SOURCE: Premier Commercial Bancorp

Premier Commercial Bancorp

October 27, 2016 18:01 ET

Premier Commercial Bancorp Reports Third Quarter 2016 Results

HILLSBORO, OR--(Marketwired - Oct 27, 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 $2.5 million, or $0.43 per diluted share, for the nine months ended September 30, 2016, a 35.7% increase over the net income of $1.9 million, or $0.32 per diluted share, for the same nine month period during 2015. Net income for third quarter 2016 alone was $1.0 million, or $0.17 per diluted share, compared to $756,000 for second quarter 2016 and $738,000 for third quarter 2015, or $0.13 per diluted share for each of these two previous quarters.

Highlights for the period included:

  • ROE and ROA for the first nine months of 2016 were 9.82% and 0.94%, respectively, compared to 7.97% and 0.74% for the first nine months of 2015. For third quarter 2016 alone, ROE and ROA were 11.34% and 1.08%, respectively.
  • Loan growth of $21.4 million, or 7.4%, for the nine months year-to-date 2016 and $31.8 million, or 11.4% over the past twelve months.
  • Local deposit growth of $36.3 million over the past twelve months and the mix continues to improve as time deposits were 23.6% of total deposits as of September 30, 2016 compared to 29.8% as of September 30, 2015.
  • Net interest margin at 4.34% year-to-date 2016 was up 38 basis points relative to the 3.96% for the same period of 2015.
  • Net interest income of $10.9 million for the first nine months of 2016 was up $1.5 million, or 16.5% when compared to the $9.4 million for the same period of 2015 as interest expense was relatively unchanged and revenues from earning assets grew.

"The Company's ability to grow the balance sheet over the past year has led to our most profitable quarter in recent history with net income of over $1.0 million. The Bank has worked hard this past year and prior years to not only grow the balance sheet, but also to make considerable improvements with its mix of assets and liabilities; and this is all coming together as evident by our returns for this past quarter and year-to-date," stated Rick A. Roby, the Company's President and CEO. And Mr. Roby added, "And we look to continue to grow on this momentum as we finish out 2016 and go into 2017."

Earnings

The Company's net income at $2.5 million for the first nine months of 2016, increased $669,000, or 35.7% when compared to the $1.9 million for the same nine month period of 2015. Driving the increase in profitability was the $1.5 million, or 14.1%, increase in revenues on earning assets driven by loan growth while at the same time interest expense was unchanged when comparing the first nine months of 2016 to that of 2015. However, contributing somewhat to the rise in interest income for the year, the Company recorded $114,000 of previously unrecognizable interest income on a non-performing loan that paid off during third quarter 2016. This non-recurring item and the continued increase in loans, as well as reduced lower yielding excess cash, drove the yield up on earning assets for the first nine months of 2016 to 4.93%, up 33 basis points when compared to the 4.60% for the prior year nine month period. Year-to-date 2016 cost of funds at 0.82% was down slightly relative to the 0.84% for the prior year period due an improved deposit mix (reduction in time deposits). Net interest margin for the first nine months of 2016 was 4.34%, up 38 basis points relative to 3.96% for the same period of 2015.

Non-interest income increased $35,000, or 7.1%, during the first nine months of 2016 relative to same period of 2015. Non-interest expense increased $380,000, or 5.3%, for the first nine months of this year compared to the previous year due primarily from an increase in employee related costs and professional services.

Net income for third quarter 2016 at $1.0 million was up $256,000, or 33.9%, compared to the $756,000 for second quarter 2016. Driving the quarter-over-quarter variance was $328,000 in increased net interest income for third quarter 2016 driven by the increase in average loans, the one time interest recapture of $114,000, and a $66,000 reduction on non-interest expense. Regarding the net interest margin of 4.41% for third quarter 2016 compared to the 4.27% for second quarter 2016, the Company's Chief Financial Officer Jason Wessling stated, "We are pleased with the continued growth of our net margin as we grow loans and improve our liability mix, however this quarter's recognition of $114,000 of non-recurring loan interest inflated this quarter's margin by 13 basis points and the year-to-date margin by 5 basis points."

The Company's return on equity increased to 9.82% for first nine months of 2016 compared to 7.97% for the same nine month period of 2015, while return on assets were 0.94% and 0.74% for the same nine month periods of 2016 and 2015. For third quarter 2016 alone, the Company's return on equity and return on assets were 11.34% and 1.08%, respectively.

Assets

As of September 30, 2016 total assets were $374.5 million which was a $24.9 million, or 7.1%, increase compared to the $349.6 million as of September 30, 2015. Outstanding loans drove this increase as they were $310.5 million as of September 30, 2016 compared to $278.7 million as of September 30, 2015, which amounted to growth of $31.8 million or 11.4%. Regarding loan growth, the Company's Chief Credit Officer Fred Johnson stated, "Despite considerable routine payoffs and a competitive market, a strong volume of originations over the past year resulted in considerable net loan growth. The volume was and will continue to be driven by the Bank's officers expanding existing and establishing new, key client relationships. This included both loans and deposits which played a significant role in funding this growth. This relationship approach to banking is evident in our loan mix as C&I loans and owner-occupied real estate loans are our most significant loan buckets."

Over the past twelve months, outstanding non-real estate commercial and industrial (C&I) loans grew $5.3 million or 6.7% to $84.7 million as of September 30, 2016, owner-occupied commercial real estate loans grew $14.1 million or 17.3% to $95.2 million, non-owner-occupied commercial real estate loans grew $11.0 million or 22.4% to $60.2 million, while construction loans grew $7.8 million or 21.7% over the past year to $43.5 million. At September 30, 2016 as a percentage of the total loan portfolio, non-real estate commercial and industrial (C&I) loans were 27.3%, owner-occupied commercial real estate loans were 30.6%, non-owner-occupied commercial real estate loans were 19.4% and construction loans were 14.0%.

The allowance for loan losses as of September 30, 2016 at $4.4 million was consistent with the prior year-end and September 30, 2015 amounts. However, the continued increases in outstanding loans caused the allowance for loan losses as a percentage of outstanding loans to decrease which at 1.41% as of September 30, 2016 was down from the 1.51% and 1.55% as of December 31, 2015 and September 30, 2015, respectively. The Bank had $67,000 in loan charge-offs and $87,000 in recoveries, resulting in $20,000 in net recoveries for the first nine months of 2016. For the full year of 2015, the Bank had loan charge-offs of $91,000 and $98,000 in recoveries, or $7,000 in net recoveries. "While outstanding loans continue to grow and though one relationship was moved to non-accrual status during third quarter 2016, the overall credit metrics of the Bank's loan portfolio are continuing to improve. In addition the Bank had net recoveries thus far in 2016 and for all of 2015 and therefore no provision for loan loss was taken for the quarter, year-to-date 2016, nor for the full year of 2015," stated Mr. Wessling.

As of September 30, 2016, the Bank had $144,000 in loans past due over 30 days and still accruing interest compared to December 31, 2015 when the Bank had no loans past due and compared to September 30, 2015 when the Bank reported $1.1 million of loans that were past due over 30 days and still accruing interest. Non-performing assets (consisting of loans on nonaccrual status and other real estate owned-OREO) were $7.6 million as of September 30, 2016 compared to $7.3 million as of December 31, 2015, and were down $517,000, or 6.4%, over the past twelve months when compared to the $8.1 million as of September 30, 2015. An additional loan relationship was moved to non-accrual status during the quarter so as of September 30, 2016, the Bank had two relationships totaling $3.6 million in non-accrual status. OREO continues to see modest declines and totaled $4.0 million as of September 30, 2016 and consisted of four properties with carrying amounts ranging from $183,000 to $2.8 million.

Deposits

Total deposits grew $24.4 million, or 8.8%, over the past twelve months to $302.2 million as of September 30, 2016. Bob Ekblad, the Company's Chief Operating Officer (and former Chief Financial Officer) stated, "The Bank continues to focus on the planned reduction of non-traditional out-of-area time deposits and replacing them with lower cost local transaction accounts. In fact, over the past 12 months non-traditional out-of-area time deposits were reduced by $11.9 million and local deposits increased by $36.3 million." As of September 30, 2016 time deposits totaled $71.2 million, or 23.6% of the Bank's total deposits and were down $11.6 million compared to the $82.8 million or 29.8% of total deposits a year ago. And also as of September 30, 2016, the Bank's demand deposits and NOW accounts totaled $109.3 million, or 36.1% of total deposits, while money market and savings accounts were $121.7 million, or 40.3% of total deposits. Strong growth of these transaction accounts was evident compared to the September 30, 2015 when amounts for demand deposits and NOW accounts of $92.5 million, or 33.3% of total deposits and money market and savings accounts were $102.5 million, or 36.9% of total deposits.

As of September 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 $17.7 million, which in aggregate were $24.8 million. These were down $12.0 million from the September 30, 2015 aggregate amount of $36.8 million at which time the Bank had $2.2 million in reciprocal brokered deposits, no wholesale time deposits, and $34.6 million in other non-traditional out-of-area time deposits.

Borrowings, Equity and Capital

Repurchase agreements at $2.0 million as of September 30, 2016 were down $4.3 million, or 68.2% since December 31, 2015 as the Bank has strategically focused on reducing this more expensive form of funding. Federal Home Loan Bank (FHLB) borrowings at $21.6 million as of September 30, 2016 have remained unchanged and consisted of eight separate notes at a weighted average cost of 2.68% with rates ranging from 1.08% to 3.28% and maturities ranging from December 2017 to April 2020. The Company's junior subordinated debentures of $8.2 million as of September 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 4.01% and the other for $5.1 million at a current rate of 2.75%.

Retained earnings are keeping pace with overall asset growth as the Bank's Tier 1 Leverage Ratio continues to increase and was 11.63% as of September 30, 2016 compared to 11.55% and 11.30% as of December 31 and September 30, 2015, respectively. However, with the increase in loans and reduction of cash (which is lower risk-weighted) has caused the Bank's Total Risk-Based Capital Ratio to decrease from 13.40% and 13.28% as of September 30, 2015 and December 31, 2015, respectively, to 13.09% as of September 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)  
                               
    September 30,     % Change     December 31,     % Change  
    2016     2015     2016 vs. 2015     2015     Year-to-Date  
                                     
ASSETS                                    
  Cash & due from banks   $ 24,550     $ 33,184     -26.0 %   $ 21,372     14.9 %
  Investment securities - available for sale     19,848       19,104     3.9 %     18,111     9.6 %
  Investments - other     2,980       3,242     -8.1 %     3,232     -7.8 %
                                       
  Gross loans     310,488       278,730     11.4 %     289,128     7.4 %
  Allowance for loan losses     (4,389 )     (4,334 )   1.3 %     (4,369 )   0.5 %
    Net loans     306,099       274,396     11.6 %     284,759     7.5 %
                                       
  Other real estate owned     4,042       4,523     -10.6 %     4,241     -4.7 %
  Other assets     17,028       15,112     12.7 %     14,808     15.0 %
                                       
    Total Assets   $ 374,547     $ 349,561     7.1 %   $ 346,523     8.1 %
                                     
LIABILITIES                                    
  Deposits   $ 302,240     $ 277,830     8.8 %   $ 273,220     10.6 %
  Repurchase agreements     2,010       5,735     -65.0 %     6,328     -68.2 %
  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     4,737       3,936     20.4 %     4,081     16.1 %
    Total Liabilities     338,785       317,299     6.8 %     313,427     8.1 %
                                     
STOCKHOLDERS' EQUITY     35,762       32,262     10.8 %     33,096     8.1 %
    Total Liabilities and Stockholders' Equity   $ 374,547     $ 349,561     7.1 %   $ 346,523     8.1 %
                                     
Shares outstanding at end-of-period     5,840,609       5,795,415             5,824,541        
Book value per share   $ 6.12     $ 5.57           $ 5.68        
Allowance for loan losses to total loans     1.41 %     1.55 %           1.51 %      
Non-performing assets (non-accrual loans & OREO)   $ 7,579     $ 8,096           $ 7,285        
                                     
Bank Tier 1 leverage ratio     11.63 %     11.30 %           11.55 %      
Bank Tier 1 risk-based capital ratio     11.84 %     12.14 %           12.03 %      
Bank Total risk-based capital ratio     13.09 %     13.40 %           13.28 %      
                                     
                                     
                                     
Consolidated Statements of Net Income  
Unaudited  
(amounts in 000s, except per share data and ratios)  
                           
  Three Months Ended         Nine Months Ended      
  9/30/2016   6/30/2016   % Change     9/30/2016   9/30/2015   % Change  
INTEREST INCOME                                  
  Loans $ 4,240   $ 3,896   8.8 %   $ 12,009   $ 10,454   14.9 %
  Investments - available for sale   82     88   -6.8 %     263     300   -12.3 %
  Federal funds sold and other   38     27   40.7 %     115     107   7.5 %
    Total interest income   4,360     4,011   8.7 %     12,387     10,861   14.1 %
                                   
INTEREST EXPENSE                                  
  Deposits   297     278   6.8 %     854     851   0.4 %
  Repurchase agreements and federal funds purchased   2     3   -33.3 %     8     12   -33.3 %
  FHLB borrowings   147     145   1.4 %     438     424   3.3 %
  Other borrowings   -     -   0.0 %     -     51   -100.0 %
  Junior subordinated debentures   64     63   1.6 %     188     165   13.9 %
    Total interest expense   510     489   4.3 %     1,488     1,503   -1.0 %
                                   
NET INTEREST INCOME BEFORE LOAN LOSS PROVISION   3,850     3,522   9.3 %     10,899     9,358   16.5 %
                                   
PROVISION FOR LOAN LOSSES   -     -   0.0 %     -     -   0.0 %
                                   
NET INTEREST INCOME AFTER LOAN LOSS PROVISION   3,850     3,522   9.3 %     10,899     9,358   16.5 %
                                   
NON-INTEREST INCOME   182     176   3.4 %     528     493   7.1 %
                                   
NON-INTEREST EXPENSE   2,452     2,518   -2.6 %     7,564     7,184   5.3 %
                                   
INVESTMENTS- REALIZED GAINS / (LOSSES)   -     -   0.0 %     -     3   -100.0 %
OREO VALUATION ADJ. & GAINS/(LOSSES) ON SALES - NET   17     -   n/a       129     211   -38.9 %
                                   
INCOME BEFORE PROVISION FOR INCOME TAXES   1,597     1,180   35.3 %     3,992     2,881   38.6 %
                                   
PROVISION FOR INCOME TAXES   585     424   38.0 %     1,449     1,007   43.9 %
                                   
NET INCOME $ 1,012   $ 756   33.9 %   $ 2,543   $ 1,874   35.7 %
                                   
Earnings per share - Basic $ 0.17   $ 0.13         $ 0.43   $ 0.32      
                                   
Earnings per share - Diluted $ 0.17   $ 0.13         $ 0.43   $ 0.32      
                                   
Return on average equity   11.34 %   8.80 %         9.82 %   7.97 %    
Return on average assets   1.08 %   0.85 %         0.94 %   0.74 %    
Net interest margin   4.41 %   4.27 %         4.34 %   3.96 %    
Efficiency ratio   60.8 %   68.1 %         66.2 %   72.9 %    
                                   

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