People’s Bank of Commerce Reports Earnings

People’s Bank of Commerce (OTCBB: PBCO) announced today its financial results for the fourth quarter and full year 2019 operations. The bank reported net income of $4,068,000 for the full year of 2019 compared to $3,398,000 in 2018, a 20% increase. In 2019 earnings per diluted share were $1.32 compared to $1.14 per diluted share during 2018, a 16% increase. Net income for the 4^th quarter of 2019 totaled $1,350,000 or $0.43 per diluted share compared to $882,000 or $0.29 per diluted share for 2018, a 48% increase.

When comparing the full year 2019 net income to 2018, several significant items impact the comparison. The bank’s mortgage division increased its gross revenue to $1,219,000 in 2019 from $615,000 in 2018, a 98% increase. Steelhead Finance, the bank’s factoring division, which focuses on the trucking industry, had reduced income in 2019 when compared to 2018. The results for 2018 were a company record and reflected the extremely strong economy, while 2019 results show the slowdown in trucking activity mirroring the slowing national economy. In addition, the bank completed a core conversion in the first quarter of 2019 that resulted in increased data processing expenses, including one time conversion expenses, which totaled $739,000 in 2019 versus $579,000 in 2018.

Highlights for the quarter and year included:

• Net loans increased $6.6 million during the fourth quarter 2019 and $28.0 million or 11.3% for the entire year.
• Deposits decreased $7.7 million over the past 3 months as the bank reduced its high cost deposits and total deposits decreased $1.2 million for the entire year.
• Total bank assets increased $20.6 million or 5.9% for the year.
• Net interest income for 2019 totaled $14.0 million dollars compared to $12.3 million in 2018, a 14.6% increase.
• Non-Interest income totaled $6.6 million in 2019 versus $6.7 million in 2018 due to changes in mortgage and Steelhead factoring discussed above.
• Non-interest expenses totaled $14.9 million in 2019 compared to $14.2 million in 2018, a 4.9% increase.
• The bank’s year-to-date efficiency ratio was 72.0 in 2019 and 75.0% in 2018.
• ROAE was 10.76% in 2019 and 10.29% in 2018. For the fourth quarter of 2019, the ROAE was 13.56% compared to 10.25% for the same period in 2018.
• ROAA was 1.13% in 2019 and 1.00% in 2018. For the fourth quarter of 2019, the ROAA was 1.46% compared to 1.03% for the same period in 2018.
• Loans on non-accrual or past due more than 90 days at the end 2019 were 0.24% of total loans, compared to no non-accrual loans at the end of 2018.

President’s Commentary

“2019 was a year of modest growth, with assets increasing 5.9%, but with a larger improvement in profitability which increased 20%,” noted Ken Trautman, bank President and CEO. “The bank still enjoys a low cost of funds and good return on assets compared to our peer group, resulting in a net interest margin of 4.55% in 2019, compared to 4.18% in 2018. Non-interest bearing DDA comprises 44% of our total deposits. Attracting low cost deposits became increasingly more difficult in 2019 and if this continues into 2020 there could be a small net interest margin compression. Loan quality and loan demand both continue to be strong, reflective of the local markets that the bank serves,” commented Trautman.

Provision for Credit Losses

The bank had a provision expense of $296,000 in 2019 compared to $406,000 in 2018. At year-end 2019, the allowance for loan and lease losses totaled 1.121% of loans held for investment compared to 1.125% at the end of 2018. Net loan charge offs in 2019 were ($11,000) versus ($7,000) the prior year.

Capital

At December 31, 2019, tangible shareholder’s equity totaled $37.97 million, compared to $32.09 million at December 31, 2018. The bank’s tangible leverage ratio was 10.35% at year-end 2019, compared to 9.28% at December 31, 2018. The bank started a capital campaign in the 4^th quarter of 2019 which added $1.5 million in new capital to the bank in 2019, with the balance of the campaign, $3.5 million, already committed and expected to close early in 2020. Tangible book value per share was $11.71 at December 31, 2019, compared to $10.35 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.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 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)	12/31/2019		9/30/2019		12/31/2018		12/31/2019		12/31/2018
Interest Income
Loans	3,729		3,672		3,343		14,417		12,193
Investments	158		160		162		604		658
Federal funds sold and due from banks	72		136		161		413		534
Total interest income	3,959		3,968		3,666		15,434		13,385
Interest Expense
Deposits	316		354		278		1,366		850
Other	13		5		75		29		282
Total interest expense	329		359		353		1,395		1,132
Net interest income	3,630		3,609		3,313		14,039		12,253
Provision for credit losses	85		113		112		296		406
Net Interest Income after provision for credit losses	3,545		3,496		3,201		13,743		11,847
Non-Interest Income
Service charges on deposit accounts	83		84		78		312		308
Mortgage lending income	454		294		150		1,219		615
Steelhead Finance income	903		1,044		1,179		4,061		4,915
Gain (loss) on other real estate	-		-		-				113
Other non-interest income	285		273		118		1,058		704
Total non-interest income	1,725		1,695		1,525		6,650		6,655
Non-Interest Expense
Salary and Benefits	2,209		2,434		2,346		9,448		8,955
Premises and fixed assets	603		544		554		2,243		1,877
Other	630		883		825		3,198		3,348
Total non-interest expense	3,442		3,861		3,725		14,889		14,180
Net income before taxes	1,828		1,330		1,001		5,504		4,322
Income taxes	478		383		119		1,436		924
Net income	1,350		947		882		4,068		3,398
Basic earnings per share	0.43		0.30		0.29		1.32		1.14
Diluted earnings per share	0.43		0.30		0.29		1.32		1.14
Average common shares outstanding	3,169,537		3,122,591		3,073,312		3,089,588		2,979,404
Performance Measures
Return on average assets	1.46%		1.02%		1.03%		1.13%		1.00%
Return on average equity	13.56%		9.88%		10.25%		10.76%		10.29%
Net interest margin	4.74%		4.54%		4.11%		4.55%		4.18%
Efficiency ratio	64.28%		72.79%		77.02%		71.97%		74.99%

People's Bank of Commerce
Balance Sheet (unaudited)
(dollars in thousands)	12/31/2019			9/30/2019			6/30/2019			3/31/2019			12/31/2018
Assets
Cash and due from banks	3,711			2,798			3,747			4,736			9,382
Federal funds sold
Interest-bearing deposits	11,936			16,004			18,694			30,152			17,127
Investment securities	27,734			23,212			22,585			20,031			25,878
Loans held for sale	2,474			3,909			2,013			1,157			2,084
Loans held for investment, net of unearned income	278,277			271,635			261,835			256,389			249,949
Allowance for loan and lease losses	(3,119	)		(3,033	)		(2,920	)		(2,880	)		(2,812	)
Loans, net	275,158			268,602			258,915			254,666			247,137
Premises and equipment, net	20,306			20,529			20,736			21,086			16,807
Other assets	28,855			28,818			31,185			30,894			31,110
Total assets	370,174			363,872			357,875			361,565			349,525
Liabilities
Deposits
Demand noninterest-bearing	136,051			140,458			136,211			128,937			124,866
Demand interest-bearing	44,341			47,020			46,690			56,175			48,813
Money market and savings	107,985			108,614			105,310			110,237			117,714
Time deposits of less than $250,000	15,715			15,419			17,915			16,750			15,300
Time deposits of more than $250,000	2,701			2,949			2,682			1,873			1,317
Total deposits	306,793			314,460			308,808			313,972			308,010
Other liabilities	21,722			10,611			11,308			11,137			6,062
Total liabilities	328,515			325,071			320,116			325,109			314,072
Capital
Common stock, surplus, retained earnings	41,663			38,879			37,913			36,863			36,011
Accumulated other comprehensive income (loss)	208			249			212			(2	)		(113	)
Unearned ESOP Shares	(212	)		(327	)		(366	)		(405	)		(445	)
Total shareholders' equity	41,659			38,801			37,759			36,456			35,453
Total Liabilities and Equity	370,174			363,872			357,875			361,565			349,525
memo:
Total intangible assets and goodwill	3,486			3,486			3,486			3,486			3,486
Current shares outstanding	3,241,075			3,122,591			3,122,155			2,955,964			2,953,464

 

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