Pacific Continental Corporation Reports First Quarter 2014 Results

Organic loan growth drives first quarter results

News provided by

Pacific Continental Corporation

Apr 16, 2014, 04:30 ET

EUGENE, Ore., April 16, 2014 /PRNewswire/ -- Pacific Continental Corporation (Nasdaq: PCBK), the holding company of Pacific Continental Bank, today reported financial results for the first quarter 2014.

Recent highlights:

  • Net income was $3.8 million for the quarter, up 56.41% over first quarter last year.
  • Outstanding loans exceed $1 billion.
  • Annualized first quarter loan growth of 10.74% continued a nine quarter growth trend.
  • Continued improvement in credit quality statistics.
  • Declared second quarter 2014 regular quarterly cash dividend of $0.10 per share and special cash dividend of $0.11 per share.
  • Total risk-based capital ratio of 16.21%, significantly above the 10% minimum for "well-capitalized" designation.
  • For the 15th consecutive year recognized by Oregon Business magazine as one of the 100 Best Companies to Work For in Oregon.
  • Recipient of the United Way of Lane County's annual LIVE UNITED award for contributions to the community by the bank and its employees.

Net income
Net income for first quarter 2014 was $3.8 million or $0.21 per diluted share compared to net income of $2.5 million or $0.14 per diluted share in first quarter 2013. First quarter 2013 results included $1.2 million of merger expenses related to the acquisition of Century Bank.  Return on average assets, average book equity, and average tangible equity were 1.06%, 8.61%, and 9.90%, respectively, in first quarter 2014, compared to 0.70%, 5.43%, and 6.21% in first quarter 2013.

"We are certainly pleased with first quarter results and continuation of strong returns for our shareholders," said Hal Brown, chief executive officer. "We are most pleased with the loan activity and production in our local markets reflecting the strength of our business strategy and improving economic conditions."

Loan activity continues
Outstanding gross loans at March 31, 2014, were $1.02 billion, up $26.3 million from year-end 2013 and up $70.3 million over March 31, 2013. First quarter loan growth represents an annualized growth rate of 10.74%.  Loan growth during the first quarter 2014 was primarily attributable to local market lending with growth in nearly every category of loans. The bank continues to expand its lending to health care professionals nationally, but is experiencing contraction in local dental loans due to early pay offs and amortization of the mature local portfolio. At March 31, 2014, loans to dental practitioners totaled $305.8 million and represented 29.94%, of the loan portfolio compared to 30.89% and 29.45% at December 31, 2013 and March 31, 2013, respectively.  National dental loans at March 31, 2014, were $133.7 million, up $5.1 million during the quarter and up $43.5 million over March 31, 2013.

"The success of our organic loan growth is being driven by our focused niche strategy, improving efficiencies, training and excellent market leadership and administrative support," said Roger Busse, president and chief operating officer. "Intense competition in the healthcare field will continue in 2014, and while we expect net growth in this segment this year, we will not divert from our insistence on quality first, followed by profitability."

Credit quality and statistics
The Company had no provision for loan losses during the first quarter 2014.  This was the fourth consecutive quarter with no provision for loan losses, reflecting the credit quality of the loan portfolio. With the growth in the loan portfolio, the allowance for loan losses as a percentage of outstanding loans at March 31, 2014, declined to 1.51% compared to 1.60% at December 31, 2013, and 1.72% at March 31, 2013.  The allowance for loan losses as a percentage of nonperforming loans net of guarantees remained strong at 339.15%, further reflecting the quality of the loan portfolio. During the first quarter 2014, net loan charge offs totaled $523 thousand compared to $885 thousand of net recoveries in fourth quarter 2013 and $283 thousand in net loan charge offs in first quarter 2013.

At March 31, 2014, nonperforming assets totaled $16.1 million, or 1.09% of total assets, a decrease from December 31, 2013, and March 31, 2013, ratios of 1.45% and 1.71%, respectively. Nonperforming assets were comprised of $4.5 million of nonperforming loans, net of government guarantees, and $11.5 million in other real estate owned. Classified assets totaled $48.2 million, a decrease of $3.9 million from the end of the prior quarter.

Loans past-due 30-89 days were 0.20% of total loans at March 31, 2014, compared to 0.23% at December 31, 2013, a figure that suggests stabilization in the migration of problem loans.

"We are pleased with our continued resolution of problem assets and improved credit quality," said Casey Hogan, executive vice president and chief credit officer. "We are also optimistic that credit quality resolutions will continue throughout the year further allowing us to move resources into business development and growth initiatives."

Core deposits
Period-end Company-defined core deposits at March 31, 2014, were $990.9 million, relatively unchanged from December 31, 2013, and were consistent with typical first quarter seasonal patterns. Average core deposits for the first quarter 2014 were $992.5 million compared to $987.2 million and $943.3 million for fourth quarter and first quarter 2013, respectively. At period-end March 31, 2014, noninterest-bearing demand deposits totaled $340.5 million and represented 34.36% of core deposits.

Capital levels
The Company's capital ratios continue to be well above the minimum FDIC "well-capitalized" designated levels. At March 31, 2014, the Company's Tier 1 leverage ratio, Tier 1 risk-based capital ratio, and Total risk-based capital ratios were 11.44%, 14.95% and 16.21%, respectively, as compared to 11.49%, 14.90% and 16.15% at December 31, 2013. The FDIC's minimum "well-capitalized" designation ratios for these metrics are 5.00%, 6.00% and 10.00%, respectively.

Net interest margin
The first quarter 2014 net interest margin averaged 4.32%, a linked-quarter decline of 6 basis points from fourth quarter 2013, but a 4 basis point improvement over first quarter 2013. The decrease in the linked-quarter net interest margin was attributable to 7 basis points of nonrecurring items recorded in the fourth quarter 2014.  Recent stabilization of the net interest margin is primarily attributable to the change in the earning asset mix as loan growth has been funded with security portfolio cash flows which have offset the decline in loan yields. Also contributing is an increase in the yield on securities together with a lower cost of funds.  During the first quarter 2014, the accretion of the Century Bank loan fair value mark recorded at the date if acquisition positively impacted the net interest margin by 7 basis points.

Noninterest income and expense
First quarter noninterest income was $1.3 million, down $240 thousand from fourth quarter 2013, and up $43 thousand over first quarter 2013. First quarter 2014 results included a gain on the sale of securities of $63 thousand resulting from a repositioning of approximately $25.0 million of the portfolio.  First quarter 2014 noninterest income also reflects lower merchant processing revenues resulting from the outsourcing of this activity that occurred during the fourth quarter 2013.  The outsourcing of merchant processing also eliminated related processing expense. 

Noninterest expense in first quarter 2014 was down $534 thousand and $1.3 million from fourth quarter 2013 and first quarter 2013, respectively. The decrease in noninterest expense on a linked-quarter basis was primarily due to lower other real estate expense and elimination of bankcard processing expense.  The decline in year-over-year noninterest expense was primarily due to $1.2 million of merger related expense recorded during the first quarter 2013.  Excluding the merger related expense in first quarter 2013, first quarter 2014 expenses were virtually flat with first quarter 2013. 

The first quarter 2014 efficiency ratio was 60.86%, compared to 61.95% and 72.25% in fourth quarter 2013 and first quarter 2013. The first quarter 2013 efficiency ratio excluding merger related expense would have been 63.89%.

Conference call and audio webcast
Management will conduct a live conference call and audio webcast for interested parties relating to the Company's results for the first quarter 2014 on Thursday, April 17, 2014, at 11:00 a.m. Pacific / 2:00 p.m. Eastern. To listen to the conference call, interested parties should call 866-292-1418. Following the formal remarks, a question and answer session will be open to all interested parties. The webcast will be available via Pacific Continental's website 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 is typically available within twenty-four hours following the live webcast and will be archived for one year on the Pacific Continental website. Any questions regarding the conference call presentation or webcast should be directed to Shannon Coffin, executive administrative assistant, 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. The Bank also operates loan production offices in Tacoma, Washington and Denver, Colorado. Pacific Continental, with $1.5 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, health care professionals, professional service providers and nonprofit organizations.

Since its founding in 1972, Pacific Continental Bank has been honored with numerous awards and recognitions from highly regarded third-party organizations including The Seattle Times, the Portland Business Journal, the Seattle Business magazine and Oregon Business magazine. A complete list of the company's awards and recognitions – as well as supplementary information about Pacific Continental Bank – can be found online at www.therightbank.com. 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.

Forward-Looking Statement Safe Harbor
This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"). These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as "anticipates," "targets," "expects," "estimates," "intends," "plans," "goals," "believes" "anticipates" and other similar expressions or future or conditional verbs such as "will," "should," "would" and "could." The forward-looking statements made represent Pacific Continental's current estimates, projections, expectations, plans or forecasts of its future results and revenues, including but not limited to statements about performance, loan growth, capital position, liquidity, credit quality, credit quality trends, competition and economic conditions generally. These statements are not guarantees of future results or performance and involve certain risks, uncertainties and assumptions that are difficult to predict and are often beyond Pacific Continental's control. Actual outcomes and results may differ materially from those expressed in, or implied by, any of these forward-looking statements. You should not place undue reliance on any forward-looking statement and should consider all of the following uncertainties and risks, as well as those more fully discussed under "Risk Factors", "Business", and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in Pacific Continental's most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, and in any of Pacific Continental's subsequent SEC filings, including the high concentration of loans of the Company's banking subsidiary in commercial and residential real estate lending and our significant concentration in loans to dental professionals; 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 Federal Reserve's monetary policies and 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 operational systems or infrastructure failures; increased competition; fluctuating interest rates; a tightening of available credit; the potential adverse impact of legal or regulatory proceedings; and risks related to acquisitions, including integration, retention of key personnel and business, anticipated cost savings and results and performance of the acquired company or the combined entity. Pacific Continental Corporation undertakes no obligation to publicly revise or update any forward-looking statement to reflect the impact of 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

(In thousands, except share and per share amounts)

(Unaudited)











Three months ended

Linked 

Year over

March 31, 

December 31,

March 31, 

Quarter

Year  

2014

2013

2013

% Change

% change

Interest and dividend income









   Loans

$      13,174

$         13,482

$      12,699

-2.28%

3.74%

   Taxable securities

1,532

1,566

1,437

-2.17%

6.61%

   Tax-exempt securities

483

489

467

-1.23%

3.43%

   Federal funds sold & interest-bearing deposits with banks

2

2

3

0.00%

-33.33%

15,191

15,539

14,606

-2.24%

4.01%









Interest expense









   Deposits

806

803

885

0.37%

-8.93%

   Federal Home Loan Bank & Federal Reserve borrowings

280

284

308

-1.41%

-9.09%

   Junior subordinated debentures

56

60

34

-6.67%

64.71%

   Federal funds purchased

5

4

4

25.00%

25.00%

1,147

1,151

1,231

-0.35%

-6.82%









      Net interest income

14,044

14,388

13,375

-2.39%

5.00%









Provision for loan losses

-

-

250



      Net interest income after provision for loan losses

14,044

14,388

13,125

-2.39%

5.10%









Noninterest income









   Service charges on deposit accounts

518

490

460

5.71%

12.61%

   Other fee income, principally bankcard

217

407

372

-46.68%

-41.67%

   Bank-owned life insurance income

117

128

126

-8.59%

-7.14%

   Gain (loss) on sale of investment securities

63

-

(8)

NA

-887.50%

     Impairment losses on investment securities (OTTI)

-

(7)

(16)

-100.00%

-100.00%

   Other noninterest income

408

545

346

-25.14%

17.92%

1,323

1,563

1,280

-15.36%

3.36%









Noninterest expense









   Salaries and employee benefits

5,819

5,776

5,479

0.74%

6.21%

   Premises and equipment

943

938

890

0.53%

5.96%

   Data processing

670

651

623

2.92%

7.54%

   Legal and professional fees

487

407

457

19.66%

6.56%

   Business development

375

430

495

-12.79%

-24.24%

   FDIC insurance assessment

220

238

221

-7.56%

-0.45%

   Bankcard processing

3

109

126

-97.25%

-97.62%

   Other real estate expense

223

639

424

-65.10%

-47.41%

   Merger related expenses(1)

-

-

1,246

NA

-100.00%

   Other noninterest expense

771

857

809

-10.04%

-4.70%

9,511

10,045

10,770

-5.32%

-11.69%









Income before provision for income taxes

5,856

5,906

3,635

-0.85%

61.10%

Provision for income taxes

2,024

2,254

1,185

-10.20%

90.21%









      Net income

$        3,832

$           3,652

$        2,450

4.93%

47.02%









Earnings per share:









   Basic

$          0.21

$             0.20

$          0.14

4.88%

55.86%

   Diluted

$          0.21

$             0.20

$          0.14

4.93%

55.20%









Weighted average shares outstanding:









   Basic

17,897,593

17,888,818

17,835,088














Common stock equivalents attributable to stock-based awards










228,595

237,455

151,431



   Diluted

18,126,188

18,126,273

17,986,519














PERFORMANCE RATIOS









Return on average assets 

1.06%

1.00%

0.70%



Return on average equity (book) 

8.61%

8.06%

5.43%



Return on average equity (tangible) (2)

9.90%

9.28%

6.21%



Net interest margin - fully tax equivalent yield (3)

4.32%

4.38%

4.28%



Efficiency ratio (4)

60.86%

61.95%

72.25%



Adjusted operating efficiency ratio (5)

57.69%

57.80%

60.81%









.



(1) Represents expenses associated with the acquisition of Century Bank.

(2) Tangible equity excludes goodwill and core deposit intangible assets related to acquisitions.

(3) Net interest margin is reported on a tax-equivalent yield basis at a 35% tax rate.

(4) Efficiency ratio is noninterest expense as a percent of net interest income (on a tax equivalent basis) plus noninterest income.

(5) Adjusted operating efficiency ratio is noninterest expense before foreclosed property expense, amortization of intangibles, merger related expenses and goodwill impairments as a percent of net interest income (on a tax equivalent basis) plus noninterest revenues, excluding gains/losses from securities transactions and other than temporary impairment charges.


PACIFIC CONTINENTAL CORPORATION

Consolidated Balance Sheets

(In thousands, except share amounts)

(Unaudited)






Linked 

Year over

March 31,

December 31,

March 31,

Quarter

Year  

2014

2013

2013

% Change

% change

ASSETS








   Cash and due from banks

$      24,455

$            19,410

$      20,059

25.99%

21.92%

   Interest-bearing deposits with banks

3,129

1,698

6,002

84.28%

-47.87%

      Total cash and cash equivalents

27,584

21,108

26,061

30.68%

5.84%








   Securities available-for-sale

341,992

347,386

379,766

-1.55%

-9.95%

   Loans, less allowance for loan losses and net deferred fees

1,004,751

977,928

933,771

2.74%

7.60%

   Interest receivable

4,693

4,703

5,085

-0.21%

-7.71%

   Federal Home Loan Bank stock

10,327

10,425

10,718

-0.94%

-3.65%

   Property and equipment, net of accumulated depreciation

18,621

18,836

19,245

-1.14%

-3.24%

   Goodwill and intangible assets

23,585

23,616

23,770

-0.13%

-0.78%

   Deferred tax asset

8,572

9,598

7,015

-10.69%

22.20%

   Taxes receivable

-

80

-

-100.00%

0.00%

   Other real estate owned

11,531

16,355

17,772

-29.50%

-35.12%

   Prepaid FDIC assessment

-

-

1,545

NA

-100.00%

   Bank-owned life insurance

16,253

16,136

15,747

0.73%

3.21%

   Other assets

3,682

3,555

3,163

3.57%

16.41%








      Total assets

$ 1,471,591

$       1,449,726

$ 1,443,658

1.51%

1.93%








LIABILITIES AND SHAREHOLDERS' EQUITY








   Deposits








      Noninterest-bearing demand

$    340,464

$          366,891

$    314,798

-7.20%

8.15%

      Savings and interest-bearing checking

588,822

559,632

566,555

5.22%

3.93%

      Core time deposits

61,647

63,792

79,390

-3.36%

-22.35%

         Total core deposits (2)

990,933

990,315

960,743

0.06%

3.14%








      Other deposits

106,422

100,666

106,952

5.72%

-0.50%

         Total deposits

1,097,355

1,090,981

1,067,695

0.58%

2.78%








   Federal funds and overnight funds purchased

5,620

5,150

4,450

9.13%

26.29%

   Federal Home Loan Bank borrowings

175,000

160,000

178,000

9.38%

-1.69%

   Junior subordinated debentures

8,248

8,248

8,248

0.00%

0.00%

   Accrued interest and other payables

3,970

6,163

2,807

-35.58%

41.43%

      Total liabilities

1,290,193

1,270,542

1,261,200

1.55%

2.30%








Shareholders' equity








   Common stock: 50,000,000 shares authorized.  Shares issued

and outstanding: 17,909,906 at March 31, 2014, 17,891,687

at December 31, 2013 and 17,835,088 at March 31, 2013


















134,293

133,835

133,236

0.34%

0.79%

   Retained earnings

45,503

45,250

44,129

0.56%

3.11%

   Accumulated other comprehensive income

1,602

99

5,093

1518.18%

-68.55%

181,398

179,184

182,458

1.24%

-0.58%








         Total liabilities and shareholders' equity

$ 1,471,591

$       1,449,726

$ 1,443,658

1.51%

1.93%


















CAPITAL RATIOS








   Total capital (to risk weighted assets)

16.21%

16.15%

16.62%


   Tier I capital (to risk weighted assets)

14.95%

14.90%

15.38%


   Tier I capital (to leverage assets)

11.44%

11.49%

11.71%


   Tangible common equity (to tangible assets)(1)

10.90%

10.91%

11.18%


   Tangible common equity (to risk-weighted assets)(1)

14.37%

14.18%

15.10%












OTHER FINANCIAL DATA








   Shares outstanding at end of period

17,909,906

17,891,687

17,835,088


   Tangible shareholders' equity(1)

$    157,813

$          155,568

$    158,688


   Book value per share

$        10.13

$              10.01

$        10.23


   Tangible book value per share

$          8.81

$                8.69

$          8.90




(1)

Tangible common equity excludes goodwill and core deposit intangible assets related to acquisitions.

(2)

Core deposits include demand, interest checking, money market, savings, and local time deposits, including local nonpublic time deposits in excess of $100 thousand.


PACIFIC CONTINENTAL CORPORATION

Loans by Type

(In thousands)

(Unaudited)














March 31,

December 31,

March 31,

2014

2013

2013

LOANS BY TYPE





Real estate secured loans:





Permanent loans:





Multi-family residential

$      51,182

$         46,217

$   43,805

Residential 1-4 family

46,557

46,438

54,615

Owner-occupied commercial

250,211

249,311

234,083

Nonowner-occupied commercial

168,888

158,786

164,725

Total permanent real estate loans

516,838

500,752

497,228

Construction loans:





Multi-family residential

22,717

23,419

23,162

Residential 1-4 family

25,859

26,512

22,550

Commercial real estate

34,936

30,516

25,866

Commercial bare land and acquisition & development

11,456

11,473

10,874

Residential bare land and acquisition & development

7,011

6,990

9,000

Total construction real estate loans

101,979

98,910

91,452

Total real estate loans

618,817

599,662

588,680

Commercial loans

397,738

390,301

357,089

Consumer loans

3,518

3,878

4,020

Other loans

1,042

928

1,039

Gross loans

1,021,115

994,769

950,828

Deferred loan origination fees

(970)

(924)

(745)

1,020,145

993,845

950,083

Allowance for loan losses

(15,394)

(15,917)

(16,312)

$ 1,004,751

$       977,928

$ 933,771





SELECTED MARKET LOAN DATA





  Eugene market gross loans, period-end

$    347,233

$       334,511

$ 324,009

  Portland market gross loans, period-end

400,537

391,295

388,979

  Seattle market gross loans, period-end

131,492

132,488

146,860

  National health care gross loans, period-end (1)

141,853

136,475

90,980

    Total gross loans, period-end

$ 1,021,115

$       994,769

$ 950,828





DENTAL LOAN DATA (2)





  Local Dental gross loans, period-end

$    172,022

$       178,673

$ 189,784

  National Dental gross loans, period-end

133,733

128,595

90,196

    Total gross dental loans, period-end

$    305,755

$       307,268

$ 279,980












(1)

National health care loans include loans to heath care professionals, primarily dental practitioners, operating outside of Pacific Continental Bank's market area. The market area is defined as Oregon and Washington, West of the Cascade Mountain Range.

(2)

Dental loans include loans to dental professionals for the purpose of practice expansion, acquisition or other purpose, supported by the cash flows of a dental practice.


PACIFIC CONTINENTAL CORPORATION

Selected Other Financial Information and Ratios

(In thousands)

(Unaudited)







Three months ended

March 31,

December 31,

March 31,

2014

2013

2013

BALANCE SHEET AVERAGES





  Loans, net of deferred fees

$ 1,008,561

$       990,566

$    917,469

  Allowance for loan losses

(15,906)

(16,709)

(16,388)

    Loans, net of allowance

992,655

973,857

901,081

  Securities and short-term deposits

350,774

350,101

387,312

   Earning assets

1,343,429

1,323,958

1,288,393

  Noninterest-earning assets

117,666

122,739

123,595

        Assets

$ 1,461,095

$    1,446,697

$ 1,411,988





  Interest-bearing core deposits(1)

$    647,114

$       626,161

$    636,138

  Noninterest-bearing core deposits(1)

345,369

361,046

307,176

    Core deposits(1)

992,483

987,207

943,314

  Noncore interest-bearing deposits

101,421

101,263

110,939

    Deposits

1,093,904

1,088,470

1,054,253

  Borrowings

181,381

173,038

170,308

  Other noninterest-bearing liabilities

5,280

5,342

4,413

       Liabilities

1,280,565

1,266,850

1,228,974

  Shareholders' equity (book)

180,530

179,847

183,014

       Liabilities and equity

$ 1,461,095

$    1,446,697

$ 1,411,988





  Shareholders' equity (tangible)(2)

$    156,929

$       156,154

$    159,879





Period-end earning assets

$ 1,349,872

$    1,327,012

$ 1,319,539





SELECTED MARKET DEPOSIT DATA





  Eugene market core deposits, period-end(1)

$    604,505

$       588,158

$    598,156

  Portland market core deposits, period-end(1)

234,631

249,050

232,431

  Seattle market core deposits, period-end(1)

151,797

153,107

130,156

    Total core deposits, period-end(1)

990,933

990,315

960,743

  Other deposits, period-end

106,422

100,666

106,952

      Total

$ 1,097,355

$    1,090,981

$ 1,067,695





  Eugene market core deposits, average(1)

$    602,977

$       592,179

$    569,330

  Portland market core deposits, average(1)

236,945

242,855

241,491

  Seattle market core deposits, average(1)

152,561

152,173

132,493

    Total core deposits, average(1)

992,483

987,207

943,314

  Other deposits, average

101,421

101,263

110,939

      Total

$ 1,093,904

$    1,088,470

$ 1,054,253





NET INTEREST MARGIN RECONCILIATION





  Yield on average loans

5.38%

5.49%

5.72%

  Yield on average securities(3)

2.63%

2.63%

2.26%

    Yield on average earning assets(3)

4.66%

4.74%

4.68%





  Rate on average interest-bearing core deposits

0.31%

0.32%

0.36%

  Rate on average interest-bearing non-core deposits

1.26%

1.18%

1.16%

    Rate on average interest-bearing deposits

0.44%

0.44%

0.48%





  Rate on average borrowings

0.76%

0.80%

0.82%

    Cost of interest-bearing funds

0.50%

0.51%

0.54%





    Interest rate spread(3)

4.16%

4.23%

4.14%





       Net interest margin- fully tax equivalent yield(3)

4.32%

4.38%

4.28%





Acquired loan fair value accretion impact to net interest margin (4)

0.07%

0.04%

0.08%





(1)

Core deposits include demand, interest checking, money market, savings, and local time deposits, including local nonpublic time deposits in excess of $100 thousand.

(2)

Tangible equity excludes goodwill and core deposit intangible assets related to acquisitions.

(3)

Tax-exempt income has been adjusted to a tax-equivalent basis at a 35% tax rate. The amount of such adjustment was an addition to recorded income of approximately $260, $263 and $251 for the three months ended March 31, 2014, December 31, 2013, and March 31, 2013, respectively.

(4)

During the three months ended March 31, 2014, December 31, 2013 and March 31, 2013 accretion of the fair value adjustment on the Century Bank acquired loans contributed $225, $136, and $243, respectively, to interest income.


PACIFIC CONTINENTAL CORPORATION

Nonperforming Assets, Asset Quality Ratios ad Allowance for Loan Losses

(In thousands)

(Unaudited)

March 31,

December 13,

March 31,

2014

2013

2013

NONPERFORMING ASSETS




Non-accrual loans





Real estate secured loans:






Permanent loans:







Multi-family residential

$              -

$                   -

$            -

Residential 1-4 family

752

636

1,269

Owner-occupied commercial

1,651

1,685

3,148

Nonowner-occupied commercial

136

136

-


Total permanent real estate loans

2,539

2,457

4,417

Construction loans:







Multi-family residential

-

-

-

Residential 1-4 family

-

-

-

Commercial real estate

-

-

-

Commercial bare land and acquisition & development

-

-

-

Residential bare land and acquisition & development

-

-

101


Total construction real estate loans

-

-

101



Total real estate loans

2,539

2,457

4,518

Commercial loans

2,623

2,886

3,344




Total nonaccrual loans

5,162

5,343

7,862

90-days past due and accruing interest

-

-

-

Total nonperforming loans

5,162

5,343

7,862

Nonperforming loans guaranteed by government

(623)

(735)

(878)

Net nonperforming loans

4,539

4,608

6,984

Other real estate owned

11,531

16,355

17,772

Total nonperforming assets, net of guaranteed loans

$    16,070

$         20,963

$    24,756










ASSET QUALITY RATIOS





Allowance for loan losses as a percentage of total loans outstanding





1.51%

1.60%

1.72%

Allowance for loan losses as a percentage of total nonperforming loans, net of government guarantees





339.15%

345.42%

233.56%

Net loan charge offs as a percentage of average loans, annualized





0.21%

0.35%

0.13%

Net nonperforming loans as a percentage of total loans

0.44%

0.46%

0.74%

Nonperforming assets as a percentage of total assets

1.09%

1.45%

1.71%

Consolidated classified asset ratio(1)

26.82%

29.02%

32.83%

Past due as a percentage of total loans(2)

0.20%

0.23%

0.20%







Three months ended

March 31,

December 31,

March 31,

2014

2013

2013

ALLOWANCE FOR LOAN LOSSES




Balance at beginning of period

$    15,917

$         16,802

$    16,345

Provision for loan losses

-

-

250

Loan charge offs

(601)

(1,039)

(597)

Loan recoveries

78

154

314

Net charge offs

(523)

(885)

(283)

Balance at end of period

$    15,394

$         15,917

$    16,312

(1)

Classified asset ratio is defined as the sum of all loan-related contingent liabilities and loans internally

graded substandard or worse, impaired loans (net of government guarantees), adversely classified

securities, and other real estate owned, divided by total consolidated Tier 1 capital plus the allowance

for loan losses.

(2)

Defined as loans past due more than 30 days and still accruing interest, as a percentage of total loans,

net of deferred fees.


PACIFIC CONTINENTAL CORPORATION

Consolidated Financial Highlights

(In thousands)





1st Quarter

4th Quarter

3rd Quarter

2nd Quarter

1st Quarter

2014

2013

2013

2013

2013

EARNINGS




  Net interest income

$      14,044

$      14,388

$      14,858

$      13,516

$      13,375

  Provision for loan loss

$                 -

$                 -

$                 -

$                 -

$           250

  Noninterest income

$        1,323

$        1,563

$        1,447

$        1,535

$        1,280

  Noninterest expense

$        9,511

$      10,045

$      10,406

$        9,508

$      10,770

  Net income

$        3,832

$        3,652

$        3,940

$        3,724

$        2,450

  Basic earnings per share

$          0.21

$          0.20

$          0.22

$          0.21

$          0.14

  Diluted earnings per share

$          0.21

$          0.20

$          0.22

$          0.21

$          0.14

  Average shares outstanding

17,897,593

17,888,818

17,888,182

17,872,378

17,835,088

  Average diluted shares outstanding

18,126,188

18,126,273

18,109,282

18,060,081

17,986,519




PERFORMANCE RATIOS




  Return on average assets

1.06%

1.00%

1.09%

1.04%

0.70%

  Return on average equity (book)

8.61%

8.06%

8.77%

8.19%

5.43%

  Return on average equity (tangible) (1)

9.90%

9.28%

10.12%

9.42%

6.21%

  Net interest margin - fully tax equivalent yield (2)

4.32%

4.38%

4.57%

4.19%

4.28%

  Efficiency ratio (tax equivalent) (3)

60.86%

61.95%

62.81%

62.13%

72.25%

  Adjusted operating efficiency ratio (4)

57.69%

57.80%

55.48%

60.93%

60.81%

  Full-time equivalent employees

285

290

285

278

268




CAPITAL




  Tier 1 leverage ratio

11.44%

11.49%

11.56%

11.58%

11.71%

  Tier 1 risk based ratio

14.95%

14.90%

15.16%

15.30%

15.38%

  Total risk based ratio

16.21%

16.15%

16.42%

16.56%

16.62%

  Book value per share

$        10.13

$        10.01

$        10.04

$        10.00

$        10.23

  Regular cash dividend per share

$          0.10

$          0.10

$          0.09

$          0.09

$          0.08

  Special cash dividend per share

$          0.11

$          0.12

$          0.12

$          0.05

$          0.08




ASSET QUALITY




  Allowance for Loan Losses (ALL)

$      15,394

$      15,917

$      16,802

$      16,303

$      16,312

  Non performing Loans (NPLs) net of government guarantees

$        4,539

$        4,608

$        5,155

$        6,403

$        6,984

  Non performing Assets (NPAs) net of government guarantees

$      16,070

$      20,963

$      21,757

$      24,226

$      24,756

  Net loan charge offs (recoveries) 

$           523

$           885

$         (499)

$               9

$           283

  ALL as a percentage of gross loans

1.51%

1.60%

1.72%

1.70%

1.72%

  ALL as a % NPLs, net of government guarantees

339.15%

345.42%

325.94%

254.62%

233.56%

  Net loan charge offs (recoveries) to average loans

0.21%

0.35%

-0.21%

0.00%

0.13%

  Net NPLs as a percentage of total loans

0.44%

0.46%

0.53%

0.67%

0.74%

  Nonperforming assets as a percentage of total assets

1.09%

1.45%

1.50%

1.69%

1.71%

  Consolidated classified asset ratio(5)

26.82%

29.02%

30.25%

33.82%

32.83%

  Past due as a percentage of total loans(6)

0.20%

0.23%

0.37%

0.11%

0.20%




END OF PERIOD BALANCES




  Total securities and short term deposits

$    345,121

$    349,084

$    363,547

$    360,026

$    385,769

  Total loans net of allowance

$ 1,004,751

$    977,928

$    960,916

$    943,255

$    933,771

  Total earning assets

$ 1,349,872

$ 1,327,012

$ 1,324,463

$ 1,303,281

$ 1,319,540

  Total assets

$ 1,471,591

$ 1,449,726

$ 1,454,878

$ 1,431,074

$ 1,443,658

  Total non-interest bearing deposits

$    340,464

$    366,890

$    379,598

$    341,218

$    314,798

  Core deposits(7)

$    990,933

$    990,315

$ 1,015,651

$    958,741

$    960,743

  Total deposits

$ 1,097,355

$ 1,090,981

$ 1,117,529

$ 1,070,628

$ 1,067,695




AVERAGE BALANCES




  Total securities and short term deposits

$    350,774

$    353,061

$    355,059

$    378,834

$    390,736

  Total loans net of allowance

$    992,655

$    973,857

$    958,372

$    939,252

$    901,081

  Total earning assets

$ 1,343,429

$ 1,326,918

$ 1,313,431

$ 1,318,086

$ 1,291,817

  Total assets

$ 1,461,095

$ 1,446,697

$ 1,435,257

$ 1,438,503

$ 1,411,988

  Total non-interest bearing deposits

$    345,369

$    361,046

$    346,692

$    328,627

$    307,176

  Core deposits(7)

$    992,482

$    987,207

$    972,487

$    966,823

$    943,314

  Total deposits

$ 1,093,904

$ 1,088,470

$ 1,077,895

$ 1,075,626

$ 1,054,253




(1) Tangible equity excludes goodwill and core deposit intangible assets related to acquisitions.

(2) Net interest margin is reported on a tax-equivalent yield basis at a 35% tax rate.

(3) Efficiency ratio is noninterest expense as a percent of net interest income (on a tax equivalent basis) plus noninterest income.

(4) Adjusted operating efficiency ratio is noninterest expense before foreclosed property expense, amortization of intangibles, merger related expenses and goodwill impairments as a percent of net interest income (on a tax equivalent basis) plus noninterest revenues, excluding gains/losses from securities transactions and other than temporary impairment charges.

(5) All loan-related contingent liabilities and loans internally graded substandard or worse, impaired loans (net of government guarantees), adversely classified securities, and other real estate owned, divided by total consolidated Tier 1 capital plus the allowance  for loan losses.

(6) Defined as loans past due more than 30 days and still accruing interest, as a percentage of total loans, net of deferred fees.

(7) Core deposits include demand, interest checking, money market, savings, and local time deposits, including local nonpublic time deposits in excess of $100 thousand.  

SOURCE Pacific Continental Corporation