Oregon Pacific Bank Announces Third Quarter Earnings Results

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.

 

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