Pacific Financial Corporation (OTCQX: PFLC), the holding company for Bank of the Pacific, released its financial results for the first quarter of 2025, reporting net income of $2.4 million, or $0.24 per diluted share. This marks a 10% increase from the $2.2 million, or $0.21 per diluted share, recorded in the fourth quarter of 2024, though it is slightly below the $2.7 million, or $0.26 per diluted share, reported in the first quarter of 2024.
The company’s earnings benefited from strong core deposit growth, expansion in net interest margin, and a lower cost of deposits, alongside the strategic closure of its residential mortgage division in late 2024. Core deposits grew by $61.2 million, or 7%, during the quarter, with non-interest-bearing deposits comprising 36% of total deposits, supporting a lower-cost funding base. Total deposits increased 6% quarter-over-quarter to $1.07 billion and rose 8% year-over-year, reflecting ongoing success in deposit growth initiatives.
Net interest income rose to $11.3 million in Q1 2025, up from $10.9 million in the previous quarter, driven by higher yields on loans and investments and reduced funding costs. The net interest margin expanded to 4.12%, compared to 3.99% in Q4 2024, fueled by a 7 basis point decline in cost of funds to 1.10% despite ongoing rate pressures. Loan yields improved as longer-term loans were renewed at higher rates and new loan originations carried higher yields. Investment portfolio yields also increased, reaching 3.60%, supported by a $9.0 million restructuring that enhanced returns by over 200 basis points on affected investments.
Loan balances grew modestly to $707.0 million, a 2% increase year-over-year, with gains primarily in multi-family and owner-occupied commercial real estate loans. The loan portfolio remains well-diversified and collateralized within the company’s Western Washington and Oregon markets. Credit quality remains strong, with nonperforming assets stable at 0.10% of total assets and allowance for credit losses maintained at $8.9 million, representing 1.26% of gross loans. The company recorded a modest provision for credit losses of $83,000 in the quarter, compared to a recapture of $103,000 in the prior quarter.
Pacific Financial’s balance sheet expanded, with total assets rising to $1.22 billion from $1.15 billion at the end of 2024. Cash and cash equivalents increased to $143.8 million, reflecting deposit growth. The company’s liquidity position remains robust, with available on- and off-balance sheet funding sources totaling $549.7 million, providing a coverage ratio of 212% against uninsured and uncollateralized deposits.
Shareholders’ equity grew to $116.9 million, supported by net income and reduced unrealized losses on securities, partially offset by dividends and stock repurchases. Book value per common share increased to $11.67 from $11.26 at year-end 2024. Regulatory capital ratios remain strong, with an estimated leverage ratio of 10.9% and a total risk-based capital ratio of 17.4%, exceeding well-capitalized thresholds.
Operating expenses decreased to $9.4 million from $10.1 million in the prior quarter, primarily due to cost reductions following the mortgage division closure, which eliminated severance, lease termination, and software contract expenses incurred in Q4 2024. The efficiency ratio improved to 75.86% from 79.80% in the previous quarter.
Noninterest income declined to $1.2 million, impacted by a $165,000 loss on the sale of investment securities and reduced gains from loan sales following the mortgage division shutdown. Fee and service charge income also decreased slightly to $1.1 million.
Reflecting confidence in ongoing performance, Pacific Financial’s Board of Directors declared a quarterly cash dividend of $0.14 per share, payable on May 23, 2025, to shareholders of record as of May 9, 2025. The Board also authorized an additional $5.3 million toward stock repurchases, representing approximately 5% of total shares outstanding, continuing the company’s commitment to returning value to shareholders.
Denise Portmann, President and CEO, highlighted the company’s focus on relationship banking, sound credit standards, and prudent risk management as key drivers of sustainable growth and shareholder value. She noted, “Our strong core deposit base, expanding net interest margin, and disciplined credit quality underpin our solid first quarter results. We remain committed to strategies that support long-term performance and stakeholder benefits.”
The company’s first quarter 2025 results demonstrate steady progress in a challenging economic environment, supported by disciplined management of assets, liabilities, and capital.
