CASHMERE, WA / ACCESSWIRE / October 18, 2022 / Cashmere Valley Bank (OTCQX:CSHX) (“Bank”), announced quarterly earnings of $8.9 million for the quarter ended September 30, 2022. Year-to-date earnings total $16.3 million as compared to $22.2 million for the nine months ended September 30, 2021. Year-to-date diluted earnings per share were $4.19, representing a decrease of $1.45 per share, or 25.6%. The primary driver for the decrease in year-to-date earnings per share was realized losses on sales of securities during the second quarter. Losses on securities sold totaled $7.2 million year-to-date.
As of September 30, 2022, deposit balances totaled $1.98 billion, an increase of $20.0 million from June 30, 2022, representing a 1.0% increase.
“We are proud of our record quarterly earnings,” said Greg Oakes, President and CEO. “The rapid rise in the Fed Funds rates, the prime rate and treasury rates provides challenges to us, but we were able to receive some benefit as some of our assets repriced into higher yields. We are wary of the economy as rates continue to rise into an economy where many economists are predicting a recession in the near future. Our goal is to be prepared for any direction the economy takes us.”
Q3 Highlights
The Bank reported the following statement of condition highlights as of September 30, 2022:
As of September 30, 2022, gross loans totaled $1.008 billion representing a slight decrease from June 30, 2022. As compared to one year ago gross loans have increased $61.4 million.The Bank’s year-to-date return on assets decreased to 1.00% from 1.41% primarily due to the aforementioned security sales.The Bank’s return on equity was 11.66% as compared to 12.53% one year ago. While net income has decreased year-over-year, the reduction in capital due to unrealized gains and losses in the available for sale securities portfolio has helped to minimize the impact to return on equity.For the quarter ended September 30, 2022 the Bank’s return on assets was 1.61% and the Bank’s return on equity was 21.58%.
Cash, Cash Equivalents and Restricted Cash
Total cash, cash equivalents and restricted cash were $182.3 million at September 30, 2022, compared to $92.1 million at September 30, 2021. Cash is maintained at a higher level as the rates earned on overnight funds have increased to 3.15% from 0.15% as of September 30, 2021.
Investments
The investment portfolio totaled $889.4 million at September 30, 2022, a decrease of $197.2 million from September 30, 2021. A significant reduction of $117.3 million in the unrealized gain and loss on available for securities was the principle reason for the reduction. Additionally, the Bank has strategically unwound the portfolio through sales and principal paydowns that have only been partially reinvested into securities.
As of September 30, 2022, $145.3 million in securities were classified as held-to-maturity as compared to none as of September 30, 2021. New securities purchases during the third quarter totaled $17.6 million. Securities sales and movement of securities into a held-to-maturity status were executed in part to help minimize the impact of continued increases in the treasury yield curve and to shorten the overall duration of the investment portfolio. Each quarter all securities are evaluated for impairment. As of September 30, 2022, no securities were determined to be other than temporarily impaired.
Loans and Credit Quality
Gross loans totaled $1.008 billion as of September 30, 2022 a decrease of $709,000 from June 30, 2022 and an increase of $61.5 million from September 30, 2021. Equipment Finance, Construction and Auto Finance loans have been mainly responsible for increasing loan balances.
As of September 30, 2022, the allowance for loans and lease losses (ALLL) was 1.37% of gross loans as compared to 1.45% one year ago. The Bank allocated $387,000 to the loan loss provisions during the third quarter of 2022 and the allowance totals $13.8 million. Increasing loan balances during the prior twelve months have effectively utilized the Bank’s unallocated loan loss provision that existed as of September 30, 2021.
Credit quality remains exceptionally strong with non-performing loans representing 0.10% of gross loans as of September 30, 2022.
Deposits
As of September 30, 2022, total deposits increased by $73.5 million or 3.8% from September 30, 2021. From June 30, 2022 to September 30, 2022 total deposits increased $20.0 million or 1.0%. Non-interest deposits totaled $494.3 million as of September 30, 2022, which represents 24.9% of total deposits. The average cost of deposits decreased 10 basis points to 0.27% as compared to the nine months ended September 30, 2021.
Equity
Tier 1 capital remains strong. Tier 1 capital increased to $225.2 million from $219.5 at June 30, 2022 due to earnings less dividends paid during the third quarter. Regulatory capital remains well capitalized.
GAAP capital reflected a decrease of $92.5 million from September 30, 2021 and a decrease of $16.9 million from June 30, 2022. The decrease was a result of market value changes in securities due to the increase in the treasury yield curve.
Earnings
Net Interest Income
Net interest income totaled $16.3 million during the third quarter of 2022, compared to $14.6 million in the prior quarter and $13.4 million in the same quarter a year ago. The increase from the prior quarter was a result of increasing interest-bearing deposits at other financial institutions and fed funds sold income of $603,000, securities income of $565,000 and loan income of $473,000. As compared to the same quarter one year ago, the increase was the result of higher income from securities in the amount of $1,438,000, cash held with other financial institutions totaling $758,000 and loan income $513,000.
The net interest margin was 2.79% for the first nine months of 2022, compared to 2.60% during the first nine months of 2021. Margin expansion is due to increasing loan balances in combination with increasing yields on new loans, securities and cash held at other financial institutions. Adjustable rate loans and securities are also consistently repricing into higher rates.
Non-Interest Income
Non-interest income totaled $7.1 million in the first nine months of 2022 as compared to $15.1 million in the first nine months of 2021. Losses on securities sales represented $7.2 million of the reduction in income. As mortgage refinances have slowed, income from mortgage banking operations has decreased from $4.3 million through September 30, 2021 to $1.9 million in the first nine months of 2022. Income from insurance commissions and fees increased to $5,461,000 from $3,910,000 million in the first nine months of 2021 due to the purchase of two insurance agencies along with organic growth.
Non-Interest Expense
Non-interest expense totaled $32.3 million in the first nine months of 2022 as compared to $28.2 million in the first nine months of 2021. The increase of $4,062,000 represented a 14.4% increase. The Bank continues to manage costs prudently, however, employee costs along with other inflation impacted areas continue to see increasing costs.
Increases in salary and benefits contributed most to the increase in non-interest expense. As compared to the same period one year ago, wages and benefits expense increased $2.6 million or 16.5%. Wages and health care premiums are up substantially in an effort to attract and retain employees.
Data processing costs have also increased 18.6% or $638,000 from the prior year.
The Bank’s efficiency ratio was 68.4% in the first nine months of 2022 as compared to 54.7% in the first nine months of 2021. The efficiency ratio was adversely impacted by the sale of securities at a loss. For the quarter ended September 30, 2022, the Bank’s efficiency ratio was 51.3%.
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.
Consolidated Balance Sheets (UNAUDITED)
(Dollars in Thousands)
Cashmere Valley Bank and Subsidiary
September 30, 2022 June 30, 2022 September 30, 2021
Assets
Cash and Cash Equivalent:
Cash & due from banks
$25,210 $24,750 $26,878
Interest bearing deposits
146,529 101,080 56,910
Fed funds sold
10,590 10,634 8,352 Total Cash and Cash Equivalent 182,329 136,464 92,140
Securities available for sale
744,137 804,607 1,086,559
Securities held to maturity
145,252 139,637 —
Federal Home Loan Bank stock, at cost
2,669 2,669 2,393
Loans held for sale
288 978 660
Loans
1,008,014 1,008,723 946,539
Allowance for credit losses
(13,808) (13,686) (13,760)
Net loans
994,206 995,037 932,779
Premises and equipment
16,942 16,824 17,061
Accrued interest receivable
8,894 8,442 8,851
Bank Owned Life Insurance
27,004 26,823 26,313
Goodwill
7,576 7,576 7,518
Intangibles
3,883 3,969 2,044
Mortgage servicing rights
2,707 2,732 2,759
Other assets
31,145 25,501 10,187
Total assets
$2,167,032 $2,171,259 $2,189,264
Liabilities and Shareholders’ Equity
Liabilities
Deposits:
Non-interest bearing demand
$494,334 $459,975 $443,846
Savings and interest-bearing demand
1,308,611 1,315,476 1,257,270
Time
180,769 188,298 209,088
Total deposits
1,983,714 1,963,749 1,910,204
Accrued interest payable
281 334 437
Short-term borrowings
28,674 36,213 29,344
Other liabilities
11,511 11,227 13,976
Total liabilities
2,024,180 2,011,523 1,953,961
Shareholders’ Equity
Common stock (no par value); authorized 10,000,000 shares;
Issued and outstanding: 9/30/2022 — 3,883,946 ;
6/30/2022 — 3,883,816 ; 9/30/2021 — 3,880,786
— — —
Additional paid-in capital
4,475 4,432 4,150
Treasury stock
(16,784) (16,784) (16,784)
Retained Earnings
250,150 244,560 233,608
Other comprehensive income
(94,989) (72,472) 14,329
Total shareholders’ equity
142,852 159,736 235,303
Total liabilities and shareholders’ equity
$2,167,032 $2,171,259 $2,189,264
Year-to-Date Consolidated Statements of Income (UNAUDITED)
(Dollars in Thousands)
Cashmere Valley Bank & Subsidiary
For the nine months ended,
September 30, 2022 September 30, 2021
Interest Income
Loans
$29,308 $29,357
Fed funds sold and deposits at other financial institutions
1,009 80
Securities available for sale:
Taxable
11,624 8,559
Tax-exempt
4,554 4,944
Securities held to maturity
1,101 —
Total interest income
47,596 42,940
Interest Expense
Deposits
3,058 3,984
Short-term borrowings
51 33
Total interest expense
3,109 4,017
Net interest income
44,487 38,923
Provision for Credit Losses
493 45
Net interest income after provision for credit losses
43,994 38,878
Non-Interest Income
Service charges on deposit accounts
1,572 1,147
Mortgage banking operations
1,898 4,294
Net gain (loss) on sales of securities available for sale
(7,160) 21
Brokerage commissions
861 875
Insurance commissions and fees
5,461 3,910
Net interchange income (expense)
2,793 3,293
BOLI cash value
519 406
Dividends from correspondent banks
63 55
Other
1,050 1,110
Total non-interest income
7,057 15,111
Non-Interest Expense
Salaries and employee benefits
18,623 15,991
Occupancy and equipment
2,402 2,353
Audits and examinations
443 413
State and local business and occupation taxes
888 755
FDIC insurance & WA state assessments
516 460
Legal and professional fees
586 697
Check losses and charge-offs
386 419
Low income housing investment losses
505 444
Data processing
4,062 3,424
Product delivery
913 804
Other
2,942 2,444
Total non-interest expense
32,266 28,204
Income before income taxes
18,785 25,785
Income Taxes
2,474 3,583
Net income
$16,311 $22,202
Earnings Per Share
Basic
$4.20 $5.66
Diluted
$4.19 $5.64
Quarterly Consolidated Statements of Income (UNAUDITED)
(Dollars in Thousands)
Cashmere Valley Bank & Subsidiary
For the quarters ended,
September 30, 2022 June 30, 2022 September 30, 2021
Interest Income
Loans
$10,292 $9,819 $9,779
Fed funds sold and deposits at other financial institutions
790 187 32
Securities available for sale:
Taxable
4,182 3,697 3,143
Tax-exempt
1,307 1,602 1,646
Securities held to maturty
738 363 —
Total interest income
17,309 15,668 14,600
Interest Expense
Deposits
1,015 1,014 1,206
Short-term borrowings
17 18 14
Total interest expense
1,032 1,032 1,220
Net interest income
16,277 14,636 13,380
Provision for Credit Losses
387 59 41
Net interest income after provision for credit losses
15,890 14,577 13,339
Non-Interest Income
Service charges on deposit accounts
566 515 466
Mortgage banking operations
475 668 1,050
Net gain (loss) on sales of securities available for sale
111 (7,407) –
Brokerage commissions
285 299 290
Insurance commissions and fees
1,920 1,868 1,393
Net interchange income (expense)
1,082 1,057 1,801
BOLI cash value
180 170 176
Dividends from correspondent banks
20 18 18
Other
432 306 331
Total non-interest income
5,071 (2,506) 5,525
Non-Interest Expense
Salaries and employee benefits
6,210 6,007 5,429
Occupancy and equipment
779 717 852
Audits and examinations
94 156 87
State and local business and occupation taxes
324 285 275
FDIC insurance & WA state assessments
175 169 166
Legal and professional fees
162 215 258
Check losses and charge-offs
140 113 87
Low income housing investment losses
152 209 144
Data processing
1,438 1,340 1,160
Product delivery
300 290 287
Other
910 1,054 906
Total non-interest expense
10,684 10,555 9,651
Income before income taxes
10,277 1,516 9,213
Income Taxes
1,386 175 1,226
Net income
$8,891 $1,341 $7,987
Earnings Per Share
Basic
$2.29 $0.35 $2.06
Diluted
$2.29 $0.34 $2.05
MEDIA CONTACT:
Greg Oakes, CEO, (509) 782-2092
or
Mike Lundstrom, CFO, (509) 782-5495
SOURCE: Cashmere Valley Bank
View source version on accesswire.com:
https://www.accesswire.com/720944/Cashmere-Valley-Bank-Reports-Record-Quarterly-Earnings-of-89-Million
