ORPB Oregon Pacific Bancorp (PK)

Oregon Pacific Bancorp (OTCBB: ORPB), a bank holding company for Oregon Pacific Banking Company dba Oregon Pacific Bank (the Bank, together the Company), reports net income of $108,000, or $0.05 per diluted share for the second quarter of 2010 compared to a loss of $432,000, or $0.20 per diluted share for the same period in 2009. For 2010, the Company is reporting a cumulative net income of $211,000, or $0.10 per diluted share year-to-date. This compares to a loss of $425,000, or $0.19 per share for the first six months of 2009.

"The Company continues to rebound from the net operating loss of $1.7 million, or $0.79 per diluted share for the full year of 2009. This loss was primarily due to deterioration in the residential real estate development portfolio of the Bank. As stated in our 2009 annual report, the effects of the recession are evident in all of the communities served by Oregon Pacific Bank and, unfortunately, has also touched the lives of many of our clients and friends. The length of the recession overtook the reserves of some of our borrowers causing the Bank to set aside provisions for loan losses not historically seen by the Bank. However, by realizing the problems in the portfolio early and aggressively acknowledging the loss in potential collection from the sale of collateral, we believe we have isolated the majority of the losses in the 2009. Real estate values appear to be stabilizing but until home buyers return to the market we can not be certain that additional reductions in collateral value may need to be taken to reduce the non-performing assets of the Bank. The Bank continues to maintain an adequate loan loss reserve of $3.33 million, or 2.7% of total loans outstanding at quarter end. Additionally, the Bank has excess reserves in the form of capital to absorb other unforeseen problems in the portfolio. It is important to note that Oregon Pacific Bank and Oregon Pacific Bancorp continue to be classified as 'well-capitalized' by banking regulations. Total risk-based capital has improved from 12.2% to 12.9% at December 31, 2009 and June 30, 2010, respectively. This is well in excess of the 10% limit established by the regulators. We are rebuilding from an extraordinary year and look forward continuing to serve our communities into the future," stated the Bank's President and Chief Executive Officer, Jim Clark.

Assets:

Total assets of $167.6 million at June 30, 2010 are up $3.0 million, or 1.8% from the beginning of the year. Cash and investments held at fair value by the Bank have increased $5.5 million, or 20.4% in the first half of the year, while loans have decreased a nominal $995,000, or 0.8% for the same period. Loan balances will continue to be reduced from normal loan payments or loans may move to non-performing as borrowers fail to perform. Past due loans that are still performing have decreased from $3.1 million (2.4% of total loans) to $1.4 million (1.1% of total loans), or a 54.2% reduction from December 31, 2009. The peak in past due loans occurred in July 2009 when $7.9 million (6.3% of the loans) was past due. Non-performing assets, loans no longer qualified as an earning asset for the bank due to past due payments or collateral deficiency, and other real estate owned ("OREO") have increased from $3.7 million (22.9% of risk-based capital) to $6.1 million (35.6% of risk-based capital) in the past six month period. Of this amount, approximately $1.7 million in loans have been restructured and are paying as agreed but cannot be reclassified as an earning asset until at least six months of payments are collected. The bank holds $2.6 million in OREO properties foreclosed upon by the Bank for non-payment of loans. Three properties represent 97.5% of that amount.

Mr. Clark continues by noting, "The economy continues to make investors cautious about purchasing properties which prevents the Bank from reducing their problem assets as fast as desired. Unfortunately, it is the lack of confidence in the economy that has kept businesses and individuals from requesting new loans. Oregon Pacific Bank continues to seek qualified loan opportunities in our communities. If loan demand does not show signs of improving, the Bank will use its excess liquidity to retire brokered deposits and Federal Home Loan Bank advances in the coming 24 months. This may cause a decline in the assets of the Bank but the Bank's net interest margin will improve with an expected improvement in profitability."

Liabilities:

We appreciate that our depositors find Oregon Pacific Bank a safe place to hold their deposits. With the permanent increase in FDIC insurance to $250,000 for a personal or business account and an additional $250,000 for deposits held in an IRA account, investing with your community bank is a safe and prudent idea. Any branch employee would be happy to explain how these benefits apply to your situation.

Our deposits at June 30, 2010 of $135.1 million are up $12.3 million, or 10.0% when compared to $122.8 million one year ago. A portion of the increase is $4.5 million of brokered deposits acquired at favorable rates to replace $4.0 million of maturing borrowings from the Federal Home Loan Bank in March and $1.0 million of maturing brokered deposits in April.

Earnings:

Net income of $211,000 for the first half of 2010 was a tremendous improvement from the $1.30 million loss in the second half of 2009 which was primarily attributable to the reduction of the loan loss provision expense to $661,000 from $2.96 million in the final two quarters of 2009. Non-interest expenses also decreased 4.1% in spite of increased OREO expenses and valuation adjustments related to OREO properties.

Net interest income, the difference between income earned on loans and securities from interest paid on deposits and borrowings, showed a $66,000, or 1.8%, increase for the six months ended June 30, 2010 over the same period ended December 31, 2009. So even though non-accrual loans increased during that period, the Bank was able to lower its cost of funds at a faster pace than the loss in interest, and we anticipate improvement as non-performing assets decline.

On August 2, 2010, the Bank entered into a written agreement with the Federal Reserve Bank of San Francisco and the Oregon Division of Finance and Corporate Securities (together, the "Regulators"), which requires the Company to take certain measures to improve its safety and soundness. Under the written agreement, the Company is required to develop and submit for approval, a plan to maintain sufficient capital, improve earnings and increase asset quality, more specifically improving the quality of the loan portfolio at the Bank. The written agreement is available on the FDIC web site and we encourage any interested investor to review the document. The Company has taken steps towards complying with all of the requirements of the written agreement, the first of which was returning the Bank to profitability which has improved our capital levels. In light of the written agreement, Oregon Pacific Bancorp anticipates raising additional capital through a private placement of stock to include a significant investment by the board and executive officers of the Bank and qualified investors.

"The written agreement is a direct reflection of the $1.7 million net operating loss we suffered in 2009 that has previously been discussed. Our performance in 2010 reflects that we continue to show core operating profits even while we reserve over $100,000 per month to cover declines in collateral values and any problem loans that may arise. The Regulators are behaving cautiously in carefully watching our performance in 2010. The additional capital being raised will act as a further reserve above our already well-capitalized rating. While the economy is stagnant the additional funds will be there in case there is a need to support unforeseen losses; when the economy is moving again the capital can be used to grow our branch network through new locations or acquisition of another bank. We will continue to keep our clients and investors informed on our progress in satisfying the written agreement and our plans for the future. Maintaining the goodwill we enjoy is an important part of our commitment to the communities we serve," stated the Bank's President and Chief Executive Officer, Jim Clark.

This presentation includes a number of forward-looking statements, including management's plans and objectives and about expected changes in our revenues and financial conditions. Forward-looking statements about the financial condition, results of operations, plans and business of Oregon Pacific are subject to various risks and uncertainties that could cause actual results to differ materially from those set forth in this presentation. These include, without limitation, changes in the overall economic condition and interest rate markets that would impact our interest rate margins and our operating expenses; our ability to accurately assess the value of intangible assets and to monitor loan quality and loan loss reserve adequacy; the impact of competition on revenues and margins and our expansion strategy, and management's ability to open and generate growth from new branches and resolve non-performing assets. Other statements include discussions of plans and goals. You should not construe any of these statements as assurances of financial performance or as promises of particular courses of action. Instead, in addition to those factors identified above, we face other risks and uncertainties that may cause us to deviate from our plans or may cause our financial performance to fall short of our expectations. Some of these factors are described from time to time in our public announcements. Some forward-looking statements can be identified by the use of forward-looking terminology, such as "may," "will," "should," "expect," "anticipate," "estimate," "plans," "intends," and words of similar terminology. Forward-looking statements offered in this presentation are accurate only as of today, and we do not intend to update these forward-looking statements to reflect subsequent events or circumstances.

                    OREGON PACIFIC BANCORP & SUBSIDIARY
                        CONSOLIDATED BALANCE SHEETS
                                (Unaudited)



                 JUNE 30,     DECEMBER 31,     JUNE 30,   % Change % Change
                                                             1H10    1H10
                                                              vs.     vs.
ASSETS             2010           2009           2009        2H09    1H09
               -------------  -------------  -------------  ------  ------

Cash and cash
 equivalents   $   2,679,839  $   3,011,135  $   3,216,804   -11.0%   -6.4%
Interest-bear-
 ing deposits
 in banks         15,771,307     13,273,577     10,475,252    18.8%   26.7%
Available-for-
 -sale securi-
 ties, at fair
 value            13,094,789      9,742,903      8,351,929    34.4%   16.7%
Restricted
 equity
 securities        1,023,650      1,023,650      1,023,650     0.0%    0.0%
Loans, net       121,040,326    122,319,922    123,656,512    -1.0%   -1.1%
Premises &
 equipment,
 net               7,091,026      7,232,453      7,453,525    -2.0%   -3.0%
Other real
 estate owned      2,662,130      2,911,281      1,735,285    -8.6%   67.8%
Accrued
 interest and
 other assets      4,266,281      5,129,952      3,543,838   -16.8%   44.8%
               -------------  -------------  -------------  ------  ------

  Total assets $ 167,629,348  $ 164,644,873  $ 159,456,795     1.8%    3.3%
               =============  =============  =============  ======  ======

LIABILITIES
 AND
 STOCKHOLDERS'
 EQUITY

Deposits       $ 135,145,806  $ 129,077,627  $ 122,815,595     4.7%    5.1%
Repurchase
 agreements        3,571,486      2,766,656      2,540,924    29.1%    8.9%
Federal Home
 Loan Bank
 borrowings        9,765,306     13,792,806     13,820,306   -29.2%   -0.2%
Junior
 Subordinated
 Debentures        4,124,000      4,124,000      4,124,000     0.0%    0.0%
Accrued
 interest and
 other
 liabilities       3,210,380      3,377,874      3,347,216    -5.0%    0.9%
               -------------  -------------  -------------  ------  ------

  Total
   liabilities   155,816,978    153,138,963    146,648,041     1.7%    4.4%
               -------------  -------------  -------------  ------  ------

Stockholders'
 equity           11,812,370     11,505,910     12,808,754     2.7%  -10.2%
               -------------  -------------  -------------  ------  ------

  Total
   liabilities
   and stock-
   holders'
   equity      $ 167,629,348  $ 164,644,873  $ 159,456,795     1.8%    3.3%
               =============  =============  =============  ======  ======


Shares
 outstanding
 at
 end-of-period     2,190,974      2,189,973      2,186,652
Book value per
 share         $        5.39  $        5.25  $        5.86
Allowance for
 loan losses
 to total
 loans                  2.67%          2.40%          2.21%
Non-performing
 assets
 (non-accr.
 loans & OREO) $   6,063,234  $   3,690,096  $   5,759,225

Bank Total
 risk-based
 capital ratio         12.87%         12.17%         13.57%
Bank Tier 1
 risk-based
 ratio                 11.60%         10.91%         12.31%
Bank Tier 1
 leverage
 ratio                  9.14%          9.17%         10.48%




                               OREGON PACIFIC BANK & SUBSIDIARY
                              CONSOLIDATED STATEMENTS OF INCOME
                                         (Unaudited)


                           Six Months Ended             % Change  % Change
                                                        1H10 vs.  1H10 vs.
                  30-Jun-10    31-Dec-09    30-Jun-09     2H09      1H09
                 -----------  -----------  -----------  --------  --------

INTEREST INCOME
  Interest and
   fees on
   loans         $ 4,295,714  $ 4,342,490  $ 4,495,874      -1.1%     -4.5%
  Interest on
   investment
   securities:       190,002      181,068      204,570       4.9%     -7.1%
  Interest on
   deposits in
   banks              24,115       28,456       19,518     -15.3%     23.6%
                 -----------  -----------  -----------  --------  --------

    Total
     interest
     income        4,509,831    4,552,014    4,719,962      -0.9%     -4.5%
                 -----------  -----------  -----------  --------  --------

INTEREST EXPENSE
  Interest-bearing
   demand
   deposits           70,980       81,085      122,756     -12.5%    -42.2%
  Savings
   deposits           31,623       32,078       29,294      -1.4%      8.0%
  Time deposits      460,060      518,728      613,553     -11.3%    -25.0%
  Other
   borrowings        302,831      341,799      368,415     -11.4%    -17.8%
                 -----------  -----------  -----------  --------  --------

    Total
     interest
     expense         865,494      973,690    1,134,018     -11.1%    -23.7%
                 -----------  -----------  -----------  --------  --------

    Net
     interest
     income        3,644,337    3,578,324    3,585,944       1.8%      1.6%

PROVISION FOR
 LOAN LOSSES         660,859    2,956,183    1,454,325     -77.6%    -54.6%
                 -----------  -----------  -----------  --------  --------

    Net
     interest
     income
     after
     provision
     for loan
     losses        2,983,478      622,141    2,131,619     379.6%     40.0%

NONINTEREST
 INCOME              963,129      982,027    1,005,228      -1.9%     -4.2%

NONINTEREST
 EXPENSE           3,612,762    3,715,703    3,872,226      -2.8%     -6.7%

OREO VALUATION
 ADJUSTMENTS &
 GAINS/(LOSSES) ON
 SALES - NET         (80,085)    (165,435)     (29,370)    -51.6%    172.7%
                 -----------  -----------  -----------  --------  --------

INCOME BEFORE
 INCOME TAXES        253,760   (2,276,970)    (764,749)   -111.1%   -133.2%

PROVISION FOR
 INCOME TAXES         42,358     (976,714)    (339,294)   -104.3%   -112.5%
                 -----------  -----------  -----------  --------  --------

NET INCOME
 (LOSS)          $   211,402  $(1,300,256) $  (425,455)   -116.3%   -149.7%
                 ===========  ===========  ===========  ========  ========


Earnings (loss)
 per diluted
 share           $      0.10  $     (0.60) $     (0.19)


Return on
 average equity          3.6%       -10.1%        -6.5%
Return of
 average assets          0.3%        -1.1%        -0.5%
Efficiency ratio        80.3%        85.1%        85.0%

Contact: James P Clark President & Chief Executive Officer 541-997-7121 jimc@opbc.com