PBCO Financial Corporation Reports Q3 2022 Earnings

Rhea-AI Summary

PBCO Financial Corporation (PBCO) reported a net income of $3.0 million, or $0.59 per diluted share for Q3 2022, compared to $2.7 million in Q3 2021. Core earnings rose by 73.9% year-over-year, excluding PPP fee income. Steelhead gross factoring revenue increased 6.2% to $1.9 million. Investment securities saw a significant gain of 20.9%, reaching $42.6 million. However, deposits declined by 1.6%, totaling a decrease of $12.2 million due to customers seeking higher yields.

Positive

• Net income increased to $3.0 million, up from $2.7 million QoQ.
• Core earnings up 73.9% from the same quarter last year.
• Steelhead gross factoring revenue increased 6.2% YoY.

Negative

• Deposits decreased by $12.2 million or 1.6% from the prior quarter.
• Earnings per share (EPS) over the last 12 months fell to $2.14 from $2.28.

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 3^rd quarter 2022.

Highlights

• Third quarter net income of $3.0 million, or $0.59 per diluted share
• Steelhead gross factoring revenue of $1.9 million, a 6.2% increase from Q3 2021
• Core earnings (excluding PPP fee income) up 73.9% from Q3 2021
• Investment securities increased $42.6 million, or 20.9%, over Q3 2021

The Company reported quarterly net income of $3.0 million, or $0.59 per diluted share, for the 3^rd quarter of 2022 compared to net income of $2.7 million, or $0.53 per diluted share, in the same quarter of 2021. Earnings per share for the trailing 12 months were $2.14 per share, down from $2.28 per share for the prior twelve-month period.

Deposits decreased $12.2 million, a 1.6% decline from the prior quarter ending June 30, 2022. Over the last 12 months, deposits contracted by $12.1 million, also a decline of 1.6%. “During 3^rd quarter, the Bank experienced a decrease in deposits as customers sought alternative investments at higher yields on their non-operating cash balances,” commented Joan Reukauf, Chief Operating Officer. “The Bank is in a position where it does not have to aggressively compete for high-cost deposits and some deposit runoff was expected. Although deposits declined during the quarter and year to date, the Bank continues to have excess liquidity available to fund loans and add to the investment portfolio,” added Reukauf.

“Portfolio loans were flat during the 3^rd quarter of 2022, compared to 2^nd quarter of 2022,” commented Julia Beattie, President. Excluding PPP loans in the portfolio as of 9/30/21, portfolio loans were up $11.4 million from the same quarter, prior year, a 2.6% increase. “Loans have been relatively flat during the year as the Bank made a conscious decision this year not to compete for loans based on historically low rates until the markets stabilize, instead focusing on high quality loan growth,” added Beattie. “These kinds of economic cycles do not favor a high growth strategy - quality and safety tend to win out as consumers and businesses adjust to the new reality.” Future reports will exclude commentary on the PPP program as it is no longer relevant to the financial statement discussion.

The investment portfolio increased $42.6 million or 20.9% from the 3^rd quarter of 2021. During the most recent quarter, investments increased $1.7 million from June 30, 2022, or 0.7%, and the average life of the portfolio decreased from 5.0 to 4.6 years. With the steep rise in market rates during 2022, the Bank has limited investment purchases to short-term maturities of less than 2 years. As of September 30, 2022, the gross unrealized loss on the investment portfolio grew to $32.4 million or 11.6% of book value. Securities income was $979 thousand during the quarter, or a yield of 1.5%, versus $903 thousand or a yield of 1.4% for the 2^nd quarter of 2022.

Classified assets were up modestly from the prior quarter as total loans past due or on non-accrual increased slightly, as a percentage of total loans, from the prior quarter to 0.38% versus 0.22% as of Q2 2022. During the 3rd 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 September 30, 2022, the ALLL was 1.08% of portfolio loans and the unallocated reserve stood at $790 thousand or 16.3% of the ALLL.

Third quarter 2022 non-interest income totaled $3.0 million, an increase of $245 thousand from the 3^rd quarter of 2021. During Q3 2022, Steelhead Finance factoring revenue increased $111 thousand, a 6.2% increase over the same quarter of 2021. Conversely, mortgage income decreased $333 thousand, or 54.1%, from the 3^rd quarter of 2021, a trend that began with the rising interest rates in Q1 2022. “Today’s mortgage rates, although up significantly from a year ago, are still reasonable when compared to long-term averages,” commented Echo Hutto, SVP and Manager of the Mortgage Division for People’s Bank. “As home purchasers, home sellers and real estate professionals become more comfortable with the new rate cycle, home prices should reflect borrower’s ability to pay and activity should pick up,” added Hutto.

Non-interest expense totaled $5.5 million in the 3^rd quarter, down $332 thousand from the same period in 2021. Notably, advertising expenses were the largest driver for the decrease, down $278 thousand in the 3^rd quarter of 2022 versus the same period in 2021 when the Bank expensed $250 thousand in donations toward housing relief support for survivors of the 2020 Alameda Fire. Also notable was the decrease in personnel expense of $597 from the prior quarter of 2022. The Bank did not accrue for a quarterly bonus during 3rd quarter as loans and deposits have not tracked with goals established for 2022, the result of the Bank adjusting its strategy to deal with higher interest rates. Salaries and commissions were down $70 thousand and $64 thousand during 3^rd quarter, respectively, due to several vacant positions and the slowdown in mortgage production noted above.

As of September 30, 2022, the Tier 1 Capital Ratio for PBCO Financial Corporation was 10.1% with total shareholder equity of $65.0 million. During the quarter, the Company was able to augment capital through earnings while assets also decreased with the decrease in deposits. The Bank’s Tier 1 Capital Ratio was 12.8% at quarter-end, up from 12.7% as of June 30, 2022. The Company also had unrealized losses on its investment portfolio, net of taxes, of $23.6 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. “Although the unrealized loss in the investment portfolio increased from the prior quarter with the increase in market rates during the same period, the Bank continues to maintain strong liquidity and access to multiple alternative sources of liquidity. The Bank has a very strong capital position that continues to be well above the threshold to be considered well-capitalized,” commented Lindsey Trautman, Chief Financial Officer.

“While the Company’s total assets shrank from the prior quarter, the Company continued to provide solid core earnings, which has allowed the Company to maintain a strong position given the current economic uncertainty,” commented Julia 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)		9/30/2022				6/30/2022				3/31/2022				9/30/2021
BALANCE SHEET
ASSETS
Cash and due from banks		$	14,888			$	14,800			$	13,019			$	4,561
Federal funds sold			-				-				-				-
Interest bearing deposits			55,770				69,980				113,055				100,429
Investment securities			246,533				244,842				249,850				203,913
Loans held for sale			894				1,333				1,549				2,802
Loans held for investment, net of unearned income			447,725				447,823				452,296				459,883
Total Loans, net of deferred fees and costs			448,619				449,156				453,845				462,685
Allowance for loan losses			(4,842	)			(4,767	)			(4,646	)			(4,302	)
Premises and equipment, net			27,286				27,657				27,979				27,567
Bank owned life insurance			14,090				13,956				13,861				13,689
Other Assets			41,173				42,081				43,186				37,070
Total assets		$	843,517			$	857,705			$	910,149			$	845,612
LIABILITIES
Deposits
Demand - non-interest bearing		$	343,708			$	333,985			$	355,358			$	358,013
Demand - interest bearing			111,184				101,743				98,064				100,341
Money market and savings			265,628				297,504				320,677				266,004
Time deposits of less than $250,000			13,878				15,429				21,027				22,670
Time deposits of more than $250,000			4,183				2,080				2,959				3,645
Total deposits		$	738,581			$	750,741			$	798,085			$	750,673
Borrowed funds			31,604				31,690				31,788				7,529
Other liabilities			8,320				8,886				8,997				9,887
Total liabilities		$	778,505			$	791,317			$	838,870			$	768,089
STOCKHOLDERS' EQUITY
Common stock		$	61,357			$	61,340			$	61,340			$	60,879
Retained earnings			27,303				24,309				21,864				16,489
Accumulated other comprehensive income,
net of tax			(23,648	)			(19,261	)			(11,925	)			155
Total stockholders' equity		$	65,012			$	66,388			$	71,279			$	77,523
Total liabilities & stockholders' equity		$	843,517			$	857,705			$	910,149			$	845,612

Consolidated Statements of Income
(Dollars in 000's)		3rd Quarter 2022				2nd Quarter 2022				1st Quarter 2022				3rd Quarter 2021
INCOME STATEMENT
INTEREST INCOME
Loans		$	5,744			$	5,552			$	5,515			$	6,632
Investments			979				903				864				544
Federal funds sold and due from banks			406				135				52				58
Total interest income			7,129				6,590				6,431				7,234
INTEREST EXPENSE
Deposits			244				146				162				218
Borrowed funds			276				273				66				15
Total interest expense			520				419				228				233
NET INTEREST INCOME			6,609				6,171				6,203				7,001
Provision for loan losses			153				113				266				347
Net interest income after provision for
loan losses			6,456				6,058				5,937				6,654
NONINTEREST INCOME
Service charges			132				120				115				106
Mortgage lending income			282				505				476				615
Steelhead finance income			1,896				1,984				2,001				1,785
Bargain purchase gain			-				-				-				(316	)
BOLI Income			101				95				96				73
Other non-interest income			571				540				580				474
Total noninterest income			2,982				3,244				3,268				2,737
NONINTEREST EXPENSE
Salaries and employee benefits			3,317				3,914				3,697				3,354
Occupancy & equipment expense			841				898				869				893
Advertising expense			118				113				119				396
Professional expenses			184				192				283				254
Data processing expense			262				292				244				324
Other operating expenses			730				650				805				563
Total noninterest expense			5,452				6,059				6,017				5,784
Income before taxes			3,986				3,243				3,188				3,608
Provision for income taxes			992				799				789				958
NET INCOME		$	2,994			$	2,444			$	2,399			$	2,650
Shares Outstanding End of Quarter			5,060,404				5,055,301				5,055,301				5,042,704
Average shares outstanding*			5,059,071				5,055,301				5,056,574				5,042,704
Earnings per share		$	0.59			$	0.48			$	0.47			$	0.53
*Adjusted for stock dividend 9/22/21

*Does not reflect the 5% stock dividend announced in September with a record date of October 10, 2022, to be paid on or about November 10, 2022.

**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 3rd 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.

(Dollars in 000's)		9/30/2022				6/30/2022				3/31/2022				9/30/2021
Financial Highlights
Total loans		$	448,619			$	449,156			$	453,845			$	462,685
Total deposits		$	738,581			$	750,741			$	798,085			$	750,673
Total assets		$	843,517			$	857,705			$	910,149			$	845,612
Net income		$	2,994			$	2,444			$	2,399			$	2,650
Steelhead Finance contribution, pre-tax		$	820			$	961			$	1,109			$	1,089
Mortgage contribution, pre-tax		$	(17	)		$	107			$	48			$	212
Performance Ratios
Return on average assets			1.38	%			1.11	%			1.10	%			1.27	%
Return on average equity			17.41	%			14.23	%			12.33	%			13.79	%
Net interest margin			3.40	%			3.14	%			3.17	%			3.70	%
Yield on loans			5.15	%			4.98	%			4.84	%			5.53	%
Cost of deposits			0.13	%			0.08	%			0.08	%			0.12	%
Efficiency ratio			56.84	%			64.35	%			63.53	%			59.39	%
Full-time equivalent employees			143				148				149				140
Capital
Leverage ratio			10.10	%			9.58	%			8.76	%			8.73	%
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		$	12.85			$	13.13			$	14.10			$	15.37
Tangible book value per share		$	12.09			$	12.38			$	13.34			$	14.61
Asset Quality
Allowance for loan losses (ALLL)		$	4,842			$	4,767			$	5,782			$	4,302
Nonperforming loans (NPLs)		$	1,684			$	1,001			$	959			$	665
Nonperforming assets (NPAs)		$	1,970			$	1,287			$	1,245			$	1,443
Classified assets(2)		$	1,843			$	1,851			$	1,874			$	3,275
ALLL as a percentage of net loans			1.08	%			1.06	%			1.27	%			0.93	%
ALLL as a percentage of NPLs			288	%			476	%			603	%			647	%
Net charge offs (recoveries) to average loans			0.02	%			0.00	%			0.00	%			0.03	%
Net NPLs as a percentage of total loans			0.38	%			0.23	%			0.21	%			0.15	%
Nonperforming assets as a percentage of total assets			0.23	%			0.15	%			0.14	%			0.17	%
Classified Asset Ratio(3)			2.64	%			2.60	%			2.47	%			4.00	%
Past due as a percentage of total loans			0.38	%			0.22	%			0.21	%			0.18	%
End of period balances
Total securities and short term deposits		$	302,303			$	314,822			$	362,905			$	304,342
Total loans, net of allowance		$	443,777			$	444,389			$	449,199			$	458,383
Total earning assets		$	750,922			$	763,978			$	816,750			$	767,027
Intangible Assets		$	3,815			$	3,828			$	3,841			$	3,872
Total assets		$	843,517			$	857,705			$	910,149			$	845,612
Total noninterest bearing deposits		$	343,708			$	333,985			$	355,358			$	358,013
Total deposits		$	738,581			$	750,741			$	798,085			$	750,673
Average balances
Total securities and short term deposits		$	324,448			$	336,810			$	328,747			$	278,310
Total loans, net of allowance		$	445,852			$	445,529			$	450,861			$	465,410
Total earning assets		$	770,301			$	782,340			$	779,609			$	743,719
Total assets		$	866,319			$	880,100			$	870,794			$	834,485
Total noninterest bearing deposits		$	344,623			$	342,067			$	353,917			$	336,375
Total deposits		$	756,539			$	770,019			$	771,160			$	739,372

(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/20221021005485/en/

Ken Trautman, CEO

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

Source: PBCO Financial Corporation

FAQ

What were PBCO's earnings for Q3 2022?

PBCO reported a net income of $3.0 million, or $0.59 per diluted share.

How did PBCO's revenue change in Q3 2022?

Steelhead gross factoring revenue increased by 6.2% to $1.9 million.

What was the decline in deposits for PBCO in Q3 2022?

Deposits declined by $12.2 million, or 1.6%, compared to the previous quarter.

What was the core earnings growth for PBCO in Q3 2022?

Core earnings, excluding PPP fee income, rose by 73.9% compared to Q3 2021.

How did PBCO's EPS change in the trailing 12 months?

Earnings per share for the trailing 12 months fell from $2.28 to $2.14.