Pacific Financial Corp Earns $3.7 Million, or $0.36 per Diluted Share, for Second Quarter of 2021; Reports Increased Loan Demand and Declares Quarterly Cash Dividend of $0.13 per Share
ABERDEEN, Wash., July 29, 2021 (GLOBE NEWSWIRE) — Pacific Financial Corporation (OTCQX: PFLC), (“Pacific Financial” or the “Company”), the holding company for Bank of the Pacific (the “Bank”), today reported net income of $3.7 million, or $0.36 per diluted share for the second quarter of 2021, compared to $2.4 million, or $0.23 per diluted share for the second quarter of 2020, and $4.2 million, or $0.40 per diluted share for the first quarter of 2021. Included in earnings for the second quarter was the recapture of $1.6 million from the provision for loan losses, compared to a provision for loan losses of $1.0 million for the second quarter of 2020, and a recapture of $1.4 million for the first quarter of 2021. For the first six months of 2021, net income was $8.0 million, or $0.76 per diluted share, compared to $3.6 million, or $0.34 per diluted share, for the first six months of 2020. Included in earnings for the first half of 2021 was the recapture of $3.0 million from the provision for loan losses, compared to a provision for loan losses of $3.0 million for the same period in 2020. All results are unaudited.
The board of directors of Pacific Financial declared a quarterly cash dividend of $0.13 per share on July 21, 2021. The dividend will be payable on August 26, 2021, to shareholders of record on August 12, 2021.
“Earnings increased 55% over the second quarter a year ago, in spite of continuing challenges from a low interest rate environment. The Company’s performance benefited from continued strong mortgage banking revenue, accelerated PPP loan fee amortization as a result of PPP loan forgiveness, and exceptional core deposit growth, as well as continued improvement in credit quality”, stated Denise Portmann, President and Chief Executive Officer.
“Loan balances, excluding PPP, have started to grow, although market competition remains fierce. We are seeing positive trend lines with increased loan pipelines and an uptick in utilization rates on lines of credit. As the pandemic eases and communities more fully re-open, combined with our healthy capital and liquidity positions, we believe we are well positioned for loan growth and to take advantage of new opportunities as we head into the second half of the year,” commented Portmann. “Our front-line customer facing relationship officers and employees have been back in offices since late 2020 and continue to remain focused on delivering a high level of customer service. We expect a majority of other staff to return to our offices by early August.”
Second Quarter 2021 Financial Highlights (as of, or for the period ended June 30, 2021, except as noted):
- Net income was $3.7 million, or $0.36 per diluted share, for the second quarter of 2021, compared to $2.4 million, or $0.23 per diluted share, for the second quarter a year ago, and $4.2 million, or $0.40 per diluted share, for the first quarter of 2021.
- Return on average assets (ROAA) was 1.19%, compared to 1.44% in the preceding quarter and 0.93% in the second quarter a year ago. Year to date ROAA was 1.31% compared to 0.74% a year ago.
- The Bank recorded into income a $1.6 million recapture of loan loss provision during the current quarter compared to a loan loss provision of $1.0 million in the second quarter a year ago, and a recapture of $1.4 million of provision for loan losses in the first quarter of 2021.
- Net interest margin (“NIM”) was 3.06% for the second quarter of 2021, compared to 3.70% for the second quarter of 2020, and 3.35% for the linked quarter.
- Gain-on-sale of loans decreased $453,000 to $2.9 million, compared to $3.3 million for the second quarter a year ago and decreased $653,000 from $3.5 million for the linked quarter.
- Gross loans excluding PPP, increased 2% or $9.9 million, compared to the linked quarter, and decreased 5% or $32.6 million for the like quarter in 2020.
- Core deposits (non-interest bearing and interest-bearing transaction and savings accounts) increased 17% to $1.08 billion at June 30, 2021, compared to $922.6 million at June 30, 2020, and increased by 5% from $1.03 billion at March 31, 2021. Core deposits represented 94% of total deposits, with non-interest-bearing deposits representing 41% of total deposits at June 30, 2021.
- Improved asset quality:
- Watch loans or other loans especially mentioned, decreased by $86.0 million, or 65%, to $46.7 million at June 30, 2021, compared to $132.8 million at June 30, 2020, and declined by $32.9 million from $79.6 million at March 31, 2021. Delinquent loans not on nonaccrual were negligible at 0.01% of gross loans outstanding at June 30, 2021
- Non-performing assets as a percentage of total assets remain minimal at 0.16% at June 30, 2021, compared to 0.20% at March 31, 2021 and 0.13% at June 30, 2020.
- The Company’s consolidated capital ratios continue to exceed regulatory guidelines for a well-capitalized financial institution. The Company repurchased 8,400 shares of its common stock during the quarter.
Income Statement Review
Net income was $3.7 million, or $0.36 per diluted share, for the second quarter of 2021, compared to $2.4 million, or $0.23 per diluted share, for the second quarter a year ago, and $4.2 million, or $0.40 per diluted share, for the first quarter of 2021. For the first six months of 2021, net income was $8.0 million, or $0.76 per diluted share compared to $3.6 million, or $0.34 per diluted share for the first six months of 2020.
Net interest income, before the provision for loan losses, was $9.0 million for both the second quarter of 2021, and for the second quarter a year ago, compared to $9.2 million for the first quarter of 2021. Amortized PPP fees and interest totaled $1.4 million, $534,000 and $1.6 million, for the quarters ended June 30, 2021, June 30, 2020 and March 31, 2021, respectively. For the first six months of 2021, net interest income was $18.2 million, compared to $18.1 million for the first six months of 2020, with amortized PPP fees and interest totaling $3.0 million and $534,000 for year-to-date 2021 and 2020, respectively.
The net interest margin (“NIM”) on a tax equivalent basis was 3.06% for the second quarter of 2021, compared to 3.70% for the second quarter of 2020, and 3.35% for the first quarter of 2021. Higher core deposit balances along with PPP loan forgiveness payments resulted in a significant increase in low yielding federal funds sold and interest bearing deposits in banks, which adversely impacted the company’s net interest margin during the quarter. For the first six months of 2021, the NIM was 3.20% compared to 3.98% for the like period in 2020. This decrease was driven by higher average balances of low yielding federal funds sold and interest bearing deposits in banks with at an average rate of 12 basis points, as well as lower rates on the loan and securities portfolios.
Average loan yields including PPP loans for the current quarter increased 13 basis points to 4.72%, from 4.59% a year ago, and declined 15 basis points from 4.87% for the first quarter of 2021. During the current quarter, PPP interest and fee amortization positively impacted loan yields by 14 basis points compared to a negative impact of 37 basis points in the second quarter of 2020 and a positive impact of 24 basis points compared to the linked quarter. The Bank’s total cost of funds decreased to 0.12% for the second quarter of 2021, from 0.27% a year earlier, and declined from 0.15% at the linked quarter. Included in the reduction was a decrease in the borrowing rate on the Company’s junior subordinated debentures as well as reduction in deposit rates. As with the current quarter, loan yields and costs of funds decreased for the six months ended June 30, 2021 compared to the like period in 2020.
Noninterest income decreased 4%, or $186,000, to $4.6 million for the second quarter of 2021, compared to $4.8 million for the second quarter of 2020, and declined 11%, or $548,000, from $5.2 million for the first quarter of 2021. Although total noninterest income was down year-over-year, and on a linked quarter basis, fee income was up 26% to $1.2 million for the second quarter of 2021, compared to $992,000 for the second quarter a year ago, and grew 10% from $1.1 million for the first quarter of 2021. For the six months ended June 30 2021, non-interest income increased 17% to $9.8 million compared to $8.4 million for the six months ended June 30, 2020. OD/NSF fee income increased during the current quarter, but has not yet returned to pre-pandemic levels. Conversely, debit card income, ATM income, and merchant processing income exceeds pre-pandemic levels as the number of digital transactions and automated payment channels by our customers continues to increase.
Gain-on-sale of loans decreased $453,000 for the current quarter compared to the like quarter a year ago and $653,000 from the linked quarter due to a reduction in gain on sale margins. However, gain-on-sale of loans increased $1.1 million for the six months ended June 30, 2021 compared to the six months ended June 30, 2020. Residential real estate purchase activity remains robust due to strong homebuyer demand and tight inventory supply in our markets.
Noninterest expenses rose 7% to $10.5 million for the second quarter of 2021, compared to $9.8 million for the second quarter of 2020 and remained flat from $10.5 million for the first quarter of 2021. For the first six months 2021, total noninterest expense increased by 11%, or $2.0 million, to $21.0 million compared to $19.0 million for the first six months of 2020. The increases over the prior year periods were primarily due to increased salary and employee benefits, higher FDIC and State assessments, and increased State and local taxes. The increase in salary and employee benefits was primarily the result of increased mortgage banking commissions, and the increase in FDIC and state assessments was the result of the Bank utilizing its final portion of its Small Bank Assessment Credit during the second quarter of 2020 to pay for FDIC deposit insurance premiums.
Provision for Loan Losses: The recapture of provision for loan losses during the current quarter reflected management’s ongoing assessment of the credit quality of the company’s loan portfolio. During the quarter, $32.9 million in loans were upgraded from the watch and other loans especially mentioned category. Other factors affecting the provision include net charge-offs and the size and composition of the loan portfolio.
Income tax provision was $977,000 for the second quarter of 2021, up 72% from $569,000 for the second quarter of 2020 and down from $1.1 million for the first quarter of 2021. The effective tax rate for the second quarter of 2021 was 20.7%, compared to 19.1% for the second quarter of 2020, and 20.0% for the first quarter of 2021. In addition to federal corporate income tax, Pacific Financial also pays Oregon corporate income tax, Oregon corporate activity tax and Washington business and occupation tax on revenues.
Balance Sheet Review
Total Assets increased 14% to $1.29 billion, at June 30, 2021, compared to $1.13 billion at June 30, 2020, and grew 4% from $1.25 billion at March 31, 2021.
Investment Securities increased 34% to $158.4 million at June 30, 2021, compared to $118.1 million at June 30, 2020 and grew 15% from $137.5 million at March 31, 2021. During the current quarter, the Bank continued to deploy a portion of its lower yielding federal funds sold balances into investment securities. This included $23.1 million in investment purchases, which was partially offset by $2.2 million in calls, maturities and payments. The average duration of our investment securities portfolio was approximately 5.5.
Federal funds balances remained at higher than historical levels, primarily as a result of total deposit increases over the current quarter and over the last twelve months.
Gross Loans declined 12% to $693.9 million at June 30, 2021, compared to $787.3 million at June 30, 2020, and decreased 4% from $722.7 million at March 31, 2021. Included in total loans at June 30, 2021, was $69.6 million of PPP loans compared to $108.4 million on a linked quarter basis. Excluding PPP loans, during the current quarter, gross loans increased 2% or $9.9 million compared to the linked quarter, and decreased 5% or $32.6 million for the like quarter in 2020. Declines in credit line utilization in mid-late 2020 contributed to the decrease in loans year-over-year.
Commercial real estate, which includes both owner occupied and non-owner occupied, comprised 44% or $310.7 million of the portfolio excluding PPP loans, as of June 30, 2021. These balances increased $3.4 million from $307.3 million at June 30, 2020 and declined $10.2 million from $320.9 million at March 31, 2021. At June 30, 2021, CRE concentration percentages remained relatively unchanged at 178% of total risk-based capital; well below the regulatory guidance limit of 300%. During the current quarter, commercial and agricultural loans increased $7.4 million to $91.0 million compared to $83.7 million the previous quarter, in part due to an increased utilization of lines of credit.
On the consumer side, loans to finance luxury and classic cars encompass most of the consumer loan balances. Those loans increased to $50.1 million at June 30, 2021, compared to $45.4 million at June 30, 2020 and $47.8 million at March 31, 2021. As of June 30, 2021, the luxury and classic car portfolio includes 868 loans with an average balance of $58,000. The portfolio continues to perform adequately and delinquencies decreased by $382,000 to $88,000, or 0.18% of loans to finance luxury and classic car portfolio, at June 30, 2021.
Loans are predominately originated within our Western Washington and Oregon markets and the Company’s portfolio is well-diversified by collateral type and by industry with a prudent credit discipline. With the risks associated with the COVID-19 pandemic reducing in severity, earlier this year the Company made reasonable adjustments to incrementally relax certain underwriting guidance, that had been tightened earlier in the pandemic, for non-owner occupied commercial real estate lending. To manage risk, the Company oversees new loan origination volume and current loan balances using concentration limits that establish maximum exposure levels by designated industry segment, real estate product types, geography and single borrower limits.
SBA Paycheck Protection Program: SBA PPP was designed to provide crucial relief to small businesses to help sustain operations impacted by COVID-19. Under this program, Bank of the Pacific funded 748 loans totaling $130.7 million for its customers in 2020, and an additional 665 loans totaling $67.4 million in the second quarter of 2021. As of June 30, 2021, $128.9 million of PPP loans have been forgiven or paid down, leaving an outstanding balance of $69.6 million.
Loan Payment Deferrals: Early in 2020, the Bank provided $106.2 million in 90-day payment deferrals to customers adversely impacted by operating restrictions due to COVID-19. During the third and fourth quarters of 2020 and early 2021, a majority of these loan deferrals returned to regular payment status, reducing the balance of deferrals to $0 at June 30, 2021.
Stressed Sectors as a Result of COVID-19: The Bank continues to identify several industries as being potentially more vulnerable to the economic and business impacts of the Coronavirus pandemic. Those industries include animal production (primarily dairy), restaurants, retail trade, and recreation and entertainment. Although these industries are potentially more directly impacted by COVID-19, the bank’s customer base within these sectors covers a wide range of clients, including those who operate under diversified business models reaching a broader range of clients, possess necessary financial resources, and are managed by experienced management teams who aid in working through these economic challenges. The accommodation industry (hospitality) is no longer included in the stressed sector list given generally positive performance during the pandemic and into the current year with strong demand for travel closer to home that has benefited operators in coastal markets in both Oregon and Washington. At June 30, 2021, the total of these industries was $46.4 million, representing 7% of gross loans excluding PPP.
| Stressed Sectors (without PPP) | |||||||||
| (Unaudited) | |||||||||
| June 30, 2021 |
% of Gross Loans (without PPP) |
||||||||
| (Dollars in thousands) | |||||||||
| Animal production | $ | 15,431 | 2 | % | |||||
| Restaurants | 9,951 | 2 | % | ||||||
| Recreation, arts and entertainment | 4,873 | 1 | % | ||||||
| Retail trade | 16,112 | 3 | % | ||||||
| Total stressed sectors | $ | 46,367 | 7 | % | |||||
Asset Quality – Balances related to loans graded watch or other loans especially mentioned, declined $32.9 million during the quarter to $46.7 million, as several credits were upgraded upon resumption of payments after being deferred during 2020. Delinquent loans not on nonaccrual status as of June 30, 2021 decreased to 0.01% of gross loans excluding PPP loans compared to 0.24% as of March 31, 2021 and 0.03% as of June 30, 2020, as clients have generally been successful navigating impacts of the pandemic. In recent quarters, past dues have been positively impacted by COVID related relief granted to clients that provided those clients with the necessary support to maintain payment performance.
The Allowance for Loan Losses (“ALL”) decreased to $9.1 million, or 1.45% of gross loans (excluding PPP) at June 30, 2021, compared to $11.5 million, or 1.75%, at June 30, 2020, and declined from $10.7 million, or 1.75%, at March 31, 2021. The Bank recorded into income a $1.6 million recapture of loan loss provision during the current quarter primarily as a result of $32.9 million in upgrades of credits from the especially mentioned or watch category, as well as a slight improvement in economic and business condition factors. For the like quarter a year ago, the bank recorded a $1.0 million provision and during the first quarter of 2021, a $1.4 million recapture of loan loss provision. Net charge-offs remained at low levels and were $43,000 for the second quarter of 2021, compared to net charge-offs of $279,000 for the second quarter a year earlier, and net recoveries of $53,000 for the first quarter of 2021.
Total Deposits continued to increase during the quarter, increasing 15% to $1.14 billion at June 30, 2021, compared to $995.0 million from a year earlier, and increasing 4% from $1.10 billion at March 31, 2021. Year-over-year increases were primarily related to SBA PPP loan proceeds deposited in customers Bank of the Pacific accounts and also a generally higher level of client liquidity from reduced business investment and elevated savings patterns, and receipt of stimulus funds. The growth in noninterest-bearing deposits increased 36% from a year ago and represents 41% of total deposits at June 30, 2021. At June 30, 2021, the Company had no brokered deposits, compared to $3.0 million at June 30, 2020 and $2.7 million as of March 31, 2021.
Shareholder’s Equity was $118.0 million at June 30, 2021 compared to $109.4 million at June 30, 2020 and $115.1 million as of March 31, 2021. Regulatory capital ratios of both the company and the Bank continue to exceed the well-capitalized regulatory thresholds, with the company’s leverage ratio at 9.1% and total risk-based capital ratio at 16.7% as of June 30, 2021. The total risk-based capital ratios of the Company include $13.4 million of junior subordinated debentures, all of which qualified as Tier 1 capital under guidance issued by the Federal Reserve. The company’s tangible book value per share increased to $10.03 compared to $9.04 a year ago. During the quarter ended June 30, 2021, Pacific Financial repurchased a total of 8,400 shares, or $105,000, under its share repurchase program.
| Balance Sheet Overview | |||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||
| June 30, 2021 |
Mar 31, 2021 |
$ Change |
% Change |
June 30, 2020 |
$ Change | % Change | |||||||||||||||||
| Assets: | (Dollars in thousands, except per share data) | ||||||||||||||||||||||
| Cash on hand and in banks | $ | 20,128 | $ | 15,175 | $ | 4,953 | 33 | % | $ | 140,132 | $ | (120,004 | ) | -86 | % | ||||||||
| Interest bearing deposits | 307,773 | 280,129 | 27,644 | 10 | % | 3,250 | 304,523 | 9370 | % | ||||||||||||||
| Federal funds sold | 23,965 | 23,316 | 649 | 3 | % | 17,635 | 6,330 | 36 | % | ||||||||||||||
| Investment securities | 158,379 | 137,454 | 20,925 | 15 | % | 118,078 | 40,301 | 34 | % | ||||||||||||||
| Loans held-for-sale | 37,777 | 19,439 | 18,338 | 94 | % | 19,477 | 18,300 | 94 | % | ||||||||||||||
| Loans, net of deferred fees | 690,607 | 719,182 | (28,575 | ) | -4 | % | 782,562 | (91,955 | ) | -12 | % | ||||||||||||
| Allowance for loan losses | (9,078 | ) | (10,721 | ) | 1,643 | -15 | % | (11,507 | ) | 2,429 | -21 | % | |||||||||||
| Net loans | 681,529 | 708,461 | (26,932 | ) | -4 | % | 771,055 | (89,526 | ) | -12 | % | ||||||||||||
| Federal Home Loan Bank and Pacific Coast Bankers’ Bank stock, at cost |
2,419 | 2,421 | (2 | ) | 0 | % | 2,140 | 279 | 13 | % | |||||||||||||
| Other assets | 58,841 | 58,679 | 162 | 0 | % | 57,708 | 1,133 | 2 | % | ||||||||||||||
| Total assets | $ | 1,290,811 | $ | 1,245,074 | $ | 45,737 | 4 | % | $ | 1,129,475 | $ | 161,336 | 14 | % | |||||||||
| Liabilities and Shareholders’ Equity: | |||||||||||||||||||||||
| Total deposits | $ | 1,144,033 | $ | 1,099,287 | $ | 44,746 | 4 | % | $ | 994,960 | $ | 149,073 | 15 | % | |||||||||
| Borrowings | 13,881 | 13,919 | (38 | ) | 0 | % | 14,031 | (150 | ) | -1 | % | ||||||||||||
| Accrued interest payable and other liabilities | 14,884 | 16,772 | (1,888 | ) | -11 | % | 11,092 | 3,792 | 34 | % | |||||||||||||
| Shareholders’ equity | 118,013 | 115,096 | 2,917 | 3 | % | 109,392 | 8,621 | 8 | % | ||||||||||||||
| Total liabilities and shareholders’ equity | $ | 1,290,811 | $ | 1,245,074 | $ | 45,737 | 4 | % | $ | 1,129,475 | $ | 161,336 | 14 | % | |||||||||
| Common Stock Shares Outstanding | 10,429,133 | 10,437,378 | (8,245 | ) | 0 | % | 10,607,617 | (178,484 | ) | -2 | % | ||||||||||||
| Book value per common share (1) | $ | 11.32 | $ | 11.03 | $ | 0.29 | 3 | % | $ | 10.31 | $ | 1.01 | 10 | % | |||||||||
| Tangible book value per common share (2) | $ | 10.03 | $ | 9.74 | $ | 0.29 | 3 | % | $ | 9.04 | $ | 0.99 | 11 | % | |||||||||
| Gross loans to deposits ratio | 60.4 | % | 65.4 | % | -5.0 | % | 78.7 | % | -18.3 | % | |||||||||||||
| (1) Book value per common share is calculated as the total common shareholders’ equity divided by the period ending number of common stock shares outstanding. | |||||||||||||||||||||||
| (2) Tangible book value per common share is calculated as the total common shareholders’ equity less total intangible assets and liabilities, divided by the period ending number of common stock shares outstanding. | |||||||||||||||||||||||
| Income Statement Overview | ||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||
| For the Three Months Ended, | ||||||||||||||||||||||
| June 30, 2021 |
Mar 31, 2021 |
$ Change |
% Change |
June 30, 2020 |
$ Change | % Change | ||||||||||||||||
| (Dollars in thousands, except per share data) | ||||||||||||||||||||||
| Interest and dividend income | $ | 9,318 | $ | 9,612 | $ | (294 | ) | -3 | % | $ | 9,608 | $ | (290 | ) | -3 | % | ||||||
| Interest expense | 324 | 387 | (63 | ) | -16 | % | 625 | (301 | ) | -48 | % | |||||||||||
| Net interest income | 8,994 | 9,225 | (231 | ) | -3 | % | 8,983 | 11 | 0 | % | ||||||||||||
| Loan loss provision | (1,600 | ) | (1,400 | ) | (200 | ) | 14 | % | 1,000 | (2,600 | ) | -260 | % | |||||||||
| Noninterest income | 4,616 | 5,164 | (548 | ) | -11 | % | 4,802 | (186 | ) | -4 | % | |||||||||||
| Noninterest expense | 10,497 | 10,504 | (7 | ) | 0 | % | 9,810 | 687 | 7 | % | ||||||||||||
| Income before income taxes | 4,713 | 5,285 | (572 | ) | -11 | % | 2,975 | 1,738 | 58 | % | ||||||||||||
| Income tax expense | 977 | 1,057 | (80 | ) | -8 | % | 569 | 408 | 72 | % | ||||||||||||
| Net Income | $ | 3,736 | $ | 4,228 | $ | (492 | ) | -12 | % | $ | 2,406 | $ | 1,330 | 55 | % | |||||||
| Average common shares outstanding – basic | 10,429,181 | 10,432,040 | (2,859 | ) | 0 | % | 10,607,617 | (178,436 | ) | -2 | % | |||||||||||
| Average common shares outstanding – diluted | 10,461,046 | 10,458,794 | 2,252 | 0 | % | 10,630,458 | (169,412 | ) | -2 | % | ||||||||||||
| Income per common share | ||||||||||||||||||||||
| Basic | $ | 0.36 | $ | 0.41 | $ | (0.05 | ) | -12 | % | $ | 0.23 | $ | 0.13 | 57 | % | |||||||
| Diluted | $ | 0.36 | $ | 0.40 | $ | (0.04 | ) | -10 | % | $ | 0.23 | $ | 0.13 | 57 | % | |||||||
| Effective tax rate | 20.7 | % | 20.0 | % | 0.7 | % | 19.1 | % | 1.6 | % | ||||||||||||
| For the Six Months Ended, | ||||||||||||||||||||||
| June 30, 2021 |
June 30, 2020 |
$ Change |
% Change |
|||||||||||||||||||
| (Dollars in thousands, except per share data) | ||||||||||||||||||||||
| Interest and dividend income | $ | 18,930 | $ | 19,391 | $ | (461 | ) | -2 | % | |||||||||||||
| Interest expense | 711 | 1,326 | (615 | ) | -46 | % | ||||||||||||||||
| Net interest income | 18,219 | 18,065 | 154 | 1 | % | |||||||||||||||||
| Loan loss provision | (3,000 | ) | 3,000 | (6,000 | ) | -200 | % | |||||||||||||||
| Noninterest income | 9,780 | 8,356 | 1,424 | 17 | % | |||||||||||||||||
| Noninterest expense | 21,000 | 18,952 | 2,048 | 11 | % | |||||||||||||||||
| Income before income taxes | 9,999 | 4,469 | 5,530 | 124 | % | |||||||||||||||||
| Income tax expense | 2,035 | 864 | 1,171 | 136 | % | |||||||||||||||||
| Net Income | $ | 7,964 | $ | 3,605 | $ | 4,359 | 121 | % | ||||||||||||||
| Average common shares outstanding – basic | 10,430,602 | 10,617,389 | (186,787 | ) | -2 | % | ||||||||||||||||
| Average common shares outstanding – diluted | 10,459,731 | 10,640,230 | (180,499 | ) | -2 | % | ||||||||||||||||
| Income per common share | ||||||||||||||||||||||
| Basic | $ | 0.76 | $ | 0.34 | $ | 0.42 | 124 | % | ||||||||||||||
| Diluted | $ | 0.76 | $ | 0.34 | $ | 0.42 | 124 | % | ||||||||||||||
| Effective tax rate | 20.4 | % | 19.3 | % | 1.1 | % | ||||||||||||||||
| Reconciliation of Non-GAAP Measure | |||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||
| For the Three Months Ended, | |||||||||||||||||||||||
| June 30, 2021 |
Mar 31, 2021 |
$ Change |
% Change |
June 30, 2020 |
$ Change | % Change | |||||||||||||||||
| Non-GAAP Net Income | (Dollars in thousands) | ||||||||||||||||||||||
| Net Income | $ | 3,736 | $ | 4,228 | $ | (492 | ) | -12 | % | $ | 2,406 | $ | 1,330 | 55 | % | ||||||||
| Loan loss provision | (1,600 | ) | (1,400 | ) | (200 | ) | 14 | % | 1,000 | (2,600 | ) | -260 | % | ||||||||||
| Income tax expense | 977 | 1,057 | (80 | ) | -8 | % | 569 | 408 | 72 | % | |||||||||||||
| Pre-tax, pre-provision net income | $ | 3,113 | $ | 3,885 | $ | (772 | ) | -20 | % | $ | 3,975 | $ | (862 | ) | -22 | % | |||||||
| Pre-tax, pre-provisions ROA, annualized | 0.99 | % | 1.32 | % | (0.33 | ) | 1.53 | % | (0.21 | ) | |||||||||||||
| Pre-tax, pre-provisions ROE, annualized | 10.73 | % | 13.69 | % | (2.96 | ) | 14.70 | % | (1.01 | ) | |||||||||||||
| For the Six Months Ended, | |||||||||||||||||||||||
| June 30, 2021 |
June 30, 2020 |
$ Change |
% Change |
||||||||||||||||||||
| Non-GAAP Operating Income | (Dollars in thousands) | ||||||||||||||||||||||
| Net Income | $ | 7,964 | $ | 3,605 | $ | 4,359 | 121 | % | |||||||||||||||
| Loan loss provision | (3,000 | ) | 3,000 | (6,000 | ) | -200 | % | ||||||||||||||||
| Income tax expense | 2,035 | 864 | 1,171 | 136 | % | ||||||||||||||||||
| Pre-tax, pre-provision net income | $ | 6,999 | $ | 7,469 | $ | (470 | ) | -6 | % | ||||||||||||||
| Pre-tax, pre-provisions ROA, annualized | 1.15 | % | 1.53 | % | (0.38 | ) | |||||||||||||||||
| Pre-tax, pre-provisions ROE, annualized | 12.23 | % | 14.03 | % | (1.80 | ) | |||||||||||||||||
| Noninterest Income | |||||||||||||||||||
| (Unaudited) | |||||||||||||||||||
| For the Three Months Ended, | |||||||||||||||||||
| June 30, 2021 |
Mar 31, 2021 |
$ Change |
% Change |
June 30, 2020 |
$ Change | % Change | |||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| Service charges on deposits | $ | 351 | $ | 342 | $ | 9 | 3 | % | $ | 315 | $ | 36 | 11 | % | |||||
| Gain on sale of loans, net | 2,882 | 3,535 | (653 | ) | -18 | % | 3,335 | (453 | ) | -14 | % | ||||||||
| Earnings on bank owned life insurance | 126 | 126 | – | 0 | % | 129 | (3 | ) | -2 | % | |||||||||
| Other noninterest income | |||||||||||||||||||
| Fee income | 1,248 | 1,133 | 115 | 10 | % | 992 | 256 | 26 | % | ||||||||||
| Other | 9 | 28 | (19 | ) | -68 | % | 31 | (22 | ) | -71 | % | ||||||||
| Total noninterest income | $ | 4,616 | $ | 5,164 | $ | (548 | ) | -11 | % | $ | 4,802 | $ | (186 | ) | -4 | % | |||
| For the Six Months Ended, | |||||||||||||||||||
| June 30, 2021 |
June 30, 2020 |
$ Change |
% Change |
||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| Service charges on deposits | $ | 693 | $ | 822 | $ | (129 | ) | -16 | % | ||||||||||
| Gain on sale of loans, net | 6,417 | 5,325 | 1,092 | 21 | % | ||||||||||||||
| Gain on sale of securities available for sale, net | – | – | – | – | |||||||||||||||
| Earnings on bank owned life insurance | 253 | 243 | 10 | 4 | % | ||||||||||||||
| Other noninterest income | |||||||||||||||||||
| Fee income | 2,381 | 1,910 | 471 | 25 | % | ||||||||||||||
| Other | 36 | 56 | (20 | ) | -36 | % | |||||||||||||
| Total noninterest income | $ | 9,780 | $ | 8,356 | $ | 1,424 | 17 | % | |||||||||||
| Noninterest Expense | |||||||||||||||||||
| (Unaudited) | |||||||||||||||||||
| For the Three Months Ended, | |||||||||||||||||||
| June 30, 2021 |
Mar 31, 2021 |
$ Change |
% Change |
June 30, 2020 |
$ Change | % Change | |||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| Salaries and employee benefits | $ | 7,148 | $ | 7,333 | $ | (185 | ) | -3 | % | $ | 6,781 | $ | 367 | 5 | % | ||||
| Occupancy | 481 | 511 | (30 | ) | -6 | % | 507 | (26 | ) | -5 | % | ||||||||
| Equipment | 316 | 319 | (3 | ) | -1 | % | 294 | 22 | 7 | % | |||||||||
| Data processing | 804 | 829 | (25 | ) | -3 | % | 803 | 1 | 0 | % | |||||||||
| Professional services | 296 | 234 | 62 | 26 | % | 312 | (16 | ) | -5 | % | |||||||||
| State and local taxes | 273 | 202 | 71 | 35 | % | 112 | 161 | 144 | % | ||||||||||
| FDIC and State assessments | 82 | 81 | 1 | 1 | % | 8 | 74 | 925 | % | ||||||||||
| Other noninterest expense: | |||||||||||||||||||
| Director fees | 80 | 77 | 3 | 4 | % | 83 | (3 | ) | -4 | % | |||||||||
| Communication | 72 | 71 | 1 | 1 | % | 76 | (4 | ) | -5 | % | |||||||||
| Advertising | 59 | 29 | 30 | 103 | % | 33 | 26 | 79 | % | ||||||||||
| Professional liability insurance | 60 | 59 | 1 | 2 | % | 57 | 3 | 5 | % | ||||||||||
| Amortization | 110 | 105 | 5 | 5 | % | 101 | 9 | 9 | % | ||||||||||
| Other | 716 | 654 | 62 | 9 | % | 643 | 73 | 11 | % | ||||||||||
| Total noninterest expense | $ | 10,497 | $ | 10,504 | $ | (7 | ) | 0 | % | $ | 9,810 | $ | 687 | 7 | % | ||||
| For the Six Months Ended, | |||||||||||||||||||
| June 30, 2021 |
June 30, 2020 |
$ Change |
% Change |
||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| Salaries and employee benefits | $ | 14,481 | $ | 12,847 | $ | 1,634 | 13 | % | |||||||||||
| Occupancy | 992 | 1,029 | (37 | ) | -4 | % | |||||||||||||
| Equipment | 634 | 578 | 56 | 10 | % | ||||||||||||||
| Data processing | 1,633 | 1,549 | 84 | 5 | % | ||||||||||||||
| Professional services | 522 | 513 | 9 | 2 | % | ||||||||||||||
| State and local taxes | 475 | 257 | 218 | 85 | % | ||||||||||||||
| FDIC and State assessments | 163 | 16 | 147 | 919 | % | ||||||||||||||
| Other noninterest expense: | |||||||||||||||||||
| Director fees | 158 | 157 | 1 | 1 | % | ||||||||||||||
| Communication | 144 | 144 | – | 0 | % | ||||||||||||||
| Advertising | 87 | 81 | 6 | 7 | % | ||||||||||||||
| Professional liability insurance | 119 | 112 | 7 | 6 | % | ||||||||||||||
| Amortization | 215 | 198 | 17 | 9 | % | ||||||||||||||
| Other | 1,377 | 1,471 | (94 | ) | -6 | % | |||||||||||||
| Total noninterest expense | $ | 21,000 | $ | 18,952 | $ | 2,048 | 11 | % | |||||||||||
| Financial Performance Overview | |||||||||||||||
| (Unaudited) | |||||||||||||||
| For the Three Months Ended | |||||||||||||||
| June 30, 2021 |
Mar 31, 2021 |
Change | June 30, 2020 |
Change | |||||||||||
| Performance Ratios | |||||||||||||||
| Return on average assets, annualized | 1.19 | % | 1.44 | % | (0.25 | ) | 0.93 | % | 0.26 | ||||||
| Return on average equity, annualized | 12.87 | % | 14.90 | % | (2.03 | ) | 8.90 | % | 3.97 | ||||||
| Efficiency ratio (1) | 77.13 | % | 73.00 | % | 4.13 | 71.16 | % | 5.97 | |||||||
| (1) Non-interest expense divided by net interest income plus noninterest income. | |||||||||||||||
| For the Six Months Ended, | |||||||||||||||
| June 30, 2021 |
June 30, 2020 |
Change | |||||||||||||
| Performance Ratios | |||||||||||||||
| Return on average assets, annualized | 1.31 | % | 0.74 | % | 0.57 | ||||||||||
| Return on average equity, annualized | 13.87 | % | 6.73 | % | 7.14 | ||||||||||
| Efficiency ratio (1) | 75.00 | % | 71.73 | % | 3.27 | ||||||||||
| (1) Non-interest expense divided by net interest income plus noninterest income. | |||||||||||||||
LIQUIDITY
| Cash and Cash Equivalents and Investment Securities | ||||||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||||||
| June 30, 2021 |
% of Total |
Mar 31, 2021 |
% of Total |
$ Change |
% Change |
June 30, 2020 |
Total | $ Change |
% Change |
|||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||
| Cash on hand and in banks | $ | 20,128 | 4 | % | $ | 15,175 | 3 | % | $ | 4,953 | 33 | % | $ | 15,227 | 5 | % | $ | 4,901 | 32 | % | ||||||||||
| Interest bearing deposits | 304,523 | 60 | % | 276,879 | 62 | % | 27,644 | 10 | % | 124,905 | 45 | % | 179,618 | 144 | % | |||||||||||||||
| Other interest earning deposits | 3,250 | 1 | % | 3,250 | 1 | % | – | 0 | % | 3,250 | 1 | % | – | 0 | % | |||||||||||||||
| Federal funds sold | 23,965 | 5 | % | 23,316 | 5 | % | 649 | 3 | % | 17,635 | 6 | % | 6,330 | 36 | % | |||||||||||||||
| Total | 351,866 | 70 | % | 318,620 | 71 | % | 33,246 | 10 | % | 161,017 | 57 | % | 190,849 | 119 | % | |||||||||||||||
| Investment securities: | ||||||||||||||||||||||||||||||
| Collateralized mortgage obligations | 65,102 | 12 | % | 47,870 | 10 | % | 17,232 | 36 | % | 44,242 | 16 | % | 20,860 | 47 | % | |||||||||||||||
| Mortgage backed securities | 9,459 | 2 | % | 13,441 | 3 | % | (3,982 | ) | -30 | % | 15,366 | 6 | % | (5,907 | ) | -38 | % | |||||||||||||
| U.S. Government and agency securities | 19,235 | 4 | % | 15,263 | 3 | % | 3,972 | 26 | % | 4,101 | 1 | % | 15,134 | 369 | % | |||||||||||||||
| Municipal securities | 62,467 | 12 | % | 58,761 | 13 | % | 3,706 | 6 | % | 52,314 | 19 | % | 10,153 | 19 | % | |||||||||||||||
| Corporate debt securities | 2,017 | 0 | % | 2,018 | 0 | % | (1 | ) | 0 | % | 1,991 | 1 | % | 26 | 1 | % | ||||||||||||||
| Equity securities | 99 | 0 | % | 101 | 0 | % | (2 | ) | -2 | % | 64 | 0 | % | 35 | 55 | % | ||||||||||||||
| Total | 158,379 | 30 | % | 137,454 | 29 | % | 20,925 | 15 | % | 118,078 | 43 | % | 40,301 | 34 | % | |||||||||||||||
| Total cash equivalents and investment securities | $ | 510,245 | 100 | % | $ | 456,074 | 100 | % | $ | 54,171 | 12 | % | $ | 279,095 | 100 | % | $ | 231,150 | 83 | % | ||||||||||
| Total cash equivalents and investment securities | ||||||||||||||||||||||||||||||
| as a percent of total assets | 40 | % | 37 | % | 25 | % | ||||||||||||||||||||||||
LOANS
| Loans by Category | |||||||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||||||
| June 30, 2021 |
% of Gross Loans |
Mar 31, 2021 |
% of Gross Loans |
$ Change |
% Change |
June 30, 2020 |
% of Gross Loans |
$ Change |
% Change |
||||||||||||||||||||||||
| Commercial: | (Dollars in thousands) | ||||||||||||||||||||||||||||||||
| Commercial and agricultural | $ | 91,038 | 13 | % | $ | 83,675 | 12 | % | $ | 7,363 | 9 | % | $ | 111,094 | 14 | % | $ | (20,056 | ) | -18 | % | ||||||||||||
| PPP | 69,621 | 10 | % | 108,377 | 15 | % | (38,756 | ) | -36 | % | 130,507 | 17 | % | (60,886 | ) | 100 | % | ||||||||||||||||
| Real estate: | |||||||||||||||||||||||||||||||||
| Construction and development | 31,429 | 5 | % | 20,936 | 3 | % | 10,493 | 50 | % | 40,462 | 5 | % | (9,033 | ) | -22 | % | |||||||||||||||||
| Residential 1-4 family | 68,238 | 10 | % | 71,567 | 10 | % | (3,329 | ) | -5 | % | 82,154 | 10 | % | (13,916 | ) | -17 | % | ||||||||||||||||
| Multi-family | 38,764 | 6 | % | 33,950 | 5 | % | 4,814 | 14 | % | 32,955 | 4 | % | 5,809 | 18 | % | ||||||||||||||||||
| Commercial real estate — owner occupied | 149,209 | 22 | % | 154,850 | 21 | % | (5,641 | ) | -4 | % | 150,626 | 19 | % | (1,417 | ) | -1 | % | ||||||||||||||||
| Commercial real estate — non owner occupied | 161,450 | 22 | % | 166,072 | 22 | % | (4,622 | ) | -3 | % | 156,712 | 20 | % | 4,738 | 3 | % | |||||||||||||||||
| Farmland | 26,047 | 4 | % | 27,418 | 4 | % | (1,371 | ) | -5 | % | 31,054 | 4 | % | (5,007 | ) | -16 | % | ||||||||||||||||
| Consumer | 58,092 | 8 | % | 55,868 | 8 | % | 2,224 | 4 | % | 51,772 | 7 | % | 6,320 | 12 | % | ||||||||||||||||||
| Gross Loans | 693,888 | 100 | % | 722,713 | 100 | % | (28,825 | ) | -4 | % | 787,336 | 100 | % | (93,448 | ) | -12 | % | ||||||||||||||||
| Less: allowance for loan losses | (9,078 | ) | (10,721 | ) | 1,643 | (11,507 | ) | 2,429 | |||||||||||||||||||||||||
| Less: deferred fees | (3,281 | ) | (3,531 | ) | 250 | (4,774 | ) | 1,493 | |||||||||||||||||||||||||
| Net loans | $ | 681,529 | $ | 708,461 | $ | (26,932 | ) | $ | 771,055 | $ | (89,526 | ) | |||||||||||||||||||||
| Loan Concentration | |||||||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||||||
| June 30, 2021 |
% of Risk Based Capital |
Mar 31, 2021 |
% of Risk Based Capital |
Change | June 30, 2020 |
% of Risk Based Capital |
Change | ||||||||||||||||||||||||||
| Commercial: | (Dollars in thousands) | ||||||||||||||||||||||||||||||||
| Commercial and agricultural | $ | 91,038 | 74 | % | $ | 83,675 | 69 | % | 5 | % | $ | 111,094 | 97 | % | -23 | % | |||||||||||||||||
| PPP | 69,621 | 57 | % | 108,377 | 90 | % | -33 | % | 130,507 | 114 | % | -57 | % | ||||||||||||||||||||
| Real estate: | |||||||||||||||||||||||||||||||||
| Construction and development | 31,429 | 26 | % | 20,936 | 17 | % | 9 | % | 40,462 | 35 | % | -9 | % | ||||||||||||||||||||
| Residential 1-4 family | 68,238 | 55 | % | 71,567 | 59 | % | -4 | % | 82,154 | 72 | % | -17 | % | ||||||||||||||||||||
| Multi-family | 38,764 | 32 | % | 33,950 | 28 | % | 4 | % | 32,955 | 29 | % | 3 | % | ||||||||||||||||||||
| Commercial real estate — owner occupied | 149,209 | 121 | % | 154,850 | 128 | % | -7 | % | 150,626 | 132 | % | -11 | % | ||||||||||||||||||||
| Commercial real estate — non owner occupied | 161,450 | 131 | % | 166,072 | 137 | % | -6 | % | 156,712 | 137 | % | -6 | % | ||||||||||||||||||||
| Farmland | 26,047 | 21 | % | 27,418 | 23 | % | -2 | % | 31,054 | 27 | % | -6 | % | ||||||||||||||||||||
| Consumer | 58,092 | 47 | % | 55,868 | 46 | % | 1 | % | 51,772 | 45 | % | 2 | % | ||||||||||||||||||||
| Gross Loans | $ | 693,888 | $ | 722,713 | $ | 787,336 | |||||||||||||||||||||||||||
| Regulatory Commercial Real Estate | $ | 219,091 | 178 | % | $ | 216,687 | 179 | % | -1 | % | $ | 220,042 | 193 | % | -15 | % | |||||||||||||||||
| Total Risk Based Capital* | $ | 123,048 | $ | 120,934 | $ | 114,216 | |||||||||||||||||||||||||||
| *Bank of the Pacific | |||||||||||||||||||||||||||||||||
DEPOSITS
| Deposits by Category | ||||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||||
| June 30, 2021 |
% of Total | Mar 31, 2021 |
% of Total | $ Change |
% Change |
June 30, 2020 |
% of Total | $ Change |
% Change |
|||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||
| Interest-bearing demand | $ | 264,470 | 22 | % | $ | 305,137 | 28 | % | $ | (40,667 | ) | -13 | % | $ | 288,274 | 30 | % | $ | (23,804 | ) | -8 | % | ||||||
| Money market | 192,653 | 17 | % | 186,887 | 17 | % | 5,766 | 3 | % | 168,570 | 17 | % | 24,083 | 14 | % | |||||||||||||
| Savings | 156,123 | 14 | % | 149,325 | 14 | % | 6,798 | 5 | % | 123,144 | 12 | % | 32,979 | 27 | % | |||||||||||||
| Time deposits (CDs) | 64,269 | 6 | % | 67,861 | 6 | % | (3,592 | ) | -5 | % | 72,402 | 7 | % | (8,133 | ) | -11 | % | |||||||||||
| Total interest-bearing deposits | 677,515 | 59 | % | 709,210 | 65 | % | (31,695 | ) | -4 | % | 652,390 | 66 | % | 25,125 | 4 | % | ||||||||||||
| Non-interest bearing demand | 466,518 | 41 | % | 390,077 | 35 | % | 76,441 | 20 | % | 342,570 | 34 | % | 123,948 | 36 | % | |||||||||||||
| Total deposits | $ | 1,144,033 | 100 | % | $ | 1,099,287 | 100 | % | $ | 44,746 | 4 | % | $ | 994,960 | 100 | % | $ | 149,073 | 15 | % | ||||||||
The following table summarizes the capital measures of the Company and the Bank respectively, at the dates listed below.
| Capital Measures | ||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||
| June 30, 2021 |
Mar 31, 2021 |
Change | June 30, 2020 |
Change | Well Capitalized Under Prompt Correction Action Regulations |
|||||||||||||||
| Pacific Financial Corporation | ||||||||||||||||||||
| Total risk-based capital ratio | 16.7 | % | 16.8 | % | (0.1 | ) | 15.1 | % | 1.6 | N/A | ||||||||||
| Tier 1 risk-based capital ratio | 15.4 | % | 15.5 | % | (0.1 | ) | 13.9 | % | 1.5 | N/A | ||||||||||
| Common equity tier 1 ratio | 13.7 | % | 13.7 | % | – | 12.1 | % | 1.6 | N/A | |||||||||||
| Leverage ratio | 9.1 | % | 9.5 | % | (0.4 | ) | 10.2 | % | (1.1 | ) | N/A | |||||||||
| Tangible common equity ratio | 8.2 | % | 8.3 | % | (0.1 | ) | 8.6 | % | (0.4 | ) | N/A | |||||||||
| Bank of the Pacific | ||||||||||||||||||||
| Total risk-based capital ratio | 16.6 | % | 16.7 | % | (0.1 | ) | 15.0 | % | 1.6 | 10.5% | ||||||||||
| Tier 1 risk-based capital ratio | 15.4 | % | 15.4 | % | – | 13.8 | % | 1.6 | 8.5% | |||||||||||
| Common equity tier 1 ratio | 15.4 | % | 15.4 | % | – | 13.8 | % | 1.6 | 7.0% | |||||||||||
| Leverage ratio | 9.1 | % | 9.5 | % | (0.4 | ) | 10.1 | % | (1.0 | ) | 7.5% | |||||||||
The following tables set forth information regarding average balances of interest-earning assets and interest-bearing liabilities and the resultant yields or cost, and the net interest margin on a tax equivalent basis. Loans held for sale and non-accrual loans are included in total loans.
| Net Interest Margin | ||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||
| (Annualized, tax-equivalent basis) | ||||||||||||||||||||||
| For the Three Months Ended, | ||||||||||||||||||||||
| June 30, 2021 |
Mar 31, 2021 |
$ Change |
% Change |
June 30, 2020 |
$ Change |
% Change |
||||||||||||||||
| Average Balances | (Dollars in thousands) | |||||||||||||||||||||
| Gross loans | $ | 709,818 | $ | 724,259 | $ | (14,441 | ) | -2 | % | $ | 762,502 | $ | (52,684 | ) | -7 | % | ||||||
| Gross loans without PPP | $ | 612,907 | $ | 620,808 | $ | (7,901 | ) | -1 | % | $ | 661,275 | $ | (48,368 | ) | -7 | % | ||||||
| Loans held for sale | $ | 28,236 | $ | 27,203 | $ | 1,033 | 4 | % | $ | 18,287 | $ | 9,949 | 54 | % | ||||||||
| Investment securities | $ | 144,927 | $ | 129,178 | $ | 15,749 | 12 | % | $ | 112,245 | $ | 32,682 | 29 | % | ||||||||
| Federal funds sold & interest bearing deposits in banks | $ | 308,196 | $ | 248,252 | $ | 59,944 | 24 | % | $ | 89,941 | $ | 218,255 | 243 | % | ||||||||
| Total interest-earning assets | $ | 1,191,177 | $ | 1,128,892 | $ | 62,285 | 6 | % | $ | 1,644,250 | $ | (453,073 | ) | -28 | % | |||||||
| Non-interest bearing demand deposits | $ | 452,149 | $ | 360,175 | $ | 91,974 | 26 | % | $ | 307,802 | $ | 144,347 | 47 | % | ||||||||
| Interest bearing deposits | $ | 662,573 | $ | 689,302 | $ | (26,729 | ) | -4 | % | $ | 601,443 | $ | 61,130 | 10 | % | |||||||
| Total Deposits | $ | 1,114,722 | $ | 1,049,477 | $ | 65,245 | 6 | % | $ | 909,245 | $ | 205,477 | 23 | % | ||||||||
| Borrowings | $ | 13,894 | $ | 13,931 | $ | (37 | ) | 0 | % | $ | 15,832 | $ | (1,938 | ) | -12 | % | ||||||
| Total interest-bearing liabilities | $ | 676,467 | $ | 703,233 | $ | (26,766 | ) | -4 | % | $ | 617,275 | $ | 59,192 | 10 | % | |||||||
| Total Equity | $ | 116,399 | $ | 115,095 | $ | 1,304 | 1 | % | $ | 108,455 | $ | 7,944 | 7 | % | ||||||||
| For the Three Months Ended, | ||||||||||||||||||||||
| June 30, 2021 |
Mar 31, 2021 |
Change | June 30, 2020 |
Change | ||||||||||||||||||
| Yield on average gross loans (1) | 4.72 | % | 4.87 | % | (0.15 | ) | 4.59 | % | 0.13 | |||||||||||||
| Yield on average gross loans without PPP (1) | 4.58 | % | 4.63 | % | (0.05 | ) | 4.96 | % | (0.38 | ) | ||||||||||||
| Yield on average investment securities (1) | 2.12 | % | 2.45 | % | (0.33 | ) | 2.71 | % | (0.59 | ) | ||||||||||||
| Yield on Fed funds sold & interest bearing deposits in banks | 0.12 | % | 0.12 | % | – | 0.21 | % | (0.09 | ) | |||||||||||||
| Cost of average interest bearing deposits | 0.16 | % | 0.19 | % | (0.03 | ) | 0.35 | % | (0.19 | ) | ||||||||||||
| Cost of average borrowings | 1.76 | % | 1.83 | % | (0.07 | ) | 2.56 | % | (0.80 | ) | ||||||||||||
| Cost of average total deposits and borrowings | 0.12 | % | 0.15 | % | (0.03 | ) | 0.27 | % | (0.15 | ) | ||||||||||||
| Yield on average interest-earning assets | 3.17 | % | 3.49 | % | (0.32 | ) | 3.96 | % | (0.79 | ) | ||||||||||||
| Cost of average interest-bearing liabilities | 0.19 | % | 0.22 | % | (0.03 | ) | 0.41 | % | (0.22 | ) | ||||||||||||
| Net interest spread | 2.98 | % | 3.27 | % | (0.29 | ) | 3.55 | % | (0.57 | ) | ||||||||||||
| Net interest spread without PPP | 2.76 | % | 2.98 | % | (0.22 | ) | 3.76 | % | (1.00 | ) | ||||||||||||
| Net interest margin (1) | 3.06 | % | 3.35 | % | (0.29 | ) | 3.70 | % | (0.64 | ) | ||||||||||||
| Net interest margin without PPP (1) | 2.83 | % | 3.05 | % | (0.22 | ) | 3.89 | % | (1.06 | ) | ||||||||||||
| (1) Tax-exempt income has been adjusted to a tax equivalent basis at a rate of 21%. | ||||||||||||||||||||||
| For the Six Months Ended, | ||||||||||||||||||||||
| June 30, 2021 |
June 30, 2020 |
$ Change |
% Change |
|||||||||||||||||||
| Average Balances | (Dollars in thousands) | |||||||||||||||||||||
| Gross loans | $ | 716,999 | $ | 722,799 | $ | (5,800 | ) | -1 | % | |||||||||||||
| Gross loans without PPP | $ | 617,957 | $ | 660,829 | $ | (42,872 | ) | -6 | % | |||||||||||||
| Loans held for sale | $ | 27,722 | $ | 14,290 | $ | 13,432 | 94 | % | ||||||||||||||
| Investment securities | $ | 137,096 | $ | 108,723 | $ | 28,373 | 26 | % | ||||||||||||||
| Federal funds sold & interest bearing deposits in banks | $ | 278,390 | $ | 74,540 | $ | 203,850 | 273 | % | ||||||||||||||
| Interest-earning assets | $ | 1,160,207 | $ | 1,581,181 | $ | (420,974 | ) | -27 | % | |||||||||||||
| Non-interest bearing demand deposits | $ | 406,416 | $ | 273,541 | $ | 132,875 | 49 | % | ||||||||||||||
| Interest bearing deposits | $ | 675,864 | $ | 575,106 | $ | 100,758 | 18 | % | ||||||||||||||
| Total Deposits | $ | 1,082,280 | $ | 848,647 | $ | 233,633 | 28 | % | ||||||||||||||
| Borrowings | $ | 13,910 | $ | 16,204 | $ | (2,294 | ) | -14 | % | |||||||||||||
| Interest-bearing liabilities | $ | 689,774 | $ | 591,310 | $ | 98,464 | 17 | % | ||||||||||||||
| Total Equity | $ | 115,751 | $ | 107,655 | $ | 8,096 | 8 | % | ||||||||||||||
| Total Deposits excl. Brokered CDs | 1,078,747 | 842,117 | 236,630 | 28.1 | % | |||||||||||||||||
| For the Six Months Ended, | ||||||||||||||||||||||
| June 30, 2021 |
June 30, 2020 |
Change | ||||||||||||||||||||
| Net Interest Margin | ||||||||||||||||||||||
| Yield on average gross loans (1) | 4.80 | % | 4.86 | % | (0.06 | ) | ||||||||||||||||
| Yield on average gross loans without PPP (1) | 4.60 | % | 5.15 | % | (0.55 | ) | ||||||||||||||||
| Yield on average investment securities (1) | 2.28 | % | 2.86 | % | (0.58 | ) | ||||||||||||||||
| Yield on Fed funds sold & interest bearing deposits in banks | 0.12 | % | 0.69 | % | (0.57 | ) | ||||||||||||||||
| Cost of average interest bearing deposits | 0.18 | % | 0.38 | % | (0.20 | ) | ||||||||||||||||
| Cost of average borrowings | 1.80 | % | 2.87 | % | (1.07 | ) | ||||||||||||||||
| Cost of average total deposits and borrowings | 0.13 | % | 0.31 | % | (0.18 | ) | ||||||||||||||||
| Yield on average interest-earning assets | 3.32 | % | 4.27 | % | (0.95 | ) | ||||||||||||||||
| Cost of average interest-bearing liabilities | 0.21 | % | 0.45 | % | (0.24 | ) | ||||||||||||||||
| Net interest spread | 3.11 | % | 3.82 | % | (0.71 | ) | ||||||||||||||||
| Net interest spread without PPP | 2.86 | % | 4.01 | % | (1.15 | ) | ||||||||||||||||
| Net interest margin (1) | 3.20 | % | 3.98 | % | (0.78 | ) | ||||||||||||||||
| Net interest margin without PPP (1) | 2.93 | % | 4.15 | % | (1.22 | ) | ||||||||||||||||
| (1) Tax-exempt income has been adjusted to a tax equivalent basis at a rate of 21%. | ||||||||||||||||||||||
| Adversely Classified Loans and Securities | |||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||
| June 30, 2021 |
Mar 31, 2021 |
$ Change |
% Change | June 30, 2020 |
$ Change |
% Change | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||
| Rated substandard or worse, but not impaired, beginning of three month period | $ | 12,698 | $ | 14,200 | $ | (1,502 | ) | -11 | % | $ | 9,269 | $ | 3,429 | 37 | % | ||||||
| Addition of previously classified pass graded loans | 589 | 304 | 285 | 94 | % | 126 | 463 | 367 | % | ||||||||||||
| Upgrades to pass or other loans especially mentioned status | (4,605 | ) | – | (4,605 | ) | 100 | % | – | (4,605 | ) | -100 | % | |||||||||
| Moved to nonaccrual | – | – | – | 0 | % | (219 | ) | 219 | -100 | % | |||||||||||
| Principal payments, net | (644 | ) | (1,806 | ) | 1,162 | -64 | % | (1,032 | ) | 388 | -38 | % | |||||||||
| Rated substandard or worse, but not impaired, end of three month period | $ | 8,038 | $ | 12,698 | $ | (4,660 | ) | -37 | % | $ | 8,144 | $ | (106 | ) | -1 | % | |||||
| Impaired | 3,357 | 3,748 | (391 | ) | -10 | % | 1,606 | 1,751 | 109 | % | |||||||||||
| Total adversely classified loans¹ | $ | 11,395 | $ | 16,446 | $ | (5,051 | ) | -31 | % | $ | 9,750 | $ | 1,645 | 17 | % | ||||||
| Other loans especially mentioned or watch, but not impaired | $ | 46,723 | $ | 79,603 | $ | (32,880 | ) | -41 | % | $ | 132,761 | $ | (86,038 | ) | -65 | % | |||||
| Gross loans (excluding deferred loan fees) | $ | 693,888 | $ | 722,713 | $ | (28,825 | ) | -4 | % | $ | 787,336 | $ | (93,448 | ) | -12 | % | |||||
| Adversely classified loans to gross loans | 1.64 | % | 2.28 | % | 1.24 | % | |||||||||||||||
| Adversely classified loans to gross loans without PPP | 1.83 | % | 2.68 | % | 1.48 | % | |||||||||||||||
| Allowance for loan losses | $ | 9,078 | $ | 10,721 | $ | (1,643 | ) | -15 | % | $ | 11,507 | $ | (2,429 | ) | -21 | % | |||||
| Allowance for loan losses as a percentage of adversely classified loans | 79.67 | % | 65.19 | % | 118.02 | % | |||||||||||||||
| Allowance for loan losses to total impaired loans | 270.42 | % | 286.05 | % | 716.50 | % | |||||||||||||||
| Adversely classified loans to total assets | 0.88 | % | 1.32 | % | 0.86 | % | |||||||||||||||
| Delinquent loans to gross loans, not in nonaccrual status 2 | 0.01 | % | 0.21 | % | 0.02 | % | |||||||||||||||
| Delinquent loans to gross loans without PPP, not in nonaccrual status | 0.01 | % | 0.24 | % | 0.03 | % | |||||||||||||||
| ¹Adversely classified loans are defined as loans having a well-defined weakness or weaknesses related to the borrower’s financial capacity or to pledged collateral that 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. | |||||||||||||||||||||
| 2 Delinquent loans are defined as loans past due 30-90 days and still accruing | |||||||||||||||||||||
| Nonperforming Assets | ||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||
| June 30, 2021 |
Mar 31, 2021 |
$ Change |
% Change |
June 30, 2020 |
$ Change |
% Change |
||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||
| Total nonaccrual loans, beginning of three month period | $ | 2,203 | $ | 2,392 | $ | (189 | ) | -8 | % | $ | 1,622 | $ | 581 | 36 | % | |||||||
| Transfer to performing loans | (138 | ) | – | (138 | ) | -100 | % | – | (138 | ) | -100 | % | ||||||||||
| Addition of nonaccrual loans | – | 202 | (202 | ) | -100 | % | 219 | (219 | ) | -100 | % | |||||||||||
| Moved to other assets owned | – | (265 | ) | 265 | -100 | % | (169 | ) | 169 | -100 | % | |||||||||||
| Principal payments, net | (246 | ) | (126 | ) | (120 | ) | 95 | % | (12 | ) | (234 | ) | 1950 | % | ||||||||
| Charge-offs, net | – | – | – | 0 | % | (234 | ) | 234 | -100 | % | ||||||||||||
| Total nonaccrual loans, end of three month period | $ | 1,819 | $ | 2,203 | $ | (384 | ) | -17 | % | $ | 1,426 | $ | 393 | 28 | % | |||||||
| Other real estate owned and foreclosed assets | 241 | 265 | (24 | ) | -9 | % | – | 241 | 100 | % | ||||||||||||
| Total nonperforming assets | $ | 2,060 | $ | 2,468 | $ | (408 | ) | -17 | % | $ | 1,426 | $ | 634 | 44 | % | |||||||
| Total restructured performing loans, beginning of period | $ | 1,545 | $ | 168 | $ | 1,377 | 820 | % | $ | 278 | $ | 1,267 | 456 | % | ||||||||
| Transfer to nonaccrual loans | – | – | – | 0 | % | – | – | 0 | % | |||||||||||||
| Addition of restructured performing loans | – | 1,382 | (1,382 | ) | -100 | % | – | – | 0 | % | ||||||||||||
| Principal payments, net | (7 | ) | (5 | ) | (2 | ) | 40 | % | (5 | ) | (2 | ) | 40 | % | ||||||||
| Charge-offs, net | – | – | – | 0 | % | (93 | ) | 93 | -100 | % | ||||||||||||
| Total restructured performing loans, end of period | $ | 1,538 | $ | 1,545 | $ | (7 | ) | 0 | % | $ | 180 | $ | 1,358 | 754 | % | |||||||
| Accruing loans past due 90 days or more | $ | – | $ | – | $ | – | 0 | % | $ | – | $ | – | 0 | % | ||||||||
| Percentage of nonperforming assets to total assets | 0.16 | % | 0.20 | % | 0.13 | % | ||||||||||||||||
| Nonperforming loans to total loans | 0.26 | % | 0.30 | % | 0.18 | % | ||||||||||||||||
| Nonperforming loans to total loans without PPP | 0.29 | % | 0.36 | % | 0.22 | % | ||||||||||||||||
| Allowance for Loan Losses | |||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||
| For the Three Months Ended, | |||||||||||||||||||||
| June 30, 2021 |
Mar 31, 2021 |
$ Change |
% Change |
June 30, 2020 |
$ Change |
% Change |
|||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||
| Gross loans outstanding at end of period | $ | 693,888 | $ | 722,713 | $ | (28,825 | ) | -4 | % | $ | 787,336 | $ | (93,448 | ) | -12 | % | |||||
| Average loans outstanding, gross | $ | 709,818 | $ | 724,259 | $ | (14,441 | ) | -2 | % | $ | 762,502 | $ | (52,684 | ) | -7 | % | |||||
| Allowance for loan losses, beginning of period | $ | 10,721 | $ | 12,068 | $ | (1,347 | ) | -11 | % | $ | 10,786 | $ | (65 | ) | -1 | % | |||||
| Commercial | – | – | – | 0 | % | (303 | ) | 303 | 100 | % | |||||||||||
| Commercial Real Estate | – | – | – | 0 | % | – | – | 0 | % | ||||||||||||
| Residential Real Estate | – | – | – | 0 | % | – | – | 0 | % | ||||||||||||
| Consumer | (48 | ) | (46 | ) | (2 | ) | 4 | % | (51 | ) | 3 | -6 | % | ||||||||
| Total charge-offs | (48 | ) | (46 | ) | (2 | ) | 4 | % | (354 | ) | 306 | -86 | % | ||||||||
| Commercial | 4 | 38 | (34 | ) | -89 | % | – | 4 | 100 | % | |||||||||||
| Commercial Real Estate | – | – | – | 0 | % | – | – | 0 | % | ||||||||||||
| Residential Real Estate | – | 49 | (49 | ) | -100 | % | 72 | (72 | ) | -100 | % | ||||||||||
| Consumer | 1 | 12 | (11 | ) | -92 | % | 3 | (2 | ) | -67 | % | ||||||||||
| Total recoveries | 5 | 99 | (94 | ) | -95 | % | 75 | (70 | ) | -93 | % | ||||||||||
| Net recoveries/(charge-offs) | (43 | ) | 53 | (96 | ) | -181 | % | (279 | ) | 236 | -85 | % | |||||||||
| Provision to income | (1,600 | ) | (1,400 | ) | (200 | ) | 14 | % | 1,000 | (2,600 | ) | -260 | % | ||||||||
| Allowance for loan losses, end of period | $ | 9,078 | $ | 10,721 | $ | (1,643 | ) | -15 | % | $ | 11,507 | $ | (2,429 | ) | -21 | % | |||||
| Ratio of net loans charged-off to average | |||||||||||||||||||||
| gross loans outstanding, annualized | 0.02 | % | -0.03 | % | 0.05 | % | 0.15 | % | -0.13 | % | |||||||||||
| Ratio of net loans charged-off to average | |||||||||||||||||||||
| gross loans outstanding without PPP, annualized | 0.03 | % | -0.03 | % | 0.06 | % | 0.17 | % | -0.14 | % | |||||||||||
| Ratio of allowance for loan losses to | |||||||||||||||||||||
| gross loans outstanding | 1.31 | % | 1.48 | % | -0.17 | % | 1.46 | % | -0.15 | % | |||||||||||
| Ratio of allowance for loan losses to | |||||||||||||||||||||
| gross loans without PPP outstanding | 1.45 | % | 1.75 | % | -0.30 | % | 1.75 | % | -0.30 | % | |||||||||||
| For the Six Months Ended, | |||||||||||||||||||||
| June 30, 2021 |
June 30, 2020 |
$ Change |
% Change |
||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||
| Gross loans outstanding at end of period | $ | 693,888 | $ | 787,336 | $ | (93,448 | ) | -12 | % | ||||||||||||
| Average loans outstanding, gross | $ | 716,999 | $ | 722,799 | $ | (5,800 | ) | -1 | % | ||||||||||||
| Allowance for loan losses, beginning of period | $ | 12,068 | $ | 8,993 | $ | 3,075 | 34 | % | |||||||||||||
| Commercial | – | (433 | ) | 433 | -100 | % | |||||||||||||||
| Commercial Real Estate | – | – | – | 0 | % | ||||||||||||||||
| Residential Real Estate | – | – | – | 0 | % | ||||||||||||||||
| Consumer | (95 | ) | (131 | ) | 36 | -27 | % | ||||||||||||||
| Total charge-offs | (95 | ) | (564 | ) | 469 | -83 | % | ||||||||||||||
| Commercial | 42 | 0 | 42 | 100 | % | ||||||||||||||||
| Commercial Real Estate | – | – | – | 0 | % | ||||||||||||||||
| Residential Real Estate | 50 | 72 | (22 | ) | -31 | % | |||||||||||||||
| Consumer | 13 | 6 | 7 | 117 | % | ||||||||||||||||
| Total recoveries | 105 | 78 | 27 | 35 | % | ||||||||||||||||
| Net recoveries (charge-offs) | 10 | (486 | ) | 496 | -102 | % | |||||||||||||||
| Provision charged to income | (3,000 | ) | 3,000 | (6,000 | ) | -200 | % | ||||||||||||||
| Allowance for loan losses, end of period | $ | 9,078 | $ | 11,507 | $ | (2,429 | ) | -21 | % | ||||||||||||
| Ratio of net loans charged-off to average | |||||||||||||||||||||
| gross loans outstanding, annualized | 0.00 | % | 0.07 | % | -0.07 | % | |||||||||||||||
| Ratio of net loans charged-off to average | |||||||||||||||||||||
| gross loans outstanding without PPP, annualized | 0.00 | % | 0.07 | % | -0.07 | % | |||||||||||||||
| Ratio of allowance for loan losses to | |||||||||||||||||||||
| gross loans outstanding | 1.31 | % | 1.46 | % | -0.15 | % | |||||||||||||||
| Ratio of allowance for loan losses to | |||||||||||||||||||||
| gross loans without PPP outstanding | 1.45 | % | 1.75 | % | -0.30 | % | |||||||||||||||
ABOUT PACIFIC FINANCIAL CORPORATION
Pacific Financial Corporation of Aberdeen, Washington, is the bank holding company for Bank of the Pacific, a state chartered and federally insured commercial bank. Bank of the Pacific offers banking products and services to small-to-medium sized businesses and professionals in western Washington and Oregon. At June 30, 2021, the Company had total assets of $1.29 billion and operated fourteen branches in the communities of Grays Harbor, Pacific, Whatcom, Skagit, Clark and Wahkiakum counties in the State of Washington, and two branches in Clatsop County, Oregon. The Company also operated loan production offices in the communities of Burlington, Washington and Salem and Eugene, Oregon. Visit the Company’s website at www.bankofthepacific.com. Member FDIC.
Cautions Concerning Forward-Looking Statements
This press release contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other laws, including all statements in this release that are not historical facts or that relate to future plans or events or projected results of Pacific Financial Corporation and its wholly-owned subsidiary, Bank of the Pacific. These forward-looking statements are subject to risks and uncertainties that could cause actual events or results to differ materially from those projected, anticipated or implied, and could negatively impact the Company’s operating and stock price performance. These risks and uncertainties include various risks associated with growing the Bank and expanding the services it provides, development of new business lines and markets, competition in the marketplace, general economic conditions, including the COVID-19 pandemic and government responses thereto, changes in interest rates, extensive and evolving regulation of the banking industry, and many other risks. We undertake no obligation to update or revise any forward-looking statement. Readers of this release are cautioned not to put undue reliance on forward-looking statements.
