Olympic Bancorp recorded another year of solid financial performance.
A historic year from an economic perspective
By all accounts 2022 was an historic year from an economic perspective. Following several years of monetary stimulus in response to the pandemic, the Federal Reserve put on the brakes in 2022 in an effort to combat inflation by raising rates a total of 425 basis points over seven separate increases throughout the year. This was the largest increase in Fed Funds rates over such a short period of time in over 50 years.
Despite these significant interest rate changes, along with inflation and wage pressures, Olympic Bancorp recorded another year of solid financial performance. Net income for 2022 was $13.0 million compared to $19.5 million for 2021. While down from the prior year, 2021 earnings were positively impacted by several unique items including $4.9 million in fees from the federal government’s Paycheck Protection Program, $5.8 million in gains on sales of surplus property and investments, and $3.3 million in investment tax credits. Those combined items added $11.4 million to 2021 after-tax net income. Absent these items, 2022 core net income would have exceeded 2021 net income by a substantial amount.
Despite these significant interest rate changes, along with inflation and wage pressures, Olympic Bancorp recorded another year of solid financial performance. Net income for 2022 was $13.0 million compared to $19.5 million for 2021. While down from the prior year, 2021 earnings were positively impacted by several unique items including $4.9 million in fees from the federal government’s Paycheck Protection Program, $5.8 million in gains on sales of surplus property and investments, and $3.3 million in investment tax credits. Those combined items added $11.4 million to 2021 after-tax net income. Absent these items, 2022 core net income would have exceeded 2021 net income by a substantial amount.
While the Bank’s cost of funds increased to 12 basis points, it continues to be among the lowest in the country.
Kitsap Bank ended the year with total assets of $1.64 billion.
Deposit growth slowed dramatically in 2022, increasing a modest $16.2 million over 2021 as customers began spending balances accumulated during the pandemic due to government stimulus and aid payments. Competition among all financial institutions for deposits is fierce. While the Bank’s cost of funds increased to 12 basis points, it continues to be among the lowest in the country. Loan growth for the year was a strong 17.0% as several loan categories achieved double-digit growth over 2021. Credit quality also remains strong with a non-performing asset ratio of 0.02% at year-end. The Bank ended 2022 with a leverage ratio of 10.4%, which is well above the regulatory minimum to be considered “well-capitalized”.
Generally Accepted Accounting Principles (GAAP) require that we fair value (“mark-to-market”) our investment portfolio that is held as “Available for Sale” and reflect the difference between purchase price and current estimated fair value as Accumulated Other Comprehensive Income (AOCI) in Shareholder’s Equity. When rates were lower a year ago, we recorded a positive $8 million AOCI; at year-end 2022 following 425 bps of increases in the Fed Funds rate during the year, we had a negative AOCI of $77 million. Although tangible capital is impacted by AOCI, the unrealized loss or gain in AOCI is not a reflection of operating income, but simply a value of the securities portfolio at a moment in time. Fair value accounting standards are not applied to loans or deposits, but if they were, Kitsap Bank’s aggregate fair value would have increased, as our low-cost deposit base has greater value in a higher interest rate environment.
Generally Accepted Accounting Principles (GAAP) require that we fair value (“mark-to-market”) our investment portfolio that is held as “Available for Sale” and reflect the difference between purchase price and current estimated fair value as Accumulated Other Comprehensive Income (AOCI) in Shareholder’s Equity. When rates were lower a year ago, we recorded a positive $8 million AOCI; at year-end 2022 following 425 bps of increases in the Fed Funds rate during the year, we had a negative AOCI of $77 million. Although tangible capital is impacted by AOCI, the unrealized loss or gain in AOCI is not a reflection of operating income, but simply a value of the securities portfolio at a moment in time. Fair value accounting standards are not applied to loans or deposits, but if they were, Kitsap Bank’s aggregate fair value would have increased, as our low-cost deposit base has greater value in a higher interest rate environment.
Today we have the largest fleet of Interactive Teller Service (ITS) machines in the Pacific Northwest.
Kitsap Bank continues to innovate and identify opportunities to partner with FinTechs.
Today we have the largest fleet of Interactive Teller Service (ITS) machines in the Pacific Northwest. Through the ITS, we are able to offer expanded teller hours – a service that has been widely embraced by clients of all ages. We’ve also rolled out instant issue debit cards to our branch network, and are in process of installing cash recyclers throughout the system.
Progress continues on the planning for Kitsap Bank’s new corporate headquarters. This unique private/public partnership is a catalyst for the revitalization of downtown Port Orchard. The City of Port Orchard has purchased the property where Kitsap Bank’s corporate headquarters sits today for the future home of the South Kitsap Community Center. Kitsap Bank will build its new corporate headquarters at 639 Bay Street – just across the street from our original 1908 location. The new headquarters will be built with the future in mind by employing sustainable building practices, while also honoring our rich past.
Progress continues on the planning for Kitsap Bank’s new corporate headquarters. This unique private/public partnership is a catalyst for the revitalization of downtown Port Orchard. The City of Port Orchard has purchased the property where Kitsap Bank’s corporate headquarters sits today for the future home of the South Kitsap Community Center. Kitsap Bank will build its new corporate headquarters at 639 Bay Street – just across the street from our original 1908 location. The new headquarters will be built with the future in mind by employing sustainable building practices, while also honoring our rich past.
We continue to remain true to our core values and deeply dedicated to serving the region. I am grateful to our customers, our employees and the Board of Directors for their continued commitment to Kitsap Bank. The bank remains safe, secure and positioned for the long-term.
