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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter ended June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ------------ to ------------
Commission File Number 000-29829
PACIFIC FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
WASHINGTON 91-1815009
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
300 EAST MARKET STREET
ABERDEEN, WASHINGTON 98520-5244
(360) 533-8870
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days:
Yes X No ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Title of Class Outstanding at July 31, 2000
-------------- ----------------------------
Common Stock, par value $1.00 per share 2,500,350 shares
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Page 1
TABLE OF CONTENTS
PART I FINANCIAL INFORMATION 3
ITEM 1. FINANCIAL STATEMENTS 3
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 2000 AND DECEMBER 31, 1999 3
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2000
AND 1999 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 5
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
SIX MONTH PERIODS ENDED JUNE 30, 2000 AND 1999 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 11
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 14
PART II OTHER INFORMATION 15
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 15
SIGNATURES 16
Page 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets
(Dollars in Thousands)
Pacific Financial Corporation
June 30, 2000 and December 31, 1999
(Unaudited) June 30, December 31,
2000 1999
ASSETS
Cash and due from banks $ 8,060 $ 13,080
Interest bearing balances with banks 790 1,744
Investment securities available for sale 60,280 65,625
Investment securities held-to-maturity 1,478 1,615
Loans 168,675 152,664
Allowance for credit losses 2,031 1,930
-------- --------
LOANS, NET 166,644 150,734
Premises and equipment 3,847 3,510
Foreclosed real estate 26 177
Accrued interest receivable 2,202 2,004
Cash surrender value of life insurance 2,398 2,330
Other assets 1,711 1,370
-------- --------
TOTAL ASSETS $247,436 $242,189
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits:
Non-interest bearing $ 36,112 $ 34,359
Interest bearing 176,415 171,780
-------- --------
TOTAL DEPOSITS 212,527 206,139
Accrued interest payable 579 549
Short-term borrowings 9,150 9,675
Other liabilities 1,209 4,388
-------- --------
TOTAL LIABILITIES 223,465 220,751
STOCKHOLDERS' EQUITY
Common stock (par value $1); authorized:
25,000,000 shares; issued: 2000 - 2,500,350 shares;
1999 - 496,770 shares 2,501 2,485
Surplus 9,829 9,432
Retained earnings 12,573 10,473
Accumulated other comprehensive income (loss) (932) (952)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 23,971 21,438
Total liabilities and stockholders' equity $247,436 $242,189
Page 3
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share) THREE MONTHS ENDED SIX MONTHS ENDED
(Unaudited) JUNE 30, JUNE 30,
2000 1999 2000 1999
INTEREST INCOME
Loans $4,130 $3,450 $7,985 $6,840
Securities held to maturity - tax exempt 25 27 50 54
Securities available for sale:
Taxable 766 774 1,543 1,396
Tax-exempt 144 187 300 309
Deposits with banks
and federal funds sold 34 120 70 351
------ ------ ------ ------
Total interest income 5,099 4,531 9,948 8,950
INTEREST EXPENSE
Deposits 1,912 1,615 3,698 3,294
Other borrowings 184 81 313 96
------ ------ ------ ------
Total interest expense 2,096 1,696 4,011 3,390
NET INTEREST INCOME 3,003 2,835 5,937 5,560
Provision for credit losses 52 0 105 0
------ ------ ------ ------
Net interest income after provision
for credit losses 2,951 2,835 5,832 5,560
NON-INTEREST INCOME
Service charges 197 203 376 386
Mortgage loan origination fees 0 0 1 0
Gain on sale of foreclosed real estate 0 0 31 0
Other operating income 108 126 253 255
------ ------ ------ ------
Total non-interest income 305 314 661 641
NON-INTEREST EXPENSE
Salaries and employee benefits 949 945 1,963 1,912
Occupancy and equipment 255 249 495 503
Other 534 407 1,026 998
------ ------ ------ ------
Total non-interest expense 1,738 1,601 3,484 3,413
Income before income taxes 1,518 1,548 3,009 2,788
Provision for income taxes 442 463 909 848
------ ------ ------ ------
NET INCOME $1,076 $1,085 $2,100 $1,940
Earnings per common share:
Basic $ .43 $ .44 (1) $ .85 $ .79 (1)
Diluted .43 .44 (1) .84 .78 (1)
Average shares outstanding:
Basic 2,483,850 2,444,845 (1) 2,483,850 2,444,845 (1)
Diluted 2,509,932 2,492,790 (1) 2,510,346 2,491,795 (1)
(1) Restated to reflect the 5-for-1 stock split approved in April 2000.
Page 4
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months ended June 30, 2000 and 1999
(Dollars in thousands)
(Unaudited) 2000 1999
OPERATING ACTIVITIES
Net income $2,100 $1,940
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for credit losses 105 ----
Depreciation and amortization 224 272
Stock dividends received (99) (126)
Gain on sale of foreclosed real estate (31) ----
Increase in accrued interest receivable (198) (381)
Increase in accrued interest payable 30 21
Other (480) (510)
------ ------
Net cash provided by operating activities 1,651 1,216
INVESTING ACTIVITIES
Net (increase)decrease in federal funds --- 7,717
Decrease in interest bearing
deposits with banks 954 5,762
Purchase of securities held to maturity --- (198)
Proceeds from maturities of investments
held to maturity 137 297
Purchases of securities available for sale (1,610) (41,002)
Proceeds from maturities of securities available for sale 7,067 26,122
Net increase in loans (16,015) (854)
Additions to premises and equipment (144) (126)
Proceeds from sales of foreclosed real estate 182 ----
------ ------
Net cash used in investing activities (9,429) (2,282)
FINANCING ACTIVITIES
Net increase (decrease) in deposits 6,388 (5,273)
Net increase (decrease) in short-term borrowings (525) 8,964
Payment of dividends (3,105) (2,379)
------ ------
Net cash provided by financing activities 2,758 1,312
Net increase(decrease)in cash and due from banks (5,020) 246
CASH AND DUE FROM BANKS
Beginning of period 13,080 8,634
End of period $8,060 $8,880
Page 5
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash payments for:
Interest $3,981 $3,369
Income Taxes 920 933
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ACTIVITIES
Unrealized gains(losses)on securities available
for sale, net of tax $ 20 $ (913)
Foreclosed real estate acquired in settlement of loans --- 30
Stock issued in five-for-one stock split 1,988 ----
Stock issued for land purchase 413 ----
Page 6
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Six months ended June 30, 2000 and 1999
(Dollars in thousands) (Unaudited) ACCUMULATED
OTHER
COMPREHENSIVE
COMMON RETAINED INCOME
STOCK SURPLUS EARNINGS (LOSS) TOTAL
Balance December 31, 1998 $2,445 $ 9,016 $ 9,656 $ 368 $21,485
Other comprehensive income:
Net income 1,940 1,940
Change in unrealized gain
on securities available
for sale, net (913) (913)
Comprehensive income 1,027
------ ------- ------- ----- -------
Balance June 30, 1999 $2,445 $ 9,016 $11,691 $(545) $22,512
Balance December 31, 1999 $ 497 $11,420 $10,473 $(952) $21,438
Other comprehensive income:
Net income 2,100 2,100
Change in unrealized loss
on securities available
for sale, net 20 20
Comprehensive income 2,120
Five-for-one stock split 1,988 (1,988)
Issuance of common stock 16 397 413
------ ------- ------- ----- -------
Balance June 30, 2000 $2,501 $ 9,829 $12,573 $(932) $23,971
Page 7
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
- - -----------------------------
The accompanying unaudited financial statements have been prepared by Pacific
Financial Corporation ("Pacific" or "Company") in accordance with generally
accepted accounting principles for interim financial information and with
instructions to Form 10Q. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the six months ended June
30, 2000, are not necessarily indicative of the results anticipated for the year
ending December 31, 2000.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reported periods.
Actual results could differ from those estimates.
All dollar amounts in tables, except per share information, are stated in
thousands.
2. EQUITY
- - --------------
In April 2000, the Board of Directors approved a five-for-one common stock
split, payable July 15, 2000 to shareholders of record on June 15, 2000. In
addition, the number of authorized shares of common stock were increased from
5,000,000 shares to 25,000,000 shares. Common stock and surplus as at June 30,
2000 have been adjusted as if the additional shares had been issued on that
date. In addition, all per share information and the average number of shares
outstanding shown in this report have been retroactively adjusted to show the
effect of the stock split.
3. INVESTMENT SECURITIES
- - -----------------------------
Investment securities consist principally of short and intermediate term debt
instruments issued by the U.S. Treasury, other U.S. government agencies, State
and local government units, and other corporations. The Company is a stockholder
in the Federal Home Loan Bank of Seattle (FHLB).
SECURITIES HELD TO MATURITY AMORTIZED UNREALIZED FAIR
COST GAINS VALUE
(LOSSES)
June 30, 2000
State and Municipal Securities $1,478 -0- $1,478
------ --- ------
TOTAL $1,478 -0- $1,478
Page 8
SECURITIES AVAILABLE FOR SALE AMORTIZED UNREALIZED FAIR
COST GAINS VALUE
(LOSSES)
June 30, 2000
U.S. Treasury Securities $ 504 $ (8) $ 496
U.S. Government Securities 30,855 (889) 29,966
State and Municipal Securities 12,052 (168) 11,884
Corporate Securities 14,841 (355) 14,486
Equity Securities 3,448 -0- 3,448
------- ------- -------
TOTAL $61,700 $(1,420) $60,280
3. ALLOWANCE FOR CREDIT LOSSES
- - -----------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2000 1999 2000 1999
Balance at beginning of period $1,980 $1,895 $1,930 $1,865
Provision for possible credit losses 52 0 105 0
Charge-offs 2 13 10 16
Recoveries 1 48 6 81
Net recoveries (charge-offs) (1) 35 (4) 65
------ ------ ------ ------
Balance at end of period $2,031 $1,930 $2,031 $1,930
4. COMPUTATION OF BASIC EARNINGS PER SHARE:
- - ------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2000 1999 (1) 2000 1999 (1)
Net Income $1,076,000 $1,085,000 $2,100,000 $1,940,000
Shares Outstanding,
Beginning of Period 2,483,850 2,444,845 2,483,850 2,444,845
Shares Issued During Period Times
Average Time Outstanding - - - -
Average Shares Outstanding 2,483,850 2,444,845 2,483,850 2,444,845
Basic Earnings Per Share $ .43 $ .44 $ .85 $ .79
(1) Restated to reflect the five-for-one stock split approved in April 2000.
Page 9
5. COMPUTATION OF DILUTED EARNINGS PER SHARE:
- - --------------------------------------------------
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2000 1999 (1) 2000 1999 (1)
Net Income $1,076,000 $1,085,000 $2,100,000 $1,940,000
Options Outstanding 78,550 93,550 78,550 93,550
Proceeds Were Options Exercised $1,424,500 $1,229,500 $1,424,500 $1,229,500
Average Share Price During Period $27.15 $26.96 $27.37 $26.38
Proceeds Divided By Average Share Price 52,468 45,605 52,054 46,600
Incremental Shares 26,082 47,945 26,496 46,950
Average Shares Outstanding 2,483,850 2,444,845 2,483,850 2,444,845
Incremental Shares
Plus Outstanding Shares 2,509,932 2,492,790 2,510,346 2,491,795
Diluted Earnings Per Share $ .43 $ .44 $ .84 $ .78
(1) Restated to reflect the five-for-one stock split approved in April 2000.
Page 10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A WARNING ABOUT FORWARD-LOOKING INFORMATION
We have made forward-looking statements in this document that are
subject to risks and uncertainties. These statements are based on the beliefs
and assumptions of our management, and on information currently available to
them. Forward-looking statements include the information concerning our possible
or assumed future results of operations set forth under "Management's Discussion
and Analysis of Financial Condition And Results of Operations" and statements
preceded by, followed by or that include the words "believes," "expects,"
"anticipates," "intends," "plans," "estimates" or similar expressions.
Any forward-looking statements in this document are subject to risks
relating to, among other things, the following:
1. effective December 15, 1999 Harbor Bancorp, Inc. completed
the merger of equals with Pacific Financial Corporation; anticipated
cost savings from the merger may not be fully realized or realized
within the expected time frame (the transaction was treated as a pooling
for accounting purposes, and accordingly, all prior results of
operations will be restated);
2. competitive pressures among depository and other financial
institutions may increase significantly;
3. changes in the interest rate environment may reduce
margins;
4. general economic or business conditions, either nationally
or in the state or regions in which we do business, may be less
favorable than expected, resulting in, among other things, a
deterioration in credit quality or a reduced demand for credit;
5. legislative or regulatory changes may adversely affect the
businesses in which we are engaged; and
6. adverse changes may occur in the securities markets.
Our management believes the forward-looking statements are reasonable;
however, you should not place undue reliance on them. Forward-looking statements
are not guarantees of performance. They involve risks, uncertainties and
assumptions. The future results and shareholder values of the combined
corporation following completion of the merger may differ materially from those
expressed or implied in these forward-looking statements. Many of the factors
that will determine these results and values are beyond our ability to control
or predict.
Page 11
NET INCOME. For the six months ended June 30, 2000, Pacific's net income was
$2,100,000 compared to $1,940,000 for the same period in 1999. The principal
contributing factor to the increase was a $272,000 increase in net interest
income after provision for credit losses, offset in part by a $71,000 increase
in non-interest expense. Net income for the three months ended June 30, 2000 was
$1,076,000, compared to $1,085,000 for the same period in 1999. The decrease was
attributable primarily to a $137,000 increase in non-interest expense and a
$52,000 increase in the provision for credit losses, which offset a $168,000
increase in net interest income.
NET INTEREST INCOME. Net interest income for the three months ended June 30,
2000 increased $168,000 compared to the same period in 1999. Net interest income
for the six months ended June 30, 2000 increased $377,000 over the comparable
period in 1999.
Interest income for the three months ended June 30, 2000 increased $568,000 or
12.5% compared to the comparable period in 1999, and for the first six months of
2000 increased $998,000 or 11.2% over the same period in 1999. Increased lending
volume and increases in the prime rate of interest were the primary reasons for
the positive variance in interest income. Average loans outstanding for the six
months ended June 30, 2000 were $166,105,000, or 14.2% higher than for the
comparable period in 1999.
Interest expense for the three months ended June 30, 2000 increased $400,000 or
23.6% compared to the same period in 1999, and increased $621,000 or 18.3% for
the six months ended June 30, 2000 over the comparable period in 1999. This is
due to the increased interest rate environment during the 2000 periods. Average
deposits for the six months ended June 30, 2000 were $209,175,000, unchanged
from the comparable period in 1999. Average short term borrowings for the six
months ended June 30, 2000 were $11,368,000, $7,652,000 higher than for the
comparable period in 1999.
PROVISION AND ALLOWANCE FOR CREDIT LOSSES. During the three months ended June
30, 2000, $52,000 was provided for possible credit losses, compared to none for
the same period in 1999. For the six months ended June 30, 2000 $105,000 was
provided for possible credit losses compared to none for the comparable period
in 1999. For the six months ended June 30, 2000, net charge-offs were $4,000
compared to net recoveries of $65,000 during the same period in 1999.
At June 30, 2000, the allowance for credit losses stood at $2,031,000 compared
to $1,930,000 at December 31, 1999, and $1,930,000 at June 30, 1999. The ratio
of the allowance to total loans outstanding was 1.20%, 1.26% and 1.30% at June
30, 2000, December 31, 1999, and June 30, 1999, respectively. Management
considers the allowance for possible credit losses to be adequate for the
periods indicated.
NON-PERFORMING ASSETS AND OTHER REAL ESTATE OWNED. Non-performing assets totaled
$2,718,000 at June 30, 2000. This represents 1.1% of total assets compared to
$492,000 or .20% at December 31, 1999, and $654,000 or .40% at June 30, 1999.
Non-accrual loans at June 30, 2000 totaled $1,525,000, of which $1,173,000 is an
agriculture loan that was contractually not delinquent. However, it does not
appear that sufficient cash flow is available to meet current obligations on the
loan. Accordingly, management deemed it prudent to place the loan in a
non-accrual status during the 2000 second quarter. Interest on this loan will be
recognized only as it is collected, and then only if ultimate collection of
principal is virtually assured.
Page 12
Loans accruing which are past due 90 days or more totaled $1,167,000 at June 30,
2000, of which $964,000 is fully guaranteed by the U.S. Government; management
believes losses, if any, associated with these loans will be minimal.
ANALYSIS OF
NONPERFORMING ASSETS JUNE 30 DECEMBER 31 JUNE 30
(Dollars in thousands) 2000 1999 1999
Accruing loans past due 90 days
or more $1,167 $140 $460
Non-accrual loans 1,525 175 32
Foreclosed loans 26 177 162
TOTAL $2,718 $492 $654
NON-INTEREST INCOME AND EXPENSES. Non-interest income for the three and six
month periods ended June 30, 2000 decreased $9,000 and increased $20,000
respectively compared to the same periods in 1999. Service charges on deposit
accounts decreased $6,000 and $10,000 compared to the same three and six month
periods in 1999, due primarily to fewer overdraft charges. Other operating
income for the three and six month periods ended June 30, 2000 declined $18,000
and $2,000 compared to the same periods in 1999. This was attributable primarily
to decreased loan servicing fees due to participation loans being paid off, and
lower check cashing fees and ATM fees.
Non-interest expense for the three and six month periods ended June 30, 2000
increased $137,000 and $71,000, respectively, compared to the same periods in
1999. For the 2000 three-month period, salaries and benefits increased $4,000,
occupancy expense increased $6,000, and other expenses increased $127,000
compared to the same period in 1999. The primary reasons for the increase in
non-interest expense for the six months ended June 30, 2000 compared to the same
period in 1999 were an increase in salaries and benefits of $51,000 due to
normal merit and inflationary increases, and in other expenses of $28,000
relating to increased general and administrative costs.
INCOME TAXES. The federal income tax provision for the six months ended June 30,
2000 was $909,000, an increase of $61,000 compared to the same period in 1999.
The effective tax rate for the 2000 period is 30.2% compared to 30.4% in 1999.
FINANCIAL CONDITION. Total assets were $247,436,000 at June 30, 2000, an
increase of $5,247,000 or 2.2% over year-end 1999. Loans totaled $168,675,000 at
June 30, 2000, an increase of $16,011,000 over year-end 1999. Total deposits
were $212,527,000 at June 30, 2000, an increase of $6,388,000 compared to the
balance at December 31, 1999.
Page 13
LOANS. Loan detail by category at June 30, 2000 and December 31, 1999 was as
follows: (Dollars in thousands)
June 30, December 31,
2000 1999
Commercial and industrial $60,663 $54,150
Agricultural 2,051 2,101
Real estate mortgage 94,777 88,852
Real estate construction 6,641 3,325
Installment 3,633 3,379
Credit cards and other 910 857
Total Loans 168,675 152,664
Allowance for credit losses (2,031) (1,930)
Net Loans $166,644 $150,734
LIQUIDITY. Adequate liquidity is available to accommodate fluctuations in
deposit levels, funds operations, and provide for customer credit needs and meet
obligations and commitments on a timely basis. The Company has no brokered
deposits. The Company has credit availability from the Federal Home Loan Bank of
Seattle of $49 million, of which $9,150,000 was used at June 30, 2000.
SHAREHOLDERS' EQUITY. Total shareholders' equity was $23,971,000 at June 30,
2000, an increase of $2,533,000 or 11.8% compared to December 31, 1999. Book
value per share increased to $9.59 at June 30, 2000 compared to $8.63 at
December 31, 1999. Book value is calculated by dividing total equity capital by
total shares outstanding.
On April 17, 2000, the Board of Directors declared a five-for-one stock split of
Pacific's outstanding common stock. The split was implemented as a stock
dividend, payable July 15, 2000, at the rate of four new shares of common stock
for each share held of record on June 15, 2000.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Interest
rate, credit, and operations risks are the most significant market risks which
affect the Company's performance. The Company relies on loan review, prudent
loan underwriting standards and an adequate allowance for possible credit losses
to mitigate credit risk.
An asset/liability management simulation model is used to measure interest rate
risk. The model produces regulatory oriented measurements of interest rate risk
exposure. The model quantifies interest rate risk through simulating forecasted
net interest income over a 12 month time period under various interest rate
scenarios, as well as monitoring the change in the present value of equity under
the same rate scenarios. The present value of equity is defined as the
difference between the market value of assets less current liabilities. By
measuring the change in the present value of equity under various rate
scenarios, management is able to identify interest rate risk that may not be
evident in changes in forecasted net interest income.
Page 14
The Company is currently asset sensitive, meaning that interest earning assets
mature or reprice more quickly than interest-bearing liabilities in a given
period. Therefore, a significant increase in market rates of interest could
improve net interest income. Conversely, a decreasing rate environment may
adversely affect net interest income.
It should be noted that the simulation model does not take into account future
management actions that could be undertaken should actual market rates change
during the year. An important point should be kept in mind; the model simulation
results are not exact measures of the Company's actual interest rate risk. They
are rather only indicators of rate risk exposure, based on assumptions produced
in a simplified modeling environment designed to heighten sensitivity to changes
in interest rates. The rate risk exposure results of the simulation model
typically are greater than the Company's actual rate risk. That is due to the
conservative modeling environment, which generally depicts a worst-case
situation. Management has assessed the results of the simulation reports as of
June 30, 2000, and believes that there has been no material change since
December 31, 1999.
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On June 30, 2000, Pacific issued 16,500 shares of its common stock
(reflecting the five-for-one stock split) in a tax-free corporate reorganization
in exchange for all of the shares of IDC Parking, held by a single individual.
The shares were issued in reliance on the exemption from registration afforded
by Section 4(2) of the Securities Act of 1933. The transaction related to the
Company's purchase of its Montesano branch site.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3.1 Amendment to Restated Articles of Incorporation of
Pacific Financial Corporation filed August 2, 2000.
3.2 Restated Articles of Incorporation of Pacific Financial
Corporation as amended effective August 2, 2000.
27 Financial Data Schedule for the six-month period ending
June 30, 2000.
(b) Reports on Form 8-K:
(1) A report on Form 8-K dated April 17, 2000, was filed on April
21, 2000, to report under item 5 that the Board of Directors
had approved a five-for-one stock split payable on July 15,
2000.
(2) A report on Form 8-K dated May 17, 2000, was filed on June
29, 2000, to report under item 5 that Pacific's two
subsidiaries, The Bank of Grays Harbor and Bank of the
Pacific, are to be merged as soon as practicable into a
single bank to be named Bank of the Pacific, with the
branches of The Bank of Grays Harbor to continue to operate
under their existing name for the present.
Page 15
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PACIFIC FINANCIAL CORPORATION
DATED: August 14, 2000 By: /s/ John Van Dijk
--------------------------------
John Van Dijk
Treasurer
(Chief Financial Officer)
Page 16