Oregon Pacific Bank Announces 2022 Earnings Results

Oregon Pacific Bancorp (ORPB), the holding company of Oregon Pacific Bank, today reported financial results for the fourth quarter ended, and year ended, December 31, 2022.

Highlights:

  • Fourth quarter net income of $1.4 million; $0.20 per diluted share.
  • Annual non-PPP loan growth of $94.8 million or 24.42%.
  • Annual deposit growth of $64.2 million or 10.38%.
  • Quarterly tax equivalent net interest margin of 3.87%
  • Bank expanded into Portland, opening a loan production office in December

Net income for the quarter ended December 31, 2022, was $1.4 million, or $0.20 per diluted share. On an annual basis, the Bank recorded net income totaling $7.1 million, or $1.01 per diluted share compared to $7.8 million, or $1.11 per diluted share for the same period in 2021.

Ron Green, President and Chief Executive Officer, said today upon the release of Oregon Pacific’s earnings, “Our bankers’ work is reflected in our financial results with record production driving annualized loan growth of 24 percent and exceptional credit metrics.” He continued, “Our investments in new and existing markets continue to result in core loan production capabilities.”

Period-end loans, net of deferred loan origination fees, totaled $483.0 million, representing quarterly growth of $26.4 million, and annual non-PPP growth of $94.8 million. The fourth quarter yield on non-PPP loans totaled 4.70%, an increase of 0.20% over the prior quarter. During the quarter the Bank saw a decrease in classified assets totaling $697 thousand, bringing the classified asset ratio to 4.81% as of December 31, 2022. This decrease was primarily attributable to a payoff of one residential loan relationship. The Bank also funded provision for loan loss expense of $335 thousand, which was largely the result of loan growth experienced during the quarter, as credit metrics including nonaccrual loan totals and past due totals remain strong.

The Bank experienced deposit contraction totaling $29.8 million or a decline of 4.2% during the quarter. On an annual basis deposits grew $64.2 million or 10.38%.

“During fourth quarter, the Bank experienced a decrease in deposits as customers pursued higher yields on their non-operating cash balances," commented John Raleigh, Chief Lending Officer. "The Bank was positioned with sufficient liquidity where it was not forced to aggressively compete for high-cost deposits and some deposit runoff was anticipated.”

The Bank’s cost of funds increased to 0.21% in fourth quarter, up from the 0.09% reported in third quarter 2022. In market rate competition increased during the quarter, with some local and regional banks offering higher yield CD specials for new depositors. While CD rates do not typically attract business depositors, the Bank did experience some consumer deposit contraction. Business related deposits were less impacted by local competition, and more impacted by online banks offering high yield money market rates or brokerage firms offering money market mutual funds.

Noninterest income totaled $1.9 million during fourth quarter 2022 and represented a decrease of $154 thousand from third quarter 2022. The largest decrease 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 Network deposits, which totaled $191 during fourth quarter, down from $437 thousand in third quarter.

During the quarter the Bank implemented a security repositioning strategy, which resulted in a pre-tax loss on sale of securities totaling $1.8 million, or an after-tax loss of $1.4 million. The Bank elected to sell $15.5 million of securities, purchased in early 2021, with a weighted average yield of 1.23% and a remaining weighted average life of 5.42 years. These securities were replaced by $13.8 million of securities, yielding 4.79%, based on the most recent monthly prepayments, and a weighted average life of 6.53 years. The replacement strategy is forecasted to result in additional interest income of $479 thousand annually and is expected to fully offset the loss in less than four years, based on current prepayment assumptions. This strategy was executed in mid-December and the increased yield on the portfolio was only realized for a small portion of the quarter.

“This security sale strategy was possible due to the strong financial results in 2022,” said Amber White, Executive Vice President and CFO. “While 2022 profitability was impacted by the sale, the bank’s margin is better positioned for 2023 and beyond, leading to enhanced shareholder value.”

The overall securities portfolio saw a reduction in the unrealized loss on securities of $2.6 million, moving to $14.3 million on December 31, 2022, down from $16.9 million at September 30, 2022. This was attributable to recognition of the loss on sale, combined with an increase in the market value of some securities. The weighted average life of the portfolio reduced to 5.2 years at December 31, 2022, down from 5.5 years at September 30, 2022. During the quarter the yield on securities grew to 3.02%, up from 2.39% in third quarter, which contributed an additional $339 thousand of interest income.

Excluding the loss on sale of securities, noninterest expense in the fourth quarter 2022 totaled $4.9 million, an increase of $97 thousand over third quarter 2022. Included in fourth quarter expenses were one-time expenses totaling $122 thousand associated with the hiring of the Portland team. The hiring of the Portland team did not occur until the end of fourth quarter and the full impact of the personnel and occupancy expense was not reflected in fourth quarter results. The initial impact of the Portland team is expected to increase quarterly expense by $340 thousand but may grow as a permanent location is identified and as the Bank moves forward with a branch application and staffing.

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, investment yields,, 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)
 
 

December 31,

 

September 30,

 

December 31,

2022

 

2022

 

2021

ASSETS
Cash and due from banks

$

10,657

 

$

13,402

 

$

8,643

 

Interest bearing deposits

 

39,863

 

 

97,840

 

 

143,192

 

Securities

 

195,881

 

 

188,366

 

 

123,076

 

Non PPP Loans, net of deferred fees and costs

 

482,979

 

 

456,627

 

 

388,187

 

PPP Loans, net of deferred fees and costs

 

-

 

 

-

 

 

9,968

 

Total Loans, net of deferred fees and costs

 

482,979

 

 

456,627

 

 

398,155

 

Allowance for loan losses

 

(6,666

)

 

(6,328

)

 

(5,905

)

Premises and equipment, net

 

9,556

 

 

9,501

 

 

9,721

 

Bank owned life insurance

 

8,616

 

 

8,563

 

 

8,402

 

Deferred tax asset

 

5,631

 

 

5,836

 

 

1,270

 

Other assets

 

7,665

 

 

6,904

 

 

5,167

 

 
Total assets

$

754,182

$

780,711

$

691,721

 
 
LIABILITIES
Deposits
Demand - non-interest bearing

$

180,589

 

$

195,536

 

$

171,380

 

Demand - interest bearing

 

236,511

 

 

242,974

 

 

181,885

 

Money market

 

165,671

 

 

170,439

 

 

164,742

 

Savings

 

82,662

 

 

85,548

 

 

80,856

 

Certificates of deposit

 

17,436

 

 

18,213

 

 

19,816

 

Total deposits

 

682,869

 

 

712,710

 

 

618,679

 

 
Junior subordinated debenture

 

4,124

 

 

4,124

 

 

4,124

 

Subordinated debenture

 

14,627

 

 

14,603

 

 

14,528

 

Other liabilities

 

6,474

 

 

6,499

 

 

5,130

 

 
Total liabilities

 

708,094

 

 

737,936

 

 

642,461

 

 
STOCKHOLDERS' EQUITY
Common stock

 

21,099

 

 

21,042

 

 

20,904

 

Retained earnings

 

35,462

 

 

34,038

 

 

28,318

 

Accumulated other comprehensive income, net of tax

 

(10,473

)

 

(12,305

)

 

38

 

 
Total stockholders' equity

 

46,088

 

 

42,775

 

 

49,260

 

 
Total liabilities & stockholders' equity

$

754,182

$

780,711

$

691,721

CONSOLIDATED STATEMENTS OF INCOME

Unaudited (dollars in thousands, except per share data)
 
THREE MONTHS ENDED TWELVE MONTHS ENDED
December 31, September 30, December 31, December 31, December 31,

2022

2022

2021

2022

2021

INTEREST INCOME
Non-PPP loans

$

5,517

 

$

5,022

$

4,194

$

19,392

$

15,575

PPP loans

 

-

 

 

-

 

697

 

349

 

4,217

Securities

 

1,470

 

 

1,131

 

364

 

3,984

 

1,046

Other interest income

 

664

 

 

305

 

63

 

1,170

 

212

Total interest income

 

7,651

 

 

6,458

 

5,318

 

24,895

 

21,050

 
INTEREST EXPENSE
Deposits

 

361

 

 

152

 

115

 

729

 

450

Borrowed funds

 

220

 

 

204

 

185

 

795

 

280

Total interest expense

 

581

 

 

356

 

300

 

1,524

 

730

 
NET INTEREST INCOME

 

7,070

 

 

6,102

 

5,018

 

23,371

 

20,320

Provision for loan losses

 

335

 

 

209

 

-

 

694

 

-

Net interest income after provision for loan losses

 

6,735

 

 

5,893

 

5,018

 

22,677

 

20,320

 
NONINTEREST INCOME
Trust fee income

 

841

 

 

783

 

819

 

3,206

 

3,029

Service charges

 

329

 

 

324

 

303

 

1,273

 

1,122

Mortgage loan sales

 

57

 

 

29

 

163

 

297

 

688

Investment sales commissions

 

-

 

 

-

 

20

 

-

 

118

Merchant card services

 

121

 

 

153

 

120

 

515

 

471

Oregon Pacific Wealth Management income

 

236

 

 

239

 

259

 

977

 

870

Other income

 

304

 

 

514

 

78

 

1,085

 

320

Total noninterest income

 

1,888

 

 

2,042

 

1,762

 

7,353

 

6,618

 
NONINTEREST EXPENSE
Salaries and employee benefits

 

2,787

 

 

2,787

 

2,383

 

10,830

 

9,362

Loss on sale of securities

 

1,829

 

 

-

 

-

 

1,829

 

-

Outside services

 

593

 

 

583

 

511

 

2,199

 

1,888

Occupancy & equipment

 

432

 

 

413

 

366

 

1,657

 

1,422

Trust expense

 

461

 

 

432

 

384

 

1,686

 

1,452

Loan and collection, OREO expense

 

(8

)

 

21

 

40

 

63

 

135

Advertising

 

111

 

 

141

 

61

 

440

 

289

Supplies and postage

 

75

 

 

74

 

63

 

279

 

251

Other operating expenses

 

457

 

 

360

 

490

 

1,536

 

1,728

Total noninterest expense

 

6,737

 

 

4,811

 

4,298

 

20,519

 

16,527

 
Income before taxes

 

1,886

 

 

3,124

 

2,482

 

9,511

 

10,411

Provision for income taxes

 

459

 

 

792

 

612

 

2,368

 

2,610

 
NET INCOME

$

1,427

 

$

2,332

$

1,870

$

7,143

$

7,801

Quarterly Highlights

4th Quarter

 

3rd Quarter

 

2nd Quarter

 

1st Quarter

 

4th Quarter

2022

 

2022

 

2022

 

2022

 

2021

 
Earnings
Net interest income

$

7,070

 

 

$

6,102

 

 

$

5,389

 

 

$

4,810

 

 

$

5,018

 

Provision for loan loss

 

335

 

 

209

 

 

100

 

 

50

 

 

-

 

Noninterest income

 

1,888

 

 

2,042

 

 

1,781

 

 

1,645

 

 

1,762

 

Noninterest expense

 

6,737

 

 

4,811

 

 

4,463

 

 

4,506

 

 

4,298

 

Provision for income taxes

 

459

 

 

792

 

 

663

 

 

455

 

 

612

 

Net income

$

1,427

 

 

$

2,332

 

 

$

1,944

 

 

$

1,444

 

 

$

1,870

 

 
Average shares outstanding

 

7,070,425

 

 

7,070,433

 

 

7,070,686

 

 

7,057,361

 

 

7,042,478

 

Earnings per share

$

0.20

 

$

0.33

 

$

0.27

 

$

0.20

 

$

0.27

 

 
Performance Ratios
Return on average assets

 

0.74

%

 

1.28

%

 

1.12

%

 

0.84

%

 

1.09

%

Return on average equity

 

13.34

%

 

20.41

%

 

17.34

%

 

12.02

%

 

15.44

%

Net interest margin - tax equivalent

 

3.87

%

 

3.54

%

 

3.27

%

 

2.93

%

 

3.04

%

Yield on loans

 

4.70

%

 

4.50

%

 

4.45

%

 

4.50

%

 

4.99

%

Yield on loans - excluding PPP loans

 

4.70

%

 

4.50

%

 

4.33

%

 

4.37

%

 

4.47

%

Yield on securities

 

3.02

%

 

2.39

%

 

1.91

%

 

1.49

%

 

1.39

%

Cost of deposits

 

0.21

%

 

0.09

%

 

0.07

%

 

0.07

%

 

0.07

%

Efficiency ratio

 

75.21

%

 

59.07

%

 

62.21

%

 

69.81

%

 

63.39

%

Full-time equivalent employees

 

120

 

 

122

 

 

122

 

 

122

 

 

118

 

 
Capital
Tier 1 capital

$

73,882

 

$

72,410

 

$

70,041

 

$

68,040

 

$

66,593

 

Leverage ratio

 

9.55

%

 

9.95

%

 

9.96

%

 

9.72

%

 

9.73

%

Common equity tier 1 ratio

 

13.92

%

 

14.81

%

 

14.79

%

 

16.42

%

 

17.12

%

Tier 1 risk based ratio

 

13.92

%

 

14.81

%

 

14.79

%

 

16.42

%

 

17.12

%

Total risk based ratio

 

15.17

%

 

16.06

%

 

16.04

%

 

17.68

%

 

18.38

%

Book value per share

$

6.52

 

$

6.05

 

$

6.37

 

$

6.52

 

$

6.99

 

 
Asset quality
Allowance for loan losses (ALLL)

$

6,666

 

$

6,328

 

$

6,088

 

$

5,959

 

$

5,905

 

Nonperforming loans (NPLs)

$

52

 

$

424

 

$

960

 

$

593

 

$

928

 

Nonperforming assets (NPAs)

$

52

 

$

424

 

$

960

 

$

593

 

$

928

 

Classified Assets (1)

$

3,877

 

$

4,574

 

$

5,089

 

$

6,349

 

$

8,756

 

Net loan charge offs (recoveries)

$

(4

)

$

(31

)

$

(29

)

$

(4

)

$

122

 

ALLL as a percentage of net loans

 

1.38

%

 

1.39

%

 

1.40

%

 

1.45

%

 

1.48

%

ALLL as a percentage of net loans (excluding PPP)

 

1.38

%

 

1.39

%

 

1.40

%

 

1.46

%

 

1.52

%

ALLL as a percentage of NPLs

 

12819.23

%

 

1492.45

%

 

634.17

%

 

1004.89

%

 

636.31

%

Net charge offs (recoveries) to average loans

 

0.00

%

 

-0.01

%

 

-0.01

%

 

0.00

%

 

0.03

%

Net NPLs as a percentage of total loans

 

0.01

%

 

0.09

%

 

0.22

%

 

0.15

%

 

0.24

%

Nonperforming assets as a percentage of total assets

 

0.01

%

 

0.05

%

 

0.13

%

 

0.08

%

 

0.13

%

Classified Asset Ratio (2)

 

4.81

%

 

5.81

%

 

6.68

%

 

8.58

%

 

12.08

%

Past due as a percentage of total loans

 

0.19

%

 

0.13

%

 

0.12

%

 

0.21

%

 

0.21

%

 
Off-balance sheet figures
Off-balance sheet demand deposits (3)

$

18,976

 

$

60,588

 

$

121,645

 

$

78,674

 

$

55,477

 

Off-balance sheet time deposits (4)

$

-

 

$

-

 

$

-

 

$

37,500

 

$

47,500

 

Unused credit commitments

$

89,680

 

$

85,880

 

$

93,411

 

$

95,570

 

$

83,778

 

Trust assets under management (AUM)

$

215,736

 

$

193,448

 

$

195,058

 

$

199,983

 

$

201,264

 

Oregon Pacific Wealth Management AUM

$

117,549

 

$

116,193

 

$

114,973

 

$

127,749

 

$

130,099

 

 
End of period balances
Total securities

$

195,881

 

$

188,366

 

$

170,977

 

$

157,922

 

$

123,076

 

Total short term deposits

$

39,863

 

$

97,840

 

$

71,429

 

$

98,345

 

$

143,192

 

Total loans net of allowance

$

476,313

 

$

450,299

 

$

429,390

 

$

406,229

 

$

392,250

 

Total earning assets

$

720,712

 

$

744,786

 

$

679,835

 

$

670,406

 

$

665,780

 

Total assets

$

754,182

 

$

780,711

 

$

712,532

 

$

706,527

 

$

691,721

 

Total noninterest bearing deposits

$

180,589

 

$

195,536

 

$

189,112

 

$

178,367

 

$

171,380

 

Total deposits

$

682,869

 

$

712,710

 

$

642,653

 

$

636,384

 

$

618,679

 

 
Average balances
Total securities

$

192,348

 

$

186,535

 

$

165,729

 

$

143,830

 

$

102,431

 

Total short term deposits

$

68,808

 

$

57,557

 

$

73,515

 

$

120,674

 

$

165,901

 

Total loans net of allowance

$

459,440

 

$

436,522

 

$

418,445

 

$

398,423

 

$

383,161

 

Total earning assets

$

728,980

 

$

688,723

 

$

665,637

 

$

670,330

 

$

658,872

 

Total assets

$

761,361

 

$

720,465

 

$

697,913

 

$

699,808

 

$

682,779

 

Total noninterest bearing deposits

$

178,226

 

$

191,292

 

$

178,626

 

$

171,184

 

$

170,600

 

Total deposits

$

692,412

 

$

648,827

 

$

627,700

 

$

626,023

 

$

610,981

 

(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

 

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