Oregon Pacific Bank Announces Second Quarter Earnings Results

·14 min read

FLORENCE, Ore., July 22, 2021--(BUSINESS WIRE)--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

View source version on businesswire.com: https://www.businesswire.com/news/home/20210722006001/en/

Contacts

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

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