Published:
Pacific Continental Reports Third Quarter 2008 Results
EUGENE, Ore., Oct. 14 /PRNewswire-FirstCall/ -- Pacific Continental
Corporation (Nasdaq: PCBK), the bank holding company for Pacific Continental
Bank, today reported financial results for the third quarter and nine months
ended September 30, 2008.
Net income for the third quarter and year-to-date 2008 were $3.0 million
and $9.1 million, respectively. Operating revenue, which consists of net
interest income plus noninterest income, was $13.4 million during the third
quarter 2008, up 11.7% from the $12.0 million reported during the third
quarter 2007. Improvement in operating revenue resulted from increases in
noninterest income, plus loan and core deposit growth while maintaining a
strong net interest margin. Contributing to the continued strong profitability
was a better than expected net interest margin, declining nonperforming
assets, improved credit quality statistics, and excellent growth in both loans
and core deposits. These results were achieved while providing provisions to
the allowance for loan losses to support the loan growth while prudently
strengthening unallocated reserves. The Company's capital condition improved
during the quarter strengthening its "well capitalized" position.
"The results achieved by Pacific Continental during a time of serious and
unprecedented financial industry disruption are in sharp contrast to many of
our peers," said Hal Brown, chief executive officer. "Our disciplined credit
practices, improved credit quality and capital position provides a strong and
safe financial institution for our many depositors and will allow Pacific
Continental Bank to continue to meet the lending needs of our clients and the
markets we serve," added Brown.
During the third quarter 2008, core deposits averaged $626.5 million, an
increase of $32.3 million from the average core deposits reported for the
second quarter 2008. At September 30, 2008, period end loans, including loans
held for sale, totaled $924.5 million, an increase of $120.6 million over
outstanding loans of $803.9 million at September 30, 2007, and up
$27.1 million during the third quarter 2008.
The third quarter 2008 net interest margin was 5.08%, and while still
strong, compressed sixteen basis points when compared to the second quarter
2008 margin of 5.24%. The year-to-date September 30, 2008 net interest margin
of 5.18% was down six basis points from the 5.24% net interest margin reported
for the same period last year. The margin compression experienced in the third
quarter and year-to-date 2008 was primarily due to the continued liquidity
squeeze that keeps wholesale borrowing costs relatively high, the expiration
and lower renewal rates of active floors on a portion of the bank's variable
rate loan portfolio, and a highly competitive market for core deposits
creating somewhat higher deposit rates.
Credit quality of the bank's loan portfolio improved during the third
quarter 2008. Nonperforming assets at September 30, 2008, were $6.3 million, a
decrease of $1.3 million from June 30, 2008, levels, and represent 0.60% of
period-end assets compared to 0.74% at June 30, 2008. The decline in
nonperforming assets was primarily attributable to the loan pay offs and the
disposition of residential construction properties that were previously
classified as nonaccrual loans or other real estate owned. Nonperforming
assets at September 30, 2008, consist of $3.1 million of loans on nonaccrual
status, net of government guarantees, and $3.2 million in other real estate
owned. The $3.1 million of nonaccrual loans at September 30, 2008, consist of
nine consumer residential construction loans totaling approximately
$1.3 million, one commercial real estate loan for $1.7 million, and one
business loan for $100 thousand. The $3.2 million in other real estate owned
consists of twenty consumer construction residential properties. Losses on
these properties and current and possible future nonperforming loans in the
residential consumer construction loan portfolio are not expected to be
significant due to a cash-secured 20% principal guarantee supporting the
majority of these loans.
For the third quarter 2008, the bank provided $1.05 million to the
allowance for loan losses compared to $125 thousand for third quarter 2007.
Year-to-date provisions to the allowance for loan loss totaled $2.55 million
and $450 thousand for the years 2008 and 2007, respectively. The increase in
the provision for loan losses during the third quarter and the first nine
months of 2008 were primarily to support the nearly $100 million in loan
growth year-to-date and, in light of the current economic conditions, to
provide prudent additions to the bank's unallocated reserves. At September 30,
2008, unallocated reserves were 7.7% and at the high end of the approved
range. At September 30, 2008, the ratio of the allowance for loan losses to
total loans was 1.15%, compared to 1.05% and 1.09% at December 31, 2007, and
September 30, 2007, respectively. For the third quarter and first nine months
of 2008, the bank had net charge offs of $274 and $552 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 portfolio.
"In line with our projections at the end of last quarter, our total
nonperforming assets declined during third quarter 2008. We are disposing of
our foreclosed properties in an orderly and efficient fashion with no
significant impact on the Bank's earnings," stated Casey Hogan, executive vice
president and chief credit officer. "Nevertheless, and despite minimal losses
and the reduction in nonperforming assets during the quarter, we determined it
was prudent to continue to add to the allowance to maintain an appropriate
unallocated reserve level. The uncertainty and apparent weakening in the
regional and national economies combined with our conservative and cautious
risk rating discipline, underscore the need for additional reserves," added
Hogan.
Improvement in operating revenue resulted from increases in noninterest
income and the loan growth while maintaining a strong net interest margin.
Growth in noninterest expense abated during the quarter and on a
linked-quarter basis was $7.5 million for third quarter 2008, the same as
reported for second quarter 2008.
Net income for the third quarter 2008 was $3.0 million, a decline from
2007 third quarter net income of $3.4 million. Earnings per diluted share were
$0.25 for the third quarter 2008, the same as reported for second quarter
2008, but down from the $0.29 reported for the prior year third quarter.
Return on average assets, return on average equity, and return on average
tangible equity for the third quarter 2008 were 1.16%, 10.68% and 13.42%,
respectively, compared to 1.51%, 13.03% and 16.77%, respectively, for the
comparable period in 2007.
Net income for the first nine months of 2008 was $9.1 million, a decline
from the $9.6 million reported for the comparable period of 2007. Earnings per
diluted share were $0.76 for the first nine months of 2008, compared to
$0.80 per diluted share for the first nine months of 2007. Return on average
assets for year-to-date September 30, 2008 and 2007 were 1.21% and 1.44%,
respectively. Year-to-date September 30, 2008, return on average book equity
and return on average tangible equity were 10.97% and 13.86%, respectively,
compared to 12.66% and 16.46%, respectively, for the comparable period of
2007.
Pacific Continental Bank manages its capital to maintain a "well-
capitalized" designation from the FDIC (the FDIC's highest designation). At
September 30, 2008, the Bank's risk-weighted capital ratio was 10.81% at
September 30, 2008 compared to 10.69% and 10.96% at June 30, 2008 and December
31, 2007.
Third Quarter 2008 Highlights:
-- Through disciplined credit practices reported improved credit quality
statistics with nonperforming assets to total assets of 0.60%.
-- Strong core deposit growth with average core deposits up $32.3 million
on a linked-quarter basis.
-- Excellent loan growth of $26.6 million for the quarter and
$101.8 million year-to-date.
-- Continued payment of the $0.10 per share quarterly dividend that when
annualized represents a 14.3% increase over 2007 cash dividends.
-- Achieved strong net interest margin of 5.08% for the third quarter
2008 and 5.18% for the first nine months of 2008.
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 third
quarter and nine months ended September 30, 2008, on Wednesday, October 15th
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 third quarter earnings." 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.
PACIFIC CONTINENTAL CORPORATION
CONSOLIDATED INCOME STATEMENTS
Amounts in $ 000's, Except for Per Share Data
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
2008 2007 2008 2007
Interest and dividend income
Loans $16,019 $16,931 $47,181 $50,453
Securities 647 472 2,070 1,310
Dividends on Federal Home
Loan Bank stock 9 5 132 14
Federal funds sold &
Interest-bearing deposits
with banks 5 11 18 40
16,680 17,419 49,401 51,817
Interest expense
Deposits 2,696 4,946 7,844 14,350
Federal Home Loan Bank &
Federal Reserve
borrowings 1,463 1,160 4,552 4,549
Junior subordinated
debentures 127 128 373 380
Federal funds purchased 91 207 555 304
4,377 6,441 13,324 19,583
Net interest income 12,303 10,978 36,077 32,234
Provision for loan losses 1,050 125 2,550 450
Net interest income
after provision for
loan losses 11,253 10,853 33,527 31,784
Noninterest income
Service charges on deposit
accounts 421 342 1,217 1,032
Other fee income,
principally bankcard 470 426 1,378 1,206
Loan servicing fees 20 25 68 74
Mortgage banking income 72 90 291 279
Other noninterest income 64 114 273 303
1,047 997 3,227 2,894
Noninterest expense
Salaries and employee
benefits 4,670 3,938 13,705 11,773
Premises and equipment 995 799 2,967 2,331
Bankcard processing 143 141 421 397
Business development 315 308 966 1,130
Other noninterest expense 1,374 1,213 4,068 3,639
7,497 6,399 22,127 19,270
Income before provision for
income taxes 4,803 5,451 14,627 15,408
Provision for income taxes 1,783 2,030 5,521 5,781
Net income $3,020 $3,421 $9,106 $9,627
Earnings per share
Basic $0.25 $0.29 $0.76 $0.82
Diluted $0.25 $0.29 $0.76 $0.80
Weighted average shares
outstanding
Basic 11,978 11,848 11,960 11,808
Common stock
equivalents
attributable to
stock-based awards 55 133 60 153
Diluted 12,033 11,981 12,020 11,961
PERFORMANCE RATIOS
Return on average assets 1.16% 1.51% 1.21% 1.44%
Return on average equity
(book) 10.68% 13.03% 10.97% 12.66%
Return on average equity
(tangible) (1) 13.42% 16.77% 13.86% 16.46%
Net interest margin 5.08% 5.25% 5.18% 5.24%
Efficiency ratio (2) 56.16% 53.44% 56.30% 54.86%
PACIFIC CONTINENTAL CORPORATION
CONSOLIDATED BALANCE SHEETS
Amounts in $ 000's
(Unaudited)
September December September
30, 31, 30,
2008 2007 2007
ASSETS
Cash and due from banks $21,510 $23,809 $20,357
Federal funds sold 290 410 410
Interest-bearing deposits with banks - 1,857 130
Total cash and cash
equivalents 21,800 26,076 20,897
Securities available-for-sale 49,848 53,994 50,345
Loans held for sale 447 - -
Loans, less allowance for loan
losses 913,430 813,647 795,184
Interest receivable 4,096 3,652 4,277
Federal Home Loan Bank stock 9,198 3,795 3,480
Property, net of accumulated
depreciation 21,000 20,876 19,934
Goodwill and other intangible assets 22,960 23,127 23,182
Other assets 9,105 4,104 3,590
Total assets $1,051,884 $949,271 $920,889
LIABILITIES AND STOCKHOLDERS' EQUITY
Deposits
Noninterest-bearing demand $178,632 $175,941 $175,932
Savings and interest-bearing
checking 413,688 401,714 405,578
Time $100,000 and over 61,850 31,856 47,025
Other time 57,470 34,913 54,679
Total deposits 711,640 644,424 683,214
Federal funds purchased 38,460 5,360 13,500
Federal Home Loan Bank and Federal
Reserve borrowings 176,000 179,500 107,500
Junior subordinated debentures 8,248 8,248 8,248
Accrued interest and other payables 4,338 4,230 4,010
Total liabilities 938,686 841,762 816,472
Stockholders' equity
Common stock, 25,000,000 shares
authorized 62,037 77,909 60,304
Retained earnings 52,003 29,622 44,251
Accumulated other comprehensive loss (842) (22) (138)
113,198 107,509 104,417
Total liabilities and
stockholders' equity $1,051,884 $949,271 $920,889
OTHER FINANCIAL DATA
Shares outstanding at end of period 11,994,363 11,934,866 11,865,541
Stockholder's equity (tangible) (1) $90,238 $84,382 $81,235
Book value $9.44 $9.01 $8.80
Tangible book value $7.52 $7.07 $6.85
PACIFIC CONTINENTAL CORPORATION
SELECTED OTHER FINANCIAL INFORMATION AND RATIOS
Amounts in $ 000's
(Unaudited)
Quarters Ended Nine Months Ended
September December September September September
30, 31, 30, 30, 30,
2008 2007 2007 2008 2007
LOANS BY TYPE (net of
fees)
Real estate secured
loans:
Multifamily
residential $53,812 $39,925 $38,066
Residential 1-4
family 70,702 51,959 47,123
Residential 1-4
family
construction 86,382 96,918 98,804
Other construction 155,986 126,809 120,287
Commercial real
estate 329,688 306,161 302,892
Other 3,801 3,999 4,177
Total real
estate loans 700,371 625,771 611,349
Commercial loans 209,710 186,619 185,253
Consumer loans 8,001 8,225 7,153
Other loans 6,020 1,707 163
Total Loans $924,102 $822,322 $803,918
ALLOWANCE FOR LOAN
LOSSES
Balance at
beginning of
period $9,896 $8,734 $8,595 $8,675 $8,284
Provision for loan
losses 1,050 275 125 2,550 450
Loan charge offs (310) (335) (18) (723) (61)
Loan recoveries 36 1 32 171 61
Net (charge
offs)
recoveries (274) (334) 14 (552) -
Balance at end of
period $10,672 $8,675 $8,734 $10,673 $8,734
NONPERFORMING ASSETS
Non-accrual loans $3,316 $4,122 $1,325
90-day past due
loans - - 229
Gross
nonperforming
loans 3,316 4,122 1,554
Government
guarantees on non-
accrual and 90-day
past due loans (239) (451) -
Nonperforming
loans, net of
government
guarantees 3,077 3,671 1,554
Other real estate
owned 3,186 423 -
Nonperforming
assets,
net of
government
guarantees $6,263 $4,094 $1,554
LOAN QUALITY RATIOS
Allowance for loan
losses as a
percentage of
total loans
outstanding, net
of loans held
for sale 1.15% 1.05% 1.09%
Allowance for loan
losses as a
percentage of
total
nonperforming
loans, net of
government
guarantees 346.83% 236.31% 562.03%
Net loan charge
offs (recoveries)
as a percentage of
average loans,
annualized 0.12% 0.16% -0.01% 0.08% 0.00%
Nonperforming loans
as a percentage of
total loans 0.36% 0.50% 0.16%
Nonperforming
assets as a
percentage of
total assets 0.60% 0.43% 0.17%
PACIFIC CONTINENTAL CORPORATION
SELECTED OTHER FINANCIAL INFORMATION AND RATIOS (Continued)
Amounts in $000's
(Unaudited)
Quarters Ended Nine Months Ended
September December September September September
30, 31, 30, 30, 30,
2008 2007 2007 2008 2007
BALANCE SHEET
AVERAGES
Loans $913,356 $812,870 $793,551 $876,491 $787,325
Allowance for
loan losses (10,115) (8,871) (8,649) (9,456) (8,551)
Loans, net of
allowance 903,241 803,999 784,902 867,035 778,774
Securities and
short-term
deposits 59,862 58,812 45,053 62,932 43,446
Earning assets 963,103 862,811 829,955 929,967 822,220
Non-interest-earning
assets 74,112 70,563 69,942 72,037 71,790
Assets $1,037,215 $933,374 $899,897 $1,002,004 $894,010
Interest-bearing
core deposits (3) $455,363 $437,808 $435,294 $441,931 $416,242
Non-interest-
bearing core
deposits (3) 171,103 173,706 171,624 169,421 167,461
Core deposits (3) 626,466 611,514 606,918 611,352 583,703
Non-core interest-
bearing deposits 71,799 49,588 67,525 51,118 68,747
Deposits 698,265 661,102 674,443 662,470 652,450
Borrowings 222,003 160,575 116,788 224,504 135,704
Non-interest-
bearing
liabilities 4,416 4,326 4,502 4,200 4,210
Liabilities 924,684 826,003 795,733 891,174 792,364
Stockholders' equity
(book) 112,531 107,371 104,164 110,830 101,646
Liabilities
and equity $1,037,215 $933,374 $899,897 $1,002,004 $894,010
Stockholders'
equity
(tangible) (1) $89,540 $84,213 $80,951 $87,784 $78,197
SELECTED MARKET DATA
Eugene market loans,
net of fees $224,327 $217,962 $216,602
Portland market
loans, net of
fees 423,194 389,053 390,186
Seattle market
loans, net of
fees 276,581 215,307 197,130
Total loans, net
of fees $924,102 $822,322 $803,918
Eugene market core
deposits (3) $413,240 $405,351 $398,190
Portland market
core deposits (3) 122,310 109,698 125,458
Seattle market core
deposits (3) 103,889 100,843 95,817
Total core
deposits (3) 639,439 615,892 619,465
Other deposits 72,201 28,532 63,750
Total $711,640 $644,424 $683,215
Eugene market core
deposits,
average (3) $400,461 $393,030 $387,334 $402,132 $382,843
Portland market
core deposits,
average (3) 117,472 121,687 129,648 113,364 119,261
Seattle market core
deposits,
average (3) 108,533 96,797 89,936 95,856 81,599
Total core
deposits,
average (3) 626,466 611,514 606,918 611,352 583,703
Other deposits,
average 71,799 49,588 67,525 51,118 68,747
Total $698,265 $661,102 $674,443 $662,470 $652,450
NET INTEREST MARGIN
RECONCILIATION
Yield on average
loans 7.06% 8.23% 8.56% 7.27% 8.66%
Yield on average
securities 4.39% 4.59% 4.30% 4.71% 4.20%
Yield on average
earning assets 6.89% 7.98% 8.33% 7.10% 8.43%
Rate on average
interest-bearing
core deposits 1.85% 3.24% 3.69% 1.94% 3.74%
Rate on average
interest-bearing
non-core deposits 3.21% 5.21% 5.29% 3.69% 5.24%
Rate on average
interest-bearing
deposits 2.03% 4.03% 6.19% 3.89% 1.42%
Rate on average
borrowings 3.01% 4.78% 5.08% 3.26% 5.16%
Cost of interest-
bearing funds 2.32% 3.77% 4.12% 2.48% 4.22%
Interest rate
spread 4.57% 4.21% 4.21% 4.62% 4.21%
Net interest
margin 5.08% 5.15% 5.25% 5.18% 5.24%
(1) Tangible equity excludes goodwill and core deposit intangible related
to acquisitions.
(2) Efficiency ratio is noninterest expense divided by operating revenues.
Operating revenues are net interest income plus noninterest income.
(3) Core deposits include all demand, savings, & interest checking
accounts, plus all local time deposits including local time deposits
in excess of $100,000.
SOURCE Pacific Continental Corporation
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