Oregon Pacific Bank Announces First Quarter Earnings Results

Rhea-AI Summary

Oregon Pacific Bancorp (ORPB) reported a strong first quarter of 2021 with net income of $1.96 million and $0.28 per diluted share, a significant increase from last year’s $642 thousand or $0.09 per share. The bank achieved $46.2 million in gross PPP loan production and $99.0 million in deposit growth, showing an annualized growth rate of 83.20%. The net interest margin stood at 3.82%. The bank did not make a provision for loan losses due to improved credit metrics. However, management anticipates that some deposit growth may be temporary due to ongoing economic uncertainty.

Positive

• First quarter net income increased to $1.96 million, up from $642 thousand year-over-year.
• Gross PPP loan production was $46.2 million, demonstrating strong demand.
• Deposits grew by $99.0 million, an annualized growth rate of 83.20%.
• Net interest margin improved to 3.82%, enhancing profitability.
• No provision for loan losses reported, indicating positive credit metrics.

Negative

• Potential for temporary deposit growth due to economic uncertainty.
• Effective yield on non-PPP loans declined to 4.63%, down from 4.69% previously.

Oregon Pacific Bancorp (ORPB) today reported financial results for the first quarter ended March 31, 2021.

Highlights

• First quarter net income of $1.96 million; $0.28 per diluted share
• Quarterly gross PPP loan production of $46.2 million with $2.1 million in loan fees
• Quarterly deposit growth of $99.0 million, an annualized growth rate of 83.20%
• Quarterly non-PPP loan growth of $10.6 million, an annualized growth rate of 13.74%
• Tax equivalent first quarter net interest margin of 3.82%

Oregon Pacific Bancorp, and its wholly owned subsidiary Oregon Pacific Bank, reported quarterly net income of $1.96 million, or $0.28 per diluted share in the first quarter of 2021 compared to $642 thousand, or $0.09 per diluted share for the quarter ended March 31, 2020. First quarter net income was again elevated due to the processing of Paycheck Protection Program (PPP) forgiveness payments, which resulted in increased interest income due to amortization of the remaining loan origination fees at payoff. The Bank made no provision for loan losses during the first quarter as the Bank’s allowance for loan loss methodology indicated no provision was necessary based on current credit metrics.

“We are extremely proud of the first quarter performance as we continue to navigate the pandemic,” said Ron Green, President and CEO. “Our staff successfully onboarded a significant number of new deposit clients during the quarter. We believe this will contribute to managing the Bank’s future cost of funds and strengthen our enterprise value. We are also fortunate to see improvement in our credit metrics, and we will continue to be there for our clients as they work through the impacts of COVID-19 and any remaining economic uncertainty.”

During the quarter, deposit growth totaled $99.0 million, an annualized growth rate of 83.20%. On an annual basis, growth totaled $246.1 million, a 72.5% increase over March 31, 2020. Initially, the deposit growth experienced by the Bank closely mirrored the PPP loan totals, but during the first quarter deposit growth far exceeded the quarterly funding of new PPP loans. Management attributes growth to several factors: migration of new clients acquired through the first round PPP loans who experienced some delay in their account transition due to the pandemic, economic uncertainty leading to increased savings, and additional stimulus payments processed at the end of the quarter. The Bank still believes some of this deposit growth is temporary as some borrowers are delaying investment or capital purchases until the economy has fully recovered from the pandemic. The Bank continues to maintain funds in the InterFi Network Insured Cash Sweep (ICS) product. As of March 31, 2021, the one-way sell ICS deposits residing off-balance sheet totaled $44.0 million. The off-balance sheet deposits continue to remain a source of liquidity and can be moved back into a reciprocal position at any point.

In April 2020, the Small Business Administration (SBA) opened the Paycheck Protection Program (PPP), which enabled eligible businesses and non-profit agencies to receive loans with forgiveness provisions to support payroll and other eligible expenses during the COVID-19 crisis. The PPP loans also carry a 100% SBA guarantee. During the initial round, Oregon Pacific Bank funded 752 PPP loans, totaling $125.2 million. Through March 31, 2021, the Bank received forgiveness and borrower payments totaling $90.3 million, representing more than 70% of the first funding loans.

At the beginning of 2021, the Paycheck Protection Program was expanded to allow certain eligible borrowers that previously received a PPP loan to apply for a Second Draw PPP Loan. Through March 31, 2021, Oregon Pacific Bank funded an additional 332 PPP loans, totaling $46.2 million. The quarterly PPP loan production was almost fully offset by forgiveness payments received during the quarter. The forgiveness payments were expedited during the quarter due to the simplified forgiveness application for loans less than $150 thousand. As of March 31, 2021, the Bank had 364 outstanding PPP loans totaling $18.3 million with loan balances less than $150 thousand. The Bank continues to process forgiveness applications, however, applications greater than $2 million are experiencing a longer approval timeline.

Below is a summary of the PPP loan activity for the first quarter 2021:

		Gross PPP loans				PPP deferred loan origination fees				Net PPP loans
December 31, 2020 balance		$	80,766			$	(1,685	)		$	79,081
PPP Forgiveness/payments/amortization			(45,856	)			1,390				(44,466	)
Q1 PPP loan production			46,182				(2,052	)			44,130
March 31, 2021 balance		$	81,092			$	(2,347	)		$	78,745

“Oregon Pacific Bank has experienced significant growth during the last twelve months, primarily tied to the Bank’s ability to respond to PPP loan demand,” said John Raleigh, Chief Lending Officer. “The PPP loan production achieved during the first quarter 2021 has further led to customer loyalty and deepened the value Oregon Pacific Bank brings to our clients.”

Period-end non-PPP loans, net of deferred loan origination fees, totaled $322.5 million, representing quarterly net growth of $10.6 million, an annualized growth rate of 13.74%. The effective yield on the non-PPP loan portfolio declined to 4.63%, down from 4.69% in the quarter ended December 31, 2020. The Bank continued to see loan opportunities during the first quarter, but a competitive rate environment has led to a declining yield on the non-PPP portfolio and the potential for an increased risk of prepayments in future quarters.

During the quarter, the Bank experienced a decrease in classified assets as there were upgrades of six different lending relationships and a payoff of another relationship. One of the larger upgrades totaled $1,192 in exposure to a forest products client who was downgraded pre-COVID but has seen substantial business improvement as a result of lumber demand due to the Oregon forest fires in September 2020. Five other small lending relationships were upgraded, with total combined exposures of $263 thousand. Over the last two years, the Bank worked with a receiver to resolve a substandard agricultural credit relationship. During the quarter, the real estate securing one of the loans was sold, and additional collateral was liquidated, resulting in the payoff of the remaining book balances, which totaled $687 thousand as of December 31, 2020. As a result of the collateral liquidation, the Bank booked net recoveries for the quarter of $230 thousand. During the quarter, the Bank’s Chief Credit Officer, Robert (Bob) Edstrom, announced his pending retirement after working at Oregon Pacific for more than seven years. James Atwood, SVP, Sr. Credit Administrator, will be promoted to EVP & Chief Credit Officer upon Bob Edstrom's retirement on June 25, 2021.

First quarter 2021 noninterest income totaled $1.4 million, which represents an increase of $49 thousand over the prior quarter and representing an increase of $162 thousand over the first quarter 2020. The Bank experienced growth of $44 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 $94.4 million as of March 31, 2021.

Noninterest expense in the first quarter totaled $4.0 million, down $189 thousand from the fourth quarter. The largest change occurred in the salaries and employee benefits expense which decreased $69 thousand from the fourth quarter of 2021. This decrease was partially attributable to an increase in the bonus accrual related to the level of Bank profitability experienced during the fourth quarter 2020, which normalized in 2021. The loan and collection expense decreased $55 thousand from the prior quarter and $118 thousand from first quarter 2020 as the receiver-related expenses tied to the agricultural property have diminished due to the collateral liquidation. The overall expense level during the first quarter was more normalized, and management believes accurately represents the expected noninterest expense moving into the rest of 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, 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)
		March 31,				Dec 31,				March 31,
			2021				2020				2020
ASSETS
Cash and due from banks		$	9,925			$	7,785			$	4,840
Interest bearing deposits			161,446				86,570				38,142
Securities			50,543				37,805				26,006
Non PPP Loans, net of deferred fees and costs			322,451				311,883				301,178
PPP Loans, net of deferred fees and costs			78,745				79,081				-
Total Loans, net of deferred fees and costs			401,196				390,964				301,178
Allowance for loan losses			(6,020	)			(5,791	)			(3,966	)
Premises and equipment, net			6,621				6,770				7,025
Bank owned life insurance			8,221				8,160				7,494
Deferred tax asset			1,079				943				625
Other assets			3,998				3,935				4,028
Total assets		$	637,009			$	537,141			$	385,423
LIABILITIES
Deposits
Demand - non-interest bearing		$	171,750			$	136,428			$	78,003
Demand - interest bearing			183,537				146,202				110,519
Money market			139,350				116,505				79,510
Savings			70,276				66,936				52,790
Certificates of deposit			20,394				20,272				18,380
Total deposits			585,307				486,343				339,202
Subordinated debenture			4,124				4,124				4,124
Other liabilities			3,695				4,399				4,335
Total liabilities			593,126				494,866				347,661
STOCKHOLDERS' EQUITY
Common stock			20,753				20,745				20,675
Retained earnings			22,484				20,517				16,806
Accumulated other comprehensive
income, net of tax			646				1,013				281
Total stockholders' equity			43,883				42,275				37,762
Total liabilities &
stockholders' equity		$	637,009			$	537,141			$	385,423

CONSOLIDATED STATEMENTS OF INCOME
Unaudited (dollars in thousands, except per share data)
		THREE MONTHS ENDED
		March 31,			Dec 31,			March 31,
		2021			2020			2020
INTEREST INCOME
Non-PPP loans		$	3,648		$	3,640		$	3,857
PPP loans			1,460			1,911			-
Securities			178			174			161
Other interest income			27			21			67
Total interest income			5,313			5,746			4,085
INTEREST EXPENSE
Deposits			100			129			240
Borrowed funds			31			31			46
Total interest expense			131			160			286
NET INTEREST INCOME			5,182			5,586			3,799
Provision for loan losses			-			-			378
Net interest income after
provision for loan losses			5,182			5,586			3,421
NONINTEREST INCOME
Trust fee income			630			635			572
Service charges			247			248			221
Mortgage loan sales and servicing			149			132			139
Investment sales commissions			35			37			48
Merchant card services			86			94			64
RIA income			188			144			134
Other income			77			73			72
Total noninterest income			1,412			1,363			1,250
NONINTEREST EXPENSE
Salaries and employee benefits			2,273			2,342			2,124
Outside services			436			423			427
Occupancy & equipment			347			339			324
Trust expense			355			398			356
Loan and collection, OREO expense			36			91			154
Advertising			58			63			51
Supplies and postage			57			61			61
Other operating expenses			407			441			320
Total noninterest expense			3,969			4,158			3,817
Income before taxes			2,625			2,791			854
Provision for income taxes			662			713			212
NET INCOME		$	1,963		$	2,078		$	642

Quarterly Highlights
	1st Quarter				4th Quarter				3rd Quarter				2nd Quarter				1st Quarter
		2021				2020				2020				2020				2020
Earnings
Net interest income	$	5,182			$	5,586			$	4,425			$	4,249			$	3,799
Provision for loan loss		-				-				900				900				378
Noninterest income		1,412				1,363				1,374				1,161				1,250
Noninterest expense		3,969				4,158				3,832				3,407				3,817
Provision for income taxes		662				713				264				273				212
Net income	$	1,963			$	2,078			$	803			$	830			$	642
Average shares outstanding		7,022,759				7,008,125				7,008,125				7,003,125				7,003,125
Earnings per share	$	0.28			$	0.30			$	0.11			$	0.12			$	0.09
Performance Ratios
Return on average assets		1.38	%			1.52	%			0.60	%			0.69	%			0.69	%
Return on average equity		18.59	%			20.33	%			8.05	%			8.69	%			6.87	%
Net interest margin - tax equivalent		3.82	%			4.29	%			3.50	%			3.73	%			4.39	%
Yield on loans		5.14	%			5.37	%			4.14	%			4.33	%			5.14	%
Yield on loans - excluding PPP loans		4.63	%			4.69	%			4.70	%			4.85	%			5.14	%
Cost of deposits		0.08	%			0.10	%			0.13	%			0.22	%			0.45	%
Efficiency ratio		60.19	%			59.84	%			66.08	%			62.98	%			75.60	%
Full-time equivalent employees		116				116				113				111				112
Capital
Leverage ratio		8.18	%			8.33	%			8.14	%			8.74	%			11.15	%
Common equity tier 1 ratio	NA(1)				NA(1)				NA(1)				NA(1)				NA(1)
Tier 1 risk based ratio	NA(1)				NA(1)				NA(1)				NA(1)				NA(1)
Total risk based ratio	NA(1)				NA(1)				NA(1)				NA(1)				NA(1)
Book value per share	$	6.23			$	6.03			$	5.75			$	5.61			$	5.39
Asset quality
Allowance for loan losses (ALLL)	$	6,020			$	5,791			$	5,782			$	4,873			$	3,966
Nonperforming loans (NPLs)	$	1,558			$	2,521			$	1,596			$	1,293			$	1,230
Nonperforming assets (NPAs)

FAQ

What were Oregon Pacific Bancorp's earnings for Q1 2021?

Oregon Pacific Bancorp reported net income of $1.96 million for Q1 2021.

What is the quarterly deposit growth rate for ORPB?

Oregon Pacific Bancorp experienced a quarterly deposit growth of $99.0 million, resulting in an annualized growth rate of 83.20%.

How much did ORPB produce in PPP loans during the first quarter?

Oregon Pacific Bancorp generated $46.2 million in gross PPP loan production in Q1 2021.

What is the net interest margin for Oregon Pacific Bancorp?

The net interest margin for Oregon Pacific Bancorp in Q1 2021 was 3.82%.

Did Oregon Pacific Bancorp make any provision for loan losses in Q1 2021?

No provision for loan losses was made in Q1 2021 due to favorable credit metrics.