SOURCE: Premier Commercial Bancorp

Premier Commercial Bancorp

July 21, 2016 17:21 ET

Premier Commercial Bancorp Reports Second Quarter 2016 Results

HILLSBORO, OR--(Marketwired - Jul 21, 2016) - Premier Commercial Bancorp (OTC PINK: PRCB), a single bank holding company for Premier Community Bank based in Hillsboro, Oregon, today reported net income of $1.5 million, or $0.26 per diluted share, for the six months ended June 30, 2016, a 34.8% increase over the net income of $1.1 million, or $0.19 per diluted share, for the same six month period during 2015.

Highlights for the period included:

  • Loan growth of $24.1 million, or 8.3%, for the six months year-to-date 2016 and $40.6 million, or 14.9% over the past twelve months.
  • Core deposit growth of $24.6 million over the past twelve months and the mix continues to improve as time deposits were 25.3% of total deposits as of June 30, 2016 compared to 31.8% as of June 30, 2015.
  • Interest income on earning assets at $8.0 million for the first six months of 2016 was up $896,000, or 12.6%, when compared to the same six month period of 2015 while interest expense over the comparable periods was relatively unchanged. As a result, net interest income for the first six months of 2016 at $7.0 million was $921,000, or 15.0%, higher than the $6.1 million for the first six months of 2015.
  • Net interest margin at 4.30% year-to-date 2016 was up 30 basis points relative to the 4.00% for the same period of 2015.
  • ROE and ROA for the first six months of 2016 were 9.02% and 0.87%, respectively, compared to 7.36 % and 0.68% for the first six months of 2015.

"The Company's accomplishments during the first half of 2016 and throughout 2015 have been significant. Loan momentum is strong, core deposit growth continues, and asset mix has improved to drive earnings to the next level. All of our offices are performing well and the markets in which they operate, Hillsboro, Beaverton, Forest Grove, Tigard, and Newberg remain sound. Our foundation is strong and I see very limited hurdles to this momentum as we forge ahead," stated Rick A. Roby, the Company's President and CEO.

Earnings

The Company's net income at $1.5 million for the first six months of 2016 increased $395,000, or 34.8% when compared to the $1.1 million for the first six months of 2015. Driving the increase in profitability was loan growth over the past year which resulted in an $896,000 increase in interest on earning assets for the first six months of 2016 relative to 2015 and interest expense was relatively unchanged for the same periods. The increase in loans reduced low yielding excess cash such that the yield on earning assets for the first six months of 2016 was 4.89%, up 24 basis points when compared to the 4.65% for the prior year six month period while the year-to-date 2016 cost of funds at 0.83% was down slightly relative to the 0.85% for the prior year period. As a result, net interest margin year-to-date 2016 was 4.30% relative to 4.00% for the same period last year.

Non-interest income was relatively unchanged for the first six months of 2016 relative to same period of 2015 and when comparing the first and second quarters of 2016. Non-interest expense has increased $249,000, or 5.1% for the first six months of 2016 relative to 2015 due primarily from an increase in employee related costs and professional services.

Net income for second quarter 2016 at $756,000 was down $19,000, or 2.5% compared to the prior quarter's $775,000 as the during the first quarter 2016 the Bank had non-recurring gains on the sale of OREO and loan prepayment fees (which also drove the higher net interest margin for first quarter 2016 of 4.32% compared to 4.27% for second quarter).

The Company's return on equity increased to 9.02% for first six months of 2016 compared to 7.36% for the same six month period of 2015; and its return on assets also rose to 0.87% for the first six months of 2016 relative to 0.68% for the same period of 2015.

Assets

Total assets as of June 30, 2016 were $360.0 million which was a $13.5 million or 3.9% increase from to the $346.5 million as of December 31, 2015, and a $12.2 million or 3.5% increase relative to the June 30, 2015 total of $347.8 million. Loans grew $24.1 million, or 8.3%, during the first six months of the year to $313.2 million as of June 30, 2016 and grew $40.6 million, or 14.9%, over the past twelve months when compared to the $272.6 million outstanding as of June 30, 2015. Loan growth over these periods was funded by continued reductions in excess cash levels and from increases in core deposits. Regarding loan growth, the Company's Chief Credit Officer, Fred Johnson, stated, "Our team of lenders has remained diligent and steadfast with our existing clients and prospects over the past several years, and with the improved economy and increased business optimism, opportunities are there for us and despite a very competitive environment, we have had considerable successes as evidenced by the strong net growth in the Bank's outstanding loans." And Mr. Johnson further commented, "Credit quality remains sound while our pipeline remains solid and the lending team continues to have a positive outlook, however as our loan portfolio grows, routine loan repayments, especially in the Bank's construction portfolio, and unscheduled prepayments will increase and challenge net loan growth rates in the future compared to those over the past year or so."

Loan growth over the past twelve months has come from all major categories. Outstanding non-real estate commercial and industrial (C&I) loans grew $9.8 million or 12.7% to $86.4 million as of June 30, 2016, owner-occupied commercial real estate loans grew $17.5 million or 21.8% to $97.7 million, non-owner-occupied commercial real estate loans grew $9.7 million or 19.1% to $60.8 million, while construction loans grew $11.1 million or 36.0% over the past year to $41.9 million. At June 30, 2016 as a percentage of the total loan portfolio, non-real estate commercial and industrial (C&I) loans were 27.6%, owner- occupied commercial real estate loans were 31.2%, non-owner-occupied commercial real estate loans were 19.4% and construction loans were 13.4%.

At $4.3 million, the allowance for loan losses as of June 30, 2016 was consistent with the prior year-end and June 30, 2015 amounts, however with the continued increase in loans, the allowance for loan losses as a percentage of outstanding loans decreased to 1.39% as of June 30, 2016 compared to 1.51% and 1.59% as of December 31, 2015 and June 30, 2015, respectively. For the first six months of 2016, the Bank had $46,000 in loan charge-offs and $15,000 in recoveries, or $31,000 in net charge-offs; while for the full year of 2015, the Bank had net charge-offs of $7,000 as the result of $98,000 in loan charge-offs and $91,000 in recoveries. The Bank had no loan loss provision expense for the first six months of 2016 or for the full-year 2015. Bob Ekblad, the Company's Chief Financial Officer commented, "Activity in the Bank's allowance for loan losses has been minimal for the first six months of 2016 and for all of 2015 as net charge-offs over these periods were negligible and the Bank made no contributions to the allowance because prior excess reserves and the continued improvements in the credit quality metrics of the loan portfolio, which reduces existing reserve requirements, have both supported the increased reserve requirements brought about by the increase in outstanding loans; however, this trend can't continue forever, and with continued loan growth, increases to the allowance for loan losses through provision expenses will likely begin soon."

As of June 30, 2016, the Bank had $103,000 in loans past due over 30 days and still accruing interest compared to December 31 and June 30, 2015 when the Bank had no loans and $1.1 million of loans that were past due over 30 days and still accruing interest, respectively. Non-performing assets (consisting of loans on nonaccrual status and other real estate owned-OREO) were $7.0 million as of June 30, 2016 compared to $7.3 million as of December 31, 2015, and were down $1.3 million, or 16.4%, over the past twelve months when compared to the $8.3 million as of June 30, 2015. As of June 30, 2016 the Bank had one loan for $2.9 million in non-accrual status while OREO was $4.1 million and consisted of four properties with carrying amounts ranging from $183,000 to $2.8 million.

Deposits

Deposits totaled $289.4 million as of June 30, 2016 which was a $16.2 million, or 5.9%, increase when compared to $273.2 million as of the December 31, 2015, or an $11.9 million and 4.3%, increase from the $277.5 million as of June 30, 2015. Bob Ekblad added, "Despite some volatility in the Bank's core deposits over these reporting periods and the strategic reduction over the past year of non-traditional out-of-area time deposits, total deposits continue to increase and support loan growth." Mr. Ekblad continued, "In fact, if you exclude the planned reductions in the Bank's non-traditional out-of-area time deposits, core deposit growth trends remain very strong at $24.6 million over the past twelve months. And as most of this core deposit growth has been in non-interest or low-interest bearing transaction accounts, the Bank's deposit mix continues to improve. In fact, as of June 30, 2016 time deposits were down to 25.3% of total deposits compared to 31.8% a year ago." As of June 30, 2016, the Bank's demand deposits and NOW accounts totaled $103.2 million, or 35.7% of total deposits, money market and savings accounts were $112.8 million, or 39.0% of total deposits, and time deposits aggregated to $73.4 million, or 25.3% of total deposits. This compares favorably to June 30, 2015 when the Bank's demand deposits and NOW accounts totaled $88.9 million, or 32.0% of total deposits, money market and savings accounts were $100.3 million, or 36.2% of total deposits, and time deposits were $88.3 million, or 31.8% of total deposits.

As of June 30, 2016, the Bank had $2.1 million in reciprocal brokered deposits, a $5.0 million wholesale brokered time deposit, and other non-traditional out-of-area time deposits of $21.7 million, which in aggregate was down from the June 30, 2015 amounts of $2.0 million in reciprocal brokered deposits and no wholesale time deposits, but $39.4 million in other non-traditional out-of-area time deposits.

Borrowings, Equity and Capital

With the exception of repurchase agreements, outstanding borrowings as of June 30, 2016 have remained consistent with the December 31 and June 30, 2015 amounts. The Bank continues to reduce repurchase agreements as they are more expensive and less advantageous to the Bank than traditional deposits; they were down to $1.7 million as of June 30, 2016 compared to $5.4 million this time last year and $6.3 million at year-end 2015. Federal Home Loan Bank (FHLB) borrowings at $21.6 million as of June 30, 2016 have remained unchanged relative to prior reporting periods. The Bank's FHLB borrowings consists of eight separate notes at a weighted average cost of 2.68% with rates ranging from 1.08% to 3.28% and maturities that range from December 2017 to April 2020. The Company's junior subordinated debentures of $8.2 million as of June 30, 2016 and prior periods are long-term variable rate debt at the holding company for which the proceeds were down streamed to the Bank as capital. The Company has two separate junior subordinated debentures, one for $3.1 million at a current rate of 3.79% and the other for $5.1 million at a current rate of 2.55%.

At the Bank level, its Tier 1 Leverage Ratio has steadily risen over the past six and twelve months as retained earnings have outpaced overall asset growth. The Bank's Tier 1 Leverage Ratio was 11.84% as of June 30, 2016 compared to 11.55% and 11.33% as of December 31 and June 30, 2015, respectively. However, with the change of mix in the balance sheet from the reduction of cash and increase in loans, the Bank's Total Risk-Based Capital Ratios have decreased from 13.57% and 13.28% as of June 30 and December 31, 2015, respectively, to 12.75% as of June 30, 2016. These capital ratios continue to be above amounts required for the Bank to be considered "well-capitalized" according to traditional regulatory 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.

   
Consolidated Balance Sheets
Unaudited
(amounts in 000s, except per share data and ratios)
 
                               
    June 30,     % Change     December 31,     % Change  
    2016     2015     2016 vs. 2015     2015     Year-to-Date  
                                     
ASSETS                                    
  Cash & due from banks   $ 12,503     $ 40,453     -69.1 %   $ 21,372     -41.5 %
  Investment securities - available for sale     16,655       15,880     4.9 %     18,111     -8.0 %
  Investments - other     2,993       3,251     -7.9 %     3,232     -7.4 %
                                       
  Gross loans     313,190       272,597     14.9 %     289,128     8.3 %
  Allowance for loan losses     (4,338 )     (4,323 )   0.3 %     (4,369 )   -0.7 %
    Net loans     308,852       268,274     15.1 %     284,759     8.5 %
                                       
  Other real estate owned     4,080       4,658     -12.4 %     4,241     -3.8 %
  Other assets     14,889       15,270     -2.5 %     14,808     0.5 %
                                       
    Total Assets   $ 359,972     $ 347,786     3.5 %   $ 346,523     3.9 %
                                     
LIABILITIES                                    
  Deposits   $ 289,415     $ 277,471     4.3 %   $ 273,220     5.9 %
  Repurchase agreements     1,723       5,426     -68.2 %     6,328     -72.8 %
  FHLB borrowings     21,550       21,550     0.0 %     21,550     0.0 %
  Other borrowings     -       -     0.0 %     -     0.0 %
  Junior subordinated debentures     8,248       8,248     0.0 %     8,248     0.0 %
  Other liabilities     4,302       3,609     19.2 %     4,081     5.4 %
    Total Liabilities     325,238       316,304     2.8 %     313,427     3.8 %
                                     
STOCKHOLDERS' EQUITY     34,734       31,482     10.3 %     33,096     4.9 %
  Total Liabilities and Stockholders' Equity   $ 359,972     $ 347,786     3.5 %   $ 346,523     3.9 %
                                     
Shares outstanding at end-of-period     5,840,609       5,795,415             5,824,541        
Book value per share   $ 5.95     $ 5.43           $ 5.68        
Allowance for loan losses to total loans     1.39 %     1.59 %           1.51 %      
Non-performing assets (non-accrual loans & OREO)   $ 6,956     $ 8,320           $ 7,285        
                                     
Bank Tier 1 leverage ratio     11.84 %     11.33 %           11.55 %      
Bank Tier 1 risk-based capital ratio     11.50 %     12.31 %           12.03 %      
Bank Total risk-based capital ratio     12.75 %     13.57 %           13.28 %      
                                     
                                     
                                     
Consolidated Statements of Net Income
Unaudited
(amounts in 000s, except per share data and ratios)
                                     
    Three Months Ended           Six Months Ended        
    6/30/2016     3/31/2016     % Change     6/30/2016     6/30/2015     % Change  
INTEREST INCOME                                            
  Loans   $ 3,896     $ 3,873     0.6 %   $ 7,769     $ 6,858     13.3 %
  Investments - available for sale     88       93     -5.4 %     181       203     -10.8 %
  Federal funds sold and other     27       50     -46.0 %     77       70     10.0 %
    Total interest income     4,011       4,016     -0.1 %     8,027       7,131     12.6 %
                                             
INTEREST EXPENSE                                            
  Deposits     278       279     -0.4 %     557       556     0.2 %
  Repurchase agreements and federal funds purchased     3       3     0.0 %     6       9     -33.3 %
  FHLB borrowings     145       146     -0.7 %     291       277     5.1 %
  Other borrowings     -       -     0.0 %     -       51     -100.0 %
  Junior subordinated debentures     63       61     3.3 %     124       110     12.7 %
    Total interest expense     489       489     0.0 %     978       1,003     -2.5 %
                                             
NET INTEREST INCOME BEFORE LOAN LOSS PROVISION     3,522       3,527     -0.1 %     7,049       6,128     15.0 %
                                             
PROVISION FOR LOAN LOSSES     -       -     0.0 %     -       -     0.0 %
                                             
NET INTEREST INCOME AFTER LOAN LOSS PROVISION     3,522       3,527     -0.1 %     7,049       6,128     15.0 %
                                             
NON-INTEREST INCOME     176       170     3.5 %     346       324     6.8 %
                                             
NON-INTEREST EXPENSE     2,518       2,594     -2.9 %     5,112       4,863     5.1 %
                                             
INVESTMENTS- REALIZED GAINS / (LOSSES)     -       -     0.0 %     -       3     -100.0 %
OREO VALUATION ADJ. & GAINS/(LOSSES) ON SALES - NET     -       112     -100.0 %     112       146     -23.3 %
                                             
INCOME BEFORE PROVISION FOR INCOME TAXES     1,180       1,215     -2.9 %     2,395       1,738     37.8 %
                                             
PROVISION FOR INCOME TAXES     424       440     -3.6 %     864       602     43.5 %
                                             
NET INCOME   $ 756     $ 775     -2.5 %   $ 1,531     $ 1,136     34.8 %
                                             
Earnings per share - Basic   $ 0.13     $ 0.13           $ 0.26     $ 0.19        
                                             
Earnings per share - Diluted   $ 0.13     $ 0.13           $ 0.26     $ 0.19        
                                             
Return on average equity     8.80 %     9.24 %           9.02 %     7.36 %      
Return on average assets     0.85 %     0.89 %           0.87 %     0.68 %      
Net interest margin     4.27 %     4.32 %           4.30 %     4.00 %      
Efficiency ratio     68.1 %     70.2 %           69.1 %     75.4 %      
                                             

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