PBCO Financial Corporation Reports Q4 and 2022 Earnings

MEDFORD, Ore.–(BUSINESS WIRE)–PBCO Financial Corporation (OTC PINK: PBCO), the holding company (Company) of People’s Bank of Commerce (Bank), announced today its financial results for the fourth quarter of 2022 and for year-end 2022.

Highlights

  • Net income of $2.0 million in the quarter, or $0.38 per diluted share
  • Loan growth of $27.3 million in the quarter, an increase of 6.1% compared to Q3 2022
  • Net interest margin of 3.74%, an increase of 34 basis points compared to Q3 2022
  • Cost of deposits was 0.16%, an increase of 3 basis points compared to Q3 2022
  • Hired team of commercial bankers in Eugene, Oregon
  • Net income of $9.9 million for 2022 year-end, or $1.92 per diluted share

The Company reported net income of $2.0 million, or $0.38 per diluted share, for the fourth quarter of 2022 compared to net income of $3.0 million, or $0.56 per diluted share, in the same quarter of 2021. Earnings for the full year 2022 were $9.9 million or $1.92 per share, down from $11.5 million or $2.33 per share for 2021. The reduction in earnings in 2022 is due to lower mortgage income of $1.7 million and absence of PPP fee revenue, which was $4.7 million in 2021, coupled with one-time income and expenses related to the merger with Willamette Community Bank in March 2021.

“Despite a challenging operating environment in 2022, the Company proved resilient with strong profitability in fourth quarter and full year 2022,” commented Ken Trautman, Chief Executive Officer. “Further, we continue to identify opportunities to grow the Bank and remain focused on serving our customers and delivering strong financial results for shareholders. We recently hired a team of commercial bankers to lead our expansion into Eugene, Oregon, and believe we are well positioned to take advantage of growth opportunities in this market.

Deposits decreased $45.8 million in the quarter, a 6.2% decline from the third quarter of 2022. Over the last twelve months, deposits decreased $71.4 million, a decline of 9.3%. “A core strength of the Bank is the deposit mix with non-interest bearing balances accounting for 47% of total deposits at year-end,” commented Joan Reukauf, Chief Operating Officer. “We maintained a low cost of deposits at 0.16% for the fourth quarter, but total deposit balances declined in the quarter as some customers sought higher yielding rates in alternative investments.”

Loans increased $27.3 million in the quarter, or 6.1% growth compared to the third quarter of 2022. “We saw higher loan growth in fourth quarter than prior quarters in the year, as we remain focused on quality loan production at attractive rates,” commented Julia Beattie, President. “The Bank had relatively muted loan growth in the first nine months of the year due to our decision to remain disciplined when loans were at historically low interest rates.”

The investment portfolio decreased $5.3 million or 2.2% from the fourth quarter of 2021. During the most recent quarter, investments decreased $10.2 million from the third quarter of 2022, or 4.2%, and the average life of the portfolio remained at 4.6 years as short-term investments matured and were not replaced. Securities income was $1.06 million during the quarter, a yield of 1.7%, versus $979 thousand or a yield of 1.5% for the third quarter of 2022.

Non-performing assets increased in Q4 as total loans past due or on non-accrual increased to 0.56%, as a percentage of total loans, versus 0.38% as of Q3 2022. “The Bank’s overall asset quality remains strong, but we did see an increase in non-performing assets for the quarter. This increase was due to a hospitality credit that has not fully recovered from the pandemic shutdown,” noted Bill Whalen, Chief Credit Officer. During the fourth quarter, the Allowance for Loan and Lease Losses (ALLL) increased by $348 thousand due to new loan growth as well as net charges offs of $56 thousand during the quarter. As of December 31, 2022, the ALLL was 1.09% of portfolio loans and the unallocated reserve stood at $839 thousand or 16.2% of the ALLL.

Fourth quarter 2022 non-interest income totaled $2.4 million, a decrease of $583 thousand from the third quarter of 2022. During Q4 2022, Steelhead Finance factoring revenue decreased $341 thousand, an 18.0% decrease from the prior quarter, while increasing $774 thousand year-over-year, or 11.6%. “A majority of revenue generated by Steelhead Finance comes from our factoring partnerships in the freight industry,” commented Bill Stewart, Steelhead Division President. “The spot market freight surge, which yielded record freight margins in 2021 and into 2022, came to an end in the fourth quarter of 2022 and has returned to a more normalized level as reflected in Q4 revenue,” added Stewart. Increased mortgage rates in 2022 led to a significant decrease in mortgage production, and consequently, mortgage income decreased $136 thousand, or 48.2%, from the third quarter of 2022 and decreased $1.7 million, or 54.9%, for full year compared to 2021. Additionally, the Bank had a non-recurring one-time bargain purchase gain of $1.7 million from its merger with Willamette Community Bank in March of 2021 that inflated non-interest income during 2021.

Non-interest expense totaled $6.2 million in the fourth quarter, up $699 thousand from the previous quarter. The primary reason for the increase in expense was attributed to salaries and personnel benefits due to an accrual adjustment. On an annual basis, salaries and benefits were up $1.2 million, a 9.1% increase over 2021. Advertising expense was down $1.0 million compared to prior year as the Bank made a one-time donation in 2021 to provide housing relief for the survivors of the 2020 Alameda Fire in Jackson County. In addition, the Bank incurred one-time merger related expenses of $2.5 million during 2021.

As of December 31, 2022, the Tier 1 Capital Ratio for PBCO Financial Corporation was 10.92% with total shareholder equity of $68.4 million. During the quarter, the Company was able to augment capital through earnings while assets also decreased due to lower deposit balances. The Tier 1 Capital Ratio for the Bank was 12.55% at quarter-end, down from 12.84% as of September 30, 2022. The Company had unrealized losses on its investment portfolio, net of taxes, of $22.7 million down from $23.6 million the prior quarter. “The Bank has a very strong capital position that continues to be well above the threshold to be considered well-capitalized, which was augmented by a successful sub debt offering in March of 2022 totaling $25 million,” commented Lindsey Trautman, Chief Financial Officer.

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 a full-service, commercial bank headquartered in Medford, Oregon with branches in Albany, Ashland, Central Point, Grants Pass, Jacksonville, Klamath Falls, Lebanon, Medford, and Salem, with a loan production office in Eugene.

“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) 12/31/2022 9/30/2022 6/30/2022 12/31/2021
BALANCE SHEET
ASSETS
Cash and due from banks

$

5,514

 

$

14,888

 

$

14,800

 

$

5,194

 

Federal funds sold

 

 

 

 

 

 

 

 

Interest bearing deposits

 

10,869

 

 

55,770

 

 

69,980

 

 

77,643

 

Investment securities

 

236,284

 

 

246,533

 

 

244,842

 

 

241,564

 

Loans held for sale

 

628

 

 

894

 

 

1,333

 

 

1,408

 

Loans held for investment, net of unearned income

 

475,024

 

 

447,725

 

 

447,823

 

 

457,224

 

Total Loans, net of deferred fees and costs

 

475,652

 

 

448,619

 

 

449,156

 

 

458,632

 

Allowance for loan losses

 

(5,190

)

 

(4,842

)

 

(4,767

)

 

(4,376

)

Premises and equipment, net

 

27,888

 

 

27,286

 

 

27,657

 

 

27,304

 

Bank owned life insurance

 

14,179

 

 

14,090

 

 

13,956

 

 

13,759

 

Other Assets

 

38,098

 

 

41,173

 

 

42,081

 

 

39,877

 

Total assets

$

803,294

 

$

843,517

 

$

857,705

 

$

859,597

 

 
LIABILITIES
Deposits
Demand – non-interest bearing

$

322,809

 

$

343,708

 

$

333,985

 

$

350,424

 

Demand – interest bearing

 

108,972

 

 

111,184

 

 

101,743

 

 

113,154

 

Money market and savings

 

244,282

 

 

265,628

 

 

297,504

 

 

276,264

 

Time deposits of less than $250,000

 

12,626

 

 

13,878

 

 

15,429

 

 

21,140

 

Time deposits of more than $250,000

 

4,106

 

 

4,183

 

 

2,080

 

 

3,247

 

Total deposits

$

692,795

 

$

738,581

 

$

750,741

 

$

764,229

 

 
Borrowed funds

 

34,449

 

 

31,604

 

 

31,690

 

 

7,437

 

Other liabilities

 

7,639

 

 

8,320

 

 

8,886

 

 

8,866

 

Total liabilities

$

734,883

 

$

778,505

 

$

791,317

 

$

780,532

 

 
STOCKHOLDERS’ EQUITY
Common stock, surplus & retained earnings

$

91,133

 

$

88,660

 

$

85,649

 

$

80,805

 

Accumulated other comprehensive income, net of tax

 

(22,722

)

 

(23,648

)

 

(19,261

)

 

(1,740

)

Total stockholders’ equity

$

68,411

 

$

65,012

 

$

66,388

 

$

79,065

 

 
Total liabilities & stockholders’ equity

$

803,294

 

$

843,517

 

$

857,705

 

$

859,597

 

 

**As a result of the PBCO Financial Corporation reorganization and merger effective February 28, 2022, the current and prior quarter financial discussion and summary balance sheet and income statement in this release reflect PBCO Financial Corporation on a consolidated basis, while the comparative prior period for fourth quarter 2021 reflects 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.

Consolidated Statements of Income
(Dollars in 000’s) 4th Quarter
2022
3rd Quarter
2022
2nd Quarter
2022
4th Quarter
2021
INCOME STATEMENT
INTEREST INCOME
Loans

$

6,042

$

5,744

$

5,552

$

5,974

 

Investments

 

1,057

 

979

 

903

 

724

 

Federal funds sold and due from banks

 

366

 

406

 

135

 

44

 

Total interest income

 

7,465

 

7,129

 

6,590

 

6,742

 

 
INTEREST EXPENSE
Deposits

 

281

 

244

 

146

 

197

 

Borrowed funds

 

276

 

276

 

273

 

15

 

Total interest expense

 

557

 

520

 

419

 

212

 

 
NET INTEREST INCOME

 

6,908

 

6,609

 

6,171

 

6,530

 

Provision for loan losses

 

403

 

153

 

113

 

139

 

Net interest income after provision for loan losses

 

6,505

 

6,456

 

6,058

 

6,391

 

 
NONINTEREST INCOME
Service charges

 

122

 

132

 

120

 

117

 

Mortgage lending income

 

146

 

282

 

505

 

472

 

Steelhead finance income

 

1,555

 

1,896

 

1,984

 

1,984

 

Bargain purchase gain

 

 

 

 

(316

)

BOLI Income

 

87

 

101

 

95

 

72

 

Other non-interest income

 

489

 

571

 

540

 

585

 

Total noninterest income

 

2,399

 

2,982

 

3,244

 

2,914

 

 
NONINTEREST EXPENSE
Salaries and employee benefits

 

3,868

 

3,317

 

3,914

 

3,416

 

Occupancy & equipment expense

 

690

 

841

 

898

 

924

 

Advertising expense

 

113

 

118

 

113

 

295

 

Professional expenses

 

358

 

184

 

192

 

213

 

Data processing expense

 

446

 

262

 

292

 

(197

)

Other operating expenses

 

676

 

730

 

650

 

699

 

Total noninterest expense

 

6,151

 

5,452

 

6,059

 

5,350

 

 
Income before taxes

 

2,753

 

3,986

 

3,243

 

3,955

 

Provision for income taxes

 

733

 

992

 

799

 

978

 

 
NET INCOME

$

2,020

$

2,994

$

2,444

$

2,977

 

 
Shares Outstanding End of Quarter

 

5,325,035

 

5,313,424

 

5,308,066

 

5,310,072

 

Average shares outstanding*

 

5,317,065

 

5,312,025

 

5,308,066

 

5,299,917

 

Earnings per share

$

0.38

$

0.56

$

0.46

$

0.56

 

*Adjusted for stock dividend 11/10/22
(Dollars in 000’s) 12/31/2022 9/30/2022 6/30/2022 12/31/2021
Financial Highlights
Total loans

$

475,652

 

$

448,619

 

$

449,156

 

$

458,632

 

Total deposits

$

692,795

 

$

738,581

 

$

750,741

 

$

764,229

 

Total assets

$

803,294

 

$

843,517

 

$

857,705

 

$

859,597

 

Net income

$

2,020

 

$

2,994

 

$

2,444

 

$

2,977

 

Steelhead Finance contribution, pre-tax

$

454

 

$

820

 

$

961

 

$

1,116

 

Mortgage contribution, pre-tax

$

(111

)

$

(17

)

$

107

 

$

(8

)

 
Performance Ratios
Return on average assets

 

0.98

%

 

1.38

%

 

1.11

%

 

1.40

%

Return on average equity

 

12.34

%

 

17.41

%

 

14.23

%

 

15.32

%

Net interest margin

 

3.74

%

 

3.40

%

 

3.14

%

 

3.46

%

Yield on loans

 

5.34

%

 

5.15

%

 

4.98

%

 

5.15

%

Cost of deposits

 

0.16

%

 

0.13

%

 

0.08

%

 

0.10

%

Efficiency ratio

 

66.09

%

 

56.84

%

 

64.35

%

 

56.65

%

Full-time equivalent employees

 

146

 

 

143

 

 

148

 

 

140

 

 
Capital
Leverage ratio

 

10.92

%

 

10.10

%

 

9.58

%

 

8.99

%

Bank Leverage Ratio

 

12.55

%

 

12.84

%

 

12.71

%

 

8.99

%

Book value per share

$

12.85

 

$

12.24

 

$

12.51

 

$

14.89

 

Tangible book value per share

$

12.13

 

$

11.52

 

$

11.79

 

$

14.16

 

 
Asset Quality
Allowance for loan losses (ALLL)

$

5,190

 

$

4,842

 

$

5,782

 

$

4,376

 

Nonperforming loans (NPLs)

$

2,653

 

$

1,684

 

$

1,001

 

$

703

 

Nonperforming assets (NPAs)

$

2,939

 

$

1,970

 

$

1,287

 

$

1,245

 

Classified assets(2)

$

5,132

 

$

1,843

 

$

1,851

 

$

2,949

 

ALLL as a percentage of net loans

 

1.09

%

 

1.08

%

 

1.29

%

 

0.95

%

ALLL as a percentage of NPLs

 

196

%

 

288

%

 

578

%

 

622

%

Net charge offs (recoveries) to average loans

 

0.03

%

 

0.02

%

 

0.00

%

 

-0.15

%

Net NPLs as a percentage of total loans

 

0.56

%

 

0.38

%

 

0.23

%

 

0.15

%

Nonperforming assets as a percentage of total assets

 

0.37

%

 

0.23

%

 

0.15

%

 

0.14

%

Classified Asset Ratio(3)

 

6.97

%

 

2.64

%

 

2.60

%

 

3.53

%

Past due as a percentage of total loans

 

0.56

%

 

0.38

%

 

0.22

%

 

0.15

%

 
End of period balances
Total securities and short term deposits

$

247,153

 

$

302,303

 

$

314,822

 

$

319,207

 

Total loans, net of allowance

$

470,462

 

$

443,777

 

$

444,389

 

$

454,256

 

Total earning assets

$

722,805

 

$

750,922

 

$

763,978

 

$

777,839

 

Intangible Assets

$

3,802

 

$

3,815

 

$

3,828

 

$

3,854

 

Total assets

$

803,294

 

$

843,517

 

$

857,705

 

$

859,597

 

Total noninterest bearing deposits

$

322,809

 

$

343,708

 

$

333,985

 

$

350,424

 

Total deposits

$

692,795

 

$

738,581

 

$

750,741

 

$

764,229

 

 
Average balances
Total securities and short term deposits

$

280,254

 

$

324,448

 

$

336,810

 

$

301,297

 

Total loans, net of allowance

$

452,921

 

$

445,852

 

$

445,529

 

$

449,826

 

Total earning assets

$

733,175

 

$

770,301

 

$

782,340

 

$

751,123

 

Total assets

$

828,608

 

$

866,319

 

$

880,100

 

$

848,239

 

Total noninterest bearing deposits

$

338,418

 

$

344,623

 

$

342,067

 

$

356,832

 

Total deposits

$

722,840

 

$

756,539

 

$

770,019

 

$

752,255

 

(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.

 

Contacts

Ken Trautman, CEO
(541) 774-7654, [email protected]

error: Content is protected !!