Pacific Continental Corporation Reports Second Quarter 2014 Results

EUGENE, Ore., July 23, 2014 /PRNewswire/ -- Pacific Continental Corporation (Nasdaq: PCBK), the holding company of Pacific Continental Bank, today reported financial results for the second quarter 2014.

Recent highlights:

• Net income of $4.1 million for the quarter, up 11.39% over second quarter last year.
• Announced share repurchase plan and repurchased 134,722 shares during the second quarter 2014.
• Loan growth continued for the twelfth consecutive quarter.
• Efficiency ratio below 60.00%.
• Declared third quarter 2014 regular quarterly cash dividend of $0.10 per share and a special cash dividend of $0.03 per share.
• Total risk-based capital ratio of 15.73%, well above the 10.00% minimum for "well-capitalized" designation.
• Recognized by the Seattle Business magazine as one of Washington's 100 Best Companies to Work for in 2014.

Net income

Net income for second quarter 2014 was $4.1 million or $0.23 per diluted share compared to net income of $3.7 million or $0.21 per diluted share in second quarter 2013. Return on average assets, average book equity, and average tangible equity were 1.13%, 9.16%, and 10.53%, respectively, in second quarter 2014, compared to 1.04%, 8.19%, and 9.42% in second quarter 2013.  The Company's efficiency ratio was 58.38% for the second quarter 2014, compared to 62.12% in second quarter 2013.

"We are certainly pleased with our second quarter performance and our active management of capital, which have provided solid returns to our shareholders," said Hal Brown, chief executive officer. "Our performance for the quarter is indicative of the significant effort we have made in the last year to improve our processes and efficiency, resulting in improved revenues and thoughtful management of our costs."

Capital levels

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 shares with purchases to take place over the next 12 months.  During the second quarter 2014, the Company repurchased 134,722 shares at a weighted average price of $13.36 per share.  Share repurchases and cash dividend payments to shareholders combined to maintain capital levels for second quarter 2014 relatively unchanged from December 31, 2011 levels.

The Company's capital ratios continue to be well above the minimum for the FDIC's minimum "well-capitalized"designation. At June 30, 2014, the Company's Tier 1 leverage ratio, Tier 1 risk-based capital ratio, and Total risk-based capital ratios were 11.26%, 14.48% and 15.73%, respectively, as compared to 11.44%, 14.95% and 16.21% at March 31, 2014. The FDIC's minimum "well-capitalized" designation ratios for these metrics are 5.00%, 6.00% and 10.00%, respectively.

Loan activity continues

Outstanding gross loans at June 30, 2014, were $1.03 billion, up $36.4 million from year-end 2013 and up $70.7 million over June 30, 2013. Loan growth for the first half of 2014 represents an annualized growth rate of 7.37%.  Loan growth during 2014 was primarily attributable to local real estate lending.  During the second quarter the Company experienced a slight contraction in total dental loans due to increased competition for new loans, early pay offs, and amortization of the portfolio. At June 30, 2014, loans to dental practitioners totaled $302.8 million and represented 29.37% of the loan portfolio compared to 29.94% and 30.25% of the loan portfolio at March 31, 2014 and June 30, 2013, respectively.  National dental loans at June 30, 2014, were $133.7 million, unchanged from the prior quarter-end and up $31.4 million over June 30, 2013.

"The success of our organic loan growth was driven by our well-established business model and dedication to improving efficiencies," said Roger Busse, president and chief operating officer. "While competition has intensified in healthcare lending, we continue to expand lending in our local markets where economic conditions continue to improve providing more opportunities for new relationship development."

Core deposits

Period-end Company-defined core deposits at June 30, 2014, were $1.03 billion, up $35.6 million from March 31, 2014, and were consistent with typical second quarter seasonal patterns. Average core deposits, which removes daily volatility in balances, for the second quarter 2014 were $1.01 billion compared to $992.5 million and $966.8 million for first quarter 2014 and second quarter 2013, respectively.  At period-end June 30, 2014, noninterest-bearing demand deposits totaled $397.9 million and represented 38.77% of core deposits.

Credit quality and statistics

The Company had no provision for loan losses during the second quarter 2014.  This was the fifth 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 June 30, 2014, declined to 1.52% compared to 1.70% at June 30, 2013.  The allowance for loan losses as a percentage of nonperforming loans net of guarantees remained strong at 340.32%, further reflecting the quality of the loan portfolio. During the second quarter 2014, the Company recorded net loan recoveries totaling $281 thousand.  Through June 30, 2014, net loan charge offs were $242 thousand compared to net loan charge offs of $292 thousand for the same period in 2013.

At June 30, 2014, nonperforming assets, net of government guarantees, totaled $16.1 million, or 1.08% of total assets, a decrease from March 31, 2014, and June 30, 2013, ratios of 1.09% and 1.69%, respectively. Nonperforming assets were comprised of $4.6 million of nonperforming loans, net of government guarantees, and $11.5 million in other real estate owned. Classified assets at June 30, 2014 totaled $44.1 million, a decrease of $4.0 million from the end of the prior quarter and a decline of $7.9 million from December 31, 2013. Loans past-due 30-89 days were 0.08% of total loans at June 30, 2014, compared to 0.20% of total loans at March 31, 2014.

"We are pleased with the continued improvement of the overall credit quality of our loan portfolio," said Casey Hogan, executive vice president and chief credit officer. "Due to the improving economic conditions and our diligence to work closely with our borrowers, we have been able to upgrade a number of previously classified loans."

Net interest margin

The second quarter 2014 net interest margin averaged 4.34%, an improvement of 2 basis points over first quarter 2014, and a 15 basis point improvement over second quarter 2013. The improvement and stabilization of the net interest margin was attributable to higher yields on the securities portfolio and the change in the earning asset mix as higher yielding loans are proportionally a greater percentage of total earning assets.  During the second quarter 2014, the accretion of loan fair value marks was $116 thousand and positively impacted the net interest margin by 3 basis points.

Noninterest income and expense

Second quarter noninterest income was $1.2 million, down $167 thousand from first quarter 2014, and down $379 thousand from second quarter 2013. Second quarter 2014 results included a loss on the sale of securities of $100 thousand resulting from the disposition of a private-label mortgage-backed security.  Second quarter 2014 noninterest income also reflected 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 second quarter 2014 was down $242 thousand and $239 thousand from first quarter 2014 and second quarter 2013, respectively. The decrease in noninterest expense on a linked-quarter basis was primarily due to lower legal and professional fees.  The decline in year-over-year noninterest expense was also due to lower legal and professional fees and reductions in the other expense category.  Year-to-date noninterest expense of $18.8 million was down $250 thousand from year-to-date 2013, when merger related expense of $1.2 million was excluded from 2013 results. 

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 2014 on Thursday, July 24, 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.

 

SOURCE Pacific Continental Corporation