Cashmere Valley Bank Reports Quarterly Earnings of $7.3 Million
*CASHMERE, WA / ACCESSWIRE / April 16, 2024 /* Cashmere Valley Bank (OTCQX:CSHX) ("Bank"), announced quarterly earnings of $7.3 million for the quarter ended March 31, 2024. Diluted earnings per share was $1.87, representing a decrease of $0.12 per share, or 6.0%.
"In spite of a challenging environment our core earnings remain strong," said Greg Oakes, President and CEO. "One year ago, our net interest margin was expanding nicely, however, deposit costs have been rapidly increasing and adversely affecting our margin. We are relieved to show slight deposit growth in the quarter; however, the cost of the deposit growth is significant. The inversion in the yield curve creates a tough environment for all financial institutions. We were pleased to navigate through the environment with another quarter of strong earnings."
*Q1 Highlights*
The Bank reported the following statement of condition highlights as of March 31, 2024:
· As of March 31, 2024, gross loans totaled $1.041 billion, representing an increase from March 31, 2023 of $25.2 million.
· Deposit balances totaled $1.785 billion as of March 31, 2024. Deposit balances decreased $56.3 million, or 3.1%, from March 31, 2023. Deposit balances increased from December 31, 2023 by $11.1 million, or 0.6%. Non-interest deposits totaled $399.0 million as of March 31, 2024, which represents 22.4% of total deposits.
· Return on assets decreased from 1.51% to 1.44%, due to an increase in assets and the reduction in earnings.
· Return on equity decreased from 18.7% to 14.4%, due to equity growth and the reduction in earnings.
*Cash, Cash Equivalents and Restricted Cash*
Total cash, cash equivalents and restricted cash totaled $138.2 million at March 31, 2024, compared to $110.5 million at March 31, 2023. The $27.7 million increase was primarily due to efforts to retain higher cash balances on overnight funds that are paying approximately 5.40%, and to help insure against further deposit losses. Available borrowing lines from the Federal Home Loan Bank and the Federal Reserve totaled approximately $416.6 million.
*Investments*
The investment portfolio totaled $793.6 million at March 31, 2024, an increase of $2.9 million from March 31, 2023. As of March 31, 2024, available for sale securities totaled $655.7 million and held to maturity securities totaled $137.9 million. For the quarter ended March 31, 2024, securities earned 3.94% as compared to 3.17% 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, 2024, unrealized losses on available for sale securities totaled $66.9 million as compared to $76.7 million as of March 31, 2023. A combination of strategies was utilized to achieve this reduction including new investment purchases, sales of securities and interest rate swaps.
*Loans and Credit Quality*
Gross loans totaled $1.041 billion as of March 31, 2024, which is an increase of $25.1 million from March 31, 2023. Since March 31, 2023, multifamily loans increased $33.7 million and municipal loans increased $11.5 million, while commercial real estate loans decreased $16.0 million and construction and land development loans decreased $13.1 million.
The Bank adopted the Current Expected Credit Losses (CECL) Methodology on January 1, 2023. The allowance for credit losses on loans (ACL) was 1.24% of gross loans as compared to 1.26% one year ago. During the first quarter of 2024, the Bank recorded $264,000 in provision expense on loans, and the allowance totaled $12.9 million.
Credit quality remains exceptionally strong with non-performing loans representing 0.23% of gross loans as of March 31, 2024. This is a slight increase from 0.15% as of March 31, 2023.
*Deposits*
Deposits totaled $1.78 billion at March 31, 2024. The average cost of deposits increased 138 basis points to 2.01% for the quarter ended March 31, 2024 as compared to 0.63% for the quarter ended March 31, 2023.
*Equity*
Tier 1 capital remains strong at 12.4% as of March 31, 2024. Tier 1 capital increased to $259.7 million as of March 31, 2024, which represents an increase from $238.0 million at March 31, 2023. The increase was primarily due to earnings less dividends paid. The first quarter dividend was paid February 5, 2024 at a rate of $0.85 per share.
As of March 31, 2024, GAAP capital reflects an increase of $31.9 million from March 31, 2023. As of March 31, 2024, the Bank's GAAP capital ratio was 10.17%. The increase in GAAP capital was primarily due to net income from the prior twelve months and a reduction in unrealized losses, due to sales of securities and a reduction in the treasury yield curve.
*Earnings*
Net Interest Income
Net interest income totaled $15.6 million in the first quarter of 2024, compared to $17.3 million in the same quarter a year ago. The decrease from the prior year first quarter was attributable to an improvement in yields on earning assets of 70 basis points as compared to an increase of 138 basis points in deposit expenses.
Loan interest income increased $2.1 million over the same quarter one year ago as the average yield on loans increased from 4.40% to 4.99%.
Interest income on available for sale and held to maturity securities increased $1.2 million from one year ago. The average yield on securities increased to 3.94% as compared to 3.17% one year ago.
Interest income from deposits with other financial institutions fell $168,000 due to a decrease in average cash balances with other financial institutions.
The net interest margin was 3.12% for the first quarter of 2024 due to significantly higher deposit costs, as compared to 3.42% during the first quarter of 2023.
Non-Interest Income
Non-interest income totaled $4.7 million in the first quarter of 2024 as compared to $4.5 million in the first quarter of 2023.
Non-Interest Expense
Non-interest expense totaled $12.0 million in the first quarter of 2024 as compared to $11.8 million in the first quarter of 2023.
The Bank's efficiency ratio was 59.0% in the first quarter of 2024 as compared to 54.0% in the first quarter of 2023.
*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 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, 2024* *December 31, 2023* *March 31, 2023*
*Assets*
Cash and Cash Equivalent:
Cash & due from banks
$ 21,393 $ 26,619 $ 24,027
Interest bearing deposits
113,141 86,432 82,565
Fed funds sold
3,639 4,085 3,863
Total Cash and Cash Equivalent
138,173 117,136 110,455
Securities available for sale
655,680 650,905 691,926
Securities held to maturity, net of allowance for credit losses
of $19, $20 and $347, respectively
137,936 139,775 144,381
Federal Home Loan Bank stock, at cost
2,981 3,008 2,505
Loans held for sale
342 4 4
Loans
1,041,410 1,042,453 1,016,257
Allowance for credit losses
(12,947 ) (13,085 ) (12,831 )
*Net loans*
*1,028,463* *1,029,368* *1,003,426*
Premises and equipment
20,510 21,017 19,286
Accrued interest receivable
9,444 9,411 8,486
Other real estate and foreclosed assets
97 97 -
Bank Owned Life Insurance
27,009 26,809 26,275
Goodwill
7,576 7,576 7,576
Intangibles
3,291 3,465 3,715
Mortgage servicing rights
2,485 2,536 2,628
Net deferred tax assets
18,695 19,037 21,293
Other assets
13,569 12,594 7,861
*Total assets*
*$* *2,066,251* *$* *2,042,738* *$* *2,049,817*
*Liabilities and Shareholders' Equity*
*Liabilities*
Deposits:
Non-interest bearing demand
$ 398,960 $ 424,380 $ 425,526
Savings and interest-bearing demand
936,416 956,290 1,093,805
Time
449,462 393,097 321,767
*Total deposits*
*1,784,838* *1,773,767* *1,841,098*
Accrued interest payable
2,661 2,216 1,060
Short-term borrowings
54,636 48,858 14,163
Other liabilities
14,008 15,099 15,326
*Total liabilities*
*1,856,143* *1,839,940* *1,871,647*
*Shareholders' Equity*
Common stock (no par value); authorized 10,000,000 shares;
Issued and outstanding: 3/31/2024 -- 3,884,186 ;
12/31/2023 -- 3,883,986 ; 3/31/2023 -- 3,883,971
-- -- --
Additional paid-in capital
4,895 4,833 4,660
Treasury stock
(16,784 ) (16,784 ) (16,784 )
Retained Earnings
284,062 280,087 263,123
Other comprehensive income
(62,491 ) (65,758 ) (72,986 )
*Total Cashmere Valley Bank shareholders' equity*
*209,682* *202,378* *178,013*
Noncontrolling interest
426 420 157
*Total shareholders' equity*
*210,108* *202,798* *178,170*
*Total liabilities and shareholders' equity*
*$* *2,066,251* *$* *2,042,738* *$* *2,049,817*
*Quarterly Consolidated Statements of Income (UNAUDITED)*
(Dollars in Thousands)
Cashmere Valley Bank & Subsidiary
For the quarters ended, *March 31, 2024* *December 31, 2023* *March 31, 2023*
*Interest Income*
Loans
$ 13,021 $ 12,767 $ 10,953
Fed funds sold and deposits at other financial institutions
1,299 1,087 1,467
Securities available for sale:
Taxable
7,220 6,750 5,568
Tax-exempt
277 357 689
Securities held to maturity:
Taxable
785 787 804
Tax-exempt
47 46 46
*Total interest income*
*22,649* *21,794* *19,527*
*Interest Expense*
Deposits
6,449 5,163 2,230
Short-term borrowings
609 150 7
*Total interest expense*
*7,058* *5,313* *2,237*
*Net interest income*
*15,591* *16,481* *17,290*
*Provision for Credit Losses*
(54 ) 1,115 605
*Net interest income after provision for credit losses*
*15,366* *15,512* *17,068*
*Non-Interest Income*
Service charges on deposit accounts
460 473 541
Mortgage banking operations
290 374 312
Net gain (loss) on sales of securities available for sale
-- (2,560 ) (365 )
Brokerage commissions
369 232 270
Insurance commissions and fees
1,950 2,007 1,863
Net interchange income (expense)
1,166 1,043 1,360
BOLI cash value
200 182 170
Dividends from correspondent banks
34 19 27
Other
257 367 287
*Total non-interest income*
*4,726* *2,137* *4,465*
*Non-Interest Expense*
Salaries and employee benefits
7,069 2,512 7,075
Occupancy and equipment
880 1,025 928
Audits and examinations
183 56 89
State and local business and occupation taxes
335 345 323
FDIC insurance & WA state assessments
244 229 165
Legal and professional fees
242 622 245
Check losses and charge-offs
120 128 117
Low income housing investment losses
-- 154 155
Data processing
1,599 1,676 1,539
Product delivery
330 324 314
Other
993 859 807
*Total non-interest expense*
*11,995* *7,930* *11,757*
*Income before income taxes*
*8,376* *9,573* *9,393*
*Income Taxes*
*1,093* *1,858* *1,670*
*Net income*
*$* *7,283* *$* *7,715* *$* *7,723*
Net income attributable to noncontrolling interest
6 27 6
*Net income attributable to Cashmere Valley Bank*
*$* *7,277* *$* *7,688* *$* *7,717*
*Earnings Per Share*
Basic
*$* *1.87* *$* *1.98* *$* *1.99*
Diluted
*$* *1.87* *$* *1.98* *$* *1.99*
*SOURCE: *Cashmere Valley Bank
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