Pacific Continental Corporation Reports First Quarter Results

EUGENE, Ore., April 20, 2016 /PRNewswire/ -- Pacific Continental Corporation (Nasdaq: PCBK), the holding company of Pacific Continental Bank, today reported financial results for the first quarter ended March 31, 2016.

First Quarter highlights:

• Net income of $5.5 million, or $0.28 per diluted share.
• Return on average assets of 1.12%.
• Return on average tangible equity of 12.35%.
• Tax-equivalent net interest margin of 4.27%.
• Efficiency ratio of 57.52%.
• Declared second quarter 2016 regular quarterly cash dividend of $0.11 per share.
• Recognized by S&P Global Market Intelligence as the 19^th ranked top-performing bank for 2015 for all banks with assets between $1 billion and $10 billion.
• Recognized by Raymond James for the second consecutive year as a "Bankers Cup" award winner, representing the top 10 percent of community banks nationally.

Net Income Highlights
Net income for first quarter 2016 was $5.5 million or $0.28 per diluted share compared to net income of $5.5 million or $0.28 per diluted share in the fourth quarter 2015.  Annualized returns on average assets, average equity and average tangible equity for first quarter 2016 were 1.12%, 9.92%, and 12.35%, respectively, compared to 1.16%, 10.10%, and 12.60% for fourth quarter 2015.  In addition, the Company's efficiency ratio was 57.52% for first quarter 2016 compared to 55.50% for the fourth quarter 2015.

"We are very pleased with first quarter results, as we remain focused on our niche community bank strategy and quality growth to achieve superior performance," said Roger Busse, chief executive officer.  "Our dedicated team of community bankers continues to set the bar high in their execution of industry-leading client service and relationship banking."

First quarter 2016 noninterest income was $1.8 million, down $201 thousand from fourth quarter 2015.  The decrease in linked-quarter noninterest income was primarily due to gains on sales of securities, which were $100 thousand lower than the fourth quarter 2015.  Additionally, bankcard income was down by $52 thousand from the fourth quarter, primarily due to one-time annual fees that are charged each December.  

Noninterest expense in first quarter 2016 was $12.0 million, an increase of $301 thousand from fourth quarter 2015.  The increase primarily related to the salaries and benefits category, which increased by $281 thousand over the period quarter.  The increase was due to above average claim activity experienced during the quarter, which required $300 thousand in additional reserves as the Bank's insurance coverage is partially self-funded.  Payroll taxes during first quarter were also $152 thousand higher than fourth quarter 2015, which is typical as the FICA limits reset at the beginning of each year.  Other than legal and professional fees, all other categories remained relatively flat quarter over quarter.  Legal and professional fee expense was up by $73 thousand, over fourth quarter 2015, primarily due to year-end related audits and reporting.

Net Interest Margin
The first quarter 2016 net interest margin averaged 4.27%, a decrease of eight basis points over fourth quarter 2015 net interest margin of 4.35%.  The primary cause of the decrease in the linked-quarter net interest margin was the fluctuation in accretion of acquired loan fair value discounts. Accretion income for the first quarter 2016 was $409 thousand compared to $671 thousand for the fourth quarter 2015.  Additionally, three brokered time deposits totaling $5.5 million were called which created $61 thousand in expense related to the accelerated amortization of the origination fees related to the time deposits.  These brokered time deposits were replaced with lower cost brokered time deposits.  The interest savings on the replacements should recoup the accelerated fee expenses during 2016 and save the Bank approximately $288 thousand over the five-year term.  The accelerated brokered time deposit fees decreased net interest margin by 0.01%.  As outlined below, the core margin was 4.17% for the first quarter 2016 compared to 4.19% for the fourth quarter 2015. 

Balance Sheet Highlights
Loans, net of deferred fees, grew by $25.3 million in first quarter 2016, and totaled $1.43 billion at March 31, 2016.  First quarter loan growth came primarily from the owner and non-owner occupied commercial real estate, and commercial loan categories.  Net loan growth occurred in the Portland, Seattle and National Health-care markets, with a slight contraction in the Eugene market due to normal amortizations outpacing new loan production.  At March 31, 2016, loans to dental practitioners increased to $350.9 million and represented 24.52% of the loan portfolio. 

Period-end Company-defined core deposits at March 31, 2016, were $1.63 billion.  Core deposits were up $100.0 million during the first quarter 2016, representing an annualized increase of 26.22%.  At March 31, 2016, noninterest-bearing demand deposits totaled $675.3 million and represented 41.33% of core deposits.  Cost of funds on core deposits was 0.26% for the first quarter 2016, unchanged from fourth quarter 2015.

"Our solid loan growth, coupled with outstanding core deposit growth highlighted the Bank's continued quarterly performance," said Casey Hogan, chief operating officer.  "Our markets continued to grow through new business opportunities, along with the expansion of existing client relationships.  We were extremely pleased with our level of deposit growth, especially given that we typically experience flat growth or even some contraction during the first quarter."

Asset Quality
During the first quarter, the Company made a $245 thousand provision for loan losses compared to $520 thousand in the fourth quarter 2015. First quarter 2016 provision for loan losses was primarily related to the loan growth experienced during the quarter, as credit quality remained strong.  As of March 31, 2016, the allowance for loan losses as a percentage of outstanding loans was 1.23%, unchanged from December 31, 2015.  At March 31, 2016, the allowance for loan losses as a percentage of nonperforming loans, net of government guarantees, remained strong at 666.01% compared to 636.30% at December 31, 2015. During the first quarter 2016, the Company recorded net loan recoveries of $50 thousand. 

At March 31, 2016, nonperforming assets, net of government guarantees, totaled $14.4 million, or 0.73% of total assets, compared to $14.5 million, or 0.76% of total assets at December 31, 2015. Nonperforming assets at March 31, 2016, were comprised of $2.7 million of nonperforming loans, net of government guarantees of $2.7 million, and $11.7 million in other real estate owned. Loans past-due 30-89 days were 0.07% of total loans at March 31, 2016, compared to 0.03% of total loans at December 31, 2015. 

Capital Adequacy
The Company's consolidated capital ratios continued to be above the minimum thresholds for the FDIC's "well-capitalized" designation. At March 31, 2016, the Company's capital ratios were as follows:

Non-GAAP Financial Measures
In addition to results presented in accordance with generally accepted accounting principles (GAAP), this press release contains certain non-GAAP financial measures. The Company believes that such non-GAAP financial measures provide investors with information useful in understanding the Company's financial performance; however, readers of this release are urged to review these non-GAAP financial measures in conjunction with the GAAP results as reported.

Financial measures such as tangible shareholders' equity, and tangible assets, are considered non-GAAP measures. Management believes including non-GAAP measures along with GAAP measures provides investors with a broader understanding of capital adequacy, funding sources and revenue trends. Tangible shareholders' equity is calculated as total shareholders' equity less goodwill and core deposit intangible assets. Additionally, tangible assets are calculated as total assets less goodwill and core deposit intangible assets.

The following table presents a reconciliation of ending total shareholders' equity (GAAP) to ending tangible shareholders' equity (non-GAAP), and total assets (GAAP) to total tangible assets (non-GAAP):

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 2016 on Thursday, April 21, 2016, at 11:00 a.m. Pacific / 2:00 p.m. Eastern. To listen to the conference call, interested parties should call: (855) 215-7498 Passcode: 1554389. 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 wholly-owned 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 approximately $2.0 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" 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 or deposit growth, capital position, liquidity, credit quality, credit quality trends, competition, securities portfolio, anticipated interest savings from brokered time deposits, and economic conditions generally and the impact and effects of recent acquisitions. 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 in loans to dental professionals; adverse economic trends in the United States and the markets we serve affecting the Bank's borrower base; 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 the PSLRA's safe harbor provisions.