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Oregon Pacific Bank Announces Third Quarter Earnings Results

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FLORENCE, Ore., October 21, 2021--(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/

Contacts

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

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