Ex-10.5

                                 EMPLOYMENT AGREEMENT
                                 --------------------
                     (Including Amendments to Reflect 2001 Bank
                       Charter Change and March 2002 extension)

     This Agreement is made this 26th of March, 2002, amending the January 24,
2001 agreement as amended November 27, 2001, by and between CASCADE BANK, a
State Chartered Banking Institution (hereafter "Cascade" or "Employer") and
CAROL KOBUKE NELSON (hereafter called "Employee").  The effective date of this
Agreement will be the 19th day of February, 2001 ("Effective Date").  Employer
and Employee are sometimes collectively referred to herein as the "Parties."

     W I T N E S S E T H:

     WHEREAS, Employer's Directors desire to employ Employee as its President
and Chief Executive Officer pursuant to the terms and conditions of this
Agreement; and

     WHEREAS, Employee desires to become and remain employed by Employer
pursuant to the terms and conditions of this Agreement;

     NOW, THEREFORE, for and in consideration of the mutual promises hereafter
set forth, the sufficiency of which is acknowledged, the Parties agree as
follows:

     1.   Employment Duties.  Employer hereby agrees to employ Employee and
Employee hereby agrees to be and remain employed as the President and Chief
Executive Officer of Cascade Bank under the terms and conditions hereinafter
set forth.  Employee shall fully and faithfully perform all the customary and
usual duties and responsibilities of President and Chief Executive Officer of
a State Chartered, multi-branch financial institution and such additional
duties and responsibilities as may reasonably be delegated and/or directed by
Employer's Board of Directors.  Included in Employee's Board delegated duties
shall be the responsibility for all personnel decisions except internal audit.
The Board of Directors in the exercise of their fiduciary duty shall be
ultimately responsible for all personnel decisions.  In addition, for the
consideration herein provided, Employee shall fully and faithfully perform
all of the customary and usual duties and responsibilities of the President
and Chief Operating Officer of Cascade Financial Corporation, the sole
shareholder of Cascade Bank, and such additional duties and responsibilities
as may be delegated and/or directed by the Board of Directors of Cascade
Financial Corporation.

     Subject to any required approval by the Shareholder(s) of Cascade Bank
and/or Cascade Financial Corporation, as the case may be the Board of
Directors of Cascade Bank and Cascade Financial Corporation shall appoint
or nominate and recommend Employee for election as a member of their
respective Boards of Directors and, if so appointed or elected, Employee
shall serve in that capacity until the end of the term or until her removal
therefrom.

     2.   Term of Employment.  The term of this Agreement shall be three (3)
years, from the Effective Date. The Board of Directors shall annually consider
whether or not to extend this Agreement for an additional year (to provide a
rolling three-year term).  The decision of Employer's Board of Directors
regarding any annual extension of this Agreement and the compensation and bonus
to be paid during such extension shall remain within the sole and absolute
discretion of said Board, provided the Board of Directors may consider, among
other things, the following performance criteria: Employer's profitability;
Safety and Soundness examination CAMELS ratings; Compliance examination
ratings; Regulatory capital requirements for a well-capitalized institution;
Managing existing capital to maximize return on equity; and Maintaining
sufficient capital to achieve business goals.  This Agreement may be
terminated prior to the expiration of its term or any extension thereof as
hereafter provided.

     3.   Compensation and Bonuses.  Upon execution and delivery of this
Agreement by Employee, Employer shall initially pay to Employee a signing
bonus in the gross amount of Fifty Thousand Dollars ($50,000.00).

          Employer shall pay Employee an annual base salary of Two Hundred
housand Dollars ($200,000.00), payable in equal installments, not less than
monthly during the term of her employment, together with bonuses to be
determined as follows:

          (a)   For the fiscal year ending June 30, 2001 a bonus of Thirty
Thousand Dollars ($30,000.00) at the first pay period in July, 2001;

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          (b)   For the period beginning July 1, 2001 and ending June 30, 2002,
a bonus equal to the greater of One Hundred Thousand Dollars ($100,000.00); or
seven and one-half percent (7 1/2%) of the amount, if any, by which the net
profit before taxes (exclusive of all extraordinary gains and losses) ("NPBT")
(calculated after deducting bonuses of all employees) for said fiscal year
exceeds the NPBT for the said one year period ending June 30, 2001; provided,
however, Employer shall advance to Employee a portion of said bonus in the sum
of Twenty-Five Thousand Dollars ($25,000.00) per quarter for the first three
quarters of the fiscal year and the balance immediately following receipt of
the financial statements acceptable to the Compensation and Personnel
Committee; and

          (c)   For the six months beginning July 1, 2002 and ending December
31, 2002, a bonus equal to the greater of Fifty Thousand Dollars ($50,000.00);
or one and one-half percent (1 1/2%) of the NPBT (calculated after deducting
bonuses of all employees) for the period of July 1, 2002 through December 31,
2002; provided however Employer shall advance to Employee a portion of said
bonus in the sum of Twenty-Five Thousand Dollars ($25,000.00) per quarter for
each of quarter of said six month period, and the balance paid immediately
following receipt of the audited financial statements.

          (d)   For calendar year 2003 a bonus equal to the greater of Fifty
Thousand Dollars ($50,000.00); or one and one-half percent (1 1/2%) of the
NPBT (calculated after deducting bonuses of all employees) for said fiscal
year ending December 31, 2003; provided however Employer shall advance to
Employee a portion of said bonus in the sum of Twenty-Five Thousand Dollars
($25,000.00) per quarter for each of the first three quarters of said fiscal
year, and the balance paid immediately following receipt of the audited
financial statements. Provided further, if Employee has received advance
payments that exceed the total bonus earned hereunder, Employee shall
immediately repay to Employer the amount of the excess.

          (e)   Pursuant to the Board's March 5, 2002 decision to extend this
contract through December 31, 2004, total compensation for fiscal year 2004
(January 1, 2004 through December 31, 2004) shall be equal to three and one-
half percent (3 1/2%) of the NPBT (calculated after deducting bonuses of all
employees).  The bonus payment for that period shall be three and one-half
percent (3 1/2%) of the NPBT (calculated after deducting bonuses of all
employees) less the amount paid to employee as base salary during said fiscal
year; provided however Employer shall advance to Employee a portion of said
bonus in the sum of Twenty-Five Thousand Dollars ($25,000.00) per quarter for
each of the first three quarters of said fiscal year, and the balance paid
immediately following receipt of the audited financial statements. Provided
further, if Employee has received advance payments that exceed the total
bonus earned hereunder, Employee shall immediately repay to Employer the
amount of the excess.  The employee shall not repay any amount paid as base
salary during said fiscal year regardless of NPBT results.  The currently paid
base salary for that period shall be deemed the employee's minimum compensation
during 2004.

          Employer's Board of Directors shall annually review Employee's base
salary.  All compensation paid shall be subject to deduction for required
Social Security, Federal Income Tax withholding and other mandated deductions.

     4.   Stock Options.  Employer herewith grants to Employee this 24th day of
January, 2001, contemporaneously with the execution and delivery of this
Agreement, the option to acquire One Hundred Thousand (100,000) shares of
capital stock in Cascade Financial Corporation in accordance with the terms
and conditions of its 1997 Stock Option Plan as set forth below:. Employee's
options shall vest in accordance with the terms and provisions of said Stock
Option Plan.  Employee will be eligible for annual grants of additional option
shares based on performance.  In the event of a "Change in Control" (as defined
in said Stock Option Plan), all options that have been granted to Employee shall
automatically vest.

          The foregoing Option shall be divided into two parts as follows:

          (a)   Incentive Stock Option.  Of the One Hundred Thousand (100,000)
option shares, 65,573 shares shall be Incentive Stock Option shares as defined
in said Stock Option Plan; and

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          (b)   Non-Qualified Stock Options Shares.  Of the One Hundred Thousand
(100,000) option shares, the remainder (34,427 shares), after deducting the
Incentive Stock Option shares granted pursuant to subparagraph 4(a) above, shall
be granted to Employee in her capacity as a Director as a "Director Option"
and Non-Qualified Stock Option as defined in said Stock Option Plan.

     5.   Employee Benefits.  Employee shall be entitled to the following
paid benefits:

          (a)   A contribution to a 401(k) plan acceptable to Cascade Bank at
a rate equivalent to the offering to similar employees, subject to the same
terms and conditions as similar employees, and subject to maximums as allowed
by federal law.  Terms of this Agreement are subject to the provisions of the
formal Plan Document and subject to vesting provisions of the current plan;

          (b)   An allowance of Twenty-Five (25) vacation days per year.

          (c)   Health insurance under a plan selected by Cascade Bank, for
single, individual coverage;

          (d)   Dental insurance under a plan selected by Cascade Bank, for
single, individual coverage;

          (e)   Life insurance in the amount of the approved benefit offering
of the applicable year; provided Employee shall have the option to pay
additional premiums for increased coverage;

          (f)   Voluntary participation (paid by Employee), as eligible, in all
approved benefit offerings of the applicable year, subject to the terms of
formal Plan Documents; and

          (g)   Voluntary participation (paid by Employee), as eligible, in
all approved disability insurance offerings selected by Cascade Bank in its
sole discretion.

     6.   Business Expenses.  Cascade Bank will pay or reimburse Employee for
reasonable and necessary business expenses incurred by Employee, which are
directly related to the performance of her duties of employment, including
travel, professional memberships and professional development, subject to
documentation by Employee and approval by Cascade Bank's Board of Directors
or its Chairperson.  Employer will pay Employee's current club monthly
membership dues at the Everett Golf and Country Club.

     7.   No Conflicts of Interests/Confidentiality.  Employee shall devote
full-time and attention to Employer's business, shall fully and faithfully
abide by Employer's conflict of interest and code of ethics policies and
directives and shall maintain the confidentiality of the Employer's
confidential and/or proprietary information possessed by, accessible or
known to Employee.  To the extent that such activities do not interfere
with her duties under Section 1 of this Agreement, Employee may participate
in other businesses as a passive investor, but (a) Employee may not actively
participate in the operation or management of those businesses, and (b)
Employee may not, without Employer's prior written consent, make or maintain
any investment in a business with which Employer has now or in the future a
competitive or commercial relationship.  Irrespective of anything hereinabove
set forth, Employee may not, without Employer's prior written consent, engage
in any activity or have an ownership interest in any entity that creates a
conflict of interest with Employer.

     8.   Federal Regulatory Provisions.

          (a)   If Employee is suspended and/or temporarily prohibited from
participating in the conduct of the bank's affairs by a notice served under
section 8 (e)(3) or (g)(1) of Federal Deposit Insurance Act (12 U.S.C. 1818
(e)(3) and (g)(1)) the Employer's obligations under the contract shall be
suspended as of the date of service unless stayed by appropriate proceedings.
If the charges in the notice are dismissed, Employer may in its discretion
(i) pay the Employee all or part of the compensation withheld while its
contract obligations were suspended, and (ii) reinstate (in whole or in part)
any of its obligations which were suspended.

          (b)   If Employee is removed and/or permanently prohibited from
participating in the conduct of the Employer's affairs by an order issued
under section 8 (e)(4) or (g)(1) of the U.S.C. 1818 (e)(4) or (g)(1)), all
obligations of Employer under the contract shall terminate as of the effective
date of the order, but vested rights of the contracting Parties shall not be
affected.

<PAGE>
          (c)   If Cascade Bank is in default (as defined in section 3(x)(1)
of the Federal Deposit Insurance Act), all obligations under the contract
shall terminate as of the date of default, but this paragraph (d) shall not
affect any vested rights of the contracting parties.

          (d)   All obligations under this Agreement shall be terminated,
except to the extent determined that continuation of the contract is
necessary to the continued operation of Cascade Bank:

          (i)   By the Director of the Federal Deposit Insurance Corporation
("Director") or his or her designee, at the time the Federal Deposit Insurance
Corporation enters into an agreement to provide assistance to or on behalf of
Cascade Bank under the authority contained in 13(c) of the Federal Deposit
Insurance Act; or

         (ii)   By the Director or his or her designee, at the time the Director
or his or her designee approves a supervisory merger to resolve problems related
to operation of Cascade Bank or when Cascade Bank is determined by the Director
to be in an unsafe or unsound condition.

     9.   Termination/Severance.

          (a)   In the event (i) Employer terminates this Agreement prior to
the expiration of its term or any extension thereof, other than termination
for Cause (as defined in Section 9(c) below), or (ii) Employee terminates this
Agreement with Good Reason (as defined in Section (d) below), Employee shall
immediately receive the annual compensation and bonuses provided for in Section
3 of this Agreement for the balance of the term of this Agreement, or two times
the amount of her then current year base salary and bonus whichever is greater;
provided, however, the extent that said severance benefit or pay constitutes a
"golden parachute payment" or a "prohibited indemnification payment" as defined
in 12 USC 1828 (k), said payment shall be made only to the extent permitted
under such regulations; provided, further, Employer shall seek all required
approvals and/or consents to permit payment of said severance benefit to the
maximum extent.

                Notwithstanding the foregoing, to the extent that any portion
of said severance benefit or pay constitutes an "excess parachute payment"
under 280G of the United States Internal Revenue Code, said severance benefit
or pay shall be reduced by the amount of the tax deduction disallowed to
Employer as a result of such excess parachute payment.

          (b)   Employer's Board of Directors may terminate Employee's
employment at any time, but any termination by the Employer's Board of
Directors other than termination for Cause, shall not prejudice Employee's
right to compensation or other benefits under the contract.  The Employee shall
have no right to receive compensation or other benefits for any period after
termination for Cause.

          (c)   "Cause" means any one or more of the following: termination
because of Employee's personal dishonesty, incompetence, willful misconduct,
breach of fiduciary duty involving personal profit, intentional failure to
perform stated duties, insubordination, willful violation of any law, rule,
or regulation (other than traffic violations or similar offenses) or final
cease-and-desist order, or material breach of any provision of this Agreement.

          (d)   "Good Reason" means any one or more of the following:
Reduction of the base salary or an alteration of the bonus formulas set forth
in Section 3 of this Agreement during the term of this Agreement without
Employee's consent; the assignment of Employee without her consent of any
duties materially inconsistent with Employee's position as of the date of this
Agreement; or a relocation or transfer of Employee's principal place of
employment that would require Employee to commute on a regular basis more
than 40 miles each way from the Employer's main office as of the date of this
Agreement; during the period within three (3) years following a "change in
control" (as defined in Section 10 below), any change by the Employer in the
exact title and/or responsibilities of the Employee.

<PAGE>
          (e)   In the event Employee voluntarily terminates her employment
prior to expiration of the initial term of this Agreement, to enable her to
enter into any business or arrangement with another person or entity in
competition with Cascade Bank or Cascade Financial Corporation whether as an
employee, owner, partner, joint venturer, or otherwise, Employee shall
immediately pay to Employer as liquidated damages, the sum of One Hundred
Thousand Dollars ($100,000.00) and Employer shall have the right to offset
said liquidated damages against any amount otherwise owing to Employee by
Employer at the time of such termination.  Additionally, Employee agrees not
to actively solicit or offer jobs on behalf of herself or any competing person
or entity to any employees of Cascade Bank or Cascade Financial Corporation.
The parties agree that Cascade Bank and Cascade Financial Corporation would be
substantially damaged in the event Employee terminated her employment prior to
the expiration of this Agreement and that said damages are and would be
extremely difficult if not impossible to calculate and that the foregoing
liquidated damage provision is a reasonable estimate of the amount of such
damages.

     10.   Change in Control.  If, at any time within three (3) years after
a change in control (as defined below) of Cascade Bank or Cascade Financial
Corporation, the Employee is terminated without Cause or Employee terminates
for good reason, the Employee shall receive severance benefit/pay as follows:
(i) if the termination is within 12 months after the change in control, the
severance benefit/pay will be three times the Employee's annual compensation
and bonus for the prior year paid pursuant to Section 3, otherwise; (ii) if
the termination occurs more than 12 months after the change in control, the
severance benefit/pay will be as provided in Section 9(a) above.

     Except in the event Employee is terminated by Employer, the severance
benefit/pay provided for in this section 10, shall not be payable under either
of the following circumstances:  Employee fails to remain employed and fully
and faithfully carry out and discharge her duties and responsibilities
including duties and responsibilities assigned in connection with any change
of control transaction(s) until thirty (30) days following the closing of such
change of control transaction(s) or until relieved of said duties and
responsibilities by Employer's Board of Directors, whichever occurs first; or
a change of control is effectuated through a transaction or combination of
transactions while Cascade Bank and/or Cascade Financial Corporation is
financially distressed and/or said transactions are undertaken pursuant
to regulatory mandate, or with regulatory assistance.

     For purposes of this Section 10, for a period of one (1) year following any
change in control, any change in the exact title and/or responsibilities of
Employee will be deemed an involuntary termination of Employee without cause.

     For purposes of this Agreement, a "change in control" shall mean:

(a) An event of a nature that would be required to be reported in
response to Item 1(a) of the current report on Form 8-K, as in effect on the
date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act");

     (b)   Any "person," as such term is used in Sections 13(d) and 14(d) of
the Exchange Act,  other than Cascade Financial Corporation or any subsidiary
or subsidiaries of Cascade Financial Corporation that are part of the
affiliated group (as defined in Section 1504 of the Internal Revenue Code of
1986, as amended, without regard to subsection (b) thereof), is or becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) directly or
indirectly of securities of Cascade Bank or Cascade Financial Corporation
representing 25% or more of the combined voting power of Cascade Bank's or
Cascade Financial Corporation's outstanding securities;

     (c)   Individuals who are members of the Board of Directors of Cascade
Financial Corporation (the "Board") on the Commencement Date (the "Incumbent
Board") cease for any reason to constitute at least a majority thereof,
provided that any person becoming a director subsequent to the Commencement
Date whose election was approved by a vote of at least three-quarters of the
directors comprising the Incumbent Board or whose nomination for election by
Cascade Financial Corporation's stockholders was approved by the nominating
committee serving under an Incumbent Board or who was appointed as a result
of a change at the direction of the Federal Reserve Board or the Federal
Deposit Insurance Corporation ("FDIC"), shall be considered a member of the
Incumbent Board;

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     (d)   The stockholders of Cascade Financial Corporation approve a merger,
consolidation or acquisition of Cascade Financial Corporation or Cascade Bank,
with or by any other corporation or entity, other than (1) a merger,
consolidation or acquisition which would result in the voting securities of
Cascade Financial Corporation outstanding immediately prior thereto continuing
to represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 50% of the combined voting power
of the voting securities of Cascade Financial Corporation or such surviving
entity outstanding immediately after such merger or consolidation or (2) a
merger or consolidation effected to implement a recapitalization of Cascade
Financial Corporation or Cascade Bank (or similar transaction) in which no
person (as hereinabove defined) acquires more than 25% of the combined voting
power of Cascade Financial Corporation's then outstanding securities; or

     (e)   The stockholders of Cascade Financial Corporation approve a plan of
complete liquidation of Cascade Financial Corporation or Cascade Bank or an
agreement for the sale or disposition by Cascade Financial Corporation of all
or substantially all of Cascade Financial Corporation's or Cascade Bank's
assets (or any transaction having a similar effect); provided that the term
"Change o Control" shall not include an acquisition of securities by an
employee benefit plan of Cascade Bank or Cascade Financial Corporation or a
change in the composition of the Board at the direction of the Federal Reserve
Board or the FDIC.

     11.   Independent Legal Counsel.  Employee acknowledges that she has had
the opportunity to review and consult with her own personal legal counsel
regarding this Agreement.

     12.   Arbitration.  Any dispute or controversy arising under or in
connection with this Agreement shall be resolve exclusively by binding
arbitration in accordance with the Commercial Rules of the American
Arbitration Association then in effect.  Judgment may be entered on the
arbitrator's award in any court having jurisdiction.

     13.   Governing Law.  This Agreement shall be governed by the law of the
State of Washington and shall be subject to applicable federal laws and
regulations.

     14.   Entire Agreement.  This instrument contains the entire agreement
of the Parties hereto.  The Parties intend that the terms of this Agreement
shall be the final expression of their Agreement with respect to the subject
matter hereof and may not be contradicted by evidence of any prior or
contemporaneous agreement or understanding.  The Parties further intend that
this Agreement shall constitute the complete and exclusive statement of its
terms and that no extrinsic evidence whatsoever may be introduced in any
judicial, administrative, arbitral, or other legal proceeding involving this
Agreement.  This Agreement may not be changed orally, but may only be changed
by an Agreement in writing, proved by the Employer's Board of Directors and
the Employee executed and delivered by their duly authorized representatives.
The provisions of this Agreement are severable; the invalidity of any
provision will not affect the validity of other provisions of this
Agreement.

     IN WITNESS WHEREOF, Employer has caused this Agreement to be executed by
its duly authorized Board Representative and Employee has signed this
Agreement.

EMPLOYER                                   EMPLOYEE

CASCADE BANK


By:
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    Frank M. McCord                        Carol Kobuke Nelson


Its:
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