Cashmere Valley Bank Reports Annual Earnings of $28.0 Million

Rhea-AI Summary

Cashmere Valley Bank (CSHX) announced annual earnings of $28.0 million for the year ended December 31, 2023, with diluted earnings per share of $7.20. The bank declared a semi-annual dividend payment of $0.85 per share. The net income increased by 7.6% to $28.0 million, and the return on equity increased to 15.69% in fiscal 2023. However, there was a decrease in cash balances, and non-interest bearing deposits totaled $424.4 million, which was 23.9% of total deposits. The Bank's net interest margin increased to 3.30% in 2023, and the book value on AFS and HTM securities totaled $858.0 million at December 31, 2023. Gross loans totaled $1.042 billion, representing an increase of $36.7 million from December 31, 2022. The allowance for credit losses on loans (ACL) was 1.26%, and the Bank recorded provision expense of $2,942,000 in 2023. Total deposits were $1.8 billion as of December 31, 2023, representing a decrease of $126.3 million from December 31, 2022. Shareholders' equity totaled $202.8 million, a 28.0% increase from December 31, 2022.

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

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FAQ

What were the annual earnings of Cashmere Valley Bank for the year ended December 31, 2023?

The annual earnings were $28.0 million.

What was the diluted earnings per share for Cashmere Valley Bank in 2023?

The diluted earnings per share was $7.20.

What was the semi-annual dividend payment declared by Cashmere Valley Bank?

The dividend payment was $0.85 per share.

What was the net income increase for Cashmere Valley Bank in fiscal year 2023?

The net income increased by 7.6% to $28.0 million.

What was the return on equity for Cashmere Valley Bank in fiscal 2023?

The return on equity increased to 15.69%.

What was the net interest margin for Cashmere Valley Bank in 2023?

The net interest margin increased to 3.30% in 2023.

What was the total gross loans for Cashmere Valley Bank as of December 31, 2023?

Gross loans totaled $1.042 billion.

What was the total deposits for Cashmere Valley Bank as of December 31, 2023?

Total deposits were $1.8 billion.

What was the total shareholder's equity for Cashmere Valley Bank as of December 31, 2023?

Shareholders' equity totaled $202.8 million, a 28.0% increase from December 31, 2022.