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8-K - FORM 8-K - PACIFIC CONTINENTAL CORPd70788d8k.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 Fourth Quarter and Annual 2015 Results

Earnings driven by strong growth, expense control, successful acquisition, and solid credit quality.

EUGENE, Ore., January 20, 2016 – Pacific Continental Corporation (Nasdaq: PCBK), the holding company of Pacific Continental Bank, today reported financial results for the fourth quarter and year ended December 31, 2015.

Fourth Quarter highlights:

 

    Achieved record net income of $5.5 million, or $0.28 per diluted share.

 

    Achieved a return on average assets of 1.16%.

 

    Improved tax-equivalent net interest margin to 4.36%.

 

    Efficiency ratio of 55.50%.

 

    Declared first quarter 2016 regular quarterly cash dividend of $0.11 per share.

 

    Recognized for the 16th consecutive year by Oregon Business magazine and for the 5th consecutive year by Seattle Business magazine as one of the Top 100 Companies to Work For.

 

    Recognized by Seattle Business magazine as the Business of the Year.

Full Year 2015 Highlights:

 

    Asset growth of $405 million, or 26.93%.

 

    Achieved annual net income of $18.8 million, or $0.97 per diluted share.

 

    Achieved a return on assets of 1.05%.

 

    Achieved a tax-equivalent net interest margin of 4.34%.

 

    Achieved organic loan growth of $156.6 million.

Net Income

Net income for fourth quarter 2015 was $5.5 million or $0.28 per diluted share compared to net income of $3.6 million or $0.20 per diluted share in fourth quarter 2014. Annualized returns on average assets, average equity and average tangible equity for fourth quarter 2015 were 1.16%, 10.10%, and 12.60%, respectively, compared to 0.97%, 7.85%, and 9.01% for fourth quarter 2014. In addition, the Company’s efficiency ratio improved to 55.50% for fourth quarter 2015 compared to 61.39% for the same quarter in 2014.

Net income for the full-year 2015 was $18.8 million, or $0.97 per diluted share, compared to net income of $16.0 million, or $0.89 per diluted share for the full year 2014. Return on average assets, average equity and average tangible equity for the full year 2015 were 1.05%, 8.99%, and 11.14%, respectively, compared to 1.09%, 8.83%, and 10.14% for the full year 2014. The Company’s efficiency ratio improved to 59.22% for full year 2015 compared to 59.41% for the full year 2014. Included in our 2015 expenses was $1.8 million in costs associated with the acquisition of Capital Pacific Bank, compared to $470 thousand in 2014.

“We are very proud of our outstanding results accomplished by our talented and dedicated team of community bankers and support teams for both the fourth quarter and full-year of 2015,” said Roger Busse, chief executive officer. “We continued to execute on our commitment to quality growth, as is reflected in reporting our third consecutive quarter of record earnings.”

Loans

Gross loans grew by $49 million in fourth quarter 2015, and totaled $1.41 billion at December 31, 2015. Organic loan growth during the fourth 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 flat from the previous quarter. At December 31, 2015, loans to dental practitioners totaled $340.2 million and represented 24.19% of the loan portfolio. The average tax-equivalent yield on the loan portfolio was 5.22% for the fourth quarter and 5.29% for the full-year 2015.

“Our loan growth was outstanding in 2015 and the fourth quarter was no exception with almost $50 million in organic loan growth,” said Casey Hogan, chief operating officer. “Our organic loan growth for the full year 2015 was approximately $157 million, which is on top of the $203 million in loans from the Capital Pacific acquisition. We further expanded existing relationships while growing in our markets with new clients and opportunities, and continue to be pleased with our strong pipelines as we head into the new year.”

Core Deposits

Period-end Company-defined core deposits at December 31, 2015, were $1.53 billion. Outstanding core deposits were up $68.4 million during the fourth quarter 2015. At December 31, 2015, noninterest-bearing demand deposits totaled $568.7 million and represented 37.07% of core deposits. Cost of funds on core deposits was 0.26% for both the fourth quarter and full-year 2015.

Credit Quality and Statistics

During the fourth quarter, the Company made a $520 thousand provision for loan losses and compared to $625 in the third quarter 2015. Fourth quarter 2015 provision for loan losses was primarily related to the loan growth experienced during the quarter, as credit quality statistics remained strong. As of December 31, 2015, the allowance for loan losses as a percentage of outstanding loans was 1.23%, approximately the same as it was as of September 30, 2015. With the acquisition of the Capital Pacific loan portfolio, the allowance for loan losses as a percentage of outstanding loans at December 31, 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 December 31, 2015, the allowance for loan losses as a percentage of nonperforming loans, net of government guarantees, remained strong at 636.30%. During the fourth quarter 2015, the Company recorded net loan recoveries of $169 thousand. For the full-year 2015, the Company recorded $31 thousand in net loan charge-offs.

At December 31, 2015, nonperforming assets, net of government guarantees, totaled $14.5 million, or 0.76% of total assets, compared to $14.1 million, or 0.75% of total assets, and $15.4 million, or 1.02% of total assets, at September 30, 2015 and December 31, 2014, respectively. Nonperforming assets at December 31, 2015, were comprised of $2.7 million of nonperforming loans, net of government guarantees, and $11.7 million in other real estate owned. Loans past-due 30-89 days were 0.03% of total loans at December 31, 2015, compared to 0.14% of total loans at September 30, 2015 and 0.15% of total loans at December 31, 2014.

Net Interest Margin

The fourth quarter 2015 net interest margin averaged 4.36%, an increase of four basis points over third quarter 2015 net interest margin, and an 11 basis point improvement over fourth quarter 2014 net interest margin. The increase in the linked-quarter net interest margin was primarily due to accretion of acquired loan fair value marks. The net accretion added 15 basis points to the fourth quarter 2015 margin, compared to 13 basis points for third quarter 2015. During fourth quarter 2015, the net accretion of loan fair value marks was $671 thousand, compared to $616 thousand for third quarter 2015. Accretion of fair value marks related to both the Capital Pacific acquisition completed in March 2015 and the Century Bank acquisition completed in February 2013.

Noninterest Income and Expense

Fourth quarter 2015 noninterest income was $2.0 million, up $294 thousand from third quarter 2015, and up $690 thousand from fourth quarter 2014. The increase in linked-quarter noninterest income was primarily due to gains on sales of securities. During the fourth quarter 2015, the bank sold approximately $16.5 million of securities, realizing a gain on sale of $337 thousand. The proceeds will be reinvested with a minimal impact to the duration and yield of the portfolio. 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.

“We will continue to look for opportunities for gains when appropriate, however our strategy is to ensure that any proceeds can be reinvested to achieve a minimal change in our portfolio yield, while remaining within our duration policy guidelines,” said Rick Sawyer, chief financial officer.


Noninterest expense in fourth quarter 2015 was $11.7 million, an increase of $524 thousand from third quarter 2015. The increase relates primarily to the salaries and benefits category, which increased by $456 thousand due primarily to new staff, an adjustment to the valuation of our liability based equity awards due to an increase in our stock price, and additional bonus expense required to bring the year-end accrual up to date.

Capital Levels

The Company’s consolidated capital ratios continued to be above the minimum thresholds for the FDIC’s “well-capitalized” designation. At December 31, 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 9.93%, 10.97%, 11.47%, and 12.58%, respectively. These ratios reflect the effectiveness of the U.S. Basel III regulatory capital rules. 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, and tangible assets, 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)

 

     December 31,
2015
     September 30,
2015
     December 31,
2014
 
     (In thousands)  

Total shareholders’ equity

   $ 218,491       $ 216,676       $ 184,161   

Subtract:

        

Goodwill

     39,255         39,074         22,881   

Core deposit intangible assets

     3,904         4,028         614   
  

 

 

    

 

 

    

 

 

 

Tangible shareholders’ equity (non-GAAP)

   $ 175,332       $ 173,574       $ 160,666   
  

 

 

    

 

 

    

 

 

 

Total assets

   $ 1,909,478       $ 1,878,283       $ 1,504,325   

Subtract:

        

Goodwill

     39,255         39,074         22,881   

Core deposit intangible assets

     3,904         4,028         614   
  

 

 

    

 

 

    

 

 

 

Total tangible assets (non-GAAP)

   $ 1,866,319       $ 1,835,181       $ 1,480,830   
  

 

 

    

 

 

    

 

 

 

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 fourth quarter 2015 on Thursday, January 21, 2016, 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, Denver, Colorado and San Francisco, California. 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, securities portfolio 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 the 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  
     December 31,     September 30,     December 31,     Quarter     Year  
     2015     2015     2014     % Change     % Change  

Interest and dividend income

          

Loans

   $ 17,674      $ 17,240      $ 13,464        2.52     31.27

Taxable securities

     1,707        1,713        1,499        -0.35     13.88

Tax-exempt securities

     485        490        500        -1.02     -3.00

Federal funds sold & interest-bearing deposits with banks

     11        7        3        57.14     266.67
  

 

 

   

 

 

   

 

 

     
     19,877        19,450        15,466        2.20     28.52
  

 

 

   

 

 

   

 

 

     

Interest expense

          

Deposits

     805        854        782        -5.74     2.94

Federal Home Loan Bank & Federal Reserve borrowings

     191        227        251        -15.86     -23.90

Junior subordinated debentures

     57        57        57        0.00     0.00

Federal funds purchased

     2        4        2        -50.00     0.00
  

 

 

   

 

 

   

 

 

     
     1,055        1,142        1,092        -7.62     -3.39
  

 

 

   

 

 

   

 

 

     

Net interest income

     18,822        18,308        14,374        2.81     30.94

Provision for loan losses

     520        625        —          -16.80     NA   
  

 

 

   

 

 

   

 

 

     

Net interest income after provision for loan losses

     18,302        17,683        14,374        3.50     27.33
  

 

 

   

 

 

   

 

 

     

Noninterest income

          

Service charges on deposit accounts

     705        703        552        0.28     27.72

Bankcard income

     342        276        294        23.91     16.33

Bank-owned life insurance income

     156        156        120        0.00     30.00

Gain on sale of investment securities

     337        143        —          135.66     NA   

Impairment losses on investment securities (OTTI)

     (8     —          —          NA        NA   

Other noninterest income

     476        436        352        9.17     35.23
  

 

 

   

 

 

   

 

 

     
     2,008        1,714        1,318        17.15     52.35
  

 

 

   

 

 

   

 

 

     

Noninterest expense

          

Salaries and employee benefits

     7,278        6,822        5,704        6.68     27.59

Premises and equipment

     1,126        1,148        910        -1.92     23.74

Data processing

     916        838        701        9.31     30.67

Legal and professional fees

     538        496        364        8.47     47.80

Business development

     507        369        472        37.40     7.42

FDIC insurance assessment

     282        283        221        -0.35     27.60

Other real estate expense

     42        122        111        -65.57     -62.16

Merger related expenses (1)

     —          —          470        NA        -100.00

Other noninterest expense

     1,017        1,104        845        -7.88     20.36
  

 

 

   

 

 

   

 

 

     
     11,706        11,182        9,798        4.69     19.47
  

 

 

   

 

 

   

 

 

     

Income before provision for income taxes

     8,604        8,215        5,894        4.74     45.98

Provision for income taxes

     3,076        2,890        2,263        6.44     35.93
  

 

 

   

 

 

   

 

 

     

Net income

   $ 5,528      $ 5,325      $ 3,631        3.81     52.24
  

 

 

   

 

 

   

 

 

     

Earnings per share:

          

Basic

   $ 0.28      $ 0.27      $ 0.20        3.70     40.00
  

 

 

   

 

 

   

 

 

     

Diluted

   $ 0.28      $ 0.27      $ 0.20        3.70     40.00
  

 

 

   

 

 

   

 

 

     

Weighted average shares outstanding:

          

Basic

     19,598,484        19,591,666        17,717,151       

Common stock equivalents attributable to stock-based awards

     167,614        225,104        222,482       
  

 

 

   

 

 

   

 

 

     

Diluted

     19,766,098        19,816,770        17,939,633       
  

 

 

   

 

 

   

 

 

     

PERFORMANCE RATIOS

          

Return on average assets

     1.16     1.14     0.97    

Return on average equity (book)

     10.10     9.91     7.85    

Return on average equity (tangible) (2)

     12.60     12.42     9.01    

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

     4.36     4.32     4.25    

Efficiency ratio (4)

     55.50     55.12     61.39    

 

(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)

 

     Twelve months ended     Year over  
     December 31,     December 31,     Year  
     2015     2014     % Change  

Interest and dividend income

      

Loans

   $ 65,694      $ 53,855        21.98

Taxable securities

     6,532        6,191        5.51

Tax-exempt securities

     1,976        1,971        0.25

Federal funds sold & interest-bearing deposits with banks

     34        10        240.00
  

 

 

   

 

 

   
     74,236        62,027        19.68
  

 

 

   

 

 

   

Interest expense

      

Deposits

     3,314        3,252        1.91

Federal Home Loan Bank & Federal Reserve borrowings

     885        1,088        -18.66

Junior subordinated debentures

     226        225        0.44

Federal funds purchased

     11        14        -21.43
  

 

 

   

 

 

   
     4,436        4,579        -3.12
  

 

 

   

 

 

   

Net interest income

     69,800        57,448        21.50

Provision for loan losses

     1,695        —          NA   
  

 

 

   

 

 

   

Net interest income after provision for loan losses

     68,105        57,448        18.55
  

 

 

   

 

 

   

Noninterest income

      

Service charges on deposit accounts

     2,644        2,134        23.90

Bankcard income

     1,029        951        8.20

Bank-owned life insurance income

     592        473        25.16

Gain (loss) on sale of investment securities

     672        (34     2076.47

Impairment losses on investment securities (OTTI)

     (22     —          NA   

Other noninterest income

     1,710        1,471        16.25
  

 

 

   

 

 

   
     6,625        4,995        32.63
  

 

 

   

 

 

   

Noninterest expense

      

Salaries and employee benefits

     27,501        23,555        16.75

Premises and equipment

     4,347        3,735        16.39

Data processing

     3,259        2,720        19.82

Legal and professional fees

     1,924        1,252        53.67

Business development

     1,640        1,531        7.12

FDIC insurance assessment

     1,051        868        21.08

Other real estate expense

     346        449        -22.94

Merger related expense (1)

     1,836        470        290.64

Other noninterest expense

     3,986        3,149        26.58
  

 

 

   

 

 

   
     45,890        37,729        21.63
  

 

 

   

 

 

   

Income before provision for income taxes

     28,840        24,714        16.69

Provision for income taxes

     10,089        8,672        16.34
  

 

 

   

 

 

   

Net income

   $ 18,751      $ 16,042        16.89
  

 

 

   

 

 

   

Earnings per share:

      

Basic

   $ 0.97      $ 0.90        7.78
  

 

 

   

 

 

   

Diluted

   $ 0.97      $ 0.89        8.99
  

 

 

   

 

 

   

Weighted average shares outstanding:

      

Basic

     19,250,838        17,821,580     

Common stock equivalents attributable to stock-based awards

     141,487        223,448     
  

 

 

   

 

 

   

Diluted

     19,392,325        18,045,028     
  

 

 

   

 

 

   

PERFORMANCE RATIOS

      

Return on average assets

     1.05     1.09  

Return on average equity (book)

     8.99     8.83  

Return on average equity (tangible) (2)

     11.14     10.14  

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

     4.34     4.30  

Efficiency ratio (4)

     59.22     59.41  

 

(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 and per share amounts)

(Unaudited)

 

                       Linked     Year over  
     December 31,     September 30,     December 31,     Quarter     Year  
     2015     2015     2014     % Change     % Change  

ASSETS

          

Cash and due from banks

   $ 23,819      $ 21,698      $ 20,929        9.78     13.81

Interest-bearing deposits with banks

     12,856        11,293        4,858        13.84     164.64
  

 

 

   

 

 

   

 

 

     

Total cash and cash equivalents

     36,675        32,991        25,787        11.17     42.22

Securities available-for-sale

     366,598        387,073        351,946        -5.29     4.16

Loans, net of deferred fees

     1,404,482        1,355,807        1,045,021        3.59     34.40

Allowance for loan losses

     (17,301     (16,612     (15,637     4.15     10.64

Interest receivable

     5,721        5,688        4,773        0.58     19.86

Federal Home Loan Bank stock

     5,208        6,768        10,019        -23.05     -48.02

Property and equipment, net of accumulated depreciation

     18,014        17,708        17,820        1.73     1.09

Goodwill and intangible assets

     43,159        43,102        23,495        0.13     83.69

Deferred tax asset

     5,670        5,319        4,464        6.60     27.02

Other real estate owned

     11,747        11,854        13,374        -0.90     -12.17

Bank-owned life insurance

     22,884        22,727        16,609        0.69     37.78

Other assets

     6,621        5,858        6,654        13.02     -0.50
  

 

 

   

 

 

   

 

 

     

Total assets

   $ 1,909,478      $ 1,878,283      $ 1,504,325        1.66     26.93
  

 

 

   

 

 

   

 

 

     

LIABILITIES AND SHAREHOLDERS’ EQUITY

          

Deposits

          

Noninterest-bearing demand

   $ 568,688      $ 544,009      $ 407,311        4.54     39.62

Savings and interest-bearing checking

     889,802        831,933        646,101        6.96     37.72

Core time deposits

     75,452        89,605        57,449        -15.79     31.34
  

 

 

   

 

 

   

 

 

     

Total core deposits (2)

     1,533,942        1,465,547        1,110,861        4.67     38.09

Non-core time deposits

     63,151        59,407        98,232        6.30     -35.71
  

 

 

   

 

 

   

 

 

     

Total deposits

     1,597,093        1,524,954        1,209,093        4.73     32.09

Securities sold under agreements to repurchase

     71        302        93        -76.49     -23.66

Federal funds and overnight funds purchased

     —          5,000        —          -100.00     NA   

Federal Home Loan Bank borrowings

     77,500        116,500        96,000        -33.48     -19.27

Junior subordinated debentures

     8,248        8,248        8,248        0.00     0.00

Accrued interest and other payables

     8,075        6,603        6,730        22.29     19.99
  

 

 

   

 

 

   

 

 

     

Total liabilities

     1,690,987        1,661,607        1,320,164        1.77     28.09
  

 

 

   

 

 

   

 

 

     

Shareholders’ equity

          

Common stock: 50,000,000 shares authorized. Shares issued and outstanding: 19,604,192 at December 31, 2015, 19,591,703 at September 30, 2015 and 17,716,776 at December 31, 2014

     156,099        155,695        131,375        0.26     18.82

Retained earnings

     59,693        56,320        48,984        5.99     21.86

Accumulated other comprehensive income

     2,699        4,661        3,802        -42.09     -29.01
  

 

 

   

 

 

   

 

 

     
     218,491        216,676        184,161        0.84     18.64
  

 

 

   

 

 

   

 

 

     

Total liabilities and shareholders’ equity

   $ 1,909,478      $ 1,878,283      $ 1,504,325        1.66     26.93
  

 

 

   

 

 

   

 

 

     

CAPITAL RATIOS

          

Total capital (to risk weighted assets) (3)

     12.58     12.58     15.73    

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

     11.47     11.49     14.48    

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

     10.97     11.00     NA       

Tier I capital (to leverage assets) (3)

     9.93     9.88     11.33    

Tangible common equity (to tangible assets)(1)

     9.39     9.46     10.85    

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

     10.96     11.08     14.11    

OTHER FINANCIAL DATA

          

Shares outstanding at end of period

     19,604,192        19,591,703        17,716,776       

Tangible shareholders’ equity(1)

   $ 175,332      $ 173,574      $ 160,666       

Book value per share

   $ 11.15      $ 11.06      $ 10.39       

Tangible book value per share

   $ 8.94      $ 8.86      $ 9.07       

 

(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, the U.S. Basel III capital framework methodology was implemented for all banks. The 2015 capital ratios have been presented 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)

 

                       Linked     Year over  
     December 31,     September 30,     December 31,     Quarter     Year  
     2015     2015     2014     % Change     % Change  

LOANS BY TYPE

          

Real estate secured loans:

          

Permanent loans:

          

Multi-family residential

   $ 66,445      $ 64,083      $ 51,586        3.69     28.80

Residential 1-4 family

     53,776        58,313        47,222        -7.78     13.88

Owner-occupied commercial

     364,742        353,255        259,805        3.25     40.39

Nonowner-occupied commercial

     300,774        288,539        201,558        4.24     49.22
  

 

 

   

 

 

   

 

 

     

Total permanent real estate loans

     785,737        764,190        560,171        2.82     40.27

Construction loans:

          

Multi-family residential

     7,027        9,340        8,472        -24.76     -17.06

Residential 1-4 family

     30,856        30,834        28,109        0.07     9.77

Commercial real estate

     42,680        39,259        18,595        8.71     129.52

Commercial bare land and acquisition & development

     20,537        16,947        12,159        21.18     68.90

Residential bare land and acquisition & development

     7,268        7,602        6,632        -4.39     9.59
  

 

 

   

 

 

   

 

 

     

Total construction real estate loans

     108,368        103,982        73,967        4.22     46.51
  

 

 

   

 

 

   

 

 

     

Total real estate loans

     894,105        868,172        634,138        2.99     41.00

Commercial loans

     501,976        479,018        406,568        4.79     23.47

Consumer loans

     3,351        3,575        3,862        -6.27     -13.23

Other loans

     6,580        6,280        1,443        4.78     355.99
  

 

 

   

 

 

   

 

 

     

Gross loans

     1,406,012        1,357,045        1,046,011        3.61     34.42

Deferred loan origination fees

     (1,530     (1,238     (990     23.59     54.55
  

 

 

   

 

 

   

 

 

     
     1,404,482        1,355,807        1,045,021        3.59     34.40

Allowance for loan losses

     (17,301     (16,612     (15,637     4.15     10.64
  

 

 

   

 

 

   

 

 

     
   $ 1,387,181      $ 1,339,195      $ 1,029,384        3.58     34.76
  

 

 

   

 

 

   

 

 

     

SELECTED MARKET LOAN DATA

          

Eugene market gross loans, period-end

   $ 379,048      $ 368,666      $ 363,953        2.82     4.15

Portland market gross loans, period-end

     667,995        647,527        407,466        3.16     63.94

Seattle market gross loans, period-end

     142,104        137,830        119,095        3.10     19.32

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

     216,865        203,022        155,497        6.82     39.47
  

 

 

   

 

 

   

 

 

     

Total gross loans, period-end

   $ 1,406,012      $ 1,357,045      $ 1,046,011        3.61     34.42
  

 

 

   

 

 

   

 

 

     

DENTAL LOAN DATA (2)

          

Local Dental gross loans, period-end

   $ 145,817      $ 155,137      $ 159,427        -6.01     -8.54

National Dental gross loans, period-end

     194,345        185,161        146,965        4.96     32.24
  

 

 

   

 

 

   

 

 

     

Total gross dental loans, period-end

   $ 340,162      $ 340,298      $ 306,392        -0.04     11.02
  

 

 

   

 

 

   

 

 

     

 

(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     Twelve months ended  
     December 31,     September 30,     December 31,     December 31,     December 31,  
     2015     2015     2014     2015     2014  

BALANCE SHEET AVERAGES

          

Loans, net of deferred fees

   $ 1,374,281      $ 1,335,897      $ 1,028,724      $ 1,270,129      $ 1,025,889   

Allowance for loan losses

     (16,820     (16,275     (15,675     (16,142     (15,707
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Loans, net of allowance

     1,357,461        1,319,622        1,013,049        1,253,987        1,010,182   

Securities and short-term deposits

     396,852        400,428        356,389        391,888        351,975   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Earning assets

     1,754,313        1,720,050        1,369,438        1,645,875        1,362,157   

Noninterest-earning assets

     138,949        139,368        115,104        136,957        114,903   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Assets

   $ 1,893,262      $ 1,859,418      $ 1,484,542      $ 1,782,832      $ 1,477,060   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest-bearing core deposits(1)

   $ 942,360      $ 944,216      $ 678,381      $ 887,901      $ 654,965   

Noninterest-bearing core deposits(1)

     584,445        538,768        404,569        518,267        376,175   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Core deposits(1)

     1,526,805        1,482,984        1,082,950        1,406,168        1,031,140   

Noncore interest-bearing deposits

     59,986        62,481        93,988        69,647        101,288   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Deposits

     1,586,791        1,545,465        1,176,938        1,475,815        1,132,428   

Borrowings

     81,872        93,211        116,567        91,700        156,765   

Other noninterest-bearing liabilities

     7,501        7,512        7,580        6,817        6,105   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities

     1,676,164        1,646,188        1,301,085        1,574,332        1,295,298   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Shareholders’ equity (book)

     217,098        213,230        183,457        208,500        181,762   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Liabilities and equity

   $ 1,893,262      $ 1,859,418      $ 1,484,542      $ 1,782,832      $ 1,477,060   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Shareholders’ equity (tangible)(2)

   $ 174,051      $ 170,062      $ 159,947      $ 168,317      $ 158,206   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Period-end earning assets

   $ 1,766,635      $ 1,737,561      $ 1,386,188       
  

 

 

   

 

 

   

 

 

     

SELECTED MARKET DEPOSIT DATA

          

Eugene market core deposits, period-end(1)

   $ 787,521      $ 747,298      $ 672,527       

Portland market core deposits, period-end(1)

     552,283        549,113        276,453       

Seattle market core deposits, period-end(1)

     194,138        169,136        161,881       
  

 

 

   

 

 

   

 

 

     

Total core deposits, period-end(1)

     1,533,942        1,465,547        1,110,861       

Other deposits, period-end

     63,151        59,407        98,232       
  

 

 

   

 

 

   

 

 

     

Total

   $ 1,597,093      $ 1,524,954      $ 1,209,093       
  

 

 

   

 

 

   

 

 

     

Eugene market core deposits, average(1)

   $ 783,391      $ 776,755      $ 668,927       

Portland market core deposits, average(1)

     562,026        537,911        263,757       

Seattle market core deposits, average(1)

     181,388        168,318        150,266       
  

 

 

   

 

 

   

 

 

     

Total core deposits, average(1)

     1,526,805        1,482,984        1,082,950       

Other deposits, average

     59,986        62,481        93,988       
  

 

 

   

 

 

   

 

 

     

Total

   $ 1,586,791      $ 1,545,465      $ 1,176,938       
  

 

 

   

 

 

   

 

 

     

NET INTEREST MARGIN RECONCILIATION

          

Yield on average loans (3)

     5.22     5.24     5.27     5.29     5.33

Yield on average securities(4)

     2.55     2.52     2.53     2.53     2.62
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Yield on average earning assets(4)

     4.60     4.59     4.56     4.61     4.63

Rate on average interest-bearing core deposits

     0.26     0.25     0.28     0.26     0.29

Rate on average interest-bearing non-core deposits

     1.30     1.58     1.29     1.40     1.35
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Rate on average interest-bearing deposits

     0.32     0.34     0.40     0.35     0.43

Rate on average borrowings

     1.21     1.23     1.06     1.22     0.85
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Cost of interest-bearing funds

     0.39     0.41     0.49     0.42     0.50
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Interest rate spread(4)

     4.21     4.17     4.07     4.19     4.13
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net interest margin- fully tax equivalent yield(4)

     4.36     4.32     4.25     4.34     4.30
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Acquiredloan fair value accretion impact to net interest margin (5)

     0.15     0.13     0.03     0.14     0.04
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(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 $223, $152, and $149 for the three months ended December 31, 2015, September 30, 2015, and December 31, 2014, respectively, and $702 and $574 for the twelve months ended December 31, 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 $198, $173 and $29 for the three months ended December 31, 2015, September 30, 2015, and December 31, 2014 , respectively, and $612 and $123 for the twelve months ended December 31, 2015 and 2014, respectively. The tax equivalent yield adjustment to interest earned on tax exempt securities was $261, $264 and $269 for the three months ended December 31, 2015, September 30, 2015, and December 31, 2014 , respectively, and $1,064 and $1,061 for the twelve months ended December 31, 2015 and 2014, respectively.
(5)  During the three months ended December 31, 2015, September 30, 2015, and December 31, 2014, accretion of the fair value adjustment on acquired loans contributed to interest income was $671, $616, and $90, respectively, and $2,291 and $526 for the twelve months ended December 31, 2015 and 2014, respectively.


PACIFIC CONTINENTAL CORPORATION

Nonperforming Assets, Asset Quality Ratios and Allowance for Loan Losses

(Dollars in thousands)

(Unaudited)

 

     December 31,     September 30,     December 31,  
     2015     2015     2014  
NONPERFORMING ASSETS       

Non-accrual loans

      

Real estate secured loans:

      

Permanent loans:

      

Multi-family residential

   $ —        $ —        $ —     

Residential 1-4 family

     733        569        321   

Owner-occupied commercial

     2,369        2,371        599   

Nonowner-occupied commercial

     790        829        906   
  

 

 

   

 

 

   

 

 

 

Total permanent real estate loans

     3,892        3,769        1,826   

Construction loans:

      

Multi-family residential

     —          —          —     

Residential 1-4 family

     53        53        —     

Commercial real estate

     —          —          —     

Commercial bare land and acquisition & development

     —          —          —     

Residential bare land and acquisition & development

     —          —          —     
  

 

 

   

 

 

   

 

 

 

Total construction real estate loans

     53        53        —     
  

 

 

   

 

 

   

 

 

 

Total real estate loans

     3,945        3,822        1,826   

Commercial loans

     1,564        983        869   
  

 

 

   

 

 

   

 

 

 

Total nonaccrual loans

     5,509        4,805        2,695   

90-days past due and accruing interest

     —          —          —     

Total nonperforming loans

     5,509        4,805        2,695   
  

 

 

   

 

 

   

 

 

 

Nonperforming loans guaranteed by government

     (2,790     (2,574     (706

Net nonperforming loans

     2,719        2,231        1,989   
  

 

 

   

 

 

   

 

 

 

Other real estate owned

     11,747        11,854        13,374   
  

 

 

   

 

 

   

 

 

 

Total nonperforming assets, net of guaranteed loans

   $ 14,466      $ 14,085      $ 15,363   
  

 

 

   

 

 

   

 

 

 

ASSET QUALITY RATIOS

      

Allowance for loan losses as a percentage of total loans outstanding

     1.23     1.22     1.50

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

     636.30     744.60     786.17

Quarter-to-date net loan charge offs (recoveries) as a percentage of average loans, annualized

     -0.02     0.00     0.03

Net nonperforming loans as a percentage of total loans

     0.19     0.16     0.19

Nonperforming assets as a percentage of total assets

     0.76     0.75     1.02

Consolidated classified asset ratio(1)

     23.03     25.14     24.54

Past due as a percentage of total loans (2)

     0.03     0.14     0.15

 

     Three months ended     Twelve months ended  
     December 31,     September 30,     December 31,     December 31,     December 31,  
     2015     2015     2014     2015     2014  

ALLOWANCE FOR LOAN LOSSES

          

Balance at beginning of period

   $ 16,612      $ 16,013      $ 15,722      $ 15,637      $ 15,917   

Provision for loan losses

     520        625        —          1,695        —     

Loan charge-offs

     (69     (105     (181     (700     (835

Loan recoveries

     238        79        96        669        555   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net recoveries (charge-offs)

     169        (26     (85     (31     (280
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Balance at end of period

   $ 17,301      $ 16,612      $ 15,637      $ 17,301      $ 15,637   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

(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 share and per share data)

(Unaudited)

 

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

EARNINGS

          

Net interest income

   $ 18,822      $ 18,308      $ 17,696      $ 14,972      $ 14,374   

Provision for loan loss

   $ 520      $ 625      $ 550      $ —        $ —     

Noninterest income

   $ 2,008      $ 1,714      $ 1,627      $ 1,276      $ 1,318   

Noninterest expense

   $ 11,706      $ 11,182      $ 11,030      $ 11,972      $ 9,798   

Net income

   $ 5,528      $ 5,325      $ 5,095      $ 2,802      $ 3,631   

Basic earnings per share

   $ 0.28      $ 0.27      $ 0.26      $ 0.15      $ 0.20   

Diluted earnings per share

   $ 0.28      $ 0.27      $ 0.26      $ 0.15      $ 0.20   

Average shares outstanding

     19,598,484        19,591,666        19,562,363        18,232,076        17,717,270   

Average diluted shares outstanding

     19,766,098        19,816,770        19,788,884        18,444,971        17,939,752   

PERFORMANCE RATIOS

          

Return on average assets

     1.16     1.14     1.14     0.72     0.97

Return on average equity (book)

     10.10     9.91     9.68     5.91     7.85

Return on average equity (tangible) (1)

     12.60     12.42     12.18     7.05     9.01

Net interest margin - fully tax equivalent yield (2)

     4.36     4.32     4.39     4.29     4.25

Efficiency ratio (tax equivalent) (3)

     55.50     55.12     56.30     72.47     61.39

Full-time equivalent employees

     322        321        322        317        288   

CAPITAL

          

Tier 1 leverage ratio (4)

     9.93     9.88     10.01     11.31     11.33

Common Equity tier 1 ratio (4)

     10.97     11.00     11.27     11.41     NA   

Tier 1 risk based ratio (4)

     11.47     11.49     11.78     11.97     14.48

Total risk based ratio (4)

     12.58     12.58     12.88     13.08     15.73

Book value per share

   $ 11.15      $ 11.06      $ 10.82      $ 10.80      $ 10.39   

Regular cash dividend per share

   $ 0.11      $ 0.11      $ 0.10      $ 0.10      $ 0.10   

Special cash dividend per share

     NA        NA        NA        NA      $ 0.05   

ASSET QUALITY

          

Allowance for loan losses (ALL)

   $ 17,301      $ 16,612      $ 16,013      $ 15,724      $ 15,637   

Non performing loans (NPLs) net of government guarantees

   $ 2,719      $ 2,231      $ 2,258      $ 2,635      $ 1,989   

Non performing assets (NPAs) net of government guarantees

   $ 14,466      $ 14,085      $ 14,924      $ 16,802      $ 15,363   

Net loan (recoveries) charge offs

   $ (169   $ 26      $ 261      $ (87   $ 85   

ALL as a percentage of gross loans

     1.23     1.23     1.23     1.25     1.50

ALL as a % NPLs, net of government guarantees

     636.30     744.60     709.17     596.74     786.17

Net loan charge offs (recoveries) to average loans

     -0.02     0.00     0.05     -0.03     0.03

Net NPLs as a percentage of total loans

     0.19     0.16     0.17     0.21     0.19

Nonperforming assets as a percentage of total assets

     0.76     0.75     0.82     0.94     1.02

Consolidated classified asset ratio(5)

     23.03     25.14     26.52     27.60     24.54

Past due as a percentage of total loans (6)

     0.03     0.14     0.19     0.35     0.15

END OF PERIOD BALANCES

          

Total securities and short term deposits

   $ 379,454      $ 398,366      $ 393,408      $ 391,988      $ 356,804   

Total loans net of allowance

   $ 1,387,181      $ 1,339,195      $ 1,288,919      $ 1,238,982      $ 1,029,384   

Total earning assets

   $ 1,766,635      $ 1,737,561      $ 1,682,327      $ 1,630,970      $ 1,386,188   

Total assets

   $ 1,909,478      $ 1,878,283      $ 1,830,942      $ 1,780,849      $ 1,504,325   

Total non-interest bearing deposits

   $ 568,688      $ 544,009      $ 531,697      $ 503,735      $ 407,311   

Core deposits (7)

   $ 1,533,942      $ 1,465,547      $ 1,445,218      $ 1,417,397      $ 1,110,861   

Total deposits

   $ 1,597,093      $ 1,524,954      $ 1,514,181      $ 1,496,747      $ 1,209,093   

AVERAGE BALANCES

          

Total securities and short term deposits

   $ 396,852      $ 400,428      $ 398,836      $ 371,061      $ 356,389   

Total loans net of allowance

   $ 1,357,461      $ 1,319,622      $ 1,257,366      $ 1,077,706      $ 1,013,049   

Total earning assets

   $ 1,754,313      $ 1,720,050      $ 1,656,202      $ 1,448,767      $ 1,369,438   

Total assets

   $ 1,893,262      $ 1,859,418      $ 1,800,527      $ 1,573,767      $ 1,484,542   

Total non-interest bearing deposits

   $ 584,445      $ 538,768      $ 508,259      $ 439,780      $ 404,569   

Core deposits (7)

   $ 1,526,805      $ 1,482,984      $ 1,409,836      $ 1,200,618      $ 1,082,950   

Total deposits

   $ 1,586,791      $ 1,545,465      $ 1,483,305      $ 1,283,604      $ 1,176,938   

 

(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)  In first quarter 2015, the U.S. Basel III capital framework methodology was implemented for all banks. The 2015 capital ratios have been presented based on the new methodology. Capital ratios prior to 2015 have not been restated in conformity with the new methodology.
(5)  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.
(6)  Defined as loans past due more than 30 days and still accruing interest, as a percentage of total loans, net of deferred fees.
(7)  Core deposits include demand, interest checking, money market, savings, and local time deposits, including local nonpublic time deposits in excess of $100 thousand.

 

NA Not applicable