SOURCE: Capital Pacific Bancorp

April 22, 2014 11:00 ET

Capital Pacific Bancorp Reports Strong Year-Over-Year Results in 1Q 2014

PORTLAND, OR--(Marketwired - Apr 22, 2014) -  Capital Pacific Bancorp (OTCQB: CPBO), (the Company), today reported financial results for the three months ending March 31, 2014. The Company is the parent company of Capital Pacific Bank (the Bank), a business bank focused on serving greater Portland area businesses, nonprofit organizations, private schools and companies committed to sustainable business practices.

Highlights

  • Net income to common shareholders in the first quarter of 2014 was $541,000 or $0.21 per common diluted share, up 32.6% compared with $408,000 or $0.16 per common diluted share in the first quarter of 2013.
  • Total assets were $232.25 million at March 31, 2014 compared with $190.92 million at March 31, 2013, primarily reflecting 21.1% year-over-year growth in loans.
  • Commercial real estate (CRE) lending was the primary driver of loan growth, as CRE loans increased 24.4% to $142.70 million at March 31, 2014 compared with $114.53 million at March 31, 2013.
  • Total client deposits were $203.09 million at March 31, 2014, up 23.9% compared with $163.89 million at March 31, 2013, reflecting growth in demand deposits which increased 34.9% year-over-year.
  • Reflecting continuing positive trends in asset quality, total non‐performing assets, including troubled debt restructurings, were 1.66% of total assets in the first quarter of 2014 compared with 2.66% in the first quarter of 2013.
  • Return on average common equity (annualized) rose to 10.18% in the first quarter of 2014 from 8.32% in the first quarter of 2013.
  • The Company's book value per common share increased to $8.58 at March 31, 2013 from $7.97 a year earlier.
  • In the first quarter of 2014, the Bank became a Certified B Corporation (B-Corp), one of six banks in the nation to have attained such certification. The Bank's B-Corp certification reinforces the Company's social and environmental stewardship for the benefit of all of its stakeholders. View Capital Pacific Bank's B-Corp profile at www.bcorporation.net.

"Our year-over-year results depict the Company's strong financial performance and growth in both loans and client deposits," said Mark Stevenson, president and CEO. "Our hands-on advisory approach with clients, coupled with customized financial solutions to meet their specific needs, have advanced our presence within the Portland area small business community." 

"The Bank's B-Corp certification received unanimous approval from the board and a great response from investors, shareholders, customers and the community. Social responsibility and profitability are not mutually exclusive; working within the rigorous B-Corp certification standards will result in both increased client growth and enhanced profits for the Company. The Portland area is one of the nation's leaders in this movement, which creates a welcoming environment for companies and organizations that embrace social and environmental responsibility -- an ideal fit with our Company's capabilities, culture and business model."

Income Statement Highlights

Net income to common shareholders in the first quarter of 2014 was $541,000 or $0.21 per common diluted share, up 33.6% compared with $408,000 or $0.16 per common diluted share in the first quarter of 2013. The increase is the result of client growth and the elimination of preferred stock dividends.

Net income to common shareholders declined 9.1% when compared to the fourth quarter of 2013 when net income to common shareholders totaled $595,000, or $0.23 per common diluted share. The decline is the result of compensation increases effective January 1, 2014. 

Net interest income in the first quarter of 2014 was $2.24 million, a 5% year‐over‐year increase compared with net interest income of $2.14 million in the first quarter of 2013, and a 2% increase as compared to the fourth quarter of 2013. The Company had no provision for loan losses in the quarters presented. 

Total non-interest expense in the first quarter of 2014 was $1.69 million compared with $1.67 million in the first quarter of 2013 and $1.58 million in the fourth quarter of 2013. Stevenson noted that the increase in non-interest expense when compared to the fourth quarter of 2013 primarily reflects the compensation adjustments previously noted as well as higher professional fees. 

The Company reported a 4.12% net interest margin in the first quarter of 2014, compared with 4.17% in the first quarter of 2013 (excluding one-time loan prepayment fees). "The low interest rate environment coupled with intense competitive pressure for quality loan business continues to be a challenge and we are pleased with the stability in our interest margin over the last several quarters," noted Stevenson. 

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

Total loans at March 31, 2014 were $186.72 million compared with $154.20 million at March 31, 2013, an increase of 21.1%. In each of the last four quarters, average loans outstanding have increased. This consistent track record of growth is primarily the result of new commercial real estate loans, roughly half of which came from loans collateralized by investor-owned properties. 

"We continue to experience solid loan demand in our private and charter school sector, and also a good mix of activity from other market segments, including nonprofit organizations, multifamily housing and investor-owned real estate," Stevenson explained. One of the Company's goals in 2014 is to expand its commercial loans, a core competency of the Company defined as owner-occupied commercial real estate, working capital lines of credit, and equipment lending. The Company has designed its incentive programs to judiciously build that segment of the loan portfolio.

Total client deposits at March 31, 2014 were $203.09 million compared with $163.89 million at March 31, 2013. Similar to loan growth, average client deposits has increased in each of the last four quarters. Demand deposits, including low cost interest-bearing checking accounts, were $103.48 million in the first quarter of 2014 compared with $75.44 million in first quarter 2013, contributing to a 28 basis point cost of funds in the first quarter of 2014. The Company's loan to total deposit ratio was 91% at March 31, 2014.

Reflecting the Company's continued asset quality improvement, total non‐performing assets (NPAs), including performing troubled debt restructurings, declined to $3.85 million at March 31, 2014, or 1.66% of total assets, compared with $5.08 million or 2.66% of total assets at March 31, 2013. The Company's loan loss reserve as a percentage of non-performing loans was 107.91% at March 31, 2014. Stevenson noted that the underlying circumstances for those loans that are classified as non-accrual continue to improve.

Operational Efficiency Improvement, Capital Adequacy, and Outlook

The Company's efficiency ratio was 69.11% for the first quarter of 2014, down from 71.84% in the first quarter of 2013, reflecting interest and non‐interest income growth. The ratio was up slightly compared with the fourth quarter of 2013, primarily reflecting an increase in compensation costs. Stevenson noted that both client growth and identifying new fee income‐generating capabilities are key toward improving the Company's efficiency ratio.

The Bank remained well-capitalized by accepted regulatory standards as of March 31, 2014, with a tier 1 leverage ratio of 10.39%, a tier 1 capital ratio of 12.45%, and a total risk based capital ratio of 13.70%.

"Demonstrated success in competing for loans and deposits, increased market share and a healthy balance sheet give us great reason to be confident about the Bank's future," concluded Stevenson. "Our competitive advantages will ultimately translate into continued growth in clients and shareholder value." 

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. Capital Pacific Bank is a Certified B Corporation, one of six Certified B Corporation banks in the U.S., reflecting the Company's commitment to meeting rigorous standards for environmental and social responsibility, financial and operational transparency and performance, and community involvement. The bank serves more than 165 clients in the nonprofit, education and sustainable focused business sectors, which represent approximately 50% of the bank's total deposits. Capital Pacific Bank itself has a longstanding commitment to sustainability, having received numerous awards and recognition for its social responsibility and sustainable business practices. 

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 3/31/2014     As of 12/31/13     % change  
Cash and due from banks   $ 11,399     $ 17,073     -33 %
Investments     28,868       28,608     1 %
Loans:                      
Construction     9,794       8,373     17 %
Real estate     142,701       148,048     -4 %
Commercial     32,278       29,058     11 %
Other     1,951       2,501     -22 %
  Total loans     186,724       187,980     -1 %
Loan loss reserve     (3,001 )     (2,986 )   1 %
  Total loans, net of loan loss reserve     183,723       184,994     -1 %
Other real estate owned     157       157     0 %
Other assets     8,103       8,292     -2 %
  Total assets   $ 232,250     $ 239,124     -3 %
                       
Deposits:                      
Non interest-bearing demand deposits   $ 60,220     $ 66,205     -9 %
Interest-bearing demand deposits     43,255       43,259     0 %
Money market deposits     55,428       56,499     -2 %
Certificates of deposit     44,182       41,032     8 %
    Total client deposits     203,085       206,995     -2 %
                       
Brokered deposits     2,000       5,000     -60 %
    Total deposits     205,085       211,995     -3 %
                       
Other liabilities     1,622       2,298     -29 %
Long-term debt     3,572       3,655     -2 %
Common equity     21,971       21,176     4 %
  Total liabilities and shareholders' equity   $ 232,250     $ 239,124     -3 %
                       
                           
Capital Pacific Bancorp              
(unaudited and dollars in thousands, except per share data)              
Condensed Consolidated Income Statements   For the three months ending 3/31/2014   For the three months ending 12/31/13   For the three months ending 3/31/2013     Sequential quarter % change     Year over year % change  
Interest income   $ 2,386   $ 2,344   $ 2,273     2 %   5 %
Interest expense     148     146     137     1 %   8 %
  Net interest income     2,238     2,198     2,136     2 %   5 %
Provision for loan losses     -     -     -     nm     nm  
  Net interest income, net of provision for loan losses     2,238     2,198     2,136     2 %   5 %
Deposit fees and other non-interest income     212     224     189     -5 %   12 %
Salaries and benefits     1,043     972     933     7 %   12 %
Occupancy     165     175     157     -6 %   5 %
Net expense (recovery) associated with non-performing assets     40     28     32     43 %   25 %
Other non-interest expense     444     401     548     11 %   -19 %
  Total non-interest expense     1,692     1,576     1,670     7 %   1 %
  Net income before tax expense     758     846     655     -10 %   16 %
Income tax expense     217     251     205     -14 %   6 %
  Net income   $ 541   $ 595   $ 450     -9 %   20 %
Preferred stock dividends     -     -     (42 )   nm     -100 %
  Net income to common shareholders   $ 541   $ 595   $ 408     -9 %   33 %
  Net income per common share, basic (1)   $ 0.21   $ 0.24   $ 0.16     -13 %   31 %
  Net income per common share, fully diluted (1)   $ 0.21   $ 0.23   $ 0.16     -9 %   31 %
Basic average common shares outstanding     2,541,726     2,532,494     2,525,086              
Fully diluted average common shares outstanding     2,593,560     2,615,756     2,598,732              
                                 
                               
Capital Pacific Bancorp               
(unaudited and dollars in thousands, except per share data)               
Performance by Quarter   3/31/14     12/31/13     9/30/13     6/30/13     3/31/13  
                                         
Actual loans, gross   $ 186,724     $ 187,980     $ 179,318     $ 168,560     $ 154,196  
Average loans, gross   $ 187,953     $ 181,518     $ 174,158     $ 157,989     $ 158,100  
                                         
Loans past due 30-89 days (2)   $ 1,348     $ -     $ -     $ -     $ -  
Loans past due 90 days or more (2)   $ -     $ -     $ -     $ -     $ -  
Loans on non-accrual status   $ 2,781     $ 2,832     $ 3,663     $ 3,456     $ 3,627  
Other real estate owned   $ 157     $ 157     $ 157     $ 157     $ 198  
Total non-performing assets   $ 2,938     $ 2,989     $ 3,820     $ 3,613     $ 3,825  
Total non-performing assets as a percentage of total assets     1.27 %     1.27 %     1.66 %     1.72 %     2.00 %
                                         
Performing troubled debt restructurings (not included in non-performing assets)   $ 908     $ 913     $ 918     $ 922     $ 1,252  
Total non-performing assets plus performing troubled debt restructurings   $ 3,846     $ 3,902     $ 4,738     $ 4,535     $ 5,077  
Total non-performing assets plus troubled debt restructurings as a percentage of total assets     1.66 %     1.63 %     2.06 %     2.16 %     2.66 %
                                         
Loan loss reserve   $ 3,001     $ 2,986     $ 2,891     $ 2,739     $ 2,719  
Loans charged off, net of recoveries / (recoveries, net of loans charged off)   $ (15 )   $ (95 )   $ (9 )   $ (19 )   $ (77 )
Loan loss reserve as a percentage of loans     1.61 %     1.59 %     1.61 %     1.62 %     1.76 %
Loan loss reserve as a percentage of non-performing loans     107.91 %     105.44 %     78.92 %     79.25 %     74.97 %
                                         
Actual client deposits   $ 203,085     $ 206,995     $ 204,127     $ 183,557     $ 163,893  
Average client deposits   $ 205,642     $ 203,529     $ 199,549     $ 178,058     $ 170,792  
                                         
Net income   $ 541     $ 595     $ 431     $ 364     $ 450  
Net income available to common shareholders (1)   $ 541     $ 595     $ 431     $ 364     $ 408  
Net earnings per common share, basic (1)   $ 0.21     $ 0.24     $ 0.17     $ 0.14     $ 0.16  
Net earnings per common share, fully diluted (1)   $ 0.21     $ 0.23     $ 0.17     $ 0.14     $ 0.16  
                                         
Actual common shares outstanding     2,560,689       2,532,985       2,532,119       2,531,064       2,529,742  
Book value per common share   $ 8.58     $ 8.36     $ 8.17     $ 8.00     $ 7.97  
Tier 1 risk-based capital ratio (bank)     12.45 %     11.95 %     11.92 %     12.96 %     13.84 %
Tier 1 risk-based capital ratio (company)     11.08 %     10.50 %     10.45 %     11.09 %     11.80 %
                                         
Return on average common equity (1)     10.18 %     11.24 %     8.37 %     7.16 %     8.32 %
Return on average assets     0.92 %     1.02 %     0.76 %     0.71 %     0.92 %
Net interest margin (3) (4)     4.12 %     4.08 %     3.92 %     4.02 %     4.61 %
Efficiency ratio (4) (5)     69.11 %     65.12 %     68.14 %     76.64 %     71.84 %
 
(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 $111,000 and $98,000 for the three months ended March 31, 2014 and 2013, 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.
 
nm = percentage not meaningful
 

Contact Information

  • Contact:
    Mark Stevenson
    President and CEO

    Felice Belfiore
    CFO

    (503) 796‐0100