US 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 March 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR TRANSITION PERIOD FROM ____________
TO _______________
Commission file number 0-25286
CASCADE FINANCIAL CORPORATION
-----------------------------
(Exact name of registrant as specified in its charter)
Delaware 91-1661954
-------- ----------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
2828 Colby Avenue
Everett, Washington 98201
------------------- -----
(Address of principal executive offices) (Zip Code)
(206) 339-5500
--------------
(Registrant's telephone number, including area code)
Indicate by a 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 twelve months (or for such shorter periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past ninety days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding as of March 31, 1997
Common Stock ($.01 par value) 2,054,352
<PAGE>
PART I - FINANCIAL INFORMATION
CASCADE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, unaudited)
<TABLE>
<CAPTION>
March 31, June 30,
--------- --------
1997 1996
--------- --------
<S> <C> <C>
ASSETS
Cash on hand and in banks $ 3,931 $ 3,627
Interest-earning deposits in other institutions 1,101 4,991
Securities available-for-sale 43,077 72,076
Loans available for sale, net 7,727 4,678
Mortgage-backed securities held to maturity
(market value of $8,450 and $9,437) 8,657 9,941
Loans, net 277,315 228,934
Real estate owned, net 1,043 747
Premises and equipment, at cost, net 6,139 6,087
Accrued interest receivable and other assets 3,331 3,350
------- -------
TOTAL ASSETS $ 352,321 $ 334,431
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $ 231,557 $ 218,063
Federal Home Loan Bank advances 72,609 68,542
Securities sold under agreements to repurchase 19,399 20,450
Advance payments by borrowers for taxes and
insurance 2,451 1,207
Principal and interest payable on loans serviced
for others 320 179
Accrued expenses and other liabilities 2,891 3,584
Deferred income tax 1,340 1,591
------- -------
TOTAL LIABILITIES 330,567 313,616
Preferred stock, $.01 par value, 500,000 shares
authorized; no shares issued or outstanding 0 0
Common stock, $.01 par value,
5,000,000 shares authorized;
2,054,352 and 2,045,894 shares issued and
outstanding 21 20
Additional paid-in capital 4,301 4,250
Retained earnings, substantially restricted 18,035 17,410
Unrealized loss on securities available-for-sale (603) (865)
------- -------
TOTAL STOCKHOLDERS' EQUITY 21,754 20,815
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 352,321 $ 334,431
======= =======
</TABLE>
See notes to consolidated financial statements
<PAGE>
CASCADE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except per share amounts)
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
1997 1996 1997 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Interest income:
Loans $5,747 $4,891 $16,060 $14,175
Mortgage-backed securities
held-to-maturity 101 138 377 443
Securities available-for-sale 391 1,037 1,440 2,987
FHLB stock dividends 75 69 238 189
Interest-earning deposits 315 54 1,331 127
------ ------ ------ ------
Total interest income 6,629 6,189 19,446 17,921
Interest expense:
Deposits 3,004 2,823 8,908 8,618
Borrowed funds 1,315 1,367 4,003 3,832
------ ------ ------ ------
Total interest expense 4,319 4,190 12,911 12,450
Net interest income 2,310 1,999 6,535 5,471
Provision for loan losses 0 0 0 0
------ ------ ------ ------
Net interest income after
provision for loan losses 2,310 1,999 6,535 5,471
Other income:
Gain (loss) on sale of loans (21) 45 59 136
Service charges 230 219 642 587
Gain on sale of securities
available-for-sale 16 338 2 338
Gain on sale of real estate
owned 0 0 3 0
Restitution recovery 0 0 0 150
Other 158 178 370 444
------ ------ ------ ------
Total other income 383 780 1,076 1,655
Other expenses:
Salaries and employee benefits 1,000 934 2,766 2,568
Occupancy 303 305 882 887
Federal deposit insurance
premiums 35 133 1,477 384
Advertising 98 44 251 145
Data processing 89 74 244 209
Other 362 298 1,044 922
------ ------ ------ ------
Total other expenses 1,887 1,788 6,664 5,115
Income before income taxes 806 991 947 2,011
Federal income taxes 274 337 322 684
------ ------ ------ ------
Net income $ 532 $ 654 $ 625 $ 1,327
====== ====== ====== ======
Net income per common and
common equivalent share,
primary .23 .27
Net income per common and
common equivalent share,
fully diluted .23 .27
Weighted average common and
common equivalent shares
outstanding, primary x,xxx,xxx 2,293,239 x,xxx,xxx 2,296,932
Weighted average common and
common equivalent shares
outstanding, fully diluted x,xxx,xxx 2,293,239 x,xxx,xxx 2,296,932
</TABLE>
See notes to consolidated financial statements
<PAGE>
CASCADE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands, unaudited)
<TABLE>
<CAPTION>
Nine Months Ended March 31,
1997 1996
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 625 $ 1,327
-------- --------
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization of
premises and equipment 386 418
Other 6 (4)
Amortization of retained servicing rights 141 98
Additions to mortgage servicing rights (205) (395)
Deferred loan fees, net of amortization 220 38
Origination of loans held-for-sale and
mortgage-backed securities held for trading (32,148) (41,716)
Proceeds from sale of loans held-for-sale
and mortgage-backed securities held for
trading 35,031 38,360
Net loss (gain) on sales of:
Securities available-for-sale (1) 0
Premises and equipment 1 (7)
Federal Home Loan Bank stock dividend received (238) (189)
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 (855) 264
------- -------
Total adjustments 2,338 (3,133)
------- -------
Net cash provided by (used in) operating
activities 2,963 (1,806)
Cash flows from investing activities:
Loans originated, net of principal repayments (49,046) (14,100)
Principal repayments on securities held-to
maturity 1,284 9,256
Principal repayments on securities available-
for-sale 5,414 3,374
Purchases of securities available-for-sale (10,922) (47,346)
Proceeds from sales of securities available-
for-sale 29,221 35,387
Purchase of real estate owned (23) (46)
Proceeds from sales of real estate owned 108 0
Purchases of premises and equipment (439) (176)
Proceeds from sales of premises and equipment,
and other assets 49 7
-------- --------
Net cash used in investing activities (24,354) (13,644)
Cash flows from financing activities:
Proceeds from issuance of common stock 50 82
Net increase in deposits 13,494 8,604
Proceeds from Federal Home Loan Bank advances 112,900 64,383
Repayment of Federal Home Loan Bank advances (108,833) (60,000)
Net increase (decrease) in securities sold
under agreements to repurchase (1,050) 793
Net decrease in advance payments by borrowers
for taxes and insurance 1,244 594
-------- --------
Net cash provided by financing activities 17,805 14,456
-------- --------
Net decrease in cash and cash equivalents (3,586) (994)
Cash and cash equivalents at beginning of period 8,618 5,762
-------- --------
Cash and cash equivalents at end of period $ 5,032 $ 4,768
======== ========
</TABLE>
<TABLE>
<S> <C> <C>
Supplemental disclosures of cash flow
information--cash paid during the period for:
Interest $ 13,053 $ 12,498
Federal income taxes 561 585
Supplemental schedule of noncash investing
activities:
Mortgage-backed securities reclassified
from held to maturity to available for sale $ 0 $ 50,577
Mortgage loans securitized into Federal Home
Loan Mortgage Corporation participation
certificates 0 0
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CASCADE FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1997
(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 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 No. 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 No. 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 No. 121 are not expected to have a material impact
on the results of operations or financial condition of the Corporation.
<PAGE>
5. New Accounting Pronouncements
SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities", was issued in June 1996 and established,
among other things, new criteria for determining whether a transfer of financial
assets in exchange for cash or other consideration should be accounted for as
a sale or as a pledge of collateral in a secured borrowing. As issued, SFAS
No. 125 is effective for all transfers and servicing of finacial assets and
extinguishments of liabilities occurring after December 31, 1996. In December
1996, the FASB issued SFAS No. 127, "Deferral of the Effective Date of Certain
Provisions of FSB Statement No. 125". In general SFAS No. 127 defers for one
year the effective date of SFAS No. 125 provisions relating to secured
borrowings and collateral.
SFAS No. 128, "Earnings Per Share", standardized the international
calculation for earings per share and requires companies with complex capital
structures that have publicly held common stock or potential common stock to
present both basic and diluted earnings per share on the face of the income
statement. SFAS No. 128 becomes effective for periods ending after December
15, 1997.
It is not anticipated that the adoption of these new accounting standards
will have a material impact on the results of operations or financial position
of the Corporation.
Item 2 - 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 the Corporation. On March 31, 1997 Cascade filed with the
Securities and Exchange Commission a current report on Form S-4 describing the
terms of the merger in greater detail. In the transaction, Amfirst share-
holders will receive approximately two shares of the Corporation's 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
Financial and Amfirst. At March 31, 1997 Amfirst had four offices located in
Snohomish County and assets of $70 million. It is anticipated that the merger
will be completed during August of 1997 and will be treated as a pooling-of-
interests.
<PAGE>
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 8%. 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 fixed rate 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 $352.3 million at March 31, 1997, compared with
$334.4 million at June 30, 1996. Loans, net increased by $51.4 million. The
loan growth was funded by a decrease in interest-earning deposits of $3.9
million and a decrease of $29.0 million in securities available for sale.
Increases in deposits and borrowings also helped to fund the increase in loans.
Deposits increased $13.5 million during the nine months ended March 31, 1997.
Total borrowings increased by $3.0 million to $92.0 million.
Asset Quality
At March 31, 1997, loans totaling $2.2 million were impaired of which one
loan for $1.2 million had allocated reserves of $300,000. Seven loans totaling
$1.0 million of the $2.2 million in impaired loans were on nonaccrual status.
This compares with the $1.6 million impaired and $373,000 nonaccrual and $1.3
million impaired and $139,000 nonaccrual at June 30, 1996 and March 31, 1996,
respectively. Interest income is normally recognized on the accural basis,
however, if the impaired loan is nonperforming, then interest income is
recorded on the receipt of cash.
Real estate owned totaled $1.0 million at March 31, 997 compared with
$747,000 and $2.3 million at June 30, and March 31, 1996, respectively. The
REO is principaly single family properties which the Bank anticipates realizing
immaterial gains on the property liquidation.
Nonperforming assets totaled $373,000 and $1.0 million at June 30, 1996
and March 31, 1997, respectively. Assets classified as substandard increased
from $2.5 million at June 30, 1996 to $3.5 million at March 31, 1997.
RESULTS OF OPERATIONS
Comparison of the Three and Nine months Ended March 31, 1997 and 1996
General
Total net income for the three months ended March 31, 1997 decreased to
$532,000 compared with $654,000 in 1996 due primarily to after-tax gains on
sales of securities of $223,000 for the three month period ended March 31, 1996
compared with after-tax security gains of $11,000 for the three month period
ended March 31, 1997. Net interest income increased $311,000 for the quarter
ended March 31, 1997 and other expenses increased $99,000 over the prior year.
Net income for the nine months ended March 31, 1997, decreased to $625,000 from
$1.3 million in 1996. The principal reason for the decrease in the nine 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 nine months ended March 31, 1997 increased to $1.4 million
compared with $1.3 million earned for the nine month period ended March 31,
1996.
Net Interest Income
Net interest income increased $311,000 to $2.3 million for the three
months ended March 31, 1997 compared to the quarter ended March 31, 1996.
Net interest income was $6.6 million for the nine months ended March 31, 1997
compared to $5.5 million for the same period in 1996. Increased net interest
margins of 16 basis points for the most recent quarter and 20 basis points for
the nine months ended March 31, 1997, coupled with an increase of $27.7 million
in average interest earning assets over the prior period's balances, accounted
for this 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, consumer installment loans 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 unsaleable 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.
Cascade is currently in the process of developing a line of commercial
business products including business loans and lines, business deposit accounts
and various other business banking services. The new products will be offered
on a limited basis during the quarter ending June 30, 1997. The Bank's
business product lines will be unveiled in full immediately following the
Bank's merger with Amfirst, which is expected to occur sometime in August 1997.
American First currently offers many of the business products and services that
Cascade is developing. Their expertise should help the Bank to develop and
market these new business products.
<PAGE>
Provision for Loan Losses
Cascade's provision for loan losses was $0 for both the nine months ended
March 31, 1997 and 1996. At March 31, 1997 and June 30, 1996, the Bank's loan
loss allowance totaled $2.9 million, and the loan loss allowance as a percent of
net loans outstanding was 1.02% and 1.23%, respectively. Nonperforming loans
increased $627,000 to $1.0 million at March 31, 1997 as compared to the period
ending June 30, 1996. Substandard loans increased $1.0 million to $3.5 million
during the same period. 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. Management intends to grow the
nonconforming, construction and income property portfolios. These loans
typically have a higher credit risk which will require additions to the
reserves in future periods. Management monitors these loans at an increased
level to maintain credit quality and adequate reserve levels. The Bank has not
increased its provision in recent years because substandard assets have
decreased from a high of $39.0 million at September 30, 1991 to $3.5 million at
March 31, 1997.
Other Income
Other income decreased $397,000 to $383,000 for the three months ended
March 31, 1997 as compared with the three months ended March 31, 1996.
Decreases in gains from the sales of securities available-for-sale of $322,000
and in gains on sale of loans of $66,000 accounted for the difference in the
three month period. For the nine months ended March 31, 1997 other income
decreased $579,000 to $1.1 million as compared to the nine months ended March
31, 1996. Decreases in gains on sale of loans of $77,000, in gains on sales of
securities available-for-sale of $336,000 and a $150,000 restitution recovery
in 1996 that did not occur in 1997, coupled with an increase in service charge
income of $55,000 were the major factors contributing to the change in other
income for the period. The reduction in gains on sales of loans and the
increase in service charges occurred as a result of the Bank's emphasis, during
the nine month period, on the origination of portfolio lending products which
increased the Bank's net loan and servicing portfolio's and lead to an increase
in service charge income. Cascade set up a Wholesale Lending department at the
end of the second quarter. The department began originating and selling loans
during the quarter. This department will help the Bank to increase it's fee
income while allowing the retail side of the Bank's lending operation to
maintain its current focus on the origination of portfolio products.
Other Expenses
Other expenses increased to $1.9 million for the three months ended March
31, 1997 compared with $1.8 million for the three months ended March 31, 1996.
Increases in salaries and employee benefits of $66,000, in advertising of
$54,000 and in other expenses of $64,000 were partially offset by a decrease in
Federal deposit insurance premiums of $99,000. For the nine month period ending
March 31, 1997 other expenses totaled $6.7 million, a $1.6 million increase
over the March 31, 1996 total of $5.1 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.
<PAGE>
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 Bank held average liquid assets of $15.5 million in March 1997, which was
in excess of the required liquidity level of $15.3 million.
Loan commitments outstanding at March 31, 1997, were $14.6 million and
will be funded through sales of loans, existing liquidity balances, FHLB-
Seattle advances, and other borrowings.
At March 31, 1997, the Bank had $72.6 million in outstanding advances from
the FHLB-Seattle. The Bank's credit line with the FHLB-Seattle is 30% of total
assets or up to $105.7 million. The Bank also had $19.4 million of reverse
repurchase agreements outstanding, a decrease of $1.1 million from June 30,
1996.
Capital Resources
Cascade Bank is in full compliance with all capital requirements
established by the OTS at March 31, 1997. Cascade's regulatory capital,
capital requirements, and related excess capital amounts as of March 31, 1997
are presented in the following table:
Tangible capital Amount Percentage
---------------- ---------- ------------
Tangible capital $22,221 6.30%
Less: Minimum requirement 5,292 1.50
------- ----
Excess $16,929 4.80%
======= ====
Core capital Amount Percentage
------------ ---------- ------------
Core capital $22,221 6.30%
Less: Minimum requirement 10,584 3.00
------- ----
Excess $11,637 3.30%
======= ====
Risk-based capital Amount Percentage
------------------ ---------- ------------
Risk-based capital $24,811 11.36%
Less: Minimum requirement(1) 17,468 8.00
------- -----
Excess $ 7,343 3.36%
======= =====
(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.
<PAGE>
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 Federal deposit insurance premiums the amount of its $1.2
million assessment. The corresponding tax deduction will be taken on the
Corporation's tax return for fiscal 1997.
<PAGE>
PART II-OTHER INFORMATION
Item 1. Legal Proceedings.
The Corporation and the Bank have certain litigation and negotiations in
progress resulting from activities arising from normal operations. In the
opinion of management, none of these matters is likely to have a materially
adverse effect on the Corporation's financial position.
Item 2. Changes in Securities.
Not applicable
Item 3. Defaults upon Senior Securities.
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders.
Not applicable
Item 5. Other information.
Not applicable
Item 6. Exhibits and Reports on Form 8-K.
Not applicable
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 FINANCIAL CORPORATION
May 15, 1997 /s/ Russell E. Rosendal
-----------------------
By: Russell E. Rosendal
Executive Vice President
(Chief Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 3931
<INT-BEARING-DEPOSITS> 1101
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 43077
<INVESTMENTS-CARRYING> 8657
<INVESTMENTS-MARKET> 8450
<LOANS> 285042
<ALLOWANCE> 2949
<TOTAL-ASSETS> 352321
<DEPOSITS> 231557
<SHORT-TERM> 77008
<LIABILITIES-OTHER> 7002
<LONG-TERM> 15000
0
0
<COMMON> 21
<OTHER-SE> 21733
<TOTAL-LIABILITIES-AND-EQUITY> 352321
<INTEREST-LOAN> 16060
<INTEREST-INVEST> 2055
<INTEREST-OTHER> 1331
<INTEREST-TOTAL> 19446
<INTEREST-DEPOSIT> 8908
<INTEREST-EXPENSE> 12911
<INTEREST-INCOME-NET> 6535
<LOAN-LOSSES> 0
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</TABLE>
