Cashmere Valley Bank Reports Record Annual Earnings of $29.0 Million
01/18/2022 - 10:00 PM
CASHMERE, WA / ACCESSWIRE / January 18, 2022 / Cashmere Valley Bank (OTCQX:CSHX) ("Bank"), announced annual earnings of $29.0 million for the year ended December 31, 2021. Diluted earnings per share was $7.39, representing an increase of $0.97 per share, or 15.1%. Earnings per share growth of 15.1% marks consecutive years with double digit earnings per share growth.
As of December 31, 2021, deposit balances totaled $1.9 billion. Deposit balances increased approximately $216.6 million from December 31, 2020 representing a 12.6% increase, which also makes consecutive years with double-digit growth.
On January 18, 2022 the Bank's Board of Director's declared a semi-annual dividend payment of $0.85 per share to shareholders of record on January 28, 2022. The dividend will be paid on February 7, 2022.
"2021 was an outstanding year for Cashmere Valley Bank" said Greg Oakes, President and CEO. "Though the interest rate environment and personnel expenses provided challenges, the Bank was able to attain significant income growth and achieve record earnings. The one-time nature of Payment Protection Program loan income will provide challenges going forward to repeat these results especially if the labor market continues at its current trajectory."
2021 Highlights
Net income increased 13.8% to $29.0 million for the year ended December 31, 2021 versus $25.5 million for fiscal year 2020.
Diluted earnings per share increased 15.1% to $7.39 per share. Earnings per share improved as a result of increased earnings in combination with a reduced share count due to the Bank's second quarter share repurchase. The total number of shares repurchased in 2021 was 98,223. The repurchase increased diluted earnings per share $0.12 for the year ended December 31, 2021.
Return on equity increased 65 basis points 12.24% from 11.59%.
Return on assets decreased five basis points to 1.36%. Significant asset growth in combination with declining asset yields contributed to the decrease.
The Bank's net interest margin declined to 2.60% from 2.71% a year ago. Margin compression was due to significant deposit growth which has increased the Bank's lower yielding securities portfolio. The margin was also affected because cash balances remained high throughout the year and yields on cash were near zero in 2021.
The efficiency ratio increased slightly to 55.6% from 54.2% during the same time period one year ago. The efficiency ratio increased as a result of increasing costs, largely in salaries and benefits.
Pandemic Response Update
Payment Protection Program (PPP) loan balances decreased from $53.5 million on December 31, 2020 to $10.0 million on December 31, 2021. Income from PPP loans increased by $2.8 million in 2021 as compared to 2020. PPP loan income increased due to a significant increase in PPP forgiveness. As of December 31, 2021, the Bank had approximately $440,000 in PPP fees to record into income upon forgiveness from SBA. Cash, Cash Equivalents and Restricted Cash
Cash balances decreased to $114.0 million at December 31, 2021 from $135.7 million as of December 31, 2020. Cash was reduced as the Bank put its deposits to work in the loan portfolio and available for sale securities.
Available for Sale Securities
Balances on available for sale securities increased 28.8% during 2021 to $1.1 billion. The book value of municipal securities increased $117.2 million, collateralized mortgage obligations (CMO's) increased $111.1 million, corporate securities increased $28.1 million and treasury securities increased $27.3 million. As of December 31, 2021, the average portfolio yield was 1.94% which represented a decrease from December 31, 2020 of two basis points. As of December 31, 2021, non-governmental securities had a book value of $150.6 million. This was an increase from $34.0 million at December 31, 2020. Loans and Credit Quality
December 31, 2021 gross loans totaled $940.8 million representing a decrease of $10.2 million or 1.1% from December 31, 2020. Excluding PPP loans, net loan growth was $33.3 million during 2021. Commercial real estate loans increased $20.3 million, construction loans increased $17.2 million and equipment finance loans increased $11.4 million. The allowance for loan and lease losses (ALLL) was 1.46%, which represented a two-basis point increase from December 31, 2020. The Bank did not record any provisions for loan losses during 2021. Activity through the ALLL represented only nominal charge-off and recovery activity which increased the ALLL by $44,000. Non-performing loans totaled $404,000 as of December 31, 2021, representing .04% of gross loans. Deposits
Total deposits showed continued strength with a second consecutive year of double-digit growth as they increased $216.6 million or 12.6%. Non-interest bearing checking accounts increased to $432.6 million, an increase of $67.0 million or 18.3%. Savings, money market and interest bearing checking accounts increased $180.1 million or 14.9%. Certificates of deposit balances decreased $30.4 million or 13.0%.
Capital
As of December 31, 2021, shareholder's equity totaled $239.2 million, a modest increase from $238.7 million at December 31, 2020. The Bank repurchased $6.9 million in stock in 2021 and paid cash dividends of $6.1 million. Capital also decreased $16.1 million due to a decrease in the Bank's unrealized gain on available for sale investment securities which was primarily due to an increase in treasury rates during 2021. These reductions in capital were offset by the Bank's year-to-date earnings.
A total of $13.0 million was returned to shareholders in the form of dividends and a share repurchase in 2021, while $13.5 million was paid to shareholders in the form of regular and special dividends during 2020.
Earnings
Net Interest Income
Net interest income totaled $52.7 million for the year ended December 31, 2021 as compared to $46.7 million for the year ended December 31, 2020. The increase of $6.0 million represented an increase of 12.9%. Interest income on PPP loans increased $2.8 million in 2021 as compared to 2020. Increase in PPP income was driven by forgiveness on PPP loans during 2021. Interest income also increased due to the expansion in balances of available for sale securities. Interest income on available for sale securities increased $3.6 million in fiscal year 2021 as compared to 2020. Interest expense decreased $1,741,000 or 25.3% from the prior year. The majority of the decrease was realized in time deposits. The Bank's cost of funds decreased from 0.55% in 2020 to 0.35% in 2021.
Non-Interest Income
Non-interest income decreased $1.1 million, 5.3% as compared to 2020. 2020 was a banner year in mortgage banking due to an extremely high level of mortgage refinances. Mortgage banking revenue decline from $7.6 million to $5.5 million in 2021. Debit card interchange income increased to $3.9 million from $2.2 million as a result of a vendor switch and a $1.1 million non-recurring event.
Non-Interest Expense
Non-interest expense increased $3.6 million or 10.2% in 2021. The Bank was not exempt from labor market challenges throughout 2021. Our regional labor market presented challenges as salaries and benefits expenses increased $2.2 million or 10.8%. Non-interest expenses outside of salaries and benefits increased $1.4 million or 9.4%. Professional and legal fees increased $491,000 largely as a result of consulting fees related to the Bank's core processing renewal negotiation. These fees will be amortized over the life of the seven-year contract and total $310,000 annually.
The provision for loans losses increased $81,000 in 2021 due to charge off and recovery activity. In 2020, provision expense totaled $3.2 million due to concerns related to COVID.
Federal income tax expense increased approximately $930,000 from the prior year due to an increase in earnings and a small increase in the Bank's effective tax rate. The Bank's effective tax rate was 14.6% for 2021 as compared to 13.6% in 2020.
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.
CONTACT:
Greg Oakes, CEO (509) 782-2092 Mike Lundstrom, CFO (509) 782-5495
Consolidated Balance Sheets (UNAUDITED)
(Dollars in Thousands)
Cashmere Valley Bank and Subsidiary
December 31, 2021 September 30, 2021 December 31, 2020 Assets
Cash and Cash Equivalent:
Cash & due from banks
$ 22,450 $ 26,878 $ 27,258 Interest bearing deposits
81,399 56,910 97,466 Fed funds sold
10,155 8,352 10,990 Total Cash and Cash Equivalent
114,004 92,140 135,714
Securities available for sale
1,103,232 1,086,559 856,327 Federal Home Loan Bank stock, at cost
2,393 2,393 1,982 Loans held for sale
1,148 356 1,470
Loans
940,802 946,843 950,970 Allowance for credit losses
(13,774 ) (13,760 ) (13,730 ) Net loans
927,028 933,083 937,240
Premises and equipment
17,058 17,061 16,381 Accrued interest receivable
8,553 8,851 7,829 Bank Owned Life Insurance
26,485 26,313 15,908 Goodwill
7,576 7,518 7,182 Intangibles
4,285 2,044 1,564 Mortgage servicing rights
2,802 2,759 2,856 Other assets
9,738 10,187 9,835
Total assets
$ 2,224,302 $ 2,189,264 $ 1,994,288
Liabilities and Shareholders' Equity
Liabilities
Deposits:
Non-interest bearing demand
$ 432,621 $ 443,846 $ 365,645 Savings and interest-bearing demand
1,301,169 1,257,270 1,121,111 Time
202,787 209,088 233,215 Total deposits
1,936,577 1,910,204 1,719,971
Accrued interest payable
403 437 612 Short-term borrowings
34,504 29,344 16,395 Other liabilities
13,721 13,976 18,631
Total liabilities
1,985,205 1,953,961 1,755,609
Shareholders' Equity
Common stock (no par value); authorized 10,000,000 shares;
Issued and outstanding: 12/31/2021 -- 3,880,811 ; 9/30/2021 -- 3,880,786 ; 12/31/2020 -- 3,972,149
4,186 4,150 3,723 Treasury stock
(16,784 ) (16,784 ) (9,908 ) Retained Earnings
240,439 233,608 217,487 Accumulated other comprehensive income
11,256 14,329 27,377 Total shareholders' equity
239,097 235,303 238,679
Total liabilities and shareholders' equity
$ 2,224,302 $ 2,189,264 $ 1,994,288
Year-to-Date Consolidated Statements of Income (UNAUDITED) (Dollars in Thousands)
Cashmere Valley Bank & Subsidiary
For the twelve months ended,
December 31, 2021 December 31, 2020 Interest Income
Loans
$ 39,151 $ 38,119 Fed funds sold and deposits at other financial institutions
106 412 Securities available for sale:
Taxable
12,041 9,368 Tax-exempt
6,595 5,711 Total interest income
57,893 53,610
Interest Expense
Deposits
5,094 6,847 Short-term borrowings
50 38 Total interest expense
5,144 6,885
Net interest income
52,749 46,725
Provision for Credit Losses
81 3,174
Net interest income after provision for credit losses
52,668 43,551
Non-Interest Income
Service charges on deposit accounts
1,634 1,247 Mortgage banking operations
5,531 7,621 Net gain (loss) on sales of securities available for sale
1 2,520 Brokerage commissions
1,327 1,002 Insurance commissions and fees
5,368 4,616 Net interchange income (expense)
3,948 2,246 BOLI cash value
578 461 Dividends from correspondent banks
74 66 Other
1,439 1,237 Total non-interest income
19,900 21,016
Non-Interest Expense
Salaries and employee benefits
22,120 19,969 Occupancy and equipment
3,123 2,997 Audits and examinations
433 479 State and local business and occupation taxes
1,032 952 FDIC insurance & WA state assessments
627 472 Legal and professional fees
991 500 Check losses and charge-offs
540 413 Low income housing investment losses
588 688 Data processing
4,637 4,636 Product delivery
1,126 1,030 Other
3,369 2,891 Total non-interest expense
38,586 35,027
Income before income taxes
33,982 29,540
Income Taxes
4,949 4,019
Net income
$ 29,033 $ 25,521
Earnings Per Share
Basic
$ 7.42 $ 6.43 Diluted
$ 7.39 $ 6.42
Quarterly Consolidated Statements of Income (UNAUDITED) (Dollars in Thousands)
Cashmere Valley Bank & Subsidiary
For the quarters ended,
December 31, 2021 September 30, 2021 December 31, 2020 Interest Income
Loans
$ 9,794 $ 9,779 $ 9,761 Fed funds sold and deposits at other financial institutions
26 32 28 Securities available for sale:
Taxable
3,481 3,143 2,259 Tax-exempt
1,652 1,646 1,617 Total interest income
14,953 14,600 13,665
Interest Expense
Deposits
1,110 1,206 1,515 Short-term borrowings
16 14 9 Total interest expense
1,126 1,220 1,524
Net interest income
13,827 13,380 12,141
Provision for Credit Losses
36 41 321
Net interest income after provision for credit losses
13,791 13,339 11,820
Non-Interest Income
Service charges on deposit accounts
486 466 327 Mortgage banking operations
1,237 1,050 2,110 Net gain (loss) on sales of securities available for sale
(19 ) - - Brokerage commissions
453 290 202 Insurance commissions and fees
1,459 1,393 1,182 Net interchange income (expense)
655 1,801 587 BOLI cash value
172 176 117 Dividends from correspondent banks
19 18 15 Other
329 332 332 Total non-interest income
4,791 5,526 4,872
Non-Interest Expense
Salaries and employee benefits
6,128 5,429 4,951 Occupancy and equipment
770 852 799 Audits and examinations
20 87 76 State and local business and occupation taxes
277 275 239 FDIC insurance & WA state assessments
167 166 139 Legal and professional fees
293 258 98 Check losses and charge-offs
121 87 99 Low income housing investment losses
144 144 134 Data processing
1,213 1,160 1,155 Product delivery
322 287 255 Other
929 907 788 Total non-interest expense
10,384 9,652 8,733
Income before income taxes
8,198 9,213 7,959
Income Taxes
1,367 1,226 967
Net income
$ 6,831 $ 7,987 $ 6,992
Earnings Per Share
Basic
$ 1.76 $ 2.06 $ 1.76 Diluted
$ 1.75 $ 2.05 $ 1.76
SOURCE: Cashmere Valley Bank
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