Pacific Financial Corp Earns $2.7 Million, or $0.27 per Diluted Share for Second Quarter 2025; Loan Growth Supports Net Interest Margin Expansion; Declares Quarterly Cash Dividend of $0.14 per Share
ABERDEEN, Wash., July 25, 2025 (GLOBE NEWSWIRE) -- Pacific Financial Corporation (OTCQX:PFLC), ("Pacific Financial") or (the "Company"), the holding company for Bank of the Pacific (the "Bank"), reported net income of $2.7 million, or $0.27 per diluted share for the second quarter of 2025, compared to $2.4 million, or $0.24 per diluted share for the first quarter of 2025, and $2.1 million, or $0.21 per diluted share for the second quarter of 2024. The current quarter's net income relative to the prior quarter reflects an increase in net interest income and higher non-interest income, partially offset by an increase in non-interest expenses. Except for year-end December 31, 2024 financials, all results are unaudited.
The Board of Directors of Pacific Financial declared a quarterly cash dividend of $0.14 per share on July 16, 2025. The dividend will be payable on August 22, 2025 to shareholders of record on August 8, 2025.
"We are pleased with the strategic execution of loan growth initiatives throughout our network. Loan balances grew 6% in the second quarter, enabling us to convert cash into higher yielding loans. Loan demand improved compared to the first quarter, which had been tempered by economic uncertainty. This loan growth during the current quarter combined with a continued decrease in our deposit cost of funds resulted in an 11 basis point increase in our net interest margin. Our funding base continues to benefit from a large balance of non-interest bearing deposits which account for 40% of total deposits," said Denise Portmann, President and Chief Executive Officer.
"Asset quality continues to remain pristine with non-performing assets totaling only 0.04% of total assets, or less than $500,000. We remain focused on delivering strong returns to our shareholders through our operations and managing our capital to support growth and enhance shareholder value," said Portmann.
Second Quarter 2025 Financial Highlights:
Return on average assets ("ROAA") improved to 0.89%, compared to 0.81% for the first quarter 2025, and 0.76% for the second quarter 2024.
Return on average equity ("ROAE") was 9.14%, compared to 8.48% from the preceding quarter, and 7.47% from the second quarter a year earlier.
Net interest income was $11.9 million, compared to $11.3 million for the first quarter of 2025, and $10.8 million for the second quarter of 2024.
Net interest margin ("NIM") increased to 4.23%, compared to 4.12% from the preceding quarter, and 4.15% for the second quarter a year ago.
Provision for credit losses increased to $387,000 for the second quarter ended June 30, 2025 due to loan growth, compared to $83,000 for the preceding quarter and $304,000 in the second quarter a year ago.
Gross portfolio loan balances increased 6% to $746.5 million at June 30, 2025, compared to $707.0 million at March 31, 2025, and increased 6%, or $42.5 million from $704.0 million one year earlier.
Total deposits decreased $3.8 million to $1.07 billion at June 30, 2025 compared to the previous quarter and increased $85.2 million, or 9%, from one year earlier. Non-interest-bearing deposits were at 40% of total deposits at June 30, 2025 and support a lower cost core deposits portfolio. Core deposits were 88% of total deposits at June 30, 2025.
Non-performing assets to total assets ratio declined to 0.04%, or $468,000 for the current quarter end compared to 0.10% and $1.2 million three months earlier. Substandard loans decreased $1.0 million to $1.6 million at June 30, 2025 and special mention assets declined $494,000 to $9.6 million at June 30, 2025.
Shareholder equity increased $2.0 million during the quarter largely due to net income and lower accumulated other comprehensive loss marks on the available-for-sale investment portfolio, partially offset by dividend payments. The tangible book value per share was $10.53 at June 30, 2025, an increase from $9.82 at June 30, 2024.
Pacific Financial and Bank of the Pacific continue to exceed regulatory well-capitalized requirements. At June 30, 2025, Pacific Financial's estimated leverage ratio was 10.9% and its estimated total risk-based capital ratio was 16.9%.
Balance Sheet Review
Total assets remained at $1.22 billion at June 30, 2025, and increased slightly from $1.12 billion at June 30, 2024.
Cash and interest earning deposits decreased $45.0 million to $98.8 million at June 30, 2025 from $143.8 million at March 31, 2025, and increased $22.9 million from $75.9 million one year earlier. The decrease compared to the prior quarter largely relates to funds used to support loan growth during the current quarter.
Liquidity metrics continue to be strong and are managed to ensure adequate funding resources are available to meet customer demand. At June 30, 2025, the Company's on and off-balance sheet sources totaled $516.7 million. This represents a coverage ratio of short-term funds available to uninsured and uncollateralized deposits of 190%. Included in available sources are collateralized credit lines the Company has established with the Federal Home Loan Bank of Des Moines (FHLB) and the Federal Reserve Bank of San Francisco, as well as unsecured borrowing lines from various correspondent banks. There was no balance outstanding on any of these facilities at quarter-end. Uninsured or uncollateralized deposits were 25% of total deposits at June 30, 2025.
Investment securities increased $2.4 million to $307.8 million, compared to $305.4 million at March 31, 2025 and increased $29.1 million compared to a year ago. The largest investment category was collateralized mortgage obligations, which accounted for 52% of the investment portfolio at June 30, 2025, compared to 51% at March 31, 2025 and 46% one year earlier. The yield on the investment portfolio decreased 2 basis points during the current quarter to 3.58% from 3.60%, and increased 12 basis points from 3.46% the second quarter a year ago. The adjusted duration of the portfolio was 4.6 years at June 30, 2025 compared to 4.3 years at June 30, 2024.
Gross loans balances increased $39.4 million, to $746.5 million at June 30, 2025, compared to $707.0 million at March 31, 2025. During the second quarter of 2025, growth occurred in commercial and agricultural, owner and non-owner occupied commercial real estate, multi-family and residential 1-4 family loans, with owner and non-owner occupied commercial real estate increasing $16.3 million and $17.8 million, respectively. Year-over-year gross loan growth was 6%, or $42.5 million, with the largest increases in multi-family loans, and owner and non-owner occupied commercial real estate loans.
The Bank originated $63.9 million in portfolio credit commitments in the 2nd quarter of 2025 and $104.0 million during the first half of 2025. The loan pipeline continues to be supported by sustained business development activity of its commercial lending teams including our newest office in Lake Oswego, OR that opened in late 2024.
The Company continues to manage concentration limits that establish maximum exposure levels by certain industry segments, loan product types, geography and single borrower limits. In addition, the loan portfolio continues to be well-diversified and is collateralized with assets predominantly within the Company's Western Washington and Oregon markets. Loans classified as commercial real estate for regulatory concentration purposes totaled $283.5 million at June 30, 2025, or 201% of total risk-based capital.
Credit quality: Nonperforming assets declined from the previous quarter and remain minimal at $468,000, or 0.04% of total assets at June 30, 2025, compared to $1.2 million, or 0.10% at March 31, 2025. Accruing loans past due more than 30 days represent only 0.02% of total loans. Total loans designated as special mention decreased $494,000 to $9.6 million at June 30, 2025 compared to $10.1 million at March 31, 2025. The Company has zero other real estate owned as of June 30, 2025.
Allowance for credit losses ("ACL"): ACL-loans increased $332,000 to $9.2 million, or 1.24% of gross loans at June 30, 2025. A provision for credit losses of $387,000 was recorded in the current quarter resulting from loan growth and net charge-offs. This compares to a provision for credit losses of $83,000 in the first quarter of 2025 and $304,000 for the second quarter one year earlier.
Total deposits decreased $3.8 million to $1.07 billion at June 30, 2025 compared to the previous quarter and increased $85.2 million from $985.6 million one year earlier. The company's strong core deposit base continues to positively impact the Bank's net interest margin and operating results. Core deposits represented 88% of total deposits at quarter end, including non-interest-bearing deposits of 40% of deposits, and interest-bearing demand and money market deposits each representing 19% of total deposits. CDs as a percentage of deposits remained at 12% of total deposits.
Shareholders' equity was $118.9 million at June 30, 2025, compared to $116.9 million at March 31, 2025, and $114.9 million at June 30, 2024. The increase in shareholders' equity during the current quarter was primarily due to $2.7 million in net income and a $704,000 decrease in unrealized losses on available-for-sale securities partially offset by $1.4 million in dividends to shareholders. Net unrealized losses (after-tax) included in shareholders' equity on available-for-sale securities were $13.5 million at June 30, 2025 compared to $14.2 million at March 31, 2025 and $17.1 million at June 30, 2024.
Book value per common share was $11.87 at June 30, 2025, compared to $11.67 at March 31, 2025, and $11.12 at June 30, 2024. Tangible book value per common share was $10.53 at June 30, 2025 compared to $10.33 at March 31, 2025 and $9.82 at June 30, 2024. The Company's tangible common equity ratio increased to 8.8% at June 30, 2025 relative to 8.6% the prior quarter and decreased from 9.1% at June 30, 2024. Regulatory capital ratios of both the Company and the Bank continue to exceed well-capitalized regulatory thresholds, with the Company's leverage ratio at 10.9% and total risk-based capital ratio at 16.9% as of June 30, 2025. These regulatory capital ratios are estimates, pending completion and filing of regulatory reports.
Income Statement Review
Net interest income increased $625,000 to $11.9 million for the second quarter of 2025, compared to $11.3 million for the first quarter of 2025, and increased $1.1 million compared to $10.8 million for the second quarter a year ago. The change in the current quarter compared to the preceding quarter reflects the impact of higher loan yields and lower deposit and borrowing costs. For the six months ended June 30, 2025, net interest income increased to $23.2 million compared to $22.2 million for the like period a year ago.
The Bank's net interest margin improved to 4.23% for the quarter ended June 30, 2025 from 4.12% the prior quarter and from 4.15% in the second quarter a year ago. During the quarter, $45.3 million in interest-earning cash was re-deployed into higher yielding loans. This change in balance sheet composition, combined with an increase in loan yield, decrease in costs of funds which were partially offset by a decrease in investment yields positively impacted the Bank's net interest margin for the quarter. For the current quarter compared to the like quarter a year ago, net interest margin was also positively impacted by an increase in loan and investment yields and a decrease in cost of funds which were partially offset by the 100 basis decrease in yield on interest-earning cash.
Yields on loans increased 5 basis points to 6.02% for the second quarter of 2025 compared to 5.97% for the prior quarter and increased 22 basis points from 5.80% in the like quarter a year ago. Loan yields improved as longer term fixed and variable rate loans (originated in a lower rate environment) were renewed at higher rates. In addition, average loan yields on new originations were at higher yields than the current loan portfolio yield.
The Bank continues to actively monitor and manage its costs of funds and for the current quarter the Bank's total cost of funds decreased 7 basis points to 1.03%, compared to 1.10% for the preceding quarter, and 1.05% for the second quarter 2024. The high percentage of non-interest-bearing deposits at 40% continues to help reduce volatility in deposit costs.
Noninterest income increased to $1.5 million for the current quarter, compared to $1.2 million for the linked quarter and decreased compared to $2.0 million for the second quarter a year earlier. The increase compared to the linked quarter was primarily the result of no losses realized on the sale of investment securities in the current quarter compared to a loss of $165,000 during the prior quarter as well as a $100,000 contract signing incentive recorded during the current quarter. Relative to the second quarter one year earlier, noninterest income decreased $476,000 due primarily to the loss of revenue associated with the mortgage banking division which was closed in late 2024. Fee and service charge income increased in the second quarter of 2025 to $1.3 million compared to $1.1 million in the previous quarter and $1.2 million in the second quarter of 2024. Total non-interest income was $2.6 million for the six months ended June 30, 2025 compared to $3.4 million for the same period a year ago.
Noninterest expenses increased to $9.7 million for the second quarter of 2025 compared to $9.4 million for the prior quarter and decreased compared to $9.8 million for the second quarter of 2024. The current quarter increases compared to the prior quarter were primarily related to an increase in salary and benefit expenses associated with increased health insurance claims and accruals, normal salary and wage increases and higher technology costs, partially offset by decreased professional services for the quarter.
For the six months ended June 30, 2025, total non-interest expense was $19.2 million, compared to $19.4 million for the six months ended June 30, 2024. The decrease in non-interest expense for first half of 2025 compared to the same period a year ago primarily relates to the closure of the mortgage banking division in the fourth quarter of 2024, as the first half of 2024 includes operating costs of that mortgage banking division. Offsetting the reduction in mortgage banking costs were increased salary and benefit expenses associated with increased health insurance claims and accruals, normal salary and wage increases, higher technology costs, and occupancy costs. The Bank's efficiency ratio was 72.47% for the second quarter of 2025, compared to 75.86% in the preceding quarter and 77.34% in the same quarter a year ago.
Income tax expense: Federal and Oregon state income tax expenses totaled $633,000 for the current quarter, and $544,000 for the preceding quarter, resulting in effective tax rates of 19.2% and 18.6%, respectively. These income tax expenses reflect the benefits of tax exempt income on tax-exempt loans and investments, affordable housing tax credit financing, and investments in bank-owned life insurance.
FINANCIAL HIGHLIGHTS (unaudited)
Quarter Ended
Change From
Six Months Ended
Change
(In 000s, except per share data)
Jun 30,
Mar 31,
Jun 30,
Mar 31, 2025
Jun 30, 2024
Jun 30,
Jun 30,
2025
2025
2024
$
%
$
%
2025
2024
$
%
Earnings Ratios & Data
Net Income
$
2,669
$
2,377
$
2,126
$
292
12%
$
543
26%
$
5,049
$
4,776
$
273
6%
Return on average assets
0.89%
0.81%
0.76%
0.08%
0.13%
0.85%
0.85%
0.00%
Return on average equity
9.14%
8.48%
7.47%
0.66%
1.67%
8.82%
8.40%
0.42%
Efficiency ratio(1)
72.47%
75.86%
77.34%
-3.39%
-4.87%
74.09%
75.77%
-1.68%
Net-interest margin %(2)
4.23%
4.12%
4.15%
0.11%
0.08%
4.18%
4.27%
-0.09%
Share Ratios & Data
Basic earnings per share
$
0.27
$
0.24
$
0.21
$
0.03
13%
$
0.06
29%
$
0.50
$
0.46
$
0.04
Diluted earning per share
$
0.27
$
0.24
$
0.21
$
0.03
13%
$
0.06
29%
$
0.50
$
0.46
$
0.04
Book value per share(3)
$
11.87
$
11.67
$
11.12
$
0.20
2%
$
0.75
7%
Tangible book value per share(4)
$
10.53
$
10.33
$
9.82
$
0.20
2%
$
0.71
7%
Common shares outstanding
10,020
10,020
10,336
-
0%
(316
)
-3%
PFLC stock price
$
10.69
$
10.90
$
9.76
$
(0.21
)
-2%
$
0.93
10%
Dividends paid per share
$
0.14
$
0.14
$
0.14
$
-
0%
$
-
0%
$
0.28
$
0.28
$
-
0%
Balance Sheet Data
Assets
$
1,215,468
$
1,218,969
$
1,124,295
$
(3,501
)
0%
$
91,173
8%
Portfolio Loans
$
746,475
$
707,034
$
703,977
$
39,441
6%
$
42,498
6%
Deposits
$
1,070,831
$
1,074,646
$
985,627
$
(3,815
)
0%
$
85,204
9%
Investments
$
307,790
$
305,377
$
278,728
$
2,413
1%
$
29,062
10%
Shareholders equity
$
118,937
$
116,949
$
114,923
$
1,988
2%
$
4,014
3%
Liquidity Ratios
Short-term funding to uninsured
and uncollateralized deposits
190%
212%
229%
-22%
-39%
Uninsured and uncollateralized
deposits to total deposits
25%
24%
24%
1%
1%
Portfolio loans to deposits ratio
70%
66%
71%
4%
-1%
Asset Quality Ratios
Non-performing assets to assets
0.04%
0.10%
0.12%
-0.06%
-0.08%
Non-accrual loans to portfolio loans
0.06%
0.17%
0.19%
-0.11%
-0.13%
Loan losses to avg portfolio loans
0.04%
0.04%
0.03%
0.00%
0.01%
0.04%
0.03%
0.01%
ACL-loans to portfolio loans
1.24%
1.26%
1.26%
-0.02%
-0.02%
Capital Ratios (PFC)
Total risk-based capital ratio
16.9%
17.4%
17.6%
-0.5%
-0.7%
Tier 1 risk-based capital ratio
15.7%
16.3%
16.4%
-0.6%
-0.7%
Common equity tier 1 ratio
14.2%
14.7%
14.8%
-0.5%
-0.6%
Leverage ratio
10.9%
10.9%
11.7%
0.0%
-0.8%
Tangible common equity ratio
8.8%
8.6%
9.1%
0.2%
-0.3%
(1)Non-interest expense divided by net interest income plus noninterest income.
(2)Tax-exempt income has been adjusted to a tax equivalent basis at a rate of 21%.
(3)Book value per share is calculated as the total common shareholders' equity divided by the period ending number of common stock shares outstanding.
(4)Tangible book value per share is calculated as the total common shareholders' equity less total intangible assets and liabilities, divided by the period ending number of common stock shares outstanding.
INCOME STATEMENT (unaudited)
Quarter Ended
Change From
Six Months Ended
Change
($ in 000s)
Jun 30,
Mar 31,
Jun 30,
Mar 31, 2025
Jun 30, 2024
Jun 30,
Jun 30,
2025
2025
2024
$
%
$
%
2025
2024
$
%
Interest Income
Loan interest & fee income
$
10,840
$
10,304
$
10,109
$
536
5%
$
731
7%
$
21,144
$
20,333
$
811
4%
Interest earning cash income
1,124
1,208
847
(84
)
-7%
277
33%
2,332
1,782
550
31%
Investment income
2,728
2,678
2,410
50
2%
318
13%
5,407
4,885
522
11%
Interest Income
14,692
14,190
13,366
502
4%
1,326
10%
28,883
27,000
1,883
7%
Interest Expense
Deposits interest expense
2,571
2,694
2,358
(123
)
-5%
213
9%
5,265
4,349
916
21%
Other borrowings interest expense
206
206
242
-
0%
(36
)
-15%
412
484
(72
)
-15%
Interest Expense
2,777
2,900
2,600
(123
)
-4%
177
7%
5,677
4,833
844
17%
Net Interest Income
11,915
11,290
10,766
625
6%
1,149
11%
23,206
22,167
1,039
5%
Provision(recapture) for credit losses
387
83
304
304
366%
83
27%
470
337
133
39%
Net Interest Income after provision
11,528
11,207
10,462
321
3%
1,066
10%
22,736
21,830
906
4%
Non-Interest Income
Fees and service charges
1,293
1,117
1,198
176
16%
95
8%
2,410
2,299
111
5%
Gain on sale of investments, net
-
(165
)
121
165
-100%
(121
)
-100%
(165
)
121
(286
)
-236%
Gain on sale of loans, net
-
(2
)
445
2
-100%
(445
)
-100%
(2
)
597
(599
)
-100%
Income on bank-owned insurance
191
191
182
-
0%
9
5%
383
362
21
6%
Other non-interest income
3
12
17
(9
)
-75%
(14
)
-82%
15
27
(12
)
-44%
Non-Interest Income
1,487
1,153
1,963
334
29%
(476
)
-24%
2,641
3,406
(765
)
-22%
Non-Interest Expense
Salaries and employee benefits
6,103
5,969
6,321
134
2%
(218
)
-3%
12,072
12,315
(243
)
-2%
Occupancy
618
592
564
26
4%
54
10%
1,209
1,205
4
0%
Furniture, Fixtures & Equipment
305
302
267
3
1%
38
14%
606
551
55
10%
Marketing & donations
157
153
176
4
3%
(19
)
-11%
310
329
(19
)
-6%
Professional services
254
299
327
(45
)
-15%
(73
)
-22%
553
663
(110
)
-17%
Data Processing & IT
1,250
1,218
1,165
32
3%
85
7%
2,468
2,356
112
5%
Other
1,026
906
1,025
120
13%
1
0%
1,932
1,958
(26
)
-1%
Non-Interest Expense
9,713
9,439
9,845
274
3%
(132
)
-1%
19,150
19,377
(227
)
-1%
Income before income taxes
3,302
2,921
2,580
381
13%
722
28%
6,227
5,859
368
6%
Provision for income taxes
633
544
454
89
16%
179
39%
1,178
1,083
95
9%
Net Income
$
2,669
$
2,377
$
2,126
$
292
12%
543
26%
$
5,049
$
4,776
$
273
6%
Effective tax rate
19.2%
18.6%
17.6%
0.6%
1.6%
18.9%
18.5%
0.4%
BALANCE SHEET (unaudited)
Period Ended
Change from
% of Total
($ in 000s)
Jun 30,
Mar 31,
Jun 30,
Mar 31, 2025
Jun 30, 2024
Jun 30,
Mar 31,
Jun 30,
2025
2025
2024
$
%
$
%
2025
2025
