UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 8-K
CURRENT REPORT
Pursuant to
SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
_______________________
Date of Report (Date of earliest event reported):
October 29, 2014
PACIFIC FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
|
Washington
(State or other jurisdiction
of incorporation or organization) |
|
000-29829
(SEC File Number) |
|
91-1815009
(IRS Employer
Identification No.) |
|
1101 S. Boone Street
Aberdeen, Washington 98520-5244
(360) 533-8870
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
Check the appropriate box below if the Form 8-K filing
is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02. Results of Operations and Financial Condition.
On October 29, 2014, Pacific Financial Corporation
announced financial results for the quarterly period ended September 30, 2014. A copy of the press release is furnished as Exhibit
99.1 to this report and incorporated by reference.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits: The following exhibit is furnished
with this Form 8-K:
99.1 Press Release dated October 29, 2014.
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
DATED: October 29, 2014 |
|
PACIFIC FINANCIAL CORPORATION |
|
|
By: |
/s/ Douglas N. Biddle |
|
|
|
Douglas N. Biddle
EVP & Chief Financial Officer |
Exhibit 99.1
Pacific Financial Corporation Profits
Increase 51% Year-Over-Year
Propelled by Steady Loan Growth, Improving
Credit Quality and Solid Net Interest Margin
ABERDEEN, WA – October 29, 2014
– Pacific Financial Corporation (OTCQB: PFLC), the holding company for Bank of the Pacific, today reported net profits
increased 51% to $1.4 million, or $0.13 per share, for the third quarter of 2014, compared to $909,000, or $0.09 per share, for
the third quarter of 2013. Earnings for the third quarter of 2014 were impacted by increased tax expenses, reflecting a reduction
in non-taxable income for the period. Second quarter 2014 earnings were $1.4 million, or $0.14 per share. For the nine months of
2014 net profits increased 29% to $3.8 million, or $0.37 per share, from $2.9 million, or $0.29 per share, for the like period
in 2013. Fueling profitability in 2014 was robust loan growth, strong net interest margin and solid credit quality. In 2013, earnings
were impacted by a credit to the provision for losses of $450,000, offset by a one-time cost of $395,000 relating to the conversion
of three branches purchased from Sterling Savings Bank. All results are unaudited.
“We reported solid profitability
this quarter delivering strong performance across key metrics. Profit drivers were growth in loans and increasing core deposits,
a strong net interest margin and further enhancements in credit quality.” said Dennis A. Long, President and Chief Executive
Officer. “Our diversified loan portfolio increased 14%, while non-interest bearing deposits grew 17% from a year ago. In
addition nonperforming assets declined 47% from the third quarter of 2013. In the second quarter this year, we announced the expansion
of our Vancouver loan production office into a full-service commercial banking center. This is validation of the momentum we are
building in this market.”
Third Quarter 2014 Highlights (as of,
or for the period ended September 30, 2014, except as noted):
| • | Year-to-date, EPS increased 28% to $0.37, from $0.29 for the same period in 2013. Earnings per
share (EPS) declined by 7% to $0.13, compared to $0.14 in second quarter 2014, primarily due more shares outstanding reflecting
the exercise of warrants during the quarter. EPS grew 44% from $0.09 in third quarter 2013. |
| • | Net interest income increased $86,000, or 1%, to $6.9 million, compared to $6.8 million in second
quarter 2014, and grew $867,000, or 14%, from $6.0 million in third quarter 2013. For the first nine months of 2014, net interest
income increased $2.7 million, or 15%, to $20.2 million, from $17.5 million for the like period in 2013. |
| • | Net interest margin (NIM) was 4.13%, compared to 4.28% for the preceding quarter, and 3.88% for
third quarter 2013. Year-to-date, net interest margin expanded 23 basis points to 4.22%, compared to 3.99% for the first nine months
of 2013. |
| | |
| • | Gross loans grew 13% to $552.1 million, from $486.7 million at September 30, 2013 and increased
by $4.8 million, or 1% from $547.3 million at June 30, 2014. |
| | |
| • | Nonperforming assets declined to $6.4 million, or 0.86% of total assets, down from $7.4 million,
or 1.03% of total assets, at June 30, 2014 and $12.4 million, or 1.73% of total assets at September 30, 2013. |
| • | Classified loans increased to $18.4 million, or 3.33% of gross loans, up from $16.0 million, or
2.91% of gross loans, at June 30, 2014, and $13.7 million, or 2.82% of gross loans at September 30, 2013. |
| • | Net charge-offs totaled $160,000, compared to $73,000 in second quarter 2014 and $156,000 for third
quarter 2013. Year-to-date, net charge-offs were $304,000, compared to $102,000 for the first nine months of 2013. |
| | |
| • | Capital levels exceeded regulatory requirements for a well-capitalized financial institution, with
a total risk-based capital ratio of 14.06% and a leverage ratio of 10.09% at quarter end. |
“We are encouraged by the recent
activity in home purchases in the quarter, which has fueled new residential mortgage originations,” said Denise Portmann,
President and Chief Executive Officer of Bank of the Pacific. “We are also expanding our customized lending offerings to
meet the needs of customers whose residence does not conform to secondary-market requirements. With our wide-range of innovative
products and services, and a talented and motivated team of exceptional people, we are well positioned to continue to deepen and
grow customer relationships, as well as bring in new customers and grow our market share.”
Pacific Financial Corporation Profits Increased 51% in Third
Quarter 2014 and 29% in First Nine Months of 2014
October 29, 2014
Page 2
OPERATING RESULTS
Net Interest Income
Net interest income for the quarter and
nine months ended September 30, 2014, increased from the quarter and nine months ended September 30, 2013. This increase was primarily
due to the growth in earning assets, along with changes in the balance sheet mix. Loan balances increased due to the production
generated predominately in Western Washington. Investment securities and federal funds sold decreased as a proportion of the balance
sheet, due to the strong loan demand during the past several quarters. Funding costs remained low due to the shift in mix toward
non-interest bearing and lower-cost deposits, and continued historically low interest rates.
Net interest income for the current quarter
increased from the second quarter of 2014, reflecting higher loan balances and lower levels of investments. While funding costs
declined slightly when comparing the periods, given the lengthy period of very low interest rates over the past several years,
additional reductions in funding costs are becoming more difficult to achieve, as renewing certificates of deposit are receiving
rates that are similar to those granted at previous renewals.
INCOME STATEMENT OVERVIEW
(Unaudited)
(Dollars in Thousands, Except for Income per Share Data)
| |
For
the Three
Months Ended
September 30, 2014 | | |
For
the Three
Months Ended
June 30, 2014 | | |
$
Change | | |
%
Change | | |
For
the Three
Months Ended
September 30, 2013 | | |
$
Change | | |
%
Change | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Interest and dividend income | |
$ | 7,400 | | |
$ | 7,337 | | |
$ | 63 | | |
| 1 | % | |
$ | 6,605 | | |
$ | 795 | | |
| 12 | % |
Interest expense | |
| 518 | | |
| 541 | | |
| (23 | ) | |
| -4 | % | |
| 590 | | |
| (72 | ) | |
| -12 | % |
Net interest income | |
| 6,882 | | |
| 6,796 | | |
| 86 | | |
| 1 | % | |
| 6,015 | | |
| 867 | | |
| 14 | % |
Loan loss provision | |
| 100 | | |
| 100 | | |
| - | | |
| 0 | % | |
| - | | |
| 100 | | |
| 100 | % |
Non-interest income | |
| 2,274 | | |
| 2,176 | | |
| 98 | | |
| 5 | % | |
| 2,232 | | |
| 42 | | |
| 2 | % |
Non-interest expense | |
| 7,133 | | |
| 7,066 | | |
| 67 | | |
| 1 | % | |
| 7,089 | | |
| 44 | | |
| 1 | % |
INCOME BEFORE PROVISION FOR INCOME TAXES | |
| 1,923 | | |
| 1,806 | | |
| 117 | | |
| 6 | % | |
| 1,158 | | |
| 765 | | |
| 66 | % |
PROVISION FOR INCOME TAXES | |
| 549 | | |
| 403 | | |
| 146 | | |
| 36 | % | |
| 249 | | |
| 300 | | |
| 120 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
NET
INCOME | |
$ | 1,374 | | |
$ | 1,403 | | |
$ | (29 | ) | |
| -2 | % | |
$ | 909 | | |
$ | 465 | | |
| 51 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
INCOME PER COMMON SHARE: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
BASIC
(1) | |
$ | 0.13 | | |
$ | 0.14 | | |
$ | (0.01 | ) | |
| -7 | % | |
$ | 0.09 | | |
$ | 0.04 | | |
| 44 | % |
DILUTED
(2) | |
$ | 0.13 | | |
$ | 0.14 | | |
$ | (0.01 | ) | |
| -7 | % | |
$ | 0.09 | | |
$ | 0.04 | | |
| 44 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Average common shares
outstanding - basic (1) | |
| 10,281,745 | | |
| 10,189,386 | | |
| 92,359 | | |
| 1 | % | |
| 10,121,853 | | |
| 159,892 | | |
| 2 | % |
Average common shares
outstanding - diluted (2) | |
| 10,379,166 | | |
| 10,275,628 | | |
| 103,538 | | |
| 1 | % | |
| 10,194,826 | | |
| 184,340 | | |
| 2 | % |
| |
For
the Nine
Months Ended
September 30, 2014 | | |
For
the Nine
Months Ended
September 30, 2013 | | |
$
Change | | |
%
Change | |
| |
| | |
| | |
| | |
| |
Interest and dividend income | |
$ | 21,821 | | |
| 19,476 | | |
| 2,345 | | |
| 12 | % |
Interest expense | |
| 1,589 | | |
| 1,927 | | |
| (338 | ) | |
| -18 | % |
Net interest income | |
| 20,232 | | |
| 17,549 | | |
| 2,683 | | |
| 15 | % |
Loan loss provision | |
| 200 | | |
| (450 | ) | |
| 650 | | |
| -144 | % |
Non-interest income | |
| 6,058 | | |
| 8,033 | | |
| (1,975 | ) | |
| -25 | % |
Non-interest expense | |
| 21,028 | | |
| 22,380 | | |
| (1,352 | ) | |
| -6 | % |
INCOME BEFORE PROVISION FOR INCOME TAXES | |
| 5,062 | | |
| 3,652 | | |
| 1,410 | | |
| 39 | % |
PROVISION FOR INCOME TAXES | |
| 1,257 | | |
| 710 | | |
| 547 | | |
| 77 | % |
| |
| | | |
| | | |
| | | |
| | |
NET INCOME | |
$ | 3,805 | | |
| 2,942 | | |
| 863 | | |
| 29 | % |
| |
| | | |
| | | |
| | | |
| | |
INCOME PER COMMON SHARE: | |
| | | |
| | | |
| | | |
| | |
BASIC
(1) | |
$ | 0.37 | | |
| 0.29 | | |
| 0.08 | | |
| 28 | % |
DILUTED
(2) | |
$ | 0.37 | | |
| 0.29 | | |
| 0.08 | | |
| 28 | % |
| |
| | | |
| | | |
| | | |
| | |
Average common shares
outstanding - basic (1) | |
| 10,218,103 | | |
| 10,121,853 | | |
| 96,250 | | |
| 1 | % |
Average common shares
outstanding - diluted (2) | |
| 10,309,436 | | |
| 10,179,928 | | |
| 129,508 | | |
| 1 | % |
Pacific Financial Corporation Profits Increased 51% in Third
Quarter 2014 and 29% in First Nine Months of 2014
October 29, 2014
Page 3
The following tables provide reconciliations
of net income to pre-tax, pre-credit cost operating income and to tax equivalent net income (each non-GAAP financial measures)
for the periods presented:
Reconciliation of Non-GAAP Measure:
Non-GAAP Operating Income
(Dollars in Thousands)
For The
Three Months Ended | |
September
30, 2014 | | |
June
30, 2014 | | |
$
Change | | |
%
Change | | |
September
30, 2013 | | |
$
Change | | |
%
Change | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Net income | |
$ | 1,374 | | |
$ | 1,403 | | |
$ | (29 | ) | |
| -2 | % | |
$ | 909 | | |
$ | 465 | | |
| 51 | % |
Provision for loan losses | |
| 100 | | |
| 100 | | |
| 0 | | |
| 0 | % | |
| - | | |
| 100 | | |
| 100 | % |
Other real estate owned write-downs | |
| 1 | | |
| 54 | | |
| (53 | ) | |
| -98 | % | |
| 176 | | |
| (175 | ) | |
| -99 | % |
Other real estate owned operating
costs | |
| 100 | | |
| 30 | | |
| 70 | | |
| 233 | % | |
| 67 | | |
| 33 | | |
| 49 | % |
Provision
for income taxes | |
| 549 | | |
| 403 | | |
| 146 | | |
| 36 | % | |
| 249 | | |
| 300 | | |
| 120 | % |
Pre-tax, pre-credit cost
operating income* | |
$ | 2,124 | | |
$ | 1,990 | | |
$ | 134 | | |
| 7 | % | |
$ | 1,401 | | |
$ | 723 | | |
| 52 | % |
For The Nine Months
Ended | |
September
30, 2014 | | |
September
30,
2013 | | |
$
Change | | |
%
Change | |
| |
| | |
| | |
| | |
| |
Net income | |
$ | 3,805 | | |
$ | 2,942 | | |
$ | 863 | | |
| 29 | % |
Provision for loan losses | |
| 200 | | |
| (450 | ) | |
| 650 | | |
| -144 | % |
Other real estate owned write-downs | |
| 67 | | |
| 636 | | |
| (569 | ) | |
| -89 | % |
Other real estate owned operating
costs | |
| 191 | | |
| 276 | | |
| (85 | ) | |
| -31 | % |
Provision
for income taxes | |
| 1,257 | | |
| 710 | | |
| 547 | | |
| 77 | % |
Pre-tax, pre-credit cost
operating income* | |
$ | 5,520 | | |
$ | 4,114 | | |
$ | 1,406 | | |
| 34 | % |
Reconciliation of Non-GAAP Measure:
Tax Equivalent Income
(Dollars in Thousands)
For the
Three Months ended | |
September
30, 2014 | | |
June
30,
2014 | | |
$
Change | | |
%
Change | | |
September
30, 2013 | | |
$
Change | | |
%
Change | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Net interest income | |
$ | 6,882 | | |
$ | 6,796 | | |
$ | 86 | | |
| 1 | % | |
$ | 6,015 | | |
$ | 867 | | |
| 14 | % |
Tax equivalent adjustment for municipal loan
interest | |
| 45 | | |
| 46 | | |
| (1 | ) | |
| -2 | % | |
| 46 | | |
| (1 | ) | |
| -2 | % |
Tax equivalent adjustment
for municipal bond interest | |
| 94 | | |
| 120 | | |
| (26 | ) | |
| -22 | % | |
| 121 | | |
| (27 | ) | |
| -22 | % |
Tax equivalent net interest income | |
| 7,021 | | |
| 6,962 | | |
| 59 | | |
| 1 | % | |
| 6,182 | | |
| 839 | | |
| 14 | % |
Provision for loan losses | |
| 100 | | |
| 100 | | |
| - | | |
| 0 | % | |
| - | | |
| 100 | | |
| 100 | % |
Non-interest income | |
| 2,274 | | |
| 2,176 | | |
| 98 | | |
| 5 | % | |
| 2,232 | | |
| 42 | | |
| 2 | % |
Non-interest expense | |
| 7,133 | | |
| 7,066 | | |
| 67 | | |
| 1 | % | |
| 7,089 | | |
| 44 | | |
| 1 | % |
Tax equivalent income before income taxes* | |
| 2,062 | | |
| 1,972 | | |
| 90 | | |
| 5 | % | |
| 1,325 | | |
| 737 | | |
| 56 | % |
Provision for income taxes | |
| 549 | | |
| 403 | | |
| 146 | | |
| 36 | % | |
| 249 | | |
| 300 | | |
| 120 | % |
Accumulative tax adjustment | |
| (139 | ) | |
| (166 | ) | |
| 27 | | |
| -16 | % | |
| (167 | ) | |
| 28 | | |
| -17 | % |
Common stock dividends | |
| - | | |
| - | | |
| - | | |
| 0 | % | |
| - | | |
| - | | |
| 0 | % |
Net income | |
$ | 1,374 | | |
$ | 1,403 | | |
$ | (29 | ) | |
| -2 | % | |
$ | 909 | | |
$ | 465 | | |
| 51 | % |
For the Nine Months ended | |
September
30, 2014 | | |
September
30, 2013 | | |
$
Change | | |
%
Change | |
| |
| | |
| | |
| | |
| |
Net interest income | |
$ | 20,232 | | |
$ | 17,549 | | |
$ | 2,683 | | |
| 15 | % |
Tax equivalent adjustment for municipal loan
interest | |
| 138 | | |
| 163 | | |
| (25 | ) | |
| -15 | % |
Tax equivalent adjustment
for municipal bond interest | |
| 332 | | |
| 392 | | |
| (60 | ) | |
| -15 | % |
Tax equivalent net interest income | |
| 20,702 | | |
| 18,104 | | |
| 2,598 | | |
| 14 | % |
Provision for loan losses | |
| 200 | | |
| (450 | ) | |
| 650 | | |
| -144 | % |
Non-interest income | |
| 6,058 | | |
| 8,033 | | |
| (1,975 | ) | |
| -25 | % |
Non-interest expense | |
| 21,028 | | |
| 22,380 | | |
| (1,352 | ) | |
| -6 | % |
Tax equivalent income before income taxes* | |
| 5,532 | | |
| 4,207 | | |
| 1,325 | | |
| 31 | % |
Provision for income taxes | |
| 1,257 | | |
| 710 | | |
| 547 | | |
| 77 | % |
Accumulative tax adjustment | |
| (470 | ) | |
| (555 | ) | |
| 85 | | |
| -15 | % |
Common stock dividends | |
| - | | |
| - | | |
| - | | |
| 0 | % |
Net income | |
$ | 3,805 | | |
$ | 2,942 | | |
$ | 863 | | |
| 29 | % |
*Pre-tax, pre-credit cost operating income
and tax equivalent net income are non-GAAP financial measures. Non-GAAP financial measures have inherent limitations and are not
required to be uniformly applied. Management believes that presentation of these non-GAAP financial measures provides useful information
that is frequently used by shareholders and analysts in the evaluation of financial institutions. Non-GAAP financial measures have
limitations as analytical tools and should not be considered in isolation or as a substitute for information reported in accordance
with GAAP.
Noninterest Income
Noninterest income for third quarter 2014
grew compared to both the preceding and year ago quarters, reflecting increases in gains from sales of loans. In addition, fee
income from annuity sales increased in the current quarter compared to the second quarter of 2013, but was down slightly from the
prior quarter due to seasonal factors. “Our annuity products are proving to be popular with our customers”, added Portmann.
“Annuities provide an attractive alternative investment for our customers, given the current low interest rate environment.
To accommodate the increased demand for these products, we are expanding the number of branch personnel who are licensed to offer
annuity products. Our customers now have access to these additional investment options at many of our local branches.” Losses
on sale of other real estate owned (OREO) were higher in the current period as compared to the prior quarter and were in contrast
to a small gain in third quarter in 2013, reflecting a more aggressive approach to pricing in order to reduce the levels of foreclosed
assets.
Pacific Financial Corporation Profits Increased 51% in Third
Quarter 2014 and 29% in First Nine Months of 2014
October 29, 2014
Page 4
Gains on sale of residential mortgage loans
and related fee income rose in third quarter 2014 compared to second quarter 2014, and was similar to that earned in third quarter
2013. Portmann continued, “The recent rebound in home purchases throughout many of our markets is fueling new residential
mortgage originations. In addition, we locked in gains on our securities available for sale portfolio in third quarter 2014 and
third quarter 2013 improving the mix of securities in the portfolio and to reduce interest rate risk.”
Noninterest income for the first nine months of 2014 was down
from the same period in 2013, reflecting the declines in gains on sale of residential mortgage loans due to the slowdown in refinancing
activity in 2013 and higher losses on sale of OREO.
Noninterest income
(Unaudited)
(Dollars in Thousands)
For The Three Months Ended
| |
September
30, 2014 | | |
June
30,
2014 | | |
$
Change | | |
%
Change | | |
September
30, 2013 | | |
$
Change | | |
%
Change | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Service charges on deposit accounts | |
$ | 450 | | |
$ | 474 | | |
$ | (24 | ) | |
| -5 | % | |
$ | 440 | | |
$ | 10 | | |
| 2 | % |
Net (loss) on sale of other real estate owned | |
| (85 | ) | |
| (57 | ) | |
| (28 | ) | |
| 49 | % | |
| 18 | | |
| (103 | ) | |
| -572 | % |
Net gains from sales of loans | |
| 1,120 | | |
| 968 | | |
| 152 | | |
| 16 | % | |
| 1,128 | | |
| (8 | ) | |
| -1 | % |
Net gains on sales of securities available for
sale | |
| 38 | | |
| (2 | ) | |
| 40 | | |
| -2000 | % | |
| 14 | | |
| 24 | | |
| 171 | % |
Net other-than-temporary impairment (net of $0,
$0, and $7, | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
respectively recognized other comprehensive income
before taxes) | |
| - | | |
| (3 | ) | |
| 3 | | |
| -100 | % | |
| (4 | ) | |
| 4 | | |
| -100 | % |
Earnings on bank owned life insurance | |
| 127 | | |
| 140 | | |
| (13 | ) | |
| -9 | % | |
| 105 | | |
| 22 | | |
| 21 | % |
Other operating income | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Fee income | |
| 498 | | |
| 442 | | |
| 56 | | |
| 13 | % | |
| 421 | | |
| 77 | | |
| 18 | % |
Income from other real estate
owned | |
| 6 | | |
| 17 | | |
| (11 | ) | |
| -65 | % | |
| 22 | | |
| (16 | ) | |
| -73 | % |
Other
non-interest income | |
| 120 | | |
| 197 | | |
| (77 | ) | |
| -39 | % | |
| 88 | | |
| 32 | | |
| 36 | % |
Total
non-interest income | |
$ | 2,274 | | |
$ | 2,176 | | |
$ | 98 | | |
| 5 | % | |
$ | 2,232 | | |
$ | 42 | | |
| 2 | % |
For The Nine Months Ended
| |
September
30, 2014 | | |
September
30, 2013 | | |
$
Change | | |
%
Change | |
| |
| | |
| | |
| | |
| |
Service charges on deposit accounts | |
$ | 1,359 | | |
$ | 1,281 | | |
$ | 78 | | |
| 6 | % |
Net (loss) on sale of other real estate owned | |
| (179 | ) | |
| 43 | | |
| (222 | ) | |
| -516 | % |
Net gains from sales of loans | |
| 2,717 | | |
| 4,306 | | |
| (1,589 | ) | |
| -37 | % |
Net gains on sales of securities available for
sale | |
| 88 | | |
| 401 | | |
| (313 | ) | |
| -78 | % |
Net other-than-temporary impairment (net of $15,
and $2, | |
| | | |
| | | |
| | | |
| | |
respectively recognized other comprehensive income
before taxes) | |
| (48 | ) | |
| (38 | ) | |
| (10 | ) | |
| 26 | % |
Earnings on bank owned life insurance | |
| 378 | | |
| 342 | | |
| 36 | | |
| 11 | % |
Other operating income | |
| | | |
| | | |
| | | |
| | |
Fee income | |
| 1,304 | | |
| 1,392 | | |
| (88 | ) | |
| -6 | % |
Income from other real estate
owned | |
| 34 | | |
| 51 | | |
| (17 | ) | |
| -33 | % |
Other
non-interest income | |
| 405 | | |
| 255 | | |
| 150 | | |
| 59 | % |
Total
non-interest income | |
$ | 6,058 | | |
$ | 8,033 | | |
$ | (1,975 | ) | |
| -25 | % |
Noninterest Expense
Noninterest expense for third quarter of
2014 was virtually unchanged as compared to the second quarter of 2014. Decreases in OREO write-downs were offset by increased
operating costs associated with acquisitions into OREO during the current quarter.
Noninterest expense for third quarter 2014
was virtually unchanged compared to the year ago quarter. Salary and benefits expense increased with the addition of loan production
personnel and branch staff for the new branch that opened in the fourth quarter of 2013. Total costs associated with OREO and related
third-party loan expenses decreased due to the decline in OREO balances and stabilization of valuations. Other non-interest expenses
also declined primarily due to a decrease in loan origination and appraisal expense associated with a decline in mortgage origination
activity.
Pacific Financial Corporation Profits Increased 51% in Third
Quarter 2014 and 29% in First Nine Months of 2014
October 29, 2014
Page 5
Noninterest expense for the first nine months of 2014 was down
as compared to the same period in 2013, because of the $471,000 savings generated from reduction in mortgage lending staff initiated
in first quarter 2014 prompted by the decline in residential mortgage loan refinance activity. Also, in second quarter 2013 the
Bank incurred one-time expenses of $395,000 in data processing conversion costs for three branches from Sterling Savings Bank acquired
in June 2013. In addition, OREO write-downs and expenses and loan origination and appraisal expense were down as compared to the
prior period for reasons noted above.
Noninterest expense
(Unaudited)
(Dollars in Thousands)
For The Three Months Ended
| |
September
30, 2014 | | |
June
30,
2014 | | |
$
Change | | |
%
Change | | |
September
30, 2013 | | |
$
Change | | |
%
Change | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Salaries and employee benefits | |
$ | 4,286 | | |
$ | 4,283 | | |
$ | 3 | | |
| 0 | % | |
$ | 4,098 | | |
$ | 188 | | |
| 5 | % |
Occupancy | |
| 483 | | |
| 504 | | |
| (21 | ) | |
| -4 | % | |
| 473 | | |
| 10 | | |
| 2 | % |
Equipment | |
| 261 | | |
| 263 | | |
| (2 | ) | |
| -1 | % | |
| 233 | | |
| 28 | | |
| 12 | % |
Data processing | |
| 492 | | |
| 462 | | |
| 30 | | |
| 6 | % | |
| 449 | | |
| 43 | | |
| 10 | % |
Professional services | |
| 220 | | |
| 201 | | |
| 19 | | |
| 9 | % | |
| 198 | | |
| 22 | | |
| 11 | % |
Other real estate owned write-downs | |
| 1 | | |
| 54 | | |
| (53 | ) | |
| -98 | % | |
| 176 | | |
| (175 | ) | |
| -99 | % |
Other real estate owned operating costs | |
| 100 | | |
| 30 | | |
| 70 | | |
| 233 | % | |
| 67 | | |
| 33 | | |
| 49 | % |
State taxes | |
| 110 | | |
| 107 | | |
| 3 | | |
| 3 | % | |
| 110 | | |
| 0 | | |
| 0 | % |
FDIC and state assessments | |
| 119 | | |
| 129 | | |
| (10 | ) | |
| -8 | % | |
| 129 | | |
| (10 | ) | |
| -8 | % |
Other non-interest expense: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Director fees | |
| 80 | | |
| 72 | | |
| 8 | | |
| 11 | % | |
| 48 | | |
| 32 | | |
| 67 | % |
Communication | |
| 65 | | |
| 53 | | |
| 12 | | |
| 23 | % | |
| 42 | | |
| 23 | | |
| 55 | % |
Advertising | |
| 73 | | |
| 76 | | |
| (3 | ) | |
| -4 | % | |
| 76 | | |
| (3 | ) | |
| -4 | % |
Professional liability insurance | |
| 24 | | |
| 19 | | |
| 5 | | |
| 26 | % | |
| 21 | | |
| 3 | | |
| 14 | % |
Amortization | |
| 99 | | |
| 98 | | |
| 1 | | |
| 1 | % | |
| 116 | | |
| (17 | ) | |
| -15 | % |
Other
non-interest expense | |
| 720 | | |
| 715 | | |
| 5 | | |
| 1 | % | |
| 853 | | |
| (133 | ) | |
| -16 | % |
Total
non-interest expense | |
$ | 7,133 | | |
$ | 7,066 | | |
$ | 67 | | |
| 1 | % | |
$ | 7,089 | | |
$ | 44 | | |
| 1 | % |
For The Nine Months Ended
| |
September
30, 2014 | | |
September
30, 2013 | | |
$
Change | | |
%
Change | |
| |
| | |
| | |
| | |
| |
Salaries and employee benefits | |
$ | 12,624 | | |
$ | 12,983 | | |
$ | (359 | ) | |
| -3 | % |
Occupancy | |
| 1,494 | | |
| 1,338 | | |
| 156 | | |
| 12 | % |
Equipment | |
| 775 | | |
| 619 | | |
| 156 | | |
| 25 | % |
Data processing | |
| 1,387 | | |
| 1,688 | | |
| (301 | ) | |
| -18 | % |
Professional services | |
| 606 | | |
| 696 | | |
| (90 | ) | |
| -13 | % |
Other real estate owned write-downs | |
| 67 | | |
| 636 | | |
| (569 | ) | |
| -89 | % |
Other real estate owned operating costs | |
| 191 | | |
| 276 | | |
| (85 | ) | |
| -31 | % |
State taxes | |
| 314 | | |
| 360 | | |
| (46 | ) | |
| -13 | % |
FDIC and state assessments | |
| 381 | | |
| 395 | | |
| (14 | ) | |
| -4 | % |
Other non-interest expense: | |
| | | |
| | | |
| | | |
| | |
Director fees | |
| 208 | | |
| 164 | | |
| 44 | | |
| 27 | % |
Communication | |
| 155 | | |
| 130 | | |
| 25 | | |
| 19 | % |
Advertising | |
| 227 | | |
| 222 | | |
| 5 | | |
| 2 | % |
Professional liability insurance | |
| 65 | | |
| 67 | | |
| (2 | ) | |
| -3 | % |
Amortization | |
| 291 | | |
| 311 | | |
| (20 | ) | |
| -6 | % |
Other
non-interest expense | |
| 2,243 | | |
| 2,495 | | |
| (252 | ) | |
| -10 | % |
Total
non-interest expense | |
$ | 21,028 | | |
$ | 22,380 | | |
$ | (1,352 | ) | |
| -6 | % |
Income Taxes
The Company recorded an income tax provision
for the three months ended September 30, 2014, June 30, 2014 and September 30, 2013. The amount of the provision for each period
was commensurate with the estimated tax liability associated with the net income earned during the period.
As of September 30, 2014, the Company maintained
a deferred tax asset balance of $4.1 million. The Company believes it will be fully utilized in the normal course of business,
thus no valuation allowance is maintained against this asset.
Pacific Financial Corporation Profits Increased 51% in Third
Quarter 2014 and 29% in First Nine Months of 2014
October 29, 2014
Page 6
SUMMARY BALANCE SHEET OVERVIEW
(Unaudited)
(Dollars in Thousands)
| |
September | | |
June | | |
| | |
% | | |
September | | |
| | |
% | |
| |
30,
2014 | | |
30,
2014 | | |
$
Change | | |
Change | | |
30,
2013 | | |
$
Change | | |
Change | |
Assets: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Cash and cash
equivalents | |
$ | 40,781 | | |
$ | 17,694 | | |
$ | 23,087 | | |
| 130 | % | |
$ | 69,657 | | |
$ | (28,876 | ) | |
| -41 | % |
Interest-bearing certificates of deposit | |
| 2,727 | | |
| 2,727 | | |
| 0 | | |
| 0 | % | |
| 1,735 | | |
| 992 | | |
| 57 | % |
Federal Home Loan Bank stock,
at cost | |
| 2,926 | | |
| 2,956 | | |
| (30 | ) | |
| -1 | % | |
| 3,041 | | |
| (115 | ) | |
| -4 | % |
Pacific Coast Bankers' Bank
stock, at cost | |
| 1,000 | | |
| 0 | | |
| 1,000 | | |
| - | | |
| 0 | | |
| 1,000 | | |
| 100 | % |
Investment securities | |
| 91,185 | | |
| 90,583 | | |
| 602 | | |
| 1 | % | |
| 94,129 | | |
| (2,944 | ) | |
| -3 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Loans held-for-sale | |
| 8,161 | | |
| 7,632 | | |
| 529 | | |
| 7 | % | |
| 7,266 | | |
| 895 | | |
| 12 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Gross loans, net of deferred
fees | |
| 552,140 | | |
| 547,283 | | |
| 4,857 | | |
| 1 | % | |
| 486,700 | | |
| 65,440 | | |
| 13 | % |
Allowance
for loan losses | |
| (8,255 | ) | |
| (8,315 | ) | |
| 60 | | |
| -1 | % | |
| (8,806 | ) | |
| 551 | | |
| -6 | % |
Net loans | |
| 543,885 | | |
| 538,968 | | |
| 4,917 | | |
| 1 | % | |
| 477,894 | | |
| 65,991 | | |
| 14 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Other assets | |
| 58,382 | | |
| 58,912 | | |
| (530 | ) | |
| -1 | % | |
| 62,026 | | |
| (3,644 | ) | |
| -6 | % |
Total
assets | |
$ | 749,047 | | |
$ | 719,472 | | |
$ | 29,575 | | |
| 4 | % | |
$ | 715,748 | | |
$ | 33,299 | | |
| 5 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Liabilities and shareholders' equity | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total deposits | |
$ | 644,004 | | |
$ | 619,301 | | |
$ | 24,703 | | |
| 4 | % | |
$ | 618,918 | | |
$ | 25,086 | | |
| 4 | % |
Accrued interest payable | |
| 141 | | |
| 151 | | |
| (10 | ) | |
| -7 | % | |
| 182 | | |
| (41 | ) | |
| -23 | % |
Borrowings | |
| 24,894 | | |
| 23,743 | | |
| 1,151 | | |
| 5 | % | |
| 23,403 | | |
| 1,491 | | |
| 6 | % |
Other liabilities | |
| 6,751 | | |
| 5,417 | | |
| 1,334 | | |
| 25 | % | |
| 4,909 | | |
| 1,842 | | |
| 38 | % |
Shareholders'
equity | |
| 73,257 | | |
| 70,860 | | |
| 2,397 | | |
| 3 | % | |
| 68,336 | | |
| 4,921 | | |
| 7 | % |
Total
liabilities and shareholders' equity | |
$ | 749,047 | | |
$ | 719,472 | | |
$ | 29,575 | | |
| 4 | % | |
$ | 715,748 | | |
$ | 33,299 | | |
| 5 | % |
Cash and Cash Equivalents and Investment Securities
(Unaudited)
(Dollars in Thousands)
| |
September
30, 2014 | | |
%
of
Total | | |
June
30, 2014 | | |
%
of
Total | | |
$
Change | | |
%
Change | | |
September
30, 2013 | | |
%
of
Total | | |
$
Change | | |
%
Change | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Cash and due from banks | |
$ | 15,284 | | |
| 11 | % | |
$ | 17,455 | | |
| 15 | % | |
$ | (2,171 | ) | |
| -12 | % | |
$ | 15,494 | | |
| 9 | % | |
$ | (210 | ) | |
| -1 | % |
Cash equivalents: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Interest-bearing deposits | |
| 25,497 | | |
| 18 | % | |
| 239 | | |
| 0 | % | |
| 25,258 | | |
| 10568 | % | |
| 54,163 | | |
| 32 | % | |
| (28,666 | ) | |
| -53 | % |
Interest-bearing certificates
of deposit | |
| 2,727 | | |
| 2 | % | |
| 2,727 | | |
| 2 | % | |
| - | | |
| 0 | % | |
| 1,735 | | |
| 1 | % | |
| 992 | | |
| 57 | % |
Total cash equivalents
and certificate of deposits | |
| 43,508 | | |
| 31 | % | |
| 20,421 | | |
| 18 | % | |
| 23,087 | | |
| 113 | % | |
| 71,392 | | |
| 42 | % | |
| (27,884 | ) | |
| -39 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Investment securities: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Collateralized mortgage obligations:
agency issued | |
| 40,039 | | |
| 29 | % | |
| 38,822 | | |
| 34 | % | |
| 1,217 | | |
| 3 | % | |
| 34,482 | | |
| 20 | % | |
| 5,557 | | |
| 16 | % |
Collateralized mortgage obligations:
non-agency issued | |
| 579 | | |
| 0 | % | |
| 604 | | |
| 1 | % | |
| (25 | ) | |
| -4 | % | |
| 2,179 | | |
| 1 | % | |
| (1,600 | ) | |
| -73 | % |
Mortgage-backed securities:
agency issued | |
| 12,630 | | |
| 9 | % | |
| 12,059 | | |
| 11 | % | |
| 571 | | |
| 5 | % | |
| 12,972 | | |
| 8 | % | |
| (342 | ) | |
| -3 | % |
U.S. Government and agency
securities | |
| 8,655 | | |
| 6 | % | |
| 8,721 | | |
| 8 | % | |
| (66 | ) | |
| -1 | % | |
| 8,859 | | |
| 5 | % | |
| (204 | ) | |
| -2 | % |
State and municipal securities | |
| 29,282 | | |
| 21 | % | |
| 30,377 | | |
| 27 | % | |
| (1,095 | ) | |
| -4 | % | |
| 35,042 | | |
| 21 | % | |
| (5,760 | ) | |
| -16 | % |
Corporate bonds | |
| - | | |
| 0 | % | |
| - | | |
| 0 | % | |
| - | | |
| 0 | % | |
| 595 | | |
| 0 | % | |
| (595 | ) | |
| -100 | % |
FHLB Stock | |
| 2,926 | | |
| 2 | % | |
| 2,956 | | |
| 3 | % | |
| (30 | ) | |
| -1 | % | |
| 3,041 | | |
| 2 | % | |
| (115 | ) | |
| -4 | % |
Pacific
Coast Bankers' Bank stock, at cost | |
| 1,000 | | |
| 1 | % | |
| - | | |
| 0 | % | |
| 1,000 | | |
| 100 | % | |
| - | | |
| 0 | % | |
| 1,000 | | |
| 100 | % |
Total investment securities | |
| 95,111 | | |
| 69 | % | |
| 93,539 | | |
| 82 | % | |
| 1,572 | | |
| 2 | % | |
| 97,170 | | |
| 58 | % | |
| (2,059 | ) | |
| -2 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total cash equivalents
and investment securities | |
$ | 138,619 | | |
| 100 | % | |
$ | 113,960 | | |
| 100 | % | |
$ | 24,659 | | |
| 22 | % | |
$ | 168,562 | | |
| 100 | % | |
$ | (29,943 | ) | |
| -18 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total cash equivalents and investment securities
as a % of total assets | |
| | | |
| 19 | % | |
| | | |
| 16 | % | |
| | | |
| | | |
| | | |
| 24 | % | |
| | | |
| | |
Pacific Financial Corporation Profits Increased 51% in Third
Quarter 2014 and 29% in First Nine Months of 2014
October 29, 2014
Page 7
Investment securities and interest-bearing certificates of
deposit
(Unaudited)
(Dollars in Thousands)
For the Three Months Ended | |
September
30, 2014 | | |
June
30,
2014 | | |
$
Change | | |
%
Change | | |
September
30, 2013 | | |
$
Change | | |
%
Change | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Balance beginning of period | |
$ | 96,266 | | |
$ | 102,951 | | |
$ | (6,685 | ) | |
| -6 | % | |
$ | 94,855 | | |
$ | 1,411 | | |
| 1 | % |
Principal purchases | |
| 7,482 | | |
| 3,806 | | |
| 3,676 | | |
| 97 | % | |
| 10,772 | | |
| (3,290 | ) | |
| -31 | % |
Proceeds from sales | |
| (3,927 | ) | |
| (8,979 | ) | |
| 5,052 | | |
| -56 | % | |
| (3,067 | ) | |
| (860 | ) | |
| 28 | % |
Principal paydowns, maturities, and calls | |
| (1,673 | ) | |
| (2,144 | ) | |
| 471 | | |
| -22 | % | |
| (4,266 | ) | |
| 2,593 | | |
| -61 | % |
Gains on sales of securities | |
| 94 | | |
| 159 | | |
| (65 | ) | |
| -41 | % | |
| 57 | | |
| 37 | | |
| 65 | % |
Losses on sales of securities | |
| (56 | ) | |
| (161 | ) | |
| 105 | | |
| -65 | % | |
| (43 | ) | |
| (13 | ) | |
| 30 | % |
OTTI loss writedown | |
| - | | |
| (3 | ) | |
| 3 | | |
| -100 | % | |
| 13 | | |
| (13 | ) | |
| -100 | % |
Change in unrealized gains (loss) before tax | |
| (64 | ) | |
| 903 | | |
| (967 | ) | |
| -107 | % | |
| 770 | | |
| (834 | ) | |
| -108 | % |
Amortization and accretion of
discounts and premiums | |
| (284 | ) | |
| (266 | ) | |
| (18 | ) | |
| 7 | % | |
| (186 | ) | |
| (98 | ) | |
| 53 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total investment portfolio | |
$ | 97,838 | | |
$ | 96,266 | | |
$ | 1,572 | | |
| 2 | % | |
$ | 98,905 | | |
$ | (1,067 | ) | |
| -1 | % |
Liquidity remains strong based on the current levels of cash
equivalents and investment securities. “We also have unsecured lines of credit totaling $16.0 million with correspondent
banks, all of which are currently available. In addition, we have a secured borrowing facility with the Federal Home Loan Bank
of Seattle of $143.8 million, of which $11.5 million is currently outstanding,” said Douglas Biddle, Executive Vice President
and Chief Financial Officer. “In an effort to fund pending loan demand, we increased our cash equivalents during the current
quarter. In addition, we initiated some restructuring of the investment portfolio to reduce the impact of interest rate risk on
securities valuation, resulting in a lowering of portfolio yields.” The expected modified duration (adjusted for calls, consensus
pre-payment speeds and rate adjustment dates) of the investment portfolio was 4.3 years at September 30, 2014, 4.5 years at June
30, 2014 and 4.4 years at September 30, 2013.
LOANS
Loans by category | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
(Unaudited) | |
September 30, | | |
% of | | |
June 30, | | |
% of | | |
$ | | |
| | |
September | | |
% of | | |
$ | | |
| |
(Dollars in Thousands) | |
2014 | | |
Gross Loans | | |
2014 | | |
Gross Loans | | |
Change | | |
% Change | | |
30, 2013 | | |
Gross Loans | | |
Change | | |
% Change | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Commercial and agricultural | |
$ | 112,873 | | |
| 21 | % | |
$ | 109,368 | | |
| 20 | % | |
$ | 3,505 | | |
| 3 | % | |
$ | 94,471 | | |
| 20 | % | |
$ | 18,402 | | |
| 19 | % |
Real estate: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Construction and development | |
| 25,419 | | |
| 3 | % | |
| 32,071 | | |
| 6 | % | |
| (16,766 | ) | |
| -52 | % | |
| 29,538 | | |
| 6 | % | |
| (14,233 | ) | |
| -48 | % |
Residential 1-4 family | |
| 94,101 | | |
| 19 | % | |
| 90,549 | | |
| 17 | % | |
| 13,666 | | |
| 15 | % | |
| 85,625 | | |
| 18 | % | |
| 18,590 | | |
| 22 | % |
Multi-family | |
| 20,554 | | |
| 4 | % | |
| 20,110 | | |
| 4 | % | |
| 444 | | |
| 2 | % | |
| 13,846 | | |
| 3 | % | |
| 6,708 | | |
| 48 | % |
Commercial real estate — owner occupied | |
| 122,090 | | |
| 22 | % | |
| 117,203 | | |
| 22 | % | |
| 4,887 | | |
| 4 | % | |
| 106,670 | | |
| 22 | % | |
| 15,420 | | |
| 14 | % |
Commercial real estate — non owner
occupied | |
| 120,569 | | |
| 22 | % | |
| 124,929 | | |
| 23 | % | |
| (4,360 | ) | |
| -3 | % | |
| 115,290 | | |
| 24 | % | |
| 5,279 | | |
| 5 | % |
Farmland | |
| 22,926 | | |
| 4 | % | |
| 23,900 | | |
| 4 | % | |
| (974 | ) | |
| -4 | % | |
| 24,002 | | |
| 5 | % | |
| (1,076 | ) | |
| -4 | % |
Consumer | |
| 34,787 | | |
| 6 | % | |
| 30,241 | | |
| 6 | % | |
| 4,546 | | |
| 15 | % | |
| 18,366 | | |
| 4 | % | |
| 16,421 | | |
| 89 | % |
Gross loans | |
| 553,319 | | |
| | | |
| 548,371 | | |
| | | |
| 4,948 | | |
| 1 | % | |
| 487,808 | | |
| | | |
| 65,511 | | |
| 13 | % |
Less: allowance for loan losses | |
| (8,255 | ) | |
| -2 | % | |
| (8,315 | ) | |
| -2 | % | |
| 60 | | |
| -1 | % | |
| (8,806 | ) | |
| -2 | % | |
| 551 | | |
| -6 | % |
Less: deferred fees | |
| (1,179 | ) | |
| 0 | % | |
| (1,088 | ) | |
| 0 | % | |
| (91 | ) | |
| 8 | % | |
| (1,108 | ) | |
| 0 | % | |
| (71 | ) | |
| 6 | % |
Loans, net | |
$ | 543,885 | | |
| | | |
$ | 538,968 | | |
| | | |
$ | 4,917 | | |
| 1 | % | |
$ | 477,894 | | |
| | | |
$ | 65,991 | | |
| 14 | % |
Loan portfolio growth continues to be well
diversified and generated predominately within our Washington and Oregon markets. This is despite a payoff of a $5.7 million non-owner
occupied commercial real estate relationship during the current quarter. The portfolio includes $36.3 million in purchased government-guaranteed
commercial and commercial real estate loans. In addition, the loan portfolio contains $25.3 million in indirect consumer loans
to individuals with high credit scores to finance luxury and classic cars as a part of a strategy to diversify the loan portfolio.
Our ability to continue loan growth will be dependent upon many
factors, including the effects of competition, economic conditions in our markets, retention of key personnel and valued customers,
and our ability to close loans in the pipeline. The Company manages new loan origination volume using concentration limits that
establish maximum exposure levels by designated industry segment, real estate product types, geography, and single borrower limits.
Pacific Financial Corporation Profits Increased 51% in Third
Quarter 2014 and 29% in First Nine Months of 2014
October 29, 2014
Page 8
DEPOSITS
Deposits
(Unaudited)
(Dollars in Thousands) | |
September
30,
2014 | | |
Percent
of
Total | | |
June
30,
2014 | | |
Percent
of
Total | | |
$
Change | | |
September
30,
2013 | | |
Percent
of
Total | | |
$
Change | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Interest-bearing demand and money
market | |
$ | 266,863 | | |
| 41.4 | % | |
$ | 268,480 | | |
| 43.4 | % | |
$ | (1,617 | ) | |
$ | 253,895 | | |
| 41.0 | % | |
$ | 12,968 | |
Savings | |
| 76,661 | | |
| 11.9 | % | |
| 74,336 | | |
| 12.0 | % | |
| 2,325 | | |
| 72,880 | | |
| 11.8 | % | |
| 3,781 | |
Time deposits | |
| 118,221 | | |
| 18.4 | % | |
| 119,531 | | |
| 19.3 | % | |
| (1,310 | ) | |
| 135,979 | | |
| 22.0 | % | |
| (17,758 | ) |
Total interest-bearing deposits | |
| 461,745 | | |
| 71.7 | % | |
| 462,347 | | |
| 74.7 | % | |
| (602 | ) | |
| 462,754 | | |
| 74.8 | % | |
| (1,009 | ) |
Non-interest bearing demand | |
| 182,259 | | |
| 28.3 | % | |
| 156,954 | | |
| 25.3 | % | |
| 25,305 | | |
| 156,164 | | |
| 25.2 | % | |
| 26,095 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total
deposits | |
$ | 644,004 | | |
| 100.0 | % | |
$ | 619,301 | | |
| 100.0 | % | |
$ | 24,703 | | |
$ | 618,918 | | |
| 100.0 | % | |
$ | 25,086 | |
Total deposits were up at September 30,
2014, compared to the second quarter of this year and the third quarter a year ago. Non-interest bearing deposits grew due to seasonal
inflows associated with increased business activity in our local markets with economies focused on summer tourism. Recent success
in acquiring business deposit relationships in conjunction with the growth in lending achieved over the past year has also contributed
to deposit growth. The combination of our efforts to reduce higher-cost time deposits through lowering interest rates paid and
offering non-insured deposit products, when appropriate, reduced the average rate paid on total deposits in third quarter 2014
from third quarter in 2013.
Total brokered deposits were $22.6 million
at September 30, 2014, which included $2.5 million via reciprocal deposit arrangements. This compares to $22.9 million and $24.1
million at June 30, 2014 and September 30, 2013, respectively. The Company views the prudent use of brokered deposits and borrowings
to be an appropriate funding tool to support interest rate risk mitigation strategies.
CAPITAL
Pacific Financial Corporation, and its
subsidiary Bank of the Pacific, continue to meet the thresholds to be considered “well-capitalized” under regulatory
requirements. Capital ratios increased slightly as compared to the prior quarter primarily due to earnings retention. Also, $1.2
million of additional capital was supplied via the exercise at a price of $6.50 per share of warrants to purchase 185,000 shares
of common stock originally issued in conjunction with a private capital raise conducted in 2009. In general, capital ratios declined
from September 30, 2013 due to the successful execution of the Company’s growth strategy and shift in the balance sheet mix
to higher risk-weighted loan assets. However, the tangible common equity ratio grew due to the additional capital supplied via
exercise of warrants, as previously mentioned.
The Board of Governors of the Federal Reserve
System (“Federal Reserve”) and the FDIC have established minimum requirements for capital adequacy for bank holding
companies and state non-member banks. For more information on these topics, see the discussions under the subheading “Capital
Adequacy” in the section “Business” included in Item 1, of the Company’s Annual Report on Form 10-K for
the year ended December 31, 2013, as filed with the Securities and Exchange Commission. The following table summarizes the capital
measures of the Company and the Bank, respectively, at the dates listed below.
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 at September 30,
2014, under guidance issued by the Federal Reserve. The Company expects to continue to rely on these junior subordinated debentures
as part of its regulatory capital.
| |
September 30,
2014 | | |
June 30,
2014 | | |
Change | | |
September
30, 2013 | | |
Change | | |
Regulatory
Minimum
to be "Well
Capitalized" | |
| |
| | |
| | |
| | |
| | |
| | |
greater than or equal to | |
Pacific Financial
Corporation | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total risk-based capital ratio | |
| 14.09 | % | |
| 13.76 | % | |
| 0.33 | | |
| 14.84 | % | |
| (0.75 | ) | |
| 10 | % |
Tier 1 risk-based capital ratio | |
| 12.83 | % | |
| 12.51 | % | |
| 0.32 | | |
| 13.59 | % | |
| (0.76 | ) | |
| 6 | % |
Leverage ratio | |
| 10.09 | % | |
| 10.04 | % | |
| 0.05 | | |
| 10.04 | % | |
| 0.05 | | |
| 5 | % |
Tangible common equity ratio | |
| 8.11 | % | |
| 8.11 | % | |
| - | | |
| 7.79 | % | |
| 0.32 | | |
| n/a | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Bank of the Pacific | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total risk-based capital ratio | |
| 13.87 | % | |
| 13.73 | % | |
| 0.14 | | |
| 14.85 | % | |
| (0.98 | ) | |
| 10 | % |
Tier 1 risk-based capital ratio | |
| 12.61 | % | |
| 12.48 | % | |
| 0.13 | | |
| 13.59 | % | |
| (0.98 | ) | |
| 6 | % |
Leverage ratio | |
| 9.91 | % | |
| 10.01 | % | |
| (0.10 | ) | |
| 10.04 | % | |
| (0.13 | ) | |
| 5 | % |
Pacific Financial Corporation Profits Increased 51% in Third
Quarter 2014 and 29% in First Nine Months of 2014
October 29, 2014
Page 9
FINANCIAL PERFORMANCE OVERVIEW
(Unaudited)
(Dollars in Thousands, Except per Share Data)
For The Three Months Ended
| |
September
30, 2014 | | |
June 30,
2014 | | |
Change | | |
September
30, 2013 | | |
Change | |
Selective quarterly performance ratios | |
| | | |
| | | |
| | | |
| | | |
| | |
Return on average assets, annualized | |
| 0.74 | % | |
| 0.79 | % | |
| (0.05 | ) | |
| 0.52 | % | |
| 0.22 | |
Return on average equity, annualized | |
| 7.55 | % | |
| 8.04 | % | |
| (0.49 | ) | |
| 5.33 | % | |
| 2.22 | |
Efficiency ratio (1) | |
| 77.91 | % | |
| 78.76 | % | |
| (0.85 | ) | |
| 85.96 | % | |
| (8.05 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Share and per share information | |
| | | |
| | | |
| | | |
| | | |
| | |
Average common shares outstanding - basic | |
| 10,281,745 | | |
| 10,189,386 | | |
| 92,359 | | |
| 10,121,853 | | |
| 159,892 | |
Average common shares outstanding - diluted | |
| 10,379,166 | | |
| 10,275,628 | | |
| 103,538 | | |
| 10,194,826 | | |
| 184,340 | |
Basic income per common share | |
| 0.13 | | |
| 0.14 | | |
| (0.01 | ) | |
| 0.09 | | |
| 0.04 | |
Diluted income per common share | |
| 0.13 | | |
| 0.14 | | |
| (0.01 | ) | |
| 0.09 | | |
| 0.04 | |
Book value per common share (2) | |
| 7.07 | | |
| 6.94 | | |
| 0.13 | | |
| 6.75 | | |
| 0.32 | |
Tangible book value per common share (3) | |
| 5.75 | | |
| 5.60 | | |
| 0.15 | | |
| 5.46 | | |
| 0.29 | |
For The Nine Months Ended
| |
September
30, 2014 | | |
September
30, 2013 | | |
Change | |
Selective quarterly performance ratios | |
| | | |
| | | |
| | |
Return on average assets, annualized | |
| 0.71 | % | |
| 0.59 | % | |
| 0.12 | |
Return on average equity, annualized | |
| 7.26 | % | |
| 5.81 | % | |
| 1.45 | |
Efficiency ratio (1) | |
| 79.98 | % | |
| 87.48 | % | |
| (7.50 | ) |
| |
| | | |
| | | |
| | |
Share and per share information | |
| | | |
| | | |
| | |
Average common shares outstanding - basic | |
| 10,218,103 | | |
| 10,121,853 | | |
| 96,250 | |
Average common shares outstanding - diluted | |
| 10,309,436 | | |
| 10,179,928 | | |
| 129,508 | |
Basic income per common share | |
| 0.37 | | |
| 0.29 | | |
| 0.08 | |
Diluted income per common share | |
| 0.37 | | |
| 0.29 | | |
| 0.08 | |
| (1) | Non-interest expense divided by net interest income plus
non-interest income. |
| (2) | Book value is calculated as the total common equity divided
by the period ending number of common shares outstanding. |
| (3) | Tangible book value is calculated as the total common
equity less total intangible assets and liabilities divided by the period ending number of common shares outstanding. |
Pacific Financial Corporation Profits
Increased 51% in Third Quarter 2014 and 29% in First Nine Months of 2014
October 29, 2014
Page 10
NET INTEREST
MARGIN
(Annualized, tax-equivalent
basis) | |
| | |
| | |
| | |
| | |
| |
(Unaudited) | |
| | |
| | |
| | |
| | |
| |
For The Three Months Ended | |
| | |
| | |
| | |
| | |
| |
| |
September
30, 2014 | | |
June
30, 2014 | | |
Change | | |
September
30, 2013 | | |
Change | |
Selective
quarterly performance ratios | |
| | | |
| | | |
| | | |
| | | |
| | |
Yield
on average gross loans (1) | |
| 4.95 | % | |
| 5.04 | % | |
| (0.09 | ) | |
| 4.99 | % | |
| (0.04 | ) |
Yield
on average investment securities (1) | |
| 2.02 | % | |
| 2.54 | % | |
| (0.52 | ) | |
| 1.70 | % | |
| 0.32 | |
Cost
of average interest bearing deposits | |
| 0.34 | % | |
| 0.37 | % | |
| (0.03 | ) | |
| 0.41 | % | |
| (0.07 | ) |
Cost
of average borrowings | |
| 1.83 | % | |
| 1.90 | % | |
| (0.07 | ) | |
| 1.97 | % | |
| (0.14 | ) |
Cost
of average total deposits and borrowings | |
| 0.31 | % | |
| 0.34 | % | |
| (0.03 | ) | |
| 0.38 | % | |
| (0.07 | ) |
Cost
of average interest-bearing liabilities | |
| 0.42 | % | |
| 0.44 | % | |
| (0.02 | ) | |
| 0.48 | % | |
| (0.06 | ) |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Yield
on average interest-earning assets | |
| 4.44 | % | |
| 4.61 | % | |
| (0.17 | ) | |
| 4.25 | % | |
| 0.19 | |
Cost
of average interest-bearing liabilities | |
| 0.42 | % | |
| 0.44 | % | |
| (0.02 | ) | |
| 0.48 | % | |
| (0.06 | ) |
Net
interest spread | |
| 4.02 | % | |
| 4.17 | % | |
| (0.15 | ) | |
| 3.77 | % | |
| 0.25 | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net
interest margin (1) | |
| 4.13 | % | |
| 4.28 | % | |
| (0.15 | ) | |
| 3.88 | % | |
| 0.25 | |
| |
| | |
| | |
| | |
| | |
| |
For The Nine Months Ended | |
| | |
| | |
| | |
| | |
| |
| |
September
30, 2014 | | |
September
30, 2013 | | |
Change | | |
| | |
| |
Selective
quarterly performance ratios | |
| | | |
| | | |
| | | |
| | | |
| | |
Yield
on average gross loans (1) | |
| 5.04 | % | |
| 5.09 | % | |
| (0.05 | ) | |
| | | |
| | |
Yield
on average investment securities (1) | |
| 2.30 | % | |
| 1.83 | % | |
| 0.47 | | |
| | | |
| | |
Cost
of average interest bearing deposits | |
| 0.36 | % | |
| 0.47 | % | |
| (0.11 | ) | |
| | | |
| | |
Cost
of average borrowings | |
| 1.90 | % | |
| 2.02 | % | |
| (0.12 | ) | |
| | | |
| | |
Cost
of average total deposits and borrowings | |
| 0.33 | % | |
| 0.43 | % | |
| (0.10 | ) | |
| | | |
| | |
Cost
of average interest-bearing liabilities | |
| 0.43 | % | |
| 0.55 | % | |
| (0.12 | ) | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Yield
on average interest-earning assets | |
| 4.55 | % | |
| 4.42 | % | |
| 0.13 | | |
| | | |
| | |
Cost
of average interest-bearing liabilities | |
| 0.43 | % | |
| 0.55 | % | |
| (0.12 | ) | |
| | | |
| | |
Net
interest spread | |
| 4.12 | % | |
| 3.87 | % | |
| 0.25 | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
Net
interest margin (1) | |
| 4.22 | % | |
| 3.99 | % | |
| 0.23 | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | |
(1)
Tax-exempt income has been adjusted to a tax equivalent basis at a 34% rate. |
Net Interest Margin
Net interest
margin declined compared to second quarter of 2014, as reductions in investment securities and loan yields offset declines in
deposit costs. Declines in yields on investment securities were primarily due to portfolio restructuring. Loan yield declines
resulted from increased competition for high quality borrowing relationships in the marketplace. Net interest margin improved
when compared to third quarter of 2013, predominantly due to a shift in the mix of earning assets toward higher-yielding loans
and the lower cost of interest bearing liabilities. The growth in the proportion of noninterest bearing deposits over the past
several quarters has supported the improvement in net interest margin as well. In second quarter 2014, loan yields and net interest
margin were enhanced by 9 and 7 basis points, respectively, due to the collection of $115,000 in non-accrual interest during the
current period. There was no similar collection of non-accrual interest during the corresponding periods in 2013.
The improvement
in yields on investment securities also enhanced net interest margin between the nine months ending September 30, 2014 and the
same period in 2013. This was primarily the result of reducing the proportion of lower yielding cash-equivalent investments to
fund loan growth and increasing the proportion of relatively higher-yielding federal government guaranteed mortgage-backed securities.
Pacific Financial Corporation Profits
Increased 51% in Third Quarter 2014 and 29% in First Nine Months of 2014
October 29, 2014
Page 11
The following tables set forth information
with regard to average balances of interest earning assets and interest bearing liabilities and the resultant yields or cost,
net interest income, and the net interest margin on a tax equivalent basis. Loans held for sale and non-accrual loans are included
in total loans.
Average Interest
Earning Balances: | |
For
the Three Months Ended | |
| |
September 30, 2014 | | |
June 30, 2014 | | |
September 30, 2013 | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| |
| | |
Interest | | |
Average | | |
| | |
Interest | | |
Average | | |
| | |
Interest | | |
Average | |
| |
Average | | |
Income or | | |
Yields or | | |
Average | | |
Income or | | |
Yields or | | |
Average | | |
Income or | | |
Yields or | |
| |
Balance | | |
Expense | | |
Rates | | |
Balance | | |
Expense | | |
Rates | | |
Balance | | |
Expense | | |
Rates | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
(Dollars in Thousands) | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
ASSETS: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Interest
bearing certificate of deposit | |
$ | 2,727 | | |
$ | 11 | | |
| 1.60 | % | |
$ | 2,727 | $ | |
| 10 | | |
| 1.47 | % | |
$ | 1,871 | $ | |
| 6 | | |
| 1.27 | % |
Interest
bearing deposits in banks | |
| 23,928 | | |
| 14 | | |
| 0.23 | % | |
| 12,552 | | |
| 9 | | |
| 0.29 | % | |
| 46,665 | | |
| 29 | | |
| 0.25 | % |
Investments
- taxable | |
| 63,751 | | |
| 298 | | |
| 1.85 | % | |
| 65,964 | | |
| 343 | | |
| 2.09 | % | |
| 61,924 | | |
| 221 | | |
| 1.42 | % |
Investments
- nontaxable | |
| 27,646 | | |
| 277 | | |
| 3.98 | % | |
| 31,607 | | |
| 352 | | |
| 4.47 | % | |
| 32,058 | | |
| 355 | | |
| 4.39 | % |
Gross loans
(1) | |
| 549,280 | | |
| 6,870 | | |
| 4.96 | % | |
| 532,490 | | |
| 6,718 | | |
| 5.06 | % | |
| 483,459 | | |
| 6,090 | | |
| 5.00 | % |
Loans
held for sale | |
| 7,068 | | |
| 69 | | |
| 3.87 | % | |
| 7,685 | | |
| 71 | | |
| 3.71 | % | |
| 6,642 | | |
| 72 | | |
| 4.30 | % |
Total interest
earning assets | |
| 674,400 | | |
| 7,539 | | |
| 4.44 | % | |
| 653,025 | | |
| 7,503 | | |
| 4.61 | % | |
| 632,619 | | |
| 6,773 | | |
| 4.25 | % |
Cash and
due from banks | |
| 14,169 | | |
| | | |
| | | |
| 13,135 | | |
| | | |
| | | |
| 12,362 | | |
| | | |
| | |
Bank premises
and equipment (net) | |
| 16,615 | | |
| | | |
| | | |
| 16,703 | | |
| | | |
| | | |
| 16,167 | | |
| | | |
| | |
Other real
estate owned | |
| 940 | | |
| | | |
| | | |
| 2,088 | | |
| | | |
| | | |
| 4,070 | | |
| | | |
| | |
Deferred
fees | |
| (1,113 | ) | |
| | | |
| | | |
| (1,068 | ) | |
| | | |
| | | |
| (1,045 | ) | |
| | | |
| | |
Allowance
for loan losses | |
| (8,342 | ) | |
| | | |
| | | |
| (8,271 | ) | |
| | | |
| | | |
| (8,917 | ) | |
| | | |
| | |
Other
assets | |
| 40,757 | | |
| | | |
| | | |
| 40,705 | | |
| | | |
| | | |
| 40,955 | | |
| | | |
| | |
Total
assets | |
$ | 737,426 | | |
| | | |
| | | |
$ | 716,317 | | |
| | | |
| | | |
$ | 696,211 | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
LIABILITIES
AND SHAREHOLDERS' EQUITY: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Interest-bearing deposits | |
$ | 343,204 | | |
| 134 | | |
| 0.15 | % | |
$ | 345,116 | | |
| 140 | | |
| 0.16 | % | |
$ | 322,606 | | |
| 167 | | |
| 0.21 | % |
Time deposits | |
| 120,515 | | |
| 269 | | |
| 0.89 | % | |
| 122,134 | | |
| 290 | | |
| 0.95 | % | |
| 138,762 | | |
| 307 | | |
| 0.88 | % |
FHLB borrowings | |
| 10,878 | | |
| 61 | | |
| 2.22 | % | |
| 10,000 | | |
| 60 | | |
| 2.41 | % | |
| 10,000 | | |
| 62 | | |
| 2.46 | % |
Short term
borrowings | |
| 587 | | |
| - | | |
| 0.00 | % | |
| 6 | | |
| - | | |
| 0.00 | % | |
| - | | |
| - | | |
| 0.00 | % |
Junior
subordinated debentures | |
| 13,403 | | |
| 54 | | |
| 1.60 | % | |
| 13,403 | | |
| 51 | | |
| 1.53 | % | |
| 13,403 | | |
| 54 | | |
| 1.60 | % |
Total interest
bearing liabilities | |
| 488,587 | | |
| 518 | | |
| 0.42 | % | |
| 490,659 | | |
| 541 | | |
| 0.44 | % | |
| 484,771 | | |
| 590 | | |
| 0.48 | % |
Non-interest-bearing deposits | |
| 170,560 | | |
| | | |
| | | |
| 150,776 | | |
| | | |
| | | |
| 138,875 | | |
| | | |
| | |
Other liabilities | |
| 6,055 | | |
| | | |
| | | |
| 4,928 | | |
| | | |
| | | |
| 4,957 | | |
| | | |
| | |
Equity | |
| 72,224 | | |
| | | |
| | | |
| 69,954 | | |
| | | |
| | | |
| 67,608 | | |
| | | |
| | |
Total
liabilities and shareholders' equity | |
$ | 737,426 | | |
| | | |
| | | |
$ | 716,317 | | |
| | | |
| | | |
$ | 696,211 | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net
interest income (3) | |
| | | |
$ | 7,021 | | |
| | | |
| | | |
$ | 6,962 | | |
| | | |
| | | |
$ | 6,183 | | |
| | |
Net
interest spread | |
| | | |
| | | |
| 4.02 | % | |
| | | |
| | | |
| 4.17 | % | |
| | | |
| | | |
| 3.77 | % |
Average
yield on investments | |
| | | |
| | | |
| 2.02 | % | |
| | | |
| | | |
| 2.54 | % | |
| | | |
| | | |
| 1.70 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Average
yield on earning assets (2) (3) | |
| | | |
| | | |
| 4.44 | % | |
| | | |
| | | |
| 4.61 | % | |
| | | |
| | | |
| 4.25 | % |
Interest
expense to earning assets | |
| | | |
| | | |
| 0.31 | % | |
| | | |
| | | |
| 0.33 | % | |
| | | |
| | | |
| 0.37 | % |
Net interest
income to earning assets (2) (3) | |
| | | |
| | | |
| 4.13 | % | |
| | | |
| | | |
| 4.28 | % | |
| | | |
| | | |
| 3.88 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Reconciliation of Non-GAAP measure: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Tax
Equivalent Net Interest Income | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net interest
income | |
| | | |
$ | 6,882 | | |
| | | |
| | | |
$ | 6,796 | | |
| | | |
| | | |
$ | 6,015 | | |
| | |
Tax equivalent
adjustment for municipal loan interest | |
| | | |
| 45 | | |
| | | |
| | | |
| 46 | | |
| | | |
| | | |
| 46 | | |
| | |
Tax
equivalent adjustment for municipal bond interest | |
| | | |
| 94 | | |
| | | |
| | | |
| 120 | | |
| | | |
| | | |
| 121 | | |
| | |
Tax
equivalent net interest income | |
| | | |
$ | 7,021 | | |
| | | |
| | | |
$ | 6,962 | | |
| | | |
| | | |
$ | 6,182 | | |
| | |
Non-GAAP financial measures have
inherent limitations, are not required to be uniformly applied, and are not audited.
Management believes that presentation of this non-GAAP measure provides useful information frequently used by shareholders in the evaluation of a company.
Non-GAAP financial measures have
limitations as analytical tools and should not be considered in isolation or as a substitute for analyses of results as reported
under GAAP.
(1) Non-accrual loans of approximately
$4.8 million at 09/30/14, $6.4 million at 06/30/2014, and $7.8 million for 09/30/2013 are included in the average loan balances.
(2) Loan interest income includes
loan fee income of $152,000, $180,000, and $169,000 for the three months ended 09/30/2014, 06/30/2014, and 09/30/2013, respectively.
(3) Tax-exempt income has been
adjusted to a tax equivalent basis at a 34% effective rate. The amount of such adjustment was an addition to recorded pre-tax
income of $139,000, $166,000, and $167,000 for the three months ended September 30, 2014, June 30, 2014, and September 30,
2013, respectively.
Pacific Financial Corporation Profits
Increased 51% in Third Quarter 2014 and 29% in First Nine Months of 2014
October 29, 2014
Page 12
| |
For the Three Months Ended | | |
For the Three Months Ended | |
| |
September 30, 2014 vs. June
30, 2014 | | |
September 30, 2014 vs. September
30, 2013 | |
| |
Increase
(Decrease) Due To | | |
Increase
(Decrease) Due To | |
(Dollars in Thousands) | |
| | |
| | |
Net | | |
| | |
| | |
Net | |
| |
Volume | | |
Rate | | |
Change | | |
Volume | | |
Rate | | |
Change | |
ASSETS: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Interest
bearing certificate of deposit | |
$ | - | | |
$ | 1 | | |
$ | 1 | | |
$ | 3 | | |
$ | 2 | | |
$ | 5 | |
Interest
bearing deposits in banks | |
| 8 | | |
| (3 | ) | |
| 5 | | |
| (14 | ) | |
| (1 | ) | |
| (15 | ) |
Investments
- taxable | |
| (12 | ) | |
| (33 | ) | |
| (45 | ) | |
| 6 | | |
| 71 | | |
| 77 | |
Investments
- nontaxable | |
| (44 | ) | |
| (31 | ) | |
| (75 | ) | |
| (48 | ) | |
| (30 | ) | |
| (78 | ) |
Gross loans | |
| 212 | | |
| (60 | ) | |
| 152 | | |
| 821 | | |
| (41 | ) | |
| 780 | |
Loans
held for sale | |
| (6 | ) | |
| 4 | | |
| (2 | ) | |
| 5 | | |
| (8 | ) | |
| (3 | ) |
Total interest
earning assets | |
$ | 158 | | |
$ | (122 | ) | |
$ | 36 | | |
$ | 773 | | |
$ | (7 | ) | |
$ | 766 | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
LIABILITIES
AND SHAREHOLDERS' EQUITY: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Interest-bearing deposits | |
$ | (1 | ) | |
$ | (5 | ) | |
$ | (6 | ) | |
$ | 11 | | |
$ | (44 | ) | |
$ | (33 | ) |
Time deposits | |
| (4 | ) | |
| (17 | ) | |
| (21 | ) | |
| (40 | ) | |
| 2 | | |
| (38 | ) |
FHLB borrowings | |
| 5 | | |
| (4 | ) | |
| 1 | | |
| 5 | | |
| (6 | ) | |
| (1 | ) |
Short-term borrowings | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | |
Long-term
borrowings | |
| - | | |
| 3 | | |
| 3 | | |
| - | | |
| - | | |
| - | |
Total
interest bearing liabilities | |
| 0 | | |
| (23 | ) | |
| (23 | ) | |
| (24 | ) | |
| (48 | ) | |
| (72 | ) |
Net
increase (decrease) in net interest income | |
$ | 158 | | |
$ | (99 | ) | |
$ | 59 | | |
$ | 797 | | |
$ | 41 | | |
$ | 838 | |
Pacific Financial Corporation Profits
Increased 51% in Third Quarter 2014 and 29% in First Nine Months of 2014
October 29, 2014
Page 13
Average Interest Earning
Balances: | |
For
the Nine Months Ended | |
| |
September
30, 2014 | | |
September
30, 2013 | |
| |
Average Balance | | |
Interest Income or Expense | | |
Average Yields or Rates | | |
Average Balance | | |
Interest Income or Expense | | |
Average Yields or Rates | |
(Dollars in Thousands) | |
| | |
| | |
| | |
| | |
| | |
| |
ASSETS: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Interest
bearing certificate of deposit | |
$ | 2,727 | | |
$ | 31 | | |
| 1.52 | % | |
$ | 2,312 | | |
$ | 20 | | |
| 1.16 | % |
Interest
bearing deposits in banks | |
| 18,167 | | |
| 33 | | |
| 0.24 | % | |
| 37,359 | | |
| 66 | | |
| 0.24 | % |
Investments
- taxable | |
| 65,789 | | |
| 980 | | |
| 1.99 | % | |
| 51,861 | | |
| 472 | | |
| 1.22 | % |
Investments
- nontaxable | |
| 30,656 | | |
| 977 | | |
| 4.26 | % | |
| 33,557 | | |
| 1,153 | | |
| 4.59 | % |
Gross loans
(1) | |
| 531,517 | | |
| 20,081 | | |
| 5.05 | % | |
| 471,702 | | |
| 18,071 | | |
| 5.12 | % |
Loans
held for sale | |
| 6,348 | | |
| 189 | | |
| 3.98 | % | |
| 9,709 | | |
| 249 | | |
| 3.43 | % |
Total interest
earning assets | |
| 655,204 | | |
| 22,291 | | |
| 4.55 | % | |
| 606,500 | | |
| 20,031 | | |
| 4.42 | % |
Cash and
due from banks | |
| 13,106 | | |
| | | |
| | | |
| 11,478 | | |
| | | |
| | |
Bank premises
and equipment (net) | |
| 16,707 | | |
| | | |
| | | |
| 15,547 | | |
| | | |
| | |
Other real
estate owned | |
| 1,858 | | |
| | | |
| | | |
| 4,086 | | |
| | | |
| | |
Deferred
fees | |
| (1,106 | ) | |
| | | |
| | | |
| (1,008 | ) | |
| | | |
| | |
Allowance
for loan losses | |
| (8,334 | ) | |
| | | |
| | | |
| (9,218 | ) | |
| | | |
| | |
Other
assets | |
| 40,862 | | |
| | | |
| | | |
| 40,925 | | |
| | | |
| | |
Total
assets | |
$ | 718,297 | | |
| | | |
| | | |
$ | 668,310 | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
LIABILITIES
AND SHAREHOLDERS' EQUITY: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Interest-bearing deposits | |
$ | 341,533 | | |
| 415 | | |
| 0.16 | % | |
$ | 311,792 | | |
| 547 | | |
| 0.23 | % |
Time deposits | |
| 123,140 | | |
| 835 | | |
| 0.91 | % | |
| 136,863 | | |
| 1,026 | | |
| 1.00 | % |
FHLB borrowings | |
| 10,296 | | |
| 181 | | |
| 2.35 | % | |
| 10,066 | | |
| 186 | | |
| 2.47 | % |
Short term
borrowings | |
| 200 | | |
| - | | |
| 0.00 | % | |
| - | | |
| - | | |
| 0.00 | % |
Junior
subordinated debentures | |
| 13,403 | | |
| 158 | | |
| 1.58 | % | |
| 13,403 | | |
| 168 | | |
| 1.68 | % |
Total interest
bearing liabilities | |
| 488,572 | | |
| 1,589 | | |
| 0.43 | % | |
| 472,124 | | |
| 1,927 | | |
| 0.55 | % |
Non-interest-bearing deposits | |
| 154,213 | | |
| | | |
| | | |
| 123,868 | | |
| | | |
| | |
Other liabilities | |
| 5,396 | | |
| | | |
| | | |
| 4,596 | | |
| | | |
| | |
Equity | |
| 70,116 | | |
| | | |
| | | |
| 67,722 | | |
| | | |
| | |
Total
liabilities and shareholders' equity | |
$ | 718,297 | | |
| | | |
| | | |
$ | 668,310 | | |
| | | |
| | |
Net
interest income (3) | |
| | | |
$ | 20,702 | | |
| | | |
| | | |
$ | 18,104 | | |
| | |
Net
interest spread | |
| | | |
| | | |
| 4.12 | % | |
| | | |
| | | |
| 3.87 | % |
Average
yield on investments | |
| | | |
| | | |
| 2.30 | % | |
| | | |
| | | |
| 1.83 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Average
yield on earning assets (2) (3) | |
| | | |
| | | |
| 4.55 | % | |
| | | |
| | | |
| 4.42 | % |
Interest
expense to earning assets | |
| | | |
| | | |
| 0.33 | % | |
| | | |
| | | |
| 0.43 | % |
Net interest
income to earning assets (2) (3) | |
| | | |
| | | |
| 4.22 | % | |
| | | |
| | | |
| 3.99 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Reconciliation
of Non-GAAP measure: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Tax
Equivalent Net Interest Income | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Net interest
income | |
| | | |
$ | 20,232 | | |
| | | |
| | | |
$ | 17,549 | | |
| | |
Tax equivalent
adjustment for municipal loan interest | |
| | | |
| 138 | | |
| | | |
| | | |
| 163 | | |
| | |
Tax
equivalent adjustment for municipal bond interest | |
| | | |
| 332 | | |
| | | |
| | | |
| 392 | | |
| | |
Tax
equivalent net interest income | |
| | | |
$ | 20,702 | | |
| | | |
| | | |
$ | 18,104 | | |
| | |
Non-GAAP financial measures have
inherent limitations, are not required to be uniformly applied, and are not audited.
Management believes that presentation
of this non-GAAP measure provides useful information frequently used by shareholders in the evaluation of a company.
Non-GAAP financial measures have
limitations as analytical tools and should not be considered in isolation or as a substitute for analyses of results as reported
under GAAP.
(1) Non-accrual loans of approximately
$4.8 million at 09/30/14 and $7.8 million for 09/30/2013 are included in the average loan balances.
(2) Loan interest income includes
loan fee income of $482,000 and $396,000 for the nine months ended 09/30/2014 and 09/30/2013, respectively.
(3) Tax-exempt income has been adjusted
to a tax equivalent basis at a 34% effective rate. The amount of such adjustment was an addition to recorded pre-tax income of
$470,000 and $555,000 for the nine months ended September 30, 2014 and September 30, 2013, respectively.
| |
For the Nine Months Ended | |
| |
September 30, 2014 vs. September 30, 2013 | |
| |
Increase (Decrease) Due To | |
(Dollars in Thousands) | |
| | |
| | |
Net | |
| |
Volume | | |
Rate | | |
Change | |
ASSETS: | |
| | | |
| | | |
| | |
Interest bearing certificate of deposit | |
$ | 2 | | |
$ | 9 | | |
$ | 11 | |
Interest bearing deposits in banks | |
| (23 | ) | |
| (10 | ) | |
| (33 | ) |
Investments - taxable | |
| 84 | | |
| 424 | | |
| 508 | |
Investments - nontaxable | |
| (66 | ) | |
| (110 | ) | |
| (176 | ) |
Gross loans | |
| 1,519 | | |
| 491 | | |
| 2,010 | |
Loans held for sale | |
| (57 | ) | |
| (3 | ) | |
| (60 | ) |
Total interest earning assets | |
$ | 1,459 | | |
$ | 801 | | |
$ | 2,260 | |
| |
| | | |
| | | |
| | |
LIABILITIES AND SHAREHOLDERS' EQUITY: | |
| | | |
| | | |
| | |
Interest-bearing deposits | |
$ | 34 | | |
$ | (166 | ) | |
$ | (132 | ) |
Time deposits | |
| (68 | ) | |
| (123 | ) | |
| (191 | ) |
FHLB borrowings | |
| 3 | | |
| (8 | ) | |
| (5 | ) |
Short-term borrowings | |
| - | | |
| - | | |
| - | |
Long-term borrowings | |
| - | | |
| (10 | ) | |
| (10 | ) |
Total interest bearing liabilities | |
| (31 | ) | |
| (307 | ) | |
| (338 | ) |
Net increase (decrease) in net interest income | |
$ | 1,490 | | |
$ | 1,108 | | |
$ | 2,598 | |
Pacific Financial Corporation Profits
Increased 51% in Third Quarter 2014 and 29% in First Nine Months of 2014
October 29, 2014
Page 14
SUMMARY AVERAGE
BALANCE SHEETS
(Unaudited) | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
(Dollars in Thousands) | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Averages for the Three Months Ended | |
September 30, | | |
June 30, | | |
| | |
| | |
September 30, | | |
| | |
| |
| |
2014 | | |
2014 | | |
$
Change | | |
%
Change | | |
2013 | | |
$
Change | | |
%
Change | |
Assets: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Cash
and due from banks | |
$ | 14,169 | | |
$ | 13,135 | | |
$ | 1,034 | | |
| 8 | % | |
$ | 12,362 | | |
$ | 1,807 | | |
| 15 | % |
Interest-bearing
deposits in banks | |
| 23,928 | | |
| 12,552 | | |
| 11,376 | | |
| 91 | % | |
| 46,665 | | |
| (22,737 | ) | |
| -49 | % |
Interest
bearing certificate of deposit | |
| 2,727 | | |
| 2,727 | | |
| 0 | | |
| 0 | % | |
| 1,871 | | |
| 856 | | |
| 46 | % |
Investment
securities | |
| 91,397 | | |
| 97,571 | | |
| (6,174 | ) | |
| -6 | % | |
| 93,982 | | |
| (2,585 | ) | |
| -3 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Loans,
net of deferred loan fees | |
| 555,235 | | |
| 539,106 | | |
| 16,129 | | |
| 3 | % | |
| 489,056 | | |
| 66,179 | | |
| 14 | % |
Allowance
for loan losses | |
| (8,342 | ) | |
| (8,271 | ) | |
| (71 | ) | |
| 1 | % | |
| (8,917 | ) | |
| 575 | | |
| -6 | % |
Net loans | |
| 546,893 | | |
| 530,835 | | |
| 16,058 | | |
| 3 | % | |
| 480,139 | | |
| 66,754 | | |
| 14 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Other
assets | |
| 58,312 | | |
| 59,497 | | |
| (1,185 | ) | |
| -2 | % | |
| 61,191 | | |
| (2,879 | ) | |
| -5 | % |
Total
assets | |
$ | 737,426 | | |
$ | 716,317 | | |
$ | 21,109 | | |
| 3 | % | |
$ | 696,210 | | |
$ | 41,216 | | |
| 6 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Liabilities: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total deposits | |
$ | 634,279 | | |
$ | 618,026 | | |
$ | 16,253 | | |
| 3 | % | |
$ | 600,242 | | |
$ | 34,037 | | |
| 6 | % |
Borrowings | |
| 24,868 | | |
| 23,409 | | |
| 1,459 | | |
| 6 | % | |
| 23,403 | | |
| 1,465 | | |
| 6 | % |
Other
liabilities | |
| 6,055 | | |
| 4,928 | | |
| 1,127 | | |
| 23 | % | |
| 4,957 | | |
| 1,098 | | |
| 22 | % |
Total
liabilities | |
| 665,202 | | |
| 646,363 | | |
| 18,839 | | |
| 3 | % | |
| 628,602 | | |
| 36,600 | | |
| 6 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Equity: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Common
equity | |
| 72,224 | | |
| 69,954 | | |
| 2,270 | | |
| 3 | % | |
| 67,608 | | |
| 4,616 | | |
| 7 | % |
Total equity | |
| 72,224 | | |
| 69,954 | | |
| 2,270 | | |
| 3 | % | |
| 67,608 | | |
| 4,616 | | |
| 7 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total
liabilities and shareholders' equity | |
$ | 737,426 | | |
$ | 716,317 | | |
$ | 21,109 | | |
| 3 | % | |
$ | 696,210 | | |
$ | 41,216 | | |
| 6 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Averages for the Nine Months Ended | |
September 30, | | |
September 30, | | |
| | |
| | |
| | |
| | |
| |
| |
2014 | | |
2013 | | |
$
Change | | |
%
Change | | |
| | |
| | |
| |
Assets: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Cash
and due from banks | |
$ | 13,106 | | |
$ | 11,478 | | |
$ | 1,628 | | |
| 14 | % | |
| | | |
| | | |
| | |
Interest-bearing
deposits in banks | |
| 18,167 | | |
| 37,359 | | |
| (19,192 | ) | |
| -51 | % | |
| | | |
| | | |
| | |
Interest
bearing certificate of deposit | |
| 2,727 | | |
| 2,312 | | |
| 415 | | |
| 18 | % | |
| | | |
| | | |
| | |
Investment
securities | |
| 96,445 | | |
| 85,418 | | |
| 11,027 | | |
| 13 | % | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Loans,
net of deferred loan fees | |
| 536,759 | | |
| 480,404 | | |
| 56,355 | | |
| 12 | % | |
| | | |
| | | |
| | |
Allowance
for loan losses | |
| (8,334 | ) | |
| (9,218 | ) | |
| 884 | | |
| -10 | % | |
| | | |
| | | |
| | |
Net loans | |
| 528,425 | | |
| 471,186 | | |
| 57,239 | | |
| 12 | % | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Other
assets | |
| 59,427 | | |
| 60,557 | | |
| (1,130 | ) | |
| -2 | % | |
| | | |
| | | |
| | |
Total
assets | |
$ | 718,297 | | |
$ | 668,310 | | |
$ | 49,987 | | |
| 7 | % | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Liabilities: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total deposits | |
$ | 618,886 | | |
$ | 572,523 | | |
$ | 46,363 | | |
| 8 | % | |
| | | |
| | | |
| | |
Borrowings | |
| 23,899 | | |
| 23,469 | | |
| 430 | | |
| 2 | % | |
| | | |
| | | |
| | |
Other
liabilities | |
| 5,396 | | |
| 4,596 | | |
| 800 | | |
| 17 | % | |
| | | |
| | | |
| | |
Total
liabilities | |
| 648,181 | | |
| 600,588 | | |
| 47,593 | | |
| 8 | % | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Equity: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Common
equity | |
| 70,116 | | |
| 67,722 | | |
| 2,394 | | |
| 4 | % | |
| | | |
| | | |
| | |
Total equity | |
| 70,116 | | |
| 67,722 | | |
| 2,394 | | |
| 4 | % | |
| | | |
| | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Total
liabilities and shareholders' equity | |
$ | 718,297 | | |
$ | 668,310 | | |
$ | 49,987 | | |
| 7 | % | |
| | | |
| | | |
| | |
ASSET
QUALITY
At September
30, 2014, total adversely classified loans increased in dollars and as a percentage of gross loans from the preceding and year
ago quarters. This is the result of designating a $4.7 million commercial and commercial real estate relationship as adversely
classified during the current quarter. Total loans on accruing status 30-89 days past due continue to remain below 1.00% of gross
loans, mirroring the improvement in overall credit quality noted previously. Past due loans increased in the current period primarily
from a $2.6 million commercial real estate relationship scheduled to be paid off. We monitor delinquencies, defined as loans on
accruing status 30-89 days past due, as an indicator of future adversely classified loans.
At September
30, 2014, total nonperforming loans were down compared to June 30, 2014 and September 30, 2013. Nonperforming assets also declined
during this period as a percentage of total assets, despite the increase in OREO during the current quarter. This was primarily
due to the payoff of a $1.0 million non-accrual commercial real estate loan during the current quarter. Nonperforming loans consist
primarily of commercial real estate loans.
Pacific Financial Corporation Profits Increased 51% in Third
Quarter 2014 and 29% in First Nine Months of 2014
October 29, 2014
Page 15
Adversely classified loans
(Unaudited)
(Dollars in Thousands)
| |
September
30, 2014 | | |
June 30,
2014 | | |
$
Change | | |
%
Change | | |
September
30, 2013 | | |
$
Change | | |
%
Change | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Rated substandard or worse, but not impaired | |
$ | 11,020 | | |
$ | 6,938 | | |
$ | 4,082 | | |
| 59 | % | |
$ | 3,365 | | |
$ | 7,655 | | |
| 227 | % |
Impaired | |
| 7,429 | | |
| 9,025 | | |
| (1,596 | ) | |
| -18 | % | |
| 10,383 | | |
| (2,954 | ) | |
| -28 | % |
Total adversely classified loans* | |
$ | 18,449 | | |
$ | 15,963 | | |
$ | 2,486 | | |
| 16 | % | |
$ | 13,748 | | |
$ | 4,701 | | |
| 34 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Gross loans | |
$ | 553,319 | | |
$ | 548,371 | | |
$ | 4,948 | | |
| 1 | % | |
$ | 487,808 | | |
$ | 65,511 | | |
| 13 | % |
Adversely classified loans to gross loans | |
| 3.33 | % | |
| 2.91 | % | |
| 0.42 | % | |
| | | |
| 2.82 | % | |
| 0.51 | % | |
| | |
Allowance for loan losses | |
$ | 8,255 | | |
$ | 8,315 | | |
$ | (60 | ) | |
| -1 | % | |
$ | 8,806 | | |
$ | (551 | ) | |
| -6 | % |
Allowance for loan losses as a percentage of adversely classified loans | |
| 44.74 | % | |
| 52.09 | % | |
| -7.35 | % | |
| | | |
| 64.05 | % | |
| -19.31 | % | |
| | |
Allowance for loan losses to total impaired loans | |
| 111.12 | % | |
| 92.13 | % | |
| 18.99 | % | |
| | | |
| 84.81 | % | |
| 26.31 | % | |
| | |
* Adversely 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 may jeopardize 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.
30-89 Days Past Due by type
(Unaudited)
(Dollars in Thousands)
| |
September
30, 2014 | | |
%
of
Category | | |
June
30,
2014 | | |
%
of
Category | | |
$ Change | | |
% Change | | |
September
30, 2013 | | |
%
of
Category | | |
$ Change | | |
% Change | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Commercial and agricultural | |
$ | 7 | | |
| 0.2 | % | |
$ | 23 | | |
| 16.5 | % | |
$ | (16 | ) | |
| -70 | % | |
$ | 52 | | |
| 6.7 | % | |
$ | (45 | ) | |
| -87 | % |
Real estate: | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Construction and development | |
| | | |
| 0.0 | % | |
| - | | |
| 0.0 | % | |
| - | | |
| 0 | % | |
| - | | |
| 0.0 | % | |
| - | | |
| 0 | % |
Residential 1-4 family | |
| 251 | | |
| 8.7 | % | |
| 53 | | |
| 38.1 | % | |
| 198 | | |
| 374 | % | |
| 590 | | |
| 76.5 | % | |
| (339 | ) | |
| -57 | % |
Multi-family | |
| | | |
| 0.0 | % | |
| - | | |
| 0.0 | % | |
| - | | |
| 0 | % | |
| - | | |
| 0.0 | % | |
| - | | |
| 0 | % |
Commercial real estate —
owner occupied | |
| | | |
| 0.0 | % | |
| 0 | | |
| 0.0 | % | |
| 0 | | |
| 0 | % | |
| 87 | | |
| 11.3 | % | |
| (87 | ) | |
| -100 | % |
Commercial real estate
— non owner occupied | |
| 2,612 | | |
| 90.9 | % | |
| 0 | | |
| 0.0 | % | |
| 2,612 | | |
| 100 | % | |
| - | | |
| 0.0 | % | |
| 2,612 | | |
| 100 | % |
Farmland | |
| | | |
| | | |
| - | | |
| 0.0 | % | |
| - | | |
| 0 | % | |
| 37 | | |
| 4.8 | % | |
| (37 | ) | |
| -100 | % |
Total real estate | |
$ | 2,863 | | |
| | | |
$ | 53 | | |
| | | |
$ | 2,810 | | |
| 5302 | % | |
$ | 714 | | |
| | | |
$ | 2,149 | | |
| | |
| |
| | | |
| | | |
| | | |
| | | |
| - | | |
| | | |
| | | |
| | | |
| | | |
| | |
Consumer | |
| 2 | | |
| 0.1 | % | |
| 63 | | |
| 45.3 | % | |
| (61 | ) | |
| -97 | % | |
| 5 | | |
| 0.6 | % | |
| (3 | ) | |
| -60 | % |
Total loans 30-89 days
past due, not in nonaccrual status | |
$ | 2,872 | | |
| 100.0 | % | |
$ | 139 | | |
| 100.0 | % | |
$ | 2,733 | | |
| 1966 | % | |
$ | 771 | | |
| 100.0 | % | |
$ | 2,101 | | |
| 273 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Delinquent loans to total loans, not in nonaccrual
status | |
| 0.60 | % | |
| | | |
| 0.03 | % | |
| | | |
| | | |
| | | |
| 0.17 | % | |
| | | |
| | | |
| | |
Non-performing assets
(Unaudited)
(Dollars in Thousands) | |
September 30, 2014 | | |
June
30,
2014 | | |
$
Change | | |
%
Change | | |
September 30, 2013 | | |
$
Change | | |
%
Change | |
Loans on nonaccrual status | |
$ | 4,811 | | |
$ | 6,388 | | |
$ | (1,577 | ) | |
| -25 | % | |
$ | 7,829 | | |
$ | (3,018 | ) | |
| -39 | % |
Loans
past due greater than 90 days but not on nonaccrual status | |
| 409 | | |
| - | | |
| 409 | | |
| 100 | % | |
| 221 | | |
| 188 | | |
| 85 | % |
Total non-performing loans | |
| 5,220 | | |
| 6,388 | | |
| (1,168 | ) | |
| -18 | % | |
| 8,050 | | |
| (2,830 | ) | |
| -35 | % |
Other real estate owned
and foreclosed assets | |
| 1,210 | | |
| 991 | | |
| 219 | | |
| 22 | % | |
| 4,334 | | |
| (3,124 | ) | |
| -72 | % |
Total
nonperforming assets | |
$ | 6,430 | | |
$ | 7,379 | | |
$ | (949 | ) | |
| -13 | % | |
$ | 12,384 | | |
$ | (5,954 | ) | |
| -48 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Percentage
of nonperforming assets to total assets | |
| 0.86 | % | |
| 1.03 | % | |
| | | |
| | | |
| 1.73 | % | |
| | | |
| | |
OREO increased during third quarter 2014,
but declined significantly year-over-year. One commercial income property was taken into the OREO portfolio during the quarter.
OREO valuation adjustments continued to be minimal. At September 30, 2014, the OREO portfolio consisted of 7 properties, down from
both second quarter 2014 and third quarter 2013. The largest balances in the OREO portfolio at the end of the quarter were attributable
to commercial properties, followed by residential properties, all of which are located within our market area.
Pacific Financial Corporation Profits Increased 51% in Third
Quarter 2014 and 29% in First Nine Months of 2014
October 29, 2014
Page 16
Other real estate owned and foreclosed assets
(Unaudited)
(Dollars in Thousands)
For the Three
Months Ended | |
September
30,
2014 | | |
%
of
Category | | |
June
30,
2014 | | |
%
of
Category | | |
$
Change | | |
%
Change | | |
September
30,
2013 | | |
%
of
Category | | |
$
Change | | |
%
Change | |
Other real estate owned,
beginning of period | |
$ | 991 | | |
| 81.9 | % | |
$ | 2,386 | | |
| 240.8 | % | |
$ | (1,395 | ) | |
| -58 | % | |
$ | 3,451 | | |
| 79.6 | % | |
$ | (2,460 | ) | |
| -71 | % |
Transfers from outstanding loans | |
| 525 | | |
| 43.4 | % | |
| 206 | | |
| 20.8 | % | |
| 319 | | |
| 155 | % | |
| 1,382 | | |
| 31.9 | % | |
| (857 | ) | |
| -62 | % |
Improvements and other additions | |
| - | | |
| 0.0 | % | |
| - | | |
| 0.0 | % | |
| - | | |
| 0 | % | |
| - | | |
| 0.0 | % | |
| - | | |
| 0 | % |
Proceeds from sales | |
| (219 | ) | |
| -18.1 | % | |
| (1,490 | ) | |
| -150.4 | % | |
| 1,271 | | |
| -85 | % | |
| (341 | ) | |
| -7.9 | % | |
| 122 | | |
| -36 | % |
Net gain (loss) on sales | |
| (86 | ) | |
| -7.1 | % | |
| (57 | ) | |
| -5.8 | % | |
| (29 | ) | |
| 51 | % | |
| 18 | | |
| 0.4 | % | |
| (104 | ) | |
| -578 | % |
Impairment charges | |
| (1 | ) | |
| -0.1 | % | |
| (54 | ) | |
| -5.4 | % | |
| 53 | | |
| -98 | % | |
| (176 | ) | |
| -4.1 | % | |
| 175 | | |
| -99 | % |
Total other
real estate owned | |
$ | 1,210 | | |
| 100.0 | % | |
$ | 991 | | |
| 100.0 | % | |
$ | 219 | | |
| 22 | % | |
$ | 4,334 | | |
| 100.0 | % | |
$ | (3,124 | ) | |
| -72 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
For the Nine Months
Ended | |
September
30,
2014 | | |
%
of
Category | | |
September
30,
2013 | | |
%
of
Category | | |
$
Change | | |
%
Change | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned,
beginning of period | |
$ | 2,771 | | |
| 229.0 | % | |
$ | 4,678 | | |
| 107.9 | % | |
$ | (1,907 | ) | |
| -41 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Transfers from outstanding loans | |
| 842 | | |
| 69.6 | % | |
| 1,591 | | |
| 36.7 | % | |
| (749 | ) | |
| -47 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Improvements and other additions | |
| - | | |
| 0.0 | % | |
| - | | |
| 0.0 | % | |
| - | | |
| 0 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from sales | |
| (2,157 | ) | |
| -178.3 | % | |
| (1,342 | ) | |
| -31.0 | % | |
| (815 | ) | |
| 61 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net gain (loss) on sales | |
| (179 | ) | |
| -14.8 | % | |
| 43 | | |
| 1.0 | % | |
| (222 | ) | |
| -516 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Impairment charges | |
| (67 | ) | |
| -5.5 | % | |
| (636 | ) | |
| -14.7 | % | |
| 569 | | |
| -89 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other
real estate owned | |
$ | 1,210 | | |
| 100.0 | % | |
$ | 4,334 | | |
| 100.0 | % | |
$ | (3,124 | ) | |
| -72 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other real estate owned and foreclosed assets by type
(Unaudited)
(Dollars in Thousands)
| |
September
30, 2014 | | |
#
of
Properties | | |
June
30,
2014 | | |
#
of
Properties | | |
$
Change | | |
%
Change | | |
September
30, 2013 | | |
#
of
Properties | | |
$
Change | | |
%
Change | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Construction, Land Dev & Other
Land | |
$ | 35 | | |
| 1 | | |
$ | 46 | | |
| 2 | | |
$ | (11 | ) | |
| -24 | % | |
$ | 787 | | |
| 7 | | |
$ | (752 | ) | |
| -96 | % |
1-4 Family Residential Properties | |
| 86 | | |
| 2 | | |
| 317 | | |
| 4 | | |
| (231 | ) | |
| -73 | % | |
| 868 | | |
| 6 | | |
| (782 | ) | |
| -90 | % |
Nonfarm Nonresidential Properties | |
| 1,089 | | |
| 4 | | |
| 628 | | |
| 4 | | |
| 461 | | |
| 73 | % | |
| 2,679 | | |
| 13 | | |
| (1,590 | ) | |
| -59 | % |
Total OREO by type | |
$ | 1,210 | | |
| 7 | | |
$ | 991 | | |
| 10 | | |
$ | 219 | | |
| 22 | % | |
$ | 4,334 | | |
| 26 | | |
$ | (3,124 | ) | |
| -72 | % |
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses continues
to decline in relation to total loans in concert with the general trend of improvement in relevant credit metrics. As such, loss
factors used in estimates to establish reserve levels have declined commensurately. A provision was made to the allowance for loan
losses in the current and prior quarter, corresponding to recent growth in the loan portfolio. No provision was made in third quarter
2013.
For the quarter ended September 30, 2014,
total net loan charge-offs were up compared to the quarter ended June 30, 2014, but virtually unchanged versus the quarter ended
September 30, 2013. The charge-offs incurred in the third quarter 2014 were primarily centered in one commercial real estate loan,
which was written down $127,000 prior to transfer to OREO. The ratio of net loan charge-offs to average gross loans (annualized)
for the current quarter was up compared to the prior quarter, but unchanged from the third quarter one year ago.
The trend of future provision for loan
losses will depend primarily on economic conditions, growth in the loan portfolio, level of adversely-classified assets, and changes
in collateral values.
Pacific Financial Corporation Profits Increased 51% in Third
Quarter 2014 and 29% in First Nine Months of 2014
October 29, 2014
Page 17
Allowance for Loan Losses
(Unaudited)
(Dollars in Thousands)
For the Three Months Ended | |
September
30, 2014 | | |
June
30,
2014 | | |
$
Change | | |
%
Change | | |
September
30, 2013 | | |
$
Change | | |
%
Change | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| |
Gross
loans outstanding at end of period | |
$ | 553,319 | | |
$ | 548,371 | | |
$ | 4,948 | | |
| 1 | % | |
$ | 487,808 | | |
$ | 65,511 | | |
| 13 | % |
Average
loans outstanding, gross | |
$ | 549,280 | | |
$ | 532,490 | | |
$ | 16,790 | | |
| 3 | % | |
$ | 483,459 | | |
$ | 65,821 | | |
| 14 | % |
Allowance
for loan losses, beginning of period | |
$ | 8,315 | | |
$ | 8,288 | | |
$ | 27 | | |
| 0 | % | |
$ | 8,962 | | |
$ | (647 | ) | |
| -7 | % |
Commercial | |
| 0 | | |
| (9 | ) | |
| 9 | | |
| -100 | % | |
| (40 | ) | |
| 40 | | |
| -100 | % |
Commercial Real Estate | |
| (126 | ) | |
| (389 | ) | |
| 263 | | |
| -68 | % | |
| (37 | ) | |
| (89 | ) | |
| 241 | % |
Residential Real Estate | |
| (61 | ) | |
| (4 | ) | |
| (57 | ) | |
| 1425 | % | |
| (29 | ) | |
| (32 | ) | |
| 110 | % |
Consumer | |
| (12 | ) | |
| (29 | ) | |
| 17 | | |
| -59 | % | |
| (79 | ) | |
| 67 | | |
| -85 | % |
Total charge-offs | |
| (199 | ) | |
| (431 | ) | |
| 232 | | |
| -54 | % | |
| (185 | ) | |
| (14 | ) | |
| 8 | % |
Commercial | |
| 7 | | |
| 1 | | |
| 6 | | |
| 600 | % | |
| 20 | | |
| (13 | ) | |
| -65 | % |
Commercial Real Estate | |
| 28 | | |
| 347 | | |
| (319 | ) | |
| -92 | % | |
| 5 | | |
| 23 | | |
| 460 | % |
Residential Real Estate | |
| 3 | | |
| 9 | | |
| (6 | ) | |
| -67 | % | |
| 3 | | |
| 0 | | |
| 0 | % |
Consumer | |
| 1 | | |
| 1 | | |
| - | | |
| 0 | % | |
| 1 | | |
| 0 | | |
| 0 | % |
Total
recoveries | |
| 39 | | |
| 358 | | |
| (319 | ) | |
| -89 | % | |
| 29 | | |
| 10 | | |
| 34 | % |
Net charge-offs | |
| (160 | ) | |
| (73 | ) | |
| (87 | ) | |
| 119 | % | |
| (156 | ) | |
| (4 | ) | |
| 3 | % |
Provision
charged to income | |
| 100 | | |
| 100 | | |
| 0 | | |
| 0 | % | |
| - | | |
| 100 | | |
| 100 | % |
Allowance
for loan losses, end of period | |
$ | 8,255 | | |
$ | 8,315 | | |
$ | (60 | ) | |
| -1 | % | |
$ | 8,806 | | |
$ | (551 | ) | |
| -6 | % |
Ratio
of net loans charged-off to average gross loans outstanding, annualized | |
| 0.12 | % | |
| 0.05 | % | |
| 0.07 | % | |
| 140 | % | |
| 0.13 | % | |
| -0.01 | % | |
| -8 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
Ratio
of allowance for loan losses to gross loans outstanding | |
| 1.49 | % | |
| 1.52 | % | |
| -0.03 | % | |
| -2 | % | |
| 1.81 | % | |
| -0.32 | % | |
| -18 | % |
| |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
For the Nine Months Ended | |
September
30, 2014 | | |
September
30, 2013 | |
|
$
Change | | |
%
Change | |
|
|
|
|
|
|
|
|
|
|
|
|
| |
| | |
| | |
| | |
| |
|
|
|
|
|
|
|
|
|
|
|
|
Gross
loans outstanding at end of period | |
$ | 553,319 | | |
$ | 487,808 | | |
$ | 65,511 | | |
| 13 | % |
|
|
|
|
|
|
|
|
|
|
|
|
Average
loans outstanding, gross | |
$ | 531,517 | | |
$ | 471,702 | | |
$ | 59,815 | | |
| 13 | % |
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for loan losses, beginning of period | |
$ | 8,359 | | |
$ | 9,358 | | |
$ | (999 | ) | |
| -11 | % |
|
|
|
|
|
|
|
|
|
|
|
|
Commercial | |
| (26 | ) | |
| (40 | ) | |
| 14 | | |
| -35 | % |
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate | |
| (509 | ) | |
| (83 | ) | |
| (426 | ) | |
| 513 | % |
|
|
|
|
|
|
|
|
|
|
|
|
Residential Real Estate | |
| (67 | ) | |
| (95 | ) | |
| 28 | | |
| -29 | % |
|
|
|
|
|
|
|
|
|
|
|
|
Consumer | |
| (110 | ) | |
| (145 | ) | |
| 35 | | |
| -24 | % |
|
|
|
|
|
|
|
|
|
|
|
|
Total charge-offs | |
| (712 | ) | |
| (363 | ) | |
| (349 | ) | |
| 96 | % |
|
|
|
|
|
|
|
|
|
|
|
|
Commercial | |
| 9 | | |
| 35 | | |
| (26 | ) | |
| -74 | % |
|
|
|
|
|
|
|
|
|
|
|
|
Commercial Real Estate | |
| 380 | | |
| 220 | | |
| 160 | | |
| 73 | % |
|
|
|
|
|
|
|
|
|
|
|
|
Residential Real Estate | |
| 16 | | |
| 4 | | |
| 12 | | |
| 300 | % |
|
|
|
|
|
|
|
|
|
|
|
|
Consumer | |
| 3 | | |
| 2 | | |
| 1 | | |
| 50 | % |
|
|
|
|
|
|
|
|
|
|
|
|
Total
recoveries | |
| 408 | | |
| 261 | | |
| 147 | | |
| 56 | % |
|
|
|
|
|
|
|
|
|
|
|
|
Net charge-offs | |
| (304 | ) | |
| (102 | ) | |
| (202 | ) | |
| 198 | % |
|
|
|
|
|
|
|
|
|
|
|
|
Provision
charged to income | |
| 200 | | |
| (450 | ) | |
| 650 | | |
| -144 | % |
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
for loan losses, end of period | |
$ | 8,255 | | |
$ | 8,806 | | |
$ | (551 | ) | |
| -6 | % |
|
|
|
|
|
|
|
|
|
|
|
|
Ratio
of net loans charged-off to average gross loans outstanding, annualized | |
| 0.08 | % | |
| 0.03 | % | |
| 0.05 | % | |
| 167 | % |
|
|
|
|
|
|
|
|
|
|
|
|
Ratio
of allowance for loan losses to gross loans outstanding | |
| 1.49 | % | |
| 1.81 | % | |
| -0.32 | % | |
| -18 | % |
|
|
|
|
|
|
|
|
|
|
|
|
Pacific Financial Corporation Profits Increased 51% in Third
Quarter 2014 and 29% in First Nine Months of 2014
October 29, 2014
Page 18
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. As of September 30, 2014, the Company had total assets of $749 million and operated seventeen
branches in the communities of Grays Harbor, Pacific, Whatcom, Skagit, Clark and Wahkiakum counties in the State of Washington,
and three branches in Clatsop County, Oregon. The Company also operates loan production offices in the communities of DuPont and
Burlington in Washington. 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 described in the Company’s filings with the Securities and Exchange Commission.
The most significant of these uncertainties are described in the Company's Annual Report on Form 10-K for the year ended December
31, 2013, which readers of this release are encouraged to review. 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.
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