ABERDEEN, Wash., Feb. 2, 2015 (GLOBE NEWSWIRE) -- Pacific Financial Corporation (OTCQB:PFLC), the holding company for Bank of the Pacific, today reported that 2014 net income increased 32% to $4.9 million, or $0.48 per share, from $3.7 million, or $0.37 per share, in 2013. Fourth quarter 2014 net income increased 42% to $1.1 million, or $0.11 per share, from $789,000, or $0.08 per share for the fourth quarter a year ago. All results for 2014 are unaudited.
Current year results reflect a reduction in gain on sale of residential real estate loans, due to a decline in refinancing activity, as compared to 2013. Prior year earnings were positively impacted by a credit to the provision for losses of $450,000 and gains on sale of investment securities of $405,000, partially offset by a one-time cost of $615,000 relating to the conversion of three branches purchased from Sterling Savings Bank.
"We delivered solid earnings in 2014 generated by a strong momentum in loan production, steady net interest margin and reduction in operating costs, especially OREO expenses," said Dennis A. Long, President and Chief Executive Officer, Pacific Financial Corporation. "Our diversified loan portfolio grew 12%, while non-interest bearing deposits increased 14% from a year ago. Our recently converted Vancouver full-service commercial banking center is already well above our breakeven hurdle, thanks to our dedicated employees who are effectively building business relationships in this vibrant market."
2014 Highlights (as of, or for the period ended December 31, 2014, except as noted):
-
Net interest income increased 14% to $27.0 million for 2014, compared to $23.8 million for 2013. Net interest income increased 9% to $6.8 million for the current quarter, compared to $6.3 million for the fourth quarter a year ago and declined slightly from $6.9 million for the third quarter 2014.
-
Net interest margin expanded 17 basis points to 4.17% for 2014, from 4.00% for 2013. Net interest margin was 4.01% for fourth quarter 2014, compared to 4.13% for the preceding quarter, and 3.98% for fourth quarter 2013.
-
Overall operating (noninterest) expenses declined 5% in 2014 from 2013 reflecting reductions in OREO expenses and the previously mentioned one-time conversion costs in 2013. Expenses were flat in the fourth quarter 2014 compared to both the preceding and year ago quarters, resulting in greater operating efficiencies.
-
Gross loans increased 12% to $563.1 million, compared to $504.7 million at December 31, 2013, and grew 2% from $552.1 million at September 30, 2014.
-
Noninterest-bearing deposits were $165.8 million at December 31, 2014, compared to $145.0 million at year end 2013, and $182.3 million at September 30, 2013.
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Nonperforming assets totaled $10.1 million, or 1.36% of total assets at December 31, 2014, compared to $10.0 million, or 1.42% of total assets at December 31, 2013, and $6.4 million, or 0.86% of total assets at September 30, 2014.
-
For the full year, net charge-offs were $306,000, compared to $549,000 for 2013. Net charge-offs declined substantially to $2,000 in the current quarter, from $447,000 for the fourth quarter 2013, and $160,000 for the third quarter 2014.
- The company declared an annual cash dividend of $0.21 per share, a 5% increase from 2013. Capital levels exceeded regulatory requirements for a well-capitalized financial institution, with a total risk-based capital ratio of 13.60% and a leverage ratio of 9.81% at December 31, 2014.
"We are excited to build on our financial performance for 2014 by announcing our entry into the Salem, Oregon market with a team of experienced and respected commercial lenders led by Dan Ebert," said Denise Portmann, President and Chief Executive Officer of Bank of the Pacific. "As the state capital, Salem is a home to a dynamic business community including a number of world class wineries located in the region. This new team will complement our continued efforts to broaden and grow new and existing customer relationships throughout all the markets we serve."
OPERATING RESULTS
PACIFIC FINANCIAL CORPORATION | |||||
CONSOLIDATED STATEMENTS OF INCOME | |||||
(Dollars in Thousands, Except per Share Data) | |||||
For the Quarter Ended | Sequential | Year over | |||
December 31, | September 30, | December 31, | Quarter | Year | |
2014 | 2014 | 2013 | % Change | % Change | |
INTEREST AND DIVIDEND INCOME | |||||
Loans | $ 6,805 | $ 6,894 | $ 6,243 | -1% | 9% |
Deposits in banks and federal funds sold | 26 | 24 | 29 | 8% | -10% |
Securities available for sale: | |||||
Taxable | 287 | 296 | 305 | -3% | -6% |
Tax-exempt | 166 | 164 | 211 | 1% | -21% |
Securities held to maturity: | |||||
Taxable | 2 | 2 | 2 | 0% | 0% |
Tax-exempt | 19 | 19 | 23 | 0% | -17% |
FHLB & PCBB dividends | 31 | 1 | 1 | 3000% | 3000% |
Total interest and dividend income | 7,336 | 7,400 | 6,814 | -1% | 8% |
INTEREST EXPENSE | |||||
Deposits: | |||||
Interest-bearing demand and savings | 166 | 134 | 153 | 24% | 8% |
Time | 252 | 269 | 295 | -6% | -15% |
Short-term borrowings | -- | 1 | 9 | -100% | -100% |
Long-term borrowings | 57 | 53 | 45 | 8% | 27% |
Junior subordinated debentures | 61 | 61 | 61 | 0% | 0% |
Total interest expense | 536 | 518 | 563 | 3% | -5% |
Net interest income | 6,800 | 6,882 | 6,251 | -1% | 9% |
LOAN LOSS PROVISION | 100 | 100 | -- | 0% | 0% |
Net interest income after loan loss provision | 6,700 | 6,782 | 6,251 | -1% | 7% |
NON-INTEREST INCOME | |||||
Service charges on deposit accounts | 450 | 450 | 450 | 0% | 0% |
Net loss on sale of other real estate owned | (28) | (85) | (3) | -67% | 833% |
Net gains from sales of loans | 970 | 1,120 | 865 | -13% | 12% |
Net gains on sales of securities available for sale | -- | 38 | 4 | -100% | -100% |
Net other-than-temporary impairment | -- | -- | 1 | 100% | -100% |
Earnings on bank owned life insurance | 126 | 127 | 110 | -1% | 15% |
Other operating income | 503 | 624 | 495 | -19% | 2% |
Total non-interest income | 2,021 | 2,274 | 1,922 | -11% | 5% |
NON-INTEREST EXPENSE | |||||
Salaries and employee benefits | 4,494 | 4,286 | 4,030 | 5% | 12% |
Occupancy | 512 | 483 | 501 | 6% | 2% |
Equipment | 274 | 261 | 241 | 5% | 14% |
Data processing | 509 | 534 | 478 | -5% | 6% |
Professional services | 108 | 230 | 217 | -53% | -50% |
Other real estate owned write-downs | -- | 1 | 310 | -100% | -100% |
Other real estate owned operating costs | 48 | 100 | 132 | -52% | -64% |
State taxes | 103 | 110 | 98 | -6% | 5% |
FDIC and state assessments | 110 | 119 | 140 | -8% | -21% |
Other non-interest expense | 969 | 1,009 | 975 | -4% | -1% |
Total non-interest expense | 7,127 | 7,133 | 7,122 | 0% | 0% |
INCOME BEFORE PROVISION FOR INCOME TAXES | 1,594 | 1,923 | 1,051 | -17% | 52% |
PROVISION FOR INCOME TAXES | 473 | 549 | 262 | -14% | 81% |
Effective Tax Rate | 29.67% | 28.55% | 24.93% | 4% | 19% |
NET INCOME APPLICABLE TO COMMON SHAREHOLDERS | $ 1,121 | $ 1,374 | $ 789 | -18% | 42% |
EARNINGS PER COMMON SHARE: | |||||
BASIC | $ 0.11 | $ 0.13 | $ 0.08 | ||
DILUTED | $ 0.11 | $ 0.13 | $ 0.08 | ||
WEIGHTED AVERAGE SHARES OUTSTANDING: | |||||
BASIC | 10,369,417 | 10,281,745 | 10,129,331 | ||
DILUTED | 10,459,808 | 10,379,166 | 10,219,443 |
PACIFIC FINANCIAL CORPORATION | |||
CONSOLIDATED STATEMENTS OF INCOME | |||
(Dollars in Thousands, Except per Share Data) | |||
For the Year Ended | One | ||
December 31, | December 31, | Year | |
2014 | 2013 | % Change | |
INTEREST AND DIVIDEND INCOME | |||
Loans | $ 26,937 | $ 24,401 | 10% |
Deposits in banks and federal funds sold | 89 | 114 | -22% |
Securities available for sale: | |||
Taxable | 1,261 | 769 | 64% |
Tax-exempt | 749 | 798 | -6% |
Securities held to maturity: | |||
Taxable | 8 | 10 | -20% |
Tax-exempt | 81 | 198 | -59% |
FHLB & PCBB dividends | 33 | 2 | 1550% |
Total interest and dividend income | 29,158 | 26,292 | 11% |
INTEREST EXPENSE | |||
Deposits: | |||
Interest-bearing demand and savings | 581 | 700 | -17% |
Time | 1,087 | 1,322 | -18% |
Short-term borrowings | 1 | 9 | -89% |
Long-term borrowings | 215 | 214 | 0% |
Secured borrowings | -- | -- | 0% |
Junior subordinated debentures | 241 | 247 | -2% |
Total interest expense | 2,125 | 2,492 | -15% |
Net interest income | 27,033 | 23,800 | 14% |
LOAN LOSS PROVISION (RECAPTURE) | 300 | (450) | -167% |
Net interest income after loan loss provision (recapture) | 26,733 | 24,250 | 10% |
NON-INTEREST INCOME | |||
Service charges on deposit accounts | 1,809 | 1,731 | 5% |
Net loss on sale of other real estate owned | (207) | 40 | -618% |
Net gains from sales of loans | 3,686 | 5,171 | -29% |
Net gains on sales of securities available for sale | 88 | 405 | -78% |
Net other-than-temporary impairment | (48) | (37) | 30% |
Earnings on bank owned life insurance | 505 | 452 | 12% |
Other operating income | 2,246 | 2,193 | 2% |
Total non-interest income | 8,079 | 9,955 | -19% |
NON-INTEREST EXPENSE | |||
Salaries and employee benefits | 17,118 | 17,013 | 1% |
Occupancy | 2,006 | 1,839 | 9% |
Equipment | 1,050 | 860 | 22% |
Data processing | 2,009 | 2,268 | -11% |
Professional services | 745 | 935 | -20% |
Other real estate owned write-downs | 67 | 946 | -93% |
Other real estate owned operating costs | 238 | 408 | -42% |
State taxes | 417 | 458 | -9% |
FDIC and state assessments | 491 | 535 | -8% |
Other non-interest expense | 4,014 | 4,240 | -5% |
Total non-interest expense | 28,155 | 29,502 | -5% |
INCOME BEFORE PROVISION FOR INCOME TAXES | 6,657 | 4,703 | 42% |
PROVISION FOR INCOME TAXES | 1,730 | 972 | 78% |
Effective Tax Rate | 25.99% | 20.67% | 26% |
NET INCOME APPLICABLE TO COMMON SHAREHOLDERS | $ 4,927 | $ 3,731 | 32% |
EARNINGS PER COMMON SHARE: | |||
BASIC | $ 0.48 | $ 0.37 | |
DILUTED | $ 0.48 | $ 0.37 | |
WEIGHTED AVERAGE SHARES OUTSTANDING: | |||
BASIC | 10,256,242 | 10,121,738 | |
DILUTED | 10,347,338 | 10,189,888 |
PACIFIC FINANCIAL CORPORATION | |||||
CONDENSED CONSOLIDATED BALANCE SHEETS | |||||
(Dollars in Thousands, except per share data) | |||||
Sequential | Year over | ||||
December 31, | September 30, | December 31, | Quarter | Year | |
2014 | 2014 | 2013 | % Change | % Change | |
ASSETS | |||||
Cash and cash equivalents: | |||||
Cash and due from banks | $ 14,782 | $ 15,284 | $ 12,214 | -3% | 21% |
Interest-bearing deposits in banks | 16,255 | 25,497 | 23,734 | -36% | -32% |
Total cash and cash equivalents | 31,037 | 40,781 | 35,948 | -24% | -14% |
Interest-bearing certificates of deposit (original maturities greater than 90 days) | 2,727 | 2,727 | 2,727 | 0% | 0% |
Federal Home Loan Bank stock, at cost | 2,896 | 2,926 | 3,013 | -1% | -4% |
Pacific Coast Bankers' Bank stock, at cost | 1,000 | 1,000 | -- | 0% | 100% |
Investment securities: | |||||
Investment securities available-for-sale, at fair market value | |||||
(amortized cost of $86,907, 89,326 and $97,536) | 87,440 | 89,328 | 96,144 | -2% | -9% |
Investment securities held-to-maturity, at amortized cost | |||||
(fair value of $1,852, $1,874 and $2,158) | 1,829 | 1,857 | 2,132 | -2% | -14% |
Total investment securities | 89,269 | 91,185 | 98,276 | -2% | -9% |
Loans held-for-sale | 5,786 | 8,161 | 7,765 | -29% | -25% |
Loans, net of deferred loan fees | 563,099 | 552,140 | 504,666 | 2% | 12% |
Allowance for loan losses | (8,353) | (8,255) | (8,359) | 1% | 0% |
Loans, net | 554,746 | 543,885 | 496,307 | 2% | 12% |
Premises and equipment, net of accumulated depreciation and amortization | 16,303 | 16,460 | 16,790 | -1% | -3% |
Other real estate owned and foreclosed assets | 999 | 1,210 | 2,771 | -17% | -64% |
Accrued interest receivable | 2,348 | 2,337 | 2,307 | 0% | 2% |
Cash surrender value of life insurance | 18,742 | 18,615 | 18,237 | 1% | 3% |
Goodwill | 12,168 | 12,168 | 12,168 | 0% | 0% |
Other intangible assets | 1,439 | 1,449 | 1,481 | -1% | -3% |
Other assets | 6,073 | 6,143 | 7,249 | -1% | -16% |
TOTAL ASSETS | $ 745,533 | $ 749,047 | $ 705,039 | 0% | 6% |
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||
LIABILITIES | |||||
Deposits: | |||||
Demand | $ 165,760 | $ 182,259 | $ 145,028 | -9% | 14% |
Interest-bearing demand and savings | 354,611 | 343,524 | 336,260 | 3% | 5% |
Time deposits | 118,683 | 118,221 | 126,059 | 0% | -6% |
Total deposits | 639,054 | 644,004 | 607,347 | -1% | 5% |
Accrued interest payable | 145 | 141 | 167 | 3% | -13% |
Short-term borrowings | -- | -- | -- | 0% | 0% |
Long-term borrowings | 11,453 | 11,491 | 10,000 | 0% | 15% |
Junior subordinated debentures | 13,403 | 13,403 | 13,403 | 0% | 0% |
Other liabilities | 8,844 | 6,751 | 6,985 | 31% | 27% |
Total liabilities | 672,899 | 675,790 | 637,902 | 0% | 5% |
COMMITMENTS AND CONTINGENCIES | |||||
SHAREHOLDERS' EQUITY | |||||
Preferred Stock, par value none | |||||
5,000,000 shares authorized, none outstanding | |||||
Common Stock, par value $1 | |||||
25,000,000 shares authorized, 10,371,460, 10,367,460 and 10,182,083 shares | |||||
issued and outstanding at 12/31/2014, 09/30/2014, and 12/31/2013, respectively | 10,371 | 10,367 | 10,182 | 0% | 2% |
Additional paid-in-capital | 42,991 | 42,940 | 41,817 | 0% | 3% |
Retained earnings | 19,256 | 20,312 | 16,507 | -5% | 17% |
Accumulated other comprehensive income/(loss) | 16 | (362) | (1,369) | -104% | -101% |
Total shareholders' equity | 72,634 | 73,257 | 67,137 | -1% | 8% |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 745,533 | $ 749,047 | $ 705,039 | 0% | 6% |
Net Interest Income
Net interest income for the quarter and twelve months ended December 31, 2014 increased from the quarter and twelve months ended December 31, 2013. This increase was primarily due to the growth in earning assets, along with changes in the balance sheet mix. Loan balances increased due to the production generated predominately in our Washington and Oregon markets. Investment securities and federal funds sold decreased as a proportion of the balance sheet, due to the strong loan demand during the current year. Funding costs have declined over the year due to the shift in mix toward non-interest bearing demand and lower-cost deposits, and continued historically low interest rates.
Net interest income for the current quarter decreased from the third quarter of 2014, primarily reflecting lower loan yields due to increased competition in our markets, despite higher loan balances. Interest expense was virtually unchanged between the quarters, 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, as renewing certificates of deposit are receiving rates that are similar to those granted at previous renewals.
INCOME STATEMENT OVERVIEW | |||||||
(Unaudited) | |||||||
(Dollars in Thousands, Except for Income per Share Data) | |||||||
For the Three Months Ended December 31, 2014 |
For the Three Months Ended September 30, 2014 |
$ Change |
% Change |
For the Three Months Ended December 31, 2013 |
$ Change |
% Change |
|
Interest and dividend income | $ 7,336 | $ 7,400 | $ (64) | -1% | $ 6,814 | $ 522 | 8% |
Interest expense | 536 | 518 | 18 | 3% | 563 | (27) | -5% |
Net interest income | 6,800 | 6,882 | (82) | -1% | 6,251 | 549 | 9% |
Loan loss provision | 100 | 100 | -- | 0% | -- | 100 | 100% |
Non-interest income | 2,021 | 2,274 | (253) | -11% | 1,922 | 99 | 5% |
Non-interest expense | 7,127 | 7,133 | (6) | 0% | 7,122 | 5 | 0% |
INCOME BEFORE PROVISION FOR INCOME TAXES | 1,594 | 1,923 | (329) | -17% | 1,051 | 543 | 52% |
PROVISION FOR INCOME TAXES | 473 | 549 | (76) | -14% | 262 | 211 | 81% |
NET INCOME | $ 1,121 | $ 1,374 | $ (253) | -18% | $ 789 | $ 332 | 42% |
INCOME PER COMMON SHARE: | |||||||
BASIC (1) | $ 0.11 | $ 0.13 | $ (0.02) | -15% | $ 0.08 | $ 0.03 | 38% |
DILUTED (2) | $ 0.11 | $ 0.13 | $ (0.02) | -15% | $ 0.08 | $ 0.03 | 38% |
Average common shares outstanding - basic (1) | 10,369,417 | 10,281,745 | 87,672 | 1% | 10,129,331 | 240,086 | 2% |
Average common shares outstanding - diluted (2) | 10,459,808 | 10,379,166 | 80,642 | 1% | 10,219,443 | 240,365 | 2% |
For the Twelve Months Ended December 31, 2014 |
For the Twelve Months Ended December 31, 2013 |
$ Change |
% Change |
||||
Interest and dividend income | $ 29,158 | 26,292 | 2,866 | 11% | |||
Interest expense | 2,125 | 2,492 | (367) | -15% | |||
Net interest income | 27,033 | 23,800 | 3,233 | 14% | |||
Loan loss provision | 300 | (450) | 750 | -167% | |||
Non-interest income | 8,079 | 9,955 | (1,876) | -19% | |||
Non-interest expense | 28,155 | 29,502 | (1,347) | -5% | |||
INCOME BEFORE PROVISION FOR INCOME TAXES | 6,657 | 4,703 | 1,954 | 42% | |||
PROVISION FOR INCOME TAXES | 1,730 | 972 | 758 | 78% | |||
NET INCOME | $ 4,927 | 3,731 | 1,196 | 32% | |||
INCOME PER COMMON SHARE: | |||||||
BASIC (1) | $ 0.48 | 0.37 | 0.11 | 30% | |||
DILUTED (2) | $ 0.48 | 0.37 | 0.11 | 30% | |||
Average common shares outstanding - basic (1) | 10,256,242 | 10,121,738 | 134,504 | 1% | |||
Average common shares outstanding - diluted (2) | 10,347,338 | 10,189,888 | 157,450 | 2% |
Noninterest Income
Noninterest income for fourth quarter 2014 fell compared to the preceding quarter, primarily due to seasonal declines in residential real estate loan production and annuity sales. Noninterest income was up compared to the year ago quarter primarily as a result of a $140,000 gain on sale of government guaranteed loans in the current quarter. In addition, fee income from annuity sales increased in the current quarter compared to the fourth quarter of 2013. "Our annuity products continue to be attractive to our customers", added Portmann. "Annuities provide a viable alternative investment for our customers, given the current low interest rate environment. By expanding the number of branch personnel who are licensed to offer annuity products, our customers now have access to these additional investment options at many of our local branches." Losses on sale of other real estate owned (OREO) were lower in the current period as compared to the prior quarter, reflecting a decline in such holdings. This is in contrast to an increase compared to fourth quarter in 2013, reflecting a more aggressive approach to liquidation in the current quarter in order to reduce the levels of foreclosed assets.
Noninterest income for 2014 was down from 2013, reflecting the declines in gains on sale of residential mortgage loans due to the reduction in refinancing activity beginning in the latter half of 2013, declines in gains on sale of securities and higher losses on sale of OREO due to a more aggressive approach to reducing these assets.
Noninterest income | |||||||
(Unaudited) | |||||||
(Dollars in Thousands) | |||||||
For The Three Months Ended | |||||||
December 31, 2014 |
September 30, 2014 |
$ Change |
% Change |
December 31, 2013 |
$ Change |
% Change |
|
Service charges on deposit accounts | $ 450 | $ 450 | $ -- | 0% | $ 450 | $ -- | 0% |
Net (loss) on sale of other real estate owned | (28) | (85) | 57 | -67% | (3) | (25) | 833% |
Net gains from sales of loans | 970 | 1,120 | (150) | -13% | 865 | 105 | 12% |
Net gains on sales of securities available for sale | -- | 38 | (38) | -100% | 4 | (4) | -100% |
Net other-than-temporary impairment | -- | -- | -- | 0% | 1 | (1) | -100% |
Earnings on bank owned life insurance | 126 | 127 | (1) | -1% | 110 | 16 | 15% |
Other operating income | |||||||
Fee income | 405 | 498 | (93) | -19% | 419 | (14) | -3% |
Annuity sales income | 81 | 111 | (30) | -27% | 71 | 10 | 14% |
Other non-interest income | 17 | 15 | 2 | 13% | 5 | 12 | 240% |
Total non-interest income | $ 2,021 | $ 2,274 | $ (253) | -11% | $ 1,922 | $ 99 | 5% |
For The Twelve Months Ended | |||||||
December 31, 2014 |
December 31, 2013 |
$ Change |
% Change |
||||
Service charges on deposit accounts | $ 1,809 | $ 1,731 | $ 78 | 5% | |||
Net gain (loss) on sale of other real estate owned | (207) | 40 | (247) | -618% | |||
Net gains from sales of loans | 3,686 | 5,171 | (1,485) | -29% | |||
Net gains on sales of securities available for sale | 88 | 405 | (317) | -78% | |||
Net other-than-temporary impairment | (48) | (37) | (11) | 30% | |||
Earnings on bank owned life insurance | 505 | 452 | 53 | 12% | |||
Other operating income | |||||||
Fee income | 1,709 | 1,811 | (102) | -6% | |||
Annuity sales income | 464 | 320 | 144 | 45% | |||
Other non-interest income | 73 | 62 | 11 | 18% | |||
Total non-interest income | $ 8,079 | $ 9,955 | $ (1,876) | -19% |
Noninterest Expense
Noninterest expense for fourth quarter 2014 was virtually unchanged as compared to third quarter 2014 and the year ago quarter. Increases in personnel expense related to the the addition of loan production personnel and branch staff for a new branch that opened in the fourth quarter of 2013 were partially offset by $471,000 savings generated from reduction in mortgage lending staff initiated in first quarter 2014 prompted by the decline in residential mortgage loan refinance activity. Decreases in OREO operating costs and reduction in professional services expenses associated with a change in external audit firms earlier in the year also contributed to a decline in expenses. Total costs associated with OREO and related third-party loan expenses decreased due to the decline in OREO balances and stabilization of collateral valuations.
Noninterest expense for 2014 was down as compared to 2013 for reasons noted above. Also, the Bank incurred one-time expenses of $615,000 related to the acquisition of three branches from Sterling Savings Bank in June 2013. In addition, OREO write-downs and expenses and professional services expense were down as compared to the prior period for reasons noted above.
Noninterest expense | |||||||
(Unaudited) | |||||||
(Dollars in Thousands) | |||||||
For The Three Months Ended | |||||||
December 31, 2014 |
September 30, 2014 |
$ Change |
% Change |
December 31, 2013 |
$ Change |
% Change |
|
Salaries and employee benefits | $ 4,494 | $ 4,286 | $ 208 | 5% | $ 4,030 | $ 464 | 12% |
Occupancy | 512 | 483 | 29 | 6% | 501 | 11 | 2% |
Equipment | 274 | 261 | 13 | 5% | 241 | 33 | 14% |
Data processing | 509 | 534 | (25) | -5% | 478 | 31 | 6% |
Professional services | 108 | 230 | (122) | -53% | 217 | (109) | -50% |
Other real estate owned write-downs | -- | 1 | (1) | -100% | 310 | (310) | -100% |
Other real estate owned operating costs | 48 | 100 | (52) | -52% | 132 | (84) | -64% |
State taxes | 103 | 110 | (7) | -6% | 98 | 5 | 5% |
FDIC and state assessments | 110 | 119 | (9) | -8% | 140 | (30) | -21% |
Other non-interest expense: | |||||||
Director fees | 79 | 80 | (1) | -1% | 60 | 19 | 32% |
Communication | 53 | 65 | (12) | -18% | 42 | 11 | 26% |
Advertising | 104 | 73 | 31 | 42% | 94 | 10 | 11% |
Professional liability insurance | 20 | 24 | (4) | -17% | 22 | (2) | -9% |
Amortization | 95 | 99 | (4) | -4% | 104 | (9) | -9% |
Other non-interest expense | 618 | 668 | (50) | -7% | 653 | (35) | -5% |
Total non-interest expense | $ 7,127 | $ 7,133 | $ (6) | 0% | $ 7,122 | $ 5 | 0% |
For The Twelve Months Ended | |||||||
December 31, 2014 |
December 31, 2013 |
$ Change |
% Change |
||||
Salaries and employee benefits | $ 17,118 | $ 17,013 | $ 105 | 1% | |||
Occupancy | 2,006 | 1,839 | 167 | 9% | |||
Equipment | 1,050 | 860 | 190 | 22% | |||
Data processing | 2,009 | 2,268 | (259) | -11% | |||
Professional services | 745 | 935 | (190) | -20% | |||
Other real estate owned write-downs | 67 | 946 | (879) | -93% | |||
Other real estate owned operating costs | 238 | 408 | (170) | -42% | |||
State taxes | 417 | 458 | (41) | -9% | |||
FDIC and state assessments | 491 | 535 | (44) | -8% | |||
Other non-interest expense: | |||||||
Director fees | 287 | 224 | 63 | 28% | |||
Communication | 209 | 172 | 37 | 22% | |||
Advertising | 331 | 316 | 15 | 5% | |||
Professional liability insurance | 85 | 90 | (5) | -6% | |||
Amortization | 385 | 415 | (30) | -7% | |||
Other non-interest expense | 2,717 | 3,023 | (306) | -10% | |||
Total non-interest expense | $ 28,155 | $ 29,502 | $ (1,347) | -5% |
Income Taxes
The Company recorded an income tax provision for the three and twelve months ended December 31, 2014 of $473,000 and $1.7 million, respectively. This compares to a provision for the three and twelve months ended December 31, 2013 of $262,000 and $972,000, respectively. The increase in the effective tax rate is primarily due to a decline in non-taxable income as a result of the growth in loans as a proportion of earning assets during 2014. The amount of the provision for each period was commensurate with the estimated tax liability associated with the net income earned during the period.
SUMMARY BALANCE SHEET OVERVIEW | |||||||
(Unaudited) | |||||||
(Dollars in Thousands) | |||||||
December | September | % | December | % | |||
31, 2014 | 30, 2014 | $ Change | Change | 31, 2013 | $ Change | Change | |
Assets: | |||||||
Cash and cash equivalents | $ 31,037 | $ 40,781 | $ (9,744) | -24% | $ 35,948 | $ (4,911) | -14% |
Interest-bearing certificates of deposit | 2,727 | 2,727 | -- | 0% | 2,727 | -- | 0% |
Federal Home Loan Bank stock, at cost | 2,896 | 2,926 | (30) | -1% | 3,013 | (117) | -4% |
Pacific Coast Bankers' Bank stock, at cost | 1,000 | 1,000 | -- | 0% | -- | 1,000 | 100% |
Investment securities | 89,269 | 91,185 | (1,916) | -2% | 98,276 | (9,007) | -9% |
Loans held-for-sale | 5,786 | 8,161 | (2,375) | -29% | 7,765 | (1,979) | -25% |
Gross loans, net of deferred fees | 563,099 | 552,140 | 10,959 | 2% | 504,666 | 58,433 | 12% |
Allowance for loan losses | (8,353) | (8,255) | (98) | 1% | (8,359) | 6 | 0% |
Net loans | 554,746 | 543,885 | 10,861 | 2% | 496,307 | 58,439 | 12% |
Other assets | 58,072 | 58,382 | (310) | -1% | 61,003 | (2,931) | -5% |
Total assets | $ 745,533 | $ 749,047 | $ (3,514) | 0% | $ 705,039 | $ 40,494 | 6% |
Liabilities and shareholders' equity | |||||||
Total deposits | $ 639,054 | $ 644,004 | $ (4,950) | -1% | $ 607,347 | $ 31,707 | 5% |
Accrued interest payable | 145 | 141 | 4 | 3% | 167 | (22) | -13% |
Borrowings | 24,856 | 24,894 | (38) | 0% | 23,403 | 1,453 | 6% |
Other liabilities | 8,844 | 6,751 | 2,093 | 31% | 6,985 | 1,859 | 27% |
Shareholders' equity | 72,634 | 73,257 | (623) | -1% | 67,137 | 5,497 | 8% |
Total liabilities and shareholders' equity | $ 745,533 | $ 749,047 | $ (3,514) | 0% | $ 705,039 | $ 40,494 | 6% |
Cash and Cash Equivalents and Investment Securities | ||||||||||
(Unaudited) | ||||||||||
(Dollars in Thousands) | ||||||||||
December 31, 2014 | % of Total | September 30, 2014 | % of Total |
$ Change |
% Change | December 31, 2013 | % of Total |
$ Change |
% Change | |
Cash and due from banks | $ 14,782 | 12% | $ 15,284 | 11% | $ (502) | -3% | $ 12,214 | 9% | $ 2,568 | 21% |
Cash equivalents: | ||||||||||
Interest-bearing deposits | 16,255 | 13% | 25,497 | 18% | (9,242) | -36% | 23,734 | 17% | (7,479) | -32% |
Interest-bearing certificates of deposit | 2,727 | 2% | 2,727 | 2% | -- | 0% | 2,727 | 2% | -- | 0% |
Total cash equivalents and certificate of deposits | 33,764 | 27% | 43,508 | 31% | (9,744) | -22% | 38,675 | 28% | (4,911) | -13% |
Investment securities: | ||||||||||
Collateralized mortgage obligations: agency issued | 38,767 | 31% | 40,039 | 30% | (1,272) | -3% | 38,791 | 28% | (24) | 0% |
Collateralized mortgage obligations: non-agency issued | 527 | 0% | 579 | 0% | (52) | -9% | 2,011 | 1% | (1,484) | -74% |
Mortgage-backed securities: agency issued | 12,322 | 10% | 12,630 | 9% | (308) | -2% | 13,548 | 10% | (1,226) | -9% |
U.S. Government and agency securities | 8,056 | 6% | 8,655 | 6% | (599) | -7% | 8,811 | 6% | (755) | -9% |
State and municipal securities | 29,597 | 23% | 29,282 | 21% | 315 | 1% | 34,133 | 24% | (4,536) | -13% |
Corporate bonds | -- | 0% | -- | 0% | -- | 0% | 982 | 1% | (982) | -100% |
FHLB Stock, at cost | 2,896 | 2% | 2,926 | 2% | (30) | -1% | 3,013 | 2% | (117) | -4% |
Pacific Coast Bankers' Bank stock, at cost | 1,000 | 1% | 1,000 | 1% | -- | 0% | -- | 0% | 1,000 | 100% |
Total investment securities | 93,165 | 73% | 95,111 | 69% | (1,946) | -2% | 101,289 | 72% | (8,124) | -8% |
Total cash equivalents and investment securities | $ 126,929 | 100% | $ 138,619 | 100% | $ (11,690) | -8% | $ 139,964 | 100% | $ (13,035) | -9% |
Total cash equivalents and investment securities as a % of total assets | 17% | 19% | 20% |
Investment securities | |||||||
(Unaudited) | |||||||
(Dollars in Thousands) | |||||||
For the Three Months Ended |
December 31, 2014 |
September 30, 2014 |
$ Change |
% Change |
December 31, 2013 |
$ Change |
% Change |
Balance beginning of period | $ 95,111 | $ 93,539 | $ 1,572 | 2% | $ 96,178 | $ (1,067) | -1% |
Principal purchases | 1,182 | 7,482 | (6,300) | -84% | 9,879 | (8,697) | -88% |
Proceeds from sales | -- | (3,927) | 3,927 | -100% | (595) | 595 | -100% |
Principal paydowns, maturities, and calls | (3,348) | (1,673) | (1,675) | 100% | (3,310) | (38) | 1% |
Gains on sales of securities | -- | 94 | (94) | -100% | 4 | (4) | -100% |
Losses on sales of securities | -- | (56) | 56 | -100% | -- | -- | 0% |
OTTI loss writedown | -- | -- | -- | 0% | -- | -- | 0% |
Change in unrealized gains (loss) before tax | 529 | (64) | 593 | -927% | (576) | 1,105 | -192% |
Amortization and accretion of discounts and premiums | (309) | (284) | (25) | 9% | (291) | (18) | 6% |
Total investment securities | $ 93,165 | $ 95,111 | $ (1,946) | -2% | $ 101,289 | $ (8,124) | -8% |
Liquidity remains strong based on the current levels of cash equivalents and investment securities. The expected modified duration (adjusted for calls, consensus pre-payment speeds and rate adjustment dates) of the investment portfolio was 4.1 years at December 31, 2014, 4.3 years at September 30, 2014 and 4.2 years at December 31, 2013.
"While we decreased our cash equivalents during the current quarter to fund loan growth and seasonal declines in demand deposits, we maintain a secured borrowing facility with the Federal Home Loan Bank of Seattle of $140.8 million, of which $11.4 million is currently outstanding. We also have unsecured lines of credit totaling $16.0 million with correspondent banks, all of which are currently available," said Douglas N. Biddle, Executive Vice President and Chief Financial Officer.
LOANS
Loans by category | ||||||||||
(Unaudited) | % of | % of | % of | |||||||
(Dollars in Thousands) | December 31, 2014 | Gross Loans | September, 30, 2014 | Gross Loans |
$ Change |
% Change | December 31, 2013 | Gross Loans |
$ Change |
% Change |
Commercial and agricultural | $ 120,517 | 21% | $ 112,873 | 20% | $ 7,644 | 7% | $ 104,111 | 21% | $ 16,406 | 16% |
Real estate: | ||||||||||
Construction and development | 26,711 | 5% | 25,419 | 5% | 1,292 | 5% | 29,096 | 6% | (2,385) | -8% |
Residential 1-4 family | 92,965 | 16% | 94,101 | 17% | (1,136) | -1% | 87,762 | 17% | 5,203 | 6% |
Multi-family | 18,541 | 3% | 20,554 | 4% | (2,013) | -10% | 17,520 | 3% | 1,021 | 6% |
Commercial real estate -- owner occupied | 125,632 | 23% | 122,090 | 22% | 3,542 | 3% | 105,594 | 21% | 20,038 | 19% |
Commercial real estate -- non owner occupied | 117,137 | 21% | 120,569 | 22% | (3,432) | -3% | 117,294 | 23% | (157) | 0% |
Farmland | 22,245 | 4% | 22,926 | 4% | (681) | -3% | 23,698 | 5% | (1,453) | -6% |
Consumer | 40,565 | 7% | 34,787 | 6% | 5,778 | 17% | 20,728 | 4% | 19,837 | 96% |
Gross loans | 564,313 | 100% | 553,319 | 100% | 10,994 | 2% | 505,803 | 100% | 58,510 | 12% |
Less: allowance for loan losses | (8,353) | (8,255) | (98) | (8,359) | 6 | |||||
Less: deferred fees | (1,214) | (1,179) | (35) | (1,137) | (77) | |||||
Loans, net | $ 554,746 | $ 543,885 | $ 10,861 | $ 496,307 | $ 58,439 |
Loan portfolio growth continues to be well diversified and generated predominately within our Washington and Oregon markets. This includes the sale of $3.6 million in purchased government-guaranteed commercial and commercial real estate loans during the quarter, which currently total $32.7 million. In addition, the loan portfolio contains $30.8 million in indirect consumer loans to individuals 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 upon 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) | December 31, 2014 | Percent of Total | September 30, 2014 | Percent of Total | $ Change | December 31, 2013 | Percent of Total | $ Change |
Interest-bearing demand and money market | $ 274,614 | 42% | $ 266,863 | 42% | $ 7,751 | $ 262,848 | 43% | $ 11,766 |
Savings | 79,997 | 13% | 76,661 | 12% | 3,336 | 73,412 | 12% | 6,585 |
Time deposits | 118,683 | 19% | 118,221 | 18% | 462 | 126,059 | 21% | (7,376) |
Total interest-bearing deposits | 473,294 | 74% | 461,745 | 72% | 11,549 | 462,319 | 76% | 10,975 |
Non-interest bearing demand | 165,760 | 26% | 182,259 | 28% | (16,499) | 145,028 | 24% | 20,732 |
Total deposits | $ 639,054 | 100% | $ 644,004 | 100% | $ (4,950) | $ 607,347 | 100% | $ 31,707 |
Total deposits were down at December 31, 2014, compared to previous quarter, but up compared to the same quarter a year ago. Non-interest bearing deposits declined in the current quarter due to seasonal outflows associated with decreased business activity in our local markets with economies focused on summer tourism. Recent success in acquiring business deposit relationships in conjunction with the growth in lending achieved over the past year has mitigated the impact of such seasonal factors. 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 fourth quarter 2014 from fourth quarter in 2013.
Total brokered deposits were $22.4 million at December 31, 2014, which included $2.3 million via reciprocal deposit arrangements. This compares to $22.6 million and $21.6 million at September 30, 2014 and December 31, 2013, respectively. The Company views 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, continue to satisfy the requirements to qualify as "well-capitalized" under regulatory guidelines. Capital ratios decreased slightly as compared to the prior quarter primarily due to asset growth and the declaration of a cash dividend of $2.2 million, or $0.21 per share, in fourth quarter 2014. Capital growth is provided primarily through earnings retention. Also, $1.2 million of additional capital was supplied in the prior quarter via the exercise at a price of $6.50 per share of warrants to purchase 185,000 shares of common stock originally issued in conjunction with a private capital raise conducted in 2009. In general, capital ratios declined from December 31, 2013 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 Annual Report on Form 10-K for the year ended December 31, 2013, as filed with the Securities and Exchange Commission. 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 December 31, 2014 and 2013, under guidance issued by the Federal Reserve. The Company expects to continue to rely on these junior subordinated debentures as part of its regulatory capital.
December 31, 2014 |
September 30, 2014 |
Change |
December 31, 2013 |
Change |
Regulatory Minimum to be "Well Capitalized" |
|
greater than or equal to | ||||||
Pacific Financial Corporation | ||||||
Actual amount | ||||||
Total risk-based capital ratio | 13.60% | 14.09% | (0.49) | 14.11% | (0.51) | 10% |
Tier 1 risk-based capital ratio | 12.35% | 12.83% | (0.48) | 12.85% | (0.50) | 6% |
Leverage ratio | 9.81% | 10.09% | (0.28) | 9.83% | (0.02) | 5% |
Tangible common equity ratio | 8.06% | 8.11% | (0.05) | 7.74% | 0.32 | n/a |
Bank of the Pacific | ||||||
Total risk-based capital ratio | 13.52% | 13.87% | (0.35) | 14.03% | (0.51) | 10% |
Tier 1 risk-based capital ratio | 12.27% | 12.61% | (0.34) | 12.78% | (0.51) | 6% |
Leverage ratio | 9.73% | 9.91% | (0.18) | 9.77% | (0.04) | 5% |
FINANCIAL PERFORMANCE OVERVIEW | |||||
(Unaudited) | |||||
(Dollars in Thousands, Except per Share Data) | |||||
For The Three Months Ended | |||||
December 31, 2014 |
September 30, 2014 |
Change |
December 31, 2013 |
Change |
|
Selective performance ratios | |||||
Return on average assets, annualized | 0.59% | 0.74% | (0.15) | 0.45% | 0.14 |
Return on average equity, annualized | 5.98% | 7.55% | (1.57) | 4.53% | 1.45 |
Efficiency ratio (1) | 80.80% | 77.91% | 2.89 | 87.14% | (6.34) |
Share and per share information | |||||
Average common shares outstanding - basic | 10,369,417 | 10,281,745 | 87,672 | 10,129,331 | 240,086 |
Average common shares outstanding - diluted | 10,459,808 | 10,379,166 | 80,642 | 10,219,443 | 240,365 |
Basic income per common share | 0.11 | 0.13 | (0.02) | 0.08 | 0.03 |
Diluted income per common share | 0.11 | 0.13 | (0.02) | 0.08 | 0.03 |
Book value per common share (2) | 7.00 | 7.07 | (0.07) | 6.60 | 0.40 |
Tangible book value per common share (3) | 5.69 | 5.75 | (0.06) | 5.26 | 0.43 |
For The Twelve Months Ended | |||||
December 31, 2014 |
December 31, 2013 |
Change |
|||
Selective performance ratios | |||||
Return on average assets, annualized | 0.68% | 0.55% | 0.13 | ||
Return on average equity, annualized | 6.92% | 5.48% | 1.44 | ||
Efficiency ratio (1) | 80.19% | 87.40% | (7.21) | ||
Share and per share information | |||||
Average common shares outstanding - basic | 10,256,242 | 10,121,738 | 134,504 | ||
Average common shares outstanding - diluted | 10,347,338 | 10,189,888 | 157,450 | ||
Basic income per common share | 0.48 | 0.37 | 0.11 | ||
Diluted income per common share | 0.48 | 0.37 | 0.11 | ||
(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 | |||||
December 31, 2014 |
September 30, 2014 |
Change |
December 31, 2013 |
Change |
|
Selective performance ratios | |||||
Yield on average gross loans (1) (2) | 4.84% | 4.95% | (0.11) | 4.97% | (0.13) |
Yield on average investment securities (1) | 2.00% | 2.02% | (0.02) | 2.00% | -- |
Cost of average interest bearing deposits | 0.35% | 0.34% | 0.01 | 0.39% | (0.04) |
Cost of average borrowings | 1.88% | 1.83% | 0.05 | 1.80% | 0.08 |
Cost of average total deposits and borrowings | 0.32% | 0.31% | 0.01 | 0.36% | (0.04) |
Cost of average interest-bearing liabilities | 0.43% | 0.42% | 0.01 | 0.46% | (0.03) |
Yield on average interest-earning assets | 4.32% | 4.44% | (0.12) | 4.33% | (0.01) |
Cost of average interest-bearing liabilities | 0.43% | 0.42% | 0.01 | 0.46% | (0.03) |
Net interest spread | 3.89% | 4.02% | (0.13) | 3.87% | 0.02 |
Net interest margin (1) | 4.01% | 4.13% | (0.12) | 3.98% | 0.03 |
For The Twelve Months Ended | |||||
December 31, 2014 |
December 31, 2013 |
Change |
|||
Selective performance ratios | |||||
Yield on average gross loans (1) (2) | 4.99% | 5.06% | (0.07) | ||
Yield on average investment securities (1) | 2.22% | 1.87% | 0.35 | ||
Cost of average interest bearing deposits | 0.36% | 0.45% | (0.09) | ||
Cost of average borrowings | 1.89% | 1.97% | (0.08) | ||
Cost of average total deposits and borrowings | 0.33% | 0.41% | (0.08) | ||
Cost of average interest-bearing liabilities | 0.43% | 0.52% | (0.09) | ||
Yield on average interest-earning assets | 4.49% | 4.39% | 0.10 | ||
Cost of average interest-bearing liabilities | 0.43% | 0.52% | (0.09) | ||
Net interest spread | 4.06% | 3.87% | 0.19 | ||
Net interest margin (1) | 4.17% | 4.00% | 0.17 | ||
(1) Tax-exempt income has been adjusted to a tax equivalent basis at a 34% rate. | |||||
(2) Includes loans held for sale |
Net Interest Margin
Net interest margin for the current quarter declined compared to third quarter 2014, primarily due to reductions in yields on investment securities and loans. Declines in yields on investment securities were primarily due to portfolio restructuring to reduce duration for interest rate risk management purposes. Loan yield declines primarily resulted from increased competition for high quality borrowing relationships in the marketplace. In addition, approximately $60,000 in interest income was reversed in fourth quarter 2014 due to the placement of two loan relationships totaling $4.3 million on non-accrual. As a result, loan yields and net interest margin were reduced by 5 and 4 basis points, respectively, for the quarter. Net interest margin improved when compared to fourth 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 year has supported the improvement in net interest margin as well. The improvement in yields on investment securities also enhanced net interest margin for the twelve months ending December 31, 2014 as compared to the same period in 2013. This was primarily the result of redeploying lower yielding cash-equivalents into higher-yielding federal government guaranteed mortgage-backed 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 | ||||||||
December 31, 2014 | September 30, 2014 | December 31, 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 Thousands) | |||||||||
ASSETS: | |||||||||
Interest bearing certificate of deposit | $ 2,727 | $ 11 | 1.60% | $ 2,727 | $ 11 | 1.60% | $ 2,298 | $ 9 | 1.55% |
Interest bearing deposits in banks | 26,735 | 15 | 0.22% | 23,928 | 13 | 0.22% | 34,108 | 20 | 0.23% |
Investments - taxable | 66,466 | 320 | 1.91% | 63,751 | 298 | 1.85% | 67,565 | 308 | 1.81% |
Investments - nontaxable | 28,427 | 280 | 3.91% | 27,646 | 278 | 3.99% | 33,047 | 355 | 4.26% |
Gross loans (1) | 554,886 | 6,787 | 4.85% | 549,280 | 6,871 | 4.96% | 494,136 | 6,227 | 5.00% |
Loans held for sale | 7,306 | 66 | 3.58% | 7,068 | 69 | 3.87% | 8,091 | 63 | 3.09% |
Total interest earning assets | 686,547 | 7,479 | 4.32% | 674,400 | 7,540 | 4.44% | 639,245 | 6,982 | 4.33% |
Cash and due from banks | 13,483 | 14,169 | 12,105 | ||||||
Bank premises and equipment (net) | 16,414 | 16,615 | 16,676 | ||||||
Other real estate owned | 1,063 | 940 | 3,861 | ||||||
Deferred fees | (1,172) | (1,113) | (1,114) | ||||||
Allowance for loan losses | (8,306) | (8,342) | (8,612) | ||||||
Other assets | 40,142 | 40,757 | 40,810 | ||||||
Total assets | $ 748,171 | $ 737,426 | $ 702,971 | ||||||
LIABILITIES AND SHAREHOLDERS' EQUITY: | |||||||||
Interest-bearing deposits | $ 351,653 | $ 166 | 0.19% | $ 343,204 | $ 134 | 0.15% | $ 329,218 | $ 153 | 0.18% |
Time deposits | 118,624 | 252 | 0.84% | 120,515 | 269 | 0.89% | 131,245 | 295 | 0.89% |
FHLB borrowings | 11,466 | 57 | 1.97% | 10,878 | 61 | 2.22% | 10,000 | 54 | 2.14% |
Short term borrowings | -- | -- | 0.00% | 587 | -- | 0.00% | -- | -- | 0.00% |
Junior subordinated debentures | 13,403 | 61 | 1.81% | 13,403 | 54 | 1.60% | 13,403 | 61 | 1.81% |
Total interest bearing liabilities | 495,146 | 536 | 0.43% | 488,587 | 518 | 0.42% | 483,866 | 563 | 0.46% |
Non-interest-bearing deposits | 172,002 | 170,560 | 145,092 | ||||||
Other liabilities | 6,655 | 6,055 | 4,962 | ||||||
Equity | 74,368 | 72,224 | 69,051 | ||||||
Total liabilities and shareholders' equity | $ 748,171 | $ 737,426 | $ 702,971 | ||||||
Net interest income (3) | $ 6,943 | $ 7,022 | $ 6,419 | ||||||
Net interest spread | 3.89% | 4.02% | 3.87% | ||||||
Average yield on investments | 2.00% | 2.02% | 2.00% | ||||||
Average yield on earning assets (2) (3) | 4.32% | 4.44% | 4.33% | ||||||
Interest expense to earning assets | 0.32% | 0.30% | 0.35% | ||||||
Net interest income to earning assets (2) (3) | 4.01% | 4.13% | 3.98% | ||||||
Reconciliation of Non-GAAP measure: | |||||||||
Tax Equivalent Net Interest Income | |||||||||
Net interest income | $ 6,800 | $ 6,882 | $ 6,251 | ||||||
Tax equivalent adjustment for municipal loan interest | 48 | 46 | 47 | ||||||
Tax equivalent adjustment for municipal bond interest | 95 | 94 | 121 | ||||||
Tax equivalent net interest income | $ 6,943 | $ 7,022 | $ 6,419 | ||||||
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 $8.7 million at 12/31/14, $4.8 million at 09/30/2014, and $7.2 million for 12/31/2013 are included in the average loan balances. | |||||||||
(2) Loan interest income includes loan fee income of $196,000, $152,000, and $151,000 for the three months ended 12/31/2014, 09/30/2014, and 12/31/2013, 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 $143,000, $140,000, and $168,000 for the three months ended December 31, 2014, September 30, 2014, and December 31, 2013, respectively. |
For the Three Months Ended | For the Three Months Ended | |||||
December 31, 2014 vs. September 30, 2014 | December 31, 2014 vs. December 31, 2013 | |||||
Increase (Decrease) Due To | Increase (Decrease) Due To | |||||
(Dollars in Thousands) | Net | Net | ||||
Volume | Rate | Change | Volume | Rate | Change | |
ASSETS: | ||||||
Interest bearing certificate of deposit | $ -- | $ -- | $ -- | $ 2 | $ -- | $ 2 |
Interest bearing deposits in banks | 2 | -- | 2 | (4) | (1) | (5) |
Investments - taxable | 13 | 9 | 22 | (5) | 17 | 12 |
Investments - nontaxable | 8 | (6) | 2 | (50) | (25) | (75) |
Gross loans | 70 | (154) | (84) | 766 | (206) | 560 |
Loans held for sale | 2 | (5) | (3) | (6) | 9 | 3 |
Total interest earning assets | $ 95 | $ (156) | $ (61) | $ 703 | $ (206) | $ 497 |
LIABILITIES AND SHAREHOLDERS' EQUITY: | ||||||
Interest-bearing deposits | $ 3 | $ 29 | $ 32 | $ 10 | $ 3 | $ 13 |
Time deposits | (4) | (13) | (17) | (28) | (15) | (43) |
FHLB borrowings | 3 | (7) | (4) | 8 | (5) | 3 |
Short-term borrowings | -- | -- | -- | -- | -- | -- |
Long-term borrowings | -- | 7 | 7 | -- | -- | -- |
Total interest bearing liabilities | 2 | 16 | 18 | (10) | (17) | (27) |
Net increase (decrease) in net interest income | $ 93 | $ (172) | $ (79) | $ 713 | $ (189) | $ 524 |
Average Interest Earning Balances: | For the Twelve Months Ended | |||||
December 31, 2014 | December 31, 2013 | |||||
Average Balance | Interest Income or Expense | Average Yields or Rates | Average Balance | Interest Income or Expense | Average Yields or Rates | |
(Dollars in Thousands) | ||||||
ASSETS: | ||||||
Interest bearing certificate of deposit | $ 2,727 | $ 42 | 1.54% | $ 2,309 | $ 29 | 1.26% |
Interest bearing deposits in banks | 20,326 | 47 | 0.23% | 36,540 | 85 | 0.23% |
Investments - taxable | 65,960 | 1,302 | 1.97% | 55,820 | 779 | 1.40% |
Investments - nontaxable | 30,094 | 1,258 | 4.18% | 33,428 | 1,508 | 4.51% |
Gross loans (1) | 536,971 | 26,871 | 5.00% | 477,356 | 24,303 | 5.09% |
Loans held for sale | 7,026 | 255 | 3.63% | 9,302 | 312 | 3.35% |
Total interest earning assets | 663,104 | 29,775 | 4.49% | 614,755 | 27,016 | 4.39% |
Cash and due from banks | 13,201 | 11,636 | ||||
Bank premises and equipment (net) | 16,633 | 15,831 | ||||
Other real estate owned | 1,658 | 4,030 | ||||
Deferred fees | (1,123) | (1,035) | ||||
Allowance for loan losses | (8,327) | (9,065) | ||||
Other assets | 40,681 | 40,894 | ||||
Total assets | $ 725,827 | $ 677,046 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY: | ||||||
Interest-bearing deposits | $ 344,084 | $ 581 | 0.17% | $ 316,184 | $ 700 | 0.22% |
Time deposits | 122,002 | 1,087 | 0.89% | 135,447 | 1,320 | 0.97% |
FHLB borrowings | 10,591 | 215 | 2.03% | 10,049 | 223 | 2.22% |
Short term borrowings | 150 | 1 | 0.67% | -- | -- | 0.00% |
Junior subordinated debentures | 13,403 | 241 | 1.80% | 13,403 | 247 | 1.84% |
Total interest bearing liabilities | 490,230 | 2,125 | 0.43% | 475,083 | 2,490 | 0.52% |
Non-interest-bearing deposits | 158,697 | 129,218 | ||||
Other liabilities | 5,712 | 4,688 | ||||
Equity | 71,188 | 68,057 | ||||
Total liabilities and shareholders' equity | $ 725,827 | $ 677,046 | ||||
Net interest income (3) | $ 27,650 | $ 24,526 | ||||
Net interest spread | 4.06% | 3.87% | ||||
Average yield on investments | 2.22% | 1.87% | ||||
Average yield on earning assets (2) (3) | 4.49% | 4.39% | ||||
Interest expense to earning assets | 0.33% | 0.42% | ||||
Net interest income to earning assets (2) (3) | 4.17% | 4.00% | ||||
Reconciliation of Non-GAAP measure: | ||||||
Tax Equivalent Net Interest Income | ||||||
Net interest income | $ 27,033 | $ 23,800 | ||||
Tax equivalent adjustment for municipal loan interest | 189 | 213 | ||||
Tax equivalent adjustment for municipal bond interest | 428 | 513 | ||||
Tax equivalent net interest income | $ 27,650 | $ 24,526 | ||||
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 $8.7 million at 12/31/14 and $7.2 million for 12/31/2013 are included in the average loan balances. | ||||||
(2) Loan interest income includes loan fee income of $679,000 and $547,000 for the twelve months ended 12/31/2014 and 12/31/2013, 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 $617,000 and $726,000 for the twelve months ended December 31, 2014 and December 31, 2013, respectively. |
For the Twelve Months Ended | |||
` | December 31, 2014 vs. December 31, 2013 | ||
Increase (Decrease) Due To | |||
(Dollars in Thousands) | Net | ||
Volume | Rate | Change | |
ASSETS: | |||
Interest bearing certificate of deposit | $ 5 | $ 8 | $ 13 |
Interest bearing deposits in banks | (37) | (1) | (38) |
Investments - taxable | 142 | 381 | 523 |
Investments - nontaxable | (150) | (100) | (250) |
Gross loans | 3,034 | (466) | 2,568 |
Loans held for sale | (76) | 19 | (57) |
Total interest earning assets | $ 2,918 | $ (159) | $ 2,759 |
LIABILITIES AND SHAREHOLDERS' EQUITY: | |||
Interest-bearing deposits | $ 61 | $ (180) | $ (119) |
Time deposits | (130) | (103) | (233) |
FHLB borrowings | 12 | (20) | (8) |
Short-term borrowings | -- | 1 | 1 |
Long-term borrowings | -- | (6) | (6) |
Total interest bearing liabilities | (57) | (308) | (365) |
Net increase (decrease) in net interest income | $ 2,975 | $ 149 | $ 3,124 |
SUMMARY AVERAGE BALANCE SHEETS | |||||||
(Unaudited) | |||||||
(Dollars in Thousands) | |||||||
Averages for the Three Months Ended | December | September | December | ||||
31, 2014 | 30, 2014 | $ Change | % Change | 31, 2013 | $ Change | % Change | |
Assets: | |||||||
Cash and due from banks | $ 13,483 | $ 14,169 | $ (686) | -5% | $ 12,105 | $ 1,378 | 11% |
Interest-bearing deposits in banks | 26,735 | 23,928 | 2,807 | 12% | 34,108 | (7,373) | -22% |
Interest bearing certificate of deposit | 2,727 | 2,727 | -- | 0% | 2,298 | 429 | 19% |
Investment securities | 94,893 | 91,397 | 3,496 | 4% | 100,612 | (5,719) | -6% |
Loans, net of deferred loan fees | 561,020 | 555,235 | 5,785 | 1% | 501,113 | 59,907 | 12% |
Allowance for loan losses | (8,306) | (8,342) | 36 | 0% | (8,612) | 306 | -4% |
Net loans | 552,714 | 546,893 | 5,821 | 1% | 492,501 | 60,213 | 12% |
Other assets | 57,619 | 58,312 | (693) | -1% | 61,347 | (3,728) | -6% |
Total assets | $ 748,171 | $ 737,426 | $ 10,745 | 1% | $ 702,971 | $ 45,200 | 6% |
Liabilities: | |||||||
Total deposits | $ 642,279 | $ 634,279 | $ 8,000 | 1% | $ 605,555 | $ 36,724 | 6% |
Borrowings | 24,869 | 24,868 | 1 | 0% | 23,403 | 1,466 | 6% |
Other liabilities | 6,655 | 6,055 | 600 | 10% | 4,962 | 1,693 | 34% |
Total liabilities | 673,803 | 665,202 | 8,601 | 1% | 633,920 | 39,883 | 6% |
Equity: | |||||||
Common equity | 74,368 | 72,224 | 2,144 | 3% | 69,051 | 5,317 | 8% |
Total equity | 74,368 | 72,224 | 2,144 | 3% | 69,051 | 5,317 | 8% |
Total liabilities and shareholders' equity | $ 748,171 | $ 737,426 | $ 10,745 | 1% | $ 702,971 | $ 45,200 | 6% |
Averages for the Twelve Months Ended | December | December | |||||
31, 2014 | 31, 2013 | $ Change | % Change | ||||
Assets: | |||||||
Cash and due from banks | $ 13,201 | $ 11,636 | $ 1,565 | 13% | |||
Interest-bearing deposits in banks | 20,326 | 36,540 | (16,214) | -44% | |||
Interest bearing certificate of deposit | 2,727 | 2,309 | 418 | 18% | |||
Investment securities | 96,054 | 89,248 | 6,806 | 8% | |||
Loans, net of deferred loan fees | 542,874 | 485,623 | 57,251 | 12% | |||
Allowance for loan losses | (8,327) | (9,065) | 738 | -8% | |||
Net loans | 534,547 | 476,558 | 57,989 | 12% | |||
Other assets | 58,972 | 60,755 | (1,783) | -3% | |||
Total assets | $ 725,827 | $ 677,046 | $ 48,781 | 7% | |||
Liabilities: | |||||||
Total deposits | $ 624,783 | $ 580,849 | $ 43,934 | 8% | |||
Borrowings | 24,144 | 23,452 | 692 | 3% | |||
Other liabilities | 5,712 | 4,688 | 1,024 | 22% | |||
Total liabilities | 654,639 | 608,989 | 45,650 | 7% | |||
Equity: | |||||||
Common equity | 71,188 | 68,057 | 3,131 | 5% | |||
Total equity | 71,188 | 68,057 | 3,131 | 5% | |||
Total liabilities and shareholders' equity | $ 725,827 | $ 677,046 | $ 48,781 | 7% |
ASSET QUALITY
At December 31, 2014, total adversely classified loans remained virtually unchanged in dollars and as a percentage of gross loans from the preceding quarter. During this period, $4.3 million in commercial real estate loans were placed on nonaccrual status. The collateral value supporting these loans is considered sufficient to mitigate any potential losses, for which specific reserves have already been established. One of these relationships, a $1.7 million loan secured by income-producing commercial real estate, is paid current as to principal and interest. Total loans on accruing status 30-89 days past due continue to remain below 1.00% of gross loans. We monitor delinquencies, defined as loans on accruing status 30-89 days past due, as an indicator of future adversely classified loans. In addition, one private label collateralized mortgage obligation security with a balance of $199,000 as of December 31, 2014 is adversely classified. This security is current as to its scheduled principal and interest payments.
Due to the loans placed on nonaccrual in the current quarter, total nonperforming loans were up as of December 31, 2014 as compared to September 30, 2014 and December 31, 2014. As a result, total nonperforming assets also increased in dollars and as a percentage of total assets, despite the decrease in OREO during the periods. Nonperforming loans consist primarily of commercial real estate loans.
Adversely classified loans and securities | |||||||
(Unaudited) | |||||||
(Dollars in Thousands) | |||||||
December 31, 2014 |
September 30, 2014 |
$ Change |
% Change |
December 31, 2013 |
$ Change |
% Change |
|
Rated substandard or worse, but not impaired | $ 7,368 | $ 11,020 | $ (3,652) | -33% | $ 2,842 | $ 4,526 | 159% |
Impaired | 11,311 | 7,429 | 3,882 | 52% | 9,922 | 1,389 | 14% |
Total adversely classified loans1 | $ 18,679 | $ 18,449 | $ 230 | 1% | $ 12,764 | $ 5,915 | 46% |
Total investment securities2 | $ 199 | $ 228 | $ (29) | -13% | $ 1,834 | $ (1,635) | -89% |
Gross loans (excluding deferred loan fees) | $ 564,313 | $ 553,319 | $ 10,994 | 2% | $ 505,803 | $ 58,510 | 12% |
Adversely classified loans to gross loans | 3.31% | 3.33% | -0.02% | 2.52% | 0.79% | ||
Allowance for loan losses | $ 8,353 | $ 8,255 | $ 98 | 1% | $ 8,359 | $ (6) | 0% |
Allowance for loan losses as a percentage of adversely classified loans | 44.72% | 44.74% | -0.02% | 65.49% | -20.77% | ||
Allowance for loan losses to total impaired loans | 73.85% | 111.12% | -37.27% | 84.25% | -10.40% | ||
Adversely classified loans and securities to total assets | 2.53% | 2.49% | 0.04% | 2% | 2.07% | 0.46% | 22% |
1Adversely classified loans are defined as loans having a well-defined weakness or weaknesses related to the borrower's financial capacity or to pledged collateral that may jeopardize the repayment of the debt. They are characterized by the possibility that the Bank may sustain some loss if the deficiencies giving rise to the substandard classification are not corrected. Note that any loans internally rated worse than substandard are included in the impaired loan totals. | |||||||
2Adversely classified investment securities consist of one private label collateralized mortgage obligation (CMO) as of 12/31/2014 and 09/30/2014 and four private label CMOs as of 12/31/2013. |
30-89 Days Past Due by type | ||||||||||
(Dollars in Thousands) | ||||||||||
December 31, 2014 | % of Category | September 30, 2014 | % of Category | $ Change | % Change | December 31, 2013 | % of Category | $ Change | % Change | |
Commercial and agricultural | $ -- | 0.0% | $ 7 | 0.2% | $ (7) | -100% | $ 14 | 1.0% | $ (14) | -100% |
Real estate: | ||||||||||
Construction and development | 18 | 2.1% | -- | 0.0% | 18 | 100% | -- | 0.0% | 18 | 100% |
Residential 1-4 family | 605 | 71.9% | 251 | 8.7% | 354 | 141% | 333 | 24.0% | 272 | 82% |
Multi-family | -- | 0.0% | -- | 0.0% | -- | 0% | -- | 0.0% | -- | 0% |
Commercial real estate --- owner occupied | -- | 0.0% | -- | 0.0% | -- | 0% | -- | 0.0% | -- | 0% |
Commercial real estate --- non owner occupied | -- | 0.0% | 2,612 | 91.0% | (2,612) | -100% | -- | 0.0% | -- | 0% |
Farmland | 46 | 5.5% | -- | 0.0% | 46 | 100% | 875 | 62.9% | (829) | -95% |
Total real estate | $ 669 | $ 2,863 | $ (2,194) | -77% | $ 1,208 | $ (539) | ||||
Consumer | 172 | 20.5% | $ 2 | 0.1% | 170 | 8500% | 168 | 12.1% | 4 | 2% |
Total loans 30-89 days past due, not in nonaccrual status | $ 841 | 100.0% | $ 2,872 | 100.0% | $ (2,031) | -71% | $ 1,390 | 100.0% | $ (549) | -39% |
Delinquent loans to total loans, not in nonaccrual status | 0.23% | 0.60% | 0.28% |
Non-performing assets | |||||||
(Unaudited) | |||||||
(Dollars in Thousands) | December 31, 2014 | September 30, 2014 | $ Change | % Change | December 31, 2013 | $ Change | % Change |
Loans on nonaccrual status | $ 8,716 | $ 4,811 | $ 3,905 | 81% | $ 7,243 | $ 1,473 | 20% |
Loans past due greater than 90 days but not on nonaccrual status | 409 | 409 | -- | 0% | -- | 409 | -- |
Total non-performing loans | 9,125 | 5,220 | 3,905 | 75% | 7,243 | 1,882 | 26% |
Other real estate owned and foreclosed assets | 999 | 1,210 | (211) | -17% | 2,771 | (1,772) | -64% |
Total nonperforming assets | $ 10,124 | $ 6,430 | $ 3,694 | 57% | $ 10,014 | $ 110 | 1% |
Percentage of nonperforming assets to total assets | 1.36% | 0.86% | 1.42% |
OREO decreased during fourth quarter 2014 and year-over-year, due to continued liquidation of these assets. OREO valuation adjustments continued to be minimal. At December 31, 2014, the OREO portfolio consisted of 4 properties, down from both third quarter 2014 and fourth quarter 2013. The largest balances in the OREO portfolio at the end of the quarter were attributable to commercial 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 | December 31, 2014 | % of Category | September 30, 2014 | % of Category | $ Change | % Change | December 31, 2013 | % of Category | $ Change | % Change | |
Other real estate owned, beginning of period | $ 1,210 | 121% | $ 991 | 82% | $ 219 | 22% | $ 4,334 | 156% | $ (3,124) | -72% | |
Transfers from outstanding loans | -- | 0% | 525 | 43% | (525) | -100% | 140 | 5% | (140) | -100% | |
Improvements and other additions | -- | 0% | -- | 0% | -- | 0% | -- | 0% | -- | 0% | |
Proceeds from sales | (183) | -18% | (219) | -18% | 36 | -16% | (1,415) | -51% | 1,232 | -87% | |
Net gain (loss) on sales | (28) | -3% | (86) | -7% | 58 | -67% | (3) | 0% | (25) | 833% | |
Impairment charges | -- | 0% | (1) | 0% | 1 | -100% | (285) | -10% | 285 | -100% | |
Total other real estate owned | $ 999 | 100% | $ 1,210 | 100% | $ (211) | -17% | $ 2,771 | 100% | $ (1,772) | -64% | |
For the Twelve Months Ended | December 31, 2014 | % of Category | December 31, 2013 | % of Category | $ Change | % Change | |||||
Other real estate owned, beginning of period | $ 2,771 | 277% | $ 4,678 | 169% | $ (1,907) | -41% | |||||
Transfers from outstanding loans | 842 | 84% | 1,731 | 62% | (889) | -51% | |||||
Improvements and other additions | -- | 0% | -- | 0% | -- | 0% | |||||
Proceeds from sales | (2,340) | -234% | (2,757) | -99% | 417 | -15% | |||||
Net gain (loss) on sales | (207) | -21% | 40 | 1% | (247) | -618% | |||||
Impairment charges | (67) | -6% | (921) | -33% | 854 | -93% | |||||
Total other real estate owned | $ 999 | 100% | $ 2,771 | 100% | $ (1,772) | -64% |
Other real estate owned and foreclosed assets by type | ||||||||||
(Unaudited) | ||||||||||
(Dollars in Thousands) | ||||||||||
December 31, 2014 | # of Properties | September 30, 2014 | # of Properties | $ Change | % Change | December 31, 2013 | # of Properties | $ Change | % Change | |
Construction, Land Dev & Other Land | $ 35 | 1 | $ 35 | 1 | $ -- | 0% | $ 121 | 4 | $ (86) | -71% |
1-4 Family Residential Properties | -- | -- | 86 | 2 | (86) | -100% | 788 | 5 | (788) | -100% |
Nonfarm Nonresidential Properties | 964 | 3 | 1,089 | 4 | (125) | -11% | 1,862 | 11 | (898) | -48% |
Total OREO by type | $ 999 | 4 | $ 1,210 | 7 | $ (211) | -17% | $ 2,771 | 20 | $ (1,772) | -64% |
ALLOWANCE FOR LOAN LOSSES
The allowance for loan losses continues to decline in relation to total loans in concert with the general trend of improvement in charge offs and delinquencies after incorporating loss potential of adversely classified loans. As such, loss factors used in estimates to establish reserve levels have declined commensurately. A provision was made to the allowance for loan losses in the current and prior quarter, corresponding to recent growth in the loan portfolio. No provision was made in fourth quarter 2013.
For the quarter ended December 31, 2014, total net loan charge-offs fell compared to the quarter ended September 30, 2014 and the quarter ended December 31, 2013. The charge-offs incurred in the fourth quarter 2014 were primarily centered in various residential real estate and consumer loans. As a result, the ratio of net loan charge-offs to average gross loans (annualized) for the current quarter was down compared to both the prior quarter and the same quarter one year ago.
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 | |||||||
(Dollars in Thousands) | |||||||
For the Three Months Ended | December 31, 2014 | September 30, 2014 |
$ Change |
% Change | December 31, 2013 |
$ Change |
% Change |
Gross loans outstanding at end of period | $ 564,313 | $ 553,319 | $ 10,994 | 2% | $ 505,803 | $ 58,510 | 12% |
Average loans outstanding, gross | $ 554,886 | $ 549,280 | $ 5,606 | 1% | $ 494,136 | $ 60,750 | 12% |
Allowance for loan losses, beginning of period | $ 8,255 | $ 8,315 | $ (60) | -1% | $ 8,806 | $ (551) | -6% |
Commercial | -- | -- | -- | 0% | (91) | 91 | -100% |
Commercial Real Estate | (10) | (127) | 117 | -92% | (7) | (3) | 43% |
Residential Real Estate | (24) | (61) | 37 | -61% | (358) | 334 | -93% |
Consumer | (20) | (12) | (8) | 67% | (9) | (11) | 122% |
Total charge-offs | (54) | (200) | 146 | -73% | (465) | 411 | -88% |
Commercial | 2 | 7 | (5) | -71% | 1 | 1 | 100% |
Commercial Real Estate | 44 | 29 | 15 | 52% | 6 | 38 | 633% |
Residential Real Estate | 5 | 4 | 1 | 25% | 10 | (5) | -50% |
Consumer | 1 | -- | 1 | 100% | 1 | -- | 0% |
Total recoveries | 52 | 40 | 12 | 30% | 18 | 34 | 189% |
Net charge-offs | (2) | (160) | 158 | -99% | (447) | 445 | -100% |
Provision charged to income | 100 | 100 | -- | 0% | -- | 100 | 100% |
Allowance for loan losses, end of period | $ 8,353 | $ 8,255 | $ 98 | 1% | $ 8,359 | $ (6) | 0% |
Ratio of net loans charged-off to average gross loans outstanding, annualized | 0.00% | 0.12% | -0.12% | -100% | 0.36% | -0.36% | -100% |
Ratio of allowance for loan losses to gross loans outstanding | 1.48% | 1.49% | -0.01% | -1% | 1.65% | -0.17% | -10% |
For the Twelve Months Ended | December 31, 2014 | December 31, 2013 |
$ Change |
% Change | |||
Gross loans outstanding at end of period | $ 564,313 | $ 505,803 | $ 58,510 | 12% | |||
Average loans outstanding, gross | $ 536,971 | $ 477,356 | $ 59,615 | 12% | |||
Allowance for loan losses, beginning of period | $ 8,359 | $ 9,358 | $ (999) | -11% | |||
Commercial | (26) | (131) | 105 | -80% | |||
Commercial Real Estate | (533) | (90) | (443) | 492% | |||
Residential Real Estate | (129) | (453) | 324 | -72% | |||
Consumer | (79) | (154) | 75 | -49% | |||
Total charge-offs | (767) | (828) | 61 | -7% | |||
Commercial | 11 | 36 | (25) | -69% | |||
Commercial Real Estate | 425 | 226 | 199 | 88% | |||
Residential Real Estate | 22 | 14 | 8 | 57% | |||
Consumer | 3 | 3 | -- | 0% | |||
Total recoveries | 461 | 279 | 182 | 65% | |||
Net charge-offs | (306) | (549) | 243 | -44% | |||
Provision charged to income | 300 | (450) | 750 | -167% | |||
Allowance for loan losses, end of period | $ 8,353 | $ 8,359 | $ (6) | 0% | |||
Ratio of net loans charged-off to average gross loans outstanding, annualized | 0.06% | 0.12% | -0.06% | -50% | |||
Ratio of allowance for loan losses to gross loans outstanding | 1.48% | 1.65% | -0.17% | -10% |
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 December 31, 2014, the Company had total assets of $746 million and operates seventeen branches in the communities of Grays Harbor, Pacific, Whatcom, Skagit, Clark 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 DuPont and Burlington in Washington and Salem, Oregon. Visit the Company's website at www.bankofthepacific.com. Member FDIC.
Cautions Concerning Forward-Looking Statements
This press release contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other laws, including all statements in this release that are not historical facts or that relate to future plans or events or projected results of Pacific Financial Corporation and its wholly-owned subsidiary, Bank of the Pacific. These forward-looking statements are subject to risks and uncertainties that could cause actual events or results to differ materially from those projected, anticipated or implied. 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 risks and 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.