. DEFINITIONS. Any term defined anywhere in this Agreement shall
have the meaning ascribed to it for all purposes of this Agreement (unless
expressly noted to the contrary). In addition:

A-25

(A) the term "Material Adverse Effect," when applied to a party,
shall mean an event, occurrence or circumstance (including without
limitation (i) the making of any provisions for possible loan and
lease losses, write-downs of other real estate and taxes and (ii)
any breach of a representation or warranty contained herein by such
party) which (a) has or is reasonably likely to have a material
adverse effect on the financial condition, results of operations,
business or prospects of the party and its subsidiaries, taken as a
whole, or (b) would materially impair the party's ability to perform
its obligations under this Agreement or the consummation of any of
the transaction contemplated hereby; and

(B) the term "Previously Disclosed" by a party shall mean
information set forth in a Schedule that is delivered by that party
to the other party contemporaneously with the execution of this
Agreement and specifically designated as information "Previously
Disclosed" pursuant to this Agreement.

8.09. BREAK-UP FEE. The parties hereby acknowledge that, in
negotiating and executing this Agreement and in taking the steps necessary or
appropriate to effect the transaction contemplated hereby, the Company has
incurred and will incur direct and indirect monetary and other costs
(including, without limitation, attorney's fees and costs and costs of the
Company employee and management time) and will forego discussion with respect
to other potential acquisitions. To compensate the Company for such cost and
to induce it to forego initiating discussions regarding other acquisitions,
AmFirst and the Bank shall be obligated to pay the Company on demand (and in
no event more than three days after such demand) in immediately available
funds

(A) $500,000 if (i) this Agreement terminates because AmFirst and the
Bank do not use all reasonable efforts to consummate the transactions
contemplated by this Agreement in accordance with the terms of this Agreement,
(ii) AmFirst terminates this Agreement for any reason other than the grounds
for termination set out in Sections 7.01, 7.02 (but only in the event that the
Company materially breaches a representation, warranty or covenant contained
herein and, as a result thereof, AmFirst exercises its right to terminate this
Agreement under Section 7.02 at a time when the Company was not entitled to
terminate this Agreement under Section 7.02, 7.03 or 7.04), 7.03 or 7.04, or
(iii) the Company terminates this Agreement pursuant to Section 7.02 as a
result of AmFirst's material breach of a representation, warranty or covenant,
including, but not limited to its covenants contained in Section 5.08; or

(B) $800,000 if within 18 months after the date hereof, the Corporate
Merger has not been completed and there occurs any of the events set forth in
subparagraphs (i), (ii) or (iii) below.

(i) Any person other than the Company or an affiliate of the
Company acquires beneficial ownership of 25% or more of the then-outstanding
AmFirst Common Stock;

(ii) AmFirst or any of its affiliates, without having received the
Company's prior written consent, enters into an agreement to engage in an
Acquisition Transaction (as defined below) with any person (the term "person"
for purposes of this section having the meaning assigned thereto in Sections
3(a)(9) and 13(d)(3) of the Exchange Act and the rules and regulations
thereunder) other than the Company or any of its subsidiaries, or AmFirst's
Board of Directors recommends that the shareholders of AmFirst approve or
accept any Acquisition Transaction with any person other than the Company or
any of its subsidiaries. For purposes of this section, "Acquisition
Transaction" shall mean (a) a merger or consolidation, or any similar
transaction, involving AmFirst or the Bank, (b) a purchase, lease or other
acquisition of all or substantially all of the assets of AmFirst or the Bank,
or (c) a purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of securities representing 10% or
more of the voting power of AmFirst or the Bank; or

(iii) A bona fide proposal is made by a third party to AmFirst
or the Bank to engage in an Acquisition Transaction and after such proposal is
made any of the following events occurs: AmFirst willfully breaches this
Agreement and such breach entitles the Company to terminate this Agreement;
the holders of AmFirst
A-26

Common Stock do not approve this Agreement at the AmFirst Meeting; the AmFirst
Meeting is not held or is canceled prior to termination of this Agreement for
reasons other than the fault of the Company; or AmFirst's Board of Directors
modifies in a manner adverse to the Company the recommendation of AmFirst's
Board of Directors with respect to this Agreement.

Notwithstanding the foregoing, AmFirst and the Bank shall not be
obligated to pay to the Company the amounts if, prior to the occurrence of any
of the events specified in 8.09(B)(i), (ii) or (iii), AmFirst validly
terminates this Agreement pursuant to Section 7.01 or 7.02 (but only in the
event that the Company materially breaches a representation, warranty or
covenant contained herein and, as a result thereof, AmFirst exercises its
right to terminate this Agreement under Section 7.02 at a time when the
Company was not entitled to terminate this Agreement under Section 7.02, 7.03
or 7.04) or clause (ii) of Section 7.04. The parties further agree that this
Section 8.09 is without prejudice to any other rights that the parties hereto
may have for any failure to perform this Agreement.

8.10 TERMINATION FEE. In the event that the Company materially breaches
a representation, warranty or covenant contained herein and, as a result
thereof (i) AmFirst exercises its right to terminate this Agreement under
Section 7.02 at a time when the Company was not entitled to terminate this
Agreement under Section 7.02, 7.03 or 7.04 and (ii) the Mergers are not
consummated, then the Company agrees to pay to AmFirst a fee of $500,000
within three business days of the Company's receipt of written demand
therefor.

8.11. ENTIRE UNDERSTANDING; NO THIRD PARTY BENEFICIARIES. This
Agreement together represent the entire understanding of the parties hereto
with reference to the transactions contemplated hereby and thereby and
supersede any and all other oral or written agreements heretofore made.
Nothing in this Agreement expressed or implied, is intended to confer upon any
person, other than the parties hereto or their respective successors, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.

8.12. HEADINGS. The headings contained in this Agreement are for
reference purposes only and are not part of this Agreement.

A-27

IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.

CASCADE FINANCIAL CORPORATION

By:/s/FRANK MCCORD
----------------
NAME: Frank McCord
TITLE: Chairman and Chief Executive Officer

CASCADE BANK

By:/s/FRANK MCCORD
----------------
NAME: Frank McCord
TITLE: Chairman and Chief Executive Officer

AMFIRST BANCORPORATION

By:/s/THOMAS H. RAINVILLE
-----------------------
NAME: Thomas H. Rainville
TITLE: Chairman, President and Chief Executive
Officer

AMERICAN FIRST NATIONAL BANK

By:/s/THOMAS H. RAINVILLE
-----------------------
NAME: Thomas H. Rainville
TITLE: Chairman and Chief Executive Officer

A-28

APPENDIX B

CHAPTER 13 OF THE WASHINGTON BUSINESS CORPORATION ACT

23B.13.010 Definitions. As used in this chapter:

(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer.

(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under RCW 23B.13.020 and who exercises that right when and in
the manner required by RCW 23B.13.200 through 23B.13.280.

(3) "Fair value," with respect to a dissenter's shares, means the
value of the shares immediately before the effective date of the corporate
action to which the dissenter objects, excluding any appreciation or
depreciation in anticipation of the corporate action unless exclusion would be
inequitable.

(4) "Interest" means interest from the effective date of the
corporate action until the date of payment, at the average rate currently paid
by the corporation on its principal bank loans or, if none, at a rate that is
fair and equitable under all the circumstances.

(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares
to the extent of the rights granted by a nominee certificate on file with a
corporation.

(6) "Beneficial shareholder" means the person who is a beneficial
owner of shares held in a voting trust or by a nominee as the record
shareholder.

(7) "Shareholder" means the record shareholder or the beneficial
shareholder.

23B.13.020 Right to dissent. (1) A shareholder is entitled to dissent from,
and obtain payment of the fair value of the shareholder's shares in the event
of, any of the following corporate actions:

(a) Consummation of a plan of merger to which the
corporation is a party (i) if shareholder approval is required for the merger
by RCW 23B.11.030, 23B.11.080, or the articles of incorporation and the
shareholder is entitled to vote on the merger, or (ii) if the corporation is a
subsidiary that is merged with its parent under RCW 23B.11.040;

(b) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be acquired, if
the shareholder is entitled to vote on the plan;

(c) Consummation of a sale or exchange of all, or
substantially all, of the property of the corporation other than in the usual
and regular course of business, if the shareholder is entitled to vote on the
sale or exchange, including a sale in dissolution, but not including a sale
pursuant to court order or a sale for cash pursuant to a plan by which all or
substantially all of the net proceeds of the sale will be distributed to the
shareholders within one year after the date of sale;

(d) An amendment of the articles of incorporation that
materially reduces the number of shares owned by the shareholder to a fraction
of a share if the fractional share so created is to be acquired for cash under
RCW 23B.06.040; or

(e) Any corporate action taken pursuant to a shareholder
vote to the extent the articles of incorporation, bylaws, or a resolution of
the board of directors provides that voting or nonvoting shareholders are
entitled to dissent and obtain payment for their shares.

(2) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this chapter may not challenge the corporate action
creating the shareholder's entitlement unless the action fails to comply with
the

B-1

procedural requirements imposed by this title, RCW 25.10.900 through 25.10.955
the articles of incorporation, or the bylaws, or is fraudulent with respect to
the shareholder or the corporation.

(3) The right of a dissenting shareholder to obtain payment of the
fair value of the shareholder's shares shall terminate upon the occurrence of
any one of the following events:

(a) The proposed corporate action is abandoned or
rescinded;

(b) A court having jurisdiction permanently enjoins or
sets aside the corporate action; or

23B.13.030 Dissent by nominees and beneficial owners. (1) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in the shareholder's name only if the shareholder dissents with
respect to all shares beneficially owned by any one person and notifies the
corporation in writing of the name and address of each person on whose behalf
the shareholder asserts dissenters' rights. The rights of a partial dissenter
under this subsection are determined as if the shares as to which the
dissenter dissents and the dissenter's other shares were registered in the
names of different shareholders.

(2) A beneficial shareholder may assert dissenters' rights as to
shares held on the beneficial shareholder's behalf only if:

(a) The beneficial shareholder submits to the corporation
the record shareholder's written consent to the dissent not later than the
time the beneficial shareholder asserts dissenters' rights; and

(b) The beneficial shareholder does so with respect to
all shares of which such shareholder is the beneficial shareholder or over
which such shareholder has power to direct the vote.

23B.13.200 Notice of dissenters' rights. (1) If proposed corporate action
creating dissenters' rights under RCW 23B.13.020 is submitted to a vote at a
shareholders' meeting, the meeting notice must state that shareholders are or
may be entitled to assert dissenters' rights under this chapter and be
accompanied by a copy of this chapter.

(2) If corporate action creating dissenters' rights under RCW
23B.13.020 is taken without a vote of shareholders, the corporation, within
ten days after the effective date of such corporate action, shall notify in
writing all shareholders entitled to assert dissenters' rights that the action
was taken and send them the dissenters' notice described in RCW 23B.13.220.

23B.13.210 Notice of intent to demand payment. (1) If proposed corporate
action creating dissenters' rights under RCW 23B.13.020 is submitted to a vote
at a shareholders' meeting, a shareholder who wishes to assert dissenters'
rights must (a) deliver to the corporation before the vote is taken written
notice of the shareholder's intent to demand payment for the shareholder's
shares if the proposed action is effected, and (b) not vote such shares in
favor of the proposed action.

(2) A shareholder who does not satisfy the requirements of
subsection (1) of this section is not entitled to payment for the
shareholder's shares under this chapter.

23B.13.220 Dissenters' notice. (1) If proposed corporate action creating
dissenters' rights under RCW 23B.13.020 is authorized at a shareholders'
meeting, the corporation shall deliver a written dissenters' notice to all
shareholders who satisfied the requirements of RCW 23B.13.210.

(2) The dissenters' notice must be sent within ten days after the
effective date of the corporate action, and must:

B-2

(a) State where the payment demand must be sent and where
and when certificates for certificated shares must be deposited;

(b) Inform holders of uncertificated shares to what
extent transfer of the shares will be restricted after the payment demand is
received;

(c) Supply a form for demanding payment that includes the
date of the first announcement to news media or to shareholders of the terms
of the proposed corporate action and requires that the person asserting
dissenters' rights certify whether or not the person acquired beneficial
ownership of the shares before that date;

(d) Set a date by which the corporation must receive the
payment demand, which date may not be fewer than thirty nor more than sixty
days after the date the notice in subsection (1) of this section is delivered;
and

(e) Be accompanied by a copy of this chapter.

23B.13.230 Duty to demand payment. (1) A shareholder sent a dissenters'
notice described in RCW 23B.13.220 must demand payment, certify whether the
shareholder acquired beneficial ownership of the shares before the date
required to be set forth in the dissenters' notice pursuant to RCW
23B.13.220(2)(c), and deposit the shareholder's certificates in accordance
with the terms of the notice.

(2) The shareholder who demands payment and deposits the
shareholder's share certificates under subsection (1) of this section retains
all other rights of a shareholder until the proposed corporate action is
effected.

(3) A shareholder who does not demand payment or deposit the
shareholder's share certificates where required, each by the date set in the
dissenters' notice, is not entitled to payment for the shareholder's shares
under this chapter.

23B.13.240 Share restrictions. (1) The corporation may restrict the transfer
of uncertificated shares from the date the demand for their payment is
received until the proposed corporate action is effected or the restriction is
released under RCW 23B.13.260.

(2) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until the
effective date of the proposed corporate action.

23B.13.250 Payment. (1) Except as provided in RCW 23B.13.270, within thirty
days of the later of the effective date of the proposed corporate action, or
the date the payment demand is received, the corporation shall pay each
dissenter who complied with RCW 23B.13.230 the amount the corporation
estimates to be the fair value of the shareholder's shares, plus accrued
interest.

(2) The payment must be accompanied by:

(a) The corporation's balance sheet as of the end of a
fiscal year ending not more than sixteen months before the date of payment, an
income statement for that year, a statement of changes in shareholders' equity
for that year, and the latest available interim financial statements, if any;

(b) An explanation of how the corporation estimated the
fair value of the shares;

(d) A statement of the dissenter's right to demand
payment under RCW 23B.13.280; and

(e) A copy of this chapter.

B-3

23B.13.260 Failure to take action. (1) If the corporation does not effect
the proposed action within sixty days after the date set for demanding payment
and depositing share certificates, the corporation shall return the deposited
certificates and release any transfer restrictions imposed on uncertificated
shares.

(2) If after returning deposited certificates and releasing transfer
restrictions, the corporation wishes to undertake the proposed action, it must
send a new dissenters' notice under RCW 23B.13.220 and repeat the payment
demand procedure.

23B.13.270 After-acquired shares. (1) A corporation may elect to withhold
payment required by RCW 23B.13.250 from a dissenter unless the dissenter was
the beneficial owner of the shares before the date set forth in the
dissenters' notice as the date of the first announcement to news media or to
shareholders of the terms of the proposed corporate action.

(2) To the extent the corporation elects to withhold payment under
subsection (1) of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares, plus accrued interest, and shall
pay this amount to each dissenter who agrees to accept it in full satisfaction
of the dissenter's demand. The corporation shall send with its offer an
explanation of how it estimated the fair value of the shares, an explanation
of how the interest was calculated, and a statement of the dissenter's right
to demand payment under RCW 23B.13.280.

23B.13.280 Procedure if shareholder dissatisfied with payment or offer. (1)
A dissenter may notify the corporation in writing of the dissenter's own
estimate of the fair value of the dissenter's shares and amount of interest
due, and demand payment of the dissenter's estimate, less any payment under
RCW 23B.13.250, or reject the corporation's offer under RCW 23B.13.270 and
demand payment of the dissenter's estimate of the fair value of the
dissenter's shares and interest due, if:

(a) The dissenter believes that the amount paid under RCW
23B.13.250 or offered under RCW 23B.13.270 is less than the fair value of the
dissenter's shares or that the interest due is incorrectly calculated;

(b) The corporation fails to make payment under RCW
23B.13.250 within sixty days after the date set for demanding payment; or

(c) The corporation does not effect the proposed action
and does not return the deposited certificates or release the transfer
restrictions imposed on uncertificated shares within sixty days after the date
set for demanding payment.

(2) A dissenter waives the right to demand payment under this
section unless the dissenter notifies the corporation of the dissenter's
demand in writing under subsection (1) of this section within thirty days
after the corporation made or offered payment for the dissenter's shares.

23B.13.300 Court action. (1) If a demand for payment under RCW 23B.13.280
remains unsettled, the corporation shall commence a proceeding within sixty
days after receiving the payment demand and petition the court to determine
the fair value of the shares and accrued interest. If the corporation does
not commence the proceeding within the sixty-day period, it shall pay each
dissenter whose demand remains unsettled the amount demanded.

(2) The corporation shall commence the proceeding in the superior
court of the county where a corporation's principal office, or, if none in
this state, its registered office, is located. If the corporation is a
foreign corporation without a registered office in this state, it shall
commence the proceeding in the county in this state where the registered
office of the domestic corporation merged with or whose shares were acquired
by the foreign corporation was located.

B-4

(3) The corporation shall make all dissenters, whether or not
residents of this state, whose demands remain unsettled, parties to the
proceeding as in an action against their shares and all parties must be served
with a copy of the petition. Nonresidents may be served by registered or
certified mail or by publication as provided by law.

(4) The corporation may join as a party to the proceeding any
shareholder who claims to be a dissenter but who has not, in the opinion of
the corporation, complied with the provisions of this chapter. If the court
determines that such shareholder has not complied with the provisions of this
chapter, the shareholder shall be dismissed as a party.

(5) The jurisdiction of the court in which the proceeding is
commenced under subsection (2) of this section is plenary and exclusive. The
court may appoint one or more persons as appraisers to receive evidence and
recommend decision on the question of fair value. The appraisers have the
powers described in the order appointing them, or in any amendment to it. The
dissenters are entitled to the same discovery rights as parties in other civil
proceedings.

(6) Each dissenter made a party to the proceeding is entitled to
judgment (a) for the amount, if any, by which the court finds the fair value
of the dissenter's shares, plus interest, exceeds the amount paid by the
corporation, or (b) for the fair value, plus accrued interest, of the
dissenter's after-acquired shares for which the corporation elected to
withhold payment under RCW 23B.13.270.

23B.13.310 Court costs and counsel fees. (1) The court in a proceeding
commenced under RCW 23B.13.300 shall determine all costs of the proceeding,
including the reasonable compensation and expenses of appraisers appointed by
the court. The court shall assess the costs against the corporation, except
that the court may assess the costs against all or some of the dissenters, in
amounts the court finds equitable, to the extent the court finds the
dissenters acted arbitrarily, vexatiously, or not in good faith in demanding
payment under RCW 23B.13.280.

(2) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:

(a) Against the corporation and in favor of any or all
dissenters if the court finds the corporation did not substantially comply
with the requirements of RCW 23B.13.200 through 23B.13.280; or

(b) Against either the corporation or a dissenter, in
favor of any other party, if the court finds that the party against whom the
fees and expenses are assessed acted arbitrarily, vexatiously, or not in good
faith with respect to the rights provided by chapter 23B.13 RCW.

(3) If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters similarly situated,
and that the fees for those services should not be assessed against the
corporation, the court may award to these counsel reasonable fees to be paid
out of the amounts awarded the dissenters who were benefitted.

B-5

APPENDIX C

FINANCIAL INFORMATION FOR CASCADE FINANCIAL CORPORATION

CASCADE FINANCIAL CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS

Asset and Liability Management

Cascade's principal financial objective is to maximize long-term
profitability while limiting exposure to fluctuations in interest rates.
Minimizing interest rate risk reduces the financial benefits of falling
interest rates and the adverse consequences of rising interest rates. Cascade
intends to reduce risk where appropriate but accept a degree of risk when
warranted by economic circumstances and internal risk tolerance.

Expected interest rate sensitivity of assets and liabilities as of
June 30, 1996 is shown on the table on page six. Cascade's asset and
liability management strategy has resulted in a negative one-year gap as a
percent of total assets of 19% at June 30, 1995 and 14% at June 30, 1996.
There are numerous estimates and assumptions which significantly influence
this calculation. At June 30, 1996, a 200 basis point increase in rates would
reduce forecasted net interest income by approximately 7%.

The Board of Directors sets guidelines for allowable changes in net
interest income. Asset maturities are controlled by holding adjustable rate
and balloon loans and selling fixed rate loans. By adjusting the pricing on
savings deposits, differing deposit maturities can be obtained to lengthen or
shorten the repricing time for liability maturities.

Cascade Bank can also borrow funds from the Federal Home Loan Bank
of Seattle (the "FHLB-Seattle"). At various times instruments such as
interest rate swaps, interest rate cap agreements, and forward sale
commitments are used to reduce the negative effect that rising rates could
have on net interest income, or to lower the cost of long-term liabilities.
Management has established strict policies and guidelines for the use of these
off-balance sheet instruments.

Review of Financial Position

Total assets increased to $334 million at June 30, 1996, an 8%
increase over 1995 and 30% over 1994. Total loans increased by $17 million to
$234 million from $217 million at June 30, 1995 and $184 million at June 30,
1994. Most of this increase was due to originations of nonconforming
residential loans, multifamily loans and residential construction loans. Cash
and securities increased to $91 million in 1996 compared with $83 million in
1995 and $66 million in 1994. This increase was due to management's desire to
maintain the Bank's capital ratio near 6%.

Deposits increased to $218 million at June 30, 1996 compared with
$200 million in 1995 and $181 million in 1994. Management has sought to fund
asset growth through retail deposits. Total borrowings increased by $5
million in 1996 and $26 million in 1995 to $89 million at June 30, 1996.

Asset Quality

At June 30, 1996, non-performing loans totaled $373,000 compared to
$597,000 in 1995 and $7 million at June 30, 1994. Loans classified as
substandard decreased from $13 million at June 30, 1994 to $7 million at June
30, 1995 and to $1 million at June 30, 1996.

At June 30, 1996, real estate owned (REO) totaled $747,000 compared
to $1.6 million at June 30, 1995 and $150,000 in 1994. The decrease in REO in
1996 was due to a sale resulting in a $24,000 gain.

C-1

The gap between interest-sensitive assets and interest-sensitive
liabilities at June 30, 1996 is shown in the following table.

Maturity or Repricing Period
Within 1-3 3-5 5-10 Over 10
One Year Years Years Years Years Total
-------- ----- ----- ----- ------- -----
(Dollars in thousands)

Interest-Sensitive
Assets

Fixed rate mortgage
loans $ 26,842 38,512 13,737 6,199 7,628 92,918
Adjustable rate mortgage
loans 113,973 13,165 18,660 -- -- 145,798
Mortgage-backed
securities 19,837 10,614 4,060 5,247 3,931 43,689
Investment securities 43,638 -- -- -- -- 43,638
-------- ------ ------ ------ ------ --------
Interest-earning assets 204,290 62,291 36,457 11,446 11,559 326,043
Impact of interest rate
caps 5,000 (5,000) -- -- -- --
-------- ------ ------ ------ ------ --------
Total interest-sensitive
assets 209,290 57,291 36,457 11,446 11,559 326,043
======= ====== ====== ====== ======
Cash on hand and in banks 3,627
--------
Other assets 4,761
--------
Total assets $334,431
========
Interest-Sensitive Liabilities

Savings and checking
accounts 15,960 -- -- -- -- 15,960
Money market accounts 34,982 -- -- -- -- 34,982
Certificates of deposit 123,399 23,766 18,293 108 -- 165,566
Other borrowings 81,833 7,000 -- 159 -- 88,992
-------- ------ ------ ------ ------ --------
Total interest-
sensitive liabilities 256,174 30,766 18,293 267 -- 305,500
======= ====== ====== ====== ======
Other liabilities 8,116
--------
Stockholders' equity 20,815
--------
Total liabilities and
stockholders' equity $334,431
========
Excess (deficiency) of
interest-sensitive
assets over interest-
sensitive liabilities (46,884) 26,525 18,164 11,179 11,559 20,543
Cumulative excess
(deficiency) of
interest-sensitive
assets (46,884) (20,359) (2,195) 8,984 20,543 --
Ratio of cumulative gap
to total assets (14.01)% (6.01)% (0.66)% 2.69% 6.14% --

C-2

Average Balance Sheets

Corporate earnings depend on the amount and yield on interest-earning assets (primarily loans and
investments) and the expense of interest-bearing liabilities (primarily deposit accounts and borrowings).
The following table sets forth average balances of assets and liabilities, interest income from
interest-earning assets, interest expense on interest-bearing liabilities, percentage yields, interest rate
spread, ratio of interest-earning assets to interest-bearing liabilities and net interest margin. Average
balances have been calculated using the month-end balances. Such average balances are considered to be
representative of the average daily balance for each period presented.

For the year ended June 30,
1994 1995 1996
-------------------------- -------------------------- ----------------------------
Average Interest Yield/ Average Interest Yield/ Average Interest Yield/
Assets Balance Income Cost Balance Income Cost Balance Income Cost
------- ------ ------ ------- -------- ------ ------- -------- -------
(Dollars in Thousands)
Interest-earning
assets (1)

Mortgage loans $177,059 13,878 7.84 198,568 18,384 9.26 221,827 19,170 8.64
Home equity and
consumer loans -- -- -- -- -- -- 5,438 480 8.83
-------- ------- ----- -------- ------- ----- -------- -------
Total loans 177,059 13,878 7.84 198,568 18,384 9.26 227,265 19,650 8.65

Mortgage-backed
securities 34,356 1,918 5.58 78,238 4,477 5.72 56,670 3,616 6.38

Investment and
trading securities 8,388 349 4.16 3,135 213 6.79 17,542 1,098 6.26

Interest-earning
deposits &
FHLB stock 3,988 400 10.03 4,207 304 7.23 5,286 412 7.79
-------- ------- ----- -------- ------- ----- -------- -------
Total interest-
earning assets 223,791 16,545 7.39 284,148 23,378 8.23 306,763 24,776 8.08

Non interest-
earning assets

Office properties
and equipment,
net 7,074 6,471 6,206

Real estate, net 133 589 1,807

Other non-interest-
earning assets 4,192 2,789 4,334
-------- -------- --------
Total assets 235,190 293,997 319,110
======= ======= =======
(table continued on following page)

C-3

For the year ended June 30,
1994 1995 1996
-------------------------- -------------------------- ----------------------------
Average Interest Yield/ Average Interest Yield/ Average Interest Yield/
Liabilities Balance Expense Cost Balance Expense Cost Balance Expense Cost
and Equity ------- ------- ------ ------- -------- ------ ------- -------- -------
(Dollars in Thousands)

Interest-bearing
liabilities

Passbook accounts $ 8,901 275 3.08 8,788 271 3.09 7,844 253 3.23
Checking accounts 8,028 190 2.36 8,205 182 2.22 9,711 165 1.70
Money market
accounts 28,715 1,092 3.80 22,542 894 3.97 20,853 896 4.30
Certificates of
deposit 130,947 6,151 4.70 145,061 7,786 5.37 167,150 10,077 6.03
-------- ------- ----- -------- ------- ----- -------- -------
Total deposits 176,591 7,708 4.36 184,596 9,133 4.95 205,558 11,391 5.54

Other interest-
bearing liabilities

FHLB advances 29,984 1,270 4.24 55,309 3,196 5.78 64,380 3,937 6.12
Other interest-
bearing
liabilities 4,473 164 3.67 28,229 1,604 5.68 21,697 1,235 5.69
-------- ------- ----- -------- ------- ----- -------- -------
Total interest-
bearing
liabilities 211,048 9,142 4.33 268,134 13,933 5.20 291,635 16,563 5.68

Other liabilities 8,705 7,518 7,429
-------- -------- --------
Total liabilities 219,753 275,652 299,064

Stockholders'
equity 15,437 18,345 20,046
-------- -------- --------
Total liabilities
and stockholders'
equity 235,190 293,997 319,110
======== ======== ========

Net interest
income (1)(2) 7,403 9,445 8,213
====== ====== ======
Interest rate
spread (1)(3) 3.06 3.03 2.40

Net interest
margin (1)(4) 3.31 3.32 2.68

Average interest-
earning assets
to average
interest-bearing
liabilities 106.04 105.97 105.19
_________________
(1) Does not include interest on loans 90 days or more past due. Includes recovery of $2.1 million in
delinquent interest in 1995.
(2) Interest on total interest-earning assets less interest on total interest-bearing liabilities.
(3) Total interest-earning assets yield less total interest-bearing liabilities cost.
(4) Net interest income as an annualized percentage of total interest-earning assets.

C-4

Yields Earned and Rates Paid

The following table sets forth the weighted average yield on assets, the
weighted average interest rate on liabilities, and the net yield on
interest-earning assets.

For the Years Ended June 30,
------------------------------- At June 30,
1994 1995* 1996 1996
---- ----- ---- ----

Weighted average yield on
loan portfolio 7.84% 9.26 8.65 8.44
Weighted average yield on
mortgage-backed securities 5.58 5.72 6.38 6.16
Weighted average yield on
securities portfolio and
cash equivalents 6.05 7.04 6.61 6.33
Weighted average yield on all
interest-earning assets 7.39 8.23 8.08 7.87
Weighted average rate paid
on deposits 4.36 4.95 5.54 5.33
Weighted average rate paid
on FHLB advances and other
borrowings 4.16 5.75 6.01 5.75
Weighted average rate paid
on all interest-bearing
liabilities 4.33 5.20 5.68 5.49
Interest rate spread (spread
between weighted average
rate on all interest-earning
assets and all interest-
bearing liabilities) 3.06 3.03 2.40 2.38
Net interest margin (net
interest income as a
percentage of average
interest-earning assets) 3.31 3.32 2.68 N/A

* Reduced for the $2.1 million recovery, the yield on loan portfolio, yield
on earning assets, spread, and net interest margin are: 8.21%, 7.49%,
2.29% and 2.59%, respectively.

C-5

Rate/Volume Analysis

The following table sets forth the effects of changing rates and
volumes on net interest income. Information is provided with respect to (i)
effects on interest income attributable to changes in volume (changes in
volume multiplied by prior rate); (ii) effects on interest income attributable
to changes in rate (changes in rate multiplied by prior volume); and (iii)
changes in rate/volume (change in rate multiplied by change in volume).

Year Ended June 30, 1995(2) Year Ended June 30, 1996
Compared to Year Ended Compared to Year Ended
June 30, 1994 June 30, 1995
Increase (Decrease) Due to Increase (Decrease) Due to
--------------------------- --------------------------
Rate/ Rate/
Rate Volume Volume Net Rate Volume Volume Net
---- ------ ------ --- ---- ------ ------ ---
(Dollars in thousands)

Interest-earning
assets

Mortgage
loans(1) $2,515 1,686 305 4,506 (1,224) 2,154 (144) 786
Home equity
& consumer
loans(1) -- -- -- -- -- -- 480 480
------ ----- ---- ----- ------ ----- --- -----
Total loans(1) 2,515 1,686 305 4,506 (1,224) 2,154 336 1,266
Mortgage-backed
securities 48 2,449 62 2,559 515 (1,234) (142) (861)
Securities 222 (220) (138) (136) (16) 977 (76) 885
Interest-earning
deposits (112) 22 (6) (96) 24 78 6 108
------ ----- ---- ----- ------ ----- --- -----
Change in income
on interest-
earning assets 2,673 3,937 223 6,833 (701) 1,975 124 1,398
------ ----- ---- ----- ------ ----- --- -----
Interest-bearing
liabilities

Interest-bearing
deposits 1,029 349 47 1,425 1,096 1,038 124 2,258
FHLB advances 462 1,074 390 1,926 186 524 31 741
Other borrowings 91 872 477 1,440 3 (371) (1) (369)
------ ----- ---- ----- ------ ----- --- -----
Change in expense
on interest-
bearing
liabilities 1,582 2,295 914 4,791 1,285 1,191 154 2,630
------ ----- ---- ----- ------ ----- --- -----
Increase
(decrease) net
interest income 2,042 (1,232)
===== ======
_____________________
(1) Does not include interest on loans ninety days or more past due.
(2) Includes $2.1 million interest recovery.

C-6

OPERATING RESULTS FOR THE YEARS ENDED JUNE 30, 1996, 1995 AND 1994

Interest Income

Interest income increased to $24.8 million for the year ended June
30, 1996 compared with $23.4 million in 1995 and $16.5 million in 1994. The
principal reason for these increases was the higher earning asset balance of
$306.8 million in 1996 compared to $284.1 million in 1995 and $223.8 million
in 1994. Additionally, in 1995 Cascade recovered $2.1 million in interest
from the payoff of a large delinquent loan. The yield on interest earning
assets adjusted for the interest recovery increased to 8.08% in 1996 from
7.49% in 1995 and 7.39% in 1994 due to the increase in yields on adjustable
rate loans and reinvestment of cash flows at higher interest rates. Interest
on loans, adjusted for the interest recovery increased by $3.4 million in 1996
and $2.4 million in 1995 from $13.9 million in 1994. This resulted from an
increased average portfolio balance of $227.3 million in 1996, compared to
$198.6 million in 1995 and $177.1 million in 1994 and an increase in the yield
on loans from 7.84% in 1994 to 8.21% in 1995 and 8.65% in 1996. Interest on
securities, FHLB-Seattle stock and interest-bearing deposits increased to $5.1
million in 1996 from $5.0 million in 1995 and $2.7 million in 1994.

Interest Expense

Interest expense increased by $2.6 million in 1996 and $4.8 million
in 1995. These increases were the result of higher market interest rates and
higher balances of deposits and borrowings to fund the increased earning
assets. The average cost of all liabilities increased to 5.68% in 1996,
compared with 5.20% in 1995 and 4.33% in 1994. Interest expense on deposits
increased by $2.3 million to $11.4 million in 1996 compared to $9.1 million in
1995 and $7.7 million in 1994. Management has sought to fund asset growth
with deposits from new and existing customers.

Hedging activities decreased interest expense by $49,000 and $42,000
during the years ended June 30, 1996 and 1995, respectively. This compares to
an increase of $54,000 in the 1994 period. Interest rate swaps and caps are
used to reduce interest rate risk or cost of longer-term liabilities. At June
30, 1996 $5.0 million in interest rate cap agreements were outstanding. At
June 30, 1995 $7.5 million in swaps were outstanding.

Net Interest Income

Net interest income for the year ended June 30, 1996, decreased by
$1.2 million to $8.2 million compared with $9.4 million in 1995 and $7.4
million in 1994. The decrease in 1996 is the result of the $2.1 million
interest recovery offset by an increase in earning assets of $22.6 million and
an increase in the interest rate margin of nine basis points (after adjusting
the 1995 margin for the interest recovery) to 2.68% in 1996.

The trend towards reduced interest margins is occurring throughout
the banking industry, especially in the state of Washington. Washington
financial institutions have one of the highest cost of funds in the nation,
based on data recently published by the federal banking agencies.

Provisions for Loan Losses

No provision for loan losses was considered necessary in 1996. There
was a recovery of $335,000 in 1995 after the repayment of a $5.1 million
delinquent loan. After the repayment management determined the allowance for
loan losses was higher than necessary and was reduced accordingly. The
provision for losses in 1994 was $495,000.

As the credit quality of the loan portfolio continued to improve,
additional provisions were not considered necessary in 1996.

C-7

At June 30, 1996, 1995 and 1994, the loan loss allowance totaled
$2.9 million, $3.0 million and $3.5 million respectively and was 1.2%, 1.3%
and 1.9% respectively, of net loans. The allowance for loan losses is
continuously monitored and adjusted as the economic conditions change.
Although the allowance is maintained at levels considered to be adequate to
provide for potential losses, there can be no assurance that such losses will
not exceed the estimated amounts or that additional provisions will not be
necessary in the future.

Other Income

Other income decreased by $252,000 to $2.2 million in 1996 compared
to 1995 and by $2.9 million compared to 1994. The principal reason for the
reduction in 1996 was a $474,000 decrease in restitution recovery income and
$238,000 decrease in gains on sales of loan servicing rights. In 1996 gains
from sales of loans and mortgage-backed securities increased by $518,000 and
gains on sales of securities available-for-sale increased to $338,000. The
reduction in other income from 1994 is principally the result of a $2.5
million decrease in gains on sales of mortgage servicing rights due to reduced
mortgage banking activity. Although not assured, management anticipates
future mortgage banking revenues will remain consistent with the 1995-1996
period.

Other Expenses

Other expenses decreased by $875,000 to $7.0 million in 1996
compared to $7.9 million in 1995 and $9.0 million in 1994. Salary and
employee benefits expenses decreased by $233,000 in 1996 and $1.1 million in
1995 as a result of mortgage banking staff reductions and decreased
compensation to loan personnel. A $332,000 restructuring charge was incurred
in 1995 to close certain loan origination offices. This charge was comprised
of $95,000 in required lease payments, $201,000 in equipment and leasehold
write-offs on closed facilities and $36,000 in severance costs.

Marketing expenses decreased $135,000 to $198,000 in 1996 compared
to $330,000 in 1995. Increased expenses for marketing, technology and product
delivery systems are anticipated.

Congress is currently considering a recapitalization of the FDIC
insurance fund which would require the Bank to make a one-time, after-tax
payment of approximately $900,000. The proposed legislation would decrease
the Bank's annual insurance premium by approximately $300,000 after taxes.

Liquidity & Capital Resources

Cascade Bank is required to maintain minimum levels of liquid assets
as defined by Office of Thrift Supervision ("OTS") regulations. This
requirement, which may change at the direction of the OTS depending upon
economic conditions and deposit flows, is based upon a percentage of deposits
and short-term borrowings. The required ratio is currently 5.0%. The Bank's
liquidity ratio was 7.2%, 9.0% and 6.3% at June 30, 1996, 1995 and 1994,
respectively.

Cascade Bank's most liquid assets are cash and cash equivalents,
which include short-term investments. The levels of these assets are
dependent on operating, financing and investing activities during any given
period. At June 30, 1996 and 1995, cash and cash equivalents totaled $8.6
million and $5.8 million, respectively. The principal sources of funds,
exclusive of operating activities, include proceeds from principal payments on
loans and mortgage-backed securities and proceeds from the sale of loans.

Cascade Bank has other significant sources of liquidity including
FHLB-Seattle advances, reverse repurchase agreements, and loan sales. If
needed, the Bank has additional borrowing ability with the FHLB-Seattle of
$31.8 million at June 30, 1996, as well as abilities to borrow from primary
dealers of United States government securities through reverse repurchase
agreements. Under these agreements, Cascade Bank collateralizes the
borrowings, generally with mortgage-backed securities or other investment
securities. These borrowings are for short time

C-8

periods, generally no more than sixty days. Cascade Bank will utilize a
particular source of funds based on comparative costs and availability.

At June 30, 1996 there were outstanding commitments to originate
loans of $11.3 million. Cascade Bank anticipates that it will have sufficient
funds available to meet its current commitments principally through sales in
the secondary market and deposit growth. Certificates of deposit which are
scheduled to mature in one year or less totaled $123.4 million at June 30,
1996. Management believes that a significant portion of such deposits will
remain with Cascade Bank.

At June 30, 1996 Cascade Bank was a "well capitalized" institution
under the prompt corrective action regulation of the OTS. The following table
summarizes the capital requirements and the Bank's capital position at June
30, 1996:

At June 30, 1996
------------------------
Percent of
Amount Assets
------ ----------
(Dollars in Thousands)

Tangible capital $21,530 6.4
Tangible capital requirement 5,027 1.5
------- ---
Excess 16,503 4.9
====== ===

Core capital 21,530 6.4
Core capital requirement 10,055 3.0
------- ---
Excess 11,475 3.4
====== ===

Risk-based capital 23,699 13.7
Risk-based capital requirement 13,844 8.0
------- ---
Excess 9,855 5.7
====== ===
C-9

KPMG Peat Marwick LLP
3100 Two Union Square
601 Union Street
Seattle, WA 98101-2327
INDEPENDENT AUDITORS' REPORT
- ------------------------------------------------------------------------------

The Board of Directors
Cascade Financial Corporation:

We have audited the accompanying consolidated balance sheets of
Cascade Financial Corporation and subsidiary (the Corporation) as of June 30,
1995 and 1996, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the years in the three year period
ended June 30, 1996. These consolidated financial statements are the
responsibility of the Corporation's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit 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 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Cascade Financial Corporation and subsidiary as of June 30, 1996 and 1995, and
the results of their operations and their cash flows for each of the years in
the three-year period ended June 30, 1996, in conformity with generally
accepted accounting principles.

As discussed in note 1 to the consolidated financial statements,
effective July 1, 1995, the Corporation changed its method of accounting for
impaired loans.

KPMG Peat Marwick LLP

/s/ KPMG Peat Marwick LLP

Seattle, Washington
July 31, 1996

C-10

CASCADE FINANCIAL CORPORATION
AND SUBSIDIARY

Consolidated Balance Sheets
June 30, 1995 and 1996
(Dollars in thousands)
- ------------------------------------------------------------------------------

1995 1996
---- ----
Assets
------

Cash on hand and in banks $ 5,419 3,627
Interest-bearing deposits in other institutions 343 4,991
Securities available-for-sale (notes 2 and 9) 7,826 72,076
Loan held-for-sale, net (note 3) 6,040 4,678
Securities held-to-maturity (fair value of $69,360
and $9,437)(notes 2 and 9) 69,896 9,941
Loans, net (notes 3 and 4) 210,569 228,934
Real estate owned, net (note 4) 1,643 747
Premises and equipment, at cost, net (note 5) 6,359 6,087
Accrued interest receivable and other assets
(notes 2, 3 and 12) 2,848 3,350
-------- --------
310,943 334,431
Liabilities and Stockholders' Equity ======== ========
------------------------------------
Deposits (notes 6 and 7) 199,938 218,063
Federal Home Loan Bank advances (note 8) 61,159 68,542
Securities sold under agreements to repurchase
(note 9) 23,285 20,450
Advance payments by borrowers for taxes and insurance 874 1,207
Principal and interest payable on loans serviced
for others 35 179
Accrued expenses and other liabilities (note 6) 4,716 3,584
Deferred Federal income taxes (note 10) 1,649 1,591
-------- --------
Total liabilities 291,656 313,616
-------- --------
Stockholders' equity (note 11):
Preferred stock, $.01 par value.
Authorized 500,000 shares; no shares issued
or outstanding -- --
Common stock, $.01 par value.
Authorized 5,000,000 shares; issued
and outstanding 2,029,277 shares in 1995
and 2,045,894 shares in 1996 20 20
Additional paid-in capital 4,143 4,250
Retained earning, substantially restricted 15,142 17,410
Unrealized loss on securities available-for-sale (18) (865)
-------- --------
Total stockholders' equity 19,287 20,815
-------- --------
Commitments and contingencies (notes 2, 3, 7, 11
and 15) 310,943 334,431
======== ========

See accompanying notes to consolidated financial statements.

C-11

CASCADE FINANCIAL CORPORATION
AND SUBSIDIARY

Consolidated Statements of Operations
Years Ended June 30, 1994, 1995, and 1996
(Dollars in thousands, except per share amounts)
- ------------------------------------------------------------------------------
1994 1995 1996
---- ---- ----
Interest income:
Loans (note 3) $13,878 18,384 19,650
Securities held-to-maturity 1,918 4,477 3,616
Securities available-for-sale 349 213 1,098
FHLB stock dividends 231 182 264
Interest-bearing deposits 169 122 148
------- ------ ------
Total interest income 16,545 23,378 24,776
------- ------ ------
Interest expense:
Deposits (notes 6 and 7) 7,708 9,133 11,391
FHLB advance 1,270 3,196 3,937
Securities sold under agreements to
repurchase (note 9) 164 1,604 1,235
------- ------ ------
Total interest expense 9,142 13,933 16,563
------- ------ ------
Net interest income 7,403 9,445 8,213
Provision for (recovery of) loan
losses (note 4) 495 (335) --
------- ------ ------
Net interest income after provision
for loan losses 6,908 9,780 8,213
------- ------ ------
Other income:
Gain on sale of loans held-for-sale 796 422 506
Gain on sale of mortgage-backed
securities held-for-trading 584 85 519
Gain on sale of mortgage servicing rights 2,481 238 --
Service charges 861 471 444
Gain (loss) on sale of securities
available-for-sale (note 2) (29) (104) 338
Gain on sale of real estate owned 62 240 24
Restitution recovery (note 15) -- 624 150
Other 380 502 245
------- ------ ------
Total other income 5,135 2,478 2,226
------- ------ ------
Other expenses:
Salaries and employee benefits 4,884 3,801 3,568
Occupancy 1,395 1,352 1,186
Federal deposit insurance premiums 432 471 515
Data processing 291 252 306
Marketing 343 333 198
Restructuring charge -- 332 --
Other 1,661 1,338 1,231
------- ------ ------
Total other expenses 9,006 7,879 7,004
------- ------ ------
Income before Federal income taxes 3,037 4,379 3,435

Federal income taxes (note 10) 1,033 1,489 1,167
------- ------ ------
Net income 2,004 2,890 2,268
======= ====== ======

Net income per common share, primary $0.91 1.28 1.00
===== ==== ====
Net income per common share, fully diluted 0.91 1.28 0.99
==== ==== ====
Weighted average number of shares
outstanding, primary 2,198,519 2,254,697 2,279,098
========= ========= =========
Weighted average number of shares
outstanding, fully diluted 2,213,213 2,256,306 2,282,033
========= ========= =========

See accompanying notes to consolidated financial statements.

C-12

CASCADE FINANCIAL CORPORATION
AND SUBSIDIARY

Consolidated Statements of Stockholders' Equity
Years Ended June 30, 1994, 1995, and 1996
(Dollars in thousands, except per share amounts)
- ------------------------------------------------------------------------------
Net
Valuation Total
Additional Reserve stock-
Common paid-in Retained for holders'
Shares stock capital earnings Securities equity
------ ----- ------- -------- ---------- ------

Balances at
June 30,
1994, as
previously
reported 1,614,498 $ 16 4,108 10,248 -- 14,372

Five for
four stock
split
effective
June 10,
1996,
including
$7 for
fractional
shares 408,366 4 (11) -- -- (7)
--------- -- ----- ------ ---- ------
Balances at
June 30,
1994,
restated 2,022,864 20 4,097 10,248 -- 14,365

Options
exercised 625 -- 5 -- -- 5
Net income
for the
year ended
June 30,
1994 -- -- -- 2,004 -- 2,004
--------- -- ----- ------ ---- ------
Balances at
June 30,
1994,
restated 2,023,489 20 4,102 12,252 -- 16,374

Options
exercised 5,788 -- 41 -- -- 41
Net income
for the
year ended
June 30,
1995 -- -- -- 2,890 -- 2,890
Adjustments
on available-
for-sale
securities -- -- -- -- (18) (18)
--------- -- ----- ------ ---- ------
Balances at
June 30,
1995,
restated 2,029,277 20 4,143 15,142 (18) 19,287

Options
exercised 16,617 -- 107 -- -- 107
Net income
for the
year ended
June 30,
1996 -- -- -- 2,268 -- 2,268
Adjustments
on
available-
for-sale-
securities -- -- -- -- (847) (847)
--------- -- ----- ------ ---- ------
Balances at
June 30,
1996 2,045,894 20 4,250 17,410 (865) 20,815
========= == ===== ====== ==== ======

(See accompanying notes to consolidated financial statements).

C-13

CASCADE FINANCIAL CORPORATION
AND SUBSIDIARY

Consolidated Statements of Cash Flows
Years Ended June 30, 1994, 1995, and 1996
(Dollars in thousands)
- ------------------------------------------------------------------------------
1994 1995 1996
---- ---- ----
Cash flows from operating activities:
Net income $2,004 $2,890 $2,268
Adjustments to reconcile net income to ------ ------ ------
net cash provided by (used in) operating
activities:
Depreciation and amortization of premises
and equipment 620 600 553
Other -- (42) (11)
Amortization of retained servicing rights -- 64 148
Provision for losses (recovery on):
Loans 495 (335) --
Real Estate -- -- 25
Securities 197 (2) --
Additions to mortgage servicing rights (508) (307) (553)
Deferred loan fees, net of amortization 232 461 13
Origination of loans held-for-sale (211,292) (34,180) (55,921)
Proceeds from sale of loans held-
for-sale 176,352 28,998 25,462
Proceeds from sale of mortgage-backed
securities held-for trading 45,632 10,708 32,849
Proceeds from sale of mortgage
servicing rights 3,158 241 --
Net loss (gain) on sales of:
Loans held-for-sale (796) (422) (506)
Mortgage-backed securities held-
for-trading (584) (85) (519)
Securities available-for-sale (168) 26 (338)
Premises and equipment 143 201 (5)
Real estate owned (63) (240) (24)
Mortgage loan servicing rights (2,481) (238) --
Federal Home Loan Bank stock dividend
received (231) (182) (264)
Deferred Federal income taxes -- 1,338 387
Net change in accrued in interest
receivable and other assets over
principal and interest payable on
loans serviced for others and
accrued expenses and other liabilities (371) (1,015) (1,099)
------- ------- -------
Total adjustments 10,335 5,589 197
------- ------- -------
Net cash provided by operating
activities 12,339 8,479 2,465
------- ------- -------
Cash flows from investing activities:
Loan originated, net of principal
repayments (51,699) (44,378) (19,110)
Purchases of mortgage-backed securities
held-to maturity (15,086) (25,740) --
Principal repayments on mortgage-backed
securities held-to-maturity 10,975 9,560 9,452
Principal repayments on securities
available-for-sale -- -- 4,846
Purchases of securities available-for-sale (11,331) (5,039) (51,740)
Proceeds from sales of securities
available-for-sale 12,448 11,000 32,455
Proceeds from maturities of securities
and interest-bearing deposits, net 2,656 -- --
Proceeds from sales of real estate owned 2,539 755 1,776
Purchases of real estate owned -- (333) (141)
Purchases of premises and equipment (391) (567) (257)
Proceeds from sales of premises and
equipment, and other assets 694 -- 5
------- ------- -------
Net cash used in investing
activities (49,195) (54,742) (22,714)
------- ------- -------
Subtotal, carried forward (36,856) (46,263) (20,249)
------- ------- -------

See accompanying notes to consolidated financial statements.

C-14

Consolidated Statements of Cash Flows, Continued
(Dollars in thousands)
- ------------------------------------------------------------------------------
1994 1995 1996
---- ---- ----
Subtotal, brought forward $(36,856) (46,263) (20,249)
------- ------- -------
Cash flows from financing activities:
Proceeds from issuance of common stock 5 37 100
Net increase in deposits 14,988 18,807 18,125
Proceeds from Federal Home Loan Bank
advances 134,475 100,800 83,133
Repayment of Federal Home Loan Bank
advances (128,175) (74,775) (75,750)
Net increases in securities sold under
agreements to repurchase 12,933 3,958 (2,835)
Net increase (decrease) in advance
payments by borrowers for taxes
and insurance (78) (2) 332
------- ------- -------
Net cash provided by financing
activities 34,148 48,825 23,105
------- ------- -------
Net increase (decrease) in cash
and cash equivalents (2,708) 2,562 2,856

Cash and cash equivalents at beginning of
year 5,908 3,200 5,762
------- ------- -------
Cash and cash equivalents at end of year 3,200 5,762 8,618
======= ======= =======
Supplemental disclosures of cash flow
information-cash paid during the year for:

Interest 9,370 13,607 16,603
Federal income taxes 1,037 70 852
======= ======= =======

Supplemental schedule of noncash investing
activities:
Mortgage loans securitized into FHLMC
participation certificates and held-
for-trading and sold 45,048 10,623 32,330
Mortgage loans securitized into FHLMC
participation certificates and held-
for-investment 16,100 4,769 --
Securities reclassified from held-to-
maturity to available-for-sale -- -- 50,503
Net mortgage loans transferred to real
estate owned 95 1,675 740

(See accompanying notes to consolidated financial statements.

C-15

CASCADE FINANCIAL CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements
June 30, 1994, 1995, and 1996
(Dollars in thousands, except share amounts)
- ------------------------------------------------------------------------------
(1) Summary of Significant Accounting Policies

The accounting and financial reporting policies of Cascade Financial
Corporation and subsidiary (the Corporation) conform to generally
accepted accounting principles and to general practice within the
financial institutions industry, where applicable. In preparing the
consolidated financial statements management makes estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of income and expense
during the reported periods. Actual results could differ from those
estimates.

Material estimates that are particularly susceptible to significant
change in the near term relate to the determination of the allowance for
loan losses and the valuation of real estate owned, securities, and
capitalized mortgage servicing rights. In connection with the
determination of the allowances for loans and real estate owned,
management obtains independent appraisals for significant properties.

Management believes the allowances for losses on loans and real estate
owned are adequate. While management uses available information to
recognize losses on these assets, future additions to the allowances may
be necessary based on changes in economic conditions, particularly in
the western Washington region. In addition, various regulatory
agencies, as an integral part of their examination process, periodically
review the Corporation's allowances for losses on loans and real estate
owned and the valuation of securities and capitalized mortgage servicing
rights. Such agencies may require the Corporation to recognize
additions to the allowances, or change valuations, based on their
judgments about information available to them at the time of their
examination.

All of the Corporation's loans are located in the Puget Sound region.
At June 30, 1996, the Corporation's loans are secured by
one-to-four-family residences (79%), multifamily residences (15%) and
commercial real estate properties (6%). Accordingly, the ultimate
collectibility of the Corporation's loan portfolio is susceptible to
changes in the economic and real estate market conditions in the Puget
Sound region.

Most loans originated by the Corporation are secured by real estate and
are generally no more than 80% of the lesser of the appraised value or
purchase price of the underlying property. The Corporation currently
requires customers to obtain private mortgage insurance on all loans
above an 80% loan-to-value ratio.

The following is a description of the more significant policies, which
the Corporation follows in preparing and presenting its consolidated
financial statements.

(a) Basis of Presentation

The consolidated financial statements include the accounts of
the Corporation, its subsidiary, Cascade Savings Bank, FSB,
(the Savings Bank), and the Savings Bank's subsidiary, Cascade
Investment Services, Inc. The par value of common stock and
additional paid-in capital of the Corporation have been
restated to reflect the new par value of the holding company
which became effective November 30, 1994. The formation of the
holding company was treated in a manner similar to
pooling-of-interest accounting.

C-16

CASCADE FINANCIAL CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements

(Dollars in thousands, except share amounts)
- ------------------------------------------------------------------------------

(b) Cash Equivalents

The Corporation considers all interest-bearing deposits and
short-term highly liquid investment securities with an original
maturity of three months or less to be cash equivalents.

Loans are stated at principal amounts outstanding, net of
deferred loan fees and costs. Interest is accrued only if
deemed collectible. Accrual of interest income is generally
discontinued when a loan becomes 90 days past due and accrued
interest amounts are reversed. Once interest has been paid to
date or management considers the loan to be fully collectible,
it is returned to accrual status. All loans on which interest
is not being accrued are referred to as loans on nonaccrual
status and are classified as impaired.

Loan origination fees and certain direct origination costs are
deferred and amortized as an adjustment of the loans' yields
over their contractual lives using the interest method. In the
event loans are sold, the remaining net deferred loan
origination fees or costs are recognized as a component of the
gains or losses on the sales of loans.

Loan commitment fees are deferred until loans are funded, at
which time they are amortized into interest income using the
interest method. If the commitment period expires, the fees
are recognized as service charges.

(d) Allowance for Loan Losses

The allowance for loan losses is maintained at a level
sufficient to provide for losses based on management's
evaluation of known and inherent risks in the loan portfolio.
This evaluation includes analyses of the fair value of
collateral securing selected loans, consideration of historical
loss experience and management's projection of trends effecting
credit quality.

On July 1, 1995, the Corporation adopted Statement of Financial
Accounting Standards ("SFAS") No. 114, Accounting by Creditors
for Impairment of a Loan, and the related SFAS No. 118,
Accounting by Creditors for Impairment of a Loan-Income
Recognition and Disclosures. There was no effect of adopting
the Statements on 1996 results of operations or financial
position because the allowance for losses established under the
previous accounting policy continued to be appropriate
following the accounting change. SFAS 114 is applicable to all
loans except large groups of smaller-balance homogeneous loans
that are collectively evaluated for impairment, loans measured
at fair value or at the lower of cost or fair value, leases,
and debt securities. The Statements require disclosures of
impaired loans for which it is probable that the lender will be
unable to collect all amounts due according to original
contractual terms of the loan agreement, based on current
information and events.

SFAS 114 requires that the valuation of impaired loans be based
on the present value of expected future cash flows discounted
at the loan's effective interest rate, or as a practical
expedient, at the loan's

C-17

CASCADE FINANCIAL CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements

(Dollars in thousands, except share amounts)
- ------------------------------------------------------------------------------

observable market price, or the fair value of the collateral if
the loan is collateral dependent. An impaired loan may not be a
nonaccrual loan.

(e) Sales of Loans

Loans Held-for-Sale

Any loan that management determines will not be held-to-
maturity is classified as held-for-sale at the time of
origination. Loans held-for-sale are carried at lower of cost
or market value, determined on an aggregate basis. Market
value is determined for loan pools with common interest rates
using published quotes as of the close of business. Unrealized
losses on such loans are included in gain on sale for loans
held-for-sale. All loans are sold without recourse.

Mortgage-backed securities held-for-trading

As part of its mortgage-banking activity, the Corporation
securitizes certain loans originated for sale. Mortgage-backed
securities ("MBS") that the Corporation holds for mortgage-
banking purposes are accounted for as trading securities at the
time of origination. These securities are carried at fair
value, determined on an aggregate basis. Fair value is
determined for securities using published quotes as of the
close of business. Realized or unrealized gains or losses on
such MBS are included in gain on sale of MBS held-for-trading.

Capitalized Mortgage Loan Servicing Rights, Loan Servicing
Income and Sale of Loan Servicing Rights

In May 1995, the FASB issued SFAS 122, "Accounting for Mortgage
Servicing Rights," an amendment of SFAS 65". SFAS 122 requires
corporations that acquire mortgage servicing rights ("MSR")
through either the purchase or origination of mortgage loans
and sells or securitizes those loans with servicing rights
retained allocate the total cost of the mortgage loans to the
MSR and the loans (without the MSR) based on their relative
fair values. The Statement also requires that corporations
assess their MSR for impairment based on the fair value of
those rights. The carrying value of the MSR is evaluated on a
quarterly basis and any impairment is recognized through a
valuation allowance for each impaired stratum. For purposes of
measuring impairment, the Corporation stratifies its MSR by
various risk characteristics such as loan type, investor type,
interest rate and origination date. The MSR are included in
other assets and are amortized as an offset to service charges
in proportion to and over the period of estimated net servicing
income. Management adopted this Statement effective July 1,
1994. As a result of this adoption net income was increased by
$112 for the year ended June 30, 1995.

At the time of loan sales, a gain or loss is recognized and a
premium (excess mortgage servicing rights or "EMSR") is
recorded based upon the present value of the difference between
the contractual interest rates of the loans and the current
market rate, reduced by normal servicing fees, over the
estimated lives of the mortgage loans. Amortization of the EMSR
is recorded as an addition to or reduction of service charges
using the level-yield method over the contractual lives of such
loans, with appropriate prepayment assumptions. The carrying
value of the EMSR is evaluated as described above.

C-18

CASCADE FINANCIAL CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements

(Dollars in thousands, except share amounts)
- ------------------------------------------------------------------------------

Loan servicing generally consists of collecting mortgage
payments and certain charges collected from borrowers such as
late payment fees, maintaining escrow accounts, and disbursing
payments to investors. Loan servicing income is recorded when
earned and is recorded to service charges. Loan servicing
costs are charged to expense as incurred.

The Corporation has periodically sold loan servicing rights.
Gains and losses from sales of loan servicing rights are
calculated using the specific identification of the related
carrying value.

(f) Securities

Debt and equity securities, including MBS, are classified as
either trading, available-for-sale, or held-to-maturity.
Securities classified as trading are carried at fair value with
unrealized gains and losses reported in earnings. Securities
available-for-sale are carried at fair value. Realized gains
or losses on the sales of these available-for-sale securities
are recognized using the specific identification method.
Unrealized gains and losses are recognized using published
quotes as of the close of business with unrealized gains and
losses reported in stockholders' equity, net of tax.

Securities and MBS held-to-maturity are carried at amortized
cost or principal balance, adjusted for amortization of
premiums and accretion of discounts. Amortization of premiums
and accretion of discounts are calculated using a method which
approximates the level yield method. The Corporation has the
ability, and it is management's intention, to hold such
securities until maturity.

In November 1995, the FASB issued a special report related to
the implementation of SFAS 115 that allowed companies a
one-time reassessment and related reclassification from the
held-to-maturity category to the available-for-sale category
without adverse accounting consequences for the remainder of
the portfolio. Accordingly, on December 31, 1995, the
Corporation reclassified securities with an aggregate amortized
cost of $50,503 from the held-to-maturity category to the
available-for-sale category, resulting in an increase in gross
unrealized gains of $367 and gross unrealized losses of $294.

(g) Asset and Liability Management Activities

The Corporation uses off-balance sheet instruments, including
interest rate exchange agreements ("swaps"), interest rate cap
agreements and forward sales to manage interest rate exposures.
Swap and cap agreements are designated either against specific
loan portfolios or against short-term deposits. The fair value
of the swap and cap agreements are not reported on the balance
sheet. The interest differential paid or received on the
agreements is recorded as an adjustment to interest income or
interest expense of the related asset or liability. Premiums
paid for interest rate caps are deferred and amortized to
interest income or expense over the term of the agreement.

The Corporation uses mandatory and optional forward commitments
to hedge loans held-for-sale and a portion of rate locked loan
applications. To the extent the Corporation's hedging
techniques are not effective, the Corporation may incur
mark-to-market losses in its loans held-for-sale portfolio,
thereby adversely affecting its results of operations.
Realized gains or losses and unrealized losses on hedging
operations are included in gain on sale of MBS held-for-
trading. If at any time the off-balance sheet

C-19

CASCADE FINANCIAL CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements

(Dollars in thousands, except share amounts)
- ------------------------------------------------------------------------------

contract no longer qualifies for hedge accounting treatment, it
is marked-to-market on a prospective basis.

(h) Real Estate Owned

Real estate owned includes real estate acquired in settlement
of loans. Real estate owned is recorded at the lower of cost
or fair value less estimated costs to sell. Any loss recorded
at the time a foreclosure occurs is classified as a charge-off
against the allowance for loan losses. Losses that result from
the ongoing periodic valuation of these properties are
established as valuation allowances and charged to operations
in the period in which they are identified.

(i) Premises and Equipment

Premises and equipment are stated at cost. Straight-line
depreciation is provided over the estimated useful lives of the
respective assets. Leasehold improvements are amortized over
the estimated useful lives of the improvements or terms of the
related leases, whichever is shorter.

(j) Federal Income Taxes

Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax
assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled. The effect on the deferred tax assets and liabilities
of a change in tax rates is recognized in income in the
period that includes the enactment date.

(k) Earnings Per Share

Primary earnings per share is computed based on the weighted
average number of shares of common stock outstanding and common
stock equivalents assumed outstanding during the year. Fully
diluted shares outstanding includes the maximum dilutive effect
of stock issuable upon exercise of common stock equivalents.
Common stock equivalents consist of common stock options.
Earnings per share figures have been restated to take into
effect stock splits.

(l) Reclassifications

Certain 1994 and 1995 balances have been reclassified to
conform to the 1996 presentation.

(m) Unaudited quarterly financial data

Quarterly financial data is included in "Selected Consolidated
Financial and other Data", in the Corporation's Annual Report
on Form 10-K.

C-20

CASCADE FINANCIAL CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements

(Dollars in thousands, except share amounts)
- ------------------------------------------------------------------------------
(2) Securities
A summary of securities at June 30 follows:

1995 1996
------------------------------- -----------------------------
Amor- Gross Gross Amor- Gross Gross
tized unreal- unreal- tized unreal- unreal-
cost, ized ized Fair cost, ized ized Fair
net gain losses value net gain losses value
--- ---- ------ ----- --- ---- ------ -----

Securities
available-
for-sale:
Mutual funds $4,525 -- 18 4,507 21,139 -- 70 21,069
FHLB stock 3,319 -- -- 3,319 4,014 -- -- 4,014
FHLMC -- -- -- -- 28,025 -- 1,065 26,960
FNMA -- -- -- -- 6,361 -- 49 6,312
SBA -- -- -- -- 13,849 -- 128 13,721
------ -- --- ------ ------ -- ----- -------
7,844 -- 18 7,826 73,388 -- 1,312 72,076

Securities
held-to
maturity:
Mortgage-
backed
securities
FHLMC 61,612 268 748 61,132 9,941 -- 504 9,437
FNMA 8,284 -- 56 8,228 -- -- -- --
------ --- --- ------ ------ -- ----- -----
69,896 268 804 69,360 9,941 -- 504 9,437
------ --- --- ------ ------ -- ----- ------
77,740 268 822 77,186 83,329 -- 1,816 81,513
====== === === ====== ====== == ===== ======

As of June 30, 1995 and 1996, the Corporation was required to maintain
30,580, and 34,271 shares respectively, of $100 par value FHLB stock.

Accrued interest receivable on securities and interest-bearing deposits
was $23, and $250 at June 30, 1995, and 1996, respectively. Accrued
interest receivable on mortgage-backed securities was $524, and $278
for the same periods. At June 30, 1995, all mortgage-backed securities
are held-to- maturity.

Mortgage-backed securities are allocated based upon contractual
maturity dates. Actual maturities may differ from contractual
maturities because the borrowers have the right to prepay their
obligations. Held-to-maturity and available-for-sale securities
pledged as collateral to secure public deposits were $881 and $0 in
1995 and $0 and $904 in 1996, respectively.

C-21

CASCADE FINANCIAL CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements

(Dollars in thousands, except share amounts)
- ------------------------------------------------------------------------------
Proceeds from the sale of securities available-for-sale and gross
realized gains and losses are summarized as follows:

Proceeds Gains Losses
-------- ----- ------

Securities available-for-sale:
Year ended June 30, 1995
Equity securities $11,000 -- 23
FHLMC-PC's 12,033 -- 81
------- --- ---
Total 23,033 -- 104
======= === ===
Year ended June 30, 1996
FHLMC-PC's 32,406 360 22
------- --- ---
Total 32,406 360 22
======= === ===

The following table shows the contractual maturities of the Corporation's
securities held-to-maturity at June 30, 1996:

Over five
Within one Over one to to ten Over ten
year five years years years Total
---------- ----------- --------- --------- -----

Amortized Cost
FHLMC $2,244 7,697 -- -- 9,941
------ ----- -- -- -----
Total amortized
cost 2,244 7,697 -- -- 9,941
------ ----- -- -- -----
Fair Value
FHLMC $2,192 7,245 -- -- 9,437
------ ----- -- -- -----
Total fair value 2,192 7,245 -- -- 9,437
====== ===== == == =====

C-22

CASCADE FINANCIAL CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements

(Dollars in thousands, except share amounts)
- ------------------------------------------------------------------------------
The following table shows the contractual maturities of the Corporation's
securities available-for-sale at June 30, 1996:

Over five
Within one Over one to to ten Over ten
year five years years years Total
---------- ----------- --------- --------- -----

Amortized Cost
FHLMC $ -- 2,148 1,582 24,295 28,025
FNMA -- -- -- 6,361 6,361
SBA -- -- -- 13,849 13,849
Mutual Funds 21,139 -- -- -- 21,139
FHLB Stock 4,014 -- -- -- 4,014
------- ----- ----- ------ ------
Total Amortized cost 25,153 2,148 1,582 44,505 73,388
======= ===== ===== ====== ======

Fair Value
FHLMC $ -- 2,030 1,525 23,405 26,960
FNMA -- -- -- 6,312 6,312
SBA -- -- -- 13,721 13,721
Mutual Funds 21,069 -- -- -- 21,069
FHLB Stock 4,014 -- -- -- 4,014
------- ----- ----- ------ ------
Total fair value 25,083 2,030 1,525 43,438 72,076
======= ===== ===== ====== ======

C-23

CASCADE FINANCIAL CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements

(Dollars in thousands, except share amounts)
- ------------------------------------------------------------------------------
(3) Loans

A summary of loans and loans held for sale at June 30 follows:

1995 1996
---- ----
Real estate mortgage:
One-to-four family $157,518 159,749
Multifamily 27,169 37,540
Commercial 16,770 14,739
Home equity 3,553 6,792
Installment -- 507
Real estate construction:
One-to-four family 22,708 28,277
Land loans 202 194
-------- -------
Total loans 227,920 247,798

Loans in process (6,215) (9,082)
Deferred loan fees, net (2,146) (2,158)
Allowance for loan losses (2,950) (2,946)
-------- -------
216,609 233,612
Loans held for sale (6,040) (4,678)
-------- -------
Loans, net 210,569 228,934
======== =======

Loans services for others $ 46,671 78,210

Accrued interest on loans is $1,333 and $1,535, respectively, at
June 30, 1995 and 1996.

At June 30, 1996, the composition of the loan portfolio was as
follows (in thousands):

Fixed Rate Adjustable Rate
---------- ---------------

Term to Maturity:
Less than one year $ 35,000 71,763
1-3 years 11,662 29,640
3-5 years 44,517 26,273
5-10 years 8,676 --
10-20 years 7,371 --
Over 20 years 12,896 --

C-24

CASCADE FINANCIAL CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements

(Dollars in thousands, except share amounts)
- -----------------------------------------------------------------------------

Nonaccrual loans totaled $597 and $373, respectively at June 30, 1995
and 1996. If interest on these loans had been recognized, such income
would have been $24 and $8, respectively for 1995 and 1996. In
addition, at June 30, 1995 and 1996, the Corporation had restructured
loans aggregating $4,168 and $4,150, respectively. During 1994, 1995
and 1996 $267, $280 and $330, respectively was recognized in interest
income on these loans. Had these loans not been restructured and
interest accrued at their original rates, the additional interest income
would have been $192, $148 and $97, respectively for 1994, 1995 and
1996.

At June 30, 1996, loans totaling $1,599 were impaired of which $1,226
had allocated reserves of $300. The remaining $373 had no reserves
allocated to them since the value of the impaired loans was equal to or
exceeded the recorded investment. Of the $1,599 of impaired loans, $373
were on nonaccrual status, $0 were under foreclosure and $1,226 were
performing but judged to be impaired. The average balance of impaired
loans during the year was $1,680 and the Corporation recognized $156 of
related interest income. Interest income is normally recognized on the
accrual basis, however, if the impaired loan is nonperforming, then
interest income is recorded on the receipt of cash. The difference
between interest income recognized on the accrual basis and cash basis
is not significant.

At June 30, 1995 and 1996, the Corporation had outstanding commitments
to fund loans with fixed interest rates totaling $8,000 and $5,200,
respectively and loans with adjustable rates totaling $6,300 and $6,100,
respectively.

The Corporation has forward commitments to sell loans into the secondary
market totaling $7,050, and $5,014 respectively, at June 30, 1995 and
1996.

Significant Gain

On August 12, 1994, a $5,100 loan was repaid and the Corporation
recorded an after-tax gain of approximately $1,450. The components of
the gain included deferred interest and reimbursement of legal expenses
and other costs.

(4) Allowance for Losses on Loans Receivable and Real Estate Owned

A summary of the allowance for losses on loans receivable and real
estate owned follows:

Year ended June 30
-------------------------
1994 1995 1996
---- ---- ----

Loans receivable:
Balances beginning of year $3,090 3,485 2,950
Provision for loss 495 -- --
Reversal of prior provision
for losses -- (335) --
Charge-offs (100) (200) (4)
------ ----- -----
Balances at end of year 3,485 2,950 2,946
====== ===== =====

C-25

CASCADE FINANCIAL CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements

(Dollars in thousands, except share amounts)
- -----------------------------------------------------------------------------
Year ended June 30
-------------------------
1994 1995 1996
---- ---- ----

Real estate owned:
Balances at beginning of year 391 -- --
Provision for loss -- -- --
Charge-offs (391) -- --
------ ----- -----
Balances at end of year -- -- --
====== ===== =====

(5) Premises and Equipment

A summary of premises and equipment follows:
June 30
Estimated -------------
useful lives 1995 1996
------------ ---- ----

Land $ 713 713
Buildings 40 years 6,397 6,485
Leasehold improvements Lease term 394 425
Furniture and equipment 2-10 years 3,453 3,578
Automobiles 3-4 years 19 19
------- ------
10,976 11,220
Less accumulated depreciation and
amortization 4,617 5,133
------- ------
6,359 6,087
======= ======

The Corporation took a one-time restructuring charge of $332 during the
year ended June 30, 1995 due to a reduction in its mortgage banking
activity. This restructuring charge included a write off of
approximately $200 in premises and equipment.

During 1995, the FASB issued SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of". The Statement establishes accounting standards for the impairment
of long-lived assets that either will be held and used in operations or
that will be disposed of. The adoption is not anticipated to have a
material impact on the results of operations or financial condition of
the Corporation.

C-26

CASCADE FINANCIAL CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements

(Dollars in thousands, except share amounts)
- -----------------------------------------------------------------------------
(6) Deposits

A summary of deposits follows:

June 30
----------------------------------
1995 1996
Amount Percent Rate Amount Percent Rate
------ ------- ---- ------ ------- ----
Checking accounts:
Noninterest bearing $ 829 0.40% 1,555 0.71
Interest bearing 7,304 3.60 2.05-2.30% 8,038 3.69 1.70-2.03
Money market deposit
accounts 19,740 9.90 2.05-4.45 34,982 16.04 4.18-6.00
------- ------ ------- ------
27,873 13.90 44,575 20.44
------- ------ ------- ------
Savings accounts 8,133 4.10 3.00 7,922 3.63 3.08
------- ------ ------- ------
Time deposits by
interest rate:
3.00-3.99% 367 0.20 32 0.01
4.00-4.99% 15,502 7.80 8,648 3.97
5.00-5.99% 51,561 25.80 117,089 53.70
6.00-6.99% 91,659 45.80 36,939 16.94
7.00-7.99% 4,172 2.10 2,389 1.10
8.00-8.99% 474 0.20 469 0.21
9.00 and over 197 0.10 0 0.00
------- ------ ------- ------
163,932 82.00 165,566 75.93
------- ------ ------- ------
199,938 100.00 218,063 100.00
======= ====== ======= ======

C-27

CASCADE FINANCIAL CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements

(Dollars in thousands, except share amounts)
- -----------------------------------------------------------------------------
Deposit
accounts with
Weighted balances in Accrued
average interest excess of interest payable
rate on deposits $100,000 on deposits
---------------- ------------- -----------------

June 30, 1995 5.8% $33,586 524
June 30, 1996 5.5% 38,682 436

A summary of interest expense on deposits follows:

Year ended June 30
------------------------------
1994 1995 1996
---- ---- ----

Checking accounts $1,295 1,076 1,063
Savings accounts and time deposits 6,413 8,057 10,328
------ ----- ------
$7,708 9,133 11,391
------ ----- ------

Maturities of time deposits are as follows:

June 30
----------------------
1995 1996
---- ----
Years ending June 30:
1996 $118,824 $ --
1997 17,972 123,400
1998 8,055 15,107
1999 6,185 8,657
2000 12,789 13,130
2001 -- 5,164
Thereafter 107 108
-------- --------
163,932 165,566
======= =======

(7) Asset and Liability Management Activities

The Corporation has entered into interest rate swap and cap agreements
with primary dealers, the Federal Home Loan Bank of Seattle ("FHLB") and
other correspondent banks to manage interest rate risk or reduce deposit
costs. Swap and cap agreements expose the Corporation to credit risk in
the event of nonperformance by counterparties to such agreements. This
risk consists primarily of the termination value of agreements where the
Corporation is in a favorable position. The Corporation controls the
credit risk associated with its swap and

C-28

CASCADE FINANCIAL CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements

(Dollars in thousands, except share amounts)
- -----------------------------------------------------------------------------
cap agreements through counterparty credit review and monitoring
procedures. None of the Corporation's derivative instruments are what
are termed leveraged derivative instruments.

During the years ended June 30, 1995 and 1996, the Corporation entered
into interest rate swaps with notional values totaling $7.5 million and
$0, respectively. These swaps had the effect of reducing the
Corporation's interest expense on deposits. The net difference between
the interest received and paid on the interest rate swaps of $54, $42
and $49, respectively for the years ended June 30, 1994, 1995 and 1996,
is recorded as a decrease to interest expense on deposits.

On June 28, 1996, the Corporation entered into interest rate cap
agreements with notional values totaling $5,000. These agreements were
designated against certain loans. If three month Libor exceeds 6%, the
net interest received would be recorded as an increase to interest
income on loans.

Interest rate cap agreements at June 30, 1996 are summarized as follows:

Notional amount $5,000
Weighted average maturity 24 months
Strike rate 6.00%
Three month Libor 5.56%
Payment terms Quarterly

(8) FHLB Advances

FHLB advances are summarized as follows:

June 30
-------------------------------------------------------
1995 1996
------------------------- -------------------------
Weighted average Weighted average
Maturity date Amount interest rate Amount interest rate
- ------------- ------ ---------------- ------ ----------------

Year ended June 30:
1996 $30,000 6.27% -- --
1997 21,000 6.74 52,383 5.87
1998 10,000 6.27 16,000 5.81
Thereafter 159 7.67 159 7.67
------- ---- ------ ----
$61,159 6.44 68,542 5.86
======= ==== ====== ====

FHLB advances are collateralized by the investment in FHLB stock and otherwise
unencumbered one-to-four family permanent mortgages equal to 120% of
outstanding advances.

C-29

CASCADE FINANCIAL CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements

(Dollars in thousands, except share amounts)
- ----------------------------------------------------------------------------
(9) Securities Sold Under Agreements to Repurchase and Lines of Credit

The Corporation enters into sales of securities under agreements to
repurchase (reverse repurchase agreements) which are treated as
financing arrangements. Accordingly, the obligations to repurchase
securities sold are reflected as a liability in the consolidated balance
sheets, and the securities underlying the agreements remain in the asset
accounts. The securities underlying the agreements are under the
Corporation's control and are held by the Federal Home Loan Mortgage
Corporation, nationally known government security dealers who are
recognized as primary dealers by the Federal Reserve Board, or other
investment banking firms approved by the Corporation's Board of
Directors. Such agreements typically have maturities ranging from
thirty to 270 days.

Securities sold under agreements to repurchase the same securities
consist of mortgage-backed securities summarized as follows:

Underlying securities
---------------------
Book value,
Weighted- including
Balance average interest accrued Market
outstanding rate interest value
----------- ---- -------- -----

June 30, 1995 $23,285 6.12% 25,685 25,100
June 30, 1996 20,450 5.44 21,266 21,120

A summary of outstanding agreements' activity follows:

Year ended June 30
------------------
1995 1996
---- ----

Maximum amount of outstanding
agreements at any month-end $36,313 $24,261
Average amount of outstanding
agreements during the year 26,418 21,432

The Corporation has a commitment of $2,000 from a regional commercial
bank to purchase Federal funds on an unsecured basis subject to annual
renewal.

On June 28, 1996, the FASB issued SFAS No. 125, "Accounting for
Transfers and Servicing of Financial Assets and Extinguishment of
Liabilities". This Statement provides accounting and reporting
standards for transfers and servicing of financial assets and
extinguishment of liabilities and provides consistent standards for
distinguishing transfers of financial assets that are sales from
transfers that are secured borrowings. The adoption is not anticipated
to have a material impact on the results of operations or financial
condition of the Corporation.

C-30

CASCADE FINANCIAL CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements

(Dollars in thousands, except share amounts)
- ----------------------------------------------------------------------------
(10) Federal Income Taxes

Income tax expense includes the following components:

Year ended June 30
---------------------------------
1994 1995 1996
---- ---- ----

Current $1,033 151 780
Deferred -- 1,338 387
------ ----- -----
1,033 1,489 1,167
===== ===== =====

Deferred Federal income taxes result from temporary differences in the
recognition of income and expense for financial statement and income tax
reporting purposes. The sources of these temporary differences and
their tax effects follow:

Year ended June 30
--------------------
1995 1996
---- ----

Premises and equipment $ -- (12)
Loan fee income for financial
statements recognized for tax
purposes as loans are repaid 207 169
Differences between provision for
loan and securities losses taken
for financial statements and bad debt
deduction for tax purposes 863 141
FHLB stock dividend and redemptions 61 90
Deductible expenses previously
recognized for financial statements 212 --
Accrued expenses and mark-to-market adjustments 8 22
Prepaid expenses (13) (23)
----- ---
1,338 387
----- ---

The provision for Federal income tax expense approximates the amount
computed by applying the "expected" Federal income tax rate of 34% to
income before Federal income taxes.

Under provision of the Internal Revenue Code, the Corporation is allowed
a statutory bad debt deduction (based upon a percentage of taxable
income before such deduction) for additions to tax bad debt reserves
established for the purpose of absorbing losses on loans or property
acquired through foreclosure. SFAS 109 provides that savings banks are
not required to provide a deferred tax liability for additions to the
tax bad debt reserve accumulated as of December 31, 1987, which amount
for the Corporation is $473. This amount represents allocations of
income to bad debt deductions for tax reporting purposes only.
Reduction of amounts so allocated for purposes other than tax bad debt
losses will create income for tax reporting purposes only, which will be
subject to the then current corporate income tax rate.

C-31

CASCADE FINANCIAL CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements

(Dollars in thousands, except share amounts)
- ----------------------------------------------------------------------------
The following table presents major components of the net deferred tax
liability resulting from differences between financial reporting and tax
bases at June 30:

1995 1996
---- ----
Deferred tax assets:
Securities available-for-sale $ -- 446
Loans 90 --
------ ------
Gross deferred tax assets 90 446

Deferred tax liabilities:
Loans -- (51)
Deferred loan fees (824) (993)
Premises and equipment (370) (358)
FHLB stock (509) (599)
Other (36) (367)
------ ------
Gross deferred tax liabilities (1,739) (2,037)
------ ------
Net deferred tax liability (1,649) (1,591)
====== ======

A valuation allowance for deferred tax assets was not considered
necessary at June 30, 1995 or 1996.

(11) Retained Earnings

(a) Stock Conversion

Concurrent with the 1992 stock conversion, the Savings Bank
established a liquidation account equal to its retained earnings
as reflected in its March 31, 1992 statement of financial
condition. The liquidation account is maintained for the benefit
of eligible depositors who maintain eligible accounts in the
Savings Bank after the conversion. In the event of a complete
liquidation of the Savings Bank (and only in such an event),
eligible depositors who continue to maintain eligible accounts
shall be entitled to receive a distribution from the liquidation
account before any liquidating distribution may be made with
respect to common stock.

(b) Restrictions on Dividends

The Savings Bank's liquidation account does not restrict the use
or application of net worth except for the repurchase of stock
and the payment of dividends. Current regulations allow the
Savings Bank to pay dividends on its stock if its regulatory
capital would not thereby be reduced below the amount required
for the aforementioned liquidation account or statutory capital
requirements set by the Office of Thrift Supervision ("OTS").

C-32

CASCADE FINANCIAL CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements

(Dollars in thousands, except share amounts)
- ----------------------------------------------------------------------------
(c) Regulatory Capital

At June 30, 1996 banking regulations require institutions to have
a minimum regulatory tangible and core (or leverage) capital
equal to 1.5% and 3%, respectively, of adjusted total assets, and
Tier 1 and total risk-based capital ("RBC") equal to 4% and 8%,
respectively, of risk-weighted assets. The OTS has adopted a
final rule adding an interest rate risk component to the RBC
requirement although implementation of the regulation has been
delayed. Management currently does not believe the interest rate
risk rule will materially affect the Corporation's current
business strategy when it is implemented.

The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") instituted a risk-based assessment system that defined
five capital tiers: well-capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized. Under the regulations, a well capitalized
institution must have a Tier 1 RBC ratio of at least 6%, a total
capital ratio of at least 10% and a leverage ratio of at least 5%
and not be subject to a capital directive order. The Savings
Bank had a tangible capital ratio of 6.4%, Tier 1 RBC ratio of
12.4%, a total capital ratio of 13.7% and a leverage ratio of
6.4% at June 30, 1996, compared with 6.2%, 12%, 13.2% and 6.2% at
June 30, 1995, respectively. At June 30, 1996, the Savings Bank
was in compliance with the regulatory requirements for
well-capitalized institutions.

(12) Mortgage Servicing Rights

A summary of capitalized mortgage servicing rights and excess mortgage
servicing rights at June 30, 1995 and 1996 follows:

June 30
1995 1996
Excess Excess
Capitalized mortgage Capitalized mortgage
mortgage servicing servicing mortgage servicing servicing
rights rights rights rights
------------------ --------- ------------------ ---------

Fair value
at beginning
of year $ -- 3 169 74
Additions 222 85 400 53
Amortization 53 11 92 56
Sale -- 3 -- --
Allowance for
losses -- -- -- --
---- -- --- ---
Fair value at
end of year 169 74 477 171
=== == === ===

There was no activity in the allowance for loss for the years ended
June 30, 1995 and 1996.

C-33

CASCADE FINANCIAL CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements

(Dollars in thousands, except share amounts)
- ------------------------------------------------------------------------------
(13) Fair Value of Financial Instruments

Statement of Financial Accounting Standards No. 107 (SFAS 107),
"Disclosures About Fair Value of Financial Instruments," requires the
Corporation to disclose estimated fair values for its financial
instruments. The fair value estimates, methods and assumptions, set
forth below for the Corporation's financial instruments, are made solely
to comply with the requirements of SFAS 107 and should be read in
conjunction with the financial statements and footnotes in this report.
The fair value estimates are subjective in nature, involve uncertainties
and matters of significant judgment and, therefore, are not necessarily
indicative of the amounts the Corporation could realize in a current
market exchange. The Corporation has not included certain material
items in its disclosure, such as the value of the long-term
relationships with the Corporation's lending and deposit customers since
this is an intangible and not a financial instrument. Additionally, the
estimates do not include any tax ramifications. There may be inherent
weaknesses in any calculation technique, and changes in the underlying
assumptions used, including discount rates and estimates of future cash
flows, could materially affect the results. For all of these reasons,
the aggregation of the fair value calculations presented herein do not
represent, and should not be construed to represent, the underlying
value of the Corporation. The following table presents a summary of the
Corporation's financial instruments, as defined by SFAS 107:

At June 30, 1995 At June 30, 1995
Carrying Estimated Carrying Estimated
value fair value value fair value
----- ---------- ----- ----------
Financial assets:
Cash and short-
term securities $5,762 5,762 8,618 8,618
Securities
available-for-sale 7,826 7,826 72,076 72,076

Mortgage-backed
securities 69,896 69,360 9,941 9,437
Loans, net 221,705 224,383 238,716 240,205
Normal servicing
rights 169 169 477 540
Excess servicing
rights 74 74 171 194

Financial liabilities:
Deposit accounts 199,138 201,651 218,063 218,238
Borrowings 84,444 84,653 88,992 88,921
Interest rate swaps/
caps 7,500 7,507 5,000 5,000

Cash and short-term securities

The carrying amount represents fair value.

Securities

Fair values are based on quoted market prices or dealer quotes.

C-34

CASCADE FINANCIAL CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements

(Dollars in thousands, except share amounts)
- ------------------------------------------------------------------------------
Mortgage-backed securities

Fair values are based on quoted market prices or dealer quotes.

Loans, net

Fair values are estimated using current market interest rates to
discount future cash flows for each of fifteen different loan segments.
Interest rates used to discount the cash flows are based on U.S.
Treasury yields or other market interest rates with appropriate spreads
for each segment. The spread over the treasury yields or other market
rates is used to account for liquidity, credit quality and higher
servicing costs. Prepayment rates are based on expected future
prepayment rates or where appropriate and available, market prepayment
rates.

Servicing rights

Fair values for mortgage servicing rights are based on quoted market
prices discounted for costs to sell.

Deposit accounts

SFAS 107 states the fair value of deposits with no stated maturity, such
as checking accounts, money market deposit accounts and savings
accounts, equals the amount payable on demand. The fair value of
certificates of deposits is calculated based on the discounted value of
contractual cash flows. The discount rate is equal to the rate
currently offered on similar products.

Borrowings

The fair value is calculated based on the discounted cash flow method,
adjusted for market interest rates and terms to maturity.

Off-balance sheet financial instruments

Fair values are estimated using market interest rates to discount the
future cash flows of the held-for-sale commitments, sale agreements,
interest rate cap agreements and swaps. Commitments to originate
portfolio loans are valued consistent with the method described above
for loans receivable.

LIMITATIONS

These fair value disclosures are made solely to comply with the
requirements of SFAS 107. The calculations represent management's best
estimates; however, due to the lack of broad markets and the significant
items excluded from this disclosure the calculations do not represent
the underlying value of the Corporation at June 30, 1995 and 1996.
These amounts have not been updated since year-end; therefore, the
valuations may have changed significantly since that point in time.

C-35

CASCADE FINANCIAL CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements

(Dollars in thousands, except share amounts)
- ------------------------------------------------------------------------------
(14) Employee Benefit Plans

(a) Savings Plan

In October 1991, the Corporation adopted a savings plan under
section 401(k) of the Internal Revenue Code, covering
substantially all full-time employees after one year of continuous
employment. Under the plan, employee contributions are partially
matched by the Corporation. Such matching becomes vested over a
period of five years of credited service. Employees may make
investments in various stock, fixed income or money market plans,
or may purchase stock in the Corporation. The Corporation
contributed $24, $27 and $24 to the plan for the years ended June
30, 1994, 1995 and 1996, respectively.

(b) Employee Stock Ownership Plan

The Corporation established an employee stock ownership plan
(ESOP) which became effective on July 1, 1992 for employees of the
Corporation, the Savings Bank, and its subsidiary who have at
least one year of continuous service. The ESOP was initially
funded by the Corporation for $117 which was used to purchase
shares in the conversion. The Corporation pays all ESOP expenses.
Shares purchased by the ESOP are held in a suspense account for
allocation among the participants. Benefits become 20% vested
after the third year of service with an additional 20% vesting
each year thereafter until 100% vesting after seven years.
Forfeitures are reallocated annually among remaining participating
employees. For the years ended June 30, 1994, 1995 and 1996, the
Corporation contributed $100, $75 and $91, respectively to the
ESOP, which is invested in Cascade Financial Corporation stock.

The Corporation maintains an employee stock purchase plan, under
the terms of which 78,125 shares of Common Stock have been
authorized for issuance. The plan allows employees of the
Corporation with three months of service the opportunity to
purchase common stock through accumulated salary deductions during
each offering period. On the first day of each six month offering
period, (January 1 and July 1 of each year), eligible employees
who elect to participate are granted options to purchase a limited
number of shares and unless the participant withdraws from the
plan, the option is automatically exercised on the last day of
each offering period. The aggregate number of shares to be
purchased in any given offering is determined by dividing the
accumulated salary deduction for the period by the lower of 85% of
the market price of a common share at the beginning or end of an
offering period.

(d) Stock Options

The Corporation maintains stock option plans pursuant to which an
aggregate of shares of Common Stock have been authorized for
issuance to certain key employees and directors of the Corporation
and it subsidiaries upon exercise of stock options. The options
granted under these plans are, in general, exercisable under a
vesting schedule whereby all options become exercisable over seven
years, and expire not more than ten years after the date of grant.

C-36

CASCADE FINANCIAL CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements

(Dollars in thousands, except share amounts)
- ------------------------------------------------------------------------------
All options granted have limited rights which enable a holder,
upon a change in control of the Corporation, to elect to receive
cash equal to the difference between the exercise price of the
option and the fair market value of the common stock on the date
of exercise. At June 30, 1995 and 1996, 54,884 and 111,801
shares, respectively, were fully exercisable. They range in price
from $3.07 to $13.60 per share in 1995 and $2.46 to $12.40 per
share in 1996.

During 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-based Compensation". The statement requires expanded
disclosures of stock-based compensation arrangements with
employees and encourages (but does not require) application of the
fair value recognition provision in the statement. SFAS No. 123
does not alter the existing accounting rules for employee
stock-based programs. Companies may continue to follow rules
outlined in Accounting Principles Board Opinion 25 ("APB 25"), but
they will now be required to disclose the pro forma amounts of net
income and earnings per share that would have been reported had
the company elected to follow the fair value recognition provision
of SFAS No. 123. The adoption of the disclosure requirements of
SFAS No.123 will have no material impact on the results of
operations or financial condition of the Corporation.

Changes in total options outstanding during 1994, 1995 and 1996 are as
follows:
1994
----------------------------------
Shares Under Option Price Per
Option Share
------ -----
Outstanding at beginning of year 82,656 $6.00
Granted during year 66,100 14.50 to 10.50
Exercised during year (625) 10.50
Two Five-for-four stock splits 82,828 14.50 to 6.00
Forfeited during year (2,764) 14.50 to 3.84
------- --------------
Outstanding at end of year 228,195 9.28 to 3.84
======= ============

1995
----------------------------------
Shares Under Option Price Per
Option Share
------ -----

Outstanding at beginning of year 228,195 9.28 to 3.84
Granted during year 4,021 17.00 to 10.88
Exercised during year (5,788) 10.88 to 3.84
Five-for-four stock split 52,947 17.00 to 3.84
Forfeited during year (17,636) 9.28 to 3.84
------- --------------
Outstanding at end of year 261,739 13.60 to 3.07
======= =============

C-37

CASCADE FINANCIAL CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements

(Dollars in thousands, except share amounts)
- ------------------------------------------------------------------------------
1996
----------------------------------
Shares Under Option Price Per
Option Share
------ -----

Outstanding at beginning of year 261,739 13.60 to 3.07
Granted during year 35,789 17.00 to 13.30
Exercised during year (16,617) 7.42 to 3.07
Five-for-four stock split 66,673 17.00 to 3.07
Forfeited during year (15,346) 17.00 to 3.07
------- --------------
Outstanding at end of year 332,238 13.60 to 2.46
======= =============

(15) Contingencies

The Corporation is a defendant in various legal proceedings arising in
connection with its business. It is the opinion of management that the
financial position of the Corporation will not be materially adversely
affected by the final outcome of these legal proceedings and that
adequate provision has been made in the accompanying consolidated
financial statements.

At periodic intervals, the OTS and the Federal Deposit Insurance
Corporation ("FDIC") routinely examine the Corporation's financial
statements as part of their legally prescribed oversight of the thrift
industry. Based on these examinations, the regulators can direct that
the Corporation's financial statements be adjusted in accordance with
their findings. A future examination by OTS or the FDIC could include a
review of certain transactions or other amounts reported in the
Corporation's 1996 financial statements. In view of the increasingly
uncertain regulatory environment in which the Corporation operates, the
extent, if any, to which a forthcoming regulatory examination may
ultimately result in adjustments to the 1996 financial statements cannot
presently be determined.

On February 21, 1995, the United States Supreme Court refused to
consider the United States Ninth Circuit Court of Appeals ruling
upholding an OTS restitution order against the Corporation's former
Chairman and Chief Executive Officer. As a result the Corporation
recorded approximately $400 of after-tax income from the restitution
order. The OTS has separately brought an enforcement action in relation
to security provided by the former executive, and in March 1994, the
United States District Court for the Western District of Washington
entered a judgement requiring payment of approximately $280 to the
Corporation by the former executive. During 1996, $150 of this amount
was collected. Ultimate collection of the remaining amount will be
recorded as income when received.

On March 30, 1995, the United States District Court granted the
Corporation's motion for summary judgement in a suit brought by the
former executive against the Corporation and several current executive
officers.

C-38

CASCADE FINANCIAL CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements

(Dollars in thousands, except share amounts)
- ------------------------------------------------------------------------------
(16) Condensed Financial Information of Cascade Financial Corporation

Following are the condensed financial statements of Cascade Financial
Corporation (Parent only) for the period indicated. The holding company
was formed on November 30, 1994.

Balance Sheet
June 30,
--------------------
1995 1996
Assets: ---- ----

Cash $ -- 40
Investment in subsidiary 19,294 21,580
Other Assets -- 63
------- ------
19,294 21,683
====== ======
Liabilities and Stockholders' Equity:

Other Liabilities -- 2
Stockholders' equity 19,294 21,681
------- ------
19,294 21,683
====== ======

Statement of Operations
For the periods
November 30, 1994 to June 30, 1995 and
July 1, 1995 to June 30, 1996
--------------------------------------
1995 1996
---- ----
Equity in undistributed net income
of the subsidiary $1,088 2,356
Operating Expenses -- (135)
------ -----
Income before Federal income
taxes 1,088 2,221
Income tax benefit -- 47
------ -----
Net income 1,088 2,268
===== =====

C-39

CASCADE FINANCIAL CORPORATION
AND SUBSIDIARY
Notes to Consolidated Financial Statements

(Dollars in thousands, except share amounts)
- ------------------------------------------------------------------------------
Statement of Operations
For the periods
November 30, 1994 to June 30, 1995 and
July 1, 1995 to June 30, 1996
--------------------------------------
1995 1996
---- ----

Cash flows from operating activities:
Net income $1,088 2,268
Adjustments to reconcile net income
to net cash provided by operating
activities:
Equity in net income of subsidiary (1,088) (2,356)
Increase in other assets -- (63)
Increase in other liabilities -- 2
------ -----
Net cash used by operating
activities -- (149)
Cash flows from investing activities:
Dividends received from subsidiary -- 50
------ -----
Net cash provided by financing
activities -- 50

Cash flows from financing activities:
Proceeds from issuance of common stock,
net -- 139
------ -----
Net cash provided by financing
activities -- 139
------ -----
Net increase in cash and cash
equivalents -- 40
===== =====
Cash and cash equivalents:
Beginning of year -- --
------ -----
End of year -- 40
===== =====

C-40

CASCADE FINANCIAL CORPORATION AND SUBSIDIARY
FINANCIAL INFORMATION FOR THE SIX MONTHS ENDED DECEMBER 31, 1996
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, unaudited)

December 31, June 30,
ASSETS ------------ --------
- ------ 1996 1996
---- ----
Cash on hand and in banks $ 3,517 $ 3,627
Interest-earning deposits in other institutions 371 4,991
Securities available-for-sale 57,638 72,076
Loans available for sale, net 4,804 4,678
Mortgage-backed securities held to maturity
(market value of $10,754 and $9,437) 9,225 9,941
Loans, net 261,896 228,934
Real estate owned, net 639 747
Premises and equipment, at cost, net 6,149 6,087
Accrued interest receivable and other assets 3,811 3,350
-------- --------
TOTAL ASSETS $348,050 $334,431
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Deposits $225,306 $218,063
Federal Home Loan Bank advances 72,159 68,542
Securities sold under agreements to
repurchase 21,981 20,450
Advance payments by borrowers for taxes
and insurance 1,438 1,207
Principal and interest payable on loans
serviced for others 170 179
Accrued expenses and other liabilities 4,421 3,584
Deferred income taxes 1,352 1,591
-------- --------
TOTAL LIABILITIES 326,827 313,616

Preferred stock, $.01 par value,
500,000 shares authorized;
no shares issued or outstanding -- --

Common stock, $.01 par value,
5,000,000 shares authorized;
2,052,929 and 2,045,894 shares issued and
outstanding 20 20
Additional paid-in capital 4,278 4,250
Retained earnings, substantially restricted 17,504 17,410
Unrealized loss on securities available-for-sale (579) (865)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 21,223 20,815
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $348,050 $334,431
======== ========

See notes to consolidated financial statements.

C-41

CASCADE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)
(unaudited)

Three Months Ended Six Months Ended
December 31, December 31,
------------------ -----------------
1996 1995 1996 1995
---- ---- ---- ----
Interest income:
Loans $5,282 $4,712 $10,313 $ 9,283
Mortgage-backed securities
held-to-maturity 149 999 275 2,047
Securities available-for-
sale 1,018 110 2,055 208
FHLB stock dividends 82 62 163 120
Interest-bearing deposits 12 39 11 73
----- ----- ------ ------
Total interest income 6,543 5,922 12,817 11,731
Interest expense:
Deposits 2,944 2,921 5,904 5,795
Borrowed funds 1,412 1,187 2,688 2,464
----- ----- ------ ------
Total interest expense 4,356 4,108 8,592 8,259
----- ----- ----- -----
Net interest income 2,187 1,814 4,225 3,472
Provision for loan losses -- -- -- --
----- ----- ------ ------
Net interest income after
provision for loan losses 2,187 1,814 4,225 3,472
Other income:
Gain on sale of loans 22 88 80 243
Service charges 225 110 412 216
Loss on sale of securities
available-for-sale (16) -- (15) --
Gain on sale of real estate
owned 3 -- 3 --
Restitution recovery -- -- -- 150
Other 100 129 213 267
----- ----- ------ ------
Total other income 334 327 693 876
Other expenses:
Salaries and employee
benefits 923 768 1,765 1,633
Occupancy 298 294 579 582
Federal deposit insurance
premiums 96 127 1,441 251
Advertising 76 57 153 101
Data processing 84 66 156 135
Other 353 299 682 625
------ ------ ------ ------
Total other expenses 1,830 1,611 4,776 3,327
----- ----- ------ ------

Income before income
taxes 691 530 142 1,021
Federal income taxes 235 180 48 347
----- ----- ------ -----
Net income $ 456 $ 350 $ 94 $ 674
====== ====== ====== ======
Net income per common and
common equivalent share,
primary $ .20 $ .15 $ .04 $ .30
Net income per common and
common equivalent share,
fully diluted $ .20 $ .15 $ .04 $ .30
Weighted average common and
common equivalent shares
outstanding, primary 2,294,933 2,272,623 2,296,976 2,274,128
Weighted average common and
common equivalent shares
outstanding, fully diluted 2,299,712 2,272,623 2,299,366 2,275,617

See notes to consolidated financial statements.

C-42

CASCADE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands, except per share amounts)
(unaudited)

Six Months Ended
December 31,
-----------------
1996 1995
---- ----

Cash flows from operating activities:
Net income $ 94 $ 674
Adjustments to reconcile net income to
net cash provided by (used in) operating
activities:
Depreciation and amortization of
premises and equipment 255 270
Other -- (13)
Amortization of retained servicing rights 87 61
Additions to mortgage servicing rights (88) (215)
Deferred loan fees, net of amortization 193 39
Origination of loans held-for-sale and
mortgage-backed securities held for
trading (16,284) (25,920)
Proceeds from sale of loans held-for-sale
and mortgage-backed securities held for
trading 22,139 26,120
Net loss (gain) on sales of:
Securities available-for-sale 15 --
Premises and equipment 1 (4)
Federal Home Loan Bank stock dividend
received (163) (120)
Net change in accrued interest receivable
and other assets over principal and
interest payable on loans serviced for
others and accrued expenses and other
liabilities (13) (1,993)
------ -------
Net cash provided by (used in)
operating activities 6,236 (1,101)

Cash flows from investing activities:
Loans originated, net of principal repayments (33,169) (9,114)
Principal repayments on securities held-to
maturity 716 8,456
Principal repayments on securities available-
for-sale 3,770 --
Purchases of securities available-for-sale (10,797) (6,990)
Proceeds from sales of securities available-
for-sale 16,075 --
Purchase of real estate owned -- (46)
Proceeds from sales of real estate owned 108 --
Purchases of premises and equipment (318) (89)
Proceeds from sales of premises and equipment,
and other assets (1) 4
------ -------
Net cash used in investing activities (23,616) (7,779)

Subtotal, carried forward (17,380) (8,880)
------- -------

C-43

CASCADE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands, except per share amounts)
(unaudited)

Six Months Ended
December 31,
-----------------
1996 1995
---- ----
Subtotal, brought forward $(17,380) $ (8,880)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock 28 69
Net increase in deposits 7,243 2,010
Proceeds from Federal Home Loan Bank advances 75,150 42,383
Repayment of Federal Home Loan Bank advances (71,533) (36,500)
Net increase (decrease) in securities sold
under agreements to repurchase 1,531 (3,538)
Net decrease in advance payments by borrowers
for taxes and insurance 231 70
------- -------
Net cash provided by financing activities 12,650 4,494
------- -------
Net decrease in cash and cash equivalents (4,730) (4,386)
Cash and cash equivalents at beginning of period 8,618 5,762

Cash and cash equivalents at end of period $ 3,888 $ 1,376
======== ========

Supplemental disclosures of cash flow
information--cash paid during the period for:
Interest $ 8,627 $ 8,553
Federal income taxes 46 219
-------- --------
Supplemental schedule of noncash
investing activities:
Mortgage-backed securities reclassified
from held to maturity to available for sale $ -- $ 50,577
Mortgage loans securitized into Federal Home
Loan Mortgage Corporation participation
certificates -- --

See notes to consolidated financial statements.

C-44

CASCADE FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
(unaudited)

1. Presentation of Financial Information

The accompanying financial information is unaudited and has been
prepared from the books and records of Cascade Financial Corporation, (the
"Corporation"). The Corporation's sole subsidiary is Cascade Bank, ("Cascade"
or "The Bank"). In the opinion of management, the financial information
reflects all adjustments (consisting of normal recurring accruals) necessary
for a fair presentation of the financial condition, results of operations, and
cash flows in conformity with generally accepted accounting principles.

Certain information and footnote disclosures included in the
Corporation's consolidated financial statements for the year ended June 30,
1996, have been condensed or omitted from this report. Accordingly, these
statements should be read with the financial statements and notes thereto
included in the Corporation's Annual Report on Form 10-K.

2. Commitments and Contingencies

In the normal course of business there are various commitments to
fund mortgage loans. Management does not anticipate any material loss as a
result of these commitments.

Periodically there have been various claims and lawsuits against
the Corporation or the Bank, such as claims to enforce liens, condemnation
proceedings on properties in which the Bank holds security interests, claims
involving the making and servicing of real property loans and other issues
incidental to the Corporation's and the Bank's business. In the opinion of
management no significant loss is expected from any of such pending lawsuits.

3. Financial Statement Reclassification

Certain amounts in the financial statements for fiscal 1996 have
been reclassified to conform with the financial statement classification for
fiscal 1997.

4. Changes in Accounting Methods

In 1995, Statement of Financial Account Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to be Disposed Of", and SFAS No. 123, "Accounting for Stock-Based
Compensation", were issued. SFAS 121 establishes accounting standards for the
impairment of long-lived assets that either will be held and used in
operations or that will be disposed of. SFAS 123 requires expanded
disclosures of stock-based compensation arrangements with employees and
encourages (but does not require) application of the fair value recognition
provision in the statement. SFAS No. 123 does not alter the existing
accounting rules for employee stock-based programs. Companies may continue to
follow rules outlined in Accounting Principles Board Opinion 25 ("APB 25"),
but they will now be required to disclose the pro forma amounts of net income
and earnings per share that would have been reported had the company elected
to follow the fair value recognition provision of SFAS No. 123.

The adoption of the disclosure requirements of SFAS No. 123, and the
accounting methods of SFAS 121 are not expected to have a material impact on
the results of operations or financial condition of the Corporation.

C-45

Management's Discussion and Analysis of Financial Condition and Results of
Operations

PLAN OF MERGER

On February 6, 1997, Cascade Financial Corporation and Cascade Bank
entered into an Agreement and Plan of Merger with Amfirst Bancorporation, the
holding company for American First National Bank, pursuant to which Amfirst
will be merged into Cascade. In the transaction, Amfirst shareholders will
receive approximately two shares of Cascade common stock for each share of
Amfirst common stock. The transaction is subject to the approval of federal
banking regulators and the shareholders of Cascade and Amfirst. At December
31, 1996 American First had four offices located in Snohomish County and
assets of approximately $71 million. It is anticipated that the merger will be
completed during June of 1997 and will be treated as a pooling-of-interests.

ASSET/LIABILITY MANAGEMENT

Cascade, like other financial institutions, is subject to
fluctuations in interest rates because its interest-bearing liabilities
reprice on different terms than its interest-earning assets. During periods
of interest rate declines this position has a generally favorable impact on
net interest income, while increases in interest rates have a generally
adverse impact on net interest income.

Cascade uses a simulation model to measure its interest rate risk
and the effects on net interest income resulting from changes in market
interest rates. Based on this model (which includes a number of significant
assumptions and estimates), a 200 basis point increase in general interest
rates would reduce Cascade's annual net interest income by 7%. Cascade
manages interest rate risk by retaining in its portfolio permanent and
construction adjustable rate loans with repricing periods that generally do
not exceed five years. Cascade also originates a limited amount of
multi-family loans in its local market area. Principally all new fifteen and
thirty year loans are sold. Cascade extends the maturity of its liabilities
by offering deposit products to long-term, less rate sensitive customers, and
by periodically obtaining longer term FHLB-Seattle advances. Cascade also
uses interest rate swap and interest rate cap agreements to effectively extend
the repricing of short-term deposit accounts or reduce the cost of longer-
term deposits.

Cascade uses mandatory and optional forward commitments from
investment banking firms to mitigate the interest rate risk from its mortgage
banking operation.

CHANGES IN FINANCIAL CONDITION

Total assets increased to $348.1 million at December 31, 1996,
compared with $334.4 million at June 30, 1996. Loans, net increased by $33.0
million. The loan growth was funded by a decrease in interest-earning
deposits of $4.6 million and a decrease of $14.4 million in securities
available for sale. Increases in deposits and borrowings also helped to fund
the increase in loans. Deposits increased $7.2 million during the six months
ended December 31, 1996. Total borrowings increased by $5.1 million to $94.1
million.

Asset Quality

Nonperforming assets totaled $373,000 and $1.4 million at June 30,
1996 and December 31, 1996, respectively. Assets classified as substandard
increased from $2.5 million at June 30, 1996 to $3.6 million at December 31,
1996.

C-46

RESULTS OF OPERATIONS

Comparison of the Three and Six Months Ended December 31, 1996 and 1995

General

Net income for the three months ended December 31, 1996
increased to $456,000 compared with $350,000 in 1995. Net interest income
increased $373,000 for the quarter ended December 31, 1996 and other expenses
increased $219,000 over the prior year. Net income for the six months ended
December 31, 1996, decreased to $94,000 from $674,000 in 1995. The principal
reason for the decrease in the six months earnings was an $811,000 charge,
after tax, related to the recapitalization of the Savings Association
Insurance Fund (SAIF). Excluding this charge, net income for the six months
ended December 31, 1996 increased to $905,000 compared with the $674,000
earned in the six month period ended December 31, 1995.

Net Interest Income

Net interest income increased $373,000 compared to the quarter
ended December 31, 1995 to $2.2 million for the three months ended December
31, 1996. Net interest income increased by $752,000 for the six months ended
December 31, 1996 compared to 1995. Increased interest margins of 17 basis
points for the most recent quarter and 23 basis points for the six months
ended December 31, 1996 coupled with an increase of $32 million in interest
earning assets over the prior December's numbers were responsible for the
increase. The increase in earning assets was primarily in loans which is
consistent with management's policy of increasing Cascade's asset size in a
controlled manner. The increase in the net interest margin for the recent
period is a result of the higher margin loans Cascade is adding, an increase
in yield of adjustable rate loans, and slightly lower funding costs.

Cascade is focusing on adding nonconforming one-to-four family
loans, multi-family loans, home equity lines of credit and one-to-four family
construction loans to its portfolio. Nonconforming loans generally include
loans where the borrower has a debt level or other financial consideration
that makes the loan unsalable to government agencies such as FHLMC and FNMA.
Management believes these products provide the best returns for Cascade and
can be underwritten conservatively to ensure low delinquency, absent
unforeseen changes in local or national economic conditions. Additionally,
these loan types are typically not effected as much by refinance activity as
conforming loans. This should help to lower Cascade's overall origination and
servicing costs in the future.

Provision for Loan Losses

Cascade's provision for loan losses was $0 for both the six months
ended December 31, 1996 and 1995. Management intends to grow the
nonconforming, construction and income property portfolios. These loans
typically have a higher credit risk. Management monitors these loans at an
increased level to maintain credit quality and adequate reserve levels. At
December 31, 1996 and June 30, 1996, the Corporation's loan loss allowance
totaled $2.9 million, and the loan loss allowance as a percent of net loans
outstanding was 1.04% and 1.29%, respectively. The provision for loan losses
reflects management's quarterly evaluation of the adequacy of the allowance
for losses on loans. In determining adequacy, management considers changes in
the size and composition of the loan portfolio, actual loan loss experience,
current and anticipated economic conditions and other factors. The Bank has
not had to add to it's provision in recent years because substandard assets
have decreased from a high of $39.0 million at September 30, 1991 to $3.6
million at December 31, 1996. Nonperforming loans increased $979,000 to $1.4
million at December 31, 1996 as compared to the period ending June 30, 1996.
Substandard loans increased $1.1 million to $3.6 million during the same
period.

C-47

Other Income

Other income increased $7,000 to $334,000 for the three months
ended December 31, 1996 as compared with the three months ended December 31,
1995. For the six months ended December 31, 1996 other income decreased
$182,000 to $693,000 as compared to the six months ended December 31, 1995.
The principal reason for the decrease in other income was a $150,000
restitution recovery in 1995 that did not occur in 1996. Gain on sale of
loans decreased $66,000 and $163,000 for the three and six month periods
ending December 31, 1996 as compared to the same periods in 1995. The
reduction occurred as a result of the Bank's emphasis on portfolio lending
which resulted in a $9.6 million decrease in the origination of salable
products. Service charges increased $115,000 to $225,000 and $196,000 to
$412,000 for the three and six month periods ending December 31, 1996 as
compared to the same periods in 1995. Service charges generated from
increases in net loan and servicing portfolio's accounted for most of the
change.

Other Expenses

Other expenses increased to $1.8 million for the three months ended
December 31, 1996 compared with $1.6 million for the three months ended
December 31, 1995. Increases in salaries and employee benefits of $155,000
coupled with smaller increases in advertising and data processing costs
accounted for this increase. For the six month period ending December 31,
1996 other expenses totaled $4.8 million, a $1.5 million increase over the
December 31, 1995 total of $3.3 million. Federal deposit insurance premiums
increased $1.2 million, before taxes, as a result of the SAIF conversion
charge. Increases to salaries and employee benefits coupled with increased
advertising costs, both related to development of new products and services,
were responsible for increases in these areas.

Liquidity and Sources of Funds

Cascade maintains liquidity balances in Federal Home Loan Bank
deposits and short-term securities at levels in accordance with regulatory
guidelines. The Corporation held average liquid assets of $19.0 million in
December 1996, which was in excess of the required liquidity level of $15.1
million.

Loan commitments outstanding at December 31, 1996, were $14.6
million and will be funded through sales of loans, existing liquidity
balances, FHLB-Seattle advances, and other borrowings.

At December 31, 1996, the Corporation had $72.2 million in
outstanding advances from the FHLB-Seattle. The Corporation's credit line with
the FHLB-Seattle is 30% of total assets or up to $104.4 million. The
Corporation also had $22.0 million of reverse repurchase agreements
outstanding, an increase of $1.5 million from June 30, 1996.

Capital Resources

Cascade Bank is in full compliance with all capital requirements
established by the OTS at December 31, 1996. Cascade's regulatory capital,
capital requirements, and related excess capital amounts as of December 31,
1996 are presented in the following table:

C-48

Tangible capital Amount Percentage
---------------- ------ ----------

Tangible capital $21,667 6.22%
Less: Minimum requirement 5,227 1.50
------- -----
Excess $16,440 4.72%
======= =====

Core capital Amount Percentage
---------------- ------ ----------

Core capital $21,667 6.22%
Less: Minimum requirement 10,455 3.00
------- -----
Excess $11,212 3.22%
======= =====

Risk-based capital Amount Percentage
---------------- ------ ----------

Risk-based capital $24,210 11.90%
Less: Minimum requirement(1) 16,272 8.00
------- -----
Excess $ 7,938 3.90%
======= =====
(1) Based on risk-weighted assets.

The Federal Deposit Insurance Corporation Improvement Act of 1991
("FDICIA") was signed into law on December 19, 1991. Among other things, the
FDICIA provides the OTS, effective December 19, 1992, with broad powers to
take "prompt corrective action" to resolve problems of insured depository
institutions. The actions the OTS can take depend upon whether the
institution in question is "well capitalized," "adequately capitalized,"
"undercapitalized," "significantly undercapitalized" or "critically
undercapitalized." The OTS has advised the Corporation that at September 30,
1996, Cascade Bank, is a "well capitalized" institution.

The OTS issued a final rule on August 31, 1993 that incorporates an
interest rate risk component into the OTS's risk-based capital rule. The rule
requires that an institution with an "above normal" level of interest rate
risk hold additional capital against interest rate risk exposure. This
additional capital for interest rate risk exposure would be in excess of the
8% risk-based capital requirement. Only institutions whose measured interest
rate risk exceeds the above normal level, has risk-based capital below 12%,
and assets exceed $300 million will be required to maintain an interest rate
risk component. The interest rate risk component will be computed quarterly.
The OTS has postponed the date the component will first be deducted from an
institution's total capital until an appeal process is developed for the
measurement of an institution's interest rate risk.

Management currently does not believe the final rule will
materially adversely increase Cascade's regulatory capital requirement nor
materially adversely effect the current business strategy when, or if it is
implemented.

SAIF Premium Assessment

Cascade is a member of the SAIF. On September 30, 1996 the
President of the United States signed an omnibus appropriations bill which
contained, among other provisions, a requirement that member companies of SAIF
pay a one-time premium assessment to recapitalize the SAIF. The premium has
been assessed at 65.7 basis points applied to March 31, 1995 deposit balances
and was paid on November 30, 1996. In accordance with generally accepted
accounting principles, the Bank recorded the SAIF premium assessment as of
September 30, 1996, by charging to non-interest expense the amount of its $1.2
million assessment. The corresponding tax deduction will be taken on the
Corporation's tax return for fiscal 1997.

C-49

APPENDIX D

FINANCIAL INFORMATION FOR AMFIRST BANCORPORATION

MANAGEMENTS DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION
AND RESULTS OF OPERATIONS OF AMFIRST BANCORPORATION

General

The Bank is primarily engaged in commercial banking activities
including lending to local businesses to meet their credit needs and
commercial real estate lending. The Bank also offers consumer lending secured
by residential real estate, home equity lending, as well as secured and
unsecured personal lending. The Bank funds its activities principally through
deposits from its commercial business customers, and also from retail customer
deposits. The Bank has access to FHLB-Seattle advances, reverse repurchase
agreements and purchased Federal funds from a regional commercial bank.

Asset\Liability Management

The Bank's principal financial objective is to achieve long-term
profitability while maintaining little exposure to fluctuations in interest
rates. To accomplish this objective, management has formulated an
asset/liability management policy with the following principal elements:
originate commercial loans with variable rates tied to the prime rate,
originate commercial real estate loans with fixed interest rates to generally
no more than five years, maintain a loan-to-deposit ratio of no more than 80%,
and maintain an investment portfolio with typically US Treasury securities
with maturities less than two years for liquidity and local municipal
securities for generation of tax-free income. Additionally, the policy is to
require commercial loan customers to maintain non-or low interest bearing
checking deposits with the bank. Further the Bank seeks to attract long term,
stable term deposits by offering personal service rather than high interest
rates.

The Bank's asset and liability management strategy has resulted in
a positive one-year "gap" (i.e., the difference between its interest-sensitive
assets and interest-sensitive liabilities that mature or reprice within one
year, based upon certain estimates and assumptions) as a percent of total
assets of 5% at December 31, 1996.

Review of Financial Position

Total assets increased by $5.3 million to $71.1 million as of
December 31, 1996. Total loans increased by $2.1 million to $40.2 million,
principally by an increase of $2.9 million in real estate based loans and
$401,000 increase in installment loans offset by a decrease in commercial
loans of $1.1 million. Cash and securities increased by $2.7 million to $27.5
million at December 31, 1996. This increase was in US Treasury and agency
available-for-sale securities which increased by $4.0 million to $12.4
million.

Deposits increased by $4.1 million to $64.9 million at December 31,
1996. This increase was the result of increases of $954,000 in
interest-bearing checking, $1.2 million money market accounts, and $1.5
million in savings accounts.

Non-accrual loans totaled $497,000 at December 31, 1996, a $456,000
increase from December 31, 1995. The allowance for loan losses totaled
$441,000 at December 31, 1996, an increase of $97,000 compared to the
allowance at December 31, 1995. The allowance as a percent of outstanding
loans was 1.1% and 0.9% at December 31, 1996 and 1995, respectively.

Real Estate Acquisition

On December 31, 1996, AmFirst completed the acquisition of assets
and assumption of liabilities of Rainville & Associates, Inc. through a merger
accounted for as a pooling-of-interests. The principal assets of this
company were the buildings and land which the Bank occupies for two branch
locations. See Note 12-REAL ESTATE ACQUISITION, in the Notes to Consolidated
Financial Statements, for additional information.

D-1

RESULTS OF OPERATIONS

General

Net income increased to $574,000 for the year ended December 31,
1996 compared to $413,000 for the year ended December 31, 1995. The increase
is principally the result of an increase of $369,000 in net interest income
offset by a $124,000 increase in the provision for loan losses and $51,000
increase in other expenses.

Interest Income

For the year ended December 31, 1996, total interest income
increased by $630,000 to $5.3 million compared with 1995 and the yield on
interest earning assets decreased to 8.41% in 1996 from 8.84% in 1995. The
principal reason for the increase in income was a $504,000 increase in
interest on loans to $4.1 million in 1996 as compared with $3.6 million. This
was the result of a $7.8 million average increase in loans outstanding to
$39.6 million in 1996 compared to $31.8 million in 1995. Offsetting this
increase was a decrease in the average yield on loans from 11.34% in 1995 to
10.39% in 1996. This decrease was due to decreasing balances of commercial
loans which have higher yields than those secured by real estate and an
increase in nonaccrual loans. Interest on municipal securities increased by
$110,000 in 1996 to $298,000. This increase was a result of a $2.3 million
increase in the average balance of municipal securities held and an increase
in the yield of 0.05% from 5.45% to 5.50%.

Interest Expense

Interest expense increased to $2.5 million for the year ended
December 31 1996 compared with $2.2 million in 1995 and the cost of funds
decreased to 4.22% in 1996 from 4.50% in 1995. The increase in interest
expense was due to increased balances of $8.0 million to fund the increased
earning assets. The decrease in the cost of funds was a result of higher
noninterest-bearing and low interest-bearing liabilities of $43.7 million and
slightly lower market interest rates.

Net Interest Income

Net interest income for the year ended December 31, 1996 increased
to $2.7 million compared with $2.4 million in 1995. The increase is a result
of higher earning asset balances of $10.2 million offset by a decrease in the
net interest margin to 4.39% in 1996 from 4.54% in 1995.

Provisions for Loan Losses

The provision for loan losses increased by $124,000 to $151,000 for
the year ended December 31, 1996. Several Small Business Administration loans
were placed on nonaccrual and subsequently changed off. Additionally, the
allowance for loan losses was increased during the year based on growth in the
Bank's loan portfolio. At December 31, 1996 and 1995, the allowance totaled
$441,000 and $344,000 respectively and was 1.1% and .9% respectively, of net
loans. The allowance for loan losses is continuously monitored and adjusted
as the economic conditions change. Although the allowance is maintained at
levels considered to be adequate to provide for potential losses, there can be
no assurance that such losses will not exceed the estimated amounts or that
additional provisions will not be necessary in the future.

Other Income

Other income increased by $12,000 to $383,000 for the year ended
December 31, 1996 as compared with 1995. Income from credit card activities
and other sales related revenues offset a slight decrease in service charges
on deposits.

D-2

Other Expenses

Other expenses increased by $51,000 to $2.2 million for the year
ended December 31, 1996. Total compensation expenses increased $17,000 and
occupancy expenses increased by $16,000 in 1996 compared with 1995.

Liquidity and Capital Resources

The Bank maintains liquid assets to meet both short-term funding
requirements and long-term growth objectives. The long-term growth objectives
are to attract and retain stable deposit relationships from its business and
consumer customers.

To meet its immediate needs for funds as well as long-term lending
demands, the Bank maintains various sources of liquid assets and borrowing
capabilities. At December 31, 1996, the Bank was able to borrow $7.1 million
from the FHLB-Seattle. The Bank has commitments of $1.3 million from two
regional commercial banks to purchase Federal funds on an unsecured basis
subject to periodic renewal. Additionally, the Bank is able to use its U.S.
Treasury and agency securities as collateral for repurchase agreements.

At December 31, 1996 there were outstanding commitments to
originate loans of $7.5 million. The Bank anticipates it will have sufficient
funds available to meet its current commitments through its liquidity balances
and deposit growth.

At December 31, 1996, the Bank was a "well capitalized" institution
under the prompt corrective action regulation. The following table summarized
the capital requirements and the Bank's capital position at December 31, 1996:

(Dollars in thousands) Minimum
Amount Percent of Assets Requirement
------ ----------------- -----------
Tier 1 leverage ratio $4,710 6.7% 3.0-5.0%
Risk-based capital ratio 5,151 12.1 8.0

D-3

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders
AmFirst Bancorporation
Everett, Washington

We have audited the accompanying consolidated balance sheets of AmFirst
Bancorporation as of December 31, 1996 and 1995, and the related consolidated
statements of income, changes in stockholders' equity, and cash flows for the
years then ended. These financial statements are the responsibility of
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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 financial position of AmFirst Bancorporation as of
December 31, 1996 and 1995, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted
accounting principles.

/s/ Hascal, Sjoholm & Company, P.S.

HASCAL, SJOHOLM & COMPANY, P.S.
Everett, Washington
January 31, 1997
D-4

AMFIRST BANCORPORATION
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995

A S S E T S
-----------

1996 1995
---- ----
ASSETS:
Cash and due from banks $ 4,017,614 $ 4,372,562
Federal funds sold 2,200,000 1,600,000
----------- -----------
Total cash and cash equivalents 6,217,614 5,972,562
----------- -----------
Securities available for sale (Note 2) 17,374,354 14,157,538
Securities to be held to maturity (Note 2) 3,918,682 4,721,324
----------- -----------
Total investment securities 21,293,036 18,878,862
----------- -----------
Loans, less unearned income and allowance
for loan losses of $540,905 and $435,496,
respectively (Note 3) 40,224,134 38,140,069
Bank premises and equipment, net (Note 5) 1,724,225 1,244,421
Federal Home Loan Bank stock 716,100 662,900
Cash surrender value of insurance on life
of officer 435,869 416,274
Accrued interest and other assets 487,887 465,872
----------- -----------
Total assets $71,098,865 $65,780,960
=========== ===========

The accompanying notes are an integral part of these financial statements.

D-5

L I A B I L I T I E S A N D S T O C K H O L D E R S ' E Q U I T Y
--------------------------------------------------------------------

1996 1995
---- ----
LIABILITIES:
Deposits-
Demand $12,212,468 $11,700,843
NOW Checking 6,046,586 5,092,670
Money Market 5,978,589 4,747,361
Savings 8,294,862 6,829,791
Time 32,365,856 32,397,724
----------- -----------
Total deposits 64,898,361 60,768,389

Note payable (Note 12) 417,834 -
Accrued interest and other liabilities 600,082 574,090
Deferred income taxes (Note 8) 79,158 79,806
----------- -----------
Total liabilities 65,995,435 61,422,285
----------- -----------
COMMITMENTS AND CONTINGENT
LIABILITIES (Notes 7 and 9)

STOCKHOLDERS' EQUITY:
Common stock, par value $1; 1,000,000
shares authorized, 331,408 and 299,231
shares issued and outstanding of which
493 and 778 are in treasury 331,408 299,231
Surplus 3,655,433 3,188,789
Unrealized gain on securities
available for sale, net of tax of
$50,158 and $77,006 (Note 2) 97,366 149,482
Retained earnings (Note 6) 1,030,069 736,644
Less treasury stock at cost (10,846) (15,471)
----------- -----------
Total stockholders' equity 5,103,430 4,358,675
----------- -----------
Total liabilities and stockholders'
equity $71,098,865 $65,780,960
=========== ===========

D-6

AMFIRST BANCORPORATION
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995

1996 1995
---- ----
Interest Income:
Interest and fees on loans $ 4,116,002 $ 3,611,793
Interest on investment securities -
U.S. Treasury Securities 670,931 616,142
Obligations of other U.S. government
agencies and corporations 85,909 74,523
Obligations of states and political
subdivisions 297,835 188,312
Interest on Federal funds sold 87,393 137,278
----------- -----------
Total interest income 5,258,070 4,628,048
----------- -----------
Interest Expense:
Interest on deposits 2,505,301 2,242,553
Interest on borrowed funds 9,468 11,152
----------- -----------
Total interest expense 2,514,769 2,253,705
----------- -----------
Net interest income 2,743,301 2,374,343

Provision for loan losses (Note 3) 151,378 27,200
----------- -----------
Net interest income after provision
for loan losses 2,591,923 2,347,143
----------- -----------
Other Income:
Service fees 187,654 199,651
Other 195,320 171,181
----------- -----------
Total other income 382,974 370,832
----------- -----------
Other Expenses:
Salaries 1,061,175 1,010,883
Payroll taxes and employee benefits 188,164 221,104
Occupancy expenses 294,206 277,949
Other operating expenses 692,028 674,641
----------- -----------
Total other expenses 2,235,573 2,184,577
----------- -----------
Income before income taxes 739,324 533,398

Provision for income taxes (Note 8) 165,102 120,000
----------- -----------
Net income $ 574,222 $ 413,398
=========== ===========
Earnings per share $ 1.83 $ 1.39
=========== ===========

The accompanying notes are an integral part of these financial statements.

D-7

AMFIRST BANCORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995

Capital Stock
--------------------
Shares Amount Surplus
------ ------ -------
Balance January 1, 1995 282,370 $282,370 $2,868,471

5% stock dividend (Note 6) 14,081 14,081 267,539

Cash paid for fractional share
dividends (Note 6) - - -

Exercise of director option (Note 11) 1,000 1,000 17,000

Sale of 1,780 shares at $19.50 and
$19.56 1,780 1,780 33,009

Purchase of 8,152 shares at $18.00 to
$20.00 for treasury - - -

Sale of 7,734 shares of treasury
stock at $19.50 to $21.00 - - 2,770

Net change in unrealized appreciation
on securities available for sale net
of tax of $77,006 - - -

1995 net income - - -
------- -------- ----------
Balance December 31, 1995 299,231 299,231 3,188,789

5% stock dividend (Note 6) 14,863 14,863 312,123

Cash paid for fractional share
dividends (Note 6) - - -

Stock exchanged for real estate
(Note 12) 16,000 16,000 126,215

Sale of 1,314 shares at $20.50
to $22.00 1,314 1,314 26,153

Purchase of 2,376 shares at $20.50
to $22.00 for treasury - - -

Sale of 2,661 shares of treasury
stock at $21.00 to $22.00 - - 2,153

Net change in unrealized appreciation
on securities available for sale net
of tax of $26,848 - - -

1996 net income - - -
------- -------- ----------
Balance December 31, 1996 331,408 $331,408 $3,655,433
======= ======== ==========

The accompanying notes are an integral part of these financial statements.

D-8

Net Unrealized
Appreciation
on Securities Treasury Stock
Available Retained -----------------
For Sale Earnings Shares Amount Total
- -------------- -------- ------ ------ -----
$ - $ 606,539 - $ - $3,757,380

- (281,620) - - -

- (1,673) - - (1,673)

- - - - 18,000

- - - - 34,789

- - 8,152 (156,557) (156,557)

- - (7,374) 141,086 143,856

149,482 - - - 149,482

- 413,398 - - 413,398
- ---------- ---------- ------- -------- ----------
149,482 736,644 778 (15,471) 4,358,675

- (326,986) - - -

- (2,102) - - (2,102)

- 48,291 - - 190,506

- - - - 27,467

- - 2,376 (49,994) (49,994)

- - (2,661) 54,619 56,772

(52,116) - - - (52,116)

- 574,222 - - 574,222
- ---------- ---------- ------- -------- ----------
$ 97,366 $1,030,069 493 $(10,846) $5,103,430
========== ========== ======= ======== ==========

D-9

AMFIRST BANCORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995

1996 1995
---- ----

Cash Flows From Operating Activities:
Interest and fees received on loans and
investments $ 5,149,352 $ 4,456,978
Other cash received 359,167 350,212
Interest paid (2,558,099) (2,088,068)
General and administrative expenses paid (2,008,982) (1,950,782)
Income taxes paid (217,866) (259,964)
----------- -----------
Net cash provided by operating
activities 723,572 508,376
----------- -----------
Cash Flows From Investing Activities:
Proceeds from maturities and calls of
investment securities 5,681,666 3,898,769
Purchases of investment securities (8,048,561) (7,865,823)
Net increase in loans (2,244,400) (8,004,593)
Proceeds from sale of equipment 5,726 3,001
Purchase of bank premises and equipment (46,428) (190,132)
Proceeds from sale of other real estate
owned - 81,103
----------- -----------
Net cash used in investing activities (4,651,997) (12,077,675)
----------- -----------
Cash Flows From Financing Activities:
Net increase in deposits 4,129,972 13,740,501
Net proceeds from stock transactions 45,607 40,088
Dividends paid - fractional shares (2,102) (1,673)
----------- -----------
Net cash provided by financing
activities 4,173,477 13,778,916
----------- -----------
Net increase in cash and cash equivalents 245,052 2,209,617

Cash and cash equivalents, beginning of year 5,972,562 3,762,945
----------- -----------
Cash and cash equivalents, end of year $ 6,217,614 $ 5,972,562
=========== ===========

The accompanying notes are an integral part of these financial statements.

D-10

1996 1995
---- ----

Reconciliation of Net Income to Net Cash
Provided By Operating Activities:
Net income $ 574,222 $ 413,398
Adjustments to reconcile net income to net
cash provided by operating activities -
Provision for loan losses 151,378 27,200
Depreciation and amortization of premises
and equipment 162,092 157,914
Gain on sale of equipment (773) (1,060)
FHLB stock dividend (53,200) (41,700)
Amortization of investment security
premiums, net of accretion of discounts (43,840) (57,733)
Gain on sale of securities (3,439) -
Amortization of unearned interest - (45)
Amortization of organization costs 2,765 2,765
Increase in cash surrender value of life
insurance (19,595) (19,560)
Deferred income taxes (52,764) (17,970)
Increase (decrease) in unamortized loan
origination fees 8,956 13,009
(Increase) decrease in interest receivable (20,634) (84,600)
(Increase) decrease in other assets (4,145) 15,147
Increase (decrease) in interest payable (43,330) 165,636
Increase (decrease) in other liabilities 65,879 (64,025)
----------- -----------
Net cash provided by operating
activities $ 723,572 $ 508,376
=========== ===========

D-11

AMFIRST BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995

NOTE 1 - Summary of Significant Accounting Policies:
------------------------------------------

NATURE OF OPERATIONS - The Bank provides a variety of financial
services to individuals and corporate customers through four
branches in the greater Everett area. The Bank's primary source of
revenue is commercial and real estate loans to businesses and
individuals.

BASIS OF CONSOLIDATION - The 1996 and 1995 financial statements
include the financial position and results of operations of AmFirst
Bancorporation (AmFirst) and its wholly owned subsidiary, American
First National Bank (Bank). All intercompany transactions have been
eliminated.

ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Material estimates that are particularly susceptible to significant
changes relate to the determination of the allowance for losses on
loans.

CASH AND DUE FROM BANKS - Included in cash and due from banks are
legally reserved amounts which are required to be maintained on an
average basis in the form of cash and balances due from the Federal
Reserve Bank and other banks. Reserve requirements at December 31,
1996 and 1995, amounted to $50,000 for each year.

SECURITIES AVAILABLE FOR SALE - Securities available for sale are
carried at fair value, based upon market quotations. Deferred
income taxes are provided on any unrealized appreciation or decline
in value. Such appreciation or decline in value, net of deferred
taxes is reflected as a separate component of stockholders' equity.

SECURITIES TO BE HELD TO MATURITY - Securities which the bank has
the intent and ability to hold to maturity are carried at cost.
Premiums and discounts on these securities are amortized to expense
and accreted to income over the life of the securities using a
method which approximates the level yield method. Gain or loss on
sales are based on the specific identification method.

D-12

AMFIRST BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995

NOTE 1 - Summary of Significant Accounting Policies (continued):
-------------------------------------------------------

RECOGNITION OF INTEREST INCOME - Interest on commercial and real
estate loans is computed daily based on the principal amount
outstanding. Interest on installment loans is recognized on the
interest method. Interest accruals are discontinued when, in the
opinion of management, it is not reasonable to expect that such
interest will be collected.

Loan origination fees and related direct costs are deferred and
recognized as an adjustment of yield on the interest method.

ALLOWANCE FOR LOAN LOSSES - The allowance for loan losses is
established by charges to operations based on management's
evaluation of the assets, economic conditions, and other factors
considered necessary to maintain the allowance at an adequate level.
Uncollectible loans are charged to the allowance account in the
period such determination is made. Recoveries on loans previously
charged off are credited to the allowance account in the period
received.

BANK PREMISES AND EQUIPMENT - Bank premises, leasehold improvements
and equipment are stated at cost, less accumulated depreciation and
amortization. The provision for depreciation for equipment is
computed principally on the straight-line method over the estimated
useful lives of the assets, which range from 3 to 24 years. The
building is depreciated by the straight-line method over its
estimated life of 39 years. Leasehold improvements are amortized
over the lesser of the lease terms or the estimated lives of the
improvements. Costs of major additions and improvements are
capitalized. Expenditures for maintenance and repairs are charged
to operations as incurred. Gains or losses from the disposition of
property are reflected in operations, and the asset accounts and
related allowance for depreciation are reduced.

ORGANIZATION COSTS - Costs incurred in the organization of AmFirst
were amortized over sixty months.

PENSION PLAN - The Bank contributes to a "401(k)" retirement plan
covering employees who meet participation requirements. The amount
of the contribution is discretionary as determined by the Board of
Directors up to the maximum deduction allowed for Federal income tax
purposes. In 1996 and 1995 contributions to the plan amounting to
$29,376 and $29,148, respectively, are included in employee benefits
expense.

D-13

AMFIRST BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995

NOTE 1 - Summary of Significant Accounting Policies (continued):
-------------------------------------------------------

PER SHARE AMOUNTS - Per share amounts are calculated based on the
weighted average number of shares outstanding during the period
presented, with appropriate retroactive recognition for stock
dividends and splits.

INCOME TAXES - The Bank provides for income taxes based on its
income reported for financial statement purposes. Deferred income
taxes are provided for temporary differences in reporting income for
financial statement purposes and tax purposes. (See Note 8).

OTHER REAL ESTATE OWNED - Other real estate owned includes
foreclosed property held pending disposition. Real estate acquired
through foreclosure is valued at the lower of its fair value or the
recorded investment in the related loan. If subsequent declines in
value occur, the additional loss is charged to income.

CASH EQUIVALENTS - Cash equivalents include amounts due from banks,
short-term interest bearing deposits in banks, and federal funds
sold. Generally, federal funds are purchased and sold for one-day
periods. The Bank maintains cash balances in banks which will
exceed the federally insured amount of $100,000. The Bank remains
liable for any outstanding checks in the event of a default by a
depository bank.

NOTE 2 - Investment Securities:
----------------------

The carrying amounts of investment securities as shown in the
balance sheets and their approximate fair values at December 31 were
as follows:

Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----
Securities
Available for
Sale -

December 31, 1996:
U.S.
Government
and agency
securities $12,423,240 $ - $(10,109) $12,413,131
State and
municipal
securities 4,803,590 157,633 - 4,961,223
----------- -------- -------- -----------
$17,226,830 $157,633 $(10,109) $17,374,354
=========== ======== ======== ===========

D-14

AMFIRST BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995

NOTE 2 - Investment Securities (continued):
----------------------------------

Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------- ---------- ---------- -----

December 31, 1995:
U.S.
Government
and agency
securities $ 8,463,055 $ 57,137 $ (8,721) $ 8,511,471
State and
municipal
securities 5,467,995 178,072 - 5,646,067
----------- -------- -------- -----------
$13,931,050 $235,209 $ (8,721) $14,157,538
=========== ======== ======== ===========

Securities to be
held to maturity -
December 31, 1996:
U.S.
Government
securities $ 3,918,682 $ - $20,556 $ 3,898,126
=========== ======== ======== ===========

December 31, 1995:
U.S.
Government
securities $ 4,721,324 $ - $63,510 $ 4,657,814
=========== ======== ======== ===========

The scheduled maturities of securities to be held to maturity and securities
available for sale at December 31, 1996, were as follows:

Securities to be Held Securities Available
to Maturity For Sale
--------------------- --------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
--------- ----- --------- -----
Due in one
year or less $ 3,918,682 $ 3,898,126 $ 4,090,045 $ 4,100,221
Due from one
year to
five years - - 9,128,456 9,192,988
Due from six to ten
years - - 3,893,329 3,961,688
Due after ten years - - 115,000 119,457
----------- ----------- ----------- -----------
$ 3,918,682 $ 3,898,126 $17,226,830 $17,374,354
=========== =========== =========== ===========

D-15

AMFIRST BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995

NOTE 2 - Investment Securities (continued):
----------------------------------

Assets, principally securities, carried at approximately $2,000,000
and $1,000,000 at December 31, 1996 and 1995, respectively, were
pledged to secure public deposits and for other purposes required or
permitted by law.

NOTE 3 - Loans:
------

A summary of loans outstanding by category at December 31, 1996 and
1995, is as follows:

1996 1995
---- ----

Commercial, financial, and
agricultural $13,448,545 $14,554,627
Real estate - mortgage 24,596,704 21,702,410
Installment loans 2,719,790 2,318,528
----------- -----------
40,765,039 38,575,565
Less:
Allowance for possible loan losses (440,780) (344,327)
Net unamortized loan origination
fees (100,125) (91,169)
----------- -----------
Total loans $40,224,134 $38,140,069
=========== ===========

Loans on which the accrual of interest has been discontinued
amounted to $497,115 and $41,215 at December 31, 1996 and 1995,
respectively.

If interest had been accrued, such income would have approximated
$64,000 and $1,800 for 1996 and 1995, respectively.

The Bank grants commercial, real estate and installment loans to
customers predominantly in northwestern Washington. Although the
Bank has a diversified loan portfolio, a substantial portion of its
debtors' ability to honor their contracts is dependent upon the
economy of the region.

D-16

AMFIRST BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995

NOTE 3 - Loans (continued):
------------------

A summary of loan maturities and the approximate amounts of loans
carrying fixed and variable interest rates as of December 31, 1996
and 1995, is as follows:

1996
--------------------------------------------------
Within One to After
One Year Five Years Five Years Total
-------- ---------- ---------- -----

Fixed rate loans $ 5,166,000 $11,131,000 $ 1,591,000 $17,888,000
Variable rate
loans 21,900,000 978,000 - 22,878,000

1995
--------------------------------------------------
Within One to After
One Year Five Years Five Years Total
-------- ---------- ---------- -----

Fixed rate loans $ 3,061,000 $ 9,079,000 $ 1,334,000 $13,474,000
Variable rate
loans 24,110,000 991,000 - 25,101,000

Changes in the allowance for loan losses at December 31, 1996 and
1995, are as follows:

1996 1995
---- ----
Balance at beginning of year $ 344,327 $ 356,864
Provision charged to operating expenses 151,378 27,200
Loan losses:
Loans charged off (54,925) (39,737)
--------- ---------
Balance at end of year $ 440,780 $ 344,327
========= =========

For Federal income tax purposes, the allowance for loan losses is
maintained at the maximum allowable by the Internal Revenue Code.

D-17

AMFIRST BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995

NOTE 4 - Related Party Transactions:
---------------------------

Certain parties (principally directors and senior officers of the
Bank, including their affiliates, families, and companies in which
they hold ten percent or more ownership) were customers of, and had
loans and other transactions with the Bank in the ordinary course of
business. The balances of such loans at December 31, 1996 and 1995,
are as follows:

1996 1995
---- ----
Loans to officers, directors, and related
companies $2,264,970 $1,894,445
========== ==========

These totals exclude loans made in the ordinary course of business
to other companies with which the Bank does not have a relationship
other than the association of one of its directors in the capacity
of officer or director. These loan transactions were made on
substantially the same terms as those prevailing at the time for
comparable loans to other persons. They did not involve more than
the normal risk of collectibility or present other unfavorable
features.

Real property for two of the Bank's four locations was leased from a
corporation in which a bank officer and directors are stockholders.
Total rental expense associated with these operating leases amounted
to $88,782 and $84,794 in 1996 and 1995, respectively. (See Note
12).

NOTE 5 - Bank Premises and Equipment:
----------------------------

Annual provisions for depreciation and amortization total $162,092
for 1996 and $157,914 for 1995. The following is a summary of bank
premises and equipment as of December 31, 1996 and 1995:

1996 1995
---- ----

Land $ 857,471 $ 325,567
Bank building 313,735 162,043
Leasehold improvements 654,706 654,706
Furniture and equipment 988,014 950,250
Transportation equipment 11,582 11,582
---------- ----------
2,825,508 2,104,148
Less allowance for depreciation and
amortization 1,101,283 859,727
---------- ----------
$1,724,225 $1,244,421
========== ==========

D-18

AMFIRST BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995

NOTE 6 - Limitation on Dividends:
------------------------

The approval of the Comptroller of the Currency is required before
the Bank's dividends to AmFirst in a given year may exceed the total
of its net profit (as defined) for the year combined with retained
net profits of the preceding two years.

A 5% stock dividend was issued September 17, 1996, to AmFirst
shareholders of record at September 1, 1996. A 5% stock dividend
was issued September 18, 1995, to AmFirst shareholders of record at
September 1, 1995. Retained earnings have been capitalized in an
amount equal to the fair market value of the additional shares
issued.

NOTE 7 - Leases:
-------

The Bank leases the main branch/administration offices under a 12
year noncancelable operating lease beginning in April, 1996. The
lease requires monthly payments of $7,439 with adjustments every
three years based on the Consumer Price Index.

Total rental expense was $90,054 and $82,656 in 1996 and 1995,
respectively.

Future minimum lease commitments as of December 31, 1996 are as
follows:

Year Ending December 31,
- ------------------------
1997 $ 89,268
1998 89,268
1999 89,268
2000 89,268
2001 89,268
2002 and thereafter 557,925
-----------
$1,004,265
==========
D-19

AMFIRST BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995

NOTE 8 - Federal Income Taxes:
---------------------

The provisions for Federal income taxes consist of the following at
December 31, 1996 and 1995:
1996 1995
---- ----
Current $ 151,340 $ 137,970
Deferred 13,762 (17,970)
---------- ----------
Total provision for income taxes $ 165,102 $ 120,000
========== ==========

The provision for income taxes is less than that computed by
applying the Federal statutory rate of 34% due primarily to the
effect of tax exempt income.

The sources of deferred income taxes (benefits) and the tax effect
of each follows:
1996 1995
---- ----

Unrealized gains on securities
available for sale $ 50,158 $ 77,006
Provision for loan losses (130,300) (97,500)
Cash basis reporting 2,300 (17,110)
Loan fee reporting 34,800 17,350
Depreciation 91,300 78,300
Deferred compensation (61,500) (59,700)
FHLB stock dividends 80,300 62,300
Other 12,100 19,160
---------- ----------
Total deferred liability $ 79,158 $ 79,806
========== ==========

NOTE 9 - Financial Instruments With Off-Balance-Sheet Risk:
--------------------------------------------------

The Bank is a party to financial instruments with off-balance-sheet
risk in the normal course of business to meet the financing needs of
its customers and to reduce its own exposure to fluctuations in
interest rates. These financial instruments include commitments to
extend credit and standby letters of credit. Those instruments
involve, to a degree, elements of credit and interest rate risk in
excess of the amount recognized in the balance sheets. The Bank's
exposure to credit loss in the event of nonperformance by the other
party to the financial instrument for commitments to extend credit
and standby letters of credit is represented by the contractual
amount of those instruments. The Bank uses the same credit policies
in making commitments and conditional obligations as it does for
on-balance-sheet instruments.

D-20

AMFIRST BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995

NOTE 9 - Financial Instruments With Off-Balance-Sheet Risk (continued):
--------------------------------------------------------------

Financial instruments whose contract amounts represent credit risk:

1996 1995
---- ----

Commitments to extend credit $ 7,559,000 $ 8,923,000
Standby letters of credit 232,000 275,000

Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or
other termination clauses and may require payment of a fee. Since
many commitments are expected to expire without being drawn upon,
the total commitment amounts do not necessarily represent future
cash requirements. The Bank evaluates each customer's
creditworthiness on a case-by-case basis. The amount of collateral
obtained if deemed necessary by the Bank upon extension of credit is
based on management's credit evaluation of the customer.

Standby letters of credit are conditional commitments issued by the
Bank to guarantee the performance of a customer to a third party.
The credit risk involved in issuing letters of credit is essentially
the same as that involved in extending loan facilities to customers.

The estimated fair values of the Bank's financial instruments were
as follows:

December 31, 1996 December 31, 1995
-------------------- --------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------- ----- -------- -----
Financial Assets:
Cash and due from
banks, interest-
bearing deposits
with banks, and
federal funds sold $ 6,217,612 $ 6,217,612 $ 5,972,562 $ 5,972,562
Securities available
for sale 17,374,354 17,374,354 14,157,538 14,157,538
Securities to be held
to maturity 3,918,682 3,898,126 4,721,324 4,657,814
Loans receivable 40,224,134 40,224,134 38,140,069 38,140,069
Accrued interest
receivable 274,398 274,398 349,755 349,755
Financial Liabilities:
Deposit liabilities 64,898,361 64,898,361 60,768,389 60,768,389

D-21

AMFIRST BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995

NOTE 10 - Non-Qualified Compensation Plans:
---------------------------------

The Bank has an executive salary continuation agreement with its CEO
dated April 15, 1987, whereby the Bank has agreed to pay monthly
retirement benefits of $2,083 upon the president's retirement at age
sixty-five. The bank has accrued the present value of payments
expected to be made under this non-qualified deferred compensation
agreement. The amounts so accrued at December 31, 1996 and 1995,
were $180,840 and $175,461, respectively. The amounts charged
against current earnings for each year were $30,378 and $30,295,
respectively.

In December 1995, the Bank adopted a non-qualified retirement plan
covering two key officers. The plan calls for benefits payable for
a period of ten years after attainment of age 65. The ten year pay-
out will range between 5 - 8% per year of the final base salary
earned prior to retirement. Vesting will not occur before 1999, at
which point the two participants will become 50% vested, with an
additional 10% vesting each of the five years thereafter. If the
Bank is sold or merged, all benefits vest fully and become due
immediately.

NOTE 11 - Stock Options Plans:
--------------------

In 1994, the AmFirst Bancorporation shareholders adopted stock
option plans for employees and directors.

The purpose of the employee plan is to assist the Bank in securing
and retaining key employees and to increase their efforts towards
the Bank's success by participating in the ownership of the Bank.
The plan is administered by the Board of Directors. Total shares
authorized for award pursuant to the plan are 42,000. Stock options
will generally be granted to salaried key employees and officers who
are selected by the board from time to time. Options will
ordinarily be granted at the fair market value of the shares as of
the date of the award, exercisable during a period of time not to
exceed ten years. With the stock dividend declared in September
1996 and 1995, the total shares awarded amounted to 46,305 and
44,100, with 46,305 and 38,850 vested as of December 31, 1996 and
1995, respectively. No options have been exercised.

The purpose of the director stock option plan is to encourage
significant ownership in the Bank by outside directors whose
services are considered essential to the Bank's progress and to
provide them with an incentive to remain as directors. The plan is
administered by the Board of Directors. Total shares authorized for
award pursuant to the plan are 9,000. Upon adoption of the plan by
shareholders, each of the nine outside directors was awarded options
for the purchase of 1,000 shares at $18 per share. Such options
vest upon each director having served for three years, including
service prior to plan adoption. Generally, the director stock
options expire on the earlier of ten years or 90 days after a
director ceases to serve as a member of the Board.

During 1994, one director exercised his 1,000 share stock option.
In December 1995 the board authorized and awarded an additional 200
shares per outside director at an option price of $21 per share.

D-22

AMFIRST BANCORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995

NOTE 12 - Real Estate Acquisition:
------------------------

On December 31, 1996, AmFirst Bancorporation completed the
acquisition of assets and assumption of liabilities of Rainville &
Associates, Inc. Rainville & Associates, Inc. stockholders are
current and former board of director members of AmFirst
Bancorporation. The principal assets of Rainville & Associates,
Inc. consisted of the buildings and land which the Bank occupies at
the Broadway and Harbour Pointe branch offices. The acquisition was
accounted for by the pooling of interest method. 1.6 shares of
AmFirst Bancorporation stock were exchanged for each share of
Rainville & Associates, Inc. stock.

The transaction included building and land at historical cost of
$600,421, net of accumulated depreciation of $83,175. A note
payable to Key Bank of Washington of $417,834 was assumed. The note
is secured by the buildings and land. Monthly payments are $6,000
including interest at a variable rate of the lender's prime rate
plus 1.5%. The current rate at December 31, 1996 was 9.75%. The
note is due August of 1999.

The following is a summary of the principal payments due on the
long-term debt:

Year Ending December 31,
- ------------------------
1997 $ 32,722
1998 36,034
1999 349,078
---------
$ 417,834
=========
NOTE 13 - Merger:
-------

The Board of Directors have approved a merger with Cascade Bank.
The merger needs final approval from the shareholders of both banks
and bank regulators. The shareholders of AmFirst will receive about
two shares of Cascade Bank stock for each share of AmFirst stock.
Changes in banking operations is expected to be complete in the
summer of 1997.

D-23

APPENDIX E

CASCADE FINANCIAL CORPORATION 1997 STOCK OPTION PLAN

Cascade Financial Corporation
1997 Stock Option Plan

SECTION 1. Purpose. The purposes of the Cascade Financial Corporation
1997 Stock Option Plan are to promote the interests of the Company, its
affiliates, and its stockholders by (i) attracting and retaining exceptional
executive personnel and other key employees and directors of the Company and
its affiliates; (ii) motivating such employees and Eligible Directors by means
of performance-related incentives to achieve longer-range performance goals;
and (iii) enabling such employees and Eligible Directors to participate in the
long-term growth and financial success of the Company.

SECTION 2. Definitions. As used in the Plan, the following terms shall
have the meanings set forth below:

"Affiliate" shall mean the Bank and any other "subsidiary"
of the Company as defined in Section 424(f) of the Code.

"Award" shall mean any grant of Options or Director Options.

"Award Agreement" shall mean any written agreement,
contract, or other instrument or document evidencing any Award, which may, but
need not, be executed or acknowledged by a Participant.

"Bank" shall mean Cascade Bank, Everett, Washington, or any
successor thereto.

"Board" shall mean the Board of Directors of the Company.

"Change in Control" shall mean an event deemed to occur if
and when (a) an offeror other than the Company purchases shares of the common
stock of the Company or the Bank pursuant to a tender or exchange offer for
such shares, (b) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) is or becomes the beneficial owner, directly or
indirectly, of securities of the Company or the Bank representing twenty-five
percent (25%) or more of the combined voting power of the Company's or the
Bank's then outstanding securities, (c) the membership of the board of
directors of the Company or the Bank changes as the result of a contested
election, such that individuals who were directors at the beginning of any
twenty-four (24) month period (whether commencing before or after the date of
adoption of this Plan) do not constitute a majority of the Board at the end of
such period, or (d) shareholders of the Company or the Bank approve a merger,
consolidation, sale or disposition of all or substantially all of the
Company's or the Bank's assets, or a plan of partial or complete liquidation.
If any of the events enumerated in clauses (a) - (d) occur, the Board shall
determine the effective date of the change in control resulting therefrom, for
purposes of the Plan.

"Code" shall mean the Internal Revenue Code of 1986, as
amended.

"Committee" shall mean a committee of the Board consisting
of at least two non-employee directors designated by the Board to administer
the Plan. If a separate committee is not so designated, the Board shall serve
as the Committee for all purposes under the Plan.

"Company" shall mean Cascade Financial Corporation, a
Delaware corporation.

"Director Option" shall mean a Non-Qualified Stock Option
granted to an Eligible Director pursuant to Section 6(e).

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"Disability" shall have the meaning set forth in Section
22(e)(3) of the Code. For purposes of the Plan, all determinations as to
whether a Participant has become disabled shall be made by a majority of the
Board upon the basis of such evidence as it deems necessary or desirable, and
shall be final and binding on all interested persons.

"Effective Date" shall mean the date specified in Section
9(a) of the Plan.

"Eligible Director" shall mean, on any date, a person who is
serving as a member of the Board but shall not include a person who is an
Employee.

"Employee" shall mean an employee of the Company or any
Affiliate.

"Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.

"Fair Market Value" shall be determined as follows:

(a) If the Shares are traded or quoted on the Nasdaq Stock
Market or other national securities exchange at the
time of grant of the Award, then the Fair Market Value
shall be the average of the highest and lowest selling
price on such exchange on the date such Award is
granted or, if there were no sales on such date, then
on the next prior business day on which there was a
sale.

(b) If the Shares are not traded or quoted on the Nasdaq
Stock Market or other national securities exchange,
then the Fair Market Value shall be a value determined
by the Committee in good faith on such basis as it
deems appropriate.

"Incentive Stock Option" shall mean a right to purchase
Shares from the Company that is granted under Section 6 of the Plan and that
is intended to meet the requirements of Section 422 of the Code or any
successor provision thereto.

"Non-Qualified Stock Option" shall mean a right to purchase
Shares from the Company that is granted under Section 6 of the Plan and that
is not intended to be an Incentive Stock Option.

"Option" shall mean an Incentive Stock Option or a
Non-Qualified Stock Option but shall not include a Director Option.

"Participant" shall mean any Employee or Eligible Director
selected by the Committee to receive an Award of Options or Director Options,
as appropriate.

"Person" shall mean any individual, corporation,
partnership, association, joint-stock company, trust, unincorporated
organization, government or political subdivision thereof or other entity.

"Plan" shall mean this Cascade Financial Corporation 1997
Stock Option Plan.

"Rule 16b-3" shall mean Rule 16b-3 as promulgated and
interpreted by the SEC under the Exchange Act, or any successor rule or
regulation thereto as in effect from time to time.

"SEC" shall mean the Securities and Exchange Commission or
any successor thereto and shall include the staff thereof.

"Shares" shall mean common shares of the Company, or such
other securities of the Company as may be designated by the Committee from
time to time.

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"Ten Percent Stockholder" shall mean any stockholder who, at
the time an Incentive Stock Option is granted to such stockholder, owns
(within the meaning of Section 424(d) of the Code) more than ten percent (10%)
of the voting power of all classes of stock of the Company.

"Termination for Cause" shall mean termination because of a
Participant's personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform
stated duties, willful violation of any law, rule, or regulation (other than
traffic violations or similar offenses) or material breach of any provision of
any employment agreement between the Company and/or, the Bank and a
Participant.

SECTION 3. Administration.

(a) The Plan shall be administered by the Committee. Subject to the
terms of the Plan and applicable law, and in addition to other express powers
and authorizations conferred on the Committee by the Plan, the Committee
shall: (i) designate Participants; (ii) determine the type or types of Awards
to be granted to an eligible Employee; (iii) determine the number of Shares to
be covered by, or with respect to which payments, rights, or other matters are
to be calculated in connection with, Awards; (iv) determine the terms and
conditions of any Award; (v) determine whether, to what extent, and under what
circumstances Awards may be settled or exercised in cash, Shares, other
securities, other Awards or other property, or canceled, forfeited, or
suspended; (vi) determine whether, to what extent, and under what
circumstances cash, Shares, other securities, other Awards, other property,
and other amounts payable with respect to an Award shall be deferred either
automatically or at the election of the holder thereof or of the Committee;
(vii) interpret and administer the Plan and any instrument or agreement
relating to, or Award made under, the Plan; (viii) establish, amend, suspend,
or waive such rules and regulations and appoint such agents as it shall deem
appropriate for the proper administration of the Plan; and (ix) make any other
determination and take any other action that the Committee deems necessary or
desirable for the administration of the Plan.

(b) Unless otherwise expressly provided in the Plan, all
designations, determinations, interpretations, and other decisions under or
with respect to the Plan or any Award shall be within the sole discretion of
the Committee, may be made at any time and shall be final, conclusive, and
binding upon all Persons, including the Company, and Participant, any holder
or beneficiary of any Award, any shareholder and any Employee.

SECTION 4. Shares Available for Awards.

(a) Shares Available. Subject to adjustment as provided in Section
4(b), the number of Shares with respect to which Options and Director Options
may be granted under the Plan shall be 115,000. If, after the effective date
of the Plan, any Shares covered by an Option or Director Option granted under
the Plan, or to which such an Option or Director Option relates, are
forfeited, or if an Option or Director Option otherwise terminates or is
canceled without the delivery of Shares, then the Shares covered by such
Option or Director Option, or to which such Option or Director Option relates,
or the number of Shares otherwise counted against the aggregate number of
Shares with respect to which Options and Director Options may be granted, to
the extent of any such settlement, forfeiture, termination or cancellation,
shall again be, or shall become, Shares with respect to which Options and
Director Options may be granted. In the event that any Option or Director
Option is exercised through the delivery of Shares, the number of Shares
available for Awards under the Plan shall be increased by the number of Shares
surrendered.

(b) Adjustments. In the event that any dividend or other
distribution (whether in the form of cash, Shares, other securities, or other
property), recapitalization, stock split, reverse stock split, reorganization,
merger, consolidation, split-up, spin-off, combination, repurchase, or
exchange of Shares or other securities of the Company, issuance of warrants or
other rights to purchase Shares or other securities of the Company, or other
similar corporate transaction or event affects the Shares such that an
adjustment is necessary in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan,
then the Committee shall proportionately adjust any or all (as necessary) of
(i) the number of Shares or other securities of the Company (or number and
kind of other securities or property) with respect to which Awards may be
granted, (ii) the number

E-3

of Shares or other securities of the Company (or number and kind of other
securities or property) subject to outstanding Awards, and (iii) the grant or
exercise price with respect to any Award; provided, in each case, that with
respect to Awards of Incentive Stock Options no such adjustment shall be
authorized to the extent that such authority would cause the Plan to violate
Section 422(b)(1) of the Code, as from time to time amended.

(c) Sources of Shares. Any Shares delivered pursuant to an Option
or Director Option may consist, in whole or in part, of authorized and
unissued Shares or of treasury Shares.

SECTION 5. Eligibility. An Employee, including any officer or
employee-director of the Company, shall be eligible to be designated a
Participant. Each Eligible Director shall be eligible to receive Director
Options in accordance with Section 6(e) hereof.

SECTION 6. Options and Director Options.

(a) Grant. Subject to the provisions of the Plan and the
recommendation of the Board, the Committee shall determine the Employees to
whom Options shall be granted, the number of Shares to be covered by each
Option, the option price therefor and the conditions and limitations
applicable to the exercise of the option. The Committee shall have the
authority to grant Incentive Stock Options, or to grant Non-Qualified Stock
Options, or to grant both types of options. In such case of Incentive Stock
Options, the terms and conditions of such grants shall be subject to and
comply with such rules as may be prescribed by Section 422 of the Code, as
from time to time amended, and any regulations implementing such statute,
including without limitation, the requirements of Code Section 422(d), which
limits the aggregate fair market value of Shares of which Incentive Stock
Options are exercisable for the first time to one hundred thousand dollars
($100,000) per calendar year. Each provision of the Plan and of each written
option agreement relating to an Option designated an Incentive Stock Option
shall be construed so that such Option qualifies as an Incentive Stock Option,
and any provision that cannot be so construed shall be disregarded.

(b) Exercise Price. The Committee shall establish the exercise
price at the time each Option or Director Option is granted, which price shall
not be less than one hundred percent (100%) of the per Share Fair Market Value
on the date of grant. Notwithstanding any provision contained herein, in the
case of an Incentive Stock Option, the exercise price at the time such
Incentive Stock Option is granted to any Employee who, at the time of such
grant, is a Ten Percent Stockholder, shall not be less than one hundred ten
percent (110%) of the per Share Fair Market Value on the date of grant.

(c) Exercise. Subject to the provisions of the Plan, each Option
shall be exercisable at such times and subject to such terms and conditions as
the Committee may, in its sole discretion, specify in the applicable Award
Agreement or thereafter; provided, however, that in the case of an Incentive
Stock Option, a Participant may not exercise such Option as an Incentive Stock
Option after the earlier of (i) the date which is ten (10) years (five (5)
years in the case of a Participant who is a Ten Percent Stockholder) after the
date on which such Incentive Stock Option is granted, or (ii) the date which
is three (3) months (twelve (12) months in the case of a Participant who
becomes Disabled, or who dies) after the date on which he ceases to be an
employee of the Company or an Affiliate. Each Award shall be one hundred
percent (100%) vested upon a Participant's death or Disability. In the event
of an Employee's Termination for Cause, his Options shall be canceled on the
date he ceases to be an Employee. The Committee may impose such conditions
with respect to the exercise of Options, including without limitation, any
relating to the application of federal or state securities laws, as it may
deem necessary or advisable.

(d) Payment. No Shares shall be delivered pursuant to any exercise
of an Option or Director Option until payment in full of the option price
therefor is received by the Company. Such payment may be made in cash or its
equivalent, or, if and to the extent permitted by the Committee, by exchanging
Shares owned by the optionee (which are not the subject of any pledge or other
security interest), or by a combination of the foregoing, provided that the
combined value of all cash and cash equivalents and the Fair Market Value of
any such Shares so tendered to the Company as of the date of such tender is at
least equal to such option price. The Committee may, in its

E-4

discretion, arrange procedures for the payment of the exercise price with one
or more stock brokerage firms for the purpose of allowing a Participant to
make a "cashless exercise" of an Option or Director Option.

(e) Director Options. Subject to the provisions of the Plan and the
recommendation of the Board, the Committee shall determine the Eligible
Directors to whom Director Options shall be granted, the number of shares to
be covered by each Director Option and the condition and limitations
applicable to the exercise of each Director Option. Each Award of Director
Options shall vest ratably over a five (5) year period whereby twenty percent
(20%) of the Award shall vest on each of the first through the fifth
anniversaries of the date of grant so long as the Eligible Director continues
to serve as a member of the Board; provided, however, that each Award shall be
one hundred percent (100%) vested in the event of the Eligible Director's
death or Disability. A Director Option shall be exercisable until the earlier
to occur of the following two (2) dates (i) the tenth anniversary of the date
of grant of such Director Option or (ii) one (1) year (two (2) years in the
case of an Eligible Director who becomes Disabled, or who dies) after the date
the Eligible Director ceases to be a member of the Board, except that if the
Eligible Director ceases to be a member of the Board upon Termination for
Cause, his Director Options shall be canceled on the date he ceases to be a
member of the Board. An Eligible Director may pay the exercise price of a
Director Option in the manner described in Section 6(d).

(f) Effect of a Change in Control. In the event of a Change in
Control, all then outstanding Options and Director Options shall become one
hundred percent (100%) vested and exercisable as of the effective date of the
Change in Control. If, in connection with or as a consequence of a Change in
Control, the Company or the Bank is merged into or consolidated with another
corporation, or if the Company or the Bank sells or otherwise disposes of
substantially all of its assets to another corporation, then unless provisions
are made in connection with such transaction for the continuance of the Plan
and/or the assumption or substitution of then outstanding Options and Director
Options with new options covering the stock of the successor corporation, or
parent or subsidiary thereof, with appropriate adjustments as to the number
and kind of shares and prices, such Options or Director Options shall be
canceled as of the effective date of the merger, consolidation, or sale and
the Participant or Eligible Director shall be paid in cash an amount equal to
the difference between the Fair Market Value of the Shares subject to the
Options or Director Options as of the effective date of such corporate event
and the exercise price of the Options or Director Options, as appropriate.

SECTION 7. Amendment and Termination.

(a) Amendments to the Plan. The Board may amend, alter, suspend,
discontinue, or terminate the Plan or any portion thereof at any time;
provided that no such amendment, alteration, suspension, discontinuation or
termination shall be made without shareholder approval if such approval is
necessary to comply with any tax or regulatory requirement with which the
Committee deems it necessary or appropriate to comply.

(b) Amendments to Awards. The Committee may waive any conditions or
rights under, amend any terms of, or alter, suspend, discontinue, cancel or
terminate, any Award theretofore granted, prospectively or retroactively;
provided, however, that any such waiver, amendment, alteration, suspension,
discontinuance, cancellation or termination that would impair the rights of
any Participant or any holder or beneficiary of any Award theretofore granted
shall not to that extent be effective without the consent of the affected
Participant, holder or beneficiary.

(c) Cancellation. Any provision of this Plan or any Award Agreement
to the contrary notwithstanding, the Committee may cause any Award of Options
granted hereunder to be canceled in consideration of the granting to the
holder of an alternative Award of Options having a Fair Market Value equal to
the Fair Market Value of such canceled Award.

E-5

SECTION 8. General Provisions.

(a) Nontransferability.

(i) Each Award, and each right under any Award, shall be
exercisable only by the Participant during his lifetime, or, if permissible
under applicable law, by the Participant's guardian or legal representative or
a transferee receiving such Award pursuant to a domestic relations order or
Section 8(a)(ii) as determined by the Committee.

(ii) No Award may be assigned, alienated, pledged, attached,
sold or otherwise transferred or encumbered by a Participant otherwise than by
will or by the laws of descent and distribution or pursuant to a domestic
relations order, and any such purported assignment, alienation, pledge,
attachment, sale, transfer or encumbrance shall be void and unenforceable
against the Company; provided, however, that the designation of a beneficiary
shall not constitute an assignment, alienation, pledge, attachment, sale,
transfer or encumbrance. Notwithstanding the preceding sentence, the
Committee shall have discretionary authority to permit the transfer of any
Non-Qualified Stock Option to members of a Participant's immediate family,
including trusts for the benefit of such family members and partnerships in
which such family members are the only partners; provided, however, that a
transferred Non-Qualified Stock Option may be exercised by the transferee on
any date only to the extent that the Participant would have been entitled to
exercise the Non-Qualified Stock Option on such date had the Non-Qualified
Stock Option not been transferred. Any transferred Non-Qualified Stock Option
shall remain subject to the terms and conditions of the Participant's Award
Agreement.

(b) No Rights to Awards. No Employee, Participant or other Person
shall have any claim to be granted any Award, and there is no obligation for
uniformity of treatment of Employees, Participants, or holders or
beneficiaries of Awards. The terms and conditions of Awards need not be the
same with respect to each recipient.

(c) Share Certificates. All Shares or other securities of the
Company delivered under the Plan pursuant to any Award or the exercise thereof
shall be subject to such stop transfer orders and other restrictions as the
Committee may deem advisable under the Plan or the rules, regulations, and
other requirements of the SEC, any stock exchange or national securities
association upon which such Shares or other securities are then listed, and
any applicable Federal or state laws, and the Committee may cause a legend or
legends to be put on any certificates representing such Shares or other
securities to make appropriate reference to such restrictions.

(d) Delegation. Subject to the terms of the Plan and applicable
law, the Committee may delegate to one or more officers or managers of the
Company, or to a committee of such officers or managers, the authority,
subject to such terms and limitations as the Committee shall determine, to
grant Awards to, or to cancel, modify or waive rights with respect to, or to
alter, discontinue, suspend, or terminate Awards held by, Employees who are
not officers or directors of the Company for purposed of Section 16 of the
Exchange Act, or any successor section thereto, or who are otherwise not
subject to such Section.

(e) Withholding. A Participant shall be required to pay to the
Company and the Company is hereby authorized to withhold from any Award, from
any payment due or transfer made under any Award or from any compensation or
other amount owing to a Participant the amount of any applicable withholding
taxes in respect of an Award, its exercise, or any payment or transfer under
an Award and to take such other action as may be necessary in the opinion of
the Company to satisfy all obligations for the payment of such taxes,
including, but not limited to, the withholding of the issuance of Shares to be
issued upon the exercise of any Option or Director Option until the
Participant reimburses the Company for any amount required to be withheld.

(f) Award Agreements. Each Award hereunder shall be evidenced by an
Award Agreement which shall be delivered to the Participant and shall specify
the terms and conditions of the Award and any rules applicable thereto.

E-6

(g) No Limit on Other Compensation Arrangements. Nothing contained
in the Plan shall prevent the Company or any Affiliate from adopting or
continuing in effect other compensation arrangements, which may, but need not,
provide for the grant of options, restricted stock, Shares and other types of
Awards provided for hereunder (subject to shareholder approval if such
approval is required), and such arrangements may be either generally
applicable or applicable only in specific cases.

(h) No Right to Employment. The grant of an Award shall not be
construed as giving a Participant the right to be retained in the employ of
the Company or an Affiliate. Further, the Company may at any time dismiss a
Participant from employment, free from any liability or any claim under the
Plan, unless otherwise expressly provided in the Plan or in any Award
Agreement.

(i) No Rights as Stockholder. Subject to the provisions of the
applicable Award, no Participant or holder or beneficiary of any Award shall
have any rights as a stockholder with respect to any Shares to be distributed
under the Plan until he has become the holder of such Shares.

(j) Governing Law. The validity, construction, and effect of the
Plan and any rules and regulations relating to the Plan and any Award
Agreement shall be determined in accordance with the laws of the State of
Delaware, without giving effect to the choice of law principles thereof.

(k) Severability. If any provisions of the Plan or any Award is or
becomes or is deemed to be invalid, illegal, or unenforceable in any
jurisdiction or as to any Person or Award, or would disqualify the Plan or any
Award under any law deemed applicable by the Committee, such provision shall
be construed or deemed amended to conform to the applicable laws, or if it
cannot be construed or deemed amended without, in the determination of the
Committee, materially altering the intent of the Plan or the Award, such
provision shall be stricken as to such jurisdiction, Person or Award and the
remainder of the Plan and any such Award shall remain in full force and
effect.

(l) Other Laws. The Committee may refuse to issue or transfer any
Shares or other consideration under an Award if, acting in its sole
discretion, it determines that the issuance or transfer of such Shares or such
other consideration might violate any applicable law or regulation or entitle
the Company to recovery under Section 16(b) of the Exchange Act, and any
payment tendered to the Company by a Participant, other holder or beneficiary
in connection with the exercise of such Award shall be promptly refunded to
the relevant Participant, holder or beneficiary. Without limiting the
generality of the foregoing, no Award granted hereunder shall be construed as
an offer to sell securities of the Company, and no such offer shall be
outstanding, unless and until the Committee in its sole discretion has
determined that any such offer, if made, would be in compliance with all
applicable requirements of the U.S. federal securities laws.

(m) No Trust or Fund Created. Neither the Plan nor any Award shall
create or be construed to create a trust or separate fund of any kind or a
fiduciary relationship between the Company and a Participant or any other
Person. To the extent that any Person acquires a right to receive payments
from the Company pursuant to an Award, such rights shall be no greater than
the right of any unsecured general creditor of the Company.

(n) Rule 16b-3 Compliance. With respect to persons subject to
Section 16 of the Exchange Act, transactions under this Plan are intended to
comply with all applicable terms and conditions of Rule 16b-3 and any
successor provisions. To the extent that any provision of the Plan or action
by the Committee fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Committee.

(o) Headings. Headings are given to the Sections and subsections of
the Plan solely as a convenience to facilitate reference. Such headings shall
not be deemed in any way material or relevant to the construction or
interpretation of the Plan or any provision thereof.

E-7

(p) No Impact on Benefits. Unless specifically provided under any
other benefit plan of the Company or its Affiliates, Awards shall not be
treated as compensation for purposes of calculating an Employee's or Eligible
Director's rights under such benefit plans.

(q) Indemnification. Each person who is or shall have been a member
of the Committee or of the Board shall be indemnified and held harmless by the
Company against and from any loss, cost, liability, or expense that may be
imposed upon or reasonably incurred by him in connection with or resulting
from any claim, action, suit, or proceeding to which he may be made a party or
in which he may be involved by reason of any action taken or failure to act
under the Plan and against and from any and all amounts paid by him in
settlement thereof, with the Company's approval, or paid by him in
satisfaction of any judgement in any such action, suit, or proceeding against
him, provided he shall give the Company an opportunity, at its own expense, to
handle and defend the same before he undertakes to handle and defend it on his
own behalf. The foregoing right of indemnification shall not be exclusive and
shall be independent of any other rights of indemnification to which such
persons may be entitled under the Company's articles of incorporation or
bylaws, by contract, as a matter of law, or otherwise.

SECTION 9. Term of the Plan.

(a) Effective Date. The Plan shall become effective upon approval
by a majority of the Company's stockholders at an annual or special meeting of
stockholders of the Company held not more than twelve (12) months after the
date of adoption of the Plan by the Board.

(b) Expiration Date. The Plan shall terminate on and no Award shall
be granted under the Plan after the tenth anniversary of the Effective Date.
Unless otherwise expressly provided in the Plan or in an applicable Award
Agreement, any Award granted hereunder may, and the authority of the Board or
the Committee to amend, alter, adjust, suspend, discontinue, or terminate any
such Award or to waive any conditions or rights under any such Award shall,
continue after the tenth anniversary of the Effective Date.

* * *

E-8

PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

Item 20. Indemnification of Directors and Officers

Article XVI of Cascade's Certificate of Incorporation provides for
indemnification of the directors, officers, employees and agents of Cascade
for expenses (including attorney's fees) actually and reasonably incurred in
connection with the defense or settlement of any threatened, pending or
completed action or suit if such director is successful on the merits or
otherwise, or acted in good faith and in a manner he reasonably believed to be
in, or not opposed to, the best interest of Cascade and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful.

Section 145 of the Delaware General Corporation Law sets forth
circumstances under which directors, officers, employees and agents may be
insured or indemnified against liability which they may incur in their
capacities:

145 INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS;
INSURANCE.--(a) A corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he or she is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with such action,
suit or proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a manner
which he or she reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his or her conduct was
unlawful.

(b) A corporation may indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor by reason of the fact that he or she is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by him
or her in connection with the defense or settlement of such action or suit if
he or she acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of the corporation and except that
no indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the Court of Chancery or the court in which
such action or suit was brought shall determine upon application that, despite
the adjudication of liability but in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.

(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (a) and (b) of this
section, or in defense of any claim, issue or matter therein, he or she shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him or her in connection therewith.

(d) Any indemnification under subsections (a) and (b) of this
section (unless ordered by a court) shall
II-1

be made by the corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances because he or she has met the applicable
standard of conduct set forth in subsections (a) and (b) of this section.
Such determination shall be made (1) by the board of directors by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding, or (2) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (3) by the stockholders.

(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such amount
if it shall ultimately be determined that he or she is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by other employees and agents may be so
paid upon such terms and conditions, if any, as the board of directors deems
appropriate.

(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, both as to action in his
or her official capacity and as to action in another capacity while holding
such office.

(g) A corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him or her or incurred by him or her any such capacity, or
arising out of his or her status as such, whether or not the corporation would
have the power to indemnify him or her against such liability under this
section.

(h) For purposes of this section, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued, would
have had power and authority to indemnify its directors, officers, and
employees or agents, so that any person who is or was a director, officer,
employee or agents, so that any person who is or was a director, officer,
employee or agent of such constituent corporation, or is or was serving at the
request of such constituent corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under this section with respect
to the resulting or surviving corporation as he or she would have with respect
to such constituent corporation if its separate existence had continued.

(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan;
and references to "serving at the request of the corporation" shall include
any service as a director, officer, employee or agent of the corporation which
imposes duties on, or involves services by, such director, officer, employee,
or agent with respect to an employee benefit plan, its participants or
beneficiaries; and a person who acted in good faith and in a manner he or she
reasonably believed to be in the interest of the participants and
beneficiaries of an employee benefit plan shall be deemed to have acted in a
manner "not opposed to the best interests of the corporation" as referred to
in this section.

(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.
II-2

Item 21. Exhibits and Financial Statement Schedules

(a) Exhibits

Exhibit
Number Description of Document
- ------- -----------------------

2 Agreement and Plan of Mergers dated February 6, 1997 by and between
Cascade Financial Corporation and Cascade Bank, and AmFirst
Bancorporation and American First National Bank (incorporated by
reference to Appendix A to the Prospectus/Joint Proxy Statement
contained in this Registration Statement).

5 Opinion of Breyer & Aguggia regarding legality of securities.

8 Form of opinion of Breyer & Aguggia regarding federal income tax
consequences.

23.1 Consent of Breyer & Aguggia (contained in its opinion filed as
Exhibit 5).

23.2 Consent of Breyer & Aguggia as to its tax opinion.

23.3 Consent of KPMG Peat Marwick LLP, Cascade's independent auditors.

23.4 Consent of Hascal, Sjoholm & Co., AmFirst's independent auditors.

24 Power of Attorney (contained in the signature page of the
Registration Statement).

99.1 Form of proxy to be mailed to shareholders of Cascade Financial
Corporation

99.2 Form of proxy to be mailed to shareholders of AmFirst
Bancorporation.

99.3 Rule 438 Consent of _____________. (a)

99.4 Rule 438 Consent of _____________. (a)

_____________
(a) To be filed by amendment

(b) Financial Statement Schedules

Not applicable.

None

II-3

Item 22. Undertakings

(a) (1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this registration statement:

(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933, as amended ("Securities Act");

(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent no
more than 20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective registration
statement;

(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement.

(2) The undersigned registrant hereby undertakes that,
for purposes of determining any liability under the Securities Act of 1933
each filing of the registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.

(3) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions referred to
in Item 20 of this registration statement, or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.

(b) The undersigned registrant hereby undertakes to respond
to requests for information that is incorporated by reference into the
prospectus pursuant to Item 4, 10(b), 11, or 13 of this form, within one
business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of
the registration statement through the date of responding to the request.

(c) The undersigned registrant hereby undertakes to supply by
means of a post effective amendment all information concerning a transaction,
and the company being acquired involved therein, that was not the subject of,
and included in the registration statement when it became effective.

II-4

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Everett, State of Washington on March 28, 1997.

CASCADE FINANCIAL CORPORATION

By: /s/ Frank M. McCord
------------------------------------
Frank M. McCord
Chairman and Chief Executive Officer
(Principal Executive Officer)

POWER OF ATTORNEY

We, the undersigned directors and officers of Cascade Financial
Corporation, do hereby severally constitute and appoint Frank M. McCord and
Russell E. Rosendal our true and lawful attorneys and agents, to do any and
all things and acts in our names in the capacities indicated below and to
execute all instruments for us and in our names in the capacities indicated
below which said Frank M. McCord and Russell E. Rosendal may deem necessary or
advisable to enable Cascade Financial Corporation, to comply with the
Securities Act of 1933, as amended, and any rules, regulations and
requirements of the Securities and Exchange Commission, in connection with the
Registration Statement on Form S-4 relating to the issuance of Cascade
Financial Corporation's Common Stock, including specifically but not limited
to, power and authority to sign for us or any of us in our names in the
capacities indicated below the Registration Statement and any and all
amendments (including post-effective amendments) thereto; and we hereby ratify
and confirm all that Frank M. McCord and Russell E. Rosendal shall do or cause
to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.

/s/ Russell E. Rosendal
- --------------------------- Executive Vice President and March 28, 1997
Russell E. Rosendal Chief Financial Officer
(Principal Financial and
Accounting Officer)

/s/ C. F. Safstrom President and Director March 28, 1997
- ---------------------------
C. F. Safstrom

/s/ Robert Disotell
- --------------------------- Executive Vice President March 28, 1997
Robert Disotell and Director

PAGE

/s/ David W. Duce Director March 28, 1997
- ---------------------------
David W. Duce

/s/ Gary Meisner Director March 28, 1997
- ---------------------------
Gary Meisner

/s/ Dwayne Lane Director March 28, 1997
- ---------------------------
Dwayne Lane

/s/ D. R. Murphy Director March 28, 1997
- ---------------------------
D. R. Murphy

/s/ Ronald E. Thompson Director March 28, 1997
- ---------------------------
Ronald E. Thompson

/s/ G. Brandt Westover Director March 28, 1997
- ---------------------------
G. Brandt Westover

/s/ Paull Shin Director March 28, 1997
- ---------------------------
Paull Shin

/s/ Joan M. Earl Director March 28, 1997
- ---------------------------
Joan M. Earl

EXHIBIT INDEX

Exhibit
Number Description of Document
- -------- -----------------------

2 Agreement and Plan of Mergers dated February 6, 1997 by and between
Cascade Financial Corporation and Cascade Bank, and AmFirst
Bancorporation and American First National Bank (incorporated by
reference to Appendix A to the Prospectus/Proxy Statement contained
in this Registration Statement).

5 Opinion of Breyer & Aguggia regarding legality of securities.

8 Form of opinion of Breyer & Aguggia regarding federal income tax
consequences.

23.1 Consent of Breyer & Aguggia (contained in its opinion filed as
Exhibit 5).

23.2 Consent of Breyer & Aguggia as to its tax opinion.

23.3 Consent of KPMG Peat Marwick LLP, Cascade's independent auditors.

23.4 Consent of Hascal, Sjoholm & Co., AmFirst's independent auditors.

24 Power of Attorney (contained in the signature page of the
Registration Statement).

99.1 Form of proxy to be mailed to shareholders of Cascade Financial
Corporation.

99.2 Form of proxy to be mailed to shareholders of AmFirst
Bancorporation.

99.3 Rule 438 Consent of _________________. (a)

99.4 Rule 438 Consent of _________________. (a)

____________
(a) To be filed by amendment.

Exhibit 5
Opinion of Breyer & Aguggia Regarding Legality of Securities

March 28, 1997

Board of Directors
Cascade Financial Corporation
2828 Colby Avenue
Everett, Washington 98201

RE: Cascade Financial Corporation

Registration Statement on Form S-4

Gentlemen and Lady:

You have requested our opinion as special counsel for Cascade
Financial Corporation, a Delaware corporation, in connection with the
above-referenced registration statement filed with the Securities and Exchange
Commission under the Securities Act of 1933, as amended.

In rendering this opinion, we understand that the common stock of
Cascade Financial Corporation will be offered and sold in the manner described
in the Prospectus/Joint Proxy Statement, which is part of the Registration
Statement. We have examined such records and documents and made such
examination as we have deemed relevant in connection with this opinion.

Based upon the foregoing, it is our opinion that the shares of
common stock of Cascade Financial Corporation will upon issuance be legally
issued, fully paid and nonassessable.

This opinion is furnished for use as an exhibit to the Registration
Statement. We hereby consent to the filing of this opinion as an exhibit to
the Registration Statement and to the reference to us under the heading "Legal
Opinions."

Very truly yours,

/s/ Breyer & Aguggia

BREYER & AGUGGIA

Washington, D.C.

Exhibit 8

Form of Opinion of Breyer & Aguggia
Regarding Federal Income Tax Consequences

___________, 1997

Board of Directors
Cascade Financial Corporation
2828 Colby Avenue
Everett, Washington 98201

Re: MERGER OF AMFIRST BANCORPORATION INTO AB MERGER CO., INC.

Dear Gentlemen and Lady:

We have acted as counsel to Cascade Financial Corporation, a
savings and loan holding company organized under the laws of the State of
Delaware ("Cascade"), in connection with the proposed merger (the "Merger") of
AmFirst Bancorporation, a Washington corporation ("AmFirst"), into AB Merger
Co., Inc., a Washington corporation ("Interim"), a wholly-owned subsidiary of
Cascade. The Merger will be effected pursuant to an Agreement and Plan of
Mergers dated February 6, 1997, by and among Cascade, Cascade Bank, AmFirst
and American First National Bank (the "Merger Agreement"). Capitalized terms
used herein without definition have the respective meaning assigned to such
terms in the Merger Agreement.

In our capacity as counsel to Cascade, our opinion has been
requested with respect to certain of the federal income tax consequences of
the Merger. In rendering this opinion, we have examined (i) the Merger
Agreement, (ii) the Registration Statement on Form S-4 (the "Registration
Statement") and the Prospectus/Joint Proxy Statement included therein that was
filed with the U.S. Securities and Exchange Commission, (iii) the Officer's
Certificate of Cascade and the Officer's Certificate of AmFirst (collectively
the "Officer's Certificates"), and (iv) such other documents, instruments and
information as we have deemed appropriate ((i-iv) collectively constituting
the "Documents").

In rendering this opinion, we have assumed, without independent
verification

(a) the genuineness of all signatures,

(b) the authenticity of any Document submitted to us as an
original,

Board of Directors
Cascade Financial Corporation
______________, 1997
Page 2

(c) the conformity to the original of all documents
submitted to us as certified, photostatic or conformed copies, and
the authenticity of the originals of all such Documents,

(d) each natural person executing any such instrument,
document, or agreement is legally competent to do so,

(e) the accuracy of the facts set forth in the
Registration Statement and the representations contained in the
Merger Agreement and the Officer's Certificates,

(f) that the Merger will be effective under applicable
state law, and,

(g) that the Merger will be consummated in the manner
described in the Merger Agreement and Registration Statement.

In rendering our opinions set forth below, we have referred solely
to the existing provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), existing, proposed and temporary regulations promulgated
thereunder, current administrative rulings, procedures and published positions
of the Internal Revenue Service (the "IRS") (collectively, the "Tax Laws"),
all of which are subject to change, either prospectively or retroactively, at
any time. No assurance can be provided as to the effect of any such change
upon our conclusions reached herein. We assume no obligation to supplement
this opinion if any applicable laws change after the date hereof or if we
become aware of any facts that might change the opinions herein after the date
hereof.

On the basis of an subject to the foregoing, we are of the opinion
that:

1. Provided that the Merger of Interim and AmFirst qualifies as a
statutory merger under applicable state law, the Merger qualifies
as a reorganization within the meaning of Section 368(a)(1)(A) of
the Code. Pursuant to Section 368(a)(2)(D) of the Code, the Merger
is not disqualified from treatment as a reorganization within the
meaning of Section 368(a)(1)(A) because Cascade Common Stock will
be conveyed to AmFirst's stockholders in exchange for their AmFirst
Common Stock.

2. No gain or loss will be recognized by Cascade, Interim or AmFirst
as a result of the Merger.

3. No gain or loss will be recognized by the AmFirst stockholders who
receive solely Cascade Common Stock in exchange for their AmFirst
stock.

PAGE

Board of Directors
Cascade Financial Corporation
______________, 1997
Page 3

4. Provided that the AmFirst stock is held as a capital asset at the
Effective Time, the basis of the Cascade Common Stock received by
the AmFirst stockholders will be the basis of the AmFirst stock
surrendered in exchange for such Common Stock decreased by the
amount of any cash received by the AmFirst stockholders and
increased by the amount of gain recognized by the AmFirst
stockholder.

5. Provided the AmFirst stock is held as a capital asset at the
Effective Time, the holding period of the Cascade Common Stock
received by the AmFirst stockholders will include the holding
period of the AmFirst stock surrendered in exchange for such stock.

6. The payment of cash to an AmFirst stockholder in lieu of a
fractional share interest in Cascade Common Stock will be treated
as received by such holder as a distribution in redemption of such
fractional share interest. Gain or loss will be realized and
calculated based on the difference between the amount of cash
received by the AmFirst stockholder and the basis of such
fractional share. If fractional shares of AmFirst stock
surrendered for Cascade Common Stock are held by such stockholder
as a capital asset at the Effective Time, any gain or loss
resulting to such former holder from such redemption will be
capital gain or loss.

7. In the case of any AmFirst stockholder who exercises his
dissenter's rights under the applicable provisions of the
Washington Business Corporation Act and receives solely cash in
exchange for his AmFirst stock, such cash will be treated as being
received by such stockholder as a distribution in redemption of his
AmFirst stock. Gain or loss will be realized and calculated based
on the difference between the amount of cash received by any such
AmFirst stockholder and his basis in his AmFirst stock therefor.
If the shares of stock held by such stockholders are held as
capital assets on the date of such exchange, any gain or loss
resulting to such stockholder from such redemption will be capital
gain or loss.

No opinion is expressed as to any transaction other than the Merger
as described in the Merger Agreement or to any transaction whatsoever,
including the Merger, if all the transactions described in the Merger
Agreement are not consummated in accordance with the terms of such Agreement
and without waiver or breach of any material provision thereof, or if all of
the representations, warranties, statements and assumptions upon which we
relied are not true and accurate at all relevant times. In the event any one
of the statements, representations, warranties or assumptions upon which we
have relied to issued this opinion is incorrect, our opinion might be
adversely affected and may not be relied upon.

The conclusions, predictions, statements and analysis presented
herein and the Prospectus/Joint Proxy Statement are not binding upon the IRS,
and this opinion should not be construed as a guarantee that the IRS might not
differ with the conclusions, predictions,

Board of Directors
Cascade Financial Corporation
______________, 1997
Page 4

statements and analysis presented herein and in the Registration Statement, or
raise other questions or issues upon audit, or that such action taken by the
IRS will not be judicially sustained.

This opinion is being furnished in connection with the Merger and
may not be used or relied upon for any other purpose and may not be
circulated, quoted or otherwise referred to for any other purpose without our
express written consent.

The shareholders of AmFirst should consult with a qualified tax
advisor with respect to any reporting requirements which may be applicable or
with respect to any tax considerations other than those expressly mentioned
herein.

Very truly yours,

BREYER & AGUGGIA

Exhibit 23.2

Consent of Breyer & Aguggia
as to its Tax Opinion

March 28, 1997

Board of Directors
Cascade Financial Corporation
2828 Colby Avenue
Everett, Washington 98201

RE: Cascade Financial Corporation
Registration Statement on Form S-4

Gentlemen and Lady:

We hereby consent to the filing of the form of our federal tax
opinion as an exhibit to the Registration Statement and to the reference to us
in the Prospectus/Joint Proxy Statement included therein under the headings
"THE MERGER -- Certain Federal Income Tax Consequences" and "LEGAL OPINIONS."

Sincerely,

/s/ Breyer & Aguggia

BREYER & AGUGGIA
Washington, D.C.

Exhibit 23.3

Consent of KPMG Peat Marwick LLP
Cascade's Independent Auditors

The Board of Directors
Cascade Financial Corporation

We consent to the use of our report included in Appendix C and incorporated
herein by reference and to the reference to our firm under the heading
"Experts" in the Registration Statement. Our report refers to a change in the
method of accounting for impaired loans.

KPMG Peat Marwick LLP

/s/ KPMG Peat Marwick LLP

Seattle, Washington
March 28, 1997

Exhibit 23.4

Consent of Hascal, Sjoholm & Co.
AmFirst's Independent Auditors

HASCAL, SJOHOLM & COMPANY,P.S.
Certified Public Accountants

CONSENT OF INDEPENDENT AUDITORS

The Board of Directors
AmFirst Bancorporation

We consent to the use in this Registration Statement on Form S-4 on behalf of
Cascade Financial Corporation of our report dated January 31, 1997, relating
to the consolidated financial statements of AmFirst Bancorporation and
Subsidiary, which appears in such Registration Statement. We also consent to
the reference to us under the heading "Experts" contained in the
Prospectus/Joint Proxy Statement, which is a part of such Registration
Statement.

/s/ Hascal, Sjoholm & Company, P.S.

HASCAL, SJOHOLM & COMPANY, P.S.
March 27, 1997

PAGE

Exhibit 99.1

Form of Proxy to Be Mailed
to Shareholders of Cascade Financial Corporation

REVOCABLE PROXY
CASCADE FINANCIAL CORPORATION
- ------------------------------------------------------------------------------
SPECIAL MEETING OF SHAREHOLDERS
____ , 1997
- ------------------------------------------------------------------------------

The undersigned hereby appoints ____________ and ______________ as
the official proxy committee of the Board of Directors, with full powers of
substitution, as attorneys and proxies for the undersigned, to vote all shares
of common stock of Cascade Financial Corporation ("Cascade") which the
undersigned is entitled to vote at the Special Meeting of Shareholders, to be
held at _____________________________________, Everett, Washington, on
________, ____ __, 1997, at __:00 _.m., local time, and at any and all
adjournments thereof, as follows:

FOR AGAINST ABSTAIN
--- ------- -------

1. A proposal to approve the Agreement and Plan ___ ___ ___
of Mergers, dated as of February 6, 1997 (the
Merger Agreement"), between Cascade and its
wholly-owned subsidiary, Cascade Bank, and
AmFirst Bancorporation ("AmFirst") and its
wholly-owned subsidiary, American First
National Bank, under the terms of which (i)
AmFirst will merge with and into a wholly-
owned subsidiary of Cascade, which will then
be merged into Cascade, and (ii) each
outstanding share of common stock of AmFirst
will be converted into shares of Cascade
common stock in accordance with the terms
of the Merger Agreement.

2. A proposal to approve an amendment to ___ ___ ___
Cascade's Certificate of Incorporation
increasing the number of authorized shares
of the Cascade's Common Stock from
5,000,000 to 8,000,000 shares.

3. A proposal to approve the Cascade Financial
Corporation 1997 Stock Option Plan.

4. In their discretion, upon such other matters as
may properly come before the meeting.

This proxy also provides voting instructions to the Trustees of the Cascade
Bank Employee Stock Ownership Plan for participants with shares allocated to
their accounts.

The Board of Directors recommends a vote "FOR" the above proposals.

- ------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR THE PROPOSITIONS STATED. IF ANY OTHER BUSINESS
IS PRESENTED AT SUCH 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 IS SOLICITED BY THE BOARD OF DIRECTORS

Should the undersigned be present and elect to vote at the Special
Meeting or at any adjournment thereof and after notification to the Secretary
of Cascade at the Meeting of the stockholder'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 Cascade prior to the
execution of this proxy of notice of the Special Meeting and a Prospectus/
Joint Proxy Statement dated ___ __, 1997.

Dated: , 1997
-------------

- ------------------------------------ --------------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER

- ------------------------------------ --------------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER

Please sign exactly as your name appears on this proxy card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder should sign.

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

Exhibit 99.2

Form of Proxy to Be Mailed to Shareholders of
AmFirst Bancorporation

REVOCABLE PROXY
AMFIRST BANCORPORATION
- ------------------------------------------------------------------------------
SPECIAL MEETING OF SHAREHOLDERS
______, 1997
- ------------------------------------------------------------------------------

The undersigned hereby appoints ____________ and ______________ as
the official proxy committee of the Board of Directors, with full powers of
substitution, as attorneys and proxies for the undersigned, to vote all shares
of common stock of AmFirst Bancorporation ("AmFirst") which the undersigned is
entitled to vote at the Special Meeting of Shareholders, to be held at
_____________________________________, Everett, Washington, on ________, ____
__, 1997, at __:00 _.m., local time, and at any and all adjournments thereof,
as follows:

FOR AGAINST ABSTAIN
--- ------- -------

1. A proposal to approve the Agreement and Plan ___ ___ ___
of Mergers, dated as of February 6, 1997 (the
"Merger Agreement"), between Cascade Financial
Corporation ("Cascade") and its wholly-owned
subsidiary, Cascade Bank, and AmFirst and its
wholly-owned subsidiary, American First National
Bank, under the terms of which (i) AmFirst will
merge with and into a wholly-owned subsidiary of
Cascade, which will then be merged into Cascade
with Cascade as the surviving corporation, and
(ii) each outstanding share of common stock of
AmFirst will be converted into shares of Cascade
common stock in accordance with the terms of
the Merger Agreement.

2. In their discretion, upon such other matters as
may properly come before the meeting.

The Board of Directors recommends a vote "FOR" the above proposals.

- ------------------------------------------------------------------------------
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR THE PROPOSITION STATED. IF ANY OTHER BUSINESS IS
PRESENTED AT SUCH 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 IS SOLICITED BY THE BOARD OF DIRECTORS

Should the undersigned be present and elect to vote at the Special
Meeting or at any adjournment thereof and after notification to the Secretary
of AmFirst at the Special 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 AmFirst prior to the
execution of this proxy of notice of the Meeting, the Prospectus/Joint Proxy
Statement dated ___ __, 1997.

Dated: , 1997
--------------

- ------------------------------------ --------------------------------
PRINT NAME OF STOCKHOLDER PRINT NAME OF STOCKHOLDER

- ------------------------------------ --------------------------------
SIGNATURE OF STOCKHOLDER SIGNATURE OF STOCKHOLDER