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Oregon Pacific Bank Announces First Quarter Earnings Results

FLORENCE, Ore., April 18, 2023--(BUSINESS WIRE)--Oregon Pacific Bancorp (ORPB), the holding company of Oregon Pacific Bank, today reported financial results for the first quarter ended, March 31, 2023.

Highlights:

  • First quarter net income of $2.4 million; $0.34 per diluted share.

  • Quarterly loan growth of $10.5 million or annualized growth of 8.82%.

  • Quarterly deposit growth of $7.2 million or annualized growth of 4.26%.

  • Quarterly tax equivalent net interest margin of 3.87%

Net income for the quarter ended March 31, 2023, was $2.4 million, or $0.34 per diluted share compared to $1.4 million or $0.20 per diluted share for the quarter ended March 31, 2022. Ron Green, President and Chief Executive Officer said today upon the release of Oregon Pacific Bank’s earnings, "We are pleased with our first quarter results for 2023, reflecting period-ending, year-over-year growth in net loans, deposits, and earnings per share." He continued, "During the recent events surrounding the closure of two larger financial institutions in the United States, our historical emphasis on balance sheet diversification, and our focus on attracting business banking relationships that value service, continues to serve the Bank well. Our increase in cost of funds has been at a rate lower than most of our peers. Although we are aware that some business depositors have invested their excess liquidity in non-banking products, such as U.S. Treasuries, we have not lost any business relationships to other local or regional commercial banks purely for reasons of clients demanding a higher yield on deposits. We will continue to lead with our value-proposition of service first and our desire to create mutual value for the Bank and its customers."

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Period-end loans, net of deferred loan origination fees, totaled $493.5 million, representing quarterly growth of $10.5 million. The first quarter loan yield grew to 4.85%, an increase of 0.15% over the prior quarter. Effective January 1, 2023, the Bank adopted Accounting Standards Update 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments ("ASU 2016-13") and all related amendments. The day 1 adoption of ASU 2016-13 and related amendments resulted in an increase of $60 thousand to the Bank’s allowance for credit losses on loans, an increase of $777 thousand to the Bank’s allowance for unfunded commitments and letters of credit and a net-of-tax cumulative-effect adjustment of $611 thousand to decrease the beginning balance of retained earnings. The Bank’s estimate of provision for credit losses for the first quarter of 2023, under the new CECL methodology, resulted in a reversal of $51 thousand of provision expense, which was comprised of an increase to the allowance for credit losses on loans of $70 thousand and a reduction in the reserve for unfunded commitments of $121 thousand. In addition to provision for credit losses, the Bank also recognized recoveries of $88 thousand during the quarter.

The Bank experienced quarterly deposit growth totaling $7.2 million or an annualized increase of 4.26%. Included in the first quarter deposit growth was approximately $19.1 million in deposits that migrated from off-balance sheet holdings with IntraFi Network, into on-balance sheet reciprocal balances. As of March 31, 2023, the Bank has migrated all off-balance sheet deposits into a reciprocal position. During the quarter the Bank experienced an increase in requests for the full FDIC insurance coverage associated with the Insured Cash Sweep accounts. Excluding the reciprocal migration, the Bank’s ICS balances grew $22.5 million. The ICS balances are currently listed under the demand interest bearing category on the balance sheet. As deposit rate pressure continues, the Bank’s cost of funds increased to 0.51% during the first quarter 2023, up from the 0.21% reported in the fourth quarter 2022. The Bank has also analyzed deposit balances and below is a breakout of deposit balances as of March 31, 2023, by type.

Deposit Detail - March 31, 2023

Unaudited (dollars in thousands)

Consumer

Business

Account
Balance

Number of
Accounts

Avg, Bal. Per
Account

Account
Balance

Number of
Accounts

Avg, Bal. Per
Account

Demand - non-interest bearing

$

62,014

4,854

$

13

$

104,395

1,993

$

52

Demand - interest bearing

52,858

801

66

106,819

730

146

Demand - ICS

6,045

8

756

98,307

36

2,731

Money market

80,729

655

123

84,389

335

252

Savings

65,773

2,534

26

12,642

240

53

Certificates of deposit

16,075

374

43

-

-

-

$

283,494

9,226

$

406,552

3,334

The securities portfolio contracted slightly from $195.9 million at December 31, 2022, down to $195.6 million at Mach 31, 2023. The contraction was attributable to portfolio cash flows, which was partially offset by a reduction in the unrealized loss on the portfolio, as the Bank did not purchase any securities during the quarter. The unrealized loss at March 31, 2023 reflected a reduction of $1.9 million, moving to $12.4 million, down from $14.3 million at December 31, 2022. The increase in market values was primarily attributable to a reduction in longer-term interest rates positively affecting the market values. The weighted average life of the portfolio was 5.2 years and the modified duration of 4.4 years at March 31, 2023. During the quarter the yield on securities grew to 3.41%, up from 3.02% in the fourth quarter 2022, with securities income increasing $217 thousand over fourth quarter 2022, which was primarily attributable to the securities repositioning strategy executed during fourth quarter 2022.

Noninterest income totaled $1.7 million during the first quarter 2023 and represented a decrease of $187 thousand from fourth quarter 2022. The largest decrease 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 $7 thousand during first quarter 2023, down from $191 thousand in fourth quarter 2022. With the Bank migrating all IntraFi deposits into a reciprocal position, this source of noninterest income is not anticipated in future periods.

First quarter 2023 noninterest expense totaled $5.3 million, down $1.4 million from the $6.7 million recorded during fourth quarter 2022. During the fourth quarter 2022 the bank recognized a loss on sale of securities of $1.8 million. Excluding the loss on sale of securities, noninterest expense increased $405 thousand over the fourth quarter 2022. The largest fluctuation occurred in the salaries and employee benefits category which grew $342 thousand, primarily attributable to the full quarter of salary expense associated with the Portland Market expansion.

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 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,

December 31,

March 31,

2023

2022

2022

ASSETS

Cash and due from banks

$

8,783

$

10,657

$

16,039

Interest bearing deposits

41,931

39,863

98,345

Securities

195,647

195,881

157,922

Non PPP Loans, net of deferred fees and costs

493,480

482,979

407,405

PPP Loans, net of deferred fees and costs

-

-

4,783

Total Loans, net of deferred fees and costs

493,480

482,979

412,188

Allowance for credit losses

(6,884

)

(6,666

)

(5,959

)

Premises and equipment, net

9,867

9,556

9,645

Bank owned life insurance

8,677

8,616

8,456

Deferred tax asset

5,319

5,631

2,998

Other assets

7,669

7,665

6,893

Total assets

$

764,489

$

754,182

$

706,527

LIABILITIES

Deposits

Demand - non-interest bearing

$

166,409

$

180,589

$

178,367

Demand - interest bearing

264,029

236,511

187,276

Money market

165,118

165,671

167,681

Savings

78,415

82,662

83,477

Certificates of deposit

16,075

17,436

19,583

Total deposits

690,046

682,869

636,384

Junior subordinated debenture

4,124

4,124

4,124

Subordinated debenture

14,652

14,627

14,553

Other liabilities

6,300

6,474

5,420

Total liabilities

715,122

708,094

660,481

STOCKHOLDERS' EQUITY

Common stock

21,103

21,099

20,917

Retained earnings

37,284

35,462

29,762

Accumulated other comprehensive income, net of tax

(9,020

)

(10,473

)

(4,633

)

Total stockholders' equity

49,367

46,088

46,046

Total liabilities & stockholders' equity

$

764,489

$

754,182

$

706,527

CONSOLIDATED STATEMENTS OF INCOME

Unaudited (dollars in thousands, except per share data)

THREE MONTHS ENDED

March 31,

December 31,

March 31,

2023

2022

2022

INTEREST INCOME

Non-PPP loans

$

5,824

$

5,517

$

4,284

PPP loans

-

-

205

Securities

1,687

1,470

556

Other interest income

401

664

55

Total interest income

7,912

7,651

5,100

INTEREST EXPENSE

Deposits

858

361

109

Borrowed funds

226

220

181

Total interest expense

1,084

581

290

NET INTEREST INCOME

6,828

7,070

4,810

Provision (credit) for credit losses

(51

)

335

50

Net interest income after provision (credit) for credit losses

6,879

6,735

4,760

NONINTEREST INCOME

Trust fee income

884

841

778

Service charges

325

329

298

Mortgage loan sales

38

57

123

Merchant card services

103

121

108

Oregon Pacific Wealth Management income

252

236

250

Other income

99

304

88

Total noninterest income

1,701

1,888

1,645

NONINTEREST EXPENSE

Salaries and employee benefits

3,129

2,787

2,614

Loss on sale of securities

-

1,829

-

Outside services

552

593

520

Occupancy & equipment

448

432

401

Trust expense

481

461

392

Loan and collection, OREO expense

24

(8

)

27

Advertising

102

111

94

Supplies and postage

88

75

69

Other operating expenses

489

457

389

Total noninterest expense

5,313

6,737

4,506

Income before taxes

3,267

1,886

1,899

Provision for income taxes

834

459

455

NET INCOME

$

2,433

$

1,427

$

1,444

Quarterly Highlights

1st Quarter

4th Quarter

3rd Quarter

2nd Quarter

1st Quarter

2023

2022

2022

2022

2022

Earnings

Net interest income

$

6,828

$

7,070

$

6,102

$

5,389

$

4,810

Provision for loan loss

(51

)

335

209

100

50

Noninterest income

1,701

1,888

2,042

1,781

1,645

Noninterest expense

5,313

6,737

4,811

4,463

4,506

Provision for income taxes

834

459

792

663

455

Net income

$

2,433

$

1,427

$

2,332

$

1,944

$

1,444

Average shares outstanding

7,085,840

7,070,425

7,070,433

7,070,686

7,057,361

Average diluted shares outstanding

7,089,090

NA

NA

NA

NA

Earnings per share

$

0.34

$

0.20

$

0.33

$

0.27

$

0.20

Diluted earnings per share

$

0.34

NA

NA

NA

NA

Performance Ratios

Return on average assets

1.13

%

0.74

%

1.28

%

1.12

%

0.84

%

Return on average equity

21.01

%

13.34

%

20.41

%

17.34

%

12.02

%

Net interest margin - tax equivalent

3.87

%

3.87

%

3.54

%

3.27

%

2.93

%

Yield on loans

4.85

%

4.70

%

4.50

%

4.45

%

4.50

%

Yield on loans - excluding PPP loans

4.85

%

4.70

%

4.50

%

4.33

%

4.37

%

Yield on securities

3.41

%

3.02

%

2.39

%

1.91

%

1.49

%

Cost of deposits

0.51

%

0.21

%

0.09

%

0.07

%

0.07

%

Efficiency ratio

62.29

%

75.21

%

59.07

%

62.21

%

69.81

%

Full-time equivalent employees

127

120

122

122

122

Capital

Tier 1 capital

$

75,684

$

73,882

$

72,410

$

70,041

$

68,040

Leverage ratio

9.94

%

9.55

%

9.95

%

9.96

%

9.72

%

Common equity tier 1 ratio

14.16

%

13.92

%

14.81

%

14.79

%

16.42

%

Tier 1 risk based ratio

14.16

%

13.92

%

14.81

%

14.79

%

16.42

%

Total risk based ratio

15.41

%

15.17

%

16.06

%

16.04

%

17.68

%

Book value per share

$

6.97

$

6.52

$

6.05

$

6.37

$

6.52

Quarterly Highlights

1st Quarter

4th Quarter

3rd Quarter

2nd Quarter

1st Quarter

2023

2022

2022

2022

2022

Asset quality

Allowance for loan losses (ALLL)

$

6,884

$

6,666

$

6,328

$

6,088

$

5,959

Nonperforming loans (NPLs)

$

72

$

52

$

424

$

960

$

593

Nonperforming assets (NPAs)

$

72

$

52

$

424

$

960

$

593

Classified Assets (1)

$

3,842

$

3,877

$

4,574

$

5,089

$

6,349

Net loan charge offs (recoveries)

$

(88

)

$

(4

)

$

(31

)

$

(29

)

$

(4

)

ACL as a percentage of net loans

1.39

%

1.38

%

1.39

%

1.40

%

1.45

%

ACL as a percentage of net loans (excluding PPP)

1.39

%

1.38

%

1.39

%

1.40

%

1.46

%

ACL as a percentage of NPLs

9561.11

%

12819.23

%

1492.45

%

634.17

%

1004.89

%

Net charge offs (recoveries) to average loans

-0.02

%

0.00

%

-0.01

%

-0.01

%

0.00

%

Net NPLs as a percentage of total loans

0.01

%

0.01

%

0.09

%

0.22

%

0.15

%

Nonperforming assets as a percentage of total assets

0.01

%

0.01

%

0.05

%

0.13

%

0.08

%

Classified Asset Ratio (2)

4.65

%

4.81

%

5.81

%

6.68

%

8.58

%

Past due as a percentage of total loans

0.06

%

0.19

%

0.13

%

0.12

%

0.21

%

Off-balance sheet figures

Off-balance sheet demand deposits (3)

$

-

$

18,976

$

60,588

$

121,645

$

78,674

Off-balance sheet time deposits (4)

$

-

$

-

$

-

$

-

$

37,500

Unused credit commitments

$

85,390

$

89,680

$

85,880

$

93,411

$

95,570

Trust assets under management (AUM)

$

219,731

$

215,736

$

193,448

$

195,058

$

199,983

Oregon Pacific Wealth Management AUM

$

113,138

$

117,549

$

116,193

$

114,973

$

127,749

End of period balances

Total securities

$

195,647

$

195,881

$

188,366

$

170,977

$

157,922

Total short term deposits

$

41,931

$

39,863

$

97,840

$

71,429

$

98,345

Total loans net of allowance

$

486,596

$

476,313

$

450,299

$

429,390

$

406,229

Total earning assets

$

733,090

$

720,712

$

744,786

$

679,835

$

670,406

Total assets

$

764,489

$

754,182

$

780,711

$

712,532

$

706,527

Total noninterest bearing deposits

$

166,409

$

180,589

$

195,536

$

189,112

$

178,367

Total deposits

$

690,046

$

682,869

$

712,710

$

642,653

$

636,384

Average balances

Total securities

$

196,060

$

192,348

$

186,535

$

165,729

$

143,830

Total short term deposits

$

35,240

$

68,808

$

57,557

$

73,515

$

120,674

Total loans net of allowance

$

480,046

$

459,440

$

436,522

$

418,445

$

398,423

Total earning assets

$

720,003

$

728,980

$

688,723

$

665,637

$

670,330

Total assets

$

752,094

$

761,361

$

720,465

$

697,913

$

699,808

Total noninterest bearing deposits

$

167,863

$

178,226

$

191,292

$

178,626

$

171,184

Total deposits

$

678,528

$

692,412

$

648,827

$

627,700

$

626,023

(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/20230418005286/en/

Contacts

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