SOURCE: Capital Pacific Bank

January 23, 2014 13:14 ET

Capital Pacific Bancorp Reports Record Results in Fourth Quarter and Full Year 2013

PORTLAND, OR--(Marketwired - Jan 23, 2014) - Capital Pacific Bancorp (OTCQB: CPBO) (the Company), the parent company of Capital Pacific Bank (the Bank), a business bank focused on serving greater Portland area businesses, private schools, nonprofit organizations and companies committed to sustainable business practices, today reported financial results for the three months and twelve months ending December 31, 2013.

Highlights

  • Net income to common shareholders in 2013 was $1.80 million or $0.69 per common diluted share, up 62% compared with $1.11 million or $0.44 per common diluted share in 2012.
  • Net income to common shareholders in the fourth quarter of 2013 was $595,000 or $0.23 per common diluted share, a 72% increase from net income of $345,000 or $0.13 per diluted common share in the fourth quarter of 2012.
  • Total assets increased to $239.0 million at December 31, 2013, up 19% compared with $201.0 million at December 31, 2012. Commercial real estate lending was the primary driver of an 18% growth in loans, which totaled $187.98 million at December 31, 2013 compared with $159.20 million at December 31, 2012.
  • Total client deposits were $207.0 million at December 31, 2013 compared with $174.31 million at December 31, 2012, reflecting 19% growth.
  • Reflecting a year-long positive trend in asset quality, total non-performing assets, including troubled debt restructurings, declined to 1.63% of total assets in the fourth quarter of 2013 compared with 2.68% in the fourth quarter of 2012.
  • Return on average common equity (annualized) rose to 11.24% in the fourth quarter of 2013 from 7.06% in the fourth quarter of 2012. Return on average assets (annualized) increased to 1.02% in the fourth quarter of 2013 compared with 0.82% in the fourth quarter of 2012.
  • The Company's book value per common share increased to $8.36 at December 31, 2013 from $7.79 a year earlier.

"Our 2013 financial results validate that our business model generates profitable growth and builds shareholder value," said Mark Stevenson, President and CEO. "Income from core operations was the highest in our Company's history, reflecting steady growth of net interest income and meaningful top line revenue growth. Both loan and deposit growth was strong in the second half of the year and that momentum is contributing to our positive outlook for future growth."

"We provide financial solutions to the Portland area business community, with an emphasis in specific market niches such as nonprofit organizations and businesses committed to profitable and sustainable business practices," noted Stevenson. "Businesses committed to sustainability are represented across many sectors within the broader Portland market. Reinforced by our own Company's commitment to these same values, this is a sector that presents a significant growth opportunity for the Company in future periods."

He explained that one focus for the Company in future periods will be to leverage its expertise and leadership serving these niches and invest in complementary areas of financial services with the aim of diversifying and growing revenue streams.

Income Statement Highlights

The Company's net interest income in the fourth quarter of 2013 was $2.20 million, a 10% year-over-year increase compared with net interest income of $2.00 million in the fourth quarter of 2012. The Company had no provision for loan losses in the fourth quarter of 2013 compared with a $260,000 provision for loan losses in the fourth quarter of 2012. Excluding changes in expenses associated with non-performing assets, total non-interest expense in the fourth quarter of 2013 was $1.55 million compared with $1.63 million in the fourth quarter of 2012, a decrease of 5%.

Net interest income for the year ending December 31, 2013 grew 9% to $8.36 million compared with $7.64 million for the previous year. The Company's provision for loan losses for the year ending December 31, 2013 was $144,000, a 51% reduction compared with $295,000 for the year ending December 31, 2012. Both non-interest income and non-interest expense were relatively flat year over year.

Payments of preferred stock dividends declined 84% year-over-year due to the redemption of $4.20 million in preferred shares issued under TARP. The Company replaced the capital with long-term debt carrying an interest rate of 4.75% and tax-deductible interest payments. Due to attractive terms, the refinancing of the Company's former TARP securities was accretive to earnings per common share.

The Company reported a 4.08% net interest margin in the fourth quarter of 2013, compared with 3.98% in the fourth quarter of 2012. Stevenson said loan yields are showing signs of stabilization. This is because the vast majority of the existing loan portfolio was originated during an environment of very low interest rates. He expects the Company to maintain margins at or slightly below the 4% range until such time that short-term interest rates rise, which is expected to support some improvement in margins.

Balance Sheet Reflects Year-Over-Year Growth, Continued Asset Quality Improvement

Total loans of $187.98 million at December 31, 2013 reflected a 27% year-over-year growth in commercial real estate loans. "Our private and charter school sector was a leading contributor to loan growth accounting for approximately 35% of the increase," said Stevenson. "Other industry sectors also showed strength including nonprofit organizations, multifamily housing and investor-owned real estate."

Total client deposits at December 31, 2013 were $207.0 million compared with $174.31 million at December 31, 2012, up 19%. The Company also raised $5.00 million of brokered deposits to fund better than forecasted loan growth in the 4th quarter and anticipated seasonal client deposit fluctuations. The Company's loan to total deposit ratio was 88% at December 31, 2013.

"Although our deposit base has seasonal fluctuations at certain times of the year, we experienced sustainable year-over-year growth in total client deposits. This reflects our strategic focus on expanding banking relationships with existing customers and the acquisition of sizable new clients, many of whom migrated to the Company in the latter part of 2013," Stevenson noted.

"Slightly more than 50% of our deposits are transactional checking accounts and our cost of funds has remained unchanged for the year at 30 basis points," said Stevenson. "We added a small amount of low-cost brokered deposits in December to ensure we have plenty of resources to meet near-term liquidity needs and to fund loan growth."

Reflecting the Company's continued asset quality improvement, total non-performing assets, including performing troubled debt restructurings, declined to $3.90 million at December 31, 2013, or 1.63% of total assets, compared with $5.40 million or 2.68% of total assets at December 31, 2012.

"We remain very positive about asset quality trends," explained Stevenson. "We continue to work toward reducing our non-performing loan totals which predominantly reside with a few borrowers and have prudently reserved for troubled assets. We believe positive asset quality trends in 2013 underscore the strength of our credit and risk management practices."

Operational Efficiency Improvement, Capital Adequacy, and Outlook

The Company's efficiency ratio was 65.12% for the fourth quarter of 2013, reflecting consistent improvement throughout 2013 as the Company grew interest and non-interest income from a growing asset base, while recording only a 3% total rise in non-interest expense. The Company's average efficiency ratio for the year was 70.4%. Stevenson noted the decline from ratios in the mid-70% range in the first half of 2013 to the mid-60% range in the fourth quarter reflects the Company's focus on core operational improvements. Stevenson also said that future investments in new interest income and fee income-generating capabilities may impact the Company's efficiency ratio in the near term and that compensation costs are expected to rise. The Bank remained well-capitalized by accepted regulatory standards as of December 31, 2013, with a tier 1 leverage ratio of 10.33%, a tier 1 capital ratio of 11.95%, and a total risk based capital ratio of 13.21%.

"We have entered 2014 with a very positive attitude about our growth prospects and the strength of our balance sheet along with the capital resources necessary to selectively pursue initiatives that will grow the Company and achieve our long-term financial goals," Stevenson concluded. "We maintain our focus on building value for our shareholders and all stakeholders, as reflected through our continued profitable growth and utmost focus on the communities we serve."

About Capital Pacific Bancorp

Capital Pacific Bancorp (OTCQB: CPBO) is the parent company of Capital Pacific Bank, which provides comprehensive banking expertise to businesses, professionals and nonprofit organizations. Backed by a tradition of high touch customer service, Capital Pacific Bank delivers a full array of products and services and advanced technology solutions to help businesses meet their financial goals. For more information on Capital Pacific Bancorp or to see past press releases, visit www.capitalpacificbank.com.

Forward-looking statements

Statements in this release about future events or performance are forward-looking statements, which involve known and unknown risks, uncertainties and other factors that may cause the actual results of the Company to be materially different from any future results expressed or implied by such forward-looking statements. Factors that could affect future results include changes in the financial condition of our borrowers, changes in economic conditions generally, changes in non-performing assets, deteriorating asset values caused by market conditions, loan losses that exceed our reserve for loan losses, gains or losses on other real estate owned, fluctuations in interest rates and the impact any of these factors may have upon clients of the Company. Other factors include competition for loans and deposits within the Company's trade area, and the impact that may have upon growth or income. Although forward-looking statements help to provide complete information about the Company, readers should keep in mind that forward-looking statements may be less reliable than historical information. The Company undertakes no obligation to update or revise forward-looking statements in this release to reflect events or changes in circumstances that occur after the date of this release.

                   
Capital Pacific Bancorp
(unaudited and dollars in thousands)
Condensed Consolidated Balance Sheets   As of 12/31/13     As of 12/31/12     % change  
Cash and due from banks   $ 17,073     $ 3,643     369 %
Time certificates of deposits at other banks     -       5,181     -100 %
Investments     28,675       30,079     -5 %
Loans:                      
Construction     8,373       7,479     12 %
Real estate     148,048       117,030     27 %
Commercial     29,058       34,454     -16 %
Other     2,501       239     nm  
  Total loans     187,980       159,202     18 %
Loan loss reserve     (2,986 )     (2,642 )   13 %
  Total loans, net of loan loss reserve     184,994       156,560     18 %
Other real estate owned     157       198     -21 %
Other assets     8,106       5,381     51 %
  Total assets   $ 239,005     $ 201,042     19 %
                       
Deposits:                      
Non interest-bearing demand deposits   $ 66,205     $ 62,938     5 %
Interest-bearing demand deposits     43,259       20,851     107 %
Money market deposits     56,499       52,337     8 %
Certificates of deposit     41,032       38,187     7 %
  Total client deposits     206,995       174,313     19 %
                       
Brokered deposits     5,000       -     100 %
  Total deposits     211,995       174,313     22 %
                       
Other liabilities     2,179       2,900     -25 %
Long-term debt     3,655       -     nm  
Preferred stock     -       4,161     nm  
Common equity     21,176       19,668     8 %
  Total liabilities and shareholders' equity   $ 239,005     $ 201,042     19 %
                       
                       
                       
Capital Pacific Bancorp
(unaudited and dollars in thousands, except per share data)
Condensed Consolidated Income Statements   For the three months ending 12/31/13   For the three months ending 9/30/13   For the three months ending 12/31/12   Sequential quarter % change   Year over year % change  
Interest income   $ 2,344   $ 2,239   $ 2,115   5 % 11 %
Interest expense     146     145     118   1 % 24 %
  Net interest income     2,198     2,094     1,997   5 % 10 %
Provision for loan losses     -     144     260   nm   nm  
  Net interest income, net of provision for loan losses     2,198     1,950     1,737   13 % 27 %
Deposit fees and other non-interest income     224     200     178   12 % 26 %
Salaries and benefits     972     1,017     901   -4 % 8 %
Occupancy     175     165     156   6 % 12 %
Net expense (recovery) associated with non-performing assets     28     28     (252 ) 0 % nm  
Other non-interest expense     401     353     576   14 % -30 %
  Total non-interest expense     1,576     1,563     1,381   1 % 14 %
  Net income before tax expense     846     587     534   44 % 58 %
Income tax expense     251     156     124   61 % 102 %
  Net income   $ 595   $ 431   $ 410   38 % 45 %
Preferred stock dividends     -     -     (65 ) nm   -100 %
  Net income to common shareholders   $ 595   $ 431   $ 345   38 % 72 %
  Net income per common share, basic (1)   $ 0.24   $ 0.17   $ 0.14   41 % 71 %
  Net income per common share, fully diluted (1)   $ 0.23   $ 0.17   $ 0.13   35 % 77 %
Basic average common shares outstanding     2,532,494     2,531,264     2,517,500          
Fully diluted average common shares outstanding     2,615,756     2,612,881     2,571,300          
                             
                             
                             
Capital Pacific Bancorp  
(unaudited and dollars in thousands, except per share data)  
    For the year     For the year        
Condensed Consolidated Income Statements   ending 12/31/13     ending 12/31/12     % change  
Interest income   $ 8,936     $ 8,171     9 %
Interest expense     577       532     8 %
  Net interest income     8,359       7,639     9 %
Provision for loan losses     144       295     -51 %
  Net interest income, net of provision for loan losses     8,215       7,344     12 %
Deposit fees and other non-interest income     802       788     2 %
Salaries and benefits     3,853       3,727     3 %
Occupancy     661       625     6 %
Net expense (recovery) associated with non-performing assets     81       (63 )   nm  
Other non-interest expense     1,838       1,939     -5 %
  Total non-interest expense     6,433       6,228     3 %
  Net income before tax expense     2,584       1,904     36 %
Income tax expense     744       535     39 %
  Net income   $ 1,840     $ 1,369     34 %
Preferred stock dividends     (42 )     (258 )   -84 %
  Net income to common shareholders   $ 1,798     $ 1,111     62 %
  Net income per common share, basic (1)   $ 0.71     $ 0.44     61 %
  Net income per common share, fully diluted (1)   $ 0.69     $ 0.44     57 %
Basic average common shares outstanding     2,529,706       2,512,107        
Fully diluted average common shares outstanding     2,605,868       2,531,500        
                       
                       
                       
Capital Pacific Bancorp  
(unaudited and dollars in thousands, except per share data)  
Performance by Quarter   12/31/13     9/30/13     6/30/13     3/31/13     12/31/12  
                                         
Actual loans, gross   $ 187,980     $ 179,318     $ 168,560     $ 154,196     $ 159,202  
Average loans, gross   $ 181,518     $ 174,158     $ 157,989     $ 158,100     $ 151,536  
                                         
Loans past due 30-89 days (2)   $ -     $ -     $ -     $ -     $ -  
Loans past due 90 days or more (2)   $ -     $ -     $ -     $ -     $ -  
Loans on non-accrual status   $ 2,832     $ 3,663     $ 3,456     $ 3,627     $ 3,940  
Other real estate owned   $ 157     $ 157     $ 157     $ 198     $ 198  
Total non-performing assets   $ 2,989     $ 3,820     $ 3,613     $ 3,825     $ 4,138  
Total non-performing assets as a percentage of total assets     1.25 %     1.66 %     1.72 %     2.00 %     2.06 %
                                         
Performing troubled debt restructurings (not included in non-performing assets)   $ 913     $ 918     $ 922     $ 1,252     $ 1,262  
Total non-performing assets plus performing troubled debt restructurings   $ 3,902     $ 4,738     $ 4,535     $ 5,077     $ 5,400  
Total non-performing assets plus troubled debt restructurings as a percentage of total assets     1.63 %     2.06 %     2.16 %     2.66 %     2.68 %
                                         
Loan loss reserve   $ 2,986     $ 2,891     $ 2,739     $ 2,719     $ 2,642  
Loans charged off, net of recoveries / (recoveries, net of loans charged off)   $ (95 )   $ (9 )   $ (19 )   $ (77 )   $ 309  
Loan loss reserve as a percentage of loans     1.59 %     1.61 %     1.62 %     1.76 %     1.65 %
Loan loss reserve as a percentage of non-performing loans     105.44 %     78.92 %     79.25 %     74.97 %     67.06 %
                                         
Actual client deposits   $ 206,995     $ 204,127     $ 183,557     $ 163,893     $ 174,313  
Average client deposits   $ 203,529     $ 199,549     $ 178,058     $ 170,792     $ 184,740  
                                         
Net income   $ 595     $ 431     $ 364     $ 450     $ 410  
Net income available to common shareholders (1)   $ 595     $ 431     $ 364     $ 408     $ 345  
Net earnings per common share, basic (1)   $ 0.24     $ 0.17     $ 0.14     $ 0.16     $ 0.14  
Net earnings per common share, fully diluted (1)   $ 0.23     $ 0.17     $ 0.14     $ 0.16     $ 0.13  
                                         
Actual common shares outstanding     2,532,985       2,532,119       2,531,064       2,529,742       2,523,732  
Book value per common share   $ 8.36     $ 8.17     $ 8.00     $ 7.97     $ 7.79  
Tier 1 risk-based capital ratio (bank)     11.95 %     11.92 %     12.96 %     13.84 %     13.54 %
Tier 1 risk-based capital ratio (company)     10.50 %     10.45 %     11.09 %     11.80 %     13.88 %
                                         
Return on average common equity (1)     11.24 %     8.37 %     7.16 %     8.32 %     7.06 %
Return on average assets     1.02 %     0.76 %     0.71 %     0.92 %     0.82 %
Net interest margin (3) (4)     4.08 %     3.92 %     4.02 %     4.61 %     3.98 %
Efficiency ratio (4) (5) (6)     65.12 %     68.14 %     76.64 %     71.84 %     63.52 %
           
(1) Includes the dilutive effect of preferred stock dividends accrued during the period.
(2) Excludes loans that are no longer accruing interest.
(3) Tax exempt interest has been adjusted to a tax equivalent basis at a 34% tax rate. The amount of such adjustment was an addition to recorded interest income of approximately $115,000 and $94,000 for the three months ended December 31, 2013 and 2012, respectively and $405,000 and $346,000 for the year ended December 31, 2013 and 2012, respectively.
(4) The 1st quarter of 2013 includes $212,000 in one-time loan prepayment fees. Excluding the one-time fees, the net interest margin was 4.17% and the efficiency ratio was 77.97%.
(5) Calculated by dividing non-interest expense by the sum of net interest income and non-interest income.
(6) The 4th quarter of 2012 includes a one time pre-tax recovery of $282,000 in work-out related expenses. Excluding this recovery, the efficiency ratio was 76.48%.
nm = percentage not meaningful
 

Contact Information

  • Contact:
    Mark Stevenson
    President and CEO
    Felice Belfiore
    CFO
    (503) 796-0100