<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM 10-Q
(MARK ONE)
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1997
------------------
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
---------- ----------
Commission file number: 0-23322
-----------
CASCADE BANCORP
(Exact name of Registrant as specified in its charter)
Oregon 93-1034484
(State of Incorporation) (I.R.S. Employer Identification No.)
1100 NW Wall Street
Bend, Oregon 97701
(Address of principal executive offices)
(Zip Code)
(541) 385-6205
(Registrant's telephone number, including area code)
----------------------
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. 4,290,870 shares of no par
value Common Stock on October 31, 1997. ---------------------------
- ---------------------------------------
<PAGE>
CASCADE BANCORP AND SUBSIDIARIES
FORM 10-Q
QUARTERLY REPORT
SEPTEMBER 30, 1997
INDEX
PART I: FINANCIAL INFORMATION PAGE
Condensed Consolidated Balance Sheets
as of September 30, 1997 and December 31, 1996 . . . .. . . . . . . . . . .3
Condensed Consolidated Statements of Income for the
nine months and three months ended September 30, 1997 and 1996 .. . . . . .4
Condensed Consolidated Statements of Changes in Stockholders' Equity
for the nine months months ended September 30, 1997 and 1996 .. . . . . . .5
Condensed Consolidated Statements of Cash Flows
for the nine months ended September 30, 1997 and 1996. . .. . . . . . . . .6
Notes to Condensed Consolidated Financial Statements . .. . . . . . . . . . .7
Management's Discussion and Analysis of Financial Condition
and Results of Operations. . .. . . . . . . . . . . . . . . . . . . . . . 11
PART II: OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K .. . . . . . . . . . . . . . 13
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2
<PAGE>
CASCADE BANCORP & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents:
Cash and due from banks $ 24,005,219 $ 19,567,608
Federal funds sold 8,400,000 9,325,000
------------ ------------
Total cash and cash equivalents 32,405,219 28,892,608
Investment securities available-for-sale 39,259,237 24,476,627
Investment securities held-to-maturity 3,120,424 3,320,207
Loans, net 151,110,389 131,626,742
Mortgage loans held for sale 1,667,024 610,650
Premises and equipment, net 4,968,821 4,280,754
Accrued interest and other assets 8,167,990 8,068,985
------------ ------------
Total assets $240,699,104 $201,276,573
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand $ 66,287,801 $ 51,484,370
Interest bearing demand 108,379,437 89,144,726
Savings 13,062,752 12,511,495
Time deposits 20,086,669 17,941,503
------------ ------------
Total deposits 207,816,659 171,082,094
Long-term debt 5,000,000 5,000,000
Accrued interest and other liabilities 1,826,033 1,622,430
------------ ------------
Total liabilities 214,642,692 177,704,524
Stockholders'equity:
Common stock, no par value;
10,000,000 shares authorized;
4,290,870 issued and outstanding (4,265,934-1996) 13,158,417 13,058,417
Retained earnings 12,683,924 10,442,535
Unrealized gains on investment
securities available-for-sale,
net of deferred income taxes 214,071 71,097
------------ ------------
Total stockholders' equity 26,056,412 23,572,049
------------ ------------
Total liabilities and stockholders'
equity $240,699,104 $201,276,573
============ ============
</TABLE>
See accompanying notes.
3
<PAGE>
CASCADE BANCORP & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS AND THREE MONTHS ENDED SEPTEMBER 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
----------------------- -----------------------
1997 1996 1997 1996
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $11,471,325 $10,443,937 $4,088,102 $3,548,911
Taxable interest on investments 1,738,910 708,200 613,351 396,681
Nontaxable interest on investments 57,272 75,346 15,659 24,679
Interest on federal funds sold 338,598 340,033 197,273 132,675
---------- ---------- ---------- ----------
Total interest income 13,606,105 11,567,516 4,914,385 4,102,946
Interest expense:
Deposits:
Interest bearing demand 2,211,071 1,850,785 826,291 657,185
Savings 209,129 213,529 72,856 73,548
Time 731,263 654,561 252,070 234,742
Other borrowings 333,757 261,050 88,035 88,489
---------- ---------- ---------- ----------
Total interest expense 3,485,220 2,979,925 1,239,252 1,053,964
---------- ---------- ---------- ----------
Net interest income 10,120,885 8,587,591 3,675,133 3,048,982
Loan loss provision 607,177 295,678 231,316 146,957
---------- ---------- ---------- ----------
Net interest income after loan loss provision 9,513,708 8,291,913 3,443,817 2,902,025
Noninterest income:
Service charges on deposit accounts 1,327,418 1,134,418 457,000 399,645
Mortgage loan origination and processing fees 773,321 734,926 285,071 233,626
Gains on sales of mortgage loans 296,597 356,905 156,216 115,708
Other income 857,999 707,103 345,245 253,227
---------- ---------- ---------- ----------
Total noninterest income 3,255,335 2,933,352 1,243,532 1,002,206
Noninterest expense:
Salaries and employee benefits 3,669,618 3,160,222 1,367,833 1,145,061
Net occupancy & equipment 1,121,612 967,323 386,378 349,323
Other expenses 1,997,239 1,750,827 670,537 609,465
---------- ---------- ---------- ----------
Total noninterest expense 6,788,469 5,878,372 2,424,748 2,103,849
---------- ---------- ---------- ----------
Income before income taxes 5,980,574 5,346,893 2,262,601 1,800,382
Provision for income taxes 2,246,107 2,010,060 801,388 677,094
---------- ---------- ---------- ----------
Net income $3,734,467 $3,336,833 $1,461,213 $1,123,288
========== ========== ========== ==========
Net income per common share $ 0.87 $ 0.78 $ 0.34 $ 0.26
========== ========== ========== ==========
</TABLE>
See accompanying notes.
4
<PAGE>
CASCADE BANCORP & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
UNREALIZED
GAINS (LOSSES)
ON SECURITIES TOTAL
COMMON RETAINED AVAILABLE STOCKHOLDERS'
STOCK EARNINGS FOR SALE EQUITY
----------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Balance at December 31, 1995 $ 9,253,012 $ 9,734,936 $ 52,007 $ 19,039,955
10% stock dividend (387,812 shares)
Declared in June 1996 3,805,405 (3,805,405) - -
Net change in unrealized gains
(losses) on securities
available-for-sale - - 44,179 44,179
Net income - 3,336,833 - 3,336,833
----------- ----------- ---------- ------------
Balance at September 30, 1996 $13,058,417 $ 9,266,364 $ 96,186 $ 22,420,967
=========== =========== ========== ============
Balance at December 31, 1996 $13,058,417 $10,442,535 $ 71,097 $ 23,572,049
Net change in unrealized gains
on securities available-for-sale - - 142,974 142,974
Cash dividend declared in January 1997
($0.25 per common share) - (1,066,485) - (1,066,485)
Cash dividend declared in July 1997
($0.10 per common share) - (426,593) - (426,593)
Stock options exercised (24,936 shares) 100,000 - - 100,000
Net income - 3,734,467 - 3,734,467
----------- ----------- ---------- -----------
Balance at September 30, 1997 $13,158,417 $12,683,924 $ 214,071 $ 26,056,412
=========== =========== ========== ===========
</TABLE>
See accompanying notes.
5
<PAGE>
CASCADE BANCORP & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------- ------------
<S> <C> <C>
Net cash provided by operating activities $ 3,382,637 $ 2,286,040
Investing activities:
Purchases of investment securities
available-for-sale (33,495,000) (23,838,205)
Proceeds from maturities and calls of
investment securities available-for-sale 19,006,719 2,491,406
Purchases of investment securities
held-to-maturity (80,800) (978,645)
Proceeds from maturities and calls of
investment securities held-to-maturity 269,797 1,243,215
Net increase in loans (19,794,227) (7,898,731)
Purchases of premises and equipments, net (1,118,002) (1,039,210)
------------ ------------
Net cash used in investing activities (35,211,513) (30,020,170)
Financing activities:
Net increase in deposits 36,734,565 17,498,939
Cash dividends paid (1,493,078) -
Net proceeds from exercise of stock options 100,000 -
------------ ------------
Net cash provided (used) by
financing activities 35,341,487 17,498,939
------------ ------------
Net increase (decrease) in cash and cash equivalents 3,512,611 (10,235,191)
Cash and cash equivalents at beginning of period 28,892,608 27,112,461
------------ ------------
Cash and cash equivalents at end of period $ 32,405,219 $ 16,877,270
============ ============
</TABLE>
See accompanying notes.
6
<PAGE>
CASCADE BANCORP & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(Unaudited)
1. BASIS OF PRESENTATION
The interim condensed consolidated financial statements include the
accounts of Cascade Bancorp (Bancorp), a bank holding company, and its wholly-
owned subsidiaries, Bank of the Cascades (the Bank) and Cascade Finance,
(collectively, "the Company"). The Bank is an Oregon State-chartered, federally
insured commercial bank and Cascade Finance is a consumer finance company. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
The interim condensed consolidated financial statements are unaudited, but
include all adjustments, consisting of only normal accruals, which the Company
considers necessary for a fair presentation of the results of operations for
such interim periods. In preparing the condensed consolidated financial
statements, management is required to make estimates and assumptions that affect
the reported amounts of assets and liabilities as of the date of the balance
sheets and income and expenses for the periods. Actual results could differ
from those estimates.
The interim condensed consolidated financial statements should be read in
conjunction with the December 31, 1996 consolidated financial statements,
including the notes thereto, included in Bancorp's 1996 Annual Report to
Shareholders.
Certain amounts for 1996 have been reclassified to conform with the 1997
presentation.
2. INVESTMENT SECURITIES
Investment securities at September 30, 1997 and December 31, 1996 consisted
of the following:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
SEPTEMBER 30, 1997 COST GAINS LOSSES FAIR VALUE
- ------------------------------ ------------ --------- --------- -----------
<S> <C> <C> <C> <C>
Available-for-Sale
- ------------------
U.S. Government agencies...... $ 35,927,726 $ 280,574 $ 5,000 $ 36,203,300
U.S. Treasury securities...... 2,986,235 69,702 - 3,055,937
------------ --------- --------- ------------
$ 38,913,961 $ 350,276 $ 5,000 $ 39,259,237
Held-to-Maturity
- ----------------
Obligations of state and
Political subdivisions..... $ 1,732,160 $ 11,973 $ - $ 1,744,133
Other......................... 1,388,264 - - 1,388,264
------------ --------- --------- ------------
$ 3,120,424 $ 11,973 $ - $ 3,132,397
============ ========= ========= ============
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
DECEMBER 31, 1996 COST GAINS LOSSES FAIR VALUE
- ------------------------------ ------------ --------- ---------- -----------
<S> <C> <C> <C> <C>
Available-for-Sale
- ------------------
U.S. Government agencies...... $ 20,372,543 $ 95,022 $ - $ 20,467,565
U.S. Treasury securities...... 3,989,347 19,715 - 4,009,062
------------ --------- ---------- ------------
$ 24,361,890 $ 114,737 $ - $ 24,476,627
Held-to-Maturity
- ----------------
Obligations of state and
Political subdivisions..... $ 2,012,743 $ 3,103 $ 2,808 $ 2,013,038
Other......................... 1,307,464 - - 1,307,464
------------ --------- ---------- ------------
$ 3,320,207 $ 3,103 $ 2,808 $ 3,320,502
============ ========= ========== ============
</TABLE>
7
<PAGE>
3. LOANS AND RESERVE FOR LOAN LOSSES
The composition of the loan portfolio at September 30, 1997 and December 31,
1996 was as follows:
1997 1996
----------- ------------
Commercial.................... $ 28,420,911 $ 22,485,269
Real Estate:
Construction............... 34,439,294 34,375,243
Mortgage................... 23,091,923 19,774,232
Commercial................. 49,715,569 42,390,479
Installment................... 17,942,608 14,665,629
------------ ------------
153,610,305 133,690,852
Less:
Reserve for loan losses.... 1,998,248 1,691,260
Deferred loan fees......... 501,668 372,850
------------ ------------
2,499,916 2,064,110
------------ ------------
Loans, net ................... $151,110,389 $131,626,742
============ ============
Mortgage loans held for sale of $1,667,024 and $610,650 at September 30,
1997 and December 31, 1996, respectively, represent real estate mortgage loans.
These loans are recorded at cost which approximates market.
Transactions in the reserve for loan losses for the nine months ended
September 30, 1997 and 1996 were as follows:
1997 1996
----------- ------------
Balance at beginning of period... $ 1,691,260 $ 1,651,352
Provisions charged to operations. 607,177 295,678
Loans charged off................ (350,015) (134,798)
Recoveries of loans previously
charged off.................... 49,826 10,683
------------ ------------
Balance at end of period......... $ 1,998,248 $ 1,822,915
============ ============
The reserve for loan losses represents management's recognition of the
assumed risks of extending credit and the quality of the existing loan
portfolio. The reserve is maintained at a level considered adequate to provide
for potential loan losses based on management's assessment of various factors
affecting the portfolio. Such factors include loss experience, review of
problem loans, current economic conditions, and an overall evaluation of the
quality, risk characteristics and concentration of loans in the portfolio. The
reserve is increased by provisions charged to operations and reduced by loans
charged-off, net of recoveries.
Although a risk of nonpayment exists with respect to all loans, certain
specific types of risks are associated with different types of loans. Due to
the nature of the Bank's customer base and the growth experienced in the Bank's
market area, real estate is frequently a material component of collateral for
the Bank's loans. The expected source of repayment of these loans is generally
the operations of the borrower's business or personal income; however, real
estate provides an additional measure of security. Risks associated with real
estate loans include fluctuating land values, local economic conditions, changes
in tax policies, and a concentration of loans within the Bank's market area.
The Bank mitigates risks on construction loans by generally lending funds to
customers that have been prequalified for long term financing and who are using
experienced contractors approved by the Bank. The commercial real estate risk
is further mitigated by making the majority of commercial real estate loans to
owner-occupied users of the property. The Bank manages the general risks
inherent in the loan portfolio by following loan policies and underwriting
practices designed to result in prudent lending activities.
8
<PAGE>
The following table presents information with respect to non-performing
assets at September 30, 1997 and December 31, 1996 (dollars in thousands):
1997 1996
------ ------
Loans on non-accrual status........... $ 783 $ 50
Loans past due 90 days or more
but non on non-accrual status...... 9 27
Other real estate owned............... - -
------ ------
Total non-performing assets........... $ 792 $ 77
====== ======
Percentage of non-performing assets
to total assets.................... .33% .04%
The accrual of interest on a loan is discontinued when, in management's
judgment, the future collectibility of principal or interest is in doubt. Loans
placed on nonaccrual status may or may not be contractually past due at the time
of such determination, and may or may not be secured. When a loan is placed on
nonaccrual status, it is the Bank's policy to reverse, and charge against
current income, interest previously accrued but uncollected. Interest
subsequently collected on such loans is credited to loan principal if, in the
opinion of management, full collectibility of principal is doubtful. If
interest on nonaccrual loans had been accrued, such income would have been
insignificant for the nine months ended September 30, 1997 and 1996.
At September 30, 1997, there were no potential problem loans, except as
discussed above, where known information about possible credit problems of the
borrower caused management to have serious doubts as to the ability of such
borrower to comply with the present loan repayment terms and which may result in
such loans being placed on a non-accrual basis.
4. MORTGAGE SERVICING RIGHTS
At September 30, 1997 and December 31, 1996, the Bank held servicing rights
to approximately $166,389,000 and $143,008,000, respectively, in mortgage loans
which have been sold to the Federal National Mortgage Association. These
mortgage loans are being serviced for the Bank by another financial institution
under a sub-servicing agreement. The sale of these mortgage loans are subject
to technical underwriting exceptions and related repurchase risks. Such risks
are considered in the determination of the reserve for loan losses.
Effective January 1, 1996, the Bank prospectively adopted Statement of
Financial Accounting Standards (SFAS) No. 122, "Accounting for Mortgage
Servicing Rights" (SFAS 122) (superceded by SFAS No. 125 - see Note 7). SFAS
122 required the Bank to recognize as separate assets the rights to service
mortgage loans which are acquired through loan origination activities
subsequent to December 31, 1995. Other assets in the accompanying condensed
consolidated balance sheets as of September 30, 1997 and December 31, 1996
include approximately $1,064,000 and approximately $575,000, respectively, for
the capitalized mortgage servicing rights.
The fair value of the capitalized mortgage servicing rights was determined
based on estimates of the present value of expected future cash flows and
comparisons to current market transactions involving mortgage servicing rights
with similar portfolio characteristics. There were no significant changes in
the valuation allowance for capitalized mortgage servicing rights during the
nine months ended September 30, 1997 and 1996. The predominant risk
characteristics of the underlying loans used to stratify the capitalized
mortgage servicing rights for purposes of measuring impairment are note rates,
terms and interest methods (i.e., fixed and variable).
5. OTHER BORROWINGS
At September 30, 1997 and December 31, 1996, the Bank had $5.0 million in
long-term debt from the Federal Home Loan Bank of Seattle (FHLB) on a three year
note due in May 1998, with a fixed interest rate of 6.96%. The borrowings from
FHLB are secured by Bank assets.
9
<PAGE>
6. NET INCOME PER COMMON SHARE
Net income per common share was computed by dividing net income by the
weighted average number of common shares outstanding during the period. The
weighted average number of common shares outstanding used to compute net income
per common share was approximately 4,269,000 for the nine-months ended
September 30, 1997 and approximately 4,266,000 for the nine-months ended
September 30, 1996. All share and per share amounts in the accompanying
financial statements have been adjusted to retroactively reflect a two-for-one
stock split declared in June 1997 and a 10% stock dividend declared in June
1996.
In February 1997 the Financial Accounting Standards Board issued SFAS No.
128, "Earnings per Share" (SFAS No. 128). SFAS 128 supercedes APB Opinion No.
15, "Earnings per Share" and the related interpretations (APB No. 15). SFAS No.
128 will require the Company to present both basic and diluted earnings per
share (EPS) on the face of the income statement and to provide a reconciliation
of the numerator and denominator of the basic EPS computation to the numerator
and denominator of the diluted EPS computation. In addition, the computation of
basic EPS will not consider common stock equivalents such as stock options.
SFAS No. 128 will be effective for the Company in the fourth quarter of 1997,
and earlier application is not permitted. After the effective date, all
prior-period EPS data presented shall be restated (including interim financial
statements) to conform with the provisions of SFAS No. 128. Management believes
that the calculation of basic and diluted earnings per share in accordance with
SFAS No. 128 will not be significantly different than historically reported net
income per share in accordance with APB No. 15.
7. ADOPTION OF ADDITIONAL NEW ACCOUNTING STANDARDS
In June 1996, SFAS No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinquishments of Liabilities" (SFAS 125) was issued.
SFAS 125 superseded SFAS 122 and also established standards for when transfers
of financial assets (e.g., loan participations), including those with continuing
involvement by the transferor, should be considered a sale. SFAS 125 also
established standards for when a liability should be considered extinguished.
SFAS 125 is generally effective for transfers of assets and extinquishments of
liabilities after December 31, 1996, applied prospectively. Earlier adoption or
retroactive application of SFAS 125 was not permitted. In addition, in December
1996, SFAS No. 127 was issued which deferred the effective date of certain
provisions of SFAS 125 for one year. The effect of adopting SFAS 125 was not
significant to the Company's condensed consolidated financial statements.
In February 1997, SFAS No. 129, "Disclosures of Information about Capital
Structure" was issued. This Statement, which establishes standards for
disclosing information about an entity's capital structure, is effective for
financial statements for periods ending after December 15, 1997. This statement
is not expected to have a material impact on the Company's financial statements.
In June 1997, SFAS No. 130, "Reporting Comprehensive Income" was issued.
This statement establishes requirements for disclosure of comprehensive income
and its components (revenues, expenses, gains, and losses) and becomes effective
for financial statements for periods ending after December 15, 1998. The
Company does not expect this pronouncement to materially impact the Company's
financial condition or results of operations.
In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information" was issued. SFAS No. 131 requires publicly-held companies
to report financial and other information about key revenue-producing segments
of the entity for which such information is available and is utilized by the
chief operating decision maker. Specific information to be reported for
individual segments includes profit or loss, certain revenue and expense items
and total assets. A reconciliation of segment financial information to amounts
reported in the financial statements will be required. SFAS No. 131 becomes
effective for financial statements for periods ending after December 15, 1998
and it has not yet been determined whether the Company will be required to make
any additional disclosure.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE NINE MONTHS AND THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
The following discussion should be read in conjunction with the Company's
unaudited condensed consolidated financial statements and the notes thereto for
the nine-month and three-month periods ended September 30, 1997 and 1996
included in this report.
The following discussion includes certain forward-looking statements. Those
statements may involve a number of risks and uncertainties which could cause
actual results to differ materially from the expectation stated, including the
following: slower than expected growth in the Company's business, deterioration
of business conditions generally or specifically in the banking industry,
regulatory changes involving banking, competitive factors, and general market
conditions.
FINANCIAL CONDITION
The Company's total assets increased 19.6 percent to $240.7 million at
September 30, 1997 compared to $201.3 million at December 31, 1996, primarily
due to an increase in investment securities available-for-sale and net loans.
These increases in assets were funded by an increase in deposits. During the
nine months ended September 30, 1997, approximately $33.5 million in investment
securities were purchased with excess funds from strong deposit growth and
proceeds from maturities and calls of investment securities. Loan demand was
strong with total loans increasing 14.9 percent to $153.6 million at September
30, 1997 compared to $133.7 million at December 31, 1996. Deposits increased
21.5 percent to $207.8 million at September 30, 1997 compared to $171.1 million
at December 31, 1996. Although all categories of deposits increased, the
primary change was in demand and interest bearing demand deposits. One of the
contributing factors to the Company's increased deposits is that the Bank
emphasizes the development of core deposit relationships because such deposits
provide a stable source of funds for operations at a relatively low cost, and
because core deposit customers are more likely to purchase other banking
services. Core deposits include demand, interest bearing demand and savings
deposits. The Bank's core deposits aggregated approximately $187.7 million at
September 30, 1997.
RESULTS OF OPERATIONS
The Company reported net income of $3,734,000, or $.87 per share, for the
nine months ended September 30, 1997, compared to net income of approximately
$3,337,000, or $.78 per share, for the same period in 1996. This represents an
increase in net income of 11.9 percent. Net income for the quarter ended
September 30, 1997 was approximately $1,461,000, or $.34 per share, compared to
net income of approximately $1,123,000, or $.26 per share, for the same period
in 1996, up 30.1 percent.
Net interest income increased 17.9 percent for the nine months and 20.5
percent for the three months ended September 30, 1997 as compared to the 1996
periods. The net increases during these periods resulted from increases in
interest income exceeding the increases in interest expense.
Total interest income increased approximately $2,038,200 (or 17.9%) for the
nine months and approximately $811,400 (or 19.8%) for the quarter ended
September 30, 1997 as compared to the 1996 periods. These were primarily the
result of increases in the volume of loans and investment securities available-
for-sale.
Total interest expense increased approximately $505,300 (or 17.0%) for the
nine months and approximately $185,300 (or 17.6%) for the quarter ended
September 30, 1997 as compared to the 1996 periods. The increase during the
nine months ended September 30, 1997 was primarily due to increased volume in
interest bearing demand deposits and federal funds purchased. The increase
during the quarter ended September 30, 1997 was primarily due to increased
volume in interest bearing demand and time deposits.
11
<PAGE>
Total noninterest income increased 11.0 percent for the nine months and 24.1
percent for the quarter ended September 30, 1997 as compared to the 1996
periods. The increase for the nine months ended September 30, 1997 was
primarily due to increases in service charges, mortgage loan origination and
processing fees and other income, which were partially offset by a decrease in
gains on sales of mortgage loans. The increase for the quarter ended September
30, 1997 was primarily due to increases in all categories of noninterest income.
Increases in service charge income during 1997 were primarily due to an
increase in the volume of deposit activity during the periods presented. The
decrease in gains on sales of mortgage loans for the nine months ended
September 30, 1997 was primarily attributable to the increased interest rate
environment and a more competitive market.
Total noninterest expense increased 15.5 percent for the nine months and
15.6 percent for the quarter ended September 30, 1997 as compared to the 1996
periods. These increases are primarily the result of increased personnel and
operating expenses due to continued growth of the Bank and the opening of
Cascade Finance.
Income tax expense increased between the periods presented primarily as a
result of higher pre-tax income.
LOAN LOSS PROVISION
The loan loss provision increased $311,499 for the nine-months and $84,359
for the quarter ended September 30, 1997 as compared to the same periods in
1996, primarily due to loan growth. Management believes the current loan loss
provision maintains the reserve for loan losses at an appropriate level. The
Bank's ratio of reserve for loan losses to total loans was 1.30 percent at
September 30, 1997 compared to 1.26 percent at December 31, 1996.
LIQUIDITY
The Company's principal subsidiary, Bank of the Cascades, has adopted
policies to maintain a relatively liquid position to enable it to respond to
changes in the Bank's needs and financial environment. Generally, the Bank's
major sources of liquidity are customer deposits, sales and maturities of
investment securities available-for-sale, the use of federal funds markets
and net cash provided by operating activities. In addition, scheduled loan
repayments are a relatively stable source of funds, while deposit inflows,
unscheduled loan prepayments, and undisbursed loan funds, are influenced by
general interest rate levels, interest rates available on other investments,
competition, economic conditions and other factors, and are not necessarily
stable sources and uses of funds.
Along with federal funds lines and undisbursed loan funds, the Bank is also
a member of the Federal Home Loan Bank, Seattle, Washington, which provides
secured borrowings and other funding opportunities for liquidity purposes.
Management believes that the Bank's existing sources of liquidity will
enable the Bank to fund its requirements in the normal course of business.
CAPITAL RESOURCES
During the nine months ended September 30, 1997 the Company's total capital
increased to $26.1 million, or 10.8 percent of total assets. The increase was
primarily due to the Company's net income of $3,734,467 for the nine months
ended September 30, 1997 and the net change in unrealized gains on investment
securities available-for-sale of $142,974. These increases to capital were
partially offset by the payment of cash dividends totaling $1,493,078 during the
nine months ended September 30, 1997.
During the third quarter ended September 30, 1997 the Company announced the
establishment of a quarterly cash dividend and the payment of a cash dividend of
$.10 per common share to all shareholders of record on August 4, 1997. On
October 21, 1997 the Company announced the payment of the third quarter cash
dividend of $.10 per common share to all shareholders of record on October 31,
1997, to be paid on November 7, 1997.
12
<PAGE>
In September 1997, the Company announced the establishment of a stock
repurchase plan. The plan authorizes management to repurchase up to 106,648
shares of the Company's common stock through the open market or in privately
negotiated transactions in accordance with all applicable State and Federal laws
and regulations.
At September 30, 1997, the Company's Tier 1 and total risked-based capital
ratios under the Federal Reserve Board's ("FRB") risk-based capital guidelines
were approximately 14.6% and 15.7%, respectively. The FRB's minimum risk-based
capital ratio guidelines for Tier 1 and total capital are 4% and 8%,
respectively.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) No exhibits were required to be filed for the quarter ended
September 30, 1997.
(b) Reports on Form 8-K. The Company did not file any reports on
Form 8-K during the quarter ended September 30, 1997.
13
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CASCADE BANCORP
----------------------------
(Registrant)
Date 11/12/97 By /s/ Roger J. Shields
----------------------------
Roger J. Shields, President
Date 11/12/97 By /s/ Patricia L. Moss
----------------------------
Patricia L. Moss, Chief
Financial Officer
14
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<PERIOD-START> JAN-01-1997
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