-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CGbdCOeU8wsEWs1RVLMxb6KHVCsmVaYPbP3FD0/jYTAl8IikeflSRov+3r6Hhl/q g8E5J/LU+IN1emjsxw7TzA== 0000865911-97-000009.txt : 19971113 0000865911-97-000009.hdr.sgml : 19971113 ACCESSION NUMBER: 0000865911-97-000009 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971113 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CASCADE BANCORP CENTRAL INDEX KEY: 0000865911 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 931034484 STATE OF INCORPORATION: OR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23322 FILM NUMBER: 97717003 BUSINESS ADDRESS: STREET 1: 1100 N W WALL ST STREET 2: P O BOX 369 CITY: BEND STATE: OR ZIP: 97701 BUSINESS PHONE: 5033856205 MAIL ADDRESS: STREET 1: 1100 NW WALL STREET STREET 2: P.O. BOX CITY: BEND STATE: OR ZIP: 97709 10-Q 1 10-Q QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------------- FORM 10-Q (MARK ONE) / X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: September 30, 1997 ------------------ / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------- ---------- Commission file number: 0-23322 ----------- CASCADE BANCORP (Exact name of Registrant as specified in its charter) Oregon 93-1034484 (State of Incorporation) (I.R.S. Employer Identification No.) 1100 NW Wall Street Bend, Oregon 97701 (Address of principal executive offices) (Zip Code) (541) 385-6205 (Registrant's telephone number, including area code) ---------------------- Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- APPLICABLE ONLY TO CORPORATE ISSUERS Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 4,290,870 shares of no par value Common Stock on October 31, 1997. --------------------------- - --------------------------------------- CASCADE BANCORP AND SUBSIDIARIES FORM 10-Q QUARTERLY REPORT SEPTEMBER 30, 1997 INDEX PART I: FINANCIAL INFORMATION PAGE Condensed Consolidated Balance Sheets as of September 30, 1997 and December 31, 1996 . . . .. . . . . . . . . . .3 Condensed Consolidated Statements of Income for the nine months and three months ended September 30, 1997 and 1996 .. . . . . .4 Condensed Consolidated Statements of Changes in Stockholders' Equity for the nine months months ended September 30, 1997 and 1996 .. . . . . . .5 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 1997 and 1996. . .. . . . . . . . .6 Notes to Condensed Consolidated Financial Statements . .. . . . . . . . . . .7 Management's Discussion and Analysis of Financial Condition and Results of Operations. . .. . . . . . . . . . . . . . . . . . . . . . 11 PART II: OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K .. . . . . . . . . . . . . . 13 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 2 CASCADE BANCORP & SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1997 AND DECEMBER 31, 1996 (Unaudited)
1997 1996 ------------ ------------ ASSETS Cash and cash equivalents: Cash and due from banks $ 24,005,219 $ 19,567,608 Federal funds sold 8,400,000 9,325,000 ------------ ------------ Total cash and cash equivalents 32,405,219 28,892,608 Investment securities available-for-sale 39,259,237 24,476,627 Investment securities held-to-maturity 3,120,424 3,320,207 Loans, net 151,110,389 131,626,742 Mortgage loans held for sale 1,667,024 610,650 Premises and equipment, net 4,968,821 4,280,754 Accrued interest and other assets 8,167,990 8,068,985 ------------ ------------ Total assets $240,699,104 $201,276,573 ============ ============ LIABILITIES & STOCKHOLDERS' EQUITY Liabilities: Deposits: Demand $ 66,287,801 $ 51,484,370 Interest bearing demand 108,379,437 89,144,726 Savings 13,062,752 12,511,495 Time deposits 20,086,669 17,941,503 ------------ ------------ Total deposits 207,816,659 171,082,094 Long-term debt 5,000,000 5,000,000 Accrued interest and other liabilities 1,826,033 1,622,430 ------------ ------------ Total liabilities 214,642,692 177,704,524 Stockholders'equity: Common stock, no par value; 10,000,000 shares authorized; 4,290,870 issued and outstanding (4,265,934-1996) 13,158,417 13,058,417 Retained earnings 12,683,924 10,442,535 Unrealized gains on investment securities available-for-sale, net of deferred income taxes 214,071 71,097 ------------ ------------ Total stockholders' equity 26,056,412 23,572,049 ------------ ------------ Total liabilities and stockholders' equity $240,699,104 $201,276,573 ============ ============
See accompanying notes. 3 CASCADE BANCORP & SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME NINE MONTHS AND THREE MONTHS ENDED SEPTEMBER 30, 1997 and 1996 (Unaudited)
NINE MONTHS ENDED THREE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ----------------------- ----------------------- 1997 1996 1997 1996 ---------- ---------- ----------- ----------- Interest income: Interest and fees on loans $11,471,325 $10,443,937 $4,088,102 $3,548,911 Taxable interest on investments 1,738,910 708,200 613,351 396,681 Nontaxable interest on investments 57,272 75,346 15,659 24,679 Interest on federal funds sold 338,598 340,033 197,273 132,675 ---------- ---------- ---------- ---------- Total interest income 13,606,105 11,567,516 4,914,385 4,102,946 Interest expense: Deposits: Interest bearing demand 2,211,071 1,850,785 826,291 657,185 Savings 209,129 213,529 72,856 73,548 Time 731,263 654,561 252,070 234,742 Other borrowings 333,757 261,050 88,035 88,489 ---------- ---------- ---------- ---------- Total interest expense 3,485,220 2,979,925 1,239,252 1,053,964 ---------- ---------- ---------- ---------- Net interest income 10,120,885 8,587,591 3,675,133 3,048,982 Loan loss provision 607,177 295,678 231,316 146,957 ---------- ---------- ---------- ---------- Net interest income after loan loss provision 9,513,708 8,291,913 3,443,817 2,902,025 Noninterest income: Service charges on deposit accounts 1,327,418 1,134,418 457,000 399,645 Mortgage loan origination and processing fees 773,321 734,926 285,071 233,626 Gains on sales of mortgage loans 296,597 356,905 156,216 115,708 Other income 857,999 707,103 345,245 253,227 ---------- ---------- ---------- ---------- Total noninterest income 3,255,335 2,933,352 1,243,532 1,002,206 Noninterest expense: Salaries and employee benefits 3,669,618 3,160,222 1,367,833 1,145,061 Net occupancy & equipment 1,121,612 967,323 386,378 349,323 Other expenses 1,997,239 1,750,827 670,537 609,465 ---------- ---------- ---------- ---------- Total noninterest expense 6,788,469 5,878,372 2,424,748 2,103,849 ---------- ---------- ---------- ---------- Income before income taxes 5,980,574 5,346,893 2,262,601 1,800,382 Provision for income taxes 2,246,107 2,010,060 801,388 677,094 ---------- ---------- ---------- ---------- Net income $3,734,467 $3,336,833 $1,461,213 $1,123,288 ========== ========== ========== ========== Net income per common share $ 0.87 $ 0.78 $ 0.34 $ 0.26 ========== ========== ========== ==========
See accompanying notes. 4 CASCADE BANCORP & SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (Unaudited)
UNREALIZED GAINS (LOSSES) ON SECURITIES TOTAL COMMON RETAINED AVAILABLE STOCKHOLDERS' STOCK EARNINGS FOR SALE EQUITY ----------- ------------ ---------- ------------ Balance at December 31, 1995 $ 9,253,012 $ 9,734,936 $ 52,007 $ 19,039,955 10% stock dividend (387,812 shares) Declared in June 1996 3,805,405 (3,805,405) - - Net change in unrealized gains (losses) on securities available-for-sale - - 44,179 44,179 Net income - 3,336,833 - 3,336,833 ----------- ----------- ---------- ------------ Balance at September 30, 1996 $13,058,417 $ 9,266,364 $ 96,186 $ 22,420,967 =========== =========== ========== ============ Balance at December 31, 1996 $13,058,417 $10,442,535 $ 71,097 $ 23,572,049 Net change in unrealized gains on securities available-for-sale - - 142,974 142,974 Cash dividend declared in January 1997 ($0.25 per common share) - (1,066,485) - (1,066,485) Cash dividend declared in July 1997 ($0.10 per common share) - (426,593) - (426,593) Stock options exercised (24,936 shares) 100,000 - - 100,000 Net income - 3,734,467 - 3,734,467 ----------- ----------- ---------- ----------- Balance at September 30, 1997 $13,158,417 $12,683,924 $ 214,071 $ 26,056,412 =========== =========== ========== ===========
See accompanying notes. 5 CASCADE BANCORP & SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 (Unaudited)
1997 1996 ------------- ------------ Net cash provided by operating activities $ 3,382,637 $ 2,286,040 Investing activities: Purchases of investment securities available-for-sale (33,495,000) (23,838,205) Proceeds from maturities and calls of investment securities available-for-sale 19,006,719 2,491,406 Purchases of investment securities held-to-maturity (80,800) (978,645) Proceeds from maturities and calls of investment securities held-to-maturity 269,797 1,243,215 Net increase in loans (19,794,227) (7,898,731) Purchases of premises and equipments, net (1,118,002) (1,039,210) ------------ ------------ Net cash used in investing activities (35,211,513) (30,020,170) Financing activities: Net increase in deposits 36,734,565 17,498,939 Cash dividends paid (1,493,078) - Net proceeds from exercise of stock options 100,000 - ------------ ------------ Net cash provided (used) by financing activities 35,341,487 17,498,939 ------------ ------------ Net increase (decrease) in cash and cash equivalents 3,512,611 (10,235,191) Cash and cash equivalents at beginning of period 28,892,608 27,112,461 ------------ ------------ Cash and cash equivalents at end of period $ 32,405,219 $ 16,877,270 ============ ============
See accompanying notes. 6 CASCADE BANCORP & SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 1997 (Unaudited) 1. BASIS OF PRESENTATION The interim condensed consolidated financial statements include the accounts of Cascade Bancorp (Bancorp), a bank holding company, and its wholly- owned subsidiaries, Bank of the Cascades (the Bank) and Cascade Finance, (collectively, "the Company"). The Bank is an Oregon State-chartered, federally insured commercial bank and Cascade Finance is a consumer finance company. All significant intercompany accounts and transactions have been eliminated in consolidation. The interim condensed consolidated financial statements are unaudited, but include all adjustments, consisting of only normal accruals, which the Company considers necessary for a fair presentation of the results of operations for such interim periods. In preparing the condensed consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheets and income and expenses for the periods. Actual results could differ from those estimates. The interim condensed consolidated financial statements should be read in conjunction with the December 31, 1996 consolidated financial statements, including the notes thereto, included in Bancorp's 1996 Annual Report to Shareholders. Certain amounts for 1996 have been reclassified to conform with the 1997 presentation. 2. INVESTMENT SECURITIES Investment securities at September 30, 1997 and December 31, 1996 consisted of the following:
GROSS GROSS AMORTIZED UNREALIZED UNREALIZED ESTIMATED SEPTEMBER 30, 1997 COST GAINS LOSSES FAIR VALUE - ------------------------------ ------------ --------- --------- ----------- Available-for-Sale - ------------------ U.S. Government agencies...... $ 35,927,726 $ 280,574 $ 5,000 $ 36,203,300 U.S. Treasury securities...... 2,986,235 69,702 - 3,055,937 ------------ --------- --------- ------------ $ 38,913,961 $ 350,276 $ 5,000 $ 39,259,237 Held-to-Maturity - ---------------- Obligations of state and Political subdivisions..... $ 1,732,160 $ 11,973 $ - $ 1,744,133 Other......................... 1,388,264 - - 1,388,264 ------------ --------- --------- ------------ $ 3,120,424 $ 11,973 $ - $ 3,132,397 ============ ========= ========= ============ GROSS GROSS AMORTIZED UNREALIZED UNREALIZED ESTIMATED DECEMBER 31, 1996 COST GAINS LOSSES FAIR VALUE - ------------------------------ ------------ --------- ---------- ----------- Available-for-Sale - ------------------ U.S. Government agencies...... $ 20,372,543 $ 95,022 $ - $ 20,467,565 U.S. Treasury securities...... 3,989,347 19,715 - 4,009,062 ------------ --------- ---------- ------------ $ 24,361,890 $ 114,737 $ - $ 24,476,627 Held-to-Maturity - ---------------- Obligations of state and Political subdivisions..... $ 2,012,743 $ 3,103 $ 2,808 $ 2,013,038 Other......................... 1,307,464 - - 1,307,464 ------------ --------- ---------- ------------ $ 3,320,207 $ 3,103 $ 2,808 $ 3,320,502 ============ ========= ========== ============
7 3. LOANS AND RESERVE FOR LOAN LOSSES The composition of the loan portfolio at September 30, 1997 and December 31, 1996 was as follows: 1997 1996 ----------- ------------ Commercial.................... $ 28,420,911 $ 22,485,269 Real Estate: Construction............... 34,439,294 34,375,243 Mortgage................... 23,091,923 19,774,232 Commercial................. 49,715,569 42,390,479 Installment................... 17,942,608 14,665,629 ------------ ------------ 153,610,305 133,690,852 Less: Reserve for loan losses.... 1,998,248 1,691,260 Deferred loan fees......... 501,668 372,850 ------------ ------------ 2,499,916 2,064,110 ------------ ------------ Loans, net ................... $151,110,389 $131,626,742 ============ ============ Mortgage loans held for sale of $1,667,024 and $610,650 at September 30, 1997 and December 31, 1996, respectively, represent real estate mortgage loans. These loans are recorded at cost which approximates market. Transactions in the reserve for loan losses for the nine months ended September 30, 1997 and 1996 were as follows: 1997 1996 ----------- ------------ Balance at beginning of period... $ 1,691,260 $ 1,651,352 Provisions charged to operations. 607,177 295,678 Loans charged off................ (350,015) (134,798) Recoveries of loans previously charged off.................... 49,826 10,683 ------------ ------------ Balance at end of period......... $ 1,998,248 $ 1,822,915 ============ ============ The reserve for loan losses represents management's recognition of the assumed risks of extending credit and the quality of the existing loan portfolio. The reserve is maintained at a level considered adequate to provide for potential loan losses based on management's assessment of various factors affecting the portfolio. Such factors include loss experience, review of problem loans, current economic conditions, and an overall evaluation of the quality, risk characteristics and concentration of loans in the portfolio. The reserve is increased by provisions charged to operations and reduced by loans charged-off, net of recoveries. Although a risk of nonpayment exists with respect to all loans, certain specific types of risks are associated with different types of loans. Due to the nature of the Bank's customer base and the growth experienced in the Bank's market area, real estate is frequently a material component of collateral for the Bank's loans. The expected source of repayment of these loans is generally the operations of the borrower's business or personal income; however, real estate provides an additional measure of security. Risks associated with real estate loans include fluctuating land values, local economic conditions, changes in tax policies, and a concentration of loans within the Bank's market area. The Bank mitigates risks on construction loans by generally lending funds to customers that have been prequalified for long term financing and who are using experienced contractors approved by the Bank. The commercial real estate risk is further mitigated by making the majority of commercial real estate loans to owner-occupied users of the property. The Bank manages the general risks inherent in the loan portfolio by following loan policies and underwriting practices designed to result in prudent lending activities. 8 The following table presents information with respect to non-performing assets at September 30, 1997 and December 31, 1996 (dollars in thousands): 1997 1996 ------ ------ Loans on non-accrual status........... $ 783 $ 50 Loans past due 90 days or more but non on non-accrual status...... 9 27 Other real estate owned............... - - ------ ------ Total non-performing assets........... $ 792 $ 77 ====== ====== Percentage of non-performing assets to total assets.................... .33% .04% The accrual of interest on a loan is discontinued when, in management's judgment, the future collectibility of principal or interest is in doubt. Loans placed on nonaccrual status may or may not be contractually past due at the time of such determination, and may or may not be secured. When a loan is placed on nonaccrual status, it is the Bank's policy to reverse, and charge against current income, interest previously accrued but uncollected. Interest subsequently collected on such loans is credited to loan principal if, in the opinion of management, full collectibility of principal is doubtful. If interest on nonaccrual loans had been accrued, such income would have been insignificant for the nine months ended September 30, 1997 and 1996. At September 30, 1997, there were no potential problem loans, except as discussed above, where known information about possible credit problems of the borrower caused management to have serious doubts as to the ability of such borrower to comply with the present loan repayment terms and which may result in such loans being placed on a non-accrual basis. 4. MORTGAGE SERVICING RIGHTS At September 30, 1997 and December 31, 1996, the Bank held servicing rights to approximately $166,389,000 and $143,008,000, respectively, in mortgage loans which have been sold to the Federal National Mortgage Association. These mortgage loans are being serviced for the Bank by another financial institution under a sub-servicing agreement. The sale of these mortgage loans are subject to technical underwriting exceptions and related repurchase risks. Such risks are considered in the determination of the reserve for loan losses. Effective January 1, 1996, the Bank prospectively adopted Statement of Financial Accounting Standards (SFAS) No. 122, "Accounting for Mortgage Servicing Rights" (SFAS 122) (superceded by SFAS No. 125 - see Note 7). SFAS 122 required the Bank to recognize as separate assets the rights to service mortgage loans which are acquired through loan origination activities subsequent to December 31, 1995. Other assets in the accompanying condensed consolidated balance sheets as of September 30, 1997 and December 31, 1996 include approximately $1,064,000 and approximately $575,000, respectively, for the capitalized mortgage servicing rights. The fair value of the capitalized mortgage servicing rights was determined based on estimates of the present value of expected future cash flows and comparisons to current market transactions involving mortgage servicing rights with similar portfolio characteristics. There were no significant changes in the valuation allowance for capitalized mortgage servicing rights during the nine months ended September 30, 1997 and 1996. The predominant risk characteristics of the underlying loans used to stratify the capitalized mortgage servicing rights for purposes of measuring impairment are note rates, terms and interest methods (i.e., fixed and variable). 5. OTHER BORROWINGS At September 30, 1997 and December 31, 1996, the Bank had $5.0 million in long-term debt from the Federal Home Loan Bank of Seattle (FHLB) on a three year note due in May 1998, with a fixed interest rate of 6.96%. The borrowings from FHLB are secured by Bank assets. 9 6. NET INCOME PER COMMON SHARE Net income per common share was computed by dividing net income by the weighted average number of common shares outstanding during the period. The weighted average number of common shares outstanding used to compute net income per common share was approximately 4,269,000 for the nine-months ended September 30, 1997 and approximately 4,266,000 for the nine-months ended September 30, 1996. All share and per share amounts in the accompanying financial statements have been adjusted to retroactively reflect a two-for-one stock split declared in June 1997 and a 10% stock dividend declared in June 1996. In February 1997 the Financial Accounting Standards Board issued SFAS No. 128, "Earnings per Share" (SFAS No. 128). SFAS 128 supercedes APB Opinion No. 15, "Earnings per Share" and the related interpretations (APB No. 15). SFAS No. 128 will require the Company to present both basic and diluted earnings per share (EPS) on the face of the income statement and to provide a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. In addition, the computation of basic EPS will not consider common stock equivalents such as stock options. SFAS No. 128 will be effective for the Company in the fourth quarter of 1997, and earlier application is not permitted. After the effective date, all prior-period EPS data presented shall be restated (including interim financial statements) to conform with the provisions of SFAS No. 128. Management believes that the calculation of basic and diluted earnings per share in accordance with SFAS No. 128 will not be significantly different than historically reported net income per share in accordance with APB No. 15. 7. ADOPTION OF ADDITIONAL NEW ACCOUNTING STANDARDS In June 1996, SFAS No. 125, "Accounting for Transfers and Servicing of Financial Assets and Extinquishments of Liabilities" (SFAS 125) was issued. SFAS 125 superseded SFAS 122 and also established standards for when transfers of financial assets (e.g., loan participations), including those with continuing involvement by the transferor, should be considered a sale. SFAS 125 also established standards for when a liability should be considered extinguished. SFAS 125 is generally effective for transfers of assets and extinquishments of liabilities after December 31, 1996, applied prospectively. Earlier adoption or retroactive application of SFAS 125 was not permitted. In addition, in December 1996, SFAS No. 127 was issued which deferred the effective date of certain provisions of SFAS 125 for one year. The effect of adopting SFAS 125 was not significant to the Company's condensed consolidated financial statements. In February 1997, SFAS No. 129, "Disclosures of Information about Capital Structure" was issued. This Statement, which establishes standards for disclosing information about an entity's capital structure, is effective for financial statements for periods ending after December 15, 1997. This statement is not expected to have a material impact on the Company's financial statements. In June 1997, SFAS No. 130, "Reporting Comprehensive Income" was issued. This statement establishes requirements for disclosure of comprehensive income and its components (revenues, expenses, gains, and losses) and becomes effective for financial statements for periods ending after December 15, 1998. The Company does not expect this pronouncement to materially impact the Company's financial condition or results of operations. In June 1997, SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" was issued. SFAS No. 131 requires publicly-held companies to report financial and other information about key revenue-producing segments of the entity for which such information is available and is utilized by the chief operating decision maker. Specific information to be reported for individual segments includes profit or loss, certain revenue and expense items and total assets. A reconciliation of segment financial information to amounts reported in the financial statements will be required. SFAS No. 131 becomes effective for financial statements for periods ending after December 15, 1998 and it has not yet been determined whether the Company will be required to make any additional disclosure. 10 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE NINE MONTHS AND THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996 The following discussion should be read in conjunction with the Company's unaudited condensed consolidated financial statements and the notes thereto for the nine-month and three-month periods ended September 30, 1997 and 1996 included in this report. The following discussion includes certain forward-looking statements. Those statements may involve a number of risks and uncertainties which could cause actual results to differ materially from the expectation stated, including the following: slower than expected growth in the Company's business, deterioration of business conditions generally or specifically in the banking industry, regulatory changes involving banking, competitive factors, and general market conditions. FINANCIAL CONDITION The Company's total assets increased 19.6 percent to $240.7 million at September 30, 1997 compared to $201.3 million at December 31, 1996, primarily due to an increase in investment securities available-for-sale and net loans. These increases in assets were funded by an increase in deposits. During the nine months ended September 30, 1997, approximately $33.5 million in investment securities were purchased with excess funds from strong deposit growth and proceeds from maturities and calls of investment securities. Loan demand was strong with total loans increasing 14.9 percent to $153.6 million at September 30, 1997 compared to $133.7 million at December 31, 1996. Deposits increased 21.5 percent to $207.8 million at September 30, 1997 compared to $171.1 million at December 31, 1996. Although all categories of deposits increased, the primary change was in demand and interest bearing demand deposits. One of the contributing factors to the Company's increased deposits is that the Bank emphasizes the development of core deposit relationships because such deposits provide a stable source of funds for operations at a relatively low cost, and because core deposit customers are more likely to purchase other banking services. Core deposits include demand, interest bearing demand and savings deposits. The Bank's core deposits aggregated approximately $187.7 million at September 30, 1997. RESULTS OF OPERATIONS The Company reported net income of $3,734,000, or $.87 per share, for the nine months ended September 30, 1997, compared to net income of approximately $3,337,000, or $.78 per share, for the same period in 1996. This represents an increase in net income of 11.9 percent. Net income for the quarter ended September 30, 1997 was approximately $1,461,000, or $.34 per share, compared to net income of approximately $1,123,000, or $.26 per share, for the same period in 1996, up 30.1 percent. Net interest income increased 17.9 percent for the nine months and 20.5 percent for the three months ended September 30, 1997 as compared to the 1996 periods. The net increases during these periods resulted from increases in interest income exceeding the increases in interest expense. Total interest income increased approximately $2,038,200 (or 17.9%) for the nine months and approximately $811,400 (or 19.8%) for the quarter ended September 30, 1997 as compared to the 1996 periods. These were primarily the result of increases in the volume of loans and investment securities available- for-sale. Total interest expense increased approximately $505,300 (or 17.0%) for the nine months and approximately $185,300 (or 17.6%) for the quarter ended September 30, 1997 as compared to the 1996 periods. The increase during the nine months ended September 30, 1997 was primarily due to increased volume in interest bearing demand deposits and federal funds purchased. The increase during the quarter ended September 30, 1997 was primarily due to increased volume in interest bearing demand and time deposits. 11 Total noninterest income increased 11.0 percent for the nine months and 24.1 percent for the quarter ended September 30, 1997 as compared to the 1996 periods. The increase for the nine months ended September 30, 1997 was primarily due to increases in service charges, mortgage loan origination and processing fees and other income, which were partially offset by a decrease in gains on sales of mortgage loans. The increase for the quarter ended September 30, 1997 was primarily due to increases in all categories of noninterest income. Increases in service charge income during 1997 were primarily due to an increase in the volume of deposit activity during the periods presented. The decrease in gains on sales of mortgage loans for the nine months ended September 30, 1997 was primarily attributable to the increased interest rate environment and a more competitive market. Total noninterest expense increased 15.5 percent for the nine months and 15.6 percent for the quarter ended September 30, 1997 as compared to the 1996 periods. These increases are primarily the result of increased personnel and operating expenses due to continued growth of the Bank and the opening of Cascade Finance. Income tax expense increased between the periods presented primarily as a result of higher pre-tax income. LOAN LOSS PROVISION The loan loss provision increased $311,499 for the nine-months and $84,359 for the quarter ended September 30, 1997 as compared to the same periods in 1996, primarily due to loan growth. Management believes the current loan loss provision maintains the reserve for loan losses at an appropriate level. The Bank's ratio of reserve for loan losses to total loans was 1.30 percent at September 30, 1997 compared to 1.26 percent at December 31, 1996. LIQUIDITY The Company's principal subsidiary, Bank of the Cascades, has adopted policies to maintain a relatively liquid position to enable it to respond to changes in the Bank's needs and financial environment. Generally, the Bank's major sources of liquidity are customer deposits, sales and maturities of investment securities available-for-sale, the use of federal funds markets and net cash provided by operating activities. In addition, scheduled loan repayments are a relatively stable source of funds, while deposit inflows, unscheduled loan prepayments, and undisbursed loan funds, are influenced by general interest rate levels, interest rates available on other investments, competition, economic conditions and other factors, and are not necessarily stable sources and uses of funds. Along with federal funds lines and undisbursed loan funds, the Bank is also a member of the Federal Home Loan Bank, Seattle, Washington, which provides secured borrowings and other funding opportunities for liquidity purposes. Management believes that the Bank's existing sources of liquidity will enable the Bank to fund its requirements in the normal course of business. CAPITAL RESOURCES During the nine months ended September 30, 1997 the Company's total capital increased to $26.1 million, or 10.8 percent of total assets. The increase was primarily due to the Company's net income of $3,734,467 for the nine months ended September 30, 1997 and the net change in unrealized gains on investment securities available-for-sale of $142,974. These increases to capital were partially offset by the payment of cash dividends totaling $1,493,078 during the nine months ended September 30, 1997. During the third quarter ended September 30, 1997 the Company announced the establishment of a quarterly cash dividend and the payment of a cash dividend of $.10 per common share to all shareholders of record on August 4, 1997. On October 21, 1997 the Company announced the payment of the third quarter cash dividend of $.10 per common share to all shareholders of record on October 31, 1997, to be paid on November 7, 1997. 12 In September 1997, the Company announced the establishment of a stock repurchase plan. The plan authorizes management to repurchase up to 106,648 shares of the Company's common stock through the open market or in privately negotiated transactions in accordance with all applicable State and Federal laws and regulations. At September 30, 1997, the Company's Tier 1 and total risked-based capital ratios under the Federal Reserve Board's ("FRB") risk-based capital guidelines were approximately 14.6% and 15.7%, respectively. The FRB's minimum risk-based capital ratio guidelines for Tier 1 and total capital are 4% and 8%, respectively. PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) No exhibits were required to be filed for the quarter ended September 30, 1997. (b) Reports on Form 8-K. The Company did not file any reports on Form 8-K during the quarter ended September 30, 1997. 13 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CASCADE BANCORP ---------------------------- (Registrant) Date 11/12/97 By /s/ Roger J. Shields ---------------------------- Roger J. Shields, President Date 11/12/97 By /s/ Patricia L. Moss ---------------------------- Patricia L. Moss, Chief Financial Officer 14 EX-27 2 FINANCIAL DATA SCHEDULE
9 1,000 9-MOS DEC-31-1997 JAN-01-1997 SEP-30-1997 24005 0 8400 0 39259 3120 3132 153610 1998 240699 207817 0 1826 5000 0 0 13158 12898 240699 11471 1796 339 13606 3151 3485 10121 607 0 6788 5981 0 0 0 3734 .87 .87 0 783 9 0 0 1691 350 50 1998 1998 0 0
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