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

Pacific Financial Corporation
Pacific Financial Corporation

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.”

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“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

%