Lewis & Clark Bancorp (OTC Pink: LWCL) announces 2023 first quarter consolidated results. Quarter to date net loss totaled $227,000 for the three months ended March 31, 2023, a decrease of $611,000 compared to net income totaling $384,000 for the same period last year. Earnings (loss) per share were $(0.21) for the current year quarter, compared to $0.36 for the prior year quarter.

The decreased earnings in the current year quarter were due to a decrease in both net interest income and the provision for income taxes, partially offset by an increase in noninterest income 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 interest and fees on loans and investments, primarily due to increases in interest on interest bearing cash and interest and fees earned on loans. Net interest margin was 2.09% for the current year quarter compared to 2.58% 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 provision for income taxes was due to a decrease in pre-tax earnings compared to the prior year period. The increase in noninterest income was due to increases in fees earned from channel partnerships, dividends earned, and an unrealized gain on equity securities, partially offset by a decrease in gains on investment securities.

Investment Securities

Due to the recent and unprecedented increase in market interest rates, the investment securities portfolio generated a negative net interest margin in the current year quarter. The corresponding net interest loss generated from the investment securities portfolio was $1.0 million for the three months ended March 31, 2023. The instruments held in the investment securities portfolio are predominantly fixed-rate U.S. Treasury and agency securities with an average remaining life of 3.1 years as of March 31, 2023. While the bulk of these securities are scheduled to mature in four annual installments beginning in the fourth quarter of 2023, it is expected that they will continue generating a negative net interest margin until the related securities mature, are sold, or market interest rates decline. The Bank is currently exploring alternatives to dampen the earnings impact of the investment securities portfolio.

Channel Partnerships

The Bank has and will continue to strategically evaluate and enter into contractual relationships with channel partners as part of its “banking-as-a-service” 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 variants of 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 channel 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 territory and is on track to contribute meaningfully to earnings.

Jeffrey Sumpter, President, and CEO, commented, “Although we are not pleased with overhang from the investment securities portfolio, both the core Bank and our strategic partnership division are performing well—and in some cases, outperforming our initial expectations. The Bank’s capital, credit quality and liquidity all remain strong, and we are well positioned for the years ahead.” Sumpter added, “Due to the unprecedented rate increases, we anticipate that 2023 will be a difficult earnings year for the Bank.”

As of March 31, 2023, total consolidated assets were $365.3 million, an increase of $2.4 million, compared to December 31, 2022, primarily due to increases in total borrowings and to a lesser extent cash, and investment securities, partially offset by decreases in total deposits. Borrowings increased by $29.3 million primarily due to fund deposit withdrawals through the current period. Total deposits decreased $27.3 million, primarily due to customers seeking a higher return on their deposits consistent with industry trends. Gross loans were relatively flat due to soft loan demand related to inflationary pressure, interest rate increases and economic uncertainty. Shareholders’ equity totaled $30.9 million at March 31, 2023, an increase of $548,000, compared to $30.3 million at December 31, 2022. The increase was due to an $849,000 decrease in unrealized losses on investment securities, partially offset by the net loss of $227,000 and shareholder dividends totaling $80,500.

About Lewis & Clark Bancorp

Headquartered in Oregon City, Oregon, Lewis & Clark Bancorp is the holding company for Lewis & Clark 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 channel 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.

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