Oregon Pacific Bank Announces Third Quarter Earnings Results

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, 2022.

Highlights:

• Third quarter net income of $2.3 million; $0.33 per diluted share.
• Quarterly loan growth of $21.1 million.
• Quarterly deposit growth of $70.0 million.
• Quarterly tax equivalent net interest margin of 3.54%

Net income for the quarter ended September 30, 2022, was $2.3 million, or $0.33 per diluted share compared to $2.0 million, or $0.29 per diluted share for the quarter ended September 30, 2021. The Bank processed forgiveness on the last PPP loan during the second quarter of 2022, so there was no PPP income recorded during the third quarter, compared to $1.1 million recorded during the third quarter of 2021.

“We are proud to see the third quarter financial results,” said Ron Green, President and CEO. “This is the first quarter without PPP fee income, and we are pleased that growth in traditional loan income has nearly offset the PPP income shortfall.”

Period-end loans, net of deferred loan origination fees, totaled $456.6 million, representing quarterly growth of $21.1 million, and year-to-date non-PPP growth of $68.4 million. This represents an annualized growth rate of 23.57%. The Bank continued to experience loan demand, but competition remains strong. The third quarter yield on non-PPP loans totaled 4.50%, an increase of 0.17% over the prior quarter. The yield in second quarter was lower due to the payoff of a USDA guaranteed loan, which was purchased at a premium during 2017. This resulted in the expense of $47 thousand for the remaining purchase premium. Without the prepayment, the effective yield on the non-PPP loan portfolio would have been 4.38%. This reflects a linked quarter increase in loan yield from second quarter to third quarter, excluding amortization of the USDA payoff, of 0.12%.

During the quarter the Bank saw a decrease in classified assets totaling $515 thousand, bringing the classified asset ratio to 5.81% as of September 30, 2022. This decrease was primarily attributable to a payoff of one residential loan relationship. The Bank also funded provision for loan loss expense of $209 thousand, which was largely the result of loan growth experienced during the quarter, as credit metrics including nonaccrual loan totals and past due totals remain strong.

Deposit growth totaled $70.1 million during the third quarter. Included in the third quarter deposit growth was approximately $48.6 million in deposits that migrated from off-balance sheet holdings with IntraFi Network, into on-balance sheet reciprocal balances. The migration occurred toward the end of the quarter and did not significantly impact average asset totals. After exclusion of the off-balance sheet migration, the Bank experienced deposit growth of $21.5 million during the third quarter and $45.4 million since December 31, 2021. This represents an annual growth rate, excluding IntraFi Network migration, of 9.82%. The Bank also maintained an additional $60.6 million in off-balance sheet deposits with IntraFi Network, which are available on demand. The Bank’s cost of funds increased slightly from the 0.07% reported in second quarter 2022 to the 0.09% in third quarter 2022. The Bank continues to monitor deposit rates and has not yet experienced significant pressure to increase rates, but the Bank anticipates growing pressure to adjust deposit rates should the Fed Funds rate continue to increase.

Third quarter investment purchases totaled $26.0 million, with a weighted average life of 5.11 years and a weighted average yield of 3.85% on the purchases. At September 30, 2022, the Bank’s total investment portfolio had an average life of 5.5 years and, based on the one month CPR, a yield of 2.67%. Securities purchases were offset by portfolio amortization and an increase in the unrealized loss on the securities portfolio. The September 30, 2022, unrealized loss on the securities portfolio grew to $17.2 million or 8.4% of the portfolio book value. For the quarter ended September 30, 2022, securities income totaled $1.1 million, or a yield of 2.39%, compared to $828 thousand, or a yield of 1.91% in the second quarter ended June 30, 2022. Several factors contributed to the increased earnings, including securities purchased during the quarter occurred at an effective rate higher than the overall portfolio yield and the increase in the yield on the variable rate securities tied to the prime rate. As of September 30, 2022, approximately $51.6 million of the securities portfolio was subject to monthly or quarterly rate resets. The Bank continues to plan for additional securities purchases during 2022, which will continue to enhance the net interest margin by shifting earnings assets from fed funds into higher yielding securities.

Noninterest income totaled $2.0 million during third quarter 2022 and represented an increase of $261 thousand over the second quarter 2022. The largest increase in noninterest income occurred in the other income category, which is primarily attributable to the income earned on the off-balance sheet portion of the IntraFi Network deposits, which totaled $437 thousand for the quarter. With migration of approximately $48.6 million of off-balance sheet deposits back onto the balance sheet, this noninterest income source is expected to decrease in the fourth quarter. Additionally, as interest rates increase this source of non-interest income will decrease over time as the Bank will be forced to increase the interest amount paid to depositors.

Noninterest expense in the third quarter 2022 totaled $4.8 million, an increase of $348 thousand over second quarter 2022. The largest drivers of the increase related to the salaries and benefits expense, which grew $145 thousand over second quarter. During third quarter the Bank implemented several salary adjustments, specifically amongst many of the lower paid positions within the Bank as a result of the competitive work environment. The Bank also increased the accruals for employee bonuses and profit sharing, which grew $97 thousand and $14 thousand, respectively, over the prior quarter expense. Both increases were tied to performance metrics tracking above original accrual levels. The Bank also saw growth in the outside services category of $79 thousand on a linked quarter basis. Approximately half of this increase was related to a recruitment fee for a new team leader position and is not expected to reoccur in future periods.

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)
		September 30,				June 30,				September 30,
		2022				2022				2021
ASSETS
Cash and due from banks		$	13,402			$	11,527			$	10,496
Interest bearing deposits			97,840				71,429				186,565
Securities			188,366				170,977				82,398
Non PPP Loans, net of deferred fees and costs			456,627				435,478				361,573
PPP Loans, net of deferred fees and costs			-				-				30,073
Total Loans, net of deferred fees and costs			456,627				435,478				391,646
Allowance for loan losses			(6,328	)			(6,088	)			(6,026	)
Premises and equipment, net			9,501				9,558				6,351
Bank owned life insurance			8,563				8,509				8,342
Deferred tax asset			5,836				4,118				1,111
Other assets			6,904				7,024				3,431
Total assets		$	780,711			$	712,532			$	684,314
LIABILITIES
Deposits
Demand - non-interest bearing		$	195,536			$	189,112			$	180,991
Demand - interest bearing			242,974				187,348				177,404
Money market			170,439				163,728				158,392
Savings			85,548				83,517				75,710
Certificates of deposit			18,213				18,948				20,453
Total deposits			712,710				642,653				612,950
Junior subordinated debenture			4,124				4,124				4,124
Subordinated debenture			14,603				14,578				14,492
Other liabilities			6,499				6,153				4,874
Total liabilities			737,936				667,508				636,440
STOCKHOLDERS' EQUITY
Common stock			21,042				20,977				20,866
Retained earnings			34,038				31,707				26,448
Accumulated other comprehensive income, net of tax			(12,305	)			(7,660	)			560
Total stockholders' equity			42,775				45,024				47,874
Total liabilities & stockholders' equity		$	780,711			$	712,532			$	684,314

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,
		2022			2022			2021				2022			2021
INTEREST INCOME
Non-PPP loans		$	5,022		$	4,568		$	3,973			$	13,875		$	11,380
PPP loans			-			145			1,100				349			3,520
Securities			1,131			828			262				2,514			682
Other interest income			305			147			69				507			148
Total interest income			6,458			5,688			5,404				17,245			15,730
INTEREST EXPENSE
Deposits			152			108			119				368			336
Borrowed funds			204			191			34				575			95
Total interest expense			356			299			153				943			431
NET INTEREST INCOME			6,102			5,389			5,251				16,302			15,299
Provision for loan losses			209			100			-				359			-
Net interest income after provision for loan losses			5,893			5,289			5,251				15,943			15,299
NONINTEREST INCOME
Trust fee income			783			804			703				2,366			2,211
Service charges			324			322			300				944			819
Mortgage loan sales			29			90			138				240			526
Investment sales commissions			-			-			29				-			98
Merchant card services			153			134			151				394			351
Oregon Pacific Wealth Management income			239			252			224				741			611
Other income			514			179			84				783			240
Total noninterest income			2,042			1,781			1,629				5,468			4,856
NONINTEREST EXPENSE
Salaries and employee benefits			2,787			2,642			2,305				8,043			6,979
Outside services			583			504			506				1,606			1,378
Occupancy & equipment			413			412			362				1,226			1,057
Trust expense			432			402			364				1,226			1,066
Loan and collection, OREO expense			21			23			30				71			95
Advertising			141			94			95				329			229
Supplies and postage			74			60			71				204			188
Other operating expenses			360			326			419				1,077			1,234
Total noninterest expense			4,811			4,463			4,152				13,782			12,226
Income before taxes			3,124			2,607			2,728				7,629			7,929
Provision for income taxes			792			663			686				1,909			1,998
NET INCOME		$	2,332		$	1,944		$	2,042			$	5,720		$	5,931

Quarterly Highlights
		3rd Quarter				2nd Quarter				1st Quarter				4th Quarter				3rd Quarter
		2022				2022				2022				2021				2021
Earnings
Net interest income		$	6,102			$	5,389			$	4,810			$	5,018			$	5,251
Provision for loan loss			209				100				50				-				-
Noninterest income			2,042				1,781				1,645				1,762				1,629
Noninterest expense			4,811				4,463				4,506				4,298				4,152
Provision for income taxes			792				663				455				612				686
Net income		$	2,332			$	1,944			$	1,444			$	1,870			$	2,042
Average shares outstanding			7,070,433				7,070,686				7,057,361				7,042,478				7,042,478
Earnings per share		$	0.33			$	0.27			$	0.20			$	0.27			$	0.29
Performance Ratios
Return on average assets			1.28	%			1.12	%			0.84	%			1.09	%			1.22	%
Return on average equity			20.41	%			17.34	%			12.02	%			15.44	%			17.24	%
Net interest margin - tax equivalent			3.54	%			3.27	%			2.93	%			3.04	%			3.25	%
Yield on loans			4.50	%			4.45	%			4.50	%			4.99	%			5.11	%
Yield on loans - excluding PPP loans			4.50	%			4.33	%			4.37	%			4.47	%			4.49	%
Yield on securities			2.39	%			1.91	%			1.49	%			1.39	%			1.39	%
Cost of deposits			0.09	%			0.07	%			0.07	%			0.07	%			0.08	%
Efficiency ratio			59.07	%			62.21	%			69.81	%			63.39	%			60.35	%
Full-time equivalent employees			122				122				122				118				116
Capital
Tier 1 capital		$	72,410			$	70,041			$	68,040			$	66,593			$	64,685
Leverage ratio			9.95	%			9.96	%			9.72	%			9.73	%			9.70	%
Common equity tier 1 ratio			14.81	%			14.79	%			16.42	%			17.12	%			18.50	%
Tier 1 risk based ratio			14.81	%			14.79	%			16.42	%			17.12	%			18.50	%
Total risk based ratio			16.06	%			16.04	%			17.68	%			18.38	%			19.75	%
Book value per share		$	6.05			$	6.37			$	6.52			$	6.99			$	6.80
Asset quality
Allowance for loan losses (ALLL)		$	6,328			$	6,088			$	5,959			$	5,905			$	6,026
Nonperforming loans (NPLs)		$	424			$	960			$	593			$	928			$	1,388
Nonperforming assets (NPAs)		$	424			$	960			$	593			$	928			$	1,388
Classified Assets (1)		$	4,574			$	5,089			$	6,349			$	8,756			$	8,156
Net loan charge offs (recoveries)		$	(31	)		$	(29	)		$	(4	)		$	122			$	(2	)
ALLL as a percentage of net loans			1.39	%			1.40	%			1.45	%			1.48	%			1.54	%
ALLL as a percentage of net loans (excluding PPP)			1.39	%			1.40	%			1.46	%			1.52	%			1.67	%
ALLL as a percentage of NPLs			1492.45	%			634.17	%			1004.89	%			636.31	%			434.15	%
Net charge offs (recoveries)
to average loans			-0.01	%			-0.01	%			0.00	%			0.03	%			0.00	%
Net NPLs as a percentage of
total loans			0.09	%			0.22	%			0.15	%			0.24	%			0.35	%
Nonperforming assets as a
percentage of total assets			0.05	%			0.13	%			0.08	%			0.13	%			0.20	%
Classified Asset Ratio (2)			5.81	%			6.68	%			8.58	%			12.08	%			11.53	%
Past due as a percentage of
total loans			0.13	%			0.12	%			0.21	%			0.21	%			0.03	%
Off-balance sheet figures
Off-balance sheet demand deposits (3)		$	60,588			$	121,645			$	78,674			$	55,477			$	57,105
Off-balance sheet time deposits (4)		$	-			$	-			$	37,500			$	47,500			$	49,500
Unused credit commitments		$	85,880			$	93,411			$	95,570			$	83,778			$	86,816
Trust assets under management (AUM)		$	193,448			$	195,058			$	199,983			$	201,264			$	188,420
Oregon Pacific Wealth Management AUM		$	116,193			$	114,973			$	127,749			$	130,099			$	122,274
End of period balances
Total securities		$	188,366			$	170,977			$	157,922			$	123,076			$	82,398
Total short term deposits		$	97,840			$	71,429			$	98,345			$	143,192			$	186,565
Total loans net of allowance		$	450,299			$	429,390			$	406,229			$	392,250			$	385,620
Total earning assets		$	744,786			$	679,835			$	670,406			$	665,780			$	661,966
Total assets		$	780,711			$	712,532			$	706,527			$	691,721			$	684,314
Total noninterest bearing deposits		$	195,536			$	189,112			$	178,367			$	171,380			$	180,991
Total deposits		$	712,710			$	642,653			$	636,384			$	618,679			$	612,950
Average balances
Total securities		$	186,535			$	165,729			$	143,830			$	102,431			$	73,271
Total short term deposits		$	57,557			$	73,515			$	120,674			$	165,901			$	176,914
Total loans net of allowance		$	436,522			$	418,445			$	398,423			$	383,161			$	388,212
Total earning assets		$	688,723			$	665,637			$	670,330			$	658,872			$	645,779
Total assets		$	720,465			$	697,913			$	699,808			$	682,779			$	666,455
Total noninterest bearing deposits		$	191,292			$	178,626			$	171,184			$	170,600			$	183,950
Total deposits		$	648,827			$	627,700			$	626,023			$	610,981			$	610,247

(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.

(4) Deposits sold through IntraFi Network Deposits CDARs program.

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20221020005062/en/

Ron Green, President & Chief Executive Officer

ron.green@opbc.com

(541) 902-9800

Source: Oregon Pacific Bancorp