SOURCE: Capital Pacific Bancorp

October 22, 2014 14:08 ET

Capital Pacific Bancorp Reports Third Quarter, Nine Months of 2014 Financial Results

Loan Growth, Asset Quality Drives 40% Plus Year-Over-Year Net Income Growth

PORTLAND, OR--(Marketwired - Oct 22, 2014) - Capital Pacific Bancorp (OTCQB: CPBO) (the Company) today reported financial results for the three months and nine months ended September 30, 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 third quarter of 2014 was $624,000 or $0.24 per common diluted share, up 45% compared with $431,000 or $0.17 per common diluted share in the third quarter of 2013.
  • Net income to common shareholders in the nine months of 2014 was $1.71 million or $0.66 per common diluted share, an increase of 42% compared with $1.20 million or $0.46 per common diluted share in the nine months of 2013, primarily reflecting higher net interest income.
  • Total loans were $201.1 million at September 30, 2014, a 7% increase from December 31, 2013 and up 12% compared with $179.32 million a year ago. 
  • Total client deposits, more than half of which are noninterest bearing or low-interest bearing demand deposits, increased 9% to $224.97 million at September 30, 2014 compared with $207.0 million at December 31, 2013 and $204.13 million a year ago.
  • The Company's net interest margin of 4.00% for the quarter ending September 30, 2014, was consistent with previous consecutive quarters, reflecting continuing management emphasis on controlling interest expense, and identifying niche lending opportunities that reduce the impact of rate-based competition for quality loans.
  • Asset quality ratios remained strong, including a decline in the ratio of non-performing assets to total assets, which was below 1% at the close of the third quarter of 2014.
  • Return on average common equity (annualized) increased to 10.8% at September 30, 2014 compared with 8.4% in the prior year's third quarter, while return on average assets (annualized) was 1.02% compared with 0.76% a year ago.
  • The Company's book value per common share was $9.08 at September 30, 2014, reflecting a steady consecutive quarter increase in book value from $8.17 per common share a year ago.

"Our commitment to stable growth, client retention, and disciplined underwriting has contributed to noteworthy financial results and growth throughout 2014," said Mark Stevenson, President and CEO. "Our financial performance reflects the consistent execution of our strategy to build long-term shareholder value."

Income Statement Highlights

Results for three and nine months ending September 30, 2014 reflected double-digit growth year-over-year in net interest income. In the third quarter of 2014, net interest income was $2.35 million, up 12% from $2.09 million in the third quarter of 2013. For the nine months ending September 30, 2014, net interest income was $6.81 million, a 10% increase compared with $6.16 million for the nine months ending September 30, 2013. Growth in net interest income is a result of new business with a growing number of companies in our market.

Revenue from deposit fees and other non-interest income was $235,000 in the third quarter of 2014, up 18% from a year ago. For the first nine months of 2014, deposit fees and other non-interest income totaled $673,000, up 16% compared with the same period last year.

Total non-interest expense in the third quarter of 2014 was $1.65 million compared with $1.56 million in the third quarter of 2013. Non-interest expense for the first nine months of 2014 was up 3% compared with the same period last year, reflecting the Company's investment in retaining experienced staff, partially offset by lower operating expenses. Stevenson noted that increasing productivity and a growing asset base were the major contributors to a 63.75% efficiency ratio in the third quarter of 2014, significantly improved from 68.14% in the third quarter of 2013.

Balance Sheet Highlights

Total loans at September 30, 2014 were $201.10 million, up 7% compared with $187.98 million at December 31, 2013 and up 12% from $179.32 million a year ago. Expansion in the Company's loan portfolio was due to growth in owner-occupied commercial real estate loans, equipment financing, acquisition financing and working capital lines of credit, all part of the Bank's commercial lending segment. 

"Among the goals we set for 2014 was to grow commercial lending and build greater diversity into our overall loan portfolio," explained Stevenson. "We planned for and delivered a strong summer season. Commercial lending, in particular, often requires a solution that is customized to integrate with a client's overall business and it is here that we excel as lenders."

Total client deposits at September 30, 2014 were $224.97 million, up from $207.0 million at December 31, 2013. "Our deposit mix is a great composite of our business clients, with over 55% of our core deposits in demand checking accounts. As a result, our cost of funds has remained very low at an annualized rate of 28 basis points for several consecutive quarters," explained Stevenson.

Asset quality remained high, with total non-performing assets of only $2.29 million at September 30, 2014 compared with $2.99 million at December 31, 2013 and $3.82 million at September 30, 2013. The ratio of total non-performing assets to total assets was 0.90% in the current quarter compared with 1.66% in the third quarter of 2013. Non-performing assets, including performing troubled debt restructurings, were $3.38 million or 1.32% of total assets at September 30, 2014. The Bank's loan loss reserve as a percentage of loans was 1.41% at September 30, 2014, and more than 200% of non-performing loans.

Other real estate owned (OREO) was $1.13 million at September 30, 2014 compared with $157,000 at September 30, 2013, reflecting the expected migration of a non-performing loan to OREO in the 2nd quarter of 2014. The Company charged off $247,000 of this loan with reserves set aside in a prior year, and anticipates the sale of the OREO without additional loss. 

The Bank remained well-capitalized by accepted regulatory standards as of September 30, 2014, with a tier 1 leverage ratio of 10.11%, a tier 1 capital ratio of 12.22%, and a total risk based capital ratio of 13.47%.

"We are part of a vibrant and growing community, which has embraced our unique business model that emphasizes business banking and social responsibility. As a result, our visibility is increasing," said Stevenson. "Reflecting our commitment to supporting our vision, we will be a sponsor at the SRI Conference in November. This is the nation's largest conference on sustainable, responsible, impact investing, attended by hundreds of financial professionals and industry practitioners. We look forward to the opportunity to share the Capital Pacific Bank story with investors on a national platform."

About Capital Pacific Bancorp

Capital Pacific Bancorp (OTCQB: CPBO) is the parent company of Capital Pacific Bank (www.capitalpacificbank.com), 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 185 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)   As of     As of        
Condensed Consolidated Balance Sheets   9/30/2014     12/31/2013     % change  
Cash and due from banks   $ 19,824     $ 17,073     16 %
Investments     28,246       28,608     -1 %
Loans:                      
Construction     6,693       8,373     -20 %
Real estate     154,110       148,048     4 %
Commercial     39,647       29,058     36 %
Other     652       2,501     -74 %
  Total loans     201,102       187,980     7 %
Loan loss reserve     (2,836 )     (2,986 )   -5 %
  Total loans, net of loan loss reserve     198,266       184,994     7 %
Other real estate owned     1,129       157     nm  
Other assets     8,426       8,292     2 %
  Total assets   $ 255,891     $ 239,124     7 %
                       
Deposits:                      
Non interest-bearing demand deposits   $ 70,844     $ 66,205     7 %
Interest-bearing demand deposits     52,326       43,259     21 %
Money market deposits     63,811       56,499     13 %
Certificates of deposit     38,235       41,032     -7 %
  Total client deposits     225,216       206,995     9 %
                       
Brokered deposits     1,987       5,000     -60 %
  Total deposits     227,203       211,995     7 %
                       
Other liabilities     2,012       2,298     -12 %
Long-term debt     3,401       3,655     -7 %
Common equity     23,275       21,176     10 %
  Total liabilities and shareholders' equity   $ 255,891     $ 239,124     7 %
                       
                       
                       
Capital Pacific Bancorp  
(unaudited and dollars in thousands, except per share data)  
Condensed Consolidated Income Statements   For the three months ending 9/30/2014     For the three months ending 6/30/2014   For the three months ending 9/30/2013   Sequential quarter % change     Year over year % change  
Interest income   $ 2,501     $ 2,373   $ 2,239   5 %   12 %
Interest expense     156       150     145   4 %   8 %
  Net interest income     2,345       2,223     2,094   5 %   12 %
Provision for loan losses     60       -     144   nm     -58 %
  Net interest income, net of provision for loan losses     2,285       2,223     1,950   3 %   17 %
Deposit fees and other non-interest income     235       224     200   5 %   18 %
Salaries and benefits     1,008       1,019     1,017   -1 %   -1 %
Occupancy     167       168     165   -1 %   1 %
Net expense (recovery) associated with non-performing assets     (27 )     39     28   nm     nm  
Other non-interest expense     497       438     353   13 %   41 %
  Total non-interest expense     1,645       1,664     1,563   -1 %   5 %
  Net income before tax expense     875       783     587   12 %   49 %
Income tax expense     251       236     156   6 %   61 %
  Net income   $ 624     $ 547   $ 431   14 %   45 %
  Net income per common share, basic   $ 0.24     $ 0.21   $ 0.17   14 %   41 %
  Net income per common share, fully diluted   $ 0.24     $ 0.21   $ 0.17   14 %   41 %
Basic average common shares outstanding     2,562,578       2,560,689     2,531,264            
Fully diluted average common shares outstanding     2,629,561       2,625,308     2,612,881            
                                 
                                 
                                 
Capital Pacific Bancorp  
(unaudited and dollars in thousands, except per share data)  
    For the nine months   For the nine months        
Condensed Consolidated Income Statements   ending 9/30/2014   ending 9/30/2013     % change  
Interest income   $ 7,260   $ 6,592     10 %
Interest expense     455     433     5 %
  Net interest income     6,805     6,159     10 %
Provision for loan losses     60     144     -58 %
  Net interest income, net of provision for loan losses     6,745     6,015     12 %
Deposit fees and other non-interest income     673     578     16 %
Salaries and benefits     3,070     2,880     7 %
Occupancy     501     486     3 %
Net expense (recovery) associated with non-performing assets     52     55     -5 %
Other non-interest expense     1,379     1,435     -4 %
  Total non-interest expense     5,002     4,856     3 %
  Net income before tax expense     2,416     1,737     39 %
Income tax expense     703     492     43 %
  Net income   $ 1,713   $ 1,245     38 %
Preferred stock dividends     -     (42 )   -100 %
  Net income to common shareholders   $ 1,713   $ 1,203     42 %
  Net income per common share, basic (1)   $ 0.67   $ 0.48     40 %
  Net income per common share, fully diluted (1)   $ 0.66   $ 0.46     43 %
Basic average common shares outstanding     2,555,074     2,528,767        
Fully diluted average common shares outstanding     2,609,485     2,604,454        
                     
                     
                     

 

   
Capital Pacific Bancorp  
(unaudited and dollars in thousands, except per share data)  
Performance by Quarter   9/30/2014     6/30/2014     3/31/2014     12/31/2013     9/30/2013  
                                         
Actual loans, gross   $ 201,102     $ 193,445     $ 186,724     $ 187,980     $ 179,318  
Average loans, gross   $ 197,495     $ 189,739     $ 187,953     $ 181,518     $ 174,158  
                                         
Loans past due 90 days or more (2)   $ -     $ -     $ -     $ -     $ -  
Loans on non-accrual status   $ 1,164     $ 1,450     $ 2,781     $ 2,832     $ 3,663  
Other real estate owned   $ 1,129     $ 1,129     $ 157     $ 157     $ 157  
Total non-performing assets   $ 2,293     $ 2,579     $ 2,938     $ 2,989     $ 3,820  
Total non-performing assets as a percentage of total assets     0.90 %     1.09 %     1.27 %     1.27 %     1.66 %
                                         
Performing troubled debt restructurings (not included in non-performing assets)   $ 1,089     $ 1,096     $ 908     $ 913     $ 918  
Total non-performing assets plus performing troubled debt restructurings   $ 3,382     $ 3,675     $ 3,846     $ 3,902     $ 4,738  
Total non-performing assets plus troubled debt restructurings as a percentage of total assets     1.32 %     1.55 %     1.66 %     1.63 %     2.06 %
                                         
Loan loss reserve   $ 2,836     $ 2,769     $ 3,001     $ 2,986     $ 2,891  
Loans charged off, net of recoveries / (recoveries, net of loans charged off)   $ (7 )   $ 232     $ (15 )   $ (95 )   $ (9 )
Loan loss reserve as a percentage of loans     1.41 %     1.43 %     1.61 %     1.59 %     1.61 %
Loan loss reserve as a percentage of non-performing loans     243.64 %     190.97 %     107.91 %     105.44 %     78.92 %
                                         
Actual client deposits   $ 225,216     $ 209,823     $ 203,085     $ 206,995     $ 204,127  
Average client deposits   $ 220,311     $ 211,942     $ 205,642     $ 203,529     $ 199,549  
                                         
Net income   $ 624     $ 547     $ 541     $ 595     $ 431  
Net earnings per common share, basic   $ 0.24     $ 0.21     $ 0.21     $ 0.24     $ 0.17  
Net earnings per common share, fully diluted   $ 0.24     $ 0.21     $ 0.21     $ 0.23     $ 0.17  
                                         
Actual common shares outstanding     2,563,707       2,560,689       2,560,689       2,532,985       2,532,119  
Book value per common share   $ 9.08     $ 8.82     $ 8.58     $ 8.36     $ 8.17  
Tier 1 risk-based capital ratio (bank)     12.22 %     12.33 %     12.45 %     11.95 %     11.92 %
Tier 1 risk-based capital ratio (company)     11.15 %     11.00 %     11.08 %     10.50 %     10.45 %
                                         
Return on average common equity     10.80 %     9.84 %     10.18 %     11.24 %     8.37 %
Return on average assets     1.02 %     0.92 %     0.92 %     1.02 %     0.76 %
Net interest margin (3)     4.00 %     4.02 %     4.12 %     4.08 %     3.92 %
Efficiency ratio (4)     63.75 %     67.09 %     69.11 %     65.12 %     68.14 %
                                         
(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 $112,000 and $98,000 for the three months ended September 30, 2014 and 2013, respectively, and $334,000 and $290,000 for the nine months ended September 30, 2014 and 2013, respectively.
 
(4) 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