Pacific Continental Reports First Quarter 2010 Results

EUGENE, Ore., April 14 /PRNewswire-FirstCall/ -- Pacific Continental Corporation (Nasdaq: PCBK), the bank holding company for Pacific Continental Bank, today reported financial results for the first quarter ended March 31, 2010.

"Net income improved significantly during the quarter which suggests a return to full-year profitability in 2010," said Hal Brown, chief executive officer. "We are cautiously optimistic that we have turned the corner on this persistent and deep credit cycle as evidenced by both lower loan loss provisioning and recoveries on several previously charged off loans," added Brown.

Net income for the first quarter 2010 was $1.1 million, compared to net income of $2.9 million for the first quarter 2009. Earnings per diluted share in first quarter 2010 were $0.06, compared to $0.23 in first quarter 2009.

Improved capital levels

During the first quarter 2010, the Company's capital levels continued to improve through retained earnings. At March 31, 2010, the Company's Tier 1 leverage ratio, Tier 1 risk-based capital ratio, and Total risk-based capital ratio were 13.03%, 14.97%, 16.22% and compared to 13.66%, 14.38% and 15.63% at December 31, 2009. All three ratios at March 31, 2010, significantly exceed the FDIC's minimum well-capitalized designation levels of 5.00%, 6.00%, and 10.00%, respectively.

Core earnings and net interest margin

Core earnings, earnings before loan loss provisions and taxes, were $5.9 million in first quarter 2010 compared to $6.1 million in first quarter 2009. The decline in core earnings resulted from operating expense growth exceeding revenue growth. Operating revenue, which consists of net interest income plus noninterest income, was $14.2 million for first quarter 2010, down $18 thousand from first quarter 2009 while noninterest expenses increased $163 thousand from that of a year ago.

Noninterest expense for the first quarter 2010 was $8.2 million, an increase of 2.0% over first quarter 2009. The increase in year-over-year expenses was primarily the result of increased FDIC assessments, up $206 thousand or 77%, and increased professional services, up $166 thousand or 51%. The increase in professional services was primarily due to legal fees related to problem loan collections. Increases in these categories were partially offset by declines in personnel expense, equipment expense, and advertising expense. On a linked quarter basis, and as projected in the Company's fourth quarter Conference Call, first quarter 2010 noninterest expense was up $760 thousand over fourth quarter 2009 as accruals for various incentive and benefit programs returned to more normal levels, combined with an increase in FDIC assessments.

The net interest margin for the current quarter was 4.86% compared to 5.28% for the same quarter last year. Presentation of the net interest margin was revised to eliminate FHLB stock of approximately $10.7 million from earning assets and increased the previously reported first quarter 2009 net interest margin by 5 basis points. A decline in the net interest margin had been expected due to a shrinking loan portfolio and the planned increase in lower yielding securities. However, the first quarter decline was more than anticipated as the net interest margin was negatively impacted by 15 basis points due to the reversal of $414 thousand in interest income for loans placed on nonaccrual status during the quarter.

Core deposit growth continues while loan demand remains soft

During the first quarter 2010, the Company continued to experience core deposit growth. At March 31, 2010, period-end core deposits totaled $775.3 million, up $3.3 million over period-end core deposits at December 31, 2009. March 31, 2010, outstanding core deposits were up $107.8 million or 16.2% over March 31, 2009, outstanding core deposits. Quarterly average core deposit figures, a measure which reduces daily deposit volatility, show similar results with first quarter 2010 average core deposits of $777.1 million, an increase of $13.0 million over the fourth quarter 2009 average and an increase of $133.2 million over the first quarter 2009 average. The growth rate in first quarter 2010 core deposits abated from levels experienced during 2009, and is more in line with historical growth rates for this period. The Company continues to show significant opportunities in all three of its primary markets for new core deposit clients.

Loan activity continues to reflect the weak economic conditions and together with the planned contraction in the construction and land development portfolios resulted in a decline in period-end gross loans by approximately $18.0 million from the end of the fourth quarter 2009 and $38.5 million from March 31, 2009. As had been planned the Bank's construction and land development portfolios have declined $77.9 million over the past year and now represent 16.4% of total gross loans compared to 23.9% of total gross loans at March 31, 2009. This decline in construction financing was partially offset by increases in the permanent real estate and commercial loan portfolios primarily as they relate to dental and small business financing. Conversely, the Company's securities portfolio grew by $105.4 million during the period from March 31, 2009 to March 31, 2010.

Non-performing assets, provisioning, and loan statistics

During the first quarter the Bank saw successful resolution of a number of credits as well as recording a $2.2 million recovery. Non-performing assets ("NPAs") at March 31, 2010, totaled $54.5 million, an increase of $17.9 million from December 31, 2009. NPAs represent 4.59% of total assets at March 31, 2009 compared to 3.05% at the end of the prior quarter. The increase in non-performing assets was anticipated as the agreed to resolutions on many NPAs are not expected to be completed until the second or early third quarters. The first quarter increase in NPAs was centered in five credits totaling $14.9 million, four of which have resolutions in place and will close in the early third to fourth quarters. These reductions along with other pending resolutions suggest a declining NPA trend through year end.

"I would characterize the increase in NPAs as temporary and now cresting. The increase in first quarter NPAs was expected and is primarily centered in five credits, four of which have pending resolutions and one is now sold," said Roger Busse, president and chief operating officer. "The issue is timing as these resolutions, combined with those already anticipated in the next two quarters, will result in a measurable reduction in non-performers suggesting an improving trend throughout the remainder of the year," added Busse.  

The Company's first quarter 2010 provision for loan losses remained elevated, but lower than the provisions made in the prior three quarters. The first quarter 2010 provision for loan losses was $4.3 million, compared to $7.0 million, $8.3 million, and $19.2 million in the fourth, third, and second quarters of 2009, respectively. During the first quarter 2010, the Bank recognized net loan charge offs of $2.8 million, down significantly from the $12.0 million recorded during fourth quarter 2009. The Company continued to maintain a historically high unallocated allowance for loan losses; and at March 31, 2010, the unallocated portion of the allowance was 11.8%. The percentage of unallocated allowance was deemed prudent by management considering future uncertainty and current economic factors. The allowance for loan losses as a percentage of outstanding loans at March 31, 2010, was 1.60%, compared to 1.42% and 1.16% at December 31, 2009 and March 31, 2009, respectively.

First quarter highlights:

• Achieved third consecutive quarter of profitability
• Continued decline in the level of the provision for loan losses
• Growth in core deposits continued
• Recognized by Oregon Business Magazine for the tenth consecutive year as one of the 100 Best Companies to Work in Oregon and rated as the highest-ranking financial institution in the large company category.
• Total risk-based capital ratio of 16.22%, significantly above the 10.0% minimum for "well-capitalized" designation.

Conference Call and Audio Webcast:

Management will conduct a live conference call and audio Webcast for interested parties relating to its results for the first quarter 2010, on Thursday, April 15, 2010, at 2:00 p.m. Eastern Time / 11:00 a.m. Pacific Time. To listen to the conference call, interested parties should call (866) 292-1418. The Webcast will be available via Pacific Continental's Web site (http://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 will be available within twenty-four hours following the live Webcast and archived for one year on the Pacific Continental Website. Any questions regarding the conference call presentation or Webcast should be directed to Maecey Castle, vice president and director of corporate communications, 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. Pacific Continental, with $1.1 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, healthcare and professional service providers, and nonprofit organizations.

Since its founding in 1972 Pacific Continental Bank has been honored with numerous awards from business and community organizations: in March 2010, Oregon Business magazine recognized Pacific Continental as the top-ranked financial institution to work for in the publication's large company category, making it the tenth consecutive year Pacific Continental has been recognized as one of the 100 Best Companies to work for in Oregon; in June 2009, for the ninth consecutive year, The Seattle Times named Pacific Continental to its "Northwest 100" ranking of top publicly rated companies in the Pacific Northwest; and in December 2008, for the second consecutive year, the Portland Business Journal recognized Pacific Continental Bank as One of the Ten Most Admired Companies in Oregon.

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. Supplementary information about Pacific Continental can be found online at www.therightbank.com.

Forward-Looking Statement Safe Harbor

This release contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"), such as forward-looking statements regarding profitability, core deposit growth opportunities, and nonperforming asset trends. Such forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected, including but not limited to the following: the high concentration of loans of the company's banking subsidiary in commercial and residential real estate lending; 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 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; increased competition among financial institutions; fluctuating interest rate environments; a tightening of available credit and other risks and uncertainties discussed in the sections titled "Risk Factors", "Business" and "Management Discussion and Analysis of Financial Condition and Results of Operations", as applicable, from Pacific Continental's most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q. Readers are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date on which they are made and reflect management's current estimates, projections, expectations and beliefs. Pacific Continental Corporation undertakes no obligation to publicly revise or update the forward-looking statements to reflect 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