Oregon Pacific Bank Announces Fourth Quarter and Full Year Earnings Results

Oregon Pacific Bancorp (ORPB) today reported financial results for the fourth quarter and year ended December 31, 2019.

Highlights

• Fourth quarter net income of $1.05 million - $0.15 per diluted share
• Quarterly loan growth of $17.4 million
• Tax equivalent net interest margin of 4.35%
• Annual loan growth of $46.8 million or 18.56%
• Annual deposit growth of $48.3 million or 17.91%
• Annual net income of $3.5 million, represents growth of 35% over 2018

Oregon Pacific Bancorp, and its wholly owned subsidiary Oregon Pacific Bank, reported quarterly net income of $1.05 million, or $0.15 per diluted share and annual net income of $3.5 million, or $0.50 per diluted share. "We are pleased to see our growth continue during the fourth quarter," said Ron Green, President and Chief Executive Officer, "with the strategic investments made before year end, we believe the Bank's growth will continue into 2020."

In November 2019 the Bank hired a small team of bankers for the Bank's Medford loan production office, headed by Tom Skinner and Dawn Hartley, both longtime Medford area bankers. The Bank has also completed the application process to convert the Medford loan production office into a full-service branch, which is currently awaiting regulatory approval anticipated sometime before the end of the first quarter. In addition, the Bank hired a new Chief Administrative Officer, Margaret Tibbets, to strengthen the Bank's operational executive oversight.

In the fourth quarter the Bank continued to experience growth in both loans and deposits. Period end loans, net of deferred loan origination fees, totaled $298.8 million representing growth of $17.4 million during the quarter and growth of $46.8 million from year end. Expansion continued across most loan categories as the Bank continues to see diversified loan production. Period end deposits totaled $318.0 million, representing growth of $1.9 million over the prior quarter end and growth of $48.3 million over the prior year end. Average deposits for the quarter, a metric that removes the daily volatility in balances, totaled $321.7 million. During the quarter the cost of interest-bearing deposits totaled 0.47%, down 0.04% from the third quarter.

"The significant growth in loans and deposits was primarily tied to an expansion in the Eugene market," said John Raleigh, Executive Vice President and Chief Lending Officer. "Since May of 2018 the Eugene market has seen $100 million in loan growth, paired with deposit growth of over $52 million. This success is a testament to the Eugene team and to the Bank as a whole."

For the quarter ended December 31, 2019, the Bank booked net loan loss recoveries of $78 thousand which resulted in a lower provision for loan losses totaling $30 thousand for the quarter. During the fourth quarter the Bank saw a slight increase in nonperforming assets which grew to $1.6 million, up from $1.5 million at the end of the third quarter. The additional loan added to the nonperforming asset totals is covered by an 80% government guarantee.

The fourth quarter 2019 net interest margin of 4.35% represented an increase of sixteen basis points from the 4.19% earned during the third quarter 2019. During the quarter the bank received a prepayment penalty totaling $103 thousand which contributed eleven basis points to the quarterly margin. Excluding the prepayment penalty, the fourth quarter net interest margin would have been 4.24%. Excluding the prepayment penalty, the linked quarter net interest margin increase of five basis points was due to a combination of an increase in the yield on loans, which grew to 5.11%, excluding the prepayment penalty, up from 5.09% in the third quarter 2019. The Bank also saw a decrease in the cost of interest-bearing liabilities which fell to 0.54%, down from 0.60% in the third quarter as the Bank made some targeted reduction in deposit rates.

For the quarter ended December 31, 2019, noninterest income was $1.26 million, up from $1.24 million in the third quarter of 2019. The biggest increase in noninterest income was attributable to the Bank's Trust Department, which saw an increase in extraordinary fee income, which is primarily related to real estate sales. On an annual basis noninterest income was $4.7 million, down from $4.8 million during 2018. Included in 2018 trust fee income was an additional $202 thousand due to a one-time accrual accounting adjustment.

Noninterest expense in the fourth quarter totaled $3.6 million, up $369 thousand from the third quarter of 2019. On a linked quarter basis, the Bank saw increases in salaries and employee benefits expense, primarily tied to the additional Medford staff. The Bank continued to incur loan and collection expense as one of the Bank's problem assets, an agricultural property, is requiring ongoing assistance from a receiver to support maintenance of the property. The Bank is continuing to work through issues associated with the liquidation.

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, strategic focus, capital position, liquidity, credit quality 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.