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8-K - FORM 8-K - PACIFIC CONTINENTAL CORPd55960d8k.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 Third Quarter 2015 Results

Earnings driven by strong loan growth.

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

Recent highlights:

 

    Achieved quarterly loan growth of $50.9 million.

 

    Achieved quarterly net income of $5.3 million, or $0.27 per diluted share.

 

    Achieved quarterly core deposit growth of $20.3 million.

 

    Achieved a return on average assets of 1.14%.

 

    Declared fourth quarter 2015 regular quarterly cash dividend of $0.11 per share.

 

    Efficiency ratio improved further to 55.12%.

 

    Recognized by Bank Director Magazine in their 2015 Performance scorecard as the 37th ranked bank in the nation of the 425 banks with assets between $1 billion and $5 billion as per the June 30, 2015 UBPR.

Net income

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

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

Loans

Growth in outstanding loans during the third quarter 2015 was a record $50.9 million, the single highest quarterly growth, not including acquisitions. Outstanding gross loans at September 30, 2015, were $1.36 billion. Organic loan growth during the third quarter 2015 was primarily attributable to increased commercial and industrial lending, funding of construction loans, and local real estate lending. Loan growth during the quarter occurred in all three of the Company’s primary markets. Loans to dental professionals were up $19.2 million from the previous quarter. At September 30, 2015, loans to dental practitioners totaled $340.3 million and represented 25.08% of the loan portfolio.

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


Core deposits

Period-end Company-defined core deposits at September 30, 2015, were $1.47 billion. Outstanding core deposits were up $20.3 million during the third quarter 2015. Average core deposits, which removes daily volatility in balances, were $1.48 billion for third quarter 2015 compared to $1.41 billion and $1.04 billion for second quarter 2015 and third quarter 2014, respectively. The increase in average core deposits on a linked-quarter and year-over-year basis was due to both organic growth and the March 2015 acquisition of Capital Pacific Bank. At period-end September 30, 2015, noninterest-bearing demand deposits totaled $544.0 million and represented 37.12% of core deposits.

Credit quality and statistics

During the third quarter, the Company made a $625 thousand provision for loan losses, compared to $550 thousand in second quarter 2015. The third quarter 2015 provision for loan losses was related to the loan growth experienced during the quarter, as credit quality statistics remained strong. With the acquisition of the Capital Pacific loan portfolio, the allowance for loan losses as a percentage of outstanding loans at September 30, 2015, declined to 1.23%, compared to 1.50% at December 31, 2014. This was a result of recording the Capital Pacific Bank acquired loans at their fair value, which included all credit risk adjustments. At September 30, 2015, the allowance for loan losses as a percentage of nonperforming loans, net of government guarantees, remained strong at 744.60%. During the third quarter 2015, the Company recorded net loan charge-offs of $26 thousand. For the first nine months of 2015, the Company recorded $200 thousand in net loan charge-offs.

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

Net interest margin

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

Noninterest income and expense

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

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

Capital levels

The Company’s consolidated capital ratios continued to be above the minimum thresholds for the FDIC’s “well-capitalized” designation. At September 30, 2015, the Company’s Tier 1 leverage ratio, Common Equity Tier 1 risk-based capital ratio, Tier 1 risk-based capital ratio, and Total risk-based capital ratios were 9.88%, 11.00%, 11.49%, and 12.58%, respectively. This is after the application of the Basel III regulatory capital framework. The FDIC’s minimum thresholds for a “well-capitalized” designation for these metrics were 5.00%, 6.50%, 8.00% and 10.00%, respectively.

Non-GAAP Financial Measures

In addition to results presented in accordance with generally accepted accounting principles (GAAP), this press release contains certain non-GAAP financial measures. The Company believes that such non-GAAP financial measures provide investors with information useful in understanding the Company’s financial performance; however, readers of this release are urged to review these non-GAAP financial measures in conjunction with the GAAP results as reported.


Financial measures such as tangible shareholders’ equity, are considered non-GAAP measures. Management believes including non-GAAP measures along with GAAP measures provides investors with a broader understanding of capital adequacy, funding sources and revenue trends. Tangible shareholders’ equity is calculated as total shareholders’ equity less goodwill and core deposit intangible assets. Additionally, tangible assets are calculated as total assets less goodwill and core deposit intangible assets.

The following table presents a reconciliation of ending total shareholders’ equity (GAAP) to ending tangible shareholders’ equity (non-GAAP), and total assets (GAAP) to total tangible assets (non-GAAP)

 

     September 30,      June 30,      September 30,  
     2015      2015      2014  
     (In thousands)  

Total shareholders’ equity

   $ 216,676       $ 212,015       $ 182,538   

Subtract:

        

Goodwill

     39,074         39,074         22,881   

Core deposit intangible assets

     4,028         4,151         644   
  

 

 

    

 

 

    

 

 

 

Tangible shareholders’ equity (non-GAAP)

   $ 173,574       $ 168,790       $ 159,013   
  

 

 

    

 

 

    

 

 

 

Total assets

   $ 1,878,283       $ 1,830,942       $ 1,489,719   

Subtract:

        

Goodwill

     39,074         39,074         22,881   

Core deposit intangible assets

     4,028         4,151         644   
  

 

 

    

 

 

    

 

 

 

Total tangible assets (non-GAAP)

   $ 1,835,181       $ 1,787,717       $ 1,466,194   
  

 

 

    

 

 

    

 

 

 

Conference call and audio webcast

Management will conduct a live conference call and audio webcast for interested parties relating to the Company’s results for the third quarter 2015 on Thursday, October 15, 2015, at 11:00 a.m. Pacific / 2:00 p.m. Eastern. To listen to the conference call, interested parties should call: (855) 215-7498 Passcode: 1554389. Following the formal remarks, a question and answer session will be open to all interested parties. The webcast will be available via Pacific Continental’s website www.therightbank.com. To listen to the live audio webcast, click on the webcast presentation link on the Company’s home page a few minutes before the presentation is scheduled to begin. An audio webcast replay is typically available within twenty-four hours following the live webcast and will be archived for one year on the Pacific Continental website. Any questions regarding the conference call presentation or webcast should be directed to Shannon Coffin, executive administrative assistant, at 541-686-8685.

About Pacific Continental Bank

Pacific Continental Bank, the operating subsidiary of Pacific Continental Corporation, delivers highly personalized services through fifteen banking offices in Oregon and Washington. The Bank also operates loan production offices in Tacoma, Washington and Denver, Colorado. Pacific Continental, with approximately $1.9 billion in assets, has established one of the most unique and attractive metropolitan branch networks in the Pacific Northwest with offices in three of the region’s largest markets, including Seattle, Portland and Eugene. Pacific Continental targets the banking needs of community-based businesses, health care professionals, professional service providers and nonprofit organizations.

Since its founding in 1972, Pacific Continental Bank has been honored with numerous awards and recognitions from highly regarded third-party organizations including The Seattle Times, the Portland Business Journal, the Seattle Business magazine and Oregon Business magazine. A complete list of the company’s awards and recognitions – as well as supplementary information about Pacific Continental Bank – can be found online at www.therightbank.com. Pacific Continental Corporation’s shares are listed on the Nasdaq Global Select Market under the symbol “PCBK” and are a component of the Russell 2000 Index.

Forward-Looking Statement Safe Harbor

This release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”). These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forward-looking statements often use words such as “anticipates,” “targets,” “expects,” “estimates,” “intends,” “plans,” “goals,” “believes” and other similar expressions or future or conditional verbs such as “will,” “should,” “would” and “could.” The forward-looking statements made represent Pacific Continental’s current estimates, projections, expectations, plans or forecasts of its future results and revenues, including but not limited to statements about performance, loan or deposit growth, capital position, liquidity, credit quality, credit quality trends, competition and economic conditions generally and the impact and effects of recent acquisitions. These statements are not guarantees of future results or performance and involve certain risks, uncertainties and assumptions that are difficult to predict and are often beyond Pacific Continental’s control. Actual outcomes


and results may differ materially from those expressed in, or implied by, any of these forward-looking statements. You should not place undue reliance on any forward-looking statement and should consider all of the following uncertainties and risks, as well as those more fully discussed under “Risk Factors”, “Business”, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Pacific Continental’s most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, and in any of Pacific Continental’s subsequent SEC filings, including the high concentration of loans of the Company’s banking subsidiary in commercial and residential real estate lending and in loans to dental professionals; adverse economic trends in the United States and the markets we serve affecting the Bank’s borrower base; continued erosion or sustained low levels of consumer confidence; changes in the Federal Reserve’s monetary policies and the regulatory environment and increases in associated costs, particularly ongoing compliance expenses and resource allocation needs; vendor quality and efficiency; the Company’s ability to control risks associated with rapidly changing technology both from an internal perspective as well as for external providers; operational systems or infrastructure failures; increased competition; fluctuating interest rates; a tightening of available credit; the potential adverse impact of legal or regulatory proceedings; and risks related to acquisitions, including integration, retention of key personnel and business, anticipated cost savings and results and performance of the acquired company or the combined entity. Pacific Continental Corporation undertakes no obligation to publicly revise or update any forward-looking statement to reflect the impact of events or circumstances that arise after the date of this release. This statement is included for the express purpose of invoking Private Securities Litigation Reform Act (PSLRA)’s safe harbor provisions.


PACIFIC CONTINENTAL CORPORATION

Consolidated Income Statements

(In thousands, except share and per share amounts)

(Unaudited)

 

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

Interest and dividend income

          

Loans

   $ 17,240      $ 16,594      $ 13,703        3.89 %     25.81

Taxable securities

     1,713        1,736        1,547        -1.32     10.73

Tax-exempt securities

     490        499        500        -1.80     -2.00

Federal funds sold & interest-bearing deposits with banks

     7        11        3        -36.36     133.33
  

 

 

   

 

 

   

 

 

     
     19,450        18,840        15,753        3.24 %     23.47
  

 

 

   

 

 

   

 

 

     

Interest expense

          

Deposits

     854        845        843        1.07 %     1.30

Federal Home Loan Bank & Federal Reserve borrowings

     227        239        278        -5.02     -18.35

Junior subordinated debentures

     57        56        57        1.79 %     0.00

Federal funds purchased

     4        4        3        0.00 %     33.33
  

 

 

   

 

 

   

 

 

     
     1,142        1,144        1,181        -0.17     -3.30
  

 

 

   

 

 

   

 

 

     

Net interest income

     18,308        17,696        14,572        3.46 %     25.64

Provision for loan losses

     625        550        —          13.64 %     NA   
  

 

 

   

 

 

   

 

 

     

Net interest income after provision for loan losses

     17,683        17,146        14,572        3.13 %     21.35
  

 

 

   

 

 

   

 

 

     

Noninterest income

          

Service charges on deposit accounts

     703        661        524        6.35 %     34.16

Bankcard income

     276        214        211        28.97 %     30.81

Bank-owned life insurance income

     156        170        118        -8.24     32.20

Gain on sale of investment securities

     143        139        3        2.88 %     4666.67

Impairment losses on investment securities (OTTI)

     —          (13     —          -100.00     NA   

Other noninterest income

     436        456        341        -4.39     27.86
  

 

 

   

 

 

   

 

 

     
     1,714        1,627        1,197        5.35 %     43.19
  

 

 

   

 

 

   

 

 

     

Noninterest expense

          

Salaries and employee benefits

     6,822        6,992        5,939        -2.43     14.87

Premises and equipment

     1,148        1,094        958        4.94 %     19.83

Data processing

     838        821        657        2.07 %     27.55

Legal and professional fees

     496        491        148        1.02 %     235.14

Business development

     369        411        344        -10.22     7.27

FDIC insurance assessment

     283        273        209        3.66 %     35.41

Other real estate expense (income)

     122        (60     100        -303.33     22.00

Other noninterest expense

     1,104        1,008        794        9.52 %     39.04
  

 

 

   

 

 

   

 

 

     
     11,182        11,030        9,149        1.38 %     22.22
  

 

 

   

 

 

   

 

 

     

Income before provision for income taxes

     8,215        7,743        6,620        6.10 %     24.09

Provision for income taxes

     2,890        2,648        2,189        9.14 %     32.02
  

 

 

   

 

 

   

 

 

     

Net income

   $ 5,325      $ 5,095      $ 4,431        4.51 %     20.18
  

 

 

   

 

 

   

 

 

     

Earnings per share:

          

Basic

   $ 0.27      $ 0.26      $ 0.25        3.85 %     8.00
  

 

 

   

 

 

   

 

 

     

Diluted

   $ 0.27      $ 0.26      $ 0.25        3.85 %     8.00
  

 

 

   

 

 

   

 

 

     

Weighted average shares outstanding:

          

Basic

     19,591,666        19,562,363        17,749,217       

Common stock equivalents attributable to stock-based awards

     225,104        226,521        221,241       
  

 

 

   

 

 

   

 

 

     

Diluted

     19,816,770        19,788,884        17,970,458       
  

 

 

   

 

 

   

 

 

     

PERFORMANCE RATIOS

          

Return on average assets

     1.14     1.14     1.18    

Return on average equity (book)

     9.91     9.68     9.69    

Return on average equity (tangible) (1)

     12.42     12.18     11.13    

Net interest margin - fully tax-equivalent yield (2)

     4.32     4.39     4.29    

Efficiency ratio (3)

     55.12     56.30     57.04    

 

(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.

 

NA Not applicable


PACIFIC CONTINENTAL CORPORATION

Year-to-Date Consolidated Income Statements

(In thousands, except share and per share amounts)

(Unaudited)

 

     Nine months ended     Year over  
     September 30,
2015
    September 30,
2014
    Year
% Change
 

Interest and dividend income

      

Loans

   $ 48,020      $ 40,391        18.89

Taxable securities

     4,825        4,693        2.81

Tax-exempt securities

     1,491        1,471        1.36

Federal funds sold & interest-bearing deposits with banks

     23        7        228.57
  

 

 

   

 

 

   
     54,359        46,562        16.75
  

 

 

   

 

 

   

Interest expense

      

Deposits

     2,509        2,469        1.62

Federal Home Loan Bank & Federal Reserve borrowings

     694        838        -17.18

Junior subordinated debentures

     169        169        0.00

Federal funds purchased

     10        12        -16.67
  

 

 

   

 

 

   
     3,382        3,488        -3.04
  

 

 

   

 

 

   

Net interest income

     50,977        43,074        18.35

Provision for loan losses

     1,175        —          NA   
  

 

 

   

 

 

   

Net interest income after provision for loan losses

     49,802        43,074        15.62
  

 

 

   

 

 

   

Noninterest income

      

Service charges on deposit accounts

     1,939        1,582        22.57

Bankcard income

     687        657        4.57

Bank-owned life insurance income

     435        352        23.58

Gain (loss) on sale of investment securities

     336        (34     -1088.24

Impairment losses on investment securities (OTTI)

     (13     —          NA   

Other noninterest income

     1,234        1,119        10.28
  

 

 

   

 

 

   
     4,618        3,676        25.63
  

 

 

   

 

 

   

Noninterest expense

      

Salaries and employee benefits

     20,223        17,851        13.29

Premises and equipment

     3,221        2,825        14.02

Data processing

     2,343        2,019        16.05

Legal and professional fees

     1,386        889        55.91

Business development

     1,134        1,059        7.08

FDIC insurance assessment

     769        647        18.86

Other real estate expense

     303        338        -10.36

Merger related expense (1)

     1,836        —          NA   

Other noninterest expense

     2,971        2,302        29.06
  

 

 

   

 

 

   
     34,186        27,930        22.40
  

 

 

   

 

 

   

Income before provision for income taxes

     20,234        18,820        7.51

Provision for income taxes

     7,012        6,409        9.41
  

 

 

   

 

 

   

Net income

   $ 13,222      $ 12,411        6.53
  

 

 

   

 

 

   

Earnings per share:

      

Basic

   $ 0.69      $ 0.70        -1.43
  

 

 

   

 

 

   

Diluted

   $ 0.68      $ 0.69        -1.45
  

 

 

   

 

 

   

Weighted average shares outstanding:

      

Basic

     19,133,682        17,844,914     

Common stock equivalents attributable to stock-based awards

     224,308        229,687     
  

 

 

   

 

 

   

Diluted

     19,357,990        18,074,601     
  

 

 

   

 

 

   

PERFORMANCE RATIOS

      

Return on average assets

     1.01     1.13  

Return on average equity (book)

     8.60     9.16  

Return on average equity (tangible) (2)

     10.62     10.53  

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

     4.34     4.32  

Efficiency ratio (4)

     60.62     58.75  

 

(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)

 

     September 30,
2015
    June 30,
2015
    September 30,
2014
    Linked
Quarter
% Change
    Year over
Year
% Change
 

ASSETS

          

Cash and due from banks

   $ 21,698      $ 29,812      $ 18,671        -27.22     16.21

Interest-bearing deposits with banks

     11,293        9,790        5,841        15.35     93.34
  

 

 

   

 

 

   

 

 

     

Total cash and cash equivalents

     32,991        39,602        24,512        -16.69     34.59

Securities available-for-sale

     387,073        383,618        348,052        0.90     11.21

Loans, less allowance for loan losses and net deferred fees

     1,339,195        1,288,919        1,019,127        3.90     31.41

Interest receivable

     5,688        5,833        4,759        -2.49     19.52

Federal Home Loan Bank stock

     6,768        5,468        10,125        23.77     -33.16

Property and equipment, net of accumulated depreciation

     17,708        17,854        18,040        -0.82     -1.84

Goodwill and intangible assets

     43,102        43,225        23,525        -0.28     83.22

Deferred tax asset

     5,319        6,036        7,247        -11.88     -26.60

Taxes receivable

     587        103        —          469.90     NA   

Other real estate owned

     11,854        12,666        13,177        -6.41     -10.04

Bank-owned life insurance

     22,727        22,571        16,488        0.69     37.84

Other assets

     5,271        5,047        4,667        4.44     12.94
  

 

 

   

 

 

   

 

 

     

Total assets

   $ 1,878,283      $ 1,830,942      $ 1,489,719        2.59     26.08
  

 

 

   

 

 

   

 

 

     

LIABILITIES AND SHAREHOLDERS’ EQUITY

          

Deposits

          

Noninterest-bearing demand

   $ 544,009      $ 531,697      $ 390,790        2.32     39.21

Savings and interest-bearing checking

     831,933        825,858        598,776        0.74     38.94

Core time deposits

     89,605        87,663        57,645        2.22     55.44
  

 

 

   

 

 

   

 

 

     

Total core deposits (2)

     1,465,547        1,445,218        1,047,211        1.41     39.95

Non-core time deposits

     59,407        68,963        98,024        -13.86     -39.40
  

 

 

   

 

 

   

 

 

     

Total deposits

     1,524,954        1,514,181        1,145,235        0.71     33.16

Securities sold under agreements to repurchase

     302        368        1,067        -17.93     -71.70

Federal funds and overnight funds purchased

     5,000        5,500        670        -9.09     646.27

Federal Home Loan Bank borrowings

     116,500        84,000        145,000        38.69     -19.66

Junior subordinated debentures

     8,248        8,248        8,248        0.00     0.00

Accrued interest and other payables

     6,603        6,630        6,961        -0.41     -5.14
  

 

 

   

 

 

   

 

 

     

Total liabilities

     1,661,607        1,618,927        1,307,181        2.64     27.11
  

 

 

   

 

 

   

 

 

     

Shareholders’ equity

          

Common stock: 50,000,000 shares authorized. Shares issued and outstanding: 19,591,703 at September 30, 2015, 19,591,532 at June 30, 2015 and 17,716,776 at September 30, 2014

     155,695        155,325        131,057        0.24     18.80

Retained earnings

     56,320        53,150        48,011        5.96     17.31

Accumulated other comprehensive income

     4,661        3,540        3,470        31.67     34.32
  

 

 

   

 

 

   

 

 

     
     216,676        212,015        182,538        2.20     18.70
  

 

 

   

 

 

   

 

 

     

Total liabilities and shareholders’ equity

   $ 1,878,283      $ 1,830,942      $ 1,489,719        2.59     26.08
  

 

 

   

 

 

   

 

 

     

CAPITAL RATIOS

          

Total capital (to risk weighted assets) (3)

     12.58     12.88     15.69    

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

     11.49     11.78     14.44    

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

     11.00     11.27     NA       

Tier I capital (to leverage assets) (3)

     9.88     10.01     11.20    

Tangible common equity (to tangible assets) (1)

     9.46     9.44     10.85    

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

     11.08     11.32     14.04    

OTHER FINANCIAL DATA

          

Shares outstanding at end of period

     19,591,703        19,591,532        17,716,776       

Tangible shareholders’ equity (1)

   $ 173,574      $ 168,790      $ 159,013       

Book value per share

   $ 11.06      $ 10.82      $ 10.30       

Tangible book value per share

   $ 8.86      $ 8.62      $ 8.98       

 

(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 2015 capital ratios have been compiled based on the new methodology. Capital ratios prior to 2015 have not been restated in conformity with the new methodology.

 


PACIFIC CONTINENTAL CORPORATION

Loans by Type

(In thousands)

(Unaudited)

 

     September 30,
2015
    June 30,
2015
    September 30,
2014
   

Linked

Quarter

% Change

   

Year over

Year

% Change

 

LOANS BY TYPE

          

Real estate secured loans:

          

Permanent loans:

          

Multi-family residential

   $ 64,083      $ 68,289      $ 50,563        -6.16     26.74

Residential 1-4 family

     58,313        57,112        44,610        2.10     30.72

Owner-occupied commercial

     353,255        346,065        249,657        2.08     41.50

Nonowner-occupied commercial

     288,539        275,077        180,648        4.89     59.72
  

 

 

   

 

 

   

 

 

     

Total permanent real estate loans

     764,190        746,543        525,478        2.36     45.43

Construction loans:

          

Multi-family residential

     9,340        6,590        19,178        41.73     -51.30

Residential 1-4 family

     30,834        30,145        35,421        2.29     -12.95

Commercial real estate

     39,259        31,659        32,946        24.01     19.16

Commercial bare land and acquisition & development

     16,947        15,870        12,264        6.79     38.18

Residential bare land and acquisition & development

     7,602        7,074        6,736        7.46     12.86
  

 

 

   

 

 

   

 

 

     

Total construction real estate loans

     103,982        91,338        106,545        13.84     -2.41
  

 

 

   

 

 

   

 

 

     

Total real estate loans

     868,172        837,881        632,023        3.62     37.36

Commercial loans

     479,018        459,458        398,702        4.26     20.14

Consumer loans

     3,575        3,783        3,348        -5.50     6.78

Other loans

     6,280        5,025        1,802        24.98     248.50
  

 

 

   

 

 

   

 

 

     

Gross loans

     1,357,045        1,306,147        1,035,875        3.90     31.00

Deferred loan origination fees

     (1,238     (1,215     (1,026     1.89     20.66
  

 

 

   

 

 

   

 

 

     
     1,355,807        1,304,932        1,034,849        3.90     31.01

Allowance for loan losses

     (16,612     (16,013     (15,722     3.74     5.66
  

 

 

   

 

 

   

 

 

     
   $ 1,339,195      $ 1,288,919      $ 1,019,127        3.90     31.41
  

 

 

   

 

 

   

 

 

     

SELECTED MARKET LOAN DATA

          

Eugene market gross loans, period-end

   $ 368,666      $ 358,806      $ 361,599        2.75     1.95

Portland market gross loans, period-end

     647,527        631,420        389,977        2.55     66.04

Seattle market gross loans, period-end

     137,830        134,341        132,827        2.60     3.77

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

     203,022        181,580        151,472        11.81     34.03
  

 

 

   

 

 

   

 

 

     

Total gross loans, period-end

   $ 1,357,045      $ 1,306,147      $ 1,035,875        3.90     31.00
  

 

 

   

 

 

   

 

 

     

DENTAL LOAN DATA (2)

          

Local Dental gross loans, period-end

   $ 155,137      $ 156,315      $ 164,271        -0.75     -5.56

National Dental gross loans, period-end

     185,161        164,740        142,817        12.40     29.65
  

 

 

   

 

 

   

 

 

     

Total gross dental loans, period-end

   $ 340,298      $ 321,055      $ 307,088        5.99     10.81
  

 

 

   

 

 

   

 

 

     

 

(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     Nine months ended  
     September 30,     June 30,     September 30,     September 30,     September 30,  
     2015     2015     2014     2015     2014  

BALANCE SHEET AVERAGES

          

Loans, net of deferred fees

   $ 1,335,897     $ 1,273,148      $ 1,038,970     $ 1,235,031      $ 1,024,935   

Allowance for loan losses

     (16,275 )     (15,782     (15,704 )     (15,913     (15,718
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans, net of allowance

     1,319,622       1,257,366        1,023,266       1,219,118        1,009,217   

Securities and short-term deposits

     400,428       398,836        351,695       390,216        350,487   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earning assets

     1,720,050       1,656,202        1,374,961       1,609,334        1,359,704   

Noninterest-earning assets

     139,368       144,325        113,786       136,283        114,835   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Assets

   $ 1,859,418     $ 1,800,527      $ 1,488,747     $ 1,745,617      $ 1,474,539   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest-bearing core deposits(1)

   $ 944,216     $ 901,577      $ 645,598     $ 869,548      $ 647,075   

Noninterest-bearing core deposits(1)

     538,768       508,259        391,738       495,965        366,607   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Core deposits(1)

     1,482,984       1,409,836        1,037,336       1,365,513        1,013,682   

Noncore interest-bearing deposits

     62,481       73,469        104,561       72,903        103,749   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Deposits

     1,545,465       1,483,305        1,141,897       1,438,416        1,117,431   

Borrowings

     93,211       100,747        158,418       95,011        170,311   

Other noninterest-bearing liabilities

     7,512       5,466        6,975       6,586        5,605   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities

     1,646,188       1,589,518        1,307,290       1,540,013        1,293,347   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Shareholders’ equity (book)

     213,230       211,009        181,457       205,604        181,192   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and equity

   $ 1,859,418     $ 1,800,527      $ 1,488,747     $ 1,745,617      $ 1,474,539   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Shareholders’ equity (tangible)(2)

   $ 170,062     $ 167,757      $ 157,916     $ 166,387      $ 157,621   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Period-end earning assets

   $ 1,737,561     $ 1,682,327      $ 1,373,020      
  

 

 

   

 

 

   

 

 

     

SELECTED MARKET DEPOSIT DATA

          

Eugene market core deposits, period-end(1)

   $ 747,298     $ 759,079      $ 642,220      

Portland market core deposits, period-end(1)

     549,113       521,317        256,732      

Seattle market core deposits, period-end(1)

     169,136       164,822        148,259      
  

 

 

   

 

 

   

 

 

     

Total core deposits, period-end(1)

     1,465,547       1,445,218        1,047,211      

Other deposits, period-end

     59,407       68,963        98,024      
  

 

 

   

 

 

   

 

 

     

Total

   $ 1,524,954     $ 1,514,181      $ 1,145,235      
  

 

 

   

 

 

   

 

 

     

Eugene market core deposits, average(1)

   $ 776,755     $ 742,252      $ 634,412      

Portland market core deposits, average(1)

     537,911       508,547        250,029      

Seattle market core deposits, average(1)

     168,318       159,037        152,895      
  

 

 

   

 

 

   

 

 

     

Total core deposits, average(1)

     1,482,984       1,409,836        1,037,336      

Other deposits, average

     62,481       73,469        104,561      
  

 

 

   

 

 

   

 

 

     

Total

   $ 1,545,465     $ 1,483,305      $ 1,141,897      
  

 

 

   

 

 

   

 

 

     

NET INTEREST MARGIN RECONCILIATION

          

Yield on average loans(3)

     5.24 %     5.34     5.31 %     5.31     5.35

Yield on average securities(4)

     2.52 %     2.61     2.61 %     2.52     2.65
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Yield on average earning assets(4)

     4.59 %     4.67     4.62 %     4.62     4.66

Rate on average interest-bearing core deposits

     0.25 %     0.27     0.28 %     0.27     0.29

Rate on average interest-bearing non-core deposits

     1.58 %     1.33     1.48 %     1.43     1.37
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Rate on average interest-bearing deposits

     0.34 %     0.35     0.45 %     0.36     0.44

Rate on average borrowings

     1.23 %     1.19     0.85 %     1.23     0.80
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cost of interest-bearing funds

     0.41 %     0.43     0.52 %     0.44     0.51
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest rate spread(4)

     4.17 %     4.24     4.11 %     4.18     4.15
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest margin- fully tax equivalent yield(4)

     4.32 %     4.39     4.28 %     4.34     4.32
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

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

     0.13     0.16     0.03     0.14     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 $152, $180 and $157 for the three months ended September 30, 2015, June 30, 2015 and September 30, 2014, respectively, and $478 and $424 for the nine months ended September 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 $173, $168 and $32 for the three months ended September 30, 2015, June 30, 2015, and September 30, 2014, respectively, and $415 and $93 for the nine months ended September 30, 2015 and 2014, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $264, $268 and $269 for the three months ended September 30, 2015, June 30, 2015 and September 30, 2014 , respectively, and $803 and $792 for the nine months ended September 30, 2015 and 2014, respectively.
(5)  During the three months ended September 30, 2015, June 30, 2015 and September 30, 2014, accretion of the fair value adjustment on acquired loans contributed to interest income $616, $635, and $95, respectively, and $1,620 and $436 for the nine months ended September 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)

 

     September 30,
2015
    June 30,
2015
    September 30,
2014
 
NONPERFORMING ASSETS       

Non-accrual loans

      

Real estate secured loans:

      

Permanent loans:

      

Multi-family residential

   $ —        $ —        $ —     

Residential 1-4 family

     569        688        459  

Owner-occupied commercial

     2,371        1,117        787  

Nonowner-occupied commercial

     829        878        1,245  
  

 

 

   

 

 

   

 

 

 

Total permanent real estate loans

     3,769        2,683        2,491  

Construction loans:

      

Multi-family residential

     —          —          —     

Residential 1-4 family

     53        —          —     

Commercial real estate

     —          —          —     

Commercial bare land and acquisition & development

     —          —          —     

Residential bare land and acquisition & development

     —          —          —     
  

 

 

   

 

 

   

 

 

 

Total construction real estate loans

     53        —          —     
  

 

 

   

 

 

   

 

 

 

Total real estate loans

     3,822        2,683        2,491  

Commercial loans

     983        955        762  
  

 

 

   

 

 

   

 

 

 

Total nonaccrual loans

     4,805        3,638        3,253  

90-days past due and accruing interest

     —          —          —     

Total nonperforming loans

     4,805        3,638        3,253  
  

 

 

   

 

 

   

 

 

 

Nonperforming loans guaranteed by government

     (2,574     (1,380     (321 )

Net nonperforming loans

     2,231        2,258        2,932  
  

 

 

   

 

 

   

 

 

 

Other real estate owned

     11,854        12,666        13,177  
  

 

 

   

 

 

   

 

 

 

Total nonperforming assets, net of guaranteed loans

   $ 14,085      $ 14,924      $ 16,109  
  

 

 

   

 

 

   

 

 

 

ASSET QUALITY RATIOS

      

Allowance for loan losses as a percentage of total loans outstanding

     1.23     1.23     1.52 %

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

     744.60     709.17     536.22 %

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

     0.00     0.05     -0.02

Net nonperforming loans as a percentage of total loans

     0.16     0.17     0.28 %

Nonperforming assets as a percentage of total assets

     0.75     0.82     1.08 %

Consolidated classified asset ratio(1)

     25.14     26.52     24.27 %

Past due as a percentage of total loans (2)

     0.14 %     0.19 %     0.16 %

 

     Three months ended     Nine months ended  
     September 30,
2015
    June 30,
2015
    September 30,
2014
    September 30,
2015
    September 30,
2014
 

ALLOWANCE FOR LOAN LOSSES

          

Balance at beginning of period

   $ 16,013      $ 15,724      $ 15,675      $ 15,637      $ 15,917   

Provision for loan losses

     625        550        —          1,175        —     

Loan charge-offs

     (105     (454     (23     (631     (654

Loan recoveries

     79        193        70        431        459   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net (charge-offs) recoveries

     (26     (261     47        (200     (195
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

   $ 16,612      $ 16,013     $ 15,722     $ 16,612      $ 15,722   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(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)

 

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

EARNINGS

          

Net interest income

   $ 18,308      $ 17,696      $ 14,972      $ 14,374      $ 14,572   

Provision for loan loss

   $ 625      $ 550      $ —        $ —        $ —     

Noninterest income

   $ 1,714      $ 1,627      $ 1,276      $ 1,318      $ 1,197   

Noninterest expense

   $ 11,182      $ 11,030      $ 11,972      $ 9,798      $ 9,149   

Net income

   $ 5,325      $ 5,095      $ 2,802      $ 3,631      $ 4,431   

Basic earnings per share

   $ 0.27      $ 0.26      $ 0.15      $ 0.20      $ 0.25   

Diluted earnings per share

   $ 0.27      $ 0.26      $ 0.15      $ 0.20      $ 0.25   

Average shares outstanding

     19,591,666        19,562,363        18,232,076        17,717,270        17,749,217   

Average diluted shares outstanding

     19,816,770        19,788,884        18,444,971        17,939,752        17,970,458   

PERFORMANCE RATIOS

          

Return on average assets

     1.14     1.14     0.72     0.97     1.18

Return on average equity (book)

     9.91     9.68     5.91     7.85     9.69

Return on average equity (tangible) (1)

     12.42     12.18     7.05     9.01     11.13

Net interest margin - fully tax equivalent yield (2)

     4.32     4.39     4.29     4.25     4.29

Efficiency ratio (tax equivalent) (3)

     55.12     56.30     72.47     61.39     57.04

Full-time equivalent employees

     321        322        317        288        289   

CAPITAL

          

Tier 1 leverage ratio

     9.88     10.01     11.31     11.33     11.20

Common Equity tier 1 ratio

     11.00     11.27     11.41     NA        NA   

Tier 1 risk based ratio

     11.49     11.78     11.97     14.48     14.44

Total risk based ratio

     12.58     12.88     13.08     15.73     15.69

Book value per share

   $ 11.06      $ 10.82      $ 10.80      $ 10.39      $ 10.30   

Regular cash dividend per share

   $ 0.11      $ 0.10      $ 0.10      $ 0.10      $ 0.10   

Special cash dividend per share

     NA        NA        NA      $ 0.05      $ 0.03   

ASSET QUALITY

          

Allowance for loan losses (ALL)

   $ 16,612      $ 16,013      $ 15,724      $ 15,637      $ 15,722   

Non performing loans (NPLs) net of government guarantees

   $ 2,231      $ 2,258      $ 2,635      $ 1,989      $ 2,932   

Non performing assets (NPAs) net of government guarantees

   $ 14,085      $ 14,924      $ 16,802      $ 15,363      $ 16,109   

Net loan (recoveries) charge offs

   $ 26      $ 261      $ (87   $ 85      $ (47

ALL as a percentage of gross loans

     1.23     1.23     1.25     1.50     1.52

ALL as a % NPLs, net of government guarantees

     744.60     709.17     596.74     786.17     536.22

Net loan charge offs (recoveries) to average loans

     0.00     0.05     -0.03     0.03     -0.02

Net NPLs as a percentage of total loans

     0.16     0.17     0.21     0.19     0.28

Non performing assets as a percentage of total assets

     0.75     0.82     0.94     1.02     1.08

Consolidated classified asset ratio (4)

     25.14     26.52     27.60     24.54     24.27

Past due as a percentage of total loans (5)

     0.14     0.19     0.35     0.15     0.16

END OF PERIOD BALANCES

          

Total securities and short term deposits

   $ 398,366      $ 393,408      $ 391,988      $ 356,804      $ 353,893   

Total loans net of allowance

   $ 1,339,195      $ 1,288,919      $ 1,238,982      $ 1,029,384      $ 1,019,127   

Total earning assets

   $ 1,737,561      $ 1,682,327      $ 1,630,970      $ 1,386,188      $ 1,373,020   

Total assets

   $ 1,878,283      $ 1,830,942      $ 1,780,849      $ 1,504,325      $ 1,489,719   

Total non-interest bearing deposits

   $ 544,009      $ 531,697      $ 503,735      $ 407,311      $ 390,790   

Core deposits (6)

   $ 1,465,547      $ 1,445,218      $ 1,417,397      $ 1,110,861      $ 1,047,211   

Total deposits

   $ 1,524,954      $ 1,514,181      $ 1,496,747      $ 1,209,093      $ 1,145,235   

AVERAGE BALANCES

          

Total securities and short term deposits

   $ 400,428      $ 398,836      $ 371,061      $ 356,389      $ 351,695   

Total loans net of allowance

   $ 1,319,622      $ 1,257,366      $ 1,077,706      $ 1,013,049      $ 1,023,266   

Total earning assets

   $ 1,720,050      $ 1,656,202      $ 1,448,767      $ 1,369,438      $ 1,374,961   

Total assets

   $ 1,859,418      $ 1,800,527      $ 1,573,767      $ 1,484,542      $ 1,488,747   

Total non-interest bearing deposits

   $ 538,768      $ 508,259      $ 439,780      $ 404,569      $ 391,738   

Core deposits (6)

   $ 1,482,984      $ 1,409,836      $ 1,200,618      $ 1,082,950      $ 1,037,336   

Total deposits

   $ 1,545,465      $ 1,483,305      $ 1,283,604      $ 1,176,938      $ 1,141,897   

 

(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.