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People’s Bank Reports Second Quarter Earnings

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July 21, 2021 3:49 PM EDT

MEDFORD, Ore.--(BUSINESS WIRE)-- 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 2nd 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 1st 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 2nd 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 30th, core portfolio loan growth, excluding PPP, totaled $10.6 million during 2nd 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 2nd 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 2nd 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 2nd 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 2nd 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 2nd 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 2nd 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.

 

Ken Trautman, CEO
(541) 774-7654, [email protected]

Source: People’s Bank of Commerce


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