People’s Bank Reports First Quarter Earnings

People’s Bank of Commerce (OTCBB: PBCO) announced today its financial results for the first quarter of 2021. The bank reported net income of $2,892,000, or $0.73 per diluted share, for the first quarter of 2021 compared to net income of $1,111,000, or $0.33 per diluted share, in the same quarter of 2020. First quarter earnings in 2021 were impacted by the one-time, non-recurring merger accounting adjustments with Willamette Community Bank totaling $527 thousand or $0.10 per diluted share. Earnings per share for the trailing 12 months were $2.17 per share up from $1.36 per share for the same period of 2020, or a 59% increase.

The first quarter of 2021 reports consolidated numbers after the merger and are compared to PBCO on a standalone basis for the first quarter of 2020:

  • Total assets of $808 million, an increase 116%, compared to the first quarter of 2020
  • Net loans of $508 million, an increase of 91% compared to the first quarter of 2020
  • Deposits of $719 million, an increase of 132% compared to first quarter of 2020
  • Tangible book value per share of $14.13, an increase of 15% compared to first quarter of 2020

Acquisition of Willamette Community Bank

On March 1, 2021, the bank completed the acquisition of Willamette Community Bank (“WMCB”). As of the acquisition date, WMCB was merged with and into People’s Bank of Commerce.

As a result of the merger agreement, WMCB shareholders received 0.6665 shares of People’s Bank common stock plus $1.70 in cash per share for each share of WMCB common stock. People’s Bank issued an aggregate 1,238,334 shares of its common stock and paid cash of $3.2 million for total consideration paid of $20.4 million.

Balance Sheet

The bank’s total assets increased $284.7 million, or 54%, to $808.1 million at March 31, 2021, from $523.3 million as of December 31, 2020. The WMCB merger resulted in an increase of total assets, $221.6 million at the merger date.

Investment securities increased $25.7 million, or 99.4%, during the quarter to $51.6 million as of March 31, 2021 from $25.9 million as of December 31, 2020. The increase was primarily the result of investments acquired in the WMCB merger, which the bank has retained within its portfolio.

Total portfolio loans, net of allowance for loan losses, increased $166.4 million, or 48.7%, to $508.2 million as of March 31, 2021, versus $341.7 million at December 31, 2020. Total loans outstanding, excluding loans acquired in the WMCB merger, increased $22.3 million during the quarter.

Total deposits increased $263.6 million, or 57.8%, to $719.3 million as of March 31, 2021 from $455.7 million at December 31, 2020. Of the increase, $197.9 million was attributed to the WMCB merger. The bank completed a one-way sell of $19.5 million in one-month CDARS during the quarter. This sell was designed to reduce the already high liquidity position of the bank.

Total shareholders’ equity increased $19.3 million, or 36.5%, during the quarter. Changes in equity during the three months ended March 31, 2021 were as follows:

(dollars in thousands)   Three Months
  Ended
  March 31, 2021
Balance, beginning of period  

52,836

 

Common stock issued less cash in the WMCB merger  

17,205

 

Capitalized deal costs in WMCB merger  

(470

)

Net Income  

2,892

 

Accumulated other comprehensive gain  

(331

)

Other  

(10

)

Balance, end of period  

72,122

 

Operating Results

Net income increased $1,781,000, or 160%, to $2,892,000 through March 31, 2021 versus the first quarter of 2020.

During the first quarter of 2021, interest income and fee amortization of PPP loans resulted in additional interest income of $1.4 million.

Non-interest income increased by $3,550,000, or 184.2%, versus the same quarter prior year. The increase was attributed to an increase in mortgage lending income of $788 thousand, or 143%, to $1,341,000 through March 31, 2021, and an increase in Steelhead Finance factoring income of $357 thousand, or 38%, to $1,308,000 for the current quarter versus the prior year. In addition, there was a bargain purchase gain of $2,343,000 from the WMCB merger.

Non-interest expense for the first quarter of 2021 was $7.7 million compared to $3.8 million for the same quarter of 2020, significantly impacted by the one-time merger expenses of $2.9 million. Deducting the one-time non-interest expenses associated with the merger of $2.9 million results in core expenses of $4.8 million in the first quarter of 2021, a 28% increase over the prior year. During the first quarter 2021, $361 thousand in PPP fee income was applied as an offset to employee expense for processing of new PPP loans added during the quarter. In addition, the bank has committed to provide $1 million in intermediate and long-term housing relief in Southern Oregon from fires experienced in our community in 2020, of which $250 thousand was expensed in the first quarter of 2021.

The one-time merger expenses in the first quarter of 2021 resulted from the following:

Data processing conversion & termination fees:

   

$ 1,801,000

Personnel – Change in control and severance payments:

   

638,000

IT support and maintenance:

   

283,000

Legal expense:

   

73,000

Professional expense:

   

40,000

Shareholder expense:

   

35,000

Total

   

$2,870,000

Excluding one-time merger adjustments, diluted earnings per share would have been $0.83 for the quarter ended March 31, 2021, versus $0.33 for the same quarter, prior year. For the twelve months ended March 31, 2021, excluding one-time merger expenses, earnings per share would have been $2.28 as of March 31, 2021, versus $1.36 for the same twelve month’s ended March 31, 2020.

CEO’s Comments

“With the merger of Willamette completed on March 1st, all anticipated merger expenses have been expensed in the first quarter,” commented Ken Trautman, CEO. “These merger expenses were offset by strong earnings during the quarter, including performance from our factoring company, Steelhead Finance, and from the mortgage division. Steelhead and mortgage combined reported gross income for the current quarter of $2,649,000 vs. $1,504,000 for the same period in 2020, a 76% increase.”

“The loan pipeline for the combined bank continues to be strong with approved credits pending funding totaling $65.3 million as the March 31, 2021. PPP loans outstanding as of quarter end were $102 million, with year-to-date PPP loan fee income of $1.5 million. The balance of the PPP loan fee income expected to be earned in 2021 totals $3.1 million,” commented Trautman.

“The bank worked very hard to respond to the needs within our communities during the COVID pandemic. It was a monumental, unified effort across all departments within the bank to deliver the volume of PPP loans we did and to have had the resulting positive impact on our local economies. Our staff continues to work very hard in providing new Round 2 PPP loans and in facilitating our clients' receipt of forgiveness,” noted Trautman. The table below presents the number and dollar amounts of the bank's PPP activity to date by quarter:

PPP Loan Activity To Date
 
As of As of As of
(dollars in thousands) 3/31/2021* 12/31/2020 9/30/2020
# $$$ # $$$ # $$$
PPP Loans Funded
Round One (2020 - Phase I & II)

1,204

$

121,199

1,056

$

95,387

1,056

$

95,387

Round Two (2021)

534

$

45,993

-

$

0

-

$

0

 
PPP Loans Forgiven
Round One (2020 - Phase I & II)

437

$

65,540

34

$

14,428

-

$

0

Round Two (2021)

-

$

0

-

$

0

-

$

0

 
Net PPP Loans Outstanding
Round One (2020 - Phase I & II)

767

$

55,659

1,022

$

80,959

1,056

$

95,387

Round Two (2021)

534

$

45,993

-

$

0

-

$

0

Total Actual Balances outstanding

1,301

$

101,652

1,022

$

80,959

1,056

$

95,387

 
* Includes PPP activity of Willamette Community Bank

Credit Quality & Provision for Credit Losses

Loan quality continues to be strong with 0.22% of loans past due over 30 days or on Non-Accrual at the end of the first quarter of 2021 vs. 0.00% for the same period last year. There were four loans on deferral as of March 31, 2021, with outstanding balances of $3.5 million. Of the deferred loans, two are hospitality loans with outstanding balances of $988 thousand, one loan to a faith-based organization has an outstanding balance of $2 million, and one loan to a national social/service organization has an outstanding balance of $532 thousand.

Now that the bank has a better feel for the effect of COVID in our markets, the bank decreased its reserve to outstanding loans, (excluding PPP loans) to 1.01% at the end of the first quarter in 2021. The Allowance for Loan and Lease losses (ALLL) was reduced 1.45% for People’s Bank portfolio loans and all Willamette Community Bank (WMCB) new loans booked in March of 2021, excluding PPP. The ALLL for WMCB was eliminated at the completion of the merger and a fair value adjustment was applied to the outstanding portfolio per GAAP purchase accounting guidelines. The carrying value of the loans acquired in the WMCB merger was $145.5 million and the related fair value discount was $1.2 million or 0.84% of the acquired balance. The unallocated portion of the reserve stands at $964 thousand or 22.3% of the ALLL.

Capital

At March 31, 2021, tangible capital totaled $67.8 million. The bank’s Tier 1 Capital ratio was 8.44% at the end of the first quarter 2021, compared to 11.64% one year ago. Tangible book value per share was $14.13 on March 31, 2021, compared to $12.32 on March 31, 2020.

About People’s Bank of Commerce

People’s Bank of Commerce’s stock trades on the over-the-counter market under the symbol PBCO. Additional information about the Bank is available in the investor section of the bank’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, 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.

People's Bank of Commerce          
Balance Sheet (unaudited)          
(dollars in thousands)   3/31/2021   12/31/2020   9/30/2020   6/30/2020   3/31/2020
Assets          
Cash and due from banks  

$

4,730

 

 

$

2,819

 

 

$

3,659

 

 

$

3,398

 

 

$

7,459

 

Federal funds sold  

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Interest-bearing deposits  

 

163,537

 

 

 

91,103

 

 

 

49,336

 

 

 

57,717

 

 

 

14,899

 

Investment securities  

 

51,631

 

 

 

25,894

 

 

 

22,910

 

 

 

23,597

 

 

 

27,172

 

Loans held for sale  

 

4,375

 

 

 

3,407

 

 

 

17,386

 

 

 

8,106

 

 

 

6,648

 

Loans held for investment,  

 

512,493

 

 

 

346,198

 

 

 

355,855

 

 

 

354,170

 

 

 

269,752

 

net of unearned income          
Allowance for loan and lease losses  

 

(4,325

)

 

 

(4,453

)

 

 

(4,271

)

 

 

(4,024

)

 

 

(3,378

)

Loans, net  

 

508,168

 

 

 

341,745

 

 

 

351,584

 

 

 

350,146

 

 

 

266,374

 

Premises and equipment, net  

 

26,763

 

 

 

21,624

 

 

 

20,664

 

 

 

20,469

 

 

 

20,170

 

Other assets  

 

48,860

 

 

 

36,738

 

 

 

34,423

 

 

 

30,308

 

 

 

31,383

 

Total assets  

$

808,065

 

 

$

523,331

 

 

$

499,963

 

 

$

493,742

 

 

$

374,105

 

           
           
Liabilities          
Deposits          
Demand noninterest-bearing  

$

319,292

 

 

$

231,095

 

 

$

219,836

 

 

$

199,808

 

 

$

141,448

 

Demand interest-bearing  

 

110,350

 

 

 

54,806

 

 

 

54,711

 

 

 

46,396

 

 

 

38,257

 

Money market and savings  

 

256,462

 

 

 

147,481

 

 

 

134,053

 

 

 

125,023

 

 

 

112,238

 

Time deposits of less than $250,000  

 

21,022

 

 

 

19,149

 

 

 

20,012

 

 

 

20,897

 

 

 

16,231

 

Time deposits of more than $250,000  

 

12,208

 

 

 

3,216

 

 

 

3,282

 

 

 

2,318

 

 

 

2,578

 

Total deposits  

 

719,334

 

 

 

455,747

 

 

 

431,894

 

 

 

394,442

 

 

 

310,752

 

Other liabilities  

 

16,609

 

 

 

14,748

 

 

 

17,217

 

 

 

50,358

 

 

 

16,603

 

Total liabilities  

 

735,943

 

 

 

470,495

 

 

 

449,111

 

 

 

444,800

 

 

 

327,355

 

           
Capital          
Common stock, surplus, retained earnings  

 

71,771

 

 

 

52,154

 

 

 

50,162

 

 

 

48,222

 

 

 

46,622

 

Accumulated other comprehensive  

 

351

 

 

 

682

 

 

 

690

 

 

 

720

 

 

 

128

 

income (loss)          
Unearned ESOP Shares  

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Total shareholders' equity  

 

72,122

 

 

 

52,836

 

 

 

50,852

 

 

 

48,942

 

 

 

46,750

 

           
Total Liabilities and Equity  

$

808,065

 

 

$

523,331

 

 

$

499,963

 

 

$

493,742

 

 

$

374,105

 

           
memo:          
Total intangible assets and goodwill  

 

3,927

 

 

 

3,486

 

 

 

3,486

 

 

 

3,486

 

 

 

3,486

 

           
Current shares outstanding  

 

4,802,978

 

 

 

3,558,581

 

 

 

3,523,078

 

 

 

3,522,857

 

 

 

3,500,065

 

           
Tier 1 Leverage Ratio  

 

8.44

%

 

 

9.36

%

 

 

9.40

%

 

 

9.13

%

 

 

11.64

%

Non-performing Loans  

 

0.22

%

 

 

0.05

%

 

 

0.03

%

 

 

0.01

%

 

 

0.00

%

Non-performing Assets  

 

0.25

%

 

 

0.20

%

 

 

0.21

%

 

 

0.71

%

 

 

0.94

%

ALLL to Portfolio Loans, excluding PPP  

 

1.01

%

 

 

1.56

%

 

 

1.54

%

 

 

1.45

%

 

 

1.25

%

ALLL to Total Portfolio Loans  

 

0.84

%

 

 

1.29

%

 

 

1.20

%

 

 

1.14

%

 

 

1.25

%

People's Bank of Commerce          
Income Statement (unaudited)          
Three Months Ended     Twelve Months Ended
(dollars in thousands) 3/31/2021   12/31/2020   3/31/2020     3/31/2021   3/31/2020
Interest Income          
Loans

5,195

 

 

4,308

 

 

3,671

 

   

17,442

 

 

14,614

 

Investments

141

 

 

155

 

 

160

 

   

585

 

 

607

 

Federal funds sold and due from banks

53

 

 

30

 

 

63

 

   

136

 

 

365

 

Total interest income

5,389

 

 

4,493

 

 

3,894

 

   

18,163

 

 

15,586

 

           
Interest Expense          
Deposits

200

 

 

176

 

 

279

 

   

733

 

 

1,298

 

Other

14

 

 

26

 

 

30

 

   

149

 

 

54

 

Total interest expense

214

 

 

202

 

 

309

 

   

882

 

 

1,352

 

           
Net interest income

5,175

 

 

4,291

 

 

3,585

 

   

17,281

 

 

14,234

 

Provision for credit losses

(125

)

 

182

 

 

260

 

   

947

 

 

496

 

Net Interest Income after provision

5,300

 

 

4,109

 

 

3,325

 

   

16,334

 

 

13,738

 

for credit losses          
           
Non-Interest Income          
Service charges on deposit accounts

78

 

 

57

 

 

82

 

   

245

 

 

328

 

Mortgage lending income

1,341

 

 

1,634

 

 

553

 

   

5,539

 

 

1,562

 

Steelhead Finance income

1,308

 

 

1,239

 

 

951

 

   

4,430

 

 

3,961

 

Bargain Purchase Gain

2,343

 

 

-

 

 

-

 

   

2,343

 

 
Other non-interest income

407

 

 

335

 

 

341

 

   

1,364

 

 

1,171

 

Total non-interest income

5,477

 

 

3,265

 

 

1,927

 

   

13,921

 

 

7,022

 

           
Non-Interest Expense          
Salary and Benefits

3,407

 

 

3,186

 

 

2,443

 

   

11,487

 

 

9,512

 

Premises and fixed assets

925

 

 

590

 

 

532

 

   

2,615

 

 

2,226

 

Other

3,353

 

 

1,281

 

 

786

 

   

6,485

 

 

3,144

 

Total non-interest expense

7,685

 

 

5,057

 

 

3,761

 

   

20,587

 

 

14,882

 

           
Net income before taxes

3,092

 

 

2,317

 

 

1,491

 

   

9,668

 

 

5,878

 

Income taxes

200

 

 

619

 

 

380

 

   

1,757

 

 

1,537

 

Net income

2,892

 

 

1,698

 

 

1,111

 

   

7,911

 

 

4,341

 

           
Basic earnings per share

0.73

 

 

0.48

 

 

0.33

 

   

2.17

 

 

1.36

 

Diluted earnings per share

0.73

 

 

0.48

 

 

0.33

 

   

2.17

 

 

1.36

 

Average common shares outstanding

3,977,422

 

 

3,560,096

 

 

3,342,993

 

   

3,645,826

 

 

3,186,346

 

           
Performance Measures          
Return on average assets

1.82

%

 

1.31

%

 

1.18

%

   

1.49

%

 

1.18

%

Return on average equity

19.11

%

 

13.11

%

 

10.15

%

   

15.04

%

 

10.93

%

Net interest margin

3.64

%

 

3.75

%

 

4.43

%

   

3.67

%

 

4.55

%

Efficiency ratio

72.15

%

 

66.93

%

 

68.23

%

   

65.98

%

 

70.01

%

         

 

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