Pacific Financial Corporation
(OTCQB:PFLC)
, the holding company for Bank of the
Pacific today reported profits increased 36% to $1.4 million, or
$0.14 per share, for the second quarter of 2014, compared to $1.0
million, or $0.10 per share for the first quarter of 2014, and grew
5% from $1.3 million, or $0.13 per share for the second quarter a
year ago. For the first six months of 2014, profits increased 20%
to $2.4 million, or $0.24 per share, from $2.0 million, or $0.20
per share, for the like period in 2013. Fueling profitability in
2014 was robust loan growth, strong net interest margin and solid
credit quality. In the year ago periods, earnings were impacted by
a credit to the provision for losses of $450,000, and a one-time
conversion cost of $395,000 for the branches purchased from
Sterling Savings Bank. All results are unaudited.
"We are in our fifth year of consecutive profitability, and our
second quarter results continue to demonstrate the fundamental
strength of our franchise," said Dennis A. Long, President &
Chief Executive Officer, Pacific Financial Corporation. "Once
again, we delivered strong performance across key metrics. Loan
growth was vigorous, with total loans growing 16% year-over-year
and 6% on a linked quarter basis. Credit quality also continued to
improve with nonperforming assets declining 47% year-over-year, and
down 24% from the preceding quarter. We will continue to build on
our franchise and our commitment to serving our customers and
communities while creating value for our shareholders."
"As part of our continuing expansion plans, we received
regulatory approval in May to convert our loan production office in
Vancouver, Washington, into a full-service commercial banking
center. We expect this commercial banking center to be operational
in the third quarter of 2014." The banking center will complement
Bank of Pacific's 19 full-service branches in Washington and
Oregon, and the two loan production offices in DuPont and
Burlington, Washington.
Second Quarter 2014 Highlights (as of, or for the period
ended June 30, 2014, except as noted):
- Earnings per share (EPS) increased 40% to $0.14, compared to
$0.10 in first quarter 2014, and grew 8% from $0.13 in second
quarter 2013. Year-to-date, EPS increased 20% to $0.24, from $0.20
for the first half of 2013.
- Net interest income grew $241,000, or 4%, to $6.8 million,
compared to $6.6 million in first quarter 2014, and grew $844,000,
or 14%, from $6.0 million in second quarter 2013. For the six
months of 2014, net interest income increased $1.8 million, or 16%,
to $13.4 million, from $11.5 million for the like period in
2013.
- Net interest margin (NIM) remained stable at 4.28%, compared to
4.27% for the preceding quarter, and improved 19 basis points from
4.09% for second quarter 2013. Year-to-date, net interest
margin expanded 22 basis points to 4.27%, compared to 4.05% for the
first half of 2013.
- Gross loans increased 6% to $547.3 million, up from $518.6
million at March 31, 2014, and grew 15% from $474.6 million a year
ago.
- Nonperforming assets declined to $7.4 million, or 1.03% of
total assets, down from $9.7 million, or 1.35% of total assets, at
March 31, 2014 and $13.8 million, or 2.01% of total assets a year
ago.
- Classified loans decreased to $16.0 million, or 2.91% of gross
loans, from $16.8 million, or 3.23% of gross loans, at March 31,
2014, and dropped from $17.0 million, or 3.59% of gross loans at
June 30, 2013.
- Net charge-offs totaled $73,000, compared to $71,000 in first
quarter 2014 and $64,000 in net recoveries for second quarter
2013. Year-to-date, net charge-offs were $144,000, compared to
net recoveries of $54,000 for the first half of 2013.
- Capital levels exceeded regulatory requirements for a
well-capitalized financial institution, with a total risk-based
capital ratio of 13.50% and a leverage ratio of 9.83%, at quarter
end.
"We are expanding our real estate lending services into our
branches. Our customers now have a one-stop-shop for all of
their banking needs with the added convenience of applying for a
mortgage loan at many of our local branches," said Denise Portmann,
President and Chief Executive Officer of Bank of the
Pacific. "More and more of our branch staff are being
certified as real estate lending specialists in order to meet the
increasing financial needs of our customers. As our customers
establish that one-on-one relationship with their local banker, we
expect to grow customer relationships, as well as gain new
customers and market share."
"We are making excellent progress in further reducing credit
resolution costs, primarily due to sustained improvements in asset
quality," added Portman. "The addition of veteran loan teams
over the past several years is contributing to our strong loan
growth, which has driven net interest income up 14% and net
interest margin up 19 basis points from year ago. At the same
time, we are prudently managing our expenses and, together with our
earnings growth, our efficiency ratio is improving."
Management continues to execute strategies to build on a
platform for sustainable profitability. Recent accomplishments
include:
- Successfully establishing loan production offices in Clark,
Skagit and Thurston Counties, Washington.
- Receiving regulatory approval to convert our Vancouver, WA loan
production office into a full-service commercial banking center.
- Reducing non-accrual loans and other-real-estate-owned,
resulting in a further reduction in nonperforming assets.
- Certifying additional banking professionals to provide home
mortgages throughout our branch network to meet the increasing
banking needs of our customers.
OPERATING RESULTS
Net Interest Income
Net interest income for the quarter and six month ended June 30,
2014 increased from the quarter and six month ended June, 30,
2013. This increase was primarily due to the growth in earning
assets. Changes in the balance sheet mix also contributed to
increases in net interest income during these periods. Loan
balances increased due to the production generated predominately
within the Company's primary market area of Western
Washington. Investment securities and federal funds sold
declined as a proportion of the balance sheet, due to the strong
loan demand during the past several quarters. Funding costs
remained low due to the shift in mix toward non-interest bearing
and lower-cost deposits, and continued historically low interest
rates. As a result, the net interest margin improved.
Net interest income for the current quarter increased from the
quarter ended March 31, 2014 primarily for the same reasons noted
above. However, funding costs were unchanged when comparing
the periods. Given the lengthy period of very low interest
rates over the past several years, additional reductions in funding
costs are becoming more difficult to achieve. This is primarily
because certificates of deposit renewing during the most recent
quarters are receiving rates as low as those granted at previous
renewals.
Certain reclassifications have been made to the March 31, 2014
and June 30, 2013 financial table presentations to conform to
current year presentations. These reclassifications have no
effect on previously reported net income per share.
INCOME STATEMENT
OVERVIEW |
|
(Unaudited) |
(Dollars in Thousands, Except for
Loss per Share Data) |
|
For the Three Months Ended June 30,
2014 |
For the Three Months Ended March 31,
2014 |
$ Change |
% Change |
For the Three Months Ended June 30,
2013 |
$ Change |
% Change |
|
|
|
|
|
|
|
|
Interest and dividend income |
$ 7,337 |
$ 7,085 |
$ 252 |
4% |
$ 6,600 |
$ 737 |
11% |
Interest expense |
541 |
530 |
11 |
2% |
648 |
(107) |
-17% |
Net interest income |
6,796 |
6,555 |
241 |
4% |
5,952 |
844 |
14% |
Loan loss provision |
100 |
-- |
100 |
100% |
(450) |
550 |
-122% |
Non-interest income |
2,176 |
1,608 |
568 |
35% |
3,175 |
(999) |
-31% |
Non-interest expense |
7,066 |
6,830 |
236 |
3% |
7,872 |
(806) |
-10% |
INCOME BEFORE PROVISION FOR INCOME TAXES |
1,806 |
1,333 |
473 |
35% |
1,705 |
101 |
6% |
PROVISION FOR INCOME TAXES |
403 |
305 |
98 |
32% |
373 |
30 |
8% |
|
|
|
|
|
|
|
|
NET INCOME |
$ 1,403 |
$ 1,028 |
$ 375 |
36% |
$ 1,332 |
$ 71 |
5% |
|
|
|
|
|
|
|
|
INCOME PER COMMON SHARE: |
|
|
|
|
|
|
|
BASIC (1) |
$ 0.14 |
$ 0.10 |
$ 0.04 |
40% |
$ 0.13 |
$ 0.01 |
8% |
DILUTED (1) |
$ 0.14 |
$ 0.10 |
$ 0.04 |
40% |
$ 0.13 |
$ 0.01 |
8% |
|
|
|
|
|
|
|
|
Average common shares outstanding - basic
(1) |
10,189,386 |
10,182,083 |
7,303.00 |
0% |
10,121,853 |
67,533 |
1% |
Average common shares outstanding - diluted
(1) |
10,275,628 |
10,272,341 |
3,287.00 |
0% |
10,182,524 |
93,104 |
1% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended June 30,
2014 |
For the Six Months Ended June 30,
2013 |
$ Change |
% Change |
|
|
|
|
|
|
|
|
|
|
|
Interest and dividend income |
$ 14,422 |
12,871 |
1,551 |
12% |
|
|
|
Interest expense |
1,071 |
1,337 |
(266) |
-20% |
|
|
|
Net interest income |
13,351 |
11,534 |
1,817 |
16% |
|
|
|
Loan loss provision |
100 |
(450) |
550 |
100% |
|
|
|
Non-interest income |
3,784 |
5,801 |
(2,017) |
-35% |
|
|
|
Non-interest expense |
13,896 |
15,291 |
(1,395) |
-9% |
|
|
|
INCOME BEFORE PROVISION FOR INCOME TAXES |
3,139 |
2,494 |
645 |
26% |
|
|
|
PROVISION FOR INCOME TAXES |
708 |
461 |
247 |
54% |
|
|
|
|
|
|
|
|
|
|
|
NET INCOME |
$ 2,431 |
2,033 |
398 |
20% |
|
|
|
|
|
|
|
|
|
|
|
INCOME PER COMMON SHARE: |
|
|
|
|
|
|
|
BASIC (1) |
$ 0.24 |
0.20 |
0.04 |
20% |
|
|
|
DILUTED (1) |
$ 0.24 |
0.20 |
0.04 |
20% |
|
|
|
|
|
|
|
|
|
|
|
Average common shares outstanding - basic
(1) |
10,185,755 |
10,121,853 |
63,902 |
1% |
|
|
|
Average common shares outstanding - diluted
(1) |
10,273,994 |
10,172,356 |
101,638 |
1% |
|
|
|
The following tables provide reconciliations of net income to
pre-tax, pre-credit cost operating income and to tax equivalent net
income (each non-GAAP financial measures) for the periods
presented:
Reconciliation of
Non-GAAP Measure: |
Non-GAAP Operating
Income |
(Dollars in Thousands) |
For The Three Months
Ended |
June 30, 2014 |
March 31, 2014 |
$ Change |
% Change |
June 30, 2013 |
$ Change |
% Change |
|
|
|
|
|
|
|
|
Net income |
$ 1,403 |
$ 1,028 |
$ 375 |
36% |
$ 1,332 |
$ 71 |
5% |
Provision for loan losses |
100 |
-- |
100 |
100% |
(450) |
550 |
-122% |
Other real estate owned write-downs |
54 |
12 |
42 |
350% |
108 |
(54) |
-50% |
Other real estate owned operating
costs |
30 |
61 |
(31) |
-51% |
125 |
(95) |
-76% |
Provision for income taxes |
403 |
305 |
98 |
32% |
373 |
30 |
8% |
Pre-tax, pre-credit cost operating
income |
$ 1,990 |
$ 1,406 |
$ 584 |
42% |
$ 1,488 |
$ 502 |
34% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For The Six Months
Ended |
June 30, 2014 |
June 30, 2013 |
$ Change |
% Change |
|
|
|
|
|
|
|
|
|
|
|
Net income |
$ 2,431 |
$ 2,033 |
$ 398 |
20% |
|
|
|
Provision for loan losses |
100 |
(450) |
550 |
-122% |
|
|
|
Other real estate owned write-downs |
66 |
460 |
(394) |
-86% |
|
|
|
Other real estate owned operating
costs |
91 |
209 |
(118) |
-56% |
|
|
|
Provision for income taxes |
708 |
461 |
247 |
54% |
|
|
|
Pre-tax, pre-credit cost operating
income |
$ 3,396 |
$ 2,713 |
$ 683 |
25% |
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of
Non-GAAP Measure: |
Tax Equivalent Net
Income |
(Dollars in Thousands) |
For the Three Months
ended |
June 30, 2014 |
March 31, 2014 |
$ Change |
% Change |
June 30, 2013 |
$ Change |
% Change |
|
|
|
|
|
|
|
|
Net interest income |
$ 6,796 |
$ 6,555 |
$ 241 |
4% |
$ 5,952 |
$ 844 |
14% |
Tax equivalent adjustment for municipal loan
interest |
46 |
46 |
-- |
0% |
60 |
(14) |
-23% |
Tax equivalent adjustment for municipal bond
interest |
120 |
118 |
2 |
2% |
135 |
(15) |
-11% |
Tax equivalent net interest income |
6,962 |
6,719 |
243 |
4% |
6,147 |
815 |
13% |
Provision for loan losses |
100 |
-- |
100 |
100% |
(450) |
550 |
-122% |
Non-interest income |
2,176 |
1,608 |
568 |
35% |
3,175 |
(999) |
-31% |
Non-interest expense |
7,066 |
6,830 |
236 |
3% |
7,872 |
(806) |
-10% |
Provision for income taxes |
403 |
305 |
98 |
32% |
373 |
30 |
8% |
Tax equivalent net income |
1,569 |
1,192 |
377 |
32% |
1,527 |
42 |
3% |
Accumulative tax adjustment |
(166) |
(164) |
(2) |
1% |
(195) |
29 |
-15% |
Common stock dividends |
-- |
-- |
-- |
0% |
-- |
-- |
0% |
Net income |
$ 1,403 |
$ 1,028 |
$ 377 |
37% |
$ 1,332 |
$ 71 |
5% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months
ended |
June 30, 2014 |
June 30, 2013 |
$ Change |
% Change |
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
$ 13,351 |
$ 11,534 |
$ 1,817 |
16% |
|
|
|
Tax equivalent adjustment for municipal loan
interest |
92 |
117 |
(25) |
-21% |
|
|
|
Tax equivalent adjustment for municipal bond
interest |
238 |
272 |
(34) |
-13% |
|
|
|
Tax equivalent net interest income |
13,681 |
11,923 |
1,758 |
15% |
|
|
|
Provision for loan losses |
100 |
(450) |
550 |
100% |
|
|
|
Non-interest income |
3,784 |
5,801 |
(2,017) |
-35% |
|
|
|
Non-interest expense |
13,896 |
15,291 |
(1,395) |
-9% |
|
|
|
Provision for income taxes |
708 |
461 |
247 |
54% |
|
|
|
Tax equivalent net income |
2,761 |
2,422 |
339 |
14% |
|
|
|
Accumulative tax adjustment |
(330) |
(389) |
59 |
-15% |
|
|
|
Common stock dividends |
-- |
-- |
-- |
0% |
|
|
|
Net income |
$ 2,431 |
$ 2,033 |
$ 398 |
20% |
|
|
|
*Pre-tax, pre-credit cost operating income
and tax equivalent net income are non-GAAP financial measures.
Non-GAAP financial measures have inherent limitations and are not
required to be uniformly applied. Management believes that
presentation of these non-GAAP financial measures provides useful
information that is frequently used by shareholders and analysts in
the evaluation of financial institutions. Non-GAAP financial
measures have limitations as analytical tools and should not be
considered in isolation or as a substitute for information
reported in accordance with GAAP. |
Noninterest Income
Noninterest income for the second quarter 2014 was up compared
to the first quarter 2014, but down significantly from second
quarter 2013, driven primarily by changes in gains from sales of
loans and securities available for sale, as described in further
detail below. Service charges on deposit accounts grew during
the current quarter due to an increase in new deposit relationships
as a result of the acquisition of three branches from Sterling
Savings Bank completed in the second quarter of
2013. Losses on sale of other real estate owned (OREO) were
higher in the current period as compared to the most recent quarter
and were in contrast to a small gain in second quarter in
2013. This was primarily due to a larger volume of sales in
the current quarter as compared to the prior periods. A small OTTI
impairment charge was taken in both first quarter 2014 and second
quarter 2013 to reflect a reduction in fair value of a
private-label CMO investment security.
Gains on sale of residential mortgage loans and related fee
income rose in second quarter 2014 compared to first quarter 2014,
but was below second quarter 2013. The recent rebound in home
purchases throughout many of our markets is fueling new residential
mortgage originations, but were not sufficient to offset the high
volumes of both purchase and refinancing activity generated in
2013. In addition, net gains on sales of securities available
for sale were taken in first quarter 2014 and second quarter 2013
for the purpose of adjusting the mix of securities to mitigate the
impact of changes in market rates on the value of the
portfolio.
Noninterest income for the six months ended June 30, 2014 was
down as compared to the same period in 2013, impacted by the
decline in gains on sale of residential mortgage loans and
securities available for sale and increase in losses on sale of
OREO, as noted above.
Noninterest
income |
(Unaudited) |
(Dollars in Thousands) |
|
|
|
|
|
|
|
|
For The Three Months
Ended |
|
June 30, 2014 |
March 31, 2014 |
$ Change |
% Change |
June 30, 2013 |
$ Change |
% Change |
|
|
|
|
|
|
|
|
Service charges on deposit accounts |
$ 474 |
$ 435 |
$ 39 |
9.0% |
$ 431 |
$ 43 |
10% |
Net (loss) on sale of other real estate
owned |
(57) |
(36) |
(21) |
58.3% |
45 |
(102) |
-227% |
Net gains from sales of loans |
968 |
627 |
341 |
54.4% |
1,669 |
(701) |
-42% |
Net gains on sales of securities available
for sale |
(2) |
52 |
(54) |
-103.8% |
329 |
(331) |
-101% |
Net other-than-temporary impairment (net of
$0, $15, and $3, respectively recognized other comprehensive income
before taxes) |
(3) |
(45) |
42 |
100.0% |
(34) |
31 |
-91% |
Earnings on bank owned life insurance |
140 |
111 |
29 |
26.1% |
116 |
24 |
21% |
Other operating income |
|
|
|
|
|
|
|
Fee income |
442 |
364 |
78 |
21.4% |
504 |
(62) |
-12% |
Income from other real estate owned |
17 |
11 |
6 |
54.5% |
14 |
3 |
21% |
Other non-interest income |
197 |
89 |
108 |
121.3% |
101 |
96 |
95% |
Total non-interest
income |
$ 2,176 |
$ 1,608 |
$ 568 |
35.3% |
$ 3,175 |
$ (999) |
-31% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For The Six Months
Ended |
|
June 30, 2014 |
June 30, 2013 |
$ Change |
% Change |
|
|
|
|
|
|
|
|
|
|
|
Service charges on deposit accounts |
$ 909 |
$ 841 |
$ 68 |
8.1% |
|
|
|
Net (loss) on sale of other real estate
owned |
(93) |
25 |
(118) |
-472.0% |
|
|
|
Net gains from sales of loans |
1,596 |
3,178 |
(1,582) |
-49.8% |
|
|
|
Net gains on sales of securities available
for sale |
50 |
387 |
(337) |
-87.1% |
|
|
|
Net other-than-temporary impairment (net of
$15, and $3, respectively recognized other comprehensive income
before taxes) |
(48) |
(34) |
(14) |
41.2% |
|
|
|
Earnings on bank owned life insurance |
251 |
237 |
14 |
5.9% |
|
|
|
Other operating income |
|
|
|
|
|
|
|
Fee income |
806 |
970 |
(164) |
-16.9% |
|
|
|
Income from other real estate owned |
28 |
29 |
(1) |
-3.4% |
|
|
|
Other non-interest income |
285 |
168 |
117 |
69.6% |
|
|
|
Total non-interest
income |
$ 3,784 |
$ 5,801 |
$ (2,017) |
-34.8% |
|
|
|
Noninterest Expense
Noninterest expense for the three months ended June 30, 2014
increased compared to the three months ended March 31,
2014. This was primarily due to increases in commissions
expense associated with recent growth in real estate mortgage
purchase lending activity and bonus accruals related to other
incentive compensation plans. This increase was partially
offset by decreases in OREO write-downs and expenses and
professional service costs associated with the reduction of
non-performing assets.
Noninterest expense for second quarter 2014 declined versus the
quarter ended June 30, 2013. This was primarily due to a
decrease of $471,000 in personnel costs associated with the
reduction in staff initiated in first quarter 2014 commensurate
with the decline in residential mortgage loan refinance activity
referred to above. Also, in second quarter 2013 the Bank
incurred one-time expenses of $395,000 in conversion costs
associated with the acquisition of three branches from Sterling
Savings Bank in June 2013. Total costs associated with OREO and
related third-party loan expenses also decreased due to the decline
in OREO balances and stabilization in real estate
valuations. This was partially offset by an increase in
occupancy and equipment expense primarily associated with the
Sterling branch acquisitions and the opening of the Warrenton, OR
branch in October 2013. Noninterest expense for the six months
ended June 30, 2014 was down as compared to the same period in
2013, primarily related to lower residential real estate mortgage
personnel costs, OREO write-downs and expenses and one-time costs
associated with the Sterling branch acquisitions, as noted
above.
Noninterest
expense |
(Unaudited) |
(Dollars in Thousands) |
|
|
|
|
|
|
|
|
For The Three Months
Ended |
|
June 30, 2014 |
March 31, 2014 |
$ Change |
% Change |
June 30, 2013 |
$ Change |
% Change |
|
|
|
|
|
|
|
|
Salaries and employee benefits |
$ 4,283 |
$ 4,055 |
$ 228 |
6% |
$ 4,499 |
$ (216) |
-5% |
Occupancy |
504 |
506 |
(2) |
0% |
452 |
52 |
12% |
Equipment |
263 |
252 |
11 |
4% |
195 |
68 |
35% |
Data processing |
462 |
433 |
29 |
7% |
809 |
(347) |
-43% |
Professional services |
201 |
185 |
16 |
9% |
236 |
(35) |
-15% |
Other real estate owned write-downs |
54 |
12 |
42 |
350% |
108 |
(54) |
-50% |
Other real estate owned operating costs |
30 |
61 |
(31) |
-51% |
125 |
(95) |
-76% |
State taxes |
107 |
97 |
10 |
10% |
133 |
(26) |
-20% |
FDIC and state assessments |
129 |
134 |
(5) |
-4% |
130 |
(1) |
-1% |
Other non-interest expense: |
|
|
|
|
|
|
|
Director fees |
72 |
56 |
16 |
29% |
70 |
2 |
3% |
Communication |
53 |
37 |
16 |
43% |
42 |
11 |
26% |
Advertising |
76 |
78 |
(2) |
-3% |
68 |
8 |
12% |
Professional liability insurance |
19 |
23 |
(4) |
-17% |
23 |
(4) |
-17% |
Amortization |
98 |
95 |
3 |
3% |
98 |
0 |
0% |
Other non-interest expense |
715 |
806 |
-91 |
-11% |
884 |
(169) |
-19% |
Total non-interest
expense |
$ 7,066 |
$ 6,830 |
$ 236 |
3% |
$ 7,872 |
$ (806) |
-10% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For The Six Months
Ended |
|
June 30, 2014 |
June 30, 2013 |
$ Change |
% Change |
|
|
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
$ 8,338 |
$ 8,885 |
$ (547) |
-6% |
|
|
|
Occupancy |
1,010 |
865 |
145 |
17% |
|
|
|
Equipment |
515 |
386 |
129 |
33% |
|
|
|
Data processing |
895 |
1,239 |
(344) |
-28% |
|
|
|
Professional services |
386 |
498 |
(112) |
-22% |
|
|
|
Other real estate owned write-downs |
66 |
460 |
(394) |
-86% |
|
|
|
Other real estate owned operating costs |
91 |
209 |
(118) |
-56% |
|
|
|
State taxes |
204 |
250 |
(46) |
-18% |
|
|
|
FDIC and state assessments |
263 |
266 |
(3) |
-1% |
|
|
|
Other non-interest expense: |
|
|
|
|
|
|
|
Director fees |
128 |
115 |
13 |
11% |
|
|
|
Communication |
90 |
88 |
2 |
2% |
|
|
|
Advertising |
154 |
146 |
8 |
5% |
|
|
|
Professional liability insurance |
41 |
46 |
(5) |
-11% |
|
|
|
Amortization |
192 |
195 |
(3) |
-2% |
|
|
|
Other non-interest expense |
1,523 |
1,643 |
(120) |
-7% |
|
|
|
Total non-interest
expense |
$ 13,896 |
$ 15,291 |
$ (1,395) |
-9% |
|
|
|
Income Taxes
The Company recorded an income tax provision for the three
months ended June 30, 2014, March 31, 2014 and June 30,
2013. The amount of the provision for each period was
commensurate with the estimated tax liability associated with the
net income earned during the period.
As of June 30, 2014, the Company maintained a deferred tax asset
balance of $4.1 million. The Company believes it will be fully
utilized in the normal course of business, thus no valuation
allowance is maintained against this asset.
SUMMARY BALANCE SHEET
OVERVIEW |
|
|
|
|
|
|
|
|
(Unaudited) |
(Dollars in Thousands) |
|
June 30, |
March 31, |
|
% |
June 30, |
|
% |
|
2014 |
2014 |
$ Change |
Change |
2013 |
$ Change |
Change |
Assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
$ 17,694 |
$ 35,619 |
$ (17,925) |
-50% |
$ 54,243 |
$ (36,549) |
-67% |
Interest-bearing certificates of
deposit |
2,727 |
2,727 |
0 |
0% |
2,235 |
492 |
22% |
Federal Home Loan Bank stock, at
cost |
2,956 |
2,985 |
(29) |
-1% |
3,069 |
(113) |
-4% |
Investment securities |
90,583 |
97,239 |
(6,656) |
-7% |
89,551 |
1,032 |
1% |
|
|
|
|
|
|
|
|
Loans held-for-sale |
7,632 |
7,997 |
(365) |
-5% |
10,855 |
(3,223) |
-30% |
|
|
|
|
|
|
|
|
Gross loans, net of deferred fees |
547,283 |
518,552 |
28,731 |
6% |
474,580 |
72,703 |
15% |
Allowance for loan losses |
(8,315) |
(8,288) |
(27) |
0% |
(8,962) |
647 |
-7% |
Net loans |
538,968 |
510,264 |
28,704 |
6% |
465,618 |
73,350 |
16% |
|
|
|
|
|
|
|
|
Other assets |
58,912 |
60,609 |
(1,697) |
-3% |
60,763 |
(1,851) |
-3% |
Total assets |
$ 719,472 |
$ 717,440 |
$ 2,032 |
0% |
$ 686,334 |
$ 33,138 |
5% |
|
|
|
|
|
|
|
|
Liabilities and shareholders' equity |
|
|
|
|
|
|
|
Total deposits |
$ 619,301 |
$ 620,456 |
$ (1,155) |
0% |
$ 591,147 |
$ 28,154 |
5% |
Accrued interest payable |
151 |
166 |
(15) |
-9% |
185 |
(34) |
-18% |
Borrowings |
23,743 |
23,403 |
340 |
1% |
23,403 |
340 |
1% |
Other liabilities |
5,417 |
4,820 |
597 |
12% |
4,750 |
667 |
14% |
Shareholders' equity |
70,860 |
68,595 |
2,265 |
3% |
66,849 |
4,011 |
6% |
Total liabilities and shareholders'
equity |
$ 719,472 |
$ 717,440 |
$ 2,032 |
0% |
$ 686,334 |
$ 33,138 |
5% |
|
Cash and Cash
Equivalents and Investment Securities |
(Unaudited) |
(Dollars in Thousands) |
|
June 30, 2014 |
% of Total |
March 31, 2014 |
% of Total |
$ Change |
% Change |
June 30, 2013 |
% of Total |
$ Change |
% Change |
|
|
|
|
|
|
|
|
|
|
|
Cash and due from banks |
$ 17,455 |
15% |
$ 15,747 |
11% |
$ 1,708 |
11% |
$ 18,158 |
12% |
$ (703) |
-4% |
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits |
239 |
0% |
19,872 |
14% |
(19,633) |
-99% |
36,085 |
24% |
(35,846) |
-99% |
Interest-bearing certificates of
deposit |
2,727 |
2% |
2,727 |
2% |
-- |
0% |
2,235 |
1% |
492 |
22% |
Total cash equivalents |
20,421 |
18% |
38,346 |
28% |
(17,925) |
-47% |
56,478 |
38% |
(36,057) |
-64% |
|
|
|
|
|
|
|
|
|
|
|
Investment securities: |
|
|
|
|
|
|
|
|
|
|
Collateralized mortgage obligations:
agency issued |
38,822 |
34% |
37,567 |
27% |
1,255 |
3% |
30,085 |
20% |
8,737 |
29% |
Collateralized mortgage obligations:
non-agency issued |
604 |
1% |
1,974 |
1% |
(1,370) |
-69% |
2,349 |
2% |
(1,745) |
-74% |
Mortgage-backed securities: agency
issued |
12,059 |
11% |
13,182 |
10% |
(1,123) |
-9% |
12,038 |
8% |
21 |
0% |
U.S. Government and agency
securities |
8,721 |
8% |
9,828 |
7% |
(1,107) |
-11% |
8,874 |
6% |
(153) |
-2% |
State and municipal securities |
30,377 |
27% |
34,688 |
25% |
(4,311) |
-12% |
33,635 |
23% |
(3,258) |
-10% |
Corporate bonds |
-- |
0% |
-- |
0% |
-- |
0% |
2,570 |
2% |
(2,570) |
-100% |
FHLB Stock |
2,956 |
3% |
2,985 |
2% |
(29) |
-1% |
3,069 |
2% |
(113) |
-4% |
Total investment securities |
93,539 |
82% |
100,224 |
72% |
(6,685) |
-7% |
92,620 |
62% |
919 |
1% |
|
|
|
|
|
|
|
|
|
|
|
Total cash equivalents and investment
securities |
$ 113,960 |
100% |
$ 138,570 |
100% |
$ (24,610) |
-18% |
$ 149,098 |
100% |
$ (35,138) |
-24% |
|
|
|
|
|
|
|
|
|
|
|
Total cash equivalents and investment
securities as a % of total assets |
|
16% |
|
19% |
|
|
|
22% |
|
|
|
Investment securities and
interest-bearing certificates of deposit |
(Unaudited) |
(Dollars in Thousands) |
For the Three Months Ended |
June 30, 2014 |
March 31, 2014 |
$ Change |
%
Change |
June 30, 2013 |
$ Change |
%
Change |
|
|
|
|
|
|
|
|
Balance beginning of period |
$ 102,951 |
$ 104,016 |
$ (1,065) |
-1% |
$ 82,624 |
$ 20,327 |
25% |
Principal purchases |
3,806 |
5,741 |
(1,935) |
-34% |
24,688 |
(20,882) |
-85% |
Proceeds from sales |
(8,979) |
(4,849) |
(4,130) |
85% |
(2,987) |
(5,992) |
201% |
Principal paydowns, maturities, and
calls |
(2,144) |
(2,259) |
115 |
-5% |
(6,568) |
4,424 |
-67% |
Gains on sales of securities |
159 |
62 |
97 |
156% |
329 |
(170) |
-52% |
Losses on sales of securities |
(161) |
(10) |
(151) |
1510% |
-- |
(161) |
100% |
OTTI loss writedown |
(3) |
(45) |
42 |
-93% |
(51) |
48 |
-94% |
Change in unrealized gains (loss) before
tax |
903 |
555 |
348 |
63% |
(2,840) |
3,743 |
-132% |
Amortization and accretion of discounts and
premiums |
(266) |
(260) |
(6) |
2% |
(340) |
74 |
-22% |
Total investment portfolio |
$ 96,266 |
$ 102,951 |
$ (6,685) |
-6% |
$ 94,855 |
$ 1,411 |
1% |
Liquidity remains strong based on the current level of combined
cash equivalents and investment securities. We also have
unsecured lines of credit totaling $16.0 million with correspondent
banks, all of which is currently available. In addition, we
have a secured borrowing facility with the Federal Home Loan Bank
of Seattle of $143.4 million, of which $10.3 million is currently
outstanding. In an effort to enhance our net interest income
and margin, we reduced our cash equivalents and investment
securities portfolio to fund loan growth. The expected modified
duration (adjusted for calls, consensus pre-payment speeds and rate
adjustment dates) of the investment portfolio was 4.5 years at June
30, 2014, 4.2 years at March 31, 2014 and 4.4 years at June 30,
2013.
LOANS
Loans by
category |
(Unaudited) |
June 30, |
% of |
March 31, |
% of |
$ |
|
June 30, |
% of |
$ |
|
(Dollars in Thousands) |
2014 |
Gross Loans |
2014 |
Gross Loans |
Change |
% Change |
2013 |
Gross Loans |
Change |
% Change |
|
|
|
|
|
|
|
|
|
|
|
Commercial and agricultural |
$ 109,368 |
20% |
$ 101,971 |
20% |
$ 7,397 |
7% |
$ 89,894 |
19% |
$ 19,474 |
22% |
Real estate: |
|
|
|
|
|
|
|
|
|
|
Construction and development |
32,071 |
6% |
30,765 |
6% |
1,306 |
4% |
25,804 |
6% |
6,267 |
24% |
Residential 1-4 family |
90,549 |
17% |
89,244 |
17% |
1,305 |
1% |
83,896 |
18% |
6,653 |
8% |
Multi-family |
20,110 |
4% |
18,982 |
4% |
1,128 |
6% |
13,978 |
3% |
6,132 |
44% |
Commercial real estate -- owner
occupied |
117,203 |
22% |
112,771 |
22% |
4,432 |
4% |
112,148 |
24% |
5,055 |
5% |
Commercial real estate -- non owner
occupied |
124,929 |
23% |
119,803 |
23% |
5,126 |
4% |
109,323 |
23% |
15,606 |
14% |
Farmland |
23,900 |
4% |
22,940 |
4% |
960 |
4% |
24,717 |
5% |
(817) |
-3% |
Consumer |
30,241 |
6% |
23,156 |
5% |
7,085 |
31% |
15,841 |
3% |
14,400 |
91% |
Gross loans |
548,371 |
|
519,632 |
|
28,739 |
6% |
475,601 |
|
72,770 |
15% |
Less: allowance for loan losses |
(8,315) |
-2% |
(8,288) |
-2% |
(27) |
0% |
(8,962) |
-2% |
647 |
-7% |
Less: deferred fees |
(1,088) |
0% |
(1,080) |
0% |
(8) |
1% |
(1,021) |
0% |
(67) |
7% |
Loans, net |
$ 538,968 |
|
$ 510,264 |
|
$ 28,704 |
6% |
$ 465,618 |
|
$ 73,350 |
16% |
Loan portfolio growth continues to be well diversified, with
higher balances in all lending categories. The recent loan
growth was generated predominately within our Washington and Oregon
markets. The portfolio includes $37.5 million in purchased
government-guaranteed commercial and commercial real estate
loans. In addition, the portfolio contains $20.7 million in
indirect consumer loans to individuals with high credit scores to
finance luxury and classic cars as a part of a strategy to
diversify the loan portfolio.
Our ability to continue loan growth will be dependent on many
factors, including the effects of competition, economic conditions
in our markets, retention of key personnel and valued customers,
and our ability to close loans in the pipeline. The Company
manages new loan origination volume using concentration limits that
establish maximum exposure levels by designated industry segment,
real estate product types, geography, and single borrower
limits.
DEPOSITS
Deposits |
(Unaudited) |
(Dollars in Thousands) |
June 30, 2014 |
Percent of Total |
March 31, 2014 |
Percent of Total |
$ Change |
June 30, 2013 |
Percent of Total |
$ Change |
|
|
|
|
|
|
|
|
|
Interest-bearing demand and money market |
$ 268,480 |
43.4% |
$ 263,953 |
42.5% |
$ 4,527 |
$ 259,956 |
44.0% |
$ 8,524 |
Savings |
74,336 |
12.0% |
78,055 |
12.6% |
(3,719) |
64,360 |
10.9% |
9,976 |
Time deposits |
119,531 |
19.3% |
125,532 |
20.2% |
(6,001) |
141,246 |
23.9% |
(21,715) |
Total interest-bearing deposits |
462,347 |
74.7% |
467,540 |
75.4% |
(5,193) |
465,562 |
78.8% |
(3,215) |
Non-interest bearing demand |
156,954 |
25.3% |
152,916 |
24.6% |
4,038 |
125,585 |
21.2% |
31,369 |
Total deposits |
$ 619,301 |
100.0% |
$ 620,456 |
100.0% |
$ (1,155) |
$ 591,147 |
100.0% |
$ 28,154 |
Total deposits were virtually unchanged at June 30, 2014 versus
first quarter of this year and up 5% from the second quarter a year
ago. Non-interest bearing, interest bearing demand and money
market deposits continued to grow. This increase is due recent
success in acquiring business deposit relationships in conjunction
with the growth in lending achieved over the past year and the
deposits obtained in the Sterling acquisition last
year. Time deposits continued to decline as a
percentage of total deposits. The combination of our efforts to
reduce higher-cost time deposits through lowering interest rates
paid and offering non-insured deposit products, when appropriate,
reduced the average rate paid on total deposits in second quarter
2014 from second quarter in 2013.
Total brokered deposits were $22.9 million at June 30, 2014,
which included $2.9 million via reciprocal deposit
arrangements. This compares to $24.2 million and $24.6 million
at March 31, 2014 and June 30, 2013, respectively. In
addition, the Company's funding structure contains $10.0 million in
borrowings from the Federal Home Loan Bank. Doug Biddle,
Executive Vice President and Chief Financial Officer, observed, "We
view the prudent use of brokered deposits and borrowings to be an
appropriate funding tool to support interest rate risk mitigation
strategies."
CAPITAL
Pacific Financial Corporation, and its subsidiary Bank of the
Pacific, met the thresholds to be considered "Well-Capitalized"
under published regulatory standards for total risk-based capital,
Tier 1 risk-based capital and Tier 1 leverage capital at June 30,
2014. Capital ratios decreased slightly as compared to the
linked quarter and the second quarter of 2013, primarily due to the
successful execution of the Company's growth strategy and shift in
the balance sheet mix to higher risk-weighted loan assets.
The Board of Governors of the Federal Reserve System ("Federal
Reserve") and the FDIC have established minimum requirements for
capital adequacy for bank holding companies and state non-member
banks. For more information on these topics, see the discussions
under the subheading "Capital Adequacy" in the section "Business"
included in Item 1, of the Company's 2013 Form 10-K. The following
table summarizes the capital measures of the Company and the Bank,
respectively, at the dates listed below.
The total risk based capital ratios of the Company include $13.4
million of junior subordinated debentures, all of which qualified
as Tier 1 capital at June 30, 2014, under guidance issued by the
Federal Reserve. As provided in the Dodd-Frank Act, the Company
expects to continue to rely on these junior subordinated debentures
as part of its regulatory capital.
|
June 30,
2014 |
March 31, 2014 |
Change |
June 30,
2013 |
Change |
Regulatory Minimum to be "Adequately
Capitalized" |
Regulatory Minimum to be "Well
Capitalized" |
|
|
|
|
|
|
greater than or equal to |
greater than or equal to |
Pacific Financial
Corporation |
|
|
|
|
|
|
|
Total risk-based capital ratio |
13.50% |
13.88% |
(0.38) |
15.24% |
(1.74) |
8% |
n/a |
Tier 1 risk-based capital ratio |
12.25% |
12.62% |
(0.37) |
13.98% |
(1.73) |
4% |
n/a |
Leverage ratio |
9.83% |
10.02% |
(0.19) |
10.44% |
(0.61) |
4% |
n/a |
Tangible common equity ratio |
8.11% |
7.81% |
0.30 |
7.90% |
0.21 |
n/a |
n/a |
|
|
|
|
|
|
|
|
Bank of the Pacific |
|
|
|
|
|
|
|
Total risk-based capital ratio |
13.73% |
13.93% |
(0.20) |
15.21% |
(1.48) |
8% |
10% |
Tier 1 risk-based capital ratio |
12.48% |
12.67% |
(0.19) |
13.96% |
(1.48) |
4% |
6% |
Leverage ratio |
10.01% |
9.99% |
0.02 |
10.42% |
(0.41) |
4% |
5% |
|
FINANCIAL PERFORMANCE
OVERVIEW |
(Unaudited) |
(Dollars in Thousands, Except per
Share Data) |
|
|
|
|
|
|
For The Three Months
Ended |
|
June 30, 2014 |
March 31, 2014 |
Change |
June 30, 2013 |
Change |
Selective quarterly performance
ratios |
|
|
|
|
|
Return on average assets, annualized |
0.79% |
0.59% |
0.20 |
0.81% |
(0.02) |
Return on average equity, annualized |
8.04% |
6.12% |
1.92 |
7.83% |
0.21 |
Efficiency ratio (1) |
78.76% |
83.67% |
(4.91) |
86.25% |
(7.49) |
|
|
|
|
|
|
Share and per share
information |
|
|
|
|
|
Average common shares outstanding -
basic |
10,189,386 |
10,182,083 |
7,303 |
10,121,853 |
67,533 |
Average common shares outstanding -
diluted |
10,275,628 |
10,272,341 |
3,287 |
10,182,524 |
93,104 |
Basic income per common share |
0.14 |
0.10 |
0.04 |
0.13 |
0.01 |
Diluted income per common share |
0.14 |
0.10 |
0.04 |
0.13 |
0.01 |
Book value per common share (2) |
6.95 |
6.74 |
0.21 |
6.60 |
0.35 |
Tangible book value per common share (3) |
5.62 |
5.34 |
0.28 |
5.10 |
0.52 |
|
|
|
|
|
|
For The Six Months
Ended |
|
June 30, 2014 |
June 30, 2013 |
Change |
|
|
Selective quarterly performance
ratios |
|
|
|
|
|
Return on average assets, annualized |
0.69% |
0.63% |
0.06 |
|
|
Return on average equity, annualized |
7.10% |
6.05% |
1.05 |
|
|
Efficiency ratio (1) |
81.10% |
88.21% |
(7.11) |
|
|
|
|
|
|
|
|
Share and per share
information |
|
|
|
|
|
Average common shares outstanding -
basic |
10,185,755 |
10,121,853 |
63,902 |
|
|
Average common shares outstanding -
diluted |
10,273,994 |
10,172,356 |
101,638 |
|
|
Basic income per common share |
0.24 |
0.20 |
0.04 |
|
|
Diluted income per common share |
0.24 |
0.20 |
0.04 |
|
|
Book value per common share (2) |
6.96 |
6.60 |
0.36 |
|
|
Tangible book value per common share (3) |
5.62 |
5.10 |
0.52 |
|
|
|
|
|
|
|
|
(1) Non-interest expense divided
by net interest income plus non-interest income. |
(2) Book value is calculated as
the total common equity divided by the period ending number of
common shares outstanding. |
(3) Tangible book value is
calculated as the total common equity less total intangible assets
and liabilities divided by the period ending number of common
shares outstanding. |
|
NET INTEREST
MARGIN |
(Annualized, tax-equivalent
basis) |
(Unaudited) |
For The Three Months
Ended |
|
June 30, 2014 |
March 31, 2014 |
Change |
June 30, 2013 |
Change |
Selective quarterly performance
ratios |
|
|
|
|
|
Yield on average gross loans (1) |
5.04% |
5.13% |
(0.09) |
5.17% |
(0.13) |
Yield on average investment securities
(1) |
2.54% |
2.37% |
0.17 |
1.91% |
0.63 |
Cost of average interest bearing
deposits |
0.37% |
0.37% |
-- |
0.48% |
(0.11) |
Cost of average borrowings |
1.90% |
1.96% |
(0.06) |
1.99% |
(0.09) |
Cost of average total deposits and
borrowings |
0.34% |
0.34% |
-- |
0.44% |
(0.10) |
Cost of average interest-bearing
liabilities |
0.44% |
0.44% |
-- |
0.55% |
(0.11) |
|
|
|
|
|
|
Yield on average interest-earning assets |
4.61% |
4.61% |
-- |
4.53% |
0.08 |
Cost of average interest-bearing
liabilities |
0.44% |
0.44% |
-- |
0.55% |
(0.11) |
Net interest spread |
4.17% |
4.17% |
-- |
3.98% |
0.19 |
|
|
|
|
|
|
Net interest margin (1) |
4.28% |
4.27% |
0.01 |
4.09% |
0.19 |
|
|
|
|
|
|
For The Six Months
Ended |
|
June 30, 2014 |
June 30, 2013 |
Change |
|
|
Selective quarterly performance
ratios |
|
|
|
|
|
Yield on average gross loans (1) |
5.09% |
5.14% |
(0.05) |
|
|
Yield on average investment securities
(1) |
2.45% |
1.91% |
0.54 |
|
|
Cost of average interest bearing
deposits |
0.37% |
0.50% |
(0.13) |
|
|
Cost of average borrowings |
1.93% |
2.04% |
(0.11) |
|
|
Cost of average total deposits and
borrowings |
0.34% |
0.46% |
(0.12) |
|
|
Cost of average interest-bearing
liabilities |
0.44% |
0.58% |
(0.14) |
|
|
|
|
|
|
|
|
Yield on average interest-earning assets |
4.61% |
4.51% |
0.10 |
|
|
Cost of average interest-bearing
liabilities |
0.44% |
0.58% |
(0.14) |
|
|
Net interest spread |
4.17% |
3.93% |
0.24 |
|
|
|
|
|
|
|
|
Net interest margin (1) |
4.27% |
4.05% |
0.22 |
|
|
|
|
|
|
|
|
(1) Tax-exempt income has been
adjusted to a tax equivalent basis at a 34% rate. |
Net Interest Margin
Net interest margin remained virtually unchanged as compared to
first quarter 2014, as improvement in investment securities yields
offset slight declines in loan yields. Improvements in
yields on investment securities were partially due to the decline
in amortization expense associated with the decrease in prepayment
speeds of mortgage-backed securities. Loan yield declines
resulted from increased competition for high quality borrowing
relationships in the marketplace. Net interest margin improved
when compared to second quarter 2013, predominantly due to a shift
in the mix of earning assets toward higher-yielding loans and the
lower cost of interest bearing liabilities. The growth in the
proportion of noninterest bearing deposits over the past several
quarters has supported the improvement in net interest margin as
well. In second quarter 2014, loan yields and net interest
margin were enhanced by 9 and 7 basis points, respectively, due to
the collection of $115,000 in non-accrual interest during the
current period. A similar enhancement to loan yields occurred
in first quarter 2014 due to the collection of $108,000 in
non-accrual interest. There was no similar collection of
non-accrual interest during the corresponding periods in 2013.
The improvement in yields on investment securities also enhanced
net interest margin between the six months ending June 30, 2014 and
the same period in 2013. This was partially due to the decline in
amortization expense associated with the decrease in prepayment
speeds of mortgage-backed securities between the two
periods. In addition, we reduced the proportion of lower
yielding cash-equivalent investments and increased the proportion
of relatively higher-yielding federal government guaranteed and
municipal securities.
The following tables set forth information with regard to
average balances of interest earning assets and interest bearing
liabilities and the resultant yields or cost, net interest income,
and the net interest margin on a tax equivalent basis. Loans
held for sale and non-accrual loans are included in total
loans.
Average Interest Earning
Balances: |
For the Three Months
Ended |
|
June 30, 2014 |
March 31, 2014 |
June 30, 2013 |
|
Average Balance |
Interest Income or Expense |
Average Yields or Rates |
Average Balance |
Interest Income or Expense |
Average Yields or Rates |
Average Balance |
Interest Income or Expense |
Average Yields or Rates |
(Dollars in 000's) |
|
|
|
|
|
|
|
|
|
ASSETS: |
|
|
|
|
|
|
|
|
|
Interest bearing certificate of deposit |
$ 2,727 |
$ 10 |
1.47% |
$ 2,727 |
$ 10 |
1.49% |
$ 2,235 |
$ 7 |
1.21% |
Interest bearing deposits in banks |
12,552 |
9 |
0.29% |
17,954 |
12 |
0.27% |
29,544 |
17 |
0.23% |
Investments - taxable |
65,964 |
343 |
2.09% |
67,695 |
339 |
2.03% |
51,990 |
145 |
1.12% |
Investments - nontaxable |
31,607 |
352 |
4.47% |
32,770 |
347 |
4.29% |
34,857 |
397 |
4.57% |
Gross loans (1) |
532,490 |
6,718 |
5.06% |
511,200 |
6,492 |
5.15% |
474,403 |
6,149 |
5.20% |
Loans held for sale |
7,685 |
71 |
3.71% |
5,436 |
49 |
3.66% |
9,170 |
80 |
3.50% |
Total interest earning assets |
653,025 |
7,503 |
4.61% |
637,782 |
7,249 |
4.61% |
602,199 |
6,795 |
4.53% |
Cash and due from banks |
13,135 |
|
|
11,989 |
|
|
11,321 |
|
|
Bank premises and equipment (net) |
16,703 |
|
|
16,806 |
|
|
15,499 |
|
|
Other real estate owned |
2,088 |
|
|
2,565 |
|
|
3,776 |
|
|
Deferred fees |
(1,068) |
|
|
(1,137) |
|
|
(1,032) |
|
|
Allowance for loan losses |
(8,271) |
|
|
(8,388) |
|
|
(9,375) |
|
|
Other assets |
40,705 |
|
|
41,129 |
|
|
40,666 |
|
|
Total assets |
$ 716,317 |
|
|
$ 700,746 |
|
|
$ 663,054 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits |
$ 345,116 |
140 |
0.16% |
$ 336,201 |
141 |
0.17% |
$ 312,459 |
181 |
0.23% |
Time deposits |
122,134 |
290 |
0.95% |
126,841 |
276 |
0.88% |
135,107 |
351 |
1.04% |
FHLB borrowings |
10,000 |
60 |
2.41% |
10,000 |
53 |
2.15% |
10,000 |
62 |
2.49% |
Short term borrowings |
6 |
-- |
0.00% |
-- |
-- |
0.00% |
-- |
-- |
0.00% |
Junior subordinated debentures |
13,403 |
51 |
1.53% |
13,403 |
60 |
1.82% |
13,403 |
54 |
1.62% |
Total interest bearing liabilities |
490,659 |
541 |
0.44% |
486,445 |
530 |
0.44% |
470,969 |
648 |
0.55% |
Non-interest-bearing deposits |
150,776 |
|
|
140,980 |
|
|
119,499 |
|
|
Other liabilities |
4,928 |
|
|
5,196 |
|
|
4,316 |
|
|
Equity |
69,954 |
|
|
68,125 |
|
|
68,270 |
|
|
Total liabilities and shareholders'
equity |
$ 716,317 |
|
|
$ 700,746 |
|
|
$ 663,054 |
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income (3) |
|
$ 6,962 |
|
|
$ 6,719 |
|
|
$ 6,147 |
|
Net interest spread |
|
|
4.17% |
|
243 |
4.17% |
|
815 |
3.98% |
|
|
|
|
|
|
|
|
|
|
Average yield on earning assets (2) (3) |
|
|
4.61% |
|
|
4.61% |
|
|
4.53% |
Interest expense to earning assets |
|
|
0.19% |
|
|
0.19% |
|
|
0.24% |
Net interest income to earning assets (2)
(3) |
|
|
4.28% |
|
|
4.27% |
|
|
4.09% |
|
|
|
|
|
|
|
|
|
|
Reconciliation of Non-GAAP
measure: |
|
|
|
|
|
|
|
|
|
Tax Equivalent Net Interest
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
$ 6,796 |
|
|
$ 6,555 |
|
|
$ 5,952 |
|
Tax equivalent adjustment for municipal loan
interest |
|
46 |
|
|
46 |
|
|
60 |
|
Tax equivalent adjustment for municipal bond
interest |
|
120 |
|
|
118 |
|
|
135 |
|
Tax equivalent net interest income |
|
$ 6,962 |
|
|
$ 6,719 |
|
|
$ 6,147 |
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP financial measures have
inherent limitations, are not required to be uniformly applied, and
are not audited. |
Management believes that
presentation of this non-GAAP measure provides useful information
frequently used by shareholders in the evaluation of a
company. |
Non-GAAP financial measures have
limitations as analytical tools and should not be considered in
isolation or as a substitute for analyses of results as reported
under GAAP. |
|
|
|
|
|
|
|
|
|
|
(1) Non-accrual loans of
approximately $6.4 million at 06/30/14, $7.3 million at 03/31/2014,
and $10.4 million for 06/30/2013 are included in the average loan
balances. |
(2) Loan interest income
includes loan fee income of $180,000, $149,000, and $131,000 for
the three months ended 06/30/2014, 03/31/2014, and 06/30/2013,
respectively. |
(3) Tax-exempt income has been
adjusted to a tax equivalent basis at a 34% effective
rate. The amount of such adjustment was an addition to
recorded pre-tax income of $166,000, $164,000, and $195,000 for the
three months ended June 30, 2014, March 31, 2014, and June 30,
2013, respectively. |
|
|
|
|
For the Three Months Ended |
For the Three Months Ended |
|
June 30, 2014 vs. March
31, 2014 |
June 30, 2014 vs. June
30, 2013 |
|
Increase (Decrease)
Due To |
Increase (Decrease)
Due To |
(Dollars in 000's) |
|
|
Net |
|
|
Net |
|
Volume |
Rate |
Change |
Volume |
Rate |
Change |
ASSETS: |
|
|
|
|
|
|
Interest bearing certificate of deposit |
$ -- |
$ -- |
$ -- |
$ 1 |
$ 2 |
$ 3 |
Interest bearing deposits in banks |
(4) |
1 |
(3) |
(10) |
2 |
(8) |
Investments - taxable |
(9) |
13 |
4 |
39 |
159 |
198 |
Investments - nontaxable |
(12) |
17 |
5 |
(37) |
(8) |
(45) |
Gross loans |
273 |
(47) |
226 |
753 |
(184) |
569 |
Loans held for sale |
21 |
1 |
22 |
(13) |
4 |
(9) |
Total interest earning assets |
$ 269 |
$ (15) |
$ 254 |
$ 733 |
$ (25) |
$ 708 |
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY: |
|
|
|
|
|
|
Interest-bearing deposits |
$ 4 |
$ (5) |
$ (1) |
$ 19 |
$ (60) |
$ (41) |
Time deposits |
(10) |
24 |
14 |
(34) |
(27) |
(61) |
FHLB borrowings |
-- |
7 |
7 |
-- |
(2) |
(2) |
Short-term borrowings |
-- |
-- |
-- |
-- |
-- |
-- |
Long-term borrowings |
-- |
(9) |
(9) |
-- |
(3) |
(3) |
Total interest bearing liabilities |
(6) |
17 |
11 |
(15) |
(92) |
(107) |
Net increase (decrease) in net interest
income |
$ 275 |
$ (32) |
$ 243 |
$ 748 |
$ 67 |
$ 815 |
|
|
Average Interest Earning
Balances: |
For the Six Months
Ended |
|
June 30, 2014 |
June 30, 2013 |
|
Average Balance |
Interest Income or Expense |
Average Yields or Rates |
Average Balance |
Interest Income or Expense |
Average Yields or Rates |
(Dollars in 000's) |
|
|
|
|
|
|
ASSETS: |
|
|
|
|
|
|
Interest bearing certificate of deposit |
$ 2,727 |
$ 21 |
1.55% |
$ 2,536 |
$ 14 |
1.11% |
Interest bearing deposits in banks |
15,238 |
19 |
0.25% |
32,629 |
37 |
0.23% |
Investments - taxable |
66,825 |
682 |
2.06% |
46,747 |
250 |
1.08% |
Investments - nontaxable |
32,185 |
700 |
4.39% |
34,319 |
800 |
4.70% |
Gross loans (1) |
521,904 |
13,210 |
5.10% |
465,727 |
11,982 |
5.19% |
Loans held for sale |
6,567 |
120 |
3.68% |
11,268 |
177 |
3.17% |
Total interest earning assets |
645,446 |
14,752 |
4.61% |
593,226 |
13,260 |
4.51% |
Cash and due from banks |
12,565 |
|
|
11,028 |
|
|
Bank premises and equipment (net) |
16,755 |
|
|
15,231 |
|
|
Other real estate owned |
2,325 |
|
|
4,095 |
|
|
Deferred fees |
(1,104) |
|
|
(989) |
|
|
Allowance for loan losses |
(8,330) |
|
|
(9,371) |
|
|
Other assets |
40,917 |
|
|
40,910 |
|
|
Total assets |
$ 708,574 |
|
|
$ 654,130 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest-bearing deposits |
$ 340,683 |
281 |
0.17% |
$ 306,297 |
381 |
0.25% |
Time deposits |
124,475 |
566 |
0.92% |
135,898 |
718 |
1.07% |
FHLB borrowings |
10,000 |
120 |
2.42% |
10,099 |
124 |
2.48% |
Short term borrowings |
3 |
-- |
0.00% |
-- |
-- |
0.00% |
Junior subordinated debentures |
13,403 |
104 |
1.56% |
13,403 |
114 |
1.72% |
Total interest bearing liabilities |
488,564 |
1,071 |
0.44% |
465,697 |
1,337 |
0.58% |
Non-interest-bearing deposits |
145,905 |
|
|
116,240 |
|
|
Other liabilities |
5,060 |
|
|
4,413 |
|
|
Equity |
69,045 |
|
|
67,780 |
|
|
Total liabilities and shareholders'
equity |
$ 708,574 |
|
|
$ 654,130 |
|
|
|
|
|
|
|
|
|
Net interest income (3) |
|
$ 13,681 |
|
|
$ 11,923 |
|
Net interest spread |
|
|
4.17% |
|
1,758 |
3.93% |
|
|
|
|
|
|
|
Average yield on earning assets (2) (3) |
|
|
4.61% |
|
|
4.51% |
Interest expense to earning assets |
|
|
0.33% |
|
|
0.45% |
Net interest income to earning assets (2)
(3) |
|
|
4.27% |
|
|
4.05% |
|
|
|
|
|
|
|
Reconciliation of Non-GAAP
measure: |
|
|
|
|
|
|
Tax Equivalent Net Interest
Income |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net interest income |
|
$ 13,351 |
|
|
$ 11,534 |
|
Tax equivalent adjustment for municipal loan
interest |
|
92 |
|
|
117 |
|
Tax equivalent adjustment for municipal bond
interest |
|
238 |
|
|
272 |
|
Tax equivalent net interest income |
|
$ 13,681 |
|
|
$ 11,923 |
|
|
|
|
|
|
|
|
Non-GAAP financial measures have
inherent limitations, are not required to be uniformly applied, and
are not audited. |
Management believes that
presentation of this non-GAAP measure provides useful information
frequently used by shareholders in the evaluation of a
company. |
Non-GAAP financial measures have
limitations as analytical tools and should not be considered in
isolation or as a substitute for analyses of results as reported
under GAAP. |
|
|
|
|
|
|
|
(1) Non-accrual loans of
approximately $6.4 million at 06/30/14 and $10.4 million for
06/30/2013 are included in the average loan balances. |
(2) Loan interest income includes
loan fee income of $330,000 and $226,000 for the six months ended
06/30/2014 and 06/30/2013, respectively. |
(3) Tax-exempt income has been
adjusted to a tax equivalent basis at a 34% effective
rate. The amount of such adjustment was an addition to
recorded pre-tax income of $330,000 and $389,000 for the six months
ended June 30, 2014 and June 30, 2013, respectively. |
|
|
|
For the Six Months Ended |
|
June 30, 2014 vs. June
30, 2013 |
|
Increase (Decrease)
Due To |
(Dollars in 000's) |
|
|
Net |
|
Volume |
Rate |
Change |
ASSETS: |
|
|
|
Interest bearing certificate of deposit |
$ 1 |
$ 6 |
$ 7 |
Interest bearing deposits in banks |
(20) |
2 |
(18) |
Investments - taxable |
108 |
324 |
432 |
Investments - nontaxable |
(50) |
(50) |
(100) |
Gross loans |
1,446 |
(218) |
1,228 |
Loans held for sale |
(74) |
17 |
(57) |
Total interest earning assets |
$ 1,411 |
$ 81 |
$ 1,492 |
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY: |
|
|
|
Interest-bearing deposits |
$ 43 |
$ (143) |
$ (100) |
Time deposits |
(61) |
(91) |
(152) |
FHLB borrowings |
(1) |
(3) |
(4) |
Short-term borrowings |
-- |
-- |
-- |
Long-term borrowings |
-- |
(10) |
(10) |
Total interest bearing liabilities |
(19) |
(247) |
(266) |
Net increase (decrease) in net interest
income |
$ 1,430 |
$ 328 |
$ 1,758 |
|
SUMMARY AVERAGE BALANCE
SHEETS |
|
|
|
|
|
|
|
|
(Unaudited) |
(Dollars in Thousands) |
Averages for the Three Months Ended |
June 30, |
March 31, |
|
|
June 30, |
|
|
|
2014 |
2014 |
$ Change |
% Change |
2013 |
$ Change |
% Change |
Assets: |
|
|
|
|
|
|
|
Cash and due from banks |
$ 13,135 |
$ 11,989 |
$ 1,146 |
10% |
$ 11,321 |
$ 1,814 |
16% |
Interest-bearing deposits in banks |
12,552 |
17,954 |
(5,402) |
-30% |
29,544 |
(16,992) |
-58% |
Interest bearing certificate of
deposit |
2,727 |
2,727 |
0 |
0% |
2,235 |
492 |
22% |
Investment securities |
97,571 |
100,465 |
(2,894) |
-3% |
86,847 |
10,724 |
12% |
|
|
|
|
|
|
|
|
Loans, net of deferred loan fees |
539,106 |
515,499 |
23,607 |
5% |
482,541 |
56,565 |
12% |
Allowance for loan losses |
(8,271) |
(8,388) |
117 |
-1% |
(9,375) |
1,104 |
-12% |
Net loans |
530,835 |
507,111 |
23,724 |
5% |
473,166 |
57,669 |
12% |
|
|
|
|
|
|
|
|
Other assets |
59,497 |
60,500 |
(1,003) |
-2% |
59,941 |
(444) |
-1% |
Total assets |
$ 716,317 |
$ 700,746 |
$ 15,571 |
2% |
$ 663,054 |
$ 53,263 |
8% |
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
Total deposits |
$ 618,026 |
$ 604,022 |
$ 14,004 |
2% |
$ 567,065 |
$ 50,961 |
9% |
Borrowings |
23,409 |
23,403 |
6 |
0% |
23,403 |
6 |
0% |
Other liabilities |
4,928 |
5,196 |
(268) |
-5% |
4,316 |
612 |
14% |
Total liabilities |
646,363 |
632,621 |
13,742 |
2% |
594,784 |
51,579 |
9% |
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
Common equity |
69,954 |
68,125 |
1,829 |
3% |
68,270 |
1,684 |
2% |
Total equity |
69,954 |
68,125 |
1,829 |
3% |
68,270 |
1,684 |
2% |
|
|
|
|
|
|
|
|
Total liabilities and shareholders'
equity |
$ 716,317 |
$ 700,746 |
$ 15,571 |
2% |
$ 663,054 |
$ 53,263 |
8% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Averages for the Six Months Ended |
June 30, |
June 30, |
|
|
|
|
|
|
2014 |
2013 |
$ Change |
% Change |
|
|
|
Assets: |
|
|
|
|
|
|
|
Cash and due from banks |
$ 12,565 |
$ 11,028 |
$ 1,537 |
14% |
|
|
|
Interest-bearing deposits in banks |
15,238 |
32,629 |
(17,391) |
-53% |
|
|
|
Interest bearing certificate of
deposit |
2,727 |
2,536 |
191 |
8% |
|
|
|
Investment securities |
99,010 |
81,066 |
17,944 |
22% |
|
|
|
|
|
|
|
|
|
|
|
Loans, net of deferred loan fees |
527,367 |
476,006 |
51,361 |
11% |
|
|
|
Allowance for loan losses |
(8,330) |
(9,371) |
1,041 |
-11% |
|
|
|
Net loans |
519,037 |
466,635 |
52,402 |
11% |
|
|
|
|
|
|
|
|
|
|
|
Other assets |
59,997 |
60,236 |
(239) |
0% |
|
|
|
Total assets |
$ 708,574 |
$ 654,130 |
$ 54,444 |
8% |
|
|
|
|
|
|
|
|
|
|
|
Liabilities: |
|
|
|
|
|
|
|
Total deposits |
$ 611,063 |
$ 558,435 |
$ 52,628 |
9% |
|
|
|
Borrowings |
23,406 |
23,502 |
(96) |
0% |
|
|
|
Other liabilities |
5,060 |
4,413 |
647 |
15% |
|
|
|
Total liabilities |
639,529 |
586,350 |
53,179 |
9% |
|
|
|
|
|
|
|
|
|
|
|
Equity: |
|
|
|
|
|
|
|
Common equity |
69,045 |
67,780 |
1,265 |
2% |
|
|
|
Total equity |
69,045 |
67,780 |
1,265 |
2% |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders'
equity |
$ 708,574 |
$ 654,130 |
$ 54,444 |
8% |
|
|
|
|
|
|
|
|
|
|
|
ASSET QUALITY
At June 30, 2014, total classified loans declined in dollars and
as a percentage of total loans as compared to March 31, 2014, and
June 30, 2013. Nonperforming loans consist
primarily of commercial real estate loans. Total loans on
accruing status 30-89 days past due also continue to remain below
0.50% of gross loans, mirroring the improvement in overall credit
quality noted previously. "We monitor delinquencies, defined
as loans on accruing status 30-89 days past due, as an indicator of
future adversely classified loans," Biddle
continued.
At June 30, 2014, total nonperforming loans were also down
compared to March 31, 2014 and June 30, 2013. Nonperforming assets
also declined during this period in terms of total outstanding
loans and as a percentage of total assets. This was primarily due
to the payoff of a $1.8 million non-accrual commercial real estate
loan during the current quarter, which was partially offset by the
placement on non-accrual of a $1.2 million commercial real estate
loan relationship. Reductions in nonperforming assets were
also achieved through sales of OREO, as write-downs were minimal
during the current period.
Adversely classified
loans |
(Unaudited) |
(Dollars in Thousands) |
|
June 30, 2014 |
March 31, 2014 |
$ Change |
% Change |
June 30, 2013 |
$ Change |
% Change |
|
|
|
|
|
|
|
|
Rated substandard or worse, but not
impaired |
$ 6,938 |
$ 6,842 |
$ 96 |
1% |
$ 4,113 |
$ 2,825 |
69% |
Impaired |
9,025 |
9,952 |
(927) |
-9% |
12,859 |
(3,834) |
-30% |
Total adversely classified loans* |
$ 15,963 |
$ 16,794 |
$ (831) |
-5% |
$ 16,972 |
$ (1,009) |
-6% |
|
|
|
|
|
|
|
|
Gross loans |
$ 548,371 |
$ 519,632 |
$ 28,739 |
6% |
$ 472,186 |
$ 76,185 |
16% |
Adversely classified loans to gross
loans |
2.91% |
3.23% |
-0.32% |
|
3.59% |
-0.68% |
|
Allowance for loan losses |
$ 8,315 |
$ 8,288 |
$ 27 |
0% |
$ 9,348 |
$ (1,033) |
-11% |
Allowance for loan losses as a percentage of
adversely classified loans |
52.09% |
49.35% |
2.74% |
|
55.08% |
-2.99% |
|
Allowance for loan losses to total impaired
loans |
92.13% |
83.28% |
8.85% |
|
72.70% |
19.43% |
|
|
|
|
|
|
|
|
|
* Adversely classified loans are
defined as loans having a well-defined weakness or weaknesses
related to the borrower's financial capacity or to pledged
collateral that may jeopardize the repayment of the debt. They are
characterized by the possibility that the Bank may sustain some
loss if the deficiencies giving rise to the substandard
classification are not corrected. Note that any loans internally
rated worse than substandard are included in the impaired loan
totals. |
|
30-89 DPD by
type |
(Unaudited) |
(Dollars in Thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2014 |
% of Category |
March 31, 2014 |
% of Category |
$ Change |
% Change |
June 30, 2013 |
% of Category |
$ Change |
% Change |
|
|
|
|
|
|
|
|
|
|
|
Commercial and agricultural |
$ 23 |
16.5% |
$ 32 |
4.1% |
$ (9) |
-28% |
$ 355 |
11.8% |
$ (332) |
-94% |
Real estate: |
|
|
|
|
|
|
|
|
|
|
Construction and development |
-- |
0.0% |
-- |
0.0% |
-- |
0% |
-- |
0.0% |
-- |
0% |
Residential 1-4 family |
53 |
38.1% |
180 |
23.1% |
(127) |
-71% |
517 |
17.2% |
(464) |
-90% |
Multi-family |
-- |
0.0% |
-- |
0.0% |
-- |
0% |
-- |
0.0% |
-- |
0% |
Commercial real estate -- owner
occupied |
-- |
0.0% |
309 |
39.6% |
(309) |
-100% |
314 |
10.4% |
(314) |
-100% |
Commercial real estate -- non owner
occupied |
-- |
0.0% |
251 |
32.2% |
(251) |
-100% |
1,745 |
58.1% |
(1,745) |
-100% |
Farmland |
-- |
|
-- |
0.0% |
-- |
0% |
55 |
1.8% |
(55) |
-100% |
Total real estate |
$ 53 |
|
$ 740 |
|
$ (687) |
-93% |
$ 2,631 |
|
$ (2,578) |
|
|
|
|
|
|
|
|
|
|
|
|
Consumer |
63 |
45.3% |
8 |
1.0% |
55 |
688% |
20 |
0.7% |
43 |
215% |
Total loans 30-89 days past due, not in
nonaccrual status |
$ 139 |
100.0% |
$ 780 |
100.0% |
$ (641) |
-82% |
$ 3,006 |
100.0% |
$ (2,867) |
-95% |
|
|
|
|
|
|
|
|
|
|
|
Delinquent loans to total loans, not in
nonaccrual status |
0.03% |
|
0.15% |
|
|
|
0.66% |
|
|
|
|
Non-performing
assets |
(Unaudited) |
(Dollars in Thousands) |
June 30, 2014 |
March 31, 2014 |
$ Change |
% Change |
June 30, 2013 |
$ Change |
% Change |
Loans on nonaccrual status |
$ 6,388 |
$ 7,296 |
$ (908) |
-12% |
$ 10,368 |
$ (3,980) |
-38% |
Loans past due greater than 90 days but not
on nonaccrual status |
-- |
-- |
-- |
|
-- |
-- |
|
Total non-performing loans |
6,388 |
7,296 |
(908) |
-12% |
10,368 |
(3,980) |
-38% |
Other real estate owned and foreclosed
assets |
991 |
2,386 |
(1,395) |
-58% |
3,451 |
(2,460) |
-71% |
Total nonperforming assets |
$ 7,379 |
$ 9,682 |
$ (2,303) |
-24% |
$ 13,819 |
$ (6,440) |
-47% |
|
|
|
|
|
|
|
|
Percentage of nonperforming assets to total
assets |
1.03% |
1.35% |
|
|
2.01% |
|
|
OREO declined during the second quarter 2014, and year-over
year. Additional real estate properties taken into the OREO
portfolio during the quarter was modest. OREO properties sold
with a larger book value in the quarter compared to prior
periods. OREO valuation adjustments continued to be
minimal. At June 30, 2014, the OREO portfolio consisted of 10
properties, down in number and balance from both the first quarter
2014 and second quarter 2013. The largest balances in the OREO
portfolio at the end of the quarter were attributable to commercial
properties, followed by residential properties, all of which are
located within our market area.
Other real estate owned
and foreclosed assets |
(Unaudited) |
(Dollars in Thousands) |
For the Three Months Ended |
June 30, 2014 |
% of Category |
March 31, 2014 |
% of Category |
$ Change |
% Change |
June 30, 2013 |
% of Category |
$ Change |
% Change |
Other real estate owned, beginning of
period |
$ 2,386 |
240.8% |
$ 2,771 |
116.1% |
$ (385) |
-14% |
$ 4,148 |
120.2% |
$ (1,762) |
-42% |
Transfers from outstanding loans |
206 |
20.8% |
111 |
4.7% |
95 |
86% |
-- |
0.0% |
206 |
100% |
Improvements and other additions |
-- |
0.0% |
-- |
0.0% |
-- |
0% |
-- |
0.0% |
-- |
0% |
Proceeds from sales |
(1,490) |
-150.4% |
(448) |
-18.8% |
(1,042) |
233% |
(634) |
-18.4% |
(856) |
135% |
Net gain (loss) on sales |
(57) |
-5.8% |
(36) |
-1.5% |
(21) |
58% |
45 |
1.3% |
(102) |
-227% |
Impairment charges |
(54) |
-5.4% |
(12) |
-0.5% |
(42) |
350% |
(108) |
-3.1% |
54 |
-50% |
Total other real estate owned |
$ 991 |
100.0% |
$ 2,386 |
100.0% |
$ (1,395) |
-58% |
$ 3,451 |
100.0% |
$ (2,460) |
-71% |
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended |
June 30, 2014 |
% of Category |
June 30, 2013 |
% of Category |
$ Change |
% Change |
|
|
|
|
Other real estate owned, beginning of
period |
$ 2,771 |
279.6% |
$ 4,678 |
135.6% |
$ (1,907) |
-41% |
|
|
|
|
Transfers from outstanding loans |
317 |
32.0% |
209 |
6.1% |
108 |
52% |
|
|
|
|
Improvements and other additions |
-- |
0.0% |
-- |
0.0% |
-- |
0% |
|
|
|
|
Proceeds from sales |
(1,938) |
-195.6% |
(1,001) |
-29.0% |
(937) |
94% |
|
|
|
|
Net gain (loss) on sales |
(93) |
-9.4% |
25 |
0.7% |
(118) |
-472% |
|
|
|
|
Impairment charges |
(66) |
-6.7% |
(460) |
-13.3% |
394 |
-86% |
|
|
|
|
Total other real estate owned |
$ 991 |
100.0% |
$ 3,451 |
100.0% |
$ (2,460) |
-71% |
|
|
|
|
|
Other real estate owned
and foreclosed assets by type |
(Unaudited) |
(Dollars in Thousands) |
|
June 30, 2014 |
# of Properties |
March 31, 2014 |
# of Properties |
$ Change |
% Change |
June 30, 2013 |
# of Properties |
$ Change |
% Change |
|
|
|
|
|
|
|
|
|
|
|
Construction, Land Dev & Other Land |
$ 46 |
2 |
$ 60 |
3 |
$ (14) |
-23% |
$ 1,041 |
8 |
$ (995) |
-96% |
1-4 Family Residential Properties |
317 |
4 |
789 |
7 |
(472) |
-60% |
570 |
4 |
(253) |
-44% |
Nonfarm Nonresidential Properties |
628 |
4 |
1,537 |
8 |
(909) |
-59% |
1,840 |
11 |
(1,212) |
-66% |
Total OREO by type |
$ 991 |
10 |
$ 2,386 |
18 |
$ (1,395) |
-58% |
$ 3,451 |
23 |
$ (2,460) |
-71% |
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses continues to decline in relation
to total loans in concert with the general trend of reduced levels
of classified loans, loan delinquencies and other relevant credit
metrics. With the reduction in delinquencies, changes in the
loan portfolio composition over the past several years and overall
improvement in credit quality, loss factors used in estimates to
establish reserve levels have declined commensurately. A
provision was made to the allowance for loan losses in second
quarter 2014 corresponding to recent growth in the loan portfolio,
as compared to no provision in the linked quarter and a reverse
provision in second quarter 2013.
For the quarter ended June 30, 2014, total net loan charge-offs
were unchanged compared to the quarter ended March 31, 2014, but up
versus the quarter ended June 30, 2013. The charge-offs
incurred in the second quarter 2014 were primarily centered in one
commercial real estate loan, which was written down $371,000 due to
an impairment of the collateral securing the loan. This was
partially offset by a $337,000 recovery resulting from the pay off
of a $1.8 million commercial real estate loan. The
ratio of net loan charge-offs to average gross loans (annualized)
for the current quarter was unchanged compared to the linked
quarter, but up slightly compared to the second quarter one year
ago.
The overall risk profile of the loan portfolio continues to
improve, as stated above. However, the trend of future
provision for loan losses will depend primarily on economic
conditions, growth in the loan portfolio, level of
adversely-classified assets, and changes in collateral values.
Allowance for Loan
Losses |
(Unaudited) |
(Dollars in Thousands) |
For the Three Months Ended |
June 30, 2014 |
March 31, 2014 |
$ Change |
% Change |
June 30, 2013 |
$ Change |
% Change |
|
|
|
|
|
|
|
|
Gross loans outstanding at end of period |
$ 548,371 |
$ 519,632 |
$ 28,739 |
6% |
$ 475,601 |
$ 72,770 |
15% |
Average loans outstanding, gross |
$ 532,490 |
$ 511,200 |
$ 21,290 |
4% |
$ 474,403 |
$ 58,087 |
12% |
Allowance for loan losses, beginning of
period |
$ 8,288 |
$ 8,359 |
$ (71) |
-1% |
$ 9,348 |
$ (1,060) |
-11% |
Commercial |
(9) |
(17) |
8 |
-47% |
-- |
(9) |
-100% |
Commercial Real Estate |
(389) |
(7) |
(382) |
5457% |
(42) |
(347) |
826% |
Residential Real Estate |
(4) |
(40) |
36 |
-90% |
(61) |
57 |
-93% |
Consumer |
(29) |
(18) |
(11) |
61% |
(49) |
20 |
-41% |
Total charge-offs |
(431) |
(82) |
(349) |
426% |
(152) |
(279) |
184% |
Commercial |
1 |
1 |
0 |
0% |
5 |
(4) |
-80% |
Commercial Real Estate |
347 |
5 |
342 |
6840% |
209 |
138 |
66% |
Residential Real Estate |
9 |
4 |
5 |
125% |
2 |
7 |
350% |
Consumer |
1 |
1 |
-- |
0% |
-- |
1 |
100% |
Total recoveries |
358 |
11 |
347 |
3155% |
216 |
142 |
66% |
Net charge-offs |
(73) |
(71) |
(2) |
3% |
64 |
(137) |
-214% |
Provision charged to income |
100 |
-- |
100 |
100% |
(450) |
550 |
-122% |
Allowance for loan losses, end of period |
$ 8,315 |
$ 8,288 |
$ 27 |
0% |
$ 8,962 |
$ (647) |
-7% |
Ratio of net loans charged-off to average
gross loans outstanding, annualized |
0.05% |
0.06% |
-0.01% |
-17% |
-0.05% |
0.10% |
-200% |
Ratio of allowance for loan losses to gross
loans outstanding |
1.52% |
1.59% |
-0.07% |
-4% |
1.88% |
-0.36% |
-19% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Six Months Ended |
June 30, 2014 |
June 30, 2013 |
$ Change |
% Change |
|
|
|
|
|
|
|
|
|
|
|
Gross loans outstanding at end of period |
$ 519,632 |
$ 472,186 |
$ 47,446 |
10% |
|
|
|
Average loans outstanding, gross |
$ 511,200 |
$ 456,954 |
$ 54,246 |
12% |
|
|
|
Allowance for loan losses, beginning of
period |
$ 8,359 |
$ 9,358 |
$ (999) |
-11% |
|
|
|
Commercial |
(26) |
-- |
(26) |
-100% |
|
|
|
Commercial Real Estate |
(396) |
(47) |
(349) |
743% |
|
|
|
Residential Real Estate |
(44) |
(71) |
27 |
-38% |
|
|
|
Consumer |
(47) |
(60) |
13 |
-22% |
|
|
|
Total charge-offs |
(513) |
(178) |
(335) |
188% |
|
|
|
Commercial |
2 |
15 |
(13) |
-87% |
|
|
|
Commercial Real Estate |
352 |
214 |
138 |
64% |
|
|
|
Residential Real Estate |
13 |
2 |
11 |
550% |
|
|
|
Consumer |
2 |
1 |
1 |
100% |
|
|
|
Total recoveries |
369 |
232 |
137 |
59% |
|
|
|
Net charge-offs |
(144) |
54 |
(198) |
-367% |
|
|
|
Provision charged to income |
100 |
(450) |
550 |
100% |
|
|
|
Allowance for loan losses, end of period |
$ 8,315 |
$ 8,962 |
$ (647) |
-7% |
|
|
|
Ratio of net loans charged-off to average
gross loans outstanding, annualized |
0.00% |
0.00% |
0.00% |
0% |
|
|
|
Ratio of allowance for loan losses to gross
loans outstanding |
1.60% |
1.90% |
-0.30% |
-16% |
|
|
|
ABOUT PACIFIC FINANCIAL CORPORATION
Pacific Financial Corporation of Aberdeen, Washington, is the
bank holding company for Bank of the Pacific, a state chartered and
federally insured commercial bank. Bank of the Pacific offers
banking products and services to small-to-medium sized businesses
and professionals in western Washington and Oregon. As of June
30, 2014, the Company had total assets of $719 million and operated
sixteen branches in the communities of Grays Harbor, Pacific,
Whatcom, Skagit and Wahkiakum counties in the State of Washington,
and three branches in Clatsop County, Oregon. The Company also
operates loan production offices in the communities of Vancouver,
DuPont and Burlington in Washington. Visit the Company's
website at www.bankofthepacific.com. Member FDIC.
Cautions Concerning Forward-Looking
Statements
This press release contains statements that constitute
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995 and other laws, including
all statements in this release that are not historical facts or
that relate to future plans or events or projected results of
Pacific Financial Corporation and its wholly-owned subsidiary, Bank
of the Pacific. These forward-looking statements are subject
to risks and uncertainties that could cause actual events or
results to differ materially from those projected, anticipated or
implied. These risks and uncertainties include various risks
associated with growing the Bank and expanding the services it
provides, successfully completing and integrating the acquisition
of new branches and development of new business lines and markets,
competition in the marketplace, general economic conditions,
changes in interest rates, extensive and evolving regulation of the
banking industry, and many other risks described in the Company's
filings with the Securities and Exchange Commission. The most
significant of these uncertainties are described in the Company's
Annual Report on Form 10-K for the year ended December 31, 2013,
which readers of this release are encouraged to review. We
undertake no obligation to update or revise any forward-looking
statement. Readers of this release are cautioned not to put
undue reliance on forward-looking statements.
CONTACT: DENNIS LONG, PRESIDENT & CEO
DENISE PORTMANN, PRESIDENT & CEO
DOUGLAS BIDDLE, EVP & CFO
360.537.4061
The Cereghino Group
IR CONTACT: 206-388-5785
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