US SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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
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
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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)
(425) 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 September 30, 1997
----- ------------------------------------
Common Stock ($.01 par value) 3,387,039
<PAGE>
CASCADE FINANCIAL CORPORATION
FORM 10-Q
for the Quarter Ended September 30, 1997
INDEX
PART I Financial Information:
Item 1 Financial Statements:
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . .1
Consolidated Statements of Operations . . . . . . . . . . . . .2
Consolidated Statements of Cash Flows . . . . . . . . . . . . .3
Notes to Consolidated Financial Statements. . . . . . . . . . .5
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . .6
PART II Other Information. . . . . . . . . . . . . . . . . . . . . 12
<PAGE>
PART I - FINANCIAL INFORMATION
CASCADE FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, unaudited)
<TABLE>
<CAPTION>
September 30, June 30,
------------- --------
1997 1997
------------- --------
<S> <C> <C>
ASSETS
Cash on hand and in banks $10,786 $8,577
Interest-earning deposits in other institutions 1,380 5,734
Securities available-for-sale 39,776 56,245
Loans available for sale, net 14,075 11,133
Mortgage-backed securities held to maturity (market
value of $6,238 and $9,437) 6,343 8,756
Loans, net 340,579 330,147
Real estate owned, net 535 750
Premises and equipment, at cost, net 8,079 7,859
Accrued interest receivable and other assets 4,898 4,961
------- -------
TOTAL ASSETS $426,451 $434,162
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits $303,258 $304,205
Federal Home Loan Bank advances 69,659 74,659
Securities sold under agreements to repurchase 14,606 19,483
Advance payments by borrowers for taxes and
insurance 2,695 1,477
Principal and interest payable on loans serviced
for others 921 200
Accrued expenses and other liabilities 5,473 5,351
Deferred income tax 1,528 1,473
------- -------
TOTAL LIABILITIES 398,140 406,848
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;
3,387,039 and 3,373,716 shares issued and
outstanding 34 34
Additional paid-in capital 4,345 8,294
Retained earnings, substantially restricted 24,168 19,300
Unrealized loss on securities available-for-sale (236) (314)
------- -------
TOTAL STOCKHOLDERS' EQUITY 28,311 27,314
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $426,451 $434,162
======= =======
</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>
September 30,
-------------------
1997 1996
------ -----
<S> <C> <C>
Interest income:
Loans $7,482 $6,013
Mortgage-backed securities held-to-maturity 82 127
Securities available-for-sale 648 1,308
FHLB-stock-dividends 102 81
Interest-bearing deposits 74 36
------ ------
Total interest income 8,388 7,565
Interest expense:
Deposits 3,953 3,581
Borrowed funds 1,246 1,277
------ ------
Total interest expense 5,199 4,858
Net interest income 3,189 2,707
Provision for loan losses 102 266
------ ------
Net interest income after provision for loan losses 3,087 2,441
Other income:
Gain (loss) on sale of loans (41) 58
Service charges 347 230
Gain on sale of securities 82 1
Other 74 160
------ ------
Total other income 462 449
Other expenses:
Salaries and employee benefits 1,241 1,154
Occupancy 402 398
Federal deposit insurance premiums 42 121
Advertising 71 77
Data processing 39 72
SAIF special assessment 0 1,224
Other 726 465
------ ------
Total other expenses 2,521 3,511
Income before income taxes 1,028 (621)
Federal income taxes 382 (166)
------ ------
Net income $ 646 $ (455)
====== ======
Net income per common and common equivalent
share, primary (note 4) $ .17 $ (.14)
Weighted average common and common equivalent
shares outstanding, primary (note 4) 3,732,378 3,358,472
</TABLE>
See notes to consolidated financial statements
<PAGE>
CASCADE FINANCIAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands, unaudited)
<TABLE>
<CAPTION>
Three Months Ended September 30,
1997 1996
------ ------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 646 $ (455)
--------- ---------
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization of
premises and equipment 165 168
Other 0 (3)
Amortization of retained servicing rights 70 53
Provision for losses on:
Loans 102 266
Additions to mortgage servicing rights (212) (55)
Deferred loan fees, net of amortization 98 27
Origination of loans held-for-sale and
mortgage-backed securities held for
trading (33,088) (9,113)
Proceeds from sale of loans held-for-sale
and mortgage-backed securities held for
trading 30,147 9,517
Net loss (gain) on sales of:
Securities available-for-sale (82) (1)
Real Estate Owned 6 0
Federal Home Loan Bank stock dividend
received (102) (95)
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 1,298 1,669
--------- --------
Total adjustments (1,598) 2,433
--------- --------
Net cash provided by (used in)
operating activities (952) 1,978
Cash flows from investing activities:
Loans originated, net of principal
repayments (10,859) (10,614)
Principal repayments on securities held-to
maturity 434 252
Principal repayments on securities
available-for-sale 875 1,591
Purchases of securities available-for-sale 39 (15,653)
Proceeds from sales of securities
available-for-sale 17,848 9,000
Proceeds from maturities of securities and
interest-bearing deposits 0 1,000
Proceeds from sales of real estate owned 435 26
Purchases of premises and equipment (384) (172)
Proceeds from sales of premises and
equipment, and other assets 0 1
-------- --------
Net cash used in investing activities 8,388 (14,569)
Cash flows from financing activities:
Proceeds from issuance of common stock 37 27
Net increase (decrease) in deposits (947) 67
Proceeds from Federal Home Loan Bank
advances 68,000 46,250
Repayment of Federal Home Loan Bank
advances (74,750) (39,633)
Net increase (decrease) in securities sold
under agreements to repurchase (3,128) (2,097)
Net decrease in advance payments by
borrowers for taxes and insurance 1,219 967
-------- --------
Net cash provided by (used in) financing
activities (9,569) 5,581
-------- --------
Net decrease in cash and cash equivalents (2,133) (7,010)
Cash and cash equivalents at beginning of
period 14,311 15,184
-------- --------
Cash and cash equivalents at end of period $ 12,178 $ 8,174
======== ========
</TABLE>
<TABLE>
<S> <C> <C>
Supplemental disclosures of cash flow
information--cash paid during the period
for:
Interest $ 5,053 $ 4,885
Federal income taxes 550 882
Supplemental schedule of noncash investing
activities:
Mortgage loans securitized into FHLMC PCs
and held-for-trading and sold 11,086 0
Net mortgage loans transferred to real
estate owned 226 0
</TABLE>
See notes to consolidated financial statements.
<PAGE>
CASCADE FINANCIAL CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 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, 1997, 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 1997 have been
reclassified to conform with the financial statement classification for fiscal
1998. In addition, the financial statements reflect Cascade's recently
completed merger with Amfirst Bancorporation. The Consolidated Financial
Statements for the Corporation for the periods ended June 30, 1997, and
September 30, 1996 have been restated to reflect the effects of the merger
which was accounted for using the pooling-of-interests method.
4. Earnings per share
Earnings per share and weighted average common and common equivalent
shares outstanding, primary, for the three months ended September 30, 1996 are
based on the weighted average number of common shares outstanding during the
period, excluding any common stock equivalents as they would be anti-dilutive.
Earnings per share and weighted average common and common equivalent shares
outstanding, primary, for the three months ended September 30, 1997 includes
common stock equivalents.
<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 financial 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. The adoption of SFAS no. 125 did not have a
material impact on the results of operations or financial position of the
Corporation.
SFAS No. 128, "Earnings Per Share", establishes a new standard for
reporting earnings 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 statement
of operations. SFAS No. 128 becomes effective for periods ending after
December 15, 1997. The Corporation plans to adopt SFAS No. 128, and
management expects no material impact on the results of operations or financial
condition of the Corporation.
In June 1997, the Financial Accounting Standards Board issued two new
Accounting Standards. SFAS No. 130, "Reporting Comprehenisive Income",
establishes standards for reporting comprehensive income and its components in
a full set of financial statements. This statement is effective for the year
ending June 30, 1999. SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information", requires public companies to report
financial and descriptive information about its operating segments. The
adoption of SFAS No. 131 is required for the fiscal year ending June 30, 1999.
The Bank is currently evaluating the effects of these statements but does not
expect their adoption to have a material impact on the results of operations
or financial positiono of the Corporation.
Item 2 - Management's Discussion and Analysis of Financial Condition and
Results of Operations
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
would 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 shareholders
received 2.412 shares of the Corporation's common stock for each share of
Amfirst common stock. The transaction was completed on August 1, 1997 and was
treated as a pooling-of-interests.
<PAGE>
Management believes the merger will provide significant revenue
enhancements and cost savings opportunities which will be realized in future
periods. The current period does not adequetly reflect the potential to be
realized. Current period costs associated with the merger totaling $196,000
will not be incurred in future periods.
The merger has allowed Cascade to develop and implement a planned
commercial banking division much more quickly than would have been practical
without the Merger. With the Merger, Cascade was able to offer a full array of
commercial and consumer banking products and services to a larger market. The
product lines of the merged entities were very dissimilar, especially lending
products. Cascade's more aggressive marketing programs should help Cascade grow
faster by cross-selling Cascade's products to the acquired customers and by
cross-selling commerical and consumer products to Cascade's original customers.
More locations and an increased market presence, should help Cascade to add new
customers faster than the two companies historically have done separately. In
addition to increased growth opportunities, a major portion of Amfirst's
investment securities were liquidated during the quarter and used to pay off
borrowings or were reinvested into higher rate assets such as home equity,
consumer, and commercial real estate loans. Consolidations of corporate,
financial, information processing and risk-management functions, as well as
personnel reductions will also provide cost savings opportunities in the future
as Cascade completes the integration of the two companies and begins operating
as a single entity.
Management's analysis of the merger indicated that Cascade's earnings per
share would increase as a result of the Merger. This analysis is dependent upon
various factors, a number of which are beyond the control of Cascade. Factors
that might cause a difference in actual results include, but are not limited to:
(i) expected cost savings from the Merger cannot be fully realized or realized
within the expected time frame; (ii) revenues following the Merger are lower
than expected; (iii) competitive pressures among depository institutions
increase significantly; (iv) costs or difficulties related to the integration of
the business of Cascade and AmFirst are greater than expected; (v) general
economic conditions, either nationally or locally, are less favorable than
expected; and (vi) legislation or regulatory changes adversely affect the
business in which the combined company would engage. Accordingly, no assurances
can be given with respect to the ultimate impact the Merger will have on
earnings.
ASSET/LIABILITY MANAGEMENT
Cascade, like other financial institutions, is subject to fluctuations in
interest rates because its interest-bearing liabilities reprice on different
terms that 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.
<PAGE>
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. The
introduction of adjustable rate consumer and business loans and the portfolio's
of these products obtained in Cascade's recent merger with Amfirst
Bancorporation will help to reduce Cascade's interest rate risk in future
periods. 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 decreased to $426.5 million at September 30, 1997, compared
with $434.2 million at June 30, 1997. Loans, net increased by $10.4 million.
The loan growth was funded by a decrease of $16.5 million in securities
available for sale. The balance of the proceeds from the sale of securities
available for sale along with a decrease in interest-earning deposits in other
institutions were used to decrease Federal Home Loan Bank advances by $5.0
million and Securities sold under agreements to repurchase by $4.9 million.
Deposits decreased $947,000 during the three months ended September 30, 1997.
Asset Quality
At September 30, 1997, loans totaling $3.1 million were impaired of which
one loan for $1.2 million had allocated reserves of $300,000. Eight loans
totaling $668,570 of the $3.1 million in impaired loans were on nonaccrual
status. This compares with the $3.2 million impaired and $911,000 nonaccrual
and $3.8 million impaired and $1.4 million nonaccrual at June 30, 1997 and
September 30, 1996, respectively. Interest income is normally recognized on
the accrual basis, however, if the impaired loan is nonperforming, then interest
income is recorded on the receipt of cash.
Real estate owned totaled $535,000 at September 30, 1997 compared with
$750,000 and $721,000 at June 30, 1997 and September 30, 1996, respectively.
The real estate owned is made up of single family properties which the Bank
anticipates realizing immaterial gains on the property liquidation.
Nonperforming assets totaled $1.7 million and $1.2 million at June 30, 1997
and September 30, 1997, respectively. Assets classified as substandard
decreased slightly from $3.2 million at June 30, 1997 to $3.1 million at
September 30, 1997.
<PAGE>
RESULTS OF OPERATIONS
Comparison of the Three months Ended September 30, 1997 and 1996
General
Total net income for the three months ended September 30, 1997 increased
to $646,000 compared with a loss of $455,000 in 1996 due primarily to the SAIF
special assessment of $1.2 million which was recorded in September 1996. Net
interest income increased $482,000 for the quarter ended September 30, 1997 and
other expenses decreased $986,000 over the prior year. Net income for the three
months ended September 30,1997 increased $290,000 compared with the $356,000
earned for the three month period ended September 30, 1996, excluding the SAIF
special assessment charge.
Net Interest Income
Net interest income increased $482,000 to $3.2 million for the three
months ended September 30, 1997 compared to the quarter ended September 30,
1996. Loans, net increased $13.4 million from the quarter ended June 30, 1997
and $72.2 million from the quarter ended September 30, 1996. During the period
from September 30, 1996 to September 30, 1997, cash and securities decreased
$53.6 million to $58.3 million. Cash and securities decreased 23.2 million in
the three month period ending September 30, 1997. The movement out of lower
yielding securities and into higher yielding loans helped to increase the Bank's
net interest margin to 3.1% for the quarter. 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 introduced a line of commercial business products including
business loans and lines, business deposit accounts and various other business
banking services during the quarter just ended. The Bank's business product
lines were unveiled in full immediately following the Bank's merger with
Amfirst on August 1, 1997. American First offered many of the business products
and services that Cascade has developed and their expertise will help Cascade's
development and marketing of these new business products lines
<PAGE>
Provision for Loan Losses
Cascade's provision for loan losses was $102,000 for the three months ended
September 30, 1997 and $266,000 for the quarter ended September 30, 1996. At
September 30, 1997 and June 30, 1997, the Bank's loan loss allowance totaled
$4.0 million and $3.9 million respectively. The loan loss allowance as a
percent of net loans outstanding was 1.2% at September 30, 1997 and June 30,
1997. 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,
income property, and commercial business portfolios in the coming years. These
loans typically have a higher credit risk which will require additional
provisions in future periods as these portfolios increase. Management monitors
these loans at an increased level to maintain credit quality and adequate
reserve levels.
Other Income
Other income increased slightly during the quarter ended September 30, 1997
to $462,000 as compared with the $449,000 recorded in the three months ended
September 30, 1996. Increased gains from the sales of securities available-for-
sale of $81,000 and a $117,000 increase in service charges were off set by a
decrease of $99,000 in gains on sale of loans. A $153,000 restitution recovery
in 1996 that did not occur in 1997, resulted in a decrease in the other
category. 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 three month
period, on the origination of portfolio lending products which increased the
Bank's net loan and servicing portfolio's and led to an increase in interest
income and service charge income. Management is focusing on increasing saleable
loan production from both retail and wholesale sources to offset reduced margins
from mortgage banking activities.
Other Expenses
Other expenses decreased to $2.5 million for the three months ended
September 30, 1997 compared with $3.5 million for the three months ended
September 30, 1996. The decrease in other expenses was due primarily to the $1.2
million SAIF special assessment in the quarter ended September 30, 1996. This
decrease was partially offset by $196,000 in merger related costs for the
quarter ended September 30, 1997. The Corporation's expense efficiency ratio
(excluding the SAIF and merger charges) improved to 64% in the current quarter
from 72% in the September 1996 quarter.
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 $16.4 million in September 1997, which was in
excess of the required liquidity level of $15.5 million.
<PAGE>
Loan commitments outstanding at September 30, 1997, were $29.7 million and
will be funded through sales of loans, existing liquidity balances, FHLB-Seattle
advances, and other borrowings.
At September 30, 1997, the Bank had $69.7 million in outstanding advances
from the FHLB-Seattle as compared to the $74.7 million outstanding at June 30,
1997. The Bank's credit line with the FHLB-Seattle is 30% of total assets or
up to approximately $128 million. The Bank also had $14.6 million of reverse
repurchase agreements outstanding, a decrease of $4.9 million from June 30,
1997. Securities obtained in the merger were liquidated and proceeds were used
to decrease the level of outstanding debt.
Capital Resources
Cascade Bank is in full compliance with all capital requirements
established by the OTS at September 30, 1997. Cascade's regulatory capital
requirements, and related excess capital amounts as of September 30, 1997 are
presented in the following table:
Tangible capital Amount Percentage
---------------- ------ ----------
Tangible capital $28,228 6.62%
Less: Minimum requirement 6,396 1.50
------ -----
Excess $21,832 5.12%
====== =====
Core capital Amount Percentage
------------ ------ ----------
Core capital $28,228 6.62%
Less: Minimum requirement 12,794 3.00
------ -----
Excess $15,434 3.62%
====== =====
Risk-based capital Amount Percentage
------------------ ------ ----------
Risk-based capital $31,562 11.85%
Less: Minimum requirement(1) 21,307 8.00
------ -----
Excess $10,255 3.85%
====== =====
(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, 1997, Cascade Bank, is a "well
capitalized" institution.
The OTS issued a final rule on August 31, 1993 that incorporates an
interest rate risk component into the OTS's risk-based capital rule. The rule
requires that an institution with an "above normal" level of interest rate risk
hold additional capital against interest rate risk exposure. This additional
capital for interest rate risk exposure would be in excess of the 8% risk-based
capital requirement. Only institutions whose measured interest rate risk
exceeds the above normal level, has risk-based capital below 12%, and assets
exceed $300 million will be required to maintain an interest rate risk
component. The interest rate risk component will be computed quarterly. The OTS
has postponed the date the component will first be deducted from an
institution's total capital until an appeal process is developed for the
measurement of an institution's interest rate risk.
<PAGE>
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.
<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
November 14, 1997 /s/ Russell E. Rosendal
-----------------------
By: Russell E. Rosendal
Executive Vice President
(Chief Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> SEP-30-1997
<CASH> 10786
<INT-BEARING-DEPOSITS> 1380
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 39776
<INVESTMENTS-CARRYING> 6343
<INVESTMENTS-MARKET> 6238
<LOANS> 354654
<ALLOWANCE> 3999
<TOTAL-ASSETS> 426451
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0
0
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</TABLE>
