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Oregon Pacific Bank Announces First Quarter Earnings Results

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)

$

1,558

 

$

2,521

 

$

1,596

 

$

1,293

 

$

1,281

 

Classified Assets (2)

$

12,141

 

$

14,366

 

$

12,667

 

$

11,945

 

$

9,058

 

Net loan charge offs (recoveries)

$

(230

)

$

(9

)

$

(9

)

$

(7

)

$

5

 

ALLL as a percentage of net loans

 

1.50

%

 

1.48

%

 

1.35

%

 

1.16

%

 

1.31

%

ALLL as a percentage of net loans (excluding PPP)

 

1.87

%

 

1.86

%

 

1.89

%

 

1.62

%

 

1.31

%

ALLL as a percentage of NPLs

 

386.39

%

 

229.75

%

 

362.26

%

 

376.98

%

 

322.44

%

Net charge offs (recoveries)
to average loans

 

-0.06

%

 

0.00

%

 

0.00

%

 

0.00

%

 

0.00

%

Net NPLs as a percentage of
total loans

 

0.39

%

 

0.64

%

 

0.53

%

 

0.44

%

 

0.41

%

Nonperforming assets as a
percentage of total assets

 

0.24

%

 

0.47

%

 

0.30

%

 

0.25

%

 

0.33

%

Classified Asset Ratio (3)

 

27.67

%

 

33.98

%

 

31.42

%

 

30.38

%

 

23.99

%

Past due as a percentage of
total loans

 

0.14

%

 

0.49

%

 

0.54

%

 

0.53

%

 

0.61

%

 
End of period balances
Total securities and short
term deposits

$

211,989

 

$

124,375

 

$

82,099

 

$

70,159

 

$

64,148

 

Total loans net of allowance

$

395,176

 

$

385,173

 

$

422,144

 

$

416,768

 

$

297,212

 

Total earning assets

$

535,797

 

$

437,404

 

$

389,299

 

$

372,903

 

$

366,472

 

Total assets

$

637,009

 

$

537,141

 

$

534,456

 

$

513,291

 

$

385,423

 

Total noninterest bearing deposits

$

171,750

 

$

136,428

 

$

134,574

 

$

125,714

 

$

78,003

 

Total deposits

$

585,307

 

$

486,343

 

$

485,589

 

$

465,322

 

$

339,202

 

 
Average balances
Total securities and short
term deposits

$

150,214

 

$

109,006

 

$

80,235

 

$

67,450

 

$

48,764

 

Total loans net of allowance

$

397,195

 

$

405,796

 

$

421,663

 

$

389,275

 

$

298,055

 

Total earning assets

$

554,446

 

$

521,734

 

$

508,244

 

$

462,157

 

$

351,537

 

Total assets

$

576,991

 

$

543,422

 

$

529,784

 

$

484,315

 

$

372,017

 

Total noninterest bearing deposits

$

167,266

 

$

138,247

 

$

134,676

 

$

132,311

 

$

76,653

 

Total deposits

$

525,064

 

$

493,502

 

$

480,742

 

$

436,776

 

$

325,128

 

 
(1) Effective March 31, 2020 Oregon Pacific Bank opted into the Community Bank Leverage Ratio and is no longer calculating risk 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.

 

Contacts

Editorial Contact:

Ron Green, President & Chief Executive Officer

ron.green@opbc.com

(541) 902-9800

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