PBCO Financial Corporation Reports Q4 and 2023 Earnings

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 2^nd 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 1^st. 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.

 

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The PBCO Financial Registered Stock at the time of publication of the news with a raise of +2,66 % to 13,50USD on Nasdaq OTC stock exchange (19. Januar 2024, 23:20 Uhr).