DECLARATION OF TRUST
                                       OF
                             CASCADE CAPITAL TRUST I

         THIS  DECLARATION  OF  TRUST  is  made as of  February  4,  2000  (this
"Declaration"),   by  and  among  Cascade  Financial  Corporation,   a  Delaware
corporation,  as sponsor  (the  "Sponsor"),  and  Wilmington  Trust  Company,  a
Delaware banking corporation,  as Delaware trustee (the "Trustee").  The Sponsor
and the Trustee hereby agree as follows:

         1. The trust created hereby shall be known as "Cascade Capital Trust I"
(the "Trust"),  in which name the Trustee or the Sponsor, to the extent provided
herein, may conduct the business of the Trust, make and execute  contracts,  and
sue and be sued.

         2. The Sponsor hereby assigns, transfers,  conveys and sets over to the
Trust the sum of $10. The Trustee hereby acknowledges  receipt of such amount in
trust from the Sponsor,  which amount shall constitute the initial trust estate.
The Trustee hereby  declares that it will hold the trust estate in trust for the
Sponsor. It is the intention of the parties hereto that the Trust created hereby
constitute a business  trust under Chapter 38 of Title 12 of the Delaware  Code,
12 Del.  C. ss.  3801,  et seq.  (the  "Business  Trust  Act"),  and  that  this
Declaration  constitute  the governing  instrument of the Trust.  The Trustee is
hereby  authorized  and directed to execute and file a certificate of trust with
the  Secretary  of State of the State of Delaware  in the form  attached to this
Declaration.

         3. The Sponsor and the Trustee  will enter into an amended and restated
Declaration  of  Trust  satisfactory  to each  such  party  to  provide  for the
contemplated operation of the Trust created hereby and the issuance by the Trust
of the Capital  Securities and Common Securities  referred to therein.  Prior to
the execution and delivery of such amended and restated Declaration of Trust (i)
the Trustee shall not have any duty or  obligation  hereunder or with respect to
the trust estate,  except as otherwise  required by applicable law, and (ii) the
Sponsor shall take or cause to be taken any action as may be necessary to obtain
prior to such  execution  and  delivery  any  licenses,  consents  or  approvals
required by applicable  law or otherwise.  Notwithstanding  the  foregoing,  the
Trustee may take all actions  which the Sponsor deems  necessary,  convenient or
incidental to effect the transactions contemplated herein. The Trustee shall not
have any duty or obligation  under or in connection with this Declaration or any
document  contemplated hereby, except as expressly provided by the terms of this
Declaration,  and no  implied  duties  or  obligations  shall be read  into this
Declaration  against  the  Trustee.  The right of the  Trustee  to  perform  any
discretionary act enumerated herein shall not be construed as a duty.

         4. The  Sponsor  hereby  agrees to (i)  reimburse  the  Trustee for all
reasonable expenses (including reasonable fees and expenses of counsel and other
experts), (ii) indemnify, defend and hold harmless the Trustee and the officers,
directors,  employees  and agents of the Trustee  (collectively,  including  the
Trustee in its individual capacity,  the "Indemnified Persons") from and against
any and  all  losses,  damages,  liabilities,  claims,  actions,  suits,  costs,
expenses, disbursements (including the reasonable fees and expenses of counsel),
taxes  and   penalties  of  any  kind  and  nature   whatsoever   (collectively,
"Expenses"), to the extent that such Expenses arise out

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of or are imposed upon or asserted at any time against such Indemnified  Persons
with respect to the performance of this  Declaration,  the creation,  operation,
administration  or termination of the Trust,  or the  transactions  contemplated
hereby;  provided,  however, that the Sponsor shall not be required to indemnify
an Indemnified  Person for Expenses to the extent such Expenses  result from the
willful  misconduct,  bad faith or gross negligence of such Indemnified  Person,
and (iii) advance to each such Indemnified Person Expenses (including reasonable
fees and expenses of counsel) incurred by such Indemnified  Person, in defending
any claim, demand,  action, suit or proceeding prior to the final disposition of
such claim, demand, action, suit or proceeding upon receipt by the Sponsor of an
undertaking, by or on behalf of such Indemnified Person, to repay such amount if
it shall be  determined  that  such  Indemnified  Person is not  entitled  to be
indemnified  therefor under this Section 4. The obligations of the Sponsor under
this Section 4 shall survive the  resignation  or removal of the Trustee,  shall
survive the  termination,  amendment,  supplement,  and/or  restatement  of this
Declaration,  and shall survive the transfer by the Sponsor of any or all of its
interest in the Trust pursuant to Section 5 below or otherwise.

         5. The Sponsor,  as sponsor of the Trust, is hereby authorized,  in its
discretion,  (i) to prepare and  distribute  one or more  offering  memoranda in
preliminary  and final form,  including any  necessary or desirable  amendments,
relating  to the  offering  and sale of  Capital  Securities  of the  Trust in a
transaction  exempt from the registration  requirements of the Securities Act of
1933, as amended (the "1933 Act"),  and such forms or filings as may be required
by the 1933 Act, the Securities  Exchange Act of 1934, as amended,  or the Trust
Indenture  Act of  1939,  as  amended,  in each  case  relating  to the  Capital
Securities  of the Trust;  (ii) to  prepare,  execute  and file on behalf of the
Trust,  such  applications,   reports,   surety  bonds,   irrevocable  consents,
appointments  of attorney for service of process and other papers and  documents
that shall be necessary or desirable to register or establish the exemption from
registration  of the Capital  Securities  of the Trust under the  securities  or
"Blue Sky" laws of such jurisdictions as the Depositor,  on behalf of the Trust,
may  deem  necessary  or  desirable;  (iii)  to  prepare,  execute  and  file an
application, and all other applications,  statements,  certificates,  agreements
and other instruments that shall be necessary or desirable,  to have the Capital
Securities  listed  on  the  Private  Offerings,  Resales  and  Trading  through
Automated  Linkages  ("PORTAL") Market and, if and at such time as determined by
the  Depositor,  with the New York Stock  Exchange or any other  national  stock
exchange or the Nasdaq  National  Market for listing or quotation of the Capital
Securities  of the  Trust;  (iv) to  prepare,  execute  and  deliver  letters or
documents  to, or  instruments  for filing with,  a  depository  relating to the
Capital Securities of the Trust; (v) to negotiate,  execute, deliver and perform
on  behalf of the Trust one or more  purchase  agreements,  registration  rights
agreements,   dealer/manager   agreements,   escrow   agreements,   subscription
agreements and other similar or related agreements  providing for or relating to
the sale and  issuance of the Capital  Securities  of the Trust and/or any other
interests  in the Trust;  and (vi) to prepare,  execute and deliver on behalf of
the Trust any and all documents,  certificates,  papers,  instruments  and other
writings as it deems desirable in connection with any of the foregoing.

          In the event that any filing referred to in this Section 5 is
required by the rules and regulations of Securities and Exchange Commission (the
"Commission"), PORTAL or state

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securities  or Blue Sky laws to be executed on behalf of the Trust by a trustee,
the Trustee,  in its capacity as a trustee of the Trust,  so required to execute
such filings is hereby authorized and directed to join in any such filing and to
execute on behalf of the Trust any and all of the foregoing, it being understood
that the  Trustee,  in its  capacity  as a trustee  of the  Trust,  shall not be
required  to join in any such  filing or execute on behalf of the Trust any such
document  unless  required  to  do  so by  the  rules  and  regulations  of  the
Commission, PORTAL or applicable state securities or Blue Sky laws.

         6. The Trustee is authorized to take such action or refrain from taking
such  action  under this  Declaration  as it may be  directed  in writing by the
Sponsor  from time to time;  provided,  however,  that the Trustee  shall not be
required  to take or  refrain  from  taking  any such  action  if it shall  have
determined,  or shall have been  advised by counsel,  that such  performance  is
likely to involve the Trustee in personal  liability or is contrary to the terms
of this Declaration or of any document contemplated hereby to which the Trust or
the  Trustee  is a party or is  otherwise  contrary  to law.  If at any time the
Trustee   determines  that  it  requires  or  desires  guidance   regarding  the
application  of any  provision of this  Declaration  or any other  document,  or
regarding compliance with any direction it received hereunder,  then the Trustee
may deliver a notice to the Sponsor  requesting  written  instructions as to the
course of action desired by the Sponsor,  and such instructions shall constitute
full and  complete  authorization  and  protection  for actions  taken and other
performance by the Trustee in reliance  thereon.  Until the Trustee has received
such  instructions  after delivering such notice, it may refrain from taking any
action with respect to the matters described in such notice.

         7. This Declaration may be executed in one or more counterparts.

         8. The number of trustees of the Trust  initially  shall be one (1) and
thereafter  the number of trustees of the Trust shall be such number as shall be
fixed from time to time by a written  instrument signed by the Sponsor which may
increase or decrease the number of trustees of the Trust; provided,  however, to
the extent  required by the Business  Trust Act, there shall at all times be one
trustee of the Trust that shall either be a natural  person who is a resident of
the  State of  Delaware  or, if not a natural  person,  an entity  which has its
principal  place of business in the State of Delaware  and  otherwise  meets the
requirements  of  applicable  law.  Subject  to the  foregoing,  the  Sponsor is
entitled  to appoint  or remove  without  cause any  trustee of the Trust at any
time.  Any trustee of the Trust may resign upon thirty days' prior notice to the
Sponsor.

         9. This  Declaration  shall be governed by, and construed in accordance
with,  the laws of the State of  Delaware  (without  regard to  conflict of laws
principles).


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         IN WITNESS WHEREOF,  the parties hereto have caused this Declaration of
Trust to be duly executed as of the day and year first above written.

                                        CASCADE FINANCIAL CORPORATION,
                                        as Sponsor



                                        By:     /s/ Frank M. McCord
                                              ----------------------------------
                                        Name:   Frank M. McCord
                                        Title:  Chairman and Chief
                                                  Executive Officer


                                        WILMINGTON TRUST COMPANY, as Trustee



                                        By:     /s/ Donald G. MacKlean
                                              ----------------------------------
                                        Name:   Donald G. MacKlean
                                        Title:  Vice President





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