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.

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