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EX-23.1 - PACIFIC FINANCIAL CORP | v165443_ex23-1.htm |
Registration No. 333-162297
UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
AMENDMENT
NO. 1
TO
FORM
S-1
REGISTRATION
STATEMENT UNDER
THE
SECURITIES ACT OF 1933
PACIFIC
FINANCIAL CORPORATION
(Exact
name of registrant as specified in its charter)
Washington
(State
or other jurisdiction of incorporation or organization)
91-1815009
(IRS
Employer Identification Number)
1101 S.
Boone Street
Aberdeen,
Washington 98520-5244
(360)
533-8870
(Address,
including zip code, and telephone number,
including
area code, of registrant's principal executive offices)
Dennis A.
Long
Chief
Executive Officer
Pacific
Financial Corporation
1101 S.
Boone Street
Aberdeen,
Washington 98520-5244
Telephone
(360) 533-8870
(Name,
address, including zip code, and telephone number, including area code, of agent
for service)
With copy
to:
Mary Ann
Frantz
David G.
Post
Miller
Nash LLP
111 S.W.
Fifth Avenue, Suite 3400
Portland,
Oregon 97204
(503)
224-5858
Approximate
date of commencement of proposed sale to the public: From time to
time after the effective date of this Registration Statement.
If any of
the securities being registered on this Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. x
If this
Form is filed to register additional securities for an offering pursuant to
Rule 462(b) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. o
____________________________
If this
Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act of 1933, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. o
____________________________
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering. o
________________________________
Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of "large accelerated filer,"
"accelerated filer" and "smaller reporting company" in rule 12b-2 of the
Exchange Act.
Large
accelerated filer 0
|
Accelerated
filer T
|
Non-accelerated
filer 0
|
Smaller
reporting company 0
|
The
registration hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until this Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The
information in this prospectus is not complete and may be
changed. The selling shareholder may not sell these securities until
the registration statement filed with the Securities and Exchange Commission
relating to these securities is effective. This prospectus is not an
offer to sell these securities and it is not a solicitation of an offer to buy
these securities in any jurisdiction where such offer, solicitation or sale is
not permitted.
PACIFIC
FINANCIAL CORPORATION
695,000
SHARES OF COMMON STOCK
This
prospectus relates to the offer and sale of up to 695,000 shares of our common
stock by the selling shareholder. We issued and sold these shares as
part of a private placement transaction in which the selling shareholder
purchased 556,000 shares and a warrant to purchase an additional 139,000 shares
at $6.50 per share. We are registering these shares pursuant to
agreements we entered into with the selling shareholder.
The
selling shareholder may sell all or a portion of these shares from time to time,
in amounts, at prices and on terms determined at the time of
offering. The shares may be sold by any means described in the
section of this prospectus entitled "Plan of Distribution" beginning on
page 18.
We will
not receive any proceeds from the sale of these shares. We will,
however, receive cash proceeds equal to the total exercise price of any warrants
that are exercised for cash, but will receive no cash if and to the extent that
warrants are exercised pursuant to the net, or "cashless," exercise feature of
the warrants.
Our
common stock is traded on the OTC Bulletin Board under the symbol
"PFLC.OB." The last reported trade price for our common stock, on
November 2, 2009, was $4.20 per share.
Investing
in our common stock involves risks. You should read the "Risk
Factors" section beginning on page 4 before investing.
These
securities are equity securities and are not deposits, savings accounts or other
obligations of a bank or savings institution and are not insured by the Federal
Deposit Insurance Corporation or any other governmental agency.
Neither
the Securities and Exchange Commission nor any state regulatory agency has
approved or disapproved of these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a
criminal offense.
The date
of this prospectus is November 9, 2009.
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TABLE
OF CONTENTS
Page
3
|
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RISK
FACTORS
|
4
|
INCORPORATION
BY REFERENCE
|
9
|
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
|
10
|
SELECTED
FINANCIAL DATA
|
11
|
DESCRIPTION
OF COMMON STOCK
|
12
|
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
|
14
|
MARKET
AND SHARE PRICE INFORMATION
|
15
|
SELLING
SHAREHOLDER
|
16
|
PLAN
OF DISTRIBUTION
|
16
|
USE
OF PROCEEDS
|
19
|
WHERE
YOU CAN FIND MORE INFORMATION
|
19
|
INDEMNIFICATION
|
20
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LEGAL
MATTERS
|
20
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EXPERTS
|
20
|
- 2
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PROSPECTUS
SUMMARY
The
following summary highlights information contained elsewhere in this
prospectus. It may not contain all the information that may be
important to you. You should read the entire prospectus, including
the section entitled "Risk Factors," and the information to which we refer you
and which is incorporated by reference, before making an investment
decision.
The
Company
Pacific
Financial Corporation is a bank holding company headquartered in Aberdeen,
Washington. We own one bank, The Bank of the Pacific, which is
located in the State of Washington and chartered under the laws of that
state. We conduct our banking business through 15 bank branches
located in communities throughout Grays Harbor, Pacific, Wahkiakum and Whatcom
counties in Washington and one branch in Clatsop County, Oregon.
We were
incorporated in the State of Washington on February 12, 1997, pursuant to a
holding company reorganization of The Bank of the Pacific. Our
principal executive offices are located at 1101 S. Boone Street, Aberdeen,
Washington 98520. Our telephone number is (360)
533-8870. We maintain a website at www.bankofthepacific.com. The
information that is contained in, or can be accessed through, our website is not
a part of this prospectus.
The
Transaction
On
August 25, 2009, we entered into a securities purchase agreement and
registration rights agreement with Ithan Creek Master Investors (Cayman) L.P.
(referred to sometimes as “Ithan Creek”), under which we sold to Ithan Creek
556,000 shares of our common stock and warrants to purchase
139,000 additional shares of common stock for total proceeds of $2,502,000
(before expenses). As of October 30, 2009, there were 10,121,853
shares of our common stock and warrants to purchase an additional
699,642 shares of common stock issued and outstanding.
Under the
registration rights agreement, we agreed to register for resale
695,000 shares that are owned by Ithan Creek or may be acquired by it upon
exercise of warrants. We are required to keep the registration
statement effective until either all of the securities covered by the
registration statement have been publicly sold or such securities may be sold by
non-affiliates without restrictions under Rule 144 under the Securities
Act, whichever is earlier.
The
Offering
Shares
Offered
|
695,000
shares of common stock
|
Selling
Shareholder
|
Ithan
Creek. We are not selling any shares in this
offering.
|
Use
of Proceeds
|
We
will not receive any proceeds from the resale of shares by the selling
shareholder.
|
Plan
of Distribution
|
See
“Plan of Distribution” for a discussion of the methods that may be used by
the selling shareholder in its offer and sale of our
shares.
|
Risk
Factors
|
See
“Risk Factors” for a discussion of certain factors you should consider
before investing in our shares.
|
- 3
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Investment
in our common stock involves risks and uncertainties. You should
carefully consider and evaluate all of the information contained in this
prospectus and in the documents we incorporate by reference into this prospectus
before you decide to purchase our common stock. In particular, you
should carefully consider and evaluate the risks and uncertainties described
below as well as the financial and other information and analysis that is
included in our Annual Report on Form 10-K for the fiscal year ended
December 31, 2008, and Quarterly Reports on Form 10-Q for the
quarterly periods ended March 31, 2009, June 30, 2009, and September
30, 2009.
Risks
Related to Our Business
Future
loan losses may exceed our allowance for loan losses.
We are
subject to credit risk, which is the risk of losing principal or interest due to
our borrowers' failure to repay loans in accordance with their
terms. A continued or sustained downturn in the economy or the real
estate market in our market areas or a rapid change in interest rates will have
a negative effect on our borrowers' ability to repay loans and on the value of
collateral securing our loans. This deterioration in economic
conditions could result in losses in excess of our loan loss
allowances. To the extent loans are not paid timely by borrowers, the
loans are placed on non-accrual, thereby reducing interest income or even
requiring reversals of previously recorded income. To the extent loan
charge-offs exceed our financial models, increased amounts will be charged to
the provision for loan losses, which would further reduce income.
Adverse
economic conditions, particularly in Washington and Oregon, have caused and
could continue to cause us to incur losses.
Our
business is directly affected by market conditions, trends in industry and
finance, legislative and regulatory changes, and changes in governmental
monetary and fiscal policies and inflation, all of which are beyond our
control. In 2007, the housing and real estate sectors experienced an
economic slowdown that continued and accelerated during 2008. In
addition, the overall economy has slipped into recession and is showing signs of
significant and continued weakness, especially as measured by the level of
unemployment nationally and in our market areas. As a result of these
and other factors, we reported significantly reduced net income for the fiscal
year ended December 31, 2008, of $951,000, or $0.13 per share. This
trend continued and intensified in the current year as we have incurred a net
loss for the first nine months of 2009 of $4,338,000, or $0.54 per
share. Further deterioration or sustained weakness in business and
economic conditions in the markets in which we do business could have one or
more of the following adverse effects on our business:
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·
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Continued
and extended losses on a quarterly and annual
basis;
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·
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An
increase in loan delinquencies, problem assets and
foreclosures;
|
|
·
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A
decrease in the demand for loans and other products and services;
or
|
|
·
|
A
decrease in the value of loan collateral, especially real estate, which in
turn may reduce a customer's borrowing power and significantly increase
our exposure to particular loans.
|
Downturns
in real estate markets in our primary market areas could continue to hurt our
business.
Our
business activities and credit exposure are concentrated in our local market
areas of Grays Harbor, Pacific, Skagit, Whatcom and Wahkiakum counties of
Washington and Clatsop County in Oregon. As such, we are particularly
dependent on economic and market conditions in the two sub-regions
in which we operate, including the coastal region of Washington and Northwest
Oregon and the areas surrounding Bellingham, Washington. Our
residential construction, commercial real estate and construction and land
development loan portfolios, and a certain number of other loans, have been
adversely affected by the downturn in the residential real estate market and
economy generally. We anticipate that future declines in the real
estate markets in our primary market areas will hurt our business, as will any
significant weakness in the lease and sale markets for commercial real
estate. As of June 30, 2009, 80% of our loan portfolio consisted of
loans secured by real estate. If real estate values continue to
decline the collateral for our loans will provide less security. As a
result, our ability to recover on defaulted loans by selling the underlying real
estate will be diminished, and we will be more likely to suffer greater losses
on defaulted loans. If economic conditions worsen or do not improve,
we expect additional borrowers to default on their loans, also leading to
greater losses.
- 4
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We
are subject to extensive regulation.
Our
operations are subject to extensive regulation by federal and state banking
authorities which impose requirements and restrictions on our
operations. Changes to laws and regulations or actions by regulatory
agencies could make regulatory compliance more difficult or expensive and could
adversely affect our financial condition and results of
operations. In addition, changing regulatory initiatives and
procedures may lead to similar adverse effects on our business or make it
necessary for us to change our operating strategies. Our regulators
have the power to impose restrictions on most aspects of our operations,
including, as examples, our loan growth, rates we pay our deposits, our use of
brokered deposits, dividend payments and various transactions involving the
holding company or the Bank, including branch openings or closings, sales of
assets and mergers and acquisitions. Regulators have become
particularly diligent in the face of current market conditions and have been
aggressively restricting bank lending, borrowing and deposit taking practices,
as well as policies and procedures relating to the treatment of classified and
nonperforming assets. Regulatory actions, whether informal or formal,
could have a material adverse effect on our results of operations, financial
condition, and capital position.
We
face liquidity risks in the operation of our business.
Liquidity
is crucial to the operation of our business. Liquidity risk is the
potential that we will be unable to fund increases in assets or meet payment
obligations, including obligations to depositors, as they become due because of
an inability to obtain adequate funding or liquidate assets. For
example, funding illiquidity may arise if we are unable to attract core
deposits, if we are limited in the types of deposits we can accept, if existing
depositors withdraw their deposits, or we are unable to renew on acceptable
terms long- or short-term borrowings from the Federal Home Loan Bank system or
other sources. We may also experience illiquidity in the event of
unexpected cash outflows on committed lines of credit or financial guarantees or
due to deposit withdrawals or other unexpected events. The
increasingly competitive retail deposit environment increases liquidity risk
(and increases our cost of funds) as depositors move funds more frequently in
search of higher rates. The holding company's liquidity may be
further negatively affected by regulatory or statutory restrictions on payment
of cash dividends to us by our bank. We monitor our liquidity risk
through contingency planning, stress testing, and other means. We
also seek to avoid over concentration of funding sources and maturities and to
establish and maintain back-up funding facilities that we can draw down if
normal funding sources become unavailable. If we fail to control our
liquidity risks, we may experience materially adverse effects on our results of
operations and financial condition.
The
financial services industry is very competitive.
We face
competition in attracting and retaining deposits, making loans, and providing
other financial services. Our competitors include other community
banks, larger banking institutions, and a wide range of other financial
institutions such as credit unions, government-sponsored enterprises, mutual
fund companies, insurance companies and other non-bank
businesses. Competition is particularly intense in the
Bellingham, Washington area, which is still a relatively new market for
us. Competition in all of our markets may increase due to the
increased presence and influence of significant commercial banks in our market
area. Many of our competitors have substantially greater resources
than we have and may compete more effectively than we do.
- 5
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Negative
publicity regarding the financial services industry may affect our ability to
access markets for funding and acquire and retain customers.
Reputation
risk is the risk to liquidity, earnings and capital arising from negative
publicity. The financial services industry continues to be featured
in negative national and local headlines about the credit crisis and financial
troubles in the banking industry and the responsive regulatory and legislative
actions. These reports may damage the industry's image, erode
customer confidence in insured financial institutions, and have other effects,
all of which may put pressure on our results of operations, financial condition,
and liquidity. If we become subject to negative publicity, the
effects could be material and adverse to our results of operations and financial
condition.
Our
deposit insurance premiums are expected to increase.
Our
deposit insurance premiums during fiscal 2008 totaled
$214,000. Deposit insurance assessments will increase in 2009 due to
recent strains on the Federal Deposit Insurance Corporation deposit insurance
fund resulting from the cost of recent bank failures and an increase in the
number of banks likely to fail over the next five years. Effective
April 1, 2009, the FDIC has updated its regulations
to: (i) alter the way in which it assesses the risk of loss that
individual banks pose to the deposit insurance fund; (ii) revise deposit
insurance assessment rates; and (iii) allow for special assessments as
necessary to replenish the deposit insurance fund. Each bank is
assigned to one of four risk categories based on whether the bank is well
capitalized, adequately capitalized, or undercapitalized, and based on the
bank's supervisory examination by its primary federal regulator (in our case,
the FDIC). Based on its risk category, a bank pays a base assessment
rate for deposit insurance, ranging from 12 to 45 basis
points. The base rate is adjusted to reflect increased or decreased
risk to the deposit insurance fund posed by unsecured debt, secured liabilities,
and brokered deposits. After adjustment to the base assessment rate,
a bank's total base assessment rate for deposit insurance can range from 7
to 77.5 basis points. Changes to our risk category and
applicable base rate adjustments may significantly increase our aggregate
deposit insurance premiums, which may adversely impact our results of
operations.
Additionally,
in May 2009, the FDIC approved a special assessment of 5 basis points
on total assets at June 30, 2009, less Tier 1 capital, capped at
10 basis points of domestic deposits, resulting in a special assessment to
us of $306,000. The FDIC has indicated that an additional special
assessment is likely to be imposed in the fourth quarter of 2009, but the amount
of the additional special assessment is uncertain. Any such special
assessments will increase our operating costs and adversely affect our results
of operations.
The
real estate construction loans that comprise a significant portion of our loan
portfolio subject us to risks, such as risks relating to the adequacy of
security and fluctuations in market demand.
As of
June 30, 2009, approximately 18.5% of our lending portfolio was classified as
real estate construction and land development loans, which are secured by the
real estate under development. Construction lending involves
extensive risks. In addition to the risk that the market values of
the real estate securing construction loans may deteriorate, these loans are
also subject to the development risks that the projects will not be completed in
a timely manner or according to original specifications or
budgets. Real estate development and construction projects that are
not completed in a timely manner or according to original specifications are
significantly less marketable than projects that are fully developed, and the
loans underlying such projects may be subject to greater losses and costs in
foreclosure, including, at times, the cost of completing unfinished
projects. Construction projects are commonly underwritten based upon
projections, such as the sales of homes or future leasing of commercial
space, and substantial deviations from such projections can
occur. The risks inherent in construction lending may have a material
adverse effect on our earnings and overall financial condition, particularly in
a time of deteriorating market and economic conditions such as now.
- 6
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Some
of our competitors are not regulated as extensively as we are and thus may have
a competitive advantage.
The
banking industry is extensively regulated by federal and state banking
supervisors and that regulation and regulatory scrutiny, in general, is expected
to increase. Regulations are designed primarily to protect banks'
depositors rather than shareholders. We are subject to regulatory
requirements relating to our capital adequacy, loan loss reserves,
loan-to-one-borrower limits, and various other aspects of our
business. As a result, our ability to extend loans may be limited,
and we may be required to take additional precautions intended to ensure our
safety and soundness. These regulations can place banks at a
competitive disadvantage as compared to entities that are scrutinized to a
lesser degree or not at all. In addition, if we fail to comply with
applicable regulations, we may be subject to sanctions or restrictions on our
business activities, any of which would be likely to have a material adverse
effect on our results of operations and financial condition.
We
may not attract enough deposits to allow us to grow our lending operations
efficiently.
Competition
for deposits and deposit-like products has intensified, making it difficult to
attract deposits at low rates. Because deposits are the most
cost-effective source for funding earning assets, if we cannot attract deposits
at favorable rates, the increasing costs of deposits may have an adverse effect
on the interest rate spread we achieve on our earning assets, thereby decreasing
our profitability. If we are forced to increase the rates we pay on
deposits in order to attract these funds, our margins will decrease, making it
more difficult for us to return to profitability.
Our
information systems may experience an interruption or breach in
security.
We rely
heavily on communication and information systems to conduct our
business. Any failure, interruption or breach in security of these
systems could result in failures or disruptions in our customer relationship
management, general ledger, deposit, loan and other systems, such as occurred as
a result of extensive flooding and the related loss of power in the area
surrounding our headquarters in the winter of 2008-09. While we have
policies and procedures designed to prevent or limit the effect of the possible
failure, interruption or security breach of our information systems, there can
be no assurance that any such failures, interruptions or security breaches will
not occur or, if they do occur, that they will be adequately
addressed. The occurrence of any failures, interruptions or security
breaches could damage our reputation, result in a loss of customer business,
increase our costs of business, subject us to additional regulatory scrutiny, or
expose us to civil litigation and possible financial liability, any of which
could have a material adverse effect on our financial condition and results of
operation.
Our
profitability measures could be adversely affected if we are unable to
effectively deploy the capital raised in our private placement.
We intend
to use the net proceeds of our recently completed private placement of
approximately $12.6 million in securities for general corporate purposes,
for additional capital and to fund potential growth. There can be no
assurance that we will be able to use the proceeds to make loans or acquisitions
or in other ways that are likely to generate income. If we are not
able to use the proceeds for higher earning assets, our measures of shareholder
returns, including earnings per share, return on assets and return on equity,
may decline or fail to improve as much as desired.
- 7
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An
inability to hire or retain certain key professionals, management and staff
could reduce our revenues and net income.
We rely
on key personnel to manage and operate our business, including important
functions such as deposit generation, loan production, and credit quality
analysis. The loss of key staff may adversely affect our ability to
maintain and manage these functions effectively, which could negatively affect
our revenues and net income.
Risks
Related to Our Common Stock
Our
common stock is illiquid and may be difficult to sell in open-market
transactions.
Our
common stock trades infrequently and in very low trading volumes on the OTC
Bulletin Board under the trading symbol "PFLC.OB." As a result of the
low trading volumes and infrequent trades, it may be difficult to liquidate your
investment in our shares. Also, because of this lack of liquidity in
the market for our common stock, the quoted price of our common stock may not
reflect its fair value as would be determined in an active market.
We
may not be able to continue to pay cash dividends in the same amounts or at
all.
Our
ability to pay cash dividends is dependent on our results of operations and on
government regulations applicable to the banking industry. Although we have paid
annual dividends in the past, changes in business strategy, business conditions,
and other factors may limit our ability or willingness to pay cash dividends in
the future.
Our
trust preferred securities have a priority right to payment of
dividends.
We have
periodically issued trust preferred securities. Trust preferred
securities have a priority right to distributions and payment over our common
stock. At September 30, 2009, we had trust preferred securities and
related debt totaling approximately $13.4 million, and $278,000 in accrued
but unpaid interest. During the second quarter of 2009, we exercised
our right to defer interest payments in connection with our trust preferred
securities. So long as this continues, interest will continue to
accrue. We cannot pay cash dividends on our common stock until
accrued but unpaid interest is paid in full.
We
are subject to restrictions on changes in control that could make it difficult
to obtain a premium for your shares.
We are
subject to statutory and regulatory limitations that, among other things,
require that certain stock acquisitions or change in control transactions be
approved by state or federal regulators, or both. Our Articles of
Incorporation also contains provisions that may limit the ability to effect a
change in control of our company or our bank. We have employment or
change in control agreements with our executive officers that may lead to
significant severance payments in the event of a change in
control. These and other factors may inhibit takeover bids or other
attempts to acquire us, decreasing your ability to obtain a premium for
your shares as a result of an acquisition.
- 8
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INCORPORATION
BY REFERENCE
Securities
and Exchange Commission regulations allow us to "incorporate by reference"
information into this prospectus, which means that we can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is considered part
of this prospectus. Information incorporated by reference from
earlier documents is superseded by information set forth in this prospectus and
by information that has been incorporated by reference from more recent
documents.
The
following documents filed by us with the SEC are incorporated in this prospectus
by reference:
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·
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Our
Annual Report on Form 10-K for the fiscal year ended
December 31, 2008;
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·
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Our
definitive proxy statement for our 2009 Annual Meeting of Shareholders,
filed with the SEC on March 27,
2009;
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·
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Our
Quarterly Reports on Form 10-Q for the fiscal quarters ended
March 31, 2009, June 30, 2009, and September 30, 2009;
and
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·
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Our
Current Reports on Form 8-K filed July 2, 2009, July 27,
2009, August 20, 2009, and August 28,
2009.
|
In
accordance with the SEC rules that allow incorporation by reference, we have
incorporated by reference from these reports the description of our business,
our properties, any legal proceedings, our financial statements and our
management's discussion and analysis of our financial condition and results of
operations. We have also incorporated by reference disclosure with
respect to our officers and directors, their compensation and any related party
transactions between us and our officers and directors.
You can
obtain any of the reports that are incorporated by reference from the SEC’s
website at www.sec.gov. Reports
incorporated by reference also are available from us without charge, including
any exhibits specifically incorporated into this prospectus by
reference. You may obtain documents by requesting them in writing or
by telephone as follows:
Pacific
Financial Corporation
Shareholder
Relations
1101 S.
Boone Street
Post
Office Box 1826
Aberdeen,
Washington 98520-5244
Telephone: (360)
533-8873, ext. 1233
These
reports are also available through our website located at www.bankofthepacific.com.
You
should rely only on the information provided in or incorporated by reference
into this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. You should not assume
that the information in this prospectus or any supplement is accurate as of any
date other than the date on the front of these documents.
- 9
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CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
document and documents incorporated by reference into this document contain
forward-looking statements that are subject to risks and
uncertainties. These statements are all statements about future
results or occurrences and are based on the beliefs and assumptions of our
management, and on information available to them at the time a particular
statement was made. Forward-looking statements can sometimes be
identified by words like "believes," "expects," "anticipates," "intends,"
"plans," "estimates" or similar expressions that often precede, follow or are
included in forward-looking statements. All forward-looking
statements are subject to risks relating to, among other things, the factors
described under the heading "Risk Factors" below, as well as the
following:
1. deteriorating
economic or business conditions, nationally and in the regions in which we do
business, that have resulted in, and are expected to continue to result in,
among other things, a deterioration in credit quality and/or reduced demand for
credit, increases in nonperforming assets, and additional workout and OREO
expenses;
2. changing
laws, regulations, standards, and government programs, that may significantly
increase our costs, including compliance and insurance costs, and place
additional burdens on our limited management resources, change the competitive
balance among financial institutions, or lead us to change our strategic
focus;
3. competitive
pressures among depository and other financial institutions that may impede our
ability to attract and retain depositors, borrowers and other customers, retain
our key employees, and/or improve or even maintain our interest margins and fee
income;
4. decreases
in real estate and other asset prices, whether or not due to changes in economic
conditions, that may reduce the value of the assets that serve as collateral for
many of our loans; and
5. our
growth strategies, which may not be successful if we fail to accurately assess
market opportunities, asset quality, anticipated cost savings, and costs, or
experience significant difficulty integrating acquired assets or businesses or
opening new branches or lending offices.
Our
management believes our 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. Many of the factors that will determine our future
results, financial condition, and share value are beyond our ability to predict
or control. We undertake no obligation to update forward-looking
statements.
- 10
-
SELECTED
FINANCIAL DATA
The
following selected consolidated financial data for the five fiscal years ended
December 31, 2008, and the unaudited consolidated financial data for the nine
months ended September 30, 2009 and 2008, should be read in conjunction
with our audited consolidated financial statements and the accompanying notes
incorporated in this report by reference from our Annual Report on Form 10-K for
the year ended December 31, 2008, and with the unaudited interim consolidated
financial statements and accompanying notes incorporated by reference from our
Quarterly Report on Form 10-Q for the quarter ended September 30,
2009.
(unaudited)
September 30,
|
December 31,
|
|||||||||||||||||||||||||||
(Dollars
in thousands, except per share information)
|
2009
|
2008
|
2008
|
2007
|
2006
|
2005
|
2004
|
|||||||||||||||||||||
Income
Statement
|
||||||||||||||||||||||||||||
Net
interest income
|
$ | 16,158 | $ | 16,623 | $ | 21,715 | $ | 24,503 | $ | 23,867 | $ | 22,284 | $ | 19,520 | ||||||||||||||
Provision
for credit losses
|
8,544 | 2,954 | 4,791 | 482 | 625 | 1,100 | 970 | |||||||||||||||||||||
Non-interest
income
|
6,517 | 3,398 | 5,057 | 4,475 | 4,176 | 4,081 | 3,162 | |||||||||||||||||||||
Non-interest
expense
|
21,821 | 16,033 | 21,591 | 20,379 | 18,118 | 16,566 | 13,555 | |||||||||||||||||||||
Income
taxes (benefit) expense
|
(3,352 | ) | 72 | (561 | ) | 2,086 | 2,749 | 2,653 | 2,450 | |||||||||||||||||||
Net
income (loss)
|
$ | (4,338 | ) | $ | 962 | $ | 951 | $ | 6,031 | $ | 6,551 | $ | 6,046 | $ | 5,707 | |||||||||||||
Earnings
(loss) per share:
|
||||||||||||||||||||||||||||
Basic(1)
|
$ | (0.54 | ) | $ | 0.13 | $ | 0.13 | $ | 0.83 | $ | 0.92 | $ | 0.86 | $ | 0.85 | |||||||||||||
Diluted(1)
|
$ | (0.54 | ) | $ | 0.13 | $ | 0.13 | $ | 0.82 | $ | 0.90 | $ | 0.84 | $ | 0.83 | |||||||||||||
Dividends
declared
|
— | — | 333 | 4,955 | 4,893 | 4,719 | 4,624 | |||||||||||||||||||||
Dividends
declared per share(1)
|
— | — | 0.05 | 0.75 | 0.75 | 0.73 | 0.72 | |||||||||||||||||||||
Dividend
payout ratio
|
— | — | 35 | % | 82 | % | 75 | % | 78 | % | 81 | % | ||||||||||||||||
Performance
Ratios
|
||||||||||||||||||||||||||||
Interest
rate spread
|
3.73 | % | 4.37 | % | 4.21 | % | 4.92 | % | 5.13 | % | 5.34 | % | 5.37 | % | ||||||||||||||
Net
interest margin(2)
|
3.60 | % | 4.27 | % | 4.10 | % | 4.82 | % | 5.04 | % | 5.25 | % | 5.25 | % | ||||||||||||||
Efficiency
ratio(3)
|
96.23 | % | 80.08 | % | 80.65 | % | 70.33 | % | 64.61 | % | 62.83 | % | 59.76 | % | ||||||||||||||
Return
on average assets
|
(.88 | )% | .22 | % | .16 | % | 1.08 | % | 1.26 | % | 1.31 | % | 1.41 | % | ||||||||||||||
Return
on average equity
|
(10.99 | )% | 2.47 | % | 1.83 | % | 11.46 | % | 13.16 | % | 12.70 | % | 14.21 | % | ||||||||||||||
Balance
Sheet
|
||||||||||||||||||||||||||||
Total
assets
|
$ | 682,158 | $ | 589,563 | $ | 625,835 | $ | 565,587 | $ | 562,384 | $ | 489,409 | $ | 441,791 | ||||||||||||||
Total
loans, net
|
473,771 | 457,751 | 478,695 | 433,904 | 420,768 | 393,574 | 341,671 | |||||||||||||||||||||
Total
deposits
|
578,805 | 468,919 | 511,307 | 467,336 | 466,841 | 399,726 | 363,501 | |||||||||||||||||||||
Other
borrowings
|
39,892 | 65,774 | 60,757 | 37,446 | 36,809 | 35,790 | 25,233 | |||||||||||||||||||||
Total
shareholders' equity
|
59,781 | 51,755 | 50,074 | 50,699 | 48,984 | 46,600 | 45,303 | |||||||||||||||||||||
Book
value per share(1)
(4)
|
5.91 | 7.07 | 6.84 | 6.98 | 6.83 | 6.55 | 6.42 | |||||||||||||||||||||
Equity
to assets ratio
|
8.76 | % | 8.78 | % | 8.00 | % | 8.96 | % | 8.71 | % | 9.52 | % | 10.25 | % | ||||||||||||||
Asset
quality ratios
|
||||||||||||||||||||||||||||
Nonperforming
loans to loans
|
3.46 | % | 1.64 | % | 3.49 | % | 1.46 | % | 1.82 | % | 1.69 | % | .14 | % | ||||||||||||||
Allowance
for loan losses to
loans
|
2.39 | % | 1.41 | % | 1.57 | % | 1.14 | % | 0.95 | % | 1.33 | % | 1.22 | % | ||||||||||||||
Allowance
for loan losses to
nonperforming
loans
|
68.87 | % | 86.10 | % | 44.97 | % | 78.10 | % | 52.30 | % | 78.67 | % | 901.28 | % | ||||||||||||||
Nonperforming
assets to total
assets
|
3.96 | % | 1.86 | % | 3.80 | % | 1.13 | % | 1.37 | % | 1.38 | % | .12 | % | ||||||||||||||
(1)
|
Retroactively
adjusted for a 1.1-for-1 stock split effective January 13, 2009 and for a
2-for-1 stock split effective April 4,
2005.
|
(2)
|
Net
interest income divided by average earning
assets.
|
(3)
|
Non-interest
expense divided by the sum of net interest income and non-interest
income.
|
(4)
|
Shareholder
equity divided by shares
outstanding.
|
- 11
-
DESCRIPTION
OF COMMON STOCK
The
following is a brief description of our common stock. This
description is qualified by reference to our Restated Articles of Incorporation
and Bylaws that are filed as exhibits to the registration statement that
includes this prospectus.
We are
authorized to issue up to 25,000,000 shares of common stock, with $1.00 par
value per share. As of November 1, 2009, there were 10,121,853 shares
of our common stock outstanding, as well as outstanding warrants exercisable for
699,642 newly issued shares of our common stock, subject to
adjustment.
The
following summary describes material aspects of our common stock. For
additional information, please refer to our Articles and Bylaws, and the
Washington Business Corporation Act (the "Act").
Dividend
Rights
The
holders of our common stock are entitled to such dividends as our Board of
Directors may declare, from time to time, out of funds legally available for
that purpose. The Act permits dividends to be paid only if, after
distributing the dividend, we would be able to pay our debts as they become due
in the ordinary course of business. In addition, a dividend may not
be paid if our total assets would be less than the sum of (a) our total
liabilities and (b) the amount that would be needed, if we were to be
dissolved at the time of the dividend, to satisfy the preferential rights of
persons whose right to payment is superior to the recipients of the
dividend. Moreover, dividends will depend on our receipt of dividends
from our bank since we have no other source of income and on compliance with
certain regulatory requirements and the terms of our debentures issued in
connection with our trust preferred securities. Dividend restrictions
placed on our bank, which may include restrictions imposed by regulatory
authorities that have the authority to prevent unsound or unsafe banking
practices, may effectively limit the amount of dividends we can
pay.
Voting
Rights
The
holders of common stock possess exclusive voting rights. Each holder
of common stock is entitled to one vote for each share held of record on all
matters submitted to a vote of shareholders. A majority of the votes
entitled to be cast on a particular matter within a voting group constitutes a
quorum for that voting group. Once a quorum is present at a
shareholder meeting, action is approved if the number of votes cast in favor of
a proposed action exceed the number of votes cast against that proposal unless
otherwise required by the Articles, applicable law, or the rules of any stock
exchange or other trading system on which the common stock may be
listed.
Election of
Directors
Our Board
must consist of at least five but not more than
20 directors. The Board is divided into three classes, with
equal numbers of directors in each class to the extent possible. The
classes are staggered so that one class is elected each year to a three-year
term. Holders of our common stock do not have cumulative voting
rights in the election of directors. Holders of our common stock may
remove directors from office, with or without cause, by a majority vote at a
special meeting of shareholders called expressly for that purpose.
Liquidation
If there
is a liquidation, dissolution, or winding up of the company, the holders of
common stock will be entitled to share ratably in all assets remaining after
payment of its debts and other liabilities.
- 12
-
Provisions
Affecting a Change of Control or other Extraordinary Transactions
Our
Articles and Bylaws contain provisions that may discourage persons from
acquiring large blocks of common stock or replacing management personnel,
thereby potentially delaying or preventing a change of control. For
example, the staggered election of directors, described above, makes it
difficult to replace a majority of directors in a short period of
time. The Articles also specifically authorize the Board to consider
non-monetary factors, such as social effects on communities and employees, when
considering tender offers, merger proposals, and offers to purchase
substantially all of our assets. This provision expands the grounds
on which the Board might reject those types of transactions.
Other
provisions of the Articles make it difficult for a person or entity already
controlling a large amount of our common stock to increase that ownership
interest. For example, fair price provisions impose special
requirements for shareholder and Board approval in connection with transactions
involving a person or entity holding at least 20 percent of our common
stock. Moreover, management has no duty to call special meetings of
the shareholders unless requested to do so by persons representing at least
25 percent of the voting power of our common stock. This
25 percent threshold makes it difficult for a shareholder to force Board
action or seek shareholder ratification.
Neither
the Bylaws nor Articles abrogate any special requirements that the Act imposes
on change-of-control transactions. Therefore, we are subject to the
Act's requirement that mergers, asset sales, and dissolutions be ratified by
two-thirds of any voting group entitled to vote on the transaction.
Warrants
As of
November 1, 2009, 90 shareholders held outstanding warrants to purchase a total
of 699,642 shares of common stock. The warrants have a five-year term
from date of issuance, and are exercisable in whole or in part at any time at an
exercise price of $6.50 per share. Alternatively, warrant holders may
satisfy the exercise price through a "cashless exercise" pursuant to a formula
provided in each warrant. The exercise price and the number of shares
covered by the warrants are subject to proportional adjustment in the event of
any stock splits or stock dividends and other adjustment in the event of certain
corporate transactions. The exercise price and number of shares
covered by the warrants issued to the selling shareholder will also be adjusted
in the event we issue shares at a price per share that is less than the fair
market value of our stock on the date of issuance, subject to certain
exceptions.
- 13
-
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS
AND MANAGEMENT
The
following table sets forth, as of September 15, 2009, information as to shares
of our common stock beneficially owned by each of our directors, executive
officers, 5% or greater owners of our common stock, and by all of our executive
officers and directors as a group. Beneficial ownership is a
technical term broadly defined by the Securities and Exchange Commission to mean
more than ownership in the economic sense. In general, beneficial
ownership includes voting or investment power over shares, as well as shares
that a person has the right to acquire within 60 days. Except as
otherwise noted, the shareholders named in the table below have sole voting and
investment power over all shares shown as beneficially owned by
them.
Name
|
Number
of Shares
Beneficially Owned (1)
|
Percent
of
Shares Outstanding
|
||||||
Directors: | ||||||||
G.
Dennis Archer
|
99,816 | (3) | * | |||||
John
R. Ferlin
|
128,724 | (4) | 1.3 | % | ||||
Gary
C. Forcum
|
159,262 | 1.6 | % | |||||
Susan
C. Freese
|
38,770 | * | ||||||
Edwin
Ketel
|
52,611 | * | ||||||
Randy
W. Rognlin
|
416,422 | 4.1 | % | |||||
Randy
Rust
|
113,103 | 1.1 | % | |||||
Douglas
M. Schermer
|
117,431 | 1.2 | % | |||||
Executive
Officers:
|
||||||||
Dennis
A. Long (2)
|
266,256 | (5) | 2.6 | % | ||||
Bruce
D. MacNaughton
|
98,180 | * | ||||||
Denise
Portmann
|
37,800 | * | ||||||
John
Van Dijk
|
91,850 | * | ||||||
Executive
Officers and Directors as a Group (12 persons)
|
1,620,225 | 15.4 | % | |||||
5%
or Greater Shareholders:
|
||||||||
Ithan
Creek Master Investers (Cayman) L.P
|
695,000 | (6) | 6.4 | % | ||||
* Less
than 1% of shares outstanding.
|
(1)
|
The
amounts shown include the following amounts of common stock each
individual has the right to acquire within 60 days of September 30,
2009, through the exercise of stock options granted pursuant to the
company's stock option plans and warrants to acquire common stock as
follows: Mr. Long, 134,517 shares (130,350 options and 4,167
warrants); Mr. MacNaughton, 75,956 shares (70,400 options and 5,556
warrants); Ms. Portmann, 29,450 shares (28,050 options and 1,400
warrants); Mr. Van Dijk, 36,850 shares (34,100 options and
2,750 warrants); Mr. Archer, 13,834 shares (5,500 options and 8,334
warrants); Mr. Ferlin, 19,389 shares (5,500 options and 13,889
warrants); Mr. Rust, 16,612 shares (5,500 options and 11,112 warrants);
Ms. Freese, 6,633 shares (3,300 options and 3,333 warrants); Mr.
Forcum, 14,825 shares (1,100 options and 13,725 warrants); Mr. Ketel,
7,350 shares (1,100 options and 6,250 warrants); Mr. Rognlin, 56,656
shares (1,100 options and 55,556 warrants); and Mr. Schermer, 13,600
shares (1,100 options and 12,500 warrants); and all executive officers and
directors as a group, 425,672 shares (287,100 options and 138,572
warrants).
|
|
(2)
|
Mr. Long
is also a director.
|
|
(3)
|
Includes
972 shares owned in a profit sharing
trust.
|
|
(4)
|
Includes
2,835 shares held by Mr. Ferlin's spouse as trustee for family
trusts.
|
|
(5)
|
Includes
60,000 shares pledged as security in connection with a margin account with
a securities broker.
|
|
(6)
|
Includes
139,000 shares that may be acquired upon exercise of outstanding
warrants. Wellington Hedge Management, LLC, is the sole general
partner of the listed shareholder. In its capacity as such, it
is deemed to
share beneficial ownership of the listed shares. The address
for the selling shareholder is c/o Wellington Management Company, LLP, 75
State Street, Boston,
MA 02109.
|
- 14
-
MARKET
AND SHARE PRICE INFORMATION
Our
common stock is presently traded on the OTC Bulletin Board under the trading
symbol PFLC.OB. Historically, trading in our stock has been very
limited and the trades that have occurred cannot be characterized as amounting
to an established public trading market. As a result, the trading
prices of our common stock may not reflect the price that would result if our
stock was actively traded.
The
following are high and low bid prices quoted on the OTC Bulletin Board during
the periods indicated. The quotations reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not represent actual
transactions:
High
|
Low
|
|||||||
Year Ending December
31, 2009
|
||||||||
First
quarter
|
$ | 7.50 | $ | 5.50 | ||||
Second
quarter
|
$ | 6.25 | $ | 4.50 | ||||
Third
quarter
|
$ | 5.60 | $ | 4.10 | ||||
Fourth
quarter (through November 1, 2009)
|
$ | 4.80 | $ | 4.00 | ||||
Year Ending December
31, 2008
|
||||||||
First
quarter
|
$ | 14.72 | $ | 10.50 | ||||
Second
quarter
|
$ | 14.50 | $ | 11.10 | ||||
Third
quarter
|
$ | 12.70 | $ | 8.50 | ||||
Fourth
quarter
|
$ | 10.00 | $ | 5.75 | ||||
Year Ending December
31, 2007
|
||||||||
Fourth
quarter
|
$ | 15.25 | $ | 12.05 |
As of
September 15, 2009, there were approximately 1,175 shareholders of record of our
common stock. Mellon Investor Services LLC serves as the transfer agent for our
common stock.
Under
federal banking law, the payment of dividends by the Company and the Bank is
subject to capital adequacy requirements established by the Federal Reserve and
the FDIC. In addition, payment of dividends by either entity is
subject to regulatory limitations and applicable state laws. Under
Washington general corporate law as it applies to the Company, no cash dividend
may be declared or paid if, after giving effect to the dividend, the Company
would not be able to pay its liabilities as they become due or its liabilities
exceed its assets. Payment of dividends on the Common Stock is also
affected by statutory limitations, which restrict the ability of the Bank to pay
upstream dividends to the Company, and on limitations under debentures issued in
connection with our trust preferred securities. Under Washington
banking law as it applies to the Bank, no dividend may be declared or paid in an
amount greater than net profits then available, and after a portion of such net
profits have been added to the surplus funds of the Bank. Under our
debentures, no dividends may be paid unless we are current on all interest
payments required by the terms of our debentures. We are presently deferring the
payment of interest on these instruments and are therefore not current in
interest payments.
- 15
-
SELLING
SHAREHOLDER
The table
below sets forth information concerning the resale of our shares by the selling
shareholder. The selling shareholder acquired our securities pursuant
to a private placement. We will not receive any proceeds from the
resale of our common stock by the selling shareholder. The selling
shareholder has not held any position or office or had any other material
relationship with us or any of our predecessors or affiliates within the past
three years.
The
following table is based on information provided to us by the selling
shareholder and is as of the date of this prospectus. Because the
selling shareholder may offer all or some portion of our common stock, no
estimate can be given as to the amount of shares that will be held by the
selling shareholder upon termination of this offering. For purposes
of the table below, however, we have assumed that after termination of this
offering, none of the shares covered by this prospectus will be held by the
selling shareholder.
Name of Selling Shareholder
|
Number of shares of Common Stock owned before the
offering
|
Number of shares of Common Stock being
registered
|
Percentage of Common Stock owned before the
offering
|
Number of shares of Common Stock owned after the
offering
|
Percentage of Common Stock owned after the
offering
|
|||||||||||||||
Ithan
Creek Master Investors (Cayman) L.P.
(1)
|
556,000 | (2) | 695,000 | 5.49 | % (3) | — | — |
(1)
|
Wellington
Management Company, LLP (“Wellington”) is an investment adviser registered
under the Investment Advisers Act of 1940, as
amended. Wellington, in such capacity, may be deemed to share
beneficial ownership of the shares held by its client
accounts.
|
(2)
|
This
number represents the shares currently held by the selling shareholder and
does not include any additional shares which may be issued to the selling
shareholder upon exercise of
warrants.
|
(3)
|
Percentage
ownership is based on 10,121,853 shares of our common stock outstanding as
of September 15, 2009, and the number of shares of common stock actually
owned before the offering by the selling shareholder, as reflected
above.
|
PLAN
OF DISTRIBUTION
We are
registering common stock issued, or issuable upon the exercise of warrants, to
the selling shareholder to permit the resale of these shares from time to time
after the date of this prospectus. We will not receive any of the
proceeds from the sale of our common stock by the selling
shareholder. We will bear all fees and expenses incident to our
obligation to register the common stock.
- 16
-
The
selling shareholder may sell all or a portion of the common stock beneficially
owned by it and offered hereby from time to time directly or through one or more
underwriters, broker-dealers or agents. If the common stock is sold
through underwriters or broker-dealers, the selling shareholder will be
responsible for underwriting discounts or commissions or agent's
commissions. The common stock may be sold on any national securities
exchange or quotation service on which the securities may be listed or quoted at
the time of sale, in the over-the-counter market or in transactions otherwise
than on these exchanges or systems or in the over-the-counter market and in one
or more transactions at fixed prices, at prevailing market prices at the time of
the sale, at varying prices determined at the time of sale, or at negotiated
prices. These sales may be effected in transactions which may involve
crosses or block transactions. The
selling shareholder may use any one or more of the following methods when
selling shares:
|
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;
|
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
|
·
|
privately
negotiated transactions;
|
|
·
|
settlement
of short sales entered into after the effective date of the registration
statement of which this prospectus is a
part;
|
|
·
|
broker-dealers
may agree with the selling shareholder to sell a specified number of such
shares at a stipulated price per
share;
|
|
·
|
through
the writing or settlement of options or other hedging transactions,
whether such options are listed on an options exchange or
otherwise;
|
|
·
|
a
combination of any such methods of sale;
and
|
|
·
|
any
other method permitted pursuant to applicable
law.
|
The
selling shareholder also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act, as
permitted by that rule, or Section 4(1) under the Securities Act, if available,
rather than under this prospectus, provided that they meet the criteria and
conform to the requirements of those provisions.
Broker-dealers
engaged by the selling shareholder may arrange for other broker-dealers to
participate in sales. If the selling shareholder effects such transactions by
selling common stock to or through underwriters, broker-dealers or agents, such
underwriters, broker-dealers or agents may receive commissions in the form of
discounts, concessions or commissions from the selling shareholder or
commissions from purchasers of the common stock for whom they may act as agent
or to whom they may sell as principal. Such commissions will be in amounts to be
negotiated, but, except as set forth in a supplement to this Prospectus, in the
case of an agency transaction will not be in excess of a customary brokerage
commission in compliance with applicable regulations of the Financial
Institutions Regulatory Authority, or FINRA.
In
connection with sales of common stock or otherwise, the selling shareholder may
enter into hedging transactions with broker-dealers or other financial
institutions, which may in turn engage in short sales in the course of hedging
in positions they assume. The selling shareholder may also sell
common stock short and if such short sale shall take place after the date that
this Registration Statement is declared effective the selling shareholder may
deliver common stock covered by this prospectus to close out short positions and
to return borrowed shares in connection with such short sales. The
selling shareholder may also loan or pledge common stock to broker-dealers that
in turn may sell such shares, to the extent permitted by applicable law. The
selling shareholder may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require
the delivery to such broker-dealer or other financial institution of shares
offered by this prospectus, which shares such broker-dealer or other financial
institution may resell pursuant to this prospectus (as supplemented or amended
to reflect such transaction). Notwithstanding the foregoing, the selling
shareholder has been advised that it may not use shares registered on this
registration statement to cover short sales made prior to the date the
registration statement, of which this prospectus forms a part, has been declared
effective by the Securities and Exchange Commission.
- 17
-
The
selling shareholder may, from time to time, pledge or grant a security interest
in some or all of the common stock owned by it and, if it defaults in the
performance of its secured obligations, the pledgees or secured parties may
offer and sell the common stock from time to time pursuant to this prospectus or
any amendment to this prospectus under Rule 424(b)(3) or other applicable
provision of the Securities Act of 1933, as amended, amending, if necessary, the
list of selling shareholders to include the pledgee, transferee or other
successors in interest as selling shareholders under this
prospectus. The selling shareholder also may transfer and donate the
common stock in other circumstances, in which case the transferees, donees,
pledgees or other successors in interest will be the selling beneficial owners
for purposes of this prospectus.
The
selling shareholder and any broker-dealer or agents participating in the
distribution of the common stock may be deemed to be "underwriters" within the
meaning of Section 2(11) of the Securities Act in connection with such
sales. In such event, any commissions paid, or any discounts or
concessions allowed to, any such broker-dealer or agent and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. Selling
shareholders who are "underwriters" within the meaning of Section 2(11) of
the Securities Act will be subject to the applicable prospectus delivery
requirements of the Securities Act and may be subject to certain statutory
liabilities, including but not limited to, Sections 11, 12 and 17 of
the Securities Act and Rule 10b-5 under the Securities Exchange Act of
1934, as amended.
The
selling shareholder has informed us that it is not a registered broker-dealer
and does not have any written or oral agreement or understanding, directly or
indirectly, with any person to distribute the common stock. Upon us
being notified in writing by a selling shareholder that any material arrangement
has been entered into with a broker-dealer for the sale of common stock through
a block trade, special offering, exchange distribution or secondary distribution
or a purchase by a broker or dealer, a supplement to this prospectus will be
filed, if required, pursuant to Rule 424(b) under the Securities Act,
disclosing (i) the name of each such selling shareholder and of the
participating broker-dealer(s), (ii) the number of shares involved,
(iii) the price at which such common stock was sold, (iv) the
commissions paid or discounts or concessions allowed to such broker-dealer(s),
where applicable, (v) that such broker-dealer(s) did not conduct any
investigation to verify the information set out or incorporated by reference in
this prospectus, and (vi) other facts material to the
transaction. In no event shall any broker-dealer receive fees,
commissions and markups, which, in the aggregate, would exceed eight percent
(8%).
Under the
securities laws of some states, the common stock may be sold in such states only
through registered or licensed brokers or dealers. In addition, in
some states the common stock may not be sold unless such shares have been
registered or qualified for sale in such state or an exemption from registration
or qualification is available and is complied with.
There can
be no assurance that the selling shareholder will sell any or all of the common
stock registered pursuant to the registration statement, of which this
prospectus forms a part.
The
selling shareholder and any other person participating in such distribution will
be subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, to the extent applicable,
Regulation M of the Exchange Act, which may limit the timing of purchases and
sales of any of the common stock by the selling shareholder and any other
participating person. To the extent applicable, Regulation M may also
restrict the ability of any person engaged in the distribution of the common
stock to engage in market-making activities with respect to the common
stock. All
of the foregoing may affect the marketability of the common stock and the
ability of any person or entity to engage in market-making activities with
respect to our common stock.
- 18
-
We will
pay all expenses of the registration of the common stock pursuant to the
registration rights agreement, including, without limitation, filing fees and
expenses of compliance with state securities or "blue sky" laws; provided, however, that each selling
shareholder will pay all underwriting discounts and selling commissions, if any,
and any related legal expenses incurred by it. We will indemnify the
selling shareholder against certain liabilities, including some liabilities
under the Securities Act, in accordance with the registration rights agreement,
or the selling shareholder will be entitled to contribution. We may
be indemnified by the selling shareholder against civil liabilities, including
liabilities under the Securities Act, that may arise from any written
information furnished to us by the selling shareholder specifically for use in
this prospectus, in accordance with the registration rights agreement, or we may
be entitled to contribution.
USE
OF PROCEEDS
We will
receive no proceeds from shares of common stock sold by the selling
shareholder.
A portion
of the shares of common stock covered by this prospectus are issuable upon
exercise of warrants issued to the selling shareholder. The exercise
price of the warrants issued is $6.50 per share. Upon any exercise of
the warrants for cash the selling shareholder will pay us the exercise
price. However, the warrants also may be exercised on a cashless
basis. We will not receive any cash payment from the selling
shareholder upon any exercise of the warrants on a cashless
basis. The exercise price and number of shares of common stock
issuable upon exercise of the warrants may be adjusted in certain circumstances,
including stock splits or dividends, mergers, consolidations, reclassifications,
reorganizations, share exchanges, or distributions of assets and upon the
issuance of certain securities at a price per share that is deemed to be less
than the fair market value per share of our common stock at the
time. To the extent we receive proceeds from the cash exercise of the
warrants, we intend to use the proceeds for working capital and other general
corporate purposes.
WHERE
YOU CAN FIND MORE INFORMATION
We file
annual, quarterly, and current reports, proxy statements, and other information
with the Securities and Exchange Commission. You may read and copy
any reports, statements, or other information that we file with the SEC at the
SEC's public reference room at 100 F Street, NE, Washington,
D.C. 20549. Please call the SEC at 1-800-SEC-0330 for
further information on the public reference room. Our SEC filings are
also available to the public on the SEC website at www.sec.gov. You
may also find copies of reports, statements, and other information we file
electronically with the SEC through the "Stockholder Info" link found on our
website at www.bankofthepacific.com under
the table “About Us”.
We have
filed a Registration Statement on Form S-1 to register the shares of common
stock to be sold by the selling shareholder. This prospectus is a
part of that Registration Statement. As allowed by SEC rules, this
prospectus does not contain all the information you can find in the Registration
Statement or the exhibits to that Registration Statement, which additional
information can be found and reviewed as described above.
- 19
-
INDEMNIFICATION
As
permitted by law, our directors and officers are entitled to indemnification
under certain circumstances against liabilities and expenses incurred in
connection with legal proceedings in which they become involved as a result of
serving as a director or officer. Insofar as indemnification for
liabilities arising under the Securities Act of 1933 may be permitted to
directors, officers or controlling persons, we have been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
LEGAL
MATTERS
The
validity of our common stock has been passed upon by Miller Nash LLP, Seattle,
Washington.
EXPERTS
The
financial statements incorporated in this prospectus by reference from our
Annual Report on Form 10-K for the year ended December 31, 2008, and the
effectiveness of our internal control over financial reporting have been audited
by Deloitte & Touche LLP, an independent registered public accounting firm,
as stated in their reports, which are incorporated herein by reference.
Such financial statements have been so incorporated in reliance upon the reports
of such firm given upon their authority as experts in accounting and
auditing.
- 20
-
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
Item
13. Other
Expenses of Issuance and Distribution.
The
following table sets forth the estimated expenses to be incurred in connection
with the sale and distribution of the securities being registered, all of which
will be paid by us (except any underwriting discounts and commissions and
expenses incurred by the selling shareholder for brokerage, accounting, tax or
legal services, or any other expenses incurred by the selling shareholder in
disposing of the shares). All amounts shown, except the SEC
registration fee, are estimates:
SEC
registration fee
|
$ | 200 | ||
Blue
sky fees
|
$ | 1,000 | ||
Legal
fees and expenses
|
$ | 25,000 | ||
Accounting
fees and expenses
|
$ | 10,000 | ||
Printing
|
$ | 2,000 | ||
Miscellaneous
|
$ | 3,000 | ||
Total
|
$ | 41,200 | ||
Item
14. Indemnification of Directors
and Officers.
Under RCW
Sections 23B.08.510 to 23B.08.570 of the Washington Business Corporation
Act (the "Act"), a person who is made a party to a proceeding because such
person is or was an officer or director of a corporation (an "Indemnitee") shall
be indemnified by the corporation (unless the corporation's articles of
incorporation provide otherwise) against reasonable expenses incurred by the
Indemnitee in connection with the proceeding if the Indemnitee is wholly
successful, on the merits or otherwise, or if ordered by a court of competent
jurisdiction. In addition, under those sections a corporation is
permitted to indemnify an Indemnitee against liability incurred in a proceeding
if (i) the Indemnitee's conduct was in good faith, (ii) in a manner he
or she reasonably believed was in the corporation's best interests or at least
not opposed to the corporation's best interests, (iii) the Indemnitee had
no reasonable cause to believe his or her conduct was unlawful if the proceeding
was a criminal proceeding, (iv) the Indemnitee was not adjudged liable to
the corporation if the proceeding was by or in the right of the corporation, and
(v) the Indemnitee was not adjudged liable on the basis that he or she
improperly received a personal benefit. Indemnification in connection
with a proceeding by or in the right of the corporation is limited to reasonable
expenses incurred in connection with the proceeding.
Pursuant
to our Restated Articles of Incorporation, as amended (the "Articles"), we will
indemnify each of our present and former directors (including directors who are
also officers), and present and former non-employee directors of our
subsidiaries, with respect to expenses, settlements, judgments, penalties, and
fines in suits to which such person is or was made or threatened to be made a
party by reason of the fact that he or she is or was a director of the
registrant or a subsidiary. No such indemnification may be provided
if the acts or omissions of the director are adjudged to involve intentional
misconduct or a knowing violation of law, if the director is liable to us for an
unlawful distribution, or if the director participated in a transaction in which
he or she personally received a benefit to which he or she was not legally
entitled. In addition, the Articles provide that our directors will
not be personally liable for monetary damages for breaches of fiduciary duty as
directors, except for liabilities that involve intentional misconduct or a
knowing violation of law, authorization of illegal distributions, or receipt of
an improper personal benefit. With respect to proceedings instituted
by a federal banking agency, indemnification may only be provided to the extent
permitted by the federal and state laws and regulations governing financial
institutions.
II-1
The Act
provides that any director held liable for the unlawful payment of a dividend or
other distribution of assets of a corporation shall be entitled to contribution
from (a) each shareholder who accepted the dividend or distribution knowing
the same to have been made in violation of the Act or the Articles and
(b) each director who voted for or assented to the dividend or distribution
without complying with specified standards of conduct.
We carry
insurance coverage for our directors and officers against certain liabilities
that they may incur in their capacity as directors or officers.
Item
15. Recent
Sales of Unregistered Securities.
In the
last three years, we have sold unregistered securities as follows:
(1) On
June 30, 2009, we issued 1,112,515 shares of common stock and warrants to
purchase 278,128 additional shares, for total proceeds of
$5,006,317.50.
(2) On
July 23, 2009, we issued 824,951 shares of common stock and warrants to purchase
206,237 additional shares, for total proceeds of $3,712,279.50.
(3) On
August 14, 2009, we issued 305,116 shares of common stock and warrants to
purchase 76,279 additional shares, for total proceeds of
$1,373,022.
(4) On
August 27, 2009, we issued to the selling shareholder 556,000 shares of common
stock and warrants to purchase 139,000 additional shares, for total proceeds of
$2,502,000.
Warrants
issued in the transactions have a five-year term, an exercise price of $6.50 per
share, and are exercisable in whole or in part at any time upon giving us
written notice of exercise and paying the aggregate exercise price or using the
net exercise option available under the warrants.
In
connection with all of the foregoing, we relied on the exemption from securities
registration afforded by Section 4(2) of the Act and the safe harbor
provisions of Rule 506 of Regulation D promulgated thereunder. No
advertising or general solicitation was employed in the offering of these
securities.
Item
16. Exhibits.
The Index
to Exhibits listing the exhibits required by Item 601 of Regulation S-K is
located on the page immediately following the signature page to this
registration statement.
Item
17. Undertakings.
|
(a)
|
The
registrant hereby undertakes:
|
|
(1)
|
To
file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration
Statement:
|
|
(i)
|
To
include any prospectus required by Section 10(a)(3) of the Securities
Act of 1933 ("Securities Act").
|
|
(ii)
|
To
reflect in the prospectus any facts or events arising after the effective
date of the Registration Statement (or the most recent post-effective
amendment thereof) which, individually or in the aggregate, represent a
fundamental
change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective Registration
Statement.
|
II-2
|
(iii)
|
To
include any material information with respect to the plan of distribution
not previously disclosed in the Registration Statement or any material
change to such information in the Registration
Statement.
|
|
(2)
|
That,
for the purpose of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
|
|
(3)
|
To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
|
|
(5)
|
That,
for the purpose of determining liability under the Securities Act to any
purchaser, each prospectus filed pursuant to Rule 424(b) as part of a
registration statement relating to an offering, other than registration
statements relying on Rule 430B or other than prospectuses filed in
reliance on Rule 430A, shall be deemed to be part of and included in the
registration statement as of the date it is first used after
effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the registration
statement or made in a document incorporated or deemed incorporated by
reference into the registration statement or prospectus that is part of
the registration statement will, as to a purchaser with a time of contract
of sale prior to such first use, supersede or modify any statement that
was made in the registration statement or prospectus that was part of the
registration statement or made in any such document immediately prior to
such date of first use.
|
|
(b)
|
Insofar
as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers, and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such
issue.
|
II-3
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly
caused this Amendment No. 1 to the registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Aberdeen,
State of Washington, on November 9, 2009.
PACIFIC
FINANCIAL CORPORATION
By:
/s/ Dennis A. Long
Dennis A.
Long
President
and Chief Executive Officer
Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities indicated as of
November 9, 2009.
Signature | Title | ||
Principal Executive Officer and Director: | |||
/s/
Dennis A. Long
|
President,
Chief Executive Officer,
|
||
Dennis
A. Long
|
and
Director
|
||
Principal
Financial and Accounting Officer:
|
|||
/s/
Denise Portmann
|
Denise
Portmann
|
||
Chief
Financial Officer
|
|||
A
majority of the Board of Directors:
|
|||
*GARY
C. FORCUM
|
Director
(Chairman of the Board)
|
||
*G.
DENNIS ARCHER
|
Director
|
||
*JOHN
R. FERLIN
|
Director
|
||
*SUSAN
C. FREESE
|
Director
|
||
*EDWIN
KETEL
|
Director
|
||
*RANDY
W. ROGNLIN
|
Director
|
||
*RANDY
RUST
|
Director
|
||
*DOUGLAS
M. SCHERMER
|
Director
|
||
*By: |
/s/
Denise Portmann
|
||
Denise
Portmann, as attorney-in-fact
|
II-4
INDEX TO
EXHIBITS
Exhibit
No
|
Exhibit
|
3(i)
|
Restated
Articles of Incorporation. Incorporated by reference to Exhibit
3.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2000.
|
3(ii)
|
Bylaws. Incorporated
by reference to Exhibit 2b to Form 8-A filed by the Company and declared
effective on March 7, 2000 (Registration
No. 000-29329).
|
4
|
Form
of Warrant. Incorporated by reference to Exhibit 4.1 to the
Company's Current Report on Form 8-K dated August 28, 2009 (the "August
2009 8-K").
|
5**
|
Opinion
of Miller Nash LLP.
|
10.1
|
Amended
and Restated Employment Agreement with Dennis A. Long dated December 29,
2008. Incorporated by reference to Exhibit 10.1 to the
Company’s Annual Report on Form 10-K for the year ended December 31, 2008
(the “2008 10-K”).*
|
10.2
|
Amended
and Restated Employment Agreement with John Van Dijk dated December 29,
2008. Incorporated by reference to Exhibit 10.2 to the 2008
10-K.*
|
10.3
|
Amended
and Restated Employment Agreement with Bruce D. MacNaughton dated December
29, 2008. Incorporated by reference to Exhibit 10.3 to the 2008
10-K.*
|
10.4
|
Amended
and Restated Employment Agreement with Denise Portmann dated December 29,
2008. Incorporated by reference to Exhibit 10.4 to the 2008
10-K.*
|
10.5
|
Bank
of the Pacific Incentive Stock Option Plan. Incorporated by
reference to Exhibit 10.7 to the Company’s Annual Report on Form 10-K for
the year ended December 31, 1999 (the “1999
10-K”).*
|
10.6
|
The
Bank of Grays Harbor Incentive Stock Option Plan. Incorporated
by reference to Exhibit 10.8 of the 1999
10-K.*
|
10.7
|
2000
Stock Incentive Compensation Plan, as amended (the “2000
Plan”). Incorporated by reference to Exhibit 10.1 to the
Company’s Quarterly Report on Form 10-Q for the quarter ended March 31,
2007 (the “March 2007 10-Q”).*
|
10.8
|
Forms
of stock option agreements under the 2000 Plan. Incorporated by
reference to Exhibits 10.2 and 10.3 to the March 2007
10-Q.*
|
10.9
|
The
Bank of Grays Harbor Employee Deferred Compensation
Plan. Incorporated by reference to Exhibit 10.10 to the
Company’s Annual Report on Form 10-K for the year ended December 31,
2000.*
|
10.10
|
Supplemental
Executive Retirement Plan effective January 1,
2007. Incorporated by reference to Exhibit 10.1 to the
Company’s Current Report on Form 8-K dated March 13, 2008 (the “March 2008
8-K”).*
|
10.11
|
Individual
Participation Agreement (SERP) dated March 13, 2008, between the Company
and Dennis A. Long. Incorporated by reference to Exhibit 10.2
to the March 2008 8-K.*
|
Exhibit
No
|
Exhibit
|
10.12
|
Individual
Participation Agreement (SERP) dated March 13, 2008, between the Company
and John Van Dijk. Incorporated by reference to Exhibit 10.3 to
the March 2008 8-K.*
|
10.13
|
Individual
Participation Agreement (SERP) dated March 13, 2008, between the Company
and Bruce MacNaughton. Incorporated by reference to Exhibit
10.4 to the March 2008 8-K.*
|
10.14
|
Individual
Participation Agreement (SERP) dated March 13, 2008, between the Company
and Denise Portmann. Incorporated by reference to Exhibit 10.5
to the March 2008 8-K.*
|
10.15
|
Securities
Purchase Agreement dated August 25, 2009, between the Company and the
selling shareholder. Incorporated by reference to Exhibit 10.1
to the August 2009 8-K.
|
10.16
|
Registration
Rights Agreement dated August 25, 2009, between the Company and the
selling shareholder. Incorporated by reference to Exhibit 10.2
to the August 2009 8-K.
|
10.17
|
Subsidiaries
of the Company. Bank of the Pacific, organized under Washington
law.
|
23.1
|
Consent
of Deloitte & Touche LLP, Independent Registered Public Accounting
Firm.
|
23.2
|
Consent
of Miller Nash LLP (included in Exhibit
5).
|
24**
|
Power
of attorney.
|
*
|
Listed
document is a management contract, compensation plan or
arrangement.
|
**
|
Filed
previously.
|