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
Read more here https://www.accesswire.com/720944/Cashmere-Valley-Bank-Reports-Record-Quarterly-Earnings-of-89-Million
