People’s Bank Reports Second Quarter Earnings

Rhea-AI Summary

People's Bank of Commerce (OTC PINK: PBCO) reported a strong financial performance for Q2 2021, achieving a net income of $2,953,000 or $0.61 per diluted share, a 56.4% increase year-over-year. Year-to-date net income rose to $5,846,000, marking a 57.3% increase. The bank's non-PPP loan growth was $10.6 million, with a tax-equivalent net interest margin of 3.68%. The acquisition of Willamette Community Bank significantly contributed to earnings, while the Steelhead Finance division saw a 96.4% increase in factoring revenue.

Positive

• Net income increased 56.4% year-over-year to $2,953,000.
• Year-to-date net income rose 57.3% to $5,846,000.
• Earnings per share (EPS) for the trailing 12 months reached $2.37, up 82.5% from 2020.
• Non-PPP loan growth of $10.6 million, representing a 10.4% growth rate.
• Steelhead factoring revenue increased by 96.4% compared to Q2 2020.

Negative

• Deposits declined by $6.4 million, or 3.5%, during the quarter.
• Reduced deposit rates resulted in additional attrition of approximately $14 million.
• Mortgage income decreased by $263,000, or 27.4%, from Q2 2020.

People’s Bank of Commerce (OTC PINK: PBCO) announced today its financial results for the second quarter of 2021.

Highlights

• Second quarter net income of $2,953,000, or $0.61 per diluted share
• Year-to-date net income of $5,846,000 or $1.33 per diluted share
• LTM EPS increased 82.5% from 2^nd quarter 2020
• Quarterly non-PPP loan growth of $10.6 million, an annualized growth rate of 10.4%
• Second Quarter tax equivalent net interest margin of 3.68%, excluding factoring revenue
• Steelhead factoring revenue increased 96.4% over Q2 2020

People’s Bank reported quarterly net income of $2,953,000, or $0.61 per diluted share, for the 2nd quarter of 2021 compared to net income of $1,385,000, or $0.39 per diluted share, in the same quarter of 2020, a 56.4% increase. The bank recognized year-to-date net income of $5,846,000 versus $2,496,000 for the first half of 2020, a 57.3% increase from the prior year. Earnings per share for the trailing 12 months were $2.37 per share, up from $1.31 per share for the same period of 2020, an 82.5% increase. Second quarter income continued to be positively impacted by PPP fee income due to pro-ration of the remaining unamortized origination processing fees at payoff. During the quarter, the bank had a credit to the provision for loan losses, in spite of achieved portfolio loan growth, as economic indicators utilized in the ALLL methodology continued to improve. Coupled with the bank’s recent acquisition of Willamette Community Bank (WMCB) in 1^st quarter, the bank was able to achieve higher earnings per share than in previous periods.

During the quarter, deposits declined $6.4 million, or an annualized 3.5%, as the bank utilized CDAR’s to assist with managing balance sheet growth, resulting in approximately $21.6 million that was taken off balance sheet. In addition, the bank evaluated and reduced deposit rates in the recently acquired WMCB division, as a means to assist with managing the bank’s overall net interest margin. This resulted in additional deposit attrition of approximately $14.0 million during the quarter. On an annual basis, deposits grew by $318.5 million, an 80.8% increase from June 30, 2020, due in large part to the bank’s acquisition of WMCB in first quarter, but also partly due to the bank’s participation in the PPP loan program, which has created significant liquidity in the banking system overall. We anticipate that some of the deposit growth from PPP will be temporary as bank clients look to make capital improvements and diversify investments as risk from the Pandemic eases over time.

Beginning in 2^nd quarter, the bank began to deploy some of its excess liquidity to the investment portfolio as an alternative to deposits at the Federal Reserve Bank. Through the end of the quarter, the bank increased its investment portfolio by $52.5 million, a 101.7% increase from the prior quarter. This shift from overnight investments to a balanced investment time horizon will assist with managing the yield on earnings assets in the low-rate environment we are experiencing today without reducing liquidity.

As of June 30^th, core portfolio loan growth, excluding PPP, totaled $10.6 million during 2^nd quarter, representing an annualized growth rate of 10.4%. The bank’s pipeline of approved credits remains strong, although some delays in funding have occurred due to increased time for completion of appraisals. In addition, increasing construction costs due to supply shortages have impacted construction costs in our markets.

Over the past year, the bank took an active role in originating loans through the Small Business Administration’s Paycheck Protection Program (PPP) beginning in April 2020 with Round I and again during first quarter 2021 with the approval of Round II. These loans were used to support payroll and other eligible expenses during the COVID-19 pandemic. During the initial round of PPP, the bank funded 1,056 PPP loans totaling $95.4 million (WMCB originated 148 PPP loans for $25.8 million reflected in the bank’s Q1 and Q2 PPP loan activity). Through the end of 2^nd quarter, the bank received Round I forgiveness totaling $112.1 million, representing more than 95% of the loans funded through Round I.

The second round of PPP was opened at the beginning of Q1 2021. The second phase was opened to allow new borrowers to participate as well as allow certain eligible borrowers to take a second draw PPP loan. Through the sunset of Round II, the bank funded an additional $48.6 million representing 629 PPP loans and $2.8 million in PPP processing fees. Of the loans funded in Round II, 73 loans representing $3.2 million had been forgiven through by the end of 2^nd quarter 2021. “With funding for Round 2 PPP discontinued in May, the bank now is focused on assisting clients with obtaining forgiveness,” commented Julia Beattie, President and Chief Credit Officer.

PPP Loan Activity To Date
			As of		As of		As of		As of
	(dollars in thousands)		6/30/2021*		3/31/2021*		12/31/2020		9/30/2020
			#	$$$	#	$$$	#	$$$	#	$$$
PPP Loans Funded
	Round One (2020 - Phase I & II)		1,204	$121,199	1,204	$121,199	1,056	$95,387	1,056	$95,387
	Round Two (2021)		629	$48,588	534	$45,993	-	$0	-	$0
PPP Loans Forgiven
	Round One (2020 - Phase I & II)		1139	$112,136	437	$65,540	34	$14,428	-	$0
	Round Two (2021)		73	$3,190	-	$0	-	$0	-	$0
Net PPP Loans Outstanding
	Round One (2020 - Phase I & II)		65	$9,063	767	$55,659	1,022	$80,959	1,056	$95,387
	Round Two (2021)		557	$45,398	534	$45,993	-	$0	-	$0
	Total Actual Balances outstanding		622	$54,461	1,301	$101,652	1,022	$80,959	1,056	$95,387
*	Includes PPP activity of Willamette Community Bank

During the quarter, the bank experienced a decrease in classified assets, primarily attributed to principal payments on non-accrual loans and a reduction in ORE. The ALLL for WMCB was eliminated at the completion of the merger and a fair value adjustment was applied to the outstanding portfolio. During 2^nd quarter, the ALLL was updated based on new loan growth achieved during the quarter and updated economic expectations which were factored into the bank’s analysis. As of June 30, 2021, the ALLL was 0.92% of portfolio loans excluding PPP and the unallocated reserve stood at $1.02 million or 25.2% of the ALLL.

Second quarter 2021 non-interest income totaled $2.9 million, which represents an increase of $825 thousand over the 2^nd quarter of 2020. During Q1 2021, the bank recognized a bargain gain of $2.3 million from its acquisition of WMCB, which was a one-time, non-recurring component of non-interest income. During the quarter, Steelhead Finance factoring revenue increased $779 thousand, a 96.4% increase over the same quarter in 2020. Conversely, mortgage income decreased $263 thousand, or a 27.4% decrease from 2^nd quarter 2020. “Over the past year, People’s Bank has performed extremely well during the pandemic, due in large part to the bank’s Steelhead Finance factoring and mortgage divisions, which have positively impacted the bank’s income during the low-rate environment,” commented Ken Trautman, CEO. “Mortgage slowed during the first quarter due to slightly higher interest rates and a lack of inventory in our markets coupled with staff turnover experienced during the quarter. Both the Steelhead and mortgage divisions are unique in that expenses can be scaled with changes in volume,” added Trautman.

Non-interest expense totaled $5,948,000 in 2^nd quarter, down $1,737,000 from the first quarter. This was primarily the result of one-time merger related expenses of $2.87 million recognized when the merger with WMCB was completed in March 2021.

For the twelve months ending June 30, 2021, excluding one-time merger adjustments, earnings per share would have been $2.47, versus $1.21 for the same period ended June 30, 2020.

About People’s Bank of Commerce

People’s Bank of Commerce’s stock trades on the over-the-counter market under the symbol PBCO. Additional information about the Bank is available in the investor section of the bank’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, 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.

(Dollars in 000's)		June 30, 2021				March 31, 2021				December 31, 2020				September 30, 2020				June 30, 2020
BALANCE SHEET
ASSETS
Cash and due from banks		$	4,752			$	4,730			$	2,819			$	3,659			$	3,398
Federal funds sold			-				-				-				-				-
Interest bearing deposits			148,554				163,537				91,103				49,336				57,717
Investment securities			104,155				51,631				25,894				22,910				23,597
Loans held for sale			901				4,375				3,407				17,386				8,106
Loans held for investment, net of unearned income			474,909				512,493				346,198				355,855				354,170
Total Loans, net of deferred fees and costs			475,810				516,868				349,605				373,241				362,276
Allowance for loan losses			(4,076	)			(4,325	)			(4,453	)			(4,271	)			(4,024	)
Premises and equipment, net			26,878				26,763				21,624				20,664				20,469
Bank owned life insurance			13,585				13,512				7,476				7,429				6,659
Other Assets			36,316				35,349				29,263				26,995				23,650
Total assets		$	805,973			$	808,065			$	523,331			$	499,963			$	493,742
LIABILITIES
Deposits
Demand - non-interest bearing		$	317,837			$	319,292			$	231,095			$	219,836			$	199,808
Demand - interest bearing			112,945				110,350				54,806				54,711				46,396
Money market and savings			250,326				256,462				147,481				134,053				125,023
Time deposits of less than $250,000			20,613				21,022				19,149				20,012				20,897
Time deposits of more than $250,000			11,259				12,208				3,216				3,282				2,318
Total deposits		$	712,979			$	719,334			$	455,747			$	431,894			$	394,442
Borrowed funds			6,817				6,871				6,924				10,102				44,892
Other liabilities			11,107				9,738				7,824				7,115				5,466
Total liabilities		$	730,904			$	735,943			$	470,495			$	449,111			$	444,800
STOCKHOLDERS' EQUITY
Common stock		$	57,104			$	57,104			$	40,379			$	40,085			$	40,082
Retained earnings			17,620				14,667				11,775				10,077				8,140
Accumulated other comprehensive income,
net of tax			345				351				682				690				720
Total stockholders' equity		$	75,069			$	72,122			$	52,836			$	50,852			$	48,942
Total liabilities & stockholders' equity		$	805,973			$	808,065			$	523,331			$	499,963			$	493,742

(Dollars in 000's)		2nd Quarter 2021				1st Quarter 2021				4th Quarter 2020				3rd Quarter 2020				2nd Quarter 2020
INCOME STATEMENT
INTEREST INCOME
Loans		$	6,673			$	5,195			$	4,308			$	4,065			$	3,874
Investments			218				141				155				133				157
Federal funds sold and due from banks			50				53				30				28				26
Total interest income			6,941				5,389				4,493				4,226				4,057
INTEREST EXPENSE
Deposits			264				200				176				177				181
Borrowed funds			15				14				26				41				67
Total interest expense			279				214				202				218				248
NET INTEREST INCOME			6,662				5,175				4,291				4,008				3,809
Provision for loan losses			(249	)			(125	)			182				247				644
Net interest income after provision for
loan losses			6,911				5,300				4,109				3,761				3,165
NONINTEREST INCOME
Service charges			108				78				57				55				54
Mortgage lending income			697				1,341				1,634				1,604				960
Steelhead finance income			1,587				1,308				1,239				1,074				808
Bargain purchase gain			-				2,343				-				-				-
BOLI Income			66				60				37				32				42
Other non-interest income			480				347				298				300				249
Total noninterest income			2,938				5,477				3,265				3,065				2,113
NONINTEREST EXPENSE
Salaries and employee benefits			3,389				3,407				3,186				2,779				2,116
Occupancy & equipment expense			800				925				590				556				543
Advertising expense			392				388				277				182				71
Professional expenses			353				547				406				127				127
Data processing expense			333				2,067				242				222				210
Other operating expenses			682				351				356				481				430
Total noninterest expense			5,948				7,685				5,057				4,347				3,497
Income before taxes			3,901				3,092				2,317				2,479				1,781
Provision for income taxes			948				200				619				542				396
NET INCOME		$	2,953			$	2,892			$	1,698			$	1,937			$	1,385
Average shares outstanding			4,802,978				3,977,422				3,560,096				3,523,004				3,522,783
Earnings per share		$	0.61			$	0.73			$	0.48			$	0.55			$	0.39

(Dollars in 000's)		June 30, 2021				March 31, 2021				December 31, 2020				September 30, 2020				June 30, 2020
Financial Highlights
Total loans		$	475,810			$	516,868			$	349,605			$	373,241			$	362,276
Total deposits		$	712,979			$	719,334			$	455,747			$	431,894			$	394,442
Total assets		$	805,973			$	808,065			$	523,331			$	499,963			$	493,742
Net income		$	2,953			$	2,892			$	1,698			$	1,937			$	1,385
Steelhead Finance contribution, pre-tax		$	970			$	679			$	531			$	399			$	200
Mortgage contribution, pre-tax		$	308			$	610			$	751			$	720			$	506
Performance Ratios
Return on average assets			1.46	%			1.82	%			1.31	%			1.58	%			1.16	%
Return on average equity			16.05	%			19.11	%			13.10	%			15.55	%			11.53	%
Net interest margin			3.68	%			3.64	%			3.75	%			3.68	%			3.61	%
Yield on loans			5.39	%			5.11	%			4.66	%			4.36	%			4.61	%
Cost of deposits			0.15	%			0.14	%			0.16	%			0.17	%			0.19	%
Efficiency ratio			61.96	%			72.15	%			66.93	%			61.46	%			59.05	%
Full-time equivalent employees			138				143				106				103				102
Capital
Leverage ratio			8.83	%			8.44	%			9.36	%			9.40	%			9.13	%
Common equity tier 1 ratio		N/A(1)				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)				N/A(1)
Total risk based ratio		N/A(1)				N/A(1)				N/A(1)				N/A(1)				N/A(1)
Book value per share		$	15.63			$	15.02			$	14.85			$	14.43			$	13.89
Asset Quality
Allowance for loan losses (ALLL)		$	4,076			$	4,325			$	5,782			$	4,873			$	4,024
Nonperforming loans (NPLs)		$	876			$	1,134			$	191			$	129			$	23
Nonperforming assets (NPAs)		$	1,845			$	2,162			$	1,220			$	1,157			$	3,530
Classified assets(2)		$	3,138			$	3,345			$	2,550			$	2,764			$	5,268
ALLL as a percentage of net loans			0.86	%			0.84	%			1.68	%			1.32	%			1.12	%
ALLL as a percentage of NPLs			465.33	%			381.44	%			3021.14	%			3771.15	%			17843.21	%
Net charge offs (recoveries) to average loans			0.00	%			0.00	%			0.00	%			0.00	%			0.00	%
Net NPLs as a percentage of total loans			0.19	%			0.22	%			0.06	%			0.04	%			0.01	%
Nonperforming assets as a percentage of total assets			0.23	%			0.27	%			0.23	%			0.23	%			0.71	%
Classified Asset Ratio(3)			3.96	%			4.38	%			4.45	%			5.01	%			9.95	%
Past due as a percentage of total loans			0.18	%			0.22	%			0.05	%			0.03	%			0.01	%
End of period balances
Total securities and short term deposits		$	252,709			$	215,168			$	116,997			$	72,246			$	81,314
Total loans, net of allowance		$	471,734			$	512,543			$	345,152			$	368,970			$	358,252
Total earning assets		$	728,520			$	732,036			$	466,602			$	445,487			$	443,590
Total assets		$	805,973			$	808,065			$	523,331			$	499,963			$	493,742
Total noninterest bearing deposits		$	317,837			$	319,292			$	231,095			$	219,836			$	199,808
Total deposits		$	712,979			$	719,334			$	455,747			$	431,894			$	394,442
Average balances
Total securities and short term deposits		$	228,874			$	150,214			$	98,223			$	74,990			$	92,612
Total loans, net of allowance		$	489,813			$	397,195			$	361,982			$	364,508			$	336,629
Total earning assets		$	722,830			$	554,446			$	460,205			$	439,498			$	429,242
Total assets		$	809,623			$	635,535			$	517,187			$	491,041			$	479,510
Total noninterest bearing deposits		$	320,986			$	167,266			$	227,689			$	209,581			$	189,084
Total deposits		$	717,147			$	525,064			$	448,225			$	412,206			$	375,632

(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 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.

(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/20210721005898/en/

FAQ

What were the financial results for PBCO in Q2 2021?

PBCO reported a net income of $2,953,000 or $0.61 per diluted share in Q2 2021.

How much did People's Bank of Commerce earn year-to-date by June 30, 2021?

The bank's year-to-date net income by June 30, 2021, was $5,846,000.

What is PBCO's non-PPP loan growth in Q2 2021?

PBCO experienced non-PPP loan growth of $10.6 million, a 10.4% annualized growth rate.

What impact did the acquisition of Willamette Community Bank have on PBCO's earnings?

The acquisition significantly contributed to PBCO's higher earnings per share during the quarter.

How much did Steelhead factoring revenue increase in Q2 2021 for PBCO?

Steelhead factoring revenue increased by 96.4% over Q2 2020.