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Oregon Pacific Bank Announces First Quarter Earnings Results

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FLORENCE, Ore., April 19, 2022--(BUSINESS WIRE)--Oregon Pacific Bancorp (ORPB), the holding company of Oregon Pacific Bank, today reported financial results for the first quarter ended March 31, 2022.

Highlights:

  • First quarter net income of $1.4 million; $0.20 per diluted share.

  • Non-PPP loan growth of $19.2 million or 20.08% annually.

  • Deposit growth of $17.7 million or 11.61% annually

  • Trust assets under management growth of $20.1 million or 40.55% annually.

Net income for the first quarter was $1.4 million, or $0.20 per diluted share compared to $2.0 million, or $0.28 per diluted share for the quarter ended March 31, 2021. The Bank continued to see Paycheck Protection Program (PPP) forgiveness payments processed during the first quarter, but the PPP interest and fees decreased substantially to $205 thousand, down from $1.5 million recognized in first quarter 2021. During the quarter the Bank saw outstanding PPP loans reduce to $4.8 million. As of March 31, 2022, unamortized PPP fee income totaled $141 thousand.

Period-end non-PPP loans, net of deferred loan origination fees, totaled $407.4 million, with growth of $19.2 million which represented an annualized growth rate of 20.08%. The Bank continued to experience non-PPP loan demand, but pricing pressures remain strong. The first quarter effective yield on the non-PPP loan portfolio lowered to 4.37%, down from 4.47% in fourth quarter, primarily related to new production occurring at rates below the current effective yield of the portfolio.

"We are pleased to post strong quarterly earnings as we see the financial benefits of the PPP loan program lessen in relation to the Bank’s overall profitability," said Ron Green, President and CEO. "Our board and management team have understood the temporary nature of the PPP fee income and have worked to enhance our noninterest income sources, primarily through Trust Services and Wealth Management."

During the quarter the Bank saw a decrease in classified assets totaling $2.4 million. This decrease was primarily attributable to upgrades of two loan relationships and one loan payoff. The payoff was related to a commercial relationship that was downgraded in the prior fiscal year.

First quarter 2022 deposit growth totaled $17.7 million. While the Bank did not experience deposit contraction during the first quarter, the possibility of this will grow as depositors react to the changing interest rate environment. The Bank maintained first quarter cost of funds totaling 0.07% and did not make any rate adjustments following the change in the fed funds rate. The Bank also continues to maintain $116.2 million of additional off-balance sheet deposits in the IntraFi Network’s Insured Cash Sweep (ICS) and CDARS products. The off-balance sheet deposits remain a source of liquidity, with the ICS deposits available on demand and the CDARs deposits with a maximum maturity of four weeks.

During first quarter 2022 the Bank continued to shift interest-bearing balances with the Federal Reserve into higher yielding securities to augment the net interest margin. First quarter securities purchases totaled $40.5 million with a weighted average maturity of 3.35 years and a weighted average yield of 1.76%. Securities purchases were offset by portfolio amortization and an increase in the unrealized loss on the securities portfolio. The March 31, 2022, unrealized loss on the securities portfolio grew to $6.3. million. This compared to an unrealized gain of $52 thousand on December 31, 2021. The Bank’s securities portfolio is classified as available-for-sale and is marked to market monthly. The changing yield curve has caused many of the investments purchased during 2021 to be at rates below the current market rate for similar securities. The Bank will benefit from the variable rate securities in the portfolio in a rising rate environment. As of March 31, 2022, approximately 30% of the securities are subject to monthly of quarter rate resets, which will enhance the Bank’s interest income moving forward.

First quarter 2022 noninterest income totaled $1.6 million, which represented a decrease of $117 thousand from fourth quarter 2021. The decrease in revenue is partially attributable to a reduction in mortgage loan sales. With increased mortgage rates, refinance activity decreased, leading to lower quarterly income. The Bank also saw a small reduction in income attributable to Oregon Pacific Wealth Management LLC, (OPWM) the wholly owned Registered Investment Advisory subsidiary of the Bank. Market fluctuations in assets contributed to a reduction in assets under management, which is directly tied to the fee income recognized through OPWM.

Noninterest expense in the first quarter totaled $4.5 million, up $208 thousand over fourth quarter 2021. The largest increase occurred in the salaries and employee benefits category, which was partially due to 401k/profit sharing expense, which was up $112 thousand over fourth quarter 2021. The Bank has a safe harbor 401k plan, and in 2022, the Bank implemented a new profit-sharing component, which is tied to overall Company profitability. The Bank is continuing to see pressure on wages due to competition for employees and will continue to evaluate overall compensation to ensure retention of key employees. Additionally, payroll tax expense was up $60 thousand over fourth quarter 2021 as payroll tax calculators are reset on an annual basis. The Bank currently anticipates this expense to decrease as the year progresses.

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)

March 31,
2022

December 31,
2021

March 31,
2021

ASSETS

Cash and due from banks

$

16,039

$

8,643

$

9,925

Interest bearing deposits

98,345

143,192

161,446

Securities

157,922

123,076

50,543

Non PPP Loans, net of deferred fees and costs

407,405

388,187

322,451

PPP Loans, net of deferred fees and costs

4,783

9,968

78,745

Total Loans, net of deferred fees and costs

412,188

398,155

401,196

Allowance for loan losses

(5,959

)

(5,905

)

(6,020

)

Premises and equipment, net

9,645

9,720

6,621

Bank owned life insurance

8,456

8,402

8,221

Deferred tax asset

2,998

1,270

1,079

Other assets

6,893

5,168

3,998

Total assets

$

706,527

$

691,721

$

637,009

LIABILITIES

Deposits

Demand - non-interest bearing

$

178,367

$

171,380

$

171,750

Demand - interest bearing

187,276

181,885

183,537

Money market

167,681

164,742

139,350

Savings

83,477

80,856

70,276

Certificates of deposit

19,583

19,816

20,394

Total deposits

636,384

618,679

585,307

Junior subordinated debenture

4,124

4,124

4,124

Subordinated debenture

14,553

14,528

-

Other liabilities

5,420

5,130

3,695

Total liabilities

660,481

642,461

593,126

STOCKHOLDERS' EQUITY

Common stock

20,917

20,904

20,753

Retained earnings

29,762

28,318

22,484

Accumulated other comprehensive income, net of tax

(4,633

)

38

646

Total stockholders' equity

46,046

49,260

43,883

Total liabilities & stockholders' equity

$

706,527

$

691,721

$

637,009

CONSOLIDATED STATEMENTS OF INCOME

Unaudited (dollars in thousands, except per share data)

THREE MONTHS ENDED

March 31,

December 31,

March 31,

2022

2021

2021

INTEREST INCOME

Non-PPP loans

$

4,284

$

4,194

$

3,648

PPP loans

205

697

1,460

Securities

556

364

178

Other interest income

55

63

27

Total interest income

5,100

5,318

5,313

INTEREST EXPENSE

Deposits

109

115

100

Borrowed funds

181

185

31

Total interest expense

290

300

131

NET INTEREST INCOME

4,810

5,018

5,182

Provision for loan losses

50

-

-

Net interest income after provision for loan losses

4,760

5,018

5,182

NONINTEREST INCOME

Trust fee income

778

819

630

Service charges

298

303

247

Mortgage loan sales

123

163

149

Investment sales commissions

-

20

35

Merchant card services

108

120

86

Oregon Pacific Wealth Management income

250

259

188

Other income

88

78

77

Total noninterest income

1,645

1,762

1,412

NONINTEREST EXPENSE

Salaries and employee benefits

2,614

2,383

2,273

Outside services

520

511

436

Occupancy & equipment

401

366

347

Trust expense

392

384

355

Loan and collection, OREO expense

27

40

36

Advertising

94

61

58

Supplies and postage

69

63

57

Other operating expenses

389

490

407

Total noninterest expense

4,506

4,298

3,969

Income before taxes

1,899

2,482

2,625

Provision for income taxes

455

612

662

NET INCOME

$

1,444

$

1,870

$

1,963

Quarterly Highlights

1st Quarter

4th Quarter

3rd Quarter

2nd Quarter

1st Quarter

2022

2021

2021

2021

2021

Earnings

Net interest income

$

4,810

$

5,018

$

5,251

$

4,865

$

5,182

Provision for loan loss

50

-

-

-

-

Noninterest income

1,645

1,762

1,629

1,812

1,412

Noninterest expense

4,506

4,298

4,152

4,105

3,969

Provision for income taxes

455

612

686

650

662

Net income

$

1,444

$

1,870

$

2,042

$

1,922

$

1,963

Average shares outstanding

7,057,361

7,042,478

7,042,478

7,041,041

7,022,759

Earnings per share

$

0.20

$

0.27

$

0.29

$

0.27

$

0.28

Performance Ratios

Return on average assets

0.84

%

1.09

%

1.22

%

1.17

%

1.38

%

Return on average equity

12.02

%

15.44

%

17.24

%

17.24

%

18.59

%

Net interest margin - tax equivalent

2.93

%

3.04

%

3.25

%

3.09

%

3.82

%

Yield on loans

4.50

%

4.99

%

5.11

%

4.78

%

5.14

%

Yield on loans - excluding PPP loans

4.37

%

4.47

%

4.49

%

4.63

%

4.63

%

Cost of deposits

0.07

%

0.07

%

0.08

%

0.08

%

0.08

%

Efficiency ratio

69.81

%

63.39

%

60.35

%

61.48

%

60.19

%

Full-time equivalent employees

122

118

116

114

116

Capital

Leverage ratio

9.72

%

9.73

%

9.70

%

7.45

%

8.18

%

Common equity tier 1 ratio

16.42

%

17.12

%

18.50

%

15.25

%

NA(1)

Tier 1 risk based ratio

16.42

%

17.12

%

18.50

%

15.25

%

NA(1)

Total risk based ratio

17.68

%

18.38

%

19.75

%

16.51

%

NA(1)

Book value per share

$

6.52

$

6.99

$

6.80

$

6.57

$

6.23

Asset quality

Allowance for loan losses (ALLL)

$

5,959

$

5,905

$

6,026

$

6,024

$

6,020

Nonperforming loans (NPLs)

$

593

$

928

$

1,388

$

1,517

$

1,558

Nonperforming assets (NPAs)

$

593

$

928

$

1,388

$

1,517

$

1,558

Classified Assets (2)

$

6,349

$

8,756

$

8,156

$

12,627

$

12,141

Net loan charge offs (recoveries)

$

(4

)

$

122

$

(2

)

$

(3

)

$

(230

)

ALLL as a percentage of net loans

1.45

%

1.48

%

1.54

%

1.54

%

1.50

%

ALLL as a percentage of net loans (excluding PPP)

1.46

%

1.52

%

1.67

%

1.79

%

1.87

%

ALLL as a percentage of NPLs

1004.89

%

636.31

%

434.15

%

397.10

%

386.39

%

Net charge offs (recoveries) to average loans

0.00

%

0.03

%

0.00

%

0.00

%

-0.06

%

Net NPLs as a percentage of total loans

0.15

%

0.24

%

0.35

%

0.39

%

0.39

%

Nonperforming assets as a percentage of total assets

0.08

%

0.13

%

0.20

%

0.23

%

0.24

%

Classified Asset Ratio (3)

13.79

%

17.78

%

17.04

%

27.30

%

27.67

%

Past due as a percentage of total loans

0.21

%

0.21

%

0.03

%

0.36

%

0.14

%

Off-balance sheet figures

Off-balance sheet demand deposits (4)

$

78,674

$

55,477

$

57,105

$

54,299

$

56,226

Off-balance sheet time deposits (5)

$

37,500

$

47,500

$

49,500

$

39,500

$

-

Unused credit commitments

$

95,570

$

83,778

$

86,816

$

83,807

$

82,458

Trust assets under management (AUM)

$

221,390

$

201,264

$

188,420

$

183,175

$

178,546

Oregon Pacific Wealth Management AUM

$

127,749

$

130,099

$

122,274

$

103,401

$

94,436

End of period balances

Total securities and short term deposits

$

256,267

$

266,268

$

268,963

$

247,475

$

211,989

Total loans net of allowance

$

406,229

$

392,250

$

385,620

$

384,076

$

395,176

Total earning assets

$

670,406

$

665,780

$

661,966

$

638,932

$

614,542

Total assets

$

706,527

$

691,721

$

684,314

$

663,683

$

637,009

Total noninterest bearing deposits

$

178,367

$

171,380

$

180,991

$

181,406

$

171,750

Total deposits

$

636,384

$

618,679

$

612,950

$

609,458

$

585,307

Average balances

Total securities and short term deposits

$

264,504

$

268,332

$

250,185

$

239,921

$

150,214

Total loans net of allowance

$

398,423

$

383,161

$

388,212

$

389,766

$

397,195

Total earning assets

$

670,330

$

658,872

$

645,779

$

637,066

$

554,446

Total assets

$

699,808

$

682,779

$

666,455

$

659,644

$

576,991

Total noninterest bearing deposits

$

171,184

$

170,600

$

183,950

$

178,155

$

167,266

Total deposits

$

626,023

$

610,981

$

610,247

$

606,476

$

525,064

(1) Effective March 31, 2020 through March 31, 2021 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

View source version on businesswire.com: https://www.businesswire.com/news/home/20220419006052/en/

Contacts

Ron Green, President & Chief Executive Officer
ron.green@opbc.com
(541) 902-9800

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