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

Rhea-AI Summary

Pacific Financial (OTCQX: PFLC) reported second quarter 2026 net income of $2.9 million, or $0.29 per diluted share, down from $3.1 million in Q1 2026 and up from $2.7 million a year earlier. ROAA was 0.92% and ROAE 9.15%. Net interest income rose to $12.3 million, with net interest margin improving sequentially to 4.16%. Noninterest income increased to $1.6 million, while noninterest expenses climbed to $10.2 million, including approximately $678,000 of merger-related costs tied to the pending all-stock acquisition by Banner Corporation at an exchange ratio of 0.2633 Banner shares per Pacific Financial share.

Total loans were $770.5 million and deposits $1.11 billion, up 3% and 4% year-over-year, respectively, though deposits declined quarter-over-quarter. Asset quality remained strong, with nonperforming assets at 0.02% of total assets. Tangible book value per share rose 7% year-over-year to $11.27. The Board declared a quarterly cash dividend of $0.15 per share, payable August 14, 2026, to shareholders of record on August 4, 2026.

Positive

• Net income $2.9 million, up 8% year-over-year for Q2 2026
• Net interest margin 4.16%, up 12 basis points sequentially
• Nonperforming assets 0.02% of total assets at June 30, 2026
• Portfolio loans $770.5 million, up 3% or $24.0 million year-over-year
• Total deposits $1.11 billion, up $42.1 million or 4% year-over-year
• Tangible book value $11.27 per share, up $0.74 or 7% year-over-year
• Regulatory capital ratios strong: leverage 11.0%, total risk-based 17.5%
• Quarterly dividend $0.15 per share, up from $0.14 a year ago
• Liquidity coverage short-term sources $592.7 million, 193% of uninsured and uncollateralized deposits

Negative

• Net income down 5% quarter-over-quarter, from $3.05 million to $2.89 million
• Noninterest expenses up $403,000 sequentially to $10.2 million
• Merger-related costs $678,000 recorded in Q2 2026
• Total deposits down $25.8 million quarter-over-quarter to $1.11 billion
• Classified loans 0.49% of portfolio loans, up from 0.36% prior quarter and 0.22% year earlier
• Shareholders’ equity down $623,000 quarter-over-quarter, largely from higher unrealized losses and dividends

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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:

• Return on average assets (“ROAA”) was 0.92% in the second quarter 2026, compared to 0.97% for the first quarter 2026, and 0.89% for the second quarter 2025.
• Return on average equity (“ROAE”) was 9.15%, compared to 9.69% the preceding quarter, and 9.14% the second quarter a year earlier.
• Net interest income increased $287,000 to $12.3 million in the second quarter, compared to the prior quarter, and increased $355,000 from $11.9 million in the second quarter of 2025.
• Net interest margin (“NIM”) increased to 4.16%, compared to 4.04% the preceding quarter, and decreased from 4.23% for the second quarter a year ago. The increase in the net interest margin in the current period relative to the prior period was related to higher yields on loans and investment securities and lower cost of deposits and borrowings.
• A recapture for credit losses of $88,000 was recognized in the second quarter ended June 30, 2026, compared to a recapture of $300,000 in the preceding quarter and a provision of $387,000 in the second quarter a year ago.
• Non-interest income increased $266,000 to $1.6 million for the quarter ended June 30, 2026 from $1.3 million the preceding quarter and increased $88,000 from $1.5 million in the second quarter of 2025.
• Non-interest expenses increased by $403,000 to $10.2 million for the second quarter from $9.8 million the prior quarter and increased $518,000 from $9.7 million in the second quarter a year ago. The increase relates to increased professional fees and other costs associated with the announced merger with Banner Corporation. Merger related expenses were approximately $678,000 during the quarter ended June 30, 2026.
• Gross portfolio loan balances decreased slightly to $770.5 million at June 30, 2026, compared to $771.1 million at March 31, 2026, and increased 3%, or $24.0 million, from $746.5 million one year earlier.
• Total deposits decreased $25.8 million to $1.11 billion at June 30, 2026, compared to the end of the previous quarter and increased $42.1 million, or 4%, from one year earlier.
• Non-performing assets decreased $380,000 to 0.02% of total assets at June 30, 2026 from 0.05% at the end of the prior quarter. Substandard loans increased $994,000 to $3.8 million while special mention assets decreased $1.3 million to $12.9 million at June 30, 2026 compared to the previous quarter.
• Shareholders’ equity decreased $623,000 during the quarter largely due to higher accumulated other comprehensive loss marks on the available-for-sale investment portfolio and payments of dividends. Tangible book value per share was $11.27 at June 30, 2026, an increase of $0.74 per share from $10.53 at June 30, 2025, representing growth in tangible book value per share of 7%. Total dividends paid to shareholders over the past year totaled $0.58 per share.
• Bank of the Pacific continues to exceed regulatory well-capitalized requirements. At June 30, 2026, Bank of the Pacific’s estimated leverage ratio was 11.0% and its estimated total risk-based capital ratio was 17.5%.
  
  

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.

FINANCIAL HIGHLIGHTS (unaudited)	Quarter Ended										Change From											Six Months Ended						Change
(In 000s, except per share data)
		Jun 30,			Mar 31,			June 30,				Mar 31, 2026					Jun 30, 2025					Jun 30,			Jun 30,
		2026			2026			2025				$		%			$		%			2026			2025				$		%
Earnings Ratios & Data
Net Income	$	2,891		$	3,050		$	2,669			$	(159	)	-5	%	$	222		8	%	$	5,940		$	5,049			$	891		18	%
Return on average assets		0.92	%		0.97	%		0.89	%			-0.05	%				0.03	%				0.94	%		0.85	%			0.09	%
Return on average equity		9.15	%		9.69	%		9.14	%			-0.54	%				0.01	%				9.41	%		8.82	%			0.59	%
Efficiency ratio(1)		73.90	%		73.94	%		72.47	%			-0.04	%				1.43	%				73.92	%		74.09	%			-0.17	%
Net-interest margin %(2)		4.16	%		4.04	%		4.23	%			0.12	%				-0.07	%				4.10	%		4.18	%			-0.08	%
Share Ratios & Data
Basic earnings per share	$	0.29		$	0.30		$	0.27			$	(0.01	)	-3	%	$	0.02		7	%	$	0.59		$	0.50			$	0.09
Diluted earning per share	$	0.29		$	0.30		$	0.27			$	(0.01	)	-3	%	$	0.02		7	%	$	0.59		$	0.50			$	0.09
Book value per share(3)	$	12.61		$	12.68		$	11.87			$	(0.07	)	-1	%	$	0.74		6	%
Tangible book value per share(4)	$	11.27		$	11.34		$	10.53			$	(0.07	)	-1	%	$	0.74		7	%
Common shares outstanding		10,025			10,024			10,020				1		0	%		5		0	%
PFLC stock price	$	17.21		$	12.98		$	10.69			$	4.23		33	%	$	6.52		61	%
Dividends paid per share	$	0.15		$	0.15		$	0.14			$	-		0	%	$	0.01		7	%	$	0.30		$	0.28			$	0.02		7	%
Balance Sheet Data
Assets	$	1,264,628		$	1,290,658		$	1,215,468			$	(26,030	)	-2	%	$	49,160		4	%
Portfolio Loans	$	770,464		$	771,142		$	746,475			$	(678	)	0	%	$	23,989		3	%
Deposits	$	1,112,886		$	1,138,653		$	1,070,831			$	(25,767	)	-2	%	$	42,055		4	%
Investments	$	334,911		$	329,742		$	307,790			$	5,169		2	%	$	27,121		9	%
Shareholders equity	$	126,457		$	127,080		$	118,937			$	(623	)	0	%	$	7,520		6	%
Liquidity Ratios
Short-term funding to uninsured
and uncollateralized deposits		193	%		194	%		190	%			-1	%				3	%
Uninsured and uncollateralized
deposits to total deposits		28	%		28	%		25	%			0	%				3	%
Portfolio loans to deposits ratio		69	%		68	%		70	%			1	%				-1	%
Asset Quality Ratios
Non-performing assets to assets		0.02	%		0.05	%		0.04	%			-0.03	%				-0.02	%
Non-accrual loans to portfolio loans		0.04	%		0.09	%		0.06	%			-0.05	%				-0.02	%
Loan losses to avg portfolio loans		0.04	%		0.00	%		0.04	%			0.04	%				0.00	%				0.02	%		0.04	%			-0.02	%
ACL-loans to portfolio loans		1.16	%		1.17	%		1.24	%			-0.01	%				-0.08	%
Capital Ratios
Total risk-based capital ratio (Bank)		17.5	%		17.4	%		16.9	%			0.1	%				0.6	%
Tier 1 risk-based capital ratio (Bank)		16.4	%		16.2	%		15.7	%			0.2	%				0.7	%
Common equity tier 1 ratio (Bank)		16.4	%		16.2	%		14.2	%			0.2	%				2.2	%
Leverage ratio (Bank)		11.0	%		10.7	%		10.9	%			0.3	%				0.1	%
Tangible common equity ratio		9.0	%		8.9	%		8.8	%			0.1	%				0.2	%
(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,			June 30,				Mar 31, 2026					Jun 30, 2025					Jun 30,			Jun 30,
		2026			2026			2025				$		%			$		%			2026			2025				$		%
Interest Income
Loan interest & fee income	$	11,488		$	11,200		$	10,840			$	288		3	%	$	648		6	%	$	22,688		$	21,144			$	1,544		7	%
Interest earning cash income		697			933			1,124				(236	)	-25	%		(427	)	-38	%		1,630			2,332				(702	)	-30	%
Investment income		3,112			2,923			2,728				189		6	%		384		14	%		6,034			5,407				627		12	%
Interest Income		15,297			15,056			14,692				241		2	%		605		4	%		30,352			28,883				1,469		5	%
Interest Expense
Deposits interest expense		2,843			2,889			2,571				(46	)	-2	%		272		11	%		5,732			5,265				467		9	%
Other borrowings interest expense		184			184			206				-		0	%		(22	)	-11	%		369			412				(43	)	-10	%
Interest Expense		3,027			3,073			2,777				(46	)	-1	%		250		9	%		6,101			5,677				424		7	%
Net Interest Income		12,270			11,983			11,915				287		2	%		355		3	%		24,251			23,206				1,045		5	%
Provision (recapture) for credit losses		(88	)		(300	)		387				212		-71	%		(475	)	-123	%		(388	)		470				(858	)	-183	%
Net Interest Income after provision		12,358			12,283			11,528				75		1	%		830		7	%		24,639			22,736				1,903		8	%
Non-Interest Income
Fees and service charges		1,208			1,102			1,293				106		10	%		(85	)	-7	%		2,310			2,410				(100	)	-4	%
Gain on sale of investments, net		-			-			-				-		0	%		-		0	%		-			(165	)			165		-100	%
Gain on sale of loans, net		-			-			-				-		0	%		-		0	%		-			(2	)			2		-100	%
Income on bank-owned insurance		361			201			191				160		80	%		170		89	%		562			383				179		47	%
Other non-interest income		6			6			3				-		0	%		3		100	%		11			15				(4	)	-27	%
Non-Interest Income		1,575			1,309			1,487				266		20	%		88		6	%		2,883			2,641				242		9	%
Non-Interest Expense
Salaries and employee benefits		6,250			6,201			6,103				49		1	%		147		2	%		12,450			12,072				378		3	%
Occupancy		583			624			618				(41	)	-7	%		(35	)	-6	%		1,207			1,209				(2	)	0	%
Furniture, Fixtures & Equipment		307			323			305				(16	)	-5	%		2		1	%		630			606				24		4	%
Marketing & donations		139			138			157				1		1	%		(18	)	-11	%		277			310				(33	)	-11	%
Professional services		697			297			254				400		135	%		443		174	%		993			553				440		80	%
Data Processing & IT		1,179			1,258			1,250				(79	)	-6	%		(71	)	-6	%		2,437			2,468				(31	)	-1	%
Other		1,076			987			1,026				89		9	%		50		5	%		2,063			1,932				131		7	%
Non-Interest Expense		10,231			9,828			9,713				403		4	%		518		5	%		20,057			19,150				907		5	%
Income before income taxes		3,702			3,764			3,302				(62	)	-2	%		400		12	%		7,465			6,227				1,238		20	%
Provision for income taxes		811			714			633				97		14	%		178		28	%		1,525			1,178				347		29	%
Net Income	$	2,891		$	3,050		$	2,669			$	(159	)	-5	%		222		8	%	$	5,940		$	5,049			$	891		18	%
Effective tax rate		21.9	%		19.0	%		19.2	%			2.9	%				2.7	%				20.4	%		18.9	%			1.5	%

BALANCE SHEET (unaudited)	Period Ended										Change from											% of Total
($ in 000s)
		Jun 30,			Mar 31,			Jun 30,				Mar 31, 2026					Jun 30, 2025					Jun 30,		Mar 31,		Jun 30,
		2026			2026			2025				$		%			$		%			2026		2026		2025
Assets
Cash on hand and in banks	$	14,689		$	17,119		$	19,305			$	(2,430	)	-14	%	$	(4,616	)	-24	%		1	%	1	%	2	%
Interest-earning cash		79,621			109,735			79,520				(30,114	)	-27	%		101		0	%		7	%	9	%	7	%
Investment securities		334,911			329,742			307,790				5,169		2	%		27,121		9	%		26	%	26	%	25	%
Portfolio Loans, net of deferred fees		769,943			770,605			745,834				(662	)	0	%		24,109		3	%		61	%	60	%	61	%
Allowance for credit losses		(8,914	)		(9,041	)		(9,222	)			127		-1	%		308		-3	%		-1	%	-1	%	-1	%
Net loans		761,029			761,564			736,612				(535	)	0	%		24,417		3	%		60	%	59	%	61	%
Premises & equipment		15,671			16,039			16,494				(368	)	-2	%		(823	)	-5	%		1	%	1	%	1	%
Goodwill & Other Intangibles		13,435			13,435			13,435				-		0	%		-		0	%		1	%	1	%	1	%
Bank-owned life Insurance		28,655			29,024			28,395				(369	)	-1	%		260		1	%		2	%	2	%	2	%
Other assets		16,617			14,000			13,917				2,617		19	%		2,700		19	%		2	%	1	%	2	%
Total Assets	$	1,264,628		$	1,290,658		$	1,215,468			$	(26,030	)	-2	%	$	49,160		4	%		100	%	100	%	100	%
Liabilities & Shareholders' Equity
Deposits	$	1,112,886		$	1,138,653		$	1,070,831			$	(25,767	)	-2	%	$	42,055		4	%		88	%	88	%	88	%
Borrowings		13,403			13,403			13,403				-		0	%		-		0	%		1	%	1	%	1	%
Other liabilities		11,882			11,522			12,297				360		3	%		(415	)	-3	%		1	%	1	%	1	%
Common Stock & Retained Earnings		139,138			137,704			132,251				1,434		1	%		6,887		5	%		11	%	11	%	11	%
Accumulated Other Comprehensive Loss		(12,681	)		(10,624	)		(13,314	)			(2,057	)	19	%		633		-5	%		-1	%	-1	%	-1	%
Shareholders' equity		126,457			127,080			118,937				(623	)	0	%		7,520		6	%		10	%	10	%	10	%
Liabilities & Shareholders' Equity	$	1,264,628		$	1,290,658		$	1,215,468			$	(26,030	)	-2	%	$	49,160		4	%		100	%	100	%	100	%

INVESTMENT COMPOSITION & CONCENTRATIONS (unaudited)	Period Ended										Change from											% of Total
($ in 000s)
		Jun 30,			Mar 31,			Jun 30,				Mar 31, 2026					Jun 30, 2025					Jun 30,		Mar 31,		Jun 30,
		2026			2026			2025				$		%			$		%			2026		2026		2025
Investment Securities
Collateralized mortgage obligations	$	189,605		$	182,632		$	159,386			$	6,973		4	%	$	30,219		19	%		57	%	55	%	52	%
Mortgage backed securities		44,010			45,402			47,094				(1,392	)	-3	%		(3,084	)	-7	%		13	%	14	%	15	%
U.S. Government and agency securities		58,199			58,502			58,668				(303	)	-1	%		(469	)	-1	%		17	%	18	%	19	%
Municipal securities		43,097			43,206			42,642				(109	)	0	%		455		1	%		13	%	13	%	14	%
Investment Securities	$	334,911		$	329,742		$	307,790			$	5,169		2	%	$	27,121		9	%		100	%	100	%	100	%
Held to maturity securities	$	26,645		$	27,462		$	29,950			$	(817	)	-3	%	$	(3,305	)	-11	%		8	%	8	%	10	%
Available for sale securities	$	308,266		$	302,280		$	277,840			$	5,986		2	%	$	30,426		11	%		92	%	92	%	90	%
Government & Agency securities	$	291,792		$	286,513		$	265,122			$	5,279		2	%	$	26,670		10	%		87	%	87	%	86	%
AAA, AA, A rated securities	$	42,456		$	42,565		$	41,979			$	(109	)	0	%	$	477		1	%		13	%	13	%	14	%
Non-rated securities	$	663		$	664		$	689			$	(1	)	0	%	$	(26	)	-4	%		0	%	0	%	0	%
AFS Unrealized Gain (Loss)	$	(16,335	)	$	(13,701	)	$	(17,375	)		$	(2,634	)	19	%	$	1,040		-6	%		-5	%	-4	%	-6	%

LIQUIDITY (unaudited)	Period Ended										Change from											% of Deposits
($ in 000s)
		Jun 30,			Mar 31,			Jun 30,				Mar 31, 2026					Jun 30, 2025					Jun 30,		Mar 31,		Jun 30,
		2026			2026			2025				$		%			$		%			2026		2026		2025
Short-term Funding
Cash and cash equivalents	$	85,897		$	115,697		$	84,957			$	(29,800	)	-26	%	$	940		1	%		8	%	10	%	8	%
Unencumbered AFS Securities		147,986			145,295			114,077				2,691		2	%		33,909		30	%		13	%	13	%	11	%
Secured lines of Credit (FHLB, FRB)		358,841			365,356			317,651				(6,515	)	-2	%		41,190		13	%		32	%	32	%	30	%
Short-term Funding	$	592,724		$	626,348		$	516,685			$	(33,624	)	-5	%	$	76,039		15	%		53	%	55	%	49	%

PORTFOLIO LOAN COMPOSITION & CONCENTRATIONS (unaudited)	Period Ended										Change from											% of Total
($ in 000s)
		Jun 30,			Mar 31,			Jun 30,				Mar 31, 2026					Jun 30, 2025					Jun 30,		Mar 31,		Jun 30,
		2026			2026			2025				$		%			$		%			2026		2026		2025
Portfolio Loans
Commercial & agriculture	$	106,219		$	106,019		$	74,831			$	200		0	%	$	31,388		42	%		14	%	14	%	10	%
Real estate:
Construction and development		28,781			34,563			30,869				(5,782	)	-17	%		(2,088	)	-7	%		4	%	4	%	4	%
Residential 1-4 family		103,114			105,301			103,233				(2,187	)	-2	%		(119	)	0	%		13	%	14	%	14	%
Multi-family		74,853			80,628			78,409				(5,775	)	-7	%		(3,556	)	-5	%		10	%	11	%	10	%
CRE -- owner occupied		199,428			188,640			193,127				10,788		6	%		6,301		3	%		26	%	24	%	26	%
CRE -- non owner occupied		180,518			175,789			177,860				4,729		3	%		2,658		1	%		23	%	23	%	24	%
Farmland		31,034			30,292			27,202				742		2	%		3,832		14	%		4	%	4	%	4	%
Consumer		46,517			49,910			60,944				(3,393	)	-7	%		(14,427	)	-24	%		6	%	6	%	8	%
Portfolio Loans		770,464			771,142			746,475			$	(678	)	0	%	$	23,989		3	%		100	%	100	%	100	%
Less: ACL		(8,914	)		(9,041	)		(9,222	)
Less: deferred fees		(521	)		(537	)		(641	)
Net loans	$	761,029		$	761,564		$	736,612
Regulatory Commercial Real Estate	$	280,875		$	288,400		$	283,527			$	(7,525	)	-3	%	$	(2,652	)	-1	%		36	%	37	%	38	%
Total Risk Based Capital(1)	$	147,503		$	145,993		$	140,987			$	1,510		1	%	$	6,516		5	%
CRE to Risk Based Capital(1)		190	%		198	%		201	%					-8	%				-11	%

CRE--MULTI-FAMILY & NON OWNER OCCUPIED COMPOSITION (unaudited)	Period Ended										Change from											% of Total
($ in 000s)
		Jun 30,			Mar 31,			Jun 30,				Mar 31, 2026					Jun 30, 2025					Jun 30,		Mar 31,		Jun 30,
		2026			2026			2025				$		%			$		%			2026		2026		2025
Collateral Composition(2)
Multifamily	$	74,819		$	82,569		$	78,760			$	(7,750	)	-9	%	$	(3,941	)	-5	%		28	%	30	%	30	%
Hospitality		32,149			32,927			32,573				(778	)	-2	%		(424	)	-1	%		12	%	12	%	12	%
Industrial		29,991			20,175			14,430				9,816		49	%		15,561		108	%		11	%	8	%	5	%
Retail		29,367			31,582			36,384				(2,215	)	-7	%		(7,017	)	-19	%		11	%	12	%	14	%
Mixed Use		27,072			28,125			24,480				(1,053	)	-4	%		2,592		11	%		10	%	11	%	9	%
Mini Storage		22,623			23,607			22,488				(984	)	-4	%		135		1	%		9	%	9	%	8	%
Office		19,018			19,249			26,034				(231	)	-1	%		(7,016	)	-27	%		7	%	7	%	10	%
Special Purpose		17,167			17,202			17,342				(35	)	0	%		(175	)	-1	%		7	%	6	%	7	%
Warehouse		9,225			9,403			10,394				(178	)	-2	%		(1,169	)	-11	%		4	%	4	%	4	%
Other		2,097			2,123			2,620				(26	)	-1	%		(523	)	-20	%		1	%	1	%	1	%
Total	$	263,528		$	266,962		$	265,505			$	(3,434	)	-1	%	$	(1,977	)	-1	%		100	%	100	%	100	%
(1)Bank of the Pacific
(2)Includes loans in process of construction

CREDIT QUALITY (unaudited)	Period Ended										Change from
($ in 000s)
		Jun 30,			Mar 31,			Jun 30,				Mar 31, 2026					Jun 30, 2025
		2026			2026			2025				$		%			$		%
Risk Rating Distribution
Pass	$	753,791		$	754,182		$	735,200			$	(391	)	0	%	$	18,591		3	%
Special Mention		12,915			14,196			9,637				(1,281	)	-9	%		3,278		34	%
Substandard		3,758			2,764			1,638				994		36	%		2,120		129	%
Portfolio Loans	$	770,464		$	771,142		$	746,475			$	(678	)	0	%	$	23,989		3	%
Nonperforming Assets
Nonaccruing loans		283			663			468			$	(380	)	-57	%		(185	)	-40	%
Other real estate owned		-			-			-				-		0	%		-		0	%
Nonperforming Assets	$	283		$	663		$	468			$	(380	)	-57	%		(185	)	-40	%
Credit Metrics
Classified loans(1)to portfolio loans		0.49	%		0.36	%		0.22	%			0.13	%				0.27	%
ACL to classified loans(1)		237.20	%		327.10	%		563.00	%			-89.90	%				-325.80	%
Loans past due 30+ days to portfolio loans(2)		0.14	%		0.03	%		0.02	%			0.11	%				0.12	%
Nonperforming assets to total assets		0.02	%		0.05	%		0.04	%			-0.03	%				-0.02	%
Nonaccruing loans to portfolio loans		0.04	%		0.09	%		0.06	%			-0.05	%				-0.02	%
(1)Classified loans include loans rated substandard or worse and 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.
(2)Excludes non-accrual loans

DEPOSIT COMPOSITION & CONCENTRATIONS (unaudited)	Period Ended										Change from											% of Total
($ in 000s)
		Jun 30,			Mar 31,			Jun 30,				Mar 31, 2026					Jun 30, 2025					Jun 30,		Mar 31,		Jun 30,
		2026			2026			2025				$		%			$		%			2026		2026		2025
Deposits
Interest-bearing demand	$	132,289		$	129,481		$	207,208			$	2,808		2	%	$	(74,919	)	-36	%		12	%	11	%	19	%
Money market		314,419			315,130			200,251				(711	)	0	%		114,168		57	%		28	%	28	%	19	%
Savings		106,887			113,036			111,577				(6,149	)	-5	%		(4,690	)	-4	%		10	%	10	%	10	%
Time deposits (CDs)		148,205			148,131			131,729				74		0	%		16,476		13	%		13	%	13	%	12	%
Total interest-bearing deposits		701,800			705,778			650,765				(3,978	)	-1	%		51,035		8	%		63	%	62	%	60	%
Non-interest bearing demand		411,086			432,875			420,066				(21,789	)	-5	%		(8,980	)	-2	%		37	%	38	%	40	%
Total deposits	$	1,112,886		$	1,138,653		$	1,070,831			$	(25,767	)	-2	%	$	42,055		4	%		100	%	100	%	100	%
Insured Deposits	$	617,050		$	634,395		$	618,964			$	(17,345	)	-3	%	$	(1,914	)	0	%		55	%	56	%	58	%
Collateralized Deposits		188,767			180,730			179,399				8,037		4	%		9,368		5	%		17	%	16	%	17	%
Uninsured Deposits		307,069			323,528			272,468				(16,459	)	-5	%		34,601		13	%		28	%	28	%	25	%
Total Deposits	$	1,112,886		$	1,138,653		$	1,070,831			$	(25,767	)	-2	%	$	42,055		4	%		100	%	100	%	100	%
Consumer Deposits	$	497,095		$	517,179		$	462,889			$	(20,084	)	-4	%	$	34,206		7	%		45	%	45	%	43	%
Business Deposits		416,562			430,072			417,675				(13,510	)	-3	%		(1,113	)	0	%		37	%	38	%	39	%
Public Deposits		199,229			191,402			190,267				7,827		4	%		8,962		5	%		18	%	17	%	18	%
Total Deposits	$	1,112,886		$	1,138,653		$	1,070,831			$	(25,767	)	-2	%	$	42,055		4	%		100	%	100	%	100	%

NET INTEREST MARGIN (unaudited)	Quarter Ended										Change From											Six Months Ended						Change
($ in 000s)
		Jun 30,			Mar 31,			June 30,				Mar 31, 2026					Jun 30, 2025					Jun 30,			Jun 30,
		2026			2026			2025				$		%			$		%			2026			2025				$		%
Average Interest Bearing Balances
Portfolio loans	$	771,426		$	772,754		$	723,472			$	(1,328	)	0	%	$	47,954		7	%	$	772,087		$	712,334			$	59,753		8	%
Investment securities	$	338,569		$	331,999		$	308,774			$	6,570		2	%	$	29,795		10	%	$	335,303		$	306,934			$	28,369		9	%
Interest-earning cash	$	75,480		$	102,289		$	101,170			$	(26,809	)	-26	%	$	(25,690	)	-25	%	$	88,811		$	105,563			$	(16,752	)	-16	%
Total interest-earning assets	$	1,185,475		$	1,207,042		$	1,133,416			$	(21,567	)	-2	%	$	52,059		5	%	$	1,196,201		$	1,124,831			$	71,370		6	%
Non-interest bearing deposits	$	405,782		$	413,375		$	389,453			$	(7,593	)	-2	%	$	16,329		4	%	$	409,557		$	383,992			$	25,565		7	%
Interest-bearing deposits	$	703,391		$	714,456		$	677,660			$	(11,065	)	-2	%	$	25,731		4	%	$	708,893		$	676,398			$	32,495		5	%
Total Deposits	$	1,109,173		$	1,127,831		$	1,067,113			$	(18,658	)	-2	%	$	42,060		4	%	$	1,118,450		$	1,060,390			$	58,060		5	%
Borrowings	$	13,403		$	13,403		$	13,403			$	-		0	%	$	-		0	%	$	13,403		$	13,403			$	-		0	%
Total interest-bearing liabilities	$	716,794		$	727,859		$	691,063			$	(11,065	)	-2	%	$	25,731		4	%	$	722,296		$	689,801			$	32,495		5	%
Yield / Cost $(1)
Portfolio loans	$	11,495		$	11,215		$	10,854			$	280		2	%	$	641		6	%	$	22,711		$	21,170			$	1,541		7	%
Investment securities	$	3,138		$	2,950		$	2,755			$	188		6	%	$	383		14	%	$	6,089		$	5,465			$	624		11	%
Interest-earning cash	$	697		$	933		$	1,124			$	(236	)	-25	%	$	(427	)	-38	%	$	1,630		$	2,332			$	(702	)	-30	%
Total interest-earning assets	$	15,330		$	15,098		$	14,733			$	232		2	%	$	597		4	%	$	30,430		$	28,966			$	1,464		5	%
Interest-bearing deposits	$	2,843		$	2,889		$	2,571			$	(46	)	-2	%	$	272		11	%	$	5,732		$	5,265			$	467		9	%
Borrowings	$	184		$	184		$	206			$	-		0	%	$	(22	)	-11	%	$	369		$	412			$	(43	)	-10	%
Total interest-bearing liabilities	$	3,027		$	3,073		$	2,777			$	(46	)	-1	%	$	250		9	%	$	6,101		$	5,677			$	424		7	%
Net interest income	$	12,303		$	12,025		$	11,956			$	278		2	%	$	347		3	%	$	24,329		$	23,289			$	1,040		4	%
Yield / Cost %(1)
Yield on portfolio loans		5.98	%		5.89	%		6.02	%			0.09	%				-0.04	%				5.93	%		5.99	%			-0.06	%
Yield on investment securities		3.72	%		3.60	%		3.58	%			0.12	%				0.14	%				3.66	%		3.59	%			0.07	%
Yield on interest-earning cash		3.70	%		3.70	%		4.46	%			0.00	%				-0.76	%				3.70	%		4.45	%			-0.75	%
Cost of interest-bearing deposits		1.62	%		1.64	%		1.52	%			-0.02	%				0.10	%				1.63	%		1.57	%			0.06	%
Cost of borrowings		5.51	%		5.57	%		6.16	%			-0.06	%				-0.65	%				5.55	%		6.20	%			-0.65	%
Cost of deposits and borrowings		1.08	%		1.09	%		1.03	%			-0.01	%				0.05	%				1.09	%		1.07	%			0.02	%
Yield on interest-earning assets		5.19	%		5.07	%		5.21	%			0.12	%				-0.02	%				5.13	%		5.19	%			-0.06	%
Cost of interest-bearing liabilities		1.69	%		1.71	%		1.61	%			-0.02	%				0.08	%				1.70	%		1.66	%			0.04	%
Net interest spread		3.50	%		3.36	%		3.60	%			0.14	%				-0.10	%				3.43	%		3.53	%			-0.10	%
Net interest margin		4.16	%		4.04	%		4.23	%			0.12	%				-0.07	%				4.10	%		4.18	%			-0.08	%
(1)Tax-exempt income has been adjusted to a tax equivalent basis at a rate of 21%.

ALLOWANCE FOR CREDIT LOSSES (ACL) (unaudited)	Quarter Ended										Change From											Six Months Ended						Change
($ in 000s)
		Jun 30,			Mar 31,			June 30,				Mar 31, 2026					Jun 30, 2025					Jun 30,			Jun 30,
		2026			2026			2025				$		%			$		%			2026			2025				$		%
ACL-Loans
Beginning of period balance	$	9,041		$	9,292		$	8,890			$	(251	)	-3	%	$	151		2	%	$	9,292		$	8,851			$	441		5	%
Charge-offs		(71	)		(6	)		(76	)			(65	)	1083	%		5		-7	%		(77	)		(151	)			74		-49	%
Recoveries		1			5			1				(4	)	-80	%		-		0	%		6			1				5		500	%
Net (charge-off) recovery		(70	)		(1	)		(75	)			(69	)	6900	%		5		-7	%		(71	)		(150	)			79		-53	%
Provision (recapture)		(57	)		(250	)		407				193		-77	%		(464	)	-114	%		(307	)		521				(828	)	-159	%
End of period balance	$	8,914		$	9,041		$	9,222			$	(127	)	-1	%	$	(308	)	-3	%	$	8,914		$	9,222			$	(308	)	-3	%
Net charge-off (recovery) to average portfolio loans		0.04	%		0.00	%		0.04	%			0.04	%				0.00	%				0.02	%		0.04	%			-0.02	%
ACL-loans to portfolio loans		1.16	%		1.17	%		1.24	%			-0.01	%				-0.08	%				1.16	%		1.24	%			-0.08	%
ACL-Unfunded Loans Commitments
Beginning of period balance	$	518		$	568		$	509			$	(50	)	-9	%	$	9		2	%	$	568		$	540			$	28		5	%
Provision (recapture)		(31	)		(50	)		(20	)			19		-38	%		(11	)	55	%		(81	)		(51	)			(30	)	59	%
End of period balance	$	487		$	518		$	489			$	(31	)	-6	%	$	(2	)	0	%	$	487		$	489			$	(2	)	0	%

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 

FAQ

What were Pacific Financial (PFLC) earnings for the second quarter of 2026?

Pacific Financial reported net income of $2.9 million, or $0.29 per diluted share, for Q2 2026. According to Pacific Financial, this compares with $3.1 million in Q1 2026 and $2.7 million in Q2 2025, reflecting higher net interest income and higher expenses.

How did Pacific Financial’s net interest margin perform in Q2 2026?

Pacific Financial’s net interest margin was 4.16% in Q2 2026. According to Pacific Financial, this increased from 4.04% in Q1 2026 but decreased from 4.23% in Q2 2025, driven by higher loan and securities yields and a slightly lower cost of funds.

What dividend did Pacific Financial (PFLC) declare for the second quarter of 2026?

Pacific Financial declared a quarterly cash dividend of $0.15 per share for Q2 2026. According to Pacific Financial, it will be payable on August 14, 2026 to shareholders of record on August 4, 2026, unchanged from Q1 2026 and up from $0.14 a year ago.

What are the key details of the Banner Corporation merger with Pacific Financial (PFLC)?

Banner Corporation agreed to acquire Pacific Financial in an all-stock transaction. According to Pacific Financial, shareholders will receive 0.2633 shares of Banner Corporation common stock for each Pacific Financial share, subject to the merger agreement’s terms and conditions announced April 30, 2026.

How did Pacific Financial’s loans and deposits change in Q2 2026?

Pacific Financial reported portfolio loans of $770.5 million and deposits of $1.11 billion at June 30, 2026. According to Pacific Financial, loans rose 3% and deposits 4% year-over-year, while deposits declined $25.8 million sequentially, mainly from lower noninterest-bearing balances.

What was Pacific Financial’s asset quality like at June 30, 2026?

Pacific Financial’s nonperforming assets were $283,000, or 0.02% of total assets, at June 30, 2026. According to Pacific Financial, classified loans were 0.49% of portfolio loans, special mention loans were $12.9 million, and there was no other real estate owned.

How strong were Pacific Financial’s capital and tangible book value in Q2 2026?

Pacific Financial reported tangible book value of $11.27 per share at June 30, 2026. According to Pacific Financial, this was up 7% year-over-year, while Bank of the Pacific’s estimated leverage ratio was 11.0% and total risk-based capital ratio 17.5%, exceeding well-capitalized thresholds.