Oregon Pacific Bank Announces Second Quarter Earnings Results

Rhea-AI Summary

Oregon Pacific Bancorp (ORPB) reported a stable second quarter ended June 30, 2022, with net income of $1.9 million, or $0.27 per diluted share, unchanged from Q2 2021. The bank successfully processed final Paycheck Protection Program (PPP) forgiveness payments, bringing PPP loan balances to zero. Notable growth was seen in non-PPP loans, which increased by $28.1 million, and deposits grew by $6.3 million. The second quarter net interest margin stood at 3.27%, while classified assets decreased to a ratio of 6.68%.

Positive

• Net income remained stable at $1.9 million, or $0.27 per diluted share.
• Non-PPP loan growth of $28.1 million for the quarter, with a year-to-date growth of 24.37%.
• Completed processing of PPP forgiveness payments, enhancing financial stability.

Negative

• Decrease in PPP fee and interest income by $816 thousand compared to the prior year.
• Decline in effective yield on non-PPP loans to 4.33% from 4.37% in Q1 2022.
• Increased unrealized loss on the securities portfolio to $10.5 million.

FLORENCE, Ore.--(BUSINESS WIRE)-- Oregon Pacific Bancorp (ORPB), the holding company of Oregon Pacific Bank, today reported financial results for the second quarter ended June 30, 2022.

Highlights:

• Final PPP forgiveness payments processed, bringing PPP loan balances to zero.
• Second quarter net income of $1.9 million; $0.27 per diluted share.
• Quarterly non-PPP loan growth of $28.1 million.
• Quarterly deposit growth of $6.3 million.
• Quarterly tax equivalent net interest margin of 3.27%.

Net income for the quarter ended June 30, 2022, was $1.9 million, or $0.27 per diluted share compared to $1.9 million, or $0.27 per diluted share for the quarter ended June 30, 2021. During the quarter the Bank saw a conclusion of the Paycheck Protection Program (PPP) forgiveness payments, recognizing $145 thousand in PPP fee and interest income during the second quarter. PPP income recognized during second quarter 2022 was down $816 thousand from the $961 thousand recognized in second quarter 2021, yet overall net income was comparable.

“We are pleased to report the ending to our PPP loan program,” said Ron Green, President and CEO. “PPP loans provided much needed support to the business community during a tremendously uncertain time. While the forgiveness process is complete, we are proud of the lasting economic benefits our clients received because of the program.”

Period-end non-PPP loans, net of deferred loan origination fees, totaled $435.5 million, with quarterly growth of $28.1 million, and year-to-date growth of $47.3 million, which represented an annualized growth rate of 24.37%. The Bank continued to experience non-PPP loan demand, but pricing pressures remain strong. The second quarter effective yield on the non-PPP loan portfolio lowered to 4.33%, down from 4.37% in first quarter. During the second quarter a USDA guaranteed loan prepaid, which was purchased at a premium during 2017. This resulted in the expense of $47 thousand for the remaining purchase premium, which resulted in a reduction to interest income during the second quarter. Without the prepayment, the effective yield on the non-PPP loan portfolio would have been 4.38%, an improvement of 0.01% over first quarter 2022.

During the quarter the Bank saw a decrease in classified assets totaling $1.3 million, bringing the classified asset ratio to 6.68% as of June 30, 2022. This decrease was primarily attributable to upgrades of one loan relationship and payoffs of three additional loans. Offsetting the upgrades and payoffs, the Bank migrated one relationship totaling $375 thousand, to nonaccrual status. This was a single-family residential loan, which as of June 30, 2022, was well secured.

Second quarter 2022 deposit growth slowed but totaled $6.3 million. The Bank maintained second quarter cost of funds totaling 0.07% and had not initiated any deposit rate increases. The Bank also continues to maintain $121.6 million of additional off-balance sheet deposits in the IntraFi Network’s Insured Cash Sweep (ICS) product. In prior quarters the Bank maintained both time deposits and demand deposits in the IntraFi network due to capacity limitation imposed by the IntraFi Network. During second quarter those limitations were eliminated, and the Bank migrated all off-balance sheet deposits into the ICS demand product. The off-balance sheet deposits remain a source of liquidity, with the ICS deposits available on demand.

During the second quarter the Bank continued to purchase investment securities with quarterly purchases totaling $19.4 million, with a weighted average maturity of 3.08 years and a weighted average yield of 3.11%. Securities purchases were offset by portfolio amortization and an increase in the unrealized loss on the securities portfolio. The June 30, 2022, unrealized loss on the securities portfolio grew to $10.5 million or 5.8% of the portfolio book value. Second quarter securities income totaled $828 thousand, an increase of $272 thousand from the $556 thousand recognized in the first quarter ended March 31, 2022. Several factors contributed to the increased earnings, including securities purchased during the quarter occurred at an effective rate higher than the overall portfolio yield and the increase in the yield on the variable rate securities tied to the prime rate. As of June 30, 2022, approximately $47.7 million of the securities portfolio is subject to monthly or quarter rate resets. The Bank continues to plan for additional securities purchases during 2022, which will continue to enhance the net interest margin by shifting earnings assets from fed funds into higher yielding securities.

Second quarter 2022 noninterest income totaled $1.8 million, which represented an increase of $136 thousand from the first quarter 2022. The increase occurred across all income categories except for mortgage loan sales. While higher interest rates have stopped most refinance activity, the Bank’s Florence community continues to see inward migration which provides opportunities for mortgage originations, but at a pace slower than 2021. The largest increase 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 deposits, which totaled $80 thousand. This represents the difference between what IntraFi paid the bank for the deposits and what was passed to the depositors. As interest rates push upward this source of non-interest income will likely decrease over time as the Bank will be forced to increase the interest amount paid to depositors.

Noninterest expense in the second quarter 2022 totaled $4.5 million, down $43 thousand from first quarter 2022. The primary driver of the reduction came from the other operating expense category, with the difference primarily attributable to timing differences in business development expenses, including nonprofit event sponsorships and charitable donations, which totaled $22 thousand in second quarter, down from $57 thousand in the first quarter.

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,
		2022				2022				2021
ASSETS
Cash and due from banks		$	11,527			$	16,039			$	12,658
Interest bearing deposits			71,429				98,345				181,966
Securities			170,977				157,922				65,509
Non PPP Loans, net of deferred fees and costs			435,478				407,405				335,813
PPP Loans, net of deferred fees and costs			-				4,783				54,287
Total Loans, net of deferred fees and costs			435,478				412,188				390,100
Allowance for loan losses			(6,088	)			(5,959	)			(6,024	)
Premises and equipment, net			9,558				9,645				6,507
Bank owned life insurance			8,509				8,456				8,282
Deferred tax asset			4,118				2,998				940
Other assets			7,024				6,893				3,745
Total assets		$	712,532			$	706,527			$	663,683
LIABILITIES
Deposits
Demand - non-interest bearing		$	189,112			$	178,367			$	181,406
Demand - interest bearing			187,348				187,276				188,135
Money market			163,728				167,681				147,506
Savings			83,517				83,477				72,557
Certificates of deposit			18,948				19,583				19,854
Total deposits			642,653				636,384				609,458
Junior subordinated debenture			4,124				4,124				4,124
Subordinated debenture			14,578				14,553				-
Other liabilities			6,153				5,420				3,843
Total liabilities			667,508				660,481				617,425
STOCKHOLDERS' EQUITY
Common stock			20,977				20,917				20,831
Retained earnings			31,707				29,762				24,406
Accumulated other comprehensive income, net of tax			(7,660	)			(4,633	)			1,021
Total stockholders' equity			45,024				46,046				46,258
Total liabilities & stockholders' equity		$	712,532			$	706,527			$	663,683

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,
		2022			2022			2021				2022			2021
INTEREST INCOME
Non-PPP loans		$	4,568		$	4,284		$	3,758			$	8,854		$	7,407
PPP loans			145			205			961				349			2,421
Securities			828			556			242				1,383			420
Other interest income			147			55			51				202			79
Total interest income			5,688			5,100			5,012				10,788			10,327
INTEREST EXPENSE
Deposits			108			109			116				217			217
Borrowed funds			191			181			31				371			61
Total interest expense			299			290			147				588			278
NET INTEREST INCOME			5,389			4,810			4,865				10,200			10,049
Provision for loan losses			100			50			-				150			-
Net interest income after provision for loan losses			5,289			4,760			4,865				10,050			10,049
NONINTEREST INCOME
Trust fee income			804			778			878				1,582			1,508
Service charges			322			298			271				620			519
Mortgage loan sales			90			123			239				211			387
Investment sales commissions			-			-			33				-			69
Merchant card services			134			108			114				242			200
Oregon Pacific Wealth Management income			252			250			199				502			387
Other income			179			88			78				269			156
Total noninterest income			1,781			1,645			1,812				3,426			3,226
NONINTEREST EXPENSE
Salaries and employee benefits			2,642			2,614			2,401				5,256			4,675
Outside services			504			520			436				1,023			872
Occupancy & equipment			412			401			348				813			694
Trust expense			402			392			348				794			702
Loan and collection, OREO expense			23			27			29				50			64
Advertising			94			94			75				188			133
Supplies and postage			60			69			61				130			117
Other operating expenses			326			389			407				716			817
Total noninterest expense			4,463			4,506			4,105				8,970			8,074
Income before taxes			2,607			1,899			2,572				4,506			5,201
Provision for income taxes			663			455			650				1,118			1,312
NET INCOME		$	1,944		$	1,444		$	1,922			$	3,388		$	3,889

Quarterly Highlights
	2nd Quarter				1st Quarter				4th Quarter				3rd Quarter				2nd Quarter
	2022				2022				2021				2021				2021
Earnings
Net interest income	$	5,389			$	4,810			$	5,018			$	5,251			$	4,865
Provision for loan loss		100				50				-				-				-
Noninterest income		1,781				1,645				1,762				1,629				1,812
Noninterest expense		4,463				4,506				4,298				4,152				4,105
Provision for income taxes		663				455				612				686				650
Net income	$	1,944			$	1,444			$	1,870			$	2,042			$	1,922
Average shares outstanding		7,070,686				7,057,361				7,042,478				7,042,478				7,041,041
Earnings per share	$	0.27			$	0.20			$	0.27			$	0.29			$	0.27
Performance Ratios
Return on average assets		1.12	%			0.84	%			1.09	%			1.22	%			1.17	%
Return on average equity		17.34	%			12.02	%			15.44	%			17.24	%			17.24	%
Net interest margin - tax equivalent		3.27	%			2.93	%			3.04	%			3.25	%			3.09	%
Yield on loans		4.45	%			4.50	%			4.99	%			5.11	%			4.78	%
Yield on loans - excluding PPP loans		4.33	%			4.37	%			4.47	%			4.49	%			4.63	%
Yield on securities		1.91	%			1.49	%			1.39	%			1.39	%			1.53	%
Cost of deposits		0.07	%			0.07	%			0.07	%			0.08	%			0.08	%
Efficiency ratio		62.21	%			69.81	%			63.39	%			60.35	%			61.48	%
Full-time equivalent employees		122				122				118				116				114
Capital
Tier 1 capital	$	70,041			$	68,040			$	66,593			$	64,685			$	49,097
Leverage ratio		9.96	%			9.72	%			9.73	%			9.70	%			7.45	%
Common equity tier 1 ratio		14.79	%			16.42	%			17.12	%			18.50	%			15.25	%
Tier 1 risk based ratio		14.79	%			16.42	%			17.12	%			18.50	%			15.25	%
Total risk based ratio		16.04	%			17.68	%			18.38	%			19.75	%			16.51	%
Book value per share	$	6.37			$	6.52			$	6.99			$	6.80			$	6.57
Asset quality
Allowance for loan losses (ALLL)	$	6,088			$	5,959			$	5,905			$	6,026			$	6,024
Nonperforming loans (NPLs)	$	960			$	593			$	928			$	1,388			$	1,517
Nonperforming assets (NPAs)	$	960			$	593			$	928			$	1,388			$	1,517
Classified Assets (1)	$	5,089			$	6,349			$	8,756			$	8,156			$	12,627
Net loan charge offs (recoveries)	$	(29	)		$	(4	)		$	122			$	(2	)		$	(3	)
ALLL as a percentage of net loans		1.40	%			1.45	%			1.48	%			1.54	%			1.54	%
ALLL as a percentage of net loans (excluding PPP)		1.40	%			1.46	%			1.52	%			1.67	%			1.79	%
ALLL as a percentage of NPLs		634.17	%			1004.89	%			636.31	%			434.15	%			397.10	%
Net charge offs (recoveries) to average loans		-0.01	%			0.00	%			0.03	%			0.00	%			0.00	%
Net NPLs as a percentage of total loans		0.22	%			0.15	%			0.24	%			0.35	%			0.39	%
Nonperforming assets as a percentage of total assets		0.13	%			0.08	%			0.13	%			0.20	%			0.23	%
Classified Asset Ratio (2)		6.68	%			8.58	%			12.08	%			11.53	%			22.91	%
Past due as a percentage of total loans		0.12	%			0.21	%			0.21	%			0.03	%			0.36	%
Off-balance sheet figures
Off-balance sheet demand deposits (3)	$	121,645			$	78,674			$	55,477			$	57,105			$	54,299
Off-balance sheet time deposits (4)	$	-			$	37,500			$	47,500			$	49,500			$	39,500
Unused credit commitments	$	93,411			$	95,570			$	83,778			$	86,816			$	83,807
Trust assets under management (AUM)	$	195,058			$	199,983			$	201,264			$	188,420			$	183,175
Oregon Pacific Wealth Management AUM	$	114,973			$	127,749			$	130,099			$	122,274			$	103,401
End of period balances
Total securities	$	170,977			$	157,922			$	123,076			$	82,398			$	65,509
Total short term deposits	$	71,429			$	98,345			$	143,192			$	186,565			$	181,966
Total loans net of allowance	$	429,390			$	406,229			$	392,250			$	385,620			$	384,076
Total earning assets	$	679,835			$	670,406			$	665,780			$	661,966			$	638,932
Total assets	$	712,532			$	706,527			$	691,721			$	684,314			$	663,683
Total noninterest bearing deposits	$	189,112			$	178,367			$	171,380			$	180,991			$	181,406
Total deposits	$	642,653			$	636,384			$	618,679			$	612,950			$	609,458
Average balances
Total securities	$	165,729			$	143,830			$	102,431			$	73,271			$	56,913
Total short term deposits	$	73,515			$	120,674			$	165,901			$	176,914			$	183,008
Total loans net of allowance	$	418,445			$	398,423			$	383,161			$	388,212			$	389,766
Total earning assets	$	665,637			$	670,330			$	658,872			$	645,779			$	637,066
Total assets	$	697,913			$	699,808			$	682,779			$	666,455			$	659,644
Total noninterest bearing deposits	$	178,626			$	171,184			$	170,600			$	183,950			$	178,155
Total deposits	$	627,700			$	626,023			$	610,981			$	610,247			$	606,476

(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/20220721005249/en/

Ron Green, President & Chief Executive Officer

ron.green@opbc.com

(541) 902-9800

Source: Oregon Pacific Bancorp

FAQ

What were the earnings results for Oregon Pacific Bancorp (ORPB) in Q2 2022?

Oregon Pacific Bancorp reported net income of $1.9 million, or $0.27 per diluted share, for the second quarter of 2022.

How much did non-PPP loans grow for ORPB in the second quarter of 2022?

Non-PPP loans increased by $28.1 million during the second quarter of 2022.

What is the current status of PPP loans for Oregon Pacific Bancorp (ORPB)?

Oregon Pacific Bancorp has processed final PPP forgiveness payments, bringing PPP loan balances to zero.

What was the net interest margin for ORPB in Q2 2022?

The net interest margin for Oregon Pacific Bancorp in the second quarter of 2022 was 3.27%.