Pacific Continental Corporation Reports Third Quarter 2015 Results

EUGENE, Ore., Oct. 14, 2015 /PRNewswire/ -- Pacific Continental Corporation (Nasdaq: PCBK), the holding company of Pacific Continental Bank, today reported financial results for the third quarter 2015.

Recent highlights:

• Achieved quarterly loan growth of $50.9 million.
• Achieved quarterly net income of $5.3 million, or $0.27 per diluted share.
• Achieved quarterly core deposit growth of $20.3 million.
• Achieved a return on average assets of 1.14%.
• Declared fourth quarter 2015 regular quarterly cash dividend of $0.11 per share.
• Efficiency ratio improved further to 55.12%.
• Recognized by Bank Director Magazine in their 2015 Performance scorecard as the 37^th ranked bank in the nation of the 425 banks with assets between $1 billion and $5 billion as per the June 30, 2015 UBPR.

Net income 
Net income for third quarter 2015 was $5.3 million or $0.27 per diluted share compared to net income of $4.4 million or $0.25 per diluted share in third quarter 2014.  Return on average assets, average equity and average tangible equity for third quarter 2015 were 1.14%, 9.91%, and 12.42%, respectively, compared to 1.18%, 9.69%, and 11.13% for third quarter 2014.  In addition, the Company's efficiency ratio improved to 55.12% for third quarter 2015 compared to 57.04% for the same quarter last year.

"We are very pleased with our second consecutive quarter of record earnings and quality loan growth, all fostered by a talented and strategically focused team of community bankers," said Roger Busse, chief executive officer.  "Our commitment to quality growth within our well-defined strategic business niche segments, along with the successful integration and expansion of the Capital Pacific client base, have provided us with solid core growth in earning assets."

Loans  
Growth in outstanding loans during the third quarter 2015 was a record $50.9 million, the single highest quarterly growth, not including acquisitions.  Outstanding gross loans at September 30, 2015, were $1.36 billion.  Organic loan growth during the third 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 $19.2 million from the previous quarter.   At September 30, 2015, loans to dental practitioners totaled $340.3 million and represented 25.08% of the loan portfolio.

"Our loan growth during the past two quarters has been substantial, and we are very pleased to set another record for production this quarter," said Casey Hogan, chief operating officer.  "Our pipeline remains solid as our bankers continue to work hard to develop new relationships and expand existing relationships and we expect strong growth in both loans and deposits as we close out 2015."

Core deposits 
Period-end Company-defined core deposits at September 30, 2015, were $1.47 billion.  Outstanding core deposits were up $20.3 million during the third quarter 2015.  Average core deposits, which removes daily volatility in balances, were $1.48 billion for third quarter 2015 compared to $1.41 billion and $1.04 billion for second quarter 2015 and third 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 September 30, 2015, noninterest-bearing demand deposits totaled $544.0 million and represented 37.12% of core deposits.

Credit quality and statistics 
During the third quarter, the Company made a $625 thousand provision for loan losses, compared to $550 thousand in second quarter 2015. The third 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 September 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 included all credit risk adjustments. At September 30, 2015, the allowance for loan losses as a percentage of nonperforming loans, net of government guarantees, remained strong at 744.60%.  During the third quarter 2015, the Company recorded net loan charge-offs of $26 thousand.  For the first nine months of 2015, the Company recorded $200 thousand in net loan charge-offs.

At September 30, 2015, nonperforming assets, net of government guarantees, totaled $14.1 million, or 0.75% of total assets, compared to $14.9 million, or 0.82% of total assets, and $15.4 million, or 1.02% of total assets, at June 30, 2015 and December 31, 2014, respectively.  During the third quarter 2015, resolutions of nonperforming loans and sales of other real estate owned continued.   Nonperforming assets at September 30, 2015, were comprised of $2.2 million of nonperforming loans, net of government guarantees, and $11.9 million in other real estate owned. Loans past-due 30-89 days were 0.14% of total loans at September 30, 2015, compared to 0.19% of total loans at June 30, 2015 and 0.16% of total loans at September 30, 2014. 

Net interest margin  
The third quarter 2015 net interest margin averaged 4.32%, a decrease of 7 basis points over the second quarter 2015 net interest margin, and a 3 basis point improvement over the third quarter 2014 net interest margin.  The decrease in the linked-quarter net interest margin was primarily due to accretion of acquired loan fair value marks. The net accretion added 13 basis points to our margin for the third quarter 2015, compared to 16 basis points for the second quarter 2015.  During the third quarter 2015, the net accretion of loan fair value marks was $616 thousand, compared to $635 thousand for second quarter 2015.  Accretion of fair value marks related to both the Capital Pacific Bank acquisition completed in March 2015 and the Century Bank acquisition completed in February 2013.   

Noninterest income and expense  
Third quarter 2015 noninterest income was $1.7 million, up $87 thousand from second quarter 2015, and up $517 thousand from third quarter 2014. The increase in linked-quarter noninterest income was primarily due to an increase in service and other account related charges, along with an increase in bankcard revenue.  The year-over-year increase in noninterest income was due to increases in account and other service charges resulting from a combination of the Capital Pacific acquisition and organic growth and an increase in gain on sale of investment securities.    

Noninterest expense in third quarter 2015 was $11.2 million, an increase of $152 thousand from second quarter 2015, primarily due to the $122 thousand in OREO related expenses.  We recorded OREO income of $60 thousand for the second quarter 2015. 

Capital levels 
The Company's consolidated capital ratios continued to be above the minimum thresholds for the FDIC's "well-capitalized" designation. At September 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 9.88%, 11.00%, 11.49%, and 12.58%, respectively.  This is after the application of the Basel III regulatory capital framework.  The FDIC's minimum thresholds for a "well-capitalized" designation 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, 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 third quarter 2015 on Thursday, October 15, 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 approximately $1.9 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 Private Securities Litigation Reform Act (PSLRA)'s safe harbor provisions.