<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

[ X ]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
         SECURITIES EXCHANGE ACT OF 1934

                  For the fiscal year ended: DECEMBER 31, 1999

[    ]   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
                (Name of registrant as specified in its charter)

        Oregon                                  93-1034484
(State of Incorporation)               (IRS Employer Identification #)

   1100 NW Wall Street, Bend, Oregon                       97701
(Address of principal executive offices)                 (Zip Code)

                                 (541) 385-6205
                         (Registrant's telephone number)

       Securities registered under Section 12(b) of the Exchange Act: None

         Securities registered under Section 12(g) of the Exchange Act:

                           Common Stock, no par value
                                (Title of Class)

     Indicate by check mark whether the registrant: (1) 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  / /

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

     State the aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of a specified date within the past 60
days. $58,721,498 AGGREGATE MARKET VALUE AS OF MARCH 2, 2000, BASED ON THE
AVERAGE BID AND ASKED PRICE.

     Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date. 6,871,759 SHARES OF
NO PAR VALUE COMMON STOCK ON MARCH 2, 2000.

                       DOCUMENTS INCORPORATED BY REFERENCE

Part III is incorporated by reference from the issuer's definitive proxy
statement for the annual meeting of shareholders to be held on April 24, 2000.

<PAGE>

                                 CASCADE BANCORP
                                    FORM 10-K
                                  ANNUAL REPORT
                                TABLE OF CONTENTS
<TABLE>
<S>                 <C>                                                                                          <C>
PART I
         Item 1.    BUSINESS......................................................................................3

         Item 2.    PROPERTIES...................................................................................17

         Item 3     LEGAL PROCEEDINGS............................................................................17

         Item 4     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..........................................17

PART II

         Item 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
                      STOCKHOLDER MATTERS........................................................................18

         Item 6.    SELECTED FINANCIAL DATA......................................................................19

         Item 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS........................................................21

         Item 7A .  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...................................25

         Item 8.    CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.....................................26

         Item 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
                      FINANCIAL DISCLOSURE.......................................................................26

PART III

         Item 10 through 13

                  Part III, items 10 through 13 are incorporated by reference from the Company's definitive
                  proxy statement issued in conjunction with the Company's Annual Meeting of Shareholders to
                  be held on April 24 2000.  (Executive Officers, Compensation arrangements, Director and
                  Management Ownership; Related Party Transactions)

PART IV

         Item 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.............................27

SIGNATURES.......................................................................................................28
</TABLE>

                                       2

<PAGE>


                                     PART I

ITEM 1.       BUSINESS

COMPANY

              Cascade Bancorp (Bancorp) is an Oregon chartered bank holding
Company formed in 1990 and headquartered in Bend, Oregon. Bancorp's principal
subsidiary is Bank of the Cascades (the Bank). Bancorp also operates Cascade
Bancorp Financial Services, Inc. a consumer finance business, (collectively, the
Company). At December 31, 1999 the Company had total consolidated assets of
approximately $348 million, net loans of $275 million and deposits of $285
million.

BANK OF THE CASCADES

              The Bank was chartered as an Oregon State bank in March 1976 and
opened for business in February 1977. Bank of the Cascades is a community bank
offering the full range of financial services to its business and consumer
clients, including trust and investments. The Bank has a network of ten
branches, nine located in Central Oregon, and one in Salem, Oregon. An
additional branch is planned to open in Keizer, Oregon in mid-2000. In Deschutes
County, its largest market concentration, the Company is the market share leader
in customer deposits, holding over 28% share. It also is the market share leader
in construction and commercial real estate lending as well as in residential
mortgage origination and financing. Deschutes County is one of the fastest
growing regions of Oregon. The Bank's headquarters is located in downtown Bend,
Oregon.

              The Bank offers a broad range of commercial and personal banking
services to its customers. Lending activities serve small to medium-sized
businesses and consumers. The Bank provides commercial real estate loans, real
estate construction and development loans, commercial and industrial loans as
well as consumer installment, line-of-credit, credit card, and home equity
loans. The Bank originates residential mortgage loans that are typically sold on
the secondary market. The Bank provides consumer and business deposit services
including checking, money market, and time deposit accounts and related payment
services such as cash management, lock box, internet banking and bill payment.
In addition, the Bank operates Cascade Finance, a consumer finance business
which predominately purchases used automobile installment contracts from local
dealerships and also offers direct consumer finance loans.

              In mid-1999 the Company began offering Trust and Investment
services, initially in Central Oregon. Trust services focus on the personal
trust needs of existing and prospective clients by providing living and
testamentary trust, asset and financial management, and fiduciary services.
Investment services are provided by a licensed on-site broker through a
broker/dealer agent relationship.

CASCADE BANCORP FINANCIAL SERVICES

              Cascade Bancorp Financial Services, Inc. was incorporated in 1999
to manage the existing consumer installment loans which were present in Cascade
Finance. Subsequent to the incorporation of Cascade Bancorp Financial Services,
Inc., the ongoing consumer finance operations of Cascade Finance became a
division of the Bank. Cascade Bancorp Financial Services opened in January 1997
and is headquartered in Bend, Oregon. The subsidiary currently holds and
services approximately $2.2 million in purchased dealer automobile installment
contracts.

                                       3

<PAGE>

BUSINESS STRATEGY

--------------------------------------------------------------------------------
o      PROVIDE SHAREHOLDERS WITH EXCEPTIONAL VALUE BY DELIVERING THE BEST IN
       COMMUNITY BANKING AND RELATED FINANCIAL SERVICES
--------------------------------------------------------------------------------

              Cascade Bancorp has established the following key performance
goals: 1) Consistently exceed 18% return on equity, 2) Consistently exceed 10%
growth in earnings per share, 3) Identify and prudently manage credit and
business risk and 4) Strive to profitably diversify revenue and continuously
seek efficiency improvements in all its activities. However, with the inherent
uncertainty of the future, there can be no assurance as to the ongoing
achievement of these goals.

              Bank of the Cascades has a 23-year commitment to delivering the
best in hometown banking services to the Oregon communities it serves. Its
strategy is to profitably grow its business by attracting and retaining high
value relationship customers. This is accomplished by providing the best in
customer service while offering a broad array of products and financial
services. Because the Company is committed to providing customer convenience and
choice in delivery channels, it applies advances in technology and delivery
systems to the benefit of its customers. Such channels include traditional
branches, ATMs, Internet banking, and telephonic access.

              In addition to targeting growth and increased market share in its
existing locations, the Company may also consider future expansion by de novo
branching where it identifies market opportunities (such as the expected new
branch in Keizer, Oregon in mid-2000). The Company may also consider making
selective business acquisitions to expand its market opportunities.

              The Company's broad risk management objectives are to develop loan
policies and underwriting practices designed to prudently manage credit risk.
Funding policies are designed to maintain an appropriate volume and mix of core
deposits and time deposit balances to efficiently fund its loan and investment
activities. The Company may complement its local deposit gathering strategies
with wholesale funding from reliable counterparties such as the Federal Home
Loan Bank. The Company monitors its sensitivity to changing interest rates
primarily by utilizing simulation analysis in addition to traditional interest
rate gap calculations.

EMPLOYEES

              Bancorp has no employees other than its executive officers, who
are also employees of the Bank. As of December 31, 1999, the Company had 205
full-time equivalent employees. None of the employees of the Company are subject
to a collective bargaining agreement. The Company considers its relationships
with its employees to be good.

COMPETITION

              Commercial and consumer banking in Central Oregon, and in the
State of Oregon as a whole, is highly competitive. The Company competes
principally with other commercial banks, savings and loan associations, credit
unions, mortgage companies, and other financial service providers with respect
to the scope and type of services offered, interest rates paid on deposits and
pricing of loans, among other factors. Many of these competitors have greater
resources than the Company and therefore have larger lending capabilities and
may provide other services that the Company does not offer.

              The Company competes for customers principally through its
commitment to customer service, the relative attractiveness of its products and
services, as well as by providing convenience in delivering those products and
services. The Company believes its hometown banking philosophy and its focus on
small and medium-sized businesses, professionals and consumers enables it to
compete effectively with other financial service providers. In addition, the
Company's lending officers and senior managers have significant experience in
their respective marketplaces. This enables them to maintain close working
relationships with their customers. To serve customers whose borrowing
requirements exceed its lending limits, the Bank may participate loans to other
financial institutions.

                                       4

<PAGE>


CONSOLIDATED STATISTICAL INFORMATION

              The following tables present certain financial and statistical
information with respect to the Company for the periods indicated. Most of the
information is required by Guide 3, "Statistical Disclosure by Bank Holding
Companies", by the Securities and Exchange Commission. At the beginning of each
table, information is presented as to the nature of data disclosed in the table.

              For most financial institutions, including the Company, the
primary component of earnings is net interest income. Net interest income is the
difference between interest income earned, principally from loans and investment
securities portfolio, and interest paid, principally on customer deposits and
borrowings. Changes in net interest income result from changes in volume, spread
and margin. Volume refers to the dollar level of interest-earning assets and
interest-bearing liabilities. Spread refers to the difference between the yield
on interest-earning assets and the cost of interest-bearing liabilities. Margin
refers to net interest income divided by interest-earning assets and is
influenced by the level and relative mix of interest-earning assets and
interest-bearing liabilities.

ANALYSIS OF CHANGES IN INTEREST DIFFERENTIAL

              The following table shows the dollar amount of the increase
(decrease) in the Company's consolidated interest income and expense, and
attributes such variance to "volume" or "rate" changes. Variances that were
immaterial have been allocated equally between rate and volume categories.
(Dollars in thousands):

<TABLE>
<CAPTION>
                                                              YEAR ENDED DECEMBER 31,
                                       -------------------------------------------------------------------------
                                                   1999 OVER 1998                     1998 OVER 1997
                                       ----------------------------------    -----------------------------------
                                                       AMOUNT OF CHANGE                      AMOUNT OF CHANGE
                                         TOTAL          ATTRIBUTED TO           TOTAL          ATTRIBUTED TO
                                        INCREASE    ---------------------      INCREASE    ---------------------
                                       (DECREASE)    VOLUME       RATE        (DECREASE)    VOLUME        RATE
                                       ----------   ---------   ---------    -----------   ---------    --------
<S>                                    <C>          <C>          <C>          <C>          <C>          <C>
Interest income:
       Interest and fees on loans      $ 6,283      $ 6,995      $  (712)     $ 3,469      $ 3,446      $    23
       Taxable securities ........        (224)         (67)        (157)         110          273         (163)
       Non-taxable securities ....           6            8           (2)         (32)         (31)          (1)
       Federal funds sold ........        (442)        (456)          14           70           78           (8)
                                       -------      -------      -------      -------      -------      -------
           Total interest income .       5,623        6,480         (857)       3,617        3,766         (149)

Interest expense:
       Interest on deposits:

           Interest bearing demand         224           63          161          435          535         (100)
           Savings ...............          12           36          (24)          20           23           (3)
           Time ..................         285          393         (108)         296          276           20
       Other borrowings ..........         635          844         (209)        (357)        (413)          56
                                       -------      -------      -------      -------      -------      -------
            Total interest expense       1,156        1,336         (180)         394          421          (27)
                                       -------      -------      -------      -------      -------      -------
Net interest spread ..............     $ 4,467      $ 5,144      $  (677)     $ 3,223      $ 3,345      $  (122)
                                       =======      =======      =======      =======      =======      =======
</TABLE>


                                       5

<PAGE>

AVERAGE BALANCES AND AVERAGE RATES EARNED AND PAID

              The following table sets forth for 1999, 1998 and 1997 information
with regard to average balances of assets and liabilities, as well as total
dollar amounts of interest income from interest-earning assets and interest
expense on interest-bearing liabilities, resultant average yields or rates, net
interest income, net interest spread, net interest margin and the ratio of
average interest-earning assets to average interest-bearing liabilities for the
Company. (Dollars in thousands):

<TABLE>
<CAPTION>
                                          YEAR ENDED                    YEAR ENDED                    YEAR ENDED
                                       DECEMBER 31, 1999             DECEMBER 31, 1998             DECEMBER 31, 1997
                                  ----------------------------  ----------------------------    ----------------------------
                                             INTEREST  AVERAGE             INTEREST AVERAGE              INTEREST AVERAGE
                                  AVERAGE    INCOME/  YIELD OR  AVERAGE    INCOME/  YIELD OR     AVERAGE   INCOME/  YIELD OR
                                  BALANCE    EXPENSE   RATES    BALANCE    EXPENSE   RATES       BALANCE   EXPENSE   RATES
                                  ---------  -----------------  ---------  -------- ---------    --------  ------------------
<S>                              <C>         <C>        <C>    <C>         <C>        <C>     <C>         <C>         <C>
ASSETS

Taxable securities               $  38,880   $  2,393   6.15%  $  39,954   $ 2,617    6.55%   $  35,898   $  2,507    6.98%
Non-taxable securities (1)           1,209         48   3.97%      1,003        42    4.19%       1,751         74    4.23%
Federal funds sold                   1,716         95   5.54%     10,107       537    5.31%       8,646        467    5.40%
Loans (2)(3)(4)                    249,565     25,540  10.23%    182,280    19,257   10.56%     149,698     15,788   10.55%
                                  ---------  ---------          ---------  --------             --------  ---------
   Total earning assets            291,370     28,076   9.64%    195,993    22,453    9.62%     165,911    195,993    9.61%
Reserve for loan losses             (3,133)                       (2,264)                        (1,784)
Cash and due from banks             22,024                        17,827                         18,922
Premises and equipment, net          7,261                         5,394                          4,710
Other Assets                        13,761                         9,855                          7,921
                                  =========                     =========                       ========
      Total assets               $ 331,283                     $ 264,156                      $ 225,762
                                  =========                     =========                       ========

LIABILITIES &  STOCKHOLDER'S

EQUITY

Int. bearing demand deposits     $ 122,519   $  3,742   3.05%  $ 120,530   $ 3,518    2.92%   $ 102,484   $  3,083    3.01%
Savings deposits                    15,828        316   2.00%     14,086       304    2.16%      13,027        284    2.18%
Time deposits                       33,254      1,579   4.75%     25,295     1,294    5.12%      19,846        998    5.03%
Other borrowings                    13,160        700   5.32%        780        65    8.33%       6,269        422    6.73%
                                  ---------  ---------          ---------  --------             --------  ---------
   Total interest bearing          184,761      6,337   3.43%    160,691     5,181    3.22%     141,626      4,787    3.38%
liabilities
Demand deposits                    115,038                        75,826                         58,062
Other liabilities                    3,465                         2,263                          1,755
                                  ---------                     ---------                       --------
Total liabilities                  303,264                       238,780                        201,443
Stockholders' equity                28,019                        25,376                         24,319
                                  =========                     =========                       ========
  Total liabilities & equity     $ 331,283                     $ 264,156                      $ 225,762    225,762
                                  =========                     =========                       ========

                                             =========                     ========                       =========
Net interest income                          $ 21,739                      $17,272                        $  14,049
                                             =========                     ========                       =========

Net interest spread                                     6.21%                         6.40%                           6.23%
                                                      ========                     =========                       =========

Net interest income to
 earning assets                                         7.46%                         7.40%                           7.17%
                                                      ========                     =========                       =========
</TABLE>

---------------------

(1)   Yields on tax-exempt securities have not been stated on a tax-equivalent
      basis.

(2)   Average non-accrual loans included in the computation of average loans
      were insignificant for 1999, 1998 and 1997.

(3)   Loan related fees included in the above yield calculations: $1,552,000 in
      1999, $1,236,000 in 1998, and $1,012,000 in 1997.

(4) Includes mortgage loans held for sale.

                                       6

<PAGE>

LOAN PORTFOLIO COMPOSITION

         Interest earned on the loan portfolio is the primary source of income
for the Company. Net loans represent 79% of total assets as of December 31,
1999. Although the Company strives to serve the credit needs of its service
area, its primary concentration is in real estate related and commercial
credits. The Company makes substantially all of its loans to customers located
within the Company's service area. The Company has no loans defined as highly
leveraged transactions by the Federal Reserve Bank. The Company has no
significant agricultural loans.

         The following table presents the composition of the Company's loan
portfolio, at the dates indicated (dollars in thousands):

<TABLE>
<CAPTION>
                                                             December 31,
                                     ------------------------------------------------------------
                                       1999         1998         1997          1996       1995
                                     --------     --------     --------     --------     --------
<S>                                  <C>          <C>          <C>          <C>          <C>
Commercial .....................     $ 43,122     $ 31,280     $ 30,059     $ 22,485     $ 21,711

Real Estate:

         Construction ..........       49,276       44,875       30,863       34,375       33,984
         Mortgage ..............       41,082       36,671       23,396       19,774       24,750
         Commercial ............      111,578       70,524       52,356       42,391       31,019

Installment ....................       34,622       22,693       18,901       14,666       15,271
                                     --------     --------     --------     --------     --------
                                      279,680      206,043      155,575      133,691      126,735
Less:

         Reserve for loan losses        3,525        2,636        2,048        1,691        1,651
         Deferred loan fees ....        1,253          864          502          373          372
                                     --------     --------     --------     --------     --------
                                        4,778        3,500        2,550        2,064        2,023
                                     --------     --------     --------     --------     --------
                                     $274,902     $202,543     $153,025     $131,627     $124,712
                                     ========     ========     ========     ========     ========
</TABLE>

         At December 31, 1999, the maturities of all loans by category were as
follows (dollars in thousands):

<TABLE>
<CAPTION>
                                       DUE AFTER
                                        ONE, BUT
                          DUE WITHIN   WITHIN FIVE   DUE AFTER
LOAN CATEGORY              ONE YEAR      YEARS      FIVE YEARS     TOTAL
-------------             ----------   -----------  ----------     -----
<S>                       <C>          <C>          <C>          <C>
Commercial ..........     $ 17,670     $ 19,120     $  6,332     $ 43,122

Real Estate:
         Construction       39,184        6,569        3,523       49,276
         Mortgage ...       25,833       11,568        3,681       41,082
         Commercial .       27,640       73,469       10,469      111,578

Installment .........        5,760       24,199        4,663       34,622
                          --------     --------     --------     --------
                          $116,087     $134,925     $ 28,668     $279,680
                          ========     ========     ========     ========
</TABLE>

         Variable rate loans due after one year totaled $91,631 at December 31,
1999 and loans with predetermined or fixed rates due after one year totaled
$71,962 at December 31, 1999.

                                       7

<PAGE>


LENDING AND CREDIT MANAGEMENT

         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 Company's customer base and the growth experienced in the
Company's market area, real estate is frequently a material component of
collateral for the Company's loans. The expected source of repayment of these
loans is generally the operations of the borrower's business or the obligor's
personal income. However, real estate collateral 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 Company has a comprehensive risk management process to control,
underwrite, monitor and manage credit risk in lending. The Company 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 Company. Making the majority of commercial real
estate loans to owner-occupied users of the property mitigates, but does not
eliminate, commercial real estate risk.

         The Company manages the general risks inherent in the loan portfolio by
following loan policies and underwriting practices designed to result in prudent
lending activities. The following table presents information with respect to
non-performing assets (dollars in thousands):

<TABLE>
<CAPTION>
                                                     DECEMBER 31,
                                        -------------------------------------------
                                        1999      1998      1997      1996     1995
                                        ----      ----      ----      ----     ----
<S>                                     <C>       <C>       <C>       <C>      <C>
Loans on non-accrual status .......     $582      $172      $ 43      $ 50     $ 45

Loans past due 90 days or more
   But not on non-accrual status ..       40       --         45        27       21

Other real estate owned ...........       40       409         9        --       --
                                        ----      ----      ----      ----     ----
Total non-performing assets .......     $662      $581      $ 97      $ 77     $ 66
                                        ====      ====      ====      ====     ====
Percentage of non-performing assets
   to total assets ................      .19%      .19%      .04%      .04%     .04%
</TABLE>


         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 periods presented.

         At December 31, 1999, 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.

                                       8

<PAGE>


RESERVE FOR LOAN LOSSES

         The provision for loan losses charged to operating expense is based on
the Company's loan loss experience and such other factors which, in management's
judgement, should be considered in estimating possible loan losses. Management
monitors the loan portfolio to ensure that the reserve for loan losses is
adequate to cover outstanding loans on non-accrual status and any current loans
deemed to be in serious doubt of repayment according to each loan's repayment
plan. The following table summarizes the Company's reserve for loan losses and
charge-off and recovery activity for each of the last five years (dollars in
thousands):

<TABLE>
<CAPTION>
                                                                YEAR ENDED DECEMBER 31,
                                       ---------------------------------------------------------------------
                                       1999             1998           1997            1996             1995
                                       ----             ----           ----            ----             ----
<S>                                  <C>             <C>             <C>             <C>             <C>
Loans outstanding at

   End of period ...............     $ 279,680       $ 206,043       $ 155,575       $ 133,691       $ 126,735
                                     =========       =========       =========       =========       =========
Average loans outstanding

   During the period ...........     $ 249,565       $ 182,280       $ 149,698       $ 137,798       $ 121,883
                                     =========       =========       =========       =========       =========
Reserve balance,

   Beginning of period .........     $   2,636    $   2,048          $   1,691       $   1,651       $   1,172


Recoveries:

   Commercial ..................             9               2              16               2              70
   Real Estate:
      Construction .............          --              --              --              --              --
      Mortgage .................             4               1               2            --              --
      Commercial ...............          --              --              --              --                 1
   Installment .................           166              39              42              28              30
                                     ---------       ---------       ---------       ---------       ---------
                                           179              42              60              30             101
Loans charged off:

   Commercial ..................          (518)           (254)            (80)           (212)            (24)
   Real Estate:
      Construction .............           (65)           --              --              --              --
      Mortgage .................           (27)            (91)           (442)            (50)           --
      Commercial ...............          --              --              --              --                (2)
   Installment .................          (790)           (288)           (256)           (160)            (77)
                                     ---------       ---------       ---------       ---------       ---------
                                        (1,399)           (633)           (778)           (422)           (103)
                                     ---------       ---------       ---------       ---------       ---------
Net loans charged-off ..........        (1,221)           (591)           (718)           (392)             (2)
Provision charged to operations          2,110           1,179           1,075             432             481
                                     ---------       ---------       ---------       ---------       ---------
Reserve balance, end of period .     $   3,525       $   2,636       $   2,048       $   1,691       $   1,651
                                     =========       =========       =========       =========       =========
Ratio of net loans charged-off
   to average loans outstanding            .49%            .32%            .48%            .28%            .00%
                                     =========       =========       =========       =========       =========
Ratio of reserve for loan losses
   to loans at end of period ...          1.26%           1.28%           1.32%           1.26%           1.30%
                                     =========       =========       =========       =========       =========
</TABLE>

                                       9


<PAGE>


ALLOCATION OF RESERVE FOR LOAN LOSSES

         The Company does not normally allocate the reserve for loan losses to
specific loan categories. An allocation to these major categories is made below
for presentation purposes. This allocation process does not necessarily measure
anticipated future credit losses; rather, it seeks to measure the Bank's
assessment at a point in time of perceived credit loss exposure and the impact
of current and anticipated economic conditions. A schedule dividing the reserve
for loan losses into allocated and unallocated categories is furnished below for
the end of each of the last five years (dollars in thousands):

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                 -------------------------------------------------------------------------------------
                                           1999                       1998                            1997
                                 -------------------------    -------------------------      -------------------------
                                              % OF LOANS                   % OF LOANS                    % OF LOANS
                                                 IN EACH                      IN EACH                        IN EACH
                                               CATEGORY TO                  CATEGORY TO                    CATEGORY TO
                                  AMOUNT       TOTAL LOANS     AMOUNT       TOTAL LOANS      AMOUNT        TOTAL LOANS
                                 -------      ------------    -------      ------------      ------      -------------
<S>                              <C>                <C>        <C>                <C>        <C>                <C>
Commercial ..............        $  283             15%        $  189             15%        $  188             20%
Real Estate:
  Construction ..........           469             18            331             22            236             20
  Mortgage ..............           202             15            199             18             81             15
  Commercial ............           384             40            221             34            245             33
Installment .............           679             12            320             11            102             12
Unallocated .............         1,508           --            1,376           --            1,196           --
                                 ------            ---         ------            ---         ------            ---
                                 $3,525            100%        $2,636            100%        $2,048            100%
                                 ======            ===         ======            ===         ======            ===
</TABLE>

<TABLE>
<CAPTION>
                                             DECEMBER 31,
                                          1996                          1995
                                 ---------------------------   ---------------------------
                                              % OF LOANS IN                 % OF LOANS IN
                                              EACH CATEGORY                 EACH CATEGORY
                                  AMOUNT      TO TOTAL LOANS    AMOUNT      TO TOTAL LOANS
                                 --------     --------------   ---------    --------------
<S>                              <C>               <C>         <C>               <C>
Commercial ..............        $  145             17%        $  153             17%
Real Estate:
  Construction ..........           227             26            218             27
  Mortgage ..............            78             15             80             20
  Commercial ............           186             32            148             24
Installment .............            92             10             94             12
Unallocated .............           963           --              958           --
                                 ------            ---         ------            ---
                                 $1,691            100%        $1,651            100%
                                 ======            ===         ======            ===
</TABLE>


                                       10


<PAGE>


INVESTMENT PORTFOLIO

         The following table shows the carrying value of the Company's portfolio
of investments at December 31, 1999, 1998 and 1997 (dollars in thousands).

<TABLE>
<CAPTION>
                                                           DECEMBER 31,
                                                     -----------------------------
                                                      1999       1998         1997
                                                     ------     ------       ------
<S>                                                 <C>         <C>         <C>
U.S. Treasury securities ......................     $ 2,016     $ 3,109     $ 3,083
Obligations of U.S. Government agencies .......      15,282      26,849      38,339
Obligations of state and political subdivisions       1,067       1,410       1,030
Mortgage-backed securities ....................       9,768      14,891        --
Corporate debt securities .....................        --           631        --
                                                    -------     -------     -------
      Total debt securities ...................      28,133      46,890      42,452

Federal Home Loan Bank stock ..................       1,676       1,529       1,416
Equity securities .............................       2,003       2,532         532
                                                    -------     -------     -------
         Total investment securities ..........     $31,812     $50,951     $44,400
                                                    =======     =======     =======
</TABLE>


         The following is a summary of the contractual maturities and weighted
average yields of investment securities at December 31, 1999 (dollars in
thousands):

<TABLE>
<CAPTION>
                                                                                    WEIGHTED
                                                               CARRYING             AVERAGE
          TYPE AND MATURITY                                      VALUE             YIELD (1)
--------------------------------------                    -------------------    ---------------
<S>                                                              <C>                      <C>
U.S. Treasury Securities

       Due after 1 but within 5 years                            $     2,016              6.68%
                                                          -------------------
              Total U.S. Treasury Securities                                              6.68%
                                                                       2,016

U.S. Government Agencies

       Due after 1 but within 5 years                                                     6.32%
                                                                      15,282
                                                          -------------------
              Total U.S. Government Agencies                                              6.32%
                                                                      15,282

State and Political Subdivisions

       Due within 1 year                                                                  3.92%
                                                                         170
       Due after 1 but within 5 years                                                     4.73%
                                                                         897
                                                          -------------------
              Total State and Political Subdivisions                                      4.60%
                                                                       1,067

Mortgage-Backed Securities                                                                6.20%
                                                                       9,768
                                                          -------------------
              Total Debt Securities                                                       6.24%
                                                                      28,133
Equity securities                                                                         4.05%
                                                                       3,679
                                                          -------------------
                          Total Securities                       $    31,812              5.99%
                                                          ===================    ===============
</TABLE>


(1) Yields on tax-exempt securities have not been stated on a tax equivalent
    basis.

                                       11

<PAGE>


DEPOSIT LIABILITIES AND TIME DEPOSIT MATURITIES

         The following table summarizes the average amount of, and the average
rate paid on, each of the deposit categories for the periods shown (dollars in
thousands):

<TABLE>
<CAPTION>
                                                                    YEARS ENDED DECEMBER 31,
                                               1999                           1998                        1997
DEPOSIT LIABILITIES                           AVERAGE                        AVERAGE                     AVERAGE
-------------------                   ---------------------          --------------------       ---------------------
                                         AMOUNT        RATE             AMOUNT       RATE           AMOUNT       RATE
                                                       PAID                          PAID                        PAID
                                      ----------------------         --------------------       ---------------------
<S>                                   <C>              <C>           <C>             <C>        <C>              <C>
Demand............................    $     115,038     N/A          $      75,826    N/A       $      58,062     N/A
Interest-bearing demand...........          122,519    3.05%               120,530   2.92%            102,484    3.01%
Savings...........................           15,828    2.00%                14,086   2.16%             13,027    2.18%
Time..............................           33,254    4.75%                25,295   5.12%             19,846    5.03%
                                      -------------                  -------------              -------------
   Total Deposits.................    $     286,639                  $     235,737              $     193,419
                                      =============                  =============              =============
</TABLE>


         As of December 31, 1999 the Company's time deposit liabilities had the
following times remaining to maturity (dollars in thousands):

<TABLE>
<CAPTION>
                                                 TIME DEPOSITS OF                        ALL OTHER
                                               $100,000 OR MORE (1)                  TIME DEPOSITS (2)
                                         ------------------------------        ---------------------------
REMAINING TIME TO MATURITY                    AMOUNT            PERCENT             AMOUNT         PERCENT
--------------------------               ------------------------------        ---------------------------
<S>                                      <C>                     <C>           <C>                  <C>
3 months or less....................     $         8,434         59.93%        $         9,697      38.80%
Over 3 months

   Through 6 months.................               2,735         19.43%                  6,310      25.33%
Over 6 months
   Through 12 months................               2,372         16.86%                  6,043      24.26%
Over 12 months......................                 532          3.78%                  2,864      11.61%
                                         ------------------------------        ---------------------------
      Total.........................     $        14,073        100.00%        $        24,914     100.00%
                                         ==============================        ===========================
</TABLE>


(1)  Time deposits of $100,000 or more represent 4.93% of total deposits as of
     December 31, 1999. (2) All other time deposits represent 8.73% of total
     deposits as of December 31, 1999.

SHORT-TERM BORROWINGS

<TABLE>
<CAPTION>
                                                                             MAXIMUM
                                                                              AMOUNT
                                          AT PERIOD END 12/31/99           OUTSTANDING          YEAR ENDED 12/31/99
                                      --------------------------------        AT ANY         ----------------------------
                                          AMOUNT          WEIGHTED          MONTH-END          AVERAGE       WEIGHTED
                                        OUTSTANDING       AVG RATE             1999            BALANCE       AVG RATE
                                      ----------------    ------------    ---------------    ------------    ------------
<S>                                         <C>              <C>                <C>             <C>             <C>
FHLB Borrowings                             $  13,000 (1)    5.79%              $ 19,400        $ 11,307        5.34%
Federal funds purchased                        17,100        4.86%              $ 17,100           1,850        5.21%
                                            ---------                                           --------
Total Short-term borrowings                 $  30,100        5.26%                              $ 13,157        5.32%
</TABLE>


(1)  Consists of $5,000,000 under the FHLB CMA Program and $8,000,000 under a
     promissory note agreement due February 11, 2000.

                                       12

<PAGE>


SUPERVISION AND REGULATION

         Bancorp and the Bank are extensively regulated under federal and Oregon
law. These laws and regulations are primarily intended to protect depositors and
the deposit insurance fund, not shareholders of the Company. To the extent that
the following information describes statutory or regulatory provisions, it is
qualified in its entirety by reference to the particular statutory or regulatory
provisions. Any change in applicable laws or regulations may have a material
effect on the business and prospects of the Company. The operations of the
Company may be affected by legislative changes and by the policies of various
regulatory authorities. Management is unable to predict the nature or the extent
of the effects on its business and earnings that fiscal or monetary policies,
economic control or new Federal or State legislation may have in the future.

FEDERAL BANK HOLDING COMPANY REGULATION

         The Company is a one-bank holding Company within the meaning of the
Bank Holding Company Act (Act), and as such, it is subject to regulation,
supervision and examination by the Federal Reserve Bank (FRB). The Company is
required to file annual reports with the FRB and to provide the FRB such
additional information as the FRB may require.

         The Act requires every bank holding Company to obtain the prior
approval of the FRB before (1) acquiring, directly or indirectly, ownership or
control of any voting shares of another bank or bank holding Company if, after
such acquisition, it would own or control more than 5% of such shares (unless it
already owns or controls the majority of such shares); (2) acquiring all or
substantially all of the assets of another bank or bank holding Company; or (3)
merging or consolidating with another bank holding Company. The FRB will not
approve any acquisition, merger or consolidation that would have a substantial
anticompetitive result, unless the anticompetitive effects of the proposed
transaction are clearly outweighed by a greater public interest in meeting the
convenience and needs of the community to be served. The FRB also considers
capital adequacy and other financial and managerial factors in reviewing
acquisitions or mergers.

         With certain exceptions, the Act also prohibits a bank holding Company
from acquiring or retaining direct or indirect ownership or control of more than
5% of the voting shares of any Company which is not a bank or bank holding
Company, or from engaging directly or indirectly in activities other than those
of banking, managing or controlling banks, or providing services for its
subsidiaries. The principal exceptions to these prohibitions involve certain
non-bank activities which, by statute or by FRB regulation or order, have been
identified as activities closely related to the business of banking or of
managing or controlling banks. In making this determination, the FRB considers
whether the performance of such activities by a bank holding Company can be
expected to produce benefits to the public such as greater convenience,
increased competition or gains in efficiency in resources, which can be expected
to outweigh the risks of possible adverse effects such as decreased or unfair
competition, conflicts of interest or unsound banking practices.

RECENT LEGISLATION - FINANCIAL HOLDING COMPANIES

         On November 12, 1999 the Gramm-Leach-Bliley Act became law, repealing
the 1933 Glass-Steagall Act's separation of the commercial and investment
banking industries. The Gramm-Leach-Bliley Act expands the range of nonbanking
activities a bank holding company may engage in, while reserving existing
authority for bank holding companies to engage in activities that are closely
related to banking. The new legislation creates a new category of holding
company called a "Financial Holding Company," a subset of bank holding companies
that satisfy the following criteria:

         1.   all of the depository institution subsidiaries must be well
              capitalized and well managed;

         2.   the holding company must file with the Federal Reserve Board a
              declaration that it elects to

                                       13

<PAGE>


              be a financial holding company to engage in activities that would
              not have been permissible before the Gramm-Leach-Bliley Act; and

         3.   all of the depository institution subsidiaries must have a
              community Reinvestment Act rating of "satisfactory" or better.

         Financial holding companies may engage in any activity that (i) is
financial in nature or incidental to such financial activity (ii) is
complementary to a financial activity and does not pose a substantial risk to
the safety and soundness of depository institutions or the financial system
generally. The Gramm-Leach-Bliley Act specifies certain activities that are
financial in nature. These activities include:

         o     acting as a principal, agent or broker for insurance;

         o     underwriting, dealing in or making a market in securities; and

         o     providing financial and investment advice.

         The Federal Reserve Board and the Secretary of the Treasury have
authority to decide whether other activities are also financial in nature or
incidental to financial activity, taking into account changes in technology,
changes in the banking marketplace, competition for banking services and so on.

         The Gramm-Leach-Bliley Act has only recently become law. Regulations of
the banking agencies implementing the legislative changes can be expected in the
near future. Except for the increase in competitive pressures faced by all
banking organizations that is a likely consequence of the Gramm-Leach-Bliley
Act, the legislation and implementing regulations are likely to have a more
immediate impact on large regional and national institutions than on community
based institutions engaged principally in traditional banking activities.
Because the legislation permits bank holding companies to engage in activities
previously prohibited altogether or severely restricted because of the risks
they posed to the banking system, implementing regulations can be expected to
impose strict and detailed prudential safeguards on affiliations among banking
and nonbanking companies in a holding company organization. Additionally,
because the legislation allows various affiliates within a single holding
company organization to serve a broader array of customers' financial goals,
including their banking, insurance and investment goals, implementing
regulations can be expected to impose strict safeguards on sharing of customer
information among affiliated entities within an organization. Bancorp will
evaluate the provisions of the Act and may elect to become a financial holding
company.

FEDERAL AND STATE BANK REGULATION

         The Bank, as a Federal Deposit Insurance Corporation (FDIC) insured
bank which is not a member of the Federal Reserve System, is subject to the
supervision and regulation of the State of Oregon Department of Consumer and
Business Services, Division of Finance and Corporate Securities, and to the
supervision and regulation of the FDIC. These agencies may prohibit the Bank
from engaging in what they believe constitute unsafe or unsound banking
practices.

         The Community Reinvestment Act (CRA) requires that, in connection with
examinations of financial institutions within their jurisdiction, the FRB or the
FDIC evaluate the record of the financial institutions in meeting the credit
needs of their local communities, including low and moderate income
neighborhoods, consistent with the safe and sound operation of those banks.
These factors are also considered in evaluating mergers, acquisitions and
applications to open a branch or facility. The Bank's current CRA rating is
"Outstanding".

         The Bank is also subject to certain restrictions imposed by the Federal
Reserve Act on extensions of credit to executive officers, directors, principal
stockholders or any related interest of such persons. Extensions of credit (I)
must be made on substantially the same terms, collateral and following credit
underwriting procedures that are not less stringent than those prevailing at the
time for comparable transactions with persons not described above, and (ii) must
not involve more than the normal risk of

                                       14

<PAGE>


repayment or present other unfavorable features. The Bank is also subject to
certain lending limits and restrictions on overdrafts to such persons. A
violation of these restrictions may result in the assessment of substantial
civil monetary penalties on the Bank or any officer, director, employee, agent
or other person participating in the conduct of the affairs of the Bank, the
imposition of a cease and desist order, and other regulatory sanctions.

         Under the Federal Deposit Insurance Corporation Improvement Act
(FDICIA), each Federal banking agency is required to prescribe by regulation,
non-capital safety and soundness standards for institutions under its authority.
These standards are to cover internal controls, information systems and internal
audit systems, loan documentation, credit underwriting, interest rate exposure,
asset growth, compensation, fees and benefits, such other operational and
managerial standards as the agency determines to be appropriate, and standards
for asset quality, earnings and stock valuation. An institution, which fails to
meet these standards, must develop a plan acceptable to the agency, specifying
the steps that the institution will take to meet the standards. Failure to
submit or implement such a plan may subject the institution to regulatory
sanctions. The Company believes that the Bank already meets substantially all
the standards that are likely to be adopted, and therefore does not believe that
the implementation of these regulatory standards will materially affect the
Company's business operations.

INTERSTATE BANKING LEGISLATION

         Under the Riegle-Neal Interstate Banking and Branching Efficiency Act
of 1994 (the "Interstate Act"), bank holding companies are permitted to acquire
banks located in any state regardless of the state law in effect at the time.
The Interstate Act also provides for the nationwide interstate branching of
banks. Under the Interstate Act, both national and state chartered banks,
including Oregon, are permitted to merge across state lines and thereby create
interstate branch networks.

DEPOSIT INSURANCE

         As a member institution of the FDIC, the deposits of the Bank are
currently insured to a maximum of $100,000 per depositor through the Bank
Insurance Fund ("BIF"), and the Bank is required to pay semiannual deposit
insurance premium assessments to the FDIC.

         The Deposit Insurance Funds Act of 1996 ("Funds Act") eliminated the
statutorily-imposed minimum assessment amount, effective January 1, 1997. The
Funds Act also authorizes assessments on Bank Insurance Fund-assessable deposits
(such as, the Bank's deposits) and stipulates that the rate of assessment must
equal one-fifth the Financing Corporation assessment rate that is applied to
deposits assessable by the Savings Association Insurance Fund. The Financing
Corporation assessment rate for Bank Insurance Fund-assessable deposits is 1.296
cents per $100 of deposits per year. The Bank's FDIC insurance expense for 1999
was approximately $38,000.

REGULATORY DIVIDEND RESTRICTIONS

         The principal source of Bancorp's cash revenues have been provided from
dividends received from the Bank. The Oregon banking laws impose the following
limitations on the payment of dividends by Oregon state chartered banks: (1) no
dividends may be paid which would impair capital; (2) until the surplus fund of
a bank is equal to 50% of its capital, no dividends may be declared unless there
has been carried to the surplus account no less than one fifth of its net
profits for the dividend period; and (3) dividends are payable only out of a
bank's undivided profits.

         In addition, the appropriate regulatory authorities are authorized to
prohibit banks and bank holding companies from paying dividends, which would
constitute an unsafe or unsound banking practice. The Bank and Bancorp are not
currently subject to any regulatory restrictions on their dividends other than
those noted above.

REGULATORY CAPITAL

                                       15

<PAGE>


         The Federal bank regulatory agencies use capital adequacy guidelines in
their examination and regulation of bank holding companies and banks. If the
capital falls below the minimum levels established by these guidelines, the bank
holding company or bank may be denied approval to acquire or establish
additional banks or non-bank businesses or to open facilities. At December 31,
1999 the Company is considered "well capitalized" according to these regulatory
capital guidelines. See footnote 17 to the Financial Statements in this report.

         The FRB and FDIC promulgate risk-based capital guidelines for banks and
bank holding companies. Risk-based capital guidelines are designed to make
capital requirements sensitive to differences in risk profile among banks and
bank holding companies, to account for off-balance sheet exposure and to
minimize disincentives for holding liquid assets. Assets and off-balance sheet
items are assigned to broad risk categories, each with appropriate weights. The
resulting capital ratios represent capital as a percentage of total
risk-weighted assets and off-balance sheet items. The guidelines are minimums,
and the FRB has noted that bank holding companies contemplating significant
expansion programs should not allow expansion to diminish their capital ratios
and should maintain ratios well in excess of the minimum. The current guidelines
require all bank holding companies and banks to maintain a minimum risk-based
total capital ratio equal to 8%, of which at least 4% must be Tier 1 capital.

         Tier 1 capital for bank holding companies includes common stockholders'
equity, qualifying perpetual preferred stock (up to 25% of total Tier 1 capital,
if cumulative; under a FRB rule, redeemable perpetual preferred stock may not be
counted as Tier 1 capital unless the redemption is subject to the prior approval
of the FRB) and minority interests in equity accounts of consolidated
subsidiaries, less intangibles. Tier 2 capital includes: (I) the allowance for
loan losses of up to 1.25% of risk-weighted assets; (ii) any qualifying
perpetual preferred stock which exceeds the amount which may be included in Tier
1 capital; (iii) hybrid capital instrument; (iv) perpetual debt; (v) mandatory
convertible securities and (vi) subordinated debt and intermediate term
preferred stock of up to 50% of Tier 1 capital. Total capital is the sum of Tier
1 and Tier 2 capital less reciprocal holdings of other banking organizations,
capital instruments and investments in unconsolidated subsidiaries.

         Banks' and bank holding companies' assets are given risk-weights of 0%,
20%, 50% and 100%. In addition, certain off-balance sheet items are given credit
conversion factors to convert them to asset equivalent amounts to which an
appropriate risk-weight will apply. These computations result in the total
risk-weighted assets.

         Loans are generally assigned to the 100% risk category, except for
first mortgage loans fully secured by residential property, which carry a 50%
rating. The Company's investment securities, mainly U.S. Government sponsored
agency obligations, are assigned to the 20% category, except for municipal or
state revenue bonds, which have a 50% risk-weight, and direct obligations of or
obligations fully guaranteed by the United States Treasury or United States
Government, which have 0% risk-weight. Off-balance sheet items, direct credit
substitutes, including general guarantees and standby letters of credit backing
financial obligations, are given a 100% conversion factor. Transaction related
contingencies such as bid bonds, other standby letters of credit and undrawn
commitments, including commercial credit lines with an initial maturity of more
than one year, have a 50% conversion factor. Short-term, self-liquidating trade
contingencies are converted at 20%, and short-term commitments have a 0% factor.

         The FRB also has implemented a leverage ratio, which is Tier 1 capital
as a percentage of average total assets less intangibles, to be used as a
supplement to risk-based guidelines. The principal objective of the leverage
ratio is to place a constraint on the maximum degree to which a bank holding
Company may leverage its equity capital base. The FRB requires a minimum
leverage ratio of 3%. However, for all but the most highly rated bank holding
companies and for bank holding companies seeking to expand, the FRB expects an
additional cushion of at least 1% to 2%.

         The FDICIA also created a new statutory framework of supervisory
actions indexed to the capital level of the individual institution. Under
regulations adopted by the FDIC, an institution is assigned to one of


                                       16

<PAGE>


five capital categories depending on its total risk-based capital ratio, Tier 1
risk-based capital ratio, and leverage ratio, together with certain subjective
factors. Institutions that are deemed "undercapitalized", depending on the
category to which they are assigned, are subject to certain mandatory
supervisory corrective actions.

MONETARY POLICY

         The earnings of a bank holding company are affected by the policies of
regulatory authorities, including the FRB, in connection with the FRB's
regulation of the money supply. Various methods employed by the FRB are open
market operations in United States Government securities, changes in the
discount rate on member bank borrowings and changes in reserve requirements
against member bank deposits. These methods are used in varying combinations to
influence overall growth and distribution of bank loans, investments and
deposits, and their use may also affect interest rates charged on loans or paid
on deposits. The monetary policies of the FRB have had a significant affect on
the operating results of commercial banks in the past and are expected to
continue to do so in the future.

ITEM 2.  PROPERTIES

         At December 31, 1999, the Company conducted banking services in ten
locations. Nine throughout Central Oregon and one in Salem, Oregon. All offices
are free standing buildings except one location, which is leased space in a
supermarket. The main office/administrative center and three other branch
buildings are owned and are situated on leased land. The Bank owns land and
building at two branch locations. The Bank leases land and building at two
branch locations. All leases include multiple renewal options. The Bank owns
property in the Old Mill district of Bend for a possible future branch, or
combination branch/operations facility. Cascade Finance is housed in separate
leased retail space in Bend, Oregon. In addition to the above, the Bank
purchased land in Keizer, Oregon and intends to build a branch on the site to
open in mid-2000.

         The Bank's Main Office and Administrative Center is located at 1100 NW
Wall Street, Bend, Oregon, and consists of approximately 15,000 square feet. The
building is owned by the Bank and is situated on leased land. The ground lease
term is for 30 years and commenced June 1, 1989. There are ten renewal options
of five years each. Monthly rental is $4,738 per month with adjustments every
five years by mutual agreement of landlord and tenant. The main bank branch
occupies the ground floor. Mortgage lending, administrative and operational
functions occupy approximately 8,400 square feet. A separate data processing and
drive-up facility is also located on site. In 1999 the Bank acquired a 3,000 sq
ft adjacent building for future expansion of administrative functions for
$295,000. Certain other operations are located in an adjacent building subject
to a short-term lease agreement.

         In the opinion of management all of the Bank's properties are
adequately insured.

ITEM 3.  LEGAL PROCEEDINGS

         The Company is from time to time a party to various legal actions
arising in the normal course of business. Management believes that there is no
threatened or pending proceedings against the Company, which, if determined
adversely, would have a material effect on the business or financial position of
the Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         None.

                                       17

<PAGE>


                                     PART II

ITEM 5.  MARKET FOR CASCADE BANCORP'S COMMON STOCK AND RELATED STOCKHOLDER
         MATTERS

         Cascade Bancorp common stock trades on The NASDAQ Small Cap Market tier
of The NASDAQ Stock Market under the symbol CACB. The primary market makers are:
Dain Rauscher Wessels Inc., Ragen MacKenzie, D.A. Davidson & Co., Pacific Crest
Securities, Black & Company Inc., Herzog, Heine, Geduld, Inc., and Keefe,
Bruyette & Woods, Inc.

         The high and low sales prices shown below are retroactively adjusted
for stock dividends and splits and are based on actual trade statistical
information provided by The NASDAQ Stock Market for the periods indicated.

<TABLE>
<CAPTION>
                    FIRST QUARTER          SECOND QUARTER          THIRD QUARTER         FOURTH QUARTER
                    -------------          --------------          -------------         --------------
<S>                    <C>                     <C>                    <C>                    <C>
1999
High                   $16.71                  $16.36                 $16.88                 $15.13
Low                    $14.89                  $13.64                 $12.88                 $11.25

1998
High                   $20.61                  $20.00                 $20.85                 $18.41
Low                    $15.75                  $16.06                 $13.75                 $14.89
</TABLE>

         The Company declared a 10% stock dividend in June 1999 and a
three-for-two stock split in June 1998. The Company announced the establishment
of regular quarterly cash dividends in 1997. The dividends declared and paid
listed below have been retroactively adjusted for past stock dividends and stock
splits.

DIVIDENDS DECLARED AND PAID

<TABLE>
<CAPTION>
                    FIRST QUARTER          SECOND QUARTER          THIRD QUARTER         FOURTH QUARTER
                      PER SHARE              PER SHARE               PER SHARE              PER SHARE
                    -------------          --------------          -------------         --------------
<S>                     <C>                     <C>                    <C>                    <C>
2000                    $.08                     N/A                    N/A                    N/A

1999                    $.08                    $.08                   $.08                   $.08

1998                    $.07                    $.08                   $.08                   $.08
</TABLE>

         At February 29, 2000, the Company had 6,871,759 shares of common stock
outstanding held by approximately 2,700 shareholders of record.

                                       18

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

         The following selected financial data should be read in conjunction
with the Company's consolidated financial statements and the accompanying notes
which are included in this Annual Report on Form 10-K, (in thousands, except per
share data and ratios; unaudited):

<TABLE>
<CAPTION>
                                                                               YEARS ENDED DECEMBER 31,
                                                          -----------------------------------------------------------------
                                                             1999            1998           1997          1996       1995
                                                          ----------     -----------    ----------     --------    --------
<S>                                                       <C>            <C>            <C>            <C>         <C>
INCOME STATEMENT DATA
     Interest income ..................................   $    28,076    $    22,453    $    18,836    $ 15,812    $ 13,904
     Interest expense .................................         6,337          5,181          4,787       4,052       3,769
     Net interest income ..............................        21,739         17,272         14,049      11,760      10,135
     Loan loss provision ..............................         2,110          1,179          1,075         432         481
     Noninterest income ...............................         5,409          5,713          4,310       4,020       3,099
     Noninterest  expense .............................        15,027         12,548          9,379       8,113       7,144
     Income before income taxes .......................        10,011          9,257          7,905       7,235       5,609
     Provision for income taxes .......................         3,773          3,491          2,864       2,722       1,977
     Net income .......................................   $     6,238    $     5,766    $     5,041    $  4,513    $  3,632

SHARE DATA

     Basic earnings per common share(1) ...............   $      0.91    $      0.84    $      0.72    $   0.64    $   0.52
     Diluted earnings per common share(1) .............   $      0.89    $      0.82    $      0.70    $   0.63    $   0.51
     Book value per common share(1) ...................   $      4.31    $      3.93    $      3.52    $   3.43    $   2.76
     Cash dividends per common share(1) ...............   $      0.32    $      0.31    $      0.27        --          --
     Ratio of dividends declared to netincome .........         35.19%         36.72%         37.99%       --          --
     Basic Weighted shares outstanding(1)(5) ..........         6,859          6,850          7,021       7,039       7,039
     Diluted weighted shares outstanding(1)(5) ........         7,021          7,065          7,224       7,158       7,104

   BALANCE SHEET DATA (AT PERIOD END)

     Investment securities ............................   $    31,812    $    50,951    $    44,400    $ 27,797    $ 13,368
     Loans, net .......................................       274,902        202,543        153,025     131,627     124,711
     Total assets .....................................       347,904        300,774        242,611     201,277     177,562
     Total deposits ...................................       285,313        270,863        211,345     171,082     152,438
     Total shareholders' equity (5) ...................        29,571         26,922         24,236      23,572      19,040

SELECTED RATIOS

     Return on average total shareholders' equity(5) ..         22.26%         22.72%         20.73%      21.04%      21.36%
     Return on average total assets ...................          1.88%          2.18%          2.23%       2.39%       2.24%
     Net interest spread ..............................          6.21%          6.40%          6.23%       6.11%       5.97%
     Net interest margin ..............................          7.46%          7.40%          7.17%       7.09%       6.92%
     Efficiency ratio (2) .............................         55.35%         54.59%         51.09%      51.41%      53.28%

ASSET QUALITY RATIOS

     Reserve for loan losses to ending total loans ....          1.26%          1.28%          1.32%       1.26%       1.30%
     Nonperforming assets to ending total assets (3) ..          0.19%          0.19%          0.04%       0.04%       0.04%
     Net loan charge-offs to average loans ............          0.49%          0.32%          0.48%       0.28%       0.00%

CAPITAL RATIOS

     Average shareholders' equity to average assets (5)          8.46%          9.61%         10.77%      11.33%      10.47%
     Leverage ratio (4) ...............................          8.37%          8.99%          9.63%      11.48%      10.64%
     Total risk-based capital ratio (4) ...............         11.09%         12.47%         14.29%      16.51%      14.29%
</TABLE>

(1)  Adjusted to reflect 10% stock dividends declared in 1995 and 1996, a
     two-for-one stock split in 1997, a three-for-two stock in 1998, and 10%
     stock dividend in 1999.

(2)  Efficiency ratio is noninterest expense divided by (net interest income +
     noninterest income).

(3)  Nonperforming assets consist of nonaccrual loans, loans contractually past
     due 90 days or more and other real estate owned.

(4)  Computed in accordance with FRB and FDIC guidelines.

(5)  During 1997 the Board adopted a stock repurchase plan to buyback
     approximately 2.5% of common stock. In addition, the Board adopted a plan
     to repurchase up to an additional 2.5% of common stock beginning in 1998.

                                       19

<PAGE>


SELECTED QUARTERLY FINANCIAL DATA

         The following table sets forth the Company's unaudited data regarding
operations for each quarter of 1999 and 1998. This information, in the opinion
of management, includes all normal recurring adjustments necessary to state
fairly the information set forth therein (in thousands, except per share
amounts):

<TABLE>
<CAPTION>
                                                                      1999 QUARTERS ENDED
                                                      ------------------------------------------------------
                                                      DEC. 31        SEPT. 30         JUNE 30        MAR. 31
                                                      -------        --------         -------        -------
<S>                                               <C>             <C>             <C>             <C>
Interest income                                   $     7,477     $     7,328     $     6,991     $    6,280
Interest expense                                        1,767           1,573           1,562          1,435
                                                    ----------      ----------      ----------      ---------
Net interest income                                     5,710           5,755           5,429          4,845
Loan loss provision                                       455             549             734            371
                                                    ----------      ----------      ----------      ---------
Net interest income after loan loss provision           5,255           5,206           4,695          4,474
Noninterest income                                      1,378           1,282           1,370          1,379
Noninterest expense                                     3,948           3,864           3,621          3,594
                                                    ----------      ----------      ----------      ---------
Income before income taxes                              2,685           2,624           2,444          2,259
Provision for income taxes                              1,017             976             937            843
                                                    ----------      ----------      ----------      ---------
Net income                                        $     1,668     $     1,648     $     1,507     $    1,416
                                                    ==========      ==========      ==========      =========
Weighted average number
  of shares outstanding (1)                             6,867           6,862           6,848          6,859
Basic earnings per share (1)                            $0.24           $0.24           $0.22          $0.21
Fully diluted weighted average
  Number of shares outstanding (1)                      6,975           6,998           6,986          7,025
Fully diluted earnings per share (1)                    $0.24           $0.24           $0.22          $0.19
</TABLE>

<TABLE>
<CAPTION>
                                                                      1998 QUARTERS ENDED
                                                      ------------------------------------------------------
                                                      DEC. 31        SEPT. 30         JUNE 30        MAR. 31
                                                      -------        --------         -------        -------
<S>                                               <C>             <C>             <C>             <C>
Interest income                                   $     6,218     $     5,892     $     5,354     $    4,989
Interest expense                                        1,374           1,352           1,239          1,216
                                                    ----------      ----------      ----------      ---------
Net interest income                                     4,844           4,540           4,115          3,773
Loan loss provision                                       503             308             284             84
                                                    ----------      ----------      ----------      ---------
Net interest income after loan loss provision           4,341           4,232           3,831          3,689
Noninterest income                                      1,504           1,501           1,491          1,217
Noninterest expense                                     3,447           3,231           3,047          2,823
                                                    ----------      ----------      ----------      ---------
Income before income taxes                              2,398           2,502           2,275          2,083
Provision for income taxes                                885             967             836            804
                                                    ----------      ----------      ----------      ---------
Net income                                        $     1,513     $     1,535     $     1,439     $    1,279
                                                    ==========      ==========      ==========      =========
Weighted average number
  of shares outstanding (1)                             6,850           6,853           6,845          6,851
Basic earnings per share (1)                            $0.22           $0.22           $0.21          $0.19
Fully diluted weighted average
   Number of shares outstanding (1)                     6,409           6,427           6,431          6,440
Fully diluted earnings per share (1)                    $0.21           $0.22           $0.20          $0.19
</TABLE>

-------------------
(1)  Adjusted to give retroactive effect to a 10% stock dividend declared in
     June 1999 and a three-for-two stock split declared in June 1998.

                                       20

<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

         The following discussion should be read in conjunction with the
Company's audited consolidated financial statements and the notes thereto as of
December 31, 1999 and 1998 and for each of the three years in the period ended
December 31, 1999 included elsewhere in this report.

         When used in the following discussion, the word "expects," "believes,"
"anticipates" and other similar expressions are intended to identify
forward-looking statements, which are made pursuant to the safe harbor
provisions of the private securities litigation reform act of 1995. Such
forward-looking statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from those projected. Specific
risks and uncertainties include, but are not limited to, general business and
economic conditions, and other factors listed from time to time in the Company's
SEC reports. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The Company
undertakes no obligation to publish revised forward-looking statements to
reflect the occurrence of unanticipated events or circumstances after the date
hereof.

HIGHLIGHTS

         The Company's 1999 net income was $6.2 million, up 8.2% from the $5.8
million earned in 1998. Net income in 1998 represented a 14.4% increase from
1997's net income of $5.0 million. During the reported periods, progressively
higher earnings have led to improved earnings per share and strong return on
equity. Diluted earnings per share reached $.89 in 1999 compared to $.82 in 1998
and $.70 in 1997, while return on equity was 22.3% in 1999 compared to 22.7% in
1998 and 20.7% in 1997.

         Increased earnings in 1999 were primarily due to a $73.6 million or
35.7% increase in the Company's loan portfolio with a resulting increase in net
interest income. Investment portfolio securities declined by $19.1 million in
1999 due to a combination of maturities, calls and sales within the portfolio.
The 1999 net growth in earning assets in 1999 was funded by expansion in
customer deposit balances augmented by Federal Home Loan Bank and other
wholesale borrowings. Similarly, 1998 earnings improved because of strong growth
in the loan portfolio funded by a solid increase in deposit balances.

         Trends in non-interest income and expense continue to be affected by
rapid growth in customers and higher account transaction volumes, as well as
costs incurred in new business locations. In 1999, however, total non-interest
income declined by 5.3% or $305,000 due to reduced revenue in residential
mortgage banking activities owing to the higher interest rate environment. In
contrast, during the lower interest rate climate in 1998, mortgage origination
and sale activity had contributed to a 29% increase in non-interest income
compared to 1997. The rate of growth in non-interest expenses moderated to 19.8%
in 1999 from a 32.2% increase in 1998. This moderation occurred despite the
Company incurring start up costs for two new branch locations and upgrading of
computer and online banking capacity during the year.

         The Company opened two new branch banking offices in the first quarter
of 1999, bringing total branch locations to ten. The Bank entered the Salem,
Oregon market with a full service branch office and opened a second branch in
Redmond, Oregon. The Redmond office reached breakeven financial performance late
in 1999, and the Salem office is meeting internal projections as to financial
performance. Management generally targets new branches to achieve profitability
within two to three years, however there can be no assurance that future
profitability will be achieved.

         Other highlights include the opening of a Bank Trust Department in July
1999. Trust services will focus on the personal trust needs of existing and
prospective clients by providing living and testamentary trust, asset and
financial management, and fiduciary services. At the same time an on-site office
of Raymond James Financial Services opened to provide convenient stock brokerage
and investment services to Bank customers.

                                       21

<PAGE>


         The Company anticipates opening a new branch banking office in Keizer,
Oregon in mid-2000, bringing total branch locations to eleven. The opening of
this branch is not expected to be material to the financial results of the
Company in 2000.

RESULTS OF OPERATIONS - YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997

NET INTEREST INCOME

         In 1999, net interest income increased 25.9% to $21.7 million compared
to 1998, as growth in loan volumes generated higher interest income. Similarly,
strong loan growth in 1998 drove an increase in net interest income of 22.9% to
$17.3 million compared to 1997. In 1999 Interest from loans and investment
activities increased $5.6 million compared to the year earlier. This followed a
1998 increase in interest income of $3.6 million compared to 1997. Increased
earning assets at year-end 1999 were funded by a year over year growth in
deposits of $14.5 million and borrowings of $30.1 million. Although the Bank's
loan growth in 1999 was partially funded by the use of higher cost borrowed
funds, the increase in interest income related to higher loan volumes exceeded
the higher cost of such borrowing. In 1998, year-end customer deposits grew
$59.5 million, approximately the same dollar growth as was experienced by the
loan portfolio that year.

         The Company's net interest margin expanded from 7.17% in 1997, to 7.40%
in 1998 and 7.46% in 1999. Yields on earning assets in 1997, 1998 and 1999 were
9.61%, 9.62% and 9.64%, respectively. Average rates paid on deposits and
borrowings increased from 3.22% in 1998 to 3.43% in 1999. In mid-1999 the
Federal Reserve embarked on a process of engineering higher market interest
rates. It is anticipated that this will have the effect of increasing the
Company's cost of funds into 2000. While the Bank has historically maintained a
net interest margin well above peer banks and anticipates this to continue, the
Company's future net interest margin is likely to be lower from the peak margins
experienced during the past two years.

LOAN LOSS PROVISION

         The loan loss provision increased during the periods presented to keep
pace with loan growth. Loan loss provision for 1999 was $2.1 compared to $1.2
million in 1998 and $1.1 million in 1997. The Bank's ratio of reserve for loan
losses to total loans was 1.26% at December 31, 1999 as compared to 1.28% at
December 31, 1998. Management believes the reserve for loan losses is adequate
to absorb potential losses on identified nonperforming assets as well as general
losses at historical and expected levels.

NONINTEREST INCOME

         During the periods reported, the Company has experienced steady
increases in service fee income as it has increased its market share of business
and consumer accounts. However, overall noninterest income in 1999 was down
slightly from 1998 due to volatility in mortgage banking revenues resulting from
the increasing interest rate environment that developed during 1999. Total
noninterest income decreased 5.3% to $5.4 million in 1999 compared to $5.7
million in the prior year. In contrast, 1998 noninterest income was up 29.3%
compared to 1997.

         Specifically, 1999 mortgage loan origination and processing fees
decreased to $1.3 million in 1999 from $1.8 million the prior year. In the lower
interest rate climate of 1998, residential mortgage loan origination and
processing fees were $1.8 million, up from $1.1 million in 1997. Residential
mortgage origination volumes totaled $98 million in 1999, $147 million in 1998
and $84 million in 1997. The general level and direction of interest rates
directly influence the volume and profitability of mortgage banking. Therefore
there can be no assurance as to the amount of origination fees and gains on
sales of residential mortgage loans in the future. The Bank commenced in-house
servicing of residential mortgage loans in March 1998. Serviced loans are bank
originated residential mortgages that have been sold to FNMA. The mortgages were
previously sub-serviced by another financial institution. Primarily due to
building volumes of serviced loans, 1999 mortgage servicing fees increased to
$640,000 compared to $492,000 in 1998 and $223,000 in 1997. Related mortgage
servicing rights are amortized in proportion to estimated net servicing income.
In the event of rapid customer

                                       22

<PAGE>


refinancing or prepayment activity, market valuation of capitalized mortgage
servicing rights could be impaired. Capitalized mortgage servicing rights
totaled approximately $2.8 million at year-end 1999 compared to $2.3 million at
year end 1998 and $1.3 million at year end 1997.

NONINTEREST EXPENSE

         Total 1999 noninterest expense was $15.0 million, an increase of $2.5
million or 19.8% from 1998. This was compared to an increase of 32.2% in 1998
over 1997. Salaries and benefits increased $1.5 million in 1999. Approximately
half of this increase resulted from additional staffing for new endeavors
including the start-up of two new branch locations and a Trust Department. In
addition, volume related additions to staff occurred in operations,
administration and data processing activities. The general level of compensation
increased along with higher costs for benefits including healthcare and payroll
taxes. Similarly, rapid growth in business volumes was the primary factor in the
1998 increase in salary and benefits of $1.9 million from 1997 levels. It is
anticipated that human resources will increase in 2000 primarily due to staff
additions for the expected new branch office in Keizer, Oregon. Other categories
of expenses grew in both 1999 and 1998 in tandem with business expansion,
including occupancy, equipment, supplies and communications costs. INCOME TAXES

         The provision for income taxes increased between the periods presented
primarily as a result of higher pre-tax income. The effective tax rate in 1997
was lower than other years due to a state income tax rebate.

FINANCIAL CONDITION

         The Company continued to experience strong growth in 1999 in
conjunction with the economic performance of the communities it serves. Total
assets increased 15.7% to $347.9 million at December 31, 1999 compared to $300.8
million at December 31, 1998. Growth in total assets was funded by a $14.4
million increase in deposits and a $30.1 increase in borrowings at period end.
Higher borrowings were a consequence of loan growth exceeding the increase in
total deposits during the year. In the continuing strong economic environment in
the markets served by the Company, the loan portfolio was up 35.7% to $280.0
million at year-end 1999, $73.6 million higher than a year earlier. Loan growth
was concentrated in the commercial real estate portfolio up $41.1 million or
58.2%. This increase in part resulted from the Bank's tailored lending programs
for owner occupied business ventures, whereby the Bank primarily relies on cash
flow from the business for loan repayment, but takes commercial real estate
properties as an additional level of security.

         The investment portfolio declined to $31.8 million at year-end 1999
compared to $51.0 million at year-end 1998. This reduction of investment
securities resulted from a combination of maturities, calls, and sales within
the portfolio. The cash proceeds from the declining investment portfolio were
re-deployed to support the funding of increased loan volumes.

         Total deposits at year end 1999 were $285.3 million, an increase of
$14.5 million or 5.3% compared to year-end 1998. Deposits averaged $286.6
million for the full year 1999, up 21.6% or $50.9 million from the prior year
average. Comparative year-end changes in deposit composition include interest
bearing demand up $13.9 million or 12.7%, time deposits up $8.2 million or
26.5%, and non-interest bearing demand down $8.3 million or 7.2%.

         The Company had no off balance sheet derivative financial instruments
as of December 31, 1999 and 1998.

                                       23

<PAGE>


INFLATION

         The general rate of inflation over the past two years, as measured by
the Consumer Price Index, has not changed significantly, and management does not
consider the effects of inflation on the Company's financial position and
earnings to be material.

LIQUIDITY

         The Company analyzes and manages its liquidity to ensure the
availability of sufficient funds to meet depositor withdrawals as well as to
fund borrowing needs of its loan customers. The Bank's stable deposit base is
the foundation of its long-term liquidity since these funds are not subject to
significant volatility as a result of changing interest rates and other economic
factors. A further source of liquidity is the Bank's ability to borrow funds
from a variety of reliable sources.

         At December 31, 1999 the Bank maintained five unsecured lines of credit
totaling $18.0 million for the purchase of funds on a short-term basis. The Bank
is also a member of the Federal Home Loan Bank (FHLB) which provides a secured
line of credit of $34.5 million that may be accessed for short or long-term
borrowings. The Bank also had $23.7 million short term borrowing availability
from the Federal Reserve System that requires specific qualifying collateral. At
December 31, 1999 the Bank had outstanding short-term borrowings totaling $30.1
million, with aggregate remaining available borrowings of $46.1 million.

         At December 31, 1999 the Bank had approximately $114 million in
outstanding commitments to extend credit. Historically a significant portion of
the commitments will expire or terminate without funding. In addition,
approximately 26% of total commitments pertain to various construction projects.
Under the terms of such construction commitments, completion of specified
project benchmarks must be certified before funds may be drawn. Management
believes that the Bank's available resources will be sufficient to fund its
commitments in the normal course of business.

CAPITAL RESOURCES

         The Company's total stockholders' equity at December 31, 1999 was $29.6
million, an increase of $2.6 million from December 31, 1998. 1999 equity was
increased by earnings of $6.2 million for the year less cash dividends paid to
shareholders of $2.2 million. In addition, during 1999, the Company repurchased
61,990 shares of its common stock outstanding pursuant to a Board of Directors
authorized program. This had the effect of reducing equity by $.9 million during
the year. At year end 1999, net unrealized gains (losses) on investment
securities available-for-sale decreased to ($.6) million from $.2 million a year
earlier.

                                       24

<PAGE>

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

INTEREST RATE RISK AND ASSET AND LIABILITY MANAGEMENT

         It is the Company's Asset and Liability management policy to manage
interest rate risk to maximize long term profitability under the range of likely
interest rate scenarios. The Board of Directors oversees implementation of
strategies to control interest rate risk. The Company may take steps to alter
its net sensitivity position by offering deposit and/or loan structures that
tend to mitigate its risk profile. In addition, the Company may acquire
investment securities, interest rate swaps or other hedging instruments with
repricing characteristics that tend to moderate interest rate risk. Because of
the volatility of market rates and uncertainties described above there can be no
assurance of the effectiveness of management programs to achieve its risk
management objectives.

         The Company's profitability, like most financial institutions, depends
to a large extent upon its net interest income, which is the difference between
the interest earned on assets (loans and investments), versus the interest
expense paid on its liabilities (deposits and borrowings). The Company's
historical business activity had tended to originate loans with maturities and
repricing terms which are shorter than those of deposit relationships. These
maturity and repricing differences had tended to create an interest rate risk
profile whereby the Company would tend to generate higher earnings should market
interest rates rise and lower earnings should interest rates fall. However, the
past years' strong loan growth coupled with increased short-term borrowings has
moderated the Company's historic interest rate risk profile. At year-end 1999
the Company's future net interest income was proportionately less adversely
impacted by markedly lower interest rates than a year ago, but is not favorably
affected by markedly higher rates, as was the case in the past.

         The Company analyzes interest rate risk by simulation modeling and by
traditional interest rate gap analysis. While both methods provide an indication
of risk for a given change in interest rates, it is management's opinion that
simulation is the more effective tool for asset and liability management. The
Bank's simulation analysis forecasts net interest income and earnings given an
unchanged interest rate scenario. The model then estimates a percentage change
in earnings from the unchanged rate scenario under various circumstances of
gradually rising and declining market interest rates over one and two year time
horizons. The following table defines extremes in market interest rates used in
the model for rapidly rising and rapidly declining interest rate scenarios.
These market rate extremes are reached gradually over the 2-year simulation
horizon.

<TABLE>
<CAPTION>
                            ----------------------------------------------------------------------------
                               Unchanged Rates                Rising Rates               Declining Rates
--------------------------------------------------------------------------------------------------------
<S>                               <C>                          <C>                          <C>
Federal Funds Rate                5.75%                        11.00%                       2.00%
--------------------------------------------------------------------------------------------------------
   Prime Rate                     8.75%                        14.00%                       5.00%
--------------------------------------------------------------------------------------------------------
</TABLE>

         The following table presents percentage change in earnings per the
simulation model under the above-described scenarios of gradually rising and
gradually declining interest rates as of year-end 1999.

         Estimated percentage increase/(decrease) in earnings compared to
"unchanged" rate scenario:

<TABLE>
<CAPTION>
                                   -----------------------------------------------------------------
                                          First twelve Months                   Second twelve Months
----------------------------------------------------------------------------------------------------
<S>                                           <C>                                   <C>
 Rising Rate Scenario                         (8.30%)                               (12.90%)
----------------------------------------------------------------------------------------------------
Declining Rate Scenario                       (4.40%)                               (17.60%)
----------------------------------------------------------------------------------------------------
</TABLE>

         The above results are only indicative of the Company's possible range
of interest rate risk exposure under various scenarios. The results do not
encompass all possible changes in market rates, nor do the results include
possible changes in volumes, pricing or portfolio management tactics which may
enable management to moderate the effect of such interest rate changes.

                                       25

<PAGE>


         Simulations are dependent on assumptions and estimations that
management believes are reasonable, although the actual results may vary
substantially, and there can be no assurance that simulation results are
reliable indicators of future earnings under such conditions. This is, in part,
because of the nature and uncertainties inherent in simulating future events
including: 1) no presumption of changes in asset and liability strategies in
response to changing circumstances; 2) errors in assumptions within the model;
3) uncertainties as to customer behavior in response to changing circumstance;
4) unexpected absolute and relative loan and deposit volume changes; 5)
unexpected absolute and relative loan and deposit pricing levels; 6) unexpected
behavior by competitors; 7) other unanticipated events impacting volatility in
market conditions and interest rates.

         At year-end 1999, the Company's one-year cumulative interest rate gap
analysis indicates that rate sensitive liabilities maturing or available for
repricing within one-year exceeded rate sensitive assets by approximately $62.8
million. A year earlier, rate sensitive assets exceeded maturing or available
for repricing rate sensitive liabilities by $13.9 million.

INTEREST RATE GAP TABLE

         Set forth below is a table showing the interest rate sensitivity Gap of
the Company's assets and liabilities over various repricing periods and
maturities, as of December 31, 1999. Maturities are based on contractual terms
and repricing amounts are based on actual historical experiences (dollars in
thousands):

<TABLE>
<CAPTION>
                                                             AFTER 90         AFTER
                                                  WITHIN     DAYS            ONE YEAR      AFTER
                                                  90         WITHIN         WITHIN         FIVE
                                                  DAYS       ONE YEAR      FIVE YEARS     YEARS         TOTAL
                                                 -------     --------      ----------     -------      --------
<S>                                            <C>           <C>           <C>          <C>          <C>
INTEREST EARNING ASSETS:

      Investments & fed funds sold .........   $    --       $   3,560     $  28,252    $   --       $  31,812
      Loans ................................      65,269        50,818       134,925       28,668      279,680
                                               ---------     ---------     ---------    ---------    ---------
          Total interest earning assets ....   $  65,269     $  54,378     $ 163,177    $  28,668    $ 311,492
                                               =========     =========     =========    =========    =========

INTEREST BEARING LIABILITIES:

      Interest-bearing demand deposits .....   $  66,469     $  50,326     $   6,654    $    --      $ 123,449
      Savings deposits .....................        --            --           6,634        9,054       15,688
      Time deposits ........................      18,101        17,460         3,426         --         38,987
                                               ---------     ---------     ---------    ---------    ---------
          Total interest bearing deposits ..      84,570        67,786        16,714        9,054      178,124

      Other borrowings .....................      30,100          --            --           --         30,100
                                               ---------     ---------     ---------    ---------    ---------
          Total interest bearing liabilities   $ 114,670     $  67,786     $  16,714    $   9,054    $ 208,224
                                               =========     =========     =========    =========    =========

Interest rate sensitivity gap ..............   $ (49,401)    $ (13,408)    $ 146,463    $  19,614    $ 103,268
Interest rate gap as a percentage
      Of total interest earning assets .....     (15.86%)        (4.30%)       47.02%        6.29%       33.15%
                                               =========     =========     =========    =========    =========
Cumulative interest rate sensitivity gap ...   $ (49,401)    $ (62,809)    $  83,654    $ 103,268    $ 103,268
Cumulative interest rate gap as a
      Percentage of total earning assets ...     (15.86%)       (20.16%)       26.86%       33.15%         N/A
                                               =========     =========     =========    =========    =========
</TABLE>

                                       26

<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         For financial statements, see Index to Consolidated Financial
Statements on page 27.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         None

                                    PART III

         Part III is incorporated by reference from the Company's definitive
proxy statement issued in conjunction with the Company's Annual Meeting of
Shareholders to be held April 24, 2000.

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

      (a)   (1)   The financial  statements  required in this Annual  Report are
                  listed in the  accompanying  Index to  Consolidated Financial
                  Statements on page 29.

             (2)  Financial Statement Schedules.

                  All financial statement schedules are omitted because they are
                  not applicable or not required, or because the required
                  information is included in the consolidated financial
                  statements or the notes thereto.

      (b)         Reports on Form 8-K.

                  The Company did not file any reports on Form 8-K during the
                  last quarter of the fiscal year ended December 31, 1999.

      (c)         Exhibits.

                  The list of exhibits has been intentionally omitted. Upon
                  written request, we will provide to you, without charge, a
                  copy of the list of exhibits as filed with the Securities and
                  Exchange Commission. Additionally, we will furnish you with a
                  copy of any exhibit upon written request. Written requests to
                  obtain a list of exhibits or any exhibit should be sent to
                  Bank of the Cascades, 1100 NW Wall Street, Bend, Oregon 97701,
                  Attention: Investor Relations.

                                       27

<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) 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                             CASCADE BANCORP

/s/ PATRICIA L. MOSS                        /s/ GREGORY D. NEWTON
-------------------------------------       ------------------------------------
Patricia L. Moss                            Gregory D. Newton
President/Chief Executive Officer           Senior Vice President/
                                              Chief Financial Officer
Date: February 21, 2000                     Date: February 21, 2000

         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

/s/ JERRY E. ANDRES                         FEBRUARY 21, 2000
-------------------------------------       ------------------------------------
Jerry E. Andres, Director                   Date

/s/ GARY L. CAPPS                           FEBRUARY 21, 2000
-------------------------------------       ------------------------------------
Gary L. Capps, Director/Chairman            Date

/s/ GARY L. HOFFMAN                         FEBRUARY 21, 2000
-------------------------------------       ------------------------------------
Gary L. Hoffman, Director/Vice Chairman     Date

/s/ PATRICIA L. MOSS                        FEBRUARY 21, 2000
-------------------------------------       ------------------------------------
Patricia L. Moss, Director/President/CEO    Date

/s/ RYAN R. PATRICK                         FEBRUARY 21, 2000
-------------------------------------       ------------------------------------
Ryan R. Patrick, Director                   Date

/s/ JAMES E. PETERSEN                       FEBRUARY 21, 2000
-------------------------------------       ------------------------------------
James E. Petersen, Director/                Date
 Assistant Secretary

/s/ ROGER J. SHIELDS                        FEBRUARY 21, 2000
-------------------------------------       ------------------------------------
Roger J. Shields, Director                  Date

                                       28

<PAGE>

                                 CASCADE BANCORP

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                  (ITEM 14(A))

<TABLE>
<CAPTION>
                                                                                                                      PAGE
                                                                                                                      ----
<S>                                                                                                                    <C>
Report of Independent Auditors..........................................................................................30

Consolidated Balance Sheets at

      December 31, 1999 and 1998........................................................................................31

For the Years Ended December 31, 1999, 1998 and 1997:

      Consolidated Statements of Income.................................................................................32
      Consolidated Statements of Changes in Stockholders' Equity........................................................33
      Consolidated Statements of Cash Flows.............................................................................34

Notes to Consolidated Financial Statements..............................................................................35
</TABLE>

<PAGE>


                    REPORT OF SYMONDS, EVANS & LARSON, P.C.,
                              INDEPENDENT AUDITORS

To the Board of Directors and
Stockholders of Cascade Bancorp

We have audited the accompanying consolidated balance sheets of Cascade Bancorp
and subsidiaries as of December 31, 1999 and 1998, and the related consolidated
statements of income, changes in stockholders' equity, and cash flows for each
of the three years in the period ended December 31, 1999. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Cascade Bancorp and
subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with generally accepted accounting principles.


/s/ SYMONDS, EVANS & LARSON, P.C.
---------------------------------


Portland, Oregon
January 14, 2000

                                       30

<PAGE>





                                CASCADE BANCORP AND SUBSIDIARIES

                                   CONSOLIDATED BALANCE SHEETS

                                   DECEMBER 31, 1999 AND 1998

<TABLE>
<CAPTION>
                                                               1999              1998
                                                            ----------        ----------
<S>                                                        <C>              <C>
ASSETS

Cash and cash equivalents:
   Cash and due from banks .............................   $  19,420,537    $  18,696,221
   Federal funds sold ..................................            --          8,450,000
                                                           -------------    -------------
       Total cash and cash equivalents .................      19,420,537       27,146,221

Investment securities available-for-sale ...............      29,069,224       48,012,491
Investment securities held-to-maturity, estimated fair
   value of $2,740,062 ($2,952,327 in 1998) ............       2,742,794        2,938,489
Loans, net .............................................     274,902,232      202,543,262
Mortgage loans held for sale ...........................         422,999        2,119,642
Premises and equipment, net ............................       7,958,439        5,984,501
Accrued interest and other assets ......................      13,387,798       12,029,810
                                                           -------------    -------------

       Total assets ....................................   $ 347,904,023    $ 300,774,416
                                                           =============    =============

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:
   Deposits:

     Demand ............................................   $ 107,188,433    $ 115,532,163
     Interest bearing demand ...........................     123,448,962      109,580,561
     Savings ...........................................      15,688,114       14,940,897
     Time ..............................................      38,987,032       30,809,110
                                                           -------------    -------------

       Total deposits ..................................     285,312,541      270,862,731

   Federal Home Loan Bank borrowings ...................      13,000,000             --
   Federal funds purchased .............................      17,100,000             --
   Accrued interest and other liabilities ..............       2,919,984        2,990,003
                                                           -------------    -------------

       Total liabilities ...............................     318,332,525      273,852,734

Commitments and contingencies (Notes 1, 4, 9, 15 and 16)

Stockholders' equity:

   Common stock, no par value; 10,000,000 shares
     authorized; 6,862,234 shares issued and outstanding
     (6,226,082 in 1998) ...............................      17,728,564        9,545,545
   Retained earnings ...................................      12,465,355       17,218,415
   Accumulated other comprehensive income (loss) .......        (622,421)         157,722
                                                           -------------    -------------
       Total stockholders' equity ......................      29,571,498       26,921,682
                                                           -------------    -------------
       Total liabilities and stockholders' equity ......   $ 347,904,023    $ 300,774,416
                                                           =============    =============
</TABLE>

                             See accompanying notes.

                                       31


<PAGE>


                                CASCADE BANCORP AND SUBSIDIARIES

                                CONSOLIDATED STATEMENTS OF INCOME

                          YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                             1999            1998           1997
                                                         -----------     ------------   ------------
<S>                                                      <C>             <C>            <C>
Interest and dividend income:
   Interest and fees on loans ........................   $ 25,540,073    $ 19,256,895   $ 15,788,357

   Taxable interest on investment securities .........      2,246,594       2,504,127      2,402,987
   Nontaxable interest on investment securities ......         47,718          41,518         73,646
   Interest on federal funds sold ....................         94,577         537,271        467,300
   Dividends on Federal Home Loan Bank stock .........        147,200         112,800        103,300
                                                         ------------    ------------   ------------
                  Total interest and dividend income .     28,076,162      22,452,611     18,835,590
Interest expense:
   Deposits:

     Interest bearing demand .........................      3,742,079       3,518,361      3,082,614
     Savings .........................................        315,848         303,702        284,093
     Time ............................................      1,579,061       1,293,588        998,334
   Federal Home Loan Bank borrowings .................        603,529          47,757        398,367
   Federal funds purchased ...........................         96,432          17,449         23,105
                                                         ------------    ------------   ------------
                  Total interest expense .............      6,336,949       5,180,857      4,786,513
                                                         ------------    ------------   ------------
Net interest income ..................................     21,739,213      17,271,754     14,049,077
Loan loss provision ..................................      2,110,138       1,179,399      1,075,109
                                                         ------------    ------------   ------------
Net interest income after loan loss provision ........     19,629,075      16,092,355     12,973,968
Noninterest income:

   Service charges on deposit accounts ...............      2,354,816       1,947,138      1,810,072
   Mortgage loan origination and processing fees .....      1,269,191       1,788,001      1,092,786
   Gains (losses) on sales of mortgage loans, net ....       (334,070)        198,129        399,947
   Losses on sales of investment securities available-
     for-sale ........................................        (10,619)           --             --
   Mortgage loan servicing fees, net .................        639,998         492,402        223,086
   Merchant bankcard fees, net .......................        300,502         300,348        324,625
   Other .............................................      1,188,713         987,202        568,787
                                                         ------------    ------------   ------------
                  Total noninterest income ...........      5,408,531       5,713,220      4,419,303
Noninterest expenses:
   Salaries and employee benefits ....................      8,560,000       7,045,542      5,175,149
   Equipment .........................................      1,271,237       1,092,319        898,156
   Occupancy .........................................      1,000,747         793,219        668,023
   Supplies ..........................................        527,004         393,344        284,756
   Third-party account services ......................        488,281         409,217        293,071
   Communications ....................................        438,371         382,498        305,428
   Advertising .......................................        212,225         352,955        269,236
   Other .............................................      2,528,780       2,079,041      1,594,611
                                                         ------------    ------------   ------------
                  Total noninterest expenses .........     15,026,645      12,548,135      9,488,430
                                                         ------------    ------------   ------------
Income before income taxes ...........................     10,010,961       9,257,440      7,904,841
Provision for income taxes ...........................      3,772,500       3,491,400      2,863,700
                                                         ------------    ------------   ------------
Net income ...........................................   $  6,238,461    $  5,766,040   $  5,041,141
                                                         ============    ============   ============
Basic earnings per common share                          $        .91    $        .84   $        .72
                                                         ============    ============   ============
Diluted earnings per common share                        $        .89    $        .82   $        .70
                                                         ============    ============   ============
</TABLE>

                             See accompanying notes.

                                       32

<PAGE>


                        CASCADE BANCORP AND SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                                                                                        ACCUMULATED
                                             NUMBER                                                       OTHER          TOTAL
                                               OF        COMPREHENSIVE      COMMON       RETAINED      COMPREHENSIVE   STOCKHOLDERS'
                                             SHARES      INCOME (LOSS)      STOCK        EARNINGS      INCOME (LOSS)     EQUITY
                                             ---------   ------------    ------------   ------------   -------------   ------------
<S>                                           <C>         <C>             <C>            <C>            <C>            <C>
Balance at December 31, 1996 ............     2,132,967                   $ 13,058,417   $ 10,442,535   $     71,097   $ 23,572,049

Comprehensive income:
   Net income ...........................          --     $  5,041,141           --        5,041,141           --        5,041,141
   Other comprehensive income -
     unrealized gains on securities
     available-for-sale (net of income
     taxes of approximately $143,000) ...          --          231,668           --             --          231,668        231,668
                                                          ------------
Comprehensive income ....................          --     $  5,272,809           --             --             --             --
                                                          ============
Cash dividends paid (aggregating
   $.27 per share) ......................          --                            --       (1,915,032)          --       (1,915,032)
Two-for-one stock split .................     2,132,967                          --             --             --             --
Stock options exercised .................        24,936                        100,000           --             --          100,000
Repurchases of common stock .............      (118,632)                    (2,793,402)          --             --       (2,793,402)
                                             ----------                     ----------     ----------     ----------     ----------
Balance at December 31, 1997 ............     4,172,238                     10,365,015     13,568,644        302,765     24,236,424
Comprehensive income:

   Net income ...........................          --     $  5,766,040           --        5,766,040           --        5,766,040
   Other comprehensive loss -
     unrealized losses on securities
     available-for-sale (net of income
     taxes of approximately $91,000) ....          --         (145,043)          --             --         (145,043)      (145,043)
                                                          ------------
Comprehensive income ....................          --     $  5,620,997           --             --             --             --
                                                          ============
Cash dividends paid (aggregating
   $.31 per share) ......................          --                            --       (2,116,269)          --       (2,116,269)
Three-for-two stock split ...............     2,086,119                          --             --             --             --
Stock options exercised .................        14,669                        42,473           --             --           42,473
Repurchases of common stock .............       (46,944)                     (861,943)          --             --         (861,943)
                                             ----------                     ----------     ----------     ----------     ----------
Balance at December 31, 1998 ............     6,226,082                     9,545,545     17,218,415        157,722     26,921,682
Comprehensive income:

   Net income ...........................          --     $  6,238,461           --        6,238,461           --        6,238,461
   Other comprehensive loss -
    unrealized losses on securities
    available-for-sale (net of income
    taxes of approximately $476,000) net
    of reclassification adjustment for
    net losses on sales of investment
    securities available-for-sale
    included in net income (net of
    income taxes of approximately $4,000)          --         (780,143)          --             --         (780,143)      (780,143)
                                                          ------------
Comprehensive income ....................          --     $  5,458,318           --             --             --
                                                          ============
Cash dividends paid (aggregating
   $.32 per share) ......................          --                            --       (2,220,508)          --       (2,220,508)
M10%  stock dividend ....................       622,608                     8,771,013     (8,771,013)          --             --
Stock options exercised .................        75,534                       317,738           --             --          317,738
Repurchases of common stock .............       (61,990)                     (905,732)          --             --         (905,732)
                                             ----------                     ----------     ----------     ----------     ----------
Balance at December 31, 1999 ............     6,862,234                  $ 17,728,564   $ 12,465,355   $   (622,421)  $ 29,571,498
                                              =========                  ============   ============   ============   ============
</TABLE>

                             See accompanying notes.

                                       33

<PAGE>


                        CASCADE BANCORP AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                  YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997

<TABLE>
<CAPTION>
                                                                 1999                1998                1997
                                                            ---------------     ---------------    ----------------
<S>                                                           <C>              <C>              <C>
Cash flows from operating activities:
   Net income .............................................   $   6,238,461    $   5,766,040    $   5,041,141

   Adjustments to reconcile net income to net cash
    provided by operating activities:
       Depreciation and amortization ......................       1,672,716        1,478,815          715,253
       Loan loss provision ................................       2,110,138        1,179,399        1,075,109
       Provision (credit) for deferred income taxes .......         (57,000)          27,000          279,000
       Discounts on sales of mortgage loans, net ..........         881,988          822,870          295,053
       Losses on sales of investment
        securities available-for-sale .....................          10,619             --               --
       Dividends on Federal Home Loan Bank stock ..........        (147,200)        (112,800)        (103,300)
       Deferred benefit plan expenses .....................         399,000          396,000          270,000
       Increase in accrued interest and other assets ......      (1,591,469)      (3,192,241)        (775,802)
       Increase (decrease) in accrued
        interest and other liabilities(355,019) ...........         563,719          137,854
       Originations of mortgage loans .....................     (97,715,204)    (146,507,292)     (84,860,279)
       Proceeds from sales of mortgage loans ..............      94,927,939      145,440,966       83,299,690
                                                              -------------    -------------    -------------

                  Net cash provided by operating activities       6,374,969        5,862,476        5,373,719

Cash flows from investing activities:
   Purchases of investment securities available-for-sale ..      (2,079,833)     (21,957,636)     (41,026,887)
   Purchases of investment securities held-to-maturity ....            --           (563,903)          (5,400)
   Proceeds from maturities and calls of investment
     securities available-for-sale ........................      15,131,540       15,663,174       23,923,471
   Proceeds from sales of investment securities
     available-for-sale ...................................       4,624,315             --               --
   Proceeds from maturities and calls of investment
     securities held-to-maturity ..........................         342,895          184,171          982,950
   Other loan originations, net ...........................     (70,867,188)     (50,697,735)     (22,473,293)
   Purchases of premises and equipment, net ...............      (2,961,632)      (1,782,254)      (1,491,887)
   Purchases of life insurance contracts ..................        (103,000)      (1,423,900)        (130,000)
   Surrender of life insurance contracts ..................          70,942           49,066          111,457
                                                              -------------    -------------    -------------
                  Net cash used in investing activities ...     (55,841,961)     (60,529,017)     (40,109,589)

Cash flows from financing activities:

   Net increase in deposits ...............................      14,449,810       59,517,958       40,262,679
   Net increase in federal funds purchased ................      17,100,000             --               --
   Net increase in Federal Home Loan Bank borrowings ......      13,000,000             --               --
   Stock options exercised ................................         317,738           42,473          100,000
   Repurchases of common stock ............................        (905,732)        (861,943)      (2,793,402)
   Cash dividends paid ....................................      (2,220,508)      (2,116,269)      (1,915,032)
   Repayment of long-term debt ............................            --         (5,000,000)            --
                                                              -------------    -------------    -------------

                  Net cash provided by financing activities      41,741,308       51,582,219       35,654,245
                                                              -------------    -------------    -------------

Net increase (decrease) in cash and cash equivalents ......      (7,725,684)      (3,084,322)         918,375

Cash and cash equivalents at beginning of the year ........      27,146,221       30,230,543       29,312,168
                                                              -------------    -------------    -------------
Cash and cash equivalents at end of the year ..............   $  19,420,537    $  27,146,221    $  30,230,543
                                                              =============    =============    =============

</TABLE>


                             See accompanying notes.

                                       34

<PAGE>


                        CASCADE BANCORP AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                DECEMBER 31, 1999


1.     DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

       PRINCIPLES OF CONSOLIDATION

       The accompanying 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
       Bancorp Financial Services, Inc. (formerly Cascade Finance)
       (collectively, "the Company"). Cascade Bancorp Financial Services, Inc.
       was incorporated in 1999 to manage the existing consumer installment
       loans which were present in Cascade Finance. Subsequent to the
       incorporation of Cascade Bancorp Financial Services, Inc., the ongoing
       consumer finance operations of Cascade Finance became a division of the
       Bank. All significant intercompany accounts and transactions have been
       eliminated in consolidation.

       DESCRIPTION OF BUSINESS

       The Bank conducts a general banking business and primarily operates in
       one business segment. Its activities include the usual lending and
       deposit functions of a commercial bank: commercial, real estate,
       installment, credit card and mortgage loans; checking, money market, time
       deposit and savings accounts; internet banking and bill payment;
       automated teller machines (ATMs) and safe deposit facilities. The Bank
       also originates and sells mortgage loans into the secondary market.

       The Bank, doing business as Cascade Finance, purchases used automobile
       installment contracts from local dealerships in addition to direct
       consumer finance loans.

       METHOD OF ACCOUNTING

       The Company prepares its consolidated financial statements in conformity
       with generally accepted accounting principles and prevailing practices
       within the banking industry. The Company utilizes the accrual method of
       accounting which recognizes income when earned and expenses when
       incurred. The preparation of consolidated financial statements in
       conformity with generally accepted accounting principles requires
       management to make estimates and assumptions that affect the reported
       amounts of assets and liabilities, the disclosure of contingent assets
       and liabilities at the date of the consolidated financial statements, and
       the reported amounts of income and expenses during the reporting periods.
       Actual results could differ from those estimates.

       CASH AND CASH EQUIVALENTS

       For purposes of reporting cash flows, cash and cash equivalents include
       cash on hand, amounts due from banks and federal funds sold. Generally,
       federal funds are sold for one-day periods.

       The Bank maintains balances in correspondent bank accounts which, at
       times, may exceed federally insured limits. Management believes that its
       risk of loss associated with such balances is minimal due to the
       financial strength of the correspondent banks. The Bank has not
       experienced any losses in such accounts.

                                       35

<PAGE>


1.     DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
       (CONTINUED)

       SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION

       During 1999, 1998 and 1997, noncash transactions resulted from unrealized
       gains (losses) on investment securities available-for-sale, net of income
       taxes, as disclosed in the accompanying consolidated statements of
       changes in stockholders' equity. In addition, during 1999, 1998 and 1997,
       noncash investing activities resulted from the net capitalization of
       approximately $547,000, $1,021,000 and $695,000, respectively, in
       originated mortgage servicing rights.

       During 1999, 1998 and 1997, the Bank paid approximately $6,302,000,
       $5,138,000 and $4,747,000, respectively, in interest expense.

       INVESTMENT SECURITIES

       Investment securities that management has the positive intent and ability
       to hold to maturity are classified as held-to-maturity securities and
       reported at cost, adjusted for premiums and discounts that are recognized
       in interest income using the interest method over the period to maturity.

       Investment securities that are purchased and held principally for the
       purpose of selling them in the near term are classified as trading
       securities and are reported at fair value, with unrealized gains and
       losses included in noninterest income. The Company had no trading
       securities as of December 31, 1999 or 1998.

       Investment securities that are not classified as either held-to-maturity
       securities or trading securities are classified as available-for-sale
       securities and are reported at fair value, with unrealized gains and
       losses excluded from earnings and reported as other comprehensive income
       or loss, net of income taxes.

       Gains or losses on the sale of available-for-sale securities are
       determined using the specific-identification method. Gross losses on
       sales of investment securities available-for-sale during 1999 were
       $10,619. The income tax benefit applicable to these losses was
       approximately $4,000. Premiums and discounts on available-for-sale
       securities are recognized in interest income using the interest method
       over the period to maturity.

       Declines in the fair value of individual held-to-maturity and
       available-for-sale securities below their cost that are other than
       temporary would result in write-downs of the individual securities to
       their fair value. The related write-downs would be included in earnings
       as realized losses. Management believes that all unrealized losses on
       investment securities as of December 31, 1999 and 1998 are temporary.

       FEDERAL HOME LOAN BANK STOCK

       The Bank invests in Federal Home Loan Bank (FHLB) stock which is carried
       at par value, which approximates fair value. As a member of the FHLB
       system, the Bank is required to maintain a minimum level of investment in
       FHLB stock based on specific percentages of its outstanding mortgages,
       total assets or FHLB advances. The Bank may request redemption at par
       value of any FHLB stock in excess of the minimum required investment.
       Stock redemptions are at the discretion of FHLB.

                                       36

<PAGE>


1.     DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
       (CONTINUED)

       LOANS

       Loans are stated at the amount of unpaid principal, reduced by any
       deferred loan fees and reserve for loan losses. 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; underlying collateral values; current economic conditions;
       and an overall evaluation of the quality, risk characteristics and
       concentration of loans in the portfolio. The reserve is based on
       estimates, and ultimate losses may vary from the current estimates. These
       estimates are reviewed periodically, and, as adjustments become
       necessary, they are reported in earnings in the periods in which they
       become known. The reserve is increased by provisions charged to
       operations and reduced by loans charged-off, net of recoveries.

       The Bank considers loans to be impaired when management believes that it
       is probable that all amounts due will not be collected according to the
       contractual terms. An impaired loan must be valued using the present
       value of expected future cash flows discounted at the loan's effective
       interest rate, the loan's observable market price or the fair value of
       the loan's underlying collateral. The Bank primarily measures impairment
       on all large balance nonaccrual loans (typically commercial and
       commercial real estate loans) based on the fair value of the underlying
       collateral. In certain other cases, impairment is measured based on the
       present value of expected future cash flows discounted at the loan's
       effective interest rate. Amounts deemed impaired are either specifically
       allocated for in the reserve for loan losses or reflected as a partial
       charge-off of the loan balance. Smaller balance homogeneous loans
       (typically installment loans) are collectively evaluated for impairment.
       Generally, the Bank evaluates a loan for impairment when it is placed on
       nonaccrual status. All of the Bank's impaired loans at December 31, 1999
       and 1998 were on nonaccrual status.

       The accrual of interest on impaired loans is discontinued when, in
       management's opinion, the borrower may be unable to meet payments as they
       become due. When interest accrual is discontinued, all unpaid accrued
       interest is reversed. Interest income is subsequently recognized only to
       the extent cash payments are received.

       Loan origination and commitment fees, net of certain direct loan
       origination costs, are generally recognized as an adjustment of the yield
       of the related loan.

       Interest income on all loans is accrued as earned on the simple interest
       method.

       Various regulatory agencies, as an integral part of their examination
       process, periodically review the Bank's reserve for loan losses. Such
       agencies may require the Bank to recognize additions to the reserve based
       on their judgment of the information available to them at the time of
       their examinations.

       MORTGAGE LOANS

       Mortgage loans held for sale are carried at the lower of cost or
       estimated market value. Market value is determined on an aggregate loan
       basis. At December 31, 1999 and 1998, mortgage loans held for sale were
       carried at cost, which approximated estimated market value.

                                       37

<PAGE>


1.     DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
       (CONTINUED)

       At December 31, 1999, 1998 and 1997, the Bank held servicing rights to
       approximately $268,792,000, $232,916,000 and $174,294,000, respectively,
       in mortgage loans which have been sold into the secondary market. Such
       mortgage loans are not included in the accompanying balance sheets.
       Beginning in March 1998, the Bank began in-house servicing of these
       mortgage loans. Previously, such mortgage loans were sub-serviced by
       another financial institution. The sale of these mortgage loans is
       subject to technical underwriting exceptions and related repurchase
       risks. Such risks are considered in the determination of the reserve for
       loan losses.

       During the years ended December 31, 1999, 1998 and 1997, the Bank
       capitalized approximately $1,154,000, $1,620,000 and $836,000,
       respectively, in mortgage servicing rights. The capitalized mortgage
       servicing rights are being amortized in proportion to, and over the
       period of, estimated net servicing income. During the years ended
       December 31, 1999, 1998 and 1997, the amortization of the capitalized
       mortgage servicing rights totaled approximately $607,000, $599,000 and
       $141,000, respectively. The net amount of capitalized mortgage servicing
       rights at December 31, 1999 and 1998 (approximately $2,838,000 and
       $2,291,000, respectively) is included in accrued interest and other
       assets in the accompanying consolidated balance sheets.

       The fair value (which approximates the carrying amount) of the
       capitalized mortgage servicing rights at December 31, 1999 and 1998 was
       determined by management based on comparisons to current market
       transactions involving mortgage servicing rights with similar portfolio
       characteristics and estimates of the net present value of expected future
       cash flows. The predominant risk characteristics of the underlying loans
       used to stratify the capitalized mortgage servicing rights for purposes
       of measuring impairment include, but are not limited to, interest rates,
       interest types (i.e., fixed and variable) and loan types. Each strata is
       then discounted to reflect the present value of the expected future cash
       flows utilizing current market assumptions including discount rates,
       prepayment speeds and delinquency rates.

       PREMISES AND EQUIPMENT

       Premises and equipment are stated at cost, less accumulated depreciation
       and amortization. Depreciation and amortization on premises and equipment
       is computed on straight-line and accelerated methods over the shorter of
       the estimated useful lives of the assets or terms of the leases.
       Amortization of leasehold improvements is included in depreciation and
       amortization expense in the accompanying consolidated financial
       statements.

       OTHER REAL ESTATE

       Other real estate, acquired through foreclosure or deeds in lieu of
       foreclosure, is carried at the lower of cost or estimated net realizable
       value. When the property is acquired, any excess of the loan balance over
       the estimated net realizable value is charged to the reserve for loan
       losses. Subsequent write-downs to net realizable value, if any, and any
       disposition gains or losses, are included in noninterest income and
       expenses. Other real estate at December 31, 1999 and 1998 totaled
       approximately $40,000 and $409,000, respectively.

                                       38

<PAGE>


1.     DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
       (CONTINUED)

       STOCKHOLDERS' EQUITY

       The Bank, as a state-chartered bank, is prohibited from declaring or
       paying any dividend in an amount greater than undivided profits. At
       December 31, 1999, approximately $6,825,000 was available for the payment
       of dividends to Bancorp without prior regulatory approval.

       In June 1999, the Company declared a 10% stock dividend; in June 1998,
       the Company declared a three-for-two stock split; and in June 1997, the
       Company declared a two-for-one stock split. Basic and diluted earnings
       per common share (see Note 11), cash dividends per share and the stock
       option plan information (see Note 14) have been adjusted to give
       retroactive effect to the stock dividend and stock splits.

       During 1999, 1998 and 1997, the Company repurchased shares of its common
       stock. As of December 31, 1999, approximately 43,000 shares remain
       authorized for possible repurchase under the Company's stock repurchase
       plan.

       In January 2000, the Company declared a $.08 per share cash dividend
       which totaled approximately $549,000 and is payable to stockholders of
       record as of January 25, 2000.

       ADVERTISING

       Advertising costs are generally charged to expense during the year in
       which they are incurred.

       INCOME TAXES

       Deferred tax assets and liabilities are reflected at currently enacted
       income tax rates applicable to the period in which the deferred tax
       assets or liabilities are expected to be realized or settled. As changes
       in tax laws or rates are enacted, deferred tax assets and liabilities are
       adjusted through the provision for income taxes.

       RECENTLY ISSUED ACCOUNTING STANDARDS

       In June 1999, the Financial Accounting Standards Board (FASB) issued
       Statement of Financial Accounting Standards No. 137, "Accounting for
       Derivative Instruments and Hedging Activities-Deferral of the Effective
       Date of FASB Statement 133" (SFAS 137), an amendment of SFAS 133, which
       establishes accounting and reporting standards for derivative instruments
       and hedging activities and requires that an entity recognize all
       derivatives as either assets or liabilities in the balance sheet and
       measure those instruments at fair value. SFAS 133, as amended by SFAS
       137, is effective for all quarterly and annual financial statements of
       fiscal years beginning after June 15, 2000. The Company had no
       significant derivatives as of December 31, 1999, nor does the Company
       engage in any hedging activities. Accordingly, the Company does not
       anticipate that the adoption of SFAS 133, as amended by SFAS 137, will
       have a material effect on its consolidated financial position or results
       of operations.

       In October 1998, SFAS No. 134, "Accounting for Mortgage-Backed Securities
       Retained After the Securitization of Mortgage Loans Held for Sale by a
       Mortgage Banking Enterprise" (SFAS 134), was issued. SFAS 134 was
       effective in 1999 and had no effect on the accompanying consolidated
       financial statements.

                                       39

<PAGE>


1.     DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
       (CONTINUED)

       RECLASSIFICATIONS

       Certain amounts in 1998 and 1997 have been reclassified to conform with
       the 1999 presentation.

2.     CASH AND DUE FROM BANKS

       The Bank is required to maintain an average reserve balance
       (approximately $1,846,000 and $1,050,000 at December 31, 1999 and 1998,
       respectively) with the Federal Reserve Bank or maintain such reserve
       balance in the form of cash. This requirement was met by holding cash and
       maintaining an average reserve balance with the Federal Reserve Bank in
       excess of this amount.

3.     INVESTMENT SECURITIES

       Investment securities at December 31, 1999 and 1998 consisted of the
       following:

<TABLE>
<CAPTION>
                                             GROSS          GROSS         ESTIMATED
                               AMORTIZED   UNREALIZED     UNREALIZED        FAIR
                                 COST        GAINS          LOSSES          VALUE
                              ----------   ----------     ----------     -----------
<S>                          <C>           <C>           <C>           <C>
1999

AVAILABLE-FOR-SALE
U.S. Government and
  agency securities ......   $15,538,091   $      --     $   255,820   $15,282,271
Mortgage-backed securities    10,009,453          --         240,969     9,768,484
U.S. Treasury securities .     1,997,742        17,878          --       2,015,620
Equity securities ........     2,527,843          --         524,994     2,002,849
                             -----------   -----------   -----------   -----------
                             $30,073,129   $    17,878   $ 1,021,783   $29,069,224
                             ===========   ===========   ===========   ===========
HELD-TO-MATURITY
Obligations of state and
  political subdivisions .   $ 1,066,694   $     5,243   $     7,975   $ 1,063,962
FHLB stock ...............     1,676,100          --            --       1,676,100
                             -----------   -----------   -----------   -----------
                             $ 2,742,794   $     5,243   $     7,975   $ 2,740,062
                             ===========   ===========   ===========   ===========
</TABLE>


<TABLE>
<CAPTION>
                                             GROSS          GROSS         ESTIMATED
                               AMORTIZED   UNREALIZED     UNREALIZED        FAIR
                                 COST        GAINS          LOSSES          VALUE
                              ----------   ----------     ----------     -----------
<S>                          <C>           <C>           <C>           <C>
1998

AVAILABLE-FOR-SALE

U.S. Government and
  agency securities ......   $26,538,402   $   318,438   $     7,350   $26,849,490
Mortgage-backed securities    15,064,132        29,777       202,794    14,891,115
U.S. Treasury securities .     2,995,217       113,783          --       3,109,000
Equity securities ........     2,529,512         2,724          --       2,532,236
Corporate debt securities        632,505          --           1,855       630,650
                             -----------   -----------   -----------   -----------

                             $47,759,768   $   464,722   $   211,999   $48,012,491
                             ===========   ===========   ===========   ===========
HELD-TO-MATURITY
Obligations of state and
  political subdivisions .   $ 1,409,525   $    17,393   $     3,555   $ 1,423,363
FHLB stock ...............     1,528,964          --            --       1,528,964
                             -----------   -----------   -----------   -----------

                             $ 2,938,489   $    17,393   $     3,555   $ 2,952,327
                             ===========   ===========   ===========   ===========
</TABLE>

                                       40

<PAGE>


3.     INVESTMENT SECURITIES (CONTINUED)

       The amortized cost and estimated fair value of investment securities at
       December 31, 1999, by contractual maturity, are shown below. Expected
       maturities will differ from contractual maturities, because borrowers may
       have the right to call or prepay obligations with or without call or
       prepayment penalties.

<TABLE>
<CAPTION>
                                                        ESTIMATED
                                          AMORTIZED       FAIR
                                            COST          VALUE
                                        ------------  ------------
<S>                                     <C>           <C>
AVAILABLE-FOR-SALE
Due after one year through five years   $17,535,833   $17,297,891
Mortgage-backed securities ..........    10,009,453     9,768,484
Equity securities ...................     2,527,843     2,002,849
                                        -----------   -----------
                                        $30,073,129   $29,069,224
                                        ===========   ===========
</TABLE>


<TABLE>
<CAPTION>
                                                       ESTIMATED
                                         AMORTIZED       FAIR
                                           COST          VALUE
                                        ----------   ------------
<S>                                     <C>          <C>
HELD-TO-MATURITY
Due in one year or less .............   $  169,974   $  169,533
Due after one year through five years      896,720      894,429
FHLB stock ..........................    1,676,100    1,676,100
                                        ----------   ----------
                                        $2,742,794   $2,740,062
                                        ==========   ==========
</TABLE>

       Investment securities with a carrying value of approximately $13,690,000
       and $12,861,000 at December 31, 1999 and 1998, respectively, were pledged
       to secure public deposits and for other purposes as required or permitted
       by law.

4.     LOANS

       Loans at December 31, 1999 and 1998 consisted of the following:

<TABLE>
<CAPTION>
                                 1999           1998
                             -----------    -----------
<S>                         <C>            <C>
Commercial ..............   $ 43,122,090   $ 31,279,762
Real estate:
  Construction ..........     49,275,932     44,874,991
  Mortgage ..............     41,082,475     36,670,954
  Commercial ............    111,577,500     70,524,183
Installment .............     34,622,137     22,693,633
                            ------------   ------------
                             279,680,134    206,043,523
Less:
  Reserve for loan losses      3,525,185      2,635,820
  Deferred loan fees ....      1,252,717        864,441
                            ------------   ------------

                               4,777,902      3,500,261
                            ------------   ------------

Loans, net ..............   $274,902,232   $202,543,262
                            ============   ============
</TABLE>

                                       41

<PAGE>


4.     LOANS (CONTINUED)

       The Bank has nine branches located in central Oregon and one branch
       located in Salem, Oregon. The result of doing business in these
       geographic areas has been growth in loan demand. A substantial portion of
       the Bank's loans are collateralized by real estate in these geographic
       areas and, accordingly, the ultimate collectibility of a substantial
       portion of the Bank's loan portfolio is susceptible to changes in the
       local market conditions.

       In the normal course of business, the Bank participates portions of loans
       to third parties in order to extend the Bank's lending capability or to
       mitigate risk. At December 31, 1999 and 1998, the portion of these loans
       participated to third parties (which are not included in the accompanying
       consolidated financial statements) totaled approximately $2,529,000 and
       $2,015,000, respectively.

       Also in the normal course of business, the Bank finances qualified
       construction projects. The majority of residential construction loans are
       sold into the secondary market subsequent to completion of the projects.

5.     RESERVE FOR LOAN LOSSES

       Transactions in the reserve for loan losses for the years ended December
       31, 1999, 1998 and 1997 were as follows:

<TABLE>
<CAPTION>
                                     1999           1998           1997
                                  ---------       --------       ---------
<S>                              <C>            <C>            <C>
Balance at beginning of year .   $ 2,635,820    $ 2,048,561    $ 1,691,260
Loan loss provision ..........     2,110,138      1,179,399      1,075,109
Loans charged-off ............    (1,399,142)      (634,077)      (777,505)
Recoveries of loans previously
  charged-off ................       178,369         41,937         59,697
                                 -----------    -----------    -----------
Balance at end of year .......   $ 3,525,185    $ 2,635,820    $ 2,048,561
                                 ===========    ===========    ===========
</TABLE>

       Impaired loans as of December 31, 1999, 1998 and 1997 and for each of the
       three years in the period ended December 31, 1999 were not significant to
       the accompanying consolidated financial statements. In addition, loans
       past due 90 days or more and still accruing interest at December 31, 1999
       and 1998 were not significant to the accompanying consolidated financial
       statements.

6.     PREMISES AND EQUIPMENT

       Premises and equipment at December 31, 1999 and 1998 consisted of the
       following:

<TABLE>
<CAPTION>
                                                    1999           1998
                                                  --------       --------
<S>                                              <C>           <C>
Land .........................................   $ 1,116,498   $   184,600
Buildings and leasehold improvements .........     6,296,418     5,452,177
Furniture and equipment ......................     6,124,845     5,085,815
                                                 -----------   -----------
                                                  13,537,761    10,722,592
Less accumulated depreciation and amortization     5,579,322     4,738,091
                                                 -----------   -----------
                                                 $ 7,958,439   $ 5,984,501
                                                 ===========   ===========
</TABLE>

                                       42

<PAGE>


7.     TIME CERTIFICATES OF DEPOSIT

       Time certificates of deposit in excess of $100,000 aggregated
       approximately $14,073,000 and $9,310,000 at December 31, 1999 and 1998,
       respectively. Interest expense on time certificates of deposit in excess
       of $100,000 was approximately $432,000, $307,000 and $169,000 in 1999,
       1998 and 1997, respectively.

       At December 31, 1999, the scheduled annual maturities of all time
       certificates of deposit were approximately as follows:

<TABLE>
<S>                                <C>
                  2000             $  35,591,000
                  2001                 2,156,000
                  2002                   921,000
                  2003                   209,000
                  2004                   110,000
                                   -------------
                                   $  38,987,000
</TABLE>

8.     BORROWING AGREEMENTS

       The Bank participates in the Cash Management Advance Program (the
       Program) with the FHLB, which is subject to annual renewal in October
       2000. As of December 31, 1999, the Bank had $5,000,000 in borrowings
       outstanding from the FHLB under the Program with interest at 5.70%. In
       addition, as of December 31, 1999, the Bank had $8,000,000 in borrowings
       outstanding from the FHLB under a promissory note agreement, which are
       due in February 2000 and bear interest at a fixed rate of 5.84%. As of
       December 31, 1999, the Bank had remaining available borrowings from the
       FHLB of approximately $21,517,000.

       All outstanding borrowings with the FHLB are collateralized by a blanket
       pledge agreement on the Bank's FHLB stock, any funds on deposit with the
       FHLB, investment securities and loans. As of December 31, 1998, there
       were no borrowings outstanding from the FHLB.

9.     OFF-BALANCE SHEET FINANCIAL INSTRUMENTS

       In the normal course of business, the Bank is a party to financial
       instruments with off-balance sheet risk to meet the financing needs of
       its customers. These financial instruments include commitments to extend
       credit, commitments under credit card lines of credit and standby letters
       of credit. These instruments involve, to varying degrees, elements of
       credit and interest-rate risk in excess of amounts recognized in the
       accompanying consolidated balance sheets. The contractual amounts of
       these instruments reflect the extent of the Bank's involvement in these
       particular classes of financial instruments. As of December 31, 1999 and
       1998, the Bank held no derivative financial instruments.

       The Bank's exposure to credit loss in the event of nonperformance by the
       other party to the financial instrument for commitments to extend credit,
       commitments under credit card lines of credit and standby letters of
       credit, is represented by the contractual amount of those instruments.
       The Bank uses the same credit policies in making commitments and
       conditional obligations as it does for on-balance sheet instruments.

                                       43

<PAGE>



9.     OFF-BALANCE SHEET FINANCIAL INSTRUMENTS (CONTINUED)

       A summary of the Bank's off-balance sheet financial instruments at
       December 31, 1999 and 1998 is approximately as follows:

<TABLE>
<CAPTION>
                                                    1999           1998
                                                  --------       --------
<S>                                             <C>            <C>
Commitments to extend credit ................   $ 97,280,000   $ 65,858,000
Commitments under credit card lines of credit     15,954,000     10,889,000
Standby letters of credit ...................      1,051,000        785,000
                                                ------------   ------------
Total off-balance sheet financial instruments   $114,285,000   $ 77,532,000
                                                ============   ============
</TABLE>


       Commitments to extend credit are agreements to lend to a customer as long
       as there is no violation of any condition established in the contract.
       Commitments generally have fixed expiration dates or other termination
       clauses and may require payment of fees. Since many of the commitments
       are expected to expire without being drawn upon, the total commitment
       amounts do not necessarily represent future cash requirements. The Bank
       evaluates each customer's creditworthiness on a case-by-case basis. The
       amount of collateral obtained, if it is deemed necessary by the Bank upon
       extension of credit, is based on management's credit evaluation of the
       counterparty. The Bank typically does not obtain collateral related to
       credit card commitments. Collateral held for other commitments varies but
       may include accounts receivable, inventory, property and equipment and
       income-producing commercial properties.

       Standby letters of credit are conditional commitments issued by the Bank
       to guarantee the performance of a customer to a third-party. These
       guarantees are primarily issued to support public and private borrowing
       arrangements. The credit risk involved in issuing letters of credit is
       essentially the same as that involved in extending loan facilities to
       customers. Collateral held, if required, varies as specified above.

10.    INCOME TAXES

       The provision (credit) for income taxes for the years ended December 31,
       1999, 1998 and 1997 was approximately as follows:

<TABLE>
<CAPTION>
                                1999            1998          1997
                              -------         -------        -------
<S>                          <C>            <C>           <C>
Current:
  Federal ................   $ 3,166,000    $ 2,851,400   $ 2,280,700
  State ..................       663,500        613,000       304,000
                             -----------    -----------   -----------
                               3,829,500      3,464,400     2,584,700
Deferred .................       (57,000)        27,000       279,000
                             -----------    -----------   -----------
Provision for income taxes   $ 3,772,500    $ 3,491,400   $ 2,863,700
                             ===========    ===========   ===========
</TABLE>



       The provision for income taxes results in effective tax rates which are
       different than the federal income tax statutory rate. The nature of the
       differences for the years ended December 31, 1999, 1998 and 1997 were
       approximately as follows:

<TABLE>
<CAPTION>
                                                1999          1998            1997
                                             --------        -------         -------
<S>                                         <C>            <C>            <C>
Expected federal income tax at statutory
  rate of 34% ...........................   $ 3,403,700    $ 3,147,500    $ 2,687,600
Effect of nontaxable interest income, net       (24,600)       (26,700)       (43,000)
State income taxes, net of federal effect       437,900        404,700        200,400
Other, net ..............................       (44,500)       (34,100)        18,700
                                            -----------    -----------    -----------
Provision for income taxes ..............   $ 3,772,500    $ 3,491,400    $ 2,863,700
                                            ===========    ===========    ===========
</TABLE>

                                       44


<PAGE>


10.    INCOME TAXES (CONTINUED)

       The components of the net deferred tax assets (liabilities) at December
       31, 1999 and 1998 were approximately as follows:

<TABLE>
<CAPTION>
                                                       1999         1998
                                                    --------      --------
<S>                                                <C>          <C>
Assets:
  Loan loss provision ..........................   $1,063,000   $  838,000
  Net unrealized losses on investment securities      381,000         --
  Deferred compensation expense ................      558,000      405,000

Deferred life insurance expense ................      149,000      121,000
  Other ........................................      239,000      145,000
                                                   ----------   ----------
       Total deferred tax assets ...............    2,390,000    1,509,000
Liabilities:
  Deferred loan fees ...........................      288,000      236,000
  Mortgage servicing rights ....................    1,090,000      880,000
  FHLB stock dividends .........................      275,000      218,000
Net unrealized gains on investment securities ..         --         95,000
  Earnings on life insurance policies ..........      416,000      292,000
  Other ........................................       45,000       45,000
                                                   ----------   ----------
       Total deferred tax liabilities ..........    2,114,000    1,766,000
                                                   ----------   ----------
       Net deferred tax assets (liabilities) ..    $  276,000   $ (257,000)
                                                   ==========   ==========
</TABLE>

       Management believes, primarily based upon the Company's historical
       performance, that the net deferred tax assets will be recognized in the
       normal course of operations and, accordingly, management has not reduced
       net deferred tax assets by a valuation allowance.

       The Company made income tax payments of approximately $4,165,000,
       $3,267,000 and $2,520,000 during 1999, 1998 and 1997, respectively.

11. BASIC AND DILUTED EARNINGS PER COMMON SHARE

       The Company's basic earnings per common share is computed by dividing net
       income by the weighted-average number of common shares outstanding during
       the period. The Company's diluted earnings per common share is computed
       by dividing net income by the weighted-average number of common shares
       outstanding plus dilutive common shares related to stock options.

                                       45

<PAGE>


11.    BASIC AND DILUTED EARNINGS PER COMMON SHARE (CONTINUED)

       The numerators and denominators used in computing basic and diluted
       earnings per common share for the years ended December 31, 1999, 1998 and
       1997 can be reconciled as follows:

<TABLE>
<CAPTION>
                                                                        NET
                                                                      INCOME           SHARES           PER-SHARE
                                                                    (NUMERATOR)     (DENOMINATOR)        AMOUNT
                                                                   ------------     -------------       ----------
<S>                                                               <C>                   <C>               <C>
       1999
       Basic earnings per common share -
         Income available to common stockholders                  $    6,238,461        6,858,681         $   .91
       Effect of assumed conversion of stock options                           -          161,951
                                                                  --------------    -------------         -------
       Diluted earnings per common share                          $    6,238,461        7,020,632         $   .89
                                                                  ==============    =============         =======

       1998
       Basic earnings per common share -
         Income available to common stockholders                  $    5,766,040        6,849,835         $   .84
       Effect of assumed conversion of stock options                           -          215,398
                                                                   --------------    -------------         ------
       Diluted earnings per common share                          $    5,766,040        7,065,233         $   .82
                                                                  ==============    =============         =======

       1997
       Basic earnings per common share -
         Income available to common stockholders                  $    5,041,141        7,021,310         $   .72
       Effect of assumed conversion of stock options                           -          203,106
                                                                  --------------    -------------         -------
       Diluted earnings per common share                          $    5,041,141        7,224,416         $   .70
                                                                  ==============    =============         =======
</TABLE>


       The above computations have not been adjusted to reflect the issuance of
       additional stock options in January 2000 (see Note 14).

12.    TRANSACTIONS WITH RELATED PARTIES

       Some of the officers and directors (and the companies with which they are
       associated) are customers of, and have had banking transactions with, the
       Bank in the ordinary course of the Bank's business. In addition, the Bank
       expects to continue to have such banking transactions in the future. All
       loans and commitments to loan to such parties are generally made on the
       same terms, including interest rates and collateral, as those prevailing
       at the time for comparable transactions with other persons. In the
       opinion of management, these transactions do not involve more than the
       normal risk of collectibility or present any other unfavorable features.

       An analysis of activity with respect to loans to directors and officers
       of the Bank for the year ended December 31, 1999 was as follows:

<TABLE>
<S>                                                       <C>
          Balance at December 31, 1998                    $  1,678,306
          Additions                                          2,851,766
          Repayments                                        (3,194,498)
                                                           -----------
          Balance at December 31, 1999                    $  1,335,574
                                                           ===========
</TABLE>

                                       46

<PAGE>


13.    BENEFIT PLANS

       401(K) PROFIT SHARING PLAN

       The Company maintains a 401(k) profit sharing plan (the Plan) that covers
       substantially all full-time employees. Employees may make voluntary
       tax-deferred contributions to the Plan, and employer contributions
       related to the Plan are at the discretion of the Board, not to exceed the
       amount deductible for federal income tax purposes. Employees have the
       option to receive a portion of the employer's contribution in cash.
       Employees vest in the employer contributions which are contributed into
       the Plan over a period of five years. The total amounts charged to
       operations under the Plan were approximately $811,000, $755,000 and
       $628,000 for the years ended December 31, 1999, 1998 and 1997,
       respectively.

       OTHER BENEFIT PLANS

       The Bank has deferred compensation plans for members of the Board of
       Directors (the Board) and certain key executives and managers, a salary
       continuation plan for certain key executives and a fee continuation plan
       for the Board.

       In accordance with the provisions of the deferred compensation plans,
       participants can elect to defer portions of their annual compensation or
       fees. The deferred amounts generally vest as deferred. The deferred
       compensation plus interest is generally payable upon termination in
       either a lump sum or monthly installments.

       The salary continuation plan for certain key executives and the fee
       continuation plan for the Board provide defined benefits to the
       participants upon termination. The defined benefits for substantially all
       of the key executives and the Board are for periods of fifteen years and
       ten years, respectively. The benefits are subject to certain vesting
       requirements, and vested amounts are generally payable upon termination
       in either a lump sum or monthly installments.

       The Bank annually expenses amounts sufficient to accrue for the present
       value of the benefits payable to the participants under these plans.

       The plans also include death benefit provisions for certain participants.
       To assist in the funding of the plans, the Bank has purchased life
       insurance policies on the majority of the participants. The cash
       surrender value of these policies at December 31, 1999 and 1998 was
       approximately $6,157,000 and $5,632,000, respectively, and is included in
       accrued interest and other assets in the accompanying consolidated
       balance sheets.

       As of December 31, 1999 and 1998, the liabilities related to the deferred
       compensation plans included in the accompanying consolidated balance
       sheets totaled approximately $693,000 and $509,000, respectively. The
       amount of expense charged to operations in 1999, 1998 and 1997 related to
       the deferred compensation plans was approximately $184,000, $182,000 and
       $122,000, respectively. As of December 31, 1999 and 1998, the liabilities
       related to the salary continuation and fee continuation plans included in
       the accompanying consolidated balance sheets totaled approximately
       $761,000 and $546,000, respectively. The amount of expense charged to
       operations in 1999, 1998 and 1997 for the salary continuation and fee
       continuation plans was approximately $215,000, $214,000 and $147,000,
       respectively. For financial reporting purposes, such expense amounts have
       not been adjusted for income

                                       47

<PAGE>


13.    BENEFIT PLANS (CONTINUED)

       earned on the life insurance policies. The net amount of income earned
       (net of related policy load charges, mortality costs and surrender
       charges incurred) on the life insurance policies which was included in
       other noninterest income in 1999, 1998 and 1997 was approximately
       $246,000, $196,000 and $123,000, respectively.

14.    STOCK OPTION PLAN

       Under the Company's Stock Option Plan, it may grant Incentive Stock
       Options (ISOs) and Non-qualified Stock Options (NSOs) to key employees.

       The option price of ISOs is the fair market value at the date of grant,
       and the option price of NSOs is to be at a price not less than 85% of the
       fair market value at the date of grant. Generally, options become
       exercisable in varying amounts based on years of employee service,
       commencing one year from the date of grant. All options expire after a
       period of ten years.

       SFAS No. 123, "Accounting for Stock-Based Compensation," (SFAS 123)
       requires companies, such as Bancorp, that use the intrinsic value method
       to account for employee stock options to provide pro forma disclosures of
       the net income and earnings per share effect of applying the fair
       value-based method of accounting for stock options. The effect of
       applying the fair value-based method to stock options granted in the
       years ended December 31, 1999, 1998 and 1997 resulted in an estimated
       weighted-average grant date fair value of $5.34, $5.72 and $2.32,
       respectively. Had compensation cost been determined based on the fair
       value of the options at the date of grant, the Company's pro forma net
       income, pro forma basic earnings per common share and pro forma diluted
       earnings per common share would have been as follows:

<TABLE>
<CAPTION>
                                                                     1999           1998              1997
                                                                  -----------    -----------       -----------
<S>                                              <C>              <C>            <C>               <C>
       Net income                                As reported      $ 6,238,461    $ 5,766,040       $ 5,041,141
                                                 Pro forma          6,072,449      5,553,108         4,905,554

       Basic earnings per common share           As reported      $       .91    $       .84       $       .72
                                                 Pro forma                .89            .81               .70

       Diluted earnings per common share         As reported      $       .89    $       .82       $       .70
                                                 Pro forma                .86            .79               .68
</TABLE>

       The Company used the Black-Scholes option-pricing model with the
       following weighted-average assumptions to value options granted:

<TABLE>
<CAPTION>
                                                                       1999             1998              1997
                                                                  --------------    -------------    --------------
<S>                                                                      <C>              <C>               <C>
       Dividend yield                                                       2.0%             1.6%              1.6%
       Expected volatility                                                 33.3%            36.3%             35.8%
       Risk-free interest rate                                              6.3%             4.6%              5.8%
       Expected option lives                                             5 years          5 years           5 years
</TABLE>

       Because SFAS 123 is applicable only to options granted subsequent to
       December 31, 1994, the proforma effects for 1999, 1998 and 1997 may not
       be representative of the effects on reported results in future years.

                                       48

<PAGE>


14.    STOCK OPTION PLAN (CONTINUED)

       At December 31, 1999, 209,965 shares reserved under the Stock Option Plan
       were available for future grant. Activity related to the Stock Option
       Plan for the years ended December 31, 1999, 1998 and 1997 was as follows:

<TABLE>
<CAPTION>
                                       1999                 1998                  1997
                                --------------------  -------------------   --------------------
                                           WEIGHTED-            WEIGHTED-              WEIGHTED-
                                 OPTIONS    AVERAGE   OPTIONS    AVERAGE    OPTIONS     AVERAGE
                                  OUT-     EXERCISE     OUT-    EXERCISE     OUT-      EXERCISE
                                STANDING    PRICE     STANDING    PRICE     STANDING    PRICE
                                --------   ---------  --------  ---------   --------   ---------
<S>                             <C>        <C>        <C>        <C>        <C>        <C>
Balance at beginning of year    354,913    $ 7.06     296,970    $ 4.32     242,827    $ 3.04
Granted ....................     64,900     16.14      75,898     16.97     100,237      6.76
Forfeited ..................    (28,212)    14.57      (1,819)    11.29      (4,950)     6.59
Exercised ..................    (75,534)     4.21     (16,136)     2.64     (41,144)     2.43
                                --------                                    -------
Balance at end of year .....    316,067    $ 8.94     354,913    $ 7.06     296,970    $ 4.32
                                =======    ======     =======    ======     =======    ======
</TABLE>

       Information regarding the number, weighted-average exercise price and
       weighted-average remaining contractual life of options by range of
       exercise price at December 31, 1999 is as follows:

<TABLE>
<CAPTION>
                    OPTIONS OUTSTANDING                       EXERCISABLE OPTIONS
                   -----------------------------------    ---------------------------
                                            WEIGHTED-
                              WEIGHTED-      AVERAGE                        WEIGHTED-
                              AVERAGE       REMAINING                       AVERAGE
EXERCISE           NUMBER OF  EXERCISE     CONTRACTUAL     NUMBER OF        EXERCISE
PRICE RANGE        OPTIONS    PRICE        LIFE (YEARS)     OPTIONS           PRICE
-----------        ---------  --------     ------------    ---------       ----------
<S>               <C>         <C>            <C>            <C>             <C>
$  2.28            57,534     $  2.28          4             57,534         $  2.28
   3.32            38,926        3.32          5             38,926            3.32
   4.62            36,299        4.62          6             36,299            4.62
   6.59            62,040        6.59          7             59,136            6.59
  11.06             3,300       11.06          7                  -           11.06
  16.97            59,393       16.97          8             48,010           16.97
  16.14            58,575       16.14          9             33,440           16.14
                   ------                                    ------
                  316,067     $  8.94        6.7            273,345         $  7.95
                  =======     =======        ===            =======         =======
</TABLE>

       Exercisable options as of December 31, 1998 and 1997 totaled 324,751 and
       280,883, respectively.

       In January 2000, ISOs for an additional 74,000 shares were granted at
       $12.50 per share, subject to the Company meeting certain performance
       standards in 2000.

                                       49

<PAGE>


15.    COMMITMENTS AND CONTINGENCIES

       The Bank leases certain land and facilities under operating leases, some
       of which include renewal options and escalation clauses. At December 31,
       1999, the aggregate minimum rental commitments under operating leases
       that have initial or remaining noncancelable lease terms in excess of one
       year were approximately as follows:

<TABLE>
<S>                                   <C>
              2000                    $   443,000
              2001                        452,000
              2002                        438,000
              2003                        424,000
              2004                        437,000
              Thereafter                4,545,000
                                        ---------
              Total minimum payments  $ 6,739,000
                                      ===========
</TABLE>

       Total rental expense was approximately $426,000, $286,000 and $236,000 in
       1999, 1998 and 1997, respectively.

       In the ordinary course of business, the Bank becomes involved in various
       litigation arising from normal banking activities. In the opinion of
       management, the ultimate disposition of these actions will not have a
       material adverse effect on the Company's consolidated financial position
       or results of operations at December 31, 1999.

16.    ESTIMATED FAIR VALUES OF FINANCIAL INSTRUMENTS

       The following disclosures are made in accordance with the provisions of
       SFAS No. 107, "Disclosures about Fair Value of Financial Instruments"
       (SFAS 107), which requires the disclosure of fair value information about
       financial instruments where it is practicable to estimate that value.

       In cases where quoted market values are not available, the Company
       primarily uses present value techniques to estimate the fair values of
       its financial instruments. Valuation methods require considerable
       judgment, and the resulting estimates of fair value can be significantly
       affected by the assumptions made and methods used. Accordingly, the
       estimates provided herein do not necessarily indicate amounts which could
       be realized in a current market exchange.

       In addition, as the Company normally intends to hold the majority of its
       financial instruments until maturity, it does not expect to realize many
       of the estimated amounts disclosed. The disclosures also do not include
       estimated fair value amounts for items which are not defined as financial
       instruments but which have significant value. These include such
       off-balance sheet items as core deposit intangibles and non-capitalized
       mortgage loan servicing rights. The Company does not believe that it
       would be practicable to estimate a representational fair value for these
       types of items as of December 31, 1999 and 1998.

       Because SFAS 107 excludes certain financial instruments and all
       nonfinancial instruments from its disclosure requirements, any
       aggregation of the fair value amounts presented would not represent the
       underlying value of the Company.

                                       50

<PAGE>


16.    ESTIMATED FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)

       The Company used the following methods and assumptions to estimate the
       fair value of its financial instruments:

           CASH AND CASH EQUIVALENTS: The carrying amount approximates the
           estimated fair value of these instruments.

           INVESTMENT SECURITIES: The market value of investment securities,
           which is based on quoted market values or the market values for
           comparable securities, represents estimated fair value.

           LOANS: The estimated fair value of loans is calculated by discounting
           the contractual cash flows of the loans using December 31, 1999 and
           1998 origination rates. The resulting amounts are adjusted to
           estimate the effect of changes in the credit quality of borrowers
           since the loans were originated.

           DEPOSITS: The estimated fair value of demand deposits, consisting of
           checking, savings and certain interest bearing demand deposit
           accounts, is represented by the amounts payable on demand. The
           estimated fair value of certificates of deposit is calculated by
           discounting the scheduled cash flows using the December 31, 1999 and
           1998 rates offered on these instruments.

           FEDERAL FUNDS PURCHASED: The carrying amount approximates the
           estimated fair value due to the short-term nature of these
           borrowings.

           FHLB BORROWINGS: The carrying amount approximates the estimated fair
           value due to the short-term nature of these borrowings.

           OFF-BALANCE SHEET FINANCIAL INSTRUMENTS: The estimated fair value of
           off-balance sheet financial instruments (primarily commitments to
           extend credit) is determined based on fees currently charged for
           similar commitments. Management estimates that these fees approximate
           $730,000 and $500,000 as of December 31, 1999 and 1998, respectively.

       The estimated fair values of the Company's significant on-balance sheet
       financial instruments at December 31, 1999 and 1998 were as follows:

<TABLE>
<CAPTION>
                                            1999                         1998
                                   ------------------------     ------------------------
                                   CARRYING       ESTIMATED     CARRYING       ESTIMATED
                                    VALUE         FAIR VALUE     VALUE         FAIR VALUE
                                  ---------      -----------   ----------      ----------
<S>                              <C>            <C>            <C>            <C>
Financial assets:
  Cash and cash equivalents ..   $ 19,420,537   $ 19,421,000   $ 27,146,221   $ 27,146,000
  Investment securities:
     Available-for-sale ......     29,069,224     29,069,000     48,012,491     48,012,000
     Held-to-maturity ........      2,742,794      2,740,000      2,938,489      2,952,000
  Loans, net (including mort-
     gage loans held for sale)    275,325,231    274,307,000    204,662,904    207,758,000

Financial liabilities:
  Deposits ...................    285,312,541    285,310,000    270,862,731    270,960,000
  FHLB borrowings ............     13,000,000     13,000,000           --             --
  Federal funds purchased ....     17,100,000     17,100,000           --             --
</TABLE>

                                       51

<PAGE>


17.    REGULATORY MATTERS

       The Company and the Bank are subject to various regulatory capital
       requirements administered by the federal banking agencies. Failure to
       meet minimum capital requirements can initiate certain mandatory - and
       possibly additional discretionary actions by regulators that, if
       undertaken, could have a direct material effect on the Company's
       consolidated financial statements. Under capital adequacy guidelines and
       the regulatory framework for prompt corrective action, the Company and
       the Bank must meet specific capital guidelines that involve quantitative
       measures of assets, liabilities and certain off-balance sheet items as
       calculated under regulatory accounting practices. The Company and the
       Bank's capital amounts and classification are also subject to qualitative
       judgments by the regulators about components, risk weightings and other
       factors.

       Quantitative measures established by regulation to ensure capital
       adequacy require the Company and the Bank to maintain minimum amounts and
       ratios (set forth in the table below) of Tier 1 capital (as defined in
       the regulations) to average assets (as defined), and Tier 1 and total
       capital (as defined) to risk-weighted assets (as defined). Management
       believes that as of December 31, 1999, the Company and the Bank meet or
       exceed all relevant capital adequacy requirements.

       As of December 31, 1999, the most recent notifications from the Federal
       Reserve Bank and the Federal Deposit Insurance Corporation categorized
       the Company and the Bank as well capitalized under the regulatory
       framework for prompt correction action. To be categorized as well
       capitalized, the Company and the Bank must maintain minimum total
       risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in
       the table. There are no conditions or events since the notifications from
       the regulators that management believes would change the Company's or the
       Bank's regulatory capital categorization.

       The Company's actual and required capital amounts and ratios are
       presented in the following table (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                              REGULATORY MINIMUM
                                                                                            TO BE "WELL CAPITALIZED"
                                                                REGULATORY MINIMUM TO BE     UNDER PROMPT CORRECTIVE
                                               ACTUAL           "ADEQUATELY CAPITALIZED"        ACTION PROVISIONS
                                        -------------------     ------------------------   ------------------------
                                        AMOUNT        RATIO        AMOUNT        RATIO       AMOUNT        RATIO
<S>                                   <C>              <C>      <C>               <C>     <C>               <C>
       December 31, 1999:

       Tier 1 capital
         (to average assets)          $    29,340      8.4%     $    14,027       4.0%    $    17,534       5.0%
       Tier 1 capital
         (to risk-weighted assets)         29,340      9.9           11,854       4.0          17,781       6.0
       Total capital
         (to risk-weighted assets)         32,866     11.1           23,708       8.0          29,635      10.0

       December 31, 1998:

       Tier 1 capital
         (to average assets)               26,391      9.0           11,740       4.0          14,676       5.0
       Tier 1 capital
         (to risk-weighted assets)         26,391     11.3            9,312       4.0          13,968       6.0
       Total capital
         (to risk-weighted assets)         29,027     12.5           18,624       8.0          23,281      10.0
</TABLE>


                                       52

<PAGE>


17.    REGULATORY MATTERS (CONTINUED)

       The Bank's actual and required capital amounts and ratios are presented
       in the following table (dollars in thousands):

<TABLE>
<CAPTION>
                                                                                              REGULATORY MINIMUM
                                                                                            TO BE "WELL CAPITALIZED"
                                                                REGULATORY MINIMUM TO BE    UNDER PROMPT CORRECTIVE
                                               ACTUAL           "ADEQUATELY CAPITALIZED"       ACTION PROVISIONS
                                        -------------------     ------------------------    -----------------------
                                        AMOUNT        RATIO        AMOUNT        RATIO       AMOUNT        RATIO
<S>                                   <C>              <C>      <C>               <C>     <C>               <C>
       December 31, 1999:

       Tier 1 capital
         (to average assets)          $    26,626      7.7%     $    13,905       4.0%    $    17,382       5.0%
       Tier 1 capital
         (to risk-weighted assets)         26,626      9.1           11,662       4.0          17,493       6.0
       Total capital
         (to risk-weighted assets)         30,149     10.3           23,324       8.0          29,155      10.0

       December 31, 1998:

       Tier 1 capital
         (to average assets)               22,347      7.7           11,627       4.0          14,534       5.0
       Tier 1 capital
         (to risk-weighted assets)         22,347      9.7            9,244       4.0          13,865       6.0
       Total capital
         (to risk-weighted assets)         24,879     10.8           18,488       8.0          23,109      10.0
</TABLE>

18.    PARENT COMPANY FINANCIAL INFORMATION

       Condensed financial information for Cascade Bancorp (Parent Company only)
       is presented as follows:

                            CONDENSED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                             DECEMBER 31,
                                                     ------------------------
                                                         1999         1998
                                                     ----------   -----------
<S>                                                 <C>           <C>
Assets:
   Cash and cash equivalents ....................   $   283,025   $   574,438
   Due from Cascade Finance .....................       375,000     1,900,000
   Investment securities available-for-sale .....     2,002,849     2,532,236
   Investment in subsidiaries ...................    27,720,558    23,808,005
   Other assets .................................       315,066       110,672
                                                    -----------   -----------
       Total assets .............................   $30,696,498   $28,925,351
                                                    ===========   ===========
Liabilities:

   Accrued liabilities ..........................   $      --     $   103,669
   Due to the Bank ..............................     1,125,000     1,900,000
                                                    -----------   -----------

       Total liabilities ........................     1,125,000     2,003,669

Stockholders' equity ............................    29,571,498    26,921,682
                                                    -----------   -----------

       Total liabilities and stockholders' equity   $30,696,498   $28,925,351
                                                    ===========   ===========
</TABLE>

                                       53

<PAGE>


18.    PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)

                         CONDENSED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
                                                          YEARS ENDED DECEMBER 31,
                                                ----------------------------------------
                                                     1999         1998           1997
                                                -----------    -----------    ----------
<S>                                             <C>            <C>            <C>
Interest and dividend income ................   $   135,053    $    19,323    $      --

Expenses:
   Administrative ...........................        59,058        102,000         34,893
   Interest .................................       102,488           --             --
   Other ....................................        96,022        119,525           --
                                                -----------    -----------    -----------
       Total expenses .......................       257,568        221,525         34,893
                                                -----------    -----------    -----------
Loss before income tax benefit and equity in
   undistributed net earnings of subsidiaries      (122,515)      (202,202)       (34,893)
Income tax benefit ..........................        46,500         74,462         13,957
                                                -----------    -----------    -----------
 Loss before equity in undistributed net
   earnings of subsidiaries .................       (76,015)      (127,740)       (20,936)
 Equity in undistributed net earnings
   of subsidiaries ..........................     6,314,476      5,893,780      5,062,077
                                                -----------    -----------    -----------
Net income ..................................   $ 6,238,461    $ 5,766,040    $ 5,041,141
                                                ===========    ===========    ===========
</TABLE>


                       CONDENSED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                  YEARS ENDED DECEMBER 31,
                                                                       -----------------------------------------
                                                                           1999          1998           1997
                                                                       -----------    -----------    -----------
<S>                                                                    <C>            <C>            <C>
 Cash flows from operating activities:

   Net income ......................................................   $ 6,238,461    $ 5,766,040    $ 5,041,141
   Adjustments to reconcile net income to
    net cash used by operating activities:

       Undistributed net earnings of subsidiaries ..................    (6,314,476)    (5,893,780)    (5,062,077)
       Increase in other assets ....................................        (3,227)      (110,672)          --
       Increase (decrease) in accrued liabilities ..................      (103,669)       103,669           --
                                                                       -----------    -----------    -----------

         Net cash used by operating activities .....................      (182,911)      (134,743)       (20,936)

Cash flows used by investing activities -
   purchases of investment securities available-
   for-sale ........................................................          --       (1,997,625)      (531,887)
</TABLE>



                                       54
<PAGE>


18.    PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)

                 CONDENSED STATEMENTS OF CASH FLOWS (continued)

<TABLE>
<CAPTION>
                                                          YEARS ENDED DECEMBER 31,
                                                  -----------------------------------------
                                                     1999           1998           1997
                                                 -----------    -----------    -----------
<S>                                              <C>            <C>            <C>
   Cash flows from financing activities:

   Investments in Cascade Finance ............   $      --      $  (500,000)   $  (500,000)
   Cash dividends paid .......................    (2,220,508)    (2,116,269)    (1,915,032)
   Dividends from the Bank ...................     1,950,000      2,100,000      8,993,078
   Stock options exercised ...................       317,738         42,473        100,000
   Repurchases of stock ......................      (905,732)      (861,943)    (2,793,402)
   Decrease (increase) in due from
      Cascade Finance ........................     1,525,000     (1,900,000)          --
   Increase (decrease) in due to the Bank ....      (775,000)     1,900,000           --
                                                 -----------    -----------    -----------
         Net cash provided (used) by
           financing activities ..............      (108,502)    (1,335,739)     3,884,644
                                                 -----------    -----------    -----------
Net increase (decrease) in cash and
      cash equivalents .......................      (291,413)    (3,468,107)     3,331,821
Cash and cash equivalents at beginning of year       574,438      4,042,545        710,724
                                                 -----------    -----------    -----------
Cash and cash equivalents at end of year .....   $   283,025    $   574,438    $ 4,042,545
                                                 ===========    ===========    ===========
</TABLE>


         These financial statements have not been reviewed for accuracy
           or relevance by the Federal Deposit Insurance Corporation.