CASHMERE, WA / ACCESSWIRE / January 16, 2024 / Cashmere Valley Bank (OTCQX:CSHX) ("Bank"), announced annual earnings of $28.0 million for the year ended December 31, 2023. Diluted earnings per share was $7.20, representing an increase of $0.51 per share, or 7.7%.
On January 16, 2024 the Bank's Board of Directors declared a semi-annual dividend payment of $0.85 per share to shareholders of record on January 26, 2024. The dividend will be paid on February 5, 2024.
"I am delighted with how we navigated 2023," said Greg Oakes, President and CEO. "The ability to increase earnings by $2.0 million in light of deposit outflows and interest rate pressure on our deposits is outstanding. 2022 and 2023 stressed financial markets in terms of capital, liquidity and interest rate risk. Those pressures have not entirely abated as of yet. Nonetheless, the increase in earnings and opening of our Union Gap location are reasons to celebrate."
2023 Highlights
The Bank reported the following statement of condition highlights as of December 31, 2023:
- Net income increased 7.6% to $28.0 million for the year ended December 31, 2023 versus $26.0 million for fiscal year 2022.
- Fourth quarter net income totaled $7.7 million or $1.98 per share.
- Diluted earnings per share increased 7.7% to $7.20 per share. Earnings increased as the Bank's net interest margin expanded and the Bank qualified for an Employee Tax Retention Credit of $3.9 million.
- Return on equity increased to 15.69% in fiscal 2023 as compared to 14.68% in 2022.
- Return on assets increased 19 basis points to 1.39%. The increase was a result of an earnings improvement of $2.0 million in conjunction with a reduction in average assets.
- The Bank's net interest margin increased to 3.30% in 2023 as compared to 2.91% a year ago. Rate increases on cash held with the Federal Reserve, variable rate assets and new asset production or purchases led to an expanding margin. An increasing treasury yield curve resulted in higher yields on interest earning assets. A significant increase in deposit costs offset a portion of asset yield improvement.
- The efficiency ratio improved to 53.5% from 58.4%. The improvement was largely attributable to an increase in net interest income, a $3.9 million Employee Tax Retention Credit and a reduction from the prior year in losses on available for sale securities sales.
Cash, Cash Equivalents and Restricted Cash
Cash balances decreased to $117.1 million at December 31, 2023 from $180.3 million as of December 31, 2022. The Bank continued to see deposit outflows during the year which reduced cash on hand. In December, the Bank entered into a 30-day borrowing from the Federal Home Loan Bank (FHLB) of $39.0 million. The borrowing was used to fund the purchase of agency mortgage backed securities. The transaction also entailed a swap arrangement. The purpose of the swap was to attempt to lock in the interest rate spread between the mortgage backed securities less FHLB borrowings
Investments
The book value on AFS and HTM securities totaled $858.0 million at December 31, 2023, a decrease of $51.0 million, or 5.6%, from December 31, 2022. AFS security sales totaled $90.2 million and the Bank recognized a pre-tax loss of $4.8 million on those security sales. Security maturities and payoffs totaled $22.2 million. AFS security purchases of $110.0 million were made in 2023. The overwhelming majority of securities purchases were amortizing mortgage backed or asset backed securities.
Held to maturity securities totaled $139.8 million at December 31, 2023 as compared to $146.4 at December 31, 2022.
During 2023 the average rate earned on HTM and AFS securities increased from 2.34% to 3.44%. The increase was due to a combination of increasing yields on floating rate securities along with purchasing higher yielding securities funded by sales of lower yielding securities.
Loans and Credit Quality
At December 31, 2023 gross loans totaled $1.042 billion, representing an increase of $36.7 million, or 3.6%, from December 31, 2022. Multifamily loans increased 88.8% to $112.3 million as of December 31, 2023, which was mostly driven by construction loans rolling over into term loans. Indirect dealer loans increased 4.1% to $234.2 million as of December 31, 2023. Municipal loans increased 10.4% to $91.0 million as of December 31, 2023. Construction and land development loans decreased 19.8% to $81.7 million as of December 31, 2023.
The allowance for credit losses on loans (ACL) was 1.26%, or $13.1 million, as of December 31, 2023. The reserve methodology in place as of December 31, 2022 changed to the Current Expected Credit Loss (CECL) methodology on January 1, 2023.
The Bank recorded provision expense of $2,942,000 in 2023 as compared to $800,000 in 2022. The increase in provision expense was largely due to an increase in charged off loans. Charged off loans totaled $4.7 million as compared to $1.4 million in 2022. The majority of charged off loans came from the equipment finance division which was adversely affected by a recession in long haul trucking throughout 2023.
Non-performing loan totals were largely unchanged from the prior year. As of December 31, 2023, non-performing loans totaled $1,998,000, representing 0.19% of gross loans.
Deposits
Total deposits were $1.8 billion as of December 31, 2023, which represented a decrease of $126.3 million, or 6.6%, from December 31, 2022. Non-interest bearing deposits totaled $424.4 million, which was 23.9% of total deposits. Certificate of deposit balances increased significantly from $214.0 million at December 31, 2022 to $393.1 million as of December 31, 2023.
Capital
As of December 31, 2023, shareholders' equity totaled $202.8 million, a 28.0% increase from $158.4 million at December 31, 2022. The increase in capital was due to unrealized losses in available for sale securities improving by $23.5 million in combination with annual earnings less dividends paid. At period end, the Bank's GAAP capital to assets ratio was 9.91% as compared to 7.58% one year ago.
Earnings
Net Interest Income
Net interest income totaled $65.6 million for the year ended December 31, 2023 as compared to $61.9 million for the year ended December 31, 2022. The increase of $3.8 million represented an increase of 6.1%. Interest income increased $15.9 million while interest expense increased by $12.1 million. The average yield on earning assets improved from 3.11% to 4.11% while interest bearing liabilities increased from 0.29% to 1.18%. Loan income increased $7.4 million, securities income increased $5.7 million, fed funds and deposits with other financial institutions increased $2.8 million.
Non-Interest Income
Non-interest income increased $2.6 million, or 22.7%, as compared to 2022. Losses on sales of available for sale securities improved by $3.4 million and totaled $4.8 million during 2023. Mitchell, Reed and Schmitten revenues increased $172,000 in 2023 and finished the year with record net income of $2.4 million. Net interchange income increased $746,000.
Non-Interest Expense
Non-interest expense remained flat in 2023. In large part, level non-interest expenses were due to a $3.9 million Employee Retention Tax Credit. The credit was applied for and accounted for as a reduction to payroll tax expense in 2023. Payment of the tax credit is not anticipated until late 2024 or 2025. Wages and commissions increased $1.1 million, or 5.5%, in 2023. Occupancy expense also increased $696,000. Increases in occupancy expense were largely due to non-depreciable improvements in our facilities.
The provision for loans losses increased $2.1 million in 2023, which was necessitated by increases in charged-off loans.
Federal income tax expense increased approximately $2.4 million from the prior year due to an increase in earnings, and in combination with an increase in the Bank's effective tax rate. The Bank's effective tax rate was 18.1% for 2023 as compared to 12.8% in 2022.
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 | ||||||||||||
| December 31, 2023 | September 30, 2023 | December 31, 2022 | ||||||||||
Assets | ||||||||||||
Cash and Cash Equivalent: | ||||||||||||
Cash & due from banks | $ | 26,619 | $ | 26,859 | $ | 27,706 | ||||||
Interest bearing deposits | 86,432 | 105,325 | 142,617 | |||||||||
Fed funds sold | 4,085 | 2,662 | 9,989 | |||||||||
Total Cash and Cash Equivalent | 117,136 | 134,846 | 180,312 | |||||||||
Securities available for sale | 650,905 | 600,278 | 670,077 | |||||||||
Securities held to maturity, net of allowance for credit losses of $20, $21 and $0, respectively | 139,775 | 141,258 | 146,409 | |||||||||
Federal Home Loan Bank stock, at cost | 3,008 | 2,505 | 2,669 | |||||||||
Loans held for sale | 4 | 1,223 | 142 | |||||||||
Loans | 1,042,453 | 1,026,040 | 1,005,741 | |||||||||
Allowance for credit losses | (13,085 | ) | (13,252 | ) | (13,746 | ) | ||||||
Net loans | 1,029,368 | 1,012,788 | 991,995 | |||||||||
Premises and equipment | 21,017 | 21,061 | 18,275 | |||||||||
Accrued interest receivable | 9,411 | 8,734 | 8,199 | |||||||||
Other real estate and foreclosed assets | 97 | 97 | -- | |||||||||
Bank Owned Life Insurance | 26,809 | 26,628 | 26,105 | |||||||||
Goodwill | 7,576 | 7,576 | 7,576 | |||||||||
Intangibles | 3,465 | 3,557 | 3,796 | |||||||||
Mortgage servicing rights | 2,536 | 2,567 | 2,685 | |||||||||
Net deferred tax assets | 19,037 | 23,735 | 21,021 | |||||||||
Other assets | 12,594 | 12,302 | 8,501 | |||||||||
Total assets | $ | 2,042,738 | $ | 1,999,155 | $ | 2,087,762 | ||||||
Liabilities and Shareholders' Equity | ||||||||||||
Liabilities | ||||||||||||
Deposits: | ||||||||||||
Non-interest bearing demand | $ | 424,380 | $ | 441,561 | $ | 457,666 | ||||||
Savings and interest-bearing demand | 956,290 | 1,008,861 | 1,228,375 | |||||||||
Time | 393,097 | 346,346 | 213,978 | |||||||||
Total deposits | 1,773,767 | 1,796,768 | 1,900,019 | |||||||||
Accrued interest payable | 2,216 | 1,476 | 434 | |||||||||
Short-term borrowings | 48,858 | 8,267 | 17,166 | |||||||||
Other liabilities | 15,099 | 14,243 | 11,753 | |||||||||
Total liabilities | 1,839,940 | 1,820,754 | 1,929,372 | |||||||||
Shareholders' Equity | ||||||||||||
Common stock (no par value); authorized 10,000,000 shares; | ||||||||||||
Issued and outstanding: 12/31/2023 -- 3,883,986 ; 9/30/2023 -- 3,883,981 ; 12/31/2022 -- 3,883,956 | -- | -- | -- | |||||||||
Additional paid-in capital | 4,833 | 4,782 | 4,540 | |||||||||
Treasury stock | (16,784 | ) | (16,784 | ) | (16,784 | ) | ||||||
Retained Earnings | 280,087 | 272,400 | 259,839 | |||||||||
Other comprehensive income | (65,758 | ) | (82,171 | ) | (89,239 | ) | ||||||
Total Cashmere Valley Bank shareholders' equity | 202,378 | 178,227 | 158,356 | |||||||||
Noncontrolling interest | 420 | 174 | 34 | |||||||||
Total shareholders' equity | 202,798 | 178,401 | 158,390 | |||||||||
Total liabilities and shareholders' equity | $ | 2,042,738 | $ | 1,999,155 | $ | 2,087,762 | ||||||
| Year-to-Date Consolidated Statements of Income (UNAUDITED) | ||||||||||
(Dollars in Thousands) | ||||||||||
Cashmere Valley Bank & Subsidiary | ||||||||||
| For the twelve months ended, | ||||||||||
| December 31, 2023 | December 31, 2022 | |||||||||
Interest Income | ||||||||||
Loans | $ | 47,392 | $ | 39,950 | ||||||
Fed funds sold and deposits at other financial institutions | 4,992 | 2,199 | ||||||||
Securities available for sale: | ||||||||||
Taxable | 24,548 | 16,528 | ||||||||
Tax-exempt | 1,886 | 5,653 | ||||||||
Securities held to maturity: | ||||||||||
Taxable | 3,151 | 1,856 | ||||||||
Tax-exempt | 184 | 58 | ||||||||
Total interest income | 82,153 | 66,244 | ||||||||
Interest Expense | ||||||||||
Deposits | 16,259 | 4,319 | ||||||||
Short-term borrowings | 257 | 63 | ||||||||
Total interest expense | 16,516 | 4,382 | ||||||||
Net interest income | 65,637 | 61,862 | ||||||||
Provision for Credit Losses | 2,942 | 800 | ||||||||
Net interest income after provision for credit losses | 62,695 | 61,062 | ||||||||
Non-Interest Income | ||||||||||
Service charges on deposit accounts | 2,128 | 2,130 | ||||||||
Mortgage banking operations | 1,514 | 2,320 | ||||||||
Net gain (loss) on sales of securities available for sale | (4,818 | ) | (8,179 | ) | ||||||
Brokerage commissions | 999 | 1,136 | ||||||||
Insurance commissions and fees | 7,720 | 7,552 | ||||||||
Net interchange income (expense) | 4,743 | 3,997 | ||||||||
BOLI cash value | 704 | 1,247 | ||||||||
Dividends from correspondent banks | 86 | 84 | ||||||||
Other | 1,234 | 1,379 | ||||||||
Total non-interest income | 14,310 | 11,666 | ||||||||
Non-Interest Expense | ||||||||||
Salaries and employee benefits | 22,359 | 24,558 | ||||||||
Occupancy and equipment | 4,013 | 3,317 | ||||||||
Audits and examinations | 409 | 546 | ||||||||
State and local business and occupation taxes | 1,346 | 1,248 | ||||||||
FDIC insurance & WA state assessments | 1,017 | 687 | ||||||||
Legal and professional fees | 1,361 | 809 | ||||||||
Check losses and charge-offs | 582 | 495 | ||||||||
Low income housing investment losses | 633 | 656 | ||||||||
Data processing | 6,372 | 5,541 | ||||||||
Product delivery | 1,255 | 1,222 | ||||||||
Other | 3,412 | 3,831 | ||||||||
Total non-interest expense | 42,759 | 42,910 | ||||||||
Income before income taxes | 34,246 | 29,818 | ||||||||
Income Taxes | 6,214 | 3,818 | ||||||||
Net income | $ | 28,032 | $ | 26,000 | ||||||
Net income attributable to noncontrolling interest | 50 | -- | ||||||||
Net income attributable to Cashmere Valley Bank | 27,982 | 26,000 | ||||||||
Earnings Per Share | ||||||||||
Basic | $ | 7.20 | $ | 6.70 | ||||||
Diluted | $ | 7.20 | $ | 6.69 | ||||||
Quarterly Consolidated Statements of Income (UNAUDITED) | ||||||||||||
(Dollars in Thousands) | ||||||||||||
Cashmere Valley Bank & Subsidiary | ||||||||||||
| For the quarters ended, | ||||||||||||
| December 31, 2023 | September 30, 2023 | December 31, 2022 | ||||||||||
Interest Income | ||||||||||||
Loans | $ | 12,767 | $ | 12,115 | $ | 10,641 | ||||||
Fed funds sold and deposits at other financial institutions | 1,087 | 1,448 | 1,190 | |||||||||
Securities available for sale: | ||||||||||||
Taxable | 6,750 | 6,254 | 4,904 | |||||||||
Tax-exempt | 357 | 372 | 1,099 | |||||||||
Securities held to maturity: | ||||||||||||
Taxable | 787 | 778 | 773 | |||||||||
Tax-exempt | 46 | 46 | 41 | |||||||||
Total interest income | 21,794 | 21,013 | 18,648 | |||||||||
Interest Expense | ||||||||||||
Deposits | 5,163 | 4,709 | 1,261 | |||||||||
Short-term borrowings | 150 | 49 | 12 | |||||||||
Total interest expense | 5,313 | 4,758 | 1,273 | |||||||||
Net interest income | 16,481 | 16,255 | 17,375 | |||||||||
Provision for Credit Losses | 1,115 | 743 | 307 | |||||||||
Net interest income after provision for credit losses | 15,366 | 15,512 | 17,068 | |||||||||
Non-Interest Income | ||||||||||||
Service charges on deposit accounts | 473 | 553 | 557 | |||||||||
Mortgage banking operations | 374 | 465 | 422 | |||||||||
Net gain (loss) on sales of securities available for sale | (2,560 | ) | -- | (1,019 | ) | |||||||
Brokerage commissions | 232 | 247 | 275 | |||||||||
Insurance commissions and fees | 2,007 | 1,830 | 2,091 | |||||||||
Net interchange income (expense) | 1,043 | 1,188 | 1,204 | |||||||||
BOLI cash value | 182 | 180 | 729 | |||||||||
Dividends from correspondent banks | 19 | 19 | 21 | |||||||||
Other | 367 | 298 | 330 | |||||||||
Total non-interest income | 2,137 | 4,780 | 4,610 | |||||||||
Non-Interest Expense | ||||||||||||
Salaries and employee benefits | 2,512 | 6,374 | 5,935 | |||||||||
Occupancy and equipment | 1,025 | 1,041 | 916 | |||||||||
Audits and examinations | 56 | 157 | 103 | |||||||||
State and local business and occupation taxes | 345 | 346 | 360 | |||||||||
FDIC insurance & WA state assessments | 229 | 265 | 171 | |||||||||
Legal and professional fees | 622 | 232 | 223 | |||||||||
Check losses and charge-offs | 128 | 185 | 109 | |||||||||
Low income housing investment losses | 154 | 153 | 151 | |||||||||
Data processing | 1,676 | 1,657 | 1,479 | |||||||||
Product delivery | 324 | 301 | 309 | |||||||||
Other | 859 | 817 | 889 | |||||||||
Total non-interest expense | 7,930 | 11,528 | 10,645 | |||||||||
Income before income taxes | 9,573 | 8,764 | 11,033 | |||||||||
Income Taxes | 1,858 | 1,574 | 1,344 | |||||||||
Net income | $ | 7,715 | $ | 7,190 | $ | 9,689 | ||||||
Net income attributable to noncontrolling interest | 27 | 7 | -- | |||||||||
Net income attributable to Cashmere Valley Bank | $ | 7,688 | $ | 7,183 | $ | 9,689 | ||||||
Earnings Per Share | ||||||||||||
Basic | $ | 1.98 | $ | 1.85 | $ | 2.49 | ||||||
Diluted | $ | 1.98 | $ | 1.85 | $ | 2.49 | ||||||
SOURCE: Cashmere Valley Bank