Oregon Pacific Bank Announces Second Quarter Earnings Results
07/22/2021 - 05:00 PM
Oregon Pacific Bancorp (ORPB) today reported financial results for the second quarter ended June 30, 2021.
Highlights
Second quarter net income of $1.92 million ; $0.27 per diluted share
Quarterly deposit growth of $24.2 million , a growth rate of 16.73%
Quarterly non-PPP loan growth of $13.4 million , a growth rate of 16.81%
Quarterly trust fees of $878 thousand
Oregon Pacific Bancorp, and its wholly owned subsidiary Oregon Pacific Bank, reported quarterly net income of $1.92 million , or $0.27 per diluted share in the second quarter of 2021 compared to $830 thousand , or $0.12 per diluted share for the quarter ended June 30, 2020. Second quarter net income was elevated due to the processing of Paycheck Protection Program (PPP) forgiveness payments, which resulted in increased interest income due to accretion of the remaining loan origination fees at payoff. The Bank made no provision for loan losses during the second quarter as the Bank’s allowance for loan loss methodology indicated no provision was necessary based on current asset quality metrics.
“We are proud to see the continuation of the Bank’s strong performance during the second quarter,” said Ron Green, President and CEO. “Our staff has worked with clients on the PPP forgiveness process, enabling them to shift focus back to core lending, which we believe will continue through the rest of 2021.”
During the quarter, deposit growth totaled $24.2 million , an annualized growth rate of 16.73% . On an annual basis, deposit growth totaled $144.1 million , a 31.0% increase over June 30, 2020. With no new PPP loan production during the second quarter, the deposit growth is attributable to normal seasonal fluctuations, including onboarding of new clients. The Bank still believes a portion of the deposit growth is temporary as some borrowers have delayed investments or capital purchases until the economy has fully recovered from the pandemic.
The Bank continued to maintain funds in the InterFi Network Insured Cash Sweep (ICS) product and expanded to utilize the CDARs time deposit product, all in a “one-way sell” or off-balance sheet capacity. The CDARS product was offered to one large deposit client who has elected to open laddered four-week CDARs deposits. In the event of a decrease in liquidity, the Bank could move all CDARS deposits back onto the balance sheet in a reciprocal deposit within a four-week time horizon. On June 30, 2021, the off-balance sheet ICS deposits totaled $54.3 million , and the CDARS off-balance sheet time deposits totaled $39.5 million .
Period-end non-PPP loans, net of deferred loan origination fees, totaled $335.8 million , representing quarterly net growth of $13.4 million and an annualized growth rate of 16.81% . The effective yield on the non-PPP loan portfolio remained flat at 4.63% . The Bank continued to see loan opportunities during the quarter, but the lending environment remains competitive. At the end of June, the Bank purchased three loans totaling $3.6 million from Network for Oregon Affordable Housing (NOAH). The NOAH loans were purchased at a premium and will result in a yield below the Bank’s current loan portfolio yield but will provide the Bank with tax credits to offset Oregon income tax which will be prorated during 2021 based on the date of the loan purchase. The Bank continued to work with borrowers on the PPP forgiveness process during the second quarter. Through June 30, 2021, 734 of the 752 PPP loans originated in 2020 were forgiven. Additionally, 81 of the 402 loans originated in 2021 were forgiven.
During the quarter, the Bank’s margin contracted to 3.09% from 3.82% in the prior quarter, which was primarily driven by the linked quarter growth in average deposits. The deposit growth increased the balance of interest-bearing deposits held with the Federal Reserve, which yielded 0.10% for most of the quarter. During the second quarter, 29% of the Bank’s interest earning assets were held on deposit with the Federal Reserve, compared to 19% during first quarter 2021, which led to margin contraction. The Bank worked to increase the investment portfolio holdings, with quarterly purchases totaling $15.5 million . The Bank will continue to plan future investment purchases to utilize a portion of the excess funds held at the Federal Reserve and help increase the yield on earning assets.
Second quarter 2021 noninterest income totaled $1.8 million , which represented an increase of $398 thousand over the prior quarter and an increase of $651 thousand over the second quarter 2020. During the quarter, the Bank recognized $878 thousand of trust fee income and increase of $248 thousand over the prior quarter. Trust revenue is comprised of two components: 1) trust management revenue, and 2) transactional revenue or “extraordinary” revenue. Trust management revenue has increased due to onboarding of new clients, with the Bank’s trust assets under management increasing $23.2 million since December 31, 2020. Transactional revenue is related to items outside the scope of standard trust administration. This is primarily comprised of fees for liquidation of real estate and is generally tied to the death of a trust client. As transactional revenue is event based, the current quarter income does not necessarily represent revenue projections for future quarters. Below is a summary of the breakout of trust revenue.
THREE MONTHS ENDED
SIX MONTHS ENDED
June 30,
March 31,
June 30,
June 30,
June 30,
2021
2021
2020
2021
2020
Trust Management Revenue
$
648
$
570
$
546
$
1,218
$
1,092
Transactional Revenue
230
60
21
290
47
Trust fee income
$
878
$
630
$
567
$
1,508
$
1,139
The Bank experienced growth of $11 thousand related to advisory income through the Bank’s wholly owned registered investment advisory (RIA) firm Oregon Pacific Wealth Management, LLC which grew assets under management to $103.4 million as of June 30, 2021. Since inception Oregon Pacific Wealth Management has been a registered investment advisor registered and overseen by the State of Oregon. Once assets under management exceed $100 million , the company is required to move from state specific registration to registration with the SEC. As the assets under management exceeded $100 million at June 30, 2021, the company is beginning the registration process with the SEC and anticipates the registration to be completed by September 30, 2021. This SEC registration is only tied to the registered investment advisory firm and will not impact financial reporting.
Noninterest expense in the second quarter totaled $4.1 million , up $136 thousand over the first quarter. The largest change occurred in the salaries and employee benefits expense which increased $127 thousand from the first quarter 2021. This increase was due to two factors: 1) no additional PPP loan production during the second quarter, which reduced the deferred loan origination costs recognized as a credit to salary expense, and 2) additional stock-based compensation expense associated with accelerated vesting of restricted stock due to retirement.
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, strategic focus, capital position, liquidity, credit quality, special asset liquidation, 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)
June 30,
March 31,
June 30,
2021
2021
2020
ASSETS
Cash and due from banks
$
12,658
$
9,925
$
6,944
Interest bearing deposits
181,966
161,446
42,291
Securities
65,509
50,543
27,868
Non PPP Loans, net of deferred fees and costs
335,813
322,451
301,598
PPP Loans, net of deferred fees and costs
54,287
78,745
120,043
Total Loans, net of deferred fees and costs
390,100
401,196
421,641
Allowance for loan losses
(6,024
)
(6,020
)
(4,873
)
Premises and equipment, net
6,507
6,621
7,041
Bank owned life insurance
8,282
8,221
7,549
Deferred tax asset
940
1,079
363
Other assets
3,745
3,998
4,467
Total assets
$
663,683
$
637,009
$
513,291
LIABILITIES
Deposits
Demand - non-interest bearing
$
181,406
$
171,750
$
125,714
Demand - interest bearing
188,135
183,537
166,562
Money market
147,506
139,350
97,506
Savings
72,557
70,276
57,098
Certificates of deposit
19,854
20,394
18,442
Total deposits
609,458
585,307
465,322
Subordinated debenture
4,124
4,124
4,124
Other liabilities
3,843
3,695
4,523
Total liabilities
617,425
593,126
473,969
STOCKHOLDERS' EQUITY
Common stock
20,831
20,753
20,697
Retained earnings
24,406
22,484
17,636
Accumulated other comprehensive income, net of tax
1,021
646
989
Total stockholders' equity
46,258
43,883
39,322
Total liabilities & stockholders' equity
$
663,683
$
637,009
$
513,291
CONSOLIDATED STATEMENTS OF INCOME
Unaudited (dollars in thousands, except per share data)
THREE MONTHS ENDED
SIX MONTHS ENDED
June 30,
March 31,
June 30,
June 30,
June 30,
2021
2021
2020
2021
2020
INTEREST INCOME
Non-PPP loans
$
3,758
$
3,649
$
3,606
$
7,407
$
7,464
PPP loans
961
1,460
634
2,421
634
Securities
242
178
172
420
333
Other interest income
51
28
14
79
81
Total interest income
5,012
5,315
4,426
10,327
8,512
INTEREST EXPENSE
Deposits
116
101
141
217
379
Borrowed funds
31
30
36
61
82
Total interest expense
147
131
177
278
461
NET INTEREST INCOME
4,865
5,184
4,249
10,049
8,051
Provision for loan losses
-
-
900
-
1,278
Net interest income after provision for loan losses
4,865
5,184
3,349
10,049
6,773
NONINTEREST INCOME
Trust fee income
878
630
567
1,508
1,139
Service charges
271
248
192
519
413
Mortgage loan sales and servicing
239
148
81
387
219
Investment sales commissions
33
36
43
69
91
Merchant card services
114
86
59
200
123
RIA income
199
188
127
387
260
Other income
78
78
92
156
165
Total noninterest income
1,812
1,414
1,161
3,226
2,410
NONINTEREST EXPENSE
Salaries and employee benefits
2,401
2,274
1,933
4,675
4,055
Outside services
436
436
381
872
808
Occupancy & equipment
348
346
315
694
638
Trust expense
348
354
319
702
677
Loan and collection, OREO expense
29
35
72
64
227
Advertising
75
58
32
133
84
Supplies and postage
61
56
62
117
124
Other operating expenses
407
410
293
817
614
Total noninterest expense
4,105
3,969
3,407
8,074
7,227
Income before taxes
2,572
2,629
1,103
5,201
1,956
Provision for income taxes
650
662
273
1,312
484
NET INCOME
$
1,922
$
1,967
$
830
$
3,889
$
1,472
Quarterly Highlights
2nd Quarter 1st Quarter 4th Quarter 3rd Quarter 2nd Quarter
2021
2021
2020
2020
2020
Earnings
Net interest income
$
4,865
$
5,184
$
5,586
$
4,425
$
4,249
Provision for loan loss
-
-
-
900
900
Noninterest income
1,812
1,414
1,363
1,374
1,161
Noninterest expense
4,105
3,969
4,158
3,832
3,407
Provision for income taxes
650
662
713
264
273
Net income
$
1,922
$
1,967
$
2,078
$
803
$
830
Average shares outstanding
7,041,041
7,022,759
7,008,125
7,008,125
7,003,125
Earnings per share
$
0.27
$
0.28
$
0.30
$
0.11
$
0.12
Performance Ratios
Return on average assets
1.17
%
1.38
%
1.52
%
0.60
%
0.69
%
Return on average equity
17.24
%
18.59
%
20.33
%
8.05
%
8.69
%
Net interest margin - tax equivalent
3.09
%
3.82
%
4.29
%
3.50
%
3.73
%
Yield on loans
4.78
%
5.14
%
5.37
%
4.14
%
4.33
%
Yield on loans - excluding PPP loans
4.63
%
4.63
%
4.69
%
4.70
%
4.85
%
Cost of deposits
0.08
%
0.08
%
0.10
%
0.13
%
0.22
%
Efficiency ratio
61.48
%
60.19
%
59.84
%
66.08
%
62.98
%
Full-time equivalent employees
114
116
116
113
111
Capital
Leverage ratio
7.45
%
8.18
%
8.33
%
8.14
%
8.74
%
Common equity tier 1 ratio
15.25
%
NA(1)
NA(1)
NA(1)
NA(1)
Tier 1 risk based ratio
15.25
%
NA(1)
NA(1)
NA(1)
NA(1)
Total risk based ratio
16.51
%
NA(1)
NA(1)
NA(1)
NA(1)
Book value per share
$
6.57
$
6.23
$
6.03
$
5.75
$
5.61
Asset quality
Allowance for loan losses (ALLL)
$
6,024
$
6,020
$
5,791
$
5,782
$
4,873
Nonperforming loans (NPLs)
$
1,517
$
1,558
$
2,521
$
1,596
$
1,293
Nonperforming assets (NPAs)
$
1,517
$
1,558
$
2,521
$
1,596
$
1,293
Classified Assets (2)
$
12,627
$
12,141
$
14,366
$
12,667
$
11,945
Net loan charge offs (recoveries)
$
(3
)
$
(230
)
$
(9
)
$
(9
)
$
(7
)
ALLL as a percentage of net loans
1.54
%
1.50
%
1.48
%
1.35
%
1.16
%
ALLL as a percentage of net loans (excluding PPP)
1.79
%
1.87
%
1.86
%
1.89
%
1.62
%
ALLL as a percentage of NPLs
397.10
%
386.39
%
229.75
%
362.26
%
376.98
%
Net charge offs (recoveries) to average loans
0.00
%
-0.06
%
0.00
%
0.00
%
0.00
%
Net NPLs as a percentage of total loans
0.39
%
0.39
%
0.64
%
0.53
%
0.44
%
Nonperforming assets as a percentage of total assets
0.23
%
0.24
%
0.47
%
0.30
%
0.25
%
Classified Asset Ratio (3)
27.30
%
27.67
%
33.98
%
31.42
%
30.38
%
Past due as a percentage of total loans
0.36
%
0.14
%
0.49
%
0.54
%
0.53
%
Off-balance sheet figures
Off-balance sheet demand deposits (4)
$
54,299
$
56,226
$
50,281
$
24,974
$
14,659
Off-balance sheet time deposits (5)
$
39,500
$
-
$
-
$
-
$
-
Unused credit commitments
$
83,807
$
82,458
$
83,982
$
74,110
$
66,806
End of period balances
Total securities and short term deposits
$
247,475
$
211,989
$
124,375
$
82,099
$
70,159
Total loans net of allowance
$
384,076
$
395,176
$
385,173
$
422,144
$
416,768
Total earning assets
$
638,932
$
614,542
$
516,485
$
511,171
$
492,946
Total assets
$
663,683
$
637,009
$
537,141
$
534,456
$
513,291
Total noninterest bearing deposits
$
181,406
$
171,750
$
136,428
$
134,574
$
125,714
Total deposits
$
609,458
$
585,307
$
486,343
$
485,589
$
465,322
Average balances
Total securities and short term deposits
$
239,921
$
150,214
$
109,006
$
80,235
$
67,450
Total loans net of allowance
$
389,766
$
397,195
$
405,796
$
421,663
$
389,275
Total earning assets
$
637,066
$
554,446
$
521,734
$
508,244
$
462,157
Total assets
$
659,644
$
576,991
$
543,422
$
529,784
$
484,315
Total noninterest bearing deposits
$
178,155
$
167,266
$
138,247
$
134,676
$
132,311
Total deposits
$
606,476
$
525,064
$
493,502
$
480,742
$
436,776
(1) Effective March 31, 2020 Oregon Pacific Bank opted into the Community Bank Leverage Ratio and stopped calculating risked based capital ratios.
(2) 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.
(3) 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.
(4) Deposits sold through IntraFi Network Deposits Insured Cash Sweep (ICS) program
(5) Deposits sold through IntraFi Network Deposits CDARs program
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