<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: June 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. 4,265,934 shares of no par
value Common Stock on July 31, 1997. ---------------------------
- -------------------------------------
<PAGE>
CASCADE BANCORP AND SUBSIDIARIES
FORM 10-Q
QUARTERLY REPORT
JUNE 30, 1997
INDEX
PART I: FINANCIAL INFORMATION PAGE
Condensed Consolidated Balance Sheets
as of June 30, 1997 and December 31, 1996.. . . . . . . . . . . . . . . . .3
Condensed Consolidated Statements of Income
for the six months and three months ended June 30, 1997 and 1996 . . . . .4
Condensed Consolidated Statements of Changes in Stockholders' Equity
for the six months and three months ended June 30, 1997 and 1996 .. . . . .5
Condensed Consolidated Statements of Cash Flows
for the six months ended June 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 4. Submissions of Matters to a Vote of Security Holders . . . . 13
Item 6. Exhibits and Reports on Form 8-K . .. . . . . . . . . . . . . 13
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
2
<PAGE>
CASCADE BANCORP & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 AND DECEMBER 31, 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents:
Cash and due from banks $ 22,373,769 $ 19,567,608
Federal funds sold 2,000,000 9,325,000
------------ ------------
Total cash and cash equivalents 24,373,769 28,892,608
Investment securities available-for-sale 34,024,688 24,476,627
Investment securities held-to-maturity 3,100,851 3,320,207
Loans, net 147,968,989 131,626,742
Mortgage loans held for sale 1,599,306 610,650
Premises and equipment, net 4,675,760 4,280,754
Accrued interest and other assets 8,745,344 8,068,985
------------ ------------
Total assets $224,488,707 $201,276,573
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Demand $ 59,215,977 $ 51,484,370
Interest bearing demand 100,344,461 89,144,726
Savings 12,961,261 12,511,495
Time deposits 20,039,502 17,941,503
------------ ------------
Total deposits 192,561,201 171,082,094
Federal funds purchased 1,000,000 -
Long-term debt 5,000,000 5,000,000
Accrued interest and other liabilities 1,138,513 1,622,430
------------ ------------
Total liabilities 199,699,714 177,704,524
Stockholders'equity:
Common stock, no par value;
10,000,000 shares authorized;
4,265,934 issued and outstanding 13,058,417 13,058,417
Retained earnings 11,649,304 10,442,535
Unrealized gains on investment
securities available-for-sale,
net of deferred income taxes 81,272 71,097
------------ ------------
Total stockholders' equity 24,788,993 23,572,049
------------ ------------
Total liabilities and stockholders'
equity $224,488,707 $201,276,573
============ ============
</TABLE>
See accompanying notes.
3
<PAGE>
CASCADE BANCORP & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
SIX MONTHS AND THREE MONTHS ENDED JUNE 30, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30, JUNE 30,
----------------------- -----------------------
1997 1996 1997 1996
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Interest income:
Interest and fees on loans $7,383,223 $6,895,026 $3,879,444 $3,492,324
Taxable interest on investments 1,125,559 311,519 657,920 137,202
Nontaxable interest on investments 41,613 50,667 20,495 28,187
Interest on federal funds sold 141,325 207,358 41,100 104,051
---------- ---------- ---------- ----------
Total interest income 8,691,720 7,464,570 4,598,959 3,761,764
Interest expense:
Deposits:
Interest bearing demand 1,384,780 1,193,600 718,035 596,792
Savings 136,273 139,981 69,790 69,971
Time 479,193 419,819 247,914 216,790
Other borrowings 245,722 172,561 159,752 85,498
---------- ---------- ---------- ----------
Total interest expense 2,245,968 1,925,961 1,195,491 969,051
---------- ---------- ---------- ----------
Net interest income 6,445,752 5,538,609 3,403,468 2,792,713
Loan loss provision 375,861 148,721 279,783 66,454
---------- ---------- ---------- ----------
Net interest income after
loan loss provision 6,069,891 5,389,888 3,123,685 2,726,259
Noninterest income:
Service charges on deposit accounts 870,418 734,773 446,707 381,144
Mortgage loan origination and
processing fees 488,250 501,300 261,186 290,961
Gains on sales of mortgage loans 140,381 241,197 77,151 56,013
Other income 512,754 453,876 267,466 225,896
---------- ---------- ---------- ----------
Total noninterest income 2,011,803 1,931,146 1,052,510 954,014
Noninterest expense:
Salaries and employee benefits 2,301,785 2,015,161 1,125,836 965,213
Net occupancy & equipment 735,234 618,000 386,250 302,457
Other expenses 1,326,702 1,141,362 678,450 577,093
---------- ---------- ---------- ----------
Total noninterest expense 4,363,721 3,774,523 2,190,536 1,844,763
---------- ---------- ---------- ----------
Income before income taxes 3,717,973 3,546,511 1,985,659 1,835,510
Provision for income taxes 1,444,719 1,332,967 783,727 689,825
---------- ---------- ---------- ----------
Net income $2,273,254 $2,213,544 $1,201,932 $1,145,685
========== ========== ========== ==========
Net income per common share $ 0.53 $ 0.52 $ 0.28 $ 0.27
========== ========== ========== ==========
</TABLE>
See accompanying notes.
4
<PAGE>
CASCADE BANCORP & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
UNREALIZED
GAINS (LOSSES)
ON SECURITIES TOTAL
COMMON RETAINED AVALABLE 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 (193,906 shares)
Declared in June 1996 3,805,405 (3,805,405) - -
Net change in unrealized gains
(losses) on securities
available-for-sale - - (33,167) (33,167)
Net income - 2,213,544 - 2,213,544
----------- ----------- ---------- ------------
Balance at June 30, 1996 $13,058,417 $ 8,143,075 $ 18,840 $ 21,220,332
=========== =========== ========== ============
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 - - 10,175 10,175
Cash dividend declared in January 1997
($0.50 per common share) - (1,066,485) - (1,066,485)
Net income - 2,273,254 - 2,273,254
----------- ----------- ---------- -----------
Balance at June 30, 1997 $13,058,417 $11,649,304 $ 81,272 $ 24,788,993
=========== =========== ========== ===========
</TABLE>
See accompanying notes.
5
<PAGE>
CASCADE BANCORP & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Net cash provided by operating activities $ 572,344 $ 446,169
Investing activities:
Purchases of investment securities
available-for-sale (22,495,000) (3,985,000)
Proceeds from maturities and calls of
investment securities available-for-sale 13,010,469 2,491,406
Purchases of investment securities
held-to-maturity (55,400) (909,309)
Proceeds from maturities and calls of
investment securities held-to-maturity 269,797 546,287
Net increase in loans (16,577,727) (6,425,843)
Purchases of premises and equipments, net (655,944) (347,101)
------------- ------------
Net cash used in investing activities (26,503,806) (8,629,560)
Financing activities:
Net increase in deposits 21,479,107 12,540,995
Cash dividends paid (1,066,485) -
Net increase in federal funds purchased 1,000,000 -
------------- ------------
Net cash provided (used) by
financing activities 21,412,622 12,540,995
------------- ------------
Net increase (decrease) in cash and
cash equivalents (4,518,839) 4,357,604
Cash and cash equivalents at beginning of period 28,892,608 27,112,461
------------- ------------
Cash and cash equivalents at end of period $ 24,373,769 $ 31,470,065
============= ============
</TABLE>
See accompanying notes.
6
<PAGE>
CASCADE BANCORP & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 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 June 30, 1997 and December 31, 1996 consisted of
the following:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED ESTIMATED
JUNE 30, 1997 COST GAINS LOSSES FAIR VALUE
- ------------------------------ ------------ --------- ---------- -----------
<S> <C> <C> <C> <C>
Available-for-Sale
- ------------------
U.S. Government agencies...... $ 30,911,201 $ 119,737 $ 27,500 $ 31,003,438
U.S. Treasury securities...... 2,984,623 36,627 - 3,021,250
------------ --------- ---------- ------------
$ 33,895,824 $ 156,364 $ 27,500 $ 34,024,688
Held-to-Maturity
- ----------------
Obligations of state and
Political subdivisions..... $ 1,737,987 $ 2,494 $ 4,316 $ 1,736,165
Other......................... 1,362,864 - - 1,362,864
------------ --------- ---------- ------------
$ 3,100,851 $ 2,494 $ 4,316 $ 3,099,029
============ ========= ========== ============
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZE 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 RESERVCE FOR LOAN LOSSES
The composition of the loan portfolio at June 30, 1997 and December 31, 1996
was as follows:
1997 1996
----------- ------------
Commercial.................... $ 27,599,904 $ 22,485,269
Real Estate:
Construction............... 36,951,654 34,375,243
Mortgage................... 21,791,882 19,774,232
Commercial................. 46,005,937 42,390,479
Installment................... 17,970,855 14,665,629
------------ ------------
150,320,232 133,690,852
Less:
Reserve for loan losses.... 1,917,400 1,691,260
Deferred loan fees......... 433,843 372,850
------------ ------------
2,351,243 2,064,110
------------ ------------
Loans, net ................... $147,968,989 $131,626,742
============ ============
Mortgage loans held for sale of $1,599,306 and $610,650 at June 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 six months ended June
30, 1997 and 1996 were as follows:
1997 1996
----------- ------------
Balance at beginning of period... $ 1,691,260 $ 1,651,352
Provisions charged to operations. 375,861 148,721
Loans charged off................ (187,274) (29,871)
Recoveries of loans previously
chargedoff.................... 37,553 6,759
------------ ------------
Balance at end of period......... $ 1,917,400 $ 1,776,961
============ ============
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 June 30, 1997 and December 31, 1996 (dollars in thousands):
1997 1996
------ ------
Loans on non-accrual status........... $ 62 $ 50
Loans past due 90 days or more
but non on non-accrual status...... 220 27
Other real estate owned............... - -
------ ------
Total non-performing assets........... $ 282 $ 77
====== ======
Percentage of non-performing assets
to total assets.................... .13% .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 six months ended June 30, 1997 and 1996.
At June 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 June 30, 1997 and December 31, 1996, the Bank held servicing rights to
approximately $157,406,000 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 June 30, 1997 and December 31, 1996 include
approximately $922,000 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 six
months ended June 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 June 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. At June 30, 1997 the Bank had $1.0 million in
federal funds purchased.
9
<PAGE>
6. NET INCOME PER COMMON SHARE
Net income per common share is net income divided by the weighted average
shares outstanding for that period. The weighted average number of common
shares outstanding used to compute net income per common share, was
approximately 4,266,000 for the six-month and three-month periods ended June 30,
1997 and 1996. Weighted average shares outstanding consists of common shares
outstanding and common stock equivalents attributable to stock options. Net
income per common share and weighted average shares outstanding have been
restated to retroactively reflect the two-for-one stock split declared in June
1997 and the 10% stock dividend declared in June 1996.
In February 1997 the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards 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" (SFAS125) 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 extinquished.
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.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE SIX MONTHS AND THREE MONTHS ENDED JUNE 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 six-month and three-month periods ended June 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 11.5 percent to $224.5 million at June
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 which were
funded by an increase in deposits. During the six monthe ended June 30, 1997
approximately $22.6 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 12.4
percent to $150.3 million at June 30, 1997 compared to $133.7 million at
December 31, 1996. Deposits increased 12.6 percent to $192.6 million at June
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 of 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 $172.5 million at June 30, 1997.
RESULTS OF OPERATIONS
The Company reported net income of $2,273,000, or $.53 per share, for the
six months ended June 30, 1997, compared to net income of approximately
$2,214,000, or $.52 per share, for the same period in 1996. This represents an
increase in net income of 2.7 percent. Net income for the quarter ended June
30, 1997 was approximately $1,202,000, or $.28 per share, compared to net income
of approximately $1,146,000, or $.27 per share, for the same period in 1996,
up 4.9 percent.
Net interest income increased 16.4 percent for the six months and 21.9
percent for the three months ended June 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 $1,227,200 for the six months
and approximately $837,200 for the quarter ended June 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 $320,000 for the six months
and approximately $226,400 for the quarter ended June 30, 1997 as compared to
the 1996 periods. These increases were primarily due to increased volume in
interest bearing demand deposits and federal funds purchased.
Total noninterest income increased 4.2 percent for the six months and 10.3
percent for the quarter ended June 30, 1997 as compared to the 1996 periods.
The increase for the six months ended June 30, 1997 was primarily due to
increases in service charges and other income, which were partially offset by
decreases in mortgage loan
11
<PAGE>
origination and processing fees and gains on sales of mortgage loans. The
increase for the quarter ended June 30, 1997 was primarily due to increases in
service charges, gains on sales of mortgage loans and other income, partially
offset by a decrease in mortgage loan origination and processing fees.
Increases in service charge income during 1997 were primarily due to an
increase in the volume of deposit activity during the periods presented. The
decreases in mortgage loan origination and processing fees is primarily due to
decreased loan originations during the periods presented. The decrease in gains
on sales of mortgage loans for the six months ended June 30, 1997 was primarily
attributable to the increased interest rate environment and a more competitive
market.
Total noninterest expense increased 15.6 percent for the six months and 18.7
percent for the quarter ended June 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 $227,140 for the six-months and $213,329
for the quarter ended June 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 1.28 percent at June
30, 1997 compared to 1.26 percent at December 31, 1996.
LIQUIDITY
Bancorp'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, 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 six months ended June 30, 1997 the Company's total capital
increased to $24.8 million, or 11.0 percent of total assets. The increase was
primarily due to the Company's net income of $2,273,254 for the six months ended
June 30, 1997 and the net change in unrealized gains on investment securities
available-for-sale of $10,175. These increases to capital were partially offset
by the $.50 per common share cash dividend totaling $1,066,485 paid from
retained earnings during the first quarter of 1997.
At June 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 14.1% and 15.3%, respectively. The FRB's minimum risk-based
capital ratio guidelines for Tier 1 and total capital are 4% and 8%,
respectively.
On July 15, 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.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
(a) April 21, 1997, Annual Meeting
(b) Need not be completed
(c) The following matters were voted on at the Annual Meeting of
Shareholders held on April 21, 1997:
1. The re-election of three directors:
Number Number Total
Of Votes of Votes Number of
DIRECTOR "FOR" "WITHHELD" Votes
------------------ --------- --------- ---------
Jerol E, Andres 1,585,879 27,289 1,613,168
Roger J. Shields 1,612,165 1,003 1,613,168
Jacob M. Wolfe 1,612,165 1,003 1,613,168
2. The approval to amend the Company's articles of
incorporation:
Proxy Number Number Total
Votes Of Votes of Votes Number of
"FOR" "AGAINST" "ABSTAIN" Votes
--------- --------- -------- ---------
1,115,444 16,710 28,022 1,160,176
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of the Quarter
Report on Form 10-Q.
3.1 ARTICLES OF INCORPORATION. A complete copy of the articles
of incorporation as amended.
(b) Reports on Form 8-K. The Company did not file any reports on
Form 8-K during the second quarter ended June 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 8/11/97 By /s/ Roger J. Shields
----------------------------
Roger J. Shields, President
Date 8/12/97 By /s/ Patricia L. Moss
----------------------------
Patricia L. Moss, Chief
Financial Officer
14
<PAGE>
Exhibit "1"
ARTICLES OF AMENDMENT
FOR
CASCADE BANCORP
1. Sections 10.2 and 10.3 of Article X of Cascade Bancorp's
Articles of Incorporation are hereby amended and restated in
their entirety as follows:
"10.2 SHAREHOLDER VOTE. In addition to any affirmative
vote required by law or under any other provision of these
Articles of Incorporation or the Bylaws of the Corporation,
and except as otherwise expressly provided in Section 10.3
hereof, no Corporate Action shall be authorized or effected
unless there is cast the affirmative vote of at least two-
thirds of the outstanding shares of capital stock of the
Corporation held by shareholders who are not interested
shareholders as defined in ORS 60.825 and who are otherwise
entitled to vote generally in the election of directors.
10.3 EXCEPTION TO TWO-THIRDS REQUIREMENT. The
provisions of Section 10.2 hereof shall not be applicable to
any particular Corporate Action and such Corporate Action
shall require only such affirmative vote as is required by
law and any other provisions of these Articles of
Incorporation, if a majority of all Continuing Directors of
the Corporation vote in favor and recommend approval of the
Corporate Action to the shareholders."
2. The following Section 10.4 is added to Article X of Cascade
Bancorp's Articles of Incorporation:
"10.4 COORDINATION WITH STATUTE: The provisions of this
Article X shall be subordinate to the provisions of ORS
60.825 to ORS 60 .845 as amended, such that said statutory
provisions shall control over any conflicting provisions of
this Article. Further, the invalidity or unenforceability
of any particular provision or provisions of this Article
shall not affect any other provisions hereof, and in such
event this Article shall be construed in all respects as if
such invalid or unenforceable provisions were amended to
conform to such statutory provisions."
<PAGE>
ARTICLES OF AMENDMENT
TO
THE ARTICLES OF INCORPORATION
OF
CASCADE BANCORP
Pursuant to ORS 60.437, the undersigned corporation hereby
submits for filing the following articles of amendment to its
articles of incorporation:
1. The name of the corporation is CASCADE BANCORP.
2. Shareholder action is required to adopt the amendment.
The shareholder vote was as follows:
Number of votes entitled to be cast 228,506
Number of votes in favor 159,195
Number of votes against 600
3. The articles of incorporation are amended as follows:
"ARTICLE VII
The total number of shares of stock which the
corporation shall have authority to issue shall be
10,000,000 shares of Common Stock without par value."
4. The amendment was adopted on October 28, 1993.
CASCADE BANCORP
/S/ James E. Petersen
----------------------
JAMES E. PETERSEN,
Assistant Secretary
Person to contact about this filing:
JAMES E. PETERSEN
KARNOPP, PETERSEN, NOTEBOOM,
HUBEL, HANSEN & ARNETT
1201 N.W. Wall Street
Suite 300
Bend, Oregon 97701
(541) 382-3011
Page 1. ARTICLES OF AMENDMENT
<PAGE>
Secretary of State
Corporate Division
158 12th Street NE
Salem, Oregon 97310-0210
Registry Number: 193154-90
ARTICLES OF AMENDMENT
By Incorporator
1. Name of the corporation prior to amendment: Cascade Bancorp.
2. The corporation has not issued any shares of stock.
3. Shareholder action was not required to adopt the amendment.
The amendment was adopted by the incorporator.
4. State the article number and set forth the article as it is
amended to read.
Paragraph 10.3 of Article X is amended and completely
restated as follows:
"10.3 EXCEPTION TO 75% REQUIREMENT. The
provisions of Section 10.2 hereof shall not be
applicable to any particular Corporate Action and
such Corporate Action shall require only such
affirmative vote as is required by law and any
other provisions of these Articles of
Incorporation, if a majority of all Continuing
Directors of the Corporation vote in favor of and
recommend approval of the Corporate Action to the
shareholders."
5. The amendment was adopted on May 21, 1990.
Execution:/S/ James E. Petersen
-----------------------------
JAMES E. PETERSEN, Incorporator
Person to contact about this filing: James E. Petersen
(503) 382-3011
<PAGE>
ARTICLES OF INCORPORATION
OF
CASCADE BANCORP
This undersigned, being over the age of 18 years and a citizen
of the United States, being desirous of forming a Corporation for
the purposes hereinafter specified and in conformity with the laws
of the state of Oregon, does hereby make and execute the following
written Articles of Incorporation in duplicate.
ARTICLE I
---------
The name of this Corporation is:
CASCADE BANCORP
ARTICLE II
-----------
The purposes of this Corporation are to engage in the business
of a bank holding company in all of its aspects and to engage in
any lawful activities for which corporations may be organized under
Oregon Statutes as from time to time constituted. This Corporation
shall have those powers which are given to corporations under
Oregon Statutes presently constituted and those powers which may
hereafter and from time to time be given or permitted to
corporations under Oregon law.
ARTICLE III
------------
The duration of this Corporation is perpetual.
ARTICLE IV
-----------
The registered agent of this Corporation for service of
process is James E. Petersen, whose address is 835 N.W. Bond
Page 1. ARTICLES OF INCORPORATION
<PAGE>
Street, Bend, Oregon 97701, which address is the registered office
of this Corporation
ARTICLE V
----------
The address where the Division may mail notices is:
c/o James E. Petersen
835 N.W. Bond Street
Bend, Oregon 97701
ARTICLE VI
-----------
The name and address of the incorporator executing these
Articles of Incorporation is as follows: James E. Petersen, whose
address is 835 N.W. Bond Street, Bend, Oregon 97701.
ARTICLE VII
-----------
The total number of shares of stock which the corporation
shall have authority to issue shall be 1,000,000 shares of Common
Stock without par value.
ARTICLE VIII
-------------
The first Board of Directors shall consist of seven members,
each of whom shall hold office until his successor is duly elected.
Their names and addresses are:
Alden K. Briggs P.O. Box 5879
Bend, Oregon 97701
L. A. Swarens P.O. Box 5879
Bend, Oregon 97701
Jacob M. Wolfe P.O. Box 5879
Bend, Oregon 97701
Roger J. Shields P.O. Box 5879
Bend, Oregon 97701
Gary L. Capps P.O. Box 5879
Bend, Oregon 97701
Page 2. ARTICLES OF INCORPORATION
<PAGE>
Gary L. Hoffman P.O. Box 5879
Bend, Oregon 97701
James E. Petersen P.O. Box 5879
Bend, Oregon 97701
ARTICLE IX
-----------
Each share of the Common Stock of this Corporation, after the
consideration therefor as fixed by the Board of Directors has been
fully paid in, shall be nonassessable and shall not be subject to
assessment to pay the debts of the Corporation.
ARTICLE X
---------
10.1 DEFINITIONS. For the purposes of this Article X only,
the following terms shall have the meanings set forth below:
(a) "Business Combination" shall mean any and all of the
following:
(I) Any merger, reorganization, consolidation or
exchange of shares of the Corporation with or into another Person
(as hereinafter defined);
(ii) Any merger, reorganization, consolidation or
exchange of shares of a Subsidiary (as hereinafter defined) of the
Corporation with or into another Person;
(iii) Any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of assets of the Corporation having
a book value in excess of 10 percent of the book value of the total
consolidated assets of the Corporation at the end of its most
recent fiscal year end determined in accordance with generally
accepted accounting principles;
Page 3. ARTICLES OF INCORPORATION
<PAGE>
(iv) Any sale, lease, exchange, mortgage, pledge,
transfer or other disposition of assets of a Subsidiary (as
hereinafter defined)of the Corporation having a book value in
excess of 10 percent of the book value of the total assets of the
Subsidiary at the end of its most recent fiscal year end determined
in accordance with generally accepted accounting principles;
(v) Any plan or proposal for the partial or complete
liquidation or dissolution, spin-off, split-off or split-up of the
Corporation or of any Subsidiary of the Corporation; and
(vi) Any reclassification of securities (including
any reverse stock split) or recapitalization of the Corporation
(other than a redemption in accordance with the terms of the
security redeemed), or any reorganization, merger or consolidation
of the Corporation with any of its Subsidiaries or any similar
transaction, except a reorganization, merger or consolidation of
the Corporation with any of its wholly owned Subsidiaries.
(b) "Subsidiary" means any corporation in which at least
a majority of any class of equity securities is owned, directly or
indirectly, by the Corporation.
"Corporate Action" shall mean any and all of the
following:
(I) the amendment, alteration, change or repeal of
this Article X of these Articles of Incorporation;
(ii) a Business Combination.
Page 4. ARTICLES OF INCORPORATION
<PAGE>
(d) "Person" shall mean any individual, association,
partnership, corporation, group, firm or other entity other than
the Corporation or wholly owned Subsidiary of the Corporation.
(e) "Continuing Directors: shall mean the directors set
forth in Article VIII of these Articles of Incorporation and
individuals designated (before such individual's initial election
as a director) as a Continuing Director by a majority of the then
Continuing Directors.
10.2 SHAREHOLDER VOTE. In addition to any affirmative vote
required by law or under any other provision of these Articles of
Incorporation or the Bylaws of the Corporation, and except as
otherwise expressly provided in Section 10.3 hereof, no Corporate
Action shall be authorized or effected unless there is cast the
affirmative vote of at least 75 percent of the outstanding shares
of capital stock of the Corporation entitled to vote generally in
the election of directors.
10.3 EXCEPTION TO 75% REQUIREMENT. The provisions of Sections
10.2 hereof shall not be applicable to any particular Corporate
Action and such Corporate Action shall require only such
affirmative vote as is required by law and any other provisions of
these Articles of Incorporation, if two-thirds of all Continuing
Directors of the Corporation vote in favor of and recommend
approval of the Corporate Action to the shareholders.
Page 5. ARTICLES OF INCORPORATION
<PAGE>
ARTICLE XI
----------
Oregon Control Share Statute
----------------------------
11.1 STATUTE. Sections 60.801-60.816 of the Oregon Business
Corporation Act (the "Oregon Control Share Act") provides for
certain procedures to occur in a control-share acquisition. All
terms used herein shall have the meanings ascribed to them in said
Section.
11.2 VOTE REQUIRED TO OPT OUT OF STATUTE. In addition to any
affirmative vote required by law or under any other provision of
these Articles of Incorporation or the Bylaws of the Corporation,
the Corporation may not opt out of the Oregon Control Share Act or
otherwise elect said Act to be inapplicable to the Corporation
unless there is cast the affirmative vote of 75 percent of the
outstanding shares of capital stock of the Corporation entitled to
vote generally in the election of directors, excluding all
interested shares or unless two thirds of all Continuing Directors
(as defined in Article 10.1(e) of the Corporation vote in favor of
amending the Bylaws of the Corporation to make the Oregon Control
Share Act inapplicable to the Corporation.
11.3 SHAREHOLDER RESOLUTION. The affirmative note of 75
percent of all the votes entitled to be cast by each class or
series entitled to vote separately on the voting rights accorded
to the control shares and the affirmative vote of 75 percent of
each class or series entitled to vote separately on the voting
rights accorded to the control shares, excluding all interested
Page 6. ARTICLES OF INCORPORATION
<PAGE>
shares, shall be required in determining the voting rights of the
control shares as set forth by resolution of the shareholders.
11.4 AMENDMENT. the amendment, alteration, change or repeal
of this Article XI of the Articles of Incorporation shall require
the affirmative vote of at least 75 percent of the outstanding
shares of capital stock of the Corporation entitled to vote
generally in the election of directors, excluding all interested
shares.
ARTICLE XII
------------
No director of the Corporation shall be personally liable to
the Corporation or its shareholders for monetary damages for
conduct as a director, except that this provision shall not
eliminate or limit the liability of a director for any act or
omission occurring prior to the date of adoption of this Article
and that this provision shall not eliminate or limit the liability
of a director for (a) any breach of the director's duty of loyalty
to the Corporation or its shareholders; (b) acts or omissions not
in good faith or which involve intentional misconduct or a knowing
violation of law; any distribution to shareholders which is
unlawful under Oregon law; or (d) any transaction from which the
director derived an improper personal benefit. No amendment to or
repeal of this Article shall apply to our have an effect on the
liability or alleged liability of any director of the Corporation
for or with respect to any acts or omissions prior to such
amendment or repeal.
Page 7. ARTICLES OF INCORPORATION
<PAGE>
If Oregon law is amended to authorize the further elimination
or limitation of the liability of directors, then the liability of
a director of the Corporation shall be eliminated or limited to the
fullest extent permitted by Oregon law as so amended.
The effective date of incorporation of this Corporation shall
be the date these Articles of Incorporation are filed with the
Oregon Secretary of State.
For the purpose of organizing this Corporation under the laws
of the state of Oregon, I sign these Articles of Incorporation in
duplicate this 2nd day of March, 1990.
/S/ James E. Petersen
-----------------------------
JAMES E. PETERSEN, Incorporator
835 N. W. Bond Street
Bend, Oregon 97701
Page 8. ARTICLES OF INCORPORATION
<PAGE>
STATE OF OREGON
(LOGO)
DEPARTMENT OF INSURANCE AND FINANCE
Finance Section
CERTIFICATE OF APPROVAL
------------------------
WHEREAS, CASCADE BANCORP, a corporation organized and existing
under and pursuant to the laws of the State of Oregon, and a
registered bank holding company pursuant to the provisions of the
Bank Holding Company Act of 1966, as amended, with its principal
office at 1700 N.E. Third Street, Bend, Oregon did on the 16th day
of March, 1990, pursuant to ORS 715.015 apply to the Administrator,
Division of Finance and Corporate Securities, Finance Section, for
a Certificate of Approval to acquire the controlling capital stock
of BANK OF THE CASCADES;
NOW, THEREFORE, I, Cecil R. Monroe, Administrator, Division of
Finance and Corporate Securities, Finance Section, State of Oregon,
DO HEREBY CERTIFY that CASCADE BANCORP has met the criteria as set
out in ORS 715.065 to control and operate the institution in a
legal and proper manner, and that the interest of the stockholders,
depositors, and creditors of the institution, and the public,
generally, will not be jeopardized by the proposed change in
ownership and management, and that CASCADE BANCORP has been
furnished, as required by the laws of the State of Oregon, with
said certificate, which, with the application as aforesaid are now
on file in my office;
ACCORDINGLY, the undersigned, as such Administrator and by
virtue of the authority vested in him by law, hereby issues this
Certificate of Approval, subject to the following condition:
(1) That all necessary and final approvals have been obtained
from the appropriate Federal authority.
In Testimony Whereof, I have hereunto set my hand and
affixed the seal of the Department of Insurance and
Finance of the State of Oregon this 30th day of November,
1990.
/s/ CECIL R. MONROE
------------------------------
Administrator
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