UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
FORM 8-K
CURRENT REPORT
Pursuant to
SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
_______________________
Date of Report (Date of earliest event reported): April 28, 2010
PACIFIC FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
|
|
Washington |
|
000-29829 |
|
91-1815009 |
|
1101 S. Boone St.
Aberdeen, Washington 98520-5244
(360) 533-8870
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 7.01. Regulation FD Disclosure
Pacific Financial Corporation ("Pacific") is furnishing information in accordance with Regulation FD regarding its financial results for the three months ended March 31, 2010. This information shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 or incorporated by reference into any filing under the Securities Act of 1933, except as may be expressly set forth by specific reference in any such filing.
Pacific's net income for the three months ended March 31, 2010, was $634,000, an increase of $948,000, compared to a net loss of $314,000 for the three month period ended March 31, 2009. The increase was primarily related to an increase in net interest income and a decrease in provision for credit losses. Net interest margin increased to 3.85% for the three months ended March 31, 2010 compared to 3.80% for the same period of the prior year. Provision for credit losses was $800,000, down from $1,787,000 a year ago. The decrease is due to the improvement in asset quality as evidenced by a decrease in non-performing loans from $20,318,000 at March 31, 2009 compared to $14,357,000 at March 31, 2010.
Net interest income for the three months ended March 31, 2010, increased $234,000 to $5,702,000 compared to the same period of the prior year. The increase is primarily the result of improvement in funding costs which reflects a decrease in rates paid on certificates of deposits. The Company continues to roll off brokered deposits as they come due for maturity. During the three months ended March 31, 2010, $10 million in brokered deposits matured which contributed to a decrease in the cost of funds. Additionally, as non-performing loans decline the reversal of interest income from non-accrual loans also declines.
Non-interest income decreased $545,000 to $1,730,000 for the three months ended March 31, 2010, compared to the same period of the prior year, reflecting a reduction in income from loan sales due to a decrease in the volume of loans sold in the secondary market. The volume in 2009 was higher than historical amounts due to exceptionally low mortgage rates and government incentive programs. Non-interest expense decreased $540,000 to $6,082,000. The decreases are primarily related to decreases in salary and employee benefits costs and other real estate owned (“OREO”) write-downs. OREO write-downs for the three months ended March 31, 2010 totaled $148,000 compared to $783,000 in the same period of the prior year. The federal income tax benefit for the three months ended March 31, 2010, was $84,000, compared to $352,000 for the three months ended March 31, 2009.
Total assets decreased 3.3% to $646.2 million at March 31, 2010, compared to $668.6 million at December 31, 2009. The decrease is mostly attributable to planned decreases in certificates of deposits which were funded from interest bearing deposits and fed funds sold. Total loans, including loans held for sale, were $493.6 million at March 31, 2010, down slightly from $494.6 million at year-end 2009. The ratio of the allowance for credit losses to total loans outstanding was 2.44%, 2.30% and 1.64%, at March 31, 2010, December 31, 2009 and March 31, 2009, respectively.
Capital ratios continue to exceed regulatory requirements for well-capitalized institutions. Tier 1 leverage and total risk based capital ratios at March 31, 2010 for the Company’s subsidiary, Bank of the Pacific, were 9.31% and 13.82%, respectively, compared to 9.03% and 13.07% at December 31, 2009, respectively. Pacific's unaudited consolidated balance sheets at March 31, 2010 and December 31, 2009, and unaudited consolidated statements of operations and selected performance ratios for the three months ended March 31, 2010 and 2009, follow.
-2-
PACIFIC FINANCIAL CORPORATION
Condensed Consolidated Balance Sheets
March 31, 2010 and December 31, 2009
(Dollars in thousands) (Unaudited)
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March 31, 2010 |
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December 31, 2009 |
||||
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Assets |
|
|
|
|
||||
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Cash and due from banks |
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$ |
11,753 |
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$ |
12,836 |
||
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Interest bearing deposits in banks |
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30,904 |
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35,068 |
||||
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Federal funds sold |
|
-- |
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5,000 |
||||
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Investment securities available-for-sale (amortized cost of $44,271 and $54,981) |
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42,812 |
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53,677 |
||||
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Investment securities held-to-maturity (fair value of $6,922 and $7,594) |
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6,778 |
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7,449 |
||||
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Federal Home Loan Bank stock, at cost |
|
3,182 |
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3,182 |
||||
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Loans held for sale |
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9,196 |
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12,389 |
||||
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Loans |
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484,359 |
|
482,246 |
||||
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Allowance for credit losses |
|
11,827 |
|
11,092 |
||||
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Loans, net |
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472,532 |
|
471,154 |
||||
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|
|
|
|
|
||||
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Premises and equipment |
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15,730 |
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15,914 |
||||
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Other real estate owned |
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8,188 |
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6,665 |
||||
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Accrued interest receivable |
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2,627 |
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2,537 |
||||
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Cash surrender value of life insurance |
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16,338 |
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16,207 |
||||
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Goodwill |
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11,282 |
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11,282 |
||||
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Other intangible assets |
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1,409 |
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1,445 |
||||
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Other assets |
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13,497 |
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13,821 |
||||
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|
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|
|
||||
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Total assets |
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$ |
646,228 |
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$ |
668,626 |
||
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||||
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Liabilities and Shareholders' Equity |
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||||
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Deposits: |
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||||
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Demand, non-interest bearing |
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$ |
82,525 |
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$ |
86,046 |
||
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Savings and interest-bearing demand |
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230,530 |
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229,281 |
||||
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Time, interest-bearing |
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231,620 |
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252,368 |
||||
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Total deposits |
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544,675 |
|
567,695 |
||||
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|
|
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|
|
||||
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Accrued interest payable |
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1,123 |
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1,125 |
||||
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Secured borrowings |
|
965 |
|
977 |
||||
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Short-term borrowings |
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4,500 |
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4,500 |
||||
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Long-term borrowings |
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21,000 |
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21,000 |
||||
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Junior subordinated debentures |
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13,403 |
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13,403 |
||||
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Other liabilities |
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2,352 |
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2,277 |
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Total liabilities |
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588,018 |
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610,977 |
||||
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||||
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Shareholders' Equity |
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|
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Common Stock (par value $1); 25,000,000 shares authorized; 10,121,853 shares issued and outstanding at March 31, 2010 and December 31, 2009 |
|
10,122 |
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10,122 |
||||
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Additional paid-in capital |
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41,281 |
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41,270 |
||||
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Retained earnings |
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8,233 |
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7,599 |
||||
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Accumulated other comprehensive loss |
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(1,426 |
) |
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(1,342 |
) | ||
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Total shareholders' equity |
|
58,210 |
|
57,649 |
||||
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|
|
|
|
|
||||
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Total liabilities and shareholders' equity |
|
$ |
646,228 |
|
$ |
668,626 |
-3-
PACIFIC FINANCIAL CORPORATION
Condensed Consolidated Statements of Income
Three months ended March 31, 2010 and 2009
(Dollars in thousands, except per share data) (Unaudited)
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Three Months Ended March 31, |
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2010 |
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2009 |
||||
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Interest and dividend income |
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||||
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Loans |
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$ |
7,234 |
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$ |
7,523 |
||
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Investment securities and FHLB dividends |
|
659 |
|
755 |
||||
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Deposits with banks and federal funds sold |
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37 |
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6 |
||||
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Total interest and dividend income |
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7,930 |
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8,284 |
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||||
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Interest Expense |
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|
|
|
||||
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Deposits |
|
1,860 |
|
2,285 |
||||
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Other borrowings |
|
368 |
|
531 |
||||
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Total interest expense |
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2,228 |
|
2,816 |
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Net Interest Income |
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5,702 |
|
5,468 |
||||
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Provision for credit losses |
|
800 |
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1,787 |
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Net interest income after provision for credit losses |
|
4,902 |
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3,681 |
||||
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|
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|
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|
||||
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Non-interest Income |
|
|
|
|
||||
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Service charges on deposits |
|
360 |
|
417 |
||||
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Gain on sales of other real estate owned |
|
25 |
|
-- |
||||
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Gain on sales of loans |
|
744 |
|
1,195 |
||||
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Gain on sales of investments available-for-sale |
|
229 |
|
303 |
||||
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Earnings on bank owned life insurance |
|
131 |
|
123 |
||||
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Other operating income |
|
241 |
|
237 |
||||
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Total non-interest income |
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1,730 |
|
2,275 |
||||
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|
|
|
|
|
||||
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Non-interest Expense |
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|
|
|
||||
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Salaries and employee benefits |
|
3,237 |
|
3,460 |
||||
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Occupancy and equipment |
|
692 |
|
656 |
||||
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Other real estate owned write-downs |
|
148 |
|
783 |
||||
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Other real estate owned operating costs |
|
122 |
|
55 |
||||
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Professional services |
|
195 |
|
178 |
||||
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FDIC and State assessments |
|
368 |
|
179 |
||||
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Data processing |
|
314 |
|
247 |
||||
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Other |
|
1,006 |
|
1,064 |
||||
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Total non-interest expense |
|
6,082 |
|
6,622 |
||||
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|
|
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|
||||
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Income (loss) before income taxes |
|
550 |
|
(666 |
) | |||
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Provision (benefit) for income taxes |
|
(84 |
) |
|
(352 |
) | ||
|
Net Income (Loss) |
|
$ |
634 |
|
$ |
(314 |
) | |
|
|
|
|
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|
||||
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Earnings (loss) per common share: |
|
|
|
|
||||
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Basic |
|
$ |
0.06 |
|
$ |
(0.04 |
) | |
|
Diluted |
|
0.06 |
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(0.04 |
) | |||
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Weighted Average shares outstanding: |
|
|
|
|
||||
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Basic |
|
10,121,853 |
|
7,323,271 |
||||
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Diluted |
|
10,121,853 |
|
7,323,271 |
||||
-4-
PACIFIC FINANCIAL CORPORATION
Selected Performance Ratios
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Three months ended March 31, |
||||
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|
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2010 |
|
2009 |
||
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|
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|
||
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Net interest margin (1) |
|
3.85 |
% |
|
3.80 |
% |
|
Efficiency ratio (2) |
|
81.84 |
% |
|
85.52 |
% |
|
Return on average assets |
|
0.39 |
% |
|
(0.20 |
%) |
|
Return on average common equity |
|
4.40 |
% |
|
(2.49 |
%) |
|
|
|
As of Period End |
||||||
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|
|
March 31, 2010 |
|
December 31, 2009 |
||||
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Book value per common share |
|
$ |
5.75 |
|
$ |
5.70 |
||
|
Tangible book vale per common share (3) |
|
$ |
4.50 |
|
$ |
4.44 |
||
|
Tier 1 Leverage Ratio |
|
9.31 |
% |
|
9.03 |
% | ||
|
Tier 1 Risk Based Capital Ratio |
|
12.56 |
% |
|
11.81 |
% | ||
|
Total Risk Based Capital Ratio |
|
13.82 |
% |
|
13.07 |
% | ||
(1) Net interest income divided by average earnings assets.
(2) Non interest expense divided by the sum of net interest income and non interest income.
(3) Total shareholders’ equity less intangibles divided by shares outstanding.
|
SUMMARY OF NON-PERFORMING ASSETS (in thousands) |
|
March 31, 2010 |
|
December 31, 2009 |
|
March 31, 2009 |
||||||
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|
|
|
|
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|
||||||
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Accruing loans past due 90 days or more |
|
$ |
- - |
|
$ |
547 |
|
$ |
1,978 |
|||
|
Restructured loans |
|
- - |
|
- - |
|
- - |
||||||
|
Non-accrual loans |
|
14,357 |
|
15,647 |
|
18,340 |
||||||
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Total non-performing loans |
|
14,357 |
|
16,194 |
|
20,318 |
||||||
|
|
|
|
|
|
|
|
||||||
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Other real estate owned |
|
8,188 |
|
6,665 |
|
7,249 |
||||||
|
Total non-performing assets |
|
$ |
22,545 |
|
$ |
22,859 |
|
$ |
27,567 |
|||
|
|
|
|
|
|
|
|
||||||
|
Non-performing loans to total loans (4) |
|
2.96 |
% |
|
3.36 |
% |
|
4.14 |
% | |||
|
Non-performing assets to total assets |
|
3.49 |
% |
|
3.42 |
% |
|
4.21 |
% | |||
|
Allowance for loan losses to non-performing loans |
|
82.38 |
% |
|
68.49 |
% |
|
39.57 |
% | |||
|
Allowance for loan losses to total loans (4) |
|
2.44 |
% |
|
2.30 |
% |
|
1.64 |
% |
(4) Excludes loans held for sale.
-5-
|
Loan Composition (in thousands) |
|
March 31, 2010 |
|
December 31, 2009 |
||||
|
|
|
|
|
|
||||
|
Commercial and industrial |
|
$ |
94,144 |
|
$ |
93,125 |
||
|
Real estate: |
|
|
|
|
||||
|
Construction, land development and other land loans |
|
62,582 |
|
64,812 |
||||
|
Residential 1-4 family |
|
90,100 |
|
91,821 |
||||
|
Multi-family |
|
8,455 |
|
8,605 |
||||
|
Commercial real estate – owner occupied |
|
110,262 |
|
105,663 |
||||
|
Commercial real estate – non owner occupied |
|
98,017 |
|
99,521 |
||||
|
Farmland |
|
21,879 |
|
22,824 |
||||
|
Consumer |
|
8,932 |
|
9,145 |
||||
|
Less unearned income |
|
(816 |
) |
|
(881 |
) | ||
|
|
|
|
|
|
||||
|
Total Loans (5) |
|
$ |
493,555 |
|
$ |
494,635 |
(5) Includes loans held for sale.
|
Deposit Composition (in thousands) |
|
March 31, 2010 |
|
December 31, 2009 | ||
|
|
|
|
|
| ||
|
Non-interest bearing demand |
|
$ |
82,525 |
|
$ |
86,046 |
|
Interest bearing demand |
|
93,880 |
|
91,968 | ||
|
Money market deposits |
|
84,865 |
|
86,260 | ||
|
Savings deposits |
|
51,785 |
|
51,053 | ||
|
Time deposits |
|
231,620 |
|
252,368 | ||
|
|
|
|
|
| ||
|
Total deposits |
|
$ |
544,675 |
|
$ |
567,695 |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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PACIFIC FINANCIAL CORPORATION | |
|
|
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By: |
|
|
|
|
|
Denise Portmann |
-6-