Pacific Continental Reports Fourth Quarter and Full Year 2009 Results

Profitability, Core Deposit Growth and Elevated Provisioning Continue in Fourth Quarter 2009.

Jan 20, 2010, 16:30 ET from Pacific Continental Corporation

EUGENE, Ore., Jan. 20 /PRNewswire-FirstCall/ -- Pacific Continental Corporation (Nasdaq: PCBK), the bank holding company for Pacific Continental Bank, today reported financial results for the fourth quarter and full year ended December 31, 2009.

"We continue to benefit from strong core earnings, a strong net interest margin, and growth in core earnings. Combined, these financial fundamentals contributed to a profitable quarter and they position us for a return to full year profitability in 2010," said Hal Brown, chief executive officer. "Additionally, as evidenced by our successful fourth-quarter equity offering, investor confidence remains strong. The equity offering strengthened our already-strong capital ratios furthering the Bank's ability to respond to the deposit and lending needs of our communities."

Net income for the fourth quarter 2009 was $24 thousand, compared to net income of $3.8 million for the fourth quarter 2008. For the full year 2009, the net loss was $4.9 million compared to net income of $12.9 million for 2008.

Improved capital levels

During the fourth quarter 2009, the Company successfully raised additional capital through an underwritten public offering securing net proceeds of $45.7 million. The Company issued 5.52 million shares of its common stock, including 720,000 shares pursuant to the underwriters' over-allotment option, at a price of $8.75 per share. As a result of the additional capital, the Company's capital ratios, which were already at the well-capitalized designation, improved significantly. At December 31, 2009, the Company's Tier 1 leverage ratio, Tier 1 risk-based capital ratio, and Total risk-based capital ratio were 13.66%, 14.38%, and 15.63%. All three ratios significantly exceed the FDIC's well-capitalized designation levels of 5.00%, 6.00%, and 10.00%, respectively.

Core earnings, revenue growth, net interest margin and expense control drive efficiency

Core earnings, earnings before loan loss provisions and taxes, expanded in the fourth quarter 2009, reflecting a continued increase in the Company's core earnings power. Core earnings for the fourth quarter were $7.4 million, an increase of 9.0% over the $6.8 million reported for the same period in 2008; and for the full year 2009, core earnings were $27.3 million, a 13.8% increase over the $24.0 million reported in 2008. This increase is the result of both revenue growth and expense control. The growth in operating revenue, together with active expense management, resulted in a fourth quarter 2009 efficiency ratio of 50.14% compared to 52.23% for the same period last year.

Operating revenue, which consists of net interest income plus noninterest income, was $58.4 million for the year 2009, up $4.9 million or 9.2% over the $53.5 million reported in 2008. Contributing to the improvement in operating revenue was an 11.1% year-over-year growth in average earning assets and a relatively stable net interest margin of 5.14% in 2009 compared to 5.21% in 2008.

Noninterest expense for the year 2009 was $31.2 million, an increase of $1.6 million or 5.4% over 2008. An increase of $1.5 million in FDIC assessments in 2009 when compared to last year accounted for nearly all of the increase in year-over-year noninterest expenses. On a linked quarter basis, fourth quarter 2009 noninterest expense was $7.5 million, up $400 thousand over third quarter 2009. This increase had been anticipated as the third quarter 2009 noninterest expenses included a one-time $417 thousand decline in personnel expense, primarily related to lower accruals for incentive compensation and for lower than expected claims experience in the Company's 2009 self-insured medical plan. During the fourth quarter, the Bank remitted approximately $7.0 million to the FDIC in payment for the Bank's fourth quarter 2009 FDIC insurance assessment and estimated prepayment for FDIC insurance assessments for the years 2010, 2011, and 2012 recording a $6.2 million prepaid expense on its December 31, 2009 balance sheet. The Bank expensed $419 thousand for FDIC premiums in the fourth quarter 2009 compared to $65 thousand in the fourth quarter 2008.

Core deposit growth continues

During the fourth quarter 2009, the Company continued to experience strong core deposit growth. At December 31, 2009, period-end core deposits totaled $772.0 million, up $20.3 million over period-end core deposits at September 30, 2009, and up $156.2 million, or 25.4% for the year 2009. Quarterly average core deposit figures, a measure which reduces daily deposit volatility, show similar strong results with fourth quarter 2009 average core deposits of $764.1 million, an increase of $39.4 million over the third quarter 2009 average and an increase of $145.3 million over the fourth quarter 2008 average. Deposit growth occurred in all three of the Bank's primary markets, but was strongest in Portland and Eugene.

Loan growth continued to slow from the prior year's activity reflecting the weak economic conditions and planned contraction in the construction and land development portfolios. At December 31, 2009, period-end gross loans declined by approximately $14.9 million from the end of the third quarter 2009 and have contracted $12.3 million during 2009. As had been planned the Bank's construction and land development portfolios have declined $66.5 million since the beginning of 2009 and at year-end now represent 17.1% of total gross loans. 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.

Nonperforming assets, provisioning, and loan statistics

Total nonperforming assets at December 31, 2009 were $36.5 million, an increase of $6.4 million from September 30, 2009. Nonperforming assets represent 3.05% of total assets at December 31, 2009 compared to 2.62% at the end of the prior quarter. The change in the level of nonperforming assets reflects the increased volatility experienced in recessionary economy and reflects the Bank's continued efforts to work through this difficult credit cycle. During the quarter the Bank saw successful resolution of a number of credits as well as some credits migrating to nonperforming status.

"Although we are beginning to see signs of an economic recovery, we can expect continued volatility in the level of our nonperforming assets which is normal in dealing with a credit cycle tail. We did see an increase in the level of our nonperforming assets as a few more of our borrowers, primarily related to construction financing, were affected by the prolonged economic challenges," said Roger Busse, President and Chief Operating Officer. "We remain steadfast in our proactive and timely approach when dealing with problem credits which did result in the resolution of several problem loans during the quarter," added Busse.

As a result of the continued weakness in the Pacific Northwest economy and residential real estate markets in particular, the Company's fourth quarter 2009 provision for loan losses remained elevated, but lower than the provisions made in the prior two quarters. The fourth quarter provision for loan losses was $7.0 million, compared to $8.3 million in third quarter 2009. During the fourth quarter, the Company recognized net loan charge offs of $12.0 million. The Company continued to maintain a historically high unallocated allowance for loan losses; and at December 31, 2009, the unallocated portion of the allowance was 15% compared to 8% at September 30, 2009. The increased 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 December 31, 2009 was 1.42%, compared to 1.91% and 1.15% at September 30, 2009 and December 31, 2008, respectively.

Fourth quarter highlights:

  • Successfully raised $45.7 million in new capital, net of fees, through an underwritten public offering.
  • Core earnings, earnings before taxes and loan loss provision, increased 9.0% quarter-over-quarter and 13.8% for the year.
  • Achieved an efficiency ratio for the quarter of 50.14%.
  • Strong average core deposit growth of $39.4 million for the fourth quarter, an annualized growth rate of 21.7%.
  • Total risk based capital ratio of 15.63%, up from 11.87% at September 30, 2009, significantly above the 10.0% "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 fourth quarter and year-end 2009, on Thursday, January 21, 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, 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 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; in February 2009, Oregon Business magazine recognized Pacific Continental as the top ranked financial institution to work for in the publication's large company category, marking it the ninth consecutive year Pacific Continental has been recognized as one of the Top 100 Companies to Work for in Oregon; 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 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.

PACIFIC CONTINENTAL CORPORATION

CONSOLIDATED INCOME STATEMENTS

Amounts in $ 000's, Except for Per Share Data

(Unaudited)

Three Months Ended

Year Ended

December 31,

December 31,

2009

2008

2009

2008

Interest and dividend income

 Loans

$ 15,669   

$ 15,866   

$ 61,977   

$ 63,047   

 Securities

1,409   

717   

4,893   

2,787   

 Dividends on Federal Home Loan    Bank stock

-   

(41)  

-   

91   

 Federal funds sold & Interest-    bearing deposits with banks

1   

2   

5   

20   

17,079   

16,544   

66,875   

65,945   

Interest expense

 Deposits

2,473   

2,298   

9,553   

10,142   

 Federal Home Loan Bank &    Federal Reserve borrowings

686   

904   

2,691   

5,456   

 Junior subordinated debentures

128   

125   

508   

498   

 Federal funds purchased

8   

23   

84   

578   

3,295   

3,350   

12,836   

16,674   

    Net interest income

13,784   

13,194   

54,039   

49,271   

Provision for loan losses

7,000   

1,050   

36,000   

3,600   

    Net interest income after       provision for loan losses

6,784   

12,144   

18,039   

45,671   

Noninterest income

 Service charges on deposit    accounts

458   

459   

1,872   

1,676   

 Other fee income, principally    bankcard

445   

445   

1,755   

1,823   

 Loan servicing fees

18   

17   

72   

85   

 Mortgage banking income

97   

64   

463   

355   

 Other noninterest income

61   

57   

243   

330   

1,079   

1,042   

4,405   

4,269   

Noninterest expense

 Salaries and employee benefits

4,083   

4,384   

16,991   

18,089   

 Premises and equipment

982   

1,023   

4,100   

3,990   

 Bankcard processing

125   

125   

506   

546   

 Business development

208   

481   

1,455   

1,447   

 FDIC insurance assessment

419   

65   

1,927   

453   

 Other real estate expense

223   

90   

820   

122   

 Other noninterest expense

1,412   

1,267   

5,363   

4,915   

7,452   

7,435   

31,162   

29,562   

Income (loss) before provision  (benefit) for income taxes

411   

5,751   

(8,718)  

20,378   

Provision (benefit) for income taxes

387   

1,918   

(3,839)  

7,439   

  Net income (loss)

$        24   

$   3,833   

$ (4,879)  

$ 12,939   

Earnings (loss) per share

  Basic

$     0.00   

$     0.32   

$   (0.35)  

$     1.08   

  Diluted

$     0.00   

$     0.32   

$   (0.35)  

$     1.08   

Weighted average shares   outstanding

    Basic

16,863   

12,039   

13,961   

11,980   

    Common stock equivalents

       attributable to stock-based         awards

41   

56   

-   

48   

    Diluted

16,904   

12,095   

13,961   

12,028   

PERFORMANCE RATIOS

 Return on average assets

0.01%

1.43%

-0.43%

1.27%

 Return on average equity (book)

0.06%

13.26%

-3.60%

11.57%

 Return on average equity     (tangible) (1)

0.07%

16.57%

-4.33%

14.56%

 Net interest margin

5.02%

5.28%

5.14%

5.21%

 Efficiency ratio (2)

50.14%

52.23%

53.32%

55.21%

PACIFIC CONTINENTAL CORPORATION

CONSOLIDATED BALANCE SHEETS

Amounts in $  000’s

(Unaudited)

December 31,

December 31,

2009

2008

ASSETS

 Cash and due from banks

$        16,698   

$        20,172   

 Interest-bearing deposits with banks

272   

283   

           Total cash and cash equivalents

16,970   

20,455   

 Securities available-for-sale

167,618   

54,933   

 Loans held for sale

745   

410   

 Loans, less allowance for loan losses

930,997   

945,377   

 Interest receivable

4,408   

4,021   

 Federal Home Loan Bank stock

10,652   

10,652   

 Property, net of accumulated depreciation

20,228   

20,763   

 Goodwill and other intangible assets

22,681   

22,904   

 Deferred tax asset

6,773   

4,849   

 Taxes receivable

5,299   

-   

 Other real estate owned

4,224   

3,806   

 Prepaid FDIC assessment

6,242   

-   

 Other assets

2,276   

2,673   

           Total assets

$   1,199,113   

$   1,090,843   

LIABILITIES AND STOCKHOLDERS' EQUITY

 Deposits

   Noninterest-bearing demand

$      202,088   

$      178,957   

   Savings and interest-bearing checking

475,869   

392,935   

   Time $100,000 and over

68,031   

67,095   

   Other time

81,930   

83,450   

      Total deposits

827,918   

722,437   

 Federal funds purchased

10,000   

44,000   

 Federal Home Loan Bank and Federal Reserve borrowings

183,025   

194,500   

 Junior subordinated debentures

8,248   

8,248   

 Accrued interest and other payables

4,260   

5,493   

           Total liabilities

1,033,451   

974,678   

Stockholders' equity

 Common stock, 25,000 shares authorized

136,316   

80,019   

 Retained earnings

29,613   

37,764   

 Accumulated other comprehensive loss

(267)  

(1,618)  

165,662   

116,165   

         Total liabilities and stockholders’ equity

$   1,199,113   

$   1,090,843   

CAPITAL RATIOS

 Total capital (to risk weighted assets)

15.63%

11.16%

 Tier I capital (to risk weighted assets)

14.38%

10.07%

 Tier I capital (to leverage assets)

13.66%

10.33%

 Tangible common equity (to tangible assets)

12.15%

8.73%

 Tangible common equity (to risk weighted assets)

14.28%

9.12%

OTHER FINANCIAL DATA

 Shares outstanding at end of period

18,394   

12,080   

 Stockholder's equity (tangible) (1)

$      142,981   

$        93,261   

 Book value

$            9.01   

$            9.62   

 Tangible book value (1)

$            7.77   

$            7.72   

PACIFIC CONTINENTAL CORPORATION

SELECTED OTHER FINANCIAL INFORMATION AND RATIOS

Amounts in $  000’s

(Unaudited)

Three Months Ended

Year Ended

December 31,

December 31,

December 31,

December 31,

2009

2008

2009

2008

LOANS BY TYPE

 Real estate secured loans:

  Permanent Loans:

    Multifamily residential

$         68,509   

$         67,466   

    Residential 1-4 family

86,795   

79,189   

    Owner-occupied commercial

197,884   

188,709   

    Non-owner-occupied commercial

147,605   

131,183   

    Other loans secured by real estate

37,404   

23,810   

     Total permanent real estate loans

538,197   

490,357   

  Construction Loans:

    Multifamily residential

18,472   

21,375   

    Residential 1-4 family

41,714   

74,900   

    Commercial real estate

38,921   

54,203   

    Commercial bare land and acquisition & development

30,169   

34,756   

    Residential bare land and acquisition & development

30,484   

33,395   

    Other

1,582   

9,195   

     Total construction real estate loans

161,342   

227,824   

       Total real estate loans

699,539   

718,181   

 Commercial loans

233,821   

226,213   

 Consumer loans

6,763   

7,484   

 Other loans

5,629   

6,209   

Gross loans

945,752   

958,087   

Deferred loan origination fees

(1,388)  

(1,730)  

944,364   

956,357   

Allowance for loan losses

(13,367)  

(10,980)  

$       930,997   

$       945,377   

Real estate loans held for sale

$              745   

$              410   

ALLOWANCE FOR LOAN LOSSES

 Balance at beginning of period

$        18,348   

$         10,672   

$        10,980   

$           8,675   

  Provision for loan losses

7,000   

1,050   

36,000   

3,600   

  Loan charge offs

(12,009)  

(754)  

(33,881)  

(1,477)  

  Loan recoveries

28   

12   

268   

182   

    Net charge offs

(11,981)  

(742)  

(33,613)  

(1,295)  

 Balance at end of period

$        13,367   

$        10,980   

$        13,367   

$        10,980   

NONPERFORMING ASSETS

Nonaccrual loans

 Real estate secured loans:

  Permanent Loans:

    Multifamily residential

$                  -   

$                  -   

    Residential 1-4 family

704   

100   

    Owner-occupied commercial

375   

-   

    Non-owner-occupied commercial

-   

-   

    Other loans secured by real estate

1,097   

-   

     Total permanent real estate loans

2,176   

100   

  Construction Loans:

    Multifamily residential

4,410   

-   

    Residential 1-4 family

13,025   

2,032   

    Commercial real estate

7,875   

1,660   

    Commercial bare land and acquisition & development

-   

-   

    Residential bare land and acquisition & development

-   

-   

    Other

-   

-   

     Total construction real estate loans

25,310   

3,692   

       Total real estate loans

27,486   

3,792   

 Commercial loans

5,268   

-   

 Consumer loans

39   

345   

 Other loans

-   

-   

Total nonaccrual loans

32,793   

4,137   

90 days past due and accruing interest

-   

-   

Total nonperforming loans

32,793   

4,137   

Nonperforming loans guaranteed by government

(447)  

(239)  

Net nonperforming loans

32,346   

3,898   

Foreclosed assets

4,224   

3,806   

Total nonperforming assets, net of guaranteed loans

$        36,570   

$          7,704   

LOAN QUALITY RATIOS

 Allowance for loan losses as a percentage of total loans

   outstanding, excluding of loans held for sale

1.42%

1.15%

 Allowance for loan losses as a percentage of total

   nonperforming loans, net of government guarantees

41.33%

281.68%

 Net loan charge offs (recoveries) as a percentage of

   average loans, annualized

4.98%

0.31%

3.50%

0.15%

 Nonperforming loans as a percentage of total loans

3.43%

0.41%

 Nonperforming assets as a percentage of total assets

3.05%

0.71%

PACIFIC CONTINENTAL CORPORATION

SELECTED OTHER FINANCIAL INFORMATION AND RATIOS (Continued)

Amounts in $  000’s

(Unaudited)

Three Months Ended

Year Ended

December 31,

December 31,

December 31,

December 31,

2009

2008

2009

2008

BALANCE SHEET AVERAGES

 Loans

$      954,543   

$      940,307   

$      959,899   

$892,532   

 Allowance for loan losses

(19,797)  

(10,785)  

(16,111)  

(9,790)  

   Loans, net of allowance

934,746   

929,522   

943,788   

882,742   

 Securities and short-term deposits

155,531   

63,656   

107,527   

63,114   

  Earning assets

1,090,277   

993,178   

1,051,315   

945,856   

 Non-interest-earning assets

85,241   

76,600   

78,656   

73,184   

       Assets

$   1,175,518   

$   1,069,778   

$   1,129,971   

$   1,019,040   

 Interest-bearing core deposits (3)

$      575,834   

$      447,978   

$      524,008   

$      443,451   

 Non-interest-bearing core deposits (3)

188,310   

170,897   

179,886   

169,792   

   Core deposits (3)

764,144   

618,875   

703,894   

613,243   

 Non-core interest-bearing deposits

61,525   

72,052   

78,941   

56,380   

   Deposits

825,669   

690,927   

782,835   

669,623   

 Borrowings

177,354   

256,852   

207,431   

232,635   

 Other non-interest-bearing liabilities

5,520   

7,040   

4,235   

4,914   

      Liabilities

1,008,543   

954,819   

994,501   

907,172   

 Stockholders' equity (book)

166,975   

114,959   

135,470   

111,868   

      Liabilities and equity

$   1,175,518   

$   1,069,778   

$   1,129,971   

$   1,019,040   

 Stockholders' equity (tangible) (1)

$      144,267   

$        92,024   

$      112,676   

$        88,850   

SELECTED MARKET DATA

 Eugene market loans, net of fees

$      255,762   

$      237,604   

 Portland market loans, net of fees

429,143   

432,961   

 Seattle market loans, net of fees

246,092   

285,792   

   Total loans, net of fees

$      930,997   

$      956,357   

 Eugene market core deposits (3)

$      492,012   

$      406,098   

 Portland market core deposits (3)

165,716   

110,287   

 Seattle market core deposits (3)

114,258   

99,447   

   Total core deposits (3)

771,986   

615,832   

 Other deposits

55,932   

106,605   

     Total

$      827,918   

$      722,437   

 Eugene market core deposits, average (3)

$      487,202   

$      402,125   

$      453,557   

$      402,128   

 Portland market core deposits, average (3)

165,125   

115,234   

144,416   

113,834   

 Seattle market core deposits, average  (3)

111,817   

101,516   

105,921   

97,281   

   Total core deposits, average  (3)

764,144   

618,875   

703,894   

613,243   

 Other deposits, average

61,525   

72,052   

78,941   

56,380   

     Total

$      825,669   

$      690,927   

$      782,835   

$      669,623   

NET INTEREST MARGIN RECONCILIATION

 Yield on average loans

6.65%

6.79%

6.57%

7.14%

 Yield on average securities

3.60%

4.24%

4.56%

4.59%

   Yield on average earning assets

6.21%

6.63%

6.36%

6.97%

 Rate on average interest-bearing core deposits

1.50%

1.56%

1.54%

1.85%

 Rate on average interest-bearing non-core deposits

1.86%

2.96%

1.85%

3.46%

   Rate on average interest-bearing deposits

1.54%

1.76%

1.58%

2.03%

 Rate on average borrowings

1.84%

1.63%

1.58%

2.81%

   Cost of interest-bearing funds

1.60%

1.72%

1.58%

2.28%

   Interest rate spread

4.61%

4.91%

4.78%

4.69%

      Net interest margin

5.02%

5.28%

5.14%

5.21%

(1) Tangible equity excludes goodwill and core deposit intangible related to acquisitions.

(2) Efficiency ratio is noninterest expense divided by operating revenues.  Operating revenues are net interest income

plus noninterest income.

(3) Core deposits include all demand, savings, & interest checking accounts, plus all local time deposits including local

time deposits in excess of $100,000.

FOR MORE INFORMATION CONTACT:

Hal Brown

Mick Reynolds

CEO

Executive Vice President/CFO

541 686-8685  

541 686-8685

http://www.therightbank.com

E-mail: banking@therightbank.com

SOURCE Pacific Continental Corporation



RELATED LINKS

http://www.therightbank.com