Published:
Pacific Continental Reports Second Quarter 2008 Results
EUGENE, Ore., July 16 /PRNewswire-FirstCall/ -- Pacific Continental
Corporation (Nasdaq: PCBK), the bank holding company for Pacific Continental
Bank, today reported financial results for the second quarter and six months
ended June 30, 2008.
Net income for the second quarter 2008 was $3.0 million, a 6.4% decline
from 2007 second quarter net income of $3.2 million. Earnings per diluted
share were $0.25 for the second quarter 2008, compared to $0.27 reported for
the prior year second quarter. Return on average assets, return on average
equity, and return on average tangible equity for the second quarter 2008 were
1.20%, 11.02% and 13.95%, respectively, compared to 1.42%, 12.66% and 16.48%,
respectively, for the comparable period in 2007.
Net income for the first six months of 2008 was $6.1 million, a decline of
1.9% from the $6.2 million reported for the comparable period of 2007.
Earnings per diluted share were $0.51 for the first six months of 2008,
compared to $0.52 per diluted share for the first six months of 2007. Return
on average assets for year-to-date June 30, 2008 and 2007 were 1.24% and
1.40%, respectively. Year-to-date June 30, 2008, return on average book equity
and return on average tangible equity were 11.15% and 14.11%, respectively,
compared to 12.47% and 16.30%, respectively, for the comparable period of
2007.
Credit quality of the bank's loan portfolio continues to be solid and
stable and in line with previous discussions. Nonperforming assets at June 30,
2008, were $7.6 million, an increase of $1.6 million from March 31, 2008,
levels, and represent 0.74% of total assets. The increase in nonperforming
assets in second quarter 2008 was primarily attributable to the addition of a
single $1.7 million loan to nonaccrual status. This loan had previously been
discussed in the bank's first quarter conference call and first quarter 10-Q.
The loan is a well secured, 68% loan-to-value, desired commercial real estate
project with no loss expected. Nonperforming assets at June 30, 2008, consist
of $4.6 million of loans on nonaccrual status, net of government guarantees,
and $3.0 million in other real estate owned. The $4.6 million of nonaccrual
loans at June 30, 2008, consist of 19 residential consumer construction loans
totaling $2.9 million and a single loan of $1.7 million, while the other real
estate owned consists of 17 consumer construction residential properties.
Losses on the current and possible future nonperforming loans in the consumer
residential loan portfolio are not expected to be significant due to a
cash-secured 20% principal guarantee for the majority of these loans.
For the second quarter 2008, the bank provided $925 thousand to the
allowance for loan losses compared to $125 thousand for second quarter 2007.
Year-to-date provisions to the allowance for loan loss totaled $1,500 and $325
for the years 2008 and 2007, respectively. The increase in the provision for
loan losses during the second quarter and the first six months of 2008 was
primarily due to loan growth and prudent additions to the bank's unallocated
reserve for possible loan losses. At June 30, 2008, unallocated reserves were
above 9.5% and at the high end of the approved range. At June 30, 2008, the
ratio of the allowance for loan losses to total loans was 1.10%, compared to
1.05% and 1.08% at December 31, 2007, and June 30, 2007, respectively. Also at
June 30, 2008, the bank had $196 thousand reserved for unfunded loan
commitments, which is classified in other liabilities on the balance sheet.
For the second quarter and first six months of 2008, the bank had net charge
offs of $174 and $279 thousand, respectively. Based on the analysis of
classified loan migration trends and independent third-party reviews of the
loan portfolio, management believes that its calculation of the adequacy of
the allowance for loan losses has accurately captured the inherent risk in the
bank's loan portfolio.
"Due to the loan growth during the quarter and an increased economic
uncertainty, we determined that it was prudent to increase our provision for
loan losses and our unallocated reserves. The increase reflects the stress we
presently see on various sectors of the regional economy and does not reflect
any deterioration of the credit quality of Pacific Continental's loan
portfolio," stated Casey Hogan, Executive Vice President and Chief Credit
Officer. "Our present level of nonperforming assets is very manageable, and we
currently expect nonperforming assets in our consumer residential loan
portfolio to decline as the year progresses," added Hogan.
At June 30, 2008, period end loans totaled $897.5 million, an increase of
$101.7 million over outstanding loans of $795.7 million at June 30, 2007, and
up a $32.2 million during the second quarter 2008. Although the bank's new
business pipelines are good in all three of the bank's principal markets,
prevailing economic conditions in the Northwest and the expected continued
contraction in the bank's residential construction portfolio suggests slower
loan growth in subsequent quarters.
Period end core deposits were $606.2 million, down $20.6 million from the
June 30, 2007, total of $626.8 million. However, approximately $25.0 million
of the core deposits at June 30, 2007, were temporary in nature and exited the
bank shortly following the end of the quarter. For the second quarter 2008,
core deposits averaged $594.5 million, a decrease of $18.8 million from the
average core deposits reported for the first quarter 2008, but up $19.5
million from average core deposits for second quarter 2007.
"Considering the current economic climate, I continue to be pleased with
our relative performance and prospects for the remainder of the year," said
Hal Brown, Chief Executive Officer. "During the quarter, we achieved two very
significant milestones -- exceeding $1 billion in assets and being included in
the Russell 2000 index, which recognized Pacific Continental Corporation as
one of the 3,000 largest public companies in America. The ability to grow and
remain opportunistic during challenging times can be attributed to our
business model, our professional bankers, and the consistently strong
practices they employ. Our strong position allows our bankers to remain
focused on our clients and prospects, providing the consultative services
needed in today's economic environment", added Brown.
Operating revenue, which consists of net interest income plus noninterest
income, was $13.3 million during the second quarter 2008, up 12.1% from the
$11.9 million reported during the second quarter 2007. Improvement in
operating revenue resulted from increases in noninterest income and the strong
loan growth while maintaining a strong and stable net interest margin.
Noninterest expenses during the second quarter increased 14.6% compared to the
same period in 2007 reflecting increased personnel expense and professional
services. Personnel expenses included increases in salary expense related to
staff additions, reduced loan origination fees which are an offset to salary
expense, and larger medical insurance provisions.
The net interest margin remained strong and stable at 5.24% for both the
second quarter and year-to-date, 2008 and, interestingly, the same as the net
interest margin reported for second quarter and year-to-date 2007. During the
second quarter 2008, the bank recovered approximately $116 thousand of
interest on a loan that had been charged off several years prior. This
interest recovery added approximately 5 basis points and 3 basis points,
respectively, to the second quarter and year-to-date June 30, 2008, net
interest margin. The stable net interest margin during the second quarter and
first six months of 2008 can be attributed to a number of factors, including a
balanced interest-rate risk profile that permits the bank to quickly adjust
rates paid on deposits in the current falling rate environment, the activation
of floors on a portion of the bank's variable rate loan portfolio, and the
widening spreads between the bank's cost of funds and its fixed rate loan and
securities portfolio. Looking forward, a number of factors suggest a lower net
interest margin during the third quarter 2008. These factors include the
industry's current continued liquidity squeeze that keeps borrowing costs
stubbornly high, the expiration of active floors on a portion of the bank's
variable rate loan portfolio, and competition for core deposits that is
expected to increase the bank's cost of funds.
Second Quarter 2008 Highlights:
-- Through disciplined credit practices continued to report solid credit
quality statistics.
-- Listed on the Russell 2000 for the first time.
-- Exceeded $1 billion in outstanding total assets.
-- Paid a $0.10 per share quarterly dividend that when annualized
represents a 14.3% increase over 2007 cash dividends.
-- Stable net interest margin of 5.24%, the same as that reported for the
second quarter 2007.
-- Named for the seventh consecutive year to the Seattle Times annual
"Northwest 100" ranking of top publicly traded companies.
Conference Call and Audio Webcast:
Pacific Continental Corporation will conduct a live conference call and
audio Webcast for interested parties relating to its results for the quarter
and six months ended June 30, 2008, on Thursday, July 17th at 2:00 p.m.
Eastern Time / 11:00 a.m. Pacific Time. To listen to the conference call,
interested parties should call (866) 292-1418 and provide the pass code:
"Pacific Continental second quarter earnings, leader: Hal Brown." The Webcast
will be available via the Internet at Pacific Continental's Website
(http://www.therightbank.com/). To listen to the live audio Webcast, click on
the Webcast presentation link on the company's home page a few minutes before
the presentation is scheduled to begin.
An audio Webcast replay will be available within twenty-four hours
following the live Webcast and archived for one year on the Pacific
Continental Web site. Any questions regarding the conference call presentation
or Webcast should be directed to Michael Reynolds at (541) 686-8685.
About Pacific Continental Bank
Pacific Continental Bank, the operating subsidiary of Pacific Continental
Corporation, delivers highly personalized services through fourteen banking
offices inOregon andWashington. Pacific Continental has established one of
the most unique and attractive metropolitan branch networks in the Pacific
Northwest with offices in three of the region's largest metropolitan areas
includingSeattle,Portland, andEugene. Pacific Continental targets the
banking needs of community-based businesses, professional service providers,
and nonprofit organizations; and provides private banking services for
business owners and executives. Pacific Continental has rewarded its
shareholders with consecutive cash dividends for twenty-four years.
Since its founding in 1972 Pacific Continental Bank has been honored with
numerous awards from business and community organizations: in June 2008 -- for
the seventh consecutive year -- the Seattle Times named Pacific Continental to
its "Northwest 100" ranking of top publicly rated companies in the Pacific
Northwest; in February 2008, Oregon Business magazine recognized Pacific
Continental as the top ranked financial institution to work for in the state,
marking the eighth consecutive year Pacific Continental has been recognized as
one of the Top 100 Companies to Work for In Oregon; and in 2007 the Portland
Business Journal recognized Pacific Continental as One of the Ten Most Admired
Companies inOregon.
Pacific Continental Corporation's shares are listed on the NASDAQ Global
Select Market under the symbol "PCBK"; additionally, PCBK is listed in the
Russell 2000 Index. Supplementary information about Pacific Continental can be
found online at http://www.therightbank.com.
Pacific Continental Safe Harbor
This release contains "forward-looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 ("PSLRA"). Such
forward-looking statements are subject to risks and uncertainties that may
cause actual results to differ materially from those projected, including but
not limited to the following: the concentration of loans of the company's
banking subsidiary, particularly with respect to commercial and residential
real estate lending; a continued decline in the housing and real estate
market, changes in the regulatory environment and increases in associated
costs, particularly ongoing compliance expenses and resource allocation needs
in response to the Sarbanes-Oxley Act and related rules and regulations;
vendor quality and efficiency; employee recruitment and retention,
specifically in the Bank'sPortland andSeattle markets; the company's ability
to control risks associated with rapidly changing technology both from an
internal perspective as well as for external providers; increased competition
among financial institutions; fluctuating interest rate environments; a
tightening of available credit, and similar matters. Readers are cautioned not
to place undue reliance on the forward-looking statements. Pacific Continental
Corporation undertakes no obligation to publicly revise or update the
forward-looking statements to reflect events or circumstances that arise after
the date of this release. Readers should carefully review any risk factors
described in Pacific Continental's Annual Report on Form 10-K, Quarterly
Reports on Form 10-Q and other documents, including any Current Reports on
Form 8-K furnished to or filed from time to time with the Securities Exchange
Commission. This statement is included for the express purpose of invoking
PSLRA's safe harbor provisions.
Consolidated Statements of Income
For the Six Months Ended
(Amounts in $ Thousands, except per share and book value data)
30-Jun-08 30-Jun-07
Interest income $32,721 $34,398
Interest expense $8,947 $13,142
Net interest income $23,774 $21,256
Provision for loan losses $1,500 $325
Noninterest income $2,180 $1,897
Noninterest expense $14,630 $12,871
Income before taxes $9,824 $9,957
Taxes $3,738 $3,751
Net income $6,086 $6,206
Net income per share
Basic (1) $0.51 $0.53
Fully diluted (1) $0.51 $0.52
Outstanding shares, end of period (1) 11,973,551 11,835,380
Outstanding shares, year-to-date
average (basic) (1) 11,950,878 11,787,923
Outstanding shares, year-to-date
average (diluted) (1) 12,016,972 11,962,111
Consolidated Statements of Income
For the Quarters Ended
(Amounts in $ Thousands, except per share and book value data)
30-Jun-08 30-Jun-07
Interest income $16,215 $17,751
Interest expense $4,057 $6,813
Net interest income $12,158 $10,938
Provision for loan losses $925 $125
Noninterest income $1,163 $949
Noninterest expense $7,463 $6,513
Income before taxes $4,933 $5,249
Taxes $1,926 $2,038
Net income $3,007 $3,211
Net income per share
Basic (1) $0.25 $0.27
Fully diluted (1) $0.25 $0.27
Outstanding shares, quarter
average (basic) (1) 11,961,692 11,814,931
Outstanding shares, quarter
average (diluted) (1) 12,029,195 11,970,211
Pacific Continental Corporation
Financial Data and Ratios
(Amounts in $ Thousands, except for per share data)
Year-to-date Ending For Quarter Ending
Balance Sheet 30-Jun-08 30-Jun-07 30-Jun-08 30-Jun-07
Loans at period end $897,465 $795,746
Real estate
secured loans
at period end $678,000 $608,983
Commercial loans
at period end $204,146 $174,665
Other loans at
period end $15,319 $12,098
Allowance for
loan losses at
period end $9,896 $8,595
Allowance for
outstanding
commitments incl.
in liabilities $196 $171
Goodwill and
core deposit
intangible $23,015 $23,238
Assets at
period end $1,035,771 $906,665
Deposits at
period end $674,915 $699,402
Noninterest-
bearing deposits
at period end $181,560 $172,145
Core deposits
at period end(2) $606,238 $626,809
Stockholders'
equity at
period end (book) $111,385 $101,435
Stockholders'
equity at period
end (tangible)(3) $88,370 $78,197
Book value
per share at
period end $9.30 $8.57
Tangible book
value per share
at period end (3) $7.38 $6.61
Loan, average $857,856 $784,160 $878,918 $802,907
Earning assets,
average $913,217 $818,289 $933,296 $836,542
Assets, average $984,205 $891,017 $1,005,114 $910,174
Deposits, average $644,544 $641,270 $637,549 $648,230
Noninterest-
bearing deposits,
average $168,655 $165,345 $170,018 $166,596
Core deposits,
average(2) $603,880 $571,902 $594,472 $574,940
Stockholders'
equity,
average (book) $109,802 $100,366 $109,741 $101,709
Stockholders'
equity average
(tangible)(3) $86,728 $76,797 $86,695 $78,171
Financial Performance
Return on
average assets 1.24% 1.40% 1.20% 1.42%
Return on
average equity
(book) 11.15% 12.47% 11.02% 12.66%
Return on
average equity
(tangible)(3) 14.11% 16.30% 13.95% 16.48%
Net interest margin 5.24% 5.24% 5.24% 5.24%
Efficiency ratio (4) 56.37% 55.59% 56.02% 54.79%
Net income per share
Basic (1) $0.51 $0.53 $0.25 $0.27
Fully diluted (1) $0.51 $0.52 $0.25 $0.27
Pacific Continental Corporation
Financial Data and Ratios
(Amounts in $ Thousands, except for per share data)
Year-to-date Ending For Quarter Ending
Loan Quality 30-Jun-08 30-Jun-07 30-Jun-08 30-Jun-07
Loan charge offs $413 $43 $293 $19
Loan recoveries ($134) ($29) ($119) ($12)
Net loan charge
offs (recoveries) $279 $14 $174 $7
Non-accrual loans $5,156 $103
90-day past due $0 $0
Gross nonperforming
loans $5,156 $103
Government guarantees
on non-accrual and
90-day past due ($546) $0
Nonperforming loans
net of government
guarantees $4,610 $103
Foreclosed property $3,030 $0
Nonperforming assets,
net of government
guarantees $7,640 $103
Loan Quality Ratios
Non-accrual loans
to total loans 0.57% 0.01%
Nonperforming assets
to total assets 0.74% 0.01%
Allowance for
loan losses to
net nonperforming
loans 214.66% 8344.66%
Net loan charge
offs (recoveries)
to average loans,
annualized 0.07% 0.00%
Allowance for loan
losses to total
loans 1.10% 1.08%
(1) All outstanding shares and per share data have been retroactively
adjusted to reflect 10% stock dividend declared and paid during second
quarter 2007.
(2) Core deposits include all demand, savings, and interest checking
accounts, plus all local time deposits including local time deposits
in excess of $100,000.
(3) Tangible equity excludes goodwill and core deposit intangible related
to acquisitions.
(4) Efficiency ratio is noninterest expense divided by operating revenues.
Operating revenues are net interest income plus noninterest income.
SOURCE Pacific Continental Corporation
Copyright © 2008, PRNewswire
Copyright © 2008, NewsBlaze,
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