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