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8-K - FORM 8-K - PACIFIC CONTINENTAL CORPd88278d8k.htm

Exhibit 99.1

NEWS RELEASE

 

FOR MORE INFORMATION CONTACT: Michael Dunne
Public Information Officer
541-338-1428
www.therightbank.com
Email: michael.dunne@therightbank.com

FOR IMMEDIATE RELEASE

Pacific Continental Corporation Reports Second Quarter 2015 Results

Record quarterly loan growth drives second quarter results.

EUGENE, Ore., July 22, 2015 – 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 5th 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)

 

     June 30,      March 31,      June 30,  
     2015      2015      2014  
     (In thousands)  

Total shareholders’ equity

   $ 212,015       $ 210,651       $ 182,137   

Subtract:

        

Goodwill

     39,075         39,032         22,881   

Core deposit intangible assets

     4,150         4,274         674   
  

 

 

    

 

 

    

 

 

 

Tangible shareholders’ equity (non-GAAP)

$ 168,790    $ 167,345    $ 158,582   
  

 

 

    

 

 

    

 

 

 

Total assets

$ 1,830,942    $ 1,780,849    $ 1,498,763   

Subtract:

Goodwill

  39,075      39,032      22,881   

Core deposit intangible assets

  4,150      4,274      674   
  

 

 

    

 

 

    

 

 

 

Total tangible assets (non-GAAP)

$ 1,787,717    $ 1,737,543    $ 1,475,208   
  

 

 

    

 

 

    

 

 

 

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.


PACIFIC CONTINENTAL CORPORATION

Consolidated Income Statements

(In thousands, except share and per share amounts)

(Unaudited)

 

     Three months ended     Linked     Year over  
     June 30,     March 31,     June 30,     Quarter     Year  
     2015     2015     2014     % Change     % Change  

Interest and dividend income

          

Loans

   $ 16,594      $ 14,185      $ 13,514        16.98     22.79

Taxable securities

     1,736        1,375        1,614        26.25     7.56

Tax-exempt securities

     499        503        488        -0.80     2.25

Federal funds sold & interest-bearing deposits with banks

     11        5        2        120.00     450.00
  

 

 

   

 

 

   

 

 

     
  18,840      16,068      15,618      17.25   20.63
  

 

 

   

 

 

   

 

 

     

Interest expense

Deposits

  845      810      821      4.32   2.92

Federal Home Loan Bank & Federal Reserve borrowings

  239      228      280      4.82   -14.64

Junior subordinated debentures

  56      56      56      0.00   0.00

Federal funds purchased

  4      2      4      100.00   0.00
  

 

 

   

 

 

   

 

 

     
  1,144      1,096      1,161      4.38   -1.46
  

 

 

   

 

 

   

 

 

     

Net interest income

  17,696      14,972      14,457      18.19   22.40

Provision for loan losses

  550      —        —        NA      NA   
  

 

 

   

 

 

   

 

 

     

Net interest income after provision for loan losses

  17,146      14,972      14,457      14.52   18.60
  

 

 

   

 

 

   

 

 

     

Noninterest income

Service charges on deposit accounts

  661      575      540      14.96   22.41

Bankcard income

  214      197      229      8.63   -6.55

Bank-owned life insurance income

  170      109      117      55.96   45.30

Gain (loss) on sale of investment securities

  139      53      (100   162.26   -239.00

Impairment losses on investment securities (OTTI)

  (13   —        —        NA      NA   

Other noninterest income

  456      342      370      33.33   23.24
  

 

 

   

 

 

   

 

 

     
  1,627      1,276      1,156      27.51   40.74
  

 

 

   

 

 

   

 

 

     

Noninterest expense

Salaries and employee benefits

  6,992      6,409      6,093      9.10   14.75

Premises and equipment

  1,094      980      924      11.63   18.40

Data processing

  821      684      693      20.03   18.47

Legal and professional fees

  491      400      251      22.75   95.62

Business development

  411      353      340      16.43   20.88

FDIC insurance assessment

  273      212      217      28.77   25.81

Other real estate (income) expense

  (60   241      16      -124.90   -475.00

Merger related expenses (1)

  —        1,836      —        -100.00   NA   

Other noninterest expense

  1,008      857      735      17.62   37.14
  

 

 

   

 

 

   

 

 

     
  11,030      11,972      9,269      -7.87   19.00
  

 

 

   

 

 

   

 

 

     

Income before provision for income taxes

  7,743      4,276      6,344      81.08   22.05

Provision for income taxes

  2,648      1,474      2,196      79.65   20.58
  

 

 

   

 

 

   

 

 

     

Net income

$ 5,095    $ 2,802    $ 4,148      81.83   22.83
  

 

 

   

 

 

   

 

 

     

Earnings per share:

Basic

$ 0.26    $ 0.15    $ 0.23      73.33   13.04
  

 

 

   

 

 

   

 

 

     

Diluted

$ 0.26    $ 0.15    $ 0.23      73.33   13.04
  

 

 

   

 

 

   

 

 

     

Weighted average shares outstanding:

Basic

  19,562,363      18,232,076      17,889,562   

Common stock equivalents attributable to stock-based awards

  226,521      212,895      229,850   
  

 

 

   

 

 

   

 

 

     

Diluted

  19,788,884      18,444,971      18,119,412   
  

 

 

   

 

 

   

 

 

     

PERFORMANCE RATIOS

Return on average assets

  1.14   0.72   1.13

Return on average equity (book)

  9.68   5.91   9.16

Return on average equity (tangible) (2)

  12.18   7.05   10.53

Net interest margin - fully tax-equivalent yield (3)

  4.39   4.29   4.35

Efficiency ratio (4)

  56.30   72.47   58.38

 

(1) Represents expenses associated with the acquisition of Capital Pacific Bank, completed during the first quarter 2015.
(2) Tangible equity excludes goodwill and core deposit intangible assets related to acquisitions.
(3) Net interest margin is reported on a tax-equivalent yield basis at a 35% tax rate.
(4)  Efficiency ratio is noninterest expense as a percent of net interest income (on a tax-equivalent basis) plus noninterest income.

 

NA Not applicable


PACIFIC CONTINENTAL CORPORATION

Year-to-Date Consolidated Income Statements

(In thousands, except share and per share amounts)

(Unaudited)

 

     Six months ended     Year over  
     June 30,
2015
    June 30,
2014
   

Year

% Change

 

Interest and dividend income

      

Loans

   $ 30,780      $ 26,688        15.33

Taxable securities

     3,112        3,146        -1.08

Tax-exempt securities

     1,002        972        3.09

Federal funds sold & interest-bearing deposits with banks

     16        4        300.00
  

 

 

   

 

 

   
  34,910      30,810      13.31
  

 

 

   

 

 

   

Interest expense

Deposits

  1,655      1,627      1.72

Federal Home Loan Bank & Federal Reserve borrowings

  468      560      -16.43

Junior subordinated debentures

  112      112      0.00

Federal funds purchased

  5      9      -44.44
  

 

 

   

 

 

   
  2,240      2,308      -2.95
  

 

 

   

 

 

   

Net interest income

  32,670      28,502      14.62

Provision for loan losses

  550      —        NA   
  

 

 

   

 

 

   

Net interest income after provision for loan losses

  32,120      28,502      12.69
  

 

 

   

 

 

   

Noninterest income

Service charges on deposit accounts

  1,236      1,058      16.82

Bankcard income

  411      446      -7.85

Bank-owned life insurance income

  279      234      19.23

Gain (loss) on sale of investment securities

  192      (36   -633.33

Impairment losses on investment securities (OTTI)

  (13   —        NA   

Other noninterest income

  798      778      2.57
  

 

 

   

 

 

   
  2,903      2,480      17.06
  

 

 

   

 

 

   

Noninterest expense

Salaries and employee benefits

  13,401      11,912      12.50

Premises and equipment

  2,073      1,867      11.03

Data processing

  1,505      1,362      10.50

Legal and professional fees

  890      739      20.43

Business development

  765      715      6.99

FDIC insurance assessment

  486      437      11.21

Other real estate expense

  181      239      -24.27

Merger related expense (1)

  1,836      —        NA   

Other noninterest expense

  1,867      1,511      23.56
  

 

 

   

 

 

   
  23,004      18,782      22.48
  

 

 

   

 

 

   

Income before provision for income taxes

  12,019      12,200      -1.48

Provision for income taxes

  4,122      4,220      -2.32
  

 

 

   

 

 

   

Net income

$ 7,897    $ 7,980      -1.04
  

 

 

   

 

 

   

Earnings per share:

Basic

$ 0.42    $ 0.45      -6.67
  

 

 

   

 

 

   

Diluted

$ 0.41    $ 0.44      -6.82
  

 

 

   

 

 

   

Weighted average shares outstanding:

Basic

  18,900,895      17,893,555   

Common stock equivalents attributable to stock-based awards

  227,090      236,278   
  

 

 

   

 

 

   

Diluted

  19,127,985      18,129,833   
  

 

 

   

 

 

   

PERFORMANCE RATIOS

Return on average assets

  0.94   1.10

Return on average equity (book)

  7.89   8.89

Return on average equity (tangible) (2)

  9.68   10.22

Net interest margin - fully tax-equivalent yield (3)

  4.34   4.34

Efficiency ratio (4)

  63.70   59.62

 

(1) Represents expenses associated with the acquisition of Capital Pacific Bank, completed during the first quarter 2015.
(2) Tangible equity excludes goodwill and core deposit intangible assets related to acquisitions.
(3) Net interest margin is reported on a tax-equivalent yield basis at a 35% tax rate.
(4)  Efficiency ratio is noninterest expense as a percent of net interest income (on a tax-equivalent basis) plus noninterest income.

 

NA Not applicable


PACIFIC CONTINENTAL CORPORATION

Consolidated Balance Sheets

(In thousands, except share amounts)

(Unaudited)

 

     June 30,
2015
    March 31,
2015
    June 30,
2014
    Linked
Quarter
% Change
   

Year over
Year

% Change

 

ASSETS

          

Cash and due from banks

   $ 29,812      $ 25,718      $ 28,219        15.92     5.65

Interest-bearing deposits with banks

     9,790        12,491        15,224        -21.62     -35.69
  

 

 

   

 

 

   

 

 

     

Total cash and cash equivalents

  39,602      38,209      43,443      3.65   -8.84

Securities available-for-sale

  383,618      379,497      344,645      1.09   11.31

Loans, less allowance for loan losses and net deferred fees

  1,288,919      1,238,982      1,014,346      4.03   27.07

Interest receivable

  5,833      5,387      5,101      8.28   14.35

Federal Home Loan Bank stock

  5,468      10,531      10,227      -48.08   -46.53

Property and equipment, net of accumulated depreciation

  17,854      17,932      18,366      -0.43   -2.79

Goodwill and intangible assets

  43,225      43,306      23,555      -0.19   83.51

Deferred tax asset

  6,036      4,887      7,154      23.51   -15.63

Taxes receivable

  103      656      —        -84.30   NA   

Other real estate owned

  12,666      14,167      11,531      -10.60   9.84

Bank-owned life insurance

  22,571      22,401      16,370      0.76   37.88

Other assets

  5,047      4,894      4,025      3.13   25.39
  

 

 

   

 

 

   

 

 

     

Total assets

$ 1,830,942    $ 1,780,849    $ 1,498,763      2.81   22.16
  

 

 

   

 

 

   

 

 

     

LIABILITIES AND SHAREHOLDERS’ EQUITY

Deposits

Noninterest-bearing demand

$ 531,697    $ 503,735    $ 397,942      5.55   33.61

Savings and interest-bearing checking

  825,858      833,325      565,265      -0.90   46.10

Core time deposits

  87,663      80,337      63,335      9.12   38.41
  

 

 

   

 

 

   

 

 

     

Total core deposits (2)

  1,445,218      1,417,397      1,026,542      1.96   40.79

Non-core time deposits

  68,963      79,350      106,112      -13.09   -35.01
  

 

 

   

 

 

   

 

 

     

Total deposits

  1,514,181      1,496,747      1,132,654      1.16   33.68

Securities sold under agreements to repurchase

  368      53      —        594.34   NA   

Federal funds and overnight funds purchased

  5,500      —        6,410      NA      -14.20

Federal Home Loan Bank borrowings

  84,000      61,000      164,500      37.70   -48.94

Junior subordinated debentures

  8,248      8,248      8,248      0.00   0.00

Accrued interest and other payables

  6,630      4,150      4,814      59.76   37.72
  

 

 

   

 

 

   

 

 

     

Total liabilities

  1,618,927      1,570,198      1,316,626      3.10   22.96
  

 

 

   

 

 

   

 

 

     

Shareholders’ equity

Common stock: 50,000,000 shares authorized. Shares issued and outstanding: 19,591,532 at June 30, 2015, 19,496,920 at March 31, 2015 and 17,848,900 at June 30, 2014

  155,325      155,298      132,532      0.02   17.20

Retained earnings

  53,150      50,014      45,887      6.27   15.83

Accumulated other comprehensive income

  3,540      5,339      3,718      -33.70   -4.79
  

 

 

   

 

 

   

 

 

     
  212,015      210,651      182,137      0.65   16.40
  

 

 

   

 

 

   

 

 

     

Total liabilities and shareholders’ equity

$ 1,830,942    $ 1,780,849    $ 1,498,763      2.81   22.16
  

 

 

   

 

 

   

 

 

     

CAPITAL RATIOS

Total capital (to risk weighted assets) (3)

  12.88   13.08   15.73

Tier I capital (to risk weighted assets) (3)

  11.78   11.97   14.48

Common equity tier 1 capital (to risk weighted assets) (3)

  11.27   11.41   NA   

Tier I capital (to leverage assets) (3)

  10.01   11.31   11.26

Tangible common equity (to tangible assets)(1)

  9.44   9.63   10.75

Tangible common equity (to risk-weighted assets)(1)

  11.32   11.58   14.44

OTHER FINANCIAL DATA

Shares outstanding at end of period

  19,591,532      19,496,920      17,848,900   

Tangible shareholders’ equity(1)

$ 168,790    $ 167,345    $ 158,582   

Book value per share

$ 10.82    $ 10.80    $ 10.20   

Tangible book value per share

$ 8.62    $ 8.58    $ 8.88   

 

(1)  Tangible common equity excludes goodwill and core deposit intangible assets related to acquisitions.
(2)  Core deposits include demand, interest checking, money market, savings, and local time deposits, including local nonpublic time deposits in excess of $100 thousand.
(3)  In first quarter 2015 Basel III capital framework methodology was implemented for all banks. The current period capital ratios have been compiled based on the new methodology. The prior period capital ratios have not been restated in conformity with the new methodology.


PACIFIC CONTINENTAL CORPORATION

Loans by Type

(In thousands)

(Unaudited)

 

     June 30,
2015
    March 31,
2015
    June 30,
2014
    Linked
Quarter
% Change
   

Year over
Year

% Change

 

LOANS BY TYPE

          

Real estate secured loans:

          

Permanent loans:

          

Multi-family residential

   $ 68,289      $ 69,968      $ 50,867        -2.40     34.25

Residential 1-4 family

     57,112        55,702        46,287        2.53     23.39

Owner-occupied commercial

     346,065        337,058        255,562        2.67     35.41

Nonowner-occupied commercial

     275,077        256,119        182,141        7.40     51.02
  

 

 

   

 

 

   

 

 

     

Total permanent real estate loans

  746,543      718,847      534,857      3.85   39.58

Construction loans:

Multi-family residential

  6,590      7,318      19,539      -9.95   -66.27

Residential 1-4 family

  30,145      28,913      33,951      4.26   -11.21

Commercial real estate

  31,659      25,477      28,019      24.27   12.99

Commercial bare land and acquisition & development

  15,870      11,987      11,096      32.39   43.02

Residential bare land and acquisition & development

  7,074      6,272      6,240      12.79   13.37
  

 

 

   

 

 

   

 

 

     

Total construction real estate loans

  91,338      79,967      98,845      14.22   -7.59
  

 

 

   

 

 

   

 

 

     

Total real estate loans

  837,881      798,814      633,702      4.89   32.22

Commercial loans

  459,458      449,793      392,810      2.15   16.97

Consumer loans

  3,783      3,528      3,410      7.23   10.94

Other loans

  5,025      3,742      1,207      34.29   316.32
  

 

 

   

 

 

   

 

 

     

Gross loans

  1,306,147      1,255,877      1,031,129      4.00   26.67

Deferred loan origination fees

  (1,215   (1,171   (1,108   3.76   9.66
  

 

 

   

 

 

   

 

 

     
  1,304,932      1,254,706      1,030,021      4.00   26.69

Allowance for loan losses

  (16,013   (15,724   (15,675   1.84   2.16
  

 

 

   

 

 

   

 

 

     
$ 1,288,919    $ 1,238,982    $ 1,014,346      4.03   27.07
  

 

 

   

 

 

   

 

 

     

SELECTED MARKET LOAN DATA

Eugene market gross loans, period-end

$ 358,806    $ 358,129    $ 354,430      0.19   1.23

Portland market gross loans, period-end

  631,420      612,762      399,764      3.04   57.95

Seattle market gross loans, period-end

  134,341      119,306      134,969      12.60   -0.47

National health care gross loans, period-end (1)

  181,580      165,680      141,966      9.60   27.90
  

 

 

   

 

 

   

 

 

     

Total gross loans, period-end

$ 1,306,147    $ 1,255,877    $ 1,031,129      4.00   26.67
  

 

 

   

 

 

   

 

 

     

DENTAL LOAN DATA (2)

Local Dental gross loans, period-end

$ 156,315    $ 159,726    $ 169,102      -2.14   -7.56

National Dental gross loans, period-end

  164,740      151,280      133,720      8.90   23.20
  

 

 

   

 

 

   

 

 

     

Total gross dental loans, period-end

$ 321,055    $ 311,006    $ 302,822      3.23   6.02
  

 

 

   

 

 

   

 

 

     

 

(1) National health care loans include loans to health care professionals, primarily dental practitioners, operating outside of Pacific Continental Bank’s market area. The market area is defined as Oregon and Washington, West of the Cascade Mountain Range.
(2)  Dental loans include loans to dental professionals for the purpose of practice expansion, acquisition or other purpose, supported by the cash flows of a dental practice.


PACIFIC CONTINENTAL CORPORATION

Selected Other Financial Information and Ratios

(In thousands)

(Unaudited)

 

     Three months ended     Six months ended  
     June 30,     March 31,     June 30,     June 30,     June 30,  
     2015     2015     2014     2015     2014  

BALANCE SHEET AVERAGES

          

Loans, net of deferred fees

   $ 1,273,148      $ 1,093,381      $ 1,026,937      $ 1,183,761      $ 1,017,800   

Allowance for loan losses

     (15,782     (15,675     (15,546     (15,729     (15,725
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans, net of allowance

  1,257,366      1,077,706      1,011,391      1,168,032      1,002,075   

Securities and short-term deposits

  398,836      371,061      348,985      385,026      349,874   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earning assets

  1,656,202      1,448,767      1,360,376      1,553,058      1,351,949   

Noninterest-earning assets

  144,325      125,000      113,094      134,715      115,368   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Assets

$ 1,800,527    $ 1,573,767    $ 1,473,470    $ 1,687,773    $ 1,467,317   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest-bearing core deposits(1)

$ 901,577    $ 760,838    $ 648,530    $ 831,596    $ 647,825   

Noninterest-bearing core deposits(1)

  508,259      439,780      362,204      474,209      353,833   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Core deposits(1)

  1,409,836      1,200,618      1,010,734      1,305,805      1,001,658   

Noncore interest-bearing deposits

  73,469      82,986      105,229      78,201      103,336   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Deposits

  1,483,305      1,283,604      1,115,963      1,384,006      1,104,994   

Borrowings

  100,747      91,051      171,385      95,925      176,355   

Other noninterest-bearing liabilities

  5,466      6,772      4,545      6,117      4,912   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities

  1,589,518      1,381,427      1,291,893      1,486,048      1,286,261   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Shareholders’ equity (book)

  211,009      192,340      181,577      201,725      181,056   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and equity

$ 1,800,527    $ 1,573,767    $ 1,473,470    $ 1,687,773    $ 1,467,317   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Shareholders’ equity (tangible)(2)

$ 167,757    $ 161,247    $ 158,006    $ 164,516    $ 157,470   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Period-end earning assets

$ 1,682,327    $ 1,630,970    $ 1,374,215   
  

 

 

   

 

 

   

 

 

     

SELECTED MARKET DEPOSIT DATA

Eugene market core deposits, period-end(1)

$ 759,079    $ 742,397    $ 616,294   

Portland market core deposits, period-end(1)

  521,317      516,976      250,288   

Seattle market core deposits, period-end(1)

  164,822      158,024      159,960   
  

 

 

   

 

 

   

 

 

     

Total core deposits, period-end(1)

  1,445,218      1,417,397      1,026,542   

Other deposits, period-end

  68,963      79,350      106,112   
  

 

 

   

 

 

   

 

 

     

Total

$ 1,514,181    $ 1,496,747    $ 1,132,654   
  

 

 

   

 

 

   

 

 

     

Eugene market core deposits, average(1)

$ 742,252    $ 711,718    $ 624,721   

Portland market core deposits, average(1)

  508,547      332,791      234,567   

Seattle market core deposits, average(1)

  159,037      156,109      151,446   
  

 

 

   

 

 

   

 

 

     

Total core deposits, average(1)

  1,409,836      1,200,618      1,010,734   

Other deposits, average

  73,469      82,986      105,229   
  

 

 

   

 

 

   

 

 

     

Total

$ 1,483,305    $ 1,283,604    $ 1,115,963   
  

 

 

   

 

 

   

 

 

     

NET INTEREST MARGIN RECONCILIATION

Yield on average loans (3)

  5.34   5.34   5.36   5.36   5.37

Yield on average securities(4)

  2.61   2.35   2.72   2.52   2.67
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Yield on average earning assets(4)

  4.67   4.57   4.68   4.63   4.67

Rate on average interest-bearing core deposits

  0.27   0.28   0.29   0.27   0.30

Rate on average interest-bearing non-core deposits

  1.33   1.41   1.36   1.37   1.32
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Rate on average interest-bearing deposits

  0.35   0.39   0.44   0.37   0.44

Rate on average borrowings

  1.19   1.27   0.80   1.23   0.78
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cost of interest-bearing funds

  0.43   0.48   0.50   0.45   0.50
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest rate spread(4)

  4.24   4.10   4.18   4.19   4.17
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest margin- fully tax equivalent yield(4)

  4.39   4.29   4.35   4.34   4.34
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Acquired loan fair value accretion impact to net interest margin (5)

  0.16   0.10   0.03   0.13   0.05
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1)  Core deposits include demand, interest checking, money market, savings, and local time deposits, including local nonpublic time deposits in excess of $100 thousand.
(2)  Tangible equity excludes goodwill and core deposit intangible assets related to acquisitions.
(3) Interest income includes recognized loan origination fees of $180, $147 and $138 for the three months ended June 30, 2015, March 31, 2015 and June 30, 2014, respectively, and $327 and $267 for the six months ended June 30, 2015 and 2014, respectively.
(4)  Tax-exempt income has been adjusted to a tax-equivalent basis at a 35% tax rate. The tax equivalent yield adjustment to interest earned on loans was $158, $82 and $31 for the three months ended June 30, 2015, March 31, 2015, and June 30, 2014 , respectively and $240 and $62 for the six months ended June 30, 2015 and 2014, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $268, $271 and $263 for the three months ended June 30, 2015, March 31, 2015 and June 30, 2014 , respectively, and $539 and $523 for the six months ended June 30, 2015 and 2014, respectively.
(5)  During the three months ended June 30, 2015, March 31, 2015 and June 30, 2014, accretion of the fair value adjustment on acquired loans contributed to interest income $635, $369, and $116, respectively, and $1,004 and $341 for the six months ended June 30, 2015 and 2014, respectively.


PACIFIC CONTINENTAL CORPORATION

Nonperforming Assets, Asset Quality Ratios and Allowance for Loan Losses

(Dollars in thousands, except per share data)

(Unaudited)

 

     June 30,
2015
    March 31,
2015
    June 30,
2014
 
NONPERFORMING ASSETS       

Non-accrual loans

      

Real estate secured loans:

      

Permanent loans:

      

Multi-family residential

   $ —        $ —        $ —     

Residential 1-4 family

     688        830        473   

Owner-occupied commercial

     1,117        1,117        1,703   

Nonowner-occupied commercial

     878        897        708   
  

 

 

   

 

 

   

 

 

 

Total permanent real estate loans

  2,683      2,844      2,884   

Construction loans:

Multi-family residential

  —        —        —     

Residential 1-4 family

  —        166      —     

Commercial real estate

  —        —        —     

Commercial bare land and acquisition & development

  —        —        —     

Residential bare land and acquisition & development

  —        —        —     
  

 

 

   

 

 

   

 

 

 

Total construction real estate loans

  —        166      —     
  

 

 

   

 

 

   

 

 

 

Total real estate loans

  2,683      3,010      2,884   

Commercial loans

  955      1,067      2,047   
  

 

 

   

 

 

   

 

 

 

Total nonaccrual loans

  3,638      4,077      4,931   

90-days past due and accruing interest

  —        —        —     

Total nonperforming loans

  3,638      4,077      4,931   
  

 

 

   

 

 

   

 

 

 

Nonperforming loans guaranteed by government

  (1,380   (1,422   (325

Net nonperforming loans

  2,258      2,635      4,606   
  

 

 

   

 

 

   

 

 

 

Other real estate owned

  12,666      14,167      11,531   
  

 

 

   

 

 

   

 

 

 

Total nonperforming assets, net of guaranteed loans

$ 14,924    $ 16,802    $ 16,137   
  

 

 

   

 

 

   

 

 

 

ASSET QUALITY RATIOS

Allowance for loan losses as a percentage of total loans outstanding

  1.23   1.25   1.52

Allowance for loan losses as a percentage of total nonperforming loans, net of government guarantees

  709.17   596.74   340.32

Net loan (recoveries) charge offs as a percentage of average loans, annualized

  0.05   -0.03   0.05

Net nonperforming loans as a percentage of total loans

  0.17   0.21   0.45

Nonperforming assets as a percentage of total assets

  0.82   0.94   1.08

Consolidated classified asset ratio(1)

  26.52   27.60   24.72

Past due as a percentage of total loans (2)

  0.19   0.35   0.08

 

     Three months ended     Six months ended  
     June 30,
2015
    March 31,
2015
    June 30,
2014
    June 30,
2015
    June 30,
2014
 

ALLOWANCE FOR LOAN LOSSES

          

Balance at beginning of period

   $ 15,724      $ 15,637      $ 15,394      $ 15,637      $ 15,917   

Provision for loan losses

     550        —          —          550        —     

Loan charge-offs

     (454     (73     (30     (527     (631

Loan recoveries

     193        160        311        353        389   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (charge-offs) recoveries

  (261   87      281      (174   (242
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

$ 16,013    $ 15,724    $ 15,675    $ 16,013    $ 15,675   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Consolidated classified asset ratio is defined as the sum of all loan-related contingent liabilities and loans internally graded substandard or worse, impaired loans (net of government guarantees), adversely classified securities, and other real estate owned, divided by total consolidated Tier 1 capital plus the allowance for loan losses.
(2)  Defined as loans past due more than 30 days and still accruing interest, as a percentage of total loans, net of deferred fees.


PACIFIC CONTINENTAL CORPORATION

Consolidated Financial Highlights

(Dollars in thousands, except per share data)

(Unaudited)

 

     2nd Quarter
2015
    1st Quarter
2015
    4th Quarter
2014
    3rd Quarter
2014
    2nd Quarter
2014
 

EARNINGS

          

Net interest income

   $ 17,696      $ 14,972      $ 14,374      $ 14,572      $ 14,457   

Provision for loan loss

   $ 550      $ —        $ —        $ —        $ —     

Noninterest income

   $ 1,627      $ 1,276      $ 1,318      $ 1,197      $ 1,156   

Noninterest expense

   $ 11,030      $ 11,972      $ 9,798      $ 9,149      $ 9,269   

Net income

   $ 5,095      $ 2,802      $ 3,631      $ 4,431      $ 4,148   

Basic earnings per share

   $ 0.26      $ 0.15      $ 0.20      $ 0.25      $ 0.23   

Diluted earnings per share

   $ 0.26      $ 0.15      $ 0.20      $ 0.25      $ 0.23   

Average shares outstanding

     19,562,363        18,232,076        17,717,270        17,749,217        17,889,562   

Average diluted shares outstanding

     19,788,884        18,444,971        17,939,752        17,970,458        18,119,412   

PERFORMANCE RATIOS

          

Return on average assets

     1.14     0.72     0.97     1.18     1.13

Return on average equity (book)

     9.68     5.91     7.85     9.69     9.16

Return on average equity (tangible) (1)

     12.18     7.05     9.01     11.13     10.53

Net interest margin - fully tax equivalent yield (2)

     4.39     4.29     4.25     4.29     4.35

Efficiency ratio (tax equivalent) (3)

     56.30     72.47     61.39     57.04     58.38

Full-time equivalent employees

     322        317        288        289        283   

CAPITAL

          

Tier 1 leverage ratio

     10.01     11.31     11.33     11.20     11.26

Common Equity tier 1 ratio

     11.27     11.41     NA        NA        NA   

Tier 1 risk based ratio

     11.78     11.97     14.48     14.44     14.48

Total risk based ratio

     12.88     13.08     15.73     15.69     15.73

Book value per share

   $ 10.82      $ 10.80      $ 10.39      $ 10.30      $ 10.20   

Regular cash dividend per share

   $ 0.10      $ 0.10      $ 0.10      $ 0.10      $ 0.10   

Special cash dividend per share

     NA        NA      $ 0.05      $ 0.03      $ 0.11   

ASSET QUALITY

          

Allowance for loan losses (ALL)

   $ 16,013      $ 15,724      $ 15,637      $ 15,722      $ 15,675   

Non performing loans (NPLs) net of government guarantees

   $ 2,258      $ 2,635      $ 1,989      $ 2,932      $ 4,606   

Non performing assets (NPAs) net of government guarantees

   $ 14,924      $ 16,802      $ 15,363      $ 16,109      $ 16,137   

Net loan (recoveries) charge offs

   $ 261      $ (87   $ 85      $ (47   $ (281

ALL as a percentage of gross loans

     1.23     1.25     1.50     1.52     1.52

ALL as a % NPLs, net of government guarantees

     709.17     596.74     786.17     536.22     340.32

Net loan charge offs (recoveries) to average loans

     0.05     -0.03     0.03     -0.02     -0.11

Net NPLs as a percentage of total loans

     0.17     0.21     0.19     0.28     0.45

Nonperforming assets as a percentage of total assets

     0.82     0.94     1.02     1.08     1.08

Consolidated classified asset ratio(4)

     26.52     27.60     24.54     24.27     24.72

Past due as a percentage of total loans (5)

     0.19     0.35     0.15     0.16     0.08

END OF PERIOD BALANCES

          

Total securities and short term deposits

   $ 393,408      $ 391,988      $ 356,804      $ 353,893      $ 359,869   

Total loans net of allowance

   $ 1,288,919      $ 1,238,982      $ 1,029,384      $ 1,019,127      $ 1,014,346   

Total earning assets

   $ 1,682,327      $ 1,630,970      $ 1,386,188      $ 1,373,020      $ 1,374,215   

Total assets

   $ 1,830,942      $ 1,780,849      $ 1,504,325      $ 1,489,719      $ 1,498,763   

Total non-interest bearing deposits

   $ 531,697      $ 503,735      $ 407,311      $ 390,790      $ 397,942   

Core deposits (6)

   $ 1,445,218      $ 1,417,397      $ 1,110,861      $ 1,047,211      $ 1,026,542   

Total deposits

   $ 1,514,181      $ 1,496,747      $ 1,209,093      $ 1,145,235      $ 1,132,654   

AVERAGE BALANCES

          

Total securities and short term deposits

   $ 398,836      $ 371,061      $ 356,389      $ 351,695      $ 348,985   

Total loans net of allowance

   $ 1,257,366      $ 1,077,706      $ 1,013,049      $ 1,023,266      $ 1,011,391   

Total earning assets

   $ 1,656,202      $ 1,448,767      $ 1,369,438      $ 1,374,961      $ 1,360,376   

Total assets

   $ 1,800,527      $ 1,573,767      $ 1,484,542      $ 1,488,747      $ 1,473,470   

Total non-interest bearing deposits

   $ 508,259      $ 439,780      $ 404,569      $ 391,738      $ 362,204   

Core deposits (6)

   $ 1,409,836      $ 1,200,618      $ 1,082,950      $ 1,037,336      $ 1,010,734   

Total deposits

   $ 1,483,305      $ 1,283,604      $ 1,176,938      $ 1,141,897      $ 1,115,963   

 

(1) Tangible equity excludes goodwill and core deposit intangible assets related to acquisitions.
(2) Net interest margin is reported on a tax-equivalent yield basis at a 35% tax rate.
(3)  Efficiency ratio is noninterest expense as a percent of net interest income (on a tax-equivalent basis) plus noninterest income.
(4)  The sum of all loan-related contingent liabilities and loans internally graded substandard or worse, impaired loans (net of government guarantees), adversely classified securities, and other real estate owned, divided by total consolidated Tier 1 capital plus the allowance for loan losses.
(5)  Defined as loans past due more than 30 days and still accruing interest, as a percentage of total loans, net of deferred fees.
(6)  Core deposits include demand, interest checking, money market, savings, and local time deposits, including local nonpublic time deposits in excess of $100 thousand.