EUGENE, Ore., Oct. 8 /PRNewswire-FirstCall/ -- Pacific Continental Corporation , the bank holding company for Pacific Continental Bank, today reported financial results for the current quarter and nine months ended September 30, 2009.
"Business fundamentals improved for the quarter as indicated by growth in core earnings, a strong and stable net interest margin, and exceptional growth in core deposits all of which contributed to a return to profitability," said Hal Brown, chief executive officer. "These strong fundamentals should contribute to improved future profitability for the Company and we believe demonstrate the effectiveness of our business model and strategies," added Brown.
Net income for the third quarter 2009 was $279 thousand, compared to net income of $3.0 million for the third quarter 2008. Net income per diluted share was $0.02 for the third quarter 2009, compared to net income of $0.25 per diluted share reported for the prior year third quarter. For the first nine months of 2009 the net loss was $4.9 million compared to net income of $9.1 million for the same period during 2008. Net loss per diluted share was $0.38 for the first nine months of 2009, compared to net income of $0.76 per diluted share for the first nine months of 2008.
Core earnings, revenue growth, net interest margin and expense control drive improved efficiency
Core earnings ("earnings before loan loss provisions and taxes") expanded significantly reflecting a continued increase in the Company''s earnings power. Core earnings for the third quarter were $7.8 million an increase of 33.5% over the $5.9 million reported for the similar period in 2008. This increase is the result of both increased operating revenue and continued expense control while achieving an expansion in an already stable and strong net interest margin. This result was achieved despite increased FDIC premium rates.
Operating revenue, which consists of net interest income plus noninterest income, was $14.8 million during the third quarter 2009, up $1.5 million or 11.1% over the $13.4 million reported during the third quarter 2008. Contributing to the improvement in operating revenue was an 8.9% quarter-over-quarter growth in average earning assets and an improvement in the net interest margin to 5.19%, up 11 basis points over third quarter 2008. On a linked-quarter basis, the third quarter 2009 net interest margin was up 5 basis points from the prior quarter. Interest reversals on approximately $197 thousand for loans placed on nonaccrual status during the quarter negatively impacted the net interest margin by approximately 7 basis points.
Noninterest expense for third quarter 2009 was $7.0 million, a decrease of $483 thousand from the third quarter 2008, and on a linked quarter basis was $1.6 million lower than the second quarter 2009 expenses. Comparing the two most recent quarters, the third quarter 2009 expense decline was primarily attributable to lower FDIC assessments as the second quarter included a one-time $510 thousand special assessment, a $447 thousand decrease in other real estate expense, and a $417 thousand decline in personnel expense, primarily related to lower accruals for incentive compensation and for the Company''s self-insured medical plan. Combined, the Company''s revenue growth and active expense management resulted in an efficiency ratio of 47.31% for the third quarter 2009 compared to 56.16% for the third quarter 2008.
Exceptionally strong core deposit growth
During the third quarter 2009, the Company continued the strong core deposit growth experienced during the first half of the year. At September 30, 2009, period-end core deposits totaled $751.7 million, up $45.8 million over period-end core deposits at June 30, 2009, and for the first nine months of 2009 core deposits were up $135.8 million, an annualized growth rate of 29.5%. Quarterly average core deposit figures, a measure which reduces daily deposit volatility, show similar strong results with third quarter 2009 average core deposits of $724.8 million, an increase of $43.6 million over the second quarter 2009 average. Deposit growth occurred in all three of the bank''s primary markets, but was most evident in Portland and Eugene.
Loan growth continued to abate from the prior year''s activity reflecting continuing weak economic conditions and management''s planned contraction in the residential construction and land development portfolios. Since the end of the third quarter 2008, these portfolios have contracted $47.0 million, or 39% to $73.7 million, and now constitute 7.7% of total gross loans versus 13.0% at the end of third quarter 2008. At September 30, 2009, period-end gross loans declined by approximately $3.1 million from the end of the second quarter 2009 and have increased just $2.1 million during the first nine months of the current year.
Improvement in nonperforming assets, provisioning, and loan statistics
Total nonperforming assets at September 30, 2009 were $30.1 million, a decrease of $2.1 million from June 30, 2009. Nonperforming assets represent 2.62% of total assets at September 30, 2009 compared to 2.85% at the end of the prior quarter. The quarter''s decline in nonperforming assets was due to the successful resolution of a number of problem loans, the sale of other real estate assets, and recognized charge-offs on certain other loans. Nonperforming assets at September 30, 2009 consist of $25.9 million of loans on nonaccrual status and $4.2 million in other real estate owned. Nonperforming loans continue to be centered in the Company''s residential construction and land development portfolios. Other real estate owned consists primarily of completed consumer residential construction properties and individual residential building lots.
"Through the concerted efforts and active management by our employees, we were successful in reducing the level of our nonperforming assets and are cautiously optimistic that these trends may continue, recognizing however the uncertain economic conditions prevailing in the real estate markets in which we operate," said Roger Busse, president and chief operating officer. "Our proactive and timely approach to dealing with loan problems together with our solid underwriting practices and focus on quality portfolio niche segments, such as dental lending, will continue to differentiate us in today''s challenging environment," added Busse.
As a result of continued weakness in the Pacific Northwest economy and residential real estate markets, the Company''s third quarter 2009 provision for loan losses remained elevated but significantly lower than the previous quarter. The third quarter provision for loan losses was $8.3 million, compared to $19.2 million in second quarter 2009. During the third quarter, the Company recognized net loan charge offs of $8.6 million. The Company continued to maintain a historically high unallocated allowance for loan losses; and at September 30, 2009, the unallocated portion of the allowance was 8% compared to 7% at June 30, 2009. The allowance for loan losses as a percentage of outstanding loans at September 30, 2009 was 1.91%, compared to 1.94% and 1.15% at June 30, 2009 and September 30, 2008, respectively.
Improved capital levels
The Company''s total risk-based capital ratio, a regulator defined indicator of strength, was 11.87% at September 30, 2009, which exceeds the "well- capitalized" minimum designation of 10.00%, and improved over the prior quarter''s total risk-based capital ratio of 11.71%.
Third quarter highlights: -- Returned to profitability. -- Third quarter core earnings, earnings before taxes and loan loss provision, increased 33.5% over the same 2008 period. -- Achieved an efficiency ratio for the quarter of 47.31%. -- Strong quarterly core deposit growth of $45.8 million, an annualized growth rate of 29.5% since year-end 2008. -- Risk based capital ratio of 11.87%, up from 11.71% at June 30, 2009, and up from 10.81% at September 30, 2008, and above the "well-capitalized" designation. -- Increased an already strong and stable net interest margin to 5.19%. -- Reduced level of nonperforming assets by $2.1 million from the end of the prior quarter. -- Completed the regularly scheduled FDIC safety and soundness examination. Conference Call and Audio Webcast:
Management will conduct a live conference call and audio Webcast for interested parties relating to its results for the third quarter 2009, on Thursday, October 8th, 2009, at 5:00 p.m. Eastern Time / 2:00 p.m. Pacific Time . To listen to the conference call, interested parties should call (866) 292-1418. The Webcast will be available via Pacific Continental''s Web site (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 Website. Any questions regarding the conference call presentation or Webcast should be directed to Maecey Castle, vice president and director of corporate communications, 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 in Oregon and Washington. Pacific Continental, with $1.2 billion in assets, 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 markets including Seattle, Portland, and Eugene. Pacific Continental targets the banking needs of community-based businesses, professional service providers and nonprofit organizations; additionally the bank provides private banking services.
Since its founding in 1972 Pacific Continental Bank has been honored with numerous awards from business and community organizations: in June 2009, for the ninth consecutive year, The Seattle Times named Pacific Continental to its "Northwest 100" ranking of top publicly rated companies in the Pacific Northwest; in February 2009, Oregon Business magazine recognized Pacific Continental as the top ranked financial institution to work for in the publication''s large company category, marking it the ninth consecutive year Pacific Continental has been recognized as one of the Top 100 Companies to Work for In Oregon; and in December 2008, for the second consecutive year, the Portland Business Journal recognized Pacific Continental Bank as One of the Ten Most Admired Companies in Oregon.
Pacific Continental Corporation''s shares are listed on the NASDAQ Global Select Market under the symbol "PCBK" and are a component of the Russell 2000 Index. Supplementary information about Pacific Continental can be found online at http://www.therightbank.com/
Forward-Looking Statement 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 high concentration of loans of the company''s banking subsidiary in commercial and residential real estate lending; adverse economic trends in the United States and the markets we serve affecting the Bank''s borrower base; a continued decline in the housing and real estate market; a continued increase in unemployment or sustained high levels of unemployment; continued erosion or sustained low levels of consumer confidence; changes in the regulatory environment and increases in associated costs, particularly ongoing compliance expenses and resource allocation needs; vendor quality and efficiency; 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 other risks and uncertainties discussed in the sections titled "Risk Factors", "Business" and "Management Discussion and Analysis of Financial Condition and Results of Operations", as applicable, from Pacific Continental''s most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q. Readers are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date on which they are made and reflect management''s current estimates, projections, expectations and beliefs. 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. 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 Nine Months Ended Ended September 30, September 30, 2009 2008 2009 2008 ---- ---- ---- ---- Interest and dividend income Loans $15,658 $16,019 $46,308 $47,181 Securities 1,322 647 3,484 2,070 Dividends on Federal Home Loan Bank stock - 9 - 132 Federal funds sold & Interest- bearing deposits with banks 2 5 4 18 - - - -- 16,982 16,680 49,796 49,401 ------ ------ ------ ------ Interest expense Deposits 2,481 2,696 7,080 7,844 Federal Home Loan Bank & Federal Reserve borrowings 633 1,463 2,005 4,552 Junior subordinated debentures 128 127 380 373 Federal funds purchased 23 91 76 555 --- --- --- --- 3,265 4,377 9,541 13,324 ----- ----- ----- ------ Net interest income 13,717 12,303 40,255 36,077 Provision for loan losses 8,300 1,050 29,000 2,550 ----- ----- ------ ----- Net interest income after provision for loan losses 5,417 11,253 11,255 33,527 ----- ------ ------ ------ Noninterest income Service charges on deposit accounts 472 421 1,414 1,217 Other fee income, principally bankcard 461 470 1,310 1,378 Loan servicing fees 17 20 54 68 Mortgage banking income 98 72 366 291 Other noninterest income 61 64 182 273 --- --- --- --- 1,109 1,047 3,326 3,227 ----- ----- ----- ----- Noninterest expense Salaries and employee benefits 3,810 4,670 12,908 13,705 Premises and equipment 1,030 995 3,118 2,967 Bankcard processing 135 143 381 421 Business development 333 315 1,247 966 FDIC insurance assessment 291 130 1,508 388 Other real estate expense 32 2 597 32 Other noninterest expense 1,383 1,242 3,951 3,648 ----- ----- ----- ----- 7,014 7,497 23,710 22,127 ----- ----- ------ ------ Income (loss) before provision (benefit) for income taxes (488) 4,803 (9,129) 14,627 Provision (benefit) for income taxes (767) 1,783 (4,226) 5,521 ---- ----- ------ ----- Net income (loss) $279 $3,020 $(4,903) $9,106 ==== ====== ======= ====== Earnings (loss) per share Basic $0.02 $0.25 $(0.38) $0.76 ----- ----- ------ ----- Diluted $0.02 $0.25 $(0.38) $0.76 ----- ----- ------ ----- Weighted average shares outstanding Basic 12,873 11,978 12,852 11,960 Common stock equivalents attributable to stock- based awards 36 55 - 60 --- --- --- --- Diluted 12,909 12,033 12,852 12,020 ====== ====== ====== ====== PERFORMANCE RATIOS Return on average assets 0.10% 1.16% -0.59% 1.21% Return on average equity (book) 0.92% 10.68% -5.25% 10.97% Return on average equity (tangible) (1) 1.14% 13.42% -6.42% 13.86% Net interest margin 5.19% 5.08% 5.18% 5.18% Efficiency ratio (2) 47.31% 56.16% 54.40% 56.30% PACIFIC CONTINENTAL CORPORATION CONSOLIDATED BALANCE SHEETS Amounts in $ 000''s (Unaudited) September 30, September 30, 2009 2008 ---- ---- ASSETS Cash and due from banks $17,624 $21,510 Interest-bearing deposits with banks 266 290 --- --- Total cash and cash equivalents 17,890 21,800 Securities available-for-sale 115,585 49,848 Loans held for sale 453 447 Loans, less allowance for loan losses 940,754 913,430 Interest receivable 4,110 4,096 Federal Home Loan Bank stock 10,652 9,198 Property, net of accumulated depreciation 20,132 21,000 Goodwill and other intangible assets 22,737 22,960 Deferred tax asset 6,301 3,231 Taxes receivable 4,707 - Other real estate owned 4,247 3,186 Other assets 2,940 2,688 ----- ----- Total assets $1,150,508 $1,051,884 ========== ========== LIABILITIES AND STOCKHOLDERS'' EQUITY Deposits Noninterest-bearing demand $196,320 $178,632 Savings and interest-bearing checking 461,723 413,688 Time $100,000 and over 71,526 61,850 Other time 96,951 57,470 ------ ------ Total deposits 826,520 711,640 Federal funds purchased 10,000 38,460 Federal Home Loan Bank and Federal Reserve borrowings 181,000 176,000 Junior subordinated debentures 8,248 8,248 Accrued interest and other payables 4,430 4,338 ----- ----- Total liabilities 1,030,198 938,686 --------- ------- Stockholders'' equity Common stock, 25,000 shares authorized 90,522 78,900 Retained earnings 29,773 35,140 Accumulated other comprehensive loss 15 (842) --- ---- 120,310 113,198 ------- ------- Total liabilities and stockholders'' equity $1,150,508 $1,051,884 ========== ========== CAPITAL RATIOS Total capital (to risk weighted assets) 11.87% 10.81% Tier I capital (to risk weighted assets) 10.61% 9.73% Tier I capital (to leverage assets) 9.65% 9.62% Tangible common equity (to tangible assets) 8.65% 8.77% Tangible common equity (to risk weighted assets) 9.74% 8.91% OTHER FINANCIAL DATA Shares outstanding at end of period 12,873 11,994 Stockholder''s equity (tangible) (1) $97,573 $90,238 Book value $9.35 $9.44 Tangible book value (1) $7.58 $7.52 PACIFIC CONTINENTAL CORPORATION SELECTED OTHER FINANCIAL INFORMATION AND RATIOS Amounts in $ 000''s (Unaudited) Three Months Ended Nine Months Ended ------------------ ----------------- September 30, September 30, September 30, September 30, 2009 2008 2009 2008 ---- ---- ---- ---- LOANS BY TYPE Real estate secured loans: Permanent Loans: Multifamily residential $67,654 $53,925 Residential 1-4 family 95,761 70,728 Owner-occupied commercial 200,569 184,961 Non-owner- occupied commercial 182,521 145,415 ------- ------- Total permanent real estate loans 546,505 455,029 Construction Loans: Multifamily residential 20,994 29,903 Residential 1-4 family 42,813 86,563 Commercial real estate 40,914 54,648 Commercial bare land and acquisition & development 28,907 33,567 Residential bare land and acquisition & development 30,879 34,111 Other 5,198 7,894 ----- ----- Total construction real estate loans 169,705 246,686 Total real estate loans 716,210 701,715 Commercial loans 229,881 210,054 Consumer loans 7,125 7,998 Other loans 7,420 6,005 ----- ----- Gross loans 960,636 925,772 Deferred loan origination fees (1,534) (1,670) ------ ------ 959,102 924,102 Allowance for loan losses (18,348) (10,672) ------- ------- $940,754 $913,430 ======== ======== Real estate loans held for sale $453 $447 ALLOWANCE FOR LOAN LOSSES Balance at beginning of period $18,680 $9,896 $10,980 $8,675 Provision for loan losses 8,300 1,050 29,000 2,550 Loan charge offs (8,822) (310) (21,872) (723) Loan recoveries 190 36 240 170 --- --- --- --- Net charge offs (8,632) (274) (21,632) (553) ------ ---- ------- ---- Balance at end of period $18,348 $10,672 $18,348 $10,672 ======= ======= ======= ======= NONPERFORMING ASSETS Nonaccrual loans Real estate secured loans: Permanent Loans: Multifamily residential $- $- Residential 1-4 family 1,283 60 Owner-occupied commercial 2,204 - Non-owner- occupied commercial - - --- --- Total permanent real estate loans 3,487 60 Construction Loans: Multifamily residential - - Residential 1-4 family 2,817 1,277 Commercial real estate 7,551 - Commercial bare land and acquisition & development - 1,660 Residential bare land and acquisition & development 8,141 - Other - - --- --- Total construction real estate loans 18,509 2,937 Total real estate loans 21,996 2,997 Commercial loans 4,036 319 Consumer loans - - Other loans - - --- --- Total nonaccrual loans 26,032 3,316 90 days past due and accruing interest - - Total nonperforming loans 26,032 3,316 ------ ----- Nonperforming loans guaranteed by government (136) (239) Net nonperforming loans 25,896 3,077 ------ ----- Foreclosed assets 4,247 3,186 ----- ----- Total nonperforming assets, net of guaranteed loans $30,143 $6,263 ======= ====== LOAN QUALITY RATIOS Allowance for loan losses as a percentage of total loans outstanding, excluding of loans held for sale 1.91% 1.15% Allowance for loan losses as a percentage of total nonperforming loans, net of government guarantees 70.85% 346.83% Net loan charge offs (recoveries) as a percentage of average loans, annualized 3.58% 0.12% 3.01% 0.08% Nonperforming loans as a percentage of total loans 2.70% 0.33% Nonperforming assets as a percentage of total assets 2.62% 0.60% PACIFIC CONTINENTAL CORPORATION SELECTED OTHER FINANCIAL INFORMATION AND RATIOS (Continued) Amounts in $ 000''s (Unaudited) Three Months Ended Nine Months Ended ------------------ ----------------- September 30, September 30, September 30, September 30, 2009 2008 2009 2008 ---- ---- ---- ---- BALANCE SHEET AVERAGES Loans $957,602 $913,356 $961,704 $876,491 Allowance for loan losses (19,309) (10,115) (14,869) (9,456) ------- ------- ------- ------ Loans, net of allowance 938,293 903,241 946,835 867,035 Securities and short-term deposits 110,217 59,862 91,350 62,932 ------- ------ ------ ------ Earning assets 1,048,510 963,103 1,038,185 929,967 Non-interest- earning assets 78,743 74,112 76,437 72,037 ------ ------ ------ ------ Assets $1,127,253 $1,037,215 $1,114,622 $1,002,004 ========== ========== ========== ========== Interest- bearing core deposits (3) $536,764 $455,363 $506,543 $441,931 Non-interest- bearing core deposits (3) 187,996 171,103 177,047 169,421 ------- ------- ------- ------- Core deposits (3) 724,760 626,466 683,590 611,352 Non-core interest- bearing deposits 84,908 71,799 84,810 51,118 ------ ------ ------ ------ Deposits 809,668 698,265 768,400 662,470 Borrowings 193,841 222,003 217,567 224,504 Other non- interest- bearing liabilities 3,617 4,416 3,802 4,200 ----- ----- ----- ----- Liabilities 1,007,126 924,684 989,769 891,174 --------- ------- ------- ------- Stockholders'' equity (book) 120,127 112,531 124,853 110,830 ------- ------- ------- ------- Liabilities and equity $1,127,253 $1,037,215 $1,114,622 $1,002,004 ========== ========== ========== ========== Stockholders'' equity (tangible) (1) $97,359 $89,540 $102,030 $87,784 SELECTED MARKET DATA Eugene market loans, net of fees $256,291 $224,327 Portland market loans, net of fees 437,674 423,194 Seattle market loans, net of fees 265,137 276,581 ------- ------- Total loans, net of fees $959,102 $924,102 ======== ======== Eugene market core deposits (3) $480,033 $413,240 Portland market core deposits (3) 162,574 122,310 Seattle market core deposits (3) 109,046 103,889 ------- ------- Total core deposits (3) 751,653 639,439 Other deposits 74,869 72,201 ------ ------ Total $826,522 $711,640 ======== ======== Eugene market core deposits, average (3) $458,122 $400,461 $442,219 $402,132 Portland market core deposits, average (3) 159,670 117,472 137,437 113,364 Seattle market core deposits, average (3) 106,968 108,533 103,934 95,856 ------- ------- ------- ------ Total core deposits, average (3) 724,760 626,466 683,590 611,352 Other deposits, average 84,908 71,799 84,810 51,118 ------ ------ ------ ------ Total $809,668 $698,265 $768,400 $662,470 ======== ======== ======== ======== NET INTEREST MARGIN RECONCILIATION Yield on average loans 6.62% 7.06% 6.54% 7.27% Yield on average securities 4.77% 4.39% 5.11% 4.71% ---- ---- ---- ---- Yield on average earning assets 6.43% 6.89% 6.41% 7.10% Rate on average interest- bearing core deposits 1.57% 1.85% 1.56% 1.94% Rate on average interest- bearing non- core deposits 1.67% 3.21% 1.85% 3.69% ---- ---- ---- ---- Rate on average interest- bearing deposits 1.58% 2.03% 1.60% 2.13% Rate on average borrowings 1.60% 3.01% 1.51% 3.26% ---- ---- ---- ---- Cost of interest- bearing funds 1.59% 2.32% 1.58% 2.48% ---- ---- ---- ---- Interest rate spread 4.84% 4.57% 4.84% 4.62% ---- ---- ---- ---- Net interest margin 5.19% 5.08% 5.18% 5.18% ==== ==== ==== ==== (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.
Pacific Continental Corporation
CONTACT: Hal Brown, CEO, or Michael A. Reynolds, Executive Vice
President/CFO, both of Pacific Continental Corporation, +1-541-686-8685,
banking@therightbank.com
Web Site: http://www.therightbank.com/
