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):  April 26, 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 three months ended March 31, 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 months ended March 31, 2011, was $432,000, a decrease of $202,000, compared to $634,000 for the three month period ended March 31, 2010.  The decrease was primarily related to a decrease in the gain on sale of loans and an other-than-temporary-impairment (“OTTI”) loss of $193,000, which were partially offset by a decrease in provision for credit losses.  Net interest margin increased to 3.95% for the three months ended March 31, 2011, compared to 3.85% for the same period of the prior year.  Provision for credit losses was $500,000, down from $800,000 a year ago.  The decrease is due to the improvement in asset quality as evidenced by a decrease in non-performing loans from $14,357,000 at March 31, 2010, to $10,842,000 at March 31, 2011.  Non-performing assets totaled $17,506,000, or 2.74% of total assets, at March 31, 2011, compared to $22,944,000, or 3.55% of total assets, at March 31, 2010.

Net interest income for the three months ended March 31, 2011, decreased slightly by $17,000 to $5,685,000 compared to the same period of the prior year.  The decrease is primarily the result of a decline in loan interest income from lower balances outstanding as loans have paid down, particularly in the construction and land development category.  This was partially offset by an improvement in funding costs.  The Company continues to roll off brokered deposits as they mature.  During the three months ended March 31, 2011, $9.7 million in brokered deposits matured which contributed to the decrease in the cost of funds.  Additionally, as non-performing loans decline the reversal of interest income from non-accrual loans also declines. 

Non-interest income decreased $397,000 to $1,333,000 for the three months ended March 31, 2011, compared to the same period of the prior year, reflecting a reduction in income from loan sales due to a decrease in the volume of loans sold in the secondary market.  Additionally, a decrease in the gain on sale of investment securities and an OTTI loss on investment securities contributed to the decrease in non-interest income in the current period.  Non-interest expense increased slightly by $60,000 to $6,142,000.  The increase is primarily related to increases in salary and employee benefits costs, which were partially offset by decreases in expenses for occupancy and equipment, other real estate owned, FDIC assessments and data processing.

Total assets decreased 0.9% to $638.4 million at March 31, 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 $476.0 million at March 31, 2011, up slightly from $475.8 million at year-end 2010.  The ratio of the allowance for credit losses to total loans outstanding was 2.29%, 2.28% and 2.44%, at March 31, 2011, December 31, 2010 and March 31, 2010, respectively. 

Capital ratios continue to exceed regulatory requirements for well-capitalized institutions.  Tier 1 leverage and total risk based capital ratios at March 31, 2011 for the Company’s subsidiary, Bank of the Pacific, were 9.97% and 14.62%, respectively, compared to 9.80% and 14.62% at December 31, 2010, respectively.  Pacific's unaudited consolidated balance sheets at March 31, 2011 and December 31, 2010, and unaudited consolidated statements of operations and selected performance ratios for the three months ended March 31, 2011 and 2010, follow.

PACIFIC FINANCIAL CORPORATION
Selected Performance Ratios

(1)       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.