Cashmere Valley Bank Reports Robust Earnings of $8.0 Million

Rhea-AI Summary

Cashmere Valley Bank (OTCQX:CSHX) reported Q3 2021 earnings of $8.0 million, bringing year-to-date earnings to $22.2 million, a 20.9% increase in diluted EPS to $5.64. Deposit balances rose 14.0% to $1.9 billion, with a quarterly increase of $37.9 million. Gross loans decreased by $33.8 million, while non-PPP loans grew by $22.4 million. Despite strong earnings, the net interest margin declined to 2.60%. The bank returned $13.0 million to shareholders through dividends and repurchases. The credit quality remains strong with non-performing loans at 0.08% of total loans.

Positive

• Year-to-date earnings of $22.2 million, up 20.9%.
• Deposit balances increased by $234.5 million (14.0%) year-over-year.
• Non-PPP loan portfolio grew by $22.4 million in Q3.
• Strong credit quality with non-performing loans at 0.08%.

Negative

• Gross loans decreased by $33.8 million year-over-year.
• Net interest margin fell to 2.60% from 2.75% in 2020.
• Non-interest income decreased by $1 million year-over-year.

CASHMERE, WA / ACCESSWIRE / October 19, 2021 / Cashmere Valley Bank (OTCQX:CSHX) ("Bank"), announced 2021 quarterly earnings of $8.0 million and year to date earnings of $22.2 million for the periods ended September 30, 2021. Year to date diluted earnings per share were $5.64, representing an increase of $0.98 per share, or 20.9%.

As of September 30, 2021, deposit balances totaled $1.9 billion. Deposit balances have increased approximately $234.5 million from September 30, 2020, representing an 14.0% increase. Deposit balances continued to increase throughout the quarter. The quarterly increase was $37.9 million.

"We were pleasantly surprised that our deposit balances have continued to increase at a significant pace" said Greg Oakes, President and CEO. "Our earnings continue to increase year-over-year though we would like improvement in our net interest margin, which is inflated at this time due to PPP forgiveness."

Third Quarter Highlights

The Bank reported the following statement of condition highlights as of September 30, 2021:

• September 30, 2021 gross loans and leases totaled $946.8 million representing a decrease of $33.8 million from September 30, 2020. PPP loans have decreased $47.3 million due to ongoing PPP forgiveness. Excluding PPP loans, the Bank has increased its loan portfolio from September 30, 2020 by $13.5 million. During the third quarter gross loans increased by $5.7 million. PPP loans decreased by $16.7 million which results in non-PPP loan growth of $22.4 million in the third quarter.
• Total deposits have increased by $234.5 million or 14.0% from September 30, 2020. Non-interest bearing deposits total $443.8 million and represent 23.2% of total deposits. During the third quarter deposits increased by $37.9 million.
• Net income for the quarter was $8.0 million, an increase of $1,465,000 or 22.5% over the same quarter one year ago. Diluted earnings per share increased $0.41 per share to $2.05 per share. Included in third quarter of 2021 earnings is a one-time settlement of $1.1 million which will not reoccur.
• Year-over-year return on assets has increased 1 basis point to 1.41%.
• Year-to-date return on equity has increased 110 basis points to 12.53%. The increase from the prior year is due to increased earnings. The Bank's capital ratios have not substantially increased due to the Bank's asset growth.

Pandemic Response Update

As of September 30, 2021, the remaining balance on PPP loans totaled $22.7 million. Remaining fees to be earned totaled $1.1 million. During the quarter, net deferred fees reported through income totaled $810,000 and year to date net deferred fees totaled $2,645,000.

The Bank began providing support to its employees at the onset of COVID-19 including at-risk employees, and employees with child care needs. During the past year the Bank has continued to provide child care support as well as support to get vaccinated and recover from vaccination side effects.

Cash, Cash Equivalents and Restricted Cash

Total cash, cash equivalents and restricted cash totaled $92.1 million at September 30, 2021, compared to $151.3 million at September 30, 2020. The decrease in cash has been intentional as the Bank has deployed excess cash into loans and available for sale securities.

Investments

The investment portfolio totaled $1.1 billion at September 30, 2021, an increase of $326.6 million from September 30, 2020. The increase is a result of significant deposit growth combined with efforts to deploy excess cash. The Bank has intentionally increased the credit risk in the securities portfolio in an attempt to mitigate the decreasing loan to asset ratio. Non-agency asset backed securities total $79.1 million and corporate debt totaled $42.8 million.

Loans and Credit Quality

Gross loans totaled $946.8 million as of September 30, 2021 an increase of $5.6 million from June 30, 2021 and a decrease of $33.8 million from September 30, 2020. As compared to September 30, 2020 real estate balances consisting of multifamily and consumer adjustable rate mortgages have decreased $34.7 million as many residential real estate loans have refinanced into fixed rate Freddie Mac loans that were sold off of the Bank's balance sheet. Commercial and agriculture balances have decreased $15.6 million. The decrease in commercial and agriculture balances were primarily the result of a decrease of $47.3 million in PPP loans which were partially offset by increases in commercial loans. Commercial real estate loans have increased $9.5 million and construction and land development loans have increased $9.2 million since September 30, 2020.

The allowance for loans and lease losses (ALLL) was 1.45% of gross loans as compared to 1.38% one year ago. The Bank has not made any provisions during 2021 and the allowance totals $13.8 million.

Credit quality remains exceptionally strong with non-performing loans totaling $712,000 representing 0.08% of total loans as of September 30, 2021.

Deposits

Deposits totaled $1.910 billion at September 30, 2021, as compared to $1.676 billion at September 30, 2020. The $234.5 million increase in deposits from September 30, 2020 represented a 14.0% increase. Transaction accounts grew $271.8 million while time deposits decreased $37.3 million over the prior 12 months.

Capital

Capital levels remain strong. Tier 1 capital was $210.3 million as of September 30, 2021 as compared to $194.7 million as of September 30, 2020.

The Bank has returned $13.0 million to shareholder in the form of dividends and stock repurchases in 2021. Dividend payments represented $6.1 million and the share repurchase totaled $6.9 million.

Earnings

Net Interest Income

Net interest income totaled $13.4 million during the third quarter of 2021 and $38.9 million year to date as compared to $11.4 million during the third quarter of 2020 and $34.6 million during the first nine months of 2020. The primary reason for increases in net interest income were increases in PPP fees which are recorded into income at the time of PPP loan forgiveness. Net PPP fees totaled approximately $2.6 million in the first nine months of 2021. Net fees in the second quarter were approximately $810,000. PPP fees recognized in the first nine months of 2020 were negligible.

Interest income from available for sale securities totaled $13.5 million in the first nine months of 2021, compared to $11.2 million in the comparable period from one year ago. As compared to the prior year, yields on investment securities have decreased from 2.39% to 1.88%.

The net interest margin was 2.60% for the first nine months of 2021, compared to 2.75% in the first nine months of 2020. Loan yields have increased 13 basis points, while cash and available for sale securities yields have decreased 37 and 51 basis points respectively. PPP forgiveness was attributable for 17 basis points of the net interest margin for the nine months ended September 31, 2021. Absent PPP forgiveness the Bank's net interest margin was 2.43%.

Non-Interest Income

Year-to-date non-interest income totals $15.1 million versus $16.1 million during the prior year. Included in 2021 non-interest income is a one-time gain of $1.1 million. The decrease in non-interest income was due to a $2.5 million reduction on gains on security sales and a reduction of $1.2 million in income from mortgage banking.

Non-Interest Expense

Non-interest expense has increased 7.3% year-over-year, or $1.9 million. Wages and benefits have increased $973,000 as wage rates have been under pressure and health insurance premiums have increased.

Professional and legal expenses have increased $296,000 due primarily to consulting expenses.

The Bank's efficiency ratio remains strong and was 54.7% through the first nine months of 2021 as compared to 54.3% in the first nine months of 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.

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
		September 30, 2021				June 30, 2021				September 30, 2020
Assets
Cash and Cash Equivalent:
Cash & due from banks		$	26,878			$	21,890			$	22,130
Interest bearing deposits			56,910				94,013				121,931
Fed funds sold			8,352				18,743				7,202
Total Cash and Cash Equivalent			92,140				134,646				151,263
Securities available for sale			1,086,559				1,007,823				759,994
Federal Home Loan Bank stock, at cost			2,393				2,393				1,982
Loans held for sale			356				532				4,109
Loans			946,843				941,176				980,598
Allowance for credit losses			(13,760	)			(13,854	)			(13,496	)
Net loans			933,083				927,322				967,102
Premises and equipment			17,061				17,348				16,605
Accrued interest receivable			8,851				8,181				7,905
Bank Owned Life Insurance			26,313				26,138				15,791
Goodwill			7,518				7,518				7,182
Intangibles			2,044				2,233				1,683
Mortgage servicing rights			2,759				2,808				2,776
Other assets			10,187				10,552				8,078
Total assets		$	2,189,264			$	2,147,494			$	1,944,470
Liabilities and Shareholders' Equity
Liabilities
Deposits:
Non-interest bearing demand		$	443,846			$	422,606			$	376,319
Savings and interest-bearing demand			1,257,270				1,232,659				1,053,022
Time			209,088				217,057				246,376
Total deposits			1,910,204				1,872,322				1,675,717
Accrued interest payable			437				506				653
Short-term borrowings			29,344				25,409				15,590
Other liabilities			13,976				14,587				23,718
Total liabilities			1,953,961				1,912,824				1,715,678
Shareholders' Equity
Common stock (no par value); authorized 10,000,000 shares;
Issued and outstanding: 9/30/2021 -- 3,880,786 ; 6/30/2021 -- 3,876,931 ; 9/30/2020 -- 3,972,149			4,150				3,898				3,685
Treasury stock			(16,784	)			(16,784	)			(9,908	)
Retained Earnings			233,608				228,723				210,495
Accumulated other comprehensive income			14,329				18,833				24,520
Total shareholders' equity			235,303				234,670				228,792
Total liabilities and shareholders' equity		$	2,189,264			$	2,147,494			$	1,944,470

Year-to-Date Consolidated Statements of Income (UNAUDITED)
(Dollars in Thousands)
Cashmere Valley Bank & Subsidiary
	For the nine months ended,
	September 30, 2021				September 30, 2020
Interest Income
Loans	$	29,357			$	28,358
Deposits at other financial institutions		80				385
Federal Funds Sold
Securities available for sale:
Taxable		8,559				7,109
Tax-exempt		4,944				4,094
Total interest income		42,940				39,946
Interest Expense
Deposits		3,984				5,333
Short-term borrowings		33				30
Total interest expense		4,017				5,363
Net interest income		38,923				34,583
Provision for Credit Losses		45				2,853
Net interest income after provision for credit losses		38,878				31,730
Non-Interest Income
Service charges on deposit accounts		1,147				921
Mortgage banking operations		4,294				5,511
Net gain (loss) on sales of securities available for sale		21				2,520
Brokerage commissions		875				800
Insurance commissions and fees		3,910				3,434
Net interchange income (expense)		3,293				1,659
BOLI cash value		406				344
Dividends from correspondent banks		55				51
Other		1,110				906
Total non-interest income		15,111				16,146
Non-Interest Expense
Salaries and employee benefits		15,991				15,018
Occupancy and equipment		2,353				2,198
Audits and examinations		413				403
State and local business and occupation taxes		755				713
FDIC insurance & WA state assessments		460				333
Legal and professional fees		697				401
Check losses and charge-offs		419				314
Low income housing investment losses		444				554
Data processing		3,424				3,481
Product delivery		804				775
Other		2,444				2,105
Total non-interest expense		28,204				26,295
Income before income taxes		25,785				21,581
Income Taxes		3,583				3,052
Net income	$	22,202			$	18,529
Earnings Per Share
Basic	$	5.66			$	4.67
Diluted	$	5.64			$	4.66

Quarterly Consolidated Statements of Income (UNAUDITED)
(Dollars in Thousands)
Cashmere Valley Bank & Subsidiary
	For the quarters ended,
	September 30, 2021				June 30, 2021				September 30, 2020
Interest Income
Loans	$	9,779			$	9,656			$	9,460
Deposits at other financial institutions		32				23				34
Federal funds sold
Securities available for sale:
Taxable		3,143				2,862				2,061
Tax-exempt		1,646				1,657				1,531
Total interest income		14,600				14,198				13,086
Interest Expense
Deposits		1,206				1,341				1,682
Short-term borrowings		14				11				12
Total interest expense		1,220				1,352				1,694
Net interest income		13,380				12,846				11,392
Provision for Credit Losses		41				8				386
Net interest income after provision for credit losses		13,339				12,838				11,006
Non-Interest Income
Service charges on deposit accounts		466				354				254
Mortgage banking operations		1,050				1,364				2,242
Net gain (loss) on sales of securities available for sale		-				21				-
Brokerage commissions		290				369				338
Insurance commissions and fees		1,393				1,264				1,105
Net interchange income (expense)		1,801				783				705
BOLI cash value		176				116				116
Dividends from correspondent banks		18				15				15
Other		332				314				333
Total non-interest income		5,526				4,600				5,108
Non-Interest Expense
Salaries and employee benefits		5,429				5,349				4,808
Occupancy and equipment		852				756				720
Audits and examinations		87				168				85
State and local business and occupation taxes		275				228				251
FDIC insurance & WA state assessments		166				148				137
Legal and professional fees		258				217				125
Check losses and charge-offs		87				131				94
Low income housing investment losses		144				155				136
Data processing		1,160				1,214				1,211
Product delivery		287				284				223
Other		907				797				747
Total non-interest expense		9,652				9,447				8,537
Income before income taxes		9,213				7,991				7,577
Income Taxes		1,226				1,092				1,055
Net income	$	7,987			$	6,899			$	6,522
Earnings Per Share
Basic	$	2.06			$	1.76			$	1.64
Diluted	$	2.05			$	1.75			$	1.64

SOURCE: Cashmere Valley Bank

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FAQ

What are the latest earnings results for Cashmere Valley Bank (CSHX)?

Cashmere Valley Bank reported Q3 2021 earnings of $8.0 million, with year-to-date earnings of $22.2 million.

How much did Cashmere Valley Bank's deposit balances increase?

Deposit balances increased by $234.5 million, or 14.0%, year-over-year, totaling $1.9 billion.

What is the current net interest margin for Cashmere Valley Bank?

The net interest margin for Q3 2021 is 2.60%, down from 2.75% in the same period last year.

How did Cashmere Valley Bank perform in terms of loans?

Gross loans decreased by $33.8 million year-over-year, but non-PPP loans increased by $22.4 million in Q3.