Oregon Pacific Bancorp (ORPB) today reported financial results for the first quarter ended March 31, 2019.
First Quarter 2019 Highlights
- First quarter net income of $400 thousand – $0.06 per diluted share
- Quarterly loan growth of $7 million.
- Quarterly deposit growth of $12.8 million.
- Sale of the Banks only OREO property
- Tax equivalent net interest margin of 4.26%
Oregon Pacific Bancorp, and its wholly owned subsidiary Oregon Pacific Bank, reported quarterly net income of $400 thousand, or $0.06 per diluted share. Included in the first quarter earnings was a $252 thousand loss on sale of other real estate as the Bank sold its last remaining bank-owned real estate asset. Excluding the impact of the loss on sale of other real estate, the Banks earnings would have been approximately $595 thousand or $0.09 per share. This non-GAAP financial metric is provided to show the impact of this one-time expense.
Non-GAAP income reconciliation:
- GAAP Net Income: $400
- Add: tax effected loss on sale of OREO: $195
- Net income excluding loss on sale of OREO: $595
The Bank took possession of this other real estate property in March of 2015 and was incurring approximately $50 thousand of annual holding costs. The property was aging, vacant and the high price point translated to a potentially lengthy holding period and increased maintenance expenses. After factoring in these considerations, the Bank made the strategic decision to sell the property and incurred a loss on sale. We are very proud to resolve the Banks final pre-recession nonperforming asset, said Ron Green, President and Chief Executive Officer. The sale of this asset sets the Bank on the right path for 2019 and better prepares our balance sheet for any future softening in the economy. Given the high-end nature of the property, it was an asset we did not want to own in the event the real estate market experienced a decline.
During the first quarter the Bank continued to experience growth in both deposits and loans. Period end deposits totaled $282.5 million representing growth of $12.8 million over year end and an annualized growth rate of 19.2%. Period end loans, net of deferred loan origination fees, totaled $259.1 million representing quarterly growth of $7.1 million and an annualized growth rate of 11.4%. Growth continued across all loan categories as the Bank continues to see diversified loan production. Our relationship management staff and administrative support teams continue to deliver a high level of service to our clients, said Green. I am very proud of everyone for the steady growth the bank is experiencing.
As of March 31, 2019, the allowance for loan losses as a percentage of outstanding loans was 1.26%, equal to the 1.26% reported at December 31, 2018. For the period ended March 31, 2019, the Bank booked no provision for loan losses as the Bank recorded a loan loss recovery of $84 thousand during the period. The loan loss recovery was sufficient to fund the provision for the quarterly loan growth. Following the sale of the Banks only other real estate property, nonperforming assets as a percentage of total assets lowered to 0.41%, down from 0.82% as of December 31, 2018.
The first quarter 2019 net interest margin averaged 4.26%, representing a decrease of 5 basis points from the fourth quarter 2018 net interest margin. The decrease in the linked-quarter net interest margin was primarily due to an increase in the cost of interest-bearing liabilities which grew from 0.51% in fourth quarter to 0.59% in first quarter 2019. The Bank may continue to see pressure on the cost of interest-bearing liabilities as market competition for deposits grows.
First quarter noninterest income was $1.0 million, down from $1.4 million in fourth quarter. Included in fourth quarter noninterest income was an adjustment of $202 thousand attributable to refining the Banks accrual accounting adjustments. The Bank also saw a decline in trust revenue as the Bank experienced a swing due to the seasonality of extraordinary fees associated with real estate sales and other terminating trusts.
Noninterest expense in the first quarter totaled $3.6 million, which was equal to the fourth quarter 2018 noninterest expense. The loss on sale of other real estate totaling $252 thousand and outside services costs associated with the annual financial statement audit offset a reduction in salaries and benefits, occupancy and other operating expenses.
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 Pacifics 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 Pacifics 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 PSLRAs safe harbor provisions.
Ellen Huntingdon, 541-902-1509