Oregon Pacific Bank Announces Third Quarter Earnings Results

FLORENCE, Ore.--()--Oregon Pacific Bancorp (ORPB), the holding company of Oregon Pacific Bank, today reported financial results for the third quarter ended September 30, 2021.

Third quarter highlights:

  • Net income of $2.04 million; $0.29 per diluted share.
  • Non-PPP loan growth of $25.8 million.
  • Issued $15 million in aggregate principal amount of fixed-to-floating rate subordinated notes.
  • $13.5 million capital investment in Oregon Pacific Bancorp, increasing Tier 1 leverage to 9.70%.

Net income for the third quarter was $2.0 million, or $0.29 per diluted share compared to $803 thousand, or $0.11 per diluted share for the quarter ended September 30, 2020. Third quarter net income continued to be 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. During the quarter the Bank saw outstanding PPP loans reduce to $30.1 million. Through September 30, 2021, 749 of the 752 PPP loans originated in 2020 and 267 of the 402 loans originated in 2021 were forgiven.

Period-end non-PPP loans, net of deferred loan origination fees, totaled $361.6 million, representing quarterly net growth of $25.8 million and year-to-date net growth of $49.7 million or an annualized increase of 21.30%. The growth in non-PPP loans was spread across nearly all loan categories, with the largest growth experienced in investor commercial real estate, construction, and owner-occupied commercial real estate, totaling $7.8 million, $6.9 million, and $5.1 million, respectively. The Bank continued to experience non-PPP loan demand, but pricing pressures remain strong. The effective yield on the non-PPP loan portfolio lowered to 4.49%, down from 4.63% in second quarter, primarily related to new production occurring at rates below the current effective yield of the portfolio.

“The Bank’s loan growth reflects the success we have had in executing our business strategies to leverage the goodwill from originating PPP loans to our local businesses,” said Ron Green, President and CEO. “Our clients continue to see value in community banking, which we believe will result in continued opportunities and long-term shareholder returns.”

During the quarter the Bank saw improvement in credit metrics as classified assets reduced to $8.2 million, down from $12.6 million in second quarter. The reduction was primarily related to improved credit performance, resulting in five separate credits totaling $4.2 million moving from substandard to pass classification. The remaining classified assets on September 30, 2021, consisted of loans across several different loan types and markets, with the largest exposure being a $2.3 million owner-occupied commercial real estate loan in Roseburg. COVID modifications totaled only $3.3 million as of September 30, 2021, with only one $1.5 million individual credit on full payment deferral.

During the quarter, deposit growth slowed, but still totaled $3.5 million. Quarterly growth was partially reduced as the Bank migrated $12.8 million of additional deposits into off balance sheet products through the InterFi Network’s Insured Cash Sweep (ICS) and CDARS products, bringing total off-balance sheet deposits to $106.6 million on September 30, 2021. The off-balance sheet deposits remain a source of liquidity, with the ICS deposits available on demand and the CDARs deposits had a maximum maturity of four weeks.

Third quarter 2021 noninterest income totaled $1.6 million, which represented a decrease of $183 thousand from second quarter 2021 and an increase of $255 thousand over third quarter 2020. During the third quarter trust fee income contracted to $703 thousand, down from $878 thousand during second quarter. The second quarter trust revenue contained $230 thousand of event-based transactional revenue, typically tied to liquidation of real estate due to the death of a trust client. This transactional revenue is tied to events outside of the Bank’s control and it contracted to $30 thousand during third quarter, but trust management revenue increased to $673 thousand, up $25 thousand over second quarter 2021 and up $98 thousand over third quarter 2020. Below is a summary of the breakout of trust revenue.

 
THREE MONTHS ENDED NINE MONTHS ENDED

Sept 30,

June 30,

Sept 30,

Sept 30,

Sept 30,

2021

2021

2020

2021

2020

Trust Management Revenue

$

673

$

648

$

575

$

1,891

$

1,667

Transactional Revenue

 

30

 

230

 

53

 

320

 

100

Trust fee income

$

703

$

878

$

628

$

2,211

$

1,767

 

The Bank experienced an increase in service charge revenue of $29 thousand compared to prior quarter. This increase was partially attributable to a change in the Bank’s consumer account service charge structure which became effective on August 1, 2021. The Bank implemented this fee change after careful review of market-based pricing and this was the first change in account fees in more than ten years.

Noninterest expense in the third quarter totaled $4.2 million, up $47 thousand over the second quarter. The largest change occurred in the outside services category, which was primarily due to legal expenses associated with review and update to the Bank’s Deferred Compensation Plan and update of the Bank’s Stock Incentive Plan. The 2012 Stock Incentive plan is set to expire in February 2022 and the Bank will be presenting an updated plan for shareholder approval in the 2022 proxy. This expense totaled $33 thousand during the quarter and will not be a reoccurring expense.

On September 29, 2021, Oregon Pacific Bancorp, the holding company for Oregon Pacific Bank, completed a private placement of $15 million in aggregate principal amount of fixed-to-floating rate subordinated notes (the “Notes”) to certain qualified institutional buyers and accredited investors. The Notes will initially bear interest at 3.375% per annum payable semi-annually until September 30, 2026, and thereafter pay a quarterly floating interest rate based on the then-current Three-Month Term Secured Overnight Financing Rate (SOFR) plus 266 basis points, payable quarterly in arrears. Beginning on September 30, 2026, the Notes may be redeemed, in whole or in part, at the Company’s option. The Notes will mature on September 30, 2031. Included in the proceeds from the debenture were various expenses, including commission, legal expenses, and various filing and paying agent expenses. The total of the issuance cost was $508 thousand and will be amortized over the life of the debt as an increase to interest expense.

Subsequent to the subordinated debt issuance, Oregon Bancorp made a capital investment in Oregon Pacific Bank totaling $13.5 million. This capital injection qualified as Tier 1 capital at the Bank and helped to increase the tier 1 leverage ratio as of September 30, 2021, to 9.70%, up from 7.45% as of June 30, 2021.

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)
 
 

Sept 30,

June 30,

Sept 30,

2021

2021

2020

ASSETS
Cash and due from banks

$

10,496

$

12,658

$

9,996

Interest bearing deposits

 

186,565

 

181,966

 

49,693

Securities

 

82,398

 

65,509

 

32,406

Non PPP Loans, net of deferred fees and costs

 

361,573

 

335,813

 

306,054

PPP Loans, net of deferred fees and costs

 

30,073

 

54,287

 

121,872

Total Loans, net of deferred fees and costs

 

391,646

 

390,100

 

427,926

Allowance for loan losses

 

(6,026)

 

(6,024)

 

(5,782)

Premises and equipment, net

 

6,351

 

6,507

 

6,917

Bank owned life insurance

 

8,342

 

8,282

 

8,101

Deferred tax asset

 

1,111

 

940

 

300

Other assets

 

3,431

 

3,745

 

4,899

 
Total assets

$

684,314

$

663,683

$

534,456

 
 
LIABILITIES
Deposits
Demand - non-interest bearing

$

180,991

$

181,406

$

134,574

Demand - interest bearing

 

177,404

 

188,135

 

163,095

Money market

 

158,392

 

147,506

 

106,838

Savings

 

75,710

 

72,557

 

61,964

Certificates of deposit

 

20,453

 

19,854

 

19,118

Total deposits

 

612,950

 

609,458

 

485,589

 
Junior subordinated debenture

 

4,124

 

4,124

 

4,124

Subordinated debenture

 

14,492

 

-

 

-

Other liabilities

 

4,874

 

3,843

 

4,423

 
Total liabilities

 

636,440

 

617,425

 

494,136

 
STOCKHOLDERS' EQUITY
Common stock

 

20,866

 

20,831

 

20,721

Retained earnings

 

26,448

 

24,406

 

18,440

Accumulated other comprehensive income, net of tax

 

560

 

1,021

 

1,159

 
Total stockholders' equity

 

47,874

 

46,258

 

40,320

 
Total liabilities & stockholders' equity

$

684,314

$

663,683

$

534,456

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

THREE MONTHS ENDED

NINE MONTHS ENDED

Sept 30,

June 30,

Sept 30,

Sept 30,

Sept 30,

2021

2021

2020

2021

2020

INTEREST INCOME
Non-PPP loans

$

3,973

$

3,758

$

3,607

$

11,380

$

11,070

PPP loans

 

1,100

 

961

 

831

 

3,520

 

1,465

Securities

 

262

 

242

 

162

 

682

 

496

Other interest income

 

69

 

51

 

17

 

148

 

98

Total interest income

 

5,404

 

5,012

 

4,617

 

15,730

 

13,129

 
INTEREST EXPENSE
Deposits

 

119

 

116

 

158

 

336

 

538

Borrowed funds

 

34

 

31

 

34

 

95

 

115

Total interest expense

 

153

 

147

 

192

 

431

 

653

 
NET INTEREST INCOME

 

5,251

 

4,865

 

4,425

 

15,299

 

12,476

Provision for loan losses

 

-

 

-

 

900

 

-

 

2,178

Net interest income after provision for loan losses

 

5,251

 

4,865

 

3,525

 

15,299

 

10,298

 
NONINTEREST INCOME
Trust fee income

 

703

 

878

 

628

 

2,211

 

1,767

Service charges

 

300

 

271

 

233

 

819

 

647

Mortgage loan sales and servicing

 

138

 

239

 

127

 

526

 

347

Investment sales commissions

 

29

 

33

 

63

 

98

 

154

Merchant card services

 

151

 

114

 

107

 

351

 

230

Oregon Pacific Wealth Management income

 

224

 

199

 

140

 

611

 

400

Other income

 

84

 

78

 

76

 

240

 

238

Total noninterest income

 

1,629

 

1,812

 

1,374

 

4,856

 

3,783

 
NONINTEREST EXPENSE
Salaries and employee benefits

 

2,305

 

2,401

 

2,211

 

6,979

 

6,265

Outside services

 

506

 

436

 

415

 

1,378

 

1,223

Occupancy & equipment

 

362

 

348

 

334

 

1,057

 

973

Trust expense

 

364

 

348

 

347

 

1,066

 

1,024

Loan and collection, OREO expense

 

30

 

29

 

95

 

95

 

321

Advertising

 

95

 

75

 

52

 

229

 

136

Supplies and postage

 

71

 

61

 

59

 

188

 

182

Other operating expenses

 

419

 

407

 

319

 

1,234

 

934

Total noninterest expense

 

4,152

 

4,105

 

3,832

 

12,226

 

11,058

 
Income before taxes

 

2,728

 

2,572

 

1,067

 

7,929

 

3,023

Provision for income taxes

 

686

 

650

 

264

 

1,998

 

748

 
NET INCOME

$

2,042

$

1,922

$

803

$

5,931

$

2,275

Quarterly Highlights

3rd Quarter 2nd Quarter 1st Quarter 4th Quarter 3rd Quarter

2021

2021

2021

2020

2020

 
Earnings
Net interest income

$

5,251

 

$

4,865

 

$

5,184

 

$

5,586

 

$

4,425

 

Provision for loan loss

 

-

 

 

-

 

 

-

 

 

-

 

 

900

 

Noninterest income

 

1,629

 

 

1,812

 

 

1,414

 

 

1,363

 

 

1,374

 

Noninterest expense

 

4,152

 

 

4,105

 

 

3,969

 

 

4,158

 

 

3,832

 

Provision for income taxes

 

686

 

 

650

 

 

662

 

 

713

 

 

264

 

Net income

$

2,042

 

$

1,922

 

$

1,967

 

$

2,078

 

$

803

 

 
Average shares outstanding

 

7,042,478

 

 

7,041,041

 

 

7,022,759

 

 

7,008,125

 

 

7,008,125

 

Earnings per share

$

0.29

 

$

0.27

 

$

0.28

 

$

0.30

 

$

0.11

 

 
Performance Ratios
Return on average assets

 

1.22

%

 

1.17

%

 

1.38

%

 

1.52

%

 

0.60

%

Return on average equity

 

17.24

%

 

17.24

%

 

18.59

%

 

20.33

%

 

8.05

%

Net interest margin - tax equivalent

 

3.25

%

 

3.09

%

 

3.82

%

 

4.29

%

 

3.50

%

Yield on loans

 

5.11

%

 

4.78

%

 

5.14

%

 

5.37

%

 

4.14

%

Yield on loans - excluding PPP loans

 

4.49

%

 

4.63

%

 

4.63

%

 

4.69

%

 

4.70

%

Cost of deposits

 

0.08

%

 

0.08

%

 

0.08

%

 

0.10

%

 

0.13

%

Efficiency ratio

 

60.35

%

 

61.48

%

 

60.19

%

 

59.84

%

 

66.08

%

Full-time equivalent employees

 

116

 

 

114

 

 

116

 

 

116

 

 

113

 

 
Capital
Leverage ratio

 

9.70

%

 

7.45

%

 

8.18

%

 

8.33

%

 

8.14

%

Common equity tier 1 ratio

 

18.50

%

 

15.25

%

NA(1) NA(1) NA(1)
Tier 1 risk based ratio

 

18.50

%

 

15.25

%

NA(1) NA(1) NA(1)
Total risk based ratio

 

19.75

%

 

16.51

%

NA(1) NA(1) NA(1)
Book value per share

$

6.80

 

$

6.57

 

$

6.23

 

$

6.03

 

$

5.75

 

 
Asset quality
Allowance for loan losses (ALLL)

$

6,026

 

$

6,024

 

$

6,020

 

$

5,791

 

$

5,782

 

Nonperforming loans (NPLs)

$

1,388

 

$

1,517

 

$

1,558

 

$

2,521

 

$

1,596

 

Nonperforming assets (NPAs)

$

1,388

 

$

1,517

 

$

1,558

 

$

2,521

 

$

1,596

 

Classified Assets (2)

$

8,156

 

$

12,627

 

$

12,141

 

$

14,366

 

$

12,667

 

Net loan charge offs (recoveries)

$

(2

)

$

(3

)

$

(230

)

$

(9

)

$

(9

)

ALLL as a percentage of net loans

 

1.54

%

 

1.54

%

 

1.50

%

 

1.48

%

 

1.35

%

ALLL as a percentage of net loans (excluding PPP)

 

1.67

%

 

1.79

%

 

1.87

%

 

1.86

%

 

1.89

%

ALLL as a percentage of NPLs

 

434.15

%

 

397.10

%

 

386.39

%

 

229.75

%

 

362.26

%

Net charge offs (recoveries) to average loans

 

0.00

%

 

0.00

%

 

-0.06

%

 

0.00

%

 

0.00

%

Net NPLs as a percentage of total loans

 

0.35

%

 

0.39

%

 

0.39

%

 

0.64

%

 

0.53

%

Nonperforming assets as a percentage of total assets

 

0.20

%

 

0.23

%

 

0.24

%

 

0.47

%

 

0.30

%

Classified Asset Ratio (3)

 

17.04

%

 

27.30

%

 

27.67

%

 

33.98

%

 

31.42

%

Past due as a percentage of total loans

 

0.03

%

 

0.36

%

 

0.14

%

 

0.49

%

 

0.54

%

 
Off-balance sheet figures
Off-balance sheet demand deposits (4)

$

57,105

 

$

54,299

 

$

56,226

 

$

50,281

 

$

24,974

 

Off-balance sheet time deposits (5)

$

49,500

 

$

39,500

 

$

-

 

$

-

 

$

-

 

Unused credit commitments

$

86,816

 

$

83,807

 

$

82,458

 

$

83,982

 

$

74,110

 

 
End of period balances
Total securities and short term deposits

$

268,963

 

$

247,475

 

$

211,989

 

$

124,375

 

$

82,099

 

Total loans net of allowance

$

385,620

 

$

384,076

 

$

395,176

 

$

385,173

 

$

422,144

 

Total earning assets

$

661,966

 

$

638,932

 

$

614,542

 

$

516,485

 

$

511,171

 

Total assets

$

684,314

 

$

663,683

 

$

637,009

 

$

537,141

 

$

534,456

 

Total noninterest bearing deposits

$

180,991

 

$

181,406

 

$

171,750

 

$

136,428

 

$

134,574

 

Total deposits

$

612,950

 

$

609,458

 

$

585,307

 

$

486,343

 

$

485,589

 

 
Average balances
Total securities and short term deposits

$

250,185

 

$

239,921

 

$

150,214

 

$

109,006

 

$

80,235

 

Total loans net of allowance

$

388,212

 

$

389,766

 

$

397,195

 

$

405,796

 

$

421,663

 

Total earning assets

$

645,779

 

$

637,066

 

$

554,446

 

$

521,734

 

$

508,244

 

Total assets

$

666,455

 

$

659,644

 

$

576,991

 

$

543,422

 

$

529,784

 

Total noninterest bearing deposits

$

183,950

 

$

178,155

 

$

167,266

 

$

138,247

 

$

134,676

 

Total deposits

$

610,247

 

$

606,476

 

$

525,064

 

$

493,502

 

$

480,742

 

 
(1) Effective March 31, 2020 through March 31, 2021 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

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

Contacts

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