Premier Commercial Bancorp PRCB, a single bank holding company for Premier Community Bank based in Hillsboro, Oregon, today reported net income of $2.3 million, or $0.40 per diluted share, for the six months ended June 30, 2017, a 51.6% increase over the net income of $1.5 million, or $0.26 per diluted share, for the same six month period during 2016. Net income for second quarter 2017 alone was $1.4 million, or $0.24 per diluted share, compared to $939,000 or $0.16 per share for first quarter 2017.
Highlights for the period included:
- Non-performing assets decreased $3.5 million, or 46.1%, since year-end 2016.
- A $1.1 million recovery to the allowance for loan losses from the full payoff of a non-performing loan with additional reserves allowed the Company to negative provision $1.3 million.
- Net loan growth of $14.0 million, or 4.5%, year-over-year.
- Return on equity and return on assets for the first half of 2017 increased to 12.41% and 1.20%, respectively compared to the first half of 2016 at 9.02% and 0.87%.
- Net interest income grew by $800,000 or 11.3% for the first half of 2017 compared to the first half of 2016.
- Net interest margin increased by seven basis points to 4.37% for the first half of 2017 compared to the 4.30% for the first half of 2016.
- Efficiency ratio at 62.2% for first half of 2017 improved when compared to the 69.1% for the first half of 2016.
- Retained earnings continue to support asset growth as regulatory capital ratios show modest increases.
"The accomplishments and trends for the first half of 2017 were significant. With the full pay-off of a $3.7 million troubled loan and other activity, non-performing assets were down to 1.03% of total assets while loan growth remains steady and performance metrics continue to strengthen as the result of the increased size, mix, and quality of our balance sheet," stated Rick A. Roby, the Company's President and CEO.
Earnings
The Company's net income for the six month period ended June 30, 2017 was $2.3 million, which was an increase from the same period in the prior year of $790,000 or 51.6%. Besides the increase in the balance sheet, the change in earnings was also driven by two non-recurring significant events during second quarter. First was a $1.1 million recovery to the allowance for loan losses related to a non-performing loan which allowed the Company to negative provision $1.3 million (the full amount of the recovery plus an additional $200,000 of loan loss reserve associated with the non-performing loan). The second item relates to other real estate owned ("OREO"), where besides taking a $22,000 loss on an anticipated sale of an OREO property, the Bank also wrote down the carrying amounts of other OREO property by $741,000 to more aggressively market these remaining non-performing assets.
Net interest income of $7.8 million for the six month period ending June 30, 2017 was up $800,000, or 11.3% from the same period in the prior year. In breaking down this increase, year-over-year interest on earning assets grew $854,000, or 10.6%, while interest expense increased a mere $54,000, or 5.5%. Net interest income for second quarter 2017 increased from first quarter 2017 by $269,000, or 7.1%, due to an increase in outstanding loans as well as a non-recurring recognition of $81,000 in loan interest during the second quarter pay-off of a problem loan. Net interest margin increased to 4.37% for the first six months of 2017 compared to 4.30% for the same period in 2016; and at 4.44% for second quarter 2017 it also increased when compared to the 4.30% for first quarter 2017.
The second quarter payoff of the Bank's largest adversely classified loan improved the credit metrics of the Bank's loan portfolio while local economies continue to remain strong; therefore the Bank took the previously stated $1.3 million negative loan loss provision during the quarter. The Bank did not take any loan loss provision expense during first quarter 2017 nor for all of 2016, however as the loan portfolio continues to grow future provisions are to be expected.
Non-interest income was up $75,000 or 21.7% for the first six months of 2017 at $421,000 compared to the first six months of 2016 at $346,000. Non-interest expense at $5.1 million for the first six months of 2017 has remained flat when compared to the same period last year despite increases in many areas such as employee and lease expenses, as other expenses, especially those related to problem loans and OREO, have declined.
"Besides some non-recurring second quarter 2017 events, the increase in loans and local non-interest bearing deposit accounts along with the reduction of higher cost non-local time deposits, excess cash, and nonperforming assets has strengthened the Company's balance sheet which in turn is driving increased core earnings and performance measures," stated Jason Wessling, the Company's Chief Financial Officer. Return on equity for the six-month period ending June 30, 2017 increased to 12.41% compared to 9.02% for the same period the prior year. Return on assets also increased when comparing the same two six month periods to 1.20% for 2017 compared to 0.87% for 2016. Albeit, as stated earlier, influenced by some non-recurring events during second quarter 2017, returns also increased for this most recent quarter to 14.48% for return on equity and 1.41% for return on assets. The Company's efficiency ratio, which ignores the effects of the negative loan loss provision and OREO write-downs, improved to 62.2% for the six months ending June 30, 2017 from the 69.1% for the same period in the prior year.
Assets
Year-over-year, the Company's total assets grew by $34.1 million, or 9.5%, to $394.1 million as of June 30, 2017 compared to $360.0 million as of June 30, 2016; while for the first half of 2017 asset growth has slowed to $3.7 million or 1.0%. Slow asset growth year-to-date 2017 was due to the reduction of excess cash and non-performing assets (both problem loans and the write-down of OREO properties) but despite the reduction in non-performing loans, gross loans increased by $9.6 million or 3.0% to $327.2 million as of June 30, 2017 compared to $317.6 million as of year-end 2016. Gross loans grew over the past twelve months by $14.0 million, or 4.5%, when compared to $313.2 million at June 30, 2016. "We are pleased with the recent elimination of the Bank's largest problem loan and look forward to redeploying its funds and capital into new loans. Loan demand in our markets remains strong and our team of lenders is growing, therefore the trend in increasing outstanding loans should continue," stated Fred Johnson, the Company's Chief Credit Officer.
Loan growth during the first six months of 2017 was driven by an increase in commercial real estate loans which increased by $5.9 million or 3.7%, and year-over-year by $7.3 million or 4.6%. While this segment of the loan portfolio was the largest, its percentage of the total loan portfolio has remained consistent at 50.7% as of June 30, 2017 when compared to year-end 2016 and period-ended June 30, 2016 at 50.3% and 50.6%, respectively. Commercial and Industrial (C&I) loans were the fastest growing segment during first quarter 2017 at 3.1% but decreased during second quarter due to the payoff of a non-performing loan. C&I loans for the first half of 2017 decreased by 2.0% or $1.8 million and year-over-year by 0.9% or $764,000. As of June 30, 2017, C&I loans made up 26.2% of the loan portfolio which was a decrease from the year-end 2016 and period-ended June 30, 2016 amounts at 27.5% and 27.6%, respectively. Construction loans have increased $4.9 million or 11.4% during the first half of 2017 and year-over-year by $6.4 million, or 11.4%. Construction loans make up 14.8% of the Bank's total loan portfolio, which was an increase from year-end 2016 and June 30, 2016 amounts which were 13.7% and 13.4%, respectively. Construction lending in the Portland market has remained strong and these loans are performing well; however the Bank continues to be selective within this market and limit its exposure.
The allowance for loan loss decreased during the first six months of 2017 by $179,000 to $4.2 million as of June 30, 2017. During second quarter 2017 there was $1.1 million recovery of a partially charged-off non-performing loan which also released $200,000 of specific allowance on that loan for a full benefit of $1.3 million which was taken as a negative provision during the period. There were no loan losses during second quarter or year-to-date 2017. With the improved credit metrics of the portfolio from the reduction of this significant problem loan, the allowance for loan loss decreased to 1.29% of total loans as of June 30, 2017 compared to the June 30 and year-end 2016 amount of 1.39%. As of June 30, 2017, loans past due greater than 30 days and still accruing interest totaled $75,000 and there were no loans greater than 90 days still accruing interest. Non-performing assets as of June 30, 2017 in total were $4.1 million, which included $773,000 in well-secured non-accrual loans from one borrower and $3.3 million in OREO which consisted of four properties ranging in carrying amounts from $152,000 to $2.0 million.
Deposits
Total deposits at $319.1 million as of June 30, 2017 increased $29.7 million, or 10.3%, over the past year when compared to total deposits of $289.4 million as of June 30, 2016, despite a $10.1 million strategic reduction of non-local time deposits over this period as well. And when comparing deposit activity for the first half of 2017, while total deposits grew by only $1.4 million, or 0.4%, during these six months there was also a reduction of non-local time deposits of $6.4 million, therefore core local deposit growth was actually, $7.8 million, or 2.6%. As of June 30, 2017, non-interest bearing and NOW accounts totaled $133.3 million, or 41.8% of total deposits; money market and savings accounts totaled $120.6 million, or 37.8% of total deposits and time deposits totaled $65.1 million, or 20.4% of total deposits. During the first half of the 2017 non-interest bearing deposits grew by $10.3 million or 8.4%, which was offset by the decrease of money market and savings accounts of $4.3 million or 3.5%, and a decrease in time deposits of $4.6 million or 6.6%. The increase in non-interest bearing deposits and reduction of higher cost deposits has improved the deposit mix and aided earnings.
The Company's Chief Operating Officer, Bob Ekblad, stated "Core local deposit growth continues to be strong and the Bank is not only utilizing these funds for continued loan growth, but we are also taking this opportunity to reduce other more expensive deposits." As of June 30, 2017, the Bank had $1.2 million in reciprocal brokered deposits, a $5.0 million wholesale brokered time deposit, and other non-traditional out-of-area time deposits of $11.5 million, which in aggregate were $17.7 million, or 5.5 % of the Bank's total deposits; compared to December 31, 2016 and June 30, 2016 when these deposits aggregated to $24.1 million and $28.8 million, respectively.
Borrowings, Equity and Capital
Borrowings for the Company have remained unchanged. Federal Home Loan Bank (FHLB) borrowings have been $21.6 million and consist of eight notes with a weighted average cost of 2.68% and rates ranging from 1.08% to 3.28% while maturities range from December 2017 to April 2020. The Company has two separate junior subordinated debentures totaling $8.2 million which are utilized at the Bank as capital. Both debentures have variable rates tied to the three-month LIBOR; one for $3.1 million with a spread of 3.15% and a current rate of 4.45% and the other for $5.1 million with a spread of 1.90% and a current rate of 3.15%. Repurchase agreements continued their downward trend to $1.5 million at June 30, 2017 down 10.6% for the first half of 2017 and down 12.4% year-over-year.
The Company's equity at $38.9 million as of June 30, 2017 grew $2.4 million, or 6.6%, during the first half of the year, which was all from retained earnings. And retained earnings at the Bank continue to augment capital and support asset growth as the leverage ratio increased during the first half of 2017 to 11.85% from 11.48% at year-end 2016. This increased capital along with the reduction of non-performing loans also drove increases in the Bank's tier 1 risk-based capital and total risk-based capital ratios to 12.14% and 13.31%, respectively, when compared to year-end 2016 amounts which were 11.95% and 13.20%, respectively. The Bank's capital ratios continued to be above amounts required to be considered "well-capitalized" according to traditional regulatory capital standards.
About Premier Commercial Bancorp:
Information about the Company's stock may be obtained through the over-the-counter marketplace at www.otcmarkets.com. Premier Commercial Bancorp's stock symbol is "PRCB."
Premier Commercial Bancorp was formed in 2002 as a holding company for Premier Community Bank which was opened in 1999 by local business people to deliver loan and deposit product solutions through experienced and professional bankers to businesses, nonprofits, professionals, and individuals. The Bank serves the greater Portland Metropolitan area with four offices in Washington County and also serves Yamhill County with an office in Newberg.
For more information about Premier Commercial Bancorp, or its subsidiary Premier Community Bank, call (503) 693-7500 or visit our website at www.pcboregon.com. Information contained in or linked to our website is not incorporated as a part of this release.
Certain statements in this release may constitute forward-looking statements within the definition of the "safe-harbor" provisions of Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are subject to significant uncertainties, which could cause actual results to differ materially from those set forth in such statements. Forward-looking statements are those that incorporate management's current expectations and plans based on information currently known to them. These statements can sometimes be identified by words such as "believe," "estimate," "anticipate," "expect," "intend," "will," "may," "should," or other similar phrases or words. Readers are cautioned not to place undue reliance on forward-looking statements. In particular, they should not be construed as assurances of a given level of performance or as promises of a given set of management's actions. Some of the factors that could cause management to deviate from its current plans, or could cause the Company's results to differ from current expectations, include the effect of localized or regional economic shifts that may affect the collectability of loans or the value of the collateral underlying those loans; the effects of laws, regulations, policies and government actions upon the Company's assets and operations; sensitivity to the Northwestern Oregon geographic markets and events affecting those markets; and the impacts of new government initiatives upon us and our borrowers. The Company does not intend to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events.
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Consolidated Balance Sheets
Unaudited (amounts in 000s, except per share data and ratios) |
||||||||||||||||||
| June 30, | % Change | December 31, | % Change | |||||||||||||||
| 2017 | 2016 | 2017 vs. 2016 | 2016 | Year-to-Date | ||||||||||||||
| ASSETS | ||||||||||||||||||
| Cash & due from banks | $ | 22,734 | $ | 12,503 | 81.8 | % | $ | 29,346 | -22.5 | % | ||||||||
| Investment securities - available for sale | 22,923 | 16,655 | 37.6 | % | 23,589 | -2.8 | % | |||||||||||
| Investments - other | 4,901 | 2,993 | 63.7 | % | 2,815 | 74.1 | % | |||||||||||
| Gross loans | 327,179 | 313,190 | 4.5 | % | 317,604 | 3.0 | % | |||||||||||
| Allowance for loan losses | (4,235 | ) | (4,338 | ) | -2.4 | % | (4,414 | ) | -4.1 | % | ||||||||
| Net loans | 322,944 | 308,852 | 4.6 | % | 313,190 | 3.1 | % | |||||||||||
| Other real estate owned | 3,278 | 4,080 | -19.7 | % | 4,042 | -18.9 | % | |||||||||||
| Other assets | 17,346 | 14,889 | 16.5 | % | 17,430 | -0.5 | % | |||||||||||
| Total Assets | $ | 394,126 | $ | 359,972 | 9.5 | % | $ | 390,412 | 1.0 | % | ||||||||
| LIABILITIES | ||||||||||||||||||
| Deposits | $ | 319,083 | $ | 289,415 | 10.3 | % | $ | 317,701 | 0.4 | % | ||||||||
| Repurchase agreements | 1,509 | 1,723 | -12.4 | % | 1,688 | -10.6 | % | |||||||||||
| FHLB borrowings | 21,550 | 21,550 | 0.0 | % | 21,550 | 0.0 | % | |||||||||||
| Junior subordinated debentures | 8,248 | 8,248 | 0.0 | % | 8,248 | 0.0 | % | |||||||||||
| Other liabilities | 4,799 | 4,302 | 11.6 | % | 4,713 | 1.8 | % | |||||||||||
| Total Liabilities | 355,189 | 325,238 | 9.2 | % | 353,900 | 0.4 | % | |||||||||||
| STOCKHOLDERS' EQUITY | 38,937 | 34,734 | 12.1 | % | 36,512 | 6.6 | % | |||||||||||
| Total Liabilities and Stockholders' Equity | $ | 394,126 | $ | 359,972 | 9.5 | % | $ | 390,412 | 1.0 | % | ||||||||
| Shares outstanding at end-of-period | 5,851,487 | 5,840,609 | 5,840,609 | |||||||||||||||
| Book value per share | $ | 6.65 | $ | 5.95 | $ | 6.25 | ||||||||||||
| Allowance for loan losses to total loans | 1.29 | % | 1.39 | % | 1.39 | % | ||||||||||||
| Non-performing assets (non-accrual loans & OREO) | $ | 4,052 | $ | 6,956 | $ | 7,523 | ||||||||||||
| Bank Tier 1 leverage ratio | 11.85 | % | 11.84 | % | 11.48 | % | ||||||||||||
| Bank Tier 1 risk-based capital ratio | 12.14 | % | 11.50 | % | 11.95 | % | ||||||||||||
| Bank Total risk-based capital ratio | 13.31 | % | 12.75 | % | 13.20 | % | ||||||||||||
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Consolidated Statements of Net Income
Unaudited (amounts in 000s, except per share data and ratios) |
||||||||||||||||||||||
| Three Months Ended | Six Months Ended | |||||||||||||||||||||
| 6/30/2017 | 3/31/2017 | % Change | 6/30/2017 | 6/30/2016 | % Change | |||||||||||||||||
| INTEREST INCOME | ||||||||||||||||||||||
| Loans | $ | 4,400 | $ | 4,133 | 6.5 | % | $ | 8,533 | $ | 7,769 | 9.8 | % | ||||||||||
| Investments - available for sale | 116 | 119 | -2.5 | % | 235 | 181 | 29.8 | % | ||||||||||||||
| Federal funds sold and other | 64 | 49 | 30.6 | % | 113 | 77 | 46.8 | % | ||||||||||||||
| Total interest income | 4,580 | 4,301 | 6.5 | % | 8,881 | 8,027 | 10.6 | % | ||||||||||||||
| INTEREST EXPENSE | ||||||||||||||||||||||
| Deposits | 300 | 297 | 1.0 | % | 597 | 557 | 7.2 | % | ||||||||||||||
| Repurchase agreements and federal funds purchased | 1 | 1 | 0.0 | % | 2 | 6 | -66.7 | % | ||||||||||||||
| FHLB borrowings | 146 | 144 | 1.4 | % | 290 | 291 | -0.3 | % | ||||||||||||||
| Junior subordinated debentures | 74 | 69 | 7.2 | % | 143 | 124 | 15.3 | % | ||||||||||||||
| Total interest expense | 521 | 511 | 2.0 | % | 1,032 | 978 | 5.5 | % | ||||||||||||||
| NET INTEREST INCOME BEFORE LOAN LOSS PROVISION | 4,059 | 3,790 | 7.1 | % | 7,849 | 7,049 | 11.3 | % | ||||||||||||||
| PROVISION FOR LOAN LOSSES | (1,300 | ) | - | N/A | (1,300 | ) | - | N/A | ||||||||||||||
| NET INTEREST INCOME AFTER LOAN LOSS PROVISION | 5,359 | 3,790 | 41.4 | % | 9,149 | 7,049 | 29.8 | % | ||||||||||||||
| NON-INTEREST INCOME | 207 | 214 | -3.3 | % | 421 | 346 | 21.7 | % | ||||||||||||||
| NON-INTEREST EXPENSE | 2,614 | 2,530 | 3.3 | % | 5,144 | 5,112 | 0.6 | % | ||||||||||||||
| INVESTMENTS- REALIZED GAINS / (LOSSES) | - | - | n/a | - | - | n/a | ||||||||||||||||
| OREO VALUATION ADJ. & GAINS/(LOSSES) ON SALES - NET | (763 | ) | - | n/a | (763 | ) | 112 | -781.3 | % | |||||||||||||
| INCOME BEFORE PROVISION FOR INCOME TAXES | 2,189 | 1,474 | 48.5 | % | 3,663 | 2,395 | 52.9 | % | ||||||||||||||
| PROVISION FOR INCOME TAXES | 807 | 535 | 50.8 | % | 1,342 | 864 | 55.3 | % | ||||||||||||||
| NET INCOME | $ | 1,382 | $ | 939 | 47.2 | % | $ | 2,321 | $ | 1,531 | 51.6 | % | ||||||||||
| Earnings per share - Basic | $ | 0.24 | $ | 0.16 | $ | 0.40 | $ | 0.26 | ||||||||||||||
| Earnings per share - Diluted | $ | 0.24 | $ | 0.16 | $ | 0.40 | $ | 0.26 | ||||||||||||||
| Return on average equity | 14.48 | % | 10.25 | % | 12.41 | % | 9.02 | % | ||||||||||||||
| Return on average assets | 1.41 | % | 0.99 | % | 1.20 | % | 0.87 | % | ||||||||||||||
| Net interest margin | 4.44 | % | 4.30 | % | 4.37 | % | 4.30 | % | ||||||||||||||
| Efficiency ratio | 61.3 | % | 63.2 | % | 62.2 | % | 69.1 | % | ||||||||||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20170720006445/en/
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