Oregon Pacific Bank Announces Second Quarter Earnings

Oregon Pacific Bancorp (ORPB) today reported financial results for the second quarter ended June 30, 2019.

Second Quarter 2019 Highlights

• Second quarter net income of $1.02 million - $0.15 per diluted share
• Quarterly deposit growth of $21.9 million
• Quarterly loan growth of $10.7 million
• Tax equivalent net interest margin of 4.30%
• Efficiency ratio of 67.7%

Oregon Pacific Bancorp, and its wholly owned subsidiary Oregon Pacific Bank, reported quarterly net income of $1.02 million, or $0.15 per diluted share. "We are pleased to share the Bank's financial results achieved during the second quarter," said Ron Green, President and Chief Executive Officer. "We have a talented team focused on strategic growth and building future earnings strength and value."

During the second quarter the Bank continued to experience growth in both deposits and loans. Period end deposits totaled $304.4 million representing growth of $21.9 million over the prior quarter end and growth of $34.7 million over the prior year-end. Deposit growth experienced during the first six months of 2019 is reflective of an annualized growth rate of 25.95%. The cost of interest-bearing deposits totaled 0.51% during the second quarter, reflecting a small increase of 0.02%, up from 0.49% in the first quarter. Over the last twelve months the Bank has seen a shift in its core deposit makeup, with growth in commercial and nonprofit deposits. As of June 30, 2018, 43% or $106.1 million of deposits were classified as commercial or nonprofit relationships. As of June 30, 2019, that percentage has grown to 47% or $143.0 million. The growth in commercial core deposits of $36.9 million during the twelve-month period is the primary factor contributing to the marginal change in the Bank's cost of funds, and an overall increase in noninterest-bearing core deposits.

Period end loans, net of deferred loan origination fees, totaled $269.8 million representing growth of $10.7 million during the quarter and growth of $17.8 million from year-end. Loan growth experienced during the first six months of 2019 is reflective of an annualized growth rate of 14.20%. Growth continued across all loan categories as the Bank continues to see diversified loan production.

For the quarter ended June 30, 2019, the Bank booked provision for loan losses totaling $110 thousand. The Bank saw a small increase in nonperforming assets with one relationship migrating to nonaccrual status during the quarter, but an overall decrease in the classified assets ratio compared to March 31, 2019. As of June 30, 2019, the allowance for loan losses as a percentage of outstanding loans was 1.25%.

The second quarter 2019 net interest margin of 4.30%, represented an increase of four basis points from the first quarter 2019 net interest margin of 4.26%. The increase in the linked-quarter net interest margin was primarily due to an increase in the yield on loans, which grew to 5.12% during the second quarter 2019, up from 5.04% in the first quarter 2019. The increase in loan yield was partially offset by a 0.01% increase in the cost of interest-bearing liabilities, which totaled 0.60% during the second quarter 2019, up from 0.59% in the first quarter of 2019.

For the quarter ended June 30, 2019, noninterest income was $1.21 million, up from $1.04 million in the first quarter 2019, as the Bank experienced growth across all noninterest income categories. The biggest increase was attributable to mortgage loan sales and servicing as activity in the Bank's mortgage department was elevated during the second quarter. During the second quarter the Bank generated mortgages sold to third parties totaling $6.6 million, up from $2.3 million of activity during the quarter ended March 31, 2019.

Noninterest expense in the first quarter totaled $3.1 million, down $466 thousand from the first quarter 2019. The Bank saw declines in all noninterest expense categories, apart from the occupancy and equipment category. The quarterly occupancy and equipment expense reflected in the second quarter is more indicative of the future expense as the Bank has continued to make investments in additional technology and infrastructure. The biggest decrease in noninterest expense was attributable to a reduction in loan and collection and OREO expense, as the Bank experienced a loss on sale of OREO during the first quarter totaling $252 thousand.

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.

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