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Oregon Pacific Bancorp Announces 2023 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, 2023.

Highlights:

  • Fourth quarter net income of $2.2 million; $0.31 per diluted share
  • Quarterly loan growth of $11.4 million or 2.18%
  • Quarterly tax equivalent net interest margin of 3.64%
  • Annual return on average assets of 1.22%
  • Annual loan growth of $53.7 million or 11.11%
  • Portland office grand opening November 1, 2023

Net income for the quarter ended December 31, 2023, was $2.2 million, or $0.31 per diluted share compared to $2.3 million or $0.33 per diluted share for the quarter ended September 30, 2023. On an annual basis, the Bank recorded net income totaling $9.2 million, or $1.30 per diluted share compared to $7.1 million, or $1.01 per diluted share for the same period in 2022.

“We are happy to report the Bank’s strong financial performance as 2023 comes to a close,” said Ron Green, President and Chief Executive Officer. “During the year, Oregon Pacific Bank made a material investment in expansion into the Portland Market, and we are happy to report that despite these expenses, the Bank achieved record profitability during 2023. We continue to look for the best bankers in the Portland-metro area, and in all markets that we serve, who might be seeking a team-oriented community bank culture. Strategic hires may occur in 2024 if opportunities arise. We continue to be excited about the prospects for organic growth throughout the state of Oregon.”

Period-end loans, net of deferred loan origination fees, totaled $536.7 million, representing quarterly growth of $11.4 million, or 2.18%. The fourth quarter loan yield grew to 5.15%, representing an increase of 0.08% over the prior quarter as new loan production is occurring at a rate higher than the existing portfolio yield. Quarterly loan production for new and renewed loans totaled $33.5 million, with a weighted average effective rate of 6.90% and a weighted-average repricing life of 4.89 years.

During the quarter ended December 31, 2023, the Bank reversed $70 thousand in provision for credit losses. This net reversal occurred due to the combination of $80 thousand of provision for credit loss expense on loans and reversal of $150 thousand for provision for credit loss expense on unfunded commitments. The reduction in provision for unfunded commitments occurred primarily due to advances on lines of credit, shifting the reserve from the reserve for unfunded commitments into the Allowance for Credit Losses and overall improvements in external credit quality indicators. During the quarter, the Bank also experienced an increase in classified assets, defined as loans and loan contingent liabilities internally graded substandard or worse, impaired loans, adversely classified securities and other real estate owned, totaling $4.9 million. The increase occurred due to the downgrading of three loan relationships totaling $2.5 million, $1.2 million and $880 thousand, respectively, into substandard classification. Two of the downgraded relationships are nonprofits that have experienced mid-year reductions in revenue and are updating their forecasted operating budgets to reflect expense adjustments for the coming fiscal year. One relationship is undergoing a property improvement plan for a conversion to a branded hotel flag that has experienced delays. All loans continue to pay as agreed and are well-secured with commercial real estate.

The Bank’s cost of funds moved to 1.00% during the fourth quarter 2023, compared to 0.86% during the third quarter 2023, resulting in a quarterly increase in interest expense of $342 thousand. The Bank experienced quarterly deposit contraction totaling $9.5 million compared to deposit totals at September 30, 2023.

“Deposits contracted during the quarter as clients self-funded projects or looked for alternative investments,” commented John Raleigh, Executive Vice President and Chief Lending Officer. “The Bank has focused on retaining relationship deposits through targeted incremental interest rate adjustments to remain competitive, also acknowledging that some deposit movement is not interest rate related.”

During the fourth quarter a large client continued to utilize excess cash to fund a large construction project, with their deposit usage totaling approximately $3 million. Additionally, another depositor utilized excess cash of $2.6 million to purchase commercial real estate.

Noninterest income totaled $1.8 million during the fourth quarter 2023 and represented growth of $52 thousand over third quarter 2023. The largest increase in non-interest income occurred in the trust fee income category, which grew $96 thousand over the prior quarter, primarily due to growth in trust assets under management (AUM). Trust revenue continues to be the Bank’s strongest source of noninterest income and a differentiator amongst similarly sized community banks. Trust revenue has historically been consistent, and it is generally not affected by economic factors such as interest rates or the stock market that could impact other lines of noninterest income including mortgage or investment advisory services. The Bank has five trust officers across its markets and believes this location-based service will enable future growth of this business line.

Noninterest expense for the fourth quarter 2023 totaled $5.7 million, representing an increase of $108 thousand over the quarter ended September 30, 2023. The largest expense fluctuation totaled $84 thousand and occurred in the occupancy and equipment category. The growth in this expense was attributable to two facility updates: 1) the opening of the Portland Office, located at 16101 SW 72nd Ave in Tigard on November 1, 2023 and 2) the full quarter of expense associated with the Bank’s new administrative building, located in Eugene at 1045 Willagillespie Rd. The Bank purchased a building in December 2021 with plans to develop the building into the Eugene administrative headquarters due to the growth of Eugene-based employees. This building was renovated throughout 2023, with staff moving into the location in September 2023. The additional quarterly expense is anticipated to be a permanent change moving into 2024.

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)
 
 
December 31, September 30, December 31,

2023

2023

2022

ASSETS
Cash and due from banks

$

8,106

 

$

8,925

 

$

10,657

 

Interest bearing deposits

 

6,246

 

 

11,216

 

 

39,863

 

Securities

 

177,599

 

 

176,593

 

 

195,881

 

Loans, net of deferred fees and costs

 

536,662

 

 

525,231

 

 

482,979

 

Allowance for credit losses

 

(6,975

)

 

(6,892

)

 

(6,666

)

Premises and equipment, net

 

13,470

 

 

13,024

 

 

9,556

 

Bank owned life insurance

 

8,866

 

 

8,801

 

 

8,616

 

Deferred tax asset

 

5,758

 

 

6,604

 

 

5,631

 

Other assets

 

11,254

 

 

8,986

 

 

7,665

 

 
Total assets

$

760,986

 

$

752,488

 

$

754,182

 

 
 
LIABILITIES
Deposits
Demand - non-interest bearing

$

155,693

 

$

160,272

 

$

180,589

 

Demand - interest bearing

 

272,968

 

 

270,677

 

 

236,511

 

Money market

 

129,543

 

 

139,033

 

 

165,671

 

Savings

 

66,254

 

 

69,018

 

 

82,662

 

Certificates of deposit

 

35,991

 

 

30,917

 

 

17,436

 

Total deposits

 

660,449

 

 

669,917

 

 

682,869

 

FHLB borrowings

 

17,000

 

 

5,000

 

 

-

 

Junior subordinated debenture

 

4,124

 

 

4,124

 

 

4,124

 

Subordinated debenture

 

14,727

 

 

14,702

 

 

14,627

 

Other liabilities

 

8,304

 

 

8,168

 

 

6,474

 

 
Total liabilities

 

704,604

 

 

701,911

 

 

708,094

 

 
STOCKHOLDERS' EQUITY
Common stock

 

21,291

 

 

21,212

 

 

21,099

 

Retained earnings

 

44,083

 

 

41,859

 

 

35,462

 

Accumulated other comprehensive income, net of tax

 

(8,992

)

 

(12,494

)

 

(10,473

)

 
Total stockholders' equity

 

56,382

 

 

50,577

 

 

46,088

 

 
Total liabilities & stockholders' equity

$

760,986

 

$

752,488

 

$

754,182

 

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,

2023

2023

2022

2023

2022

INTEREST INCOME
Non-PPP loans

$

6,871

 

$

6,587

 

$

5,517

 

$

25,531

 

$

19,392

PPP loans

 

-

 

 

-

 

 

-

 

 

-

 

 

349

Securities

 

1,608

 

 

1,568

 

 

1,470

 

 

6,504

 

 

3,984

Other interest income

 

172

 

 

373

 

 

664

 

 

1,263

 

 

1,170

Total interest income

 

8,651

 

 

8,528

 

 

7,651

 

 

33,298

 

 

24,895

 
INTEREST EXPENSE
Deposits

 

1,677

 

 

1,483

 

 

361

 

 

5,331

 

 

729

Borrowed funds

 

379

 

 

231

 

 

220

 

 

1,066

 

 

795

Total interest expense

 

2,056

 

 

1,714

 

 

581

 

 

6,397

 

 

1,524

 
NET INTEREST INCOME

 

6,595

 

 

6,814

 

 

7,070

 

 

26,901

 

 

23,371

(Credit) provision for credit losses

 

(70

)

 

(123

)

 

335

 

 

(230

)

 

694

Net interest income after (credit) provision for credit losses

 

6,665

 

 

6,937

 

 

6,735

 

 

27,131

 

 

22,677

 
NONINTEREST INCOME
Trust fee income

 

944

 

 

848

 

 

841

 

 

3,619

 

 

3,206

Service charges

 

348

 

 

359

 

 

329

 

 

1,374

 

 

1,273

Mortgage loan sales

 

56

 

 

25

 

 

57

 

 

147

 

 

297

Merchant card services

 

129

 

 

162

 

 

121

 

 

515

 

 

515

Oregon Pacific Wealth Management income

 

274

 

 

294

 

 

236

 

 

1,095

 

 

977

Other income

 

106

 

 

117

 

 

304

 

 

405

 

 

1,085

Total noninterest income

 

1,857

 

 

1,805

 

 

1,888

 

 

7,155

 

 

7,353

 
NONINTEREST EXPENSE
Salaries and employee benefits

 

3,218

 

 

3,164

 

 

2,787

 

 

12,594

 

 

10,830

Outside services

 

631

 

 

678

 

 

593

 

 

2,449

 

 

2,199

Occupancy & equipment

 

540

 

 

456

 

 

432

 

 

1,895

 

 

1,657

Trust expense

 

542

 

 

545

 

 

461

 

 

2,102

 

 

1,686

Loan and collection, OREO expense

 

16

 

 

9

 

 

(8

)

 

76

 

 

63

Advertising

 

77

 

 

93

 

 

111

 

 

417

 

 

440

Supplies and postage

 

98

 

 

98

 

 

75

 

 

363

 

 

279

Loss on sale of securities

 

-

 

 

-

 

 

1,829

 

 

-

 

 

1,829

Other operating expenses

 

561

 

 

532

 

 

457

 

 

2,119

 

 

1,536

Total noninterest expense

 

5,683

 

 

5,575

 

 

6,737

 

 

22,015

 

 

20,519

 
Income before taxes

 

2,839

 

 

3,167

 

 

1,886

 

 

12,271

 

 

9,511

Provision for income taxes

 

614

 

 

820

 

 

459

 

 

3,039

 

 

2,368

 
NET INCOME

$

2,225

 

$

2,347

 

$

1,427

 

$

9,232

 

$

7,143

Quarterly Highlights

4th Quarter

3rd Quarter

2nd Quarter

1st Quarter

4th Quarter

2023

2023

2023

2023

2022

 
Earnings
Interest income

$

8,651

 

$

8,528

 

$

8,206

 

$

7,912

 

$

7,651

 

Interest expense

 

2,056

 

 

1,714

 

 

1,540

 

 

1,084

 

 

581

 

Net interest income

$

6,595

 

$

6,814

 

$

6,666

 

$

6,828

 

$

7,070

 

Provision for loan loss

 

(70

)

 

(123

)

 

14

 

 

(51

)

 

335

 

Noninterest income

 

1,857

 

 

1,805

 

 

1,792

 

 

1,701

 

 

1,888

 

Noninterest expense

 

5,683

 

 

5,575

 

 

5,442

 

 

5,313

 

 

6,737

 

Provision for income taxes

 

614

 

 

820

 

 

771

 

 

834

 

 

459

 

Net income

$

2,225

 

$

2,347

 

$

2,231

 

$

2,433

 

$

1,427

 

 
Average shares outstanding

 

7,094,180

 

 

7,094,180

 

 

7,097,866

 

 

7,085,840

 

 

7,070,425

 

Average diluted shares outstanding

 

7,100,680

 

 

7,100,680

 

 

7,104,366

 

 

7,089,090

 

NA
Period end shares outstanding

 

7,094,180

 

 

7,094,180

 

 

7,094,562

 

 

7,102,271

 

 

7,068,659

 

Period end diluted shares outstanding

 

7,100,680

 

 

7,100,680

 

 

7,101,062

 

 

7,108,771

 

NA
Earnings per share

$

0.31

 

$

0.33

 

$

0.31

 

$

0.34

 

$

0.20

 

Diluted earnings per share

$

0.31

 

$

0.33

 

$

0.31

 

$

0.34

 

NA
 
Performance Ratios
Return on average assets

 

1.17

%

 

1.22

%

 

1.19

%

 

1.13

%

 

0.74

%

Return on average equity

 

17.45

%

 

18.65

%

 

18.12

%

 

21.01

%

 

13.34

%

Net interest margin - tax equivalent

 

3.64

%

 

3.74

%

 

3.72

%

 

3.87

%

 

3.87

%

Yield on loans

 

5.15

%

 

5.07

%

 

4.96

%

 

4.85

%

 

4.70

%

Yield on securities

 

3.53

%

 

3.43

%

 

3.37

%

 

3.41

%

 

3.02

%

Cost of deposits

 

1.00

%

 

0.86

%

 

0.78

%

 

0.51

%

 

0.21

%

Cost of interest-bearing liabilities

 

1.52

%

 

1.26

%

 

1.15

%

 

0.84

%

 

0.44

%

Efficiency ratio

 

67.25

%

 

64.73

%

 

64.34

%

 

62.29

%

 

75.21

%

Full-time equivalent employees

 

134

 

 

131

 

 

128

 

 

127

 

 

120

 

 
Capital
Tier 1 capital

$

82,278

 

$

80,082

 

$

77,917

 

$

75,684

 

$

73,882

 

Leverage ratio

 

10.70

%

 

10.40

%

 

10.24

%

 

9.94

%

 

9.55

%

Common equity tier 1 ratio

 

14.28

%

 

14.34

%

 

14.18

%

 

14.16

%

 

13.92

%

Tier 1 risk based ratio

 

14.28

%

 

14.34

%

 

14.18

%

 

14.16

%

 

13.92

%

Total risk based ratio

 

15.53

%

 

15.59

%

 

15.43

%

 

15.41

%

 

15.17

%

Book value per share

$

7.95

 

$

7.13

 

$

7.03

 

$

6.97

 

$

6.52

 

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

2023

2023

2023

2023

2022

 
Asset quality
Allowance for credit losses (ACL)

$

6,975

 

$

6,892

 

$

6,887

 

$

6,884

 

$

6,666

 

Nonperforming loans (NPLs)

$

443

 

$

456

 

$

178

 

$

72

 

$

52

 

Nonperforming assets (NPAs)

$

443

 

$

456

 

$

178

 

$

72

 

$

52

 

Classified Assets (1)

$

9,186

 

$

4,252

 

$

3,750

 

$

3,842

 

$

3,877

 

Net loan charge offs (recoveries)

$

(3

)

$

(6

)

$

(3

)

$

(88

)

$

(4

)

ACL as a percentage of net loans

 

1.30

%

 

1.31

%

 

1.35

%

 

1.39

%

 

1.38

%

ACL as a percentage of NPLs

 

1574.49

%

 

1511.40

%

 

3869.10

%

 

9561.11

%

 

12819.23

%

Net charge offs (recoveries) to average loans

 

0.00

%

 

0.00

%

 

0.00

%

 

-0.02

%

 

0.00

%

Net NPLs as a percentage of total loans

 

0.08

%

 

0.09

%

 

0.03

%

 

0.01

%

 

0.01

%

Nonperforming assets as a percentage of total assets

 

0.06

%

 

0.06

%

 

0.02

%

 

0.10

%

 

0.01

%

Classified Asset Ratio (2)

 

10.29

%

 

4.89

%

 

4.42

%

 

4.65

%

 

4.81

%

Past due as a percentage of total loans

 

0.15

%

 

0.12

%

 

0.12

%

 

0.06

%

 

0.19

%

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

$

-

 

$

-

 

$

-

 

$

-

 

$

18,976

 

Unused credit commitments

$

105,900

 

$

103,163

 

$

97,111

 

$

85,390

 

$

89,680

 

Trust assets under management (AUM)

$

226,695

 

$

219,268

 

$

222,880

 

$

219,731

 

$

215,736

 

Oregon Pacific Wealth Management AUM

$

147,159

 

$

140,153

 

$

141,990

 

$

133,138

 

$

117,549

 

 
End of period balances
Total securities

$

177,599

 

$

176,593

 

$

181,530

 

$

195,647

 

$

195,881

 

Total short term deposits

$

6,246

 

$

11,216

 

$

22,967

 

$

41,931

 

$

39,863

 

Total loans net of allowance

$

529,687

 

$

518,339

 

$

503,377

 

$

486,596

 

$

476,313

 

Total earning assets

$

722,855

 

$

715,273

 

$

716,793

 

$

733,090

 

$

720,712

 

Total assets

$

760,986

 

$

752,488

 

$

752,804

 

$

764,489

 

$

754,182

 

Total noninterest bearing deposits

$

155,693

 

$

160,272

 

$

159,184

 

$

166,409

 

$

180,589

 

Total deposits

$

660,449

 

$

669,917

 

$

677,672

 

$

690,046

 

$

682,869

 

 
Average balances
Total securities

$

176,066

 

$

180,344

 

$

190,818

 

$

196,060

 

$

192,348

 

Total short term deposits

$

12,637

 

$

27,510

 

$

24,616

 

$

35,240

 

$

68,808

 

Total loans net of allowance

$

522,432

 

$

508,385

 

$

498,069

 

$

480,046

 

$

459,440

 

Total earning assets

$

720,383

 

$

725,179

 

$

722,420

 

$

720,003

 

$

728,980

 

Total assets

$

756,740

 

$

759,592

 

$

751,845

 

$

752,094

 

$

761,361

 

Total noninterest bearing deposits

$

156,729

 

$

163,669

 

$

154,949

 

$

167,863

 

$

178,226

 

Total deposits

$

668,296

 

$

681,749

 

$

675,954

 

$

678,528

 

$

692,412

 

 
(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 credit losses.
(3) Deposits sold through IntraFi Network Deposits Insured Cash Sweep (ICS) program

Contacts

Editorial Contact:

Ron Green, President & Chief Executive Officer

ron.green@opbc.com

(541) 902-9800

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