Press Release

Pacific Financial Corp Earns $2.6 Million, or $0.25 per Diluted Share, for Third Quarter of 2021; Year-To-Date, Net Income increased 40% to $10.6 Million, from $7.5 Million for the First Nine Months of 2020; Declares Quarterly Cash Dividend of $0.13 per Share

Company Release - 10/28/2021

ABERDEEN, Wash., Oct. 28, 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 $2.6 million, or $0.25 per diluted share for the third quarter of 2021, compared to $3.9 million, or $0.37 per diluted share for the third quarter of 2020, and $3.7 million, or $0.36 per diluted share for the second quarter of 2021. Included in earnings for the current quarter was the recapture of $500,000 from the allowance for loan losses, compared to a provision for loan losses of $500,000 for the third quarter of 2020, and a recapture of $1.6 million for the second quarter of 2021. For the first nine months of 2021, net income increased 40% to $10.6 million, or $1.01 per diluted share, compared to $7.5 million, or $0.71 per diluted share, for the first nine months of 2020. Included in earnings for the first nine months of 2021 was a recapture of $3.5 million from the allowance for loan losses, compared to a provision for loan losses of $3.5 million for the first nine months of 2020. All results are unaudited.

The board of directors of Pacific Financial declared a quarterly cash dividend of $0.13 per share on October 20, 2021. The dividend will be payable on November 25, 2021, to shareholders of record on November 11, 2021.

“Third quarter earnings were solid, despite the challenging low interest rate environment. Credit quality improved as loans classified as non-impaired especially mention or watch loan balances decreased $16.0 million during the quarter, resulting in a recapture from the allowance for loan losses,” said Denise Portmann, President and Chief Executive Officer. “We are pleased with our ability to hold loan yields and balances, excluding PPP loans, relatively steady for the quarter. Our loan pipeline remains active, and we are optimistic that loan activity will increase with the continued improvement in our local economies. As expected with the decrease in refinance activity during the quarter, mortgage banking revenue was down for the third quarter compared to the linked quarter and year-over-year.”

“In addition, while the net interest margin decreased during the quarter as a result of continued deposit growth and higher levels of liquidity, total interest income excluding PPP interest and fees increased compared to the linked quarter, as the bank continued to deploy lower yielding federal funds sold balances into higher yielding investment securities,” commented Portmann. “We believe our balance sheet is well positioned for when interest rates return to more normal levels. Finally, our capital position is strong relative to our risk profile, with our total risk-based capital ratio reaching 17.27%, up from 15.13% early in 2020, at the beginning of the pandemic.”

Third Quarter 2021 Financial Highlights (as of, or for the period ended September 30, 2021, except as noted):
  • Net income was $2.6 million, or $0.25 per diluted share, for the third quarter of 2021, compared to $3.9 million, or $0.37 per diluted share, for the third quarter a year ago, and $3.7 million, or $0.36 per diluted share, for the second quarter of 2021.
  • Return on average assets (“ROAA”) was 0.79%, compared to 1.37% in the third quarter a year ago and 1.19% for the preceding quarter. Year to date ROAA was 1.13% compared to 0.97% a year ago.
  • The Bank recorded a $500,000 recapture from the allowance for loan losses during the current quarter, compared to a loan loss provision of $500,000 in the third quarter a year ago, and a recapture of $1.6 million in the second quarter of 2021.
  • Net interest margin (“NIM”) was 2.86% for the third quarter of 2021, compared to 3.49% for the third quarter of 2020, and 3.06% for the linked quarter.
  • Net gain-on-sale of loans from mortgage banking activities decreased $2.8 million to $1.6 million, compared to $4.4 million for the third quarter a year ago, and decreased $1.3 million from $2.9 million for the second quarter of 2021.
  • Gross loans totaled $665.6 million, compared to $779.8 million at September 30, 2020, and $693.9 million from the preceding quarter. Included in total loans at September 30, 2021, was $45.6 million of PPP loans compared to $130.7 million at September 30, 2020, and $69.6 million on a linked quarter basis.
  • Core deposits (non-interest bearing and interest-bearing transaction and savings accounts) increased 19% to $1.13 billion at September 30, 2021, compared to $952.5 million at September 30, 2020, and increased by 5% from $1.11 billion at June 30, 2021. Core deposits represented 95% of total deposits, with non-interest-bearing deposits representing 41% of total deposits at September 30, 2021.
  • Asset quality:
    • Watch loans or other loans especially mentioned, decreased $16.0 million from $46.7 million at June 30, 2021 and decreased $91.8 million, or 75%, to $30.8 million at September 30, 2021, compared to $122.6 million at September 30, 2020.
    • Non-performing, assets as a percentage of total assets, remain minimal at 0.15% at September 30, 2021, compared 0.14% at September 30, 2020 and 0.16% at June 30, 2021.
  • The Company’s consolidated capital ratios continue to exceed regulatory guidelines for a well-capitalized financial institution.
  • The Company repurchased 45,000 shares of its common stock during the quarter at an average cost of $12.51.
Income Statement Review

Net income was $2.6 million, or $0.25 per diluted share, for the third quarter of 2021, compared to $3.9 million, or $0.37 per diluted share, for the third quarter a year ago, and $3.7 million, or $0.36 per diluted share, for the second quarter of 2021. For the first nine months of 2021, net income increased 40% to $10.6 million, or $1.01 per diluted share compared to $7.5 million, or $0.71 per diluted share for the first nine months of 2020.

Net interest income, before the provision for loan losses, was $8.9 million for the third quarter of 2021, compared to $9.4 million for the third quarter a year ago and $9.0 million for the second quarter of 2021. Amortized PPP fees and interest totaled $1.0 million, $1.0 million and $1.4 million, for the quarters ended September 30, 2021, September 30, 2020 and June 30, 2021, respectively. For the first nine months of 2021, net interest income was $27.1 million, compared to $27.5 million for the first nine months of 2020, with amortized PPP fees and interest totaling $4.2 million and $1.6 million for year-to-date 2021 and 2020, respectively. Interest income, excluding PPP interest and fees, increased during the quarter compared to the linked quarter, as lower-yield federal funds sold were deployed into higher-yielding assets. In addition, continued decreases in interest expenses also positively impacted net interest income during the quarter and year-over-year.

The net interest margin (“NIM”) was 2.86% for the third quarter of 2021, compared to 3.49% for the third quarter of 2020, and 3.06% for the second quarter of 2021. Year-to-date, the NIM was 3.08% compared to 3.80% for the first nine months of 2020. Net interest margin was impacted by higher average balances of low yielding federal funds sold and interest bearing deposits in banks with an average rate of 14-basis points, as well as lower rates in the securities portfolio. The increased liquidity resulted from the continued growth in core deposit balances and PPP loan forgiveness payments. “The impact of the increased liquidity was partially offset by a reduction in deposit costs, purchases and increased balances of securities, and stable loan yields for the quarter,” stated Carla Tucker, EVP and Chief Financial Officer.

Average loan yields excluding PPP loans for the current quarter was 4.59% compared to 4.58% for the second quarter of 2021 and 4.87% a year ago. Average loan yields including PPP loans for the current quarter increased 10 basis points to 4.82% from 4.72% for the second quarter of 2021 and 22 basis points from 4.60% a year ago. Yields on investment securities decreased during the quarter as the company purchased additional balances of securities at yields lower than the previous portfolio. The Bank’s total cost of funds continued to decrease and was at 0.10% for the third quarter of 2021 compared to 0.22% a year earlier, and 0.12% at the linked quarter. The decreases were primarily the result of the decreases in deposit market rates as well as a reduction in the borrowing rate on the Company’s junior subordinated debentures. For the first nine months of 2021, loan yields increased four basis points to 4.81%, compared to 4.77% for the comparable period in 2020, while the cost of funds declined 16 basis points year-to-date compared to the like period in 2020.

Noninterest income declined 35%, or $2.1 million, to $4.0 million for the third quarter of 2021, compared to $6.0 million for the third quarter of 2020, and declined 14%, or $665,000, from $4.6 million for the second quarter of 2021. For the nine months ended September 30 2021, non-interest income was $13.7 million, compared to $14.4 million, for the first nine months ended September 30, 2020. Gain-on-sale of loans decreased $2.8 million for the current quarter to $1.6 million, compared to the third quarter a year ago, and declined $1.3 million from the preceding quarter. For the nine months ended September 30, 2021, gain-on-sale of loans decreased $1.7 million to $8.0 million from the nine months ended September 30, 2020. During the quarter, refinance volume slowed as expected and that combined with lower gain on sale margins during 2021 resulted in the decreased gains year-over-year and on a linked quarter basis. This reduction was partially offset by an unexpected bank-owned life insurance event of $875,000 recorded into income during the current quarter. In addition, OD/NSF fee income increased slightly during the current quarter, and debit card income, ATM income, and merchant processing income continued to increase exceeding pre-pandemic levels as the number of digital transactions and automated payment channels by our customers has consistently increased over the last year.

Noninterest expenses increased 4% to $10.4 million for the third quarter of 2021, compared to $10.0 million for the third quarter of 2020 and declined $122,000 from $10.5 million for the second quarter of 2021. The decrease from the linked quarter primarily reflects a decrease in salary and employee benefits including lower variable commission on mortgage banking due to decreased loan origination volumes. This decrease was partially offset by an increase in other expenses. The year-over-year quarterly non-interest expenses increase was due to higher FDIC and State assessments, data processing related expenses and other miscellaneous expenses. For the first nine months 2021, total noninterest expense increased by 8%, or $2.4 million, to $31.4 million compared to $29.0 million for the first nine months of 2020. The increase was primarily due to salary and employee benefits increases associated with mortgage banking activities during the first half of 2021, as well as increases in FDIC and state assessments, state and local taxes and other miscellaneous expenses.

The Bank had $368,000 in income tax expense for the third quarter of 2021, down 62% from $977,000 for the second quarter of 2021 and down 63% from $1.0 million from the year-over-year quarter. The lower effective tax rate for the third quarter of 2021 at 12.3% reflects the impact of the tax-exempt BOLI event posted this quarter. For the second quarter of 2021, and third quarter of 2020, the effective tax rate was 20.7% and 20.4%, respectively. This income tax includes not only federal corporate income tax but also includes Oregon corporate income tax.

Balance Sheet Review

Total Assets increased 15% to $1.34 billion, at September 30, 2021, compared to $1.16 billion at September 30, 2020, and grew 4% from $1.29 billion at June 30, 2021.

Investment Securities increased 76% to $223.6 million at September 30, 2021, compared to $126.8 million at September 30, 2020 and grew 41% from $158.4 million at June 30, 2021. During the current quarter, the Bank continued to deploy its excess liquidity into investment securities. This included $77.4 million in investment purchases, which was partially offset by $4.9 million in calls, maturities and payments. The average duration of the investment securities portfolio was approximately 5.5 years. Federal funds balances remained at higher than historical levels, primarily as a result of total deposit increases over the current quarter and during 2020, as well as the receipt of PPP loan forgiveness payments.

Gross Loan balances excluding PPP loans remained relatively steady at period-end compared to the linked quarter end, while total gross loans declined $28.3 million during the quarter to $665.6 million, driven primarily by PPP forgiveness reducing PPP balances by $24.1 million. Gross loan balances were $779.8 million at September 30, 2020, and $693.9 million at June 30, 2021. Included in total loans at September 30, 2021, September 30, 2020, and June 30, 2021 was $45.6 million, $130.7 million and $69.6 million in PPP loans, respectively.

Commercial real estate (“CRE”), which includes both owner occupied, and non-owner occupied, comprised 46% or $307.1 of the portfolio excluding PPP loans, as September 30, 2021. CRE owner occupied increased to $153.5 million at September 30, 2021, from $150.2 million a year earlier, and from $149.2 million at June 30, 2021, while non-owner occupied decreased during the like time-frames. At September 30, 2021, CRE concentration percentages remained relatively unchanged at 173% of total risk-based capital; well below the regulatory guidance limit of 300%. Commercial and agricultural loans, excluding PPP loans, decreased to $88.8 million compared to $107.2 million year-over-year and from $91.0 million the previous quarter end, in part due to decreased lines of credit utilization. On the consumer side, loans to finance luxury and classic cars were $49.7 million at September 30, 2021, compared to $45.8 million and $50.1 million at September 30, 2020 and June 30, 2021, respectively. As of September 30, 2021, the luxury and classic car portfolio includes 845 loans with an average balance of $59,000. The portfolio continues to perform adequately, as delinquent and non-accrual loans were 0.45% of the total luxury and classic car portfolio at September 30, 2021.

Loans were predominately originated within the Western Washington and Oregon markets and the Bank’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 Bank 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 Bank 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.

Credit Quality

Credit quality remains strong, but has also continued to improve during 2021. In early 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 September 30, 2021. Primarily as a result of the return to regular payment status, balances related to loans graded watch or other loans especially mentioned, declined $16.0 million during the quarter to $30.8 million. Non-performing assets were $2.0 million or 0.15% of total assets at September 30, 2021, compared to $2.06 million or 0.16% at June 30, 2021 and $1.6 million or 0.14% at September 30, 2020.

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 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, and are managed by experienced management teams who aid in working through these economic challenges. At September 30, 2021, total loans to these industries was $49.5 million, representing 8% of gross loans excluding PPP.

Stressed Sectors (without PPP)
(Unaudited)
         
    Sept 30,
2021
  % of Gross
Loans
(without PPP)
  (Dollars in thousands)
Restaurants   14,886   2 %
Recreation, arts and entertainment   5,808   1 %
Retail trade   28,840   5 %
Total stressed sectors $ 49,534   8 %

The Allowance for Loan Losses (“ALL”) was $8.5 million, or 1.38% of gross loans (excluding PPP) at September 30, 2021, $12.0 million, or 1.85%, at September 30, 2020, and $9.1 million, or 1.45%, at June 30, 2021. Net charge-offs totaled $51,000 for the third quarter of 2021, compared to net charge-offs of $5,000 for the third quarter a year earlier, and net charge offs of $43,000 for the second quarter of 2021. The Bank reversed $500,000 of loan loss provision during the current quarter compared to a $500,000 provision for the like quarter a year ago and a recapture of $1.6 million for the linked quarter. The reversal of provision for loan losses during 2021 reflects management’s ongoing assessment of the credit quality of the company’s loan portfolio.

Total Deposits increased $171.5 million, or 17%, to $1.2 billion at September 30, 2021, compared to $1.0 billion at September 30, 2020, and increased $50.8 million, or 4%, from $1.1 billion at June 30, 2021. Increases are primarily related to PPP loan proceeds deposited into our customers’ accounts at Bank of the Pacific, from a generally higher level of client liquidity from reduced business investment, from elevated savings patterns, and also from receipt of stimulus funds during 2020 and 2021. “Core deposit growth remains very strong for the quarter, due in part to seasonal inflows, with a majority of the deposit growth in non-interest-bearing deposits,” commented Carla Tucker, EVP and Chief Financial Officer. Year over year noninterest-bearing deposits increased 39% and represents 41% or $493.6 million of total deposits at September 30, 2021, 35% or $356.2 million at September 30, 2020 and 41% or $466.5 million at June 30, 2021. Term deposits were at 5% or $61.8 million of total deposits as of September 30, 2021, down from $64.3 million at June 30, 2021 and $70.8 million at September 30, 2020.

Shareholder’s Equity was $117.5 million at September 30, 2021 compared to $112.0 million at September 30, 2020 and $118.0 million as of June 30, 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 8.8% and total risk-based capital ratio at 17.3% as of September 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 was $10.02 compared to $9.36 a year ago. During the quarter ended September 30, 2021, Pacific Financial repurchased a total of 45,000 shares, at an average price of $12.51, under its share repurchase program.


Balance Sheet Overview
(Unaudited)
                               
      Sept 30,
2021
  June 30,
2021
  $
Change
  %
Change
  Sept 30,
2020
  $
Change
  %
Change
Assets:   (Dollars in thousands, except per share data)
  Cash on hand and in banks $ 20,003   $ 20,128   $ (125 )   -1 % $ 147,476   $ (127,473 )   -86 %
  Interest bearing deposits   328,717     307,773     20,944     7 %   3,250     325,467     10014 %
  Federal funds sold   32,796     23,965     8,831     37 %   20,735     12,061     58 %
  Investment securities   223,610     158,379     65,231     41 %   126,799     96,811     76 %
  Loans held-for-sale   15,903     37,777     (21,874 )   -58 %   37,813     (21,910 )   -58 %
  Loans, net of deferred fees   663,219     690,607     (27,388 )   -4 %   775,865     (112,646 )   -15 %
  Allowance for loan losses   (8,527 )   (9,078 )   551     -6 %   (12,002 )   3,475     -29 %
  Net loans   654,692     681,529     (26,837 )   -4 %   763,863     (109,171 )   -14 %
  Federal Home Loan Bank and Pacific Coast                                          
  Bankers' Bank stock, at cost   2,418     2,419     (1 )   0 %   2,138     280     13 %
  Other assets   58,470     58,841     (371 )   -1 %   59,269     (799 )   -1 %
  Total assets $ 1,336,609   $ 1,290,811   $ 45,798     4 % $ 1,161,343   $ 175,266     15 %
                               
Liabilities and Shareholders' Equity:                            
  Total deposits $ 1,194,867   $ 1,144,033   $ 50,834     4 % $ 1,023,319   $ 171,548     17 %
  Borrowings   13,844     13,881     (37 )   0 %   13,994     (150 )   -1 %
  Accrued interest payable and other liabilities   10,408     14,884     (4,476 )   -30 %   11,985     (1,577 )   -13 %
  Shareholders' equity   117,490     118,013     (523 )   0 %   112,045     5,445     5 %
  Total liabilities and shareholders' equity $ 1,336,609   $ 1,290,811   $ 45,798     4 % $ 1,161,343   $ 175,266     15 %
                               
Common Shares Outstanding   10,385,133     10,429,133     (44,000 )   0 %   10,528,290     (143,157 )   -1 %
                               
Book value per common share (1) $ 11.31   $ 11.32   $ (0.01 )   0 % $ 10.64   $ 0.67     6 %
Tangible book value per common share (2) $ 10.02   $ 10.03   $ (0.01 )   0 % $ 9.36   $ 0.66     7 %
Gross loans to deposits ratio   55.5 %   60.4 %   -4.9 %       75.8 %   -20.3 %    
                               
(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,
      Sept 30,
2021
  June 30,
2021
  $
Change
  %
Change
  Sept 30,
2020
  $
Change
  %
Change
      (Dollars in thousands, except per share data)
Interest and dividend income $ 9,188   $ 9,318   $ (130 )   -1 % $ 9,964   $ (776 )   -8 %
Interest expense   284     324     (40 )   -12 %   562     (278 )   -49 %
  Net interest income   8,904     8,994     (90 )   -1 %   9,402     (498 )   I-5 %
Loan loss provision   (500 )   (1,600 )   1,100     -69 %   500     (1,000 )   -200 %
Noninterest income   3,951     4,616     (665 )   -14 %   6,033     (2,082 )   -35 %
Noninterest expense   10,375     10,497     (122 )   -1 %   9,993     382     4 %
Income before income taxes   2,980     4,713     (1,733 )   -37 %   4,942     (1,962 )   -40 %
Income tax expense   368     977     (609 )   -62 %   1,007     (639 )   -63 %
  Net Income $ 2,612   $ 3,736   $ (1,124 )   -30 % $ 3,935   $ (1,323 )   -34 %
                               
Average common shares outstanding - basic   10,405,340     10,429,181     (23,841 )   0 %   10,599,494     (194,154 )   -2 %
Average common shares outstanding - diluted   10,435,341     10,461,046     (25,705 )   0 %   10,626,598     (191,257 )   -2 %
                               
Income per common share                            
  Basic $ 0.25   $ 0.36   $ (0.11 )   -31 % $ 0.37   $ (0.12 )   -32 %
  Diluted $ 0.25   $ 0.36   $ (0.11 )   -31 % $ 0.37   $ (0.12 )   -32 %
                               
Effective tax rate   12.3 %   20.7 %   -8.4 %       20.4 %   -8.1 %    
                               
      For the Nine Months Ended,            
      Sept 30,
2021
  Sept 30,
2020
  $
Change
  %
Change
           
      (Dollars in thousands, except per share data)            
Interest and dividend income $ 28,118   $ 29,355   $ (1,237 )   -4 %            
Interest expense   995     1,888     (893 )   -47 %            
  Net interest income   27,123     27,467     (344 )   -1 %            
Loan loss provision   (3,500 )   3,500     (7,000 )   -200 %            
Noninterest income   13,732     14,389     (657 )   -5 %            
Noninterest expense   31,377     28,944     2,433     8 %            
Income before income taxes   12,978     9,412     3,566     38 %            
Income tax expense   2,402     1,872     530     28 %            
  Net Income $ 10,576   $ 7,540   $ 3,036     40 %            
                               
Average common shares outstanding - basic   10,422,089     10,611,380     (189,291 )   -2 %            
Average common shares outstanding - diluted   10,451,334     10,638,484     (187,150 )   -2 %            
                               
Income per common share                            
  Basic $ 1.01   $ 0.71   $ 0.30     42 %            
  Diluted $ 1.01   $ 0.71   $ 0.30     42 %            
                               
Effective tax rate   18.5 %   19.9 %   -1.4 %                
                                             

 

Reconciliation of Non-GAAP Measure
(Unaudited)
                               
      For the Three Months Ended,
      Sept 30,
2021
  June 30,
2021
  $
Change
  %
Change
  Sept 30,
2020
  $
Change
  %
Change
Non-GAAP Net Income   (Dollars in thousands)
Net Income $ 2,612   $ 3,736   $ (1,124 )   -30 % $ 3,935   $ (1,323 )   -34 %
  Loan loss provision   (500 )   (1,600 )   1,100     -69 %   500     (1,000 )   -200 %
  Income tax expense   368     977     (609 )   -62 %   1,007     (639 )   -63 %
Pre-tax, pre-provision net income $ 2,480   $ 3,113   $ (633 )   -20 % $ 5,442   $ (2,962 )   -54 %
                               
Pre-tax, pre-provisions ROA, annualized 0.75 %   0.99 %   (0.24 )       1.89 %   (1.14 )    
Pre-tax, pre-provisions ROE, annualized 8.29 %   10.73 %   (2.44 )       19.24 %   (10.95 )    
                               
      For the Nine Months Ended,            
      Sept 30,
2021
  Sept 30,
2020
  $
Change
  %
Change
           
Non-GAAP Operating Income   (Dollars in thousands)            
Net Income $ 10,576   $ 7,540   $ 3,036     40 %            
  Loan loss provision   (3,500 )   3,500     (7,000 )   -200 %            
  Income tax expense   2,402     1,872     530     28 %            
Pre-tax, pre-provision net income $ 9,478   $ 12,912   $ (3,434 )   -27 %            
                               
Pre-tax, pre-provisions ROA, annualized 1.01 %   1.67 %   (0.66 )                
Pre-tax, pre-provisions ROE, annualized 10.84 %   15.81 %   (4.97 )                
                               


Noninterest Income
(Unaudited)
      For the Three Months Ended,
      Sept 30,
2021
  June 30,
2021
  $
Change
  %
Change
  Sept 30,
2020
  $
Change
  %
Change
      (Dollars in thousands)
Service charges on deposits $ 365 $ 351 $ 14     4 % $ 356 $ 9     3 %
Gain on sale of loans, net   1,562   2,882   (1,320 )   -46 %   4,384   (2,822 )   -64 %
Earnings on bank owned life insurance   1,003   126   877     696 %   130   873     672 %
Other noninterest income                            
  Fee income   995   1,248   (253 )   -20 %   1,132   (137 )   -12 %
  Other   26   9   17     189 %   31   (5 )   -16 %
Total noninterest income $ 3,951 $ 4,616 $ (665 )   -14 % $ 6,033 $ (2,082 )   -35 %
                               
                               
      For the Nine Months Ended,            
      Sept 30,
2021
  Sept 30,
2020
  $
Change
  %
Change
           
      (Dollars in thousands)            
Service charges on deposits $ 1,059 $ 1,178 $ (119 )   -10 %            
Gain on sale of loans, net   7,980   9,709   (1,729 )   -18 %            
Gain on sale of securities available for sale, net   -   -   -     -              
Earnings on bank owned life insurance   1,255   373   882     236 %            
Other noninterest income                            
  Fee income   3,376   3,042   334     11 %            
  Other   62   87   (25 )   -29 %            
Total noninterest income $ 13,732 $ 14,389 $ (657 )   -5 %            
                               


Noninterest Expense
(Unaudited)
                               
      For the Three Months Ended,
      Sept 30,
2021
  June 30,
2021
  $
Change
  %
Change
  Sept 30,
2020
  $
Change
  %
Change
      (Dollars in thousands)
Salaries and employee benefits $ 6,577 $ 7,148 $ (571 )   -8 % $ 6,940 $ (363 )   -5 %
Occupancy   503   481   22     5 %   498   5     1 %
Equipment   315   316   (1 )   0 %   292   23     8 %
Data processing   841   804   37     5 %   763   78     10 %
Professional services   251   296   (45 )   -15 %   208   43     21 %
State and local taxes   186   273   (87 )   -32 %   202   (16 )   -8 %
FDIC and State assessments   124   82   42     51 %   35   89     254 %
Other noninterest expense:                            
  Director fees   76   80   (4 )   -5 %   81   (5 )   -6 %
  Communication   69   72   (3 )   -4 %   108   (39 )   -36 %
  Advertising   31   59   (28 )   -47 %   33   (2 )   -6 %
  Professional liability insurance   60   60   -     0 %   53   7     13 %
  Amortization   48   110   (62 )   -56 %   91   (43 )   -47 %
  Other   1,294   716   578     81 %   689   605     88 %
Total noninterest expense $ 10,375 $ 10,497 $ (122 )   -1 % $ 9,993 $ 382     4 %
                               
                               
      For the Nine Months Ended,            
      Sept 30,
2021
  Sept 30,
2020
  $
Change
  %
Change
           
      (Dollars in thousands)            
Salaries and employee benefits $ 21,058 $ 19,786 $ 1,272     6 %            
Occupancy   1,495   1,527   (32 )   -2 %            
Equipment   949   870   79     9 %            
Data processing   2,474   2,312   162     7 %            
Professional services   781   688   93     14 %            
State and local taxes   661   459   202     44 %            
FDIC and State assessments   287   51   236     463 %            
Other noninterest expense:                            
  Director fees   234   238   (4 )   -2 %            
  Communication   212   252   (40 )   -16 %            
  Advertising   119   115   4     3 %            
  Professional liability insurance   179   164   15     9 %            
  Amortization   264   289   (25 )   -9 %            
  Other   2,664   2,193   471     21 %            
Total noninterest expense $ 31,377 $ 28,944 $ 2,433     8 %            
                               


Financial Performance Overview
(Unaudited)
                     
    For the Three Months Ended
    Sept 30,
2021
  June 30,
2021
  Change   Sept 30,
2020
  Change
Performance Ratios                  
Return on average assets, annualized 0.79 %   1.19 %   (0.40 )   1.37 %   (0.58 )
Return on average equity, annualized 8.73 %   12.87 %   (4.14 )   13.91 %   (5.18 )
Efficiency ratio (1) 80.71 %   77.13 %   3.58     64.74 %   15.97  
                     
(1) Non-interest expense divided by net interest income plus noninterest income.            
                     
                     
    For the Nine Months Ended,        
    Sept 30,
2021
  Sept 30,
2020
  Change        
Performance Ratios                  
Return on average assets, annualized 1.13 %   0.97 %   0.16          
Return on average equity, annualized 12.11 %   9.22 %   2.89          
Efficiency ratio (1) 76.80 %   69.15 %   7.65          
                     
(1) Non-interest expense divided by net interest income plus noninterest income.            
                     


LIQUIDITY

Cash and Cash Equivalents and Investment Securities
(Unaudited)
        Sept 30,
2021
  % of
Total
  June 30,
2021
  % of
Total
  $
Change
  %
Change
  Sept 30,
2020
  Total   $
Change
  %
Change
        (Dollars in thousands)
Cash on hand and in banks $ 20,003   3 % $ 20,128   4 % $ (125 )   -1 % $ 15,492   5 % $ 4,511   29 %
Interest bearing deposits   325,467   54 %   304,523   60 %   20,944     7 %   131,984   44 %   193,483   147 %
Other interest earning deposits   3,250   1 %   3,250   1 %   -     0 %   3,250   1 %   -   0 %
Federal funds sold   32,796   5 %   23,965   5 %   8,831     37 %   20,735   7 %   12,061   58 %
  Total   381,516   63 %   351,866   70 %   29,650     8 %   171,461   57 %   210,055   123 %
                                             
Investment securities:                                        
  Collateralized mortgage obligations   84,530   14 %   65,102   12 %   19,428     30 %   46,811   16 %   37,719   81 %
  Mortgage backed securities   16,013   3 %   9,459   2 %   6,554     69 %   13,194   4 %   2,819   21 %
  U.S. Government and agency securities   49,901   8 %   19,235   4 %   30,666     159 %   8,449   3 %   41,452   491 %
  Municipal securities   71,041   12 %   62,467   12 %   8,574     14 %   56,272   19 %   14,769   26 %
  Corporate debt securities   2,016   0 %   2,017   0 %   (1 )   0 %   2,009   1 %   7   0 %
  Equity securities   109   0 %   99   0 %   10     10 %   64   0 %   45   70 %
    Total   223,610   37 %   158,379   30 %   65,231     41 %   126,799   43 %   96,811   76 %
Total cash equivalents and investment securities $ 605,126   100 % $ 510,245   100 % $ 94,881     19 % $ 298,260   100 % $ 306,866   103 %
                                             
Total cash equivalents and investment securities                                        
  as a percent of total assets       45 %       40 %               26 %        
                                             


LOANS

  Loans by Category
  (Unaudited)
                                             
        Sept 30, 2021   % of
Gross Loans
  June 30, 2021   % of
Gross Loans
  $
Change
  %
Change
  Sept 30, 2020   % of
Gross Loans
  $
Change
  %
Change
  Commercial:   (Dollars in thousands)
    Commercial and agricultural $ 88,828     13 % $ 91,038     13 % $ (2,210 )   -2 % $ 107,187     14 % $ (18,359 )   -17 %
    PPP   45,558     7 %   69,621     10 %   (24,063 )   -35 %   130,700     16 %   (85,142 )   100 %
  Real estate:                                        
  Construction and development   35,052     5 %   31,429     5 %   3,623     12 %   35,276     5 %   (224 )   -1 %
  Residential 1-4 family   66,771     10 %   68,238     10 %   (1,467 )   -2 %   76,856     10 %   (10,085 )   -13 %
  Multi-family   39,971     6 %   38,764     6 %   1,207     3 %   36,293     5 %   3,678     10 %
  Commercial real estate – owner occupied   153,502     23 %   149,209     22 %   4,293     3 %   150,211     19 %   3,291     2 %
  Commercial real estate – non owner occupied   153,641     23 %   161,450     22 %   (7,809 )   -5 %   160,922     20 %   (7,281 )   -5 %
  Farmland   25,140     4 %   26,047     4 %   (907 )   -3 %   30,268     4 %   (5,128 )   -17 %
  Consumer   57,112     9 %   58,092     8 %   (980 )   -2 %   52,078     7 %   5,034     10 %
    Gross Loans   665,575     100 %   693,888     100 %   (28,313 )   -4 %   779,791     100 %   (114,216 )   -15 %
    Less: allowance for loan losses   (8,527 )       (9,078 )       551         (12,002 )       3,475      
    Less: deferred fees   (2,356 )       (3,281 )       925         (3,926 )       1,570      
    Net loans $ 654,692       $ 681,529       $ (26,837 )     $ 763,863       $ (109,171 )    
                                             


Loan Concentration
(Unaudited)
      Sept 30, 2021   % of Risk Based Capital   June 30, 2021   % of Risk Based Capital   Change   Sept 30, 2020   % of Risk Based Capital   Change  
Commercial:   (Dollars in thousands)  
  Commercial and agricultural $ 88,828   72 % $ 91,038   74 %   -2 % $ 107,187   93 %   -21 %  
  PPP   45,558   37 %   69,621   57 %   -20 %   130,700   113 %   -76 %  
Real estate:                                
Construction and development   35,052   28 %   31,429   26 %   2 %   35,276   30 %   -2 %  
Residential 1-4 family   66,771   54 %   68,238   55 %   -1 %   76,856   66 %   -12 %  
Multi-family   39,971   32 %   38,764   32 %   0 %   36,293   31 %   1 %  
Commercial real estate -- owner occupied   153,502   124 %   149,209   121 %   3 %   150,211   130 %   -6 %  
Commercial real estate -- non owner occupied   153,641   124 %   161,450   131 %   -7 %   160,922   139 %   -15 %  
Farmland   25,140   20 %   26,047   21 %   -1 %   30,268   26 %   -6 %  
Consumer   57,112   46 %   58,092   47 %   -1 %   52,078   45 %   1 %  
  Gross Loans $ 665,575     $ 693,888         $ 779,791        
Regulatory Commercial Real Estate $ 214,212   173 % $ 219,091   178 %   -5 % $ 222,719   192 %   -19 %  
Total Risk Based Capital* $ 123,472     $ 123,048         $ 115,852        
                                   
*Bank of the Pacific                                
                                   


DEPOSITS

                                         
Deposits by Category
(Unaudited)
                                         
    Sept 30, 2021   % of Total   June 30, 2021   % of Total   $
Change
  %
Change
  Sept 30, 2020   % of Total   $
Change
  %
Change
    (Dollars in thousands)
Interest-bearing demand $ 274,505   24 % $ 264,470   22 % $ 10,035     4 % $ 286,512   28 % $ (12,007 )   -4 %
Money market   196,236   16 %   192,653   17 %   3,583     2 %   183,425   18 %   12,811     7 %
Savings   168,786   14 %   156,123   14 %   12,663     8 %   126,359   12 %   42,427     34 %
Time deposits (CDs)   61,786   5 %   64,269   6 %   (2,483 )   -4 %   70,823   7 %   (9,037 )   -13 %
Total interest-bearing deposits   701,313   59 %   677,515   59 %   23,798     4 %   667,119   65 %   34,194     5 %
Non-interest bearing demand   493,554   41 %   466,518   41 %   27,036     6 %   356,200   35 %   137,354     39 %
Total deposits $ 1,194,867   100 % $ 1,144,033   100 % $ 50,834     4 % $ 1,023,319   100 % $ 171,548     17 %
                                         


The following table summarizes the capital measures of the Company and the Bank respectively, at the dates listed below.

Capital Measures
(unaudited)
  Sept 30,
2021
  June 30,
2021
  Change   Sept 30,
2020
  Change   Well
Capitalized
Under Prompt Correction
Action
Regulations
Pacific Financial Corporation                      
Total risk-based capital ratio 17.3 %   16.7 %   0.7     15.4 %   2.0     N/A
Tier 1 risk-based capital ratio 16.1 %   15.4 %   0.7     14.1 %   2.0     N/A
Common equity tier 1 ratio 14.2 %   13.7 %   0.6     12.4 %   1.9     N/A
Leverage ratio 8.8 %   9.1 %   (0.3 )   9.5 %   (0.7 )   N/A
Tangible common equity ratio 7.9 %   8.2 %   (0.3 )   8.6 %   (0.7 )   N/A
                       
Bank of the Pacific                      
Total risk-based capital ratio 17.2 %   16.6 %   0.6     15.2 %   2.0     10.5 %
Tier 1 risk-based capital ratio 16.0 %   15.4 %   0.6     14.0 %   2.0     8.5 %
Common equity tier 1 ratio 16.0 %   15.4 %   0.6     14.0 %   2.0     7.0 %
Leverage ratio 8.7 %   9.1 %   (0.3 )   9.4 %   (0.6 )   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.

      For the Three Months Ended,
                               
      Sept 30,
2021
  June 30,
2021
  $
Change
  %
Change
  Sept 30,
2020
  $
Change
  %
Change
Average Balances   (Dollars in thousands)
Gross loans $ 670,061 $ 709,818 $ (39,757 )   -6 % $ 781,917 $ (111,856 )   -14 %
Gross loans without PPP $ 613,090 $ 612,907 $ 183     0 % $ 655,481 $ (42,391 )   -6 %
Loans held for sale $ 23,270 $ 28,236 $ (4,966 )   -18 % $ 25,002 $ (1,732 )   -7 %
Investment securities $ 188,997 $ 144,927 $ 44,070     30 % $ 124,062 $ 64,935     52 %
Federal funds sold & interest bearing deposits in banks $ 363,327 $ 308,196 $ 55,131     18 % $ 148,970 $ 214,357     144 %
Total interest-earning assets $ 1,245,655 $ 1,191,177 $ 54,478     5 % $ 1,079,951 $ 165,704     15 %
Non-interest bearing demand deposits $ 483,479 $ 452,149 $ 31,330     7 % $ 349,763 $ 133,716     38 %
Interest bearing deposits $ 685,650 $ 662,573 $ 23,077     3 % $ 655,945 $ 29,705     5 %
Total Deposits $ 1,169,129 $ 1,114,722 $ 54,407     5 % $ 1,005,708 $ 163,421     16 %
Borrowings $ 13,856 $ 13,894 $ (38 )   0 % $ 14,018 $ (162 )   -1 %
Total interest-bearing liabilities $ 699,506 $ 676,467 $ 23,039     3 % $ 669,963 $ 29,543     4 %
Total Equity $ 118,744 $ 116,399 $ 2,345     2 % $ 112,236 $ 6,508     6 %
                               


      For the Three Months Ended,
      Sept 30,
2021
  June 30,
2021
  Change   Sept 30,
2020
  Change
Yield on average gross loans (1)   4.82 %   4.72 %   0.10     4.60 %   0.22  
Yield on average gross loans without PPP (1)   4.59 %   4.58 %   0.01     4.87 %   (0.28 )
Yield on average investment securities (1)   1.87 %   2.12 %   (0.25 )   2.43 %   (0.56 )
Yield on Fed funds sold & interest bearing deposits in banks   0.16 %   0.12 %   0.04     0.16 %   -  
Cost of average interest bearing deposits   0.13 %   0.16 %   (0.03 )   0.30 %   (0.17 )
Cost of average borrowings   1.72 %   1.76 %   (0.04 )   1.90 %   (0.18 )
Cost of average total deposits and borrowings   0.10 %   0.12 %   (0.02 )   0.22 %   (0.12 )
                       
Yield on average interest-earning assets   2.96 %   3.17 %   (0.21 )   3.69 %   (0.73 )
Cost of average interest-bearing liabilities   0.16 %   0.19 %   (0.03 )   0.33 %   (0.17 )
Net interest spread   2.80 %   2.98 %   (0.18 )   3.36 %   (0.56 )
Net interest spread without PPP   2.59 %   2.76 %   (0.17 )   3.43 %   (0.84 )
                       
Net interest margin (1)   2.86 %   3.06 %   (0.20 )   3.49 %   (0.63 )
Net interest margin without PPP (1)   2.66 %   2.83 %   (0.17 )   3.53 %   (0.87 )
                       
(1) Tax-exempt income has been adjusted to a tax equivalent basis at a rate of 21%.              
                       


      For the Nine Months Ended,  
      Sept 30,
2021
  Sept 30,
2020
  $
Change
  %
Change
 
Average Balances   (Dollars in thousands)  
Gross loans $ 701,181 $ 742,649 $ (41,468 )   -6 %  
Gross loans without PPP $ 616,163 $ 680,679 $ (64,516 )   -9 %  
Loans held for sale $ 26,222 $ 17,887 $ 8,335     47 %  
Investment securities $ 154,587 $ 113,873 $ 40,714     36 %  
Federal funds sold & interest bearing deposits in banks $ 307,014 $ 99,531 $ 207,483     208 %  
Interest-earning assets $ 1,189,004 $ 973,940 $ 215,064     22 %  
Non-interest bearing demand deposits $ 432,386 $ 299,134 $ 133,252     45 %  
Interest bearing deposits $ 679,162 $ 602,249 $ 76,913     13 %  
Total Deposits $ 1,111,548 $ 901,383 $ 210,165     23 %  
Borrowings $ 13,891 $ 15,470 $ (1,579 )   -10 %  
Interest-bearing liabilities $ 693,053 $ 617,719 $ 75,334     12 %  
Total Equity $ 116,760 $ 109,194 $ 7,566     7 %  
                   
Total Deposits excl. Brokered CDs   1,108,774   895,718   213,056     23.8 %  
                   


      For the Nine Months Ended,      
      Sept 30,
2021
  Sept 30,
2020
  Change      
Net Interest Margin                  
Yield on average gross loans (1)   4.81 %   4.77 %   0.04      
Yield on average gross loans without PPP (1)   4.60 %   5.10 %   (0.50 )    
Yield on average investment securities (1)   2.11 %   2.71 %   (0.60 )    
Yield on Fed funds sold & interest bearing deposits in banks   0.14 %   0.42 %   (0.28 )    
Cost of average interest bearing deposits   0.16 %   0.35 %   (0.19 )    
Cost of average borrowings   1.76 %   2.58 %   (0.82 )    
Cost of average total deposits and borrowings   0.12 %   0.28 %   (0.16 )    
               
Yield on average interest-earning assets   3.19 %   4.06 %   (0.87 )    
Cost of average interest-bearing liabilities   0.19 %   0.41 %   (0.22 )    
Net interest spread   3.00 %   3.65 %   (0.65 )    
Net interest spread without PPP   2.76 %   3.85 %   (1.09 )    
               
Net interest margin (1)   3.08 %   3.80 %   (0.72 )    
Net interest margin without PPP (1)   2.83 %   3.98 %   (1.15 )    
               
(1) Tax-exempt income has been adjusted to a tax equivalent basis at a rate of 21%.      
               


Adversely Classified Loans and Securities
(Unaudited)
                             
    Sept 30,
2021
  June 30,
2021
  $
Change
  %
Change
  Sept 30,
2020
  $
Change
  %
Change
    (Dollars in thousands)
Rated substandard or worse, but not impaired, beginning of three month period $ 8,038   $ 12,698   $ (4,660 )   -37 % $ 8,144   $ (106 )   -1 %
Addition of previously classified pass graded loans   1,379     589     790     134 %   4,222     (2,843 )   -67 %
Upgrades to pass or other loans especially mentioned status   (185 )   (4,605 )   4,420     -96 %   (89 )   (96 )   108 %
Moved to nonaccrual   -     -     -     0 %   (486 )   486     -100 %
Principal payments, net   (447 )   (644 )   197     -31 %   (186 )   (261 )   140 %
Rated substandard or worse, but not impaired, end of three month period $ 8,785   $ 8,038   $ 747     9 % $ 11,605   $ (2,820 )   -24 %
Impaired   3,330     3,357     (27 )   -1 %   1,797     1,533     85 %
Total adversely classified loans¹ $ 12,115   $ 11,395   $ 720     6 % $ 13,402   $ (1,287 )   -10 %
                             
Other loans especially mentioned or watch, but not impaired $ 30,770   $ 46,723   $ (15,953 )   -34 % $ 122,567   $ (91,797 )   -75 %
Gross loans (excluding deferred loan fees) $ 665,575   $ 693,888   $ (28,313 )   -4 % $ 779,791   $ (114,216 )   -15 %
Adversely classified loans to gross loans   1.82 %   1.64 %           1.72 %        
Adversely classified loans to gross loans without PPP   1.95 %   1.83 %           2.06 %        
Allowance for loan losses $ 8,527   $ 9,078   $ (551 )   -6 % $ 12,002   $ (3,475 )   -29 %
Allowance for loan losses as a percentage of adversely classified loans   70.38 %   79.67 %           89.55 %        
Allowance for loan losses to total impaired loans   256.07 %   270.42 %           667.89 %        
Adversely classified loans to total assets   0.91 %   0.88 %           1.15 %        
Delinquent loans to gross loans, not in nonaccrual status 2   0.02 %   0.01 %           0.00 %        
Delinquent loans to gross loans without PPP, not in nonaccrual status   0.02 %   0.01 %           0.00 %        
                             
Adversely classified loans are defined as loans having a well-defined weakness or weaknesses related to the borrower's financial capacity or to pledged collateral that may
jeopardize the repayment of the debt. They are characterized by the possibility that the Bank may sustain some loss if the deficiencies giving rise to the substandard      
classification are not corrected. Note that any loans internally rated worse than substandard are included in the impaired loan totals.               
                             
2 Delinquent loans are defined as loans past due 30-90 days and still accruing                            
                             


Nonperforming Assets
(Unaudited)
                             
    Sept 30,
2021
  June 30,
2021
  $
Change
  %
Change
  Sept 30,
2020
  $
Change
  %
Change
    (Dollars in thousands)
Total nonaccrual loans, beginning of three month period $ 1,819   $ 2,203   $ (384 )   -17 % $ 1,426   $ 393     28 %
Transfer to performing loans   -     (138 )   138     -100 %   -     -     0 %
Addition of nonaccrual loans   323     -     323     100 %   543     (220 )   -41 %
Moved to other assets owned   -     -     -     0 %   -     -     0 %
Principal payments, net   (308 )   (246 )   (62 )   25 %   (346 )   38     -11 %
Charge-offs, net   (34 )   -     (34 )   -100 %   -     (34 )   -100 %
Total nonaccrual loans, end of three month period $ 1,800   $ 1,819   $ (19 )   -1 % $ 1,623   $ 177     11 %
                             
Other real estate owned and foreclosed assets   194     241     (47 )   -20 %   -     194     100 %
Total nonperforming assets $ 1,994   $ 2,060   $ (66 )   -3 % $ 1,623   $ 371     23 %
                             
                             
Total restructured performing loans, beginning of period $ 1,538   $ 1,545   $ (7 )   0 % $ 180   $ 1,358     754 %
Transfer to nonaccrual loans   -     -     -     0 %   -     -     0 %
Addition of restructured performing loans   -     -     -     0 %   -     -     0 %
Principal payments, net   (7 )   (7 )   -     0 %   (6 )   (1 )   17 %
Charge-offs, net   -     -     -     0 %   -     -     0 %
Total restructured performing loans, end of period $ 1,531   $ 1,538   $ (7 )   0 % $ 174   $ 1,357     780 %
                             
Accruing loans past due 90 days or more $ -   $ -   $ -     0 % $ -   $ -     0 %
Percentage of nonperforming assets to total assets   0.15 %   0.16 %           0.14 %        
Nonperforming loans to total loans   0.27 %   0.26 %           0.21 %        
Nonperforming loans to total loans without PPP   0.29 %   0.29 %           0.25 %        
                             


Allowance for Loan Losses
(Unaudited)
                             
    For the Three Months Ended,
    Sept 30,
2021
  June 30,
2021
  $
Change
  %
Change
  Sept 30,
2020
  $
Change
  %
Change
    (Dollars in thousands)
Gross loans outstanding at end of period $ 665,575   $ 693,888   $ (28,313 )   -4 % $ 779,791   $ (114,216 )   -15 %
Average loans outstanding, gross $ 670,061   $ 709,818   $ (39,757 )   -6 % $ 781,917   $ (111,856 )   -14 %
Allowance for loan losses, beginning of period $ 9,078   $ 10,721   $ (1,643 )   -15 % $ 11,507   $ (2,429 )   -21 %
Commercial   (34 )   -     (34 )   -100 %   -     (34 )   -100 %
Commercial Real Estate   -     -     -     0 %   -     -     0 %
Residential Real Estate   -     -     -     0 %   -     -     0 %
Consumer   (21 )   (48 )   27     -56 %   (14 )   (7 )   50 %
Total charge-offs   (55 )   (48 )   (7 )   15 %   (14 )   (41 )   293 %
Commercial   -     4     (4 )   -100 %   5     (5 )   -100 %
Commercial Real Estate   -     -     -     0 %   -     -     0 %
Residential Real Estate   -     -     -     0 %   -     -     0 %
Consumer   4     1     3     300 %   4     -     0 %
Total recoveries   4     5     (1 )   -20 %   9     (5 )   -56 %
Net recoveries/(charge-offs)   (51 )   (43 )   (8 )   19 %   (5 )   (46 )   920 %
Provision to income   (500 )   (1,600 )   1,100     -69 %   500     (1,000 )   -200 %
Allowance for loan losses, end of period $ 8,527   $ 9,078   $ (551 )   -6 % $ 12,002   $ (3,475 )   -29 %
Ratio of net loans charged-off to average                            
gross loans outstanding, annualized   0.03 %   0.02 %   0.01 %       0.00 %   0.03 %    
Ratio of net loans charged-off to average                            
gross loans outstanding without PPP, annualized   0.03 %   0.03 %   0.00 %       0.00 %   0.03 %    
Ratio of allowance for loan losses to                            
gross loans outstanding   1.28 %   1.31 %   -0.03 %       1.54 %   -0.26 %    
Ratio of allowance for loan losses to                            
gross loans without PPP outstanding   1.38 %   1.45 %   -0.07 %       1.85 %   -0.47 %    
                             


    For the Nine Months Ended,  
    Sept 30,
2021
  Sept 30,
2020
  $
Change
  %
Change
   
    (Dollars in thousands)                      
Gross loans outstanding at end of period $ 665,575   $ 779,791   $ (114,216 )   -15 %  
Average loans outstanding, gross $ 701,181   $ 742,649   $ (41,468 )   -6 %  
Allowance for loan losses, beginning of period $ 12,068   $ 8,993   $ 3,075     34 %  
Commercial   (34 )   (433 )   399     -92 %  
Commercial Real Estate   -     -     -     0 %  
Residential Real Estate   -     -     -     0 %  
Consumer   (115 )   (147 )   32     -22 %  
Total charge-offs   (149 )   (580 )   431     -74 %  
Commercial   42     5     37     740 %  
Commercial Real Estate   -     -     -     0 %  
Residential Real Estate   49     72     (23 )   -32 %  
Consumer   17     12     5     42 %  
Total recoveries   108     89     19     21 %  
Net recoveries (charge-offs)   (41 )   (491 )   450     -92 %  
Provision charged to income   (3,500 )   3,500     (7,000 )   -200 %  
Allowance for loan losses, end of period $ 8,527   $ 12,002   $ (3,475 )   -29 %  
Ratio of net loans charged-off to average                
gross loans outstanding, annualized   0.01 %   0.07 %   -0.06 %    
Ratio of net loans charged-off to average                
gross loans outstanding without PPP, annualized   0.01 %   0.07 %   -0.06 %    
Ratio of allowance for loan losses to                
gross loans outstanding   1.28 %   1.54 %   -0.26 %    
Ratio of allowance for loan losses to                
gross loans without PPP outstanding   1.38 %   1.85 %   -0.47 %    
                 

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 September 30, 2021, the Company had total assets of $1.34 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.

CONTACTS:
DENISE PORTMANN, PRESIDENT & CEO
CARLA TUCKER, EVP & CFO
360.533.8873


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Source: Pacific Financial Corporation