PBCO Financial Corporation Reports Q4 and 2023 Earnings

MEDFORD, Ore.–(BUSINESS WIRE)–PBCO Financial Corporation (OTCPK: “PBCO”), the holding company (Company) of People’s Bank of Commerce (Bank), today reported a loss of $3.90 million and earnings per diluted share of -$0.73 for the quarter ended December 31, 2023, compared to earnings of $1.56 million and $0.29 per diluted share for the quarter ended September 30, 2023. For the full year, the Company posted net income of $0.99 million or $0.19 per diluted share compared to $9.86 million for 2022 or $1.92 per diluted share.

Highlights

  • Net interest margin increased to 3.19%, compared to 3.07% in the prior quarter
  • Tangible book value per share increased to $13.86, compared to $12.70 in the prior quarter
  • Loan portfolio increased by 8.8% compared to year-end 2022
  • Recognized pre-tax loss of $6.8 million on sale of $49.4 million of investment securities
  • Exited residential mortgage lending

The Company made two notable, strategic business decisions in the fourth quarter of 2023. The first initiative was the closure of the residential lending division as of November 1, 2023, due to industry trends and the challenging outlook for residential loan demand in 2024 and beyond. The closure resulted in one-time expenses of $340 thousand. The second was the sale of $49.4 million of investment securities at a pre-tax loss of $6.8 million. “These decisions were made to improve the Company’s future profitability and strengthen our balance sheet. We were able to execute both of these initiatives due to our strong capital position,” commented Julia Beattie, President & CEO.

Excluding the loss on sale of securities and one-time cost from exiting the mortgage business, net income was $1.4 million, or $0.27 per diluted share in fourth quarter of 2023, and $6.3 million, or $1.18 per share for the year ended December 31, 2023.

“We remain focused on maintaining our core deposit franchise and strong credit culture, while serving our communities and supporting our clients,” added Beattie. Credit quality remained strong with non-performing assets slightly higher at 0.12% of total assets, versus 0.09% in the third quarter 2023, but still low compared to the company’s historical performance.

The investment portfolio decreased 23.3% to $154.2 million in the fourth quarter of 2023 from $200.9 million at the end of the third quarter 2023. The decrease was driven primarily by the sale of $49.4 million in investments during the quarter. The average life of the portfolio was 4.2 years at the end of the fourth quarter, versus 4.5 years at the prior quarter-end. Securities income was $0.77 million during the quarter, a yield of 1.67%, versus $0.88 million, and a yield of 1.66% for the third quarter of 2023. As of December 31, 2023, the net after tax unrealized loss on the investment portfolio decreased to $13.8 million versus $24.1 million as of September 30, 2023. The improvement was partly due to the loss recognized with the sale of investments in December, but also improved due to the decrease in market rates at year-end. Highly rated government agency and government sponsored agency investments comprise 95.9% of the investment portfolio with the balance of approximately 2.9% held in municipal investments and 1.2% held in corporate sub-debt issued by community banks. As of the fourth quarter 2023, liquid assets to total assets were 13.6%, including the market value of the investment portfolio less pledged investments.

Deposits decreased $12.2 million during the quarter, a 1.9% decline from the third quarter of 2023. For the year, deposits decreased $63.0 million, a 9.1% decrease from 2022. “The pace of deposit runoff slowed substantially during the 2nd half of the year,” commented Beattie.

Fourth quarter 2023 non-interest income totaled $2.3 million, an increase of $36 thousand from the third quarter of 2023. The increase was primarily attributed to a large prepayment penalty of $174 thousand collected on an early loan payoff. Steelhead revenue was down $32 thousand from the prior quarter, a 2.6% decrease. “While still a strong revenue source, our factoring division has experienced the effects of a negative year-over-year trend in the transportation industry,” noted Beattie. Mortgage revenue was down $69 thousand in the quarter with the closure of the Division effective November 1st. For the year, non-interest income was $9.1 million, a decrease of $2.8 million, or 23.8% from 2022. Steelhead revenue was $5.2 million, a decrease of $2.3 million from 2022, or a 30.5% reduction. Mortgage revenue was $769 thousand for the year, down $639 thousand from 2022, or a 45.4% decrease from prior year.

Non-interest expenses totaled $12.9 million in the fourth quarter, up $7.3 million from the previous quarter. Of the increase, $6.8 million represents the loss on sale of investments and $340 thousand was related to the exit of residential mortgage lending. This one-time expense is reflected in both salaries and employee benefits for severance expenses, as well as data processing expense for contract terminations. The bank also wrote off $80 thousand on ORE to current estimated market value. On an annual basis, non-interest expense was $30.9 million, an increase of $7.2 million over 2022, or a 30.4% increase, directly correlated to the loss on sale of investments incurred in fourth quarter.

As of December 31, 2023, the Tier 1 Capital Ratio for PBCO Financial Corporation was 11.54% with total shareholder equity of $77.6 million, versus a Tier 1 Capital Ratio of 11.36% and total shareholder equity of $71.4 million as of September 30, 2023. The reduction in core capital during the quarter is directly attributed to the quarterly loss as the bank repositioned its balance sheet. The Tier 1 Capital Ratio for the Bank was 13.39% at year-end, up from 13.01% as of September 30, 2023. Tangible Capital was $73.8 million, or 9.73% as of December 31, 2023, versus third quarter of 2023 at $67.6 million or 8.34%, which improved due to lower market rates.

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

$

6,926

 

$

4,502

 

$

6,021

 

$

5,097

 

$

5,514

 

Federal funds sold

 

 

 

 

 

 

 

 

 

 

Interest bearing deposits

 

13,127

 

 

15,732

 

 

20,469

 

 

8,224

 

 

10,869

 

Investment securities

 

154,228

 

 

200,941

 

 

220,430

 

 

234,647

 

 

236,284

 

Loans held for sale

 

 

 

449

 

 

1,863

 

 

299

 

 

628

 

Loans held for investment, net of unearned income

 

516,697

 

 

511,374

 

 

490,378

 

 

488,025

 

 

475,024

 

Total Loans, net of deferred fees and costs

 

516,697

 

 

511,823

 

 

492,241

 

 

488,324

 

 

475,652

 

Allowance for loan losses

 

(5,863

)

 

(5,656

)

 

(5,424

)

 

(5,508

)

 

(5,190

)

Premises and equipment, net

 

30,001

 

 

30,334

 

 

27,352

 

 

27,659

 

 

27,888

 

Bank owned life insurance

 

16,637

 

 

16,479

 

 

16,322

 

 

16,210

 

 

14,179

 

Other Assets

 

31,524

 

 

36,961

 

 

35,470

 

 

36,450

 

 

38,098

 

Total assets

$

763,277

 

$

811,116

 

$

812,881

 

$

811,103

 

$

803,294

 

 
LIABILITIES
Deposits
Demand – non-interest bearing

$

272,945

 

$

292,230

 

$

291,981

 

$

299,535

 

$

322,809

 

Demand – interest bearing

 

142,043

 

 

131,603

 

 

115,844

 

 

123,494

 

 

108,972

 

Money market and savings

 

186,875

 

 

187,952

 

 

213,715

 

 

222,834

 

 

244,282

 

Time deposits of less than $250,000

 

16,771

 

 

20,530

 

 

21,017

 

 

19,579

 

 

12,626

 

Time deposits of more than $250,000

 

11,147

 

 

9,685

 

 

8,078

 

 

8,236

 

 

4,106

 

Total deposits

$

629,781

 

$

642,000

 

$

650,635

 

$

673,678

 

$

692,795

 

 
Borrowed funds

 

49,756

 

 

86,190

 

 

79,276

 

 

54,860

 

 

34,449

 

Other liabilities

 

6,151

 

 

11,545

 

 

10,349

 

 

9,013

 

 

7,639

 

Total liabilities

$

685,688

 

$

739,735

 

$

740,260

 

$

737,551

 

$

734,883

 

 
STOCKHOLDERS’ EQUITY
Common stock, surplus & retained earnings

$

91,399

 

$

95,516

 

$

93,959

 

$

92,433

 

$

91,133

 

Accumulated other comprehensive income,
net of tax

 

(13,810

)

 

(24,135

)

 

(21,338

)

 

(18,881

)

 

(22,722

)

Total stockholders’ equity

$

77,589

 

$

71,381

 

$

72,621

 

$

73,552

 

$

68,411

 

 
Total liabilities & stockholders’ equity

$

763,277

 

$

811,116

 

$

812,881

 

$

811,103

 

$

803,294

 

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

$

7,399

 

$

7,071

$

6,757

 

$

6,350

$

6,042

Investments

 

766

 

 

880

 

970

 

 

1,035

 

1,057

Federal funds sold and due from banks

 

195

 

 

312

 

113

 

 

61

 

366

Total interest income

 

8,360

 

 

8,263

 

7,840

 

 

7,446

 

7,465

 
INTEREST EXPENSE
Deposits

 

1,885

 

 

1,580

 

1,418

 

 

746

 

281

Borrowed funds

 

794

 

 

997

 

520

 

 

382

 

276

Total interest expense

 

2,679

 

 

2,577

 

1,938

 

 

1,128

 

557

 
NET INTEREST INCOME

 

5,681

 

 

5,686

 

5,902

 

 

6,318

 

6,908

Provision for loan losses

 

286

 

 

252

 

(86

)

 

57

 

403

Net interest income after provision for
loan losses

 

5,395

 

 

5,434

 

5,988

 

 

6,261

 

6,505

 
NONINTEREST INCOME
Service charges

 

115

 

 

119

 

124

 

 

119

 

122

Mortgage lending income

 

183

 

 

252

 

275

 

 

59

 

146

Steelhead finance income

 

1,192

 

 

1,224

 

1,291

 

 

1,465

 

1,555

BOLI Income

 

155

 

 

124

 

112

 

 

108

 

87

Other non-interest income

 

633

 

 

523

 

558

 

 

426

 

489

Total noninterest income

 

2,278

 

 

2,242

 

2,360

 

 

2,177

 

2,399

 
NONINTEREST EXPENSE
Salaries and employee benefits

 

3,804

 

 

3,332

 

3,990

 

 

4,000

 

3,868

Occupancy & equipment expense

 

899

 

 

902

 

875

 

 

877

 

690

Advertising expense

 

115

 

 

118

 

121

 

 

119

 

113

Professional expenses

 

206

 

 

194

 

205

 

 

214

 

358

Data processing expense

 

355

 

 

322

 

317

 

 

321

 

446

Loss on sale of investments

 

6,814

 

 

 

 

 

 

Other operating expenses

 

724

 

 

706

 

614

 

 

674

 

676

Total noninterest expense

 

12,917

 

 

5,574

 

6,122

 

 

6,205

 

6,151

 
Income before taxes

 

(5,244

)

 

2,102

 

2,226

 

 

2,233

 

2,753

Provision for income taxes

 

(1,338

)

 

544

 

571

 

 

560

 

733

 
NET INCOME

$

(3,906

)

$

1,558

$

1,655

 

$

1,673

$

2,020

 
Shares Outstanding End of Quarter

 

5,327,035

 

 

5,325,535

 

5,325,535

 

 

5,325,535

 

5,325,035

Average shares outstanding*

 

5,326,035

 

 

5,325,535

 

5,325,368

 

 

5,317,065

 

5,317,065

Earnings per share

$

(0.73

)

$

0.29

$

0.31

 

$

0.31

$

0.38

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

$

516,697

 

$

511,374

 

$

490,378

 

$

488,025

 

$

475,024

 

Total deposits

$

629,781

 

$

642,000

 

$

650,635

 

$

673,678

 

$

692,795

 

Total assets

$

763,277

 

$

811,116

 

$

812,881

 

$

811,103

 

$

803,294

 

Net income

$

(3,906

)

$

1,558

 

$

1,655

 

$

1,673

 

$

2,020

 

Steelhead Finance contribution, pre-tax

$

205

 

$

323

 

$

450

 

$

481

 

$

454

 

Mortgage contribution, pre-tax

$

(476

)

$

(162

)

$

(164

)

$

(259

)

$

(111

)

 
Performance Ratios
Return on average assets

 

-1.97

%

 

0.76

%

 

0.82

%

 

0.83

%

 

0.98

%

Return on average equity

 

-22.02

%

 

8.53

%

 

9.06

%

 

9.48

%

 

12.34

%

Net interest margin

 

3.19

%

 

3.07

%

 

3.22

%

 

3.49

%

 

3.74

%

Yield on loans

 

5.68

%

 

5.55

%

 

5.46

%

 

5.36

%

 

5.34

%

Cost of deposits

 

1.16

%

 

0.96

%

 

0.84

%

 

0.44

%

 

0.16

%

Efficiency ratio

 

162.29

%

 

70.31

%

 

74.10

%

 

73.04

%

 

66.09

%

Efficiency ratio excluding non-recurring expenses

 

72.40

%

 

70.31

%

 

74.10

%

 

73.04

%

 

66.09

%

Full-time equivalent employees

 

132

 

 

148

 

 

142

 

 

146

 

 

146

 

 
Capital
Leverage ratio

 

11.54

%

 

11.36

%

 

11.15

%

 

10.98

%

 

10.92

%

Community Bank Leverage Ratio

 

13.39

%

 

13.01

%

 

12.78

%

 

12.60

%

 

12.55

%

Book value per share

$

14.57

 

$

13.40

 

$

13.64

 

$

13.81

 

$

12.85

 

Tangible book value per share

$

13.86

 

$

12.70

 

$

12.93

 

$

13.10

 

$

12.13

 

 
Asset Quality
Allowance for loan losses (ALLL)

$

5,863

 

$

5,656

 

$

5,782

 

$

4,873

 

$

5,190

 

Nonperforming loans (NPLs)

$

733

 

$

427

 

$

677

 

$

1,280

 

$

2,653

 

Nonperforming assets (NPAs)

$

939

 

$

713

 

$

963

 

$

1,566

 

$

2,939

 

Classified assets(2)

$

6,549

 

$

5,800

 

$

5,964

 

$

6,984

 

$

5,132

 

ALLL as a percentage of net loans

 

1.13

%

 

1.11

%

 

1.17

%

 

1.00

%

 

1.09

%

ALLL as a percentage of NPLs

 

800

%

 

1325

%

 

854

%

 

381

%

 

196

%

Net charge offs (recoveries) to average loans

 

0.01

%

 

0.01

%

 

0.00

%

 

0.00

%

 

0.03

%

Net NPLs as a percentage of total loans

 

0.14

%

 

0.08

%

 

0.14

%

 

0.27

%

 

0.56

%

Nonperforming assets as a percentage of total assets

 

0.12

%

 

0.09

%

 

0.12

%

 

0.19

%

 

0.37

%

Classified Asset Ratio(3)

 

7.85

%

 

7.53

%

 

7.64

%

 

8.83

%

 

6.97

%

Past due as a percentage of total loans

 

0.14

%

 

0.08

%

 

0.14

%

 

0.26

%

 

0.56

%

 
End of period balances
Total securities and short term deposits

$

167,355

 

$

216,673

 

$

240,899

 

$

242,871

 

$

247,153

 

Total loans, net of allowance

$

510,834

 

$

506,167

 

$

486,817

 

$

482,816

 

$

470,462

 

Total earning assets

$

684,052

 

$

728,496

 

$

733,140

 

$

731,195

 

$

722,805

 

Intangible Assets

$

3,753

 

$

3,766

 

$

3,778

 

$

3,790

 

$

3,802

 

Total assets

$

763,277

 

$

811,116

 

$

812,881

 

$

811,103

 

$

803,294

 

Total noninterest bearing deposits

$

272,945

 

$

292,230

 

$

291,981

 

$

299,535

 

$

322,809

 

Total deposits

$

629,781

 

$

642,000

 

$

650,635

 

$

673,678

 

$

692,795

 

 
Average balances
Total securities and short term deposits

$

201,788

 

$

241,049

 

$

242,315

 

$

245,101

 

$

280,254

 

Total loans, net of allowance

$

504,002

 

$

493,314

 

$

489,624

 

$

473,919

 

$

452,921

 

Total earning assets

$

705,790

 

$

734,363

 

$

731,939

 

$

719,020

 

$

733,175

 

Total assets

$

794,196

 

$

821,162

 

$

811,697

 

$

803,116

 

$

828,608

 

Total noninterest bearing deposits

$

273,413

 

$

291,470

 

$

293,331

 

$

318,548

 

$

338,418

 

Total deposits

$

643,015

 

$

657,331

 

$

675,579

 

$

685,318

 

$

722,840

 

 
(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.

 

Contacts

Julia Beattie, President & CEO
(541) 608-8920, [email protected]