CASHMERE, WA / ACCESSWIRE / April 20, 2021 / Cashmere Valley Bank (OTCQX:CSHX) ("Bank"), announced quarterly earnings of $7.3 million for the quarter ended March 31, 2021. Diluted earnings per share were $1.84, representing an increase of $0.47 per share, or 34.0%.
As of March 31, 2021, deposit balances totaled $1.9 billion. Deposit balances increased approximately $132.3 million from December 31, 2020, representing a 7.7% increase.
"The Bank had a great start to 2021" said Greg Oakes, President and CEO. "Our deposit growth continued throughout the first quarter, well exceeding our expectations. We are thrilled with our substantial earnings increase. PPP loan forgiveness and our increasing asset base were the primary reasons for the increase. Our net interest margin is a concern going forward especially as PPP forgiveness begins to slow down."
Q1 Highlights
The Bank reported the following statement of condition highlights as of March 31, 2021:
- March 31, 2020 gross loans totaled $963.0 million representing an increase of $12.1 million or 3.5% from December 31, 2020.
- Total deposits increased by $132.3 million or 7.7% from December 31, 2020. Non-interest bearing deposits have increased $48.5 million or 13.3% since December 31, 2020. Non-interest bearing deposits total $414.1 million and represent 22.4% of total deposits.
- On April 13, 2021 the Bank announced a share repurchase program in the form of a tender offer whereby the Bank is authorized to repurchase up to 340,000 shares of common stock at a price of $70.00 per share.
Pandemic Response Update
As of March 31, 2021, loans with deferred payments or on interest only due to COVID-19 consisted of 0.08% of gross loans. There were 19 loans remaining on deferral as of March 31, 2021, the majority of which were indirect auto loans.
The Bank originated $106.4 million in PPP loans including originations of $35.8 million in the first quarter of 2021. PPP loan balances as of March 31, 2021 totaled $57.4 million. Net deferred fees remaining as of March 31, 2021 totaled approximately $2.3 million.
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.
Cash, Cash Equivalents and Restricted Cash
Total cash, cash equivalents and restricted cash were $131.2 million at March 31, 2021, compared to $135.7 million at December 31, 2020. The $4.5 million decrease was primarily due to increasing the size of the investment portfolio.
Investments
The investment portfolio totaled $972.6 million at March 31, 2021, an increase of $116.3 million from December 31, 2020 and an increase of $312.4 million from March 31, 2020. The increase in the first quarter of 2021 was attributable to securities purchases of $150.4 million. Securities purchases mainly consisted of $66.3 million in collateralized mortgage obligations and $58.7 million in municipal securities. The increase in available for sale securities year-over-year was primarily due to an increase in deposit balances.
Loans and Credit Quality
Gross loans totaled $963.0 million as of March 31, 2021 an increase of $12.1 million from December 31, 2020 and an increase of $61.9 million from March 31, 2020. Year-over-year the main reason for the increase in loan balances was the $57.4 million increase in PPP loans. Other significant changes include an increase of $20.5 million in commercial real estate loans and a $15.2 million increase in municipal loans. Growth in these categories was partially offset by a decrease of $32.8 million in real estate loans driven by refinances into fixed rate government real estate loans.
The allowance for loans and lease losses (ALLL) was 1.43% of gross loans as compared to 1.26% one year ago. The Bank did not make any provisions during the first quarter of 2021 and the allowance totals $13.8 million.
Credit quality remains exceptionally strong with non-performing loans representing 0.09% of gross loans as of March 31, 2021. This is a slight decrease from 0.12% as of December 31, 2020.
Deposits
Deposits totaled $1.852 billion at March 31, 2021, as compared to $1.720 billion at December 31, 2020. The $132 million increase in deposits from the year end represented a 7.7% increase and the growth was in non-maturity deposits. The average cost of deposits decreased 3 basis points in the fourth quarter to 0.42% and has decreased 24 basis points from the first quarter of 2020.
Earnings
Net Interest Income
Net interest income totaled $12.7 million in the first quarter of 2021, compared to $12.1 million in the prior quarter and $11.7 million in the same quarter a year ago. 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 $1.1 million in the first quarter of 2021 versus $424,000 in the fourth quarter of 2020 and $0 in the first quarter of 2020.
Interest income from available for sale securities totaled $4.2 million in the first quarter of 2021, compared to $3.9 million in the previous quarter and $3.8 million in the first quarter of 2020. Yields on investment securities have decreased approximately 70 basis points from one year ago, however, the decrease in yields has been more than offset by the significant increase in securities balances.
The tax-equivalent net interest margin was 2.66% for the first quarter of 2021, compared to 2.60% in the prior quarter and 2.98% in the first quarter of 2020. The six basis point increase from the prior quarter was primarily due to increased loan income from PPP loan forgiveness. As compared to the same quarter one year ago the decrease in the net interest margin is largely due to a reduction in the yields earned on interest bearing deposits and available for sale securities in combination with significant growth in the balances of those two categories.
Non-Interest Income
Non-interest income totaled $5.9 million in the first quarter of 2021 as compared to $5.8 million in the fourth quarter of 2020 and compared to $4.7 million in the first quarter of 2020. The increase over the prior quarter was primarily due to an increase in card fees and the increase from the first quarter of 2020 was primarily due to an increase in mortgage origination fees, which increased $1.0 million from the same quarter one year ago. Income from mortgage origination fees remain at an elevated level as the Bank works through its refinance pipeline.
Non-Interest Expense
Non-interest expense totaled $10.1 million in the first quarter of 2021 as compared to $9.7 million in the fourth quarter of 2020 and $9.6 million in the first quarter of 2020.
As compared to the same period one year ago, wages and benefits expense increased $211,000 or 4.2% and mortgage banking expense increased $103,000 due to volume increases.
As compared to the prior quarter, wages and benefits increased $262,000. The increase was due to a $104,000 increase in employee benefits which comprised of a $78,000 increase in health insurance costs and a $36,000 increase in 401(k) contributions. Wages also increased $87,000 due to annual salary increases.
The Bank's efficiency ratio was 54.0% in the first quarter of 2021 as compared to 53.8% in the fourth quarter of 2020 and 58.3% in the first quarter of 2020.
Share Repurchase Program
On April 13, 2021, the Board issued a stock repurchase program in the form of a tender offer. The Board has approved a repurchase of up to 340,000 shares at a price of $70.00 per share. Shareholders have up to 30 days to tender their shares.
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
SOURCE: Cashmere Valley Bank
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