Lewis & Clark Bancorp Announces 2023 Second Quarter and Year-to-Date Results

Rhea-AI Summary

Lewis & Clark Bancorp announces Q2 2023 results with a net loss of $2.7 million, compared to net income of $515 thousand in the same period last year. Loss per share was ($2.51), compared to $0.48 in the prior-year quarter. The net loss was due to a $3.2 million pre-tax loss on the sale of investment securities. The company sold $72.9 million of fixed-rate investment securities, resulting in a $3.2 million loss. However, the sale improved the company's balance sheet by increasing earnings, enhancing liquidity, and reducing interest-rate risk. The weighted-average net yield of the sold securities was 0.62%, while the replacement securities and interest-bearing cash balances had a combined weighted-average net yield of 5.66%. The company still holds $77.5 million of investment securities yielding a weighted-average 1.11%. The decrease in earnings was also attributed to a decrease in net interest income and an increase in loss on sale of securities. Strategic partnerships are performing well and expected to contribute meaningfully to net income. Total consolidated assets increased to $365.3 million, primarily due to increases in cash and borrowings, partially offset by decreases in investment securities, gross loans, and total deposits. Shareholders' equity decreased to $30.0 million due to the net loss and dividends, partially offset by a decrease in unrealized losses on investment securities.

Positive

• Strategic partnerships performing well and expected to contribute to net income
• Improvement in balance sheet through the sale of investment securities

Negative

• Net loss of $2.7 million in Q2 2023 compared to net income of $515 thousand in the same period last year
• Decrease in net interest income and increase in loss on sale of securities

OREGON CITY, Ore.--(BUSINESS WIRE)-- Lewis & Clark Bancorp (OTC Pink: LWCL) announces 2023 second-quarter and year-to-date consolidated results. Quarter-to-date net loss totaled $2.7 million for the three months ended June 30, 2023, which included a $3.2 million pre-tax loss on the sale of investment securities. Net income for the same period last year was $515 thousand. Earnings (loss) per share were ($2.51) for the current-year quarter, compared to $0.48 for the prior-year quarter.

Investment Securities

The net loss during the current year was substantially due to a $3.2 million pre-tax loss on the sale of investment securities during the three months ended June 30, 2023. In response to the rapid and unprecedented increase in market interest rates and resulting negative net interest margin earned on the investment portfolio, Management effected the sale of $72.9 million (amortized cost) of fixed-rate investment securities. The proceeds from the sale of investments totaled $69.7 million, resulting in a $3.2 million pre-tax loss. A portion of the proceeds of this sale was reinvested into higher-yielding investment securities totaling $21.8 million, while the remaining $47.9 million was invested in interest-bearing cash balances. This sale better positioned the Company’s balance sheet in three ways: increased earnings going forward, enhanced on-balance-sheet liquidity, and a more flexible interest-rate risk position.

The weighted-average net yield of the securities sold was 0.62%, compared to the weighted-average net yield of the replacement securities of 6.18% and interest-bearing cash balances of 5.13%, for a combined weighted-average net yield of 5.66%. This repositioning provides a significant increase in earnings on the $69.7 million in sale proceeds. Note, however, that the Company still holds $77.5 million of investment securities currently yielding a weighted-average 1.11%. At this time, Management does not intend to sell all or a portion of these investment securities.

Income Statement

The decreased earnings in the current-year quarter were due to a decrease in net interest income and an increase in loss on sale of securities, partially offset by an in increase in noninterest income and decreases in both noninterest expense and the provision for income taxes compared to the same period one year ago. The decrease in net interest income was due to an increase in interest expense as a result of increased rates paid on deposits and interest expense on borrowings, and a decrease in interest and fees earned on loans, partially offset by an increase in interest on interest-bearing cash. Net interest margin was 1.92% for the current-year quarter compared to 3.30% for the same quarter one year ago. The decrease in the net interest margin was due to an increase in interest expense on deposits and borrowed funds. The increase in loss on sale of securities was due to the sale of investment securities as previously discussed. The increase in noninterest income was due to increases in fees earned from strategic partnerships and dividends earned. The decrease in noninterest expense was due to decreases in professional fees, occupancy expense and intangible amortization, partially offset by increases in salaries and employee benefits, and the FDIC assessment compared to the prior-year period. The decrease in the provision for income taxes was due to a decrease in pre-tax earnings compared to the prior year quarter.

Year-to-date net loss totaled $2.9 million, or ($2.72) per share, compared to net income of $899 thousand, or $0.84 per share for the same period last year. The decreased earnings in the current-year period were due to a decrease in net interest income and an increase in loss on sale of securities, partially offset by an increase in noninterest income and decreases in both noninterest expense and the provision for income taxes compared to the same period one year ago. With the exception of noninterest income, the decreased earnings for the year-to-date period are substantially the same as those for the current-year quarter as previously discussed. The increase in noninterest income was due to increases in fees earned from strategic partnerships, dividends earned, and an unrealized gain on equity securities compared to the prior-year period.

Strategic Partnerships

The Company has and will continue to selectively evaluate and enter into strategic partnerships as part of its “banking-as-a-service” and embedded banking initiative. These partnerships include programs that generate loans, deposits, transaction fees and platform revenue. Examples of select programs that are either live or in implementation include brand-integrated commercial and consumer deposit accounts and debit cards, government-guaranteed consumer installment loans, commercial spend management platform, commercial fleet management, equipment financing and deposit custody. While the Bank entered into its first strategic partnership in 2017, expanding these relationships into a full-fledged division began in late 2020. Since that time, the Bank has made substantial investments in governance, risk management, support infrastructure and personnel to enable capacity and oversight in an effort to ensure the scalability and sustainability of its strategic partnership division. In the first quarter of 2023, the return on investment for the division shifted into positive earnings territory and is on track to contribute meaningfully to net income.

Jeffrey Sumpter, President and CEO, commented, “Although we incurred a current-year loss from the sale of investment securities, it was clear that restructuring the investment portfolio would provide long-term benefits to the Company and generate improved performance as we transition into the second half of the year.” Sumpter added, “We are pleased with the progress of our Strategic Partnership division and the addition of Strategic Partnership programs that will complement the Bank as we move forward.”

Balance Sheet

As of June 30, 2023, total consolidated assets were $365.3 million, an increase of $2.3 million compared to December 31, 2022, primarily due to increases in cash and borrowings, partially offset by decreases in investment securities, gross loans and total deposits. Cash increased year to date by $60.4 million, due to proceeds from the sale of securities and principal reductions on loans, partially offset by securities purchased. Borrowings increased year to date by $59.0 million as a result of borrowings secured through the Federal Reserve’s Bank Term Funding Program. Investment securities decreased year to date by $48.0 million primarily due to the sale and subsequent purchases as previously discussed. Gross loans decreased year to date by $9.9 million primarily due to principal reductions and payoffs exceeding new originations. Total deposits decreased year to date by $57.1 million, primarily due to select customers moving excess funds to higher-yielding vehicles, consistent with industry trends. Shareholders’ equity totaled $30.0 million at June 30, 2023, a decrease of $322 thousand, compared to $30.3 million at December 31, 2022. The decrease was due to the $2.9 million net loss, and shareholder dividends totaling $80 thousand, substantially offset by a $2.7 million decrease in unrealized losses on investment securities.

About Lewis & Clark Bancorp

Headquartered in Oregon City, Oregon, Lewis & Clark Bancorp (the “Company”) is the holding company for Lewis & Clark Bank (the “Bank”), a state-chartered full-service commercial bank. Partnering with people and businesses—whether in our local geographic footprint within Oregon and SW Washington or through select strategic partnerships nationally—we believe that being an integral part of the community we serve helps promote both growth and success for all stakeholders.

For more information about Lewis & Clark Bank, visit www.lewisandclarkbank.com.

Forward-looking Statements

Statements included in this press release that are not historical or current fact are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. Lewis & Clark Bancorp disclaims any obligation to subsequently revise any forward-looking statements to reflect events or circumstances after the date of such statements, or to reflect the occurrence of anticipated or unanticipated events or circumstances.

Summary Balance Sheet
(dollars in thousands)
		June 30, 2023				December 31, 2022				$ Change				% Change
ASSETS
Cash		$	76,875			$	16,465			$	60,410			366.9	%
Equity Securities			2,130				2,439				(309	)		-12.7	%
Investment Securities			103,116				151,128				(48,012	)		-31.8	%
Gross loans			161,779				171,689				(9,910	)		-5.8	%
Allowance for loan losses			(2,328	)			(2,328	)			0			0.0	%
Net loans			159,451				169,361				(9,910	)		-5.9	%
Fixed Assets			6,877				6,970				(93	)		-1.3	%
Other Assets			16,836				16,615				221			1.3	%
Total Assets		$	365,285			$	362,978			$	2,307			0.6	%
LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing		$	70,265			$	91,070			$	(20,805	)		-22.8	%
Interest-bearing demand			14,774				17,074				(2,300	)		-13.5	%
Money market and savings			134,484				165,666				(31,182	)		-18.8	%
Time deposits			26,392				29,194				(2,802	)		-9.6	%
Total deposits			245,915				303,004				(57,089	)		-18.8	%
Subordinated debentures, net			6,943				6,931				12			0.17	%
Borrowings			80,000				21,000				59,000			280.95	%
Other liabilities			2,419				1,713				706			41.2	%
Total liabilities			335,277				332,648				2,629			0.8	%
Equity			30,008				30,330				(322	)		-1.1	%
Total Liabilities and Equity		$	365,285			$	362,978			$	2,307			0.6	%
Net loans to deposits			64.84	%			55.89	%
Allowance for loan losses to total loans			1.44	%			1.36	%
DDA deposits to total deposits			28.57	%			30.06	%
Tangible book value per share		$	27.37			$	27.62

Summary Income Statement
(dollars in thousands)
		Three months ended June 30,								Six months ended June 30,
			2023				2022				2023				2022
Interest and fees on loans and investments		$	3,538			$	3,330			$	6,650			$	6,248
Interest expense			1,901				227				3,252				470
Net interest income			1,637				3,103				3,398				5,778
Provision for loan losses			-				-				-				-
Net interest income after provision			1,637				3,103				3,398				5,778
Noninterest income			404				223				899				432
(Loss) Gain on sale on securities			(3,181	)			-				(3,181	)			151
Noninterest expense			2,576				2,639				5,157				5,169
Pre-tax income			(3,716	)			687				(4,041	)			1,192
Provision for income taxes			(1,025	)			172				(1,123	)			293
Net income		$	(2,691	)		$	515			$	(2,918	)		$	899
Return on average equity			-35.11	%			6.35	%			-19.14	%			5.23	%
Return on average assets			-2.90	%			0.51	%			-1.59	%			0.43	%
Net interest margin			1.92	%			3.30	%			2.01	%			2.93	%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230822605236/en/

Jeffrey Sumpter – President and Chief Executive Officer

Phone: (503) 212-3107

John Lende – Executive Vice President and Chief Financial Officer

Phone: (503) 212-3141

Source: Lewis & Clark Bancorp