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 |
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(dollars in thousands) |
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June 30, 2023 |
December 31, 2022 |
$ Change |
% Change |
|
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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 |
% |
|
||||
|
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LIABILITIES AND EQUITY |
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Deposits: |
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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 |
% |
|
||||
|
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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 |
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(dollars in thousands) |
|
|
|
|
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|
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Three months ended June 30, |
|
Six months ended June 30, |
||||||||||||||
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
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|
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 |
% |
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