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Oregon Pacific Bank Announces Second Quarter Earnings Results

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

 

Contacts

Editorial Contact:

Ron Green, President & Chief Executive Officer

ron.green@opbc.com

(541) 902-9800

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