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Oregon Pacific Bank Announces Second Quarter Earnings Results

Oregon Pacific Bancorp (ORPB), the holding company of Oregon Pacific Bank, today reported financial results for the second quarter ended June 30, 2022.

Highlights:

  • Final PPP forgiveness payments processed, bringing PPP loan balances to zero.
  • Second quarter net income of $1.9 million; $0.27 per diluted share.
  • Quarterly non-PPP loan growth of $28.1 million.
  • Quarterly deposit growth of $6.3 million.
  • Quarterly tax equivalent net interest margin of 3.27%.

Net income for the quarter ended June 30, 2022, was $1.9 million, or $0.27 per diluted share compared to $1.9 million, or $0.27 per diluted share for the quarter ended June 30, 2021. During the quarter the Bank saw a conclusion of the Paycheck Protection Program (PPP) forgiveness payments, recognizing $145 thousand in PPP fee and interest income during the second quarter. PPP income recognized during second quarter 2022 was down $816 thousand from the $961 thousand recognized in second quarter 2021, yet overall net income was comparable.

“We are pleased to report the ending to our PPP loan program,” said Ron Green, President and CEO. “PPP loans provided much needed support to the business community during a tremendously uncertain time. While the forgiveness process is complete, we are proud of the lasting economic benefits our clients received because of the program.”

Period-end non-PPP loans, net of deferred loan origination fees, totaled $435.5 million, with quarterly growth of $28.1 million, and year-to-date growth of $47.3 million, which represented an annualized growth rate of 24.37%. The Bank continued to experience non-PPP loan demand, but pricing pressures remain strong. The second quarter effective yield on the non-PPP loan portfolio lowered to 4.33%, down from 4.37% in first quarter. During the second quarter a USDA guaranteed loan prepaid, which was purchased at a premium during 2017. This resulted in the expense of $47 thousand for the remaining purchase premium, which resulted in a reduction to interest income during the second quarter. Without the prepayment, the effective yield on the non-PPP loan portfolio would have been 4.38%, an improvement of 0.01% over first quarter 2022.

During the quarter the Bank saw a decrease in classified assets totaling $1.3 million, bringing the classified asset ratio to 6.68% as of June 30, 2022. This decrease was primarily attributable to upgrades of one loan relationship and payoffs of three additional loans. Offsetting the upgrades and payoffs, the Bank migrated one relationship totaling $375 thousand, to nonaccrual status. This was a single-family residential loan, which as of June 30, 2022, was well secured.

Second quarter 2022 deposit growth slowed but totaled $6.3 million. The Bank maintained second quarter cost of funds totaling 0.07% and had not initiated any deposit rate increases. The Bank also continues to maintain $121.6 million of additional off-balance sheet deposits in the IntraFi Network’s Insured Cash Sweep (ICS) product. In prior quarters the Bank maintained both time deposits and demand deposits in the IntraFi network due to capacity limitation imposed by the IntraFi Network. During second quarter those limitations were eliminated, and the Bank migrated all off-balance sheet deposits into the ICS demand product. The off-balance sheet deposits remain a source of liquidity, with the ICS deposits available on demand.

During the second quarter the Bank continued to purchase investment securities with quarterly purchases totaling $19.4 million, with a weighted average maturity of 3.08 years and a weighted average yield of 3.11%. Securities purchases were offset by portfolio amortization and an increase in the unrealized loss on the securities portfolio. The June 30, 2022, unrealized loss on the securities portfolio grew to $10.5 million or 5.8% of the portfolio book value. Second quarter securities income totaled $828 thousand, an increase of $272 thousand from the $556 thousand recognized in the first quarter ended March 31, 2022. Several factors contributed to the increased earnings, including securities purchased during the quarter occurred at an effective rate higher than the overall portfolio yield and the increase in the yield on the variable rate securities tied to the prime rate. As of June 30, 2022, approximately $47.7 million of the securities portfolio is subject to monthly or quarter rate resets. The Bank continues to plan for additional securities purchases during 2022, which will continue to enhance the net interest margin by shifting earnings assets from fed funds into higher yielding securities.

Second quarter 2022 noninterest income totaled $1.8 million, which represented an increase of $136 thousand from the first quarter 2022. The increase occurred across all income categories except for mortgage loan sales. While higher interest rates have stopped most refinance activity, the Bank’s Florence community continues to see inward migration which provides opportunities for mortgage originations, but at a pace slower than 2021. The largest increase 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 deposits, which totaled $80 thousand. This represents the difference between what IntraFi paid the bank for the deposits and what was passed to the depositors. As interest rates push upward this source of non-interest income will likely decrease over time as the Bank will be forced to increase the interest amount paid to depositors.

Noninterest expense in the second quarter 2022 totaled $4.5 million, down $43 thousand from first quarter 2022. The primary driver of the reduction came from the other operating expense category, with the difference primarily attributable to timing differences in business development expenses, including nonprofit event sponsorships and charitable donations, which totaled $22 thousand in second quarter, down from $57 thousand in the first 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, 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)
 

June 30,

 

March 31,

 

June 30,

2022

 

2022

 

2021

ASSETS
Cash and due from banks

$

11,527

 

$

16,039

 

$

12,658

 

Interest bearing deposits

 

71,429

 

 

98,345

 

 

181,966

 

Securities

 

170,977

 

 

157,922

 

 

65,509

 

Non PPP Loans, net of deferred fees and costs

 

435,478

 

 

407,405

 

 

335,813

 

PPP Loans, net of deferred fees and costs

 

-

 

 

4,783

 

 

54,287

 

Total Loans, net of deferred fees and costs

 

435,478

 

 

412,188

 

 

390,100

 

Allowance for loan losses

 

(6,088

)

 

(5,959

)

 

(6,024

)

Premises and equipment, net

 

9,558

 

 

9,645

 

 

6,507

 

Bank owned life insurance

 

8,509

 

 

8,456

 

 

8,282

 

Deferred tax asset

 

4,118

 

 

2,998

 

 

940

 

Other assets

 

7,024

 

 

6,893

 

 

3,745

 

 
Total assets

$

712,532

 

$

706,527

 

$

663,683

 

 
 
LIABILITIES
Deposits
Demand - non-interest bearing

$

189,112

 

$

178,367

 

$

181,406

 

Demand - interest bearing

 

187,348

 

 

187,276

 

 

188,135

 

Money market

 

163,728

 

 

167,681

 

 

147,506

 

Savings

 

83,517

 

 

83,477

 

 

72,557

 

Certificates of deposit

 

18,948

 

 

19,583

 

 

19,854

 

Total deposits

 

642,653

 

 

636,384

 

 

609,458

 

 
Junior subordinated debenture

 

4,124

 

 

4,124

 

 

4,124

 

Subordinated debenture

 

14,578

 

 

14,553

 

 

-

 

Other liabilities

 

6,153

 

 

5,420

 

 

3,843

 

 
Total liabilities

 

667,508

 

 

660,481

 

 

617,425

 

 
STOCKHOLDERS' EQUITY
Common stock

 

20,977

 

 

20,917

 

 

20,831

 

Retained earnings

 

31,707

 

 

29,762

 

 

24,406

 

Accumulated other comprehensive income, net of tax

 

(7,660

)

 

(4,633

)

 

1,021

 

 
Total stockholders' equity

 

45,024

 

 

46,046

 

 

46,258

 

 
Total liabilities & stockholders' equity

$

712,532

 

$

706,527

 

$

663,683

 

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,

 

 

2022

 

2022

 

2021

 

 

2022

 

2021

INTEREST INCOME
Non-PPP loans

$

4,568

$

4,284

$

3,758

$

8,854

$

7,407

PPP loans

 

145

 

205

 

961

 

349

 

2,421

Securities

 

828

 

556

 

242

 

1,383

 

420

Other interest income

 

147

 

55

 

51

 

202

 

79

Total interest income

 

5,688

 

5,100

 

5,012

 

10,788

 

10,327

 
INTEREST EXPENSE
Deposits

 

108

 

109

 

116

 

217

 

217

Borrowed funds

 

191

 

181

 

31

 

371

 

61

Total interest expense

 

299

 

290

 

147

 

588

 

278

 
NET INTEREST INCOME

 

5,389

 

4,810

 

4,865

 

10,200

 

10,049

Provision for loan losses

 

100

 

50

 

-

 

150

 

-

Net interest income after provision for loan losses

 

5,289

 

4,760

 

4,865

 

10,050

 

10,049

 
NONINTEREST INCOME
Trust fee income

 

804

 

778

 

878

 

1,582

 

1,508

Service charges

 

322

 

298

 

271

 

620

 

519

Mortgage loan sales

 

90

 

123

 

239

 

211

 

387

Investment sales commissions

 

-

 

-

 

33

 

-

 

69

Merchant card services

 

134

 

108

 

114

 

242

 

200

Oregon Pacific Wealth Management income

 

252

 

250

 

199

 

502

 

387

Other income

 

179

 

88

 

78

 

269

 

156

Total noninterest income

 

1,781

 

1,645

 

1,812

 

3,426

 

3,226

 
NONINTEREST EXPENSE
Salaries and employee benefits

 

2,642

 

2,614

 

2,401

 

5,256

 

4,675

Outside services

 

504

 

520

 

436

 

1,023

 

872

Occupancy & equipment

 

412

 

401

 

348

 

813

 

694

Trust expense

 

402

 

392

 

348

 

794

 

702

Loan and collection, OREO expense

 

23

 

27

 

29

 

50

 

64

Advertising

 

94

 

94

 

75

 

188

 

133

Supplies and postage

 

60

 

69

 

61

 

130

 

117

Other operating expenses

 

326

 

389

 

407

 

716

 

817

Total noninterest expense

 

4,463

 

4,506

 

4,105

 

8,970

 

8,074

 
Income before taxes

 

2,607

 

1,899

 

2,572

 

4,506

 

5,201

Provision for income taxes

 

663

 

455

 

650

 

1,118

 

1,312

 
NET INCOME

$

1,944

$

1,444

$

1,922

$

3,388

$

3,889

Quarterly Highlights

 

2nd Quarter

 

1st Quarter

 

4th Quarter

 

3rd Quarter

 

2nd Quarter

 

2022

 

2022

 

2021

 

2021

 

2021

 
Earnings
Net interest income

$

5,389

 

$

4,810

 

$

5,018

 

$

5,251

 

$

4,865

 

Provision for loan loss

 

100

 

 

50

 

 

-

 

 

-

 

 

-

 

Noninterest income

 

1,781

 

 

1,645

 

 

1,762

 

 

1,629

 

 

1,812

 

Noninterest expense

 

4,463

 

 

4,506

 

 

4,298

 

 

4,152

 

 

4,105

 

Provision for income taxes

 

663

 

 

455

 

 

612

 

 

686

 

 

650

 

Net income

$

1,944

 

$

1,444

 

$

1,870

 

$

2,042

 

$

1,922

 

 
Average shares outstanding

 

7,070,686

 

 

7,057,361

 

 

7,042,478

 

 

7,042,478

 

 

7,041,041

 

Earnings per share

$

0.27

 

$

0.20

 

$

0.27

 

$

0.29

 

$

0.27

 

 
Performance Ratios
Return on average assets

 

1.12

%

 

0.84

%

 

1.09

%

 

1.22

%

 

1.17

%

Return on average equity

 

17.34

%

 

12.02

%

 

15.44

%

 

17.24

%

 

17.24

%

Net interest margin - tax equivalent

 

3.27

%

 

2.93

%

 

3.04

%

 

3.25

%

 

3.09

%

Yield on loans

 

4.45

%

 

4.50

%

 

4.99

%

 

5.11

%

 

4.78

%

Yield on loans - excluding PPP loans

 

4.33

%

 

4.37

%

 

4.47

%

 

4.49

%

 

4.63

%

Yield on securities

 

1.91

%

 

1.49

%

 

1.39

%

 

1.39

%

 

1.53

%

Cost of deposits

 

0.07

%

 

0.07

%

 

0.07

%

 

0.08

%

 

0.08

%

Efficiency ratio

 

62.21

%

 

69.81

%

 

63.39

%

 

60.35

%

 

61.48

%

Full-time equivalent employees

 

122

 

 

122

 

 

118

 

 

116

 

 

114

 

 
Capital
Tier 1 capital

$

70,041

 

$

68,040

 

$

66,593

 

$

64,685

 

$

49,097

 

Leverage ratio

 

9.96

%

 

9.72

%

 

9.73

%

 

9.70

%

 

7.45

%

Common equity tier 1 ratio

 

14.79

%

 

16.42

%

 

17.12

%

 

18.50

%

 

15.25

%

Tier 1 risk based ratio

 

14.79

%

 

16.42

%

 

17.12

%

 

18.50

%

 

15.25

%

Total risk based ratio

 

16.04

%

 

17.68

%

 

18.38

%

 

19.75

%

 

16.51

%

Book value per share

$

6.37

 

$

6.52

 

$

6.99

 

$

6.80

 

$

6.57

 

 
Asset quality
Allowance for loan losses (ALLL)

$

6,088

 

$

5,959

 

$

5,905

 

$

6,026

 

$

6,024

 

Nonperforming loans (NPLs)

$

960

 

$

593

 

$

928

 

$

1,388

 

$

1,517

 

Nonperforming assets (NPAs)

$

960

 

$

593

 

$

928

 

$

1,388

 

$

1,517

 

Classified Assets (1)

$

5,089

 

$

6,349

 

$

8,756

 

$

8,156

 

$

12,627

 

Net loan charge offs (recoveries)

$

(29

)

$

(4

)

$

122

 

$

(2

)

$

(3

)

ALLL as a percentage of net loans

 

1.40

%

 

1.45

%

 

1.48

%

 

1.54

%

 

1.54

%

ALLL as a percentage of net loans (excluding PPP)

 

1.40

%

 

1.46

%

 

1.52

%

 

1.67

%

 

1.79

%

ALLL as a percentage of NPLs

 

634.17

%

 

1004.89

%

 

636.31

%

 

434.15

%

 

397.10

%

Net charge offs (recoveries) to average loans

 

-0.01

%

 

0.00

%

 

0.03

%

 

0.00

%

 

0.00

%

Net NPLs as a percentage of total loans

 

0.22

%

 

0.15

%

 

0.24

%

 

0.35

%

 

0.39

%

Nonperforming assets as a percentage of total assets

 

0.13

%

 

0.08

%

 

0.13

%

 

0.20

%

 

0.23

%

Classified Asset Ratio (2)

 

6.68

%

 

8.58

%

 

12.08

%

 

11.53

%

 

22.91

%

Past due as a percentage of total loans

 

0.12

%

 

0.21

%

 

0.21

%

 

0.03

%

 

0.36

%

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

$

121,645

 

$

78,674

 

$

55,477

 

$

57,105

 

$

54,299

 

Off-balance sheet time deposits (4)

$

-

 

$

37,500

 

$

47,500

 

$

49,500

 

$

39,500

 

Unused credit commitments

$

93,411

 

$

95,570

 

$

83,778

 

$

86,816

 

$

83,807

 

Trust assets under management (AUM)

$

195,058

 

$

199,983

 

$

201,264

 

$

188,420

 

$

183,175

 

Oregon Pacific Wealth Management AUM

$

114,973

 

$

127,749

 

$

130,099

 

$

122,274

 

$

103,401

 

 
End of period balances
Total securities

$

170,977

 

$

157,922

 

$

123,076

 

$

82,398

 

$

65,509

 

Total short term deposits

$

71,429

 

$

98,345

 

$

143,192

 

$

186,565

 

$

181,966

 

Total loans net of allowance

$

429,390

 

$

406,229

 

$

392,250

 

$

385,620

 

$

384,076

 

Total earning assets

$

679,835

 

$

670,406

 

$

665,780

 

$

661,966

 

$

638,932

 

Total assets

$

712,532

 

$

706,527

 

$

691,721

 

$

684,314

 

$

663,683

 

Total noninterest bearing deposits

$

189,112

 

$

178,367

 

$

171,380

 

$

180,991

 

$

181,406

 

Total deposits

$

642,653

 

$

636,384

 

$

618,679

 

$

612,950

 

$

609,458

 

 
Average balances
Total securities

$

165,729

 

$

143,830

 

$

102,431

 

$

73,271

 

$

56,913

 

Total short term deposits

$

73,515

 

$

120,674

 

$

165,901

 

$

176,914

 

$

183,008

 

Total loans net of allowance

$

418,445

 

$

398,423

 

$

383,161

 

$

388,212

 

$

389,766

 

Total earning assets

$

665,637

 

$

670,330

 

$

658,872

 

$

645,779

 

$

637,066

 

Total assets

$

697,913

 

$

699,808

 

$

682,779

 

$

666,455

 

$

659,644

 

Total noninterest bearing deposits

$

178,626

 

$

171,184

 

$

170,600

 

$

183,950

 

$

178,155

 

Total deposits

$

627,700

 

$

626,023

 

$

610,981

 

$

610,247

 

$

606,476

 

(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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