Pacific Continental Reports First Quarter 2011 Results

EUGENE, Ore., April 13, 2011 /PRNewswire/ -- Pacific Continental Corporation (Nasdaq: PCBK), the holding company of Pacific Continental Bank, today reported financial results for the first quarter ended March 31, 2011.

Recent highlights:

• Improved net income on both a year-over-year and linked-quarter basis and seventh consecutive quarter of profitability.
• Achieved eight percent year-over-year growth in the commercial loan portfolio.
• Loan loss provisioning expense reduced for the seventh consecutive quarter.
• Total risk-based capital ratio of 18.18%, significantly above the 10.0% minimum for "well-capitalized" designation.
• Recognized for the eleventh consecutive year by the Oregon Business magazine as one of the 100 Best Companies to Work for in Oregon.
• Announced plans to open Business Banking Center in Tacoma, Washington.

"We are continuing to make progress in this challenging economic environment in improving our bottom line income and in reducing our credit risk exposure," said Hal Brown, chief executive officer. "We are particularly pleased with the growth in our commercial loan portfolio which demonstrates our commitment to meet the credit needs of businesses in our communities and suggests further improvement in revenues and profitability," added Brown.

Net income for the first quarter 2011 was $1.4 million, up 31% over net income of $1.1 million for the first quarter 2010; and on a linked-quarter basis, net income was up $258 thousand from the fourth quarter 2010. Earnings per diluted share were $0.08 for the first quarter 2011, compared to $0.06 and $0.07 for the first and fourth quarters of 2010, respectively.

Non-performing assets, provisioning and loan statistics

Non-performing assets ("NPAs") at March 31, 2011, totaled $44.1 million, or 3.67% of total assets, a decrease of $2.1 million for the quarter from $46.3 million, or 3.82% of total assets, at December 31, 2010.

The Company's first quarter 2011 provision for loan losses was $2.2 million, down $1.1 million and $2.1 million from fourth and first quarters 2010, respectively. While the provision remains elevated when compared to pre-recession periods, it has generally been trending down over the past seven quarters. During the first quarter of 2011, the Company recognized net loan charge-offs of $3.5 million, down from the $4.4 million recorded in the fourth quarter 2010. The allowance for loan losses as a percentage of outstanding loans net of loans held-for-sale at March 31, 2011, was 1.81%, compared to 1.93% and 1.60% at December 31, 2010, and March 31, 2010, respectively.

"While we had only a modest reduction in our nonperforming assets in the quarter due to delays in the final disposition of certain problem assets, we were successful in several important negotiations and now have a number of pending resolutions in the queue," said Roger Busse, president and chief operating officer. "We are optimistic reductions in problem assets will accelerate as the year progresses," added Busse.

Property appraisals continue to reflect a weakness in the Northwest real estate markets and during the quarter the Company recorded other real estate expense of $955 thousand, of which $843 thousand represented valuation charges on foreclosed real estate.

Core deposit growth continues and commercial loan activity strengthens

During the first quarter 2011, the Company continued to experience growth in its company-defined core deposit base. Quarterly average core deposit figures, a measure which reduces daily deposit volatility, showed first quarter 2011 average core deposits of $877.2 million, an increase of $6.9 million over the fourth quarter 2010 average. First quarter 2011 average core deposits were up $100.1 million or 13% over first quarter 2010 with average noninterest bearing demand deposits increasing 27% during the same period.

Outstanding commercial loans increased $10.8 million or 4% and $18.5 million or 8% over outstanding loans at December 31, 2010, and March 31, 2010, respectively. This growth continues to validate the Company's business model and focused strategy on meeting the credit needs of community-based businesses, nonprofit organizations, and professional service providers. However, weak real estate markets in the Northwest and the planned contraction in the construction and land development portfolios led to a net decline in period-end gross loans. Outstanding loans at March 31, 2011, were $842.3 million, down $14.7 million from the end of fourth quarter 2010 and down $85.4 million from that of a year ago. Planned contraction in the Company's construction and land development portfolio continued during the first quarter 2011 declining $8.7 million at March 31, 2011, from year end 2010 and have declined $77.7 million over the past year. Construction and land development loans at March 31, 2011, were $74.8 million and represented 8.9% of total outstanding loans.

Capital levels

The Company's capital ratios continue to be well above the minimum FDIC well-capitalized designated levels. At March 31, 2011, the Company's Tier 1 leverage ratio, Tier 1 risk-based capital ratio, and Total risk-based capital ratio were 13.42%, 16.93% and 18.18% as compared to 13.38%, 15.86% and 17.10% at December 31, 2010. The FDIC's minimum well-capitalized designation ratios are 5.00%, 6.00% and 10.00%, respectively.

Net interest margin

The net interest margin for the current quarter was 4.66%, up 6 basis points from the 4.60% margin reported for fourth quarter 2010, and down 20 basis points from the 4.86% margin reported for first quarter 2010. The first quarter 2011 net interest margin benefitted from a reduction in interest reversed on loans placed on nonaccrual status when compared to the prior quarter, combined with a decline in the rate paid on $8.2 million of trust preferred securities from 6.25% in fourth quarter 2010 to 1.65% in first quarter 2011. The growth in core deposits together with the net contraction in the loan portfolio continued to result in additions to the investment portfolio which at March 31, 2011, represented 22.5% of total assets versus 15.0% of total assets one year ago. This increase in investment portfolio, which has significantly lower yields than loans, as a percentage of total earning assets, is the primary reason for the decline in the net interest margin in first quarter 2011 when compared to first quarter 2010. Looking forward, loan pipelines in all three markets are more robust suggesting a stable or increasing net interest margin.

Noninterest income and expense

All categories of noninterest income in first quarter 2011 were up over first quarter 2010 with the exception of a small $9 thousand loss on the sale of securities. Merchant bankcard fees continued to show strong year-over-year growth as evidenced by the 19% increase in this category. The increase in bankcard fees is reflective of improving volumes and increased margins. On a linked-quarter basis, first quarter 2011 noninterest income was down $340 thousand, most of which was attributable to seasonal declines in merchant bankcard revenues and one-time revenues of $164 thousand in fourth quarter from other real estate rental income and fees earned on negotiated other real estate dispositions.

Noninterest expense in first quarter 2011 was up $1.1 million over first quarter 2010. This increase was entirely attributable to other real estate expenses and legal and collection expenses. Other real estate expenses totaled $955 thousand during the first quarter 2011 compared to $88 thousand during the first quarter 2010. On a linked-quarter basis, noninterest expense was up $557 thousand again almost entirely attributable to increased other real estate expense and legal and collection expenses.

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 first quarter 2011 on Thursday, April 14, 2011, at 11:00 a.m. Pacific Time / 2:00 p.m. Eastern Time. To listen to the conference call, interested parties should call (866) 292-1418. The webcast will be available via Pacific Continental's website (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 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 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 $1.2 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 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"). 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's 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.