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Oregon Pacific Bank Announces First Quarter Earnings Results

Oregon Pacific Bancorp (ORPB), the holding company of Oregon Pacific Bank, today reported financial results for the first quarter ended, March 31, 2023.

Highlights:

  • First quarter net income of $2.4 million; $0.34 per diluted share.
  • Quarterly loan growth of $10.5 million or annualized growth of 8.82%.
  • Quarterly deposit growth of $7.2 million or annualized growth of 4.26%.
  • Quarterly tax equivalent net interest margin of 3.87%

Net income for the quarter ended March 31, 2023, was $2.4 million, or $0.34 per diluted share compared to $1.4 million or $0.20 per diluted share for the quarter ended March 31, 2022. Ron Green, President and Chief Executive Officer said today upon the release of Oregon Pacific Bank’s earnings, “We are pleased with our first quarter results for 2023, reflecting period-ending, year-over-year growth in net loans, deposits, and earnings per share.” He continued, “During the recent events surrounding the closure of two larger financial institutions in the United States, our historical emphasis on balance sheet diversification, and our focus on attracting business banking relationships that value service, continues to serve the Bank well. Our increase in cost of funds has been at a rate lower than most of our peers. Although we are aware that some business depositors have invested their excess liquidity in non-banking products, such as U.S. Treasuries, we have not lost any business relationships to other local or regional commercial banks purely for reasons of clients demanding a higher yield on deposits. We will continue to lead with our value-proposition of service first and our desire to create mutual value for the Bank and its customers.”

Period-end loans, net of deferred loan origination fees, totaled $493.5 million, representing quarterly growth of $10.5 million. The first quarter loan yield grew to 4.85%, an increase of 0.15% over the prior quarter. Effective January 1, 2023, the Bank adopted Accounting Standards Update 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”) and all related amendments. The day 1 adoption of ASU 2016-13 and related amendments resulted in an increase of $60 thousand to the Bank’s allowance for credit losses on loans, an increase of $777 thousand to the Bank’s allowance for unfunded commitments and letters of credit and a net-of-tax cumulative-effect adjustment of $611 thousand to decrease the beginning balance of retained earnings. The Bank’s estimate of provision for credit losses for the first quarter of 2023, under the new CECL methodology, resulted in a reversal of $51 thousand of provision expense, which was comprised of an increase to the allowance for credit losses on loans of $70 thousand and a reduction in the reserve for unfunded commitments of $121 thousand. In addition to provision for credit losses, the Bank also recognized recoveries of $88 thousand during the quarter.

The Bank experienced quarterly deposit growth totaling $7.2 million or an annualized increase of 4.26%. Included in the first quarter deposit growth was approximately $19.1 million in deposits that migrated from off-balance sheet holdings with IntraFi Network, into on-balance sheet reciprocal balances. As of March 31, 2023, the Bank has migrated all off-balance sheet deposits into a reciprocal position. During the quarter the Bank experienced an increase in requests for the full FDIC insurance coverage associated with the Insured Cash Sweep accounts. Excluding the reciprocal migration, the Bank’s ICS balances grew $22.5 million. The ICS balances are currently listed under the demand interest bearing category on the balance sheet. As deposit rate pressure continues, the Bank’s cost of funds increased to 0.51% during the first quarter 2023, up from the 0.21% reported in the fourth quarter 2022. The Bank has also analyzed deposit balances and below is a breakout of deposit balances as of March 31, 2023, by type.

Deposit Detail - March 31, 2023
Unaudited (dollars in thousands)
 
Consumer Business
Account

Balance
Number of

Accounts
Avg, Bal. Per

Account
Account

Balance
Number of

Accounts
Avg, Bal. Per

Account
 
Demand - non-interest bearing

$

62,014

4,854

$

13

$

104,395

1,993

$

52

Demand - interest bearing

 

52,858

801

 

66

 

106,819

730

 

146

Demand - ICS

 

6,045

8

 

756

 

98,307

36

 

2,731

Money market

 

80,729

655

 

123

 

84,389

335

 

252

Savings

 

65,773

2,534

 

26

 

12,642

240

 

53

Certificates of deposit

 

16,075

374

 

43

 

-

-

 

-

$

283,494

9,226

$

406,552

3,334

The securities portfolio contracted slightly from $195.9 million at December 31, 2022, down to $195.6 million at Mach 31, 2023. The contraction was attributable to portfolio cash flows, which was partially offset by a reduction in the unrealized loss on the portfolio, as the Bank did not purchase any securities during the quarter. The unrealized loss at March 31, 2023 reflected a reduction of $1.9 million, moving to $12.4 million, down from $14.3 million at December 31, 2022. The increase in market values was primarily attributable to a reduction in longer-term interest rates positively affecting the market values. The weighted average life of the portfolio was 5.2 years and the modified duration of 4.4 years at March 31, 2023. During the quarter the yield on securities grew to 3.41%, up from 3.02% in the fourth quarter 2022, with securities income increasing $217 thousand over fourth quarter 2022, which was primarily attributable to the securities repositioning strategy executed during fourth quarter 2022.

Noninterest income totaled $1.7 million during the first quarter 2023 and represented a decrease of $187 thousand from fourth 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 $7 thousand during first quarter 2023, down from $191 thousand in fourth quarter 2022. With the Bank migrating all IntraFi deposits into a reciprocal position, this source of noninterest income is not anticipated in future periods.

First quarter 2023 noninterest expense totaled $5.3 million, down $1.4 million from the $6.7 million recorded during fourth quarter 2022. During the fourth quarter 2022 the bank recognized a loss on sale of securities of $1.8 million. Excluding the loss on sale of securities, noninterest expense increased $405 thousand over the fourth quarter 2022. The largest fluctuation occurred in the salaries and employee benefits category which grew $342 thousand, primarily attributable to the full quarter of salary expense associated with the Portland Market expansion.

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)
 
 
March 31, December 31, March 31,

 

2023

 

 

 

2022

 

 

 

2022

 

ASSETS
Cash and due from banks

$

8,783

 

$

10,657

 

$

16,039

 

Interest bearing deposits

 

41,931

 

 

39,863

 

 

98,345

 

Securities

 

195,647

 

 

195,881

 

 

157,922

 

Non PPP Loans, net of deferred fees and costs

 

493,480

 

 

482,979

 

 

407,405

 

PPP Loans, net of deferred fees and costs

 

-

 

 

-

 

 

4,783

 

Total Loans, net of deferred fees and costs

 

493,480

 

 

482,979

 

 

412,188

 

Allowance for credit losses

 

(6,884

)

 

(6,666

)

 

(5,959

)

Premises and equipment, net

 

9,867

 

 

9,556

 

 

9,645

 

Bank owned life insurance

 

8,677

 

 

8,616

 

 

8,456

 

Deferred tax asset

 

5,319

 

 

5,631

 

 

2,998

 

Other assets

 

7,669

 

 

7,665

 

 

6,893

 

 
Total assets

$

764,489

 

$

754,182

 

$

706,527

 

 
 
LIABILITIES
Deposits
Demand - non-interest bearing

$

166,409

 

$

180,589

 

$

178,367

 

Demand - interest bearing

 

264,029

 

 

236,511

 

 

187,276

 

Money market

 

165,118

 

 

165,671

 

 

167,681

 

Savings

 

78,415

 

 

82,662

 

 

83,477

 

Certificates of deposit

 

16,075

 

 

17,436

 

 

19,583

 

Total deposits

 

690,046

 

 

682,869

 

 

636,384

 

 
Junior subordinated debenture

 

4,124

 

 

4,124

 

 

4,124

 

Subordinated debenture

 

14,652

 

 

14,627

 

 

14,553

 

Other liabilities

 

6,300

 

 

6,474

 

 

5,420

 

 
Total liabilities

 

715,122

 

 

708,094

 

 

660,481

 

 
STOCKHOLDERS' EQUITY
Common stock

 

21,103

 

 

21,099

 

 

20,917

 

Retained earnings

 

37,284

 

 

35,462

 

 

29,762

 

Accumulated other comprehensive income, net of tax

(9,020

)

(10,473

)

(4,633

)
 
Total stockholders' equity

 

49,367

 

 

46,088

 

 

46,046

 

 
Total liabilities & stockholders' equity

$

764,489

 

$

754,182

 

$

706,527

 

CONSOLIDATED STATEMENTS OF INCOME
Unaudited (dollars in thousands, except per share data)
THREE MONTHS ENDED
March 31, December 31, March 31,

 

2023

 

 

 

2022

 

 

 

2022

INTEREST INCOME
Non-PPP loans

$

5,824

 

$

5,517

 

$

4,284

PPP loans

 

-

 

 

-

 

 

205

Securities

 

1,687

 

 

1,470

 

 

556

Other interest income

 

401

 

 

664

 

 

55

Total interest income

 

7,912

 

 

7,651

 

 

5,100

 
INTEREST EXPENSE
Deposits

 

858

 

 

361

 

 

109

Borrowed funds

 

226

 

 

220

 

 

181

Total interest expense

 

1,084

 

 

581

 

 

290

 
NET INTEREST INCOME

 

6,828

 

 

7,070

 

 

4,810

Provision (credit) for credit losses

 

(51

)

 

335

 

 

50

Net interest income after provision (credit) for credit losses

 

6,879

 

 

6,735

 

 

4,760

 
NONINTEREST INCOME
Trust fee income

 

884

 

 

841

 

 

778

Service charges

 

325

 

 

329

 

 

298

Mortgage loan sales

 

38

 

 

57

 

 

123

Merchant card services

 

103

 

 

121

 

 

108

Oregon Pacific Wealth Management income

 

252

 

 

236

 

 

250

Other income

 

99

 

 

304

 

 

88

Total noninterest income

 

1,701

 

 

1,888

 

 

1,645

 
NONINTEREST EXPENSE
Salaries and employee benefits

 

3,129

 

 

2,787

 

 

2,614

Loss on sale of securities

 

-

 

 

1,829

 

 

-

Outside services

 

552

 

 

593

 

 

520

Occupancy & equipment

 

448

 

 

432

 

 

401

Trust expense

 

481

 

 

461

 

 

392

Loan and collection, OREO expense

 

24

 

 

(8

)

 

27

Advertising

 

102

 

 

111

 

 

94

Supplies and postage

 

88

 

 

75

 

 

69

Other operating expenses

 

489

 

 

457

 

 

389

Total noninterest expense

 

5,313

 

 

6,737

 

 

4,506

 
Income before taxes

 

3,267

 

 

1,886

 

 

1,899

Provision for income taxes

 

834

 

 

459

 

 

455

 
NET INCOME

$

2,433

 

$

1,427

 

$

1,444

 

Quarterly Highlights 

1st Quarter 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter

 

2023

 

 

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2022

 

 
Earnings
Net interest income

$

6,828

 

$

7,070

 

$

6,102

 

$

5,389

 

$

4,810

 

Provision for loan loss

 

(51

)

 

335

 

 

209

 

 

100

 

 

50

 

Noninterest income

 

1,701

 

 

1,888

 

 

2,042

 

 

1,781

 

 

1,645

 

Noninterest expense

 

5,313

 

 

6,737

 

 

4,811

 

 

4,463

 

 

4,506

 

Provision for income taxes

 

834

 

 

459

 

 

792

 

 

663

 

 

455

 

Net income

$

2,433

 

$

1,427

 

$

2,332

 

$

1,944

 

$

1,444

 

 
Average shares outstanding

 

7,085,840

 

 

7,070,425

 

 

7,070,433

 

 

7,070,686

 

 

7,057,361

 

Average diluted shares outstanding

 

7,089,090

 

NA NA NA NA
Earnings per share

$

0.34

 

$

0.20

 

$

0.33

 

$

0.27

 

$

0.20

 

Diluted earnings per share

$

0.34

 

NA NA NA NA
 
Performance Ratios
Return on average assets

 

1.13

%

 

0.74

%

 

1.28

%

 

1.12

%

 

0.84

%

Return on average equity

 

21.01

%

 

13.34

%

 

20.41

%

 

17.34

%

 

12.02

%

Net interest margin - tax equivalent

 

3.87

%

 

3.87

%

 

3.54

%

 

3.27

%

 

2.93

%

Yield on loans

 

4.85

%

 

4.70

%

 

4.50

%

 

4.45

%

 

4.50

%

Yield on loans - excluding PPP loans

 

4.85

%

 

4.70

%

 

4.50

%

 

4.33

%

 

4.37

%

Yield on securities

 

3.41

%

 

3.02

%

 

2.39

%

 

1.91

%

 

1.49

%

Cost of deposits

 

0.51

%

 

0.21

%

 

0.09

%

 

0.07

%

 

0.07

%

Efficiency ratio

 

62.29

%

 

75.21

%

 

59.07

%

 

62.21

%

 

69.81

%

Full-time equivalent employees

 

127

 

 

120

 

 

122

 

 

122

 

 

122

 

 
Capital
Tier 1 capital

$

75,684

 

$

73,882

 

$

72,410

 

$

70,041

 

$

68,040

 

Leverage ratio

 

9.94

%

 

9.55

%

 

9.95

%

 

9.96

%

 

9.72

%

Common equity tier 1 ratio

 

14.16

%

 

13.92

%

 

14.81

%

 

14.79

%

 

16.42

%

Tier 1 risk based ratio

 

14.16

%

 

13.92

%

 

14.81

%

 

14.79

%

 

16.42

%

Total risk based ratio

 

15.41

%

 

15.17

%

 

16.06

%

 

16.04

%

 

17.68

%

Book value per share

$

6.97

 

$

6.52

 

$

6.05

 

$

6.37

 

$

6.52

 

 

 

Quarterly Highlights 

1st Quarter 4th Quarter 3rd Quarter 2nd Quarter 1st Quarter

 

2023

 

 

 

2022

 

 

 

2022

 

 

 

2022

 

 

 

2022

 

 
Asset quality
Allowance for loan losses (ALLL)

$

6,884

 

$

6,666

 

$

6,328

 

$

6,088

 

$

5,959

 

Nonperforming loans (NPLs)

$

72

 

$

52

 

$

424

 

$

960

 

$

593

 

Nonperforming assets (NPAs)

$

72

 

$

52

 

$

424

 

$

960

 

$

593

 

Classified Assets (1)

$

3,842

 

$

3,877

 

$

4,574

 

$

5,089

 

$

6,349

 

Net loan charge offs (recoveries)

$

(88

)

$

(4

)

$

(31

)

$

(29

)

$

(4

)

ACL as a percentage of net loans

 

1.39

%

 

1.38

%

 

1.39

%

 

1.40

%

 

1.45

%

ACL as a percentage of net loans (excluding PPP)

 

1.39

%

 

1.38

%

 

1.39

%

 

1.40

%

 

1.46

%

ACL as a percentage of NPLs

 

9561.11

%

 

12819.23

%

 

1492.45

%

 

634.17

%

 

1004.89

%

Net charge offs (recoveries) to average loans

 

-0.02

%

 

0.00

%

 

-0.01

%

 

-0.01

%

 

0.00

%

Net NPLs as a percentage of total loans

 

0.01

%

 

0.01

%

 

0.09

%

 

0.22

%

 

0.15

%

Nonperforming assets as a percentage of total assets

 

0.01

%

 

0.01

%

 

0.05

%

 

0.13

%

 

0.08

%

Classified Asset Ratio (2)

 

4.65

%

 

4.81

%

 

5.81

%

 

6.68

%

 

8.58

%

Past due as a percentage of total loans

 

0.06

%

 

0.19

%

 

0.13

%

 

0.12

%

 

0.21

%

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

$

-

 

$

18,976

 

$

60,588

 

$

121,645

 

$

78,674

 

Off-balance sheet time deposits (4)

$

-

 

$

-

 

$

-

 

$

-

 

$

37,500

 

Unused credit commitments

$

85,390

 

$

89,680

 

$

85,880

 

$

93,411

 

$

95,570

 

Trust assets under management (AUM)

$

219,731

 

$

215,736

 

$

193,448

 

$

195,058

 

$

199,983

 

Oregon Pacific Wealth Management AUM

$

113,138

 

$

117,549

 

$

116,193

 

$

114,973

 

$

127,749

 

 
End of period balances
Total securities

$

195,647

 

$

195,881

 

$

188,366

 

$

170,977

 

$

157,922

 

Total short term deposits

$

41,931

 

$

39,863

 

$

97,840

 

$

71,429

 

$

98,345

 

Total loans net of allowance

$

486,596

 

$

476,313

 

$

450,299

 

$

429,390

 

$

406,229

 

Total earning assets

$

733,090

 

$

720,712

 

$

744,786

 

$

679,835

 

$

670,406

 

Total assets

$

764,489

 

$

754,182

 

$

780,711

 

$

712,532

 

$

706,527

 

Total noninterest bearing deposits

$

166,409

 

$

180,589

 

$

195,536

 

$

189,112

 

$

178,367

 

Total deposits

$

690,046

 

$

682,869

 

$

712,710

 

$

642,653

 

$

636,384

 

 
Average balances
Total securities

$

196,060

 

$

192,348

 

$

186,535

 

$

165,729

 

$

143,830

 

Total short term deposits

$

35,240

 

$

68,808

 

$

57,557

 

$

73,515

 

$

120,674

 

Total loans net of allowance

$

480,046

 

$

459,440

 

$

436,522

 

$

418,445

 

$

398,423

 

Total earning assets

$

720,003

 

$

728,980

 

$

688,723

 

$

665,637

 

$

670,330

 

Total assets

$

752,094

 

$

761,361

 

$

720,465

 

$

697,913

 

$

699,808

 

Total noninterest bearing deposits

$

167,863

 

$

178,226

 

$

191,292

 

$

178,626

 

$

171,184

 

Total deposits

$

678,528

 

$

692,412

 

$

648,827

 

$

627,700

 

$

626,023

 

 
(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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