PBCO Financial Corporation Reports Q1 2023 Earnings

Rhea-AI Summary

PBCO Financial Corporation (OTC PINK: PBCO) reported its Q1 2023 financial results, including a net income of $1.7 million, or $0.31 per diluted share, down from $2.4 million, or $0.45 per diluted share in Q1 2022. The bank experienced a loan growth of $13 million, a 2.7% increase from the previous quarter, while deposits declined by $19.1 million, marking a 2.8% decrease. The net interest margin decreased to 3.49%, reflecting rising deposit costs and competition for liquidity. The company opened a new branch in Eugene, Oregon, as part of its growth strategy. Non-performing assets improved, decreasing to 0.26%, and asset quality remains strong. The Tier 1 Capital Ratio stands at 10.98%, indicating solid capitalization. Despite challenges, the bank aims for improved efficiency and growth in lending operations.

Positive

• Loan growth of $13 million, 2.7% increase from Q4 2022.
• Improved non-performing assets to 0.26% of total loans.
• Tier 1 Capital Ratio at 10.98%, demonstrating strong capitalization.
• New branch opened in Eugene, indicating strategic growth initiative.

Negative

• Net income decreased from $2.4 million in Q1 2022 to $1.7 million in Q1 2023.
• Deposits decreased by $19.1 million, a 2.8% decline compared to Q4 2022.
• Net interest margin fell by 0.25% to 3.49% due to rising deposit costs.

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 first quarter of 2023.

Highlights

• Net income of $1.7 million in the quarter, or $0.31 per diluted share
• Loan growth of $13.0 million in the quarter, an increase of 2.74% compared to Q4 2022
• Net interest margin of 3.49%, a decrease of 0.25% compared to Q4 2022
• Cost of deposits was 44 basis points, an increase of 28 basis points when compared to Q4 2022
• Opened a full-service branch in Eugene, Oregon

The Company reported net income of $1.7 million, or $0.31 per diluted share, for the first quarter of 2023 compared to net income of $2.4 million, or $0.45 per diluted share, in the same quarter of 2022. The reduction in earnings for the first quarter is primarily due to the rising cost of deposits as depositors sought higher yields and reduced mortgage lending and Steelhead revenue due to inflationary pressures.

“Despite higher funding costs and increased competition for deposits as liquidity left the banking system, the bank is well positioned with a strong core deposit base and capital to support future growth and economic challenges,” commented Ken Trautman, Chief Executive Officer. “The bank recently opened a new branch in Eugene as part of its strategic growth initiative,” added Trautman. “The banking industry is resilient, and in spite of recent challenges, remains strong overall versus the last economic downturn.”

Deposits decreased $19.1 million during the quarter, a 2.8% decline from the fourth quarter of 2022. Over the last twelve months, deposits decreased $124.4 million, a decline of 15.6%. “The deposit outflow over the last year was expected considering the large deposit inflow as a result of government stimulus during the COVID-19 Pandemic,” commented Joan Reukauf, Chief Operating Officer. “Competition for deposits increased as the government began its quantitative tightening initiative in 2022, in combination with steep Fed Funds rate increases to combat persistent inflation, which incented depositors to seek higher yields on their liquid balances.”

Loans increased $13.0 million in the quarter, or 2.7% growth compared to the fourth quarter of 2022. “The bank continued to grow its loan portfolio during first quarter, with demand for loans staying strong in spite of significantly higher borrowing costs than the same period last year,” commented Julia Beattie, President.

The investment portfolio decreased to $234.6 million in Q1 2023 from $236.3 million at the end of Q4 2022, a 0.7% decrease. The average life of the portfolio decreased to 4.5 years from 4.6 years during the quarter as short-term investments matured and were not replaced. Securities income was $1.04 million during the quarter, a yield of 1.76%, versus $1.06 million or a yield of 1.79% for the fourth quarter of 2022. “The bank’s investment portfolio is classified as available-for-sale, meaning there are no undisclosed, unrealized losses that could negatively impact the bank,” noted Lindsey Trautman, Chief Financial Officer. “While rising interest rates have negatively impacted the market value of our investment portfolio, the bank continues to be well-capitalized when considering the impact on capital of the unrealized loss,” added Trautman. As of March 31, 2023, the net after tax unrealized loss on the investment portfolio was $18.9 million versus $22.7 million as of December 31, 2022. Highly rated government agency and government sponsored agency investments comprise 94.8% of the investment portfolio with the balance of approximately 4.5% held in municipal investments and 0.7% held in corporate sub-debt issued by community banks. As of Q1 2023, liquid assets to total assets were 24.0%, including the market value of the investment portfolio, less pledged investments of $53.7 million.

Non-performing assets improved in Q1 as total loans past due or on non-accrual decreased to 0.26%, as a percentage of total loans, versus 0.56% as of Q4 2022. “Credit quality has remained strong during the first quarter, with past due loans improving from the prior quarter,” noted Bill Whalen, Chief Credit Officer. During the first quarter, the Allowance for Loan and Lease Losses (ALLL) increased by $318 thousand. Of the increase, $261 thousand was attributed to implementation of the new Current Expected Credit Losses (CECL) accounting standard, which went into effect on January 1^st and provides for an accounting adjustment as an offset to retained earnings, net of deferred taxes. The difference of $57 thousand was the loan loss provision for the quarter under the new standard. As of March 31, 2023, the ALLL was 1.13% of portfolio loans.

First quarter 2023 non-interest income totaled $2.2 million, a decrease of $222 thousand from the fourth quarter of 2022. During Q1 2023, Steelhead Finance factoring revenue decreased $90 thousand, a 5.8% decrease from the prior quarter. “Although factoring revenue decreased during the 2^nd half of 2022 and Q1 of 2023, overall activity is strong and will continue to provide a diversified income source outside of the bank’s traditional banking products” commented Bill Stewart, President of Steelhead Finance. Increased mortgage rates have continued to negatively impact mortgage production, and consequently, mortgage income decreased $87 thousand, or 59.6%, from the fourth quarter of 2022. “Although mortgage production continued to trend negatively during the first quarter, mortgage rates have improved recently,” commented Echo Hutto, the mortgage division manager. “The bank recently hired a new team of seasoned mortgage lenders to increase production in our northern market going into the spring and summer months,” added Hutto.

Non-interest expenses totaled $6.2 million in the first quarter, up $54 thousand from the previous quarter. The primary reason for the increase in expenses was attributed to salary adjustments implemented at the start of the year. “The bank has focused on improving efficiency in 2023 as a strategic objective for the year,” noted Beattie. “The board and management have set a goal to be more efficient as the bank matures into its existing infrastructure. The Eugene expansion and the recent increase in the mortgage lending team will have a short-term impact on efficiency that should correct as we penetrate new markets,” added Beattie.

As of March 31, 2023, the Tier 1 Capital Ratio for PBCO Financial Corporation was 10.98% with total shareholder equity of $73.6 million. During the quarter, the Company was able to augment capital through earnings, while the unrealized loss on the investment portfolio also improved, as noted above. The Tier 1 Capital Ratio for the Bank was 12.60% at quarter-end, up from 12.55% as of December 31, 2022. Tangible Capital was $69.8 million, or 8.60% as of March 31, 2023, versus Q4 2022 at $64.6 million or 8.04%.

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, Eugene, Grants Pass, Jacksonville, Klamath Falls, Lebanon, Medford, 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.

		1st Quarter 2023			4th Quarter 2022			3rd Quarter 2022			1st Quarter 2022
Consolidated Balance Sheets
	(Dollars in 000's)	3/31/2023			12/31/2022			9/30/2022			3/31/2022
BALANCE SHEET
ASSETS
Cash and due from banks		$	5,097		$	5,514		$	14,888		$	13,019
Federal funds sold			-			-			-			-
Interest bearing deposits			8,224			10,869			55,770			113,055
Investment securities			234,647			236,284			246,533			249,850
Loans held for sale			299			628			894			1,549
Loans held for investment, net of unearned income			488,025			475,024			447,725			452,296
	Total Loans, net of deferred fees and costs		488,324			475,652			448,619			453,845
Allowance for loan losses			(5,508	)		(5,190	)		(4,842	)		(4,646	)
Premises and equipment, net			27,659			27,888			27,286			27,979
Bank owned life insurance			16,210			14,179			14,090			13,861
Other Assets			36,450			38,098			41,173			43,186
	Total assets	$	811,103		$	803,294		$	843,517		$	910,149
LIABILITIES
Deposits
	Demand - non-interest bearing	$	299,535		$	322,809		$	343,708		$	355,358
	Demand - interest bearing		123,494			108,972			111,184			98,064
	Money market and savings		222,834			244,282			265,628			320,677
	Time deposits of less than $250,000		19,579			12,626			13,878			21,027
	Time deposits of more than $250,000		8,236			4,106			4,183			2,959
	Total deposits	$	673,678		$	692,795		$	738,581		$	798,085
Borrowed funds			54,860			34,449			31,604			31,788
Other liabilities			9,013			7,639			8,320			8,997
	Total liabilities	$	737,551		$	734,883		$	778,505		$	838,870
STOCKHOLDERS' EQUITY
Common stock, surplus & retained earnings		$	92,433		$	91,133		$	88,660		$	83,204
Accumulated other comprehensive income, net of tax			(18,881	)		(22,722	)		(23,648	)		(11,925	)
	Total stockholders' equity	$	73,552		$	68,411		$	65,012		$	71,279
	Total liabilities & stockholders' equity	$	811,103		$	803,294		$	843,517		$	910,149
**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. 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)	1st Quarter 2023		4th Quarter 2022		3rd Quarter 2022		1st Quarter 2022
INCOME STATEMENT
INTEREST INCOME
Loans		$	6,350	$	6,042	$	5,744	$	5,515
Investments			1,035		1,057		979		864
Federal funds sold and due from banks			61		366		406		52
	Total interest income		7,446		7,465		7,129		6,431
INTEREST EXPENSE
Deposits			746		281		244		162
Borrowed funds			382		276		276		66
	Total interest expense		1,128		557		520		228
NET INTEREST INCOME			6,318		6,908		6,609		6,203
Provision for loan losses			57		403		153		266
Net interest income after provision for loan losses			6,261		6,505		6,456		5,937
NONINTEREST INCOME
Service charges			119		122		132		115
Mortgage lending income			59		146		282		476
Steelhead finance income			1,465		1,555		1,896		2,001
Bargain purchase gain			-		-		-		-
BOLI Income			108		87		101		96
Other non-interest income			426		489		571		580
	Total noninterest income		2,177		2,399		2,982		3,268
NONINTEREST EXPENSE
Salaries and employee benefits			4,000		3,868		3,317		3,697
Occupancy & equipment expense			877		690		841		869
Advertising expense			119		113		118		119
Professional expenses			214		358		184		283
Data processing expense			321		446		262		244
Other operating expenses			674		676		730		805
	Total noninterest expense		6,205		6,151		5,452		6,017
Income before taxes			2,233		2,753		3,986		3,188
Provision for income taxes			560		733		992		789
NET INCOME		$	1,673	$	2,020	$	2,994	$	2,399
	Shares Outstanding End of Quarter		5,325,035		5,325,035		5,313,424		5,308,066
	Average shares outstanding*		5,317,065		5,317,065		5,312,025		5,309,403
	Earnings per share	$	0.31	$	0.38	$	0.56	$	0.45
	*Adjusted for stock dividend 11/10/22

	(Dollars in 000's)	3/31/2023			12/31/2022			9/30/2022			3/31/2022
Financial Highlights
	Total loans	$	488,324		$	475,652		$	448,619		$	453,845
	Total deposits	$	673,678		$	692,795		$	738,581		$	798,085
	Total assets	$	811,103		$	803,294		$	843,517		$	910,149
	Net income	$	1,673		$	2,020		$	2,994		$	2,399
	Steelhead Finance contribution, pre-tax	$	481		$	454		$	820		$	1,109
	Mortgage contribution, pre-tax	$	(259	)	$	(111	)	$	(17	)	$	48
Performance Ratios
	Return on average assets		0.83	%		0.98	%		1.38	%		1.10	%
	Return on average equity		9.48	%		12.34	%		17.41	%		12.33	%
	Net interest margin		3.49	%		3.74	%		3.40	%		3.17	%
	Yield on loans		5.36	%		5.34	%		5.15	%		4.84	%
	Cost of deposits		0.44	%		0.16	%		0.13	%		0.08	%
	Efficiency ratio		73.04	%		66.09	%		56.84	%		63.53	%
	Full-time equivalent employees		146			146			143			149
Capital
	Leverage ratio		10.98	%		10.92	%		10.10	%		8.76	%
	Bank Leverage Ratio		12.60	%		12.55	%		12.84	%		11.25	%
	Book value per share	$	13.81		$	12.85		$	12.24		$	13.43
	Tangible book value per share	$	13.10		$	12.13		$	11.52		$	12.70
Asset Quality
	Allowance for loan losses (ALLL)	$	5,508		$	5,190		$	5,782		$	4,646
	Nonperforming loans (NPLs)	$	1,280		$	2,653		$	1,684		$	959
	Nonperforming assets (NPAs)	$	1,566		$	2,939		$	1,970		$	1,245
	Classified assets(2)	$	6,984		$	5,132		$	1,843		$	1,874
	ALLL as a percentage of net loans		1.13	%		1.09	%		1.29	%		1.02	%
	ALLL as a percentage of NPLs		430	%		196	%		343	%		484	%
	Net charge offs (recoveries) to average loans		0.00	%		0.03	%		0.02	%		0.00	%
	Net NPLs as a percentage of total loans		0.27	%		0.56	%		0.38	%		0.21	%
	Nonperforming assets as a percentage of total assets		0.19	%		0.37	%		0.23	%		0.14	%
	Classified Asset Ratio(3)		8.83	%		6.97	%		2.64	%		2.47	%
	Past due as a percentage of total loans		0.26	%		0.56	%		0.38	%		0.21	%
End of period balances
	Total securities and short term deposits	$	242,871		$	247,153		$	302,303		$	362,905
	Total loans, net of allowance	$	482,816		$	470,462		$	443,777		$	449,199
	Total earning assets	$	731,195		$	722,805		$	750,922		$	816,750
	Intangible Assets	$	3,790		$	3,802		$	3,815		$	3,841
	Total assets	$	811,103		$	803,294		$	843,517		$	910,149
	Total noninterest bearing deposits	$	299,535		$	322,809		$	343,708		$	355,358
	Total deposits	$	673,678		$	692,795		$	738,581		$	798,085
Average balances
	Total securities and short term deposits	$	245,101		$	280,254		$	324,448		$	328,747
	Total loans, net of allowance	$	473,919		$	452,921		$	445,852		$	450,861
	Total earning assets	$	719,020		$	733,175		$	770,301		$	779,609
	Total assets	$	803,116		$	828,608		$	866,319		$	870,794
	Total noninterest bearing deposits	$	318,548		$	338,418		$	344,623		$	353,917
	Total deposits	$	685,318		$	722,840		$	756,539		$	771,160
(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.

Division Financial Information
		Three Months Ended March 31, 2023
	(Dollars in 000's)	Bank		Steelhead			Mortgage			Holding Co.			Consolidated
Net interest income (expense)		$	6,606	$	(171	)	$	7		$	(124	)	$	6,318
Provision for credit losses		$	15	$	(12	)	$	54		$	-		$	57
Noninterest income		$	651	$	1,466		$	60		$	-		$	2,177
Noninterest expense		$	4,955	$	885		$	335		$	30		$	6,205
Income (loss) before income taxes			2,287		422			(322	)		(154	)		2,233
Income tax expense (benefit)			574		108			(82	)		(40	)		560
Net income (loss)			1,713		314			(240	)		(114	)		1,673

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230419006017/en/

Ken Trautman, CEO

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

Source: PBCO Financial Corporation

FAQ

What were the Q1 2023 earnings for PBCO Financial Corporation?

PBCO Financial Corporation reported Q1 2023 net income of $1.7 million, or $0.31 per diluted share.

How much did PBCO Financial Corporation's deposits change in Q1 2023?

Deposits decreased by $19.1 million in Q1 2023, a 2.8% decline from the previous quarter.

What is the Tier 1 Capital Ratio for PBCO Financial Corporation as of Q1 2023?

The Tier 1 Capital Ratio for PBCO Financial Corporation is 10.98% as of March 31, 2023.

What loan growth did PBCO Financial Corporation achieve in Q1 2023?

PBCO Financial Corporation achieved a loan growth of $13 million, representing a 2.7% increase from Q4 2022.

What impact did Q1 2023 have on PBCO Financial Corporation's non-performing assets?

Non-performing assets improved to 0.26% of total loans in Q1 2023.