Pacific Financial Corp Reports Second Quarter 2026 Earnings of $2.9 Million, or $0.29 per Diluted Share; Declares Quarterly Cash Dividend of $0.15 per Share
ABERDEEN, Wash., July 24, 2026 (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 $2.9 million, or $0.29 per diluted share for the second quarter of 2026, compared to $3.1 million, or $0.30 per diluted share for the first quarter of 2026, and $2.7 million, or $0.27 per diluted share for the second quarter of 2025. The current quarter’s net income compared to the prior quarter reflects higher net interest income, lower recapture for credit losses, higher non-interest income and higher non-interest expenses. Non-interest expenses were higher in the current quarter due to expenses related to a pending merger with Banner Corporation.
Banner Corporation, the holding company for Banner Bank, and Pacific Financial, the holding company for Bank of the Pacific, jointly announced on April 30, 2026 that they had entered into a definitive merger agreement under the terms of which Banner Corporation will acquire Pacific Financial in an all-stock transaction subject to the terms and conditions set forth in the agreement. Under the terms of the agreement, Pacific Financial shareholders will receive 0.2633 shares of Banner Corporation common stock in exchange for each share of Pacific Financial common stock.
The Board of Directors of Pacific Financial declared a quarterly cash dividend of $0.15 per share on July 15, 2026. The dividend will be payable on August 14, 2026 to shareholders of record as of August 4, 2026. The cash dividend was unchanged from the prior quarter and an increase from $0.14 per share paid in the second quarter a year ago.
“Our second quarter results demonstrate the resilience of our franchise and the commitment of our employees, who continue to deliver strong financial performance while providing the high level of service our customers expect," said Denise Portmann, President and Chief Executive Officer. "We are encouraged by our results and our disciplined execution of both our day-to-day operations and transition planning which reflects the professionalism of our team and our shared commitment to our customers, employees, shareholders and communities.”
Second Quarter 2026 Financial Highlights:
Balance Sheet Review
Total assets decreased $26.0 million to $1.26 billion at June 30, 2026 from $1.29 billion one quarter earlier and increased $49.2 million compared to $1.22 billion at June 30, 2025.
Cash and interest-earning cash decreased $32.5 million to $94.3 million at June 30, 2026, from $126.9 million at March 31, 2026, and decreased $4.5 million from $98.8 million one year earlier. The decrease in cash and interest-earning cash in the current quarter largely relates to lower deposit funding and the purchase of investment securities.
During the second quarter of 2026, liquidity metrics continued to be strong. At June 30, 2026, the Company’s short-term funding sources totaled $592.7 million. This represents a coverage ratio of short-term funds available to uninsured and uncollateralized deposits of 193%. 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. Additionally, the Bank has $60 million of 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 28% of total deposits at June 30, 2026.
Investment securities increased $5.2 million to $334.9 million at June 30, 2026, compared to $329.7 million at March 31, 2026, and increased $27.1 million compared to a year ago. The increase in investment securities was funded from interest earning cash as available funds were used to purchase higher yielding securities. The largest investment category was collateralized mortgage obligations, which accounted for 57% of the investment portfolio at June 30, 2026 compared to 55% at March 31, 2026 and 52% at June 30, 2025. The yield on the investment portfolio increased 12 basis points during the current quarter to 3.72% from 3.60% the prior quarter and 14 basis points from the same quarter a year ago. The adjusted duration of the investment securities portfolio was 4.1 years at June 30, 2026.
Gross loans balances decreased $678,000, to $770.5 million at June 30, 2026, compared to $771.1 million at March 31, 2026. Despite the overall decrease in gross loans during the most recent quarter, commercial real estate owner-occupied and non-owner occupied loans increased a total of $15.5 million. Offsetting the increase in commercial reals estate loans were declines in construction, residential 1-4 family, multi-family and consumer loans totaling $17.1 million. The Company’s commercial lending teams remain active and are in discussion with borrowers about the prospects of larger loan limits subsequent to the proposed bank merger with Banner Corporation.
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 $280.9 million at June 30, 2026, or 190% of total risk-based capital.
Credit quality: Nonperforming assets decreased to $283,000, or 0.02% of total assets at June 30, 2026. Classified loans, which are defined as loans rated substandard or worse, totaled 0.49% of portfolio loans at June 30, 2026 compared to 0.36% the prior quarter and 0.22% one year earlier. Special mention decreased $1.3 million to $12.9 million during the quarter, or 1.68% of total loans compared to 1.84% the prior quarter. The Company had zero other real estate owned as of June 30, 2026.
Allowance for credit losses (“ACL”): ACL-loans decreased $127,000 to $8.9 million, or 1.16% of total portfolio loans at June 30, 2026, compared to 1.17% at March 31, 2026. The ratio of ACL to non-government guaranteed loans was 1.21% at June 30, 2026. The recapture for credit losses of $88,000 recorded in the current quarter compared to a recapture for credit losses of $300,000 in the prior quarter, was largely due to lower loans outstanding, loan composition changes and lower unfunded loan commitments.
Total deposits decreased $25.8 million to $1.11 billion at June 30, 2026, compared to the previous quarter and increased $42.1 million, or 4% from $1.07 billion one year earlier. The majority of the decrease for the current quarter was due to decreased non-interest-bearing deposits. The decrease in total deposits quarter over quarter reflects a combination of customer-specific events and the current interest rate environment. The current market interest rate environment continues to encourage some customers, including a few municipal customers, to seek higher-yielding short-term alternatives for excess liquidity, resulting in a decrease in traditional deposit accounts. Deposit balances also declined as several commercial customers who sold their businesses in recent periods withdrew excess liquidity from sale proceeds that had been deposited in previous quarters, reducing their ongoing deposit relationship balances. The Bank continues to maintain regular communication with customers and remains focused on maintaining its strong core deposit base through proactive customer outreach and relationship management supporting deposit retention and long-term franchise growth.
Year-over-year deposit growth was $42.1 million and primarily reflected an increase in money-market balances. Core deposits represented 87% of total deposits at quarter end, including non-interest-bearing deposits of 37% of deposits, and interest-bearing demand, money market, and savings deposits representing 12%, 28%, and 10% of total deposits, respectively. CDs as a percentage of deposits remained at 13% of total deposits. The high percentage of non-interest-bearing deposits continues to support a lower cost core deposits portfolio.
Shareholders’ equity was $126.5 million at June 30, 2026, compared to $127.1 million at March 31, 2026, and $118.9 million at June 30, 2025. The decrease in shareholders’ equity during the current quarter was primarily due to $2.1 million increase in unrealized losses (after-tax) on available-for-sale securities and $1.5 million in dividends to shareholders offset by earnings of $2.9 million. Net unrealized losses (after-tax) included in shareholders’ equity on available-for-sale securities were $12.7 million at June 30, 2026, compared to $10.6 million at March 31, 2026, and $13.3 million at June 30, 2025.
Book value per common share was $12.61 at June 30, 2026, compared to $12.68 at March 31, 2026, and $11.87 at June 30, 2025. Tangible book value per common share was $11.27 at June 30, 2026, compared to $11.34 at March 31, 2026, and $10.53 at June 30, 2025. The Company’s tangible common equity ratio was 9.0% at June 30, 2026, compared to 8.9% in the prior quarter and 8.8% one year earlier.
Regulatory capital ratios of the Bank continue to exceed well-capitalized regulatory thresholds, with the Bank’s leverage ratio at 11.0% and total risk-based capital ratio at 17.5% as of June 30, 2026. These regulatory capital ratios are estimates, pending completion and filing of regulatory reports.
Income Statement Review
Net interest income increased by $287,000, to $12.3 million for the second quarter of 2026, and increased $355,000 compared from $11.9 million for the second quarter a year ago. The increase in the current quarter compared to the preceding quarter reflects increased loan and investment yields as well as a decrease in deposit and borrowing costs.
The Company’s NIM increased 12 basis points to 4.16% for the second quarter of 2026, from 4.04% the prior quarter and decreased from 4.23% in the second quarter a year ago.
Yields on portfolio loans increased 9 basis points during the second quarter to 5.98% from 5.89% the preceding quarter, while yields on investment securities increased 12 basis points to 3.72% from 3.60% over the same time period.
The Company continues to actively monitor and manage its cost-of-funds, which benefits from a large balance of non-interest deposits. For the current quarter, the Company’s total cost of funds decreased slightly to 1.08% compared to 1.09% for the preceding quarter. The cost of interest bearing deposits decreased 2 basis points to 1.62% for the current quarter from 1.64% for the preceding quarter and the cost of borrowings decreased 6 basis points to 5.51% for the second quarter ended June 30, 2026 from 5.57% the preceding quarter.
Noninterest income was $1.6 million for the current quarter compared to $1.3 million the prior quarter and $1.5 million for the second quarter a year earlier. The $266,000 increase compared to the prior quarter was primarily due to the receipt of a death benefit payment of $159,000 related to Bank-owned life insurance.
Noninterest expenses increased $403,000 to $10.2 million for the second quarter of 2026 compared to $9.8 million for the prior quarter and increased from $9.7 million for the second quarter of 2025. The increase in the current quarter compared to the prior quarter was primarily due to increases in professional fees and other costs associated with the pending merger. Merger related expenses totaled approximately $678,000 during the second quarter ended June 30, 2026.
Income tax expense: Federal and Oregon state income tax expenses totaled $811,000 for the current quarter, and $714,000 for the preceding quarter, resulting in effective tax rates of 21.9% and 19.0%, 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.
ABOUT PACIFIC FINANCIAL CORPORATION
Pacific Financial Corporation of Aberdeen, Washington, is the bank holding company for Bank of the Pacific, a state chartered and federally insured commercial bank. Bank of the Pacific offers banking products and services to small-to-medium sized businesses and professionals in western Washington and Oregon. At June 30, 2026, the Company had total assets of $1.26 billion and operated fifteen branches in the communities of Grays Harbor, Pacific, Thurston, Whatcom, Skagit, Clark and Wahkiakum counties in the State of Washington, and three branches in the communities of Clatsop and Clackamas counties in Oregon. The Company also operated loan production offices in the communities of Burlington, Washington and Salem, Oregon. Visit the Company’s website at www.bankofthepacific.com. Member FDIC.
Cautions Concerning Forward-Looking Statements
This press release contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other laws, including all statements in this release that are not historical facts or that relate to future plans or events or projected results of Pacific Financial Corporation and its wholly-owned subsidiary, Bank of the Pacific. Such statements are based on information available at the time of communication and are based on current beliefs and expectations of the Company’s management and are subject to risks and uncertainties, many of which are beyond our control, which could cause actual events or results to differ materially from those projected, anticipated or implied, and could negatively impact the Company’s operating and stock price performance. These risks and uncertainties include various risks associated with growing the Bank and expanding the services it provides, development of new business lines and markets, competition in the marketplace, general economic conditions, changes in interest rates, extensive and evolving regulation of the banking industry, the pending merger with Banner Corporation, and many other risks. Any forward-looking statements in this communication are based on information at the time the statement is made. We undertake no obligation to update or revise any forward-looking statement. Readers of this release are cautioned not to put undue reliance on forward-looking statements.
CONTACTS:
DENISE PORTMANN, PRESIDENT & CEO
CARLA TUCKER, EVP & CFO
360.533.8873