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 30, 2012

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, 2012. 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, 2012, was $1,073,000, and $2,091,000, respectively, compared to $603,000 and $1,035,000 for the three and six month periods ended June 30, 2011. The increase in net income for the three month period was primarily related to increases in net interest income and gain on sale of loans. The increase in net income for the six month period was primarily related to increases in net interest income, gain on sale of other real estate owned (OREO) and gain on sale of loans, partially offset by an increase in salaries and benefits. Net interest margin increased to 4.27% for the six months ended June 30, 2012, compared to 3.97% for the same period of the prior year.

Provision for credit losses for the three months ended June 30, 2012, was $300,000, compared to zero in the same period a year ago. Net charge-offs for the current three month period were $99,000 compared to net recoveries of $192,000 for the same period of the prior year. Provision for credit losses for the six months ended June 30, 2012, was $400,000, compared to $500,000 in the same period a year ago. The slight decrease in provision for the six month period is due to improving credit quality as evidenced by decreases in non-performing loans and non-performing assets and a decrease in loans rated substandard. Loans classified as substandard decreased $1,819,000 from year-end 2011 to $32,751,000 at the close of the current quarter.

Non-performing loans totaled $10,216,000 at June 30, 2012, compared to $14,035,000 at December 31, 2011 and $12,958,000 at June 30, 2011. Non-performing assets totaled $16,411,000, or 2.59% of total assets, at June 30, 2012, compared to $21,760,000, or 3.39% of total assets, at December 31, 2011.

Net interest income for the three and six months ended June 30, 2012, increased $365,000 and $730,000, 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 further decrease in rates paid on deposits, partially offset by declining loan yields.

Non-interest income for the three and six months ended June 30, 2012 increased by $1,035,000 and $1,553,000, or 75.33% and 57.43%, respectively, compared to the same periods in 2011. The increase was the result of an increase in gain on sale of loans of $655,000 for the three month period and $901,000 for the six month period due to increased mortgage refinancing activity driven by the low rate environment. Additionally, gain on sale of OREO increased $285,000 and $454,000 for the current three and six month periods, respectively. Non-interest expense for the three and six months ended June 30, 2012 increased $316,000 and $776,000, or 4.79% and 6.09%, respectively, compared to the same periods in 2011. The increase is attributable to increases in salaries and employee benefits related to annual performance and merit increases, coupled with higher commissions paid on the sale of loans held for sale. These expense increases were partially offset by reductions in FDIC assessments and OREO write-downs.

Total assets decreased 1.26% to $633.2 million at June 30, 2012, compared to $641.3 million at December 31, 2011. Decreases in loans, OREO and interest bearing cash were the primary contributors to overall asset decline, which were partially offset by an increase in investments. Total loans, including loans held for sale, were $479.5 million at June 30, 2012, down $9.9 million from $489.4 million at year-end 2011. The decrease in loans was primarily due to a decline of $9.9 million in construction and land development loans and $7.8 million in commercial real estate loans which were largely a result of continued loan payoffs prior to maturity, which we believe are reflective of the current low interest rate environment and economic conditions. These declines were partially offset by a modest increase in commercial and industrial loans and residential real estate loans. The ratio of the allowance for credit losses to total loans outstanding was 2.41%, 2.34% and 2.30% at June 30, 2012, December 31, 2011 and June 30, 2011, respectively.

Capital ratios continue to exceed regulatory requirements for well-capitalized institutions. Tier 1 leverage and total risk based capital ratios at June 30, 2012 for the Company’s subsidiary, Bank of the Pacific, were 10.63% and 15.83%, respectively, compared to 10.35% and 15.05% at December 31, 2011.

Pacific's unaudited consolidated balance sheets at June 30, 2012 and December 31, 2011, unaudited consolidated statements of operations, selected performance ratios, and certain supplemental information regarding nonperforming assets and loan and deposit balances as of and for the three and six months ended June 30, 2012 and 2011, follow.

PACIFIC FINANCIAL CORPORATION
Selected Performance Ratios

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.