PBCO Financial Corporation Reports Q2 2022 Earnings

PBCO Financial Corporation (OTC PINK: PBCO), the holding company of People’s Bank of Commerce, announced today its financial results for the 2nd 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

  • Second quarter net income of $2.4 million, or $0.48 per diluted share
  • Steelhead gross factoring revenue of $2.0 million, an increase of 25.0% from Q2 2021
  • Core earnings (excluding PPP fee income) up 25.9% from Q2 2021
  • Investment securities increased $140.7 million, or 135.1%, over Q2 2021

The company reported quarterly net income of $2.4 million, or $0.48 per diluted share, for the 2nd quarter of 2022 compared to net income of $3.0 million, or $0.59 per diluted share, in the same quarter of 2021. Earnings per share for the trailing 12 months were $2.08 per share, down from $2.28 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 2nd quarter. Excluding PPP income for the 2nd quarter of 2021, EPS would have been $0.38 per share, demonstrating the strength in core earnings for the most recent quarter,” said Lindsey Trautman, Chief Financial Officer. During the quarter, the company also made a provision for loan losses of $113 thousand. “The second 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 going forward,” commented Ms. Trautman.

Deposits decreased $47.3 million, a 5.9% decrease from the prior quarter ending March 31, 2022. Over the last 12 months, deposits grew by $37.8 million, an annualized 5.3% growth rate. “During 2nd quarter, the company experienced a decrease in deposits, primarily related to tax payments made in April after ramping up in March,” commented Joan Reukauf, Chief Operating Officer.

“Portfolio loans were down $4.5 million during the 2nd quarter of 2022, compared to 1st quarter of 2022,” commented Julia Beattie, President. “During 1st quarter, the bank experienced strong competition for long-term fixed rate loans which materialized into continued downward pressure during the 2nd quarter. This competition has eased with the rising rate environment but impacted 2nd quarter loan growth overall,” added Beattie. The last four remaining PPP loans were forgiven during 2nd quarter.

Classified assets were flat from the prior quarter in both Other Real Estate Owned and classified loans. Total loans past due or on non-accrual increased slightly, as a percentage of total loans, from the prior quarter to 0.22% versus 0.21% as of Q1 2022. During the 2nd 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 June 30, 2022, the ALLL was 1.06% of portfolio loans and the unallocated reserve stood at $791 thousand or 16.6% of the allowance.

Second quarter 2022 non-interest income totaled $3.2 million, an increase of $306 thousand from the 2nd quarter of 2021. During Q2 2022, Steelhead Finance factoring revenue increased $397 thousand, a 25.0% increase over the same quarter of 2021. Conversely, mortgage income decreased $192 thousand, or 27.5%, from the 2nd quarter of 2021, due to an increase in interest rates and a softening housing market.

Non-interest expense totaled $6.1 million in the 2nd quarter, up $111 thousand from the same period in 2021. Notably, personnel expense was the largest driver for the increase in non-interest expense, up $526 thousand versus the same quarter prior year, a 15.5% increase, primarily due to increasing wage pressure in the company’s markets. Advertising expenses were down $279 thousand in the 2nd quarter of 2022 versus the same period in 2021 as the bank expensed $250 thousand in donations toward housing relief support for survivors of the 2020 Alameda Fire during 2nd quarter 2021.

As of June 30, 2022, the Tier 1 Capital Ratio for PBCO Financial Corporation was 9.58% with total shareholder equity of $66.4 million. During the quarter, the company was able to augment capital through earnings while assets also decreased with the decrease in deposits during the quarter. As of June 30, 2022, the bank’s Tier 1 Capital Ratio was 12.71%, up from 11.25% as of March 31, 2022. The company also had unrealized losses on its investment portfolio, net of taxes, of $19.3 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 prior periods. “Losses in the investment portfolio would only be recognized if the company needed additional liquidity for operations,” commented Lindsey Trautman. “Given the company’s strong liquidity position and access to alternative sources of liquidity, the probability of recognizing any losses in the investment portfolio remains very low,” added Trautman.

“Overall, 2nd quarter of 2022 demonstrated the company’s solid core earnings and strengthened capital position which will allow us to weather the uncertain economic future,” commented Julia Beattie. “The $25.0 million sub-debt issuance completed in first quarter has allowed the company to continue implementing its strategic plan while providing a cushion, should a downturn occur,” added Beattie. “Based on experience gained in the Great Recession, we know that banks who looked to the future and planned for economic uncertainty were able to work with clients and manage through challenges as they arose, while protecting the safety and soundness of the company,” concluded Beattie.

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
(Dollars in 000's) 6/30/2022 3/31/2022 12/31/2021 6/30/2021
BALANCE SHEET
ASSETS
Cash and due from banks

 $

            14,800

 

 $

           13,019

 

 $

              5,194

 

$

                4,752

 

Federal funds sold

 

                        -

 

 

                       -

 

 

                        -

 

 

-

 

Interest bearing deposits

 

               69,980

 

 

            113,055

 

 

               77,643

 

 

148,554

 

Investment securities

 

             244,842

 

 

            249,850

 

 

             241,564

 

 

104,155

 

Loans held for sale

 

                  1,333

 

 

                1,549

 

 

                  1,408

 

 

901

 

Loans held for investment, net of unearned income

 

             447,823

 

 

            452,296

 

 

             457,224

 

 

474,909

 

Total Loans, net of deferred fees and costs

 

             449,156

 

 

            453,845

 

 

             458,632

 

 

475,810

 

Allowance for loan losses

 

                (4,767

)

 

               (4,646

)

 

                (4,376

)

 

(4,076

)

Premises and equipment, net

 

               27,657

 

 

              27,979

 

 

               27,304

 

 

26,878

 

Bank owned life insurance

 

               13,956

 

 

              13,861

 

 

               13,759

 

 

13,585

 

Other Assets

 

               42,081

 

 

              43,186

 

 

               39,877

 

 

36,316

 

Total assets

 $

          857,705

 

 $

         910,149

 

 $

          859,597

 

 $

           805,973

 

LIABILITIES
Deposits
Demand - non-interest bearing

 $

          333,985

 

 $

         355,358

 

 $

          350,424

 

$

           317,837

 

Demand - interest bearing

 

             101,743

 

 

              98,064

 

 

             113,154

 

 

112,945

 

Money market and savings

 

             297,504

 

 

            320,677

 

 

             276,264

 

 

250,326

 

Time deposits of less than $250,000

 

               15,429

 

 

              21,027

 

 

               21,140

 

 

20,613

 

Time deposits of more than $250,000

 

                  2,080

 

 

                2,959

 

 

                  3,247

 

 

11,259

 

      Total deposits

 $

          750,741

 

 $

         798,085

 

 $

          764,229

 

$

           712,979

 

Borrowed funds

 

               31,690

 

 

              31,788

 

 

                  7,437

 

 

6,817

 

Other liabilities

 

                  8,886

 

 

                8,997

 

 

                  8,866

 

 

11,107

 

Total liabilities

 $

          791,317

 

 $

         838,870

 

 $

          780,532

 

$

           730,904

 

STOCKHOLDERS' EQUITY
Common stock

 $

            61,340

 

 $

           61,340

 

 $

            61,340

 

$

             57,104

 

Retained earnings

 

               24,309

 

 

              21,864

 

 

               19,465

 

 

17,620

 

Accumulated other comprehensive income,
net of tax

 

              (19,261

)

 

            (11,925

)

 

                (1,740

)

 

345

 

Total stockholders' equity

 $

            66,388

 

 $

           71,279

 

 $

            79,065

 

$

             75,069

 

Total liabilities & stockholders' equity

 $

          857,705

 

 $

         910,149

 

 $

          859,597

 

 $

           805,973

 

Consolidated Statements of Income
(Dollars in 000's)  

2nd Quarter

2022

1st Quarter

2022

4th Quarter

2021

2nd Quarter

2021

INCOME STATEMENT  
INTEREST INCOME  
Loans  

 $

                                 5,552

 $

                               5,515

 $

                                 5,974

 

 $

                                   6,673

 

Investments  

 

                                        903

 

                                      864

 

                                        724

 

 

                                          218

 

Federal funds sold and due from banks  

 

                                        135

 

                                         52

 

                                           44

 

 

                                             50

 

Total interest income  

 

                                     6,590

 

                                   6,431

 

                                     6,742

 

 

                                       6,941

 

   
INTEREST EXPENSE  
Deposits  

 

                                        146

 

                                      162

 

                                        197

 

 

                                          264

 

Borrowed funds  

 

                                        273

 

                                         66

 

                                           15

 

 

                                             15

 

Total interest expense  

 

                                        419

 

                                      228

 

                                        212

 

 

                                          279

 

   
NET INTEREST INCOME  

 

                                     6,171

 

                                   6,203

 

                                     6,530

 

 

                                       6,662

 

Provision for loan losses  

 

                                        113

 

                                      266

 

                                        139

 

 

                                        (249

)

Net interest income after provision for          
loan losses  

 

                                     6,058

 

                                   5,937

 

                                     6,391

 

 

                                       6,911

 

   
NONINTEREST INCOME  
Service charges  

 

                                        120

 

                                      115

 

                                        117

 

 

                                          108

 

Mortgage lending income  

 

                                        505

 

                                      476

 

                                        472

 

 

                                          697

 

Steelhead finance income  

 

                                     1,984

 

                                   2,001

 

                                     1,984

 

 

                                       1,587

 

Bargain purchase gain  

 

                                            -  

 

                                          -  

 

                                      (316

)

 

                                              -

 

BOLI Income  

 

                                           95

 

                                         96

 

                                           72

 

 

                                             66

 

Other non-interest income  

 

                                        540

 

                                      580

 

                                        585

 

 

                                          480

 

Total noninterest income  

 

                                     3,244

 

                                   3,268

 

                                     2,914

 

 

                                       2,938

 

   
NONINTEREST EXPENSE  
Salaries and employee benefits  

 

                                     3,914

 

                                   3,697

 

                                     3,416

 

 

                                       3,389

 

Occupancy & equipment expense  

 

                                        898

 

                                      869

 

                                        924

 

 

                                          800

 

Advertising expense  

 

                                        113

 

                                      119

 

                                        295

 

 

                                          392

 

Professional expenses  

 

                                        192

 

                                      283

 

                                        213

 

 

                                          266

 

Data processing expense  

 

                                        292

 

                                      244

 

                                      (197

)

 

                                          333

 

Other operating expenses  

 

                                        650

 

                                      805

 

                                        699

 

 

                                          769

 

Total noninterest expense  

 

                                     6,059

 

                                   6,017

 

                                     5,350

 

 

                                       5,948

 

   
Income before taxes  

 

                                     3,243

 

                                   3,188

 

                                     3,955

 

 

                                       3,901

 

Provision for income taxes  

 

                                        799

 

                                      789

 

                                        978

 

 

                                          948

 

   
NET INCOME  

 $

                                 2,444

 $

                               2,399

 $

                                 2,977

 

 $

                                   2,953

 

   
Shares Outstanding End of Quarter  

 

                            5,055,301

 

                          5,055,301

 

                            5,057,211

 

 

                              5,043,127

 

Average shares outstanding*  

 

                            5,055,301

 

                          5,056,574

 

                            5,047,540

 

 

                              5,043,127

 

Earnings per share  

 $

                                    0.48

 $

                                  0.47

 $

                                    0.59

 

 $

                                      0.59

 

*Adjusted for stock dividend 9/22/21  
(Dollars in 000's) 6/30/2022 3/31/2022 12/31/2021 6/30/2021
Financial Highlights
Total loans

 $                             449,156

 $                           453,845

 $                             458,632

$                               475,810

Total deposits

 $                             750,741

 $                           798,085

 $                             764,229

$                               712,979

Total assets

 $                             857,705

 $                           910,149

 $                             859,597

$                               805,973

Net income

 $                                 2,444

 $                               2,399

 $                                 2,977

$                                   2,953

Steelhead Finance contribution, pre-tax

 $                                     961

 $                               1,109

 $                                 1,116

$                                   1,649

Mortgage contribution, pre-tax

 $                                     107

 $                                     48

 $                                       (8)

$                                       919

Performance Ratios
Return on average assets

1.11%

1.10%

1.40%

1.46%

Return on average equity

14.23%

12.33%

15.32%

16.05%

Net interest margin

3.14%

3.17%

3.46%

3.68%

Yield on loans

4.98%

4.84%

5.15%

5.39%

Cost of deposits

0.08%

0.08%

0.10%

0.15%

Efficiency ratio

64.35%

63.53%

56.65%

61.96%

Full-time equivalent employees

                                        148

                                      149

                                        140

138

Capital
Leverage ratio

9.58%

8.76%

8.99%

8.83%

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

 $                                 13.13

 $                               14.10

 $                                 15.63

$                                   14.89

Tangible book value per share

 $                                 12.38

 $                               13.34

 $                                 14.87

$                                   14.11

Asset Quality
Allowance for loan losses (ALLL)

 $                                 4,767

 $                               4,646

 $                                 5,782

$                                   4,076

Nonperforming loans (NPLs)

 $                                 1,001

 $                                   959

 $                                     703

$                                       876

Nonperforming assets (NPAs)

 $                                 1,287

 $                               1,245

 $                                 1,245

$                                   1,845

Classified assets(2)

 $                                 1,851

 $                               1,874

 $                                 2,949

$                                   3,138

ALLL as a percentage of net loans

1.06%

1.02%

1.26%

0.86%

ALLL as a percentage of NPLs

476%

484%

822%

465%

Net charge offs (recoveries) to average loans

0.00%

0.00%

-0.15%

0.00%

Net NPLs as a percentage of total loans

0.23%

0.21%

0.15%

0.19%

Nonperforming assets as a percentage of total assets

0.15%

0.14%

0.14%

0.23%

Classified Asset Ratio(3)

2.60%

2.47%

3.53%

3.96%

Past due as a percentage of total loans

0.22%

0.21%

0.15%

0.18%

End of period balances
Total securities and short term deposits

 $                             314,822

 $                           362,905

 $                             319,207

$                               252,709

Total loans, net of allowance

 $                             444,389

 $                           449,199

 $                             454,256

$                               471,734

Total earning assets

 $                             763,978

 $                           816,750

 $                             777,839

$                               728,520

Intangible Assets

 $                                 3,828

 $                               3,841

 $                                 3,854

$                                   3,901

Total assets

 $                             857,705

 $                           910,149

 $                             859,597

$                               805,973

Total noninterest bearing deposits

 $                             333,985

 $                           355,358

 $                             350,424

$                               317,837

Total deposits

 $                             750,741

 $                           798,085

 $                             764,229

$                               712,979

Average balances
Total securities and short term deposits

 $                             336,810

 $                           328,747

 $                             301,297

$                               228,874

Total loans, net of allowance

 $                             445,529

 $                           450,861

 $                             449,826

$                               489,813

Total earning assets

 $                             782,340

 $                           779,609

 $                             751,123

$                               718,687

Total assets

 $                             880,100

 $                           870,794

 $                             848,239

$                               809,623

Total noninterest bearing deposits

 $                             342,067

 $                           353,917

 $                             356,832

$                               320,986

Total deposits

 $                             770,019

 $                           771,160

 $                             752,255

$                               717,147

(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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