Pacific Continental Corporation Reports Fourth Quarter and Full Year 2014 Results

EUGENE, Ore., Jan. 21, 2015 /PRNewswire/ -- Pacific Continental Corporation (Nasdaq: PCBK), the holding company of Pacific Continental Bank, today reported financial results for the fourth quarter and full year 2014.

Recent highlights:

• Announced acquisition of Capital Pacific Bank expected to close during first quarter 2015.
• Record net income of $16.0 million in 2014, up 16.53% over prior year.
• Period-end outstanding loans increased $51.2 million or 5.15% over 2013.
• Average core deposits increased $45.6 million or 4.40% during fourth quarter and increased $95.7 million or 9.70% over fourth quarter 2013.
• Annual efficiency ratio improved to 59.41%.
• Declared first quarter 2015 regular quarterly cash dividend of $0.10 per share.
• Announced plans to open new office in downtown Vancouver, Washington.
• Nationally recognized by the American Bankers Association as the National Community Commitment Award winner for its commitment in employee volunteerism.
• Recognized by the Portland Business Journal for the sixth time as one of Oregon's most admired companies.

Net income
Net income for fourth quarter 2014 was $3.6 million or $0.20 per diluted share compared to net income of $3.7 million or $0.20 per diluted share in fourth quarter 2013. Fourth quarter 2014 results included $470 thousand of merger expense related to the pending acquisition of Capital Pacific Bank that reduced net income in the current quarter by approximately $0.02 per share. 

Net income for the full year 2014 was a record $16.0 million or $0.89 per diluted share, compared to net income of $13.8 million or $0.76 per diluted share for 2013.  Excluding the $470 thousand of merger expense, net income for the year was $16.3 million or $0.91 per share.  Return on average assets, average book equity, and average tangible equity were 1.09%, 8.83%, and 10.14%, respectively.  The efficiency ratio for the full year 2014 improved to 59.41%.

"Our record earnings for 2014 reflect the efforts of every Pacific Continental employee and the successful execution of our business strategies," said Roger Busse, chief executive officer. "We are optimistic our results will continue to improve during 2015 on an organic basis, and anticipate our pending acquisition of Capital Pacific Bank in Portland, Oregon will add to our financial performance during the year."

Core deposits
Period-end Company-defined core deposits at December 31, 2014, were $1.11 billion, up $63.7 million from September 30, 2014, and were consistent with typical fourth quarter seasonal patterns. Outstanding core deposits at December 31, 2014 were up $120.5 million or 12.17% over December 31, 2013.  Average core deposits, which removes daily volatility in balances, for the fourth quarter 2014 were $1.08 billion compared to $1.04 billion and $987.2 million for third quarter 2014 and fourth quarter 2013, respectively.  At period-end December 31, 2014, noninterest-bearing demand deposits totaled $407.3 million and represented 36.67% of core deposits.

"We strongly believe that a stable and growing core deposit base provides long-term franchise and shareholder value," said Casey Hogan, chief operating officer. "We continue to provide high levels of personal and technological service to our clients developing long-term deposit relationships to support our lending activities."

Loans
Outstanding gross loans at December 31, 2014, were $1.05 billion, up $10.1 million from September 30, 2014 and up $51.2 million over December 31, 2013. Overall, loan growth during 2014 was primarily attributable to increased commercial and industrial lending and local real estate lending.  Loans to dental professionals were relatively unchanged in fourth quarter 2014 from the previous quarter. During 2014, the Company continued to see expansion of its national dental lending, but experienced a decline in the more seasoned local dental portfolio due to normal principal payments.  At December 31, 2014, loans to dental practitioners totaled $306.4 million and represented 29.29% of the loan portfolio compared to 29.65% and 30.89% of the loan portfolio at September 30, 2014 and December 31, 2013, respectively. 

Credit quality and statistics
For the seventh consecutive quarter, the Company made 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 December 31, 2014, declined to 1.50% compared to 1.60% at December 31, 2013.  The allowance for loan losses as a percentage of nonperforming loans net of guarantees remained very strong at 786.17%. During the fourth quarter 2014, the Company recorded net loan charge offs totaling $85 thousand.  For the full year 2014, net loan charge offs were $280 thousand, compared to net loan charge offs of $678 thousand in 2013.

At December 31, 2014, nonperforming assets, net of government guarantees, totaled $15.4 million, or 1.02% of total assets, compared to $21.0 million or 1.45% of total assets at December 31, 2013. Nonperforming assets at December 31, 2014 were comprised of $2.0 million of nonperforming loans, net of government guarantees, and $13.4 million in other real estate owned. Loans past-due 30-89 days were 0.15% of total loans at December 31, 2014, compared to 0.16% of total loans at September 30, 2014.

Net interest margin
The fourth quarter 2014 net interest margin averaged 4.24%, a decline of 4 basis points and 14 basis points from third quarter 2014 and fourth quarter 2013, respectively. The decline in the linked-quarter net interest margin was due to lower earning asset yields as the yield on both the loan and securities portfolio fell slightly.  The decline in the current quarter net interest margin from last year of 14 basis points was due to nonrecurring interest income recoveries recorded in fourth quarter 2013.  During the fourth quarter 2014, the net accretion of loan fair value marks was $90 thousand and positively impacted the net interest margin by 3 basis points.

Noninterest income and expense
Fourth quarter 2014 noninterest income was $1.3 million, up $121 thousand from third quarter 2014, and down $245 thousand from fourth quarter 2013. Fourth quarter 2014 noninterest income reflected increased merchant processing revenues resulting in the linked-quarter improvement.  The decline in year-over-year noninterest income resulted from the outsourcing of merchant processing in the fourth quarter 2013.  The outsourcing of merchant processing also eliminated related processing expense. 

Noninterest expense in fourth quarter 2014 was up $649 thousand over third quarter 2014, primarily due to the $470 thousand of merger expense recorded during the current quarter.  For the full year 2014, noninterest expense was down $3.0 million or 7.37%.  When the merger related expenses are removed from noninterest expense, $470 thousand related to the Capital Pacific pending acquisition and $1.2 million related to the Century Bank acquisition, noninterest expense declined $2.2 million or 5.64% in 2014 compared to 2013.  The decline in year-over-year noninterest expense was primarily due to lower legal fees, business development costs, and reductions in other real estate expense. 

Capital levels
The Company's capital ratios continued to be well above the minimum for the FDIC's minimum "well-capitalized" designation. At December 31, 2014, the Company's Tier 1 leverage ratio, Tier 1 risk-based capital ratio, and Total risk-based capital ratios were 11.33%, 14.48% and 15.73%, 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.

On May 6, 2014, the Company's board of directors authorized the repurchase of up to five percent or approximately 893,000 of the Company's outstanding shares with purchases to take place over the following 12 months.  During the fourth quarter 2014, the Company did not repurchase any shares.  During 2014, the Company repurchased 267,080 shares at a weighted average price of $13.48 per share. 

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

The following table presents a reconciliation of ending shareholders' equity (GAAP) to ending tangible shareholders' equity (non-GAAP), and total assets (GAAP) and total 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 fourth quarter and full year 2014 on Thursday, January 22, 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" 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 and expectations regarding the timing and financial impact of Pacific Continental's announced acquisition of Capital Pacific and plans to open a new office in Vancouver, Washington 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 concentration 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 PSLRA's safe harbor provisions.

SOURCE Pacific Continental Corporation