Pacific Continental Corporation Reports Second Quarter 2013 Results

EUGENE, Ore., July 17, 2013 /PRNewswire/ -- Pacific Continental Corporation (Nasdaq: PCBK), the holding company of Pacific Continental Bank, today reported financial results for the second quarter 2013.

Recent highlights:

• Net income $3.7 million or $0.21 per diluted share.
• Organic loan growth continued for sixth consecutive quarter.
• Declared third quarter 2013 quarterly cash dividend of $0.09 per share and special cash dividend of $0.12 per share.   
• Total risk-based capital ratio of 16.56%, significantly above the 10.00% minimum for "well-capitalized" designation.
• Successfully converted Century Bank core systems.
• Recognized by the U.S. Small Business Administration (SBA) Portland District Office as a Lending All-Star.
• Recognized by Seattle Business magazine as one of Washington's 100 Best Companies to Work for in 2013 in "Companies Headquartered Outside Washington" category.

Net income
Net income for second quarter 2013 was $3.7 million or $0.21 per diluted share compared to net income of $3.1 million or $0.17 per diluted share in second quarter 2012. Return on average assets, average book equity, and average tangible equity were 1.04%, 8.19%, and 9.42%, respectively, in second quarter 2013, compared to 0.97%, 6.94%, and 7.92% for the same quarter last year.

"We are pleased with the successful integration of our recent acquisition and can report a high level of client retention following conversion of systems," said Hal Brown, chief executive officer. "We also enjoyed our sixth consecutive quarter of organic loan growth, and we believe that our future performance outlook supports the board's decision to reward our shareholders by once again declaring a special cash dividend," added Brown.

Loan activity continues
Outstanding gross loans at June 30, 2013, were $960.4 million, up $9.6 million over the prior quarter end and up $89.2 million from year-end 2012. Excluding loans acquired in the Century Bank transaction, organic loan growth for the first six months of 2013 was $35.6 million and represents an annualized growth rate of 8.20%.  Loan growth for the second quarter was primarily centered in permanent real estate lending and residential construction.  The Bank continued to expand its lending to health care professionals; at June 30, 2013, loans to dental practitioners totaled $290.5 million representing 30.25% of the total loan portfolio.  Outstanding loans to dental professionals grew 7.30% during the first six months of 2013 and 24.69% over June 30, 2012.  National dental lending at June 30, 2013, totaled $102.3 million, up $12.1 million during the second quarter and up $41.8 million over June 30, 2012.

"We've now seen loan growth for the sixth consecutive quarter which reflects the good work of our bankers as well as the improving economic conditions in the Pacific Northwest," said Roger Busse, president and chief operating officer. "Both our local and national pipelines are strong, suggesting organic loan growth should  continue throughout 2013," added Busse.

Capital levels
The Company's capital ratios continue to be well above the minimum FDIC "well-capitalized" designated levels. At June 30, 2013, the Company's Tier 1 leverage ratio, Tier 1 risk-based capital ratio, and Total risk-based capital ratios were 11.58%, 15.30% and 16.56%, respectively, as compared to 12.70%, 17.73% and 18.99% at June 30, 2012, reflecting incrementally improved capital leverage. The FDIC's minimum "well-capitalized" ratios are 5.00%, 6.00% and 10.00%, respectively.

In February 2013, the Company's board of directors authorized a stock repurchase plan. The plan is authorized to repurchase up to 892,000 shares or five percent of the Company's outstanding shares. The plan commenced on April 1, 2013, with the purchases to occur over a 12-month period. No shares were repurchased during the first or second quarter of 2013.

Classified assets, provisioning and loan statistics
At June 30, 2013, classified assets totaled $60.6 million and represented 33.82% of regulatory capital, compared to $56.1 million and 31.18% of regulatory capital at December 31, 2012.  The increase in classified assets was primarily due to classified loans acquired through the Century Bank acquisition, net of the fair value credit adjustment, totaling approximately $5.8 million.

Nonperforming assets, a subcategory of classified assets, totaled $24.2 million at June 30, 2013, or 1.69% of total assets, a decrease from December 31, 2012, and June 30, 2012, ratios of 1.92% and 2.30%, respectively. Nonperforming assets were comprised of $6.4 million of nonperforming loans, net of government guarantees, and $17.8 million in other real estate owned.

Loans past-due 30-89 days were 0.11% of total loans at June 30, 2013, compared to 0.30% at December 31, 2012. This is the sixteenth consecutive quarter in which this ratio was near or below one percent.

The dental loan portfolio continued to perform well with no loans past-due in the 30-89 days category. Classified dental loans totaled 2.21% of total dental loans with net charge offs of $397 thousand for the first half of 2013. National dental lending statistics continued to be very strong with no loans past due, and 0.89% of the national dental lending portfolio considered classified. 

"Our expectation is that we will see further reductions in the level of classified and problem assets throughout 2013 based on current pending resolutions," said Casey Hogan, executive vice president and chief credit officer.

The Company made no provision for loan losses during the second quarter 2013, compared to $250 thousand in provision for first quarter 2013 and a provision of $600 thousand in second quarter 2012.  During the second quarter 2013, net loan charge offs totaled only $9 thousand.  For the first six months of 2013, net loan charge offs totaled $293 thousand, compared to $666 thousand for the same period last year.

The allowance for loan losses as a percentage of outstanding loans at June 30, 2013, was 1.70% compared to 1.88% at December 31, 2012, and 1.96% at June 30, 2012. The decrease was partially attributable to the Century Bank acquired loans included at their fair value, net of credit risk adjustments. The allowance for loan losses as a percentage of total nonperforming loans, net of government guarantees, has improved to 254.62% at June 30, 2013, from the 67.70% reported one year ago, reflecting both a reduction in nonperforming loans and an overall general improvement in the quality of the loan portfolio.

Core deposit growth slows
Period-end Company-defined core deposits at June 30, 2013, were $958.7 million, relatively unchanged from the prior quarter end. This is a typical seasonal pattern where outstanding core deposits are relatively flat or decline during the first six months of the year, with growth historically occurring during the last half of the year. Average core deposits, a calculation that eliminates daily volatility of outstanding balances, for the second quarter 2013 were $966.8 million, up $23.5 million over the prior quarter end. A portion of the increase was attributable to the acquisition of Century Bank core deposits. At period-end June 30, 2013, noninterest-bearing demand deposits totaled $341.2 million and represented 35.59% of core deposits.

Net interest margin
The second quarter 2013 net interest margin, on a tax equivalent basis, was 4.20%, representing a linked-quarter decline of 9 basis points from first quarter 2013, and a decline of 11 basis points from second quarter 2012. The decline in the linked-quarter net interest margin was attributable to a 10 basis point reduction on earning assets, while the cost of interest-bearing funds was unchanged.  The accretion of the Century Bank loan fair value market adjustment during the second quarter 2013 positively impacted the net interest margin by 11 basis points in second quarter 2013 compared to 7 basis points in first quarter 2013.

Noninterest income and expense
Second quarter noninterest income was $1.5 million, up $42 thousand over second quarter 2012. On a linked-quarter basis, second quarter 2013 noninterest income was up $255 thousand over first quarter 2013.  The linked-quarter increase in noninterest income was due to seasonal improvement in merchant bankcard revenues, increased service charges attributable to the accounts acquired in the Century Bank acquisition and approximately $100 thousand of rental income received on other real estate owned. 

Noninterest expense in second quarter 2013 was up $743 thousand over second quarter 2012, with increases in compensation, premises, data processing and business development, partially offset by a reduction in FDIC assessments and other real estate expense.  When first quarter merger-related expenses of $1.2 million are excluded from first quarter 2013, linked-quarter noninterest expense was relatively unchanged at $9.5 million. 

The second quarter efficiency ratio was 63.17% compared to 62.64% for second quarter 2012. For the first six months of 2013, excluding merger expenses, the efficiency ratio was 64.07% compared to 62.32% for the same period in 2012. 

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 second quarter 2013 on Thursday, July 18, 2013, 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 a loan production office in Tacoma, Washington. Pacific Continental, with $1.4 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 strategy, future classified and problem asset migration and credit quality trends 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; 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.