Market Overview

People's Bank Year-to-Date Earnings Increase 55%

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People's Bank of Commerce (OTC:PBCO) announced today its financial
results for the second quarter and year-to-date 2018. The bank reported
net income of $845,000 or $0.29 per basic and diluted share for the
second quarter of 2018, compared to net income of $483,000 or $0.20 per
share in the same quarter of 2017. Earnings for the first six months of
2018 totaled $1,569,000 or $0.56 per share compared to $1,011,000 or
$0.43 per share during the first half of 2017. Diluted earnings per
share for the trailing 12 months ending 6/30/2018 were $0.97 per share
compared to $0.92 one year earlier.

Balance Sheet June 30, 2018 vs. June 30, 2017:

  • Total Loans increased 15%
  • Total Deposits increased 14%
  • Total Assets increased 16%
  • Total Equity increased 22%

Income Statement year-to date June 30, 2018 vs. June 30, 2017:

  • Net-interest Income increased 9%
  • Pre-tax income increased 34%
  • Non-interest Income increased 257%
  • Non-interest Expense increased 46%

President's Comments

"Total loans and deposits showed strong increases in the first half of
2018 as noted above," stated Ken Trautman, bank President and CEO. "Our
pipeline of approved but not yet funded loans is at the highest level in
the bank's history, which positions us well for the last half of this
year. The recent increases in interest rates has been expected for some
time and will steadily increase our cost of funds. The bank has been
fortunate to have large non-interest demand deposit balances, about 46%
of total deposits, which have lessened the impact of rising interest
rates. Increasing local and national competition for deposits could
impact the bank's net interest margin."

Provision for Credit Losses

Mr. Trautman continued, "With total loans increasing over 12% during
first 6 months of this year, our provision for loan and lease losses has
increased to $224 thousand compared to a decrease of $6 thousand during
the same period last year. Credit quality remains strong with no loans
past due over 90 days or on non-accrual at the end of June 2018 compared
to $71 thousand of non-accrual in 2017. At the end of the second quarter
2018, the loan loss reserve was 1.126% of loans held for investment
compared to 1.15% at the end of the second quarter 2017.

Non-Interest Income

For the quarter ending June 30, 2018, non-interest income was $1.8
million compared to $429 thousand in the same quarter one year earlier.
For the first half of 2018, non-interest income was higher than the
previous year with $3.4 million compared to $949 thousand year-to-date
in 2017. The bank's wholly owned subsidiary Steelhead Finance, LLC
generated $2.4 million in non-interest income during the first half of
2018.

Non-Interest Expense

For the quarter ending June 30, 2018, non-interest expense was $3.6
million compared to $2.4 million in 2017. Year-to-date non-interest
expense totaled $6.9 million through June 30, 2018, compared to $4.7
million in the same period the prior year. Mr. Trautman explained, "Two
significant items impacted non-interest expense during 2018, the first
is the salary expense associated with the Steelhead Finance purchase and
the second is the salary and overhead expense associated with the bank's
expansion into the Klamath Falls market."

Capital

As of June 30, 2018, shareholder's equity totaled $33 million, compared
to $27.2 million at June 30, 2017. The bank's leverage ratio was 10.1%
at the end of the second quarter 2017, compared to 9.6% one year ago.
Book value per share was $11.37 on June 30, 2018, compared to $10.80 on
June 30, 2017, when adjusted for the 5% stock dividend received in May
of 2018.

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          
Balance Sheet (unaudited)
(dollars in thousands) 6/30/2018 3/31/2018 12/31/2017 9/30/2017 6/30/2017
Assets
Cash and due from banks 2,431 11,918 14,046 13,133 11,713
Federal funds sold -
Interest-bearing deposits 15,713 13,948 8,209 22,377 14,164
Investment securities 26,198 26,871 28,538 27,436 31,315
Loans held for sale 1,381 1,862 2,191 742 2,295

Loans held for investment, net of unearned income

233,600 219,359 208,657 202,165 202,891
Allowance for loan and lease losses (2,631 ) (2,523 ) (2,400 ) (2,327 ) (2,339 )
Loans, net 230,969 216,836 206,257 199,838 200,552
Premises and equipment, net 16,165 14,806 12,196 10,965 7,432
Other assets 34,064   32,581   31,004   26,601   13,947  
Total assets 326,921   318,822   302,441   301,092   281,418  
 
 
Liabilities
Deposits
Demand noninterest-bearing 131,743 126,424 118,948 117,755 113,979
Demand interest-bearing 29,300 27,188 26,218 25,717 23,882
Money market and savings 107,634 108,666 101,141 101,925 97,656
Time deposits of less than $100,000 16,136 16,483 16,555 17,087 8,406
Time deposits of more than $100,000 2,074   2,067   2,060   1,803   8,131  
Total deposits 286,887 280,828 264,922 264,287 252,054
Other liabilities 7,022   5,983   6,103   5,093   2,208  
Total liabilities 293,909 286,811 271,025 269,380 254,262
 
 
Shareholders' Equity
Common stock, surplus, retained earnings 33,891 32,901 32,152 31,671 27,067
Accumulated other comprehensive (278 ) (249 ) (56 ) 41   89  
income (loss)
Unearned ESOP Shares (601 ) (641 ) (680 ) -   -  
Total shareholders' equity 33,012 32,011 31,416 31,712 27,156
 
Total Liabilities and Equity 326,921   318,822   302,441   301,092   281,418  
 
People's Bank of Commerce
Income Statement (unaudited)                    
Three Months Ended Twelve Months Ended
(dollars in thousands) 6/30/2018     3/31/2018     6/30/2017   6/30/2018     6/30/2017  
Interest Income      
Loans 2,957 2,741 2,597 10,986 9,948
Investments 170 173 180 690 748
Federal funds sold and due from banks 108   97   30   338   67  
Total interest income 3,235 3,011 2,807 12,014 10,763
 
Interest Expense
Deposits 188 143 100 572 405
Other 84   60   -   144   -  
Total interest expense 272 203 100 716 405
 
Net interest income 2,963 2,808 2,706 11,298 10,358
Provision for credit losses 102   122   30   283   133  

Net Interest Income after provision for credit losses

2,861 2,686 2,676 11,015 10,225
 
Non-Interest Income
Service charges on deposit accounts 78 75 67 298 287
Mortgage lending income 159 176 156 744 860
Steelhead Finance income 1,312 1,085 3,797
Gain (loss) on other real estate - - 25 123
Other non-interest income 289   211   206   823   753  
Total non-interest income 1,838 1,547 429 5,687 2,023
 
Non-Interest Expense
Bank salary and benefits 1,693 1,601 1,395 6,711 5,284
Steelhead Finance salary and benefits 523 495 1,009
Premises and fixed assets 474 389 354 1,650 1,367
Other 893   801   624   3,095   2,392  
Total non-interest expense 3,583 3,286 2,373 12,465 9,043
 
Net income before taxes 1,116 948 732 4,237 3,205
Income taxes 271   224   250   1,660   1,060  
Net income 845   724   483   2,577   2,145  
 
Basic earnings per share * 0.29 0.26 0.20 0.98 0.93
Diluted earnings per share * 0.29 0.26 0.20 0.97 0.92
Average common shares outstanding * 2,897,801 2,746,227 2,394,360 2,635,817 2,307,857
 
Performance Measures
Return on average assets 1.06 % 0.94 % 0.66 % 0.85 % 0.80 %
Return on average equity 10.55 % 8.94 % 6.72 % 9.81 % 8.16 %
Net interest margin 4.19 % 4.35 % 4.13 % 4.22 % 4.17 %
Efficiency ratio 74.63 %   75.45 %   75.69 % 73.39 %   73.04 %
* adjusted for 5% stock dividend May 2017, May 2018

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