The Board of Directors of Pacific Financial declared a quarterly cash dividend of $0.14 per share on October 22, 2025. The dividend will be payable on November 28, 2025 to shareholders of record on November 14, 2025.
"We are encouraged by the continued momentum driven by both strong loan growth and deposit growth as well as the strategic initiatives taken in 2024 - expanding our lending team while also improving our efficiency through the closure of our mortgage division. During 2025, deposit balances have increased 10% or $99 million and loan balances have increased 10% or $67 million. As we continue to redeploy lower yielding liquid investments into higher yielding assets, we anticipate our earnings levels will remain strong," said Denise Portmann, President and Chief Executive Officer.
"Credit quality metrics remain strong and continued on a positive trend with non-performing assets totaling only 0.03% of total assets, or less than $400,000 at quarter end. Our return on shareholder equity was 11.5% for the quarter, dividend payments were $0.14 per share, and our market capitalization now exceeds $115 million based on current market pricing. We remain focused on delivering strong returns to our shareholders through our operations and managing our capital to support growth," said Portmann.
Third Quarter 2025 Financial Highlights:
Return on average assets ("ROAA") improved to 1.12% in the third quarter 2025, compared to 0.89% for the second quarter 2025, and 0.90% for the third quarter 2024.
Return on average equity ("ROAE") was 11.50%, compared to 9.14% the preceding quarter, and 8.77% the third quarter a year earlier.
Net interest income increased to $12.3 million, compared to $11.9 million for the second quarter of 2025, and $11.2 million for the third quarter of 2024.
Net interest margin ("NIM") increased to 4.25%, compared to 4.23% the preceding quarter, and 4.19% for the third quarter a year ago.
A recapture for credit losses of $49,000 was recognized in the third quarter ended September 30, 2025, compared to a provision of $387,000 for the preceding quarter and a recapture of $66,000 in the third quarter a year ago.
Gross portfolio loan balances increased 3% to $772.2 million at September 30, 2025, compared to $746.5 million at June 30, 2025, and increased 10%, or $72.6 million from $699.6 million one year earlier.
Total deposits increased $43.2 million to $1.11 billion at September 30, 2025, compared to the previous quarter and increased $102.6 million, or 10%, from one year earlier.
Non-performing assets to total assets ratio declined to 0.03%, or $365,000 for the current quarter end compared to 0.04% and $468,000 three months earlier. Substandard loans decreased $410,000 to $1.2 million and special mention assets declined $61,000 to $9.6 million at September 30, 2025 compared to the previous quarter.
Shareholder equity increased $4.4 million during the quarter largely due to net income and lower accumulated other comprehensive loss marks on the available-for-sale investment portfolio, partially offset by dividend payments. The tangible book value per share was $10.97 at September 30, 2025, an increase of $0.50 from $10.47 at September 30, 2024. Total dividends paid to shareholders over the past year totaled $0.56 per share.
Pacific Financial and Bank of the Pacific continue to exceed regulatory well-capitalized requirements. At September 30, 2025, Pacific Financial's estimated leverage ratio was 10.9% and its estimated total risk-based capital ratio was 17.1%.
Balance Sheet Review
Total assets increased to $1.26 billion at September 30, 2025 from $1.21 billion one quarter earlier, and $1.16 billion at September 30, 2024.
Cash and interest earning deposits increased $25.5 million to $124.3 million at September 30, 2025, from $98.8 million at June 30, 2025, and increased $23.1 million from $101.1 million one year earlier. These increases largely relate to deposit growth during the same time periods.
During the third quarter of 2025, liquidity metrics improved and continued to be strong. At September 30, 2025, the Company's on and off-balance sheet sources totaled $580.5 million. This represents a coverage ratio of short-term funds available to uninsured and uncollateralized deposits of 187%. Included in available sources are collateralized credit lines the Company has established with the Federal Home Loan Bank of Des Moines (FHLB) and the Federal Reserve Bank of San Francisco, as well as unsecured borrowing lines from various correspondent banks. There was no balance outstanding on any of these facilities at quarter-end. Uninsured or uncollateralized deposits were 28% of total deposits at September 30, 2025.
Investment securities decreased $4.0 million to $303.8 million at September 30, 2025, compared to $307.8 million at June 30, 2025, and increased $7.0 million compared to a year ago. The largest investment category was collateralized mortgage obligations, which accounted for 52% of the investment portfolio at September 30, 2025, and at June 30, 2025 compared to 48% one year earlier. The yield on the investment portfolio increased 3 basis points during the current quarter to 3.61% from 3.58% the prior quarter and increased 8 basis points from 3.53% the third quarter a year ago. The adjusted duration of the portfolio was 4.3 years at September 30, 2025, up slightly from 4.2 years a year ago.
Gross loans balances increased $25.7 million, to $772.2 million at September 30, 2025, compared to $746.5 million at June 30, 2025. During the third quarter of 2025, $30.2 million SBA C&I loans were purchased, primarily in an effort to manage loan portfolio diversification and concentration levels. With the purchase of the SBA loans, commercial and agricultural loans increased from 10% of gross loans to 14% during the current quarter. Excluding the loan purchase, gross loans declined slightly during the current quarter. Year-over-year gross loan growth was 10%, or $72.6 million and exclusive of the loan purchase, gross loans increased $42.4 million, or 6% year-over-year. The Bank originated $181 million in loans year to date through the third quarter of 2025. The loan pipeline continues to be supported by sustained business development activity of the Company's commercial lending teams.
The Company manages concentration limits that establish maximum exposure levels by certain industry segments, loan product types, geography and single borrower limits. In addition, the loan portfolio continues to be well-diversified and is collateralized with assets predominantly within the Company's Western Washington and Oregon markets. Loans classified as commercial real estate for regulatory concentration purposes totaled $291.4 million at September 30, 2025, or 204% of total risk-based capital.
Credit quality: Nonperforming assets declined from the previous quarter and remain minimal at $365,000, or 0.03% of total assets at September 30, 2025, compared to $468,000, or 0.04% at June 30, 2025. Total loans designated as special mention decreased $61,000 to $9.6 million at September 30, 2025 compared to the previous quarter. The Company has zero other real estate owned as of September 30, 2025.
Allowance for credit losses ("ACL"): ACL-loans decreased $165,000 to $9.1 million, or 1.17% of total portfolio loans at September 30, 2025, compared to 1.27% at September 30, 2024. The decrease in the percentage of ACL-loans to total portfolio loans was primarily the result of the $30.2 million purchase of fully guaranteed SBA loans during the quarter, as the guaranteed portion of SBA loans are expected to have zero credit losses. The ratio of ACL to non-government guaranteed loans was 1.23% at September 30, 2025.
A recapture for credit losses of $49,000 was recorded in the current quarter resulting from a small decline in non-government guaranteed loan balances. Conversely, a provision for credit losses of $387,000 was established in the second quarter of 2025 due to loan growth while a recapture of $66,000 was recorded for the third quarter one year ago.
Total deposits increased $43.2 million to $1.11 billion at September 30, 2025, compared to the previous quarter and increased $102.6 million from $1.01 billion one year earlier. A majority of the increase for the current quarter was due to increased money-market balances, which were partially offset by decreases in interest-bearing demand balances. Core deposits represented 88% of total deposits at quarter end, including non-interest-bearing deposits of 38% of deposits, and interest-bearing demand and money market deposits representing 18% and 22% of total deposits, respectively. CDs as a percentage of deposits remained at 12% of total deposits. The high percentage of non-interest-bearing deposits supports a lower cost core deposits portfolio.
Shareholders' equity was $123.3 million at September 30, 2025, compared to $118.9 million at June 30, 2025, and $121.1 million at September 30, 2024. The increase in shareholders' equity during the current quarter was primarily due to $3.5 million in net income and a $2.3 million decrease in unrealized losses (after-tax) on available-for-sale securities partially offset by $1.4 million in dividends to shareholders. Net unrealized losses (after-tax) included in shareholders' equity on available-for-sale securities were $11.0 million at September 30, 2025, compared to $13.3 million at June 30, 2025, and $11.4 million at September 30, 2024.
Book value per common share was $12.31 at September 30, 2025, compared to $11.87 at June 30, 2025, and $11.78 at September 30, 2024. Tangible book value per common share was $10.97 at September 30, 2025, compared to $10.53 at June 30, 2025, and $10.47 at September 30, 2024. The Company's tangible common equity ratio was 8.8% at September 30, 2025, remaining the same compared to the prior quarter and decreased from 9.4% at September 30, 2024. Regulatory capital ratios of both the Company and the Bank continue to exceed well-capitalized regulatory thresholds, with the Company's leverage ratio at 10.9% and total risk-based capital ratio at 17.1% as of September 30, 2025. These regulatory capital ratios are estimates, pending completion and filing of regulatory reports.
Income Statement Review
Net interest income increased $368,000 to $12.3 million for the third quarter of 2025, compared to $11.9 million for the second quarter of 2025, and increased $1.1 million compared to $11.2 million for the third quarter a year ago. The change in the current quarter compared to the preceding quarter reflects increased loan interest income from larger average loan balances and increased investment income from higher yields, partially offset by increased deposit interest expense from both higher average balances and a 2 basis point increase in cost of funds, plus decreased interest income on interest-earning cash resulting from both decreased cash balances as well as decreased yields. Late in the quarter, the FOMC decreased the federal funds rate by 25 basis points. For the nine months ended September 30, 2025, net interest income increased to $35.5 million compared to $33.4 million for the like period a year ago.
The Bank's net interest margin improved to 4.25% for the quarter ended September 30, 2025, from 4.23% the prior quarter and from 4.19% in the third quarter a year ago. Increases in net interest margin during the last year were driven by asset composition changes, i.e. deploying interest-earning cash into higher-earning loan balances augmented by a decline in cost of funds and growth in loan and investment securities yields. These changes were only partially offset by a decline in yields on interest-earning cash. FOMC has decreased the federal funds target rate 75 basis points during the last 12 months.
Yields on loans remained relatively unchanged; decreasing 1 basis points to 6.01% for the third quarter of 2025 compared to 6.02% for the prior quarter and increasing 2 basis points from 5.99% in the like quarter a year ago. The Bank continues to actively monitor and manage its costs of funds and for the current quarter the Bank's total cost of funds increased only 2 basis points to 1.05%, compared to 1.03% for the preceding quarter, and 1.15% for the third quarter 2024. The high percentage of non-interest-bearing deposits at 38% continues to help reduce volatility in deposit costs.
Noninterest income remained at $1.5 million for the current quarter and decreased compared to $1.7 million for the third quarter a year earlier. The decrease compared to one year earlier was primarily due to the loss of revenue associated with the mortgage banking division which was closed in late 2024. Fee and service charge income remained at $1.3 million in the current quarter compared to the previous quarter and increased slightly from $1.2 million in the third quarter of 2024. Total non-interest income was $4.1 million for the nine months ended September 30, 2025, compared to $5.1 million for the same period a year ago, with the decrease primarily due to the loss of gross revenue associated with the mortgage banking division which closed in late 2024.
Noninterest expenses decreased to $9.4 million for the third quarter of 2025 compared to $9.7 million for both the prior quarter and the third quarter of 2024. The decrease in the current quarter compared to the prior quarter was primarily related to a decrease in salary and benefit expenses associated with decreased health insurance claims and accruals and the decrease from the third quarter of 2024 was primarily due to decreased expenses associated with the mortgage banking division which was closed in late 2024.
For the nine months ended September 30, 2025, total non-interest expenses were $28.6 million, compared to $29.1 million for the nine months ended September 30, 2024. The decrease in non-interest expenses primarily relates to decreased expenses associated with the mortgage division which closed in late 2024, as the first nine months of 2024 included operating costs of the mortgage banking division. The Bank's efficiency ratio improved to 68.47% for the third quarter of 2025, compared to 72.47% in the preceding quarter and 75.48% in the same quarter a year ago.
Income tax expense: Federal and Oregon state income tax expenses totaled $904,000 for the current quarter, and $633,000 for the preceding quarter, resulting in effective tax rates of 20.6% and 19.2%, 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
Nine Months Ended
Change
(In 000s, except per share data)
Sep 30,
Jun 30,
Sep 30,
Jun 30, 2025
Sep 30, 2024
Sep 30,
Sep 30,
2025
2025
2024
$
%
$
%
2025
2024
$
%
Earnings Ratios & Data
Net Income
$
3,478
$
2,669
$
2,594
$
809
30
%
$
884
34
%
$
8,525
$
7,370
$
1,155
16
%
Return on average assets
1.12
%
0.89
%
0.90
%
0.23
%
0.22
%
0.94
%
0.87
%
0.07
%
Return on average equity
11.50
%
9.14
%
8.77
%
2.36
%
2.73
%
9.75
%
8.52
%
1.23
%
Efficiency ratio (1)
68.47
%
72.47
%
75.48
%
-4.00
%
-7.01
%
72.14
%
75.67
%
-3.53
%
Net-interest margin %(2)
4.25
%
4.23
%
4.19
%
0.02
%
0.06
%
4.20
%
4.24
%
-0.04
%
Share Ratios & Data
Basic earnings per share
$
0.35
$
0.27
$
0.25
$
0.08
30
%
$
0.10
40
%
$
0.85
$
0.71
$
0.14
Diluted earning per share
$
0.35
$
0.27
$
0.25
$
0.08
30
%
$
0.10
40
%
$
0.85
$
0.71
$
0.14
Book value per share(3)
$
12.31
$
11.87
$
11.78
$
0.44
4
%
$
0.53
4
%
Tangible book value per share(4)
$
10.97
$
10.53
$
10.47
$
0.44
4
%
$
0.50
5
%
Common shares outstanding
10,020
10,020
10,283
-
0
%
(263
)
-3
%
PFLC stock price
$
11.59
$
10.69
$
11.65
$
0.90
8
%
$
(0.06
)
-1
%
Dividends paid per share
$
0.14
$
0.14
$
0.14
$
-
0
%
$
-
0
%
$
0.42
$
0.42
$
-
0
%
Balance Sheet Data
Assets
$
1,263,138
$
1,215,468
$
1,158,410
$
47,670
4
%
$
104,728
9
%
Portfolio Loans
$
772,220
$
746,475
$
699,603
$
25,745
3
%
$
72,617
10
%
Deposits
$
1,114,040
$
1,070,831
$
1,011,473
$
43,209
4
%
$
102,567
10
%
Investments
$
303,804
$
307,790
$
296,792
$
(3,986
)
-1
%
$
7,012
2
%
Shareholders equity
$
123,329
$
118,937
$
121,087
$
4,392
4
%
$
2,242
2
%
Liquidity Ratios
Short-term funding to uninsured
and uncollateralized deposits
187
%
190
%
229
%
-3
%
-42
%
Uninsured and uncollateralized
deposits to total deposits
28
%
25
%
25
%
3
%
3
%
Portfolio loans to deposits ratio
69
%
70
%
69
%
-1
%
0
%
Asset Quality Ratios
Non-performing assets to assets
0.03
%
0.04
%
0.10
%
-0.01
%
-0.07
%
Non-accrual loans to portfolio loans
0.05
%
0.06
%
0.16
%
-0.01
%
-0.11
%
Loan losses to avg portfolio loans
0.03
%
0.04
%
-0.01
%
-0.01
%
0.04
%
0.04
%
0.01
%
0.03
%
ACL-loans to portfolio loans
1.17
%
1.24
%
1.27
%
-0.07
%
-0.10
%
Capital Ratios (PFC)
Total risk-based capital ratio
17.1
%
16.9
%
17.9
%
0.2
%
-0.8
%
Tier 1 risk-based capital ratio
15.9
%
15.7
%
16.7
%
0.2
%
-0.8
%
Common equity tier 1 ratio
14.4
%
14.2
%
15.0
%
0.2
%
-0.6
%
Leverage ratio
10.9
%
10.9
%
11.6
%
0.0
%
-0.7
%
Tangible common equity ratio
8.8
%
8.8
%
9.4
%
0.0
%
-0.6
%
(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
Nine Months Ended
Change
($ in 000s)
Sep 30,
Jun 30,
Sep 30,
Jun 30, 2025
Sep 30, 2024
Sep 30,
Sep 30,
2025
2025
2024
$
%
$
%
2025
2024
$
%
Interest Income
Loan interest & fee income
$
11,469
$
10,840
$
10,520
$
629
6
%
$
949
9
%
$
32,613
$
30,853
$
1,760
6
%
Interest earning cash income
957
1,124
1,108
(167
)
-15
%
(151
)
-14
%
3,288
2,890
398
14
%
Investment income
2,760
2,728
2,503
32
1
%
257
10
%
8,166
7,388
778
11
%
Interest Income
15,186
14,692
14,131
494
3
%
1,055
7
%
44,067
41,131
2,936
7
%
Interest Expense
Deposits interest expense
2,695
2,571
2,684
124
5
%
11
0
%
7,960
7,033
927
13
%
Other borrowings interest expense
208
206
243
2
1
%
(35
)
-14
%
620
727
(107
)
-15
%
Interest Expense
2,903
2,777
2,927
126
5
%
(24
)
-1
%
8,580
7,760
820
11
%
Net Interest Income
12,283
11,915
11,204
368
3
%
1,079
10
%
35,487
33,371
2,116
6
%
Provision (recapture) for credit losses
(49
)
387
(66
)
(436
)
-113
%
17
-26
%
422
271
151
56
%
Net Interest Income after provision
12,332
11,528
11,270
804
7
%
1,062
9
%
35,065
33,100
1,965
6
%
Non-Interest Income
Fees and service charges
1,255
1,293
1,225
(38
)
-3
%
30
2
%
3,666
3,523
143
4
%
Gain on sale of investments, net
-
-
-
-
0
%
-
0
%
(165
)
121
(286
)
-236
%
Gain on sale of loans, net
-
-
267
-
0
%
(267
)
-100
%
(2
)
865
(867
)
-100
%
Income on bank-owned insurance
195
191
188
4
2
%
7
4
%
578
550
28
5
%
Other non-interest income
9
3
7
6
200
%
2
29
%
24
34
(10
)
-29
%
Non-Interest Income
1,459
1,487
1,687
(28
)
-2
%
(228
)
-14
%
4,101
5,093
(992
)
-19
%
Non-Interest Expense
Salaries and employee benefits
5,851
6,103
6,341
(252
)
-4
%
(490
)
-8
%
17,923
18,656
(733
)
-4
%
Occupancy
566
618
601
(52
)
-8
%
(35
)
-6
%
1,775
1,806
(31
)
-2
%
Furniture, Fixtures & Equipment
318
305
286
13
4
%
32
11
%
924
837
87
10
%
Marketing & donations
135
157
201
(22
)
-14
%
(66
)
-33
%
446
531
(85
)
-16
%
Professional services
278
254
233
24
9
%
45
19
%
830
897
(67
)
-7
%
Data Processing & IT
1,245
1,250
1,185
(5
)
0
%
60
5
%
3,713
3,541
172
5
%
Other
1,016
1,026
883
(10
)
-1
%
133
15
%
2,948
2,839
109
4
%
Non-Interest Expense
9,409
9,713
9,730
(304
)
-3
%
(321
)
-3
%
28,559
29,107
(548
)
-2
%
Income before income taxes
4,382
3,302
3,227
1,080
33
%
1,155
36
%
10,607
9,086
1,521
17
%
Provision for income taxes
904
633
633
271
43
%
271
43
%
2,082
1,716
366
21
%
Net Income
$
3,478
$
2,669
$
2,594
$
809
30
%
884
34
%
$
8,525
$
7,370
$
1,155
16
%
Effective tax rate
20.6
%
19.2
%
19.6
