Pacific Financial Corp Earns $2.7 Million, or $0.26 per Diluted Share, for First Quarter 2024, Declares Quarterly Cash Dividend of $0.14 per Share

Rhea-AI Summary

Pacific Financial (PFLC) reported net income of $2.7 million, or $0.26 per diluted share for Q1 2024, a decrease from the previous quarter but an improvement from the same quarter last year. The company declared a dividend of $0.14 per share. Despite a decline in net interest income, the net interest margin expanded, driven by higher loan yields. Loan growth outpaced deposit growth, with core deposits representing 88% of total deposits. Asset quality remained strong, and regulatory capital ratios exceeded requirements.

ABERDEEN, Wash., April 26, 2024 (GLOBE NEWSWIRE) -- Pacific Financial Corporation (OTCQX: PFLC), (“Pacific Financial”) or the (“Company”), the holding company for Bank of the Pacific (the “Bank”), reported net income of $2.7 million, or $0.26 per diluted share for the first quarter of 2024, compared to $2.9 million, or $0.28 per diluted share for the fourth quarter of 2023, and $4.1 million, or $0.39 per diluted share for the first quarter of 2023. All results are unaudited.   

The board of directors of Pacific Financial declared a quarterly cash dividend of $0.14 per share on April 24, 2024. The dividend will be payable on May 24, 2024 to shareholders of record on May 10, 2024.

“We are pleased with our first quarter results, which is a good start to the year; operating earnings were solid, loan growth outpaced deposit growth during the quarter, our net interest margin expanded, and asset quality remained strong,” said Denise Portmann, President and Chief Executive Officer. “Although net interest income declined quarter-over-quarter, primarily as a result of decreased interest earning deposit balances, our net interest margin remains strong and continued to expand as growth in earning asset yields outpaced increases in deposit cost of funds. This expansion in net interest margin was fueled by higher rates on loan production resulting in a loan yield of 5.97%, a 17 basis points improvement from the prior quarter, while cost of funds increased only 7 basis points to 0.90%, despite continued rate pressure.”

“Our lending team continues to successfully meet the credit needs of our customers and new clients while employing strong underwriting practices.   Loan origination volumes remained steady and net loans receivable increased by $8.9 million during the quarter.   While the possibility of a slowing economy and a continued higher interest rate environment still exist, we remain optimistic regarding the overall strength of our loan portfolio and the economic opportunities for growth in our markets,” said Portmann. “Our team continues to work diligently and we are focused on making progress on our strategic initiatives.”

First Quarter 2024 Financial Highlights:

• Return on average assets (“ROAA”) was 0.95%, compared to 1.02% for the fourth quarter 2023, and 1.33% for the first quarter 2023.
• Return on average equity (“ROAE”) was 9.32%, compared to 10.88% from the preceding quarter, and 15.63% from the first quarter a year earlier.
• Net interest income was $11.4 million, compared to $11.7 million for the fourth quarter of 2023, and $13.1 million for the first quarter 2023.
• Net interest margin (“NIM”) expanded 4 basis points to 4.38%, compared to 4.34% from the preceding quarter, and contracted 13 basis points from 4.51% for the first quarter a year ago.
• Provision for credit losses was $33,000 compared to $111,000 for the preceding quarter and $157,000 in the first quarter a year ago.
• Gross loans balances grew by $8.9 million, or 1%, to $694.2 million at March 31, 2024, compared to $685.3 million at December 31, 2023, and increased by $48.6 million, or 8%, from $645.6 million at March 31, 2023.
• Total deposits declined $13.5 million to $995.8 million, compared to $1.01 billion at December 31, 2023, and declined 10% from $1.11 billion at March 31, 2023. Core deposits represented 88% of total deposits, with non-interest bearing deposits representing 41% of total deposits at March 31, 2024.
• Coverage of short-term funds available to uninsured and uncollateralized deposits was 251% at March 31, 2024 compared to 243% at December 31, 2023. Uninsured or uncollateralized deposits were 22% of total deposits at March 31, 2024 and 23% at December 31, 2023.
• Asset quality remains solid with nonperforming assets to total assets at 0.13%, compared to nonperforming assets to total assets at 0.06% for the preceding quarter, and 0.08% at March 31, 2023.
• At March 31, 2024, Pacific Financial continued to exceed regulatory well-capitalized requirements with a leverage ratio of 11.6% and a total risk-based capital ratio of 17.6%.

Income Statement Review

Net interest income decreased $251,000 to $11.4 million for the first quarter of 2024, compared to $11.7 million for the fourth quarter of 2023, and decreased $1.7 million compared to $13.1 million for the first quarter a year ago. The decrease in net interest income compared to the preceding quarter and the year ago quarter reflects the increase in funding costs, with interest income remaining relatively flat reflecting lower interest earning deposit balances offset by increased loan interest income.

Net interest margin (NIM) expanded 4 basis points to 4.38% for the first quarter of 2024, compared to 4.34% for the fourth quarter of 2023 and contracted 13 basis points compared to 4.51% for the first quarter of 2023. During the current quarter compared to the preceding quarter increases in asset yields outpaced the growth in cost of funds. Yield on interest earning assets increased 10 basis points to 5.24% for the first quarter of 2024 compared to 5.14% for the prior quarter and 4.72% in the like quarter a year ago. These increases on interest earning assets resulted mainly from increased loan yields. 

Average loan yields increased 17 basis points to 5.97% during the current quarter, compared to 5.80% for the preceding quarter and increased 53 basis points from 5.44% for the first quarter 2023, as rates on new loan originations and variable rate loans have priced in a higher interest rate environment. The yield on Fed funds sold and interest-bearing bank deposits was 5.45% for the current quarter, compared to 5.42% for the preceding quarter, and 4.61% for the first quarter of 2023.

The Bank’s total cost of funds increased to 0.90% for the current quarter, compared to 0.83% for the preceding quarter, and 0.21% for the first quarter 2023. The increase in the costs of deposits was due to a change in deposit mix, as customers continued to look for yield by transferring balances from non-maturity deposits to higher rate certificates of deposit and increases in deposit rates, primarily money market and certificate of deposits rates.

Noninterest income declined 5% to $1.4 million for the current quarter, compared to $1.5 million for the linked quarter and increased 12% from $1.3 million a year earlier. The decrease compared to the linked quarter was primarily due to decreased debit card revenue related to lower transaction account volume for the current quarter which was partially offset by higher gain-on-sale of loans during the current quarter. The increase year over year was a result of increased gain-on-sale of loans as well as no loss on securities compared to the like quarter a year ago.

Mortgage banking loan production increased during the current quarter compared to the prior quarter and the like quarter a year ago, this was despite ongoing market challenges, including the higher interest rate environment and limited inventory levels in the Bank’s markets. This higher production resulted in higher gains-on-sale of loans at $152,000 for the current quarter compared to $95,000 for the prior quarter and $111,000 for the like quarter a year ago.

Noninterest expenses were $9.5 million for both the first quarter of 2024 and the prior quarter, increasing $0.3 million compared to $9.2 million for the first quarter of 2023.   Within the total, for the current quarter compared to the prior quarter, salaries and employee benefits increased $207,000 reflecting higher staffing levels from the implementation of strategic initiatives including the opening of a new commercial banking center of seven seasoned commercial bankers in December 2023. The increase in non-interest expense for the current quarter compared to the same quarter a year ago also reflects increases in salaries and employee benefits as well as occupancy expenses, and marketing expenses partially offset by decreases in state and local taxes, FDIC insurance premiums and professional services. The company’s efficiency ratio was 74.21% for the first quarter of 2024, compared to 72.22% in the preceding quarter and 63.91% in the same quarter a year ago.  

Income Tax Expense: Federal and Oregon state income tax expense was $630,000 for the current quarter, and $608,000 for the preceding quarter, resulting in effective tax rates of 19.2% and 17.1%, respectively. These income tax expenses reflect the benefits of tax exempt income and credits on tax-exempt loans and investments, affordable housing tax credit financing, and investments in bank owned life insurance.

Balance Sheet Review

Total Assets declined by 1% to $1.13 billion at March 31, 2024, compared to $1.15 billion at December 31, 2023, and decreased 9% from $1.24 billion at March 31, 2023.

Liquidity metrics continued to remain strong with total liquidity sources, both on and off balance sheet sources, at $556.7 million as of March 31, 2024. The Bank has established collateralized credit lines with borrowing capacity from the Federal Home Loan Bank of Des Moines (FHLB) and from the Federal Reserve Bank of San Francisco, as well as $60.0 million in unsecured borrowing lines from various correspondent banks. There was no balance outstanding on any of these facilities at quarter-end.

The following table summarize the Bank’s available liquidity:

Liquidity
(Unaudited)
				Mar 31, 2024		% of Deposits			Dec 31, 2023			% of Deposits			$ Change			% Change		Mar 31, 2023		% of Deposits			$ Change			% Change
				(Dollars in thousands)
Cash and cash equivalents			$	80,052		8%		$	95,781			9%		$	(15,729)			-16%	$	237,704		21%		$	(157,652)			-66%
Unencumbered AFS Securities				139,144		14%			140,049			14%			(905)			-1%		116,886		11%			22,258			19%
Secured lines of Credit (FHLB, FRB)				337,553		34%			327,264			32%			10,289			3%		318,179		29%			19,374			6%
	Total short-term funds available		$	556,749		56%		$	563,094			55%		$	(6,345)			-1%	$	672,769		61%		$	(116,020)			-17%
									Mar 31, 2024			Dec 31, 2023			Mar 31, 2023
Short-term funds available to uninsured/uncollateralized deposits									251%			243%			259%
Uninsured/uncollateralized deposits to total deposits									22%			23%			23%
Gross loans to deposits ratio									69%			67%			57%

Investment Securities decreased 2% to $288.4 million at March 31, 2024, compared to $293.6 million at December 31, 2023, and increased 1% from $285.9 million at March 31, 2023. During the quarter, new purchases totaled $5.0 million at an average yield of 4.8%, with payments, maturities, and fair value changes of $10.2 million. The average adjusted duration of the investment securities portfolio was 4.3 at March 31, 2024.  

Gross loans balances increased $8.9 million, or 1%, to $694.2 million at March 31, 2024, compared to $685.3 million at December 31, 2023. Year-over-year loan growth was 8%, or $48.6 million, with loan growth occurring in most categories. The largest year-over-year increases were in construction and development, residential 1-4 family and multi-family which increased $17.1 million, $14.4 million and $13.5 million, respectively. In addition, commercial real estate both owner and non-owner occupied increased during the same time period, while commercial and consumer loans both decreased.

The Company manages new loan origination volume and the portfolio using concentration limits that establish maximum exposure levels by certain industry segments, loan product types, geography and single borrower limits. The loan pipeline continues to be supported by sustained business development activity of its commercial lending teams. In addition, the loan portfolio continues to be well-diversified and is originated predominantly within the Company’s Western Washington and Oregon markets.

Credit Quality: Non-performing assets remain minimal although increasing to $1.5 million, or 0.13% of total assets at March 31, 2024, compared to $664,000, or 0.06% at December 31, 2023, and $961,000, or 0.08% at March 31, 2023. The increase was primarily due to a single well secured farmland loan transferring to non-accrual status during the quarter.

Allowance for Credit Losses (“ACL”) for loans was $8.6 million, or 1.24% of gross loans at March 31, 2024, and at December 31, 2023, compared to $8.2 million at March 31, 2023. The total provision for credit losses, which includes a provision for credit losses on loans as well as a provision for credit losses for unfunded loan commitments, was $33,000 in the first quarter of 2024, compared to $111,000 in the fourth quarter of 2023 and a provision of $157,000 for the first quarter of 2023. The provision during the current quarter primarily reflected net loan growth which was partially offset by an improved 12 month forecast for national unemployment used in the allowance forecast model. Minimal charge-offs during the quarter and ongoing strong loan quality metrics during the quarter in large part mitigated additional reserves associated with the loan growth.   Net charge offs for the current quarter totaled $33,000, compared to net recoveries of $21,000 for the preceding quarter and net recoveries of $1,000 for the first quarter a year ago.

Total Deposits were $995.8 million at March 31, 2024, compared to $1.01 billion at December 31, 2023 and $1.11 billion at March 31, 2023. During the current quarter, the deposit mix continued to change with some customers transferring a portion of their excess deposit funds into higher yield certificate of deposits. The decline in deposits from a year ago was also primarily due to interest rate sensitive clients shifting a portion of their non-operating deposit balances to higher yielding investments.

Certificate of deposit balances increased $13.8 million from the linked quarter and $49.4 million from the same quarter a year ago and represent 12%, 10%, and 6%, of total deposits, at March 31, 2024, December 31, 2023, and March 31, 2023, respectively. Non-interest-bearing account balances decreased 1% to $404.5 million at March 31, 2024, compared to $409.3 million at December 31, 2023 and decreased 16% compared to $480.5 million at March 31, 2023. At 41%, non-interest bearing demand deposits continues to represent a high percentage of total deposits. Additionally, we continue to benefit from a strong core deposit base, with core deposits representing 88% of total deposits at quarter end.

Shareholder’s Equity remained flat at $114.7 million at March 31, 2024, compared to December 31, 2023, and increased $5.8 million compared to $108.9 million at March 31, 2023. Net unrealized losses on available-for-sale securities increased during the quarter and was $21.5 million at March 31, 2024 compared to $20.8 million at December 31, 2023, and $20.5 million at March 31, 2023. This increase in net unrealized losses reflects the increases in longer-term market interest rates during the quarter. Also impacting shareholder’s equity was the repurchase of $670,000 or 62,317 shares under our current stock repurchase program during the quarter and $1.07 million or 100,817 shares since the inception of the current program.

Book value per common share was $11.10 at March 31, 2024, compared to $11.04 at December 31, 2023, and $10.45 at March 31, 2023. Regulatory capital ratios of both the Company and the Bank continue to exceed the well-capitalized regulatory thresholds, with the company’s leverage ratio at 11.6% and total risk-based capital ratio at 17.6% as of March 31, 2024.

Financial Performance Overview
(Unaudited)
		For the Three Months Ended
		Mar 31, 2024			Dec 31, 2023			Change			Mar 31, 2023			Change
Performance Ratios
Return on average assets, annualized		0.95%			1.02%			(0.07)			1.33%			(0.38)
Return on average equity, annualized		9.32%			10.88%			(1.56)			15.63%			(6.31)
Efficiency ratio (1)		74.21%			72.22%			1.99			63.91%			10.30
(1) Non-interest expense divided by net interest income plus noninterest income.

Balance Sheet Overview
(Unaudited)
			Mar 31, 2024			Dec 31, 2023			$ Change			% Change			Mar 31, 2023			$ Change			% Change
Assets:			(Dollars in thousands, except per share data)
	Cash on hand and in banks	$	15,597		$	16,716		$	(1,119)			-7%		$	16,593		$	(996)			-6%
	Interest bearing deposits		75,705			91,355			(15,650)			-17%			235,958			(160,253)			-68%
	Investment securities		288,439			293,579			(5,140)			-2%			285,925			2,514			1%
	Loans held-for-sale		-			1,103			(1,103)			-100%			249			(249)			-100%
	Loans, net of deferred fees		693,461			684,554			8,907			1%			644,901			48,560			8%
	Allowance for loan losses		(8,580)			(8,530)			(50)			1%			(8,231)			(349)			4%
	Net loans		684,881			676,024			8,857			1%			636,670			48,211			8%
	Federal Home Loan Bank and Pacific Coast Bankers' Bank stock, at cost		1,689			1,783			(94)			-5%			2,567			(878)			-34%
	Other assets		68,275			68,339			(64)			0%			65,572			2,703			4%
	Total assets	$	1,134,586		$	1,148,899		$	(14,313)			-1%		$	1,243,534		$	(108,948)			-9%
Liabilities and Shareholders' Equity:
	Total deposits	$	995,756		$	1,009,292		$	(13,536)			-1%		$	1,110,368		$	(114,612)			-10%
	Borrowings		13,403			13,403			-			0%			13,403			-			0%
	Accrued interest payable and other liabilities		10,702			11,513			(811)			-7%			10,848			(146)			-1%
	Shareholders' equity		114,725			114,691			34			0%			108,915			5,810			5%
	Total liabilities and shareholders' equity	$	1,134,586		$	1,148,899		$	(14,313)			-1%		$	1,243,534		$	(108,948)			-9%
Common Shares Outstanding			10,335,557			10,388,724			(53,167)			-1%			10,424,294			(88,737)			-1%
Book value per common share (1)		$	11.10		$	11.04		$	0.06			1%		$	10.45		$	0.65			6%
Tangible book value per common share (2)		$	9.80		$	9.75		$	0.05			1%		$	9.16		$	0.64			7%
(1) Book value per common share is calculated as the total common shareholders' equity divided by the period ending number of common stock shares outstanding.
(2) Tangible book value per common share is calculated as the total common shareholders' equity less total intangible assets and liabilities, divided by the period ending number of common stock shares outstanding.

Income Statement Overview
(Unaudited)
			For the Three Months Ended,
			Mar 31, 2024			Dec 31, 2023			$ Change			% Change			Mar 31, 2023			$ Change			% Change
			(Dollars in thousands, except per share data)
Interest and dividend income		$	13,634		$	13,813		$	(179)			-1%		$	13,690		$	(56)			0%
Interest expense			2,233			2,161			72			3%			593			1,640			277%
	Net interest income		11,401			11,652			(251)			-2%			13,097			(1,696)			-13%
Provision for credit losses			33			111			(78)			-70%			157			(124)			-79%
Noninterest income			1,444			1,528			(84)			-5%			1,287			157			12%
Noninterest expense			9,532			9,519			13			0%			9,187			345			4%
Income before income taxes			3,280			3,550			(270)			-8%			5,040			(1,760)			-35%
Income tax expense			630			608			22			4%			930			(300)			-32%
	Net Income	$	2,650		$	2,942		$	(292)			-10%		$	4,110		$	(1,460)			-36%
Average common shares outstanding - basic			10,350,830			10,411,812			(60,982)			-1%			10,418,292			(67,462)			-1%
Average common shares outstanding - diluted			10,363,460			10,420,337			(56,877)			-1%			10,432,245			(68,785)			-1%
Income per common share
	Basic	$	0.26		$	0.28		$	(0.02)			-7%		$	0.39		$	(0.13)			-33%
	Diluted	$	0.26		$	0.28		$	(0.02)			-7%		$	0.39		$	(0.13)			-33%
Effective tax rate			19.2%			17.1%			2.1%						18.5%			0.7%

Noninterest Income
(Unaudited)
			For the Three Months Ended,
			Mar 31, 2024		Dec 31, 2023		$ Change			% Change			Mar 31, 2023			$ Change			% Change
			(Dollars in thousands)
Service charges on deposits		$	475	$	478	$	(3)			-1%		$	473		$	2			0%
Gain on sale of loans, net			152		95		57			60%			111			41			37%
Gain on sale of securities available for sale, net			-		-		-			0%			(154)			154			0%
Earnings on bank owned life insurance			180		176		4			2%			164			16			10%
Other noninterest income
	Fee income		626		764		(138)			-18%			705			(79)			-11%
	Other		11		15		(4)			-27%			(12)			23			-192%
Total noninterest income		$	1,444	$	1,528	$	(84)			-5%		$	1,287		$	157			12%

Noninterest Expense
(Unaudited)
			For the Three Months Ended,
			Mar 31, 2024		Dec 31, 2023		$ Change			% Change			Mar 31, 2023		$ Change			% Change
			(Dollars in thousands)
Salaries and employee benefits		$	5,994	$	5,787	$	207			4%	%	$	5,785	$	209			4%
Occupancy			641		679		(38)			-6	%		531		110			21%
Equipment			284		301		(17)			-6	%		287		(3)			-1%
Data processing			950		971		(21)			-2	%		951		(1)			0%
Professional services			210		238		(28)			-12	%		241		(31)			-13%
State and local taxes			150		187		(37)			-20	%		178		(28)			-16%
FDIC and State assessments			134		144		(10)			-7	%		154		(20)			-13%
Other noninterest expense:
	Director fees		88		82		6			7%	%		71		17			24%
	Communication		67		73		(6)			-8	%		59		8			14%
	Advertising		104		114		(10)			-9	%		60		44			73%
	Professional liability insurance		72		79		(7)			-9	%		67		5			7%
	Amortization		45		43		2			5%	%		44		1			2%
	Other		793		821		(28)			-3	%		759		34			4%
Total noninterest expense		$	9,532	$	9,519	$	13			0%	%	$	9,187	$	345			4%

Investment Securities
(Unaudited)
				Mar 31, 2024			% of Total			Dec 31, 2023			% of Total			$ Change			% Change			Mar 31, 2023			% of Total			$ Change			% Change
				(Dollars in thousands)
Investment securities:
	Collateralized mortgage obligations		$	129,213			45%		$	126,949			43%		$	2,264			2%		$	122,992			43%		$	6,221			5%
	Mortgage backed securities			37,753			13%			38,103			13%			(350)			-1%			32,294			11%			5,459			17%
	U.S. Government and agency securities			77,826			27%			83,748			29%			(5,922)			-7%			84,814			30%			(6,988)			-8%
	Municipal securities			43,647			15%			44,779			15%			(1,132)			-3%			44,827			16%			(1,180)			-3%
	Corporate debt securities			-			0%			-			0%			-			0%			998			0%			(998)			-100%
		Total	$	288,439			100%		$	293,579			100%		$	(5,140)			-2%		$	285,925			100%		$	2,514			1%
	Held to maturity securities		$	49,132			17%		$	55,454			19%		$	(6,322)			-11%		$	58,595			20%		$	(9,463)			-16%
	Available for sale securities		$	239,307			83%		$	238,125			81%		$	1,182			0%		$	227,330			80%		$	11,977			5%
	Government & Agency securities		$	244,762			85%		$	248,768			85%		$	(4,006)			-2%		$	240,061			84%		$	4,701			2%
	AAA, AA, A rated securities		$	43,008			15%		$	43,687			15%		$	(679)			-2%		$	44,614			16%		$	(1,606)			-4%
	Non-rated securities		$	669			0%		$	1,124			0%		$	(455)			-40%		$	1,250			0%		$	(581)			-46%
	AFS Unrealized Gain (Loss)		$	(21,464)			-7%		$	(20,808)			-7%		$	(656)			0%		$	(20,518)			-7%		$	(946)			0%

Loans by Category
(Unaudited)
				Mar 31, 2024			% of Gross Loans			Dec 31, 2023			% of Gross Loans			$ Change			% Change			Mar 31, 2023			% of Gross Loans			$ Change			% Change
	Commercial:			(Dollars in thousands)
		Commercial and agricultural	$	71,212			10	%	$	75,322			11	%	$	(4,110	)		-5	%	$	75,279			12	%	$	(4,067	)		-5	%
		PPP		108			0	%		122			0	%		(14	)		-11	%		405			0	%		(297	)		-73	%
	Real estate:
	Construction and development			51,978			7	%		48,720			7	%		3,258			7	%		34,918			5	%		17,060			49	%
	Residential 1-4 family			99,808			14	%		96,301			14	%		3,507			4	%		85,380			13	%		14,428			17	%
	Multi-family			54,430			8	%		51,025			7	%		3,405			7	%		40,882			6	%		13,548			33	%
	Commercial real estate -- owner occupied			167,631			24	%		164,443			24	%		3,188			2	%		160,534			25	%		7,097			4	%
	Commercial real estate -- non owner occupied			157,322			23	%		155,280			23	%		2,042			1	%		151,923			24	%		5,399			4	%
	Farmland			26,752			4	%		27,273			4	%		(521	)		-2	%		26,451			4	%		301			1	%
	Consumer			64,988			10	%		66,863			10	%		(1,875	)		-3	%		69,867			11	%		(4,879	)		-7	%
		Gross Loans		694,229			100	%		685,349			100	%		8,880			1	%		645,639			100	%		48,590			8	%
		Less: allowance for loan losses		(8,580	)					(8,530	)					(50	)					(8,231	)					(349	)
		Less: deferred fees		(768	)					(795	)					27						(738	)					(30	)
		Net loans	$	684,881					$	676,024					$	8,857					$	636,670					$	48,211
Loan Concentration
(Unaudited)
				Mar 31, 2024			% of Risk Based Capital			Dec 31, 2023			% of Risk Based Capital			Change			Mar 31, 2023			% of Risk Based Capital			Change
	Commercial:			(Dollars in thousands)
		Commercial and agricultural	$	71,212			51	%	$	75,322			54	%		-3	%	$	75,279			57	%		-6	%
		PPP		108			0	%		122			0	%		0	%		405			0	%		0	%
	Real estate:
	Construction and development			51,978			37	%		48,720			35	%		2	%		34,918			26	%		11	%
	Residential 1-4 family			99,808			72	%		96,301			70	%		2	%		85,380			64	%		8	%
	Multi-family			54,430			39	%		51,025			37	%		2	%		40,882			31	%		8	%
	Commercial real estate -- owner occupied			167,631			120	%		164,443			119	%		1	%		160,534			121	%		-1	%
	Commercial real estate -- non owner occupied			157,322			113	%		155,280			112	%		1	%		151,923			115	%		-2	%
	Farmland			26,752			19	%		27,273			20	%		-1	%		26,451			20	%		-1	%
	Consumer			64,988			47	%		66,863			48	%		-1	%		69,867			53	%		-6	%
		Gross Loans	$	694,229					$	685,349								$	645,639
	Regulatory Commercial Real Estate		$	261,155			188	%	$	252,493			182	%		6	%	$	225,163			170	%		18	%
	Total Risk Based Capital*		$	139,255					$	138,449								$	132,579
	*Bank of the Pacific
The following table presents the Commercial real estate – non owner occupied loan balances, including loans in the process of construction and development, by collateral type:
Non-Owner Occupied Commercial Real Estate Composition*
(Unaudited)
				Mar 31, 2024			% of Total
	Multifamily		$	61,085			27	%
	Retail			36,192			16	%
	Hospitality			32,468			14	%
	Office			23,730			10	%
	Mini Storage			23,438			10	%
	Mixed Use			22,204			10	%
	Industrial			13,348			6	%
	Warehouse			7,483			3	%
	Special Purpose			7,058			3	%
	Other			3,259			0	%
		Total	$	230,265
	*Includes loans in the process of construction and development

Deposits by Category
(Unaudited)
		Mar 31, 2024		% of Total			Dec 31, 2023		% of Total			$ Change			% Change			Mar 31, 2023		% of Total			$ Change			% Change
		(Dollars in thousands)
Interest-bearing demand	$	177,735		17	%	$	183,436		18	%	$	(5,701	)		-3	%	$	215,853		20	%	$	(38,118	)		-18	%
Money market		169,095		17	%		179,344		17	%		(10,249	)		-6	%		183,066		16	%		(13,971	)		-8	%
Savings		129,796		13	%		136,408		14	%		(6,612	)		-5	%		165,694		15	%		(35,898	)		-22	%
Time deposits (CDs)		114,644		12	%		100,832		10	%		13,812			14	%		65,231		6	%		49,413			76	%
Total interest-bearing deposits		591,270		59	%		600,020		59	%		(8,750	)		-1	%		629,844		57	%		(38,574	)		-6	%
Non-interest bearing demand		404,486		41	%		409,272		41	%		(4,786	)		-1	%		480,524		43	%		(76,038	)		-16	%
Total deposits	$	995,756		100	%	$	1,009,292		100	%	$	(13,536	)		-1	%	$	1,110,368		100	%	$	(114,612	)		-10	%
Insured Deposits	$	645,784		65	%	$	647,330		64	%	$	(1,546	)		0	%	$	700,960		64	%	$	(55,176	)		-8	%
Collaterialized Deposits		127,733		13	%		129,895		13	%		(2,162	)		-2	%		149,856		13	%		(22,123	)		-15	%
Uninsured Deposits		222,239		22	%		232,067		23	%		(9,828	)		-4	%		259,552		23	%		(37,313	)		-14	%
Total Deposits	$	995,756		100	%	$	1,009,292		100	%	$	(13,536	)		-1	%	$	1,110,368		100	%	$	(114,612	)		-10	%
Consumer Deposits	$	470,442		47	%	$	470,425		46	%	$	17			0	%	$	502,430		45	%	$	(31,988	)		-6	%
Business Deposits		387,917		39	%		398,977		40	%		(11,060	)		-3	%		447,778		40	%		(59,861	)		-13	%
Public Deposits		137,397		14	%		139,890		14	%		(2,493	)		-2	%		160,160		15	%		(22,763	)		-14	%
Total Deposits	$	995,756		100	%	$	1,009,292		100	%	$	(13,536	)		-1	%	$	1,110,368		100	%	$	(114,612	)		-10	%

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

Capital Measures
(unaudited)
	Mar 31, 2024			Dec 31, 2023			Change			Mar 31, 2023			Change			Well Capitalized Under Prompt Correction Action Regulations
Pacific Financial Corporation
Total risk-based capital ratio	17.6	%		17.7	%		(0.1	)		17.5	%		0.1			N/A
Tier 1 risk-based capital ratio	16.5	%		16.5	%		-			16.3	%		0.2			N/A
Common equity tier 1 ratio	14.8	%		14.9	%		(0.1	)		14.6	%		0.2			N/A
Leverage ratio	11.6	%		11.3	%		0.3			9.9	%		1.7			N/A
Tangible common equity ratio	9.0	%		8.9	%		0.1			7.8	%		1.2			N/A
Bank of the Pacific
Total risk-based capital ratio	17.6	%		17.6	%		-			17.4	%		0.2			10.5	%
Tier 1 risk-based capital ratio	16.4	%		16.4	%		-			16.2	%		0.2			8.5	%
Common equity tier 1 ratio	16.4	%		16.4	%		-			16.2	%		0.2			7.0	%
Leverage ratio	11.5	%		11.2	%		0.3			9.8	%		1.7			7.5	%

The following tables set forth information regarding average balances of interest-earning assets and interest-bearing liabilities and the resultant yields or cost, and the net interest margin on a tax equivalent basis. Loans held for sale and non-accrual loans are included in total loans. 

Net Interest Margin
(Unaudited)
(Annualized, tax-equivalent basis)
			For the Three Months Ended,
			Mar 31, 2024			Dec 31, 2023			$ Change			% Change			Mar 31, 2023			$ Change			% Change
Average Balances			(Dollars in thousands)
Gross loans		$	688,918		$	675,622		$	13,296			2	%	$	643,851		$	45,067			7	%
Loans held for sale		$	595		$	709		$	(114	)		-16	%	$	584		$	11			2	%
Investment securities		$	292,375		$	289,245		$	3,130			1	%	$	287,714		$	4,661			2	%
Federal funds sold & interest bearing deposits in banks		$	68,873		$	105,177		$	(36,304	)		-35	%	$	251,118		$	(182,245	)		-73	%
Total interest-earning assets		$	1,050,761		$	1,070,753		$	(19,992	)		-2	%	$	1,183,267		$	(132,506	)		-11	%
Non-interest bearing demand deposits		$	395,004		$	419,994		$	(24,990	)		-6	%	$	483,135		$	(88,131	)		-18	%
Interest bearing deposits		$	590,410		$	593,464		$	(3,054	)		-1	%	$	643,972		$	(53,562	)		-8	%
Total Deposits		$	985,414		$	1,013,458		$	(28,044	)		-3	%	$	1,127,107		$	(141,693	)		-13	%
Borrowings		$	13,403		$	13,403		$	-			0	%	$	13,403		$	-			0	%
Total interest-bearing liabilities		$	603,813		$	606,867		$	(3,054	)		-1	%	$	657,375		$	(53,562	)		-8	%
Total Equity		$	114,309		$	107,251		$	7,058			7	%	$	106,612		$	7,697			7	%
			For the Three Months Ended,
			Mar 31, 2024			Dec 31, 2023			Change			Mar 31, 2023			Change
Yield on average gross loans (1)			5.97	%		5.80	%		0.17			5.44	%		0.53
Yield on average investment securities (1)			3.45	%		3.48	%		(0.03	)		3.20	%		0.25
Yield on Fed funds sold & interest bearing deposits in banks			5.45	%		5.42	%		0.03			4.61	%		0.84
Cost of average interest bearing deposits			1.36	%		1.28	%		0.08			0.24	%		1.12
Cost of average borrowings			7.26	%		7.31	%		(0.05	)		6.45	%		0.81
Cost of average total deposits and borrowings			0.90	%		0.83	%		0.07			0.21	%		0.69
Yield on average interest-earning assets			5.24	%		5.14	%		0.10			4.72	%		0.52
Cost of average interest-bearing liabilities			1.49	%		1.41	%		0.08			0.37	%		1.12
Net interest spread			3.75	%		3.73	%		0.02			4.35	%		(0.60	)
Net interest margin (1)			4.38	%		4.34	%		0.04			4.51	%		(0.13	)
(1) Tax-exempt income has been adjusted to a tax equivalent basis at a rate of 21%.

Credit Quality
(Unaudited)
		Mar 31, 2024			Dec 31, 2023			$ Change			% Change			Mar 31, 2023			$ Change			% Change
Risk rating:		(Dollars in thousands)
Pass	$	684,779		$	674,993		$	9,786			1	%	$	635,187		$	49,592			8	%
Special Mention		4,771			4,669			102			2	%		4,736			35			1	%
Substandard		4,679			5,687			(1,008	)		-18	%		5,716			(1,037	)		-18	%
Gross Loans	$	694,229		$	685,349		$	8,880			1	%	$	645,639		$	48,590			8	%
Classified loans1 to gross loans		0.67	%		0.83	%								0.89	%
ACL as a percentage of classified loans1		183.37	%		149.94	%								144.00	%
Delinquent loans 30-90 days, not in nonaccrual status, to gross loans		0.10	%		0.08	%								0.03	%
¹Classified loans include loans rated substandard or worse and 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.

Nonperforming Assets
(Unaudited)
		Mar 31, 2024			Dec 31, 2023			$ Change			% Change			Mar 31, 2023			$ Change			% Change
		(Dollars in thousands)
Total nonaccrual loans, beginning of three month period	$	664		$	1,219		$	(555	)		-46	%	$	869		$	(205	)		-24	%
Transfer to performing loans		-			(478	)		478			-100	%		(21	)		21			-100	%
Addition of nonaccrual loans		1,089			-			1,089			100	%		241			848			352	%
Moved to other assets owned		-			-			-			0	%		-			-			0	%
Principal payments, net		(227	)		(77	)		(150	)		195	%		(128	)		(99	)		77	%
Charge-offs, net		-			-			-			0	%		-			-			0	%
Total nonaccrual loans, end of three month period	$	1,526		$	664		$	862			130	%	$	961		$	565			59	%
Other real estate owned and foreclosed assets		-			-			-			0	%		-			-			0	%
Total nonperforming assets	$	1,526		$	664		$	862			130	%	$	961		$	565			59	%
Accruing loans past due 90 days or more	$	-		$	-		$	-			0	%	$	-		$	-			0	%
Percentage of nonperforming assets to total assets		0.13	%		0.06	%								0.08	%
Nonperforming loans to total loans		0.22	%		0.10	%								0.15	%

Allowance for Credit Losses
(Unaudited)
		For the Three Months Ended,
		Mar 31, 2024			Dec 31, 2023			$ Change			% Change			Mar 31, 2023			$ Change			% Change
Loans:		(Dollars in thousands)
Gross loans outstanding at end of period	$	694,229		$	685,349		$	8,880			1	%	$	645,639		$	48,590			8	%
Average loans outstanding, gross	$	688,918		$	675,622		$	13,296			2	%	$	643,851		$	45,067			7	%
Allowance for credit losses, beginning of period	$	8,530		$	8,347		$	183			2	%	$	8,236		$	294			4	%
Impact of CECL Adoption (ASC 326)		-			-			-			0	%		(157	)		157			-100	%
Commercial		(3	)		-			(3	)		-100	%		-			(3	)		-100	%
Commercial Real Estate		-			-			-			0	%		-			-			0	%
Residential Real Estate		(2	)		-			(2	)		-100	%		-			(2	)		-100	%
Consumer		(30	)		(20	)		(10	)		50	%		(39	)		9			-23	%
Total charge-offs		(35	)		(20	)		(15	)		75	%		(39	)		4			-10	%
Commercial		-			40			(40	)		-100	%		27			(27	)		-100	%
Commercial Real Estate		-			-			-			0	%		-			-			0	%
Residential Real Estate		-			-			-			0	%		-			-			0	%
Consumer		2			1			1			100	%		13			(11	)		-85	%
Total recoveries		2			41			(39	)		-95	%		40			(38	)		-95	%
Net recoveries/(charge-offs)		(33	)		21			(54	)		-257	%		1			(34	)		-3400	%
Provision (benefit) to income		83			162			(79	)		-49	%		151			(68	)		-45	%
Allowance for credit losses, end of period	$	8,580		$	8,530		$	50			1	%	$	8,231		$	349			4	%
Ratio of net loans charged-off to average
gross loans outstanding, annualized		0.02	%		-0.01	%		0.03	%					0.00	%		0.02	%
Ratio of allowance for credit losses to
gross loans outstanding		1.24	%		1.24	%		0.00	%					1.27	%		-0.03	%
Unfunded Loan Commitments:
Allowance for credit losses, beginning of period	$	698		$	749		$	(51	)		-7	%	$	203		$	495			244	%
Impact of CECL Adoption (ASC 326)		-			-			-			0	%		609			(609	)		-100	%
Provision (benefit) to income		(50	)		(51	)		1			-2	%		5			(55	)		-1100	%
Allowance for credit losses, end of period	$	648		$	698		$	(50	)		-7	%	$	817		$	(169	)		-21	%

ABOUT PACIFIC FINANCIAL CORPORATION

Pacific Financial Corporation of Aberdeen, Washington, is the bank holding company for Bank of the Pacific, a state chartered and federally insured commercial bank. Bank of the Pacific offers banking products and services to small-to-medium sized businesses and professionals in western Washington and Oregon. At March 31, 2024, the Company had total assets of $1.13 billion and operated fifteen branches in the communities of Grays Harbor, Pacific, Thurston, Whatcom, Skagit, Clark and Wahkiakum counties in the State of Washington, and two branches in Clatsop County, Oregon. The Company also operated loan production offices in the communities of Burlington, Washington, Salem, Oregon and Lake Oswego, 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. Such statements are based on information available at the time of communication and are based on current beliefs and expectations of the Company’s management and are subject to risks and uncertainties, many of which are beyond our control, which could cause actual events or results to differ materially from those projected, anticipated or implied, and could negatively impact the Company’s operating and stock price performance. These risks and uncertainties include various risks associated with growing the Bank and expanding the services it provides, development of new business lines and markets, competition in the marketplace, general economic conditions, including the COVID-19 pandemic and government responses thereto, changes in interest rates, extensive and evolving regulation of the banking industry, and many other risks. Any forward-looking statements in this communication are based on information at the time the statement is made. 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.

FAQ

What was Pacific Financial 's net income for the first quarter of 2024?

Pacific Financial reported a net income of $2.7 million for the first quarter of 2024.

What was the earnings per share for Pacific Financial in Q1 2024?

Pacific Financial 's earnings per diluted share for Q1 2024 were $0.26.

What was the quarterly cash dividend declared by Pacific Financial in April 2024?

Pacific Financial declared a quarterly cash dividend of $0.14 per share in April 2024.

How did Pacific Financial 's net interest margin change in Q1 2024?

Pacific Financial 's net interest margin expanded by 4 basis points to 4.38% in Q1 2024.

What percentage of total deposits do core deposits represent for Pacific Financial ?

Core deposits represented 88% of total deposits for Pacific Financial