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Cashmere Valley Bank Reports Record Annual Earnings of $29.0 Million

CASHMERE, WA / ACCESSWIRE / January 18, 2022 / Cashmere Valley Bank (OTCQX:CSHX) ("Bank"), announced annual earnings of $29.0 million for the year ended December 31, 2021. Diluted earnings per share was $7.39, representing an increase of $0.97 per share, or 15.1%. Earnings per share growth of 15.1% marks consecutive years with double digit earnings per share growth.

As of December 31, 2021, deposit balances totaled $1.9 billion. Deposit balances increased approximately $216.6 million from December 31, 2020 representing a 12.6% increase, which also makes consecutive years with double-digit growth.

On January 18, 2022 the Bank's Board of Director's declared a semi-annual dividend payment of $0.85 per share to shareholders of record on January 28, 2022. The dividend will be paid on February 7, 2022.

"2021 was an outstanding year for Cashmere Valley Bank" said Greg Oakes, President and CEO. "Though the interest rate environment and personnel expenses provided challenges, the Bank was able to attain significant income growth and achieve record earnings. The one-time nature of Payment Protection Program loan income will provide challenges going forward to repeat these results especially if the labor market continues at its current trajectory."

2021 Highlights

Net income increased 13.8% to $29.0 million for the year ended December 31, 2021 versus $25.5 million for fiscal year 2020.

Diluted earnings per share increased 15.1% to $7.39 per share. Earnings per share improved as a result of increased earnings in combination with a reduced share count due to the Bank's second quarter share repurchase. The total number of shares repurchased in 2021 was 98,223. The repurchase increased diluted earnings per share $0.12 for the year ended December 31, 2021.

Return on equity increased 65 basis points 12.24% from 11.59%.

Return on assets decreased five basis points to 1.36%. Significant asset growth in combination with declining asset yields contributed to the decrease.

The Bank's net interest margin declined to 2.60% from 2.71% a year ago. Margin compression was due to significant deposit growth which has increased the Bank's lower yielding securities portfolio. The margin was also affected because cash balances remained high throughout the year and yields on cash were near zero in 2021.

The efficiency ratio increased slightly to 55.6% from 54.2% during the same time period one year ago. The efficiency ratio increased as a result of increasing costs, largely in salaries and benefits.

Pandemic Response Update

  • Payment Protection Program (PPP) loan balances decreased from $53.5 million on December 31, 2020 to $10.0 million on December 31, 2021.
  • Income from PPP loans increased by $2.8 million in 2021 as compared to 2020. PPP loan income increased due to a significant increase in PPP forgiveness.
  • As of December 31, 2021, the Bank had approximately $440,000 in PPP fees to record into income upon forgiveness from SBA.

Cash, Cash Equivalents and Restricted Cash

Cash balances decreased to $114.0 million at December 31, 2021 from $135.7 million as of December 31, 2020. Cash was reduced as the Bank put its deposits to work in the loan portfolio and available for sale securities.

Available for Sale Securities

  • Balances on available for sale securities increased 28.8% during 2021 to $1.1 billion.
  • The book value of municipal securities increased $117.2 million, collateralized mortgage obligations (CMO's) increased $111.1 million, corporate securities increased $28.1 million and treasury securities increased $27.3 million.
  • As of December 31, 2021, the average portfolio yield was 1.94% which represented a decrease from December 31, 2020 of two basis points.
  • As of December 31, 2021, non-governmental securities had a book value of $150.6 million. This was an increase from $34.0 million at December 31, 2020.

Loans and Credit Quality

  • December 31, 2021 gross loans totaled $940.8 million representing a decrease of $10.2 million or 1.1% from December 31, 2020.
  • Excluding PPP loans, net loan growth was $33.3 million during 2021. Commercial real estate loans increased $20.3 million, construction loans increased $17.2 million and equipment finance loans increased $11.4 million.
  • The allowance for loan and lease losses (ALLL) was 1.46%, which represented a two-basis point increase from December 31, 2020.
  • The Bank did not record any provisions for loan losses during 2021. Activity through the ALLL represented only nominal charge-off and recovery activity which increased the ALLL by $44,000.
  • Non-performing loans totaled $404,000 as of December 31, 2021, representing .04% of gross loans.


Total deposits showed continued strength with a second consecutive year of double-digit growth as they increased $216.6 million or 12.6%. Non-interest bearing checking accounts increased to $432.6 million, an increase of $67.0 million or 18.3%. Savings, money market and interest bearing checking accounts increased $180.1 million or 14.9%. Certificates of deposit balances decreased $30.4 million or 13.0%.


As of December 31, 2021, shareholder's equity totaled $239.2 million, a modest increase from $238.7 million at December 31, 2020. The Bank repurchased $6.9 million in stock in 2021 and paid cash dividends of $6.1 million. Capital also decreased $16.1 million due to a decrease in the Bank's unrealized gain on available for sale investment securities which was primarily due to an increase in treasury rates during 2021. These reductions in capital were offset by the Bank's year-to-date earnings.

A total of $13.0 million was returned to shareholders in the form of dividends and a share repurchase in 2021, while $13.5 million was paid to shareholders in the form of regular and special dividends during 2020.


Net Interest Income

Net interest income totaled $52.7 million for the year ended December 31, 2021 as compared to $46.7 million for the year ended December 31, 2020. The increase of $6.0 million represented an increase of 12.9%. Interest income on PPP loans increased $2.8 million in 2021 as compared to 2020. Increase in PPP income was driven by forgiveness on PPP loans during 2021. Interest income also increased due to the expansion in balances of available for sale securities. Interest income on available for sale securities increased $3.6 million in fiscal year 2021 as compared to 2020. Interest expense decreased $1,741,000 or 25.3% from the prior year. The majority of the decrease was realized in time deposits. The Bank's cost of funds decreased from 0.55% in 2020 to 0.35% in 2021.

Non-Interest Income

Non-interest income decreased $1.1 million, 5.3% as compared to 2020. 2020 was a banner year in mortgage banking due to an extremely high level of mortgage refinances. Mortgage banking revenue decline from $7.6 million to $5.5 million in 2021. Debit card interchange income increased to $3.9 million from $2.2 million as a result of a vendor switch and a $1.1 million non-recurring event.

Non-Interest Expense

Non-interest expense increased $3.6 million or 10.2% in 2021. The Bank was not exempt from labor market challenges throughout 2021. Our regional labor market presented challenges as salaries and benefits expenses increased $2.2 million or 10.8%. Non-interest expenses outside of salaries and benefits increased $1.4 million or 9.4%. Professional and legal fees increased $491,000 largely as a result of consulting fees related to the Bank's core processing renewal negotiation. These fees will be amortized over the life of the seven-year contract and total $310,000 annually.

The provision for loans losses increased $81,000 in 2021 due to charge off and recovery activity. In 2020, provision expense totaled $3.2 million due to concerns related to COVID.

Federal income tax expense increased approximately $930,000 from the prior year due to an increase in earnings and a small increase in the Bank's effective tax rate. The Bank's effective tax rate was 14.6% for 2021 as compared to 13.6% in 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.


Greg Oakes, CEO
(509) 782-2092
Mike Lundstrom, CFO
(509) 782-5495

Consolidated Balance Sheets (UNAUDITED)
(Dollars in Thousands)
Cashmere Valley Bank and Subsidiary

December 31, 2021September 30, 2021December 31, 2020

Cash and Cash Equivalent:

Cash & due from banks$22,450$26,878$27,258
Interest bearing deposits81,39956,91097,466
Fed funds sold10,1558,35210,990
Total Cash and Cash Equivalent114,00492,140135,714

Securities available for sale1,103,2321,086,559856,327
Federal Home Loan Bank stock, at cost2,3932,3931,982
Loans held for sale1,1483561,470

Allowance for credit losses(13,774)(13,760)(13,730)
Net loans927,028933,083937,240

Premises and equipment17,05817,06116,381
Accrued interest receivable8,5538,8517,829
Bank Owned Life Insurance26,48526,31315,908
Mortgage servicing rights2,8022,7592,856
Other assets9,73810,1879,835

Total assets$2,224,302$2,189,264$1,994,288

Liabilities and Shareholders' Equity

Non-interest bearing demand$432,621$443,846$365,645
Savings and interest-bearing demand1,301,1691,257,2701,121,111
Total deposits1,936,5771,910,2041,719,971

Accrued interest payable403437612
Short-term borrowings34,50429,34416,395
Other liabilities13,72113,97618,631

Total liabilities1,985,2051,953,9611,755,609

Shareholders' Equity
Common stock (no par value); authorized 10,000,000 shares;
Issued and outstanding: 12/31/2021 -- 3,880,811 ; 9/30/2021 -- 3,880,786 ; 12/31/2020 -- 3,972,1494,1864,1503,723
Treasury stock(16,784)(16,784)(9,908)
Retained Earnings240,439233,608217,487
Accumulated other comprehensive income11,25614,32927,377
Total shareholders' equity239,097235,303238,679

Total liabilities and shareholders' equity$2,224,302$2,189,264$1,994,288
Year-to-Date Consolidated Statements of Income (UNAUDITED)
(Dollars in Thousands)
Cashmere Valley Bank & Subsidiary

For the twelve months ended,

December 31, 2021December 31, 2020
Interest Income

Fed funds sold and deposits at other financial institutions106412
Securities available for sale:
Total interest income57,89353,610

Interest Expense
Short-term borrowings5038
Total interest expense5,1446,885

Net interest income52,74946,725

Provision for Credit Losses813,174

Net interest income after provision for credit losses52,66843,551

Non-Interest Income
Service charges on deposit accounts1,6341,247
Mortgage banking operations5,5317,621
Net gain (loss) on sales of securities available for sale12,520
Brokerage commissions1,3271,002
Insurance commissions and fees5,3684,616
Net interchange income (expense)3,9482,246
BOLI cash value578461
Dividends from correspondent banks7466
Total non-interest income19,90021,016

Non-Interest Expense
Salaries and employee benefits22,12019,969
Occupancy and equipment3,1232,997
Audits and examinations433479
State and local business and occupation taxes1,032952
FDIC insurance & WA state assessments627472
Legal and professional fees991500
Check losses and charge-offs540413
Low income housing investment losses588688
Data processing4,6374,636
Product delivery1,1261,030
Total non-interest expense38,58635,027

Income before income taxes33,98229,540

Income Taxes4,9494,019

Net income$29,033$25,521

Earnings Per Share
Quarterly Consolidated Statements of Income (UNAUDITED)
(Dollars in Thousands)
Cashmere Valley Bank & Subsidiary

For the quarters ended,

December 31, 2021September 30, 2021December 31, 2020
Interest Income

Fed funds sold and deposits at other financial institutions263228
Securities available for sale:
Total interest income14,95314,60013,665

Interest Expense
Short-term borrowings16149
Total interest expense1,1261,2201,524

Net interest income13,82713,38012,141

Provision for Credit Losses3641321

Net interest income after provision for credit losses13,79113,33911,820

Non-Interest Income
Service charges on deposit accounts486466327
Mortgage banking operations1,2371,0502,110
Net gain (loss) on sales of securities available for sale(19)--
Brokerage commissions453290202
Insurance commissions and fees1,4591,3931,182
Net interchange income (expense)6551,801587
BOLI cash value172176117
Dividends from correspondent banks191815
Total non-interest income4,7915,5264,872

Non-Interest Expense
Salaries and employee benefits6,1285,4294,951
Occupancy and equipment770852799
Audits and examinations208776
State and local business and occupation taxes277275239
FDIC insurance & WA state assessments167166139
Legal and professional fees29325898
Check losses and charge-offs1218799
Low income housing investment losses144144134
Data processing1,2131,1601,155
Product delivery322287255
Total non-interest expense10,3849,6528,733

Income before income taxes8,1989,2137,959

Income Taxes1,3671,226967

Net income$6,831$7,987$6,992

Earnings Per Share

SOURCE: Cashmere Valley Bank

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