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Pacific Financial Corporation (PFLC)

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Previous Close12.67
Open12.80
Bid0.00 x 0
Ask0.00 x 0
Day's Range12.70 - 12.95
52 Week Range5.95 - 13.35
Volume7,517
Avg. Volume2,848
Market Cap132.515M
Beta (5Y Monthly)1.06
PE Ratio (TTM)11.92
EPS (TTM)1.07
Earnings DateJan 26, 2021
Forward Dividend & Yield0.52 (4.12%)
Ex-Dividend DateMay 17, 2021
1y Target EstN/A
  • Pacific Financial Corp Earns $4.2 Million, or $0.40 per Diluted Share, for First Quarter of 2021; Declares Quarterly Cash Dividend of $0.13 per Share
    GlobeNewswire

    Pacific Financial Corp Earns $4.2 Million, or $0.40 per Diluted Share, for First Quarter of 2021; Declares Quarterly Cash Dividend of $0.13 per Share

    ABERDEEN, Wash., April 30, 2021 (GLOBE NEWSWIRE) -- Pacific Financial Corporation (OTCQX: PFLC), (“Pacific Financial” or the “Company”), the holding company for Bank of the Pacific (the “Bank”), today reported net income of $4.2 million, or $0.40 per diluted share for the first quarter of 2021, compared to $1.2 million, or $0.11 per diluted share for the first quarter of 2020, and $3.8 million, or $0.37 per diluted share for the fourth quarter of 2020. First quarter 2021 results included a loan loss provision recapture of $1.4 million compared to recording a $2.0 million loan loss provision for the first quarter of 2020. All results are unaudited. The board of directors of Pacific Financial declared a quarterly cash dividend of $0.13 per share on April 28, 2021. The dividend will be payable on June 2, 2021, to shareholders of record on May 18, 2021. “We generated record earnings in the first quarter of 2021, including the recapture of $1.4 million from our allowance for loan losses. Credit quality remains solid and during the quarter $19.0 million in loans were upgraded from the watch or especially mentioned category resulting in a decrease to our allowance for loan losses balance,” said Denise Portmann, President and Chief Executive Officer. “First quarter results were also highlighted by strong deposit growth and an ongoing robust mortgage banking business as the low interest rate environment continued to fuel strong refinance activity and home purchases.” The allowance for loan losses was 1.48% of total loans and 286.05% of impaired loans as of March 31, 2021 compared to 1.65% of total loans and 471.22% of impaired loans as of December 31, 2020. The Consolidated Appropriations Act, 2021 provided additional COVID-19 stimulus relief, and it included $284 billion allocated for another round of Paycheck Protection Program (PPP) funding, with a date extension by the Small Business Administration (SBA) to May 31, 2021. “From the beginning, the Bank has been providing PPP loans and assisting our customers in keeping their businesses operational, and we continue to actively participate in the latest round of PPP lending,” added Portmann. “As of March 31, 2021, under the latest round of PPP, we have assisted 509 businesses with $55.4 million in PPP loans.” First Quarter 2021 Financial Highlights (as of, or for the period ended March 31, 2021, except as noted): Net income was $4.2 million, or $0.40 per diluted share, for the first quarter of 2021, compared to $1.2 million, or $0.11 per diluted share, for the first quarter a year ago, and $3.8 million, or $0.37 per diluted share, for the fourth quarter of 2020.Annualized pre-tax pre-provision return on assets (non-GAAP) and annualized pre-tax pre-provision return on equity (non-GAAP) was 1.32% and 13.69% for the first quarter of 2021, compared to 1.53% and 13.16% for the first quarter a year ago, and 1.65% and 16.93% for the fourth quarter of 2020.First quarter 2021 results included $1.4 million in recapture of provision for loan losses, compared to a loan loss provision of $2.0 million in the first quarter a year ago, and no provision for loan losses in the fourth quarter of 2020.Net interest margin (“NIM”) was 3.35% including SBA PPP loans and 3.05% excluding SBA PPP loans for the first quarter of 2021, compared to 4.30% for the first quarter of 2020 with no PPP loans. For the preceding quarter, NIM was 3.53% including SBA PPP loans and 3.27% excluding SBA PPP loans. Noninterest income was $5.2 million for the first quarter of 2021, an increase of 45% from $3.6 million for the like quarter a year ago and was at $5.8 million for the fourth quarter of 2020. Total deposits increased by $304.7 million, or 38%, to $1.10 billion at March 31, 2021, compared to $794.6 million at March 31, 2020, and increased by $70.9 million from $1.03 billion at December 31, 2020. Non-interest-bearing deposits grew by 62% from a year ago and represented 35% of total deposits at March 31, 2021.Gross loans increased by $44.1 million, or 6%, to $722.7 million at March 31, 2021, compared to $678.6 million at March 31 2020, and declined by $9.3 million, or 1%, from $732.0 million at December 31, 2020. Included in total loans for the current quarter were $108.4 million in PPP loans.Asset quality remains solid: Loans 30-90 delinquent, still on accrual status, were minimal at 0.21% of gross loans outstanding.Net recoveries totaled $53,000, or 0.03% of average gross loans, for the first quarter of 2021, compared to net recoveries of $66,000, or 0.03% of average gross loans, for the fourth quarter of 2020, and net charge-offs of $207,000, or 0.12%, of average gross loans for the first quarter of 2020.Adversely classified loans were $16.4 million, or 2.28% of gross loans, versus $16.8 million, or 2.29%, at December 31, 2020, and $11.2 million, or 1.65%, at March 31, 2020.Other loans especially mentioned or watch, but not impaired, decreased $29.7 million, or 27%, to $79.6 million at March 31, 2021 compared to $109.3 million at December 31, 2020 and were $105.0 million at March 31, 2020. The company re-confirmed the share repurchase program during the first quarter of 2021. During the quarter ended March 31, 2021, Pacific Financial had repurchased a total of 4,192 shares, or $48,000. The Company’s consolidated capital ratios continue to exceed regulatory guidelines for a well-capitalized financial institution. Income Statement Review Net interest income, before the provision for loan losses, was $9.2 million for the first quarter of 2021, compared to $9.1 million for the first quarter a year ago, and $9.7 million for the fourth quarter of 2020. The year-over-year growth in net interest income was primarily due to PPP fee income. For the first quarter of 2021 and the linked quarter, PPP fees and interest totaled $1.6 million. The net interest margin (“NIM”), including PPP loans, was 3.35% for the first quarter of 2021, compared to 4.30% for the first quarter of 2020, and 3.53% for the fourth quarter of 2020. The NIM, excluding PPP loans, was 3.05% for the first quarter of 2021, compared to 4.30% for the first quarter of 2020, and 3.27% for the preceding quarter. The low interest rate environment and persistent market competition for loans continues to put downward pressure on loan yields, and in addition, increased balances of lower yielding federal funds sold, from growth in core deposits, negatively impacted net interest margin during the quarter and past year. During the first quarter of 2021, average interest-earning asset yields declined to 3.49% from 4.62% a year earlier and 3.71% for the linked quarter. Average loan yields declined 29 basis points to 4.87%, from 5.16% a year ago, and remained relatively flat from 4.88% for the fourth quarter of 2020. Average loan yield including PPP loans and PPP interest and fees can vary on a quarterly basis, as the amortization of PPP fees are typically higher in quarters with higher forgiveness or payoff of PPP loans, thus increasing the average loan yield. During the current quarter, PPP interest and fee amortization impacted loan yields by 24 basis points versus 18 basis points in the fourth quarter 2020. The Bank’s total cost of funds decreased to 0.15% for the first quarter of 2021, from 0.35% from a year earlier, and declined from 0.19% at the linked quarter. Included in the reduction was a decrease in the borrowing rate on the Company’s junior subordinated debentures as well as reduction in deposit account offering rates. Noninterest income increased 45%, or $1.6 million, to $5.2 million for the first quarter of 2021, compared to $3.6 million for the first quarter of 2020, and declined by 10%, or $592,000, from $5.8 million for the preceding quarter. The largest component of non-interest income is related to mortgage banking activity. Mortgage banking activity has continued to be robust with mortgage originations near record levels set last quarter. Home purchase activity accounted for 31.2% of mortgage loan originations during the quarter compared to 41.7% in the prior quarter and 37.9% in same quarter a year ago. Year-over-year gain on sale of loans increased 78%, or $1.5 million, to $3.5 million in the first quarter of 2021, from $2.0 million for the first quarter a year earlier, and decreased from $4.0 million for the linked quarter. Partially offsetting this increase year over year was the reduction in overdraft fees of $142,000 for the current quarter compared to the like quarter in 2020. Noninterest expenses rose 15% to $10.5 million for the first quarter of 2021, compared to $9.1 million for the first quarter of 2020 and decreased by 1% from $10.6 million for the fourth quarter of 2020. The increase in noninterest expense in the current quarter compared to a year ago was primarily due to increased salary and employee benefits associated with increased mortgage banking staffing and variable compensation. In addition, with the launching of expanded digital tools to enhance online functionality, provide instant issue debit cards, improve international wire capability and upgrade to a more robust Commercial Banking business online platform, information technology expenses increased $85,000 year-over-year. Partially offsetting the increase in digital technology costs was reductions in travel related expenses. Income tax provision was $1.1 million for the first quarter of 2021, compared to $296,000 for the first quarter of 2020 and $991,000 for the fourth quarter of 2020. The effective tax rate for the first quarter of 2021 was 20.0%, compared to 19.8% for the first quarter of 2020, and 20.5% for the fourth quarter of 2020. In addition to federal corporate income tax, Pacific Financial also pays Oregon corporate income tax and Washington Business and Occupation tax on revenues. Balance Sheet Review Total Assets increased 34% to $1.25 billion, at March 31, 2021, compared to $926.3 million at March 31, 2020, and grew 7% from $1.17 billion at December 31, 2020. Investment Securities increased 25% to $137.5 million at March 31, 2021, compared to $109.9 million at March 31, 2020 and grew 10% from $125.2 million at December 31, 2020. During the current quarter, the Bank continued to deploy a portion of its lower yielding federal funds sold balances into investment securities. This included $18.8 million in investment purchases, which was partially offset by $6.5 million in calls, maturities and payments. Federal funds balances remained at higher than historical levels, primarily as a result of total deposits increases over the current quarter and over the last twelve months. Gross Loans increased 6%, or $44.1 million, to $722.7 million at March 31, 2021, compared to $678.6 million at March 31, 2020, and declined 1%, or $9.3 million, from $732.0 million at March 31, 2020. Total loans at March 31, 2021, included $108.4 million of PPP loans compared to $96.1 million at December 31, 2020. Excluding PPP loans, loan balances declined $64.3 million on a year-over-year basis and $21.6 since December 31, 2020. Loan balances were impacted by commercial and agricultural lines of credit usage which dropped by 71%, or $30.6 million, to $12.6 million at March 31, 2021, compared to $43.2 million a year ago, and dropped by 47%, or $11.1 million from $23.7 million at December 31 2020. Balances were also impacted by the expected payoff of two especially mentioned or watch commercial credit relationships for which the Bank had been working with the customers on an exit strategy. Loans are predominately originated within our Western Washington and Oregon markets and the Company’s portfolio is well-diversified by collateral type and by industry with a prudent credit discipline. With the risks associated with the COVID-19 pandemic reducing the severity, the Company made reasonable adjustments to incrementally relax certain underwriting guidance, that had been tightened earlier in the pandemic, for non-owner occupied commercial real estate lending. To manage risk, the Company oversees new loan origination volume and current loan balances using concentration limits that establish maximum exposure levels by designated industry segment, real estate product types, geography and single borrower limits. At March 31, 2021, CRE concentration remained relatively unchanged at 179% of total risk-based capital; well below the regulatory guidance limit of 300%. Commercial and agricultural loans together with CRE-owner occupied, accounted for 38.8% of total loans outstanding (excluding PPP loans) at March 31, 2021, compared to 40.7% at March 31, 2020 and 40.5% at December 31, 2020. CRE non-owner-occupied and multifamily concentrations accounted for 32.6% of total loans outstanding (excluding PPP loans) at March 31, 2021, compared to 27.0% at March 31, 2020 and 30.9% at December 31, 2020. Hospitality, 5+ unit apartments and commercial properties comprise the largest areas of the commercial real estate non-owner occupied and multi-family property portfolios at $44.2 million, $39.6 million and $32.6 million, respectively, at March 31, 2021. On the consumer side, loans to finance luxury and classic cars, which encompass most of the consumer loan balances, increased slightly to $47.8 million at March 31, 2021, compared to $46.1 million at March 31, 2020 and $46.5 million at December 31, 2020. As part of our strategic plan, we have been limiting our concentrations in indirect loans to finance luxury and classic cars. As of March 31, 2021, the luxury and classic car portfolio includes 843 loans with an average balance of $57,000. The portfolio continues to perform adequately, though delinquencies increased to by $470,000 to $589,000, or 1.2% of loans to finance luxury and classic car portfolio, at March 31, 2021. SBA Paycheck Protection Program: SBA PPP was designed to provide crucial relief to small businesses to help sustain operations impacted by COVID-19. Under this program, Bank of the Pacific funded 748 loans totaling $130.7 million for its customers in 2020, and an additional 509 loans totaling $55.4 million in the first quarter of 2021. PPP Loan Detail (Unaudited) As of March 31, 2021 Total Balance Total Originated # of Loans Originated $ Forgiveness Submitted $ Forgiveness Received Total Fee Collected (Dollars in Thousands) Agriculture$9,494$13,417 168$6,004$4,039$597 Construction 26,900 47,984 190 29,209 21,487 1,634 Manufacturing 12,959 28,079 113 17,422 15,941 1,010 Wholesale Trade 4,070 8,234 35 4,346 4,264 251 Retail Trade 6,006 13,682 138 7,754 7,711 569 Transportation and Warehousing 1,382 5,013 30 3,631 3,631 187 Professional Services 3,680 8,589 84 4,982 4,955 398 Waste Mngt & Remediation 5,872 9,700 45 7,574 3,827 292 Health Care 11,527 13,950 72 2,423 2,217 419 Accommodation and Food Services 17,785 22,994 168 10,485 5,713 931 Other Services 4,471 5,304 63 834 834 233 Other 4,232 9,269 151 5,506 5,022 450 PPP Loans$108,377$186,215 1,257$100,170$79,641$6,971 Loan Payment Deferrals: Early in 2020, the Bank provided $106.2 million in 90-day payment deferrals to customers adversely impacted by operating restrictions due to COVID-19. During the third and fourth quarters of 2020, a majority of these loan deferrals returned to regular payment status, reducing the balance of deferrals to $1.9 million at year end 2020. The Bank has continued to provide a payment deferral program during 2021 and as of March 31, 2021, total outstanding deferrals were $7.0 million, with $4.6 million of these deferrals related to the accommodations and food services industry, with rental and leasing real estate, and recreation and leisure comprising a majority of the remaining $2.4 million. Stressed Sectors as a Result of COVID-19: The Bank continues to identify several industries as being potentially more vulnerable to the economic and business impacts of the Coronavirus pandemic. Those industries include accommodation (hospitality), animal production (primarily dairy), restaurants, retail trade, and recreation and entertainment. Although these industries are potentially more directly impacted by COVID-19, the bank’s customer base within these sectors covers a wide range of clients, including those who operate under diversified business models reaching a broader range of clients, possess necessary financial resources, and are managed by experienced management teams who aid in working through these economic challenges. At March 31, 2021, the total of these industries was $93.6 million, representing 15% of gross loans without PPP. Throughout the last few quarters, the Bank has closely monitored the performance and status of loans within these industries. Despite the initial impact to these higher risk industries caused by required shut down measures taken at onset of crises as well as pandemic driven changes to certain client operating models, generally most customers have been able to successfully navigate the challenges faced by their businesses. Certain industries appear to be stabilizing, such as accommodation (hospitality) where clients have generally performed reasonably well through the 2020 summer and early fall months especially for those operators located in coastal markets benefiting from local Pacific Northwest consumers preferring to vacation closer to home. Animal production (primarily dairy) clients were negatively impacted by lower milk prices in early stages of the crisis, but prices have since rebounded along with financial benefits provided under several government programs. Retail trade portfolio is well diversified within the Banks geographic footprint with majority of business located in rural markets versus metropolitan areas that have been more exposed to domestic unrest or protests. There continues to be pandemic driven challenges for selective retail trade credits and commercial real estate retail tenants as local government restrictions have only recently relaxed. A larger share of the Bank’s restaurant clients are more focused on convenience food and quick service concepts that have performed acceptably well throughout the pandemic. The identified groups of higher risk industries may change over time as conditions improve or worsen. Three industries including healthcare and social service, repair and maintenance, and other services were removed from the stressed sector list at March 31, 2021 as clients have generally performed as agreed with no loans from these groups currently under payment deferral. Nonetheless, the Bank will continue its close monitoring of customer performance in these stressed sectors. Stressed Sectors (without PPP)(Unaudited) Mar 31, 2021 % of Gross Loans (without PPP) (Dollars in thousands)Animal production$18,055 3%Accommodation 43,003 7%Restaurants 10,037 2%Recreation, arts and entertainment 4,941 1%Retail trade 17,601 3% Total stressed sectors$93,637 15% Asset Quality – Nonperforming assets (“NPAs”) increased to $2.5 million, or 0.20% of total assets, at March 31, 2021, compared to $1.6 million, or 0.18% of total assets a year earlier, and remained relatively unchanged compared to $2.4 million, or 0.20% of assets at December 31, 2020. At March 31, 2021, adversely classified loans increased by $5.3 million, to $16.5 million, or 2.68% of adversely classified loans to gross loans (excluding PPP), compared to $11.2 million, or 1.65% of gross loans, at March 31, 2020, and decreased by $315,000 from $16.8 million, or 2.64% of gross loans (excluding PPP), at December 31, 2020. Balances related to loans graded watch or other loans especially mentioned, declined $29.7 during the quarter to $79.6 million, as several credits were upgraded upon resumption of payments after being deferred during 2020. The adversely classified loans to total assets ratio was 1.32%, at March 31, 2021, compared to 1.21% at March 31, 2020, and 1.44%, at December 31, 2020. The Allowance for Loan Losses (“ALL”) decreased 1% to $10.7 million, or 1.75% of gross loans (excluding PPP) at March 31, 2021, compared to $10.8 million, or 1.59% of gross loans, at March 31, 2020, and declined 11% from $12.1 million, or 2.01% (excluding PPP), at December 31, 2020. The Bank recorded into income a $1.4 million recapture of loan loss provision during the current quarter. This was primarily the result of $19 million in loan risk rating upgrades as several credits were upgraded upon resumption of payments after being deferred during 2020. No adjustment to qualitative factors were made in the first quarter of 2021. For the same quarter a year ago, the bank recorded a $2.0 million provision and no provision for the fourth quarter of 2020. Net recoveries were $53,000 for the first quarter of 2021, compared to net charge-offs of $207,000 for the first quarter a year earlier, and net recoveries of $66,000 for the fourth quarter of 2020. Total Deposits increased 38% to $1.10 billion at March 31, 2021, compared to $794.6 million from a year earlier, and grew by 7% from $1.03 billion at December 31, 2020. Year-over-year increases were primarily related to SBA PPP loan proceeds deposited in customers Bank of the Pacific accounts and also a generally higher level of client liquidity from reduced business investment and customer spending and receipt of stimulus funds. “We continue to benefit from our outreach to our existing customers as well as with new customers established through PPP lending,” said Tucker. The growth in noninterest-bearing deposits increased 62% from a year ago and represents 35% of total deposits at March 31, 2021. Capital Ratios of Pacific Financial Corporation, and its subsidiary Bank of the Pacific, continue to exceed the well-capitalized regulatory thresholds. At March 31, 2021, Pacific Financial Corporation’s leverage ratio was 9.5% and the total risk-based capital ratio was 16.8%. 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 under guidance issued by the Federal Reserve. As provided in the Dodd-Frank Act, the Company expects to continue to rely on these junior subordinated debentures as part of its regulatory capital. The company re-confirmed the share repurchase program during the first quarter of 2021. During the quarter ended March 31, 2021, Pacific Financial had repurchased a total of 4,192 shares, or $48,000. Balance Sheet Overview (Unaudited) Mar 31, 2021 Dec 31, 2020 $ Change % Change Mar 31, 2020 $ Change % Change Assets: (Dollars in thousands, except per share data) Cash on hand and in banks$15,175 $12,960 $2,215 17%$40,342 $(25,167) -62% Interest bearing deposits 280,129 182,889 97,240 53% 3,250 276,879 8519% Federal funds sold 23,316 33,024 (9,708) -29% 25,170 (1,854) -7% Investment securities 137,454 125,184 12,270 10% 109,875 27,579 25% Loans held-for-sale 19,439 34,906 (15,467) -44% 21,398 (1,959) -9% Loans, net of deferred fees 719,182 729,398 (10,216) -1% 677,907 41,275 6% Allowance for loan losses (10,721) (12,068) 1,347 -11% (10,786) 65 -1% Net loans 708,461 717,330 (8,869) -1% 667,121 41,340 6% Federal Home Loan Bank and Pacific Coast Bankers' Bank stock, at cost 2,421 2,137 284 13% 2,241 180 8% Other assets 58,679 58,863 (184) 0% 56,947 1,732 3% Total assets$1,245,074 $1,167,293 $77,781 7%$926,344 $318,730 34% Liabilities and Shareholders' Equity: Total deposits$1,099,287 $1,028,424 $70,863 7%$794,585 $304,702 38% Borrowings 13,919 13,956 (37) 0% 16,569 (2,650) -16% Accrued interest payable and other liabilities 16,772 10,728 6,044 56% 8,641 8,131 94% Shareholders' equity 115,096 114,185 911 1% 106,549 8,547 8% Total liabilities and shareholders' equity$1,245,074 $1,167,293 $77,781 7%$926,344 $318,730 34% Common Stock Shares Outstanding 10,437,378 10,434,533 2,845 0% 10,607,617 (170,239) -2% Book value per common share (1)$11.03 $10.94 $0.09 1%$10.04 $0.99 10% Tangible book value per common share (2)$9.74 $9.65 $0.09 1%$8.78 $0.96 11% Gross loans to deposits ratio 65.4% 70.9% -5.5% 85.3% -19.9% (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, 2021 Dec 31, 2020 $ Change % Change Mar 31, 2020 $ Change % Change (Dollars in thousands, except per share data) Interest and dividend income$9,612 $10,219 $(607) -6%$9,783 $(171) -2% Interest expense 387 492 (105) -21% 700 (313) -45% Net interest income 9,225 9,727 (502) -5% 9,083 142 2% Loan loss provision (1,400) - (1,400) 100% 2,000 (3,400) -170% Noninterest income 5,164 5,756 (592) -10% 3,555 1,609 45% Noninterest expense 10,504 10,648 (144) -1% 9,142 1,362 15% Income before income taxes 5,285 4,835 450 9% 1,496 3,789 253% Income tax expense 1,057 991 66 7% 296 761 257% Net Income$4,228 $3,844 $384 10%$1,200 $3,028 252% Average common shares outstanding - basic 10,432,040 10,469,896 (37,856) 0% 10,627,160 (195,120) -2% Average common shares outstanding - diluted 10,458,794 10,496,840 (38,046) 0% 10,676,227 (217,433) -2% Income per common share Basic$0.41 $0.37 $0.04 11%$0.11 $0.30 273% Diluted$0.40 $0.37 $0.03 8%$0.11 $0.29 264% Effective tax rate 20.0% 20.5% -0.5% 19.8% 0.2% Reconciliation of Non-GAAP Measure (Unaudited) For the Three Months Ended, Mar 31, 2021 Dec 31, 2020 $ Change % Change Mar 31, 2020 $ Change % Change Non-GAAP Net Income (Dollars in thousands) Net Income$4,228 $3,844 $384 10%$1,200 $3,028 252% Loan loss provision (1,400) - (1,400) -100% 2,000 (3,400) -170% Income tax expense 1,057 991 66 7% 296 761 257% Pre-tax, pre-provision net income$3,885 $4,835 $(950) -20%$3,496 $389 11% Pre-tax, pre-provisions ROA, annualized 1.32% 1.65% (0.33) 1.53% 0.12 Pre-tax, pre-provisions ROE, annualized 13.69% 16.93% (3.24) 13.16% 3.77 Noninterest Income(Unaudited) For the Three Months Ended, Mar 31, 2021 Dec 31, 2020 $ Change % Change Mar 31, 2020 $ Change % Change (Dollars in thousands)Service charges on deposits$342$366$(24) -7%$507$(165) -33%Gain on sale of loans, net 3,535 4,020 (485) -12% 1,990 1,545 78%Earnings on bank owned life insurance 126 125 1 1% 115 11 10%Other noninterest income Fee income 1,133 1,117 16 1% 918 215 23% Other 28 128 (100) -78% 25 3 12%Total noninterest income$5,164$5,756$(592) -10%$3,555$1,609 45% Noninterest Expense(Unaudited) For the Three Months Ended, Mar 31, 2021 Dec 31, 2020 $ Change % Change Mar 31, 2020 $ Change % Change (Dollars in thousands)Salaries and employee benefits$7,333$7,257$76 1%$6,066$1,267 21%Occupancy 511 516 (5) -1% 522 (11) -2%Equipment 319 315 4 1% 285 34 12%Data processing 829 776 53 7% 746 83 11%Professional services 234 221 13 6% 200 34 17%State and local taxes 202 193 9 5% 145 57 39%FDIC and State assessments 81 77 4 5% 8 73 913%Other noninterest expense: Director fees 77 74 3 4% 74 3 4% Communication 71 76 (5) -7% 68 3 4% Advertising 29 58 (29) -50% 48 (19) -40% Professional liability insurance 59 55 4 7% 55 4 7% Amortization 105 122 (17) -14% 97 8 8% Other 654 908 (254) -28% 828 (174) -21%Total noninterest expense$10,504$10,648$(144) -1%$9,142$1,362 15% Financial Performance Overview (Unaudited) For the Three Months Ended Mar 31, 2021 Dec 31, 2020 Change Mar 31, 2020 Change Performance Ratios Return on average assets, annualized1.44% 1.31% 0.13 0.52% 0.92 Return on average equity, annualized14.90% 13.46% 1.44 4.52% 10.38 Efficiency ratio (1)73.00% 68.77% 4.23 72.34% 0.66 (1) Non-interest expense divided by net interest income plus noninterest income. LIQUIDITY Cash and Cash Equivalents and Investment Securities (Unaudited) Mar 31, 2021 % of Total Dec 31, 2020 % of Total $ Change % Change Mar 31, 2020 Total $ Change % Change (Dollars in thousands) Cash on hand and in banks$15,175 3%$12,960 4%$2,215 17%$13,088 7%$2,087 16% Interest bearing deposits 276,879 62% 179,639 51% 97,240 54% 27,254 16% 249,625 916% Other interest earning deposits 3,250 1% 3,250 1% - 0% 3,250 2% - 0% Federal funds sold 23,316 5% 33,024 9% (9,708) -29% 25,170 14% (1,854) -7% Total 318,620 71% 228,873 65% 89,747 39% 68,762 39% 249,858 363% Investment securities: Collateralized mortgage obligations 47,870 10% 45,358 13% 2,512 6% 43,483 25% 4,387 10% Mortgage backed securities 13,441 3% 11,366 3% 2,075 18% 16,934 9% (3,493) -21% U.S. Government and agency securities 15,263 3% 8,142 2% 7,121 87% 2,010 1% 13,253 659% Municipal securities 58,761 13% 58,228 16% 533 1% 45,518 25% 13,243 29% Corporate debt securities 2,018 0% 2,016 1% 2 0% 1,874 1% 144 8% Equity securities 101 0% 74 0% 27 36% 56 0% 45 80% Total 137,454 29% 125,184 35% 12,270 10% 109,875 61% 27,579 25% Total cash equivalents and investment securities$456,074 100%$354,057 100%$102,017 29%$178,637 100%$277,437 155% Total cash equivalents and investment securities as a percent of total assets 37% 30% 19% LOANS Loans by Category (Unaudited) Mar 31, 2021 % of Gross Loans Dec 31, 2020 % of Gross Loans $ Change % Change Mar 31, 2020 % of Gross Loans $ Change %Change Commercial: (Dollars in thousands) Commercial and agricultural$83,675 12%$100,801 14%$(17,126) -17%$ 129,085 19%$(45,410) -35% PPP 108,377 15% 96,070 13% 12,307 13% - 0% 108,377 100% Real estate: Construction and development 20,936 3% 20,722 3% 214 1% 47,054 7% (26,118) -56% Residential 1-4 family 71,567 10% 77,045 11% (5,478) -7% 84,662 12% (13,095) -15% Multi-family 33,950 5% 31,311 4% 2,639 8% 30,368 4% 3,582 12% Commercial real estate -- owner occupied 154,850 21% 156,833 21% (1,983) -1% 147,024 22% 7,826 5% Commercial real estate -- non owner occupied 166,072 22% 165,365 22% 707 0% 152,830 23% 13,242 9% Farmland 27,418 4% 28,516 4% (1,098) -4% 31,500 5% (4,082) -13% Consumer 55,868 8% 55,361 8% 507 1% 56,091 8% (223) 0% Gross Loans 722,713 100% 732,024 100% (9,311) -1% 678,614 100% 44,099 6% Less: allowance for loan losses (10,721) (12,068) 1,347 (10,786) 65 Less: deferred fees (3,531) (2,626) (905) (707) (2,824) Net loans$708,461 $717,330 $(8,869) $ 667,121 $41,340 Loan Concentration (Unaudited) Mar 31, 2021 % of Risk Based Capital Dec 31, 2020 % of Risk Based Capital Change Mar 31, 2020 % of Risk Based Capital Change Commercial: (Dollars in thousands) Commercial and agricultural$83,675 69%$100,801 93% -24%$129,085 114% -45% PPP 108,377 90% 96,070 113% -23% - 0% 90% Real estate: Construction and development 20,936 17% 20,722 30% -13% 47,054 42% -25% Residential 1-4 family 71,567 59% 77,045 66% -7% 84,662 75% -16% Multi-family 33,950 28% 31,311 31% -3% 30,368 27% 1% Commercial real estate -- owner occupied 154,850 128% 156,833 130% -2% 147,024 130% -2% Commercial real estate -- non owner occupied 166,072 137% 165,365 139% -2% 152,830 135% 2% Farmland 27,418 23% 28,516 26% -3% 31,500 28% -5% Consumer 55,868 46% 55,361 45% 1% 56,091 50% -4% Gross Loans$722,713 $732,024 $678,614 Regulatory Commercial Real Estate$216,687 179%$214,928 181% -2%$220,794 196% -17% Total Risk Based Capital*$120,934 $118,961 $112,802 *Bank of the Pacific DEPOSITS Deposits by Category (Unaudited) Mar 31, 2021 % of Total Dec 31, 2020 % of Total $ Change % Change Mar 31, 2020 % of Total $ Change % Change (Dollars in thousands) Interest-bearing demand$305,137 28%$292,031 29%$13,106 4%$224,741 29%$80,396 36% Money market 186,887 17% 190,174 19% (3,287) -2% 147,412 19% 39,475 27% Savings 149,325 14% 137,615 13% 11,710 9% 105,983 13% 43,342 41% Time deposits (CDs) 67,861 6% 65,895 6% 1,966 3% 74,972 9% (7,111) -9% Total interest-bearing deposits 709,210 65% 685,715 67% 23,495 3% 553,108 70% 156,102 28% Non-interest bearing demand 390,077 35% 342,709 33% 47,368 14% 241,477 30% 148,600 62% Total deposits$1,099,287 100%$1,028,424 100%$70,863 7%$794,585 100%$304,702 38% The following table summarizes the capital measures of the Company and the Bank respectively, at the dates listed below. Capital Measures (unaudited) Mar 31, 2021 Dec 31, 2020 Change Mar 31, 2020 Change Well Capitalized Under Prompt Correction Action Regulations Pacific Financial Corporation Total risk-based capital ratio16.8% 15.9% 0.9 15.1% 1.7 N/A Tier 1 risk-based capital ratio15.5% 14.6% 0.9 13.9% 1.6 N/A Common equity tier 1 ratio13.7% 12.9% 0.8 12.1% 1.6 N/A Leverage ratio9.5% 9.5% - 11.4% (1.9) N/A Tangible common equity ratio8.3% 8.6% (0.3) 10.2% (1.9) N/A Bank of the Pacific Total risk-based capital ratio16.7% 15.8% 0.9 15.0% 1.7 10.5% Tier 1 risk-based capital ratio15.4% 14.5% 0.9 13.8% 1.6 8.5% Common equity tier 1 ratio15.4% 14.5% 0.9 13.8% 1.6 7.0% Leverage ratio9.5% 9.5% - 11.3% (1.8) 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, 2021 Dec 31, 2020 $ Change % Change Mar 31, 2020 $ Change % Change Average Balances (Dollars in thousands) Gross loans$724,259 $758,801 $(34,542) -5%$683,096 $41,163 6% Gross loans without PPP$620,808 $651,127 $(30,319) -5%$683,096 $(62,288) -9% Loans held for sale$27,203 $31,288 $(4,085) -13%$10,293 $16,910 164% Investment securities$129,178 $127,808 $1,370 1%$105,202 $23,976 23% Federal funds sold & interest bearing deposits in banks$248,252 $185,531 $62,721 34%$59,139 $189,113 320% Total interest-earning assets$1,128,892 $1,103,428 $25,464 2%$857,730 $271,162 32% Non-interest bearing demand deposits$360,175 $353,686 $6,489 2%$239,280 $120,895 51% Interest bearing deposits$689,302 $672,733 $16,569 2%$548,769 $140,533 26% Total Deposits$1,049,477 $1,026,419 $23,058 2%$788,049 $261,428 33% Borrowings$13,931 $13,969 $(38) 0%$16,581 $(2,650) -16% Total interest-bearing liabilities$703,233 $686,702 $16,531 2%$565,350 $137,883 24% Total Equity$115,095 $113,306 $1,789 2%$106,853 $8,242 8% For the Three Months Ended, Mar 31, 2021 Dec 31, 2020 Change Mar 31, 2020 Change Yield on average gross loans (1) 4.87% 4.88% (0.01) 5.16% (0.29) Yield on average gross loans without PPP (1) 4.63% 4.70% (0.07) 5.16% (0.53) Yield on average investment securities (1) 2.45% 2.31% 0.14 3.02% (0.57) Yield on Fed funds sold & interest bearing deposits in banks 0.12% 0.14% (0.02) 1.43% (1.31) Cost of average interest bearing deposits 0.19% 0.25% (0.06) 0.42% (0.23) Cost of average borrowings 1.83% 1.82% 0.01 3.18% (1.35) Cost of average total deposits and borrowings 0.15% 0.19% (0.04) 0.35% (0.20) Yield on average interest-earning assets 3.49% 3.71% (0.22) 4.62% (1.13) Cost of average interest-bearing liabilities 0.22% 0.28% (0.06) 0.50% (0.28) Net interest spread 3.27% 3.43% (0.16) 4.12% (0.85) Net interest spread without PPP 2.98% 3.18% (0.20) 4.12% (1.14) Net interest margin (1) 3.35% 3.53% (0.18) 4.30% (0.95) Net interest margin without PPP (1) 3.05% 3.27% (0.22) 4.30% (1.25) (1) Tax-exempt income has been adjusted to a tax equivalent basis at a rate of 21%. Adversely Classified Loans and Securities (Unaudited) Mar 31, 2021 Dec 31, 2020 $ Change % Change Mar 31, 2020 $ Change % Change (Dollars in thousands) Rated substandard or worse, but not impaired, beginning of three month period$14,200 $11,605 $2,595 22%$10,400 $3,800 37% Addition of previously classified pass graded loans 304 4,219 (3,915) -93% - 304 100% Upgrades to pass or other loans especially mentioned status - - - 0% - - 0% Moved to nonaccrual - (616) 616 -100% - - 0% Principal payments, net (1,806) (1,008) (798) 79% (1,131) (675) 60% Rated substandard or worse, but not impaired, end of three month period$12,698 $14,200 $(1,502) -11%$9,269 $3,429 37% Impaired 3,748 2,561 1,187 46% 1,900 1,848 97% Total adversely classified loans1$16,446 $16,761 $(315) -2%$11,169 $5,277 47% Other loans especially mentioned or watch, but not impaired$79,603 $109,324 $(29,721) -27%$105,008 $(25,405) -24% Gross loans (excluding deferred loan fees)$722,713 $732,025 $(9,312) -1%$678,614 $44,099 6% Adversely classified loans to gross loans 2.28% 2.29% 1.65% Adversely classified loans to gross loans without PPP 2.68% 2.64% 1.65% Allowance for loan losses$10,721 $12,068 $(1,347) -11%$10,786 $(65) -1% Allowance for loan losses as a percentage of adversely classified loans 65.19% 72.00% 96.57% Allowance for loan losses to total impaired loans 286.05% 471.22% 567.68% Adversely classified loans to total assets 1.32% 1.44% 1.21% Delinquent loans to gross loans, not in nonaccrual status 2 0.21% 0.06% 0.27% Delinquent loans to gross loans without PPP, not in nonaccrual status 0.24% 0.07% 0.27% 1 Adversely classified loans are defined as loans having a well-defined weakness or weaknesses related to the borrower's financial capacity or to pledged collateral that may jeopardize the repayment of the debt. They are characterized by the possibility that the Bank may sustain some loss if the deficiencies giving rise to the substandard classification are not corrected. Note that any loans internally rated worse than substandard are included in the impaired loan totals. 2 Delinquent loans are defined as loans past due 30-90 days and still accruing Nonperforming Assets (Unaudited) Mar 31, 2021 Dec 31, 2020 $ Change % Change Mar 31, 2020 $ Change % Change (Dollars in thousands) Total nonaccrual loans, beginning of three month period$2,392 $1,623 $769 47%$1,029 $1,363 132% Transfer to performing loans - - - 0% (127) 127 100% Addition of nonaccrual loans 202 1,056 (854) -81% 852 (650) -76% Moved to other assets owned (265) - (265) 100% - (265) -100% Principal payments, net (126) (287) 161 -56% (6) (120) 2000% Charge-offs, net - - - 0% (126) 126 100% Total nonaccrual loans, end of three month period$2,203 $2,392 $(189) -8%$1,622 $581 36% Other real estate owned and foreclosed assets 265 - 265 100% - 265 100% Total nonperforming assets$2,468 $2,392 $76 3%$1,622 $846 52% Total restructured performing loans, beginning of period$168 $174 $(6) -3%$320 $(152) -48% Transfer to nonaccrual loans - - - 0% (129) 129 100% Addition of restructured performing loans 1,382 - 1,382 100% 93 1,289 1386% Principal payments, net (5) (6) 1 -17% (6) 1 -17% Charge-offs, net - - - 0% - - 0% Total restructured performing loans, end of period$1,545 $168 $1,377 820%$278 $1,267 456% Accruing loans past due 90 days or more$- $- $- 0%$- $- 0% Percentage of nonperforming assets to total assets 0.20% 0.20% 0.18% Nonperforming loans to total loans 0.30% 0.33% 0.24% Nonperforming loans to total loans without PPP 0.36% 0.38% 0.24% Allowance for Loan Losses (Unaudited) For the Three Months Ended, Mar 31, 2021 Dec 31, 2020 $ Change % Change Mar 31, 2020 $ Change % Change (Dollars in thousands) Gross loans outstanding at end of period$722,713 $732,024 $(9,311) -1%$678,614 $44,099 6% Average loans outstanding, gross$724,259 $758,801 $(34,542) -5%$683,096 $41,163 6% Allowance for loan losses, beginning of period$12,068 $12,002 $66 1%$8,993 $3,075 34% Commercial - - - 0% (130) 130 -100% Commercial Real Estate - - - 0% - - 0% Residential Real Estate - - - 0% - - 0% Consumer (46) (10) (36) 360% (80) 34 -43% Total charge-offs (46) (10) (36) 360% (210) 164 -78% Commercial 38 14 24 171% - 38 100% Commercial Real Estate - - - 0% - - 0% Residential Real Estate 49 63 (14) -22% - 49 100% Consumer 12 (1) 13 -1300% 3 9 300% Total recoveries 99 76 23 30% 3 96 3200% Net recoveries/(charge-offs) 53 66 (13) -20% (207) 260 -126% Provision to income (1,400) - (1,400) -100% 2,000 (3,400) -170% Allowance for loan losses, end of period$10,721 $12,068 $(1,347) -11%$10,786 $(65) -1% Ratio of net loans charged-off to average gross loans outstanding, annualized -0.03% -0.03% 0.00% 0.12% -0.15% Ratio of net loans charged-off to average gross loans outstanding without PPP, annualized -0.03% -0.04% 0.01% 0.12% -0.15% Ratio of allowance for loan losses to gross loans outstanding 1.48% 1.65% -0.17% 1.59% -0.11% Ratio of allowance for loan losses to gross loans without PPP outstanding 1.75% 2.01% -0.26% 1.59% 0.16% ABOUT PACIFIC FINANCIAL CORPORATION Pacific Financial Corporation of Aberdeen, Washington, is the bank holding company for Bank of the Pacific, a state chartered and federally insured commercial bank. Bank of the Pacific offers banking products and services to small-to-medium sized businesses and professionals in western Washington and Oregon. At March 31, 2021, the Company had total assets of $1.25 billion and operated fourteen branches in the communities of Grays Harbor, Pacific, 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 and Salem and Eugene, 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, including the current COVID-19 pandemic and government responses thereto, changes in interest rates, extensive and evolving regulation of the banking industry, and many other risks. The pandemic could cause us to experience higher loan losses within our lending portfolio, impairment of goodwill, reduced demand for our products and services and other negative impacts on our financial position or results of operations. The depth, severity and scope of this current recession is uncertain, and our company will not be immune to the effects of the financial stress resulting from a global pandemic and economic shutdown. 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. CONTACTS: DENISE PORTMANN, PRESIDENT & CEO CARLA TUCKER, EVP & CFO 360.533.8873

  • GlobeNewswire

    Pacific Financial Corp Earns $3.8 Million, or $0.37 per Diluted Share, for the Fourth Quarter of 2020; Declares Quarterly Cash Dividend of $0.13 per Share

    ABERDEEN, Wash., Jan. 26, 2021 (GLOBE NEWSWIRE) -- Pacific Financial Corporation (OTCQX: PFLC), (“Pacific Financial” or the “Company”), the holding company for Bank of the Pacific (the “Bank”), today reported net income of $3.8 million, or $0.37 per diluted share for the fourth quarter of 2020, compared to $3.4 million, or $0.32 per diluted share for the fourth quarter of 2019, and $3.9 million, or $0.37 per diluted share for the third quarter of 2020. For the year ended December 31, 2020, net income was $11.4 million, or $1.07 per diluted share, compared to $13.8 million, or $1.29 per diluted share, for the year ended December 31, 2019. All results are unaudited. The board of directors of Pacific Financial declared a quarterly cash dividend of $0.13 per share on January 20, 2021. The dividend will be payable on February 24, 2021, to shareholders of record on February 10, 2021. “Despite the economic challenges brought on by the pandemic, our earnings for the fourth quarter and full year 2020 were solid, boosted by a robust mortgage banking business, as we continued to support customers’ home financing and re-financing needs,” said Denise Portmann, President and Chief Executive Officer. “In addition, we continued to benefit from the Small Business Administration ('SBA') Paycheck Protection Program ('PPP') loans generated in the second quarter with total PPP interest and fee income of $1.6 and $3.3 million recognized for the fourth quarter and during the year, respectively. We plan on participating in the new round of PPP beginning the first quarter of 2021.” “Credit quality remains solid, and although we did experience some increase in adversely classified and nonperforming loans during the quarter, levels remain low. A majority of loans granted payment deferrals have resumed payments, with less than $2 million of loans under deferment at year end. This resumption of payments allowed us to upgrade several credits resulting in watch loan balances decreasing $13.2 million during the quarter. In prior quarters of 2020, the Bank proactively provisioned $3.5 million for potential credit losses on loans due to the COVID-19 impact and a projected slowing economy, however based on current credit quality and our ALLL methodology, no additional provision was provided for during the fourth quarter,” said Portmann. Pacific Financial continues to buy back shares under the program announced in early 2020 and as of December 31, 2020, has repurchased a total of 214,008 shares or $1.8 million. “We believe this is an excellent way to build long-term value for our shareholders,” said Portmann. All regulatory ratios continue to be in excess of “well-capitalized” requirements with a leverage ratio of 9.52% and a total risk-based capital ratio of 16.01% at December 31, 2020. COVID-19 Pandemic Update Branches and Operations: Bank branch lobbies remain open with pandemic safety protocols in place. The Bank continues to encourage the use of drive-up services, and digital and electronic channels, while our bankers proactively reach out to our customers to provide personalized customer service. Many of our front-line customer facing relationship officers are back in offices to provide a high level of service and for more convenient interaction with our customers, while, where practicable, many of our staff in back-office functions continue to work from home. SBA Paycheck Protection Program: SBA PPP was implemented to provide short-term loans to help small businesses impacted by COVID-19. During the year, the Bank funded 748 applications for a total of $130.8 million. At year end, the Bank had submitted 255, or $51.5 million, in loan forgiveness applications for our customers and by December 31, 2020 had received $35.2 million in funds relating to those forgiveness applications. At year end PPP loans totaled $96.1 million. It is our intent to participate in the second round of PPP beginning in the first quarter of 2021. PPP Loan Detail(Unaudited) As of December 31, 2020 Total Balance # of Loans Total FeeCollected YTDAmortizedFee #Forgiveness Submitted $Forgiveness Submitted $Forgiveness Received (Dollars in Thousands)Agriculture$8,337 63$388$169 19$2,033$1,361Construction 22,621 82 1,037 592 41 11,577 10,435Manufacturing 14,102 56 725 385 36 11,612 6,273Wholesale Trade 6,148 20 223 112 5 1,565 1,565Retail Trade 9,783 85 466 202 36 3,485 2,289Transportation and Warehousing 2,309 10 134 76 11 1,440 1,440Professional Services 2,309 34 249 161 26 3,902 3,301Waste Mngt & Remediation 5,434 24 221 122 13 6,244 2,687Health Care 6,413 30 229 105 10 1,330 1,330Accommodation and Food Services 11,509 77 477 196 21 4,625 1,730Other Services 3,032 30 139 57 4 349 349Other 4,073 67 290 151 33 3,336 2,432PPP Loans$96,070 578$4,578$2,327 255$51,497$35,191 Loan Payment Deferrals: In March 2020, the Company began providing 90-day payment deferrals to customers adversely impacted by operating restrictions due to COVID-19. During the third and fourth quarters, the Company made consistent progress reducing modified loans, with a majority of the $106.2 million in the first round of deferrals expiring with loans returning to regular payment status. As of December 31, 2020, deferrals totaled $1.9 million, compared to $16.8 million as of September 30, 2020. Payment Deferrals by Industry(Unaudited) As of Sept 30,2020 As of December 31, 2020 DeferralsOutstanding TotalDeferralsOutstanding % of TotalDeferrals (Dollars in thousands)Accommodation and food services$7,340 $280 15%Construction and manufacturing - - 0%Health care and social assistance 1,099 - 0%Real estate, rental and leasing 5,982 1,575 82%Recreation and leisure 335 - 0%Retail and wholesale trade - - 0%Other services (except public admin) 1,524 - 0%Consumer loans 38 64 3%Other 515 - 0%Total deferrals$16,833 $1,918 100% Fourth quarter 2020 Financial Highlights (as of, or for the period ended December 31, 2020, except as noted): Net income was $3.8 million, or $0.37 per diluted share, for the fourth quarter of 2020, compared to $3.4 million, or $0.32 per diluted share, for the fourth quarter a year ago, and $3.9 million, or $0.37 per diluted share, for the third quarter of 2020.Annualized pre-tax pre-provision return on assets (non-GAAP) was 1.65% for the fourth quarter of 2020, compared to 1.80% for the fourth quarter a year ago, and 1.89% for the third quarter of 2020.Annualized pre-tax pre-provision return on equity (non-GAAP) was 16.93% for the fourth quarter of 2020, compared to 16.17% for the fourth quarter of 2019, and 19.24% for the third quarter of 2020.There was no provision for loan losses for the fourth quarter of 2020 nor the fourth quarter of 2019, compared to a provision of $500,000 in the third quarter of 2020. Net interest margin (“NIM”) was 3.53% including SBA PPP loans, and 3.27% excluding SBA PPP loans, for the fourth quarter of 2020, compared to 4.31% for the fourth quarter of 2019, with no PPP loans. For the preceding quarter, NIM was 3.49%, including SBA PPP loans and 3.53%, excluding SBA PPP loans. Industry peer NIM was 3.29% at September 30, 2020. [Industry peers comprise of approximately 476 banks in the SNL Microcap U.S. Bank Index.] Noninterest income for the fourth quarter of 2020 increased 48% over the like quarter a year ago. Total deposits increased by $229.8 million, or 29%, to $1.03 billion at December 31, 2020, compared to $798.6 million at December 30, 2019, and increased by $5.1 million from $1.02 billion at September 30, 2020. Non-interest-bearing deposits grew by 40% from a year ago and represented 33% of total deposits, at December 31, 2020.Gross loans increased by $46.8 million, or 7%, to $732.0 million at December 31, 2020, compared to $685.3 million at December 30, 2019, and decreased by $47.8 million, or 6%, from $779.8 million at September 30, 2020. Included in total loans for the current quarter were 578 PPP loans totaling $96.1 million. Shareholder equity increased 8% to $114.2 million from the fourth quarter a year ago and grew 2% from the linked quarter. Book value per share increased 11% to $10.94 from a year earlier and grew 3% from the third quarter of 2020. Results of Operations Net income was $3.8 million for the fourth quarter of 2020, compared to $3.4 million for the fourth quarter a year ago, and $3.9 million for third quarter of 2020. For the year ended December 31, 2020, net income was $11.4 million, compared to $13.8 million for the year ended December 31, 2019. Diluted earnings per share were $0.37 for the fourth quarter of 2020, compared to $0.32 per diluted share for the fourth quarter of 2019, and $0.37 for the third quarter of 2020. For the year ended December 31, 2020, diluted earnings per share were $1.07, compared to $1.29 for the year ended December 31, 2019. Net interest income, before provision for loan losses, was $9.7 million for the fourth quarter of 2020, compared to $9.5 million for the fourth quarter a year ago, and $9.4 million for third quarter of 2020. The growth, both from a year ago and on a linked quarter basis, was primarily due to PPP fee income. For the year ended December 31, 2020, net interest income was $37.2 million compared to $38.6 million for 2019. Included in net interest income for the year ended December 31, 2020, was $3.3 million in fees and interest on PPP loans, compared to none in 2019. For the fourth quarter 2020, PPP fees and interest totaled $1.6 million compared to $1.0 million for the linked quarter and $0 for 2019. The net interest margin (“NIM”) including PPP loans increased 4 basis points during the current quarter compared to the linked quarter. NIM was 3.53% for the fourth quarter of 2020, compared to 4.31% for the fourth quarter 2019, and 3.49% for the third quarter of 2020. For the year ended December 31, 2020, the NIM was 3.73% compared to 4.57% for prior year. The low interest rate environment combined with the impact of low loan yields on SBA PPP loans and growth in core deposits resulting in significant growth in low yielding federal funds sold, adversely impacted the net interest margin for 2020 compared to 2019. The Company continues to maintain a net interest margin above the peer average posted by the SNL Micro Cap U.S. Bank Index as of September 30, 2020(1). (1)As of September 30, 2020, the SNL Micro Cap US Bank Index tracked 476 banks with total common market capitalization less than $250 million with an average for NIM of 3.29%. During the fourth quarter yields on average interest-earning assets remained relatively unchanged, increasing 2 basis points to 3.71% from 3.69% for the linked quarter, and decreasing 93 basis points from the fourth quarter a year ago. For the year ended December 31, 2020, the yield on average interest-earning assets decreased 95 basis points to 3.97% compared to 4.92% for the year ended December 31, 2019. Average loan yields increased 28 basis points to 4.88% in the fourth quarter 2020 compared to 4.60% in the linked quarter and decreased 42 basis points compared to 5.30% a year ago. Average loan yield including PPP loans and PPP interest and fee can vary on a quarterly basis, as the amortization of PPP fees are typically higher in quarters with higher forgiveness or payoff of PPP loans, thus increasing the average loan yield. As such, overall average loan yields are impacted. During the current quarter, the impact of PPP loan yields increased overall loan yields by 18 basis points, while in the third quarter 2020, the impact of PPP loan yields decreased overall loan yield by 27 basis points. For 2020, the impact of PPP loan yields decreased overall loan yields by 13 basis points. The Bank’s total cost of funds continued to decrease during the fourth quarter to 0.19% from 0.22% for the third quarter of 2020 and compared to 0.35% for the fourth quarter a year ago. For the year ended December 31, 2020, the cost of funds was 0.25% compared to 0.36% for the year ended December 31, 2019. Included in the reduction was a decrease in the borrowing rate on the Company’s junior subordinated debentures to 1.81% for the current quarter compared to 3.64% for the like quarter a year ago and 1.89% for the third quarter of 2020. Provision for loan losses – The Bank recorded zero provision for loan losses for the fourth quarter of 2020 and 2019, compared to a provision of $500,000 for the third quarter of 2020. For the year ended December 31, 2020, the provision for loan losses totaled $3.5 million, compared to no provision for the year ended December 31, 2019. Noninterest income increased 48%, or $1.9 million, to $5.8 million for the fourth quarter of 2020, compared to $3.9 million for the fourth quarter 2019, and declined by 5%, or $277,000, for the third quarter of 2020. The year-over-year increase in noninterest income in the current quarter was primarily due to the 82%, or $1.8 million, increase in the gain on sale of loans to $4.0 million in the fourth quarter of 2020, from $2.2 million for the fourth quarter a year earlier. Fee income was up 13% to $1.1 million for the fourth quarter of 2020, compared to $992,000 for the fourth quarter of 2019, and declined by $15,000 from the linked quarter. For the year ended December 31, 2020, noninterest income increased by 45%, or $6.3 million, to $20.1 million, compared to $13.9 million for the year ended December 31, 2019, mainly due to the 91% increase in gain on sale of loans from 2019. Noninterest expenses rose 18% to $10.6 million for the fourth quarter of 2020, compared to $9.1 million for the fourth quarter of 2019 and increasing 7% from $10.0 million for the third quarter of 2020. For the year ended December 31, 2020, noninterest expense was $39.6 million, compared to $35.6 million for 2019. The increase in noninterest expense in the current quarter was primarily due to an increase in salary and employee benefits including increased mortgage banking variable compensation, which was partially offset by reductions in communication and professional services expenses. As with the current quarter, for the year ended December 31, 2020, noninterest expenses increased with the majority of the increase related to salary and employee benefits including higher variable commission on mortgage banking, as well as costs associated with the I-5 corridor expansion into the Eugene market and the growing Willamette Valley. Similar to the quarter, these increases were partially offset by reduction in professional services, occupancy, and advertising expenses. Income tax provision was $991,000 for the fourth quarter of 2020, compared to $836,000 for the fourth quarter 2019 and $1.0 million for the third quarter of 2020. The effective tax rate for the fourth quarter of 2020 was 20.5%, compared to 19.5% for the fourth quarter of 2019, and 20.4% for the third quarter of 2020. For the year ended December 31, 2020 the income tax provision was $2.9 million, down 11% from $3.2 million for the year ended December 31, 2019. In addition to federal corporate income tax, Pacific Financial also pays Oregon corporate income tax and Washington Business and Occupation tax on revenues. Balance Sheet Review Total Assets remained unchanged at $1.2 billion as of December 31, 2020 compared to September 30, 2020, with a significant increase of 26% from $929.4 million at December 30, 2019. Investment Securities, interest bearing deposits and federal funds sold increased $169.0 million to $341.1 million at December 31, 2020, compared to $172.1 million at December 30, 2019, and increased by $58.1 from $283.0 million at September 30, 2020. Within that total federal funds sold and interest bearing deposits increased $147.0 million compared to a year ago. This increase was primarily related to increases in deposits from PPP loan proceeds and other stimulus deposits received by our customers during the year, in addition to the receipt of funds from the SBA relating to the forgiveness of our customer’s PPP loans during the current quarter. Gross Loans increased 7%, or $46.8 million, to $732.0 million at December 31, 2020, compared to $685.3 million at December 30, 2019, and declined 6% from $779.8 million at September 30, 2020. Total loans at December 31, 2020, included $96.1 million of PPP loans compared to $130.7 million at September 30, 2020. Loan balances, excluding PPP loans, declined $49.3 million on a year over year basis, and was impacted by commercial and agricultural lines of credit usage which has declined by 18%, or $25.0 million, at December 31, 2020, compared to December 31, 2019. Loans are predominately originated within our Western Washington and Oregon markets and the Company’s portfolio is well-diversified by collateral type and by industry with a prudent credit discipline. With the potential increased risk associated with the COVID-19 pandemic, the Company continued to make prudent enhancements to its credit oversight, such as greater underwriting control of both unsecured and non-owner occupied commercial real estate lending along with the addition of an experienced credit risk officer to the credit administration team to support existing clients as needed. To manage risk, the Company oversees new loan origination volume and current loan balances using concentration limits that establish maximum exposure levels by designated industry segment, real estate product types, geography and single borrower limits. At December 31, 2020, CRE concentration remained relatively unchanged at 182% of total risk-based capital; below the regulatory guidance limit of 300%. Commercial and agricultural loans together with CRE-owner occupied, accounted for 41% of total loans outstanding (excluding PPP loans) at December 31, 2020, compared to 40% at December 30, 2019. CRE non-owner occupied and multifamily concentrations totaled $196.7 million. Hospitality, 5+ unit apartments and commercial properties comprise the largest areas of the commercial real estate non-owner occupied and multi-family property portfolios at $44.7 million, $37.0 million and $31.6 million, respectively. On the consumer side, loans to finance luxury and classic cars, which encompass a majority of the consumer loan balances, were relatively flat during the current quarter, ending at $46.5 million compared to $45.8 million at September 30, 2020, and represented a decline of $1.7 million from $48.2 million a year ago. As part of our strategic plan, we have been limiting our concentrations in indirect loans to finance luxury and classic cars. As of December 31, 2020 the luxury and classic car portfolio includes 871 loans with an average balance of $54,600. The portfolio continues to perform well with delinquencies at $118,000, or 2 basis points of the loans to finance luxury and classic car portfolio. Higher Risk Industries as a Result of COVID-19: Early in the pandemic, the Company identified several industries as being potentially more vulnerable to the economic and business impacts of the Coronavirus pandemic. Those industries included accommodation (hospitality), animal production (primarily dairy), restaurants, retail trade, healthcare, repair and maintenance (primary automotive) and recreation and entertainment. Although these industries are potentially more directly impacted by COVID-19, the bank’s customer base within these sectors covers a wide range of clients, including those who operate under diversified business models reaching a broader range of clients, possess necessary financial resources, and are managed by experienced management teams who aid in working through these economic challenges. At December 31, 2020, the total of these industries was $128.9 million, representing 20% of gross loans without PPP. Throughout the last few quarters, the Bank has closely monitored the performance and status of loans within these industries. Despite the initial impact to these higher risk industries caused by required shut down measures taken at onset of crises as well as pandemic driven changes to certain client operating models, generally most customers have been able to successfully navigate the challenges faced by their businesses. Certain industries appear to be stabilizing, such as accommodation (hospitality) where clients have generally performed reasonably well through the summer and early fall months especially for those operators located in coastal markets benefiting from local Pacific Northwest consumers preferring to vacation closer to home. Animal production (primarily dairy) clients were negatively impacted by lower milk prices in early stages of the crisis, but prices have since rebounded along with financial benefits provided under several government programs. Retail trade portfolio is well diversified within the Banks geographic footprint with majority of business located in rural markets versus metropolitan areas that are experiencing domestic unrest or protests. There continues to be pandemic driven challenges for selective retail trade credits and commercial real estate retail tenants. A larger share of Bank’s restaurant clients are more focused on convenience food and quick service concepts that have performed acceptably well through-out the pandemic. The identified groups of higher risk industries may change over time as conditions improve or worsen. Nonetheless, the Bank will continue its close monitoring of customer performance in these higher risk industries. Higher Risk Industries (without PPP)(Unaudited) Dec 31,2020 % of Gross Loans(without PPP) (Dollars in thousands)Animal production$20,227 3%Accommodation 43,269 7%Restaurants 11,438 2%Recreation, arts and entertainment 4,967 1%Retail trade 18,043 3%Repair and maintenance 10,111 2%Other services 7,586 1%Health care and social assistance 13,295 2%Total high risk loans$128,936 20% Asset Quality – Nonperforming assets totaled $2.4 million, or 0.20% of total assets, at December 31, 2020, compared to $1.0 million, or 0.11%, of total assets at December 30, 2019, and $1.6 million, or 0.14%, of total assets at September 30, 2020. “While delinquencies and nonperforming assets remained low for the quarter, we recognize that the challenges and credit impacts related to the pandemic economic downturn may not be realized until next year,” added Portmann. At December 31, 2020, adversely classified loans increased $5.0 million, to $16.8 million, or 2.64% of adversely classified loans to gross loans (excluding PPP), compared to $11.7 million, or 1.71% of gross loans, at December 31, 2019, and increased by $3.4 million from $13.4 million or 2.06% of gross loans (excluding PPP), at September 30, 2020. The increase from September 30, 2020 was largely due to the downgrade of a credit within the hospitality industry where the pandemic crisis was a contributing factor to business performance. Conversely, balances related to loans graded watch or other loans especially mentioned, declined $13.2 during the quarter to $109.3 million, as several credits were upgraded upon resumption of payments after being deferred early in the year. The classified coverage ratio was 13.77%, at December 31, 2020, compared to 10.38% at December 30, 2019, and 11.59%, at September 30, 2020. The increase from the linked quarter was primarily related to the hospitality credit downgrade. The classified coverage ratio is a measurement of asset risk and the capacity for capital to protect against that risk. It reflects the aggregate level of all adversely classified items in relation to Tier 1 Capital and the allowance for loan losses. The Allowance for Loan Losses (“ALL”) increased 34% to $12.1 million, or 1.65% of gross loans, or 2.01% of gross loans excluding PPP, at December 31, 2020, compared to $9.0 million, or 1.31% of gross loans, a year earlier and grew slightly from $12.0 million, or 1.85% of gross loans excluding PPP, at September 30, 2020. There was no provision for loan losses for the fourth quarter of 2020, or for the fourth quarter of 2019, compared to a provision for loan losses of $500,000 for the third quarter of 2020. For the year ended December 31, 2020, the loan loss provision totaled $3.5 million, compared to no provision for the year ended December 31, 2019. The increase in reserves during 2020 was driven primarily by increases earlier in the year in adversely classified and watch loan balances as a result of the economic impact of the Coronavirus pandemic, along with adjustments to various qualitative factors within the allowance methodology. No adjustment to qualitative factors were made in the fourth quarter of 2020. Net recoveries were $66,000 for the fourth quarter of 2020, as compared to net charge offs of $24,000 for the fourth quarter of 2019 and $5,000 for the third quarter of 2020. For the year ended December 31, 2020, net charge-offs were $425,000, compared to net charge-offs of $56,000 for the year ended December 31, 2019. Total Deposits increased 29% to $1.03 billion at December 31, 2020, compared to $798.6 million from a year earlier, and grew slightly from $1.02 billion at September 30, 2020. “We benefitted from deposit inflows from customers receiving PPP loan proceeds with the growth in non-interest-bearing deposits as well as increases relating to changes in spending habits during this pandemic,” said Tucker. Non-interest-bearing deposits increased by 40% from a year ago and represented 33% of total deposits at December 31, 2020, while core deposits (consisting of non-interest-bearing, interest-bearing accounts, money market and savings accounts) account for 94% of total deposits. Capital Ratios of Pacific Financial Corporation, and its subsidiary Bank of the Pacific, continue to exceed the well-capitalized regulatory thresholds. At December 31, 2020, Pacific Financial Corporation’s leverage ratio was 9.52% and the total risk-based capital ratio was 16.01%. 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 under guidance issued by the Federal Reserve. As provided in the Dodd-Frank Act, the Company expects to continue to rely on these junior subordinated debentures as part of its regulatory capital. Balance Sheet Overview(Unaudited) Dec 31,2020 Sept 30,2020 $Change %Change Dec 31,2019 $ Change % Change Assets: (Dollars in thousands, except per share data) Cash on hand and in banks$12,960 $15,492 $(2,532) -16%$12,264 $696 6% Interest bearing deposits 182,889 135,234 47,655 35% 27,709 155,180 560% Federal funds sold 33,024 20,735 12,289 59% 41,210 (8,186) -20% Investment securities 125,184 126,799 (1,615) -1% 103,216 21,968 21% Loans held-for-sale 34,906 37,813 (2,907) -8% 10,108 24,798 245% Loans, net of deferred fees 729,398 775,865 (46,467) -6% 684,438 44,960 7% Allowance for loan losses (12,068) (12,002) (66) 1% (8,993) (3,075) 34% Net loans 717,330 763,863 (46,533) -6% 675,445 41,885 6% Federal Home Loan Bank and Pacific Coast Bankers’ Bank stock, at cost 2,137 2,138 (1) 0% 2,217 (80) -4% Other assets 58,863 59,269 (406) -1% 57,246 1,617 3% Total assets$1,167,293 $1,161,343 $5,950 1%$929,415 $237,878 26% Liabilities and Shareholders’ Equity: Total deposits$1,028,424 $1,023,319 $5,105 0%$798,638 $229,786 29% Borrowings 13,956 13,994 (38) 0% 16,606 (2,650) -16% Accrued interest payable and other liabilities 10,728 11,985 (1,257) -10% 8,878 1,850 21% Shareholders’ equity 114,185 112,045 2,140 2% 105,293 8,892 8% Total liabilities and shareholders’ equity$1,167,293 $1,161,343 $5,950 1%$929,415 $237,878 26% Common Stock Shares Outstanding 10,434,533 10,528,290 (93,757) -1% 10,632,058 (197,525) -2% Book value per common share (1)$10.94 $10.64 $0.30 3%$9.90 $1.04 11%Tangible book value per common share (2)$9.65 $9.36 $0.29 3%$8.64 $1.01 12%Gross loans to deposits ratio 70.9% 75.8% -4.9% 85.7% -14.8% (1) Book value per common share is calculated as the total common shareholders’ equity divided by the period ending number of common stock shares outstanding.(2) Tangible book value per common share is calculated as the total common shareholders’ equity less total intangible assets and liabilities, divided by the period ending number of common stock shares outstanding. Income Statement Overview(Unaudited) For the Three Months Ended, Dec 31,2020 Sept 30,2020 $Change %Change Dec 31,2019 $ Change % Change (Dollars in thousands, except per share data)Interest and dividend income$10,219 $9,964 $255 3%$10,187 $32 0%Interest expense 492 562 (70) -12% 730 (238) -33% Net interest income 9,727 9,402 325 3% 9,457 270 3%Loan loss provision - 500 (500) -100% - - 0%Noninterest income 5,756 6,033 (277) -5% 3,887 1,869 48%Noninterest expense 10,648 9,993 655 7% 9,062 1,586 18%Income before income taxes 4,835 4,942 (107) -2% 4,282 553 13%Income tax expense 991 1,007 (16) -2% 836 155 19% Net Income$3,844 $3,935 $(91) -2%$3,446 $398 12% Average common shares outstanding - basic 10,469,896 10,599,494 (129,598) -1% 10,626,443 (156,547) -1%Average common shares outstanding - diluted 10,496,840 10,626,598 (129,758) -1% 10,664,621 (167,781) -2% Income per common share Basic$0.37 $0.37 $- 0%$0.32 $0.05 16% Diluted$0.37 $0.37 $- 0%$0.32 $0.05 16% Effective tax rate 20.5% 20.4% 0.1% 19.5% 1.0% For the Year Ended, Dec 31,2020 Dec 31,2019 $Change %Change (Dollars in thousands, except per share data) Interest and dividend income$39,574 $41,570 $(1,996) -5% Interest expense 2,380 2,928 (548) -19% Net interest income 37,194 38,642 (1,448) -4% Loan loss provision 3,500 - 3,500 100% Noninterest income 20,146 13,895 6,251 45% Noninterest expense 39,594 35,556 4,038 11% Income before income taxes 14,246 16,981 (2,735) -16% Income tax expense 2,862 3,223 (361) -11% Net Income$11,384 $13,758 $(2,374) -17% Average common shares outstanding - basic 10,575,816 10,596,776 (20,960) 0% Average common shares outstanding - diluted 10,602,816 10,652,228 (49,412) 0% Income per common share Basic$1.08 $1.30 $(0.22) -17% Diluted$1.07 $1.29 $(0.22) -17% Effective tax rate 20.1% 19.0% 1.1% Reconciliation of Non-GAAP Measure(Unaudited) For the Three Months Ended, Dec 31,2020 Sept 30,2020 $Change %Change Dec 31,2019 $ Change % Change Non-GAAP Net Income (Dollars in thousands)Net Income$3,844 $3,935 $(91) -2%$3,446 $398 12% Loan loss provision - 500 (500) -100% - - 0% Income tax expense 991 1,007 (16) -2% 836 155 19%Pre-tax, pre-provision net income$4,835 $5,442 $(607) -11%$4,282 $553 13% Pre-tax, pre-provisions ROA, annualized1.65% 1.89% (0.24) 1.80% 0.09 Pre-tax, pre-provisions ROE, annualized16.93% 19.24% (2.31) 16.17% 3.07 For the Year Ended, Dec 31,2020 Dec 31,2019 $Change %Change Non-GAAP Operating Income (Dollars in thousands) Net Income$11,384 $13,758 $(2,374) -17% Loan loss provision 3,500 - 3,500 100% Income tax expense 2,862 3,223 (361) -11% Pre-tax, pre-provision net income$17,746 $16,981 $765 5% Pre-tax, pre-provisions ROA, annualized1.66% 1.67% (0.01) Pre-tax, pre-provisions ROE, annualized16.10% 15.81% 0.29 Noninterest Income(Unaudited) For the Three Months Ended, Dec 31,2020 Sept 30,2020 $Change %Change Dec 31,2019 $ Change % Change (Dollars in thousands)Service charges on deposits$366 $356 $10 3%$527 $(161) -31%Gain on sale of loans, net 4,020 4,384 (364) -8% 2,212 1,808 82%Earnings on bank owned life insurance 125 130 (5) -4% 119 6 5%Other noninterest income Fee income 1,117 1,132 (15) -1% 992 125 13% Other 128 31 97 313% 37 91 246%Total noninterest income$5,756 $6,033 $(277) -5%$3,887 $1,869 48% For the Year Ended, Dec 31,2020 Dec 31,2019 $Change %Change (Dollars in thousands) Service charges on deposits$1,544 $2,055 $(511) -25% Gain on sale of loans, net 13,728 7,204 6,524 91% Gain on sale of securities available for sale, net - 102 (102) -100% Earnings on bank owned life insurance 498 667 (169) -25% Other noninterest income Fee income 4,160 3,641 519 14% Other 216 226 (10) -4% Total noninterest income$20,146 $13,895 $6,251 45% Noninterest Expense(Unaudited) For the Three Months Ended, Dec 31,2020 Sept 30,2020 $Change %Change Dec 31,2019 $ Change % Change (Dollars in thousands)Salaries and employee benefits$7,257 $6,940 $317 5%$5,726 $1,531 27%Occupancy 516 498 18 4% 529 (13) -2%Equipment 315 292 23 8% 275 40 15%Data processing 776 763 13 2% 781 (5) -1%Professional services 221 208 13 6% 389 (168) -43%State and local taxes 193 202 (9) -4% 158 35 22%FDIC and State assessments 77 35 42 120% 8 69 863%Other noninterest expense: Director fees 74 81 (7) -9% 75 (1) -1% Communication 76 108 (32) -30% 76 - 0% Advertising 58 33 25 76% 78 (20) -26% Professional liability insurance 55 53 2 4% 54 1 2% Amortization 122 91 31 34% 108 14 13% Other 908 689 219 32% 805 103 13%Total noninterest expense$10,648 $9,993 $655 7%$9,062 $1,586 18% For the Year Ended, Dec 31,2020 Dec 31,2019 $Change %Change (Dollars in thousands) Salaries and employee benefits$27,043 $22,691 $4,352 19% Occupancy 2,043 2,125 (82) -4% Equipment 1,186 1,009 177 18% Data processing 3,088 2,912 176 6% Professional services 897 1,436 (539) -38% State and local taxes 652 515 137 27% FDIC and State assessments 127 135 (8) -6% Other noninterest expense: Director fees 313 274 39 14% Communication 328 297 31 10% Advertising 173 304 (131) -43% Professional liability insurance 220 207 13 6% Amortization 411 414 (3) -1% Other 3,113 3,237 (124) -4% Total noninterest expense$39,594 $35,556 $4,038 11% Financial Performance Overview(Unaudited) For the Three Months Ended Dec 31,2020 Sept 30,2020 Change Dec 31,2019 ChangePerformance Ratios Return on average assets, annualized1.31% 1.37% (0.06) 1.45% (0.14)Return on average equity, annualized13.46% 13.91% (0.45) 13.01% 0.45 Efficiency ratio (1)68.77% 64.74% 4.03 67.91% 0.86 (1) Non-interest expense divided by net interest income plus noninterest income. For the Year Ended, Dec 31,2020 Dec 31,2019 Change Performance Ratios Return on average assets, annualized1.07% 1.50% (0.43) Return on average equity, annualized10.33% 13.70% (3.37) Efficiency ratio (1)69.05% 67.68% 1.37 (1) Non-interest expense divided by net interest income plus noninterest income. LIQUIDITY Cash and Cash Equivalents and Investment Securities(Unaudited) Dec 31,2020 % ofTotal Sept 30,2020 % ofTotal $Change %Change Dec 31,2019 Total $Change %Change (Dollars in thousands)Cash on hand and in banks$12,960 4%$15,492 5%$(2,532) -16%$12,264 7%$696 6%Interest bearing deposits 179,639 51% 131,984 44% 47,655 36% 24,458 13% 155,181 634%Other interest earning deposits 3,250 1% 3,250 1% - 0% 3,250 2% - 0%Federal funds sold 33,024 9% 20,735 7% 12,289 59% 41,210 22% (8,186) -20% Total 228,873 65% 171,461 57% 57,412 33% 81,182 44% 147,691 182% Investment securities: Collateralized mortgage obligations 45,358 13% 46,811 16% (1,453) -3% 45,141 25% 217 0% Mortgage backed securities 11,366 3% 13,194 4% (1,828) -14% 18,579 10% (7,213) -39% U.S. Government and agency securities 8,142 2% 8,449 3% (307) -4% 484 0% 7,658 1582% Municipal securities 58,228 16% 56,272 19% 1,956 3% 36,925 20% 21,303 58% Corporate debt securities 2,016 1% 2,009 1% 7 0% 2,004 1% 12 1% Equity securities 74 0% 64 1% 10 16% 84 1% (10) -12% Total 125,184 35% 126,799 43% (1,615) -1% 103,217 56% 21,967 21%Total cash equivalents and investment securities$354,057 100%$298,260 100%$55,797 19%$184,399 100%$169,658 92% Total cash equivalents and investment securities as a percent of total assets 30% 26% 20% LOANS Loans by Category(Unaudited) Dec 31,2020 % ofGrossLoans Sept 30,2020 % ofGrossLoans $Change %Change Dec 31,2019 % ofGrossLoans $Change %Change Commercial: (Dollars in thousands) Commercial and agricultural$100,802 14%$107,187 14%$(6,385) -6%$132,167 19%$(31,365) -24% PPP 96,070 13% 130,700 16% (34,630) -26% - 0% 96,070 100%Real estate: Construction and development 23,608 3% 35,276 5% (11,668) -33% 45,227 7% (21,619) -48% Residential 1-4 family 77,045 11% 76,856 10% 189 0% 85,711 13% (8,666) -10% Multi-family 31,311 4% 36,293 5% (4,982) -14% 29,865 4% 1,446 5% Commercial real estate -- owner occupied 156,833 21% 150,211 19% 6,622 4% 147,049 21% 9,784 7% Commercial real estate -- non owner occupied 165,365 23% 160,922 20% 4,443 3% 153,865 22% 11,500 7% Farmland 28,516 4% 30,268 4% (1,752) -6% 32,370 5% (3,854) -12%Consumer 52,474 7% 52,078 7% 396 1% 59,014 9% (6,540) -11% Gross Loans 732,024 100% 779,791 100% (47,767) -6% 685,268 100% 46,756 7% Less: allowance for loan losses (12,068) (12,002) (66) (8,993) (3,075) Less: deferred fees (2,626) (3,926) 1,300 (830) (1,796) Net loans$717,330 $763,863 $(46,533) $675,445 $41,885 Gross Loans w/o PPP 635,954 87% 649,091 83% (13,137) -2% 685,268 100% (49,314) -7% Woodside 46,497 6% 45,814 6% 683 1% 48,237 7% (1,740) -4% Loan Concentration(Unaudited) Dec 31,2020 % of RiskBasedCapital Sept 30,2020 % of RiskBasedCapital Change Dec 31,2019 % of RiskBasedCapital Change Commercial: (Dollars in thousands) Commercial and agricultural$100,802 85%$107,187 93% -8%$132,167 118% -33% PPP 96,070 81% 130,700 113% -32% - 0% 81%Real estate: Construction and development 23,608 20% 35,276 30% -10% 45,227 40% -20% Residential 1-4 family 77,045 65% 76,856 66% -1% 85,711 77% -12% Multi-family 31,311 27% 36,293 31% -4% 29,865 27% 0% Commercial real estate -- owner occupied 156,833 133% 150,211 130% 3% 147,049 132% 1% Commercial real estate -- non owner occupied 165,365 140% 160,922 139% 1% 153,865 138% 2% Farmland 28,516 24% 30,268 26% -2% 32,370 29% -5%Consumer 52,474 44% 52,078 45% -1% 59,014 53% -9% Gross Loans$732,024 $779,791 $685,268 Regulatory Commercial Real Estate$214,928 182%$222,719 192% -10%$222,899 199% -17% Total Risk Based Capital*$118,131 $115,852 $111,782 *Bank of the Pacific DEPOSITS Deposits by Category(Unaudited) Dec 31,2020 % of Total Sept 30,2020 % of Total $Change %Change Dec 31,2019 % of Total $Change %Change (Dollars in thousands)Interest-bearing demand$292,031 29%$286,512 28%$5,519 2%$228,579 28%$63,452 28%Money market 190,174 19% 183,425 18% 6,749 4% 149,510 19% 40,664 27%Savings 137,615 13% 126,359 12% 11,256 9% 104,871 13% 32,744 31%Time deposits (CDs) 65,895 6% 70,823 7% (4,928) -7% 70,668 9% (4,773) -7%Total interest-bearing deposits 685,715 67% 667,119 65% 18,596 3% 553,628 69% 132,087 24%Non-interest bearing demand 342,709 33% 356,200 35% (13,491) -4% 245,010 31% 97,699 40%Total deposits$1,028,424 100%$1,023,319 100%$5,105 0.5%$798,638 100%$229,786 29% The following table summarizes the capital measures of the Company and the Bank respectively, at the dates listed below. Capital Measures(unaudited) Dec 31,2020 Sept 30,2020 Change Dec 31,2019 Change WellCapitalizedUnder PromptCorrectionActionRegulations*Pacific Financial Corporation Total risk-based capital ratio16.01% 15.38% 0.63 14.72% 1.29 N/ATier 1 risk-based capital ratio14.74% 14.13% 0.61 13.54% 1.20 N/ACommon equity tier 1 ratio12.99% 12.42% 0.57 11.84% 1.15 N/ALeverage ratio9.52% 9.51% 0.01 11.17% (1.65) N/A Tangible common equity ratio8.60% 8.60% - 10.02% (1.42) N/A Bank of the Pacific Total risk-based capital ratio15.84% 15.21% 0.63 14.60% 1.24 10.5%Tier 1 risk-based capital ratio14.59% 13.96% 0.63 13.40% 1.19 8.5%Common equity tier 1 ratio14.59% 13.96% 0.63 13.40% 1.19 7.0%Leverage ratio9.46% 9.43% 0.03 11.07% (1.61) 7.5% *Includes Basel III 2019 Capital Conservation Buffer The following table summarizes the capital measures of the Company and the Bank respectively, at the dates listed below. (Unaudited)(Annualized, tax-equivalent basis) For the Three Months Ended, Dec 31,2020 Sept 30,2020 $Change %Change Dec 31,2019 $Change %Change Average Balances (Dollars in thousands)Gross loans$758,801 $781,917 $(23,116) -3%$680,220 $78,581 12%Gross loans without PPP$651,127 $655,481 $(4,354) -1%$680,220 $(29,093) -4%Loans held for sale$31,288 $25,002 $6,286 25%$16,909 $14,379 85%Investment securities$127,808 $124,062 $3,746 3%$100,942 $26,866 27%Federal funds sold & interest bearing deposits in banks$185,531 $148,970 $36,561 25%$79,827 $105,704 132%Total interest-earning assets$1,103,428 $1,079,951 $23,477 2%$877,898 $225,530 26%Non-interest bearing demand deposits$353,686 $349,763 $3,923 1%$257,780 $95,906 37%Interest bearing deposits$672,733 $655,945 $16,788 3%$552,949 $119,784 22%Total Deposits$1,026,419 $1,005,708 $20,711 2%$810,729 $215,690 27%Borrowings$13,969 $14,018 $(49) 0%$16,619 $(2,650) -16%Total interest-bearing liabilities$686,702 $669,963 $16,739 2%$569,568 $117,134 21%Total Equity$113,306 $112,236 $1,070 1%$105,072 $8,234 8% For the Three Months Ended, Dec 31,2020 Sept 30,2020 Change Dec 31,2019 Change Yield on average gross loans (1) 4.88% 4.60% 0.28 5.30% (0.42) Yield on average gross loans without PPP (1) 4.70% 4.87% (0.17) 5.30% (0.60) Yield on average investment securities (1) 2.31% 2.43% (0.12) 2.78% (0.47) Yield on Fed funds sold & interest bearing deposits in banks 0.14% 0.16% (0.02) 1.72% (1.58) Cost of average interest bearing deposits 0.25% 0.30% (0.05) 0.42% (0.17) Cost of average borrowings 1.82% 1.90% (0.08) 3.37% (1.55) Cost of average total deposits and borrowings 0.19% 0.22% (0.03) 0.35% (0.16) Yield on average interest-earning assets 3.71% 3.69% 0.02 4.64% (0.93) Cost of average interest-bearing liabilities 0.28% 0.33% (0.05) 0.51% (0.23) Net interest spread 3.43% 3.36% 0.07 4.13% (0.70) Net interest spread without PPP 3.18% 3.43% (0.25) 4.13% (0.95) Net interest margin (1) 3.53% 3.49% 0.04 4.31% (0.78) Net interest margin without PPP (1) 3.27% 3.53% (0.26) 4.31% (1.04) (1) Tax-exempt income has been adjusted to a tax equivalent basis at a rate of 21%. For the Year Ended, Dec 31,2020 Dec 31,2019 $Change %Change Average Balances (Dollars in thousands) Gross loans$746,709 $689,594 $57,115 8% Gross loans without PPP$662,875 $689,594 $(26,719) -4% Loans held for sale$21,255 $12,482 $8,773 70% Investment securities$117,376 $109,595 $7,781 7% Federal funds sold & interest bearing deposits in banks$121,148 $40,997 $80,151 196% Interest-earning assets$1,006,488 $852,668 $153,820 18% Non-interest bearing demand deposits$312,847 $245,370 $67,477 28% Interest bearing deposits$619,967 $542,687 $77,280 14% Total Deposits$932,814 $788,057 $144,757 18% Borrowings$15,092 $18,542 $(3,450) -19% Interest-bearing liabilities$635,059 $561,229 $73,830 13% Total Equity$110,228 $100,435 $9,793 10% Total Deposits excl. Brokered CDs 927,609 769,455 158,154 20.6% For the Year Ended, Dec 31,2020 Dec 31,2019 Change Net Interest Margin Yield on average gross loans (1) 4.80% 5.44% (0.64) Yield on average gross loans without PPP (1) 4.93% 5.44% (0.51) Yield on average investment securities (1) 2.60% 2.87% (0.27) Yield on Fed funds sold & interest bearing deposits in banks 0.31% 2.06% (1.75) Cost of average interest bearing deposits 0.33% 0.42% (0.09) Cost of average borrowings 2.41% 3.59% (1.18) Cost of average total deposits and borrowings 0.25% 0.36% (0.11) Yield on average interest-earning assets 3.97% 4.92% (0.95) Cost of average interest-bearing liabilities 0.37% 0.52% (0.15) Net interest spread 3.60% 4.40% (0.80) Net interest spread without PPP 3.61% 4.40% (0.79) Net interest margin (1) 3.73% 4.57% (0.84) Net interest margin without PPP (1) 3.73% 4.57% (0.84) (1) Tax-exempt income has been adjusted to a tax equivalent basis at a rate of 21%. Adversely Classified Loans and Securities(Unaudited) Dec 31,2020 Sept 30,2020 $Change % Change Dec 31,2019 $Change % Change (Dollars in thousands)Rated substandard or worse, but not impaired, beginning of three month period$11,605 $8,144 $3,461 42%$6,637 $4,968 75%Addition of previously classified pass graded loans 4,219 4,222 (3) 0% 4,053 166 4%Upgrades to pass or other loans especially mentioned status - (89) 89 -100% (27) 27 -100%Moved to nonaccrual (616) (486) (130) 27% - (616) 100%Principal payments, net (1,008) (186) (822) 442% (263) (745) 283%Rated substandard or worse, but not impaired, end of three month period$14,200 $11,605 $2,595 22%$10,400 $3,800 37%Impaired 2,561 1,797 764 43% 1,349 1,212 90%Total adversely classified loans¹$16,761 $13,402 $3,359 25%$11,749 $5,012 43% Other loans especially mentioned or watch, but not impaired$109,324 $122,567 $(13,243) -11%$22,691 $86,633 382%Gross loans (excluding deferred loan fees)$732,024 $779,791 $(47,767) -6%$685,268 $46,756 7%Adversely classified loans to gross loans 2.29% 1.72% 1.71% Adversely classified loans to gross loans without PPP 2.64% 2.06% 1.71% Allowance for loan losses$12,068 $12,002 $66 1%$8,993 $3,075 34%Allowance for loan losses as a percentage of adversely classified loans 72.00% 89.55% 76.54% Allowance for loan losses to total impaired loans 471.22% 667.89% 666.64% Adversely classified loans to total assets 1.44% 1.15% 1.26% Delinquent loans to gross loans, not in nonaccrual status 2 0.06% 0.00% 0.02% Delinquent loans to gross loans without PPP, not in nonaccrual status 0.07% 0.00% 0.16% 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 mayjeopardize 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. 2 Delinquent loans are defined as loans past due 30-90 days and still accruing. Nonperforming Assets(Unaudited) Dec 31,2020 Sept 30,2020 $Change %Change Dec 31,2019 $Change %Change (Dollars in thousands)Total nonaccrual loans, beginning of three month period$1,623 $1,426 $197 14%$1,014 $609 60%Transfer to performing loans - - - 0% - - 0%Addition of nonaccrual loans 1,056 543 513 94% 349 707 203%Moved to other assets owned - - - 0% (22) 22 -100%Principal payments, net (287) (346) 59 -17% (312) 25 -8%Charge-offs, net - - - 0% - - 0%Total nonaccrual loans, end of three month period$2,392 $1,623 $769 47%$1,029 $1,363 132% Other real estate owned and foreclosed assets - - - 0% 22 (22) -100%Total nonperforming assets$2,392 $1,623 $769 47%$1,051 $1,341 128% Total restructured performing loans, beginning of period$174 $180 $(6) -3%$327 $(153) -47%Transfer to nonaccrual loans - - - 0% - - 0%Addition of restructured performing loans - - - 0% - - 0%Principal payments, net (6) (6) - 0% (7) 1 -14%Charge-offs, net - - - 0% - - 0%Total restructured performing loans, end of period$168 $174 $(6) -3%$320 $(152) -48% Accruing loans past due 90 days or more$- $- $- 0%$- $- 0%Percentage of nonperforming assets to total assets 0.20% 0.14% 0.11% Nonperforming loans to total loans 0.33% 0.21% 0.15% Nonperforming loans to total loans without PPP 0.38% 0.25% 0.15% Allowance for Loan Losses(Unaudited) For the Three Months Ended, Dec 31,2020 Sept 30,2020 $Change %Change Dec 31,2019 $Change %Change (Dollars in thousands)Gross loans outstanding at end of period$732,024 $779,791 $(47,767) -6%$685,268 $46,756 7%Average loans outstanding, gross$758,801 $781,917 $(23,116) -3%$680,220 $78,581 12%Allowance for loan losses, beginning of period$12,002 $11,507 $495 4%$9,017 $2,985 33%Commercial - - - 0% - - 0%Commercial Real Estate - - - 0% - - 0%Residential Real Estate - - - 0% - - 0%Consumer (10) (14) 4 -29% (27) 17 -63%Total charge-offs (10) (14) 4 -29% (27) 17 -63%Commercial 14 5 9 180% - 14 100%Commercial Real Estate - - - 0% - - 0%Residential Real Estate 63 - 63 100% - 63 100%Consumer (1) 4 (5) -125% 3 (4) -133%Total recoveries 76 9 67 744% 3 73 NMNet recoveries/(charge-offs) 66 (5) 71 NM (24) 90 -375%Provision charged to income - 500 (500) -100% - - 0%Allowance for loan losses, end of period$12,068 $12,002 $66 1%$8,993 $3,075 34%Ratio of net loans charged-off to average gross loans outstanding, annualized -0.03% 0.00% -0.03% 0.01% -0.04% Ratio of net loans charged-off to average gross loans outstanding without PPP, annualized -0.04% 0.00% -0.04% 0.01% -0.05% Ratio of allowance for loan losses to gross loans outstanding 1.65% 1.54% 0.11% 1.31% 0.34% Ratio of allowance for loan losses to gross loans without PPP outstanding 2.01% 1.85% 0.16% 1.31% 0.70% For the Year Ended, Dec 31,2020 Dec 31,2019 $Change %Change (Dollars in thousands) Gross loans outstanding at end of period$732,024 $685,268 $46,756 7% Average loans outstanding, gross$746,709 $689,594 $57,115 8% Allowance for loan losses, beginning of period$8,993 $9,049 $(56) -1% Commercial (433) (30) (403) NM Commercial Real Estate - - - 0% Residential Real Estate - - - 0% Consumer (160) (139) (21) 15% Total charge-offs (593) (169) (424) 251% Commercial 19 56 (37) -66% Commercial Real Estate - - - 0% Residential Real Estate 135 34 101 297% Consumer 14 23 (9) -39% Total recoveries 168 113 55 49% Net (charge-offs) (425) (56) (369) 659% Provision charged to income 3,500 - 3,500 100% Allowance for loan losses, end of period$12,068 $8,993 $3,075 34% Ratio of net loans charged-off to average gross loans outstanding, annualized 0.06% 0.01% 0.05% Ratio of net loans charged-off to average gross loans outstanding without PPP, annualized 0.06% 0.01% 0.05% Ratio of allowance for loan losses to gross loans outstanding 1.65% 1.31% 0.34% Ratio of allowance for loan losses to gross loans without PPP outstanding 2.01% 1.31% 0.70% 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 December 31, 2020, the Company had total assets of $1.2 billion and operated fourteen branches in the communities of Grays Harbor, Pacific, 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 and Salem and Eugene, 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, including the current COVID-19 pandemic and government responses thereto, changes in interest rates, extensive and evolving regulation of the banking industry, and many other risks. The pandemic could cause us to experience higher loan losses within our lending portfolio, impairment of goodwill, reduced demand for our products and services and other negative impacts on our financial position or results of operations. The depth, severity and scope of this current recession is uncertain, and our company will not be immune to the effects of the financial stress resulting from a global pandemic and economic shutdown. 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. CONTACTS: DENISE PORTMANN, PRESIDENT & CEO CARLA TUCKER, EVP & CFO 360.533.8873

  • Bank of the Pacific to Close a Branch in Astoria, OR and Open a Full-Service Branch in Warrenton, OR
    GlobeNewswire

    Bank of the Pacific to Close a Branch in Astoria, OR and Open a Full-Service Branch in Warrenton, OR

    ABERDEEN, Wash., Nov. 12, 2020 (GLOBE NEWSWIRE) -- Pacific Financial Corporation (OTCQX: PFLC), (“Pacific”), the holding company for Bank of the Pacific, today announced plans to relocate its branch in Astoria, Oregon to Warrenton, Oregon effective March 2021. All customer accounts will be transferred to Warrenton and customers will be receiving a letter in the coming weeks outlining details of the transition. "The lease for our Astoria Branch is expiring and after reviewing the increased rental costs we decided to look at other possibilities particularly in light of increased digital adoption and reduced lobby traffic accelerated by the pandemic. After careful review, we decided to reopen the Bank owned Warrenton Branch and close Astoria. The Warrenton building is only eight years old and was purposely built as a bank branch. While we are using it for administrative purposes today, it is five miles from the Astoria location, in great shape and easily accessible for our customers. Our employees look forward to continuing to support our customers in Clatsop County, offering the same great service as they do today,” said Denise Portmann, President and Chief Executive Officer.While we are closing the physical location in Astoria, business development efforts will continue in Astoria and throughout Clatsop County. Customers have access to all of our branch locations as well as our technology based banking services such as mobile banking, remote deposit capture, Zelle, ATMs, debit cards and online banking. We believe optimizing our branch network and maximizing the use of our facilities are important aspects in prudently managing our capital resources.Our Astoria team currently led by Kelly Knick - Astoria Branch Manager, Pam Rush - Business Banker and Joe Talamantez Jr. - Residential Real Estate Lender, will bring many years of relationship banking experience, with a proven track record in retail and small business to the Astoria and Warrenton communities.ABOUT PACIFIC FINANCIAL CORPORATIONPacific 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 October 31, 2020, the Company had total assets of $1.2 billion and operated fourteen branches in the communities of Grays Harbor, Pacific, Whatcom, Skagit, Clark and Wahkiakum counties in the State of Washington, and two branches in Clatsop County, Oregon. The Company also operates loan production offices in the communities of Burlington, Washington and Salem and Eugene, Oregon. Visit the Company’s website at www.bankofthepacific.com. Member FDIC.Cautions Concerning Forward-Looking StatementsThis 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, including the current COVID-19 pandemic and government responses thereto, changes in interest rates, extensive and evolving regulation of the banking industry, and many other risks. The pandemic could cause us to experience higher loan losses within our lending portfolio, impairment of goodwill, reduced demand for our products and services and other negative impacts on our financial position or results of operations. The depth, severity and scope of this current recession is uncertain, and our company will not be immune to the effects of the financial stress resulting from a global pandemic and economic shutdown. 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.Contacts: Denise Portmann, President & CEO Carla Tucker, EVP & CFO 360.533.8873