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People's Bank of Commerce Reports 47% Increase in Earnings Per Share
[January 23, 2019]

People's Bank of Commerce Reports 47% Increase in Earnings Per Share


People's Bank of Commerce (OTCBB: PBCO) announced today its financial results for the fourth quarter and full year 2018 operations. The bank reported net income of $3,398,000 for the full year of 2018 compared to $2,061,000 in 2017, a 65% increase. In 2018 earnings per diluted share were $1.18 compared $0.80 per diluted share during 2017, a 47% increase. Net income for the 4th quarter of 2018, totaled $882,000 or $0.30 per diluted share compared to $313,000 or $0.11 per diluted share for 2017.

When comparing the full year 2018 net income to 2017, several significant items impact the comparison. First, the bank owned Steelhead Finance for a full 12 months in 2018 compared to only 4 months in 2017, contributing $0.48 of earning per share in 2018 compared to $0.14 per share in 2017. Second, passage of the Tax Cuts and Jobs Act (Tax Reform) for corporations resulted in a one-time, non-cash income tax expense of $413,000 in the fourth quarter of 2017 while 2018 benefited from the reduction in Federal Income tax rate from 34% to 21%. Additionally, the bank was able to lower its tax expense in 2018 by over $100,000, recovering taxes paid in earlier years by accelerating depreciation expense. Examples of the other one-time events that affected bottom line income include:

  • The bank was able to provide a "tax reform bonus" to all non-executives of $500 to $2,000 per employee based on time with the company. Plus, the bank established a minimum wage of $14 per hour for all bank employees.
  • The bank opened a new 3-story headquarters building in April 2018.
  • The bank established a full-service branch in Klamath Falls, Oregon in January 2018
  • The bank celebrated its 20th anniversary including "pay it forward" gifts to the community.
  • The bank increased outstanding loans by almost 20% resulting in an increase to the loan and lease loss provision.

Highlights for the quarter and year included:

  • Total loans increased $9.9 million or 4.1% during the fourth quarter 2018 and $41.3 million or 20% for the entire year.
  • Deposits increased $12.8 million or 4.4% over the past 3 months and increased $43.1 million or 16.3% for the entire year.
  • The bank's total assets increased $13.0 million during the fourth quarter and increased $47.1 million or 15.6% for the entire year.
  • Net interest income for 2018 totaled $12.3 million dollars compared to $10.8 million in 2017, a 13.3% increase.
  • Non-Interest income totaled $6.7 million in 2018 versus $3.3 million in 2017, a 104% increase. This increase was the result of activity from the bank's factoring company, Steelhead Finance, which provided $4.9 million of gross revenue during 2018.
  • Non-interest expenses totaled $14.2 million in 2018 compared to $10.3 million in 2017, a 37.4% increase. $2.8 million of this increase was the result of the purchase of Steelhead Financial with the balance attributed to the bank.
  • The bank's year-to-date efficiency ratio was 75% in 2018 and 73.23% in 2017.
  • ROAE was 10.29% in 2018 and 7.18% in 2017.
  • ROAA was 1.00% in 2018, 0.73% in 2017.
  • EPS was $1.18 in 2018 compared to $0.80 in 2017.
  • Loans on non-accrual or past due more than 90 days at the end 2018 were 0.16% of loans outstanding, compared to zero at the end of 2017.

President's Commentary

"As noted by the list of accomplishments above, 2018 was a year of growth, both for the balance sheet as well as the bank's image in the community," noted Ken Trautman, bank President and CEO. "Because many of the expenses incurred in 2018 were one-time in nature, the bank is positioned for strong performance in the next year and the years to come. Expansion of the national and local economies has been a great tailwind, but the level of service from our employees has been a real driving force. Rising short-term interest rates and a flat yield curve will be a challenge to all banks, as the cost of funds will rise more than the yield on assets. Despite this, the bank has maintained a net interest margin superior to our FDIC peer group. With many one-time expenses behind us, the bank can continue to look for additional opportunities to diversify its non-interest income and increase efficiency."

Provision for Credit Losses

Strong loan growth and credit quality prompted a provision expense of $406,000 in 2018 compared to $52,000 in 2017. At yearend 2018, the allowance for loan and lease losses totaled 1.125% of loans held for investment compared to 1.15% at the end of 2017. Net loan charge offs in 2018 were ($6,645) versus ($4,978) the prior year.

Capital

At December 31, 2018, tangible shareholder's equity totaled $32.08 million, compared to $28.00 million at December 31, 2017. The bank's tangible leverage ratio was 9.27% at year-end 2018, compared to 9.37% at December 31, 2017. The completion of the Steelhead acquisition resulted in approximately $3.3 million in goodwill reflected above in the tangible shareholder equity and leverage ratios. Tangible book value per share was $10.86 at December 31, 2018, compared to $9.71 one year earlier.

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.peoplesbankofcommerce.com.

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 bank headquartered in Medford, Oregon with branches in Medford, Ashland, Central Point, Grants Pass and Klamath Falls.

"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.





         
People's Bank of Commerce
Balance Sheet (unaudited)
(dollars in thousands) 12/31/2018 9/30/2018 6/30/2018 3/31/2018 12/31/2017
Assets
Cash and due from banks 9,382 3,928 2,431 11,918 14,046
Federal funds sold
Interest-bearing deposits 17,127 21,381 15,713 13,948 8,209
Investment securities 25,878 24,462 26,198 26,871 28,538
Loans held for sale 2,084 215 1,381 1,862 2,191
Loans held for investment, 249,949 240,093 233,600 219,359 208,657
net of unearned income
Allowance for loan and lease losses (2,812 ) (2,701 ) (2,631 ) (2,523 ) (2,400 )
Loans, net 247,137 237,392 230,969 216,836 206,257
Premises and equipment, net 16,807 16,387 16,165 14,806 12,196
Other assets 31,110 32,730   34,064   32,581   31,004  
Total assets 349,525   336,495   326,921   318,822   302,441  
 
 
Liabilities
Deposits
Demand noninterest-bearing 124,866 120,679 131,743 126,424 118,948
Demand interest-bearing 48,813 44,661 29,300 27,188 26,218
Money market and savings 117,714 112,728 107,634 108,666 101,141
Time deposits of less than $250,000 15,300 15,017 16,136 16,483 16,555
Time deposits of more than $250,000 1,317   2,081   2,074   2,067   2,060  
Total deposits 308,010 295,166 286,887 280,828 264,922
Other liabilities 6,062   7,290   7,022   5,983   6,103  
Total liabilities 314,072 302,456 293,909 286,811 271,025
 
Capital
Common stock, surplus, retained earnings 36,011 34,920 33,891 32,901 32,152
Accumulated other comprehensive (113 ) (319 ) (278 ) (249 ) (56 )
income (loss)
Unearned ESOP Shares (445 ) (562 ) (601 ) (641 ) (680 )
Total shareholders' equity 35,453 34,039 33,012 32,011 31,416
 
Total Liabilities and Equity 349,525   336,495   326,921   318,822   302,441  
 
memo:
Total intangible assets and goodwill 3,486 3,468 3,468 3,468 3,468
 
Current shares outstanding 2,953,434 2,915,752 2,902,164 2,747,164 2,745,758
 

         
People's Bank of Commerce
Income Statement (unaudited)                
Three Months Ended Twelve Months Ended
(dollars in thousands) 12/31/2018   9/30/2018   12/31/2017 12/31/2018   12/31/2017
Interest Income
Loans 3,343 3,152 2,678 12,193 10,367
Investments 162 152 164 658 703
Federal funds sold and due from banks 161 182 61 534 175
Total interest income 3,666 3,486 2,903 13,385 11,245
 
Interest Expense
Deposits 278 241 129 850 435
Other 75 77 - 282 -
Total interest expense 353 318 129 1,132 435
 
Net interest income 3,313 3,169 2,774 12,253 10,810
Provision for credit losses 112 69 72 406 52
Net Interest Income after provision 3,201 3,100 2,702 11,847 10,758
for credit losses
 
Non-Interest Income
Service charges on deposit accounts 78 76 73 308 290
Mortgage lending income 150 130 191 615 805
Steelhead Finance income 1,179 1,339 1,072 4,915 1,398
Gain (loss) on other real estate - - - 22
Other non-interest income 118 199 151 817 755
Total non-interest income 1,525 1,744 1,487 6,655 3,270
 
Non-Interest Expense
Salary and Benefits 2,346 2,297 1,954 8,955 6,210
Premises and fixed assets 554 460 419 1,877 1,473
Other 825 828 724 3,348 2,634
Total non-interest expense 3,725 3,585 3,097 14,180 10,317
 
Net income before taxes 1,001 1,259 1,092 4,322 3,711
Income taxes 119 311 779 924 1,650
Net income 882 948 313 3,398 2,061
 
Basic earnings per share * 0.30 0.33 0.11 1.18 0.80
Diluted earnings per share * 0.30 0.32 0.11 1.18 0.80
Average common shares outstanding * 2,926,964 2,909,889 2,725,925 2,870,220 2,570,472
 
Performance Measures
Return on average assets 1.03% 1.11% 0.41% 1.00% 0.73%
Return on average equity 10.25% 11.43% 3.87% 10.29% 7.18%
Net interest margin 4.11% 4.05% 4.12% 4.18% 4.22%
Efficiency ratio 76.99%   72.97%   72.68% 74.99%   73.23%
 
* adjusted for 5% stock dividend May 2017, May 2018
 


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