PACIFIC FINANCIAL CORPORATION ABERDEEN, Wash., Jan. 28, 2020 (GLOBE NEWSWIRE) -- Pacific Financial Corporation (OTCQX: PFLC), the holding company (the “Company”) for Bank of the Pacific (the “Bank”), today reported fourth quarter net income increased 6% to $3.4 million, or $0.32 per diluted share, compared to $3.2 million, or $0.30 per diluted share, for the fourth quarter of 2018. Net income for the third quarter of 2019 was $3.8 million, or $0.35 per diluted share. For the year ended December 31, 2019, net income was $13.8 million, or $1.29 per diluted share, an increase of 21% from $11.3 million, or $1.06 per diluted share, for 2018.
The Board of Directors of Pacific Financial declared a quarterly cash dividend of $0.11 per share on January 22, 2020. The dividend will be payable on February 26, 2020, to shareholders of record at close of business day on February 12, 2020.
“We generated record profits for the year ended December 31, 2019, highlighted by a strong net interest margin of 4.58%, and a 39% increase in noninterest income from 2018, which was primarily driven by an increase in mortgage lending activity,” said Denise Portmann, President and Chief Executive Officer. “Credit quality remains solid, with nonperforming loans to total loans at 0.15%, and adversely classified loans remaining at relatively low levels. Our risk management protocols guide the growth of our loan portfolio as we carefully monitor loan concentrations to stay within regulatory guidelines, particularly in commercial real estate.” Fourth quarter 2019 performance metrics remained above average with an annualized return on average assets (“ROAA”) at 1.45% and an annualized return on average equity (“ROAE”) of 13.01%.
“Our recent expansion along the I-5 corridor in the growing area of Eugene was a logical progressive step for us,” said Portmann. “With our team of highly experienced lenders, we look forward to developing a solid customer base initially focusing on commercial lending. Operating expenses incurred during the year reflect the investments associated with the expansion of our franchise operations into Eugene and the hiring of key talent. We will continue to invest in our future and look forward to continuing to deliver value to each of our customers and shareholders.”
Fourth Quarter 2019 Financial Highlights (as of, or for the period ended December 31, 2019, except as noted):
- Diluted earnings per share were $0.32, compared to $0.30 for the fourth quarter of 2018, and $0.35 for the third quarter of 2019.
- ROAA was 1.45%, compared to 1.39% for the fourth quarter a year ago. Industry peer ROAA was 1.02%. ROAE was 13.01%, compared to 13.76% for the fourth quarter of 2018. Industry peer ROAE was 9.66%. [Industry peers are the 418 banks that make up the SNL Microcap U.S. Bank Index, at September 30, 2019.]
- Net interest margin was 4.31% for the fourth quarter, compared to 4.58% for the fourth quarter 2018, and 4.57% for the third quarter of 2019. Industry peer NIM was 3.67%. [Industry peers are the 418 banks that comprised the SNL Microcap U.S. Bank Index, at September 30, 2019.] Net interest margin for the full year was 4.58% compared to 4.52% for 2018.
- Noninterest income increased 61%, or $1.5 million, to $3.9 million in the fourth quarter, compared to $2.4 million in the fourth quarter a year ago, and declined 7% from $4.2 million on a linked quarter basis. For the full year, noninterest income increased 39% to $13.9 million from $10.0 million for 2018.
- Total assets increased $21.5 million to $929.4 million from $907.9 million a year earlier.
- Total deposits were $798.6 million, compared to $783.5 million at December 31, 2018 and $816.1 million at September 30, 2019. The decline in deposits on a linked quarter basis was due to seasonal deposit outflow and an intentional roll-off of $4.8 million of brokered deposits. Noninterest-bearing demand deposits represented 31% of total deposits, at December 31, 2019.
- Gross loans were $685.3 million at December 31, 2019, compared to $704.1 million a year ago, and $683.8 million at September 30, 2019. This includes a strategic reduction of $12.1 million in indirect consumer loans to finance luxury and classic cars year-over-year.
- Asset quality remains solid with nonperforming assets to total assets at 0.11% at December 31, 2019.
- The allowance for loan losses was 1.31% of gross loans outstanding at December 31, 2019.
Results of Operations
Net interest income was $9.5 million for the fourth quarter of 2019, compared to $9.8 million for the fourth quarter a year ago, and $9.8 million for third quarter of 2019. The decline in net interest income from a year ago, and from the preceding quarter, was largely due to a decrease in earning asset yields, as interest rates on adjustable rate loans and investments decreased following decreases in short term rates of 50 basis points and 25 points during the quarters ending September 30, 2019 and December 31, 2019, respectively. The yield on interest earning assets was 4.64% for the fourth quarter of 2019, compared to 4.90% for the fourth quarter a year ago and 4.91% on a linked quarter basis. The cost of funds remained relatively steady at 0.35% for the fourth quarter of 2019, compared to 0.34% for the fourth quarter a year ago, and 0.35% for the third quarter of 2019.
For the full year 2019, net interest income grew 3%, to $38.6 million compared to $37.5 million for 2018. This increase was largely due to year-over-year increases in yields on loans and other interest earning assets, which were partially offset by a four basis points increase in cost of funds to 0.36% for 2019, from 0.32% for 2018.
The net interest margin was 4.31% for the fourth quarter of 2019, compared to 4.58% for the fourth quarter of 2018, and 4.57% for the third quarter of 2019. The compression in the net interest margin from the preceding quarter and year-over-year, was primarily due to the impact of decreasing market interest rates, including fed funds and prime interest rates. For the full year 2019, the net interest margin expanded six basis points to 4.58% from 4.52% for 2018.
Noninterest income increased 61%, or $1.5 million, to $3.9 million for the fourth quarter of 2019, compared to $2.4 million for the fourth quarter of 2018, and declined from $4.2 million for the third quarter of 2019. The decline in noninterest income from the preceding quarter, was primarily due to the decrease in the gain on sale of loans during the fourth quarter, and from recognition of income from an unexpected bank-owned life insurance event in the third quarter. The increase in noninterest income year-over-year was primarily due to increases in gains on sale of loans and higher fee income. For the full year, noninterest income increased 39% to $13.9 million, compared to $10.0 million for 2018.
“Mortgage banking production remained robust in this continued low rate environment. This loan activity has increased contributions to noninterest income throughout the year,” added Portmann. “In addition, we continue to benefit from initiatives which have improved workflow efficiencies, revenue and cost management.”
Noninterest expense increased 10% to $9.1 million, compared to $8.3 million in the fourth quarter of 2018, and declined 3% from $9.4 million on a linked quarter basis. The increase in operating expenses year-over-year, was primarily due to higher compensation and commissions associated with the growth in residential mortgage production, the investment made in expanding operations down the I-5 corridor into the Eugene market, professional fees and state and local taxes. These costs were partially offset by a decline in occupancy expenses as well as credits from the FDIC insurance assessment. For the full year 2019, noninterest expense grew 5% to $35.6 million compared to $33.8 million for 2018.
The efficiency ratio was 67.91% for the fourth quarter of 2019, compared to 67.58% for the fourth quarter of 2018, and 67.03% for the third quarter of 2019. The efficiency ratio improved to 67.68% for the year ended December 31, 2019, compared to 71.14% for the year ended December 31, 2018.
Balance Sheet Review
Total assets increased $21.5 million to $929.4 million at December 31, 2019, compared to $907.9 million at December 31, 2018, and decreased $15.8 million from $945.2 million at September 30, 2019.
Investment securities declined 16% to $103.2 million, at December 31, 2019, compared to $122.6 million at December 31, 2018, primarily as a result of maturities, payments and sales within the portfolio. During the fourth quarter, the Bank re-invested a portion of its federal funds sold balances into higher yielding investments; as a result, the portfolio grew 4% compared to the preceding quarter. The portfolio is comprised primarily of amortizing U.S. agency collateralized mortgage, mortgage-backed securities and municipal securities.
“Liquidity within the company remains strong as a result of existing levels of combined cash equivalents, investment securities, unused borrowing capacity and strong deposit growth,” said Carla Tucker, EVP and Chief Financial Officer. In addition to cash equivalent assets of $81.2 million, the Bank had established borrowing lines with the Federal Home Loan Bank of Des Moines of $181.0 million, with $3.2 million outstanding, at December 31, 2019. The Bank’s borrowing facility with the FHLB is subject to collateral and stock ownership requirements. The Bank also has available a discount window primary credit line with the Federal Reserve Bank of San Francisco of approximately $53.0 million, subject to collateral requirements, and $16.0 million from correspondent banks, with no balance outstanding on any of these facilities.
The loan portfolio continues to remain well-diversified with loans originating predominately within the Western Washington and Oregon markets. Gross loan balances were $685.3 million at December 31, 2019, compared to $704.1 million at December 31, 2018. Decreases during the year occurred in consumer loans, and commercial and agricultural loans and commercial real estate loans. To manage risk, the Company oversees new loan origination volume and current loan balance using concentration limits that establish maximum exposure levels by designated industry segment, real estate product types, geography and single borrower limits. As of December 31, 2019, the consumer loan portfolio included $48.2 million in indirect consumer loans to finance luxury and classic cars, a decline of $12.1 million from $60.3 million a year earlier, and down $3.2 million compared to $51.4 million at September 30, 2019. “As part of our strategic plan, we have been limiting our concentrations in indirect consumer loans to finance luxury and classic cars,” said Portmann.
Deposit growth continues to be strong. Excluding brokered deposits, total deposits increased by $36.3 million or 4.8%. Including brokered deposits, total deposits increased $15.1 million, or 2%, to $798.6 million at December 31, 2019, compared to $783.5 million at December 31, 2018. This increase included a planned roll-off of $21.2 million in brokered CDs that were acquired during the latter part of 2015 and 2016. Interest-bearing demand deposits grew by $37.0 million, or 19%, year-over-year. Noninterest-bearing deposits accounted for 31% of total deposits, at December 31, 2019.
Capital ratios of Pacific Financial Corporation, and its subsidiary Bank of the Pacific, continue to exceed the regulatory requirements for the well-capitalized thresholds. At December 31, 2019, Pacific Financial Corporation’s leverage ratio was 11.17% and the total risk-based capital ratio was 14.72%. The total risk-based capital ratios of the Company include $13.4 million of junior subordinated debentures, all of which qualified as Tier 1 capital under guidance issued by the Federal Reserve. As provided in the Dodd-Frank Act, the Company expects to continue to rely on these junior subordinated debentures as part of its regulatory capital.
Asset Quality
Asset quality remained solid with nonperforming assets to total assets at 0.11%, at December 31, 2019, and at September 30, 2019, compared to 0.12% at December 31, 2018. Net charge offs remained at low levels and were $24,000 for the fourth quarter and $56,000 for the full year of 2019. Adversely classified loans to total gross loans increased to 1.71% at the end of the current quarter, compared to 1.10% a year earlier, and 1.17% on a linked quarter basis. This increase was primarily related to the adverse classification of five relationships totaling $4.1 million. Two relationships were related to the dairy industry which has struggled in recent years with historically low milk prices while the other three relationships suffered from financial setbacks unique to their own business rather than as a result the broader economic environment.
The allowance for loan losses to gross loans stood at 1.31%, at December 31, 2019, compared to 1.29% a year ago, and 1.32% at September 30, 2019. No provision for loan losses was incurred in the current quarter, linked quarter or the like quarter a year ago. The overall risk profile of the loan portfolio continues to be conservative, demonstrating the solid credit risk management framework in place.
Income Tax Provision
Income tax provision was $836,000 for the fourth quarter of 2019, compared to $719,000 for the fourth quarter of 2018, and $859,000 for the third quarter of 2019. The effective tax rate for the fourth quarter of 2019 was 19.5%, compared to 18.1% for the fourth quarter of 2018, and 18.6% for the third quarter of 2019. Income tax expense for the full year of 2019 was $3.2 million, compared to $2.4 million for 2018. The effective tax rates were 19.0%, and 17.3% for the years ending December 31, 2019 and December 31, 2018, respectively. A planned reduction in nontaxable municipal securities during 2019, a decrease in tax credit for stock awards and an increase in Oregon tax expenses contributed to the increase in the effective tax rate. The remaining tax provision increase can be attributed to growth in pre-tax income. In addition to federal corporate income tax, Pacific Financial also pays Oregon corporate income tax and Washington Business and Occupation tax on revenues.
| Balance Sheet Overview | ||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||
| Dec 31, 2019 | Sept 30, 2019 | $ Change | % Change | Dec 31, 2018 | $ Change | % Change | ||||||||||||||||
| Assets: | (Dollars in thousands, except per share data) | |||||||||||||||||||||
| Cash on hand and in banks | $ | 36,723 | $ | 48,910 | $ | (12,187 | ) | -25 | % | $ | 22,188 | $ | 14,535 | 66 | % | |||||||
| Interest bearing deposits | 3,250 | 3,250 | - | 0 | % | 3,250 | - | 0 | % | |||||||||||||
| Federal funds sold | 41,210 | 36,876 | 4,334 | 12 | % | - | 41,210 | 100 | % | |||||||||||||
| Investment securities | 103,216 | 99,222 | 3,994 | 4 | % | 122,610 | (19,394 | ) | -16 | % | ||||||||||||
| Loans held-for-sale | 10,108 | 23,542 | (13,434 | ) | -57 | % | 6,204 | 3,904 | 63 | % | ||||||||||||
| Loans, net of deferred fees | 684,438 | 682,832 | 1,606 | 0 | % | 703,103 | (18,665 | ) | -3 | % | ||||||||||||
| Allowance for loan losses | (8,993 | ) | (9,017 | ) | 24 | 0 | % | (9,049 | ) | 56 | -1 | % | ||||||||||
| Net loans | 675,445 | 673,815 | 1,630 | 0 | % | 694,054 | (18,609 | ) | -3 | % | ||||||||||||
| Federal Home Loan Bank and Pacific Coast | ||||||||||||||||||||||
| Bankers' Bank stock, at cost | 2,217 | 2,218 | (1 | ) | 0 | % | 2,407 | (190 | ) | -8 | % | |||||||||||
| Other assets | 57,246 | 57,372 | (126 | ) | 0 | % | 57,216 | 30 | 0 | % | ||||||||||||
| Total assets | $ | 929,415 | $ | 945,205 | $ | (15,790 | ) | -2 | % | $ | 907,929 | $ | 21,486 | 2 | % | |||||||
| Liabilities and Shareholders' Equity: | ||||||||||||||||||||||
| Total deposits | $ | 798,638 | $ | 816,090 | $ | (17,452 | ) | -2 | % | $ | 783,549 | $ | 15,089 | 2 | % | |||||||
| Borrowings | 16,606 | 16,644 | (38 | ) | 0 | % | 21,756 | (5,150 | ) | -24 | % | |||||||||||
| Accrued interest payable and other liabilities | 8,878 | 9,000 | (122 | ) | -1 | % | 10,141 | (1,263 | ) | -12 | % | |||||||||||
| Shareholders' equity | 105,293 | 103,471 | 1,822 | 2 | % | 92,483 | 12,810 | 14 | % | |||||||||||||
| Total liabilities and shareholders' equity | $ | 929,415 | $ | 945,205 | $ | (15,790 | ) | -2 | % | $ | 907,929 | $ | 21,486 | 2 | % | |||||||
| Common Stock Shares Outstanding | 10,632,058 | 10,608,558 | 23,500 | 0 | % | 10,568,720 | 63,338 | 1 | % | |||||||||||||
| Book value per common share (1) | $ | 9.90 | $ | 9.75 | $ | 0.15 | 2 | % | $ | 8.75 | $ | 1.15 | 13 | % | ||||||||
| Tangible book value per common share (2) | $ | 8.64 | $ | 8.48 | $ | 0.16 | 2 | % | $ | 7.47 | $ | 1.17 | 16 | % | ||||||||
| Gross loans to deposits ratio | 85.7 | % | 83.7 | % | 2.0 | % | 89.7 | % | -4.0 | % | ||||||||||||
| (1) Book value per common share is calculated as the total common shareholders' equity divided by the period ending number of common stock shares outstanding. | ||||||||||||||||||||||
| (2) Tangible book value per common share is calculated as the total common shareholders' equity less total intangible assets and liabilities, divided by the period ending number of common stock shares outstanding. | ||||||||||||||||||||||
| Income Statement Overview | ||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||
| For the Three Months Ended, | ||||||||||||||||||||||
| Dec 31, 2019 | Sept 30, 2019 | $ Change | % Change | Dec 31, 2018 | $ Change | % Change | ||||||||||||||||
| (Dollars in thousands, except per share data) | ||||||||||||||||||||||
| Interest and dividend income | $ | 10,187 | $ | 10,563 | $ | (376 | ) | -4 | % | $ | 10,519 | $ | (332 | ) | -3 | % | ||||||
| Interest expense | 730 | 721 | 9 | 1 | % | 700 | 30 | 4 | % | |||||||||||||
| Net interest income | 9,457 | 9,842 | (385 | ) | -4 | % | 9,819 | (362 | ) | -4 | % | |||||||||||
| Loan loss provision | - | - | - | 0 | % | - | - | 0 | % | |||||||||||||
| Noninterest income | 3,887 | 4,167 | (280 | ) | -7 | % | 2,409 | 1,478 | 61 | % | ||||||||||||
| Noninterest expense | 9,062 | 9,390 | (328 | ) | -3 | % | 8,264 | 798 | 10 | % | ||||||||||||
| Income before income taxes | 4,282 | 4,619 | (337 | ) | -7 | % | 3,964 | 318 | 8 | % | ||||||||||||
| Income tax expense | 836 | 859 | (23 | ) | -3 | % | 719 | 117 | 16 | % | ||||||||||||
| Net Income | $ | 3,446 | $ | 3,760 | $ | (314 | ) | -8 | % | $ | 3,245 | $ | 201 | 6 | % | |||||||
| Average common shares outstanding - basic | 10,626,443 | 10,595,992 | 30,451 | 0 | % | 10,565,595 | 60,848 | 1 | % | |||||||||||||
| Average common shares outstanding - diluted | 10,664,213 | 10,669,761 | (5,548 | ) | 0 | % | 10,673,908 | (9,695 | ) | 0 | % | |||||||||||
| Income per common share | ||||||||||||||||||||||
| Basic | $ | 0.32 | $ | 0.35 | $ | (0.03 | ) | -9 | % | $ | 0.31 | $ | 0.01 | 3 | % | |||||||
| Diluted | $ | 0.32 | $ | 0.35 | $ | (0.03 | ) | -9 | % | $ | 0.30 | $ | 0.02 | 7 | % | |||||||
| Effective tax rate | 19.5 | % | 18.6 | % | 0.9 | % | 18.1 | % | 1.4 | % | ||||||||||||
| For the Year Ended, | ||||||||||||||||||||||
| Dec 31, 2019 | Dec 31, 2018 | $ Change | % Change | |||||||||||||||||||
| (Dollars in thousands, except per share data) | ||||||||||||||||||||||
| Interest and dividend income | $ | 41,570 | $ | 40,060 | $ | 1,510 | 4 | % | ||||||||||||||
| Interest expense | 2,928 | 2,590 | 338 | 13 | % | |||||||||||||||||
| Net interest income | 38,642 | 37,470 | 1,172 | 3 | % | |||||||||||||||||
| Loan loss provision | - | - | - | 0 | % | |||||||||||||||||
| Noninterest income | 13,895 | 10,031 | 3,864 | 39 | % | |||||||||||||||||
| Noninterest expense | 35,556 | 33,793 | 1,763 | 5 | % | |||||||||||||||||
| Income before income taxes | 16,981 | 13,708 | 3,273 | 24 | % | |||||||||||||||||
| Income tax expense | 3,223 | 2,378 | 845 | 36 | % | |||||||||||||||||
| Net Income | $ | 13,758 | $ | 11,330 | $ | 2,428 | 21 | % | ||||||||||||||
| Average common shares outstanding - basic | 10,596,776 | 10,551,174 | 45,602 | 0 | % | |||||||||||||||||
| Average common shares outstanding - diluted | 10,652,126 | 10,673,393 | (21,267 | ) | 0 | % | ||||||||||||||||
| Income per common share | ||||||||||||||||||||||
| Basic | $ | 1.30 | $ | 1.07 | $ | 0.23 | 21 | % | ||||||||||||||
| Diluted | $ | 1.29 | $ | 1.06 | $ | 0.23 | 22 | % | ||||||||||||||
| Effective tax rate | 19.0 | % | 17.3 | % | 1.7 | % | ||||||||||||||||
| Noninterest Income | |||||||||||||||||||
| (Unaudited) | |||||||||||||||||||
| For the Three Months Ended, | |||||||||||||||||||
| Dec 31, 2019 | Sept 30, 2019 | $ Change | % Change | Dec 31, 2018 | $ Change | % Change | |||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| Service charges on deposits | $ | 527 | $ | 493 | $ | 34 | 7 | % | $ | 507 | $ | 20 | 4 | % | |||||
| Gain on sale of loans, net | 2,212 | 2,353 | (141 | ) | -6 | % | 941 | 1,271 | 135 | % | |||||||||
| Gain on sale of securities available for sale, net | - | - | - | 0 | % | - | - | 0 | % | ||||||||||
| Earnings on bank owned life insurance | 119 | 333 | (214 | ) | -64 | % | 111 | 8 | 7 | % | |||||||||
| Other noninterest income | |||||||||||||||||||
| Fee income | 992 | 936 | 56 | 6 | % | 811 | 181 | 22 | % | ||||||||||
| Other | 37 | 52 | (15 | ) | -29 | % | 39 | (2 | ) | -5 | % | ||||||||
| Total noninterest income | $ | 3,887 | $ | 4,167 | $ | (280 | ) | -7 | % | $ | 2,409 | $ | 1,478 | 61 | % | ||||
| For the Year Ended, | |||||||||||||||||||
| Dec 31, 2019 | Dec 31, 2018 | $ Change | % Change | ||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| Service charges on deposits | $ | 2,055 | $ | 2,034 | $ | 21 | 1 | % | |||||||||||
| Gain on sale of loans, net | 7,204 | 4,103 | 3,101 | 76 | % | ||||||||||||||
| Gain on sale of securities available for sale, net | 102 | - | 102 | 100 | % | ||||||||||||||
| Earnings on bank owned life insurance | 667 | 432 | 235 | 54 | % | ||||||||||||||
| Other noninterest income | |||||||||||||||||||
| Fee income | 3,641 | 3,331 | 310 | 9 | % | ||||||||||||||
| Other | 226 | 131 | 95 | 73 | % | ||||||||||||||
| Total noninterest income | $ | 13,895 | $ | 10,031 | $ | 3,864 | 39 | % | |||||||||||
| Noninterest Expense | ||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||
| For the Three Months Ended, | ||||||||||||||||||||
| Dec 31, 2019 | Sept 30, 2019 | $ Change | % Change | Dec 31, 2018 | $ Change | % Change | ||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Salaries and employee benefits | $ | 5,726 | $ | 6,058 | $ | (332 | ) | -5 | % | $ | 5,186 | $ | 540 | 10 | % | |||||
| Occupancy | 529 | 584 | (55 | ) | -9 | % | 606 | (77 | ) | -13 | % | |||||||||
| Equipment | 275 | 251 | 24 | 10 | % | 246 | 29 | 12 | % | |||||||||||
| Data processing | 781 | 737 | 44 | 6 | % | 740 | 41 | 6 | % | |||||||||||
| Professional services | 389 | 376 | 13 | 3 | % | 193 | 196 | 102 | % | |||||||||||
| State and local taxes | 158 | 136 | 22 | 16 | % | (15 | ) | 173 | -1153 | % | ||||||||||
| FDIC and State assessments | 8 | 50 | (42 | ) | -84 | % | 73 | (65 | ) | -89 | % | |||||||||
| Other noninterest expense: | ||||||||||||||||||||
| Director fees | 75 | 67 | 8 | 12 | % | 67 | 8 | 12 | % | |||||||||||
| Communication | 76 | 74 | 2 | 3 | % | 74 | 2 | 3 | % | |||||||||||
| Advertising | 78 | 70 | 8 | 11 | % | 95 | (17 | ) | -18 | % | ||||||||||
| Professional liability insurance | 54 | 54 | - | 0 | % | 51 | 3 | 6 | % | |||||||||||
| Amortization | 108 | 114 | (6 | ) | -5 | % | 88 | 20 | 23 | % | ||||||||||
| Other | 805 | 819 | (14 | ) | -2 | % | 860 | (55 | ) | -6 | % | |||||||||
| Total noninterest expense | $ | 9,062 | $ | 9,390 | $ | (328 | ) | -3 | % | $ | 8,264 | $ | 798 | 10 | % | |||||
| For the Year Ended, | ||||||||||||||||||||
| Dec 31, 2019 | Dec 31, 2018 | $ Change | % Change | |||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||
| Salaries and employee benefits | $ | 22,691 | $ | 21,265 | $ | 1,426 | 7 | % | ||||||||||||
| Occupancy | 2,125 | 2,207 | (82 | ) | -4 | % | ||||||||||||||
| Equipment | 1,009 | 1,087 | (78 | ) | -7 | % | ||||||||||||||
| Data processing | 2,912 | 2,862 | 50 | 2 | % | |||||||||||||||
| Professional services | 1,436 | 756 | 680 | 90 | % | |||||||||||||||
| Other real estate owned operating costs | - | 6 | (6 | ) | -100 | % | ||||||||||||||
| State and local taxes | 515 | 360 | 155 | 43 | % | |||||||||||||||
| FDIC and State assessments | 135 | 393 | (258 | ) | -66 | % | ||||||||||||||
| Other noninterest expense: | ||||||||||||||||||||
| Director fees | 274 | 264 | 10 | 4 | % | |||||||||||||||
| Communication | 297 | 303 | (6 | ) | -2 | % | ||||||||||||||
| Advertising | 304 | 341 | (37 | ) | -11 | % | ||||||||||||||
| Professional liability insurance | 207 | 193 | 14 | 7 | % | |||||||||||||||
| Amortization | 414 | 374 | 40 | 11 | % | |||||||||||||||
| Other | 3,237 | 3,382 | (145 | ) | -4 | % | ||||||||||||||
| Total noninterest expense | $ | 35,556 | $ | 33,793 | $ | 1,763 | 5 | % | ||||||||||||
| Financial Performance Overview | |||||||||||||||
| (Unaudited) | |||||||||||||||
| For the Three Months Ended | |||||||||||||||
| Dec 31, 2019 | Sept 30, 2019 | Change | Dec 31, 2018 | Change | |||||||||||
| Performance Ratios | |||||||||||||||
| Return on average assets, annualized | 1.45 | % | 1.61 | % | (0.16 | ) | 1.39 | % | 0.06 | ||||||
| Return on average equity, annualized | 13.01 | % | 14.52 | % | (1.51 | ) | 13.76 | % | (0.75 | ) | |||||
| Efficiency ratio (1) | 67.91 | % | 67.03 | % | 0.88 | 67.58 | % | 0.33 | |||||||
| (1) Non-interest expense divided by net interest income plus noninterest income. | |||||||||||||||
| For the Year Ended, | |||||||||||||||
| Dec 31, 2019 | Dec 31, 2018 | Change | |||||||||||||
| Performance Ratios | |||||||||||||||
| Return on average assets, annualized | 1.50 | % | 1.26 | % | 0.24 | ||||||||||
| Return on average equity, annualized | 13.70 | % | 12.63 | % | 1.07 | ||||||||||
| Efficiency ratio (1) | 67.68 | % | 71.14 | % | (3.46 | ) | |||||||||
| (1) Non-interest expense divided by net interest income plus noninterest income. | |||||||||||||||
LIQUIDITY
| Cash and Cash Equivalents and Investment Securities | |||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||
| Dec 31, 2019 | % of Total | Sept 30, 2019 | % of Total | $ Change | % Change | Dec 31, 2018 | Total | $ Change | % Change | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||
| Cash on hand and in banks | $ | 12,264 | 7 | % | $ | 21,517 | 11 | % | $ | (9,253 | ) | -43 | % | $ | 15,899 | 11 | % | $ | (3,635 | ) | -23 | % | |||||||
| Interest bearing deposits | 24,458 | 13 | % | 27,393 | 15 | % | (2,935 | ) | -11 | % | 6,289 | 4 | % | 18,169 | 289 | % | |||||||||||||
| Other interest earning deposits | 3,250 | 2 | % | 3,250 | 2 | % | - | 0 | % | 3,250 | 2 | % | - | 0 | % | ||||||||||||||
| Federal funds sold | 41,210 | 22 | % | 36,876 | 20 | % | 4,334 | 12 | % | - | 0 | % | 41,210 | 100 | % | ||||||||||||||
| Total | 81,182 | 44 | % | 89,036 | 48 | % | (7,854 | ) | -9 | % | 25,438 | 17 | % | 55,744 | 219 | % | |||||||||||||
| Investment securities: | |||||||||||||||||||||||||||||
| Collateralized mortgage obligations | 45,141 | 25 | % | 43,805 | 23 | % | 1,336 | 3 | % | 40,424 | 28 | % | 4,717 | 12 | % | ||||||||||||||
| Mortgage backed securities | 18,579 | 10 | % | 20,457 | 11 | % | (1,878 | ) | -9 | % | 22,393 | 15 | % | (3,814 | ) | -17 | % | ||||||||||||
| U.S. Government and agency securities | 484 | 0 | % | 501 | 0 | % | (17 | ) | -3 | % | 4,125 | 3 | % | (3,641 | ) | -88 | % | ||||||||||||
| Municipal securities | 36,925 | 20 | % | 32,378 | 17 | % | 4,547 | 14 | % | 54,649 | 36 | % | (17,724 | ) | -32 | % | |||||||||||||
| Corporate debt securities | 2,004 | 1 | % | 1,999 | 1 | % | 5 | 0 | % | 959 | 1 | % | 1,045 | 109 | % | ||||||||||||||
| Equity securities | 84 | 0 | % | 82 | 0 | % | 2 | 2 | % | 60 | 0 | % | 24 | 40 | % | ||||||||||||||
| Total | 103,217 | 56 | % | 99,222 | 52 | % | 3,995 | 4 | % | 122,610 | 83 | % | (19,393 | ) | -16 | % | |||||||||||||
| Total cash equivalents and investment securities | $ | 184,399 | 100 | % | $ | 188,258 | 100 | % | $ | (3,859 | ) | -2 | % | $ | 148,048 | 100 | % | $ | 36,351 | 25 | % | ||||||||
| Total cash equivalents and investment securities | |||||||||||||||||||||||||||||
| as a percent of total assets | 20 | % | 20 | % | 14 | % | |||||||||||||||||||||||
LOANS
| Loans by Category | |||||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||||
| Dec 31, 2019 | % of Gross Loans | Sept 30, 2019 | % of Gross Loans | $ Change | % Change | Dec 31, 2018 | % of Gross Loans | $ Change | % Change | ||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||
| Commercial and agricultural | $ | 132,167 | 19 | % | $ | 134,758 | 20 | % | $ | (2,591 | ) | -2 | % | $ | 140,167 | 20 | % | $ | (8,000 | ) | -6 | % | |||||||||
| Real estate: | |||||||||||||||||||||||||||||||
| Construction and development | 45,227 | 7 | % | 41,663 | 6 | % | 3,564 | 9 | % | 47,291 | 7 | % | (2,064 | ) | -4 | % | |||||||||||||||
| Residential 1-4 family | 85,711 | 13 | % | 86,771 | 13 | % | (1,060 | ) | -1 | % | 89,091 | 13 | % | (3,380 | ) | -4 | % | ||||||||||||||
| Multi-family | 29,865 | 4 | % | 32,920 | 5 | % | (3,055 | ) | -9 | % | 30,948 | 4 | % | (1,083 | ) | -3 | % | ||||||||||||||
| Commercial real estate -- owner occupied | 147,049 | 21 | % | 142,297 | 21 | % | 4,752 | 3 | % | 142,761 | 21 | % | 4,288 | 3 | % | ||||||||||||||||
| Commercial real estate -- non owner occupied | 153,865 | 22 | % | 150,249 | 21 | % | 3,616 | 2 | % | 152,017 | 20 | % | 1,848 | 1 | % | ||||||||||||||||
| Farmland | 32,370 | 5 | % | 32,448 | 5 | % | (78 | ) | 0 | % | 28,876 | 4 | % | 3,494 | 12 | % | |||||||||||||||
| Consumer | 59,014 | 9 | % | 62,707 | 9 | % | (3,693 | ) | -6 | % | 72,946 | 11 | % | (13,932 | ) | -19 | % | ||||||||||||||
| Gross Loans | 685,268 | 100 | % | 683,813 | 100 | % | 1,455 | 0 | % | 704,097 | 100 | % | (18,829 | ) | -3 | % | |||||||||||||||
| Less: allowance for loan losses | (8,993 | ) | (9,017 | ) | 24 | (9,049 | ) | 56 | |||||||||||||||||||||||
| Less: deferred fees | (830 | ) | (981 | ) | 151 | (994 | ) | 164 | |||||||||||||||||||||||
| Net loans | $ | 675,445 | $ | 673,815 | $ | 1,630 | $ | 694,054 | $ | (18,609 | ) | ||||||||||||||||||||
| Loan Concentration | |||||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||||
| Dec 31, 2019 | % of Risk Based Capital | Sept 30, 2019 | % of Risk Based Capital | Change | Dec 31, 2018 | % of Risk Based Capital | Change | ||||||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||||
| Commercial and agricultural | $ | 132,167 | 118 | % | $ | 134,758 | 123 | % | -5 | % | $ | 140,167 | 134 | % | -16 | % | |||||||||||||||
| Real estate: | |||||||||||||||||||||||||||||||
| Construction and development | 45,227 | 40 | % | 41,663 | 38 | % | 2 | % | 47,291 | 49 | % | -9 | % | ||||||||||||||||||
| Residential 1-4 family | 85,711 | 77 | % | 86,771 | 79 | % | -2 | % | 89,091 | 89 | % | -12 | % | ||||||||||||||||||
| Multi-family | 29,865 | 27 | % | 32,920 | 30 | % | -3 | % | 30,948 | 31 | % | -4 | % | ||||||||||||||||||
| Commercial real estate -- owner occupied | 147,049 | 132 | % | 142,297 | 130 | % | 2 | % | 142,761 | 143 | % | -11 | % | ||||||||||||||||||
| Commercial real estate -- non owner occupied | 153,865 | 138 | % | 150,249 | 137 | % | 1 | % | 152,017 | 137 | % | 1 | % | ||||||||||||||||||
| Farmland | 32,370 | 29 | % | 32,448 | 30 | % | -1 | % | 28,876 | 29 | % | 0 | % | ||||||||||||||||||
| Consumer | 59,014 | 53 | % | 62,707 | 57 | % | -4 | % | 72,946 | 74 | % | -21 | % | ||||||||||||||||||
| Gross Loans | $ | 685,268 | $ | 683,813 | $ | 704,097 | |||||||||||||||||||||||||
| Regulatory Commercial Real Estate | $ | 222,899 | 199 | % | $ | 221,191 | 202 | % | -3 | % | $ | 225,806 | 212 | % | -13 | % | |||||||||||||||
| Total Risk Based Capital* | $ | 111,782 | $ | 109,428 | $ | 101,487 | |||||||||||||||||||||||||
| *Bank of the Pacific | |||||||||||||||||||||||||||||||
DEPOSITS
| Deposits by Category | |||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||
| Dec 31, 2019 | % of Total | Sept 30, 2019 | % of Total | $ Change | % Change | Dec 31, 2018 | % of Total | $ Change | % Change | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||
| Interest-bearing demand | $ | 228,579 | 28 | % | $ | 222,412 | 27 | % | $ | 6,167 | 3 | % | $ | 191,530 | 24 | % | $ | 37,049 | 19 | % | |||||||||
| Money market | 149,510 | 19 | % | 150,655 | 18 | % | (1,145 | ) | -1 | % | 162,238 | 20 | % | (12,728 | ) | -8 | % | ||||||||||||
| Savings | 104,871 | 13 | % | 106,284 | 13 | % | (1,413 | ) | -1 | % | 101,408 | 13 | % | 3,463 | 3 | % | |||||||||||||
| Time deposits (CDs) | 70,668 | 9 | % | 71,501 | 9 | % | (833 | ) | -1 | % | 86,188 | 11 | % | (15,520 | ) | -18 | % | ||||||||||||
| Total interest-bearing deposits | 553,628 | 69 | % | 550,852 | 67 | % | 2,776 | 1 | % | 541,364 | 68 | % | 12,264 | 2 | % | ||||||||||||||
| Non-interest bearing demand | 245,010 | 31 | % | 265,238 | 33 | % | (20,228 | ) | -8 | % | 242,185 | 32 | % | 2,825 | 1 | % | |||||||||||||
| Total deposits | $ | 798,638 | 100 | % | $ | 816,090 | 100 | % | $ | (17,452 | ) | -2.1 | % | $ | 783,549 | 100 | % | $ | 15,089 | 2 | % | ||||||||
The following table summarizes the capital measures of the Company and the Bank respectively, at the dates listed below.
| Capital Measures | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| Dec 31, 2019 | Sept 30, 2019 | Change | Dec 31, 2018 | Change | Well Capitalized Under Prompt Correction Action Regulations* | |||||||||||
| Pacific Financial Corporation | ||||||||||||||||
| Total risk-based capital ratio | 14.72 | % | 14.30 | % | 0.42 | 13.36 | % | 1.36 | N/A | |||||||
| Tier 1 risk-based capital ratio | 13.54 | % | 13.13 | % | 0.41 | 12.17 | % | 1.37 | N/A | |||||||
| Common equity tier 1 ratio | 11.84 | % | 11.45 | % | 0.39 | 10.47 | % | 1.37 | N/A | |||||||
| Leverage ratio | 11.17 | % | 11.11 | % | 0.06 | 10.21 | % | 0.96 | N/A | |||||||
| Tangible common equity ratio | 10.02 | % | 9.66 | % | 0.36 | 8.83 | % | 1.19 | N/A | |||||||
| Bank of the Pacific | ||||||||||||||||
| Total risk-based capital ratio | 14.60 | % | 14.22 | % | 0.38 | 13.30 | % | 1.30 | 10.5% | |||||||
| Tier 1 risk-based capital ratio | 13.40 | % | 13.02 | % | 0.38 | 12.09 | % | 1.31 | 8.5% | |||||||
| Common equity tier 1 ratio | 13.40 | % | 13.02 | % | 0.38 | 12.09 | % | 1.31 | 7.0% | |||||||
| Leverage ratio | 11.07 | % | 11.01 | % | 0.06 | 10.14 | % | 0.93 | 7.5% | |||||||
| *Includes Basel III 2019 Capital Conservation Buffer | ||||||||||||||||
The following tables set forth information regarding average balances of interest-earning assets and interest-bearing liabilities and the resultant yields or cost, and the net interest margin on a tax equivalent basis. Loans held for sale and non-accrual loans are included in total loans.
| Net Interest Margin | ||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||
| (Annualized, tax-equivalent basis) | ||||||||||||||||||||||
| For the Three Months Ended, | ||||||||||||||||||||||
| Dec 31, 2019 | Sept 30, 2019 | $ Change | % Change | Dec 31, 2018 | $ Change | % Change | ||||||||||||||||
| Average Balances | (Dollars in thousands) | |||||||||||||||||||||
| Gross loans | $ | 680,220 | $ | 688,166 | $ | (7,946 | ) | -1 | % | $ | 691,064 | $ | (10,844 | ) | -2 | % | ||||||
| Loans held for sale | $ | 16,909 | $ | 16,825 | $ | 84 | 0 | % | $ | 5,793 | $ | 11,116 | 192 | % | ||||||||
| Investment securities | $ | 100,942 | $ | 104,236 | $ | (3,294 | ) | -3 | % | $ | 119,402 | $ | (18,460 | ) | -15 | % | ||||||
| Federal funds sold & interest bearing deposits in banks | $ | 79,827 | $ | 51,931 | $ | 27,896 | 54 | % | $ | 45,070 | $ | 34,757 | 77 | % | ||||||||
| Total interest-earning assets | $ | 877,898 | $ | 861,158 | $ | 16,740 | 2 | % | $ | 861,329 | $ | 16,569 | 2 | % | ||||||||
| Non-interest bearing demand deposits | $ | 257,780 | $ | 254,184 | $ | 3,596 | 1 | % | $ | 255,968 | $ | 1,812 | 1 | % | ||||||||
| Interest bearing deposits | $ | 552,949 | $ | 541,200 | $ | 11,749 | 2 | % | $ | 545,616 | $ | 7,333 | 1 | % | ||||||||
| Total Deposits | $ | 810,729 | $ | 795,384 | $ | 15,345 | 2 | % | $ | 801,584 | $ | 9,145 | 1 | % | ||||||||
| Borrowings | $ | 16,619 | $ | 16,661 | $ | (42 | ) | 0 | % | $ | 21,769 | $ | (5,150 | ) | -24 | % | ||||||
| Total interest-bearing liabilities | $ | 569,568 | $ | 557,861 | $ | 11,707 | 2 | % | $ | 567,385 | $ | 2,183 | 0 | % | ||||||||
| Total Equity | $ | 105,072 | $ | 102,715 | $ | 2,357 | 2 | % | $ | 93,560 | $ | 11,512 | 12 | % | ||||||||
| For the Three Months Ended, | ||||||||||||||||||||||
| Dec 31, 2019 | Sept 30, 2019 | Change | Dec 31, 2018 | Change | ||||||||||||||||||
| Yield on average gross loans (1) | 5.30 | % | 5.47 | % | (0.17 | ) | 5.43 | % | (0.13 | ) | ||||||||||||
| Yield on average investment securities (1) | 2.78 | % | 2.80 | % | (0.02 | ) | 2.66 | % | 0.12 | |||||||||||||
| Yield on Fed funds sold & interest bearing deposits in banks | 1.72 | % | 2.24 | % | (0.52 | ) | 2.25 | % | (0.53 | ) | ||||||||||||
| Cost of average interest bearing deposits | 0.42 | % | 0.42 | % | - | 0.37 | % | 0.05 | ||||||||||||||
| Cost of average borrowings | 3.37 | % | 3.60 | % | (0.23 | ) | 3.39 | % | (0.02 | ) | ||||||||||||
| Cost of average total deposits and borrowings | 0.35 | % | 0.35 | % | - | 0.34 | % | 0.01 | ||||||||||||||
| Yield on average interest-earning assets | 4.64 | % | 4.91 | % | (0.27 | ) | 4.90 | % | (0.26 | ) | ||||||||||||
| Cost of average interest-bearing liabilities | 0.51 | % | 0.51 | % | - | 0.49 | % | 0.02 | ||||||||||||||
| Net interest spread | 4.13 | % | 4.40 | % | (0.27 | ) | 4.41 | % | (0.28 | ) | ||||||||||||
| Net interest margin (1) | 4.31 | % | 4.57 | % | (0.26 | ) | 4.58 | % | (0.27 | ) | ||||||||||||
| (1) Tax-exempt income has been adjusted to a tax equivalent basis at a rate of 21%. | ||||||||||||||||||||||
| For the Year Ended, | ||||||||||||||||||||||
| Dec 31, 2019 | Dec 31, 2018 | $ Change | % Change | |||||||||||||||||||
| Average Balances | (Dollars in thousands) | |||||||||||||||||||||
| Gross loans | $ | 689,594 | $ | 692,376 | $ | (2,782 | ) | 0 | % | |||||||||||||
| Loans held for sale | $ | 12,482 | $ | 7,405 | $ | 5,077 | 69 | % | ||||||||||||||
| Investment securities | $ | 109,595 | $ | 111,232 | $ | (1,637 | ) | -1 | % | |||||||||||||
| Federal funds sold & interest bearing deposits in banks | $ | 40,997 | $ | 27,920 | $ | 13,077 | 47 | % | ||||||||||||||
| Interest-earning assets | $ | 852,668 | $ | 838,933 | $ | 13,735 | 2 | % | ||||||||||||||
| Non-interest bearing demand deposits | $ | 245,370 | $ | 249,255 | $ | (3,885 | ) | -2 | % | |||||||||||||
| Interest bearing deposits | $ | 542,687 | $ | 533,541 | $ | 9,146 | 2 | % | ||||||||||||||
| Total Deposits | $ | 788,057 | $ | 782,796 | $ | 5,261 | 1 | % | ||||||||||||||
| Borrowings | $ | 18,542 | $ | 22,241 | $ | (3,699 | ) | -17 | % | |||||||||||||
| Interest-bearing liabilities | $ | 561,229 | $ | 555,782 | $ | 5,447 | 1 | % | ||||||||||||||
| Total Equity | $ | 100,435 | $ | 89,676 | $ | 10,759 | 12 | % | ||||||||||||||
| Total Deposits excl. Brokered CDs | 769,455 | 745,312 | 24,143 | 3.2 | % | |||||||||||||||||
| For the Year Ended, | ||||||||||||||||||||||
| Dec 31, 2019 | Dec 31, 2018 | Change | ||||||||||||||||||||
| Net Interest Margin | ||||||||||||||||||||||
| Yield on average gross loans (1) | 5.45 | % | 5.30 | % | 0.15 | |||||||||||||||||
| Yield on average investment securities (1) | 2.87 | % | 2.60 | % | 0.27 | |||||||||||||||||
| Yield on Fed funds sold & interest bearing deposits in banks | 2.06 | % | 2.00 | % | 0.06 | |||||||||||||||||
| Cost of average interest bearing deposits | 0.42 | % | 0.35 | % | 0.07 | |||||||||||||||||
| Cost of average borrowings | 3.59 | % | 3.29 | % | 0.30 | |||||||||||||||||
| Cost of average total deposits and borrowings | 0.36 | % | 0.32 | % | 0.04 | |||||||||||||||||
| Yield on average interest-earning assets | 4.92 | % | 4.83 | % | 0.09 | |||||||||||||||||
| Cost of average interest-bearing liabilities | 0.52 | % | 0.47 | % | 0.05 | |||||||||||||||||
| Net interest spread | 4.40 | % | 4.36 | % | 0.04 | |||||||||||||||||
| Net interest margin (1) | 4.58 | % | 4.52 | % | 0.06 | |||||||||||||||||
| (1) Tax-exempt income has been adjusted to a tax equivalent basis at a rate of 21%. | ||||||||||||||||||||||
| Adversely Classified Loans and Securities | |||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||
| Dec 31, 2019 | Sept 30, 2019 | $ Change | % Change | Dec 31, 2018 | $ Change | % Change | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||
| Rated substandard or worse, but not impaired | $ | 10,400 | $ | 6,637 | $ | 3,763 | 57 | % | $ | 6,723 | $ | 3,677 | 55 | % | |||||||
| Impaired | 1,349 | 1,341 | 8 | 1 | % | 1,043 | 306 | 29 | % | ||||||||||||
| Total adversely classified loans¹ | $ | 11,749 | $ | 7,978 | $ | 3,771 | 47 | % | $ | 7,766 | $ | 3,983 | 51 | % | |||||||
| Gross loans (excluding deferred loan fees) | $ | 685,268 | $ | 683,813 | $ | 1,455 | 0 | % | $ | 704,097 | $ | (18,829 | ) | -3 | % | ||||||
| Adversely classified loans to gross loans | 1.71 | % | 1.17 | % | 1.10 | % | |||||||||||||||
| Allowance for loan losses | $ | 8,993 | $ | 9,017 | $ | (24 | ) | 0 | % | $ | 9,049 | $ | (56 | ) | -1 | % | |||||
| Allowance for loan losses as a percentage of adversely classified loans | 76.54 | % | 113.02 | % | 116.52 | % | |||||||||||||||
| Allowance for loan losses to total impaired loans | 666.64 | % | 672.41 | % | 867.59 | % | |||||||||||||||
| Adversely classified loans to total assets | 1.26 | % | 0.84 | % | 0.86 | % | |||||||||||||||
| Delinquent loans to gross loans, not in nonaccrual status | 0.16 | % | 0.25 | % | 0.43 | % | |||||||||||||||
| ¹Adversely classified loans are defined as loans having a well-defined weakness or weaknesses related to the borrower's financial capacity or to pledged collateral that mayjeopardize the repayment of the debt. They are characterized by the possibility that the Bank may sustain some loss if the deficiencies giving rise to the substandard classification are not corrected. Note that any loans internally rated worse than substandard are included in the impaired loan totals. | |||||||||||||||||||||
| Nonperforming Assets | |||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||
| Dec 31, 2019 | Sept 30, 2019 | $ Change | % Change | Dec 31, 2018 | $ Change | % Change | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||
| Loans on nonaccrual status | $ | 1,029 | $ | 1,014 | $ | 15 | 1 | % | $ | 1,079 | $ | (50 | ) | -5 | % | ||||||
| Total nonaccrual loans | 1,029 | 1,014 | 15 | 1 | % | 1,079 | (50 | ) | -5 | % | |||||||||||
| Other real estate owned and foreclosed assets | 22 | - | 22 | 100 | % | - | 22 | 100 | % | ||||||||||||
| Total nonperforming assets | $ | 1,051 | $ | 1,014 | $ | 37 | 4 | % | $ | 1,079 | $ | (28 | ) | -3 | % | ||||||
| Restructured performing loans | $ | 320 | $ | 327 | $ | (7 | ) | -2 | % | $ | 281 | $ | 39 | 14 | % | ||||||
| Accruing loans past due 90 days or more | $ | - | $ | - | $ | - | 0 | % | $ | 239 | $ | (239 | ) | -100 | % | ||||||
| Percentage of nonperforming assets to total assets | 0.11 | % | 0.11 | % | 0.12 | % | |||||||||||||||
| Nonperforming loans to total loans | 0.15 | % | 0.15 | % | 0.15 | % | |||||||||||||||
| Allowance for Loan Losses | |||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||
| For the Three Months Ended, | |||||||||||||||||||||
| Dec 31, 2019 | Sept 30, 2019 | $ Change | % Change | Dec 31, 2018 | $ Change | % Change | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||
| Gross loans outstanding at end of period | $ | 685,268 | $ | 683,813 | $ | 1,455 | 0 | % | $ | 704,097 | $ | (18,829 | ) | -3 | % | ||||||
| Average loans outstanding, gross | $ | 680,220 | $ | 688,166 | $ | (7,946 | ) | -1 | % | $ | 692,043 | $ | (11,823 | ) | -2 | % | |||||
| Allowance for loan losses, beginning of period | $ | 9,017 | $ | 9,046 | $ | (29 | ) | 0 | % | $ | 9,067 | $ | (50 | ) | -1 | % | |||||
| Commercial | - | - | - | 0 | % | - | - | 0 | % | ||||||||||||
| Commercial Real Estate | - | - | - | 0 | % | - | - | 0 | % | ||||||||||||
| Residential Real Estate | - | - | - | 0 | % | - | - | 0 | % | ||||||||||||
| Consumer | (27 | ) | (33 | ) | 6 | -18 | % | (22 | ) | (5 | ) | 23 | % | ||||||||
| Total charge-offs | (27 | ) | (33 | ) | 6 | -18 | % | (22 | ) | (5 | ) | 23 | % | ||||||||
| Commercial | - | - | - | 0 | % | - | - | 0 | % | ||||||||||||
| Commercial Real Estate | - | - | - | 0 | % | - | - | 0 | % | ||||||||||||
| Residential Real Estate | - | - | - | 0 | % | - | - | 0 | % | ||||||||||||
| Consumer | 3 | 4 | (1 | ) | -25 | % | 4 | (1 | ) | -25 | % | ||||||||||
| Total recoveries | 3 | 4 | (1 | ) | -25 | % | 4 | (1 | ) | -25 | % | ||||||||||
| Net recoveries/(charge-offs) | (24 | ) | (29 | ) | 5 | -17 | % | (18 | ) | (6 | ) | 33 | % | ||||||||
| Provision charged to income | - | - | - | 0 | % | - | - | 0 | % | ||||||||||||
| Allowance for loan losses, end of period | $ | 8,993 | $ | 9,017 | $ | (24 | ) | 0 | % | $ | 9,049 | $ | (56 | ) | -1 | % | |||||
| Ratio of net loans charged-off to average | |||||||||||||||||||||
| gross loans outstanding, annualized | 0.01 | % | 0.02 | % | -0.01 | % | 0.01 | % | 0.00 | % | |||||||||||
| Ratio of allowance for loan losses to | |||||||||||||||||||||
| gross loans outstanding | 1.31 | % | 1.32 | % | -0.01 | % | 1.29 | % | 0.02 | % | |||||||||||
| For the Year Ended, | |||||||||||||||||||||
| Dec 31, 2019 | Dec 31, 2018 | $ Change | % Change | ||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||
| Gross loans outstanding at end of period | $ | 685,268 | $ | 704,097 | $ | (18,829 | ) | -3 | % | ||||||||||||
| Average loans outstanding, gross | $ | 689,594 | $ | 693,408 | $ | (3,814 | ) | -1 | % | ||||||||||||
| Allowance for loan losses, beginning of period | $ | 9,049 | $ | 9,092 | $ | (43 | ) | 0 | % | ||||||||||||
| Commercial | (30 | ) | (4 | ) | (26 | ) | 650 | % | |||||||||||||
| Commercial Real Estate | - | - | - | 0 | % | ||||||||||||||||
| Residential Real Estate | - | - | - | 0 | % | ||||||||||||||||
| Consumer | (139 | ) | (177 | ) | 38 | -21 | % | ||||||||||||||
| Total charge-offs | (169 | ) | (181 | ) | 12 | -7 | % | ||||||||||||||
| Commercial | 56 | 77 | (21 | ) | -27 | % | |||||||||||||||
| Commercial Real Estate | - | - | - | 0 | % | ||||||||||||||||
| Residential Real Estate | 34 | - | 34 | 100 | % | ||||||||||||||||
| Consumer | 23 | 61 | (38 | ) | -62 | % | |||||||||||||||
| Total recoveries | 113 | 138 | (25 | ) | -18 | % | |||||||||||||||
| Net (charge-offs) | (56 | ) | (43 | ) | (13 | ) | 30 | % | |||||||||||||
| Provision charged to income | - | - | - | 0 | % | ||||||||||||||||
| Allowance for loan losses, end of period | $ | 8,993 | $ | 9,049 | $ | (56 | ) | -1 | % | ||||||||||||
| Ratio of net loans charged-off to average | |||||||||||||||||||||
| gross loans outstanding, annualized | 0.01 | % | 0.01 | % | 0.00 | % | |||||||||||||||
| Ratio of allowance for loan losses to | |||||||||||||||||||||
| gross loans outstanding | 1.31 | % | 1.29 | % | 0.02 | % | |||||||||||||||
ABOUT PACIFIC FINANCIAL CORPORATION
Pacific Financial Corporation of Aberdeen, Washington, is the bank holding company for Bank of the Pacific, a state chartered and federally insured commercial bank. Bank of the Pacific offers banking products and services to small-to-medium sized businesses and professionals in western Washington and Oregon. At December 31, 2019, the Company had total assets of $929.4 million and operated fourteen branches in the communities of Grays Harbor, Pacific, Whatcom, Skagit, Clark and Wahkiakum counties in the State of Washington, and two branches in Clatsop County, Oregon. The Company also operated loan production offices in the communities of Burlington, Washington and Salem and Eugene, Oregon. Visit the Company’s website at www.bankofthepacific.com. Member FDIC.
Cautions Concerning Forward-Looking Statements
This press release contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other laws, including all statements in this release that are not historical facts or that relate to future plans or events or projected results of Pacific Financial Corporation and its wholly-owned subsidiary, Bank of the Pacific. These forward-looking statements are subject to risks and uncertainties that could cause actual events or results to differ materially from those projected, anticipated or implied. These risks and uncertainties include various risks associated with growing the Bank and expanding the services it provides, successfully completing and integrating the acquisition of new branches and development of new business lines and markets, competition in the marketplace, general economic conditions, changes in interest rates, extensive and evolving regulation of the banking industry, and many other risks. We undertake no obligation to update or revise any forward-looking statement. Readers of this release are cautioned not to put undue reliance on forward-looking statements.
| CONTACTS: |
| DENISE PORTMANN, PRESIDENT & CEO CARLA TUCKER, EVP & CFO 360.533.8873 |
