Pacific Financial Corp Earns $3.9 Million, or $0.37 per Diluted Share, for Second Quarter of 2023, and $8.0 Million, or $0.77 per Diluted Share, for the First Six Months of 2023

Rhea-AI Summary

Pacific Financial Corporation (PFLC) Declares Quarterly Cash Dividend of $0.13 per Share

Positive

• Strong earnings momentum from the first quarter continued, with steady growth in the loan portfolio and a solid net interest margin. Year-over-year net interest margin expanded 151 basis points and 176 basis points for the current quarter and first half of 2023, respectively. Credit quality remains solid, with nonperforming assets to total assets unchanged at 0.08%. Liquidity metrics were robust, with cash on hand or in banks at 84% of uninsured and uncollateralized deposits at June 30, 2023.

Negative

• None.

Declares Quarterly Cash Dividend of $0.13 per Share

ABERDEEN, Wash., July 27, 2023 (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 $3.9 million, or $0.37 per diluted share for the second quarter 2023, compared to $4.1 million, or $0.39 per diluted share for the first quarter of 2023, and $1.6 million, or $0.15 per diluted share for the second quarter of 2022. There was a provision for credit losses of $71,000 in the second quarter of 2023, compared to a provision for credit losses of $151,000 for the preceding quarter and no provision in the second quarter a year ago. For the first six months of 2023, net income was $8.0 million, or $0.77 per diluted share, compared to $3.2 million, or $0.31 per diluted share, for the first six months of 2022. There was a $223,000 provision in the first half of 2023, compared to no provision in the first half of 2022. All results are unaudited. 

The board of directors of Pacific Financial declared a quarterly cash dividend of $0.13 per share on July 19, 2023. The dividend will be payable on August 25, 2023 to shareholders of record on August 11, 2023.

“Following our strong earnings momentum from the first quarter, we continued to post strong profits for both the current quarter and for the first half of 2023, highlighted by steady growth in our loan portfolio, and a solid net interest margin,” said Denise Portmann, President and Chief Executive Officer. “Year-over-year net interest margin for the current quarter and first half of 2023 expanded 151 basis points and 176 basis points respectively. Current quarter net interest margin of 4.33% contracted 18 basis points compared to the linked quarter of 4.51%, with improved yields across all asset classes, offset by an increase in costs of funds due primarily to competitive rate pressures early in the current quarter.”

“We continue to maintain a high level of on-balance sheet cash and robust liquidity metrics. Though deposits decreased during the quarter due, largely to industry-wide competitive pricing pressures and normal seasonal declines in deposits balances combined with higher customer spending levels and customers moving excess funds to alternative higher yielding investments, deposit balances showed signs of stabilization during the latter part of the current quarter,” stated Portmann. “Our deposits are well-diversified and core deposits represent 93% of total deposits at June 30, 2023, with non-interest bearing demand representing 41% of total deposits. This well-diversified deposit base is supported by our strong capital and excess liquidity positions. As always we continue to prioritize our customer relationships, which have been the bedrock of our success for over fifty years.”

“Credit quality remains solid, aided by continued low levels of adversely classified and nonperforming loans. Our risk management protocols guide the growth of our loan portfolio as we carefully monitor loan concentrations to stay within regulatory guidelines, particularly in commercial real estate. As a result, charge-offs continued to be minimal,” added Portmann.

Second Quarter 2023 Financial Highlights

• Return on average assets (“ROAA”) was 1.30%, compared to 1.33% for the first quarter 2023, and 0.49% for the second quarter 2022.
• Return on average equity (“ROAE”) was 14.30%, compared to 15.63% from the preceding quarter, and 6.05% from the second quarter a year earlier.
• Net interest income was $12.2 million, down 7% compared to $13.1 million for the first quarter of 2023, and increased 38% from $8.8 million for the second quarter of 2022.
• Net interest margin (“NIM”) contracted 18 basis points to 4.33%, compared to 4.51% from the preceding quarter, and expanded 151 basis points from 2.82% in the second quarter a year ago.
• Gross loans balances increased $13.1 million, or 2%, to $658.7 million at June 30, 2023, compared to $645.6 from the preceding quarter end and 9% or $51.8 million compared June 30, 2022.
• Total deposits declined $32.9 million to $1.08 billion, compared to $1.11 billion from the first quarter 2023, with core deposits representing 93% of total deposits at June 30, 2023. Non-interest bearing deposits represented 41% of total deposits at June 30, 2023.
• Asset quality remains solid with nonperforming assets to total assets unchanged at 0.08%, compared to nonperforming assets to total assets at 0.08% for the preceding quarter.
• Tangible book value per common share was $9.15 at June 30, 2023, compared to $9.16 at March 31, 2023, and $8.59 at June 30, 2022.

Liquidity

Liquidity metrics were robust with:

• Cash on hand or in banks of $200 million, or 84% of uninsured and uncollateralized deposits, at June 30, 2023 compared to $238 million at March 31, 2023.
• Coverage of short-term funds available to uninsured and uncollateralized deposits was 261% at June 30, 2023 compared to 259% at March 31, 2023.
• Uninsured or uncollateralized deposits were 22% of total deposits at June 30, 2023 compared to 23% at March 31, 2023.
  

As shown below the Bank has established credit lines with borrowing capacity from the Federal Home Loan Bank of Des Moines (FHLB) and from the Federal Reserve Bank of San Francisco, both of which are subject to collateral requirements. In addition, the Bank has $60.0 million in unsecured borrowing capacity from various correspondent banks. There is no balance outstanding on any of these facilities. 

Liquidity
(Unaudited)
			Jun 30, 2023		% of Deposits			Mar 31, 2023			% of Deposits			$ Change			% Change			Jun 30, 2022		% of Deposits			$ Change			% Change
			(Dollars in thousands)
Cash on hand and in banks		$	199,707		19	%	$	237,704			21	%	$	(37,997	)		-16	%	$	373,847		31	%	$	(174,140	)		-47	%
Unencumbered AFS Securities			104,898		10	%		116,886			11	%		(11,988	)		-10	%		114,116		9	%		(9,218	)		-8	%
Secured lines of Credit (FHLB, FRB)			316,214		29	%		318,179			29	%		(1,965	)		-1	%		251,324		21	%		64,890			26	%
	Total short-term funds available	$	620,819		58	%	$	672,769			61	%	$	(51,950	)		-8	%	$	739,287		61	%	$	(118,468	)		-16	%
								Jun 30, 2023			Mar 31, 2023			Jun 30, 2022
Short-term funds available to uninsured/uncollateralized deposits								261	%		259	%		226	%
Uninsured/uncollateralized deposits to total deposits								22	%		23	%		27	%
Gross loans to deposits ratio								60	%		57	%		50	%

Income Statement Review

Net interest income declined 7% to $12.2 million during the current quarter compared to $13.1 million for the first quarter of 2023, and grew 38% from $8.8 million for the second quarter of 2022. For the current quarter, both interest income and interest expense increased compared to the linked quarter with a larger increase in interest expense. For the six months ended June 30, 2023, net interest income increased 47% or $8.1 million compared to the like period in 2022. Current quarter net interest margin contracted 18 basis points to 4.33% for the second quarter of 2023, compared to 4.51% for the first quarter of 2023, and expanded 151 basis points from 2.82% compared to the second quarter of 2022. For the first six months of 2023, the NIM expanded 176 basis points to 4.42% from 2.66% for the first six months of 2022.

During the current quarter, the decrease in net interest income compared to the first quarter of 2023 was primarily a result of funding costs growth outpacing growth in average interest earning asset yields. The increases in both net interest income and net interest margin year-over-year were largely due to increased yields on all categories of interest earning assets which outpaced growth in funding costs during those same time periods. The increase in average yields on interest-earning assets during the current quarter and first half of 2023 reflects the benefit of variable rate interest-earning assets repricing higher, as well as new loans being originated at higher interest rates. As a result, average loan yields for the current quarter increased 11 basis points to 5.55% compared to the preceding quarter of 5.44%, and increased 85 basis points from 4.70% from the second quarter of 2022. The yield on interest-bearing bank deposits increased 48 basis points to 5.09% for the current quarter, compared to 4.61% for the preceding quarter, and increased 425 basis points from 0.84% from the second quarter of 2022. The Bank’s total cost of funds increased to 0.58% for the current quarter, compared to 0.21% for the preceding quarter, and 0.08% for the second quarter of 2022. The increases in deposit cost of funds were largely a result of increases in money market and certificate of deposit rates early in the current quarter due to competitive rate pressures, as well as an increase in LIBOR-based junior subordinated debentures borrowing costs.

Noninterest income was $1.7 million for the second quarter of 2023, compared to $1.3 million for the first quarter of 2023, and $1.9 million for the second quarter of 2022. The increase in noninterest income on a linked quarter basis was primarily due to the increase in gain-on-sale of loans, and $154,000 loss on sale of securities booked in first quarter of 2023, as well as increased service charges and other fee income. Service charges on deposits increased 21% to $509,000 from the quarter a year ago. Deposit service charges and other related fees were increased earlier in the current year consistent with product pricing in our market.

While mortgage production improved during the current quarter, higher mortgage interest rates and housing prices, as well as tight housing supply continue to impact home financing activities and home purchases within our markets. Correspondingly, we continue to manage our staffing levels in this line of business. “Recent increases in mortgage rates have moderated demand for refinancing. Demand for purchase financing has slowed as the increase in mortgage rates are beginning to price some prospective purchasers out of the market,” Carla Tucker, EVP, Chief Financial Officer noted.

For the first six months of 2023, noninterest income declined to 3.0 million compared to $4.0 million for the six months ended June 30, 2022, primarily due to lower gain on sale of loans due to factors noted above.

Noninterest expense declined to $8.9 million for the second quarter of 2023, compared to $9.2 million for the first quarter of 2023, and increased slightly from $8.8 million for the second quarter of 2022. The decrease in noninterest expense from the linked quarter was primarily due to lower payroll taxes and benefit costs compared to a higher level of those same expenses typically experienced in the first quarter of the year. Noninterest expense for the first six months of 2023 increased 4% to $18.1 million compared to $17.4 million for the first six months of 2022, primarily due to increased FDIC insurance premiums, as well as increased salary and employee benefits. Salary expenses comprise a large portion of non-interest expenses and continue to be impacted by competitive recruiting and wages pressures. Employee staffing numbers, excluding mortgage banking employees, have remained relatively stable during the previous 12 months.

Federal and Oregon state income tax expense was $994,000 for the current quarter, and $930,000 for the preceding quarter, resulting in effective tax rates of 20.3% and 18.5%, respectively. These income tax expenses reflect the benefits of tax exempt income and tax credits. Income tax expense for the six months ended June 30, 2023 was $1.9 million, and $476,000 for the six months ended June 30, of 2022, with an effective tax rate of 19.4% and 12.8%, respectively.

Balance Sheet Review

Total Assets decreased 3% to $1.21 billion at June 30, 2023, compared to $1.24 billion at March 31, 2023 and declined 9% from $1.33 billion at March 31, 2022.

Investment Securities totaled $276.4 million at June 30, 2023, compared to $285.9 million at March 31, 2023, and increased 1% from $274.3 million at June 30, 2022 with no investment purchases during the current quarter. The average portfolio yield was 3.21%, 3.20% and 1.96% for the current quarter, linked quarter, and for the second quarter a year ago, respectively. The increase year-over-year was primarily related to investment purchases in the later part of 2022 at higher rates due to increased market interest rates. The average adjusted duration of the investment securities portfolio was 4.5 years at June 30, 2023.

Gross loans balances increased $13.1 million, or 2%, to $658.7 million at June 30, 2023, compared to $645.6 million at March 31, 2023. Year-over-year growth was 9% or $51.8 million. The Bank has experienced growth in most of our loan categories with the exception of commercial and agriculture loans. Utilization on commercial lines-of credit decreased during the pandemic and continues to remain at historic lows. Year-over-year the largest growth categories were residential 1-4 family, owner occupied commercial real estate, and consumer with growth of $23.6 million, $16.1 million and $7.7 million, respectively. For the current quarter, larger growth categories by dollar included owner-occupied and non-occupied commercial real estate as well as multi-family loans.

The Bank also maintains a portfolio of loans to finance luxury and classic cars and as part of our risk management program the Bank manages the concentration levels of that portfolio. Loans to finance luxury and classic cars increased 1% to $62.8 million at June 30, 2023 compared to $62.1 million at March 31, 2023, and increased 14% or $7.6 million compared to $55.2 million a year ago.

The Company manages new loan origination volume using concentration limits that establish maximum exposure levels by certain industry segments, loan product types, geography and single borrower limits. Our loan pipeline continues to be strongly supported by continued business development activity by our commercial lending teams. In addition, the loan portfolio continues to be well-diversified and is originated predominantly within our Western Washington and Oregon markets.

Credit Quality metrics remain sound with nonperforming assets at $959,000, or 0.08% of total assets at June 30, 2023, compared to nonperforming assets of $961,000, or 0.08% of total assets at March 31, 2023, and $1.4 million of nonperforming assets, or 0.10% of total assets, at June 30, 2022. Balances related to non-impaired loans, graded watch or other loans especially mentioned, increased slightly to $13.1 million at June 30, 2023, compared to $12.7 million at March 31, 2023, and decreased substantially from $31.4 million at March 31, 2022. This decrease was primarily related to risk rating upgrades.

“Our sustained strength in asset quality metrics, including ongoing low levels of nonperforming assets, past due loans, and loan charge-offs, reflects our persistent emphasis on solid loan underwriting and our borrowers’ demonstrated ability to meet the challenges posed by the current operating environment. As part of our standard risk management program, we will continue to closely monitor our loan portfolio for any signs of a systemic decline in credit quality and will seek to swiftly implement curative measures to mitigate the impact of any identified credit issues on our overall financial condition,” noted Dan Kuenzi, EVP and Chief Credit Officer. 

Adoption of New Accounting Standard In June 2016, Financial Accounting Standards Board issued Accounting Standard Update No. 2016-13, Measurement of Credit Losses on Financial Instruments (ASU 2016-13). The allowance for credit losses under ASU 2016-13 utilizes a Current Expected Credit Losses (“CECL”) methodology which estimates the expected loan losses over the contractual life of the loans. GAAP prior to ASU 2016-13 required an “incurred loss” methodology for recognizing credit losses that delays recognition until it is probable a loss has been incurred. ASU 2016-13 became effective for the Company on January 1, 2023. The day 1 adoption of ASU 2016-13 and related amendments resulted in a decrease of $157,000 to the Bank’s allowance for credit losses-loans and an increase of $609,000 to the Bank’s allowance for credit losses-unfunded loan commitments for a cumulative-effect adjustment of $452,000 to decrease the beginning balance of retained earnings.

Allowance for Credit Losses (“ACL”) was $8.2 million, or 1.25% of gross loans (excluding PPP) at June 30, 2023, compared to $8.2 million, or 1.28% of gross loans, at March 31, 2023, and $8.2 million, or 1.37%, at March 31, 2022. Net charge-offs remained minimal and were $79,000 for both the current quarter and the first six months of 2023. A provision for credit losses of $71,000 was booked in the second quarter of 2023, largely due to continued loan growth as discussed in the loan section, with a total provision for credit losses of $223,000 for the first six months of 2023, compared to no provision for the first six months of 2022. In addition to the allowance for credit losses for loans, the Bank maintains a liability for credit losses for unfunded loan commitments, which was $754,000 at June 30, 2023, compared to $817,000 at March 31, 2023. Unfunded loan commitments decreased during the quarter as advances on construction lines were drawn upon.

Total Deposits were $1.10 billion at June 30, 2023, compared to $1.11 billion at March 31, 2023 and $1.20 billion at March 31, 2022. Deposits decreased quarter over quarter, though deposit balances showed signs of stabilization toward the latter part of the current quarter. Industry-wide pressure on deposits and competitive pricing pressures impacted deposit balances during the quarter as well as normal seasonal declines in deposit balances. Deposits were also impacted by interest rate sensitive customers transferring a portion of their excess deposits funds and increased customer spending. As some customers continued to seek higher yields, the demand for certificates of deposits (“CD’s”) increased by $10.2 million from the linked quarter and $23.2 million from the second quarter a year ago. Time deposits represented 7%, 6%, and 4%, of total deposits, at June 30, 2023, March 31, 2023, and June 30, 2022, respectively. With a strong core deposit track record, noninterest-bearing deposits represented 41% of total deposits, with core deposits (excluding CDs) representing 93% of total deposits at June 30, 2023.

Shareholder’s Equity was relatively flat at $108.9 million at June 30, 2023 compared to March 31, 2023 and increased 6% from $102.8 million at June 30, 2022. Book value per common share was $10.44 at June 30, 2023, compared to $10.45 at March 31, 2023, and $9.89 at June 30, 2022. Regulatory capital ratios of both the company and the Bank continue to exceed the well-capitalized regulatory thresholds, with the company’s leverage ratio at 10.8% and total risk-based capital ratio at 17.8% as of June 30, 2023.

The small decrease in book value per common share quarter-over-quarter was largely due to a decrease in the comprehensive income due to unrealized loss on available for sale securities partially offset by quarterly net income. With the increase in longer-term market interest rates during the quarter, the unrealized loss on available for sale securities increased 2% or $3.4 million to $23.9 million.

Financial Performance Overview
(Unaudited)
	For the Three Months Ended
	Jun 30, 2023			Mar 31, 2023			Change			Jun 30, 2022			Change
Performance Ratios
Return on average assets, annualized	1.30	%		1.33	%		(0.03	)		0.49	%		0.81
Return on average equity, annualized	14.30	%		15.63	%		(1.33	)		6.05	%		8.25
Efficiency ratio (1)	64.26	%		63.91	%		0.35			82.18	%		(17.92	)
(1) Non-interest expense divided by net interest income plus noninterest income.
	For the Six Months Ended,
	Jun 30, 2023			Jun 30, 2022			Change
Performance Ratios
Return on average assets, annualized	1.31	%		0.50	%		0.81
Return on average equity, annualized	14.95	%		5.93	%		9.02
Efficiency ratio (1)	64.08	%		82.32	%		(18.24	)
(1) Non-interest expense divided by net interest income plus noninterest income.

Balance Sheet Overview
(Unaudited)
			Jun 30, 2023			Mar 31, 2023			$ Change			% Change			Jun 30, 2022			$ Change			% Change
Assets:			(Dollars in thousands, except per share data)
	Cash on hand and in banks	$	14,880		$	16,593		$	(1,713	)		-10	%	$	16,434		$	(1,554	)		-9	%
	Interest bearing deposits		197,952			235,958			(38,006	)		-16	%		199,431			(1,479	)		-1	%
	Federal funds sold		-			-			-			0	%		169,597			(169,597	)		-100	%
	Investment securities		276,366			285,925			(9,559	)		-3	%		274,330			2,036			1	%
	Loans held-for-sale		590			249			341			137	%		2,477			(1,887	)		-76	%
	Loans, net of deferred fees		657,950			644,901			13,049			2	%		606,336			51,614			9	%
	Allowance for loan losses		(8,223	)		(8,231	)		8			0	%		(8,282	)		59			-1	%
	Net loans		649,727			636,670			13,057			2	%		598,054			51,673			9	%
	Federal Home Loan Bank and Pacific Coast Bankers' Bank stock, at cost		2,567			2,567			-			0	%		2,596			(29	)		-1	%
	Other assets		66,473			65,572			901			1	%		64,967			1,506			2	%
	Total assets	$	1,208,555		$	1,243,534		$	(34,979	)		-3	%	$	1,327,886		$	(119,331	)		-9	%
Liabilities and Shareholders' Equity:
	Total deposits	$	1,077,493		$	1,110,368		$	(32,875	)		-3	%	$	1,203,509		$	(126,016	)		-10	%
	Borrowings		13,403			13,403			-			0	%		13,731			(328	)		-2	%
	Accrued interest payable and other liabilities		8,794			10,848			(2,054	)		-19	%		7,892			902			11	%
	Shareholders' equity		108,865			108,915			(50	)		0	%		102,754			6,111			6	%
	Total liabilities and shareholders' equity	$	1,208,555		$	1,243,534		$	(34,979	)		-3	%	$	1,327,886		$	(119,331	)		-9	%
Common Shares Outstanding			10,427,224			10,424,294			2,930			0	%		10,392,738			34,486			0	%
Book value per common share (1)		$	10.44		$	10.45		$	(0.01	)		0	%	$	9.89		$	0.55			6	%
Tangible book value per common share (2)		$	9.15		$	9.16		$	(0.01	)		0	%	$	8.59		$	0.56			7	%
(1) Book value per common share is calculated as the total common shareholders' equity divided by the period ending number of common stock shares outstanding.
(2) Tangible book value per common share is calculated as the total common shareholders' equity less total intangible assets and liabilities, divided by the period ending number of common stock shares outstanding.

Income Statement Overview
(Unaudited)
			For the Three Months Ended,
			Jun 30, 2023			Mar 31, 2023			$ Change			% Change			Jun 30, 2022			$ Change			% Change
			(Dollars in thousands, except per share data)
Interest and dividend income		$	13,735		$	13,690		$	45			0	%	$	9,097		$	4,638			51	%
Interest expense			1,564			593			971			164	%		253			1,311			518	%
	Net interest income		12,171			13,097			(926	)		-7	%		8,844			3,327			38	%
Loan loss provision			71			151			(80	)		-53	%		-			71			100	%
Noninterest income			1,747			1,287			460			36	%		1,864			(117	)		-6	%
Noninterest expense			8,944			9,193			(249	)		-3	%		8,800			144			2	%
Income before income taxes			4,903			5,040			(137	)		-3	%		1,908			2,995			157	%
Income tax expense			994			930			64			7	%		310			684			221	%
	Net Income	$	3,909		$	4,110		$	(201	)		-5	%	$	1,598		$	2,311			145	%
Average common shares outstanding - basic			10,424,391			10,418,292			6,099			0	%		10,392,738			31,653			0	%
Average common shares outstanding - diluted			10,430,494			10,432,245			(1,751	)		0	%		10,422,073			8,421			0	%
Income per common share
	Basic	$	0.37		$	0.39		$	(0.02	)		-5	%	$	0.15		$	0.22			147	%
	Diluted	$	0.37		$	0.39		$	(0.02	)		-5	%	$	0.15		$	0.22			147	%
Effective tax rate			20.3	%		18.5	%		1.8	%					16.2	%		4.1	%
			For the Six Months Ended,
			Jun 30, 2023			Jun 30, 2022			$ Change			% Change
			(Dollars in thousands, except per share data)
Interest and dividend income		$	27,425		$	17,623		$	9,802			56	%
Interest expense			2,157			492			1,665			338	%
	Net interest income		25,268			17,131			8,137			47	%
Loan loss provision			223			-			223			100	%
Noninterest income			3,034			3,976			(942	)		-24	%
Noninterest expense			18,136			17,376			760			4	%
Income before income taxes			9,943			3,731			6,212			166	%
Income tax expense			1,924			476			1,448			304	%
	Net Income	$	8,019		$	3,255		$	4,764			146	%
Average common shares outstanding - basic			10,421,358			10,391,624			29,734			0	%
Average common shares outstanding - diluted			10,431,406			10,423,499			7,907			0	%
Income per common share
	Basic	$	0.77		$	0.31		$	0.46			148	%
	Diluted	$	0.77		$	0.31		$	0.46			148	%
Effective tax rate			19.4	%		12.8	%		6.6	%

Noninterest Income
(Unaudited)
			For the Three Months Ended,
			Jun 30, 2023			Mar 31, 2023			$ Change			% Change			Jun 30, 2022			$ Change			% Change
			(Dollars in thousands)
Service charges on deposits		$	509		$	473		$	36			8	%	$	420		$	89			21	%
Gain on sale of loans, net			260			111			149			134	%		366			(106	)		-29	%
Gain on sale of securities available for sale, net			-			(154	)		154			0	%		-			-			0	%
Earnings on bank owned life insurance			172			164			8			5	%		170			2			1	%
Other noninterest income
	Fee income		759			705			54			8	%		909			(150	)		-17	%
	Other		47			(12	)		59			-492	%		(1	)		48			-4800	%
Total noninterest income		$	1,747		$	1,287		$	460			36	%	$	1,864		$	(117	)		-6	%
			For the Six Months Ended,
			Jun 30, 2023			Jun 30, 2022			$ Change			% Change
			(Dollars in thousands)
Service charges on deposits		$	982		$	802		$	180			22	%
Gain on sale of loans, net			371			1,044			(673	)		-64	%
Gain on sale of securities available for sale, net			(154	)		-			(154	)		-100	%
Earnings on bank owned life insurance			336			354			(18	)		-5	%
Other noninterest income
	Fee income		1,615			1,775			(160	)		-9	%
	Other		(116	)		1			(117	)		-11700	%
Total noninterest income		$	3,034		$	3,976		$	(942	)		-24	%

Noninterest Expense
(Unaudited)
			For the Three Months Ended,
			Jun 30, 2023		Mar 31, 2023		$ Change			% Change			Jun 30, 2022		$ Change			% Change
			(Dollars in thousands)
Salaries and employee benefits		$	5,661	$	5,785	$	(124	)		-2	%	$	5,661	$	-			0	%
Occupancy			504		531		(27	)		-5	%		506		(2	)		0	%
Equipment			269		287		(18	)		-6	%		311		(42	)		-14	%
Data processing			922		951		(29	)		-3	%		889		33			4	%
Professional services			204		241		(37	)		-15	%		195		9			5	%
State and local taxes			207		178		29			16	%		161		46			29	%
FDIC and State assessments			154		154		-			0	%		101		53			52	%
Other noninterest expense:
	Director fees		76		71		5			7	%		75		1			1	%
	Communication		62		59		3			5	%		68		(6	)		-9	%
	Advertising		52		60		(8	)		-13	%		118		(66	)		-56	%
	Professional liability insurance		69		67		2			3	%		63		6			10	%
	Amortization		43		44		(1	)		-2	%		46		(3	)		-7	%
	Other		721		765		(44	)		-6	%		606		115			19	%
Total noninterest expense		$	8,944	$	9,193	$	(249	)		-3	%	$	8,800	$	144			2	%
			For the Six Months Ended,
			Jun 30, 2023		Jun 30, 2022		$ Change			% Change
			(Dollars in thousands)
Salaries and employee benefits		$	11,446	$	11,177	$	269			2	%
Occupancy			1,035		1,026		9			1	%
Equipment			556		598		(42	)		-7	%
Data processing			1,874		1,744		130			7	%
Professional services			445		397		48			12	%
State and local taxes			385		319		66			21	%
FDIC and State assessments			308		201		107			53	%
Other noninterest expense:
	Director fees		147		150		(3	)		-2	%
	Communication		121		135		(14	)		-10	%
	Advertising		112		144		(32	)		-22	%
	Professional liability insurance		136		122		14			11	%
	Amortization		87		92		(5	)		-5	%
	Other		1,484		1,271		213			17	%
Total noninterest expense		$	18,136	$	17,376	$	760			4	%

Investment Securities
(Unaudited)
				Jun 30, 2023			% of Total			Mar 31, 2023			% of Total			$ Change			% Change			Jun 30, 2022			% of Total			$ Change			% Change
				(Dollars in thousands)
Investment securities:
	Collateralized mortgage obligations		$	117,448			43	%	$	122,992			43	%	$	(5,544	)		-5	%	$	84,807			30	%	$	32,641			38	%
	Mortgage backed securities			31,346			11	%		32,294			11	%		(948	)		-3	%		35,017			13	%		(3,671	)		-10	%
	U.S. Government and agency securities			83,319			30	%		84,814			30	%		(1,495	)		-2	%		86,988			32	%		(3,669	)		-4	%
	Municipal securities			44,253			16	%		44,827			16	%		(574	)		-1	%		65,539			24	%		(21,286	)		-32	%
	Corporate debt securities			-			0	%		998			0	%		(998	)		-100	%		1,979			1	%		(1,979	)		-100	%
		Total	$	276,366			100	%	$	285,925			100	%	$	(9,559	)		-3	%	$	274,330			100	%	$	2,036			1	%
	Held to maturity securities		$	57,464			21	%	$	58,595			20	%	$	(1,131	)		-2	%	$	61,482			22	%	$	(4,018	)		-7	%
	Available for sale securities		$	218,902			79	%	$	227,330			80	%	$	(8,428	)		-4	%	$	212,848			78	%	$	6,054			3	%
	Government & Agency securities		$	232,076			84	%	$	240,061			84	%	$	(7,985	)		-3	%	$	206,763			75	%	$	25,313			12	%
	AAA, AA, A rated securities		$	43,086			16	%	$	44,614			16	%	$	(1,528	)		-3	%	$	66,187			24	%	$	(23,101	)		-35	%
	Non-rated securities		$	1,204			0	%	$	1,250			0	%	$	(46	)		-4	%	$	1,380			1	%	$	(176	)		-13	%
	AFS Unrealized Gain (Loss)		$	(23,900	)		-9	%	$	(20,518	)		-7	%	$	(3,382	)		-2	%	$	(18,274	)		-7	%	$	(5,626	)		-2	%

Loans by Category
(Unaudited)
			Jun 30, 2023			% of Gross Loans			Mar 31, 2023			% of Gross Loans			$ Change			% Change			Jun 30, 2022			% of Gross Loans			$ Change			% Change
Commercial:			(Dollars in thousands)
	Commercial and agricultural	$	70,422			11	%	$	75,279			12	%	$	(4,857	)		-6	%	$	80,041			13	%	$	(9,619	)		-12	%
	PPP		370			0	%		405			0	%		(35	)		-9	%		570			0	%		(200	)		-35	%
Real estate:
Construction and development			37,781			6	%		34,918			5	%		2,863			8	%		34,750			6	%		3,031			9	%
Residential 1-4 family			87,002			13	%		85,380			13	%		1,622			2	%		63,377			10	%		23,625			37	%
Multi-family			44,854			7	%		40,882			6	%		3,972			10	%		39,428			6	%		5,426			14	%
Commercial real estate -- owner occupied			166,594			24	%		160,534			25	%		6,060			4	%		150,533			25	%		16,061			11	%
Commercial real estate -- non owner occupied			155,002			24	%		151,923			24	%		3,079			2	%		149,093			25	%		5,909			4	%
Farmland			25,936			4	%		26,451			4	%		(515	)		-2	%		26,051			5	%		(115	)		0	%
Consumer			70,738			11	%		69,867			11	%		871			1	%		63,047			10	%		7,691			12	%
	Gross Loans		658,699			100	%		645,639			100	%		13,060			2	%		606,890			100	%		51,809			9	%
	Less: allowance for loan losses		(8,223	)					(8,231	)					8						(8,282	)					59
	Less: deferred fees		(749	)					(738	)					(11	)					(554	)					(195	)
	Net loans	$	649,727					$	636,670					$	13,057					$	598,054					$	51,673
Loan Concentration
(Unaudited)
			Jun 30, 2023			% of Risk Based Capital			Mar 31, 2023			% of Risk Based Capital			Change			Jun 30, 2022			% of Risk Based Capital			Change
Commercial:			(Dollars in thousands)
	Commercial and agricultural	$	70,422			52	%	$	75,279			57	%		-4	%	$	80,041			64	%		-11	%
	PPP		370			0	%		405			0	%		0	%		570			0	%		0	%
Real estate:
Construction and development			37,781			28	%		34,918			26	%		2	%		34,750			28	%		0	%
Residential 1-4 family			87,002			64	%		85,380			64	%		2	%		63,377			51	%		15	%
Multi-family			44,854			33	%		40,882			31	%		3	%		39,428			32	%		2	%
Commercial real estate -- owner occupied			166,594			123	%		160,534			121	%		5	%		150,533			121	%		5	%
Commercial real estate -- non owner occupied			155,002			115	%		151,923			115	%		2	%		149,093			119	%		-2	%
Farmland			25,936			19	%		26,451			20	%		0	%		26,051			21	%		-1	%
Consumer			70,738			52	%		69,867			53	%		0	%		63,047			51	%		2	%
	Gross Loans	$	658,699					$	645,639								$	606,890
Regulatory Commercial Real Estate		$	235,318			174	%	$	225,163			170	%		7	%	$	220,881			177	%		0	%
Total Risk Based Capital*		$	135,106					$	132,579								$	124,810
*Bank of the Pacific

Deposits by Category
(Unaudited)
		Jun 30, 2023		% of Total			Mar 31, 2023		% of Total			$ Change			% Change			Jun 30, 2022		% of Total			$ Change			% Change
		(Dollars in thousands)
Interest-bearing demand	$	226,696		22	%	$	215,853		20	%	$	10,843			5	%	$	260,712		21	%	$	(34,016	)		-13	%
Money market		177,210		16	%		183,066		16	%		(5,856	)		-3	%		214,218		18	%		(37,008	)		-17	%
Savings		151,406		14	%		165,694		15	%		(14,288	)		-9	%		176,790		15	%		(25,384	)		-14	%
Time deposits (CDs)		75,403		7	%		65,231		6	%		10,172			16	%		52,241		4	%		23,162			44	%
Total interest-bearing deposits		630,715		59	%		629,844		57	%		871			0	%		703,961		58	%		(73,246	)		-10	%
Non-interest bearing demand		446,778		41	%		480,524		43	%		(33,746	)		-7	%		499,548		42	%		(52,770	)		-11	%
Total deposits	$	1,077,493		100	%	$	1,110,368		100	%	$	(32,875	)		-3	%	$	1,203,509		100	%	$	(126,016	)		-10	%
Insured Deposits	$	678,027		63	%	$	700,960		64	%	$	(22,933	)		-3	%	$	730,449		61	%	$	(52,422	)		-7	%
Collateralized Deposits		161,482		15	%		149,856		13	%		11,626			8	%		145,397		12	%		16,085			11	%
Uninsured Deposits		237,984		22	%		259,552		23	%		(21,568	)		-8	%		327,663		27	%		(89,679	)		-27	%
Total Deposits	$	1,077,493		100	%	$	1,110,368		100	%	$	(32,875	)		-3	%	$	1,203,509		100	%	$	(126,016	)		-10	%
Consumer Deposits	$	479,665		45	%	$	502,430		45	%	$	(22,765	)		-5	%	$	548,944		45	%	$	(69,279	)		-13	%
Business Deposits		427,025		40	%		447,778		40	%		(20,753	)		-5	%		500,105		42	%		(73,080	)		-15	%
Public Deposits		170,803		15	%		160,160		15	%		10,643			7	%		154,460		13	%		16,343			11	%
Total Deposits	$	1,077,493		100	%	$	1,110,368		100	%	$	(32,875	)		-3	%	$	1,203,509		100	%	$	(126,016	)		-10	%

The following table summarizes the capital measures of the Company and the Bank respectively, at the dates listed below.

Capital Measures
(unaudited)
	Jun 30, 2023			Mar 31, 2023			Change		Jun 30, 2022			Change			Well Capitalized Under Prompt Correction Action Regulations
Pacific Financial Corporation
Total risk-based capital ratio	17.8	%		17.5	%		-		16.7	%		0.8			N/A
Tier 1 risk-based capital ratio	16.6	%		16.3	%		-		15.6	%		0.7			N/A
Common equity tier 1 ratio	14.9	%		14.6	%		-		13.9	%		0.7			N/A
Leverage ratio	10.8	%		9.9	%		-		8.9	%		1.0			N/A
Tangible common equity ratio	8.0	%		7.8	%		-		6.8	%		1.0			N/A
Bank of the Pacific
Total risk-based capital ratio	17.7	%		17.4	%		-		16.7	%		0.7			10.5%
Tier 1 risk-based capital ratio	16.5	%		16.2	%		-		15.6	%		0.6			8.5%
Common equity tier 1 ratio	16.5	%		16.2	%		-		15.6	%		0.6			7.0%
Leverage ratio	10.5	%		9.8	%		-		8.9	%		0.9			7.5%

The following tables set forth information regarding average balances of interest-earning assets and interest-bearing liabilities and the resultant yields or cost, and the net interest margin on a tax equivalent basis. Loans held for sale and non-accrual loans are included in total loans.

Net Interest Margin
(Unaudited)
(Annualized, tax-equivalent basis)
		For the Three Months Ended,
		Jun 30, 2023			Mar 31, 2023			$ Change			% Change			Jun 30, 2022		$ Change			% Change
Average Balances		(Dollars in thousands)
Gross loans	$	651,472		$	643,851		$	7,621			1	%	$	607,332	$	44,140			7	%
Gross loans without PPP	$	651,081		$	643,414		$	7,667			1	%	$	604,824	$	46,257			8	%
Loans held for sale	$	722		$	584		$	138			24	%	$	2,561	$	(1,839	)		-72	%
Investment securities	$	284,902		$	287,714		$	(2,812	)		-1	%	$	259,643	$	25,259			10	%
Federal funds sold & interest bearing deposits in banks	$	196,409		$	251,118		$	(54,709	)		-22	%	$	372,181	$	(175,772	)		-47	%
Total interest-earning assets	$	1,133,505		$	1,183,267		$	(49,762	)		-4	%	$	1,241,717	$	(108,212	)		-9	%
Non-interest bearing demand deposits	$	448,788		$	483,135		$	(34,347	)		-7	%	$	492,912	$	(44,124	)		-9	%
Interest bearing deposits	$	624,051		$	643,972		$	(19,921	)		-3	%	$	694,671	$	(70,620	)		-10	%
Total Deposits	$	1,072,839		$	1,127,107		$	(54,268	)		-5	%	$	1,187,583	$	(114,744	)		-10	%
Borrowings	$	13,403		$	13,403		$	-			0	%	$	13,745	$	(342	)		-2	%
Total interest-bearing liabilities	$	637,454		$	657,375		$	(19,921	)		-3	%	$	708,416	$	(70,962	)		-10	%
Total Equity	$	109,662		$	106,612		$	3,050			3	%	$	105,922	$	3,740			4	%
		For the Three Months Ended,
		Jun 30, 2023			Mar 31, 2023			Change			Jun 30, 2022			Change
Yield on average gross loans (1)		5.55	%		5.44	%		0.11			4.70	%		0.85
Yield on average gross loans without PPP (1)		5.55	%		5.44	%		0.11			4.57	%		0.98
Yield on average investment securities (1)		3.21	%		3.20	%		0.01			1.96	%		1.25
Yield on Fed funds sold & interest bearing deposits in banks		5.09	%		4.61	%		0.48			0.84	%		4.25
Cost of average interest bearing deposits		0.86	%		0.24	%		0.62			0.10	%		0.76
Cost of average borrowings		6.67	%		6.45	%		0.22			2.54	%		4.13
Cost of average total deposits and borrowings		0.58	%		0.21	%		0.37			0.08	%		0.50
Yield on average interest-earning assets		4.88	%		4.72	%		0.16			2.97	%		1.91
Cost of average interest-bearing liabilities		0.98	%		0.37	%		0.61			0.14	%		0.84
Net interest spread		3.90	%		4.35	%		(0.45	)		2.83	%		1.07
Net interest spread without PPP		3.90	%		4.35	%		(0.45	)		2.76	%		1.14
Net interest margin (1)		4.33	%		4.51	%		(0.18	)		2.89	%		1.44
Net interest margin without PPP (1)		4.33	%		4.51	%		(0.18	)		2.82	%		1.51
(1) Tax-exempt income has been adjusted to a tax equivalent basis at a rate of 21%.
		For the Six Months Ended,
		Jun 30, 2023			Jun 30, 2022			$ Change			% Change
Average Balances		(Dollars in thousands)
Gross loans	$	647,682		$	614,333		$	33,349			5	%
Gross loans without PPP	$	647,268		$	604,414		$	42,854			7	%
Loans held for sale	$	654		$	3,112		$	(2,458	)		-79	%
Investment securities	$	286,300		$	250,912		$	35,388			14	%
Federal funds sold & interest bearing deposits in banks	$	223,612		$	380,495		$	(156,883	)		-41	%
Interest-earning assets	$	1,158,248		$	1,248,852		$	(90,604	)		-7	%
Non-interest bearing demand deposits	$	465,867		$	494,862		$	(28,995	)		-6	%
Interest bearing deposits	$	633,956		$	694,015		$	(60,059	)		-9	%
Total Deposits	$	1,099,823		$	1,188,877		$	(89,054	)		-7	%
Borrowings	$	13,401		$	13,761		$	(360	)		-3	%
Interest-bearing liabilities	$	647,357		$	707,776		$	(60,419	)		-9	%
Total Equity	$	108,146		$	110,766		$	(2,620	)		-2	%
		For the Six Months Ended,
		Jun 30, 2023			Jun 30, 2022			Change
Net Interest Margin
Yield on average gross loans (1)		5.49	%		4.75	%		0.74
Yield on average gross loans without PPP (1)		5.49	%		4.51	%		0.98
Yield on average investment securities (1)		3.20	%		1.85	%		1.35
Yield on Fed funds sold & interest bearing deposits in banks		4.82	%		0.52	%		4.30
Cost of average interest bearing deposits		0.55	%		0.10	%		0.45
Cost of average borrowings		6.56	%		2.20	%		4.36
Cost of average total deposits and borrowings		0.39	%		0.08	%		0.31
Yield on average interest-earning assets		4.80	%		2.88	%		1.92
Cost of average interest-bearing liabilities		0.67	%		0.14	%		0.53
Net interest spread		4.13	%		2.74	%		1.39
Net interest spread without PPP		4.13	%		2.60	%		1.53
Net interest margin (1)		4.42	%		2.80	%		1.62
Net interest margin without PPP (1)		4.42	%		2.66	%		1.76
(1) Tax-exempt income has been adjusted to a tax equivalent basis at a rate of 21%.

Adversely Classified Loans and Securities
(Unaudited)
		Jun 30, 2023			Mar 31, 2023			$ Change			% Change			Jun 30, 2022			$ Change			% Change
		(Dollars in thousands)
Rated substandard or worse, but not impaired, beginning of three month period	$	4,755		$	2,884		$	1,871			65	%	$	8,122		$	(3,367	)		-41	%
Addition of previously classified pass graded loans		981			2,237			(1,256	)		-56	%		-			981			100	%
Upgrades to pass or other loans especially mentioned status		-			-			-			0	%		(601	)		601			-100	%
Moved to nonaccrual		-			(241	)		241			-100	%		(174	)		174			-100	%
Principal payments, net		(550	)		(125	)		(425	)		340	%		(247	)		(303	)		123	%
Rated substandard or worse, but not impaired, end of three month period	$	5,186		$	4,755		$	431			9	%	$	7,100		$	(1,914	)		-27	%
Impaired		959			961			(2	)		0	%		2,853			(1,894	)		-66	%
Total adversely classified loans¹	$	6,145		$	5,716		$	429			8	%	$	9,953		$	(3,808	)		-38	%
Other loans especially mentioned or watch, but not impaired	$	13,097		$	12,666		$	431			3	%	$	31,395		$	(18,298	)		-58	%
Gross loans (excluding deferred loan fees)	$	658,699		$	645,639		$	13,060			2	%	$	606,890		$	51,809			9	%
Adversely classified loans to gross loans		0.93	%		0.89	%								1.64	%
Adversely classified loans to gross loans without PPP		0.93	%		0.89	%								1.64	%
Allowance for loan losses	$	8,223		$	8,231		$	(8	)		0	%	$	8,282		$	(59	)		-1	%
Allowance for loan losses as a percentage of adversely classified loans		133.82	%		144.00	%								83.21	%
Allowance for loan losses to total impaired loans		857.46	%		856.50	%								290.29	%
Adversely classified loans to total assets		0.51	%		0.46	%								0.75	%
Delinquent loans to gross loans, not in nonaccrual status 2		0.01	%		0.03	%								0.09	%
Delinquent loans to gross loans without PPP, not in nonaccrual status		0.01	%		0.03	%								0.09	%
¹Adversely classified loans are defined as loans having a well-defined weakness or weaknesses related to the borrower's financial capacity or to pledged collateral that may jeopardize the repayment of the debt. They are characterized by the possibility that the Bank may sustain some loss if the deficiencies giving rise to the substandard classification are not corrected. Note that any loans internally rated worse than substandard are included in the impaired loan totals.
2 Delinquent loans are defined as loans past due 30-90 days and still accruing

Nonperforming Assets
(Unaudited)
		Jun 30, 2023			Mar 31, 2023			$ Change			% Change			Jun 30, 2022			$ Change			% Change
		(Dollars in thousands)
Total nonaccrual loans, beginning of three month period	$	961		$	869		$	92			11	%	$	1,198		$	(237	)		-20	%
Transfer to performing loans		-			(21	)		21			-100	%		-			-			0	%
Addition of nonaccrual loans		93			241			(148	)		-61	%		113			(20	)		-18	%
Moved to other assets owned		-			-			-			0	%		-			-			0	%
Principal payments, net		(95	)		(128	)		33			-26	%		(71	)		(24	)		34	%
Charge-offs, net		-			-			-			0	%		-			-			0	%
Total nonaccrual loans, end of three month period	$	959		$	961		$	(2	)		0	%	$	1,240		$	(281	)		-23	%
Other real estate owned and foreclosed assets		-			-			-			0	%		122			(122	)		-100	%
Total nonperforming assets	$	959		$	961		$	(2	)		0	%	$	1,362		$	(403	)		-30	%
Accruing loans past due 90 days or more	$	-		$	-		$	-			0	%	$	-		$	-			0	%
Percentage of nonperforming assets to total assets		0.08	%		0.08	%								0.10	%
Nonperforming loans to total loans		0.15	%		0.15	%								0.20	%
Nonperforming loans to total loans without PPP		0.15	%		0.15	%								0.20	%

Allowance for Credit Losses
(Unaudited)
		For the Three Months Ended,
		Jun 30, 2023			Mar 31, 2023			$ Change			% Change			Jun 30, 2022			$ Change			% Change
		(Dollars in thousands)
Gross loans outstanding at end of period	$	658,699		$	645,639		$	13,060			2	%	$	606,890		$	51,809			9	%
Average loans outstanding, gross	$	651,472		$	643,851		$	7,621			1	%	$	607,332		$	44,140			7	%
Allowance for credit losses, beginning of period	$	8,231		$	8,236		$	(5	)		0	%	$	8,276		$	(45	)		-1	%
Impact of CECL Adoption (ASC 326)		-			(157	)		157			-100	%		-			-			0	%
Commercial		(84	)		-			(84	)		-100	%		-			(84	)		-100	%
Commercial Real Estate		-			-			-			0	%		-			-			0	%
Residential Real Estate		-			-			-			0	%		-			-			0	%
Consumer		(10	)		(39	)		29			-74	%		(17	)		7			-41	%
Total charge-offs		(94	)		(39	)		(55	)		141	%		(17	)		(77	)		453	%
Commercial		-			27			(27	)		-100	%		-			-			0	%
Commercial Real Estate		-			-			-			0	%		-			-			0	%
Residential Real Estate		-			-			-			0	%		-			-			0	%
Consumer		15			13			2			15	%		23			(8	)		-35	%
Total recoveries		15			40			(25	)		-63	%		23			(8	)		-35	%
Net recoveries/(charge-offs)		(79	)		1			(80	)		-8000	%		6			(85	)		-1417	%
Provision (benefit) to income		71			151			(80	)		-53	%		-			71			100	%
Allowance for credit losses, end of period	$	8,223		$	8,231		$	(8	)		0	%	$	8,282		$	(59	)		-1	%
Ratio of net loans charged-off to average
gross loans outstanding, annualized		0.05	%		0.00	%		0.05	%					0.00	%		0.05	%
Ratio of net loans charged-off to average
gross loans outstanding without PPP, annualized		0.05	%		0.00	%		0.05	%					0.00	%		0.05	%
Ratio of allowance for credit losses to
gross loans outstanding		1.25	%		1.27	%		-0.02	%					1.36	%		-0.11	%
Ratio of allowance for loan credit to
gross loans without PPP outstanding		1.25	%		1.28	%		-0.03	%					1.37	%		-0.12	%
		For the Six Months Ended,
		Jun 30, 2023			Jun 30, 2022			$ Change			% Change
		(Dollars in thousands)
Gross loans outstanding at end of period	$	658,699		$	606,890		$	51,809			9	%
Average loans outstanding, gross	$	647,682		$	614,333		$	33,349			5	%
Allowance for credit losses, beginning of period	$	8,236		$	8,297		$	(61	)		-1	%
Impact of CECL Adoption (ASC 326)		(157	)
Commercial		(84	)		-			(84	)		-100	%
Commercial Real Estate		-			-			-			0	%
Residential Real Estate		-			-			-			0	%
Consumer		(49	)		(42	)		(7	)		17	%
Total charge-offs		(133	)		(42	)		(91	)		217	%
Commercial		27			-			27			100	%
Commercial Real Estate		-			-			-			0	%
Residential Real Estate		-			-			-			0	%
Consumer		27			27			-			0	%
Total recoveries		54			27			27			100	%
Net recoveries (charge-offs)		(79	)		(15	)		(64	)		427	%
Provision (benefit) to income		223			-			223			100	%
Allowance for credit losses, end of period	$	8,223		$	8,282		$	(59	)		-1	%
Ratio of net loans charged-off to average
gross loans outstanding, annualized		0.01	%		0.00	%		0.01	%
Ratio of net loans charged-off to average
gross loans outstanding without PPP, annualized		0.01	%		0.00	%		0.01	%
Ratio of allowance for credit losses to
gross loans outstanding		1.25	%		1.36	%		-0.11	%
Ratio of allowance for credit losses to
gross loans without PPP outstanding		1.25	%		1.37	%		-0.12	%

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, 2023, the Company had total assets of $1.21 billion and operated fourteen branches in the communities of Grays Harbor, Pacific, Whatcom, Skagit, Clark and Wahkiakum counties in the State of Washington, and two branches in Clatsop County, Oregon. The Company also operated loan production offices in the communities of Olympia and 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, including the COVID-19 pandemic and government responses thereto, changes in interest rates, extensive and evolving regulation of the banking industry, 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

FAQ

What is Pacific Financial Corporation's quarterly cash dividend?

Pacific Financial Corporation declared a quarterly cash dividend of $0.13 per share on July 19, 2023, payable on August 25, 2023 to shareholders of record on August 11, 2023.

What was Pacific Financial Corporation's net income for the second quarter of 2023?

Pacific Financial Corporation reported net income of $3.9 million, or $0.37 per diluted share for the second quarter 2023, compared to $4.1 million, or $0.39 per diluted share for the first quarter of 2023, and $1.6 million, or $0.15 per diluted share for the second quarter of 2022.

How did Pacific Financial Corporation's net interest margin change in the second quarter of 2023?

Pacific Financial Corporation's net interest margin contracted 18 basis points to 4.33% compared to the linked quarter of 4.51%, with improved yields across all asset classes, offset by an increase in costs of funds due primarily to competitive rate pressures early in the current quarter.

What was Pacific Financial Corporation's return on average assets for the second quarter of 2023?

Pacific Financial Corporation's return on average assets was 1.30%, compared to 1.33% for the first quarter of 2023, and 0.49% for the second quarter of 2022.

How did Pacific Financial Corporation's total deposits change in the second quarter of 2023?

Total deposits declined $32.9 million to $1.08 billion, compared to $1.11 billion from the first quarter 2023, with core deposits representing 93% of total deposits at June 30, 2023. Non-interest bearing deposits represented 41% of total deposits at June 30, 2023.