Oregon Pacific Bank Announces First Quarter Earnings Results

FLORENCE, Ore.--()--Oregon Pacific Bancorp (ORPB) today reported financial results for the first quarter ended March 31, 2020.

Highlights

  • First quarter net income of $642 thousand - $0.09 per diluted share
  • Quarterly deposit growth of $21.2 million
  • Quarterly loan growth of $2.32 million
  • Tax equivalent net interest margin of 4.39%

Oregon Pacific Bancorp, and its wholly owned subsidiary Oregon Pacific Bank, reported quarterly net income of $642 thousand, or $0.09 per diluted share compared to $400 thousand, or $0.06 per diluted share for the quarter ended March 31, 2019. Quarterly earnings were impacted by an increase in provision for loan losses, totaling $378 thousand for the quarter. The increase in provision was in response to economic conditions attributable to COVID-19 and the Governor’s mandated closure of certain businesses. “During March, Oregon Pacific’s Bankers proactively worked with borrowers to understand how their businesses were impacted by COVID-19,” said Ron Green, President and CEO. “This hands-on approach resulted in several loan modifications, including short term interest only, or payment deferral periods based on each businesses’ cash flow needs. While the full economic impact of COVID-19 is not fully understood, Oregon Pacific Bank is committed to assisting our clients through these unprecedented times.”

In the first quarter the Bank continued to experience growth in both loans and deposits. Period end deposits totaled $339.2 million, representing growth of $21.2 million over the prior quarter end. Average deposits for the quarter, a metric that removes the daily volatility in balances, totaled $325.1 million. The Bank experienced a large portion of the deposit growth following the stock market disruption in early March.

Period end loans, net of deferred loan origination fees, totaled $301.2 million, representing growth of $2.3 million during the quarter. The Bank did experience some payoffs during the quarter, as a decrease in rates at the beginning of March prompted some borrowers to refinance with other financial institutions. During the month of March, the Bank experienced unscheduled prepayments totaling approximately $7.5 million. The Bank saw a reduction in payoff requests toward the end of March as economic uncertainty made the prospects of refinancing more difficult for some borrowers.

Subsequent to the end of the quarter, the Small Business Administration (SBA) opened the Paycheck Protection Program (PPP), which enables eligible businesses and non-profit agencies to receive partially forgivable loans to support payroll expenses during the COVID-19 crisis. Through April 20, 2020, Oregon Pacific Bank worked with existing clients to have 470 PPP loans approved through the SBA, totaling $94.8 million. “We are proud to see the work our bankers have undertaken to support our clients through the Paycheck Protection Program,” said John Raleigh, Executive Vice President and Chief Lending Officer. “Our bankers worked quickly to secure loans for our clients and demonstrate the responsiveness of a small community bank.”

For the quarter ended March 31, 2020, the Bank booked net charge offs of $5 thousand. During the first quarter the Bank saw a decrease in nonperforming assets which lowered to $1.3 million, down from $1.6 million at the end of the fourth quarter primarily related to the payoff of one loan relationship. The Bank also transferred one residential property into other real estate with a balance of $51 thousand during the quarter. The allowance for loan losses as a percentage of nonperforming loans grew to 322.44% amid the economic uncertainty of COVID-19.

The first quarter 2020 net interest margin of 4.39% represented an increase of four basis points from the 4.35% earned during the fourth quarter 2019. During the quarter the bank received prepayment penalties totaling $141 thousand which contributed 16 basis points to the quarterly margin. Excluding the prepayment penalty, the first quarter net interest margin would have been 4.23%. The Bank also saw a decrease in the cost of interest-bearing liabilities which fell to 0.45% during the first quarter 2020, down from 0.54% in the fourth quarter 2019, as the Bank instituted reductions in deposit rates following the reduction in the Fed Funds rate in early March.

During the first quarter 2020, noninterest income was $1.25 million, down slightly from the $1.26 million earned in the fourth quarter of 2019. During the quarter, the Bank’s wholly owned investment advisory subsidiary, Oregon Pacific Wealth Management, LLC, saw an increase in investment advisory fees, which were assessed based on assets under management of $65.5 million as of December 31, 2019. Assets under management fell to $58.0 million on March 31, 2020. This reduction was attributed to the significant market correction during the quarter and was partially offset by the addition of new clients since December 31, 2019. This overall reduction in assets under management will affect second quarter revenue as the investment advisory fees are assessed based on asset totals as of March 31, 2020.

Noninterest expense in the fourth quarter totaled $3.8 million, up $181 thousand from the fourth quarter 2019. On a linked quarter basis, the Bank saw increases in salaries and employee benefits expense, primarily tied to the full quarter of salary and benefits expense associated with the new Medford branch operations staff, who were hired in early November 2019. The Bank also saw an increase in outside services due to the timing of the annual financial statement audit in February 2020 and the outsourcing of Trust Operations Function, which was implemented in November 2019 and resulted in additional monthly trust expense of $7 thousand per month. The Bank continued to incur loan and collection expense as one of the Bank’s problem assets, an agricultural property, is requiring ongoing assistance from a receiver to support maintenance of the property. The Bank is continuing to work through issues associated with the liquidation.

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, strategic focus, capital position, liquidity, credit quality 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,

2020

 

2019

 

2019

ASSETS
Cash and due from banks

$

4,840

 

$

4,982

 

$

7,453

 

Interest bearing deposits

 

38,142

 

 

17,511

 

 

14,767

 

Securities

 

26,006

 

 

27,601

 

 

26,927

 

Loans, net of deferred loan fees and costs

 

301,178

 

 

298,847

 

 

259,132

 

Allowance for loan losses

 

(3,966

)

 

(3,592

)

 

(3,264

)

Premises and equipment, net

 

7,025

 

 

7,042

 

 

7,079

 

Bank owned life insurance

 

7,494

 

 

7,066

 

 

6,896

 

Other real estate owned

 

51

 

 

-

 

 

-

 

Deferred tax asset

 

625

 

 

535

 

 

1,074

 

Other assets

 

4,028

 

 

4,196

 

 

2,894

 

 
Total assets

$

385,423

 

$

364,188

 

$

322,958

 

 
 
LIABILITIES
Deposits
Demand - non-interest bearing

$

78,003

 

$

73,771

 

$

73,366

 

Demand - interest bearing

 

110,519

 

 

106,242

 

 

86,860

 

Money market

 

79,510

 

 

71,027

 

 

55,539

 

Savings

 

52,790

 

 

48,398

 

 

47,914

 

Certificates of deposit

 

18,380

 

 

18,601

 

 

18,845

 

Total deposits

 

339,202

 

 

318,039

 

 

282,524

 

 
Subordinated debenture

 

4,124

 

 

4,124

 

 

4,124

 

Other liabilities

 

4,335

 

 

4,674

 

 

2,893

 

 
Total liabilities

 

347,661

 

 

326,837

 

 

289,541

 

 
STOCKHOLDERS' EQUITY
Common stock

 

20,675

 

 

20,663

 

 

20,641

 

Retained earnings

 

16,806

 

 

16,164

 

 

13,048

 

Accumulated other comprehensive income/(loss), net of tax

 

281

 

 

524

 

 

(272

)

 
Total stockholders' equity

 

37,762

 

 

37,351

 

 

33,417

 

 
Total liabilities & stockholders' equity

$

385,423

 

$

364,188

 

$

322,958

 

CONSOLIDATED STATEMENTS OF INCOME
Unaudited (dollars in thousands, except per share data)

THREE MONTHS ENDED

March 31,

 

December 31,

 

March 31,

2020

 

2019

 

2019

INTEREST INCOME
Loans

$

3,857

$

3,823

$

3,148

Securities

 

161

 

170

 

158

Other interest income

 

67

 

128

 

63

Total interest income

 

4,085

 

4,121

 

3,369

 
INTEREST EXPENSE
Deposits

 

240

 

291

 

249

Borrowed funds

 

46

 

51

 

58

Total interest expense

 

286

 

342

 

307

 
NET INTEREST INCOME

 

3,799

 

3,779

 

3,062

Provision for loan losses

 

378

 

30

 

-

Net interest income after provision for loan losses

 

3,421

 

3,749

 

3,062

 
NONINTEREST INCOME
Trust fee income

 

572

 

576

 

490

Service charges

 

221

 

229

 

208

Mortgage loan sales and servicing

 

139

 

145

 

71

Investment sales commissions

 

48

 

51

 

48

Merchant card services

 

64

 

67

 

51

RIA income

 

134

 

119

 

83

Other income

 

72

 

72

 

84

Total noninterest income

 

1,250

 

1,259

 

1,035

 
NONINTEREST EXPENSE
Salaries and employee benefits

 

2,124

 

1,942

 

1,795

Outside services

 

427

 

359

 

370

Occupancy & equipment

 

324

 

325

 

281

Trust expense

 

356

 

353

 

328

Loan and collection, OREO expense

 

154

 

211

 

357

Advertising

 

51

 

82

 

71

Supplies and postage

 

61

 

57

 

54

Other operating expenses

 

320

 

307

 

324

Total noninterest expense

 

3,817

 

3,636

 

3,580

 
Income before taxes

 

854

 

1,372

 

517

Provision for income taxes

 

212

 

318

 

117

 
NET INCOME

$

642

$

1,054

$

400

Quarterly Highlights

1st Quarter

 

4th Quarter

 

3rd Quarter

 

2nd Quarter

 

1st Quarter

2020

 

2019

 

2019

 

2019

 

2019

 
Earnings
Net interest income

$

3,799

 

$

3,779

 

$

3,531

 

$

3,383

 

$

3,062

 

Provision for loan loss

 

378

 

 

30

 

 

95

 

 

110

 

 

-

 

Noninterest income

 

1,250

 

 

1,259

 

 

1,239

 

 

1,209

 

 

1,035

 

Noninterest expense

 

3,817

 

 

3,636

 

 

3,267

 

 

3,114

 

 

3,580

 

Provision for income taxes

 

212

 

 

318

 

 

363

 

 

349

 

 

117

 

Net income

$

642

 

$

1,054

 

$

1,045

 

$

1,019

 

$

400

 

 
Average shares outstanding

 

7,003,125

 

 

6,975,084

 

 

6,975,084

 

 

6,973,431

 

 

6,972,584

 

Earnings per share

$

0.09

 

$

0.15

 

$

0.15

 

$

0.15

 

$

0.06

 

 
Performance Ratios
Return on average assets

 

0.69

%

 

1.14

%

 

1.16

%

 

1.21

%

 

0.52

%

Return on average equity

 

6.87

%

 

11.45

%

 

11.70

%

 

12.05

%

 

4.92

%

Net interest margin - tax equivalent

 

4.39

%

 

4.35

%

 

4.19

%

 

4.30

%

 

4.26

%

Efficiency ratio

 

75.60

%

 

72.19

%

 

68.49

%

 

67.77

%

 

67.81

%

Full-time equivalent employees

 

112

 

 

110

 

 

105

 

 

102

 

 

102

 

 
Capital
Leverage ratio

 

11.15

%

 

11.13

%

 

11.12

%

 

11.44

%

 

11.97

%

Common equity tier 1 ratio

 

NA

(1)

 

13.83

%

 

14.42

%

 

14.62

%

 

14.88

%

Tier 1 risk based ratio

 

NA

(1)

 

13.83

%

 

14.42

%

 

14.62

%

 

14.88

%

Total risk based ratio

 

NA

(1)

 

15.06

%

 

15.68

%

 

15.87

%

 

16.13

%

Book value per share

$

5.39

 

$

5.35

 

$

5.20

 

$

5.03

 

$

4.79

 

Cost of interest bearing liabilities

 

0.45

%

 

0.54

%

 

0.60

%

 

0.60

%

 

0.59

%

 
Asset quality
Allowance for loan losses (ALLL)

$

3,966

 

$

3,592

 

$

3,484

 

$

3,380

 

$

3,264

 

Nonperforming loans (NPLs)

$

1,230

 

$

1,614

 

$

1,510

 

$

1,693

 

$

1,318

 

Nonperforming assets (NPAs)

$

1,281

 

$

1,614

 

$

1,510

 

$

1,693

 

$

1,318

 

Net loan charge offs (recoveries)

$

5

 

$

(78

)

$

(8

)

$

(7

)

$

(84

)

ALLL as a percentage of net loans

 

1.32

%

 

1.20

%

 

1.24

%

 

1.26

%

 

1.26

%

ALLL as a percentage of NPLs

 

322.44

%

 

222.55

%

 

230.73

%

 

199.65

%

 

247.65

%

Net charge offs (recoveries) to average loans

 

0.00

%

 

-0.03

%

 

0.00

%

 

0.00

%

 

-0.03

%

Net NPLs as a percentage of total loans

 

0.41

%

 

0.55

%

 

0.54

%

 

0.64

%

 

0.52

%

Nonperforming assets as a percentage of total assets

 

0.33

%

 

0.44

%

 

0.42

%

 

0.49

%

 

0.41

%

Classified Asset Ratio

 

23.99

%

 

17.60

%

 

15.80

%

 

14.99

%

 

15.46

%

Past due as a percentage of total loans

 

0.61

%

 

0.62

%

 

1.00

%

 

0.74

%

 

0.88

%

 
End of period balances
Total securities and short term deposits

$

64,148

 

$

45,112

 

$

56,627

 

$

56,932

 

$

41,694

 

Total loans net of allowance

$

297,212

 

$

295,255

 

$

277,979

 

$

266,437

 

$

255,868

 

Total earning assets

$

366,472

 

$

345,038

 

$

339,169

 

$

327,828

 

$

301,905

 

Total assets

$

385,423

 

$

364,188

 

$

360,358

 

$

347,191

 

$

322,958

 

Total noninterest bearing deposits

$

78,003

 

$

73,771

 

$

78,230

 

$

80,785

 

$

73,366

 

Total deposits

$

339,202

 

$

318,039

 

$

316,176

 

$

304,432

 

$

282,524

 

 
Average balances
Total securities and short term deposits

$

48,764

 

$

57,528

 

$

60,571

 

$

52,991

 

$

40,110

 

Total loans net of allowance

$

298,055

 

$

285,491

 

$

272,845

 

$

261,487

 

$

250,167

 

Total earning assets

$

351,537

 

$

347,646

 

$

337,903

 

$

318,838

 

$

294,537

 

Total assets

$

372,017

 

$

366,647

 

$

356,452

 

$

337,585

 

$

313,824

 

Total noninterest bearing deposits

$

76,653

 

$

74,489

 

$

78,817

 

$

77,694

 

$

69,258

 

Total deposits

$

325,128

 

$

321,687

 

$

312,530

 

$

295,451

 

$

273,364

 

 
(1) Effective March 31, 2020 Oregon Pacific Bank opted into the Community Bank Leverage Ratio and is no longer calculating risk based capital ratios.

 

Contacts

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

Contacts

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