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Cashmere Valley Bank Earnings Increase 18.4% From Prior Year

·13 min read

CASHMERE, WA / ACCESSWIRE / July 20, 2021 / Cashmere Valley Bank (OTCQX:CSHX) ("Bank"), announced 2021 year to date earnings of $14.2 million and quarterly earnings of $6.9 million for the periods ended June 30, 2021. Year to date diluted earnings per share were $3.59, representing an increase of $0.57 per share, or 18.8%.

As of June 30, 2021, deposit balances totaled $1.9 billion. Deposit balances increased approximately $152.4 million from December 31, 2021, representing an 8.9% increase.

"Our deposit growth has been the driver for our increasing earnings," said Greg Oakes, President and CEO. "Our deposit growth continued in the second quarter, exceeding our expectations. Deposit growth along with fees earned from PPP forgiveness have been welcome surprises in light of the industry's compressed interest rate environment. We were also pleased with the results of our tender offer which was completed during the second quarter."

Q2 Highlights
The Bank reported the following statement of condition highlights as of June 30, 2021:

  • June 30, 2021 gross loans totaled $941.2 million representing a decrease of $9.8 million or 1.0% from December 31, 2020.

  • Total deposits increased by $152.4 million or 8.9% from December 31, 2020. Non-interest bearing deposits have increased $57.0 million or 15.6% since December 31, 2020. Non-interest bearing deposits total $422.6 million and represent 22.6% of total deposits.

  • On May 14, 2021 the Bank announced the completion of a tender offer to repurchase the Bank's stock at $70.00 per share. The Bank was approved to repurchase 340,000 shares and successfully repurchased 98,223 shares.

  • Net income for the quarter was $6.9 million, an increase of $348,000 or 5.3% over the prior year. Diluted earnings per share increased $0.10 to $1.75 per share. An increase of $1,358,000 in net interest income combined with a reduction in provision for loan losses of $1,996,000 were the primary reasons for the increase in income. The second quarter of 2020 did have a non-recurring gain of $2.5 million on the sale of securities.

Pandemic Response Update
As of June 30, 2021, the remaining balance on PPP loans totaled $40.1 million. Remaining fees to be earned totaled $1.9 million. During the quarter, net deferred fees reported through income totaled $762,000 and year to date net deferred fees totaled $1,835,000, which have had a positive impact on the Bank's earnings and net interest margin.

The Bank began providing support to its employees at the onset of COVID-19 including at-risk employees and employees with child care needs. Those employees have been allowed to stay home, Bank paid as needed on an unlimited basis, or work from home if their position allows. While some employees will continue to work from home at a reduced level, the program to financially support for COVID related illnesses has been suspended.

Cash, Cash Equivalents and Restricted Cash
Total cash, cash equivalents and restricted cash were $134.7 million at June 30, 2021, compared to $135.7 million at December 31, 2020.

Investments
The investment portfolio totaled $1.0 billion at June 30, 2021, an increase of $151.5 million from December 31, 2020 and an increase of $330.0 million from June 30, 2020. The increase is a result of significant deposit growth combined with marginal loan demand. Security types showing the most significant increases year to date were CMO's $77.9 million, taxable municipal securities $54.2 million and treasury securities $22.4 million.

Loans and Credit Quality
Gross loans totaled $941.2 million as of June 30, 2021 a decrease of $21.9 million from March 31, 2021 and a decrease of $33.8 million from June 30, 2020. As compared to the prior June 30, real estate balances consisting of multifamily and consumer adjustable rate mortgages have decreased $29.0 million. Commercial and agriculture balances have decreased $15.1 million. The decrease in commercial and agriculture balances were primarily the result of a decrease of $26.3 million in PPP loans which were partially offset by increases in commercial loans. Over the last 12 months the Bank did see a significant increase in commercial real estate (CRE) loans. CRE loans increased $25.6 million or 10.4%.

The allowance for loans and lease losses (ALLL) was 1.47% of gross loans as compared to 1.36% one year ago. The Bank did not make any provisions during the first half of 2021 and the allowance totals $13.9 million.

Credit quality remains exceptionally strong with non-performing loans totaling $856,000 representing 0.09% of total loans as of June 30, 2021.

Deposits
Deposits totaled $1.872 billion at June 30, 2021, as compared to $1.585 billion at June 30, 2020. The $286.9 million increase in deposits from the year end represented an 18.1% increase. Transaction accounts grew $322.7 million while time deposits decreased $35.9 million over the prior 12 months.

Earnings

Net Interest Income
Net interest income totaled $25.5 million during the first six months of 2021, compared to $23.2 million during the first six months of 2020. The primary reason for increases in net interest income were increases in PPP fees which are generally recorded into income at the time of PPP loan forgiveness. Net PPP fees totaled approximately $1.8 million in the first six months of 2021. Net fees in the second quarter were approximately $762,000 which was a decrease from $1,073,000 in the first quarter of 2021. PPP fees recognized in the first six months of 2020 were negligible.

Interest income from available for sale securities totaled $8.7 million in the first half of 2021, compared to $7.6 million in the comparable period from one year ago. As compared to the prior year, yields on investment securities have decreased from 2.54% to 1.90%. Securities portfolio growth has driven the increase in securities income.

The net interest margin was 2.61% for the first six months of 2021, compared to 2.87% in the first six months of 2020. Loan yields have increased six basis points, while cash and available for sale securities yields have decreased 68 and 64 basis points respectively.

Non-Interest Income
Non-interest income totaled $9.6 million in the first half of 2021 as compared to $11.0 million in the first half of 2020. The decrease was due to a $2.5 million reduction on gains on security sales. Mortgage banking income remained strong and was largely unchanged from the prior year. Interchange income increased significantly by $539,000 (56.6%) due to program and network changes.

Non-Interest Expense
Non-interest expense totaled $18.5 million in the first half of 2021 as compared to $17.8 million in the first half of 2020.

As compared to the same period one year ago, wages and benefits expense increased $352,000 or 3.4% and professional services including legal, audits and examination expenses increased $269,000.

The Bank's efficiency ratio was 55.4% in the first half of 2021 as compared to 54.2% in the first half 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
Mike Lundstrom, CFO, (509) 782-5495

Consolidated Balance Sheets
(UNAUDITED)

(Dollars in Thousands)




Cashmere Valley Bank and Subsidiary





June 30, 2021

December 31, 2020

June 30, 2020

Assets




Cash and Cash Equivalent:




Cash & due from banks

$

21,890

$

27,258

$

28,355

Interest bearing deposits

94,013

97,466

108,387

Fed funds sold

18,743

10,990

4,872

Total Cash and Cash Equivalent

134,646

135,714

141,614


Securities available for sale

1,007,823

856,327

677,793

Federal Home Loan Bank stock, at cost

2,393

1,982

1,982

Loans held for sale

532

1,470

5,497


Loans

941,176

950,970

974,953

Allowance for credit losses

(13,854

)

(13,730

)

(13,226

)

Net loans

927,322

937,240

961,727


Premises and equipment

17,348

16,381

16,680

Accrued interest receivable

8,181

7,829

7,228

Foreclosed real estate

-

-

-

Bank Owned Life Insurance

26,138

15,908

15,675

Goodwill

7,518

7,182

7,162

Intangibles

2,233

1,564

1,684

Mortgage servicing rights

2,808

2,856

2,659

Other assets

10,552

9,835

7,073


Total assets

$

2,147,494

$

1,994,288

$

1,846,774


Liabilities and Shareholders' Equity


Liabilities

Deposits:

Non-interest bearing demand

$

422,606

$

365,645

$

348,397

Savings and interest-bearing demand

1,232,659

1,121,111

984,123

Time

217,057

233,215

252,927

Total deposits

1,872,322

1,719,971

1,585,447


Accrued interest payable

506

612

699

Short-term borrowings

25,409

16,395

14,122

Long-term borrowings

-

-

-

Other liabilities

14,587

18,632

23,549


Total liabilities

1,912,824

1,755,610

1,623,817


Shareholders' Equity

Common stock (no par value); authorized 10,000,000 shares;

Issued and outstanding: 6/30/2021 -- 3,876,931 ;
3/31/2021 -- 3,972,304 ; 6/30/2020 -- 3,972,149

3,898

3,723

3,649

Treasury stock

(16,784

)

(9,908

)

(9,908

)

Retained Earnings

228,723

217,487

206,753

Accumulated other comprehensive income

18,833

27,376

22,463

Total shareholders' equity

234,670

238,678

222,957


Total liabilities and shareholders' equity

$

2,147,494

$

1,994,288

$

1,846,774


Quarterly Consolidated Statements of Income
(UNAUDITED)

(Dollars in Thousands)




Cashmere Valley Bank & Subsidiary





For the quarters ended,


June 30, 2021

December 31, 2020

June 30, 2020

Interest Income




Loans

$

9,656

$

9,761

$

9,409

Deposits at other financial institutions

21

26

(7

)

Federal funds sold

2

1

2

Securities available for sale:

Taxable

2,862

2,259

2,362

Tax-exempt

1,657

1,617

1,466

Total interest income

14,198

13,664

13,232


Interest Expense

Deposits

1,341

1,515

1,735

Short-term borrowings

11

9

9

Long-term borrowings

-

-

-

Total interest expense

1,352

1,524

1,744


Net interest income

12,846

12,140

11,488


Provision for Credit Losses

8

321

2,004


Net interest income after provision for credit losses

12,838

11,819

9,484


Non-Interest Income

Service charges on deposit accounts

354

327

204

Mortgage banking operations

1,364

2,110

2,121

Net gain (loss) on sales of securities available for sale

21

-

2,508

Brokerage commissions

369

202

241

Insurance commissions and fees

1,264

1,182

1,143

Net interchange income (expense)

783

587

552

BOLI cash value

116

117

116

Dividends from correspondent banks

15

15

14

Other

314

332

267

Total non-interest income

4,600

4,872

7,166


Non-Interest Expense

Salaries and employee benefits

5,349

4,951

5,208

Occupancy and equipment

756

799

728

Audits and examinations

316

216

233

State and local business and occupation taxes

228

239

259

Legal and professional fees

217

98

140

Net loss (gain) on foreclosed real estate

-

-

-

Check losses and charge-offs

131

99

114

Low income housing investment losses

155

134

336

Data processing

1,214

1,155

1,087

Product delivery

284

255

301

Other

797

786

618

Total non-interest expense

9,447

8,732

9,024


Income before income taxes

7,991

7,959

7,626


Income Taxes

1,092

967

1,075


Net income

$

6,899

$

6,992

$

6,551


Earnings Per Share

Basic

$

1.76

$

1.76

$

1.65

Diluted

$

1.75

$

1.76

$

1.65


Year-to-Date Consolidated Statements of Income
(UNAUDITED)

(Dollars in Thousands)



Cashmere Valley Bank & Subsidiary




For the six months ended,


June 30, 2021

June 30, 2020

Interest Income



Loans

$

19,578

$

18,898

Deposits at other financial institutions

44

324

Federal Funds Sold

3

26

Securities available for sale:

Taxable

5,416

5,048

Tax-exempt

3,298

2,563

Total interest income

28,339

26,859


Interest Expense

Deposits

2,779

3,650

Short-term borrowings

19

18

Long-term borrowings

-

-

Total interest expense

2,798

3,668


Net interest income

25,541

23,191


Provision for Credit Losses

4

2,467


Net interest income after provision for credit losses

25,537

20,724


Non-Interest Income

Service charges on deposit accounts

681

667

Mortgage banking operations

3,244

3,269

Net gain (loss) on sales of securities available for sale

21

2,520

Brokerage commissions

584

463

Insurance commissions and fees

2,516

2,329

Net interchange income (expense)

1,492

953

BOLI cash value

230

228

Dividends from correspondent banks

37

36

Other

778

573


9,583

11,038

Total non-interest income

Non-Interest Expense

Salaries and employee benefits

10,562

10,210

Occupancy and equipment

1,501

1,478

Audits and examinations

619

513

State and local business and occupation taxes

479

462

Legal and professional fees

439

276

Net loss (gain) on foreclosed real estate

-

-

Check losses and charge-offs

332

220

Low income housing investment losses

300

418

Data processing

2,264

2,270

Product delivery

517

553

Other

1,536

1,358

Total non-interest expense

18,549

17,758


Income before income taxes

16,571

14,004


Income Taxes

2,356

1,997


Net income

$

14,215

$

12,007


Earnings Per Share

Basic

$

3.60

$

3.02

Diluted

$

3.59

$

3.02


SOURCE: Cashmere Valley Bank



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