Cascade Financial Corp. of Everett, Wash., is expected to become a force in the Pacific Northwest now that its subsidiary Cascade Bank has solidified its conversion from thrift to commercial bank.
Last month the $885 million-asset company announced its first acquisition since the 2001 conversion, one that would put it over the $1 billion mark in assets. Chief executive officer Carol K. Nelson's plan is to double the asset size by 2010.
Ms. Nelson, who is also president, was hired from Bank of America Corp. to lead the conversion. She joined in February 2001 and the conversion was completed that July. Today, more lucrative commercial loans are on the books, the company is turning a profit consistently, and its performance ratios are up.
"Our goal," she said in an interview last week, "is to be the premier community bank, by growing our portfolio, expanding our product lines, and continuing to look for different ways to grow - whether through more acquisitions or by de novo branching."
James Bradshaw, an analyst at D.A. Davidson & Co. in Portland, Ore., said Cascade may be the next to break out of a pack of nine or so banking companies in the region whose assets top $1 billion.
The $4.27 billion-asset Sterling Financial Corp. in Spokane and the $2.96 billion-asset asset Umpqua Holdings Corp. in Portland have already "punched out," Mr. Bradshaw said - extending their geographic reach with acquisitions.
"Cascade could be the next one to come out of the fold, mainly because it has such a dynamic leader - Carol Nelson," Mr. Bradshaw said. "It's easy to see her running a billion-plus-dollar company, and that's not always the case with others."
Ms. Nelson, 46, brought a team of commercial bankers with her from Bank of America, where she had been a senior vice president based in Seattle.
Said Mr. Bradshaw: "It's a very good group now, and in my mind unquestionably capable for the size the company is today. But I think they'll need to expand their ranks if they want to be substantially larger. I also think they'll need to beef up the depth and quality of the management team and the board talent, too."
Robert J. Rogowski, a principal at Columbia Financial Advisors Inc. in Seattle, said Cascade faces tough competition, particularly in its home county of Snohomish north of Seattle - from the $2 billion-asset Frontier Financial Corp. in Everett and the $618.5 million-asset City Bank in Lynnwood.
Buying the $128 million-asset Issaquah Bancshares in Issaquah, Wash., will probably help Cascade gain market share in the growing suburbs east of Seattle - where Frontier and City Bank have no branches. (The $32 million cash and stock deal was announced Feb. 11 and is expected to close next quarter.)
Cascade's niche businesses are another strength, Mr. Rogowski said. For instance, it targets women-owned businesses; it is starting a women's financial group and has formed an advisory board of local women business leaders.
This is "one of the most rapidly growing segments of the economy, and we're currently learning what we could do to capitalize on that, and be more effective in really making inroads in that market," Ms. Nelson said.
Another niche is lending to dentists. Two years ago Cascade hired a lending officer with expertise in that field, and so far the bank has lent $15 million to dentists.
Not too long ago the company was a sleepy thrift. Founded in 1916, Cascade did well for years making single-family mortgages, before the product became a commodity with tight margins. Commercial loans now make up 61% of the portfolio, versus 42% in June 2001, and Cascade has set earnings records for 13 consecutive quarters. Its profits rose 44% in 2002, to $8 million, and 19% last year, to $9.6 million.
Cascade's net interest margin was 3.35% at the end of 2003, against 2.94% in June 2001. Its return on assets rose to 1.13% from 0.71%, its return on equity rose to 15.9% from 11.7%, and its efficiency ratio improved to 53.9%, against 62.7% in June 2002.
"It was a real sea change here," Ms. Nelson said. "The teamwork that exists today across divisions or business lines really didn't exist before." And "the opportunities for employees to develop or move between divisions really didn't exist before, either."
Cascade's sales and performance really shot up when it began incentive programs and recognition for a job well done, Ms. Nelson added.
Others have taken notice. Last June, Cascade was named by Washington CEO magazine as the state's best midsize company to work for.
