SOURCE: Premier Commercial Bancorp

Premier Commercial Bancorp

January 29, 2015 16:05 ET

Premier Commercial Bancorp Reports Full Year and Fourth Quarter 2014 Results

HILLSBORO, OR--(Marketwired - Jan 29, 2015) - Premier Commercial Bancorp (OTCQB: PRCB), a single bank holding company for Premier Community Bank based in Hillsboro, Oregon (the Bank), today reported net income of $587,000, or $0.10 per diluted share, for the full year of 2014 compared to net income of $1.1 million, or $0.25 per diluted share, for 2013. 

Highlights for the year include:

  • Net interest income increased $735,000, or 7.1% for the year from both increased interest income on earning assets as well as a reduction in costs on paying liabilities. Net interest margin for 2014 was 3.54% compared to 3.38% for 2013.
  • During the fourth quarter, the Bank deleveraged by using excess cash and low-yielding securities to prepay $25.0 million of high cost FHLB debt that had an average rate of 4.50%. The prepayment penalty was almost $2.0 million which significantly impacted current year net income but will materially enhance future profitability. 
  • To assist in offsetting the FHLB prepayment penalty, the Bank sold and recognized a $1.0 million gain on a Preferred Trust Security. 
  • Loans grew $9.2 million, or 3.7%, year-over-year.
  • Non-performing assets decreased by $5.8 million, or 38.3%, and were $9.4 million, or 2.9% of total assets at year-end 2014 compared to the $15.1 million, or 4.5% of total assets at year-end 2013.
  • Deposits from our local markets grew by almost $22.0 million over the past year.
  • The Bank converted its loan production office in Newberg to a full-service branch.

"The fundamentals in regards to loan origination and deposit acquisition from within the Bank's natural markets are strong, problem assets continue to be reduced, and with the recent balance sheet restructuring, we are confident the right foundation has been set and normalized earnings will return for the years ahead," stated Rick A. Roby, the Company's President and CEO. And Mr. Roby continued, "Our franchise markets are strong and vibrant and our veteran team of bankers continue to produce excellent results in an improving economy. We look forward to a successful 2015." 

Earnings

Full year 2014 net income of $587,000 was down 46.1% from the $1.1 million for 2013 due to a number of significant non-routine transactions for both 2014 and 2013. During 2014, the Bank paid a $2.0 million penalty to prepay $25.0 million in FHLB debt that had an above-market average cost of 4.50%; however this cost was partially off-set by the one-time $1.0 million gain on the sale of a Preferred Trust Security that in prior years had been significantly written down through other-than-temporary-impairment (OTTI) accounting. Also contributing to higher earnings in the prior year, during 2013 the Bank took a reverse loan provision of $750,000 while it also benefited from a $900,000 one-time settlement. Valuation adjustments on OREO properties as well as the net gains and losses on the sale of OREO property adversely affected net income by $311,000 for 2014 and $1.6 million for 2013. 

Net interest income before the provision for loan losses was $11.1 million for 2014, or 7.1% higher than the $10.3 million for 2013. Interest income on loans was relatively stable for the year as the approximately $5.0 million increase in average outstanding loans offset rate reductions from scheduled repricings and lower-priced new loans. The average yield on loans decreased from 5.38% in 2013 to 5.30% in 2014. However, improved liability mix, lower repricings on various deposit products, and the early December pay-off of $25.0 million in FHLB debt reduced interest expense by $481,000 for 2014 compared to 2013. Overall, net interest margin improved from the 3.38% for 2013 to 3.54% for 2014. Bob Ekblad, the Company's Chief Financial Officer stated, "Looking forward, after prepaying the $25.0 million in FHLB debt, the Company will save $1.1 million annually in interest expense over the next few years, and this will add almost 40 basis points to our net interest margin beginning first quarter 2015."

Noninterest income at $625,000 for 2014 was relatively consistent with the $609,000 for 2013. Noninterest expense at $9.7 million for 2014 was up 2.7% when compared to the $9.4 million for the prior year due to increased personnel costs related to the existing employee base as well as strategic new hires, including those for the recently opened Newberg Branch. While costs related to problem loans and OREO declined by $111,000 in 2014 compared to 2013, they were still significant at $506,000 for the full-year and $86,000 for the fourth quarter of 2014.

Assets

Total assets as of December 31, 2014 at $324.4 million were down $10.7 million or 3.2% compared to the $335.1 million as of December 31, 2013 and were down $19.2 million, or 5.6%, when compared to the $343.6 million as of September 30, 2014. The reduction in assets was driven by the fourth quarter balance sheet deleveraging of $11.0 million in mortgage backed securities and excess cash to prepay $25.0 million in FHLB debt. Outstanding loans grew $9.2 million, or 3.7%, during 2014 to $257.6 million at year-end 2014 compared to the $248.4 million at year-end 2013. "The Bank's net loan growth was quite an accomplishment considering the amount of loan pay-downs from project completions, business sales, and other more routine reductions," stated Fred Johnson, the Bank's Chief Credit Officer. Mr. Johnson continued, "During 2014 the Bank had over $80.0 million in loan originations from our local market. With this momentum and fewer non-routine pay-downs expected, overall loan growth for 2015 should significantly exceed the growth of this past year." Year-over-year loan mix has remained relatively stable. Non-real estate commercial and industrial (C&I) loans were $76.0 million, or 29.5% of the loan portfolio as of December 31, 2014, owner occupied commercial real estate loans were $73.1 million and non-owner occupied commercial real estate loans were $46.2 million, or 28.4% and 17.9% respectively, while real estate acquisition, development, and construction loans were $29.6 million, or 11.5% of the total loan portfolio. 

As of December 31, 2014, the Bank had two loans totaling $765,000 that were past due over 30 days and still accruing interest compared to September 30, 2014 when there was one past due loan over 30 days for $671,000. At December 31, 2013, the Bank had no loans past due and still accruing interest. 

During fourth quarter 2014, the Bank charged-off $1.1 million in various loans to a single borrower that is in bankruptcy. For the year, the Bank had a total of $1.2 million in charge-offs, $143,000 in recoveries, or net charge-offs of approximately $1.1 million. The Bank's allowance for loan losses at $4.4 million was 1.69% of loans as of December 31, 2014 compared to the $5.4 million, or 2.18% of loans, as of December 31, 2013. With the continued improvement in the overall metrics of its loan portfolio over the past few years, the Bank had no loan loss provision expense for 2014 while for 2013 the Bank took a $750,000 reverse loan provision. 

Non-performing assets consist of loans on nonaccrual status and other real estate owned (OREO) which totaled $9.4 million, or 2.9% of total assets at year-end 2014 compared to the $15.1 million, or 4.5% of total assets at year-end 2013. As of December 31, 2014 the Bank had $4.0 million in loans on nonaccrual status which consisted of four relationships (one borrower accounted for $3.4 million) and OREO was $5.4 million which consisted of 10 projects/properties with carrying amounts ranging from $45,000 to $2.8 million.

Deposits and Repurchase Agreements

Total deposits increased $12.6 million, or 5.4% over the past year as they were $246.7 million as of December 31, 2014 compared to $234.1 million as of December 31, 2013. At year-end 2014, the Bank had no brokered deposits and $31.4 million of non-traditional out-of-area time deposits compared to $440,000 in brokered deposits and $40.3 million in non-traditional out-of-area time deposits at year-end 2013. "Based upon the overall increase in total deposits coinciding with a decrease in brokered and non-traditional out-of-area time deposits, the Bank's deposit growth from its local markets was almost $22.0 million over the past year, which was quite an accomplishment," stated Bob Ekblad. 

Over the past several quarters the Bank worked to reduce the amount of its outstanding client repurchase agreements as they are more expensive and less beneficial to the Bank than traditional deposits, however recent surge amounts created a temporary increase as repurchase agreements were $18.2 million as of December 31, 2014, compared to $16.5 million as of December 31, 2013, and $9.2 million as of September 30, 2014. 

Borrowings, Equity and Capital

During early December 2014, the Bank prepaid, at a penalty of almost $2.0 million, three Federal Home Loan Bank (FHLB) notes which totaled $25.0 million. Maturities on these notes were from October 2016 to January 2017 and they had rates ranging from 4.35% to 4.70% with a weighted average rate of 4.50%. The Bank liquidated approximately $11.0 million in mortgage-backed securities and utilized other excess cash as the source of funds for the debt reduction. As of December 31, 2014, the Bank had $16.0 million in FHLB debt at an average rate of 3.17% and all maturing in December 2017. And included within "Other Borrowings" as December 31, 2013, the Company had $1,095,000 of 8.50% convertible notes that were scheduled to mature in December 2014; however, during third quarter 2014, the Company converted all those notes, plus interest that would have been earned through maturity, to common stock at $4.40 per share, or 259,441 shares in total. 

Through retained earnings and the conversion of notes to common stock over the past year, the Company's equity increased $1.9 million, or 6.8% to $30.4 million as of December 31, 2014. At the Bank level, capital ratios continue to be well above regulatory standards. The Bank's leverage ratios and total risk-based capital ratios as of December 31, 2014 were 10.88% and 14.19%, respectively, compared to 10.65% and 14.23% as of December 31, 2013.

About Premier Commercial Bancorp:

In April 2014 the shareholders of Columbia Commercial Bancorp approved a proposal to amend its articles of incorporation to change its name to Premier Commercial Bancorp, which is reflective of the new name for its primary operating subsidiary, Premier Community Bank. Information about the Company's stock may be obtained through the OTCQB 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, the new name for Columbia 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 throughout Washington County and the greater Portland metropolitan area.

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.

   
Premier Commercial Bancorp
Consolidated Balance Sheet
Unaudited
(amounts in 000s, except per share data and ratios)
 
                             
  December 31,     % Change     September 30,     % Change  
  2014     2013     2014 vs. 2013     2014     Quarter  
                                   
ASSETS                                  
  Cash & due from banks $ 21,751     $ 27,602     -21.2 %   $ 34,234     -36.5 %
  Investment Securities - Available for Sale   23,948       39,471     -39.3 %     37,784     -36.6 %
  Investments - Other   4,025       2,149     87.3 %     4,055     -0.7 %
                                   
  Gross loans   257,624       248,434     3.7 %     251,647     2.4 %
  Allowance for loan losses   (4,362 )     (5,422 )   -19.5 %     (5,452 )   -20.0 %
    Net loans   253,262       243,012     4.2 %     246,195     2.9 %
                                   
  Other real estate owned   5,411       7,598     -28.8 %     5,899     -8.3 %
  Other assets   15,953       15,294     4.3 %     15,467     3.1 %
                                   
    Total Assets $ 324,350     $ 335,126     -3.2 %   $ 343,634     -5.6 %
                                   
LIABILITIES                                  
  Deposits $ 246,708     $ 234,082     5.4 %   $ 248,443     -0.7 %
  Repurchase agreements   18,188       16,530     10.0 %     9,240     96.8 %
  FHLB borrowings   16,000       41,000     -61.0 %     41,000     -61.0 %
  Other borrowings   1,247       2,465     -49.4 %     1,279     -2.5 %
  Junior subordinated debentures   8,248       8,248     0.0 %     8,248     0.0 %
  Other liabilities   3,588       4,355     -17.6 %     4,108     -12.7 %
    Total Liabilities   293,979       306,680     -4.1 %     312,318     -5.9 %
                                   
STOCKHOLDERS' EQUITY   30,371       28,446     6.8 %     31,316     -3.0 %
                                   
    Total Liabilities and Stockholders' Equity $ 324,350     $ 335,126     -3.2 %   $ 343,634     -5.6 %
                                   
Shares outstanding at end-of-period   5,795,415       5,535,974             5,795,415        
Book value per share $ 5.24     $ 5.14           $ 5.40        
Allowance for loan losses to total loans   1.69 %     2.18 %           2.17 %      
Non-performing assets (non-accrual loans & OREO) $ 9,351     $ 15,136           $ 11,035        
                                   
Bank Tier 1 leverage ratio   10.88 %     10.65 %           11.06 %      
Bank Tier 1 risk-based capital ratio   12.94 %     12.97 %           13.30 %      
Bank Total risk-based capital ratio   14.19 %     14.23 %           14.55 %      
                                   
                                   
                                   
Consolidated Statement of Operations
Unaudited
(amounts in 000s, except per share data and ratios)
 
                                   
    Twelve Months Ended           Three Months Ended        
    12/31/2014   12/31/2013     % Change     12/31/2014     9/30/2014     % Change  
INTEREST INCOME                                          
  Loans   $ 13,355   $ 13,286     0.5 %   $ 3,387     $ 3,420     -1.0 %
  Investments     728     586     24.2 %     156       181     -13.8 %
  Federal funds sold and other     103     60     71.7 %     34       34     0.0 %
    Total interest income     14,186     13,932     1.8 %     3,577       3,635     -1.6 %
                                           
INTEREST EXPENSE                                          
  Deposits     1,094     1,420     -23.0 %     259       267     -3.0 %
  Repurchase agreements and federal funds purchased     32     67     -52.2 %     8       8     0.0 %
  FHLB borrowings     1,570     1,654     -5.1 %     332       418     -20.6 %
  Other borrowings     190     199     -4.5 %     23       70     -67.1 %
  Junior subordinated debentures     226     253     -10.7 %     55       54     1.9 %
    Total interest expense     3,112     3,593     -13.4 %     677       817     -17.1 %
                                           
NET INTEREST INCOME BEFORE PROVISION FOR LOAN LOSSES     11,074     10,339     7.1 %     2,900       2,818     2.9 %
                                           
PROVISION FOR LOAN LOSSES     -     (750 )   -100.0 %     -       -     0.0 %
                                           
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES     11,074     11,089     -0.1 %     2,900       2,818     2.9 %
                                           
NON-INTEREST INCOME     625     609     2.6 %     151       165     -8.5 %
                                           
NON-INTEREST EXPENSE     9,686     9,428     2.7 %     2,453       2,320     5.7 %
                                           
NON-RECURRING SETTLEMENT     -     900     -100.0 %     -       -     0.0 %
FHLB NOTE PREPAYMENT PENALTIES     (1,955 )   -     100.0 %     (1,955 )     -     100.0 %
INVESTMENTS- REALIZED GAINS / (LOSSES)     1,024     -     100.0 %     1,024       -     100.0 %
OREO VALUATION ADJ. & GAINS/(LOSSES) ON SALES - NET     (311 )   (1,611 )   -80.7 %     (231 )     (63 )   266.7 %
                                           
INCOME BEFORE PROVISION FOR INCOME TAXES     771     1,559     -50.5 %     (564 )     600     -194.0 %
                                           
PROVISION (BENEFIT) FOR INCOME TAXES     184     470     -60.9 %     (246 )     203     -221.2 %
                                           
NET INCOME   $ 587   $ 1,089     -46.1 %   $ (318 )   $ 397     -180.1 %
                                           
Earnings per share - Basic   $ 0.10   $ 0.25           $ (0.06 )   $ 0.07        
                                           
Earnings per share - Diluted   $ 0.10   $ 0.25           $ (0.06 )   $ 0.07        
                                           
Return on average equity     1.95 %   4.55 %           -4.04 %     5.13 %      
Return on average assets     0.17 %   0.33 %           -0.37 %     0.46 %      
Net interest margin     3.54 %   3.38 %           3.64 %     3.60 %      
Efficiency ratio     82.8 %   86.1 %           80.4 %     77.8 %      
                                           
                                           

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