SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(MARK ONE)

For the quarterly period ended: June 30, 2002

For the transition period from______ to______

Commission file number: 0-23322

CASCADE BANCORP
(Exact name of Registrant as specified in its charter)

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

(541) 385-6205
(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |   |

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 12,490,967 shares of no par value Common Stock on August 2, 2002.

CASCADE BANCORP & SUBSIDIARIES
FORM 10-Q
QUARTERLY REPORT
JUNE 30, 2002

INDEX

2

Cascade Bancorp & Subsidiaries
Condensed Consolidated Balance Sheets
June 30, 2002 and December 31, 2001
(Unaudited)

See accompanying notes.

3

Cascade Bancorp & Subsidiaries
Condensed Consolidated Statements of Income
Six Months and Three Months ended June 30, 2002 and 2001
(Unaudited)

See accompanying notes.

4

Cascade Bancorp & Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders’ Equity
Six Months Ended June 30, 2002 and 2001
(Unaudited)

See accompanying notes.

5

Cascade Bancorp & Subsidiaries
Condensed Consolidated Statements of Cash Flows
Six Months ended June 30, 2002 and 2001
(Unaudited)

See accompanying notes.

6

Cascade Bancorp & Subsidiaries
Notes to Condensed Consolidated Financial Statements
June 30, 2002
(Unaudited)

1. Basis of Presentation

     The accompanying interim condensed consolidated financial statements include the accounts of Cascade Bancorp (Bancorp), a financial holding company, and its wholly-owned subsidiaries, Bank of the Cascades (the Bank) and Cascade Bancorp Financial Services, Inc. (presently inactive) (collectively, “the Company”). All significant intercompany accounts and transactions have been eliminated in consolidation.

     The interim condensed consolidated financial statements are prepared by the Company without audit and in conformity with generally accepted accounting principles in the United States for interim financial statements. Accordingly, certain financial information and footnotes have been omitted or condensed. In the opinion of management, the condensed consolidated financial statements include all necessary adjustments (which are of a normal and recurring nature) for the fair presentation of the results of the interim periods presented. In preparing the condensed consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheets and income and expenses for the periods. Actual results could differ from those estimates.

     The balance sheet data as of December 31, 2001 was derived from audited financial statements, but does not include all disclosures contained in the Company’s 2001 Annual Report to Shareholders.

     The interim condensed consolidated financial statements should be read in conjunction with the December 31, 2001 consolidated financial statements, including the notes thereto, included in the Company’s 2001 Annual Report to Shareholders.

     Certain amounts for 2001 have been reclassified to conform with the 2002 presentation.

2. Investment Securities

     Investment securities at June 30, 2002 and December 31, 2001 consisted of the following:

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2. Investment Securities (cont.)

3. Lending, Credit Management, and Non-Performing Assets

     The composition of the loan portfolio at June 30, 2002 and December 31, 2001 was as follows:

     Mortgage real estate loans include mortgage loans held for sale of approximately $2,725,000 at June 30, 2002 and approximately $4,319,000 at December 31, 2001.

     The Company has a comprehensive risk management process to underwrite, monitor and manage credit risk in lending. The Company Loan Policy details specific underwriting guidelines, portfolio limitations, and approval practices in the origination of loans. The underwriting process relies on historical and prospective cash flow analysis augmented by collateral assessment, credit bureau information, as well as business plan assessment. Ongoing loan portfolio monitoring is performed by a centralized credit administration function including review and testing of compliance to loan policies and procedures. In addition, internal and external examiners periodically sample and test certain credit files.

     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. Risks associated with real estate loans include fluctuating land values, national, regional and local economic conditions, changes in tax policies, and a concentration of loans within the Company’s market area. The Company’s real estate loan portfolio includes commercial real estate loans, as well as construction loans for residential and commercial development, as well as construction and permanent loans for owner occupied residential housing. The expected source of repayment of these loans is generally the operations of the borrower’s business, or the obligor’s personal income. Management believes that real estate collateral provides an additional measure of security. Approximately two-thirds of commercial real estate loans consist of loans made to owner-occupied users of the property, which mitigates, but does not eliminate, commercial real estate risk. With respect to residential construction, the Company generally lends funds to customers that have been pre-qualified for long term financing and who are using experienced contractors acceptable to the Company.

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     Risk of nonpayment exists with respect to all loans, which could result in the classification of such loans as non-performing. The following table presents information with respect to non-performing assets at June 30, 2002 and December 31, 2001 (dollars in thousands):

     2001 non-performing assets included a single term commercial real estate credit that became non-performing in the first quarter of 2001 in the amount of $1.8 million. At June 30, 2002, non-performing assets decreased to .28% of total assets primarily due to trustee sale of several properties related to that credit, with recovery proceeds applied to the carrying value. Management believes that the remaining net carrying value of this and other non-performing assets are adequately secured.

     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 non-accrual 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 non-accrual 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. Interest income that was reversed and charged against income for the six months ended June 30, 2002 was approximately $72,000 (including $35,000 on the above mentioned single term credit) and was approximately $262,000 (including $109,000 on the above mentioned single term credit) for the six months ended June 30, 2001.

     At June 30, 2002, except as discussed above, there were no potential material problem loans 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.

4. Reserve for Loan Losses

     The reserve for loan losses represents management’s recognition of the assumed and present risks of extending credit and the possible inability or failure of the obligors to make repayment. The reserve is maintained at a level considered adequate to provide for loan losses based on management’s assessment of a variety of current factors affecting the loan portfolio. Such factors include loss experience, review of problem loans, current economic conditions, and an overall evaluation of the quality, risk characteristics and concentration of loans in the portfolio. The reserve is increased by provisions charged to operations and reduced by loans charged-off, net of recoveries. No assurance can be given that in any particular period loan losses could be sustained that are sizable in relation to the amount reserved, or that changing economic factors or other environmental conditions could cause increases in the loan loss provision.

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     Transactions in the reserve for loan losses for the six months ended June 30, 2002 and 2001 were as follows: