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Pacific Financial Corp Earns $2.4 Million, or $0.24 per Diluted Share for First Quarter 2025;听Board of Directors Approves 5% Stock Buyback Plan;听Declares Quarterly Cash Dividend of $0.14 per Share

ABERDEEN, Wash., April 25, 2025 (GLOBE NEWSWIRE) -- Pacific Financial Corporation (OTCQX: PFLC), (鈥淧acific Financial鈥�) or the (鈥淐ompany鈥�), the holding company for Bank of the Pacific (the 鈥淏ank鈥�), reported net income of $2.4 million, or $0.24 per diluted share for the first quarter of 2025, compared to $2.2 million, or $0.21 per diluted share for the fourth quarter of 2024, and $2.7 million, or $0.26 per diluted share for the first quarter of 2024. Current quarter net income includes a provision for credit losses of $83,000, compared to the recapture of $103,000 from the allowance for credit losses for the fourth quarter of 2024, and a provision for credit losses of $33,000 for the first quarter of 2024. Except for year-end December 31, 2024 financials, all results are unaudited.

The Board of Directors of Pacific Financial declared a quarterly cash dividend of $0.14 per share on April 23, 2025. The dividend will be payable on May 23, 2025 to shareholders of record on May 9, 2025. Additionally, the Board of Directors has authorized an additional $5.3 million toward future stock repurchases, or approximately 5.0% of total shares outstanding.

鈥淲e are pleased with our first quarter results; operating earnings were solid and benefitted from strong core deposit growth, margin expansion and a lower cost of deposits as well as the closure of the residential mortgage division in late 2024. During the quarter, we saw good progress with our deposit growth initiative with core deposit growth of $61.2 million or 7%. We continue to benefit from our strong core deposit base, with non-interest bearing accounts representing 36% of total deposits. The expansion in our net interest margin was fueled by higher rates on loan production and on investment purchases, as well as a declining cost of funds. Cost of funds declined 7 basis points to 1.10%, despite continued rate pressure. Demand for lending continues to be tempered by the current level of interest rates and economic uncertainty.鈥� said Denise Portmann, President and Chief Executive Officer.

鈥淥ur business model and strategies continue to be built on a culture of relationship banking with a strong foundation of sound credit quality lending standards. At quarter-end, our asset quality metrics remained strong, allowance for credit loss levels were solid and capital levels also remained strong. We believe the combination of our strong balance sheet, and prudent risk management will allow us to achieve sustainable growth and continue delivering results that benefit our stakeholders for the long term," said Portmann.

First Quarter 2025 Financial Highlights:

• Return on average assets (鈥淩OAA鈥�) improved to 0.81%, compared to 0.74% for the fourth quarter 2024, and decreased from 0.95% for the first quarter 2024.
• Return on average equity (鈥淩OAE鈥�) was 8.48%, compared to 7.27% from the preceding quarter, and 9.32% from the first quarter a year earlier.
• Net interest income was $11.3 million, compared to $10.9 million for the fourth quarter of 2024, and $11.4 million for the first quarter of 2024.
• Net interest margin (鈥淣IM鈥�) increased to 4.12%, compared to 3.99% from the preceding quarter, and 4.38% for the first quarter a year ago.
• Provision for credit losses was $83,000 for the first quarter ended March 31, 2025, compared to a recapture of $103,000 for the preceding quarter and a provision of $33,000 in the first quarter a year ago.
• Gross portfolio loan balances increased to $707.0 million at March 31, 2025, compared to $704.9 million at December 31, 2024, and increased 2%, or $12.8 million from $694.2 million one year earlier.
• Total deposits increased $59.9 million, or 6%, to $1.07 billion at March 31, 2025 compared to the previous quarter and increased $78.9 million, or 8%, from one year earlier. Non-interest bearing deposits represent 36% of total deposits at March 31, 2025, and support a lower cost core deposits portfolio. Core deposits were 88% of total deposits at March 31, 2025.
• Non-performing assets to total assets ratio remained low at 0.10%, or $1.2 million for the current quarter end and were 0.09% and $1.1 million three months earlier. Substandard loans decreased $41,000 to $2.7 million at March 31, 2025 and special mention assets declined $680,000 to $10.1 million at March 31, 2025.
• Shareholder equity increased $3.1 million during the quarter largely due to net income and lower accumulated other comprehensive loss marks on the investment portfolio, offset by stock repurchases and dividend payments. Tangible book value per share was $10.33 at March 31, 2025, an increase from $9.80 at March 31, 2024.
• Pacific Financial and Bank of the Pacific continue to exceed regulatory well-capitalized requirements. At March 31, 2025, Pacific Financial鈥檚 estimated leverage ratio was 10.9% and its estimated total risk-based capital ratio was 17.4%.

Balance Sheet Review

Total assets increased to $1.22 billion at March 31, 2025, compared to $1.15 billion at December 31, 2024, and $1.13 billion one year earlier.

Cash and cash equivalents increased $63.7 million to $143.8 million at March 31, 2025 from $80.2 million at December 31, 2024 and $91.3 million one year earlier. The increase largely relates to deposit growth during the first quarter.

Liquidity metrics continue to be strong and are managed to ensure adequate funding resources are available to meet customer demand. At March 31, 2025, the Company鈥檚 on and off-balance sheet sources totaled $549.7 million. This represents a coverage ratio of short-term funds available to uninsured and uncollateralized deposits of 212%. Included in available sources are collateralized credit lines the Company has established with the Federal Home Loan Bank of Des Moines (FHLB) and the Federal Reserve Bank of San Francisco, as well as unsecured borrowing lines from various correspondent banks. There were no balance outstanding on any of these facilities at quarter-end. Uninsured or uncollateralized deposits were 24% of total deposits at March 31, 2025.

Investment securities increased $0.9 million to $305.4 million, compared to $304.5 million at December 31, 2024 and increased $16.9 million compared to the like period a year ago. The largest investment category was collateralized mortgage obligations which accounted for 51% of the investment portfolio at March 31, 2025, compared to 48% at December 31, 2024 and 45% one year earlier. The yield on the investment portfolio increased 15 basis points during the current quarter to 3.60% from 3.45% for both the prior quarter and the first quarter a year ago. During the quarter, the bank implemented a $9.0 million restructure with a loss of $165,000; improving yields by over 200 basis points on those investment funds. The adjusted duration of the portfolio was 4.31 years at March 31, 2025 compared to 4.35 years at March 31, 2024.

Gross loans balances increased $2.1 million, to $707.0 million at March 31, 2025, compared to $704.9 million at December 31, 2024. During the first quarter of 2025, growth in new owner-occupied commercial real estate and multi-family loans more than offset the decline in commercial & agriculture, construction & development and residential 1-4 family loans. Year-over-year loan growth was 2%, or $12.8 million, with the largest increases in multi-family loans and owner-occupied commercial real estate increasing $17.9 million and $9.2 million, respectively. Loans classified as commercial real estate for regulatory concentration purposes totaled $263.4 million at March 31, 2025, or 189% of total risk-based capital.

The Company continues to manage concentration limits that establish maximum exposure levels by certain industry segments, loan product types, geography and single borrower limits. In addition, the loan portfolio continues to be well-diversified and is collateralized with assets predominantly within the Company鈥檚 Western Washington and Oregon markets.

Credit quality: Nonperforming assets remain minimal at $1.2 million, or 0.10% of total assets at March 31, 2025, compared to $1.1 million, or 0.09% at December 31, 2024. Accruing loans past due more than 30 days represent only 0.04% of total loans. Total loans designated as special mention decreased to $10.1 million at March 31, 2025 compared to $10.8 million at December 31, 2024. The Company has zero other real estate owned as of March 31, 2025.

Allowance for credit losses (鈥淎CL鈥�) remained at $8.9 million, or 1.26% of gross loans at March 31, 2025. A provision for credit losses of $83,000 was recorded in the current quarter resulting from $75,000 in net charge-offs and loan growth. This compares to a recapture for credit losses of $103,000 in the fourth quarter of 2024 and a provision for credit losses of $33,000 for the first quarter one year earlier.听听

Total deposits increased to $1.07 billion at March 31, 2025 from $1.01 billion the prior quarter and $995.8 million one year earlier. The company鈥檚 strong core deposit base continues to positively impact the Bank鈥檚 net interest margin and operating results. Non-interest bearing deposits continued to remain the largest category of deposits and represented 36% of deposits at March 31, 2025. Additionally, interest-bearing demand and money market deposits represented 23% and 18% of total deposits, respectively, at March 31, 2025, and CDs as a percentage of deposits declined during the quarter, after increasing since fourth quarter 2022. CD balances were 12% of total deposits for the current quarter compared to 13% at the prior quarter.

Shareholders鈥� equity was $116.9 million at March 31, 2025, compared to $113.9 million at December 31, 2024, and $114.7 million at March 31, 2024. The increase in shareholders鈥� equity during the current quarter was primarily due to net income and a decrease in unrealized losses on available-for-sale securities with dividend payments and stock repurchases partially offsetting those increases. Net unrealized losses (after-tax) included in shareholders鈥� equity on available-for-sale securities were $14.2 million at March 31, 2025 compared to $17.5 million at December 31, 2024 and $16.6 million at March 31, 2024. During the quarter, the Company completed its repurchase of shares under the stock repurchase plan announced in October 2024.

Book value per common share was $11.67 at March 31, 2025, compared to $11.26 at December 31, 2024, and $11.10 at March 31, 2024. The Company鈥檚 tangible common equity ratio declined to 8.6% at March 31, 2025 relative to 8.8% the prior quarter and 9.0% at March 31, 2024. Regulatory capital ratios of both the Company and the Bank continue to exceed the well-capitalized regulatory thresholds, with the Company鈥檚 leverage ratio at 10.9% and total risk-based capital ratio at 17.4% as of March 31, 2025. These regulatory capital ratios are estimates, pending completion and filing of regulatory reports.

Income Statement Review

Net interest income increased $439,000 to $11.3 million for the first quarter of 2025, compared to $10.9 million for the fourth quarter of 2024, and decreased $111,000 compared to $11.4 million for the first quarter a year ago. The change in the current quarter compared to the preceding quarter reflects the impact of higher loan and investment yields, lower deposit and borrowing costs as well as growth in total interest earning assets resulting from core deposit growth during the quarter. The decrease in net interest income compared to the year ago quarter primarily reflects a rise in funding costs and a decrease in yields on interest-bearing cash as the FOMC decreased the federal funds rate 100 basis points in 2024.

The Bank鈥檚 net interest margin improved to 4.12% for the quarter ended March 31, 2025 from 3.99% the prior quarter and declined from 4.38% one year earlier. The increase from the prior quarter resulted from both a 7 basis points decrease in costs of funds combined with a 13 basis point increase in loan yields and a 15 basis point increase in investment yields which was partially offset by a 34 basis point decrease in yields on interest-earning cash balances. Loan yields improved as longer term fixed and variable rate loans (originated in a lower rate environment) were renewed at higher rates. In addition, average loan yields on new originations were at higher yields than the current loan portfolio yield. Investment yields improved partially due to $32.3 million of investment purchases at higher yields over the last 6 months including a $9.0 million restructure that replaced lower yielding investments with higher yielding investments. The Bank continues to actively monitor and manage its costs of funds and even in a competitive environment was able to decrease rates on specific deposit categories during the first quarter. In addition, the high percentage of non-interest bearing deposits at 36% continues to help reduce volatility in deposit costs.

Noninterest income decreased to $1.2 million for the current quarter, compared to $1.8 million for the linked quarter and $1.4 million a year earlier. The decrease compared to the linked quarter was primarily due to a loss on the sale of investment securities of $165,000 during the current quarter and a reduction in gain on sale of loans compared to the prior quarter as a result of closing the mortgage division during late 2024. In addition, a death benefit from a bank-owned life insurance policy realized in the fourth quarter of 2024 also contributed to the variance.听听 Fee and service charge income decreased in the first quarter of 2025 to $1.1 million compared to $1.3 million in the previous quarter and $1.1 million in the first quarter of 2024.

Noninterest expenses decreased to $9.4 million for the first quarter of 2025 compared to $10.1 million for the prior quarter and $9.5 million for the first quarter of 2024. The decrease from the prior quarter was primarily related to reductions in mortgage lending salary and employee benefit costs and other mortgage lending costs resulting from the closure of the mortgage division in late 2024. The prior quarter included $773,000 in costs associated with severance and retention payments, lease termination costs and software contract termination expenses related to closing the mortgage division and $602,000 in other mortgage division costs.

The company鈥檚 efficiency ratio decreased to 75.86% for the first quarter of 2025, compared to 79.80% in the preceding quarter and increased from 74.21% in the same quarter a year ago.

Income tax expense: Federal and Oregon state income tax expenses totaled $544,000 for the current quarter, and $492,000 for the preceding quarter, resulting in effective tax rates of 18.6% and 18.5%, respectively. These income tax expenses reflect the benefits of tax exempt income on tax-exempt loans and investments, affordable housing tax credit financing, and investments in bank-owned life insurance.

ABOUT PACIFIC FINANCIAL CORPORATION

Pacific Financial Corporation of Aberdeen, Washington, is the bank holding company for Bank of the Pacific, a state chartered and federally insured commercial bank. Bank of the Pacific offers banking products and services to small-to-medium sized businesses and professionals in western Washington and Oregon. At March 31, 2025, the Company had total assets of $1.22 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鈥檚 website at . 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鈥檚 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鈥檚 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, 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:
听 Denise Portmann, President & CEO
听 Carla Tucker, EVP & CFO
听 360.533.8873