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PBCO Financial Corporation Reports Q3 2023 Earnings

PBCO Financial Corporation (OTCPK: “PBCO”), the holding company (Company) of People’s Bank of Commerce (Bank), today reported earnings of $1.56 million and earnings per diluted share of $0.29 for the quarter ended September 30, 2023, compared to $1.66 million and $0.31 per diluted share for the quarter ended June 30, 2023.

Highlights

  • Portfolio loans increased 7.7% year-to-date
  • Credit quality remains strong with non-performing assets to total assets of 0.09%
  • Total non-interest expense declined 9.0% during the quarter from expense containment efforts

“Third quarter loan growth outpaced the prior two quarters, with a concerted effort toward high quality loan growth within the bank’s markets, especially the new Eugene branch that opened in March 2023,” reported Julia Beattie, President and Chief Executive Officer. Loans increased $21.0 million in the quarter, or 4.28%, compared to the second quarter of 2023. “In spite of higher borrowing costs, we continued to experience strong demand for loans through the end of the quarter,” added Beattie.

Non-performing assets continued to improve in the third quarter to 0.09%, as a percentage of total assets, versus 0.12% in the second quarter 2023. During the third quarter, the Allowance for Credit Losses increased by $252 thousand, primarily the result of strong loan growth over the prior quarter.

Deposits decreased $8.6 million during the quarter, a 1.3% decline from the second quarter of 2023. “Deposits continued to contract during the quarter, given continued pressure on interest rates, although at a slower pace than experienced over the prior three quarters,” commented Beattie. “The bank has focused on retaining core deposits while acknowledging that the pressure on rates has added to margin compression within the Bank,” continued Beattie. Funding costs increased over the prior quarter as a result of rising deposit rates and borrowing expenses related to the advance from the Bank Term Funding Program taken at the end of second quarter, which resulted in the incremental borrowed funds interest expense of $477 thousand in the third quarter.

The investment portfolio decreased 8.8% to $200.9 million in third quarter of 2023 from $220.4 million at the end of the second quarter 2023. This decrease is the result of maturing investments being reinvested in loan growth. The average life of the portfolio was 4.5 years at the end of the third quarter. Securities income was $0.88 million during the quarter, a yield of 1.66%, versus $0.97 million, and a yield of 1.76% for the second quarter of 2023. As of September 30, 2023, the net after tax unrealized loss on the investment portfolio was $24.1 million versus $21.3 million as of June 30, 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 4.6% held in municipal investments and 0.9% held in corporate sub-debt issued by community banks. As of third quarter 2023, liquid assets to total assets were 14.8%, including the market value of the investment portfolio less pledged investments.

Third quarter 2023 non-interest income totaled $2.2 million, a decrease of $118 thousand from the second quarter of 2023. The slight decrease was primarily driven by a reduction in factoring revenue from Steelhead Finance, which declined by 5.2%, or $67 thousand, from the prior quarter. “Our factoring division has experienced the effects of the current economic conditions on the transportation industry. Factoring volumes for the industry nationwide are down approximately 33% from last year’s average,” reported Bill Stewart, President of Steelhead Finance. Mortgage revenue was down $23 thousand in the quarter, demonstrating continued reduction in mortgage demand attributed to elevated rates.

Non-interest expenses totaled $5.6 million in the third quarter, down $548 thousand from the previous quarter. The reduction in expenses was the result of a decrease in personnel expense of $658 thousand versus second quarter due to expense containment efforts, a 16.5% decrease.

As of September 30, 2023, the Tier 1 Capital Ratio for PBCO Financial Corporation was 11.36% with total shareholder equity of $71.4 million. During the quarter, the Company continued to augment capital through earnings. The Tier 1 Capital Ratio for the Bank was 13.01% at quarter-end, up from 12.78% as of June 30, 2023. Tangible Capital was $67.6 million, or 8.34% as of September 30, 2023, versus second quarter of 2023 at $68.8 million or 8.47%.

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) 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022
BALANCE SHEET
ASSETS
Cash and due from banks

$

4,502

 

$

6,021

 

$

5,097

 

$

5,514

 

$

14,888

 

Federal funds sold

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Interest bearing deposits

 

15,732

 

 

20,469

 

 

8,224

 

 

10,869

 

 

55,770

 

Investment securities

 

200,941

 

 

220,430

 

 

234,647

 

 

236,284

 

 

246,533

 

Loans held for sale

 

449

 

 

1,863

 

 

299

 

 

628

 

 

894

 

Loans held for investment, net of unearned income

 

511,374

 

 

490,378

 

 

488,025

 

 

475,024

 

 

447,725

 

Total Loans, net of deferred fees and costs

 

511,823

 

 

492,241

 

 

488,324

 

 

475,652

 

 

448,619

 

Allowance for loan losses

 

(5,656

)

 

(5,424

)

 

(5,508

)

 

(5,190

)

 

(4,842

)

Premises and equipment, net

 

30,334

 

 

27,352

 

 

27,659

 

 

27,888

 

 

27,286

 

Bank owned life insurance

 

16,479

 

 

16,322

 

 

16,210

 

 

14,179

 

 

14,090

 

Other Assets

 

36,961

 

 

35,470

 

 

36,450

 

 

38,098

 

 

41,173

 

Total assets

$

811,116

 

$

812,881

 

$

811,103

 

$

803,294

 

$

843,517

 

 
LIABILITIES
Deposits
Demand - non-interest bearing

$

292,230

 

$

291,981

 

$

299,535

 

$

322,809

 

$

343,708

 

Demand - interest bearing

 

131,603

 

 

115,844

 

 

123,494

 

 

108,972

 

 

111,184

 

Money market and savings

 

187,952

 

 

213,715

 

 

222,834

 

 

244,282

 

 

265,628

 

Time deposits of less than $250,000

 

20,530

 

 

21,017

 

 

19,579

 

 

12,626

 

 

13,878

 

Time deposits of more than $250,000

 

9,685

 

 

8,078

 

 

8,236

 

 

4,106

 

 

4,183

 

Total deposits

$

642,000

 

$

650,635

 

$

673,678

 

$

692,795

 

$

738,581

 

 
Borrowed funds

 

86,190

 

 

79,276

 

 

54,860

 

 

34,449

 

 

31,604

 

Other liabilities

 

11,545

 

 

10,349

 

 

9,013

 

 

7,639

 

 

8,320

 

Total liabilities

$

739,735

 

$

740,260

 

$

737,551

 

$

734,883

 

$

778,505

 

 
STOCKHOLDERS' EQUITY
Common stock, surplus & retained earnings

$

95,516

 

$

93,959

 

$

92,433

 

$

91,133

 

$

88,660

 

Accumulated other comprehensive income, net of tax

 

(24,135

)

 

(21,338

)

 

(18,881

)

 

(22,722

)

 

(23,648

)

Total stockholders' equity

$

71,381

 

$

72,621

 

$

73,552

 

$

68,411

 

$

65,012

 

 
Total liabilities & stockholders' equity

$

811,116

 

$

812,881

 

$

811,103

 

$

803,294

 

$

843,517

 

Consolidated Statements of Income
(Dollars in 000's) 3rd Quarter 2023 2nd Quarter 2023 1st Quarter 2023 4th Quarter 2022 3rd Quarter 2022
INCOME STATEMENT
INTEREST INCOME
Loans

$

7,071

 

$

6,757

 

$

6,350

 

$

6,042

 

$

5,744

 

Investments

 

880

 

 

970

 

 

1,035

 

 

1,057

 

 

979

 

Federal funds sold and due from banks

 

312

 

 

113

 

 

61

 

 

366

 

 

406

 

Total interest income

 

8,263

 

 

7,840

 

 

7,446

 

 

7,465

 

 

7,129

 

 
INTEREST EXPENSE
Deposits

 

1,580

 

 

1,418

 

 

746

 

 

281

 

 

244

 

Borrowed funds

 

997

 

 

520

 

 

382

 

 

276

 

 

276

 

Total interest expense

 

2,577

 

 

1,938

 

 

1,128

 

 

557

 

 

520

 

 
NET INTEREST INCOME

 

5,686

 

 

5,902

 

 

6,318

 

 

6,908

 

 

6,609

 

Provision for loan losses

 

252

 

 

(86

)

 

57

 

 

403

 

 

153

 

Net interest income after provision for loan losses

 

5,434

 

 

5,988

 

 

6,261

 

 

6,505

 

 

6,456

 

 
NONINTEREST INCOME
Service charges

 

119

 

 

124

 

 

119

 

 

122

 

 

132

 

Mortgage lending income

 

252

 

 

275

 

 

59

 

 

146

 

 

282

 

Steelhead finance income

 

1,224

 

 

1,291

 

 

1,465

 

 

1,555

 

 

1,896

 

BOLI Income

 

124

 

 

112

 

 

108

 

 

87

 

 

101

 

Other non-interest income

 

523

 

 

558

 

 

426

 

 

489

 

 

571

 

Total noninterest income

 

2,242

 

 

2,360

 

 

2,177

 

 

2,399

 

 

2,982

 

 
NONINTEREST EXPENSE
Salaries and employee benefits

 

3,332

 

 

3,990

 

 

4,000

 

 

3,868

 

 

3,317

 

Occupancy & equipment expense

 

902

 

 

875

 

 

877

 

 

690

 

 

841

 

Advertising expense

 

118

 

 

121

 

 

119

 

 

113

 

 

118

 

Professional expenses

 

194

 

 

205

 

 

214

 

 

358

 

 

184

 

Data processing expense

 

322

 

 

317

 

 

321

 

 

446

 

 

262

 

Other operating expenses

 

706

 

 

614

 

 

674

 

 

676

 

 

730

 

Total noninterest expense

 

5,574

 

 

6,122

 

 

6,205

 

 

6,151

 

 

5,452

 

 
Income before taxes

 

2,102

 

 

2,226

 

 

2,233

 

 

2,753

 

 

3,986

 

Provision for income taxes

 

544

 

 

571

 

 

560

 

 

733

 

 

992

 

 
NET INCOME

$

1,558

 

$

1,655

 

$

1,673

 

$

2,020

 

$

2,994

 

 
Shares Outstanding End of Quarter

 

5,325,535

 

 

5,325,535

 

 

5,325,535

 

 

5,325,035

 

 

5,313,424

 

Average shares outstanding

 

5,325,535

 

 

5,325,368

 

 

5,317,065

 

 

5,317,065

 

 

5,312,025

 

Earnings per share

$

0.29

 

$

0.31

 

$

0.31

 

$

0.38

 

$

0.56

 

 
 
(Dollars in 000's) 9/30/2023 6/30/2023 3/31/2023 12/31/2022 9/30/2022
Financial Highlights
Total portfolio loans

$

511,374

 

$

490,378

 

$

488,025

 

$

475,024

 

$

447,725

 

Total deposits

$

642,000

 

$

650,635

 

$

673,678

 

$

692,795

 

$

738,581

 

Total assets

$

811,116

 

$

812,881

 

$

811,103

 

$

803,294

 

$

843,517

 

Net income

$

1,558

 

$

1,655

 

$

1,673

 

$

2,020

 

$

2,994

 

Steelhead Finance contribution, pre-tax

$

323

 

$

450

 

$

481

 

$

454

 

$

820

 

Mortgage contribution, pre-tax

$

(162

)

$

(164

)

$

(259

)

$

(111

)

$

(17

)

 
Performance Ratios
Return on average assets

 

0.76

%

 

0.82

%

 

0.83

%

 

0.98

%

 

1.38

%

Return on average equity

 

8.53

%

 

9.06

%

 

9.48

%

 

12.34

%

 

17.41

%

Net interest margin

 

3.07

%

 

3.22

%

 

3.49

%

 

3.74

%

 

3.40

%

Yield on loans

 

5.48

%

 

5.46

%

 

5.36

%

 

5.34

%

 

5.15

%

Cost of deposits

 

0.96

%

 

0.84

%

 

0.44

%

 

0.16

%

 

0.13

%

Efficiency ratio

 

70.31

%

 

74.10

%

 

73.04

%

 

66.09

%

 

56.84

%

Full-time equivalent employees

 

148

 

 

142

 

 

146

 

 

146

 

 

143

 

 
Capital
Leverage ratio

 

11.36

%

 

11.15

%

 

10.98

%

 

10.92

%

 

10.10

%

Community Bank Leverage Ratio

 

13.01

%

 

12.78

%

 

12.60

%

 

12.55

%

 

12.84

%

Book value per share

$

13.40

 

$

13.64

 

$

13.81

 

$

12.85

 

$

12.24

 

Tangible book value per share

$

12.70

 

$

12.93

 

$

13.10

 

$

12.13

 

$

11.52

 

 
Asset Quality
Allowance for loan losses (ALLL)

$

5,656

 

$

5,424

 

$

5,782

 

$

4,873

 

$

4,842

 

Nonperforming loans (NPLs)

$

427

 

$

677

 

$

1,280

 

$

2,653

 

$

1,684

 

Nonperforming assets (NPAs)

$

713

 

$

963

 

$

1,566

 

$

2,939

 

$

1,970

 

Classified assets(2)

$

5,800

 

$

5,964

 

$

6,984

 

$

5,132

 

$

1,843

 

ALLL as a percentage of net loans

 

1.11

%

 

1.10

%

 

1.18

%

 

1.02

%

 

1.08

%

ALLL as a percentage of NPLs

 

1325

%

 

801

%

 

452

%

 

184

%

 

288

%

Net charge offs (recoveries) to average loans

 

0.01

%

 

0.00

%

 

0.00

%

 

0.03

%

 

0.02

%

Net NPLs as a percentage of total loans

 

0.08

%

 

0.14

%

 

0.27

%

 

0.56

%

 

0.38

%

Nonperforming assets as a percentage of total assets

 

0.09

%

 

0.12

%

 

0.19

%

 

0.37

%

 

0.23

%

Classified Asset Ratio(3)

 

7.53

%

 

7.64

%

 

8.83

%

 

6.97

%

 

2.64

%

Past due as a percentage of total loans

 

0.08

%

 

0.14

%

 

0.26

%

 

0.56

%

 

0.38

%

 
End of period balances
Total securities and short term deposits

$

216,673

 

$

240,899

 

$

242,871

 

$

247,153

 

$

302,303

 

Total loans, net of allowance

$

506,167

 

$

486,817

 

$

482,816

 

$

470,462

 

$

443,777

 

Total earning assets

$

728,496

 

$

733,140

 

$

731,195

 

$

722,805

 

$

750,922

 

Intangible Assets

$

3,766

 

$

3,778

 

$

3,790

 

$

3,802

 

$

3,815

 

Total assets

$

811,116

 

$

812,881

 

$

811,103

 

$

803,294

 

$

843,517

 

Total noninterest bearing deposits

$

292,230

 

$

291,981

 

$

299,535

 

$

322,809

 

$

343,708

 

Total deposits

$

642,000

 

$

650,635

 

$

673,678

 

$

692,795

 

$

738,581

 

 
Average balances
Total securities and short term deposits

$

241,049

 

$

242,315

 

$

245,101

 

$

280,254

 

$

324,448

 

Total loans, net of allowance

$

493,314

 

$

489,624

 

$

473,919

 

$

452,921

 

$

445,852

 

Total earning assets

$

734,363

 

$

731,939

 

$

719,020

 

$

733,175

 

$

770,301

 

Total assets

$

821,162

 

$

811,697

 

$

803,116

 

$

828,608

 

$

866,319

 

Total noninterest bearing deposits

$

291,470

 

$

293,331

 

$

318,548

 

$

338,418

 

$

344,623

 

Total deposits

$

657,331

 

$

675,579

 

$

685,318

 

$

722,840

 

$

756,539

 

(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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