FLORENCE, Ore., July 18, 2024--(BUSINESS WIRE)--Oregon Pacific Bancorp (ORPB), the holding company of Oregon Pacific Bank, today reported financial results for the second quarter ended, June 30, 2024.
Highlights:
Second quarter net income of $1.9 million; $0.26 per diluted share.
Quarterly tax equivalent net interest margin of 3.65%.
Quarterly cost of funds of 1.30%.
Quarterly loan growth of $12.1 million or 8.80% annualized.
Net income for the quarter ended June 30, 2024, was $1.9 million, or $0.26 per diluted share compared to $1.6 million or $0.22 per diluted share for the quarter ended March 31, 2024. "We are pleased with the growth in our core earnings," said Ron Green, President and Chief Executive Officer. "Expansion of our net interest margin coupled with growth in noninterest income centered around our trust, Oregon Pacific Wealth Management investment advisory services and mortgage income continue to trend positively. We remain uniquely positioned to offer these additional services and are optimistic about future opportunities for the Bank to attract clients who desire the traditional community banking model."
During the quarter the Bank’s net interest margin expanded to 3.65%, up from 3.59% in the first quarter. The expansion was primarily driven by an increase in the asset yields, which grew from 4.88% in the first quarter of 2024 to 5.03% in the second quarter of 2024. This occurred in part due to the shift in asset mix as investment securities matured and shifted into higher yielding loans and fed funds, with that increase more than offsetting the growth in the cost of interest-bearing liabilities.
Period-end loans, net of deferred loan origination fees, totaled $563 million, representing quarterly growth of $12.1 million, or 8.80% annualized. The second quarter loan yield grew to 5.43%, representing an increase of 0.13% over the prior quarter as new loan production continued to occur at a rate higher than the existing portfolio yield. Quarterly loan production for new and renewed loans totaled $31.6 million, with a weighted average effective rate of 7.50% and a weighted-average repricing life of 4.22 years.
During the second quarter ended June 30, 2024, the bank 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 $2 million. This occurred primarily due to the downgrade of one commercial and industrial lending relationship, totaling $2 million, into substandard classification. The company is a manufacturer that has been impacted by a slowdown in the RV industry but is shifting focus onto non-RV related industries while working to reduce expenses. The relationship is comprised of three loans secured by business assets and is monitored monthly. All three loans continue to pay as agreed and no losses are currently anticipated.
During the quarter, the Bank recorded a recovery of $91 thousand, attributable to a residential real estate loan which was charged off in 2011. In addition to the recovery, the Bank also recorded a $141 thousand provision for credit losses, which resulted in a quarterly increase in the allowance for credit losses of $232 thousand. The increase was primarily attributable to quarterly loan growth.
Period-end deposits totaled $677.5 million and represented quarterly contraction of $18.0 million. While the balances contracted on a quarterly basis, total deposits still reflect growth of $17.0 million since December 31, 2023. The Bank’s cost of funds experienced a small increase to 1.30%, up from 1.20% in the first quarter. The Bank is continuing to evaluate deposit pricing and will likely see quarterly increases in cost of funds based on competitive rate pressures to retain deposits.
Noninterest income totaled $2.0 million during the second quarter 2024 and represented growth of $171 thousand from first quarter 2024. The largest increase occurred in the trust fee income category, which grew $37 thousand from the prior quarter. This increase was primarily tied to growth in Assets Under Management, which increased $12.2 million as the Bank continues to onboard new trust clients. The Bank also experienced growth of $63 thousand in the other income category compared to the first quarter 2024. This growth was partially attributable to a one-time incentive payment of $34 thousand through Visa associated with our debit card processing. This payment is not anticipated to be received in future periods. During the second quarter 2024 noninterest expense totaled $6.1 million, representing a decrease of $130 thousand from the quarter ended March 31, 2024. The largest expense fluctuation occurred in the outside services category as the cost of the financial statement audit in the first quarter of $69 thousand was not repeated during the second quarter.
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,
December 31,
June 30,
2024
2024
2023
2023
ASSETS
Cash and due from banks
$
6,505
$
10,464
$
8,106
$
10,951
Interest bearing deposits
10,559
25,851
6,246
22,967
Securities
162,483
170,740
177,599
181,530
Loans, net of deferred fees and costs
563,002
550,945
536,662
510,264
Allowance for credit losses
(7,250
)
(7,018
)
(6,975
)
(6,887
)
Premises and equipment, net
13,403
13,346
13,470
11,708
Bank owned life insurance
9,002
8,933
8,866
8,738
Deferred tax asset
5,784
5,742
5,758
5,978
Other assets
8,354
8,432
11,254
7,555
Total assets
$
771,842
$
787,435
$
760,986
$
752,804
LIABILITIES
Deposits
Demand - non-interest bearing
$
154,226
$
155,038
$
155,693
$
159,184
Demand - interest bearing
285,802
297,288
272,968
265,550
Money market
119,863
129,154
129,543
152,046
Savings
64,458
63,230
66,254
75,196
Certificates of deposit
53,126
50,735
35,991
25,696
Total deposits
677,475
695,445
660,449
677,672
FHLB borrowings
7,500
7,500
17,000
-
Junior subordinated debenture
4,124
4,124
4,124
4,124
Subordinated debenture
14,777
14,752
14,727
14,677
Other liabilities
8,101
7,611
8,304
6,482
Total liabilities
711,977
729,432
704,604
702,955
STOCKHOLDERS' EQUITY
Common stock
21,388
21,280
21,291
21,135
Retained earnings
47,538
45,672
44,083
39,516
Accumulated other comprehensive income, net of tax
(9,061
)
(8,949
)
(8,992
)
(10,802
)
Total stockholders' equity
59,865
58,003
56,382
49,849
Total liabilities & stockholders' equity
$
771,842
$
787,435
$
760,986
$
752,804
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,
2024
2024
2023
2024
2023
INTEREST INCOME
Loans
$
7,548
$
7,143
$
6,249
$
14,691
$
12,073
Securities
1,515
1,539
1,641
3,054
3,328
Other interest income
224
198
316
422
717
Total interest income
9,287
8,880
8,206
18,167
16,118
INTEREST EXPENSE
Deposits
2,214
1,999
1,311
4,213
2,169
Borrowed funds
335
372
229
707
455
Total interest expense
2,549
2,371
1,540
4,920
2,624
NET INTEREST INCOME
6,738
6,509
6,666
13,247
13,494
Provision (credit) for credit losses on loans
141
40
121
181
70
Provision (credit) for unfunded commitments
10
(40
)
(107
)
(30
)
(107
)
Net interest income after provision (credit) for credit losses
6,587
6,509
6,652
13,096
13,531
NONINTEREST INCOME
Trust fee income
937
900
943
1,837
1,827
Service charges
361
347
342
708
667
Mortgage loan sales
61
32
28
93
66
Merchant card services
125
112
122
237
225
Oregon Pacific Wealth Management income
316
301
275
617
527
Other income
160
97
82
257
181
Total noninterest income
1,960
1,789
1,792
3,749
3,493
NONINTEREST EXPENSE
Salaries and employee benefits
3,634
3,633
3,082
7,267
6,211
Outside services
639
718
588
1,357
1,140
Occupancy & equipment
478
510
451
988
899
Trust expense
635
617
533
1,252
1,014
Loan and collection, OREO expense
20
14
27
34
51
Advertising
96
55
145
151
247
Supplies and postage
68
79
79
147
167
Other operating expenses
516
590
537
1,106
1,026
Total noninterest expense
6,086
6,216
5,442
12,302
10,755
Income before taxes
2,461
2,082
3,002
4,543
6,269
Provision for income taxes
595
492
771
1,087
1,605
NET INCOME
$
1,866
$
1,590
$
2,231
$
3,456
$
4,664
Quarterly Highlights
2nd Quarter
1st Quarter
4th Quarter
3rd Quarter
2nd Quarter
2024
2024
2023
2023
2023
Earnings
Interest income
$
9,287
$
8,880
$
8,651
$
8,528
$
8,206
Interest expense
2,549
2,371
2,056
1,714
1,540
Net interest income
$
6,738
$
6,509
$
6,595
$
6,814
$
6,666
Provision (credit) for credit losses on loans
141
40
80
-
121
Provision (credit) for unfunded commitments
10
(40
)
(150
)
(123
)
(107
)
Noninterest income
1,960
1,789
1,857
1,805
1,792
Noninterest expense
6,086
6,216
5,683
5,575
5,442
Provision for income taxes
595
492
614
820
771
Net income
$
1,866
$
1,590
$
2,225
$
2,347
$
2,231
Average shares outstanding
7,135,227
7,115,125
7,094,180
7,094,180
7,097,866
Average diluted shares outstanding
7,154,631
7,128,148
7,100,680
7,100,680
7,104,366
Period end shares outstanding
7,135,227
7,135,615
7,094,180
7,094,180
7,094,562
Period end diluted shares outstanding
7,154,631
7,155,019
7,100,680
7,100,680
7,101,062
Earnings per share
$
0.26
$
0.22
$
0.31
$
0.33
$
0.31
Diluted earnings per share
$
0.26
$
0.22
$
0.31
$
0.33
$
0.31
Performance Ratios
Return on average assets
0.96
%
0.83
%
1.17
%
1.22
%
1.19
%
Return on average equity
13.01
%
11.43
%
17.45
%
18.65
%
18.12
%
Net interest margin - tax equivalent
3.65
%
3.59
%
3.64
%
3.74
%
3.72
%
Yield on loans
5.43
%
5.30
%
5.15
%
5.07
%
4.96
%
Yield on securities
3.62
%
3.54
%
3.53
%
3.43
%
3.37
%
Cost of deposits
1.30
%
1.20
%
1.00
%
0.86
%
0.78
%
Cost of interest-bearing liabilities
1.83
%
1.74
%
1.52
%
1.26
%
1.15
%
Efficiency ratio
70.00
%
74.91
%
67.25
%
64.73
%
64.34
%
Full-time equivalent employees
143
142
134
131
128
Capital
Tier 1 capital
$
85,416
$
83,699
$
82,278
$
80,082
$
77,917
Leverage ratio
10.82
%
10.78
%
10.70
%
10.40
%
10.24
%
Common equity tier 1 ratio
14.36
%
14.33
%
14.28
%
14.34
%
14.18
%
Tier 1 risk based ratio
14.36
%
14.33
%
14.28
%
14.34
%
14.18
%
Total risk based ratio
15.61
%
15.58
%
15.53
%
15.59
%
15.43
%
Book value per share
$
8.39
$
8.13
$
7.95
$
7.13
$
7.03
Quarterly Highlights
2nd Quarter
1st Quarter
4th Quarter
3rd Quarter
2nd Quarter
2024
2024
2023
2023
2023
Asset quality
Allowance for credit losses (ACL)
$
7,250
$
7,018
$
6,975
$
6,892
$
6,887
Nonperforming loans (NPLs)
$
275
$
113
$
443
$
456
$
178
Nonperforming assets (NPAs)
$
275
$
113
$
443
$
456
$
178
Classified Assets (1)
$
11,778
$
9,668
$
9,186
$
4,252
$
3,750
Net loan charge offs (recoveries)
$
(91
)
$
(3
)
$
(3
)
$
(6
)
$
(3
)
ACL as a percentage of net loans
1.29
%
1.27
%
1.30
%
1.31
%
1.35
%
ACL as a percentage of NPLs
2636.36
%
6210.62
%
1574.49
%
1511.40
%
3869.10
%
Net charge offs (recoveries) to average loans
-0.02
%
0.00
%
0.00
%
0.00
%
0.00
%
Net NPLs as a percentage of total loans
0.05
%
0.02
%
0.08
%
0.09
%
0.03
%
Nonperforming assets as a percentage of total assets
0.04
%
0.01
%
0.06
%
0.06
%
0.02
%
Classified Asset Ratio (2)
12.63
%
10.66
%
10.29
%
4.89
%
4.42
%
Past due as a percentage of total loans
0.19
%
0.29
%
0.15
%
0.12
%
0.12
%
Off-balance sheet figures
Unused credit commitments
$
97,763
$
99,498
$
105,900
$
103,163
$
97,111
Trust assets under management (AUM)
$
254,380
$
242,222
$
226,695
$
219,268
$
222,880
Oregon Pacific Wealth Management AUM
$
159,201
$
153,228
$
147,159
$
140,153
$
141,990
End of period balances
Total securities
$
162,483
$
170,740
$
177,599
$
176,593
$
181,530
Total short term deposits
$
10,559
$
25,851
$
6,246
$
11,216
$
22,967
Total loans net of allowance
$
555,752
$
543,927
$
529,687
$
518,339
$
503,377
Total earning assets
$
737,936
$
749,463
$
722,855
$
715,273
$
716,793
Total assets
$
771,842
$
787,435
$
760,986
$
752,488
$
752,804
Total noninterest bearing deposits
$
154,226
$
155,038
$
155,693
$
160,272
$
159,184
Total deposits
$
677,475
$
695,445
$
660,449
$
669,917
$
677,672
Average balances
Total securities
$
166,077
$
172,769
$
176,066
$
180,344
$
190,818
Total short term deposits
$
16,430
$
14,663
$
12,637
$
27,510
$
24,616
Total loans net of allowance
$
552,490
$
535,251
$
522,432
$
508,385
$
498,069
Total earning assets
$
744,050
$
731,735
$
720,383
$
725,179
$
722,420
Total assets
$
780,003
$
767,409
$
756,740
$
759,592
$
751,845
Total noninterest bearing deposits
$
156,858
$
156,513
$
156,729
$
163,669
$
154,949
Total deposits
$
685,983
$
672,409
$
668,296
$
681,749
$
675,954
(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.
