Pacific Continental Corporation Reports Second Quarter 2015 Results

EUGENE, Ore., July 22, 2015 /PRNewswire/ -- Pacific Continental Corporation (Nasdaq: PCBK), the holding company of Pacific Continental Bank, today reported financial results for the second quarter 2015.

Recent highlights:

• Achieved record quarterly loan growth of $50.3 million.
• Achieved record quarterly net income of $5.1 million.
• Achieved quarterly core deposit growth of $27.8 million.
• Declared third quarter 2015 regular quarterly cash dividend of $0.11 per share.
• Recognized as one of Washington's top corporate philanthropists in the Puget Sound Business Journal's 2015 Corporate Citizenship list.
• Recognized by the Seattle Business magazine for the 5^th consecutive year as one of Washington's 100 Best to Work For in 2015 in the Companies Headquartered Outside Washington category.  

Net income

Net income for second quarter 2015 was $5.1 million or $0.26 per diluted share compared to net income of $4.1 million or $0.23 per diluted share in second quarter 2014.  Return on average assets, average equity and average tangible equity for second quarter 2015 were 1.14%, 9.68%, and 12.18%, respectively, compared to 1.13%, 9.16%, and 10.53% for second quarter 2014.  In addition, the Company's efficiency ratio improved to 56.30% for second quarter 2015 compared to 58.38% for the same quarter last year.

"Our second quarter results reflect both the efforts of our bankers to develop new relationships and the successful integration of systems and people from the Capital Pacific acquisition in Portland, Oregon," said Roger Busse, chief executive officer. "We cannot be more pleased with the record financial performance generated this quarter and the blending of two outstanding organizations, including our success in client retention and the business synergies that have been created."

Loans

Growth in outstanding loans during the second quarter 2015 was a record $50.3 million.  Outstanding gross loans at June 30, 2015, were $1.31 billion.  Organic loan growth during the second quarter 2015 was primarily attributable to increased commercial and industrial lending, funding of construction loans, and local real estate lending.  Loan growth during the quarter occurred in all three of the Company's primary markets.  Loans to dental professionals were up $10.0 million from the previous quarter.   At June 30, 2015, loans to dental practitioners totaled $321.1 million and represented 24.58% of the loan portfolio.

"Our bankers continued to effectively develop new relationships and deepen existing relationships by providing our customers with high quality service and solutions to help customers grow their businesses," said Casey Hogan, chief operating officer. "Our pipelines continue to be strong, and we anticipate loan and deposit growth to continue into the second half of 2015."

Core deposits

Period-end Company-defined core deposits at June 30, 2015, were $1.45 billion.  Outstanding core deposits were up $27.8 million during the second quarter 2015.  Average core deposits, which removes daily volatility in balances, were $1.41 billion for second quarter 2015 compared to $1.20 billion and $1.01 billion for first quarter 2015 and second quarter 2014, respectively.  The increase in average core deposits on a linked-quarter and year-over-year basis was due to both organic growth and the March 2015 acquisition of Capital Pacific Bank.  At period-end June 30, 2015, noninterest-bearing demand deposits totaled $531.7 million and represented 36.79% of core deposits.

Credit quality and statistics

During the second quarter, the Company made a $550 thousand provision for loan losses, the first quarterly provision recorded in two years. The second quarter 2015 provision for loan losses was related to the loan growth experienced during the quarter, as credit quality statistics remained strong.  With the acquisition of the Capital Pacific loan portfolio, the allowance for loan losses as a percentage of outstanding loans at June 30, 2015, declined to 1.23%, compared to 1.50% at December 31, 2014.  This was a result of recording the Capital Pacific Bank acquired loans at their fair value, which includes all credit risk adjustment. At June 30, 2015, the allowance for loan losses as a percentage of nonperforming loans, net of government guarantees, remained very strong at 709.17%.  During the second quarter 2015, the Company recorded net loan charge-offs of $261 thousand.  For the first six months of 2015, the Company recorded $174 thousand in net loan charge-offs.

At June 30, 2015, nonperforming assets, net of government guarantees, totaled $14.9 million, or 0.82% of total assets, compared to $16.8 million, or 0.94% of total assets, and $15.4 million, or 1.02% of total assets, at March 31, 2015 and December 31, 2014, respectively.  During the second quarter 2015, resolutions of nonperforming loans and sales of other real estate owned continued.   Nonperforming assets at June 30, 2015, were comprised of $2.2 million of nonperforming loans, net of government guarantees, and $12.7 million in other real estate owned. Loans past-due 30-89 days were 0.19% of total loans at June 30, 2015, compared to 0.35% of total loans at March 31, 2015 and 0.08% at June 30, 2014. 

Net interest margin

The second quarter 2015 net interest margin averaged 4.39%, an increase of 10 basis points over the first quarter 2015 net interest margin, and a 4 basis point improvement over the second quarter 2014 net interest margin.  The improvement in the linked-quarter net interest margin was primarily due to accretion of acquired loan fair value marks, which added 16 basis points to the core margin.  During the second quarter 2015, the net accretion of loan fair value marks was $635 thousand, compared to $369 thousand for first quarter 2015.  Accretion of fair value marks relates to both the Capital Pacific Bank acquisition completed in March 2015 and the Century Bank acquisition completed in February 2013.   

Noninterest income and expense

Second quarter 2015 noninterest income was $1.6 million, up $351 thousand from first quarter 2015, and up $471 thousand over second quarter 2014. The increase in linked-quarter noninterest income was primarily due to the full quarter effect of higher fee income resulting from the acquisition of Capital Pacific Bank and gains on the sale of securities of $139 thousand.  The year-over-year increase in noninterest income was also due primarily to the same factors as the linked-quarter increase. 

Noninterest expense in second quarter 2015 was $11.0 million, down $942 thousand from first quarter 2015, primarily due to the $1.8 million of merger expense recorded during the first quarter 2015.  The second quarter 2015 noninterest expense levels represented the first full quarter of on-going expense related to the Capital Pacific Bank acquisition, including all personnel-related costs. 

Capital levels

The Company's consolidated capital ratios continued to be above the minimum for the FDIC's minimum "well-capitalized" designation. At June 30, 2015, the Company's Tier 1 leverage ratio, Common Equity Tier 1 risk-based capital ratio, Tier 1 risk-based capital ratio, and Total risk-based capital ratios were 10.01%, 11.27%, 11.78%, and 12.88%, respectively.  This is after the application of the Basel III regulatory capital framework.  The FDIC's minimum "well-capitalized" designation ratios for these metrics were 5.00%, 6.50%, 8.00% and 10.00%, respectively.

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 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 second quarter 2015 on Thursday, July 23, 2015, 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 operating subsidiary of Pacific Continental Corporation, delivers highly personalized services through fifteen banking offices in Oregon and Washington. The Bank also operates loan production offices in Tacoma, Washington and Denver, Colorado. Pacific Continental, with $1.8 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 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 PSLRA's safe harbor provisions.

SOURCE Pacific Continental Corporation