Oregon Pacific Bank Announces 2022 Earnings Results

Rhea-AI Summary

Oregon Pacific Bancorp (ORPB) reported financial results for Q4 2022, revealing a net income of $1.4 million or $0.20 per diluted share. Annual non-PPP loan growth reached $94.8 million (24.42%), and deposits grew by $64.2 million (10.38%). However, the bank faced a quarterly deposit contraction of $29.8 million (4.2%). A strategic security repositioning resulted in a pre-tax loss of $1.8 million but is forecasted to enhance future interest income by $479 thousand annually. Additionally, noninterest income decreased to $1.9 million, driven by lower other income. The yield on non-PPP loans improved to 4.70%, marking a robust financial performance despite challenges.

Positive

• Annual non-PPP loan growth of $94.8 million (24.42%)
• Net income of $1.4 million in Q4, totaling $7.1 million for the year
• Successful expansion into Portland with new loan production office
• Increased yield on non-PPP loans to 4.70%
• Strategic securities repositioning expected to enhance interest income by $479 thousand annually

Negative

• Quarterly deposit contraction of $29.8 million (4.2%)
• Decrease in noninterest income to $1.9 million, down $154 thousand from previous quarter
• Pre-tax loss of $1.8 million from security sales, impacting 2022 profitability

FLORENCE, Ore.--(BUSINESS WIRE)-- Oregon Pacific Bancorp (ORPB), the holding company of Oregon Pacific Bank, today reported financial results for the fourth quarter ended, and year ended, December 31, 2022.

Highlights:

• Fourth quarter net income of $1.4 million; $0.20 per diluted share.
• Annual non-PPP loan growth of $94.8 million or 24.42%.
• Annual deposit growth of $64.2 million or 10.38%.
• Quarterly tax equivalent net interest margin of 3.87%
• Bank expanded into Portland, opening a loan production office in December

Net income for the quarter ended December 31, 2022, was $1.4 million, or $0.20 per diluted share. On an annual basis, the Bank recorded net income totaling $7.1 million, or $1.01 per diluted share compared to $7.8 million, or $1.11 per diluted share for the same period in 2021.

Ron Green, President and Chief Executive Officer, said today upon the release of Oregon Pacific’s earnings, “Our bankers’ work is reflected in our financial results with record production driving annualized loan growth of 24 percent and exceptional credit metrics.” He continued, “Our investments in new and existing markets continue to result in core loan production capabilities.”

Period-end loans, net of deferred loan origination fees, totaled $483.0 million, representing quarterly growth of $26.4 million, and annual non-PPP growth of $94.8 million. The fourth quarter yield on non-PPP loans totaled 4.70%, an increase of 0.20% over the prior quarter. During the quarter the Bank saw a decrease in classified assets totaling $697 thousand, bringing the classified asset ratio to 4.81% as of December 31, 2022. This decrease was primarily attributable to a payoff of one residential loan relationship. The Bank also funded provision for loan loss expense of $335 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.

The Bank experienced deposit contraction totaling $29.8 million or a decline of 4.2% during the quarter. On an annual basis deposits grew $64.2 million or 10.38%.

“During fourth quarter, the Bank experienced a decrease in deposits as customers pursued higher yields on their non-operating cash balances," commented John Raleigh, Chief Lending Officer. "The Bank was positioned with sufficient liquidity where it was not forced to aggressively compete for high-cost deposits and some deposit runoff was anticipated.”

The Bank’s cost of funds increased to 0.21% in fourth quarter, up from the 0.09% reported in third quarter 2022. In market rate competition increased during the quarter, with some local and regional banks offering higher yield CD specials for new depositors. While CD rates do not typically attract business depositors, the Bank did experience some consumer deposit contraction. Business related deposits were less impacted by local competition, and more impacted by online banks offering high yield money market rates or brokerage firms offering money market mutual funds.

Noninterest income totaled $1.9 million during fourth quarter 2022 and represented a decrease of $154 thousand from third quarter 2022. The largest decrease 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 $191 during fourth quarter, down from $437 thousand in third quarter.

During the quarter the Bank implemented a security repositioning strategy, which resulted in a pre-tax loss on sale of securities totaling $1.8 million, or an after-tax loss of $1.4 million. The Bank elected to sell $15.5 million of securities, purchased in early 2021, with a weighted average yield of 1.23% and a remaining weighted average life of 5.42 years. These securities were replaced by $13.8 million of securities, yielding 4.79%, based on the most recent monthly prepayments, and a weighted average life of 6.53 years. The replacement strategy is forecasted to result in additional interest income of $479 thousand annually and is expected to fully offset the loss in less than four years, based on current prepayment assumptions. This strategy was executed in mid-December and the increased yield on the portfolio was only realized for a small portion of the quarter.

“This security sale strategy was possible due to the strong financial results in 2022,” said Amber White, Executive Vice President and CFO. “While 2022 profitability was impacted by the sale, the bank’s margin is better positioned for 2023 and beyond, leading to enhanced shareholder value.”

The overall securities portfolio saw a reduction in the unrealized loss on securities of $2.6 million, moving to $14.3 million on December 31, 2022, down from $16.9 million at September 30, 2022. This was attributable to recognition of the loss on sale, combined with an increase in the market value of some securities. The weighted average life of the portfolio reduced to 5.2 years at December 31, 2022, down from 5.5 years at September 30, 2022. During the quarter the yield on securities grew to 3.02%, up from 2.39% in third quarter, which contributed an additional $339 thousand of interest income.

Excluding the loss on sale of securities, noninterest expense in the fourth quarter 2022 totaled $4.9 million, an increase of $97 thousand over third quarter 2022. Included in fourth quarter expenses were one-time expenses totaling $122 thousand associated with the hiring of the Portland team. The hiring of the Portland team did not occur until the end of fourth quarter and the full impact of the personnel and occupancy expense was not reflected in fourth quarter results. The initial impact of the Portland team is expected to increase quarterly expense by $340 thousand but may grow as a permanent location is identified and as the Bank moves forward with a branch application and staffing.

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, investment yields,, 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)
		December 31,				September 30,				December 31,
		2022				2022				2021
ASSETS
Cash and due from banks		$	10,657			$	13,402			$	8,643
Interest bearing deposits			39,863				97,840				143,192
Securities			195,881				188,366				123,076
Non PPP Loans, net of deferred fees and costs			482,979				456,627				388,187
PPP Loans, net of deferred fees and costs			-				-				9,968
Total Loans, net of deferred fees and costs			482,979				456,627				398,155
Allowance for loan losses			(6,666	)			(6,328	)			(5,905	)
Premises and equipment, net			9,556				9,501				9,721
Bank owned life insurance			8,616				8,563				8,402
Deferred tax asset			5,631				5,836				1,270
Other assets			7,665				6,904				5,167
Total assets		$	754,182			$	780,711			$	691,721
LIABILITIES
Deposits
Demand - non-interest bearing		$	180,589			$	195,536			$	171,380
Demand - interest bearing			236,511				242,974				181,885
Money market			165,671				170,439				164,742
Savings			82,662				85,548				80,856
Certificates of deposit			17,436				18,213				19,816
Total deposits			682,869				712,710				618,679
Junior subordinated debenture			4,124				4,124				4,124
Subordinated debenture			14,627				14,603				14,528
Other liabilities			6,474				6,499				5,130
Total liabilities			708,094				737,936				642,461
STOCKHOLDERS' EQUITY
Common stock			21,099				21,042				20,904
Retained earnings			35,462				34,038				28,318
Accumulated other comprehensive income, net of tax			(10,473	)			(12,305	)			38
Total stockholders' equity			46,088				42,775				49,260
Total liabilities & stockholders' equity		$	754,182			$	780,711			$	691,721

CONSOLIDATED STATEMENTS OF INCOME
Unaudited (dollars in thousands, except per share data)
		THREE MONTHS ENDED											TWELVE MONTHS ENDED
		December 31,				September 30,			December 31,				December 31,			December 31,
		2022				2022			2021				2022			2021
INTEREST INCOME
Non-PPP loans		$	5,517			$	5,022		$	4,194			$	19,392		$	15,575
PPP loans			-				-			697				349			4,217
Securities			1,470				1,131			364				3,984			1,046
Other interest income			664				305			63				1,170			212
Total interest income			7,651				6,458			5,318				24,895			21,050
INTEREST EXPENSE
Deposits			361				152			115				729			450
Borrowed funds			220				204			185				795			280
Total interest expense			581				356			300				1,524			730
NET INTEREST INCOME			7,070				6,102			5,018				23,371			20,320
Provision for loan losses			335				209			-				694			-
Net interest income after provision for loan losses			6,735				5,893			5,018				22,677			20,320
NONINTEREST INCOME
Trust fee income			841				783			819				3,206			3,029
Service charges			329				324			303				1,273			1,122
Mortgage loan sales			57				29			163				297			688
Investment sales commissions			-				-			20				-			118
Merchant card services			121				153			120				515			471
Oregon Pacific Wealth Management income			236				239			259				977			870
Other income			304				514			78				1,085			320
Total noninterest income			1,888				2,042			1,762				7,353			6,618
NONINTEREST EXPENSE
Salaries and employee benefits			2,787				2,787			2,383				10,830			9,362
Loss on sale of securities			1,829				-			-				1,829			-
Outside services			593				583			511				2,199			1,888
Occupancy & equipment			432				413			366				1,657			1,422
Trust expense			461				432			384				1,686			1,452
Loan and collection, OREO expense			(8	)			21			40				63			135
Advertising			111				141			61				440			289
Supplies and postage			75				74			63				279			251
Other operating expenses			457				360			490				1,536			1,728
Total noninterest expense			6,737				4,811			4,298				20,519			16,527
Income before taxes			1,886				3,124			2,482				9,511			10,411
Provision for income taxes			459				792			612				2,368			2,610
NET INCOME		$	1,427			$	2,332		$	1,870			$	7,143		$	7,801

Quarterly Highlights
	4th Quarter				3rd Quarter				2nd Quarter				1st Quarter				4th Quarter
	2022				2022				2022				2022				2021
Earnings
Net interest income	$	7,070			$	6,102			$	5,389			$	4,810			$	5,018
Provision for loan loss		335				209				100				50				-
Noninterest income		1,888				2,042				1,781				1,645				1,762
Noninterest expense		6,737				4,811				4,463				4,506				4,298
Provision for income taxes		459				792				663				455				612
Net income	$	1,427			$	2,332			$	1,944			$	1,444			$	1,870
Average shares outstanding		7,070,425				7,070,433				7,070,686				7,057,361				7,042,478
Earnings per share	$	0.20			$	0.33			$	0.27			$	0.20			$	0.27
Performance Ratios
Return on average assets		0.74	%			1.28	%			1.12	%			0.84	%			1.09	%
Return on average equity		13.34	%			20.41	%			17.34	%			12.02	%			15.44	%
Net interest margin - tax equivalent		3.87	%			3.54	%			3.27	%			2.93	%			3.04	%
Yield on loans		4.70	%			4.50	%			4.45	%			4.50	%			4.99	%
Yield on loans - excluding PPP loans		4.70	%			4.50	%			4.33	%			4.37	%			4.47	%
Yield on securities		3.02	%			2.39	%			1.91	%			1.49	%			1.39	%
Cost of deposits		0.21	%			0.09	%			0.07	%			0.07	%			0.07	%
Efficiency ratio		75.21	%			59.07	%			62.21	%			69.81	%			63.39	%
Full-time equivalent employees		120				122				122				122				118
Capital
Tier 1 capital	$	73,882			$	72,410			$	70,041			$	68,040			$	66,593
Leverage ratio		9.55	%			9.95	%			9.96	%			9.72	%			9.73	%
Common equity tier 1 ratio		13.92	%			14.81	%			14.79	%			16.42	%			17.12	%
Tier 1 risk based ratio		13.92	%			14.81	%			14.79	%			16.42	%			17.12	%
Total risk based ratio		15.17	%			16.06	%			16.04	%			17.68	%			18.38	%
Book value per share	$	6.52			$	6.05			$	6.37			$	6.52			$	6.99
Asset quality
Allowance for loan losses (ALLL)	$	6,666			$	6,328			$	6,088			$	5,959			$	5,905
Nonperforming loans (NPLs)	$	52			$	424			$	960			$	593			$	928
Nonperforming assets (NPAs)	$	52			$	424			$	960			$	593			$	928
Classified Assets (1)	$	3,877			$	4,574			$	5,089			$	6,349			$	8,756
Net loan charge offs (recoveries)	$	(4	)		$	(31	)		$	(29	)		$	(4	)		$	122
ALLL as a percentage of net loans		1.38	%			1.39	%			1.40	%			1.45	%			1.48	%
ALLL as a percentage of net loans (excluding PPP)		1.38	%			1.39	%			1.40	%			1.46	%			1.52	%
ALLL as a percentage of NPLs		12819.23	%			1492.45	%			634.17	%			1004.89	%			636.31	%
Net charge offs (recoveries) to average loans		0.00	%			-0.01	%			-0.01	%			0.00	%			0.03	%
Net NPLs as a percentage of total loans		0.01	%			0.09	%			0.22	%			0.15	%			0.24	%
Nonperforming assets as a percentage of total assets		0.01	%			0.05	%			0.13	%			0.08	%			0.13	%
Classified Asset Ratio (2)		4.81	%			5.81	%			6.68	%			8.58	%			12.08	%
Past due as a percentage of total loans		0.19	%			0.13	%			0.12	%			0.21	%			0.21	%
Off-balance sheet figures
Off-balance sheet demand deposits (3)	$	18,976			$	60,588			$	121,645			$	78,674			$	55,477
Off-balance sheet time deposits (4)	$	-			$	-			$	-			$	37,500			$	47,500
Unused credit commitments	$	89,680			$	85,880			$	93,411			$	95,570			$	83,778
Trust assets under management (AUM)	$	215,736			$	193,448			$	195,058			$	199,983			$	201,264
Oregon Pacific Wealth Management AUM	$	117,549			$	116,193			$	114,973			$	127,749			$	130,099
End of period balances
Total securities	$	195,881			$	188,366			$	170,977			$	157,922			$	123,076
Total short term deposits	$	39,863			$	97,840			$	71,429			$	98,345			$	143,192
Total loans net of allowance	$	476,313			$	450,299			$	429,390			$	406,229			$	392,250
Total earning assets	$	720,712			$	744,786			$	679,835			$	670,406			$	665,780
Total assets	$	754,182			$	780,711			$	712,532			$	706,527			$	691,721
Total noninterest bearing deposits	$	180,589			$	195,536			$	189,112			$	178,367			$	171,380
Total deposits	$	682,869			$	712,710			$	642,653			$	636,384			$	618,679
Average balances
Total securities	$	192,348			$	186,535			$	165,729			$	143,830			$	102,431
Total short term deposits	$	68,808			$	57,557			$	73,515			$	120,674			$	165,901
Total loans net of allowance	$	459,440			$	436,522			$	418,445			$	398,423			$	383,161
Total earning assets	$	728,980			$	688,723			$	665,637			$	670,330			$	658,872
Total assets	$	761,361			$	720,465			$	697,913			$	699,808			$	682,779
Total noninterest bearing deposits	$	178,226			$	191,292			$	178,626			$	171,184			$	170,600
Total deposits	$	692,412			$	648,827			$	627,700			$	626,023			$	610,981

(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

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230119005832/en/

Ron Green, President & Chief Executive Officer

ron.green@opbc.com

(541) 902-9800

Source: Oregon Pacific Bancorp

FAQ

What were Oregon Pacific Bancorp's Q4 2022 earnings results?

Oregon Pacific Bancorp reported Q4 net income of $1.4 million, or $0.20 per diluted share.

How did Oregon Pacific Bancorp perform in terms of loan growth?

The bank experienced annual non-PPP loan growth of $94.8 million, or 24.42%.

What is the status of Oregon Pacific Bancorp's deposits?

Oregon Pacific Bancorp saw a quarterly deposit contraction of $29.8 million, although annual deposits grew by $64.2 million.

What impact did the securities repositioning strategy have on Oregon Pacific Bancorp?

The securities repositioning resulted in a pre-tax loss of $1.8 million but is expected to increase annual interest income by $479 thousand.

How did Oregon Pacific Bancorp's yield on loans change?

The yield on non-PPP loans increased to 4.70% in Q4 2022.