Investor Contacts:
Carol K. Nelson, CEO Rob Disotell, CCO Cascade Bank 425.339.5500 www.cascadebank.com	NEWS RELEASE

Cascade Financial Announces Second Quarter Results

Reports Improved Credit Quality with a 28% Reduction in Nonperforming Loans

Everett, WA – July 21, 2010 – Cascade Financial Corporation (NASDAQ: CASB), the parent company of Cascade Bank, today reported financial results for the second quarter ended June 30, 2010 which included improvements in overall credit quality metrics and further reductions of nonperforming loans and nonperforming assets in the quarter.

“While managing through a very challenging economic environment in the Pacific Northwest, our team remained focused on reducing nonperforming assets, strengthening our performing loan portfolio, growing our depositor base and increasing on-balance sheet liquidity,” said Carol K. Nelson, President and CEO.  “We made significant improvement in credit quality metrics across all areas and saw progress during the quarter with a reduction of 11% in nonperforming assets and a decline in the real estate construction portfolio of 47% in the past year.  We are pleased with the positive progress we made in these areas and will remain focused on working diligently to show continued improvement and a return to profitability.”

For the quarter, Cascade recorded an $11.7 million provision for loan losses and a non-cash charge of $12.9 million against its goodwill based upon an impairment analysis.  As a result, Cascade reported a net operating loss, excluding the goodwill impairment charge, of $11.3 million and a net loss on a GAAP basis of $24.2 million.  The non-cash goodwill impairment represents the write-off of the remaining balance of the goodwill recorded from a prior bank acquisition.  The goodwill impairment charge does not impact liquidity, operations, tangible capital or Cascade’s regulatory capital ratios.

Including accruals for preferred stock dividends and accretion of the issuance discount on preferred stock issued to the U.S. Treasury, Cascade reported a net loss attributable to common stockholders of $24.8 million, or $2.02 per diluted common share, for the second quarter of 2010, compared to a loss of $22.0 million, or $1.82 per diluted common share, for the second quarter a year ago.  Second quarter 2009 results include a goodwill impairment charge of $11.7 million.  Dividend accruals on preferred stock issued to the U.S. Treasury under the Capital Purchase Program for the second quarter of 2010 totaled $503,000, and the accretion of the issuance discount on preferred stock for the quarter was $112,000.

Significant items for the second quarter of 2010 include:

·   Provision for loan losses of $11.7 million; a 63% decrease on a sequential quarter basis and a 36% decrease from the same period in the prior year;

·   Net charge-offs of $11.7 million; a 63% decrease on a sequential quarter basis and a 37% decrease from the same period in the prior year;

·   Nonperforming loans to total loans declined to 6.30% from 8.37%;

·   Nonperforming assets to total assets declined to 6.57% from 7.34%;

·   The allowance for loan losses increased to 2.36% of total loans, up from 2.26% three months earlier and 2.00% a year ago;

·   Loan portfolio mix improved with a 24% reduction in real estate construction loans compared to three months earlier, and a 47% reduction from a year ago.  Land acquisition and development/land loans are a component of this portfolio and declined $34.3 million, down 32% from three months earlier, and down 57% from one year ago;

·   A reduction in average interest rates paid on interest checking and CDs combined to reduce the cost of deposits by 16 basis points;

·   Total deposits were up $10.7 million as strong growth in retail CDs was offset by planned reductions in public deposits and brokered CDs;

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July 21, 2010

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·   Remaining balance of goodwill was written off;

·   Risk based capital ratio at 10.7%.

For the first six months of the year, net losses were $56.3 million and losses allocated to common shareholders were $57.5 million.  Losses per diluted common share were $4.71, compared to a loss of $27.4 million, or $2.26 per diluted common share in the first six months of 2009.  The loan loss provision for the first half of 2010 was $43.0 million versus $32.2 million in the first half of 2009.

Asset Quality

After flattening in the first quarter, credit quality metrics improved significantly in the second quarter.  “Credit quality metrics improved in all areas, including delinquent loan levels, nonperforming loans, nonperforming assets and loan charge-offs,” said Rob Disotell, EVP and Chief Credit Officer.

Nonperforming loans declined by 28% during the quarter to $69.8 million, or 6.30% of total loans at June 30, 2010, compared to $96.7 million or 8.37% of total loans three months earlier.  Real estate owned (REO) increased $13.1 million during the quarter as Cascade acquired title to properties securing nonperforming loans.  REO totaled $40.5 million at June 30, 2010, compared to $27.4 million three months earlier.  Nonperforming assets were 6.57% of total assets at June 30, 2010, compared to 7.34% at the end of the preceding quarter, and 7.59% a year ago.

The second quarter provision for loan losses was $11.7 million, with net charge-offs of $11.7 million.  The provision for loan losses was $31.3 million for the preceding quarter and $18.3 million for the second quarter a year ago.  The total allowance for loan losses, which includes a $60,000 allowance for off-balance sheet loan commitments, now stands at $26.1 million, or 2.36% of total loans at quarter end, compared to $26.1 million, or 2.26% of total loans at March 31, 2010, and $24.6 million, or 2.00% of total loans a year ago.

The following table shows nonperforming loans versus total loans in each category:

	Balance at		Nonperforming		NPL as a %
LOAN PORTFOLIO ($ in 000's)	06/30/2010		Loans (NPL)		of Loans
Business	$	437,516	$	6,715		2	%
R/E construction
Spec construction		45,099		19,165		42	%
Land acquisition & development/land		74,119		19,305		26	%
Multifamily/custom construction		11,258		-		0	%
Commercial R/E construction		26,338		-		0	%
Total R/E construction		156,814		38,470		25	%
Commercial R/E		184,223		24,126		13	%
Multifamily		94,325		-		0	%
Home equity/consumer		31,879		147		0	%
Residential		203,138		366		0	%
Total	$	1,107,895	$	69,824		6	%

Nonperforming loans continue to be centered in R/E construction which accounted for 55% of Cascade’s total nonperforming loans.  Commercial R/E loans account for 35% of Cascade’s nonperforming loans and consist of two office buildings.

“We are pleased to have made progress in reducing nonperforming loans during the second quarter.  We continue to move quickly to convert nonperforming loans to REO, enabling us to actively market and liquidate these properties,” said Disotell.  “During the second quarter of 2010, a total of $24.7 million in loans were placed on nonaccrual status, $25.3 million were converted to REO status, $11.7 million were paid off or paid down during the quarter and $12.4 million were charged off in connection with pending sales transactions and as a result of new appraisals received in the period.”

Additions of $24.7 million to nonperforming loans were centered in:

·   $6.7 million in spec construction loans including $4.6 million in advances on existing spec construction loans to fund the completion of single-family homes as a part of work-out strategies;

·   $3.7 million in land acquisition and development/land loans;

·   A $12.2 million commercial real estate loan.

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July 21, 2010

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There were $11.7 million in paydowns on nonaccruing loans during the quarter.  These loans were centered in:

·   $7.9 in spec construction loans through the sale of completed homes;

·   $3.2 million in land acquisition & development/land through the sale of completed homes and payments.

The following table shows the migration of nonperforming loans through the portfolio in each category (6/30/10 compared to 3/31/10).

NONPERFORMING LOANS ($ in 000's)	Balance at 06/30/2010		Additions during quarter			Paydowns during quarter			Charge-offs during quarter			Transfers to REO			Transfers to Notes Receivable			Balance at 03/31/2010
Business	$	6,715	$	2,165		$	(117	)	$	(5,150	)	$	(560	)	$	(2,225	)	$	12,602
R/E construction
Spec construction		19,165		6,727			(7,939	)		(427	)		-			-			20,804
Land acquisition & development/land		19,305		3,686			(3,220	)		(5,436	)		(19,959	)		-			44,234
Commercial R/E construction		-		20			-			(1,075	)		(4,745	)		-			5,800
Total R/E construction		38,470		10,433			(11,159	)		(6,938	)		(24,704	)		-			70,838
Commercial R/E		24,126		12,210			(185	)		(227	)		-			-			12,328
Home equity/consumer		147		(81	)		(2	)		(102	)		-			-			332
Residential		366		-			(251	)		(2	)		-			-			619
Total	$	69,824	$	24,727		$	(11,714	)	$	(12,419	)	$	(25,264	)	$	(2,225	)	$	96,719

The following table shows the change in REO during the quarter:

			Additions
	Balance at		during		Capitalized		Paydowns/			Writedowns/			Balance at
REO ($ in 000's)	06/30/2010		quarter		costs		sales			loss/gain			03/31/2010
R/E construction
Residential construction	$	1,029	$	108	$	1,329	$	(3,490	)	$	(248	)	$	3,330
Land acquisition & development/land		31,606		19,851		1,243		(6,803	)		(2,896	)		20,211
Condominium construction		2,112		-		449		-			(432	)		2,095
Total R/E construction		34,747		19,959		3,021		(10,293	)		(3,576	)		25,636
Commercial R/E		5,375		5,305		70		-			-			-
Residential		341		-		-		(1,398	)		(19	)		1,758
	$	40,463	$	25,264	$	3,091	$	(11,691	)	$	(3,595	)	$	27,394

“REO increased primarily in land development and finished lots as that segment of the loan portfolio continues to be challenged,” said Disotell.  “By taking control of the projects through the foreclosure process, the Bank gains the ability to control the property and affect a quicker resolution.  As a result, approximately $26.2 million, or 64% of our REO balances are currently under purchase and sales agreements or letters of intent.  This includes $921,000 in residential construction, $20.1 million in land, $4.8 million in commercial real estate and $341,000 in residential homes.”

In the first quarter, Cascade announced that it had entered into agreements to sell 397 residential lots associated with its two largest land acquisition and development loans.  On the first of the two agreements, which included 263 lots, the first takedown of 164 lots closed in the second quarter as scheduled resulting in net sales proceeds of $4.7 million.  The remaining lots are expected to close in accordance with the agreement in the third quarter and will generate approximately $3.0 million in net sales proceeds.  On the second of the two agreements for the sale of 134 lots in King County, Cascade was not able to convert the letter of intent to a purchase and sale agreement.  However, Cascade has now executed a new letter of intent to enter into a purchase and sale agreement for the property on essentially the same terms, which is expected to close in the third quarter.  In addition, we have executed a letter of intent to enter into a purchase and sale agreement for the sale of 146 lots located in Pierce County for a property related to our third largest land acquisition and development loan that was acquired by Cascade in the second quarter.  Closing on this property is expected in the third quarter.

These transactions are subject to customary closing conditions and there can be no guarantee they will close as Cascade currently anticipates.

Loans delinquent 31-89 days and still accruing totaled $811,000, or 0.07% of total loans at June 30, 2010, compared to $3.5 million, or 0.30% of total loans at March 31, 2010 and $23.7 million, or 1.93% of total loans at June 30, 2009.  Cascade had no loans that were 90 days or more past due and still accruing interest at June 30, 2010.

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Cascade Financial – 2Q10 Results

July 21, 2010

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Loan Portfolio

Total loans decreased from a year ago as Cascade aggressively reduced its real estate construction loan concentration.  Total loans decreased 10%, or $119 million, on a year-over-year basis to $1.11 billion at June 30, 2010.

The following table shows the changes in the loan portfolio in each category (6/30/10 compared to 3/31/10 and 6/30/09).

							One Year
LOANS ($ in 000's)	June 30, 2010		March 31, 2010		June 30, 2009		Change
Business	$	437,516	$	457,426	$	467,923		-6	%
R/E construction
Spec construction		45,099		52,098		81,169		-44	%
Land acquisition & development/land		74,119		108,402		171,229		-57	%
Multifamily/custom construction		11,258		12,905		14,795		-24	%
Commercial R/E construction		26,338		31,996		29,738		-11	%
Total R/E construction		156,814		205,401		296,931		-47	%
Commercial R/E		184,223		183,027		192,886		-4	%
Multifamily		94,325		89,920		91,554		3	%
Home equity/consumer		31,879		31,274		30,919		3	%
Residential		203,138		188,930		146,231		39	%
Total loans	$	1,107,895	$	1,155,978	$	1,226,444		-10	%

Business loans decreased 6% from the prior year to $438 million.  Total R/E construction loans outstanding decreased 47% to $157 million at June 30, 2010, compared to $297 million a year ago.  Within this category, spec construction declined 44% to $45.1 million and land acquisition & development/land decreased 57% to $74.1 million at June 30, 2010 compared to one year ago.  Commercial real estate loans decreased 4% from the prior year to $184 million.  Multifamily loans increased 3% from the prior year to $94.3 million.  Home equity and consumer loans increased 3% to $31.9 million, while residential loans grew 39% to $203 million, compared to a year ago.  Growth in residential loans came primarily from the success of the Builder Sales Program used to facilitate the sale of newly constructed homes to qualified buyers.  Loans originated for the Builder Sales Program have an average FICO credit score of 741 and are performing as agreed.

Further details on changes during the first quarter are as follows:

																Transfers
	Balance at			Net			Reclassifi-						Transfers			to Notes			Balance at
LOANS ($ in 000's)	06/30/2010			Additions			cations			Charge-offs (1)			to REO			Receivable			03/31/2010
Business	$	437,516		$	(11,996	)	$	21		$	(5,150	)	$	(560	)	$	(2,225	)	$	457,426
R/E construction		156,814			(14,132	)		(2,813	)		(6,938	)		(24,704	)		-			205,401
Commercial R/E		184,223			869			554			(227	)		-			-			183,027
Multifamily		94,325			2,115			2,290			-			-			-			89,920
Home equity/consumer		31,879			759			(52	)		(102	)		-			-			31,274
Residential		203,138			14,210			-			(2	)		-			-			188,930
Total loans		1,107,895			(8,175	)		-			(12,419	)		(25,264	)		(2,225	)		1,155,978
Deferred loan fees		(4,255	)		(383	)		-			-			-			-			(3,872	)
Allowance for loan losses		(26,058	)		(11,725	)		(9	)		11,679			-			-			(26,003	)
Loans, net	$	1,077,582		$	(20,283	)	$	(9	)	$	(740	)	$	(25,264	)	$	(2,225	)	$	1,126,103
(1) Loan charge-off detail excludes negative NOW accounts totaling $68,000, recoveries of $808,000

Investment Portfolio and Liquidity

Strong deposit growth and a reduction in the loan portfolio have led to increased on-balance sheet liquidity.  The investment portfolio increased $58.7 million over the end of the second quarter a year ago, and increased $44.7 million from the preceding quarter, to $337 million.  Most of the quarterly increase was due to the increase in securities available-for-sale as a result of net securities purchased.  Interest-earning deposits, including deposits at the Federal Reserve, were $157 million as of June 30, 2010, up considerably from $26.4 million a year earlier.  “We continue to maintain sizeable balances in our account at the Federal Reserve Bank. This is a reflection of our commitment to

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July 21, 2010

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enhancing on-balance sheet liquidity,” said Nelson.  “With interest rates at historically low levels, we are being very cautious with our investment portfolio.  The average life of our investment portfolio, excluding our Federal Reserve deposits, is approximately 2.9 years, in a range we believe provides the best risk/reward balance at this point in time.”

Deposit Growth

“During the quarter, we adjusted our deposit strategy to reduce our levels of public funds as a result of anticipated changes to collateral requirements, reduce brokered CDs and further enhance liquidity, all while lowering our cost of deposits,” said Nelson.  Total deposits increased $10.7 million during the quarter or 1%, while checking account balances were down $61.8 million primarily through the cross-sale and conversion of checking balances to MMDA and CDs.  Savings and MMDA declined $4.4 million during the quarter through the planned reduction of $17.6 million in public funds MMDA mostly offset by an increase of $13.6 million in personal MMDA.  CDs increased $76.8 million during the quarter.  Total deposits were up $182 million, or 18% compared to a year ago.  Total checking account balances were up $121 million, or 42% over the past year with personal checking account balances increasing 108% or $158 million during the same period.  Business checking accounts were down $36.6 million on a year-over-year basis due to a planned reduction in public funds checking which require 100% collateralization.  CDs increased $64.3 million on a year-over-year basis.

The following table shows deposits in each category (6/30/10 compared to 3/31/10 and 6/30/09).

							One Year
DEPOSITS ($ in 000's)	June 30, 2010		March 31, 2010		June 30, 2009		Change
Personal checking accounts	$	304,145	$	353,610	$	146,310		108	%
Business checking accounts		103,789		116,090		140,345		-26	%
Total checking accounts		407,934		469,700		286,655		42	%
Savings and MMDA		128,803		133,188		132,704		-3	%
CDs		646,218		569,370		581,937		11	%
Total deposits	$	1,182,955	$	1,172,258	$	1,001,296		18	%

Capital

Total stockholders’ equity was $83.8 million as of June 30, 2010.  Book value was $3.79 per common share at June 30, 2010, compared to $7.89 a year ago and tangible book value was $3.77 per common share at quarter-end compared to $6.79 a year ago.  Cascade had a risk-based capital ratio of 10.65% and a Tier 1 capital ratio of 6.08% as of June 30, 2010.  Cascade’s tangible capital to assets ratio was 2.75% at quarter-end compared to 5.15% a year earlier.

Operating Results

Second quarter net interest income was down 13% to $9.5 million compared to $10.8 million for the second quarter of 2009, due primarily to Cascade’s enhanced on-balance sheet liquidity position.

Total other income increased 74% to $3.8 million for the quarter, compared to $2.2 million for the second quarter a year ago.  The increase in total other income compared to the prior year’s second quarter was primarily due to a gain on sale of securities of $1.8 million.  Excluding the gain on sale of securities, other income was $2.1 million, up 11% from the prior quarter.  Checking fees were up 11% over the second quarter a year ago.

Total other expenses (excluding the 2Q10 goodwill impairment charge) were $12.9 million in the second quarter of 2010, compared to $10.0 million (excluding the 2Q09 goodwill impairment charge), in the second quarter of 2009.  Compensation expenses decreased by 5% during the second quarter compared to the second quarter a year ago, partly as a result of the suspension of the Bank’s 401(k) match program at the beginning of the second quarter of 2010.  However, they were more than offset by a $2.4 million increase in writedowns or losses on sale of REO. 

For the first six months of 2010, net interest income was $19.2 million, compared to $21.9 million in the first six months of 2009.  Other income was $5.7 million for the first half of 2010 compared to $5.9 million in the first half of 2009.  For the first half of the year, total other expenses (excluding the 2Q10 goodwill impairment) increased to $22.1 million compared to $18.6 million (excluding the 2Q09 goodwill impairment) in the first half of 2009. The increase was largely due to the increase in writedowns or losses on sale of REO.

The efficiency ratio excluding the 2Q10 goodwill charge was 96.7% in the second quarter of 2010 compared to 79.6% in the preceding quarter.  The efficiency ratio, excluding the 2Q09 goodwill and OTTI charge, was 76.6% in the second quarter a year ago.  The ratio was impacted by the reduction in interest income from nonperforming loans and higher costs associated with REO and legal expenses.

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July 21, 2010

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Net Interest Margin

“The net interest margin was impacted negatively during the quarter compared to the prior quarter mostly due to the change in mix in assets towards a higher level of securities as we increased the securities portfolio by purchasing low yielding high quality securities to enhance on-balance sheet liquidity,” said Nelson.  Cascade’s net interest margin was 2.49% for the second quarter of 2010, compared to 2.60% in the immediate prior quarter and 3.01% for the second quarter a year ago.  The yield on earning assets declined by 24 basis points compared to the preceding quarter, while the cost of interest-bearing liabilities declined by 14 basis points.  The decline in the yield on earning assets compared to the prior quarter was due to a combination of an increase of 17 basis points in the yield on total loans, more than offset by a decline of 101 basis points in the yield of investments.  The decline in the yield on investments is the result of repositioning the investment portfolio toward shorter duration investment securities to enhance on-balance sheet liquidity.

The following table depicts Cascade’s yield on earning assets, its cost of funds on paying liabilities and the resulting spread and margin:

	2Q10	1Q10	4Q09	3Q09	2Q09	1Q09	4Q08	3Q08	2Q08
Asset yield	4.89%	5.13%	5.35%	5.60%	5.63%	5.83%	6.07%	6.67%	6.31%
Liability cost	2.46%	2.60%	2.65%	2.63%	2.74%	3.02%	3.33%	3.44%	3.51%
Spread	2.43%	2.53%	2.70%	2.97%	2.89%	2.81%	2.74%	3.23%	2.80%
Margin	2.49%	2.60%	2.79%	3.03%	3.01%	3.03%	3.01%	3.52%	3.17%

Recent Developments

Earlier this month Cascade named Debra L. Johnson as Executive Vice President and Chief Financial Officer.  Johnson has served as a consultant and interim CFO at Cascade since February of this year.  She has nearly 30 years of banking experience, including 12 years as Chief Financial Officer for HomeStreet Bank in Seattle.

“Debbie’s proven performance as a senior level executive and CFO, along with her understanding of the dynamics of community banking, makes her an exceptional choice for this position,” Nelson said.

On July 21, 2010, Cascade Bank entered into a Consent Order with the FDIC and Washington State DFI.  Under the Order, Cascade Bank is required, among other things, to improve asset quality and reduce classified assets; to improve profitability; and to increase Tier 1 capital to 10% and Risk Based Capital to 12% within 120 days.

It is also expected that Cascade will enter into a similar Order with the Federal Reserve Bank of San Francisco. In light of these developments, Cascade will actively engage in efforts to raise additional capital.

Additionally, Craig G. Skotdal and Dwayne R. Lane resigned from the Board of Directors on July 16, 2010 and July 20, 2010, respectively.

Conference Call

Cascade’s management team will host an analyst call on Thursday, July 22, 2010, at 10:00 a.m. PDT (1:00 p.m. EDT) to discuss second quarter results.  Interested investors may listen to the call live or via replay at www.cascadebank.com under shareholder information.  Investment professionals are invited to dial (480) 629-9770, using access code 4325841 to participate in the live call.  A replay will be available for a week at (303) 590-3030, using access code 4325841.

About Cascade Financial

Established in 1916, Cascade Bank, the only operating subsidiary of Cascade Financial Corporation, is a state chartered commercial bank headquartered in Everett, Washington.  Cascade Bank maintains an “Outstanding” CRA rating and has proudly served the Puget Sound region for over 90 years.  Cascade Bank operates 22 full service branches in Everett, Lynnwood, Marysville, Mukilteo, Shoreline, Smokey Point, Issaquah, Clearview, Woodinville, Lake Stevens, Bellevue, Snohomish, North Bend, Burlington and Edmonds.

In October 2009, Cascade Bank was named Favorite Snohomish County Company in the fourth annual NW.Jobs.com People’s Picks awards.  In June 2009, Cascade was ranked #55 on the Seattle Times’ Northwest 100 list of public companies.  In April 2010, Cascade was ranked #8 on the Puget Sound Business Journal’s list of largest bank companies headquartered in the Puget Sound area.

Non-GAAP Financial Measures

This news release contains certain non-GAAP financial measures in addition to results presented in accordance with Generally Accepted Accounting Principles (GAAP).  These measures include tangible book value per share, efficiency ratio and tangible capital/assets ratio.  These measures should not be construed as a substitute for GAAP measures; they should be read and used in conjunction with Cascade’s GAAP financial information.  A reconciliation of the included non-GAAP financial measures to GAAP measures is included elsewhere in this release.

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Forward-Looking Statements

This press release contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”). This statement is included for the express purpose of availing Cascade of the protections of the safe harbor provisions of the PSLRA.  Readers should not place undue reliance on forward-looking statements, which reflect management’s views only as of the date hereof.  The words “should,” “anticipate,” “expect,” “will,” “believe,” and words of similar meaning are intended, in part, to help identify forward-looking statements.  Future events are difficult to predict, and the expectations described above are subject to risks and uncertainties that may cause actual results to differ materially.  Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or expected. In addition to discussions about risks and uncertainties set forth from time to time in the Company’s filings with the Securities and Exchange Commission, factors that may cause actual results to differ materially from those contemplated in these forward-looking statements include, among others:  (1) the extent and duration of continued economic and market disruptions and governmental actions to address these disruptions; (2) the risk of new and changing legislation, regulation and/or regulatory actions; (3) pending litigation and regulatory actions; (4) local and national general and economic conditions; (5) changes in interest rates; (6) reductions in loan demand or deposit levels; and (7) changes in loan collectibility, defaults and charge-off rates.

Cascade undertakes no obligation to publicly revise or update these forward-looking statements to reflect events or circumstances that arise after the date of this release. Readers should carefully review the risk factors described in this and other documents Cascade files from time to time with the Securities and Exchange Commission, including Cascade’s 2009 Form 10-K and Cascade’s Form 10-Q for the quarter ending June 30, 2010.

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BALANCE SHEET
(Dollars in thousands except per share amounts)	June 30, 2010			March 31, 2010			Three Month Change			June 30, 2009			One Year Change
(Unaudited)
ASSETS
Cash and due from banks	$	4,464		$	4,371			2	%	$	13,976			-68	%
Interest-earning deposits		157,127			152,440			3	%		26,403			495	%
Securities available-for-sale, fair value		303,064			247,240			23	%		227,924			33	%
Securities held-to-maturity, amortized cost		21,849			32,956			-34	%		38,243			-43	%
Federal Home Loan Bank (FHLB) stock		11,920			11,920			0	%		11,920			0	%
Total securities		336,833			292,116			15	%		278,087			21	%
Loans
Business		437,516			457,426			-4	%		467,923			-6	%
R/E construction		156,814			205,401			-24	%		296,931			-47	%
Commercial R/E		184,223			183,027			1	%		192,886			-4	%
Multifamily		94,325			89,920			5	%		91,554			3	%
Home equity/consumer		31,879			31,274			2	%		30,919			3	%
Residential		203,138			188,930			8	%		146,231			39	%
Total loans		1,107,895			1,155,978			-4	%		1,226,444			-10	%
Deferred loan fees		(4,255	)		(3,872	)		10	%		(2,928	)		45	%
Allowance for loan losses		(26,058	)		(26,003	)		0	%		(24,490	)		6	%
Loans, net		1,077,582			1,126,103			-4	%		1,199,026			-10	%
Real estate owned (REO)		40,463			27,394			48	%		7,872			414	%
Premises and equipment, net		13,932			14,268			-2	%		15,319			-9	%
Bank owned life insurance		25,012			24,759			1	%		24,052			4	%
Goodwill		-			12,885			-100	%		12,885			-100	%
Prepaid FDIC insurance premiums		5,009			6,071			-17	%		26			N/A
Federal income tax receivable		-			13,420			-100	%		11,768			-100	%
Deferred tax asset		-			-			N/A			7,167			-100	%
Other assets		18,111			16,434			10	%		14,115			28	%
Total assets	$	1,678,533		$	1,690,261			-1	%	$	1,610,696			4	%
LIABILITIES AND EQUITY
Liabilities:
Deposits
Personal checking accounts	$	304,145		$	353,610			-14	%	$	146,310			108	%
Business checking accounts		103,789			116,090			-11	%		140,345			-26	%
Total checking accounts		407,934			469,700			-13	%		286,655			42	%
Savings and money market accounts		128,803			133,188			-3	%		132,704			-3	%
Certificates of deposit		646,218			569,370			13	%		581,937			11	%
Total deposits		1,182,955			1,172,258			1	%		1,001,296			18	%
FHLB advances		239,000			239,000			0	%		239,000			0	%
Securities sold under agreement to repurchase		145,420			146,065			0	%		146,600			-1	%
Federal Reserve borrowings		-			-			N/A			60,000			-100	%
Junior subordinated debentures		15,465			15,465			0	%		15,465			0	%
Junior subordinated debentures, fair value		3,341			3,341			0	%		8,708			-62	%
Other liabilities		8,573			9,879			-13	%		7,307			17	%
Total liabilities		1,594,754			1,586,008			1	%		1,478,376			8	%
Stockholders' equity:
Preferred stock		37,262			37,150			0	%		36,826			1	%
Common stock and paid in capital		44,030			43,841			0	%		43,443			1	%
Retained earnings		(2,740	)		22,047			-112	%		53,430			N/A
Accumulated other comprehensive gain (loss), net		5,227			1,215			330	%		(1,379	)		N/A
Total stockholders' equity		83,779			104,253			-20	%		132,320			-37	%
Total liabilities and stockholders' equity	$	1,678,533		$	1,690,261			-1	%	$	1,610,696			4	%

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Cascade Financial – 2Q10 Results

July 21, 2010

Page 9

STATEMENT OF OPERATIONS	Quarter Ended			Quarter Ended			Three Month			Quarter Ended			One Year
(Dollars in thousands except per share amounts)	June 30, 2010			March 31, 2010			Change			June 30, 2009			Change
(Unaudited)
Interest income	$	18,627		$	19,131			-3	%	$	20,215			-8	%
Interest expense		9,162			9,444			-3	%		9,392			-2	%
Net interest income		9,465			9,687			-2	%		10,823			-13	%
Provision for loan losses		11,725			31,290			-63	%		18,300			-36	%
Net interest loss after provision for loan losses		(2,260	)		(21,603	)		-90	%		(7,477	)		-70	%
Other income:
Checking fees		1,414			1,263			12	%		1,270			11	%
Service fees		247			233			6	%		286			-14	%
Bank owned life insurance		253			237			7	%		191			32	%
Gain on sales/calls of securities		1,764			28			N/A			226			681	%
Gain on sale of loans		11			26			-58	%		98			-89	%
Fair value gains		-			-			N/A			12			-100	%
Other		149			125			19	%		120			24	%
Total other income		3,838			1,912			101	%		2,203			74	%
Total income (loss)		1,578			(19,691	)		-108	%		(5,274	)		N/A
Other expenses:
Compensation expense		3,393			3,682			-8	%		3,587			-5	%
Other operating expenses		3,447			3,346			3	%		3,323			4	%
Legal		585			162			261	%		162			261	%
Contract services		406			200			103	%		84			383	%
FDIC insurance		1,106			853			30	%		1,241			-11	%
Real estate owned (REO) and
real estate in acquisition (REA) expense		333			296			13	%		356			-6	%
Writedowns/loss on sales of REO		3,595			698			415	%		1,225			193	%
Goodwill impairment		12,885			-			N/A			11,700			10	%
Total other expenses		25,750			9,237			179	%		21,678			19	%
Net loss before provision (benefit) for income tax		(24,172	)		(28,928	)		-16	%		(26,952	)		-10	%
Provision (benefit) for income tax		-			3,211			-100	%		(5,552	)		N/A
Net loss		(24,172	)		(32,139	)		-25	%		(21,400	)		13	%
Dividends on preferred stock		503			499			1	%		487			3	%
Accretion of issuance discount on preferred stock		112			112			0	%		105			7	%
Loss attributable to common stockholders	$	(24,787	)	$	(32,750	)		-24	%	$	(21,992	)		13	%
NET LOSS PER COMMON SHARE INFORMATION
Net loss per common share, basic	$	(2.02	)	$	(2.69	)		-25	%	$	(1.82	)		11	%
Net loss per common share, diluted	$	(2.02	)	$	(2.69	)		-25	%	$	(1.82	)		11	%
Weighted average number of shares outstanding
Basic		12,246,529			12,165,167						12,110,434
Diluted		12,246,529			12,165,167						12,110,434

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Cascade Financial – 2Q10 Results

July 21, 2010

Page 10

STATEMENT OF OPERATIONS	Six Months Ended						Six Month
(Dollars in thousands except per share amounts)	June 30, 2010			June 30, 2009			Change
(Unaudited)
Interest income	$	37,758		$	41,626			-9	%
Interest expense		18,606			19,683			-5	%
Net interest income		19,152			21,943			-13	%
Provision for loan losses		43,015			32,175			34	%
Net interest loss after provision for loan losses		(23,863	)		(10,232	)		133	%
Other income:
Checking fees		2,677			2,382			12	%
Service fees		480			535			-10	%
Bank owned life insurance		490			414			18	%
Gain on sales/calls of securities		1,792			344			421	%
Gain on sale of loans		37			138			-73	%
Fair value gains		-			1,802			-100	%
Other		273			236			16	%
Total other income		5,749			5,851			-2	%
Total loss		(18,114	)		(4,381	)		313	%
Other expenses:
Compensation expense		7,075			7,195			-2	%
Other operating expenses		6,647			6,519			2	%
Legal		746			246			203	%
Other insurance premiums		753			126			498	%
FDIC insurance		1,960			1,632			20	%
WPDPC assessment		-			368			-100	%
Real estate owned (REO) and
real estate in acquisition (REA) expense		629			365			72	%
Writedowns/loss on sales of REO		4,292			1,279			236	%
OTTI charge		-			858			-100	%
Goodwill impairment		12,885			11,700			10	%
Total other expenses		34,987			30,288			16	%
Net loss before provision (benefit) for income tax		(53,101	)		(34,669	)		53	%
Provision (benefit) for income tax		3,211			(8,452	)		N/A
Net loss		(56,312	)		(26,217	)		115	%
Dividends on preferred stock		1,002			969			3	%
Accretion of issuance discount on preferred stock		223			210			6	%
Loss attributable to common stockholders	$	(57,537	)	$	(27,396	)		110	%
NET LOSS PER COMMON SHARE INFORMATION
Net loss per common share, basic	$	(4.71	)	$	(2.26	)		108	%
Net loss per common share, diluted	$	(4.71	)	$	(2.26	)		108	%
Weighted average number of shares outstanding
Basic		12,210,751			12,104,805
Diluted		12,210,751			12,104,805

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Cascade Financial – 2Q10 Results

July 21, 2010

Page 11

(Dollars in thousands except per share amounts)
(Unaudited)
	Quarter Ended									Six Months Ended
PERFORMANCE MEASURES AND RATIOS	June 30, 2010			March 31, 2010			June 30, 2009			June 30, 2010			June 30, 2009
Return on average common equity (annualized)		-187.06	%		-137.53	%		-83.14	%		-154.71	%		-47.92	%
Return on average tangible common equity (annualized)*		-90.30	%		-159.35	%		-44.50	%		-131.94	%		-32.93	%
Return on average assets		-5.85	%		-7.74	%		-5.47	%		-6.79	%		-3.40	%
Efficiency ratio		193.57	%		79.64	%		166.42	%		140.50	%		108.97	%
Efficiency ratio (excluding goodwill and OTTI)*		96.71	%		79.64	%		76.60	%		88.76	%		63.79	%
Net interest margin		2.49	%		2.60	%		3.01	%		2.54	%		3.02	%
*Non-GAAP measurement
		Quarter Ended								Six Months Ended
AVERAGE BALANCES	June 30, 2010			March 31, 2010			June 30, 2009			June 30, 2010			June 30, 2009
Average assets	$	1,699,249		$	1,715,524		$	1,611,721		$	1,707,598		$	1,622,955
Average earning assets		1,526,742			1,512,046			1,440,316			1,519,434			1,465,368
Average total loans		1,134,477			1,196,091			1,247,475			1,165,114			1,253,370
Average deposits		1,197,710			1,169,309			986,945			1,183,588			980,118
Average equity (including preferred stock)		90,338			133,652			142,861			112,132			152,006
Average common equity (excluding preferred stock)		53,149			96,574			106,102			74,998			115,287
Average tangible common equity (excluding preferred stock and goodwill and intangibles)		52,867			83,353			92,776			68,247			96,125
EQUITY ANALYSIS	June 30, 2010			March 31, 2010			June 30, 2009
Total equity	$	83,779		$	104,253		$	132,320
Less: preferred stock		37,262			37,150			36,826
Total common equity		46,517			67,103			95,494
Less: goodwill and intangibles		282			13,202			13,308
Tangible common equity	$	46,235		$	53,901		$	82,186
Common stock outstanding		12,271,529			12,171,529			12,110,434
Book value per common share	$	3.79		$	5.51		$	7.89
Tangible book value per common share	$	3.77		$	4.43		$	6.79

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Cascade Financial – 2Q10 Results

July 21, 2010

Page 12

(Dollars in thousands except per share amounts)
(Unaudited)
ASSET QUALITY	June 30, 2010			March 31, 2010			June 30, 2009
Nonperforming loans (NPLs)	$	69,824		$	96,719		$	114,449
Nonperforming loans/total loans		6.30	%		8.37	%		9.33	%
REO and other repossessed assets	$	40,463		$	27,394		$	7,872
Nonperforming assets	$	110,287		$	124,113		$	122,321
Nonperforming assets/total assets		6.57	%		7.34	%		7.59	%
Net loan charge-offs in the quarter	$	11,679		$	31,187		$	18,512
Net charge-offs in the quarter/total loans		1.05	%		2.70	%		1.51	%
Allowance for loan losses	$	26,058		$	26,003		$	24,490
Plus: Allowance for off-balance sheet commitments		60			69			72
Total allowance for loan losses	$	26,118		$	26,072		$	24,562
Total allowance for loan losses/total loans		2.36	%		2.26	%		2.00	%
Total allowance for loan losses/nonperforming loans		37.41	%		26.96	%		21.46	%
Capital/asset ratio (including junior subordinated debentures)		6.48	%		7.65	%		9.77	%
Capital/asset ratio (Tier 1, including junior subordinated debentures)		6.08	%		6.75	%		9.10	%
Tangible cap/asset ratio (excluding preferred stock and goodwill and intangibles)		2.75	%		3.21	%		5.15	%
Risk based capital/risk weighted asset ratio		10.65	%		11.00	%		12.60	%
		Quarter Ended
INTEREST SPREAD ANALYSIS	June 30, 2010			March 31, 2010			June 30, 2009
Yield on interest-earning deposits		0.22	%		0.22	%		0.16	%
Yield on total loans		5.65	%		5.48	%		6.00	%
Yield on investments		3.13	%		4.14	%		4.49	%
Yield on earning assets		4.89	%		5.13	%		5.63	%
Cost of deposits		1.31	%		1.47	%		1.62	%
Cost of FHLB advances		4.35	%		4.35	%		4.33	%
Cost of Federal Reserve borrowings		0.00	%		0.25	%		0.30	%
Cost of securities sold under agreement to repurchase		5.92	%		5.94	%		5.74	%
Cost of junior subordinated debentures		10.78	%		10.68	%		8.79	%
Cost of interest-bearing liabilities		2.46	%		2.60	%		2.74	%
Net interest spread		2.43	%		2.53	%		2.89	%
Net interest margin		2.49	%		2.60	%		3.01	%

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Cascade Financial – 2Q10 Results

July 21, 2010

Page 13

RECONCILIATION TO NON-GAAP FINANCIAL MEASURES*
(Dollars in thousands)
(Unaudited)
	Quarter Ended									Six Months Ended
	June 30, 2010			March 31, 2010			June 30, 2009			June 30, 2010			June 30, 2009
AVERAGE TANGIBLE COMMON EQUITY
Loss attributable to common stockholders	$	(24,787	)	$	(32,750	)	$	(21,992	)	$	(57,537	)	$	(27,396	)
Goodwill impairment		12,885			-			11,700			12,885			11,700
Loss available for common stockholders (excluding goodwill impairment)	$	(11,902	)	$	(32,750	)	$	(10,292	)	$	(44,652	)	$	(15,696	)
Average equity	$	90,338		$	133,652		$	142,861		$	112,132		$	152,006
Average preferred stock		37,189			37,078			36,679			37,134			36,719
Average common equity		53,149			96,574			106,182			74,998			115,287
Average goodwill and intangibles		282			13,221			13,406			6,751			19,162
Average tangible common equity (excluding preferred stock	$	52,867		$	83,353		$	92,776		$	68,247		$	96,125
and goodwill and intangibles)
Return on average tangible common equity (annualized)		-90.30	%		-159.35	%		-44.50	%		-131.94	%		-32.93	%
EFFICIENCY RATIO
Total other expenses	$	25,750		$	9,237		$	21,678		$	34,987		$	30,288
Less goodwill impairment		12,885			-			11,700			12,885			11,700
Less OTTI		-			-			-			-			858
Total other expenses (excluding goodwill impairment and OTTI)	$	12,865		$	9,237		$	9,978		$	22,102		$	17,730
Net interest income	$	9,465		$	9,687		$	10,823		$	19,152		$	21,943
Other income		3,838			1,912			2,203			5,749			5,851
Total income	$	13,303		$	11,599		$	13,026		$	24,901		$	27,794
Efficiency ratio (excluding goodwill impairment and OTTI)		96.71	%		79.64	%		76.60	%		88.76	%		63.79	%
TANGIBLE COMMON EQUITY
Total assets	$	1,678,533		$	1,690,261		$	1,610,696
Less goodwill and intangibles		282			13,202			13,308
Total tangible assets	$	1,678,251		$	1,677,059		$	1,597,388
Total equity	$	83,779		$	104,253		$	132,320
Less: preferred stock		37,262			37,150			36,826
Total common equity		46,517			67,103			95,494
Less: goodwill and intangibles		282			13,202			13,308
Tangible common equity	$	46,235		$	53,901		$	82,186
Tangible cap/asset ratio (excluding preferred stock
and goodwill and intangibles)		2.75	%		3.21	%		5.15	%
*Management believes that the presentation of non-GAAP results provides useful information to investors regarding the effects on the Company's reported results of operations.

Note:  Transmitted on GlobeNewswire on July 21, 2010 at 1:00 p.m. PDT.