People’s Bank of Commerce Earnings Increase 37%

People’s Bank of Commerce (OTCBB: PBCO) announced today its financial results for the first quarter of 2018. The bank reported net income of $724,000 or $0.26 per diluted share for the first quarter of 2018, compared to net income of $528,000 or $0.23 per diluted share in the same quarter of 2017. Earnings in the fourth quarter of 2017 totaled $313,000 or $0.11 per diluted share. Earnings per share for the trailing 12 months, was $0.86 per share at the end of the first quarter 2018 from $0.93 per share for the prior period. Fourth quarter 2017 earnings were impacted by the one-time tax charge associated with the tax law revision of $413,000 or $0.15 per share.

Highlights for the quarter compared to the first quarter of 2017:

• Net loans increased 10%.
• Deposits increased 16%
• The bank’s total assets increased 17%.
• Net interest income increased by 9%.
• Non-Interest income increased 198%.
• Non-interest expense increased 41%

President’s Comments

“The bank is seeing an increase in the number and size of requests for commercial loans, indicative of the strength of the local economy and the optimism of our business owners. This optimism was greatly assisted by the recently passed tax cuts that benefited a large majority of our customers. The net interest margin for the first quarter of 2018 was 4.35% compared to 4.33% for the same quarter of 2017. The efficiency ratio was 73.46% for the 12 months ending 3/31/18 from 72.28% for the 12 months ending 3/31/2017,” said Ken Trautman, President and CEO.

Provision for Credit Losses

Loan quality continues to be strong and loans outstanding are growing at a year-to-date annualized rate of over 20%. This growth resulted in an increase to the allowance for loan losses of $122,000, compared to a reduction in the allowance of $36,000 in the same quarter last year. The addition in 2018 was due to a 5% increase in loans outstanding during the quarter. “The bank anticipates continued additions to the allowance for loan and lease losses during 2018 due to anticipated loan growth,” commented Mr. Trautman.

Non-Interest Income

Non-interest income for the first quarter of 2018 was $1,547,000 compared to $519,000 for the same quarter of 2017, an increase of 198%. This increase was primarily driven by income generated by the Bank’s wholly owned subsidiary, Steelhead Finance, which provided $1,085,000 in revenue. Mortgage income for the 1^st quarter of 2018 was down $64,000 when compared to the 1^st quarter of 2017 on reduced volume.

Non-Interest Expense

Non-interest expense for the first quarter of 2018 was $3,286,000 compared to $2,330,000 for the same quarter of 2017, an increase of 41% driven primarily by salary and benefit increases associated with the Steelhead Finance purchase in September of 2017. The Bank also opened a full service branch in Klamath Falls during the first quarter of 2018 which increased non-interest expenses in all categories.

Capital

At March 31, 2018, shareholder equity totaled $32.0 million, compared to $26.6 million at March 31, 2017. The bank’s leverage ratio was 10.0% at the end of the first quarter 2018, compared to 9.8% one year ago. Book value per share was $11.65 on March 31, 2018, compared to $11.67 on March 31, 2017, when adjusted for the 5% stock dividend received in May of 2017.

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
Income Statement (unaudited)
		Three Months Ended											Twelve Months Ended
(dollars in thousands)		3/31/2018			12/31/2017			3/31/2017					3/31/2018			3/31/2017
Interest Income
Loans		2,741			2,678			2,484					10,625			9,649
Investments		173			164			176					700			772
Federal funds sold and due from banks		97			62			12					261			60
Total interest income		3,011			2,904			2,672					11,586			10,481
Interest Expense
Deposits		143			130			93					485			435
Other		60			-			-					60			-
Total interest expense		203			130			93					545			435
Net interest income		2,808			2,774			2,579					11,041			10,046
Provision for credit losses		122			72			(36	)				211			237
Net Interest Income after provision for credit losses		2,686			2,702			2,615					10,830			9,809
Non-Interest Income
Service charges on deposit accounts		75			74			78					287			289
Mortgage lending income		176			191			240					742			892
Steelhead Finance income		1,085			1,072								2,485
Gain (loss) on other real estate		-			-			22					22			62
Other non-interest income		211			150			179					742			906
Total non-interest income		1,547			1,487			519					4,278			2,149
Non-Interest Expense
Bank salary and benefits		1,601			1,492			1,407					5,943			5,078
Steelhead Finance salary and benefits		495			462								957
Premises and fixed assets		389			419			335					1,530			1,340
Other		801			724			588					2,824			2,397
Total non-interest expense		3,286			3,097			2,330					11,254			8,815
Net income before taxes		948			1,092			804					3,854			3,143
Income taxes		224			779			276					1,639			1,033
Net income		724			313			528					2,215			2,110
Basic earnings per share *		0.26			0.11			0.23					0.86			0.93
Diluted earnings per share *		0.26			0.11			0.23					0.85			0.93
Average common shares outstanding *		2,746,110			2,723,883			2,279,022					2,568,080			2,261,014
Performance Measures
Return on average assets		0.94	%		0.41	%		0.80	%				0.75	%		0.79	%
Return on average equity		8.93	%		3.87	%		7.97	%				8.23	%		6.41	%
Net interest margin		4.35	%		4.12	%		4.33	%				4.27	%		3.97	%
Efficiency ratio		75.45	%		72.68	%		75.21	%				73.46	%		72.28	%
* adjusted for 5% stock dividend May 2016, May 2017

People's Bank of Commerce
Balance Sheet (unaudited)
(dollars in thousands)		3/31/2018			12/31/2017			9/30/2017			6/30/2017			3/31/2017
Assets
Cash and due from banks		11,918			14,046			13,133			11,713			10,181
Federal funds sold								-
Interest-bearing deposits		13,948			8,209			22,377			14,164			11,067
Investment securities		26,871			28,538			27,436			31,315			29,883
Loans held for sale		1,862			2,191			742			2,295			1,603
Loans held for investment, net of unearned income		219,359			208,657			202,165			202,891			199,990
Allowance for loan and lease losses		(2,523	)		(2,400	)		(2,327	)		(2,339	)		(2,300	)
Loans, net		216,836			206,257			199,838			200,552			197,690
Premises and equipment, net		14,806			12,196			10,965			7,432			7,088
Other assets		32,581			31,004			26,601			13,947			13,966
Total assets		318,822			302,441			301,092			281,418			271,478
Liabilities
Deposits
Demand noninterest-bearing		126,424			118,948			117,755			113,979			106,171
Demand interest-bearing		27,188			26,218			25,717			23,882			22,858
Money Moneyt and savings		108,666			101,141			101,925			97,656			97,137
Time deposits of less than $100,000		16,483			16,555			17,087			8,406			8,501
Time deposits of more than $100,000		2,067			2,060			1,803			8,131			8,224
Total deposits		280,828			264,922			264,287			252,054			242,891
Other liabilities		5,983			6,103			5,093			2,208			1,986
Total liabilities		286,811			271,025			269,380			254,262			244,877
Shareholders' Equity
Common stock, surplus, retained earnings		32,901			32,152			31,671			27,067			26,578
Accumulated other comprehensive income (loss)		(249	)		(56	)		41			89			23
Unearned ESOP shares		(641	)		(680	)		-			-			-
Total shareholders' equity		32,011			31,416			31,712			27,156			26,601
Total Liabilities and Equity		318,822			302,441			301,092			281,418			271,478

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