Oregon Pacific Bancorp Announces Third Quarter Earnings Results

Rhea-AI Summary

Oregon Pacific Bancorp reports Q3 2023 financial results with net income of $2.3 million and quarterly loan growth of $15.0 million.

Positive

• Net income of $2.3 million; $0.33 per diluted share
• Quarterly loan growth of $15.0 million or 2.93%
• Net interest margin increased to 3.74%
• Core earnings remained strong, with net interest income expanding to $6.8 million
• Cost of funds moved to 0.86% during the third quarter
• Certificates of deposit grow to $30.9 million
• Quarterly loan production for new and renewed loans totaled $39.5 million
• Noninterest income totaled $1.8 million
• The Bank anticipates continued activity in operating account transition
• Period-end loans, net of deferred loan origination fees, totaled $525.2 million
• The Bank saw a small increase in classified assets totaling $502 thousand
• The Bank's credit administration team continues to proactively work with lending staff
• Noninterest expense for the third quarter 2023 totaled $5.6 million

Negative

• Quarterly deposit contraction totaling $7.8 million
• Reduction in savings and money market deposit totals by $19.2 million
• Reduction in trust income of $95 thousand
• Small reduction in assets under management (AUM) of $3.6 million
• Increase in noninterest expense by $133 thousand

FLORENCE, Ore.--(BUSINESS WIRE)-- Oregon Pacific Bancorp (ORPB), the holding company of Oregon Pacific Bank, today reported financial results for the third quarter ended, September 30, 2023.

Highlights:

• Net income of $2.3 million; $0.33 per diluted share.
• Return on average assets of 1.22%
• Quarterly loan growth of $15.0 million or 2.93%.
• Net interest margin increased to 3.74%

Net income for the quarter ended September 30, 2023, was $2.3 million, or $0.33 per diluted share compared to $2.2 million or $0.31 per diluted share for the quarter ended June 30, 2023. Core earnings remained strong, with net interest income expanding to $6.8 million, up from $6.7 million during the second quarter 2023. The third quarter net interest margin increased to 3.74%, up from 3.72% in the second quarter 2023. “We are pleased with the margin expansion experienced during the third quarter and strong loan production,” said Ron Green, President and Chief Executive Officer. “The higher interest rate environment has been challenging for many community banks, but Oregon Pacific has focused on relationship deposits, which enabled us to maintain strong financial performance and continue to serve our clients.”

The Bank’s cost of funds moved to 0.86% during the third quarter, compared to 0.78% during the second quarter, resulting in an increase in interest expense of $174 thousand during the quarter. The Bank experienced quarterly deposit contraction totaling $7.8 million compared to deposit totals at June 30, 2023. During the third quarter a large client continued to utilize excess cash to fund a large construction project, with funding beginning in the second quarter 2023 and expecting to continue into fourth quarter. Third quarter funding totaled $7.2 million and is anticipated to draw on an additional $3 million of deposits into the fourth quarter. The Bank experienced a reduction in the savings and money market deposit totals, which decreased by a total of $19.2 million during the third quarter, primarily tied to clients seeking higher yields. A reduction in money market and savings deposits was partially offset by an increase in interest bearing and non-interest-bearing demand deposits of $6.2 million. Additionally, the Bank saw certificates of deposit grow to $30.9 million, with clients looking to secure higher deposit rates. Disruption in the market due to a recent large merger has provided great opportunities for the transition of operating accounts looking for stable and available customer service. The Bank anticipates this activity will continue into the fourth quarter and 2024.

Period-end loans, net of deferred loan origination fees, totaled $525.2 million, representing quarterly growth of $15 million, which is 2.9% or 11.7% annualized. The third quarter loan yield grew to 5.07%, representing an increase of 0.11% over the prior quarter as new loan production is occurring at a rate higher than the portfolio yield. Quarterly loan production for new and renewed loans totaled $39.5 million, with a weighted average effective rate of 7.38% and a weighted-average repricing life of 4.32 years. During the quarter the Bank recorded a credit to the provision for loan losses totaling $123 thousand. This was primarily tied to a reduction in the reserve for unfunded commitments.

During the quarter the Bank saw a small increase in classified assets totaling $502 thousand. This increase was attributable to downgrades of two loans totaling $589 thousand, which was partially offset by the payoff of one relationship. The downgrades represent two lending relationships, both of which are secured by commercial real estate. The Bank believes both relationships are adequately collateralized and does not currently recognize any impairment. The Bank’s credit administration team continues to proactively work with lending staff to identify any possible credit stress, placing particular attention on the office sector. At September 30, 2023, commercial real estate loans classified as office loans totaled $78.3 million, with an average loan size of $850 thousand, with 31.7%, or $24.9 million classified as owner-occupied. 98.2% of the office portfolio is located within the state of Oregon. The aggregate loan-to-value of the office portfolio was 45.4%.

Noninterest income totaled $1.8 million during the third quarter 2023 and represented growth of $13 thousand over second quarter 2023. The largest increase in non-interest income occurred in the Merchant card services category which grew $40 thousand over the prior quarter. This fluctuation is typical of seasonal merchant activity as many Florence-based merchant clients experience an increase in tourism during the summer. Offsetting that growth was a quarterly reduction in trust income of $95 thousand. The Bank’s trust department experienced a small reduction in assets under management (AUM) of $3.6 million or 1.62% during the third quarter. The trust business includes terminating trusts which occur typically after the death of the grantor, and assets are distributed to beneficiaries over a period of 12 to 24 months. This can cause occasional reductions in AUM due to the temporary nature of some trust assets.

Noninterest expense for the third quarter 2023 totaled $5.6 million, representing an increase of $133 thousand over the quarter ended June 30, 2023. The largest expense fluctuation totaled $90 thousand and occurred in the outside services category. A portion of the increase was due to the one-time data conversion from the Bank’s prior loan imaging software to a new software, which totaled $38 thousand. Salaries and benefits also increased during the quarter by $82 thousand. This increase was attributable to two factors 1) growth in salary expense due to the hiring of operational staff for the Portland office and the full quarter of salary expense for the second quarter new hires, which grew $37 thousand and 2) a reduction in the number of new and renewed loans during the quarter which impacted the deferred loan origination costs, which are reflected as a credit to salary expense. The third quarter ASC 310-20 loan origination costs totaled $164 thousand, a reduction of $41 thousand from the prior quarter. These variances were partially offset by a reduction in advertising expense of $52 thousand as the bank discontinued its Money Matters television advertising, which was airing on loan KVAL news.

Forward-Looking Statement Safe Harbor

This release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”). These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as “anticipates,” “targets,” “expects,” “estimates,” “intends,” “plans,” “goals,” “believes” and other similar expressions or future or conditional verbs such as “will,” “should,” “would” and “could.” The forward-looking statements made represent Oregon Pacific Bank’s current estimates, projections, expectations, plans or forecasts of its future results and revenues, including but not limited to statements about performance, loan or deposit growth, loan prepayments, investment purchases, investment yields, strategic focus, capital position, liquidity, credit quality, special asset liquidation, noninterest income, noninterest expense and credit quality trends. These statements are not guarantees of future results or performance and involve certain risks, uncertainties and assumptions that are difficult to predict and are often beyond Oregon Pacific Bank’s control. Actual outcomes and results may differ materially from those expressed in, or implied by, any of these forward-looking statements. You should not place undue reliance on any forward-looking statement and should consider all of the following uncertainties and risks. Oregon Pacific Bancorp undertakes no obligation to publicly revise or update any forward-looking statement to reflect the impact of events or circumstances that arise after the date of this release. This statement is included for the express purpose of invoking the PSLRA’s safe harbor provisions.

CONSOLIDATED BALANCE SHEETS
Unaudited (dollars in thousands)
		September 30,				June 30,				September 30,
			2023				2023				2022
ASSETS
Cash and due from banks		$	8,925			$	10,951			$	13,402
Interest bearing deposits			11,216				22,967				97,840
Securities			176,593				181,530				188,366
Loans, net of deferred fees and costs			525,231				510,264				456,627
Allowance for credit losses			(6,892	)			(6,887	)			(6,328	)
Premises and equipment, net			13,024				11,708				9,501
Bank owned life insurance			8,801				8,738				8,563
Deferred tax asset			6,604				5,978				5,836
Other assets			8,986				7,555				6,904
Total assets		$	752,488			$	752,804			$	780,711
LIABILITIES
Deposits
Demand - non-interest bearing		$	160,272			$	159,184			$	195,536
Demand - interest bearing			270,677				265,550				242,974
Money market			139,033				152,046				170,439
Savings			69,018				75,196				85,548
Certificates of deposit			30,917				25,696				18,213
Total deposits			669,917				677,672				712,710
FHLB borrowings			5,000				-				-
Junior subordinated debenture			4,124				4,124				4,124
Subordinated debenture			14,702				14,677				14,603
Other liabilities			8,168				6,482				6,499
Total liabilities			701,911				702,955				737,936
STOCKHOLDERS' EQUITY
Common stock			21,212				21,135				21,042
Retained earnings			41,859				39,516				34,038
Accumulated other comprehensive
income, net of tax			(12,494	)			(10,802	)			(12,305	)
Total stockholders' equity			50,577				49,849				42,775
Total liabilities &
stockholders' equity		$	752,488			$	752,804			$	780,711

CONSOLIDATED STATEMENTS OF INCOME
Unaudited (dollars in thousands, except per share data)
		THREE MONTHS ENDED											NINE MONTHS ENDED
		September 30,			June 30,				September 30,				September 30,				September 30,
		2023				2023			2022				2023				2022
INTEREST INCOME
Non-PPP loans		$	6,587			$	6,249		$	5,022			$	18,660			$	13,875
PPP loans			-				-			-				-				349
Securities			1,568				1,641			1,131				4,896				2,514
Other interest income			373				316			305				1,090				507
Total interest income			8,528				8,206			6,458				24,646				17,245
INTEREST EXPENSE
Deposits			1,483				1,311			152				3,653				368
Borrowed funds			231				229			204				686				575
Total interest expense			1,714				1,540			356				4,339				943
NET INTEREST INCOME			6,814				6,666			6,102				20,307				16,302
(Credit) provision for credit losses			(123	)			14			209				(160	)			359
Net interest income after
(credit) provision for credit losses			6,937				6,652			5,893				20,467				15,943
NONINTEREST INCOME
Trust fee income			848				943			783				2,675				2,366
Service charges			359				342			324				1,026				944
Mortgage loan sales			25				28			29				91				240
Merchant card services			162				122			153				386				394
Oregon Pacific Wealth Management income			294				275			239				821				741
Other income			117				82			514				299				783
Total noninterest income			1,805				1,792			2,042				5,298				5,468
NONINTEREST EXPENSE
Salaries and employee benefits			3,164				3,082			2,787				9,374				8,043
Outside services			678				588			583				1,818				1,606
Occupancy & equipment			456				451			413				1,355				1,226
Trust expense			545				533			432				1,560				1,226
Loan and collection, OREO expense			9				27			21				60				71
Advertising			93				145			141				339				329
Supplies and postage			98				79			74				264				204
Other operating expenses			532				537			360				1,558				1,077
Total noninterest expense			5,575				5,442			4,811				16,328				13,782
Income before taxes			3,167				3,002			3,124				9,437				7,629
Provision for income taxes			820				771			792				2,424				1,909
NET INCOME		$	2,347			$	2,231		$	2,332			$	7,013			$	5,720

Quarterly Highlights
	3rd Quarter				2nd Quarter				1st Quarter				4th Quarter				3rd Quarter
		2023				2023				2023				2022				2022
Earnings
Interest income	$	8,528			$	8,206			$	7,912			$	7,651			$	6,458
Interest expense		1,714				1,540				1,084				581				356
Net interest income	$	6,814			$	6,666			$	6,828			$	7,070			$	6,102
Provision for loan loss		(123	)			14				(51	)			335				209
Noninterest income		1,805				1,792				1,701				1,888				2,042
Noninterest expense		5,575				5,442				5,313				6,737				4,811
Provision for income taxes		820				771				834				459				792
Net income	$	2,347			$	2,231			$	2,433			$	1,427			$	2,332
Average shares outstanding		7,094,180				7,097,866				7,085,840				7,070,425				7,070,433
Average diluted shares outstanding		7,100,680				7,104,366				7,089,090				NA				NA
Period end shares outstanding		7,094,180				7,094,562				7,102,271				7,068,659				7,070,304
Period end diluted shares outstanding		7,100,680				7,101,062				7,108,771				NA				NA
Earnings per share	$	0.33			$	0.31			$	0.34			$	0.20			$	0.33
Diluted earnings per share	$	0.33			$	0.31			$	0.34				NA				NA
Performance Ratios
Return on average assets		1.22	%			1.19	%			1.13	%			0.74	%			1.28	%
Return on average equity		18.65	%			18.12	%			21.01	%			13.34	%			20.41	%
Net interest margin - tax equivalent		3.74	%			3.72	%			3.87	%			3.87	%			3.54	%
Yield on loans		5.07	%			4.96	%			4.85	%			4.70	%			4.50	%
Yield on securities		3.43	%			3.37	%			3.41	%			3.02	%			2.39	%
Cost of deposits		0.86	%			0.78	%			0.51	%			0.21	%			0.09	%
Cost of interest-bearing liabilities		1.26	%			1.15	%			0.84	%			0.44	%			0.29	%
Efficiency ratio		64.73	%			64.34	%			62.29	%			75.21	%			59.07	%
Full-time equivalent employees		131				128				127				120				122
Capital
Tier 1 capital	$	80,082			$	77,917			$	75,684			$	73,882			$	72,410
Leverage ratio		10.40	%			10.24	%			9.94	%			9.55	%			9.95	%
Common equity tier 1 ratio		14.34	%			14.18	%			14.16	%			13.92	%			14.81	%
Tier 1 risk based ratio		14.34	%			14.18	%			14.16	%			13.92	%			14.81	%
Total risk based ratio		15.59	%			15.43	%			15.41	%			15.17	%			16.06	%
Book value per share	$	7.13			$	7.03			$	6.97			$	6.52			$	6.05

Quarterly Highlights
	3rd Quarter				2nd Quarter				1st Quarter				4th Quarter				3rd Quarter
		2023				2023				2023				2022				2022
Asset quality
Allowance for loan losses (ALLL)	$	6,892			$	6,887			$	6,884			$	6,666			$	6,328
Nonperforming loans (NPLs)	$	456			$	178			$	72			$	52			$	424
Nonperforming assets (NPAs)	$	456			$	178			$	72			$	52			$	424
Classified Assets (1)	$	4,252			$	3,750			$	3,842			$	3,877			$	4,574
Net loan charge offs (recoveries)	$	(6	)		$	(3	)		$	(88	)		$	(4	)		$	(31	)
ACL as a percentage of net loans		1.31	%			1.35	%			1.39	%			1.38	%			1.39	%
ACL as a percentage of NPLs		1511.40	%			3869.10	%			9561.11	%			12819.23	%			1492.45	%
Net charge offs (recoveries)
to average loans		0.00	%			0.00	%			-0.02	%			0.00	%			-0.01	%
Net NPLs as a percentage of
total loans		0.09	%			0.03	%			0.01	%			0.01	%			0.09	%
Nonperforming assets as a
percentage of total assets		0.06	%			0.02	%			0.10	%			0.01	%			0.05	%
Classified Asset Ratio (2)		4.89	%			4.42	%			4.65	%			4.81	%			5.81	%
Past due as a percentage of
total loans		0.12	%			0.12	%			0.06	%			0.19	%			0.13	%
Off-balance sheet figures
Off-balance sheet demand deposits (3)	$	-			$	-			$	-			$	18,976			$	60,588
Unused credit commitments	$	103,163			$	97,111			$	85,390			$	89,680			$	85,880
Trust assets under management (AUM)	$	219,268			$	222,880			$	219,731			$	215,736			$	193,448
Oregon Pacific Wealth Management AUM	$	140,153			$	141,990			$	133,138			$	117,549			$	116,193
End of period balances
Total securities	$	176,593			$	181,530			$	195,647			$	195,881			$	188,366
Total short term deposits	$	11,216			$	22,967			$	41,931			$	39,863			$	97,840
Total loans net of allowance	$	518,339			$	503,377			$	486,596			$	476,313			$	450,299
Total earning assets	$	715,273			$	716,793			$	733,090			$	720,712			$	744,786
Total assets	$	752,488			$	752,804			$	764,489			$	754,182			$	780,711
Total noninterest bearing deposits	$	160,272			$	159,184			$	166,409			$	180,589			$	195,536
Total deposits	$	669,917			$	677,672			$	690,046			$	682,869			$	712,710
Average balances
Total securities	$	180,344			$	190,818			$	196,060			$	192,348			$	186,535
Total short term deposits	$	27,510			$	24,616			$	35,240			$	68,808			$	57,557
Total loans net of allowance	$	508,385			$	498,069			$	480,046			$	459,440			$	436,522
Total earning assets	$	725,179			$	722,420			$	720,003			$	728,980			$	688,723
Total assets	$	759,592			$	751,845			$	752,094			$	761,361			$	720,465
Total noninterest bearing deposits	$	163,669			$	154,949			$	167,863			$	178,226			$	191,292
Total deposits	$	681,749			$	675,954			$	678,528			$	692,412			$	648,827
(1) Classified assets is defined as the sum of all loan-related contingent liabilities and loans internally graded substandard or worse, impaired loans (net of government guarantees),
adversely classified securities, and other real estate owned.
(2) Classified asset ratio is defined as the sum of all loan-related contingent liabilities and loans internally graded substandard or worse, impaired loans (net of government guarantees),
adversely classified securities, and other real estate owned, divided by bank Tier 1 capital, plus the allowance for loan losses.
(3) Deposits sold through IntraFi Network Deposits Insured Cash Sweep (ICS) program

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20231019558617/en/

Ron Green, President & Chief Executive Officer

ron.green@opbc.com

(541) 902-9800

Source: Oregon Pacific Bancorp

What was the net income for Oregon Pacific Bancorp in Q3 2023?

The net income for Q3 2023 was $2.3 million, or $0.33 per diluted share.

What was the quarterly loan growth for Oregon Pacific Bancorp in Q3 2023?

The quarterly loan growth for Q3 2023 was $15.0 million or 2.93%.

What was the net interest margin for Oregon Pacific Bancorp in Q3 2023?

The net interest margin increased to 3.74% in Q3 2023.

What was the cost of funds for Oregon Pacific Bancorp in Q3 2023?

The cost of funds moved to 0.86% during Q3 2023.

What was the total amount of period-end loans for Oregon Pacific Bancorp in Q3 2023?

The total amount of period-end loans, net of deferred loan origination fees, was $525.2 million in Q3 2023.