People’s Bank Reports Third Quarter Earnings

⁽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 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.

⁽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.

MEDFORD, Ore.–(BUSINESS WIRE)–People’s Bank of Commerce (OTC PINK: PBCO) announced today its financial results for the 3^rd quarter of 2021.

Highlights

Third quarter net income of $2,650,000, or $0.53 per diluted share
Year-to-date net income of $8,496,000, or $1.85 per diluted share
Quarterly non-PPP loan growth rate of 14.5%
Third quarter tax equivalent net interest margin of 3.7%, excluding factoring revenue
Steelhead factoring revenue increased 66.2% over Q3 2020

People’s Bank reported quarterly net income of $2,650,000, or $0.53 per diluted share, for the 3rd quarter of 2021 compared to net income of $1,937,000, or $0.53 per diluted share, in the same quarter of 2020. The bank recognized year-to-date net income of $8,496,000 versus $4,433,000 for the nine months of 2020, a 91.6% increase from the prior year. Earnings per share for the trailing 12 months were $2.36 per share, up from $1.69 per share for the same period of 2020, a 39.3% increase. Third quarter income continued to be positively impacted by PPP fee income due to pro-ration of the remaining unamortized origination processing fees at payoff with $1,271,000 in PPP fee income recognized during the quarter. Steelhead Finance also demonstrated solid revenue of $1,785,000 during the quarter, versus $1,074,000 in 3^rd quarter 2020. During the quarter, the bank made a provision for loan losses of $347,000. The Bank also charged-off two non-accrual loans totaling $199,000 during the third quarter. As anticipated with the bank’s recent acquisition of Willamette Community Bank (WMCB) in the 1^st quarter, the bank was able to achieve higher earnings per share than in previous periods.

During the quarter, deposits increased $37.7 million, or an annualized 21.2% growth rate. On an annual basis, deposits grew by $318.8 million, a 73.8% increase from September 30, 2020. “Of deposit growth achieved in the last 12 months, 43.4% was in non-interest DDA,” commented Joan Reukauf, Chief Operating Officer. The deposit growth was due to several factors, including the bank’s acquisition of WMCB in the first quarter, the bank’s participation in the PPP loan program, and organic growth in all of our deposit markets. “The bank recently completed its system conversion for the Willamette division in September 2021, which is one of the final steps on the merger that took place March 1^st of this year,” added Reukauf.

The Bank continued to deploy excess liquidity to the investment portfolio as an alternative to deposits at the Federal Reserve Bank. Through the end of the quarter, the bank increased its investment portfolio by $99.8 million, a 95.8% increase from the prior quarter.

As of September 30^th, core portfolio loan growth, excluding PPP, totaled $15.3 million during the 3^rd quarter, representing an annualized growth rate of 14.5%. “The bank’s pipeline of approved credits remains strong, while acknowledging there has been increased pressure on loan rates from competitors,” commented Julia Beattie, President.

The bank’s active role in the Paycheck Protection Program (PPP) beginning in April 2020 resulted in 1,204 PPP loans in Round I, totaling $121.2 million (includes loans funded by WMCB prior to the bank merger with People’s Bank). At the end of September 2021, 100% of Round I PPP loans had been submitted for forgiveness- only 8 loans remain in the portfolio that are being reviewed for forgiveness, totaling $328,000. Similarly, the bank funded 629 loans in Round II of the Paycheck Protection Program, representing $48.6 million in loans supporting our local businesses. Through the end of September, 164 loans funded in Round II remained outstanding, totaling $23.2 million. “Through our employee’s diligence in assisting our customers in submitting applications for forgiveness, 90.6% of total PPP loans were forgiven by the end of 3^rd quarter,” commented Beattie.

PPP Loan Activity To Date

		As of		As of		As of		As of
	(dollars in thousands)	9/30/2021*		6/30/2021*		3/31/2021*		12/31/2020
		#	$$$	#	$$$	#	$$$	#	$$$
PPP Loans Funded
	Round One (2020 – Phase I & II)	1,204	$121,199	1,204	$121,199	1,204	$121,199	1,056	$95,387
	Round Two (2021)	629	$ 48,588	629	$ 48,588	534	$45,993	–	$0

PPP Loans Forgiven
	Round One (2020 – Phase I & II)	1196	$120,871	1139	$112,136	437	$65,540	34	$14,428
	Round Two (2021)	465	$ 25,377	73	$3,190	–	$0	–	$0

Net PPP Loans Outstanding
	Round One (2020 – Phase I & II)	8	$328	65	$9,063	767	$55,659	1,022	$80,959
	Round Two (2021)	164	$23,211	557	$45,398	534	$45,993	–	$0
	Total Actual Balances outstanding	172	$23,539	622	$54,461	1,301	$101,652	1,022	$80,959

*	Includes PPP activity of Willamette Community Bank

During the quarter, the bank experienced a decrease in classified assets. This was the result of two events- the reduction of Other Real estate Owned, “ORE”, and the charge-off of two loans previously on non-accrual with book values totaling $199,000. Total loans past due or on non-accrual were flat from the prior quarter. During the 3^rd quarter, the Allowance for Loan and Lease Losses (ALLL) was updated based on new loan growth achieved during the quarter and updated economic expectations, which were factored into the bank’s analysis. The bank also took a recovery of $76 thousand on a loan previously charged off in 2011. As of September 30, 2021, the ALLL was 0.94% of portfolio loans excluding PPP and the unallocated reserve stood at $0.8 million or 18.2% of the allowance.

As of September 30, 2021, the bank’s Tier 1 Leverage Ratio was 8.73% versus 9.40% as of the same date in 2020, with total shareholder equity of $77.5 million. Although the bank has continued to augment capital with earnings, the merger with WMCB and ongoing deposit growth has resulted in the bank’s assets outgrowing capital in the current period.

Third quarter 2021 non-interest income totaled $2.7 million, a decrease of $328 thousand from the 3^rd quarter of 2020. During the quarter, Steelhead Finance factoring revenue increased $711 thousand, a 66.2% increase over the same quarter of 2020. Conversely, mortgage income decreased $989 thousand, or a 61.7% decrease from the 3^rd quarter of 2020. “Steelhead Finance continued to perform extremely well during the 3^rd quarter due to increased trucking activity needed to support consumer demand,” commented Ken Trautman, CEO. “Mortgage remains a key part of our business strategy, but volume has softened in the 3^rd quarter versus the same period last year,” added Trautman. During the quarter, the bank also updated its bargain purchase gain from the WMCB merger, resulting in a reduction to other non-interest income of $317 thousand, needed to partially offset anticipated tax consequences.

Non-interest expense totaled $5.8 million in the 3^rd quarter, down $164 thousand from the 2nd quarter. Included in non-interest expense is the quarterly accrual of $250,000 for the bank’s $1 million donation to fire relief to assist with intermediate and long-term housing needs as our Southern Oregon community rebuilds. This is a non-recurring item for 2021. For the twelve months ending September 30, 2021, excluding one-time merger adjustments, earnings per share would have been $2.48, versus $1.71 for the same period ended September 30, 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.

	(Dollars in 000’s)	September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020
BALANCE SHEET
ASSETS
Cash and due from banks		$	4,561		$	4,752		$	4,730		$	2,819		$	3,659
Federal funds sold			–			–			–			–			–
Interest bearing deposits			100,429			148,554			163,537			91,103			49,336
Investment securities			203,913			104,155			51,631			25,894			22,910
Loans held for sale			2,802			901			4,375			3,407			17,386
Loans held for investment, net of unearned income			459,883			474,909			512,493			346,198			355,855
	Total Loans, net of deferred fees and costs		462,685			475,810			516,868			349,605			373,241
Allowance for loan losses			(4,302	)		(4,076	)		(4,325	)		(4,453	)		(4,271	)
Premises and equipment, net			27,567			26,878			26,763			21,624			20,664
Bank owned life insurance			13,689			13,585			13,512			7,476			7,429
Other Assets			37,070			36,316			35,349			29,263			26,995
	Total assets	$	845,612		$	805,973		$	808,065		$	523,331		$	499,963

LIABILITIES
Deposits
	Demand – non-interest bearing	$	358,013		$	317,837		$	319,292		$	231,095		$	219,836
	Demand – interest bearing		100,341			112,945			110,350			54,806			54,711
	Money market and savings		266,004			250,326			256,462			147,481			134,053
	Time deposits of less than $250,000		22,670			20,613			21,022			19,149			20,012
	Time deposits of more than $250,000		3,645			11,259			12,208			3,216			3,282
	Total deposits	$	750,673		$	712,979		$	719,334		$	455,747		$	431,894

Borrowed funds			7,529			6,817			6,871			6,924			10,102
Other liabilities			9,887			11,107			9,738			7,824			7,115
	Total liabilities	$	768,089		$	730,904		$	735,943		$	470,495		$	449,111

STOCKHOLDERS’ EQUITY
Common stock		$	60,879		$	57,104		$	57,104		$	40,379		$	40,085
Retained earnings			16,489			17,620			14,667			11,775			10,077
Accumulated other comprehensive income,
	net of tax		155			345			351			682			690
	Total stockholders’ equity	$	77,523		$	75,069		$	72,122		$	52,836		$	50,852

	Total liabilities & stockholders’ equity	$	845,612		$	805,973		$	808,065		$	523,331		$	499,963

	(Dollars in 000’s)	3rd Quarter 2021			2nd Quarter 2021			1st Quarter 2021			4th Quarter 2020		3rd Quarter 2020
INCOME STATEMENT
INTEREST INCOME
Loans		$	6,632		$	6,673		$	5,195		$	4,308	$	4,065
Investments			544			218			141			155		133
Federal funds sold and due from banks			58			50			53			30		28
	Total interest income		7,234			6,941			5,389			4,493		4,226

INTEREST EXPENSE
Deposits			218			264			200			176		177
Borrowed funds			15			15			14			26		41
	Total interest expense		233			279			214			202		218

NET INTEREST INCOME			7,001			6,662			5,175			4,291		4,008
Provision for loan losses			347			(249	)		(125	)		182		247
Net interest income after provision for
	loan losses		6,654			6,911			5,300			4,109		3,761

NONINTEREST INCOME
Service charges			106			108			78			57		55
Mortgage lending income			615			697			1,341			1,634		1,604
Steelhead finance income			1,785			1,587			1,308			1,239		1,074
Bargain purchase gain			(316	)		–			2,343			–		–
BOLI Income			73			66			60			37		32
Other non-interest income			474			480			347			298		300
	Total noninterest income		2,737			2,938			5,477			3,265		3,065

NONINTEREST EXPENSE
Salaries and employee benefits			3,354			3,389			3,407			3,186		2,779
Occupancy & equipment expense			893			800			925			590		556
Advertising expense			396			392			388			277		182
Professional expenses			110			353			547			406		127
Data processing expense			324			333			2,067			242		222
Other operating expenses			708			682			351			356		481
	Total noninterest expense		5,784			5,948			7,685			5,057		4,347

Income before taxes			3,608			3,901			3,092			2,317		2,479
Provision for income taxes			958			948			200			619		542

NET INCOME		$	2,650		$	2,953		$	2,892		$	1,698	$	1,937

	Average shares outstanding*		4,962,936			4,802,978			3,977,422			3,560,096		3,640,440
	Earnings per share	$	0.53		$	0.61		$	0.73		$	0.48	$	0.53
	*Adjusted for stock dividend 9/22/21

	(Dollars in 000’s)	September 30, 2021			June 30, 2021			March 31, 2021			December 31, 2020			September 30, 2020
Financial Highlights
	Total loans	$	462,685		$	475,810		$	516,868		$	349,605		$	373,241
	Total deposits	$	750,673		$	712,979		$	719,334		$	455,747		$	431,894
	Total assets	$	845,612		$	805,973		$	808,065		$	523,331		$	499,963
	Net income	$	2,650		$	2,953		$	2,892		$	1,698		$	1,937
	Steelhead Finance contribution, pre-tax	$	1,089		$	970		$	679		$	531		$	399
	Mortgage contribution, pre-tax	$	212		$	308		$	610		$	751		$	720

Performance Ratios
	Return on average assets		1.27	%		1.46	%		1.82	%		1.31	%		1.58	%
	Return on average equity		13.79	%		16.05	%		19.11	%		13.10	%		15.55	%
	Net interest margin		3.70	%		3.68	%		3.64	%		3.75	%		3.68	%
	Yield on loans		5.53	%		5.39	%		5.11	%		4.66	%		4.36	%
	Cost of deposits		0.12	%		0.15	%		0.14	%		0.16	%		0.17	%
	Efficiency ratio		59.39	%		61.96	%		72.15	%		66.93	%		61.46	%
	Full-time equivalent employees		140			138			143			106			103

Capital
	Leverage ratio		8.73	%		8.83	%		8.44	%		9.36	%		9.40	%
	Common equity tier 1 ratio	N/A(1)			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)			N/A(1)
	Total risk based ratio	N/A(1)			N/A(1)			N/A(1)			N/A(1)			N/A(1)
	Book value per share	$	15.37		$	15.63		$	15.02		$	14.85		$	13.75
	Tangible book value per share	$	14.61		$	14.82		$	14.20		$	13.87		$	12.80

Asset Quality
	Allowance for loan losses (ALLL)	$	4,302		$	4,076		$	5,782		$	4,873		$	4,271
	Nonperforming loans (NPLs)	$	665		$	876		$	1,134		$	191		$	129
	Nonperforming assets (NPAs)	$	1,443		$	1,845		$	2,162		$	1,220		$	1,157
	Classified assets⁽²⁾	$	3,275		$	3,138		$	3,345		$	2,550		$	2,764
	ALLL as a percentage of net loans		0.94	%		0.86	%		1.13	%		1.41	%		1.16	%
	ALLL as a percentage of NPLs		646.63	%		465.33	%		509.94	%		2546.18	%		3305.27	%
	Net charge offs (recoveries) to average loans		0.03	%		0.00	%		0.00	%		0.00	%		0.00	%
	Net NPLs as a percentage of total loans		0.15	%		0.19	%		0.22	%		0.06	%		0.04	%
	Nonperforming assets as a percentage of total assets		0.17	%		0.23	%		0.27	%		0.23	%		0.23	%
	Classified Asset Ratio⁽³⁾		4.00	%		3.96	%		4.38	%		4.45	%		5.01	%
	Past due as a percentage of total loans		0.18	%		0.18	%		0.22	%		0.05	%		0.03	%

End of period balances
	Total securities and short term deposits	$	304,342		$	252,709		$	215,168		$	116,997		$	72,246
	Total loans, net of allowance	$	458,383		$	471,734		$	512,543		$	345,152		$	368,970
	Total earning assets	$	767,027		$	728,520		$	732,036		$	466,602		$	445,487
	Total assets	$	845,612		$	805,973		$	808,065		$	523,331		$	499,963
	Total noninterest bearing deposits	$	358,013		$	317,837		$	319,292		$	231,095		$	219,836
	Total deposits	$	750,673		$	712,979		$	719,334		$	455,747		$	431,894

Average balances
	Total securities and short term deposits	$	278,310		$	228,874		$	150,214		$	98,223		$	74,990
	Total loans, net of allowance	$	465,410		$	489,813		$	397,195		$	361,982		$	364,508
	Total earning assets	$	747,858		$	722,830		$	554,446		$	460,205		$	439,498
	Total assets	$	834,485		$	809,623		$	635,535		$	517,187		$	491,041
	Total noninterest bearing deposits	$	336,375		$	320,986		$	167,266		$	227,689		$	209,581
	Total deposits	$	739,372		$	717,147		$	525,064		$	448,225		$	412,206