PBCO Financial Corporation Reports Q2 2022 Earnings

Rhea-AI Summary

PBCO Financial Corporation (OTC PINK: PBCO) announced its 2nd quarter 2022 results, reporting net income of $2.4 million, or $0.48 per diluted share, down from $3.0 million in the same quarter of 2021. Steelhead gross factoring revenue grew 25% to $2.0 million, while core earnings increased 25.9%. Deposits decreased by $47.3 million from the previous quarter but showed an annual growth of 5.3%. The Tier 1 Capital Ratio improved to 12.71%. However, unrealized losses on investments reached $19.3 million, impacting book value.

Positive

• Net income of $2.4 million for Q2 2022.
• Steelhead gross factoring revenue increased by 25% from Q2 2021.
• Core earnings up 25.9% compared to Q2 2021.
• Tier 1 Capital Ratio improved to 12.71%, up from 11.25%.

Negative

• Net income decreased from $3.0 million in Q2 2021.
• Deposits dropped $47.3 million, a 5.9% decrease from Q1 2022.
• Unrealized losses on investments totaled $19.3 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 2^nd 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 2^nd 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 2^nd quarter. Excluding PPP income for the 2^nd 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 2^nd 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 2^nd quarter of 2022, compared to 1^st 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 2^nd quarter. This competition has eased with the rising rate environment but impacted 2^nd quarter loan growth overall,” added Beattie. The last four remaining PPP loans were forgiven during 2^nd 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 2^nd 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 2^nd 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 2^nd quarter of 2021, due to an increase in interest rates and a softening housing market.

Non-interest expense totaled $6.1 million in the 2^nd 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 2^nd 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 2^nd 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, 2^nd 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.

                            

View source version on businesswire.com: https://www.businesswire.com/news/home/20220720006048/en/

Ken Trautman, CEO

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

Source: PBCO Financial Corporation

FAQ

What were PBCO's earnings results for Q2 2022?

PBCO reported net income of $2.4 million, or $0.48 per diluted share, for Q2 2022.

How did Steelhead revenue perform in Q2 2022?

Steelhead gross factoring revenue increased by 25% to $2.0 million compared to Q2 2021.

What is the status of PBCO's deposits in Q2 2022?

Deposits decreased by $47.3 million, representing a 5.9% decline from the end of Q1 2022.

What is PBCO's Tier 1 Capital Ratio as of June 30, 2022?

The Tier 1 Capital Ratio for PBCO was 12.71%, up from 11.25% as of March 31, 2022.

Did PBCO experience any unrealized losses in Q2 2022?

Yes, PBCO reported unrealized losses on its investment portfolio of $19.3 million.