Pacific Financial Corp Earns $2.9 Million, or $0.28 per Diluted Share, for Fourth Quarter 2023, and Record Earnings of $14.6 Million, or $1.40 per Diluted Share, for the full year ended December 31, 2023; Declares Quarterly Cash Dividend of $0.14 per Share
ABERDEEN, Wash., Jan. 26, 2024 (GLOBE NEWSWIRE) — Pacific Financial Corporation (OTCQX: PFLC), (“Pacific Financial”) or the (“Company”), the holding company for Bank of the Pacific (the “Bank”), reported net income of $2.9 million, or $0.28 per diluted share for the fourth quarter of 2023, compared to $3.6 million, or $0.35 per diluted share for the third quarter of 2023, and $4.7 million, or $0.45 per diluted share for the fourth quarter of 2022. For the year ended December 31, 2023, net income was $14.6 million, or $1.40 per diluted share, compared to $10.9 million, or $1.04 per diluted share, for the full year of 2022. All results are unaudited.
The board of directors of Pacific Financial declared a quarterly cash dividend of $0.14 per share on January 24, 2024. The dividend will be payable on February 23, 2024 to shareholders of record on February 9, 2024.
“We’re pleased to report another solid quarter, fueling record earnings for the full year of 2023,” said Denise Portmann, President and Chief Executive Officer. “Fourth quarter earnings benefitted from higher yields on interest earning assets as well as strong loan growth, and our full year results were highlighted by pre-provision earnings growth, driven by strong net interest income growth and a wider net interest margin. Current quarter net interest margin was at 4.34%, only a slight decline of 3 basis points from the prior quarter. Credit quality remains solid, with continued low levels of adversely classified and nonperforming loans.”
“Loan growth was strong, increasing 7% year-over-year and 2% over the linked quarter, and we continue to be optimistic about loan demand in our markets,” said Portmann. “We recently announced a new commercial banking center in Lake Oswego, Oregon, supported by a new team of seven seasoned commercial bankers who have established ties to the Portland market and its community. We look forward to the opportunities this new market presents and to establishing new customer relationships within the greater Portland region. This expansion into these new markets aligns with our long-term goals and strategic plans.”
Fourth Quarter 2023 Financial Highlights:
- Return on average assets (“ROAA”) was 1.02%, compared to 1.21% for the third quarter 2023, and 1.41% for the fourth quarter 2022.
- Return on average equity (“ROAE”) was 10.88%, compared to 13.16% from the preceding quarter, and 18.70% from the fourth quarter a year earlier.
- Net interest income was $11.7 million, compared to $12.3 million for the third quarter of 2023, and $12.9 million for the fourth quarter 2022.
- Net interest margin (“NIM”) contracted 3 basis points to 4.34%, compared to 4.37% from the preceding quarter, and expanded 22 basis points from 4.12% for the fourth quarter a year ago.
- Provision for credit losses was $111,000 compared to $244,000 for the preceding quarter and no provision in the fourth quarter a year ago.
- Gross loans balances increased $13.4 million, or 2%, to $685.3 million at December 31, 2023, compared to $672.0 from the preceding quarter end and increased 7%, or $44.6 million, compared to $640.7 million at December 31, 2022.
- Total deposits declined $42.0 million to $1.01 billion, compared to $1.05 billion from the third quarter 2023, with core deposits representing 90% of total deposits at December 31, 2023. Non-interest bearing deposits represented 41% of total deposits at December 31, 2023.
- Asset quality remains solid with nonperforming assets to total assets at 0.06%, compared to nonperforming assets to total assets at 0.10% for the preceding quarter, and 0.07% at December 31, 2022.
- At December 31, 2023, Pacific Financial continued to exceed regulatory well-capitalized requirements with a leverage ratio of 11.3% and a total risk-based capital ratio of 17.7%.
Income Statement Review
Net interest income declined 5% to $11.7 million for the current quarter, compared to $12.3 million for the third quarter of 2023, and declined 10% from $12.9 million for the fourth quarter of 2022. For the current quarter, interest and fees on loans continued to increase as a result of both balance and yield increases. These increases were partially offset by deposit interest expense increases as well as the decrease in interest income on interest bearing bank balances. For the year ended December 31, 2023, net interest income increased 20%, or $8.3 million, to $49.2 million compared to $40.9 million for the year 2022.
Net interest margin (NIM) contracted 3 basis points to 4.34% for the fourth quarter of 2023, compared to 4.37% for the third quarter of 2023, primarily due to a higher cost of funds. The NIM expanded 22 basis points in the current quarter compared to 4.12% for the fourth quarter of 2022. Higher market interest rates during most of the year combined with growth of investments and loan balances positively impacted NIM for the current quarter and for the year ended December 31, 2023. For the year ended December 31, 2023, the NIM expanded 110 basis points to 4.39% from 3.29% for the year ended December 31, 2022.
The increase in average yields on interest-earning assets during the current quarter and for the year 2023 reflects the benefit of variable rate interest-earning assets repricing higher, as well as new loans being originated at higher interest rates. For the current quarter, loan yields increased 9 basis points to 5.80% compared to the preceding quarter of 5.71%, and increased 62 basis points from 5.18% from the fourth quarter 2022. In addition, the yield on interest-bearing bank deposits was 5.42% for the current quarter, compared to 5.35% for the preceding quarter, and 3.72% for the fourth quarter 2022. The Bank’s total cost of funds increased to 0.83% for the current quarter, compared to 0.72% for the preceding quarter, and 0.14% for the fourth quarter 2022. Our deposit offering rates have remained relatively unchanged since end of May 2023.
Noninterest income decreased to $1.5 million for the current quarter, compared to $1.6 million for the linked quarter and for the fourth quarter a year earlier. On a year-over-year basis, the company’s focused initiative on fee revenue growth in 2023, in which deposit service charges and other related fees were increased consistent with product pricing in our market, has positively impacted service charges on deposits. These service charges increased $354,000 or 22% from a year ago. Higher mortgage interest rates and housing prices during most of 2023 continued to negatively impact loan origination volumes for our mortgage banking division and, as a result, gain-on-sale of loans remained at the low end of historic levels. For the year ended December 31, 2023, noninterest income declined 15% to $6.2 million compared to $7.2 million for the year ended December 31, 2022, primarily due to lower gain on sale of loans.
Noninterest expense increased 4% to $9.5 million for the fourth quarter of 2023, compared to $9.1 million for the third quarter of 2023, and increased 10% from $8.6 million for the fourth quarter of 2022. Current quarter increases compared to the linked quarter and quarter a year ago were primarily a result of increases in salary and employee benefit costs from salary, recruitment and other hiring costs for the new commercial banking team as well as increased occupancy costs from the relocation of the Vancouver Commercial Banking Center and the Olympia branch. In addition, compared to the quarter a year ago, marketing, professional services and state and local taxes were up for the current quarter.
Noninterest expense for the year ended December 31, 2023 increased 5% to $36.9 million compared to $35.0 million for 2022, primarily due to increased salary and employee benefits, occupancy, FDIC insurance premiums, state and local taxes and data processing costs. Salary expenses increased by 2% for the full year of 2023 compared to the full year of 2022. Salary expenses comprise a large portion of non-interest expenses and continue to be impacted by competitive recruiting and wage pressures. In addition, similar to the quarter, year-over-year salary expenses were also impacted by recruiting and ongoing costs related to the new commercial banking team and an overall increase in the number of employees. Employee staffing numbers, excluding mortgage banking employees, remained relatively stable during most of the year, however staffing numbers increased 9 FTE in the later part of the year. State and local taxes increased $325,000 year-over-year primarily as a result of accrual of not yet settled tax audit assessment which was fully funded at year end.
Federal and Oregon state income tax expense was $608,000 for the current quarter, and $859,000 for the preceding quarter, resulting in effective tax rates of 17.1% and 19.1%, respectively. These income tax expenses reflect the benefits of tax exempt income and tax credits. Income tax expense for the year ended December 31, 2023, was $3.4 million, and $2.3 million for the year ended December 31, 2022, with an effective tax rate of 18.8% and 17.5%, respectively.
Balance Sheet Review
Total Assets declined by 3% to $1.15 billion at December 31, 2023, compared to $1.18 billion at September 30, 2023 and decreased 12% from $1.31 billion at December 31, 2022.
Liquidity metrics continued to remain strong with:
- Cash and cash equivalents of $95.8 million, or 41% of uninsured and uncollateralized deposits, at December 31, 2023 compared to $148 million at September 30, 2023.
- Coverage of short-term funds available to uninsured and uncollateralized deposits was 243% at December 31, 2023 compared to 254% at September 30, 2023.
- Uninsured or uncollateralized deposits were 23% of total deposits at December 31, 2023 and 22% at September 30, 2023.
Investment Securities increased 2% to $293.6 million at December 31, 2023, compared to $289.2 million at September 30, 2023, and increased 3% from $286.3 million at December 31, 2022. During the year, new purchases totaled $43.5 million at an average yield of 4.93%. In part due to purchases at higher yields, the average portfolio yield increased to 3.48% from 3.36% for the linked quarter and from 2.81% for the like-quarter a year ago. For the twelve months ended December 31, 2023, yields increased 109 basis points to 3.31% compared to the twelve months ended December 31, 2022. The average adjusted duration of the investment securities portfolio was 4.42 years at December 31, 2023.
Gross loans balances increased $13.4 million, or 2%, to $685.3 million at December 31, 2023, compared to $672.0 million at September 30, 2023. Year-over-year loan growth was 7%, or $44.6 million, with loan growth occurring in most categories of loans except consumer and C&I. The largest increases were in construction and development, residential 1-4 family and owner-occupied commercial real estate, and increased $11.4 million, $13.6 million and $10.1 million, respectively. C&I balances were impacted by elevated payoffs during the year and in addition, balances continue to be impacted by low utilization on commercial lines-of credit that began during the pandemic. That utilization rate continues to remain low compared to historic levels.
The Company manages new loan origination volume using concentration limits that establish maximum exposure levels by certain industry segments, loan product types, geography and single borrower limits. The loan pipeline continues to be supported by sustained business development activity by its commercial lending teams. In addition, the loan portfolio continues to be well-diversified and is originated predominantly within the Company’s Western Washington and Oregon markets.
Credit Quality metrics remain sound with nonperforming assets declining to $664,000, or 0.06% of total assets, at December 31, 2023, compared to nonperforming assets at $1.2 million, or 0.10% of total assets, at September 30, 2023, and $899,000 million, or 0.07% of total assets, at December 31, 2022. Balances related to non-impaired loans, graded watch or other loans especially mentioned, increased $2 million to $15.1 million at December 31, 2023, compared to $13.1 million at September 30, 2023, and $26.4 million at December 31, 2022.
Adoption of New Accounting Standard In June 2016, Financial Accounting Standards Board issued Accounting Standard Update No. 2016-13, Measurement of Credit Losses on Financial Instruments (ASU 2016-13). The allowance for credit losses under ASU 2016-13 utilizes a Current Expected Credit Losses (“CECL”) methodology which estimates the expected loan losses over the contractual life of the loans. GAAP prior to ASU 2016-13 required an “incurred loss” methodology for recognizing credit losses that delays recognition until it is probable a loss has been incurred. ASU 2016-13 became effective for the Company on January 1, 2023. The day 1 adoption of ASU 2016-13 and related amendments resulted in a decrease of $157,000 to the Bank’s allowance for credit losses-loans and an increase of $609,000 to the Bank’s allowance for credit losses-unfunded loan commitments for a cumulative-effect adjustment of $452,000 to decrease the beginning balance of retained earnings.
Allowance for Credit Losses (“ACL”) for loans was $8.5 million, or 1.24% of gross loans at December 31, 2023, compared to $8.3 million, or 1.24% of gross loans, at September 30, 2023, and $8.2 million, or 1.29%, at December 31, 2022.
Net recoveries for the current quarter totaled $21,000, compared to $125,000 of net charge-offs for the preceding quarter and $13,000 for the fourth quarter a year earlier. For the year ended December 31, 2023, net charge-offs were $183,000, compared to $61,000 for the year ended December 31, 2022. The total provision for credit losses, which includes a provision for credit losses on loans as well as a provision for credit losses for unfunded loan commitments, was $111,000 in the fourth quarter of 2023, compared to $244,000 in the third quarter of 2023. There was no provision for loan losses booked in the fourth quarter a year ago. There was a $520,000 provision for credit losses on loans and unfunded loan commitments in the year ended December 31, 2023, compared to no provision in year ended December 31, 2022. The provision booked in the current quarter was primarily as a result of a 2% or $13.4 million loan growth during the quarter.
Total Deposits were $1.01 billion at December 31, 2023, compared to $1.05 billion at September 30, 2023 and $1.18 billion at December 31, 2022. “Deposit balances continued to be impacted by interest rate sensitive customers transferring a portion of their excess deposits funds into higher yielding investments as well as increased business and customer spending and the general market tightening of liquidity,” stated Carla Tucker, Executive Vice-President and Chief Financial Officer.
As some customers continued to seek higher yield, certificate of deposit balances increased $8.1 million from the linked quarter and $52.1 million from the fourth quarter a year ago and represent 10%, 9%, and 4%, of total deposits, at December 31, 2023, September 30, 2023, and December 31, 2022, respectively. At 41%, non-interest bearing demand deposits continues to represent a high percentage of total deposits.
Shareholder’s Equity increased 8% to $114.7 million at December 31, 2023, compared to $106.6 million at September 30, 2023 and increased 11% from $103.2 million at December 31, 2022. Book value per common share was $11.04 at December 31, 2023, compared to $10.22 at September 30, 2023, and $9.91 at December 31, 2022. The increase in shareholder’s equity during the current quarter was due to net income during the quarter plus the decrease in unrealized loss on available-for-sale securities which was partially offset by dividends to shareholders and $399,000 in stock repurchases under the Company’s stock repurchase program. The decrease in the unrealized gain/(loss) on available-for-sale investment securities had a positive impact on the Tangible Common Equity Ratio (TCE) increasing the Company’s tangible common equity ratio to 8.92% at December 31, 2023, compared to 7.97% at September 30, 2023 and from 6.94% at December 31, 2022. The gross unrealized loss on available-for-sale securities was $20.8 million at December 31, 2023, compared to $29.8 million at September 30, 2023, and $24.9 million at December 31, 2022. The decline in longer-term market interest rates during the quarter contributed to this change.
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 11.3% and total risk-based capital ratio at 17.7% as of December 31, 2023.
| Financial Performance Overview | ||||||||||||||
| (Unaudited) | ||||||||||||||
| For the Three Months Ended | ||||||||||||||
| Dec 31, 2023 | Sep 30, 2023 | Change | Dec 31, 2022 | Change | ||||||||||
| Performance Ratios | ||||||||||||||
| Return on average assets, annualized | 1.02 | % | 1.21 | % | (0.19 | ) | 1.41 | % | (0.39 | ) | ||||
| Return on average equity, annualized | 10.88 | % | 13.16 | % | (2.28 | ) | 18.70 | % | (7.82 | ) | ||||
| Efficiency ratio (1) | 72.22 | % | 65.78 | % | 6.44 | 59.67 | % | 12.55 | ||||||
| (1) Non-interest expense divided by net interest income plus noninterest income. | ||||||||||||||
| For the Twelve Months Ended, | ||||||||||||||
| Dec 31, 2023 | Dec 31, 2022 | Change | ||||||||||||
| Performance Ratios | ||||||||||||||
| Return on average assets, annualized | 1.22 | % | 0.82 | % | 0.40 | |||||||||
| Return on average equity, annualized | 13.48 | % | 10.24 | % | 3.24 | |||||||||
| Efficiency ratio (1) | 66.56 | % | 72.60 | % | (6.04 | ) | ||||||||
| (1) Non-interest expense divided by net interest income plus noninterest income. | ||||||||||||||
| Balance Sheet Overview | ||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||
| Dec 31, 2023 | Sep 30, 2023 | $ Change | % Change | Dec 31, 2022 | $ Change | % Change | ||||||||||||||||
| Assets: | (Dollars in thousands, except per share data) | |||||||||||||||||||||
| Cash on hand and in banks | $ | 16,716 | $ | 12,052 | $ | 4,664 | 39 | % | $ | 18,673 | $ | (1,957 | ) | -10 | % | |||||||
| Interest bearing deposits | 91,355 | 146,886 | (55,531 | ) | -38 | % | 299,813 | (208,458 | ) | -70 | % | |||||||||||
| Investment securities | 293,579 | 289,152 | 4,427 | 2 | % | 286,297 | 7,282 | 3 | % | |||||||||||||
| Loans held-for-sale | 1,103 | 637 | 466 | 73 | % | – | 1,103 | 100 | % | |||||||||||||
| Loans, net of deferred fees | 684,554 | 671,134 | 13,420 | 2 | % | 639,958 | 44,596 | 7 | % | |||||||||||||
| Allowance for loan losses | (8,530 | ) | (8,347 | ) | (183 | ) | 2 | % | (8,236 | ) | (294 | ) | 4 | % | ||||||||
| Net loans | 676,024 | 662,787 | 13,237 | 2 | % | 631,722 | 44,302 | 7 | % | |||||||||||||
| Federal Home Loan Bank and Pacific Coast Bankers’ Bank stock, at cost | 1,783 | 2,567 | (784 | ) | -31 | % | 2,583 | (800 | ) | -31 | % | |||||||||||
| Other assets | 68,339 | 67,894 | 445 | 1 | % | 67,115 | 1,224 | 2 | % | |||||||||||||
| Total assets | $ | 1,148,899 | $ | 1,181,975 | $ | (33,076 | ) | -3 | % | $ | 1,306,203 | $ | (157,304 | ) | -12 | % | ||||||
| Liabilities and Shareholders’ Equity: | ||||||||||||||||||||||
| Total deposits | $ | 1,009,292 | $ | 1,051,256 | $ | (41,964 | ) | -4 | % | $ | 1,180,362 | $ | (171,070 | ) | -14 | % | ||||||
| Borrowings | 13,403 | 13,403 | – | 0 | % | 13,403 | – | 0 | % | |||||||||||||
| Accrued interest payable and other liabilities | 11,513 | 10,715 | 798 | 7 | % | 9,276 | 2,237 | 24 | % | |||||||||||||
| Shareholders’ equity | 114,691 | 106,601 | 8,090 | 8 | % | 103,162 | 11,529 | 11 | % | |||||||||||||
| Total liabilities and shareholders’ equity | $ | 1,148,899 | $ | 1,181,975 | $ | (33,076 | ) | -3 | % | $ | 1,306,203 | $ | (157,304 | ) | -12 | % | ||||||
| Common Shares Outstanding | 10,388,724 | 10,427,224 | (38,500 | ) | 0 | % | 10,414,276 | (25,552 | ) | 0 | % | |||||||||||
| Book value per common share (1) | $ | 11.04 | $ | 10.22 | $ | 0.82 | 8 | % | $ | 9.91 | $ | 1.13 | 11 | % | ||||||||
| Tangible book value per common share (2) | $ | 9.75 | $ | 8.93 | $ | 0.82 | 9 | % | $ | 8.62 | $ | 1.13 | 13 | % | ||||||||
| (1) Book value per common share is calculated as the total common shareholders’ equity divided by the period ending number of common stock shares outstanding. | ||||||||||||||||||||||
| (2) Tangible book value per common share is calculated as the total common shareholders’ equity less total intangible assets and liabilities, divided by the period ending number of common stock shares outstanding. | ||||||||||||||||||||||
| Income Statement Overview | ||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||
| For the Three Months Ended, | ||||||||||||||||||||||
| Dec 31, 2023 | Sep 30, 2023 | $ Change | % Change | Dec 31, 2022 | $ Change | % Change | ||||||||||||||||
| (Dollars in thousands, except per share data) | ||||||||||||||||||||||
| Interest and dividend income | $ | 13,813 | $ | 14,242 | $ | (429 | ) | -3 | % | $ | 13,352 | $ | 461 | 3 | % | |||||||
| Interest expense | 2,161 | 1,962 | 199 | 10 | % | 417 | 1,744 | 418 | % | |||||||||||||
| Net interest income | 11,652 | 12,280 | (628 | ) | -5 | % | 12,935 | (1,283 | ) | -10 | % | |||||||||||
| Provision for credit losses | 111 | 244 | (133 | ) | -55 | % | – | 111 | 100 | % | ||||||||||||
| Noninterest income | 1,528 | 1,610 | (82 | ) | -5 | % | 1,559 | (31 | ) | -2 | % | |||||||||||
| Noninterest expense | 9,519 | 9,142 | 377 | 4 | % | 8,648 | 871 | 10 | % | |||||||||||||
| Income before income taxes | 3,550 | 4,504 | (954 | ) | -21 | % | 5,846 | (2,296 | ) | -39 | % | |||||||||||
| Income tax expense | 608 | 859 | (251 | ) | -29 | % | 1,129 | (521 | ) | -46 | % | |||||||||||
| Net Income | $ | 2,942 | $ | 3,645 | $ | (703 | ) | -19 | % | $ | 4,717 | $ | (1,775 | ) | -38 | % | ||||||
| Average common shares outstanding – basic | 10,411,812 | 10,427,224 | (15,412 | ) | 0 | % | 10,407,967 | 3,845 | 0 | % | ||||||||||||
| Average common shares outstanding – diluted | 10,420,337 | 10,433,686 | (13,349 | ) | 0 | % | 10,426,346 | (6,009 | ) | 0 | % | |||||||||||
| Income per common share | ||||||||||||||||||||||
| Basic | $ | 0.28 | $ | 0.35 | $ | (0.07 | ) | -20 | % | $ | 0.45 | $ | (0.17 | ) | -38 | % | ||||||
| Diluted | $ | 0.28 | $ | 0.35 | $ | (0.07 | ) | -20 | % | $ | 0.45 | $ | (0.17 | ) | -38 | % | ||||||
| Effective tax rate | 17.1 | % | 19.1 | % | -2.0 | % | 19.3 | % | -2.2 | % | ||||||||||||
| For the Twelve Months Ended, | ||||||||||||||||||||||
| Dec 31, 2023 | Dec 31, 2022 | $ Change | % Change | |||||||||||||||||||
| (Dollars in thousands, except per share data) | ||||||||||||||||||||||
| Interest and dividend income | $ | 55,480 | $ | 42,152 | $ | 13,328 | 32 | % | ||||||||||||||
| Interest expense | 6,280 | 1,206 | 5,074 | 421 | % | |||||||||||||||||
| Net interest income | 49,200 | 40,946 | 8,254 | 20 | % | |||||||||||||||||
| Provision for credit losses | 520 | – | 520 | 100 | % | |||||||||||||||||
| Noninterest income | 6,172 | 7,227 | (1,055 | ) | -15 | % | ||||||||||||||||
| Noninterest expense | 36,856 | 34,974 | 1,882 | 5 | % | |||||||||||||||||
| Income before income taxes | 17,996 | 13,199 | 4,797 | 36 | % | |||||||||||||||||
| Income tax expense | 3,391 | 2,311 | 1,080 | 47 | % | |||||||||||||||||
| Net Income | $ | 14,605 | $ | 10,888 | $ | 3,717 | 34 | % | ||||||||||||||
| Average common shares outstanding – basic | 10,420,431 | 10,396,268 | 24,163 | 0 | % | |||||||||||||||||
| Average common shares outstanding – diluted | 10,429,187 | 10,423,301 | 5,886 | 0 | % | |||||||||||||||||
| Income per common share | ||||||||||||||||||||||
| Basic | $ | 1.40 | $ | 1.05 | $ | 0.35 | 33 | % | ||||||||||||||
| Diluted | $ | 1.40 | $ | 1.04 | $ | 0.36 | 35 | % | ||||||||||||||
| Effective tax rate | 18.8 | % | 17.5 | % | 1.3 | % | ||||||||||||||||
| Noninterest Income | ||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||
| For the Three Months Ended, | ||||||||||||||||||||||
| Dec 31, 2023 | Sep 30, 2023 | $ Change | % Change | Dec 31, 2022 | $ Change | % Change | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||
| Service charges on deposits | $ | 478 | $ | 514 | $ | (36 | ) | -7 | % | $ | 404 | $ | 74 | 18 | % | |||||||
| Gain on sale of loans, net | 95 | 170 | (75 | ) | -44 | % | 97 | (2 | ) | -2 | % | |||||||||||
| Earnings on bank owned life insurance | 176 | 174 | 2 | 1 | % | 161 | 15 | 9 | % | |||||||||||||
| Other noninterest income | ||||||||||||||||||||||
| Fee income | 764 | 734 | 30 | 4 | % | 903 | (139 | ) | -15 | % | ||||||||||||
| Other | 15 | 18 | (3 | ) | -17 | % | (6 | ) | 21 | -350 | % | |||||||||||
| Total noninterest income | $ | 1,528 | $ | 1,610 | $ | (82 | ) | -5 | % | $ | 1,559 | $ | (31 | ) | -2 | % | ||||||
| For the Twelve Months Ended, | ||||||||||||||||||||||
| Dec 31, 2023 | Dec 31, 2022 | $ Change | % Change | |||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||
| Service charges on deposits | $ | 1,975 | $ | 1,621 | $ | 354 | 22 | % | ||||||||||||||
| Gain on sale of loans, net | 635 | 1,406 | (771 | ) | -55 | % | ||||||||||||||||
| Gain(loss) on sale of securities available for sale, net | (154 | ) | – | (154 | ) | -100 | % | |||||||||||||||
| Earnings on bank owned life insurance | 685 | 682 | 3 | 0 | % | |||||||||||||||||
| Other noninterest income | ||||||||||||||||||||||
| Fee income | 2,963 | 3,518 | (555 | ) | -16 | % | ||||||||||||||||
| Other | 68 | – | 68 | 100 | % | |||||||||||||||||
| Total noninterest income | $ | 6,172 | $ | 7,227 | $ | (1,055 | ) | -15 | % | |||||||||||||
| Noninterest Expense | ||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||
| For the Three Months Ended, | ||||||||||||||||||||||
| Dec 31, 2023 | Sep 30, 2023 | $ Change | % Change | Dec 31, 2022 | $ Change | % Change | ||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||
| Salaries and employee benefits | $ | 5,787 | $ | 5,560 | $ | 227 | 4 | % | $ | 5,432 | $ | 355 | 7 | % | ||||||||
| Occupancy | 679 | 501 | 178 | 36 | % | 509 | 170 | 33 | % | |||||||||||||
| Equipment | 301 | 252 | 49 | 19 | % | 296 | 5 | 2 | % | |||||||||||||
| Data processing | 971 | 925 | 46 | 5 | % | 881 | 90 | 10 | % | |||||||||||||
| Professional services | 238 | 193 | 45 | 23 | % | 158 | 80 | 51 | % | |||||||||||||
| State and local taxes | 187 | 446 | (259 | ) | -58 | % | 197 | (10 | ) | -5 | % | |||||||||||
| FDIC and State assessments | 144 | 140 | 4 | 3 | % | 107 | 37 | 35 | % | |||||||||||||
| Other noninterest expense: | ||||||||||||||||||||||
| Director fees | 82 | 84 | (2 | ) | -2 | % | 68 | 14 | 21 | % | ||||||||||||
| Communication | 73 | 67 | 6 | 9 | % | 61 | 12 | 20 | % | |||||||||||||
| Advertising | 114 | 103 | 11 | 11 | % | (31 | ) | 145 | -468 | % | ||||||||||||
| Professional liability insurance | 79 | 70 | 9 | 13 | % | 68 | 11 | 16 | % | |||||||||||||
| Amortization | 43 | 43 | – | 0 | % | 48 | (5 | ) | -10 | % | ||||||||||||
| Other | 821 | 758 | 63 | 8 | % | 854 | (33 | ) | -4 | % | ||||||||||||
| Total noninterest expense | $ | 9,519 | $ | 9,142 | $ | 377 | 4 | % | $ | 8,648 | $ | 871 | 10 | % | ||||||||
| For the Twelve Months Ended, | ||||||||||||||||||||||
| Dec 31, 2023 | Dec 31, 2022 | $ Change | % Change | |||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||
| Salaries and employee benefits | $ | 22,793 | $ | 22,401 | $ | 392 | 2 | % | ||||||||||||||
| Occupancy | 2,215 | 2,023 | 192 | 9 | % | |||||||||||||||||
| Equipment | 1,109 | 1,184 | (75 | ) | -6 | % | ||||||||||||||||
| Data processing | 3,770 | 3,506 | 264 | 8 | % | |||||||||||||||||
| Professional services | 875 | 709 | 166 | 23 | % | |||||||||||||||||
| State and local taxes | 1,018 | 693 | 325 | 47 | % | |||||||||||||||||
| FDIC and State assessments | 592 | 402 | 190 | 47 | % | |||||||||||||||||
| Other noninterest expense: | ||||||||||||||||||||||
| Director fees | 312 | 279 | 33 | 12 | % | |||||||||||||||||
| Communication | 261 | 256 | 5 | 2 | % | |||||||||||||||||
| Advertising | 328 | 207 | 121 | 58 | % | |||||||||||||||||
| Professional liability insurance | 285 | 257 | 28 | 11 | % | |||||||||||||||||
| Amortization | 174 | 185 | (11 | ) | -6 | % | ||||||||||||||||
| Other | 3,124 | 2,872 | 252 | 9 | % | |||||||||||||||||
| Total noninterest expense | $ | 36,856 | $ | 34,974 | $ | 1,882 | 5 | % | ||||||||||||||
| Investment Securities | ||||||||||||||||||||||||||||||||
| (Unaudited) | ||||||||||||||||||||||||||||||||
| Dec 31, 2023 | % of Total | Sep 30, 2023 | % of Total | $ Change | % Change | Dec 31, 2022 | % of Total | $ Change | % Change | |||||||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||||||||||
| Investment securities: | ||||||||||||||||||||||||||||||||
| Collateralized mortgage obligations | $ | 126,949 | 43 | % | $ | 126,376 | 44 | % | $ | 573 | 0 | % | $ | 103,330 | 36 | % | $ | 23,619 | 23 | % | ||||||||||||
| Mortgage backed securities | 38,103 | 13 | % | 38,322 | 13 | % | (219 | ) | -1 | % | 32,802 | 11 | % | 5,301 | 16 | % | ||||||||||||||||
| U.S. Government and agency securities | 83,748 | 29 | % | 82,292 | 28 | % | 1,456 | 2 | % | 83,889 | 29 | % | (141 | ) | 0 | % | ||||||||||||||||
| Municipal securities | 44,779 | 15 | % | 42,162 | 15 | % | 2,617 | 6 | % | 64,277 | 22 | % | (19,498 | ) | -30 | % | ||||||||||||||||
| Corporate debt securities | – | 0 | % | – | 0 | % | – | 0 | % | 1,999 | 1 | % | (1,999 | ) | -100 | % | ||||||||||||||||
| Total | $ | 293,579 | 100 | % | $ | 289,152 | 100 | % | $ | 4,427 | 2 | % | $ | 286,297 | 100 | % | $ | 7,282 | 3 | % | ||||||||||||
| Held to maturity securities | $ | 55,454 | 19 | % | $ | 56,469 | 20 | % | $ | (1,015 | ) | -2 | % | $ | 59,513 | 21 | % | $ | (4,059 | ) | -7 | % | ||||||||||
| Available for sale securities | $ | 238,125 | 81 | % | $ | 232,683 | 80 | % | $ | 5,442 | 2 | % | $ | 226,784 | 79 | % | $ | 11,341 | 5 | % | ||||||||||||
| Government & Agency securities | $ | 248,768 | 85 | % | $ | 246,956 | 85 | % | $ | 1,812 | 1 | % | $ | 219,982 | 77 | % | $ | 28,786 | 13 | % | ||||||||||||
| AAA, AA, A rated securities | $ | 43,687 | 15 | % | $ | 41,025 | 14 | % | $ | 2,662 | 6 | % | $ | 65,024 | 23 | % | $ | (21,337 | ) | -33 | % | |||||||||||
| Non-rated securities | $ | 1,124 | 1 | % | $ | 1,171 | 1 | % | $ | (47 | ) | -4 | % | $ | 1,291 | 0 | % | $ | (167 | ) | -13 | % | ||||||||||
| AFS Unrealized Gain (Loss) | $ | (20,808 | ) | -7 | % | $ | (29,783 | ) | -10 | % | $ | 8,975 | 3 | % | $ | (24,927 | ) | -9 | % | $ | 4,119 | 2 | % | |||||||||
As shown below, the Bank has established credit lines with borrowing capacity from the Federal Home Loan Bank of Des Moines (FHLB) and from the Federal Reserve Bank of San Francisco, both of which are subject to collateral requirements. In addition, the Bank has $60.0 million in unsecured borrowing capacity from various correspondent banks. There was no balance outstanding on any of these facilities at quarter-end.
| Liquidity | |||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||
| Dec 31, 2023 | % of Deposits | Sep 30, 2023 | % of Deposits | $ Change | % Change | Dec 31, 2022 | % of Deposits | $ Change | % Change | ||||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||||
| Cash and cash equivalents | $ | 95,781 | 9 | % | $ | 147,970 | 14 | % | $ | (52,189 | ) | -35 | % | $ | 302,178 | 26 | % | $ | (206,397 | ) | -68 | % | |||||||
| Unencumbered AFS Securities | 140,049 | 14 | % | 123,842 | 12 | % | 16,207 | 13 | % | 133,892 | 11 | % | 6,157 | 5 | % | ||||||||||||||
| Secured lines of Credit (FHLB, FRB) | 327,264 | 32 | % | 318,557 | 30 | % | 8,707 | 3 | % | 253,387 | 21 | % | 73,877 | 29 | % | ||||||||||||||
| Total short-term funds available | $ | 563,094 | 56 | % | $ | 590,369 | 56 | % | $ | (27,275 | ) | -5 | % | $ | 689,457 | 58 | % | $ | (126,363 | ) | -18 | % | |||||||
| Dec 31, 2023 | Sep 30, 2023 | Dec 31, 2022 | |||||||||||||||||||||||||||
| Short-term funds available to uninsured/uncollateralized deposits | 243 | % | 254 | % | 222 | % | |||||||||||||||||||||||
| Uninsured/uncollateralized deposits to total deposits | 23 | % | 22 | % | 26 | % | |||||||||||||||||||||||
| Gross loans to deposits ratio | 67 | % | 63 | % | 54 | % | |||||||||||||||||||||||
| Loans by Category | |||||||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||||||
| Dec 31, 2023 | % of Gross Loans | Sep 30, 2023 | % of Gross Loans | $ Change | % Change | Dec 31, 2022 | % of Gross Loans | $ Change | % Change | ||||||||||||||||||||||
| Commercial: | (Dollars in thousands) | ||||||||||||||||||||||||||||||
| Commercial and agricultural | $ | 75,322 | 11 | % | $ | 72,901 | 11 | % | $ | 2,421 | 3 | % | $ | 75,705 | 12 | % | $ | (383 | ) | -1 | % | ||||||||||
| PPP | 122 | 0 | % | 331 | 0 | % | (209 | ) | -63 | % | 515 | 0 | % | (393 | ) | -76 | % | ||||||||||||||
| Real estate: | |||||||||||||||||||||||||||||||
| Construction and development | 48,720 | 7 | % | 42,584 | 6 | % | 6,136 | 14 | % | 37,287 | 6 | % | 11,433 | 31 | % | ||||||||||||||||
| Residential 1-4 family | 96,301 | 14 | % | 90,449 | 14 | % | 5,852 | 6 | % | 82,653 | 13 | % | 13,648 | 17 | % | ||||||||||||||||
| Multi-family | 51,025 | 7 | % | 49,092 | 7 | % | 1,933 | 4 | % | 41,122 | 6 | % | 9,903 | 24 | % | ||||||||||||||||
| Commercial real estate — owner occupied | 164,443 | 24 | % | 164,057 | 25 | % | 386 | 0 | % | 154,380 | 24 | % | 10,063 | 7 | % | ||||||||||||||||
| Commercial real estate — non owner occupied | 155,280 | 23 | % | 154,993 | 23 | % | 287 | 0 | % | 153,707 | 24 | % | 1,573 | 1 | % | ||||||||||||||||
| Farmland | 27,273 | 4 | % | 27,641 | 4 | % | (368 | ) | -1 | % | 26,935 | 4 | % | 338 | 1 | % | |||||||||||||||
| Consumer | 66,863 | 10 | % | 69,921 | 10 | % | (3,058 | ) | -4 | % | 68,412 | 11 | % | (1,549 | ) | -2 | % | ||||||||||||||
| Gross Loans | 685,349 | 100 | % | 671,969 | 100 | % | 13,380 | 2 | % | 640,716 | 100 | % | 44,633 | 7 | % | ||||||||||||||||
| Less: allowance for loan losses | (8,530 | ) | (8,347 | ) | (183 | ) | (8,236 | ) | (294 | ) | |||||||||||||||||||||
| Less: deferred fees | (795 | ) | (835 | ) | 40 | (758 | ) | (37 | ) | ||||||||||||||||||||||
| Net loans | $ | 676,024 | $ | 662,787 | $ | 13,237 | $ | 631,722 | $ | 44,302 | |||||||||||||||||||||
| Loan Concentration | |||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||
| Dec 31, 2023 | % of Risk Based Capital | Sep 30, 2023 | % of Risk Based Capital | Change | Dec 31, 2022 | % of Risk Based Capital | Change | ||||||||||||||||||
| Commercial: | (Dollars in thousands) | ||||||||||||||||||||||||
| Commercial and agricultural | $ | 75,322 | 54 | % | $ | 72,901 | 53 | % | 1 | % | $ | 75,705 | 58 | % | -4 | % | |||||||||
| PPP | 122 | 0 | % | 331 | 0 | % | 0 | % | 515 | 0 | % | 0 | % | ||||||||||||
| Real estate: | |||||||||||||||||||||||||
| Construction and development | 48,720 | 35 | % | 42,584 | 31 | % | 4 | % | 37,287 | 29 | % | 6 | % | ||||||||||||
| Residential 1-4 family | 96,301 | 70 | % | 90,449 | 66 | % | 4 | % | 82,653 | 64 | % | 6 | % | ||||||||||||
| Multi-family | 51,025 | 37 | % | 49,092 | 36 | % | 1 | % | 41,122 | 32 | % | 5 | % | ||||||||||||
| Commercial real estate — owner occupied | 164,443 | 119 | % | 164,057 | 119 | % | 0 | % | 154,380 | 119 | % | 0 | % | ||||||||||||
| Commercial real estate — non owner occupied | 155,280 | 112 | % | 154,993 | 113 | % | -1 | % | 153,707 | 119 | % | -7 | % | ||||||||||||
| Farmland | 27,273 | 20 | % | 27,641 | 20 | % | 0 | % | 26,935 | 21 | % | -1 | % | ||||||||||||
| Consumer | 66,863 | 48 | % | 69,921 | 51 | % | -3 | % | 68,412 | 53 | % | -5 | % | ||||||||||||
| Gross Loans | $ | 685,349 | $ | 671,969 | $ | 640,716 | |||||||||||||||||||
| Regulatory Commercial Real Estate | $ | 252,493 | 182 | % | $ | 244,277 | 178 | % | 4 | % | $ | 229,592 | 177 | % | 5 | % | |||||||||
| Total Risk Based Capital* | $ | 138,449 | $ | 137,473 | $ | 129,551 | |||||||||||||||||||
| *Bank of the Pacific | |||||||||||||||||||||||||
The following table presents the Commercial real estate – non owner occupied loan balances, including loans in the process of construction and development, by collateral type:
| Non-Owner Occupied Commercial Real Estate Composition* | ||||||
| (Unaudited) | ||||||
| Dec 31, 2023 | % of Total | |||||
| Multifamily | $ | 59,557 | 27 | % | ||
| Hospitality | 31,657 | 14 | % | |||
| Retail | 29,470 | 13 | % | |||
| Mixed Use | 26,329 | 12 | % | |||
| Office | 23,626 | 11 | % | |||
| Mini Storage | 21,625 | 10 | % | |||
| Industrial | 11,410 | 5 | % | |||
| Special Purpose | 7,102 | 3 | % | |||
| Warehouse | 6,169 | 3 | % | |||
| Other | 3,326 | 1 | % | |||
| Total | $ | 220,271 | ||||
| *Includes loans in the process of construction and development | ||||||
| Deposits by Category | |||||||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||||||
| Dec 31, 2023 | % of Total | Sep 30, 2023 | % of Total | $ Change | % Change | Dec 31 2022 | % of Total | $ Change | % Change | ||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||||||||
| Interest-bearing demand | $ | 183,436 | 18 | % | $ | 208,091 | 20 | % | $ | (24,655 | ) | -12 | % | $ | 253,272 | 20 | % | $ | (69,836 | ) | -28 | % | |||||
| Money market | 179,344 | 17 | % | 179,367 | 17 | % | (23 | ) | 0 | % | 195,814 | 17 | % | (16,470 | ) | -8 | % | ||||||||||
| Savings | 136,408 | 14 | % | 138,981 | 13 | % | (2,573 | ) | -2 | % | 174,887 | 16 | % | (38,479 | ) | -22 | % | ||||||||||
| Time deposits (CDs) | 100,832 | 10 | % | 92,720 | 9 | % | 8,112 | 9 | % | 48,754 | 4 | % | 52,078 | 107 | % | ||||||||||||
| Total interest-bearing deposits | 600,020 | 59 | % | 619,159 | 59 | % | (19,139 | ) | -3 | % | 672,727 | 57 | % | (72,707 | ) | -11 | % | ||||||||||
| Non-interest bearing demand | 409,272 | 41 | % | 432,097 | 41 | % | (22,825 | ) | -5 | % | 507,635 | 43 | % | (98,363 | ) | -19 | % | ||||||||||
| Total deposits | $ | 1,009,292 | 100 | % | $ | 1,051,256 | 100 | % | $ | (41,964 | ) | -4 | % | $ | 1,180,362 | 100 | % | $ | (171,070 | ) | -14 | % | |||||
| Insured Deposits | $ | 647,330 | 64 | % | $ | 666,308 | 63 | % | $ | (18,978 | ) | -3 | % | $ | 709,468 | 60 | % | $ | (62,138 | ) | -9 | % | |||||
| Collaterialized Deposits | 129,895 | 13 | % | 152,960 | 15 | % | (23,065 | ) | -15 | % | 160,354 | 14 | % | (30,459 | ) | -19 | % | ||||||||||
| Uninsured Deposits | 232,067 | 23 | % | 231,988 | 22 | % | 79 | 0 | % | 310,540 | 26 | % | (78,473 | ) | -25 | % | |||||||||||
| Total Deposits | $ | 1,009,292 | 100 | % | $ | 1,051,256 | 100 | % | $ | (41,964 | ) | -4 | % | $ | 1,180,362 | 100 | % | $ | (171,070 | ) | -14 | % | |||||
| Consumer Deposits | $ | 470,425 | 46 | % | $ | 466,877 | 44 | % | $ | 3,548 | 1 | % | $ | 519,948 | 44 | % | $ | (49,523 | ) | -10 | % | ||||||
| Business Deposits | 398,977 | 40 | % | 429,443 | 41 | % | (30,466 | ) | -7 | % | 490,341 | 42 | % | (91,364 | ) | -19 | % | ||||||||||
| Public Deposits | 139,890 | 14 | % | 154,936 | 15 | % | (15,046 | ) | -10 | % | 170,073 | 14 | % | (30,183 | ) | -18 | % | ||||||||||
| Total Deposits | $ | 1,009,292 | 100 | % | $ | 1,051,256 | 100 | % | $ | (41,964 | ) | -4 | % | $ | 1,180,362 | 100 | % | $ | (171,070 | ) | -14 | % | |||||
The following table summarizes the capital measures of the Company and the Bank respectively, at the dates listed below.
| Capital Measures | ||||||||||||||||
| (unaudited) | ||||||||||||||||
| Dec 31, 2023 | Sep 30, 2023 | Change | Dec 31, 2022 | Change | Well Capitalized Under Prompt Correction Action Regulations | |||||||||||
| Pacific Financial Corporation | ||||||||||||||||
| Total risk-based capital ratio | 17.7 | % | 17.6 | % | 0.1 | 17.1 | % | 0.6 | N/A | |||||||
| Tier 1 risk-based capital ratio | 16.5 | % | 16.5 | % | – | 16.0 | % | 0.5 | N/A | |||||||
| Common equity tier 1 ratio | 14.9 | % | 14.8 | % | 0.1 | 14.3 | % | 0.6 | N/A | |||||||
| Leverage ratio | 11.3 | % | 10.7 | % | 0.6 | 9.4 | % | 1.9 | N/A | |||||||
| Tangible common equity ratio | 8.9 | % | 8.0 | % | 0.9 | 6.9 | % | 2.0 | N/A | |||||||
| Bank of the Pacific | ||||||||||||||||
| Total risk-based capital ratio | 17.6 | % | 17.6 | % | – | 17.0 | % | 0.6 | 10.5 | % | ||||||
| Tier 1 risk-based capital ratio | 16.4 | % | 16.4 | % | – | 15.9 | % | 0.5 | 8.5 | % | ||||||
| Common equity tier 1 ratio | 16.4 | % | 16.4 | % | – | 15.9 | % | 0.5 | 7.0 | % | ||||||
| Leverage ratio | 11.2 | % | 10.6 | % | 0.6 | 9.1 | % | 2.1 | 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, | |||||||||||||||||||||
| Dec 31, 2023 | Sep 30, 2023 | $ Change | % Change | Dec 31, 2022 | $ Change | % Change | |||||||||||||||
| Average Balances | (Dollars in thousands) | ||||||||||||||||||||
| Gross loans | $ | 675,622 | $ | 665,300 | $ | 10,322 | 2 | % | $ | 629,976 | $ | 45,646 | 7 | % | |||||||
| Loans held for sale | $ | 709 | $ | 497 | $ | 212 | 43 | % | $ | 898 | $ | (189 | ) | -21 | % | ||||||
| Investment securities | $ | 289,245 | $ | 284,041 | $ | 5,204 | 2 | % | $ | 270,416 | $ | 18,829 | 7 | % | |||||||
| Federal funds sold & interest bearing deposits in banks | $ | 105,177 | $ | 172,119 | $ | (66,942 | ) | -39 | % | $ | 352,628 | $ | (247,451 | ) | -70 | % | |||||
| Total interest-earning assets | $ | 1,070,753 | $ | 1,121,957 | $ | (51,204 | ) | -5 | % | $ | 1,253,918 | $ | (183,165 | ) | -15 | % | |||||
| Non-interest bearing demand deposits | $ | 419,994 | $ | 441,782 | $ | (21,788 | ) | -5 | % | $ | 521,133 | $ | (101,139 | ) | -19 | % | |||||
| Interest bearing deposits | $ | 593,464 | $ | 619,183 | $ | (25,719 | ) | -4 | % | $ | 684,377 | $ | (90,913 | ) | -13 | % | |||||
| Total Deposits | $ | 1,013,458 | $ | 1,060,965 | $ | (47,507 | ) | -4 | % | $ | 1,205,510 | $ | (192,052 | ) | -16 | % | |||||
| Borrowings | $ | 13,403 | $ | 13,403 | $ | – | 0 | % | $ | 13,403 | $ | – | 0 | % | |||||||
| Total interest-bearing liabilities | $ | 606,867 | $ | 632,586 | $ | (25,719 | ) | -4 | % | $ | 697,780 | $ | (90,913 | ) | -13 | % | |||||
| Total Equity | $ | 107,251 | $ | 109,872 | $ | (2,621 | ) | -2 | % | $ | 100,076 | $ | 7,175 | 7 | % | ||||||
| For the Three Months Ended, | |||||||||||||||||||||
| Dec 31, 2023 | Sep 30, 2023 | Change | Dec 31, 2022 | Change | |||||||||||||||||
| Yield on average gross loans (1) | 5.80% | 5.71% | 0.09 | 5.18 | % | 0.62 | |||||||||||||||
| Yield on average investment securities (1) | 3.48% | 3.36% | 0.12 | 2.81 | % | 0.67 | |||||||||||||||
| Yield on Fed funds sold & interest bearing deposits in banks | 5.42% | 5.35% | 0.07 | 3.72 | % | 1.70 | |||||||||||||||
| Cost of average interest bearing deposits | 1.28% | 1.10% | 0.18 | 0.14 | % | 1.14 | |||||||||||||||
| Cost of average borrowings | 7.31% | 7.28% | 0.03 | 5.42 | % | 1.89 | |||||||||||||||
| Cost of average total deposits and borrowings | 0.83% | 0.72% | 0.11 | 0.14 | % | 0.69 | |||||||||||||||
| Yield on average interest-earning assets | 5.14% | 5.06% | 0.08 | 4.25 | % | 0.89 | |||||||||||||||
| Cost of average interest-bearing liabilities | 1.41% | 1.23% | 0.18 | 0.24 | % | 1.17 | |||||||||||||||
| Net interest spread | 3.73% | 3.83% | (0.10 | ) | 4.01 | % | (0.28 | ) | |||||||||||||
| Net interest margin (1) | 4.34% | 4.37% | (0.03 | ) | 4.12 | % | 0.22 | ||||||||||||||
| (1) Tax-exempt income has been adjusted to a tax equivalent basis at a rate of 21%. | |||||||||||||||||||||
| For the Twelve Months Ended, | |||||||||||||||||||||
| Dec 31, 2023 | Dec 31, 2022 | $ Change | % Change | ||||||||||||||||||
| Average Balances | (Dollars in thousands) | ||||||||||||||||||||
| Gross loans | $ | 659,165 | $ | 617,220 | $ | 41,945 | 7 | % | |||||||||||||
| Loans held for sale | $ | 628 | $ | 2,135 | $ | (1,507 | ) | -71 | % | ||||||||||||
| Investment securities | $ | 286,473 | $ | 261,843 | $ | 24,630 | 9 | % | |||||||||||||
| Federal funds sold & interest bearing deposits in banks | $ | 180,781 | $ | 376,166 | $ | (195,385 | ) | -52 | % | ||||||||||||
| Interest-earning assets | $ | 1,127,047 | $ | 1,257,364 | $ | (130,317 | ) | -10 | % | ||||||||||||
| Non-interest bearing demand deposits | $ | 448,234 | $ | 508,102 | $ | (59,868 | ) | -12 | % | ||||||||||||
| Interest bearing deposits | $ | 620,026 | $ | 693,719 | $ | (73,693 | ) | -11 | % | ||||||||||||
| Total Deposits | $ | 1,068,260 | $ | 1,201,821 | $ | (133,561 | ) | -11 | % | ||||||||||||
| Borrowings | $ | 13,401 | $ | 13,591 | $ | (190 | ) | -1 | % | ||||||||||||
| Interest-bearing liabilities | $ | 633,427 | $ | 707,310 | $ | (73,883 | ) | -10 | % | ||||||||||||
| Total Equity | $ | 108,355 | $ | 106,352 | $ | 2,003 | 2 | % | |||||||||||||
| For the Twelve Months Ended, | |||||||||||||||||||||
| Dec 31, 2023 | Dec 31, 2022 | Change | |||||||||||||||||||
| Net Interest Margin | |||||||||||||||||||||
| Yield on average gross loans (1) | 5.63% | 4.87% | 0.76 | ||||||||||||||||||
| Yield on average investment securities (1) | 3.31% | 2.22% | 1.09 | ||||||||||||||||||
| Yield on Fed funds sold & interest bearing deposits in banks | 5.04% | 1.74% | 3.30 | ||||||||||||||||||
| Cost of average interest bearing deposits | 0.86% | 0.11% | 0.75 | ||||||||||||||||||
| Cost of average borrowings | 6.93% | 3.41% | 3.52 | ||||||||||||||||||
| Cost of average total deposits and borrowings | 0.58% | 0.10% | 0.48 | ||||||||||||||||||
| Yield on average interest-earning assets | 4.94% | 3.38% | 1.56 | ||||||||||||||||||
| Cost of average interest-bearing liabilities | 0.99% | 0.17% | 0.82 | ||||||||||||||||||
| Net interest spread | 3.95% | 3.21% | 0.74 | ||||||||||||||||||
| Net interest margin (1) | 4.39% | 3.29% | 1.10 | ||||||||||||||||||
| (1) Tax-exempt income has been adjusted to a tax equivalent basis at a rate of 21%. | |||||||||||||||||||||
| Adversely Classified Loans and Securities | |||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||
| Dec 31, 2023 | Sep 30, 2023 | $ Change | % Change | Dec 31, 2022 | $ Change | % Change | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||
| Rated substandard or worse, but not impaired, beginning of three month period | $ | 5,072 | $ | 5,186 | $ | (114 | ) | -2 | % | $ | 2,814 | $ | 2,258 | 80 | % | ||||||
| Addition of previously classified pass graded loans | 383 | 107 | 276 | 258 | % | 272 | 111 | 41 | % | ||||||||||||
| Upgrades to pass or other loans especially mentioned status | – | – | – | 0 | % | (85 | ) | 85 | -100 | % | |||||||||||
| Moved to nonaccrual | – | – | – | 0 | % | – | – | 0 | % | ||||||||||||
| Principal payments, net | (430 | ) | (221 | ) | (209 | ) | 95 | % | (117 | ) | (313 | ) | 268 | % | |||||||
| Rated substandard or worse, but not impaired, end of three month period | $ | 5,025 | $ | 5,072 | $ | (47 | ) | -1 | % | $ | 2,884 | $ | 2,141 | 74 | % | ||||||
| Impaired | 664 | 1,219 | (555 | ) | -46 | % | 2,452 | (1,788 | ) | -73 | % | ||||||||||
| Total adversely classified loans¹ | $ | 5,689 | $ | 6,291 | $ | (602 | ) | -10 | % | $ | 5,336 | $ | 353 | 7 | % | ||||||
| Other loans especially mentioned or watch, but not impaired | $ | 15,120 | $ | 13,148 | $ | 1,972 | 15 | % | $ | 26,408 | $ | (11,288 | ) | -43 | % | ||||||
| Gross loans (excluding deferred loan fees) | $ | 685,349 | $ | 671,969 | $ | 13,380 | 2 | % | $ | 640,716 | $ | 44,633 | 7 | % | |||||||
| Adversely classified loans to gross loans | 0.83 | % | 0.94 | % | 0.83 | % | |||||||||||||||
| Allowance for loan losses | $ | 8,530 | $ | 8,347 | $ | 183 | 2 | % | $ | 8,236 | $ | 294 | 4 | % | |||||||
| Allowance for loan losses as a percentage of adversely classified loans | 149.94 | % | 132.68 | % | 154.35 | % | |||||||||||||||
| Allowance for loan losses to total impaired loans | 1284.64 | % | 684.74 | % | 335.89 | % | |||||||||||||||
| Adversely classified loans to total assets | 0.50 | % | 0.53 | % | 0.41 | % | |||||||||||||||
| Delinquent loans to gross loans, not in nonaccrual status 2 | 0.08 | % | 0.25 | % | 0.08 | % | |||||||||||||||
| 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) | |||||||||||||||||||||
| Dec 31, 2023 | Sep 30, 2023 | $ Change | % Change | Dec 31, 2022 | $ Change | % Change | |||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||
| Total nonaccrual loans, beginning of three month period | $ | 1,219 | $ | 959 | $ | 260 | 27 | % | $ | 899 | $ | 320 | 36 | % | |||||||
| Transfer to performing loans | (478 | ) | – | (478 | ) | -100 | % | – | (478 | ) | -100 | % | |||||||||
| Addition of nonaccrual loans | – | 288 | (288 | ) | -100 | % | – | – | 0 | % | |||||||||||
| Moved to other assets owned | – | – | – | 0 | % | – | – | 0 | % | ||||||||||||
| Principal payments, net | (77 | ) | (28 | ) | (49 | ) | 175 | % | (30 | ) | (47 | ) | 157 | % | |||||||
| Charge-offs, net | – | – | – | 0 | % | – | – | 0 | % | ||||||||||||
| Total nonaccrual loans, end of three month period | $ | 664 | $ | 1,219 | $ | (555 | ) | -46 | % | $ | 869 | $ | (205 | ) | -24 | % | |||||
| Other real estate owned and foreclosed assets | – | – | – | 0 | % | 30 | (30 | ) | -100 | % | |||||||||||
| Total nonperforming assets | $ | 664 | $ | 1,219 | $ | (555 | ) | -46 | % | $ | 899 | $ | (235 | ) | -26 | % | |||||
| Accruing loans past due 90 days or more | $ | – | $ | – | $ | – | 0 | % | $ | – | $ | – | 0 | % | |||||||
| Percentage of nonperforming assets to total assets | 0.06 | % | 0.10 | % | 0.07 | % | |||||||||||||||
| Nonperforming loans to total loans | 0.10 | % | 0.18 | % | 0.14 | % | |||||||||||||||
| Allowance for Credit Losses | |||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||
| For the Three Months Ended, | |||||||||||||||||||||
| Dec 31, 2023 | Sep 30, 2023 | $ Change | % Change | Dec 31, 2022 | $ Change | % Change | |||||||||||||||
| Loans: | (Dollars in thousands) | ||||||||||||||||||||
| Gross loans outstanding at end of period | $ | 685,349 | $ | 671,969 | $ | 13,380 | 2 | % | $ | 640,716 | $ | 44,633 | 7 | % | |||||||
| Average loans outstanding, gross | $ | 675,622 | $ | 665,300 | $ | 10,322 | 2 | % | $ | 629,976 | $ | 45,646 | 7 | % | |||||||
| Allowance for credit losses, beginning of period | $ | 8,347 | $ | 8,223 | $ | 124 | 2 | % | $ | 8,249 | $ | 98 | 1 | % | |||||||
| Impact of CECL Adoption (ASC 326) | – | – | – | 0 | % | – | – | 0 | % | ||||||||||||
| Commercial | – | – | – | 0 | % | – | – | 0 | % | ||||||||||||
| Commercial Real Estate | – | – | – | 0 | % | – | – | 0 | % | ||||||||||||
| Residential Real Estate | – | – | – | 0 | % | – | – | 0 | % | ||||||||||||
| Consumer | (20 | ) | (126 | ) | 106 | -84 | % | (14 | ) | (6 | ) | 43 | % | ||||||||
| Total charge-offs | (20 | ) | (126 | ) | 106 | -84 | % | (14 | ) | (6 | ) | 43 | % | ||||||||
| Commercial | 40 | – | 40 | 100 | % | – | 40 | 100 | % | ||||||||||||
| Commercial Real Estate | – | – | – | 0 | % | – | – | 0 | % | ||||||||||||
| Residential Real Estate | – | – | – | 0 | % | – | – | 0 | % | ||||||||||||
| Consumer | 1 | 1 | – | 0 | % | 1 | – | 0 | % | ||||||||||||
| Total recoveries | 41 | 1 | 40 | 4000 | % | 1 | 40 | 4000 | % | ||||||||||||
| Net recoveries/(charge-offs) | 21 | (125 | ) | 146 | -117 | % | (13 | ) | 34 | -262 | % | ||||||||||
| Provision (benefit) to income | 162 | 249 | (87 | ) | -35 | % | – | 162 | 100 | % | |||||||||||
| Allowance for credit losses, end of period | $ | 8,530 | $ | 8,347 | $ | 183 | 2 | % | $ | 8,236 | $ | 294 | 4 | % | |||||||
| Ratio of net loans charged-off to average | |||||||||||||||||||||
| gross loans outstanding, annualized | -0.01 | % | 0.07 | % | -0.08 | % | 0.01 | % | -0.02 | % | |||||||||||
| Ratio of allowance for credit losses to | |||||||||||||||||||||
| gross loans outstanding | 1.24 | % | 1.24 | % | 0.00 | % | 1.29 | % | -0.05 | % | |||||||||||
| Unfunded Loan Commitments: | |||||||||||||||||||||
| Allowance for credit losses, beginning of period | $ | 749 | $ | 754 | $ | (5 | ) | -1 | % | $ | 203 | $ | 546 | 269 | % | ||||||
| Provision (benefit) to income | (51 | ) | (5 | ) | (46 | ) | 920 | % | – | (51 | ) | -100 | |||||||||
| Allowance for credit losses, end of period | $ | 698 | $ | 749 | $ | (51 | ) | -7 | % | $ | 203 | $ | 495 | 244 | % | ||||||
| For the Twelve Months Ended, | |||||||||||||||||||||
| Dec 31, 2023 | Dec 31, 2022 | $ Change | % Change | ||||||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||||
| Gross loans outstanding at end of period | $ | 685,349 | $ | 640,716 | $ | 44,633 | 7 | % | |||||||||||||
| Average loans outstanding, gross | $ | 659,165 | $ | 617,220 | $ | 41,945 | 7 | % | |||||||||||||
| Allowance for credit losses, beginning of period | $ | 8,236 | $ | 8,297 | $ | (61 | ) | -1 | % | ||||||||||||
| Impact of CECL Adoption (ASC 326) | (157 | ) | – | ||||||||||||||||||
| Commercial | (84 | ) | – | (84 | ) | -100 | % | ||||||||||||||
| Commercial Real Estate | – | – | – | 0 | % | ||||||||||||||||
| Residential Real Estate | – | – | – | 0 | % | ||||||||||||||||
| Consumer | (195 | ) | (90 | ) | (105 | ) | 117 | % | |||||||||||||
| Total charge-offs | (279 | ) | (90 | ) | (189 | ) | 210 | % | |||||||||||||
| Commercial | 67 | – | 67 | 100 | % | ||||||||||||||||
| Commercial Real Estate | – | – | – | 0 | % | ||||||||||||||||
| Residential Real Estate | – | – | – | 0 | % | ||||||||||||||||
| Consumer | 29 | 29 | – | 0 | % | ||||||||||||||||
| Total recoveries | 96 | 29 | 67 | 231 | % | ||||||||||||||||
| Net recoveries (charge-offs) | (183 | ) | (61 | ) | (122 | ) | 200 | % | |||||||||||||
| Provision (benefit) to income | 634 | – | 634 | 100 | % | ||||||||||||||||
| Allowance for credit losses, end of period | $ | 8,530 | $ | 8,236 | $ | 294 | 4 | % | |||||||||||||
| Ratio of net loans charged-off to average | |||||||||||||||||||||
| gross loans outstanding, annualized | 0.03 | % | 0.01 | % | 0.02 | % | |||||||||||||||
| Ratio of allowance for credit losses to | |||||||||||||||||||||
| gross loans outstanding | 1.24 | % | 1.29 | % | -0.05 | % | |||||||||||||||
| Unfunded Loan Commitments: | |||||||||||||||||||||
| Allowance for credit losses, beginning of period | $ | 203 | $ | 203 | $ | – | 0 | % | |||||||||||||
| Impact of CECL Adoption (ASC 326) | 609 | – | 609 | 100 | % | ||||||||||||||||
| Provision (benefit) to income | (114 | ) | – | (114 | ) | -100 | % | ||||||||||||||
| Allowance for credit losses, end of period | $ | 698 | $ | 203 | $ | 495 | 244 | % | |||||||||||||
ABOUT PACIFIC FINANCIAL CORPORATION
Pacific Financial Corporation of Aberdeen, Washington, is the bank holding company for Bank of the Pacific, a state chartered and federally insured commercial bank. Bank of the Pacific offers banking products and services to small-to-medium sized businesses and professionals in western Washington and Oregon. At December 31, 2023, the Company had total assets of $1.15 billion and operated fifteen branches in the communities of Grays Harbor, Pacific, Thurston, 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, Salem, Oregon and Lake Oswego, 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. Such statements are based on information available at the time of communication and are based on current beliefs and expectations of the Company’s management and are subject to risks and uncertainties, many of which are beyond our control, which 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. Any forward-looking statements in this communication are based on information at the time the statement is made. 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.
