FLORENCE, Ore., January 25, 2024--(BUSINESS WIRE)--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
