Lewis & Clark Bancorp announces 2023 Fourth Quarter and Year-to-Date Results

Lewis & Clark Bancorp (OTC Pink: LWCL) announces 2023 fourth-quarter and year-to-date consolidated results. Quarter-to-date net income totaled $191,000 for the three months ended December 31, 2023, compared to net income for the same period last year of $617,000. Earnings per share were $0.18 for the current-year quarter, compared to $0.57 for the prior-year quarter.

Investment Securities

The full-year 2023 net loss was substantially due to a $3.2 million pre-tax loss on the sale of investment securities. 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. The bulk of the proceeds from this sale were reinvested into higher-yielding investment securities, with the remainder being held 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 6.09%, while the interest-bearing cash balance is currently earning 5.38%. This repositioning provides a significant increase in earnings on the $69.7 million in sale proceeds. As of December 31, 2023, the Company still holds $81.0 million of investment securities currently yielding a weighted-average 1.11%.

Income Statement

The decreased earnings in the current-year quarter were due to a decrease in net interest income, a decrease in the recapture of credit losses, and an increase in noninterest expense, partially offset by an in increase in noninterest income and a decrease in 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, partially offset by an increase in earnings from investments and interest-bearing cash. Net interest margin was 2.62% for the current-year quarter compared to 2.89% 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 decrease in the recapture of credit losses compared to the prior year period was primarily due to adjusting the allowance for credit losses to reflect the estimated balance anticipated upon the adoption of the current expected credit loss methodology. The increase in noninterest expense was due to increases in salaries and employee benefits and the FDIC assessment, partially offset by decreases in data processing, professional fees, bank service charges and intangible amortization compared to the prior year quarter. The increase in noninterest income was due to increases in fees earned from strategic partnerships, and unrealized gains on equity securities. The decrease in the provision for income taxes was due to a decrease in pre-tax earnings compared to the prior year quarter.

The full-year 2023 net loss totaled $2.5 million, or ($2.35) per share, compared to net income of $1.8 million, or $1.71 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, a decrease in the recapture of credit losses, an increase in loss on sale of securities, and an increase in noninterest expense, partially offset by an increase in noninterest income and a decrease in the provision for income taxes compared to the same period one year ago. The decrease in both the net interest income and the recapture of credit losses is substantially the same as that of the current year quarter as previously discussed. The increase in loss on sale of securities was due to the sale of investment securities as previously discussed. The increase in noninterest expense was due to increases in salaries and employee benefits, FDIC assessment, insurance and employee travel, partially offset by decreases in occupancy expense, professional fees, education, bank service charges and intangible amortization compared to the same period last year. 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. The decrease in the provision for income taxes was due to a decrease in pre-tax earnings compared to the prior year period.

Strategic Partnerships

The Company will continue to selectively evaluate and enter into market-facing partnerships as part of strategic partnerships division. 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, 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 made a favorable contribution to net income.

Jeffrey Sumpter, President and CEO, commented, “With the full year now behind us we are ready to close the books on 2023 and focus on continued improvement and increased earnings as we transition into 2024.” Sumpter added, “The impact of restructuring the investment portfolio has yielded favorable results and generated positive earnings during the second half of the year.”

Balance Sheet

As of December 31, 2023, total consolidated assets were $392.1 million, an increase of $29.1 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 $53.3 million, due to proceeds from the sale of securities, principal reductions on loans, and increased borrowings, partially offset by securities purchased, and a decrease in total deposits. 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 $10.0 million primarily due to the sale and subsequent purchases as previously discussed. Gross loans decreased by $14.8 million primarily due to principal reductions and payoffs exceeding new originations. Total deposits decreased year to date by $33.6 million, primarily due to select customers moving excess funds to higher-yielding vehicles, consistent with industry trends. Although total deposits reflect a decrease from December 31, 2022, interest-bearing demand balances increased by $17.2 million. This increase is substantially due to deposits obtained from strategic partnership relationships. Shareholders’ equity totaled $30.9 million at December 31, 2023, an increase of $661 thousand, compared to $30.3 million at December 31, 2022. The increase was due to a $3.3 million decrease in unrealized losses on investment securities, partially offset by the $2.5 million net loss, and shareholder dividends totaling $161 thousand.

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 individuals 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 communities 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)
		December 31, 2023				December 31, 2022				$ Change				% Change
ASSETS
Cash		$	69,745			$	16,465			$	53,280			323.6	%
Equity Securities			2,583				2,439				144			5.9	%
Investment Securities			141,137				151,128				(9,991	)		-6.6	%
Gross loans			156,876				171,689				(14,813	)		-8.6	%
Allowance for credit losses			(2,166	)			(2,328	)			162			-7.0	%
Net loans			154,710				169,361				(14,651	)		-8.7	%
Fixed Assets			6,826				6,970				(144	)		-2.1	%
Other Assets			17,118				16,615				503			3.0	%
Total Assets		$	392,119			$	362,978			$	29,141			8.0	%
LIABILITIES AND EQUITY
Deposits:
Noninterest-bearing		$	89,754			$	91,070			$	(1,316	)		-1.4	%
Interest-bearing demand			34,309				17,074				17,235			100.9	%
Money market and savings			126,049				165,666				(39,617	)		-23.9	%
Time deposits			19,307				29,194				(9,887	)		-33.9	%
Total deposits			269,419				303,004				(33,585	)		-11.1	%
Subordinated debentures, net			6,956				6,931				25			0.4	%
Borrowings			80,000				21,000				59,000			281.0	%
Other liabilities			4,753				1,713				3,040			177.5	%
Total liabilities			361,128				332,648				28,480			8.6	%
Equity			30,991				30,330				661			2.2	%
Total Liabilities and Equity		$	392,119			$	362,978			$	29,141			8.0	%
Net loans to deposits			57.42	%			55.89	%
Allowance for loan losses to total loans			1.38	%			1.36	%
DDA deposits to total deposits			33.31	%			30.06	%
Tangible book value per share		$	28.30			$	27.62

Summary Income Statement
(dollars in thousands)
		Three months ended December 31,								Twelve months ended December 31,
			2023				2022				2023				2022
Interest and fees on loans and investments		$	4,580			$	3,163			$	15,763			$	12,410
Interest expense			2,229				701				7,535				1,434
Net interest income			2,351				2,462				8,228				10,976
Recapture of credit losses			-				(730	)			-				(730	)
Net interest income after provision			2,351				3,192				8,228				11,706
Noninterest income			638				306				2,008				959
Gain (Loss) on sale on securities			0				0				(3,181	)			151
Noninterest expense			2,753				2,665				10,596				10,377
Pre-tax income (loss)			236				833				(3,541	)			2,439
Provision (benefit) for income taxes			45				216				(1,023	)			605
Net income (loss)		$	191			$	617			$	(2,518	)		$	1,834
Return on average equity			2.58	%			8.55	%			-8.37	%			5.70	%
Return on average assets			0.20	%			0.67	%			-0.67	%			0.46	%
Net interest margin			2.62	%			2.89	%			2.36	%			2.95	%
Efficiency ratio			92.09	%			96.27	%			150.18	%			85.86	%

 

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