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, 2023.
Highlights:
- Second quarter net income of $2.2 million; $0.31 per diluted share.
- Quarterly loan growth of $16.8 million or 3.40%.
- Quarterly tax equivalent net interest margin of 3.72%.
- Federal Reserve approved conversion of Portland loan production office to full-service branch.
Net income for the quarter ended June 30, 2023, was $2.2 million, or $0.31 per diluted share compared to $1.9 million or $0.27 per diluted share for the quarter ended June 30, 2022. Core earnings remained strong, but the Bank experienced some margin compression as pressure on cost of funds and deposit retention grew. The second quarter margin contracted to 3.72%, down from 3.87% in first quarter 2023, but still remains elevated when compared to the quarterly margin of 3.27% from second quarter 2022. The rapid pace of rate increases occurring between mid-2022 and early-2023 lead to record margin expansion and the industry is seeing some amount of compression as deposit rates lagged the increase in asset yields.
During the quarter the Bank received regulatory approval to convert the Portland loan production office into a full-service Branch. The Bank has identified a permanent branch location located at 16101 SW 72nd Avenue, with an official branch opening anticipated during the third quarter. "Conversion of the Portland Loan Production Office into a full-service branch further demonstrates the Bank's commitment to growing the Portland Market," said Ron Green, President and Chief Executive Officer. "We believe the strength of our Portland banking team, led by Market President Kyle Baisch, will have tremendous success as clients continue to see the value of relationships and the community bank model."
Period-end loans, net of deferred loan origination fees, totaled $510.3 million, representing quarterly growth of $16.8 million. The first quarter loan yield grew to 4.96%, representing an increase of 0.11% over the prior quarter as new loan production is occurring at a rate higher than the portfolio yield. Quarterly loan production for new and renewed loans totaled $32.1 million, with a weighted average effective rate of 6.71%.
The Bank experienced quarterly deposit contraction totaling $12.4 million compared to deposit totals at March 31, 2023. During the second quarter two large clients reduced their deposit balances held with the Bank. A large nonprofit utilized excess cash to begin funding a large construction project and a commercial client completed a partner buyout. The deposit reductions associated with these two clients totaled $15.6 million compared to their balances at March 31, 2023. "Deposit migration during the second quarter generally occurred as a result of normal operating activity, with rate-based migration occurring far less," commented John Raleigh, Chief Lending Officer. "Deposit rates are still top of mind, but the targeted interest rate increases implemented during the second quarter have helped retain rate-sensitive clients while balancing the bank's total cost of funds." The Bank's cost of funds increased to 0.78% during the second quarter, compared to 0.51% during the first quarter, resulting in an increase in interest expense of $453 thousand during the quarter. The Bank continued to utilize Insured Cash Sweep (ICS) deposits to provide added FDIC insurance to customers seeking added protection. ICS deposits grew from $104.3 million at March 31, 2023 to $110.1 million at June 30, 2023 and are reflected in the interest checking line item of the balance sheet. Through June 30, 2023, the Bank's ICS reciprocal concentration remains below 20% of deposits, so no portion of the ICS deposits are classified as brokered deposits for regulatory reporting purposes.
The securities portfolio contracted to $181.5 million during the quarter, down from $195.6 million at March 31, 2023. The reduction was attributable to an increase in the unrealized loss on the portfolio, normal portfolio cash flows and a sale of $9.5 million in securities. The sale candidates were tax-exempt municipal bonds purchased during 2016, which were able to be liquidated with a minimal loss of $30 thousand to generate cash flow to fund loan growth, while maintaining the overall security portfolio yield.
Noninterest income totaled $1.8 million during the second quarter 2023 and represented growth of $91 thousand over first quarter 2023. The largest increase in non-interest income occurred in the trust fee income category, which increased $59 thousand over first quarter 2023. The increase was primarily attributable to growth in trust assets under management which totaled $222.9 million at June 30, 2023. On a year-over-year basis this represents growth of $27.5 million or 14.26%. "The Trust business continues to be a strong source of non-interest income," said Beth Knorr, Director of Trust Services. "Demand for Trust Services continues to grow and as a result, during the quarter the Bank added two new Trust Officers, Shaina Peters in Roseburg and Justin Miller in Coos Bay. The investment in additional trust personnel should position the Trust Department for anticipated future business growth."
Noninterest expense for the second quarter 2023 totaled $5.4 million, representing an increase of $129 thousand over first quarter 2023. The largest expense fluctuation totaled $52 thousand and occurred in the trust expense category due to investment in trust-related personnel. Additionally, the other operating expense line item also grew $48 thousand over the prior quarter. This fluctuation was primarily attributable to increased FDIC insurance assessment as the FDIC approved a final rule in October 2022 to increase the initial base deposit insurance assessment rate by two basis points for the first quarterly assessment period of 2023, which was billed in second quarter 2023. This rate increase occurred before the failure of Silicon Valley Bank, and this line item may see additional fluctuation based on the final Silicon Valley Bank related special assessment.
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 income, 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, | ||||||||||
2023 | 2023 | 2022 | ||||||||||
| ASSETS | ||||||||||||
| Cash and due from banks | $ | 10,951 | $ | 8,783 | $ | 11,527 | ||||||
| Interest bearing deposits | 22,967 | 41,931 | 71,429 | |||||||||
| Securities | 181,530 | 195,647 | 170,977 | |||||||||
| Loans, net of deferred fees and costs | 510,264 | 493,480 | 435,478 | |||||||||
| Allowance for credit losses | (6,887 | ) | (6,884 | ) | (6,088 | ) | ||||||
| Premises and equipment, net | 11,708 | 9,867 | 9,558 | |||||||||
| Bank owned life insurance | 8,738 | 8,677 | 8,509 | |||||||||
| Deferred tax asset | 5,978 | 5,319 | 4,118 | |||||||||
| Other assets | 7,555 | 7,669 | 7,024 | |||||||||
| Total assets | $ | 752,804 | $ | 764,489 | $ | 712,532 | ||||||
| LIABILITIES | ||||||||||||
| Deposits | ||||||||||||
| Demand - non-interest bearing | $ | 159,184 | $ | 166,409 | $ | 189,112 | ||||||
| Demand - interest bearing | 265,550 | 264,029 | 187,348 | |||||||||
| Money market | 152,046 | 165,118 | 163,728 | |||||||||
| Savings | 75,196 | 78,415 | 83,517 | |||||||||
| Certificates of deposit | 25,696 | 16,075 | 18,948 | |||||||||
| Total deposits | 677,672 | 690,046 | 642,653 | |||||||||
| Junior subordinated debenture | 4,124 | 4,124 | 4,124 | |||||||||
| Subordinated debenture | 14,677 | 14,652 | 14,578 | |||||||||
| Other liabilities | 6,482 | 6,300 | 6,153 | |||||||||
| Total liabilities | 702,955 | 715,122 | 667,508 | |||||||||
| STOCKHOLDERS' EQUITY | ||||||||||||
| Common stock | 21,135 | 21,103 | 20,977 | |||||||||
| Retained earnings | 39,516 | 37,284 | 31,707 | |||||||||
| Accumulated other comprehensive income, net of tax | (10,802 | ) | (9,020 | ) | (7,660 | ) | ||||||
| Total stockholders' equity | 49,849 | 49,367 | 45,024 | |||||||||
| Total liabilities & stockholders' equity | $ | 752,804 | $ | 764,489 | $ | 712,532 | ||||||
| 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, | |||||||||||||
2023 | 2023 | 2022 | 2023 | 2022 | |||||||||||||
| INTEREST INCOME | |||||||||||||||||
| Non-PPP loans | $ | 6,249 | $ | 5,824 | $ | 4,568 | $ | 12,073 | $ | 8,854 | |||||||
| PPP loans | - | - | 145 | - | 349 | ||||||||||||
| Securities | 1,641 | 1,687 | 828 | 3,328 | 1,383 | ||||||||||||
| Other interest income | 316 | 401 | 147 | 717 | 202 | ||||||||||||
| Total interest income | 8,206 | 7,912 | 5,688 | 16,118 | 10,788 | ||||||||||||
| INTEREST EXPENSE | |||||||||||||||||
| Deposits | 1,311 | 858 | 108 | 2,169 | 217 | ||||||||||||
| Borrowed funds | 229 | 226 | 191 | 455 | 371 | ||||||||||||
| Total interest expense | 1,540 | 1,084 | 299 | 2,624 | 588 | ||||||||||||
| NET INTEREST INCOME | 6,666 | 6,828 | 5,389 | 13,494 | 10,200 | ||||||||||||
| Provision (credit) for credit losses | 14 | (51 | ) | 100 | (37 | ) | 150 | ||||||||||
| Net interest income after provision (credit) for credit losses | 6,652 | 6,879 | 5,289 | 13,531 | 10,050 | ||||||||||||
| NONINTEREST INCOME | |||||||||||||||||
| Trust fee income | 943 | 884 | 804 | 1,827 | 1,582 | ||||||||||||
| Service charges | 342 | 325 | 322 | 667 | 620 | ||||||||||||
| Mortgage loan sales | 28 | 38 | 90 | 66 | 211 | ||||||||||||
| Merchant card services | 122 | 103 | 134 | 225 | 242 | ||||||||||||
| Oregon Pacific Wealth Management income | 275 | 252 |
| 252 | 527 | 502 | |||||||||||
| Other income | 82 | 99 | 179 | 181 | 269 | ||||||||||||
| Total noninterest income | 1,792 | 1,701 | 1,781 | 3,493 | 3,426 | ||||||||||||
| NONINTEREST EXPENSE | |||||||||||||||||
| Salaries and employee benefits | 3,082 | 3,129 | 2,642 | 6,211 | 5,256 | ||||||||||||
| Outside services | 588 | 552 | 504 | 1,140 | 1,023 | ||||||||||||
| Occupancy & equipment | 451 | 448 | 412 | 899 | 813 | ||||||||||||
| Trust expense | 533 | 481 | 402 | 1,014 | 794 | ||||||||||||
| Loan and collection, OREO expense | 27 | 24 | 23 | 51 | 50 | ||||||||||||
| Advertising | 145 | 102 | 94 | 247 | 188 | ||||||||||||
| Supplies and postage | 79 | 88 | 60 | 167 | 130 | ||||||||||||
| Other operating expenses | 537 | 489 | 326 | 1,026 | 716 | ||||||||||||
| Total noninterest expense | 5,442 | 5,313 | 4,463 | 10,755 | 8,970 | ||||||||||||
| Income before taxes | 3,002 | 3,267 | 2,607 | 6,269 | 4,506 | ||||||||||||
| Provision for income taxes | 771 | 834 | 663 | 1,605 | 1,118 | ||||||||||||
| NET INCOME | $ | 2,231 | $ | 2,433 | $ | 1,944 | $ | 4,664 | $ | 3,388 | |||||||
| Quarterly Highlights | ||||||||||||||||||||
2nd Quarter | 1st Quarter | 4th Quarter | 3rd Quarter | 2nd Quarter | ||||||||||||||||
2023 | 2023 | 2022 | 2022 | 2022 | ||||||||||||||||
| Earnings | ||||||||||||||||||||
| Interest income | $ | 8,206 | $ | 7,912 | $ | 7,651 | $ | 6,458 | $ | 5,688 | ||||||||||
| Interest expense | 1,540 | 1,084 | 581 | 356 | 299 | |||||||||||||||
| Net interest income | $ | 6,666 | $ | 6,828 | $ | 7,070 | $ | 6,102 | $ | 5,389 | ||||||||||
| Provision for loan loss | 14 | (51 | ) | 335 | 209 | 100 | ||||||||||||||
| Noninterest income | 1,792 | 1,701 | 1,888 | 2,042 | 1,781 | |||||||||||||||
| Noninterest expense | 5,442 | 5,313 | 6,737 | 4,811 | 4,463 | |||||||||||||||
| Provision for income taxes | 771 | 834 | 459 | 792 | 663 | |||||||||||||||
| Net income | $ | 2,231 | $ | 2,433 | $ | 1,427 | $ | 2,332 | $ | 1,944 | ||||||||||
| Average shares outstanding | 7,097,866 | 7,085,840 | 7,070,425 | 7,070,433 | 7,070,686 | |||||||||||||||
| Average diluted shares outstanding | 7,104,366 | 7,089,090 | NA | NA | NA | |||||||||||||||
| Period end shares outstanding | 7,094,562 | 7,102,271 | 7,068,659 | 7,070,304 | 7,070,304 | |||||||||||||||
| Period end diluted shares outstanding | 7,101,062 | 7,108,771 | NA | NA | NA | |||||||||||||||
| Earnings per share | $ | 0.31 | $ | 0.34 | $ | 0.20 | $ | 0.33 | $ | 0.27 | ||||||||||
| Diluted earnings per share | $ | 0.31 | $ | 0.34 | NA | NA | NA | |||||||||||||
| Performance Ratios | ||||||||||||||||||||
| Return on average assets | 1.19 | % | 1.13 | % | 0.74 | % | 1.28 | % | 1.12 | % | ||||||||||
| Return on average equity | 18.12 | % | 21.01 | % | 13.34 | % | 20.41 | % | 17.34 | % | ||||||||||
| Net interest margin - tax equivalent | 3.72 | % | 3.87 | % | 3.87 | % | 3.54 | % | 3.27 | % | ||||||||||
| Yield on loans | 4.96 | % | 4.85 | % | 4.70 | % | 4.50 | % | 4.45 | % | ||||||||||
| Yield on loans - excluding PPP loans | 4.96 | % | 4.85 | % | 4.70 | % | 4.50 | % | 4.33 | % | ||||||||||
| Yield on securities | 3.37 | % | 3.41 | % | 3.02 | % | 2.39 | % | 1.91 | % | ||||||||||
| Cost of deposits | 0.78 | % | 0.51 | % | 0.21 | % | 0.09 | % | 0.07 | % | ||||||||||
| Cost of interest-bearing liabilities | 1.15 | % | 0.84 | % | 0.44 | % | 0.29 | % | 0.26 | % | ||||||||||
| Efficiency ratio | 64.34 | % | 62.29 | % | 75.21 | % | 59.07 | % | 62.21 | % | ||||||||||
| Full-time equivalent employees | 128 | 127 | 120 | 122 | 122 | |||||||||||||||
| Capital | ||||||||||||||||||||
| Tier 1 capital | $ | 77,917 | $ | 75,684 | $ | 73,882 | $ | 72,410 | $ | 70,041 | ||||||||||
| Leverage ratio | 10.24 | % | 9.94 | % | 9.55 | % | 9.95 | % | 9.96 | % | ||||||||||
| Common equity tier 1 ratio | 14.18 | % | 14.16 | % | 13.92 | % | 14.81 | % | 14.79 | % | ||||||||||
| Tier 1 risk based ratio | 14.18 | % | 14.16 | % | 13.92 | % | 14.81 | % | 14.79 | % | ||||||||||
| Total risk based ratio | 15.43 | % | 15.41 | % | 15.17 | % | 16.06 | % | 16.04 | % | ||||||||||
| Book value per share | $ | 7.03 | $ | 6.97 | $ | 6.52 | $ | 6.05 | $ | 6.37 | ||||||||||
| Quarterly Highlights | ||||||||||||||||||||
| 2nd Quarter | 1st Quarter | 4th Quarter | 3rd Quarter | 2nd Quarter | ||||||||||||||||
2023 | 2023 | 2022 | 2022 | 2022 | ||||||||||||||||
| Asset quality | ||||||||||||||||||||
| Allowance for loan losses (ALLL) | $ | 6,887 | $ | 6,884 | $ | 6,666 | $ | 6,328 | $ | 6,088 | ||||||||||
| Nonperforming loans (NPLs) | $ | 178 | $ | 72 | $ | 52 | $ | 424 | $ | 960 | ||||||||||
| Nonperforming assets (NPAs) | $ | 178 | $ | 72 | $ | 52 | $ | 424 | $ | 960 | ||||||||||
| Classified Assets (1) | $ | 3,750 | $ | 3,842 | $ | 3,877 | $ | 4,574 | $ | 5,089 | ||||||||||
| Net loan charge offs (recoveries) | $ | (3 | ) | $ | (88 | ) | $ | (4 | ) | $ | (31 | ) | $ | (29 | ) | |||||
| ACL as a percentage of net loans | 1.35 | % | 1.39 | % | 1.38 | % | 1.39 | % | 1.40 | % | ||||||||||
| ACL as a percentage of NPLs | 3869.10 | % | 9561.11 | % | 12819.23 | % | 1492.45 | % | 634.17 | % | ||||||||||
| Net charge offs (recoveries) to average loans | 0.00 | % | -0.02 | % | 0.00 | % | -0.01 | % | -0.01 | % | ||||||||||
| Net NPLs as a percentage of total loans | 0.03 | % | 0.01 | % | 0.01 | % | 0.09 | % | 0.22 | % | ||||||||||
| Nonperforming assets as a percentage of total assets | 0.02 | % | 0.10 | % | 0.01 | % | 0.05 | % | 0.13 | % | ||||||||||
| Classified Asset Ratio (2) | 4.42 | % | 4.65 | % | 4.81 | % | 5.81 | % | 6.68 | % | ||||||||||
| Past due as a percentage of total loans | 0.12 | % | 0.06 | % | 0.19 | % | 0.13 | % | 0.12 | % | ||||||||||
| Off-balance sheet figures | ||||||||||||||||||||
| Off-balance sheet demand deposits (3) | $ | - | $ | - | $ | 18,976 | $ | 60,588 | $ | 121,645 | ||||||||||
| Unused credit commitments | $ | 97,111 | $ | 85,390 | $ | 89,680 | $ | 85,880 | $ | 93,411 | ||||||||||
| Trust assets under management (AUM) | $ | 222,880 | $ | 219,731 | $ | 215,736 | $ | 193,448 | $ | 195,058 | ||||||||||
| Oregon Pacific Wealth Management AUM | $ | 141,990 | $ | 133,138 | $ | 117,549 | $ | 116,193 | $ | 114,973 | ||||||||||
| End of period balances | ||||||||||||||||||||
| Total securities | $ | 181,530 | $ | 195,647 | $ | 195,881 | $ | 188,366 | $ | 170,977 | ||||||||||
| Total short term deposits | $ | 22,967 | $ | 41,931 | $ | 39,863 | $ | 97,840 | $ | 71,429 | ||||||||||
| Total loans net of allowance | $ | 503,377 | $ | 486,596 | $ | 476,313 | $ | 450,299 | $ | 429,390 | ||||||||||
| Total earning assets | $ | 716,793 | $ | 733,090 | $ | 720,712 | $ | 744,786 | $ | 679,835 | ||||||||||
| Total assets | $ | 752,804 | $ | 764,489 | $ | 754,182 | $ | 780,711 | $ | 712,532 | ||||||||||
| Total noninterest bearing deposits | $ | 159,184 | $ | 166,409 | $ | 180,589 | $ | 195,536 | $ | 189,112 | ||||||||||
| Total deposits | $ | 677,672 | $ | 690,046 | $ | 682,869 | $ | 712,710 | $ | 642,653 | ||||||||||
| Average balances | ||||||||||||||||||||
| Total securities | $ | 190,818 | $ | 196,060 | $ | 192,348 | $ | 186,535 | $ | 165,729 | ||||||||||
| Total short term deposits | $ | 24,616 | $ | 35,240 | $ | 68,808 | $ | 57,557 | $ | 73,515 | ||||||||||
| Total loans net of allowance | $ | 498,069 | $ | 480,046 | $ | 459,440 | $ | 436,522 | $ | 418,445 | ||||||||||
| Total earning assets | $ | 722,420 | $ | 720,003 | $ | 728,980 | $ | 688,723 | $ | 665,637 | ||||||||||
| Total assets | $ | 751,845 | $ | 752,094 | $ | 761,361 | $ | 720,465 | $ | 697,913 | ||||||||||
| Total noninterest bearing deposits | $ | 154,949 | $ | 167,863 | $ | 178,226 | $ | 191,292 | $ | 178,626 | ||||||||||
| Total deposits | $ | 675,954 | $ | 678,528 | $ | 692,412 | $ | 648,827 | $ | 627,700 | ||||||||||
(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. | ||||||||||
Contacts
Ron Green, President & Chief Executive Officer
ron.green@opbc.com
(541) 902-9800
