PBCO Financial Corporation Reports Q1 2022 Earnings

Rhea-AI Summary

PBCO Financial Corporation (OTC PINK: PBCO) announced its Q1 2022 financial results, reporting a net income of $2.4 million, or $0.47 per diluted share, down from $2.9 million, or $0.69 per diluted share in Q1 2021. The company's Steelhead gross factoring revenue grew 53% to $2.0 million. Total deposits increased by $33.9 million (4.4%) quarter-over-quarter and $78.8 million (17.7%) year-over-year. Following a $25 million issuance of subordinated notes, the Tier 1 Capital Ratio rose to 11.25%. However, non-interest income fell by $2.2 million compared to Q1 2021, primarily due to a one-time gain from a merger.

Positive

• Net income of $2.4 million, down only slightly year-over-year.
• Steelhead gross factoring revenue increased by 53% to $2.0 million.
• Deposits grew $33.9 million quarter-over-quarter and $78.8 million year-over-year.
• Tier 1 Capital Ratio increased to 11.25% due to capital injection.

Negative

• Net income declined from $2.9 million in Q1 2021 to $2.4 million.
• Non-interest income decreased by $2.2 million year-over-year.
• Mortgage income fell by 64.5% compared to Q1 2021.
• Unrealized losses on investment portfolio amounted to $11.9 million.

MEDFORD, Ore.--(BUSINESS WIRE)-- PBCO Financial Corporation (OTC PINK: PBCO), the holding company of People’s Bank of Commerce, announced today its financial results for the 1^st 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 1^st 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 1^st 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 1^st 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 1^st 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 1^st 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 1^st quarter of 2021.

Non-interest expense totaled $6.0 million in the 1^st 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.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220420006210/en/

Ken Trautman, CEO

(541) 774-7654, ken@peoplesbank.bank

Source: PBCO Financial Corporation

FAQ

What were PBCO's earnings for Q1 2022?

PBCO reported a net income of $2.4 million, or $0.47 per diluted share for Q1 2022.

How did Steelhead Finance perform in Q1 2022?

Steelhead Finance generated $2.0 million in revenue during Q1 2022, a 53% increase from Q1 2021.

What changes occurred in PBCO's deposits in Q1 2022?

Deposits increased by $33.9 million, a 4.4% rise from the previous quarter.

How did the Tier 1 Capital Ratio change for PBCO?

The Tier 1 Capital Ratio rose to 11.25% as of March 31, 2022, up from 8.99% at the end of 2021.

Did PBCO experience any losses in Q1 2022?

Yes, PBCO reported unrealized losses of $11.9 million on its investment portfolio due to market changes.