PB Bankshares, Inc. (PBBK) has established itself as a community-focused financial institution, steadily expanding its reach and diversifying its operations to navigate the dynamic banking landscape. With a strategic emphasis on commercial lending and deposit growth, the company has demonstrated resilience and a commitment to driving long-term shareholder value.
Business Overview and History PB Bankshares, Inc. was formed in 2021 in connection with the conversion of Presence Bank from the mutual to the stock form of organization. Presence Bank, originally established in 1919, is a state-chartered savings bank headquartered in Coatesville, Pennsylvania. Prior to 2019, the bank's business had traditionally focused on originating fixed-rate one- to four-family residential real estate loans and offering retail deposit accounts.
A significant turning point in the company's history came in September 2019 when Janak M. Amin was hired as the President and CEO. Under Amin's leadership, the bank developed a robust commercial lending infrastructure, with a particular focus on expanding its commercial real estate and commercial and industrial loan portfolios. This strategic shift has helped diversify the bank's balance sheet and increase interest income.
The bank's primary market area now consists of Chester and Lancaster Counties and the surrounding Pennsylvania counties of Cumberland, Dauphin, and Lebanon. Management has also emphasized the importance of attracting commercial deposit accounts from its customers. As a result of these initiatives and the completion of Presence Bank's initial public stock offering on July 14, 2021, the company was able to grow and strengthen its balance sheet.
During 2021, PB Bankshares reported net income of $785,000, a significant improvement from the $415,000 net loss recorded in 2020. This turnaround was driven by growth in net interest income as the bank expanded its commercial lending activities. However, the company faced challenges in 2022 as net income dipped to $2.11 million due to an $821,000 pre-tax charge related to the disposal of premises and equipment. Despite this setback, PB Bankshares maintained its focus on commercial lending and deposit growth, positioning the bank for future success.
Financials and Performance PB Bankshares' financial performance has been stable, with the company reporting net income of $1.92 million in 2023, $2.11 million in 2022, and $785,000 in 2021. The company's annual revenue has also steadily increased, reaching $12.79 million in 2023, $11.32 million in 2022, and $8.51 million in 2021.
The company's operating cash flow has remained healthy, reaching $3.88 million in 2023, $3.37 million in 2022, and $1.39 million in 2021. PB Bankshares' free cash flow, which provides a measure of the company's financial flexibility, has also been positive, amounting to $3.24 million in 2023, $3.23 million in 2022, and $1.38 million in 2021.
For the most recent quarter ended September 30, 2024, PB Bankshares reported revenue of $3.06 million, representing a 17% increase compared to the same quarter last year. However, net income decreased by 21.2% to $404,000, primarily due to a 51.8% increase in interest expense. This was partially offset by a 17% increase in interest and dividend income and a 48.1% increase in noninterest income.
Liquidity PB Bankshares' liquidity position remains strong, with cash and cash equivalents totaling $54.5 million as of September 30, 2024, up from $32.4 million at the end of 2023. This robust liquidity, combined with the company's access to additional funding sources, positions PB Bankshares to navigate potential market challenges and seize growth opportunities.
The company has several available credit lines, including a $7.5 million unsecured line of credit with Atlantic Community Bankers Bank expiring in 2025, a $5 million unsecured line of credit with SouthState Bank, N.A., a $2 million discount window with the Federal Reserve Bank of Philadelphia, and an $89.2 million open-ended line of credit with the Federal Home Loan Bank.
PB Bankshares maintains a strong liquidity profile with a current ratio and quick ratio of 170.65. The company's debt-to-equity ratio stands at 0.95, indicating a balanced capital structure.
Product Segments and Market Position PB Bankshares operates primarily in the banking and financial services industry, offering a diverse range of products and services to its customers.
Loan Portfolio: As of September 30, 2024, the company's total loan portfolio stood at $349.19 million. Commercial real estate loans make up the largest segment at $205.62 million (58.9%), followed by one- to four-family residential loans at $105.95 million (30.3%). The commercial real estate portfolio has an average loan-to-value ratio of 62.6% and a debt service coverage ratio of 1.64 times, reflecting PBBK's focus on conservative underwriting standards. The company closely monitors this portfolio and conducts stress testing to assess the associated risks.
Deposit Products: PB Bankshares offers a range of deposit products, including interest-bearing and non-interest-bearing demand deposits, savings accounts, money market accounts, and certificates of deposit. As of September 30, 2024, the company's total deposits were $354.8 million, with certificates of deposit making up the largest portion at $170.29 million (48%), followed by interest-bearing demand deposits at $96.61 million (27.2%) and money market accounts at $51.05 million (14.4%).
Investment Portfolio: The company's investment portfolio primarily consists of debt securities available-for-sale, which totaled $36.38 million as of September 30, 2024. The portfolio is composed of agency bonds, corporate bonds, treasury securities, mortgage-backed securities, and collateralized mortgage obligations.
Fee-based Income: PB Bankshares generates noninterest income from various sources, including service charges on deposit accounts, debit card income, bank-owned life insurance income, and other service charges. For the nine months ended September 30, 2024, the company's noninterest income totaled $651,000, with service charges on deposit accounts and debit card income being the largest contributors.
Risks and Challenges While PB Bankshares has demonstrated resilience, the company faces several risks and challenges that merit attention. The banking industry's competitive landscape, interest rate fluctuations, and regulatory changes can all impact the company's profitability and growth trajectory.
Furthermore, the company's increasing focus on commercial lending, particularly in the real estate and hospitality sectors, exposes it to concentration risks. PB Bankshares carefully monitors its commercial real estate portfolio, conducting stress tests and closely tracking key credit metrics, such as loan-to-value and debt service coverage ratios. However, any downturn in these sectors could adversely affect the company's asset quality and financial performance.
Additionally, the COVID-19 pandemic had a significant impact on the banking industry, and PB Bankshares was not immune to its effects. The company's provision for credit losses increased in 2020 and 2021 as it proactively addressed the potential impact of the pandemic on its loan portfolio. While the company has since navigated the challenges posed by the pandemic, it remains vigilant in monitoring the evolving economic conditions and their implications for its business.
Outlook and Conclusion PB Bankshares' strategic pivot towards commercial lending and deposit growth has positioned the company for continued success. The company's focus on building a diversified loan portfolio and expanding its commercial customer base has resulted in steady financial performance and improved risk management.
Looking ahead, PB Bankshares is well-positioned to capitalize on the evolving banking landscape. The company's strong liquidity, access to funding sources, and disciplined approach to risk management suggest it is equipped to navigate the challenges and seize the opportunities that lie ahead.
As PB Bankshares continues to execute its strategic plan, investors should closely monitor the company's progress in diversifying its revenue streams, maintaining asset quality, and delivering consistent financial results. With a seasoned management team, a focused growth strategy, and a commitment to serving its local communities, PB Bankshares appears poised to navigate the dynamic banking environment and create long-term value for its shareholders.
The company's main office is located in Coatesville, Pennsylvania, with three other branches in New Holland, Oxford, and Georgetown, Pennsylvania. This strategic geographic presence allows PB Bankshares to serve its target market effectively while maintaining a strong community focus.
PB Bankshares' conservative underwriting practices, diversified product offerings, and emphasis on commercial banking and deposit relationships have enabled the company to generate steady financial performance and maintain a strong capital position. As of September 30, 2024, the Bank exceeded all regulatory capital requirements and was considered well-capitalized, providing a solid foundation for future growth and stability in the competitive banking landscape.