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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