Oregon Pacific Bank Announces Third Quarter Earnings Results

Rhea-AI Summary

Oregon Pacific Bancorp (ORPB) reported a strong third quarter for 2021, achieving a net income of $2.04 million or $0.29 per diluted share, up from $803 thousand or $0.11 per share year-over-year. Non-PPP loan growth totaled $25.8 million, reflecting a 21.30% year-to-date increase. The company issued $15 million in subordinated notes to enhance liquidity, raising its Tier 1 leverage to 9.70%. While credit metrics improved with classified assets down to $8.2 million, the effective yield on non-PPP loans decreased to 4.49%.

Positive

• Net income increased to $2.04 million, a significant year-over-year rise.
• Non-PPP loan growth of $25.8 million, showing strong demand across various categories.
• Tier 1 leverage ratio improved to 9.70% after $13.5 million capital investment.

Negative

• Effective yield on non-PPP loan portfolio decreased to 4.49%, indicating pricing pressures.
• Trust fee income declined from $878 thousand in Q2 to $703 thousand in Q3.

FLORENCE, Ore.--(BUSINESS WIRE)-- 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

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20211021005247/en/

Ron Green, President & Chief Executive Officer

ron.green@opbc.com

(541) 902-9800

Source: Oregon Pacific Bancorp

FAQ

What are the financial results for Oregon Pacific Bancorp (ORPB) in Q3 2021?

Oregon Pacific Bancorp reported a net income of $2.04 million or $0.29 per diluted share for Q3 2021.

How much did Oregon Pacific Bancorp (ORPB) grow its non-PPP loans in Q3 2021?

The company reported non-PPP loan growth of $25.8 million in Q3 2021.

What is the current Tier 1 leverage ratio for Oregon Pacific Bancorp (ORPB)?

As of September 30, 2021, Oregon Pacific Bancorp's Tier 1 leverage ratio is 9.70%.

How has the effective yield on non-PPP loans changed for ORPB?

The effective yield on Oregon Pacific Bancorp's non-PPP loan portfolio decreased to 4.49%.