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PBCO Financial Corporation Reports Q2 2023 Earnings

PBCO Financial Corporation (OTC PINK: PBCO), the holding company (Company) of People’s Bank of Commerce (Bank), today reported earnings of $1.65 million and earnings per diluted share of $0.31 for the quarter ended June 30, 2023, similar to $1.67 million and $0.31 per diluted share for the quarter ended March 31, 2023.

Highlights

  • Portfolio loans increased 3.2% year to date as our Eugene operation gains traction
  • Credit quality continues to improve with non-performing assets totaling only 0.12% of total assets
  • Total non-interest expense declined slightly during the quarter from cost containment efforts
  • Mortgage lending income showing improvement, reflecting the 1st quarter strategic investment in mortgage lending personnel
  • Net interest margin declined to 3.22% during the quarter from 3.49% the prior quarter, reflecting the continued challenge of the rising rate environment
  • Julia Beattie appointed President and CEO after Ken Trautman’s retirement on June 30, 2023

“During 2nd quarter, the Bank continued to focus on quality loan growth supported by improved yields in the rising rate environment,” commented Julia Beattie, President and Chief Executive Officer. Loans increased $2.4 million in the quarter, or 0.50%, compared to the first quarter of 2023. “Although at a more moderate pace, the Bank’s loan portfolio continued to grow during the quarter, with demand for loans staying strong in spite of significantly higher borrowing costs than the same period last year,” commented Julia Beattie.

Non-performing assets improved in the second quarter to 0.12%, as a percentage of total assets, versus 0.19% in the first quarter 2023. “Although credit quality has been strong from a historical perspective, non-performing loans decreased from the prior quarter with the successful resolution of a non-accrual loan,” noted Bill Whalen, Chief Credit Officer. During the second quarter, the Allowance for Loan and Lease Losses (ALLL) decreased by $84 thousand utilizing the recently implemented Current Expected Credit Loss model that went into effect in January 2023.

Deposits decreased $23.0 million during the quarter, a 3.4% decline from the first quarter of 2023. “Contraction in deposits was due to continued rate competition, both from conventional banks as well as non-banking institutions, and the effects of quantitative tightening,” commented Beattie. “We continue to focus on retention and growth of strong core deposits driven by our philosophy of relationship banking,” continued Beattie. The Bank continued to experience increased funding costs as a result of rising deposit rate pressure and borrowing costs. Furthermore, the Bank strategically bolstered liquidity by participating in the Federal Reserve Bank Term Funding Program (BTFP).

The investment portfolio decreased 6.1% to $220.4 million in second quarter of 2023 from $234.6 million at the end of the first quarter 2023. This decrease is the result of maturing investments being reinvested in loan growth and liquidity. The average life of the portfolio was 4.5 years at the end of the second quarter. Securities income was $0.97 million during the quarter, a yield of 1.76%, versus $1.04 million, and the same yield of 1.76% for the first quarter of 2023. As of June 30, 2023, the net after tax unrealized loss on the investment portfolio was $21.3 million versus $18.9 million as of March 31, 2023, due to increased market rates. Highly rated government agency and government sponsored agency investments comprise 94.5% of the investment portfolio with the balance of approximately 4.5% held in municipal investments and 0.8% held in corporate sub-debt issued by community banks. As of second quarter 2023, liquid assets to total assets were 17.0%, including the market value of the investment portfolio less pledged investments.

Second quarter 2023 non-interest income totaled $2.4 million, an increase of $183 thousand from the first quarter of 2023. The improvement was driven in large part by mortgage lending income which increased $216 thousand, from the first quarter reported income of $59 thousand. “First quarter results were reflective of the very challenging mortgage environment responding to escalation in interest rates. While many mortgage lenders chose to retract their market presence, People’s Bank opted to make an investment in mortgage lending for the future,” commented Echo Hutto, the mortgage division manager.

Non-interest expenses totaled $6.1 million in the first quarter, down $83 thousand from the previous quarter, reflecting the Bank’s continued commitment to cost containment efforts. The reduction in expenses was attained even with the increase in payroll and related expenses from the bank’s recent expansion and strategic addition of additional mortgage related staff.

As of June 30, 2023, the Tier 1 Capital Ratio for PBCO Financial Corporation was 11.15% with total shareholder equity of $72.6 million. During the quarter, the Company continued to augment capital through earnings. The Tier 1 Capital Ratio for the Bank was 12.78% at quarter-end, up from 12.60% as of March 31, 2023. Tangible Capital was $68.8 million, or 8.47% as of June 30, 2023, versus Q1 2023 at $69.8 million or 8.60%. “The Bank’s strong capital position allows for quality growth and resilience during these uncertain economic times,” commented Ms. Beattie.

Ken Trautman and his partner, Mike Sickels, founded People’s Bank of Commerce 25 years ago. Mr. Trautman served as CEO from 2008 to his recent retirement on June 30, 2023. Julia Beattie, who was named President in June 2020, has been appointed CEO. “Having had the opportunity to work very closely with Ken over the past 3 years has provided me with a strong foundation to now assume the incremental responsibilities of CEO. We will remain focused on our Bank’s mission of helping the communities we serve to thrive, not only with our product offering, but also with a focus on relationship banking and community engagement,” commented Ms. 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 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.

Consolidated Balance Sheets
(Dollars in 000's) 6/30/2023 3/31/2023 12/31/2022 9/30/2022 6/30/2022
BALANCE SHEET
ASSETS
Cash and due from banks

$

6,021

 

$

5,097

 

$

5,514

 

$

14,888

 

$

14,800

 

Federal funds sold

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Interest bearing deposits

 

20,469

 

 

8,224

 

 

10,869

 

 

55,770

 

 

69,980

 

Investment securities

 

220,430

 

 

234,647

 

 

236,284

 

 

246,533

 

 

244,842

 

Loans held for sale

 

1,863

 

 

299

 

 

628

 

 

894

 

 

1,333

 

Loans held for investment, net of unearned income

 

490,378

 

 

488,025

 

 

475,024

 

 

447,725

 

 

447,823

 

Total Loans, net of deferred fees and costs

 

492,241

 

 

488,324

 

 

475,652

 

 

448,619

 

 

449,156

 

Allowance for loan losses

 

(5,424

)

 

(5,508

)

 

(5,190

)

 

(4,842

)

 

(4,767

)

Premises and equipment, net

 

27,352

 

 

27,659

 

 

27,888

 

 

27,286

 

 

27,657

 

Bank owned life insurance

 

16,322

 

 

16,210

 

 

14,179

 

 

14,090

 

 

13,956

 

Other Assets

 

35,470

 

 

36,450

 

 

38,098

 

 

41,173

 

 

42,081

 

Total assets

$

812,881

 

$

811,103

 

$

803,294

 

$

843,517

 

$

857,705

 

 
LIABILITIES
Deposits
Demand - non-interest bearing

$

291,981

 

$

299,535

 

$

322,809

 

$

343,708

 

$

333,985

 

Demand - interest bearing

 

115,844

 

 

123,494

 

 

108,972

 

 

111,184

 

 

101,743

 

Money market and savings

 

213,715

 

 

222,834

 

 

244,282

 

 

265,628

 

 

297,504

 

Time deposits of less than $250,000

 

21,017

 

 

19,579

 

 

12,626

 

 

13,878

 

 

15,429

 

Time deposits of more than $250,000

 

8,078

 

 

8,236

 

 

4,106

 

 

4,183

 

 

2,080

 

Total deposits

$

650,635

 

$

673,678

 

$

692,795

 

$

738,581

 

$

750,741

 

 
Borrowed funds

 

79,276

 

 

54,860

 

 

34,449

 

 

31,604

 

 

31,690

 

Other liabilities

 

10,349

 

 

9,013

 

 

7,639

 

 

8,320

 

 

8,886

 

Total liabilities

$

740,260

 

$

737,551

 

$

734,883

 

$

778,505

 

$

791,317

 

 
STOCKHOLDERS' EQUITY
Common stock, surplus & retained earnings

$

93,959

 

$

92,433

 

$

91,133

 

$

88,660

 

$

85,649

 

Accumulated other comprehensive income,
net of tax

 

(21,338

)

 

(18,881

)

 

(22,722

)

 

(23,648

)

 

(19,261

)

Total stockholders' equity

$

72,621

 

$

73,552

 

$

68,411

 

$

65,012

 

$

66,388

 

 
Total liabilities & stockholders' equity

$

812,881

 

$

811,103

 

$

803,294

 

$

843,517

 

$

857,705

 

 
Consolidated Statements of Income
(Dollars in 000's)

2nd Quarter

2023

1st Quarter

2023

4th Quarter

2022

3rd Quarter

2022

2nd Quarter

2022

INCOME STATEMENT
INTEREST INCOME
Loans

$

6,757

$

6,350

$

6,042

$

5,744

$

5,552

Investments

 

970

 

 

1,035

 

 

1,057

 

 

979

 

 

903

 

Federal funds sold and due from banks

 

113

 

 

61

 

 

366

 

 

406

 

 

135

 

Total interest income

 

7,840

 

 

7,446

 

 

7,465

 

 

7,129

 

 

6,590

 

 
INTEREST EXPENSE
Deposits

 

1,418

 

 

746

 

 

281

 

 

244

 

 

146

 

Borrowed funds

 

520

 

 

382

 

 

276

 

 

276

 

 

273

 

Total interest expense

 

1,938

 

 

1,128

 

 

557

 

 

520

 

 

419

 

 
NET INTEREST INCOME

 

5,902

 

 

6,318

 

 

6,908

 

 

6,609

 

 

6,171

 

Provision for loan losses

 

(86

)

 

57

 

 

403

 

 

153

 

 

113

 

Net interest income after provision for
loan losses

 

5,988

 

 

6,261

 

 

6,505

 

 

6,456

 

 

6,058

 

 
NONINTEREST INCOME
Service charges

 

124

 

 

119

 

 

122

 

 

132

 

 

120

 

Mortgage lending income

 

275

 

 

59

 

 

146

 

 

282

 

 

505

 

Steelhead finance income

 

1,291

 

 

1,465

 

 

1,555

 

 

1,896

 

 

1,984

 

BOLI Income

 

112

 

 

108

 

 

87

 

 

101

 

 

95

 

Other non-interest income

 

558

 

 

426

 

 

489

 

 

571

 

 

540

 

Total noninterest income

 

2,360

 

 

2,177

 

 

2,399

 

 

2,982

 

 

3,244

 

 
NONINTEREST EXPENSE
Salaries and employee benefits

 

3,990

 

 

4,000

 

 

3,868

 

 

3,317

 

 

3,914

 

Occupancy & equipment expense

 

875

 

 

877

 

 

690

 

 

841

 

 

898

 

Advertising expense

 

121

 

 

119

 

 

113

 

 

118

 

 

113

 

Professional expenses

 

205

 

 

214

 

 

358

 

 

184

 

 

192

 

Data processing expense

 

317

 

 

321

 

 

446

 

 

262

 

 

292

 

Other operating expenses

 

614

 

 

674

 

 

676

 

 

730

 

 

650

 

Total noninterest expense

 

6,122

 

 

6,205

 

 

6,151

 

 

5,452

 

 

6,059

 

 
Income before taxes

 

2,226

 

 

2,233

 

 

2,753

 

 

3,986

 

 

3,243

 

Provision for income taxes

 

571

 

 

560

 

 

733

 

 

992

 

 

799

 

 
NET INCOME

$

1,655

 

$

1,673

 

$

2,020

 

$

2,994

 

$

2,444

 

 
Shares Outstanding End of Quarter

 

5,325,535

 

 

5,325,535

 

 

5,325,035

 

 

5,313,424

 

 

5,308,066

 

Average shares outstanding*

 

5,325,368

 

 

5,317,065

 

 

5,317,065

 

 

5,312,025

 

 

5,308,066

 

Earnings per share

$

0.31

 

$

0.31

 

$

0.38

 

$

0.56

 

$

0.46

 

*Adjusted for stock dividend 11/10/22
 
(Dollars in 000's) 6/30/2023 3/31/2023 12/31/2022 9/30/2022 6/30/2022
Financial Highlights
Total portfolio loans

$

490,378

 

$

488,025

 

$

475,024

 

$

447,725

 

$

447,823

 

Total deposits

$

650,635

 

$

673,678

 

$

692,795

 

$

738,581

 

$

750,741

 

Total assets

$

812,881

 

$

811,103

 

$

803,294

 

$

843,517

 

$

857,705

 

Net income

$

1,655

 

$

1,673

 

$

2,020

 

$

2,994

 

$

2,444

 

Steelhead Finance contribution, pre-tax

$

450

 

$

481

 

$

454

 

$

820

 

$

961

 

Mortgage contribution, pre-tax

$

(164

)

$

(259

)

$

(111

)

$

(17

)

$

107

 

 
Performance Ratios
Return on average assets

 

0.82

%

 

0.83

%

 

0.98

%

 

1.38

%

 

1.11

%

Return on average equity

 

9.06

%

 

9.48

%

 

12.34

%

 

17.41

%

 

14.23

%

Net interest margin

 

3.22

%

 

3.49

%

 

3.74

%

 

0.00

%

 

3.14

%

Yield on loans

 

5.48

%

 

5.36

%

 

5.34

%

 

5.15

%

 

4.98

%

Cost of deposits

 

0.84

%

 

0.44

%

 

0.16

%

 

0.13

%

 

0.08

%

Efficiency ratio

 

74.10

%

 

73.04

%

 

66.09

%

 

56.84

%

 

64.35

%

Full-time equivalent employees

 

142

 

 

146

 

 

146

 

 

143

 

 

148

 

 
Capital
Leverage ratio

 

11.15

%

 

10.98

%

 

10.92

%

 

10.10

%

 

9.58

%

Bank Leverage Ratio

 

12.78

%

 

12.60

%

 

12.55

%

 

12.71

%

Book value per share

$

13.64

 

$

13.81

 

$

12.85

 

$

12.24

 

$

12.51

 

Tangible book value per share

$

12.93

 

$

13.10

 

$

12.13

 

$

11.52

 

$

11.79

 

 
Asset Quality
Allowance for loan losses (ALLL)

$

5,424

 

$

5,508

 

$

5,782

 

$

4,873

 

$

4,767

 

Nonperforming loans (NPLs)

$

677

 

$

1,280

 

$

2,653

 

$

1,684

 

$

1,001

 

Nonperforming assets (NPAs)

$

963

 

$

1,566

 

$

2,939

 

$

1,970

 

$

1,287

 

Classified assets(2)

$

5,964

 

$

6,984

 

$

5,132

 

$

1,843

 

$

1,851

 

ALLL as a percentage of net loans

 

1.10

%

 

1.13

%

 

1.22

%

 

1.09

%

 

1.06

%

ALLL as a percentage of NPLs

 

801

%

 

430

%

 

218

%

 

289

%

 

476

%

Net charge offs (recoveries) to average loans

 

0.00

%

 

0.00

%

 

0.03

%

 

0.02

%

 

0.00

%

Net NPLs as a percentage of total loans

 

0.14

%

 

0.27

%

 

0.56

%

 

0.38

%

 

0.23

%

Nonperforming assets as a percentage of total assets

 

0.12

%

 

0.19

%

 

0.37

%

 

0.23

%

 

0.15

%

Classified Asset Ratio(3)

 

7.64

%

 

8.83

%

 

6.97

%

 

2.64

%

 

2.60

%

Past due as a percentage of total loans

 

0.14

%

 

0.26

%

 

0.56

%

 

0.38

%

 

0.22

%

 
End of period balances
Total securities and short term deposits

$

240,899

 

$

242,871

 

$

247,153

 

$

302,303

 

$

314,822

 

Total loans, net of allowance

$

486,817

 

$

482,816

 

$

470,462

 

$

443,777

 

$

444,389

 

Total earning assets

$

733,140

 

$

731,195

 

$

722,805

 

$

750,922

 

$

763,978

 

Intangible Assets

$

3,778

 

$

3,790

 

$

3,802

 

$

3,815

 

$

3,828

 

Total assets

$

812,881

 

$

811,103

 

$

803,294

 

$

843,517

 

$

857,705

 

Total noninterest bearing deposits

$

291,981

 

$

299,535

 

$

322,809

 

$

343,708

 

$

333,985

 

Total deposits

$

650,635

 

$

673,678

 

$

692,795

 

$

738,581

 

$

750,741

 

 
Average balances
Total securities and short term deposits

$

242,315

 

$

245,101

 

$

280,254

 

$

324,448

 

$

336,810

 

Total loans, net of allowance

$

489,624

 

$

473,919

 

$

452,921

 

$

445,852

 

$

445,529

 

Total earning assets

$

731,939

 

$

719,020

 

$

733,175

 

$

770,301

 

$

782,340

 

Total assets

$

811,697

 

$

803,116

 

$

828,608

 

$

866,319

 

$

880,100

 

Total noninterest bearing deposits

$

293,331

 

$

318,548

 

$

338,418

 

$

344,623

 

$

342,067

 

Total deposits

$

675,579

 

$

685,318

 

$

722,840

 

$

756,539

 

$

770,019

 

(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.

 

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