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