UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
_____________________

FORM 8-K
CURRENT REPORT
Pursuant to
SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934

_______________________

Date of Report (Date of earliest event reported):  July 27, 2011

PACIFIC FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)

1101 S. Boone St.
Aberdeen, Washington 98520-5244
(360) 533-8870
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 7.01.  Regulation FD Disclosure

Pacific Financial Corporation ("Pacific") is furnishing information in accordance with Regulation FD regarding its financial results for the six months ended June 30, 2011.  This information shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 or incorporated by reference into any filing under the Securities Act of 1933, except as may be expressly set forth by specific reference in any such filing.

Pacific's net income for the three and six months ended June 30, 2011, was $603,000, and $1,035,000, respectively, compared to $503,000 and $1,137,000 for the three and six month periods ended June 30, 2010.  The increase in net income for the three month period was primarily related to a decrease in provision for credit losses.  The decrease in net income for the six month period was primarily related to a decrease in the gain on sale of loans and an other-than-temporary-impairment (“OTTI”) loss of $243,000, which were partially offset by a decrease in provision for credit losses.  Net interest margin increased to 3.97% for the six months ended June 30, 2011, compared to 3.89% for the same period of the prior year.  Provision for credit losses was $500,000, down from $2,000,000 a year ago.  The decrease is due to a decline in net charge-offs which totaled $151,000 for the six months ended June 30, 2011 compared to $1,848,000 for the same period in 2010.  Non-performing assets totaled $20,154,000, or 3.13% of total assets, at June 30, 2011, compared to $16,579,000, or 2.57% of total assets, at December 31, 2010.  The increase is due largely to one loan totaling $3,997,000, of which 80% is guaranteed by the United States Department of Agriculture.

Net interest income for the three and six months ended June 30, 2011, increased $85,000 and $68,000, respectively, compared to the same periods of the prior year.  The increase is primarily the result of an improvement in funding costs which reflects a decrease in rates paid on certificates of deposits.  The Company continues to roll off brokered deposits as they mature.  During the six months ended June 30, 2011, $9.7 million in brokered deposits matured which contributed to the decrease in the cost of funds. 

Non-interest income for the three and six months ended June 30, 2011 decreased $1,082,000 and $1,482,000, or 28.68% and 16.71%, respectively, compared to the same periods in 2010.  The decreases are mostly attributable to decreases in gain on sales of loans and other real estate owned (“OREO”), as well as an OTTI loss of $243,000.  These were partially offset by an increase in interchange revenue on debit cards.  Non-interest expense for the three and six months ended June 30, 2011 increased slightly by $87,000 and $144,000, or 1.34% and 1.14%, respectively, compared to the same periods in 2010.  The increases were primarily related to increases in salary and employee benefits costs and OREO write-downs, which were partially offset by decreases in expenses for occupancy and equipment and FDIC assessments.

Total assets decreased 0.12% to $643.7 million at June 30, 2011, compared to $644.4 million at December 31, 2010.  The decrease is mostly attributable to planned decreases in certificates of deposits which were funded from interest bearing deposits.  Total loans, including loans held for sale, were $487.0 million at June 30, 2011, up $11.1 million from $475.8 million at year-end 2010.  The increase in loans was primarily in commercial and industrial loans and commercial real estate loans.  The ratio of the allowance for credit losses to total loans outstanding was 2.30%, 2.28% and 2.39% at June 30, 2011, December 31, 2010 and June 30, 2010, respectively. 

Capital ratios continue to exceed regulatory requirements for well-capitalized institutions.  Tier 1 leverage and total risk based capital ratios at June 30, 2011 for the Company’s subsidiary, Bank of the Pacific, were 10.05% and 14.48%, respectively, compared to 9.80% and 14.62% at December 31, 2010, respectively.  Pacific's unaudited consolidated balance sheets at June 30, 2011 and December 31, 2010, and unaudited consolidated statements of operations and selected performance ratios for the three and six months ended June 30, 2011 and 2010, follow.

PACIFIC FINANCIAL CORPORATION

Condensed Consolidated Balance Sheets

June 30, 2011 and December 31, 2010

(Dollars in thousands) (Unaudited)

PACIFIC FINANCIAL CORPORATION

Condensed Consolidated Statements of Income

Three and six months ended June 30, 2011 and 2010

(Dollars in thousands, except per share data) (Unaudited)

PACIFIC FINANCIAL CORPORATION
Selected Performance Ratios

(1)     Net interest income divided by average earnings assets.

(2)     Non interest expense divided by the sum of net interest income and non interest income.

(3)     Total shareholders’ equity less intangibles divided by shares outstanding.

(4)     Includes $5,555,000 and $932,000 in non-accrual troubled debt restructured loans (“TDRs”) as of June 30, 2011 and December 31, 2010, respectively.  There were no TDRs as of June 30, 2010.

(5)     Excludes loans held for sale.

(6)     Includes loans held for sale.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.