Cashmere Valley Bank Reports Quarterly Earnings of $7.7 Million
04/18/2023 - 07:00 PM
CASHMERE, WA / ACCESSWIRE / April 18, 2023 / Cashmere Valley Bank (OTCQX:CSHX) ("Bank"), announced quarterly earnings of $7.7 million for the quarter ended March 31, 2023. Diluted earnings per share were $1.99 , representing an increase of $0.43 per share, or 27.6% .
"We are proud to report our first quarter earnings and the improvement these earnings represent," said Greg Oakes, President and CEO. "The benefit of higher rates on our net interest margin is significant. The downside of higher rates is that deposit competition and our costs to retain deposits is starting to increase at a rapid pace. We continue to deploy strategies to attract and retain deposits. In addition, we are continuing to try to unwind the level of unrealized loss in our securities portfolio."
Q1 Highlights The Bank reported the following statement of condition highlights as of March 31, 2023:
As of March 31, 2023, gross loans totaled $1.01 6 billion, representing an increase from March 31, 2022 of $44.5 million . Deposit balances totaled $1.84 billion as of March 31, 2023. Deposit balances decreased $120.9 million , or 6.2% , from March 31, 2022. Non-interest deposits totaled $425.5 million as of March 31, 2023, which represents 23.1% of total deposits. Cash, Cash Equivalents and Restricted Cash Total cash, cash equivalents and restricted cash were $110.5 million at March 31, 2023, compared to $87.6 million at March 31, 2022. The $22.8 million increase was primarily due to efforts to retain higher cash balances as rates paid to the Bank on overnight funds have increased significantly from one year ago. Rates have increased from 0.40% to 4.90% from March 31, 2022 to March 31, 2023. Available borrowing lines from the Federal Home Loan Bank and the Federal Reserve total approximately $347 million . As of March 31, 2023, the Bank had full borrowing capacity as no advances had been made.
Investments The investment portfolio totaled $836.3 at March 31, 2023, a decrease of $224.5 million from March 31, 2022. As of March 31, 2023, available for sale securities totaled $691.9 million and held to maturity securities totaled $144.4 million . For the quarter ended March 31, 2023, securities earned 3.17% as compared to 1.99% one year ago. The increase in the earnings rate is attributable to increasing yields on floating rate securities in combination with higher rates on new securities purchases.
As of March 31, 2023, unrealized losses on available for sale securities totaled $76.7 million . Additionally, there was a $7.1 million unrealized loss on held to maturity securities. To conform with generally accepted accounting principles, held to maturity securities are recorded on the balance sheet at amortized cost. The unrealized loss on held to maturity securities was not recorded on the balance sheet. As of March 31, 2022, the unrealized loss on available for sale securities totaled $52.7 million and there was no loss on held to maturity securities.
Loans and Credit Quality Gross loans totaled $1.01 6 billion as of March 31, 2023, which is an increase of $44.5 million from March 31, 2022. Since March 31, 2022, loan growth was reported for purchased auto dealer loans of $39.2 million , equipment finance loans of $16.6 million , and multi-family loans of $23.8 million . Decreases in loan balances were noted for commercial real estate loans of $25.6 million and municipal loans of $9.5 million .
The Bank adopted the Current Expected Credit Losses (CECL) Methodology on January 1, 2023. As part of the adoption the Bank lowered the Allowance for Credit Losses on Loans balance by $1.1 million and increased the unfunded commitment reserve by $2.1 million . According to generally accepted accounting principles (GAAP) the changes to reserve amounts were applied against capital net of tax rather than through earnings. The allowance for credit losses on loans (ACL) was 1.26% of gross loans as compared to 1.41% one year ago. During the first quarter of 2023, provision expense of $605,000 was recorded, and the allowance totaled $12.8 million .
Credit quality remains exceptionally strong with non-performing loans representing 0.15% of gross loans as of March 31, 2023. This is a slight increase from 0.03% as of March 31, 2022.
Deposits Deposits totaled $1.84 billion at March 31, 2023. The average cost of deposits increased 36 basis points to 0.63% for the quarter ended March 31, 2023 as compared to 0.27% for the quarter ended March 31, 2022.
Equity Tier 1 capital remains strong. Tier 1 capital increased to $238.0 million as of March 31, 2023 an increase from $217.9 at March 31, 2022. The increase is due to earnings less dividends paid during the first quarter. The first quarter dividend was paid February 13, 2023 at a rate of $0.85 per share.
As of March 31, 2023, GAAP capital reflects a decrease of $11.0 million from March 31, 2022. The decrease was a result of market value changes in securities as a result of the increase in the treasury yield curve, which was partially offset by earnings.
Earnings
Net Interest Income Net interest income totaled $17.3 million in the first quarter of 2023, compared to $13.6 million in the same quarter a year ago. The increase from the prior quarter was attributable to an improvement in yields on earning assets of 108 basis points as compared to an increase of 36 basis points in deposit expenses.
Loan interest income increased $1.8 million over the same quarter one year ago as the average yield on loans increased from 3.91% to 4.40% .
Interest income on available for sale and held to maturity securities increased $1.7 million from one year ago as the average yield on securities increased from 1.99% to 3.17% .
Interest income from deposits with other financial institutions increased $1.4 million as the average yield on interest bearing accounts increased from 0.18% to 4.63% .
The net interest margin was 3.42% for the first quarter of 2023, compared to 2.58% during the first quarter of 2022.
Non-Interest Income Non-interest income totaled $4.5 million in the first quarter of 2023 as compared to $4.5 million in the first quarter of 2022. As mortgage purchases and refinances have slowed, income from mortgage banking operations decreased to $312,000 in the first quarter of 2023 as compared to $755,000 in the first quarter of 2022. Income from insurance commission and fees increased to $1.9 million from $1.7 million in the first quarter of 2022. Net interchange income has increased significantly from $654,000 in the first quarter of 2022 to $1,360,000 in the first quarter of 2023. While interchange volume has increased, the bulk of the increase was due to improved interchange pricing. Price improvements were negotiated for higher interchange income as well as reductions in costs incurred for processing debit card transactions.
Non-Interest Expense Non-interest expense totaled $11.8 million in the first quarter of 2023 as compared to $11.0 million in the first quarter of 2022.
The primary driver of the increase in non-interest expense has been the increase in salaries and benefits. As compared to the same period one year ago, wages and benefits expense increased $670,000 or 10.5% . Wages and health care premiums are up substantially in an effort to attract and retain employees.
The Bank's efficiency ratio was 54.0% in the first quarter of 2023 as compared to 61.0% in the first quarter of 2022.
About Cashmere Valley Bank Cashmere Valley Bank was established September 24, 1932 and now has 11 retail offices in Chelan, Douglas, Kittitas and Yakima Counties and a municipal lending office in King County. The Bank provides business and personal banking, commercial lending, insurance services through its wholly owned subsidiary Mitchell, Reed & Schmitten Insurance, investment services, mortgage services, equipment lease financing, auto and marine dealer financing and municipal lending. The success of Cashmere Valley Bank is the result of maintaining a high level of personal service and controlling expenses so our fees and charges offer our customers the best value available. We remain committed to those principles that we feel are best summarized as, "the little Bank with the big circle of friends."
Forward-Looking Statements This release may contain certain forward-looking statements that are based on management's current expectations regarding economic, legislative, and regulatory issues that may impact the Bank's earnings in future periods. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include the words "believe," "expect," "intend," "anticipate," "estimate," "will," "would," "should," "could" or "may." Factors that could cause future results to vary materially from current management expectations include, but are not limited to, general economic conditions, economic uncertainty in the United States and abroad, changes in interest rates, deposit flows, real estate values, costs or effects of acquisitions, competition, changes in accounting principles, policies or guidelines, legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors affecting the Bank's operations. The Bank undertakes no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.
MEDIA CONTACT Greg Oakes, CEO, (509) 782-2092 or Mike Lundstrom, CFO, (509) 782-5495
Consolidated Balance Sheets (UNAUDITED)
(Dollars in Thousands)
Cashmere Valley Bank and Subsidiary
March 31, 2023 December 31, 2022 March 31, 2022 Assets
Cash and Cash Equivalent:
Cash & due from banks
$ 24,027 $ 27,706 $ 24,697 Interest bearing deposits
82,565 142,617 54,485 Fed funds sold
3,863 9,989 8,434 Total Cash and Cash Equivalent
110,455 180,312 87,616
Securities available for sale
691,926 670,077 1,060,851 Securities held to maturity, net of allowance for credit losses of $347 and $0 , respectively
144,381 146,409 - Federal Home Loan Bank stock, at cost
2,505 2,669 2,669 Loans held for sale
4 142 910
Loans
1,016,257 1,005,741 971,745 Allowance for credit losses
(12,831 ) (13,746 ) (13,707 ) Net loans
1,003,426 991,995 958,038
Premises and equipment
19,286 18,275 17,047 Accrued interest receivable
8,486 8,199 9,237 Bank Owned Life Insurance
26,275 26,105 26,653 Goodwill
7,576 7,576 7,576 Intangibles
3,715 3,796 4,115 Mortgage servicing rights
2,628 2,685 2,744 Net deferred tax assets
21,293 21,021 12,277 Other assets
7,861 8,501 9,774
Total assets
$ 2,049,817 $ 2,087,762 $ 2,199,507
Liabilities and Shareholders' Equity
Liabilities
Deposits:
Non-interest bearing demand
$ 425,526 $ 457,666 $ 440,821 Savings and interest-bearing demand
1,093,805 1,228,375 1,325,500 Time
321,767 213,978 195,719 Total deposits
1,841,098 1,900,019 1,962,040
Accrued interest payable
1,060 434 363 Short-term borrowings
14,163 17,166 34,887 Other liabilities
15,326 11,753 13,027
Total liabilities
1,871,647 1,929,372 2,010,317
Shareholders' Equity
Common stock (no par value); authorized 10,000,000 shares;
Issued and outstanding: 3/31/2023 -- 3,883,971 ; 12/31/2022 -- 3,883,956 ; 3/31/2022 -- 3,883,801
-- -- -- Additional paid-in capital
4,660 4,540 4,393 Treasury stock
(16,784 ) (16,784 ) (16,784 ) Retained Earnings
263,123 259,839 243,219 Other comprehensive income
(72,986 ) (89,239 ) (41,638 ) Total Cashmere Valley Bank shareholders' equity
178,013 158,356 189,190
Noncontrolling interests
157 34 - Total shareholders' equity
178,170 158,390 189,190
Total liabilities and shareholders' equity
$ 2,049,817 $ 2,087,762 $ 2,199,507
Quarterly Consolidated Statements of Income (UNAUDITED) (Dollars in Thousands)
Cashmere Valley Bank & Subsidiary
For the quarters ended,
March 31, 2023 December 31, 2022 March 31, 2022 Interest Income
Loans
$ 10,953 $ 10,641 $ 9,197 Fed funds sold and deposits at other financial institutions
1,467 1,190 33 Securities available for sale:
Taxable
5,568 4,904 3,746 Tax-exempt
689 1,099 1,646 Securities held to maturity:
Taxable
804 773 - Tax-exempt
46 41 - Total interest income
19,527 18,648 14,622
Interest Expense
Deposits
2,230 1,261 1,029 Short-term borrowings
7 12 16 Total interest expense
2,237 1,273 1,045
Net interest income
17,290 17,375 13,577
Provision for Credit Losses
605 307 47
Net interest income after provision for credit losses
16,685 17,068 13,530
Non-Interest Income
Service charges on deposit accounts
541 557 491 Mortgage banking operations
312 422 755 Net gain (loss) on sales of securities available for sale
(365 ) (1,019 ) 135 Brokerage commissions
270 275 276 Insurance commissions and fees
1,863 2,091 1,673 Net interchange income (expense)
1,360 1,204 654 BOLI cash value
170 729 168 Dividends from correspondent banks
27 21 25 Other
287 330 311 Total non-interest income
4,465 4,610 4,488
Non-Interest Expense
Salaries and employee benefits
7,075 5,935 6,405 Occupancy and equipment
928 916 906 Audits and examinations
89 103 193 State and local business and occupation taxes
323 360 279 FDIC insurance & WA state assessments
165 171 173 Legal and professional fees
245 223 209 Check losses and charge-offs
117 109 133 Low income housing investment losses
155 151 144 Data processing
1,539 1,479 1,283 Product delivery
314 309 323 Other
807 889 979 Total non-interest expense
11,757 10,645 11,027
Income before income taxes
9,393 11,033 6,991
Income Taxes
1,670 1,344 913
Net income
$ 7,723 $ 9,689 $ 6,078
Net income attributable to noncontrolling interest
6 - - Net income attributable to Cashmere Valley Bank
$ 7,717 $ 9,689 $ 6,078
Earnings Per Share
Basic
$ 1.99 $ 2.49 $ 1.57 Diluted
$ 1.99 $ 2.49 $ 1.56
SOURCE: Cashmere Valley Bank
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