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PBCO Financial Corporation Reports Q1 2022 Earnings

PBCO Financial Corporation (OTC PINK: PBCO), the holding company of People’s Bank of Commerce, announced today its financial results for the 1st quarter 2022. As a result of the PBCO Financial Corporation reorganization and merger effective February 28, 2022, the current period financial discussion and summary balance sheet and income statement in this release reflect PBCO Financial Corporation on a consolidated basis, while the comparative prior periods are People’s Bank of Commerce results only. As the results of operations presented are substantially from the performance of People’s Bank of Commerce, management believes there is not a material difference related to disclosing the current and comparative results as presented.

Highlights

  • First quarter net income of $2.4 million, or $0.47 per diluted share
  • Steelhead gross factoring revenue of $2.0 million, an increase of 53% over Q1 2021
  • Holding company reorganization completed
  • Issued $25.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes
  • $22.5 million capital investment in People’s Bank of Commerce, increasing the Tier 1 Capital Ratio to 11.25%

The Company reported quarterly net income of $2.4 million, or $0.47 per diluted share, for the 1st quarter of 2022 compared to net income of $2.9 million, or $0.69 per diluted share, in the same quarter of 2021. Earnings per share for the trailing 12 months were $2.18 per share, up from $2.07 per share for the prior twelve-month period. “Although earnings were impacted by the absence of income from PPP, the bank performed according to expectations during 1st quarter. Steelhead Finance continued to demonstrate strong performance with $2.0 million in revenue during Q1 2022, versus $1.3 million in Q1 2021,” said Lindsey Trautman, Chief Financial Officer. During the quarter, the bank made a provision for loan losses of $266 thousand. “The first quarter of 2022 represents the first time in two years that earnings are not materially impacted by PPP loans or merger related adjustments and more closely represent core bank earnings,” commented Ms. Trautman.

Deposits increased $33.9 million, a 4.4% increase from the prior quarter ending December 31, 2021. On an annual basis, deposits grew by $78.8 million, an annualized 17.7% growth rate. “Since the merger with Willamette Community Bank March 2021, People’s Bank continued to grow deposits with a strong focus on maintaining relationships with existing clients while increasing market share in our recently acquired markets,” commented Joan Reukauf, Chief Operating Officer.

“Core portfolio loan growth, excluding PPP, was down $1.0 million during the 1st quarter of 2022, compared to Q4 2021, due to several early payoffs, including a previously classified loan and a loan prepaid due to a business sale,” commented Julia Beattie, President. “We continue to see strong competition for loans in our northern market, with rate being the driving factor,” added Beattie. PPP loans outstanding at quarter end were $2.6 million, with only four loans remaining.

During the quarter, the bank experienced a decrease in classified assets, the result of a reduction in both Other Real Estate Owned and in classified loans. Total loans past due or on non-accrual increased, as a percentage of total loans, from the prior quarter to 0.21% versus 0.15% as of Q4 2021. During 1st quarter, the Allowance for Loan and Lease Losses (ALLL) was updated based on changes in loans and updated economic expectations, which were factored into the bank’s analysis. As of March 31, 2022, the ALLL was 1.03% of portfolio loans excluding PPP and the unallocated reserve stood at $620 thousand or 13.5% of the allowance.

First quarter 2022 non-interest income totaled $3.3 million, a decrease of $2.2 million from the 1st quarter of 2021. This was largely attributed to a one-time bargain purchase gain of $2.3 million recognized in Q1 2021 resulting from the Willamette Community Bank merger that took effect on March 1, 2021. During Q1 2022, Steelhead Finance factoring revenue increased $693 thousand, a 53.0% increase over the same quarter of 2021. Conversely, mortgage income decreased $866 thousand, or 64.5%, from the 1st quarter of 2021.

Non-interest expense totaled $6.0 million in the 1st quarter, down $1.7 million from the same period in 2021. During Q1 2021, the bank incurred $2.9 million in one-time transaction expenses related to the Willamette merger. “All anticipated merger expense saves have been realized as of the end of the first quarter, 2022,” commented Ms. Trautman.

On March 11, 2022, PBCO Financial Corporation, the holding company for People’s Bank of Commerce, completed a private placement of $25.0 million in aggregate principal amount of fixed-to-floating rate subordinated notes. The proceeds will be used to support continued organic growth and strategic initiatives. The majority of the proceeds of the subordinated debt issuance, $22.5 million, was down streamed by PBCO Financial Corporation to People’s Bank of Commerce. This capital injection qualified as Tier 1 capital at the Bank and helped to increase the Tier 1 Capital Ratio as of March 31, 2022, to 11.25%, up from 8.99% as of December 31, 2021.

As of March 31, 2022, the Tier 1 Capital Ratio for PBCO Financial Corporation was 8.76% with total shareholder equity of $71.3 million. During the quarter, the company was able to augment capital through earnings while assets also increased with our growth in deposits. The company also had unrealized losses on its investment portfolio, net of taxes, of $11.9 million, which is attributed to changes in market value in the current rising rate environment. The net unrealized losses in the investment portfolio resulted in the decline in Book Value Per Share and Tangible Book Value per share from the prior quarter.

About PBCO Financial Corporation

PBCO Financial Corporation’s stock trades on the over-the-counter market under the symbol PBCO. Additional information about the Company is available in the investor section of the Company’s website at: www.peoplesbank.bank.

Founded in 1998, People’s Bank of Commerce is the only locally owned and managed community bank in Southern Oregon. People’s Bank of Commerce is a full-service, commercial bank headquartered in Medford, Oregon with branches in Albany, Medford, Ashland, Central Point, Grants Pass, Jacksonville, Klamath Falls, Lebanon, and Salem.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995:

This release includes forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. These forward-looking statements generally can be identified by phrases such as People’s Bank or its management "believes," "expects," "anticipates," "foresees," "forecasts," "estimates" or other words or phrases of similar import. Similarly, statements herein that describe People’s Bank’s business strategy, outlook, objectives, plans, intentions or goals also are forward-looking statements. All such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those in forward-looking statements.

Consolidated Balance Sheets

 
1st Quarter 2022 4th Quarter 2021 3rd Quarter 2021 1st Quarter 2021
 
(Dollars in 000's) 3/31/2022 12/31/2021 9/30/2021 3/31/2021
BALANCE SHEET
ASSETS
Cash and due from banks

$

13,019

 

$

5,194

 

$

4,561

 

$

4,730

 

Federal funds sold

 

-

 

 

-

 

 

-

 

 

-

 

Interest bearing deposits

 

113,055

 

 

77,643

 

 

100,429

 

 

163,537

 

Investment securities

 

249,850

 

 

241,564

 

 

203,913

 

 

51,631

 

Loans held for sale

 

1,549

 

 

1,408

 

 

2,802

 

 

4,375

 

Loans held for investment, net of unearned income

 

452,296

 

 

457,224

 

 

459,883

 

 

512,493

 

Total Loans, net of deferred fees and costs

 

453,845

 

 

458,632

 

 

462,685

 

 

516,868

 

Allowance for loan losses

 

(4,646

)

 

(4,376

)

 

(4,302

)

 

(4,325

)

Premises and equipment, net

 

27,979

 

 

27,304

 

 

27,567

 

 

26,763

 

Bank owned life insurance

 

13,861

 

 

13,759

 

 

13,689

 

 

13,512

 

Other Assets

 

43,186

 

 

39,877

 

 

37,070

 

 

35,349

 

Total assets

$

910,149

 

$

859,597

 

$

845,612

 

$

808,065

 

 
LIABILITIES
Deposits
Demand - non-interest bearing

$

355,358

 

$

350,424

 

$

358,013

 

$

319,292

 

Demand - interest bearing

 

98,064

 

 

113,154

 

 

100,341

 

 

110,350

 

Money market and savings

 

320,677

 

 

276,264

 

 

266,004

 

 

256,462

 

Time deposits of less than $250,000

 

21,027

 

 

21,140

 

 

22,670

 

 

21,022

 

Time deposits of more than $250,000

 

2,959

 

 

3,247

 

 

3,645

 

 

12,208

 

Total deposits

$

798,085

 

$

764,229

 

$

750,673

 

$

719,334

 

 
Borrowed funds

 

31,788

 

 

7,437

 

 

7,529

 

 

6,871

 

Other liabilities

 

8,997

 

 

8,866

 

 

9,887

 

 

9,738

 

Total liabilities

$

838,870

 

$

780,532

 

$

768,089

 

$

735,943

 

 
STOCKHOLDERS' EQUITY
Common stock

$

61,340

 

$

61,340

 

$

60,879

 

$

57,104

 

Retained earnings

 

21,864

 

 

19,465

 

 

16,489

 

 

14,667

 

Accumulated other comprehensive income,
net of tax

 

(11,925

)

 

(1,740

)

 

155

 

 

351

 

Total stockholders' equity

$

71,279

 

$

79,065

 

$

77,523

 

$

72,122

 

 
Total liabilities & stockholders' equity

$

910,149

 

$

859,597

 

$

845,612

 

$

808,065

 

Consolidated Statements of Income

 
(Dollars in 000's) 1st Quarter 2022 4th Quarter 2021 3rd Quarter 2021 1st Quarter 2021
INCOME STATEMENT
INTEREST INCOME
Loans

$

5,515

$

5,974

 

$

6,632

 

$

5,195

 

Investments

 

864

 

724

 

 

544

 

 

141

 

Federal funds sold and due from banks

 

52

 

44

 

 

58

 

 

53

 

Total interest income

 

6,431

 

6,742

 

 

7,234

 

 

5,389

 

 
INTEREST EXPENSE
Deposits

 

162

 

197

 

 

218

 

 

200

 

Borrowed funds

 

66

 

15

 

 

15

 

 

14

 

Total interest expense

 

228

 

212

 

 

233

 

 

214

 

 
NET INTEREST INCOME

 

6,203

 

6,530

 

 

7,001

 

 

5,175

 

Provision for loan losses

 

266

 

139

 

 

347

 

 

(125

)

Net interest income after provision for
loan losses

 

5,937

 

6,391

 

 

6,654

 

 

5,300

 

 
NONINTEREST INCOME
Service charges

 

115

 

117

 

 

106

 

 

78

 

Mortgage lending income

 

476

 

472

 

 

615

 

 

1,341

 

Steelhead finance income

 

2,001

 

1,984

 

 

1,785

 

 

1,308

 

Bargain purchase gain

 

-

 

(316

)

 

(316

)

 

2,343

 

BOLI Income

 

96

 

72

 

 

73

 

 

60

 

Other non-interest income

 

580

 

585

 

 

474

 

 

347

 

Total noninterest income

 

3,268

 

2,914

 

 

2,737

 

 

5,477

 

 
NONINTEREST EXPENSE
Salaries and employee benefits

 

3,697

 

3,416

 

 

3,354

 

 

3,407

 

Occupancy & equipment expense

 

869

 

924

 

 

893

 

 

925

 

Advertising expense

 

119

 

295

 

 

396

 

 

388

 

Professional expenses

 

283

 

213

 

 

561

 

 

547

 

Data processing expense

 

244

 

(197

)

 

324

 

 

2,067

 

Other operating expenses

 

805

 

699

 

 

256

 

 

351

 

Total noninterest expense

 

6,017

 

5,350

 

 

5,784

 

 

7,685

 

 
Income before taxes

 

3,188

 

3,955

 

 

3,608

 

 

3,092

 

Provision for income taxes

 

789

 

978

 

 

958

 

 

200

 

 
NET INCOME

$

2,399

$

2,977

 

$

2,650

 

$

2,892

 

 
Shares Outstanding End of Quarter

 

5,055,301

 

5,057,211

 

 

5,042,704

 

 

5,043,127

 

Average shares outstanding*

 

5,056,574

 

5,047,540

 

 

4,962,936

 

 

4,176,293

 

Earnings per share

$

0.47

$

0.59

 

$

0.53

 

$

0.69

 

*Adjusted for stock dividend 9/22/21
(Dollars in 000's) 3/31/2022 12/31/2021 9/30/2021 3/31/2021
Financial Highlights
Total loans

$

453,845

 

$

458,632

 

$

462,685

 

$

516,868

 

Total deposits

$

798,085

 

$

764,229

 

$

750,673

 

$

719,334

 

Total assets

$

910,149

 

$

859,597

 

$

845,612

 

$

808,065

 

Net income

$

2,399

 

$

2,977

 

$

2,650

 

$

2,892

 

Steelhead Finance contribution, pre-tax

$

1,109

 

$

1,116

 

$

1,089

 

$

679

 

Mortgage contribution, pre-tax

$

48

 

$

(8

)

$

212

 

$

610

 

 
Performance Ratios
Return on average assets

 

1.10

%

 

1.40

%

 

1.27

%

 

1.82

%

Return on average equity

 

12.33

%

 

15.32

%

 

13.79

%

 

19.11

%

Net interest margin

 

3.17

%

 

3.46

%

 

3.70

%

 

3.64

%

Yield on loans

 

4.84

%

 

5.15

%

 

5.53

%

 

5.11

%

Cost of deposits

 

0.08

%

 

0.10

%

 

0.12

%

 

0.14

%

Efficiency ratio

 

63.53

%

 

56.65

%

 

59.39

%

 

72.15

%

Full-time equivalent employees

 

149

 

 

140

 

 

140

 

 

143

 

 
Capital
Leverage ratio

 

8.76

%

 

8.99

%

 

8.73

%

 

8.44

%

Common equity tier 1 ratio N/A(1) N/A(1) N/A(1) N/A(1)
Tier 1 risk based ratio N/A(1) N/A(1) N/A(1) N/A(1)
Total risk based ratio N/A(1) N/A(1) N/A(1) N/A(1)
Book value per share

$

14.10

 

$

15.63

 

$

15.37

 

$

14.30

 

Tangible book value per share

$

13.34

 

$

14.87

 

$

14.61

 

$

13.52

 

 
Asset Quality
Allowance for loan losses (ALLL)

$

4,646

 

$

4,376

 

$

5,782

 

$

4,325

 

Nonperforming loans (NPLs)

$

959

 

$

703

 

$

665

 

$

1,134

 

Nonperforming assets (NPAs)

$

1,245

 

$

1,245

 

$

1,443

 

$

2,162

 

Classified assets(2)

$

1,874

 

$

2,949

 

$

3,275

 

$

3,345

 

ALLL as a percentage of net loans

 

1.02

%

 

0.95

%

 

1.25

%

 

0.84

%

ALLL as a percentage of NPLs

 

484

%

 

622

%

 

869

%

 

381

%

Net charge offs (recoveries) to average loans

 

0.00

%

 

-0.15

%

 

0.03

%

 

0.00

%

Net NPLs as a percentage of total loans

 

0.21

%

 

0.15

%

 

0.15

%

 

0.22

%

Nonperforming assets as a percentage of total assets

 

0.14

%

 

0.14

%

 

0.17

%

 

0.27

%

Classified Asset Ratio(3)

 

2.47

%

 

3.53

%

 

4.00

%

 

4.38

%

Past due as a percentage of total loans

 

0.21

%

 

0.15

%

 

0.18

%

 

0.22

%

 
End of period balances
Total securities and short term deposits

$

362,905

 

$

319,207

 

$

304,342

 

$

215,168

 

Total loans, net of allowance

$

449,199

 

$

454,256

 

$

458,383

 

$

512,543

 

Total earning assets

$

816,750

 

$

777,839

 

$

767,027

 

$

732,036

 

Intangible Assets

$

3,841

 

$

3,854

 

$

3,872

 

$

3,926

 

Total assets

$

910,149

 

$

859,597

 

$

845,612

 

$

808,065

 

Total noninterest bearing deposits

$

355,358

 

$

350,424

 

$

358,013

 

$

319,292

 

Total deposits

$

798,085

 

$

764,229

 

$

750,673

 

$

719,334

 

 
Average balances
Total securities and short term deposits

$

328,747

 

$

301,297

 

$

278,310

 

$

150,214

 

Total loans, net of allowance

$

450,861

 

$

449,826

 

$

465,410

 

$

397,195

 

Total earning assets

$

779,609

 

$

751,123

 

$

743,719

 

$

547,409

 

Total assets

$

870,794

 

$

848,239

 

$

834,485

 

$

635,535

 

Total noninterest bearing deposits

$

353,917

 

$

356,832

 

$

336,375

 

$

167,266

 

Total deposits

$

771,160

 

$

752,255

 

$

739,372

 

$

525,064

 

 
(1) Effective March 31, 2020, People's Bank of Commerce opted into the Community Bank Leverage Ratio and is no longer calculating risk based capital ratios.
(2) Classified assets are defined as the sum of all loan-related contingent liabilities and loans internally graded substandard or worse, impaired loans (net of government guarantees), adversely classified securities, and other real estate owned.
(3) Classified asset ratio is defined as the sum of all loan related contingent liabilities and loans internally graded substandard or worse, impaired loans (net of government guarantees), adversely classified securities, and other real estate owned, divided by bank Tier 1 capital, plus the allowance for loan losses.

 

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