SOURCE: Capital Pacific Bank

October 24, 2012 13:34 ET

Capital Pacific Bancorp Reports Year-Over-Year Growth in Earnings, Loans and Deposits for Third Quarter, Nine Months of 2012

PORTLAND, OR--(Marketwire - Oct 24, 2012) -  Capital Pacific Bancorp (OTCQB: CPBO), a community bank focused on serving Portland's vibrant business community, private schools and not-for-profit institutions, today reported financial results for the quarter and nine months ended September 30, 2012.

Highlights

  • Third quarter net income of $399,000 or $0.13 per common diluted share represented the company's highest quarterly profit in four years and its 10th consecutive quarter of profitable performance. Deposits rose 6% to $180.25 million at September 30, 2012 compared with $170.27 million at September 30, 2011 and have grown on a sequential quarter basis during 2012.
  • Gross loans were $145.08 million at September 30, 2012, up 10% compared with $131.70 million a year ago.
  • Non-interest expense declined 20% in the third quarter compared to same quarter last year, reflecting a stable operating environment and a significant reduction of credit costs related to non-performing assets.
  • Total non-performing assets declined to 1.31% of total assets at September 30, 2012 compared with 1.76% at September 30, 2011, reflecting a decrease in total non-performing assets to $2.70 million compared with $3.48 million a year ago.
  • The company's efficiency ratio improved to 73% for the quarter ending September 30, 2012 compared with 95% for the quarter ending September 30, 2011, reflecting greater productivity and lower problem credit costs.
  • Tangible book value per share increased to $7.64 at the end of third quarter 2012 compared with $7.26 at the end of third quarter 2011.

"We produced our most profitable quarter in four years, while managing interest and non-interest expenses and making significant improvements in asset quality," said Mark Stevenson, President and CEO. "The growth in our loan and deposit balances through the third quarter 2012 is the result of our experienced team at Capital Pacific Bank, which is focused on both strategic growth and consistent improvement in financial performance metrics.

"Our financial position is improved compared with a year ago, and we are well-positioned to expand relationships with current clients and pursue new client relationships throughout the Portland metropolitan area. The improvement in our balance sheet allowed a greater amount of revenue to flow to the bottom line as a result of reduced problem assets and new high quality loans. Our strong credit and risk management practices have resulted in the decline of non-accruing and past due loans."

Net Income and Income Statement Demonstrate Growth

The company reported net income of $399,000 for the three months ended September 30, 2012, or $.13 per common diluted share, compared with net income of $75,000 or $0.00 per common diluted share in third quarter 2011. For the nine months ended September 30, 2012, net income was $959,000 or $.30 per common diluted share, a 124% increase compared with nine months' 2011 net income of $428,000 or $0.12 per common diluted share.

Net interest income was $1.98 million in third quarter 2012 compared with $1.93 million in third quarter 2011. Interest income reflects continuing pressure on interest margins in a low-interest rate environment. By managing the rates paid on interest-bearing deposits, Capital Pacific Bank lowered interest expense 37% to $123,000 in third quarter 2012 compared with $196,000 in third quarter 2011.

For the nine months of 2012, net interest income was $5.64 million, up 4% compared with $5.44 million when compared to the same quarter last year. The increase in net interest income was primarily due to a 35% year-over-year reduction in interest expense, from $413,000 compared with $634,000. 

Net interest margin, which measures the net yield on earning assets, was 4.08% at September 30, 2012 compared with 4.24% at September 30, 2011. Stevenson explained that maintaining margins continues to be a challenge, although the ability to generate a margin above 4% compares favorably with many community bank peers. The company does expect ongoing margin pressure as new and renewed loans and investments are originated with rates that are lower than average portfolio yields, likely resulting in a lower interest margin in future periods.

"The competition for quality loans is intense," said Stevenson. "Rather than solely competing on price for a wide swath of business loans, we are growing relationships in our niche market of small business, private schools and not-for-profit institutions by providing service, support, and relationship banking to our target customers. We offer distinct advantages compared with larger competitors, which helps offset a price-only perspective. This remains our value proposition for Capital Pacific Bank clients."

Non-interest income in third quarter 2012 totaled $188,000 compared with $154,000 in third quarter 2011. Non-interest expense in third quarter 2012 was $1.59 million, down 20% compared with third quarter 2011. In third quarter 2011 the company had a $426,000 loss on the sale or impairment of OREO compared with a $19,000 gain in third quarter 2012 and a reduction in net expense associated with non-performing assets. Salaries and benefits rose 12%, partially reflecting the growth in the number of commercial banking veterans at the company.

Balance Sheet Reflects Loan, Deposit Growth, Asset Quality Improves

Loans grew to $145.08 million at September 30, 2012 compared with $131.70 million at September 30, 2011. There has been sequential quarterly loan growth in 2012.

Compared with lending totals at December 31, 2011, the company grew construction loans by 32% and commercial real estate loans by 11%, predominately owner-occupied. Stevenson said that commercial lending remains a major focus and is an integral part of the company's ongoing growth strategy. He also pointed to loan growth as an element in the company's overall increase in income generation.

"We are winning new clients, making new loans, and expanding business relationships with current customers," said Stevenson. "By building long-term relationships and defining our position as valued-added bankers, we have won new loan business and have built what we believe is a sustainable new business pipeline."

The company had $395,000 in loans past due 30-89 days, and no loans past due over 90 days. Non-performing assets were $2.70 million at September 30, 2012 compared with $3.48 million at September 30, 2011, reflecting a 22% decline in total non-performing assets. The company reduced other real estate owned levels to $198,000 in third quarter 2012 compared with $1.41 million in third quarter 2011, and $320,000 in second quarter 2012. The company's allowance for loan losses was stable since the last quarter at 1.86% of gross loans.

"Our ability to reduce non-performing assets and sell other real estate owned expeditiously has allowed the company to focus on other important strategic initiatives, unlike many banks bogged down by poor asset quality," commented Stevenson. "We feel there is strong potential to further improve asset quality in the next several quarters."

Deposits at September 30, 2012 were $180.25 million compared with $170.27 million at September 30, 2011 and $160.87 million at June 30, 2012. The company's deposit base growth was driven by increases in core deposits, both non-interest bearing and interest bearing. "Non interest-bearing demand deposits increased by 36% since the end of 2011, while interest-bearing demand accounts grew 33% since that time," noted Stevenson.

Operational Efficiency, Capital Adequacy, and Outlook

Stevenson noted the company has made significant progress toward its goal of driving increased productivity and efficiency. Capital Pacific Bank improved its efficiency ratio to 73% at September 30, 2012, compared with 95% in the prior year's third quarter and 76% in second quarter 2012. "We operate from a single headquarter facility with room to grow. We are confident we can increase revenue without increasing facility costs and further improve our efficiency," explained Stevenson.

"Our return on average common equity increased to 6.98% in third quarter 2012 compared with 0.24% in third quarter 2011, while our return on assets increased to 0.77% compared with 0.15% a year ago. We know there is more work to do, but we are encouraged by these steady financial improvements."

The company is well-capitalized by regulatory standards as of September 30, 2012. The Company's tier 1 leverage ratio, tier 1 capital ratio and total risk-based capital ratio were 11.31%, 15.13% and 16.39%, respectively. To be considered well-capitalized, a bank holding company must have ratios of 5.00%, 6.00% and 10.00%, respectively. 

"Portland has a significant amount of economic and business diversity, and is healthier than many markets. The region has certainly avoided much of the boom and bust speculation that has plagued other metropolitan areas in the United States," concluded Stevenson. "Our business community is tight knit and appreciates banking within the community, and that creates opportunities for a Portland-focused bank like Capital Pacific Bank to identify specific market opportunities and execute its strategic plan to grow the bank.

"We are also committed to building value for our shareholders. Management and our board of directors has established a strategic growth plan that we feel is realistic and achievable. Along with continuing to improve the quality of our balance sheet, Capital Pacific Bank has established an infrastructure able to accommodate significant growth. We are focused on building shareholder value."

Other

The board of directors is very saddened to communicate the recent death of Richard Alexander. Mr. Alexander was a founding director of the company and chairman of the board. Mr. Alexander was a widely respected community and business leader. He was a treasured advocate for numerous community organizations, including Capital Pacific Bank, and was a key component of the company's success within the not-for-profit sector. 

Vice chair Thomas Tomjack, who in past years served as chair of the board of directors, assumed the duties of the chair over the last several months during Mr. Alexander's absence. Under the terms of the company's succession plan, Mr. Tomjack will oversee the election of Mr. Alexander's successor which is expected to conclude at the November 27, 2012 meeting of directors. 

About Capital Pacific Bancorp
Capital Pacific Bancorp (OTCQB: CPBO) is the parent company of Capital Pacific Bank, which serves businesses, professionals and not-for-profit organizations with comprehensive banking expertise and an elite level of service. Centrally headquartered in the Fox Tower in downtown Portland, the Bank's full array of products and services are delivered through a strategic combination of vice president-level client service officers and the innovative application of technology. 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 9/30/2012     As of 12/31/2011     % change  
Cash and due from banks   $ 22,325     $ 11,773     90 %
Time certificates of deposits at other banks     6,158       7,144     -14 %
Investments     30,211       28,792     5 %
Loans:                      
Construction and land development     6,302       4,758     32 %
Real estate     104,970       94,771     11 %
Commercial     33,452       33,875     -1 %
Other     357       71     nm  
  Total loans     145,081       133,475     9 %
Loan loss reserve     (2,691 )     (2,893 )   -7 %
  Total loans, net of loan loss reserve     142,390       130,582     9 %
Other real estate owned     198       724     -73 %
Other assets     5,310       5,832     -9 %
  Total assets   $ 206,592     $ 184,847     12 %
                       
Deposits:                      
Non interest-bearing demand   $ 62,498     $ 46,088     36 %
Interest-bearing demand     78,524       58,899     33 %
Certificates of deposit     39,223       53,699     -27 %
  Total client deposits     180,245       158,686     14 %
                       
Other liabilities     2,968       3,656     -19 %
Shareholders' equity     23,379       22,505     4 %
  Total liabilities and shareholders' equity   $ 206,592     $ 184,847     12 %
                         
                         
                         
Capital Pacific Bancorp            
(unaudited and dollars in thousands, except per share data)            
                         
Condensed Consolidated Income Statements   For the three months ending September 30, 2012   For the three months ending June 30, 2012   For the three months ending September 30, 2011   Sequential quarter % change     Year over year % change  
Interest income   $ 2,107   $ 1,990   $ 2,122   6 %   -1 %
Interest expense     123     137     196   -10 %   -37 %
  Net interest income     1,984     1,853     1,926   7 %   3 %
Provision for loan losses     -     35     20   nm     nm  
  Net interest income, net of provision for loan losses     1,984     1,818     1,906   9 %   4 %
Deposit fees and other non-interest income     188     206     154   -9 %   22 %
Income associated with the sale of loans and investments     -     23     -   nm     nm  
  Total non-interest income     188     229     154   -18 %   22 %
Salaries and benefits     980     900     878   9 %   12 %
Occupancy     160     161     155   -1 %   3 %
Net expense associated with non-performing assets     45     57     138   -21 %   -67 %
Net loss (income) on sale or impairment of other real estate owned     (19 )   -     426   nm     nm  
Other non-interest expense     422     461     382   -8 %   10 %
  Total non-interest expense     1,588     1,579     1,979   1 %   -20 %
  Net income before tax expense     584     468     81   25 %   nm  
Income tax expense     185     138     6   34 %   nm  
  Net income   $ 399   $ 330   $ 75   21 %   nm  
Preferred stock dividends     (65 )   (65 )   (65 ) 0 %   0 %
  Net income to common shareholders   $ 334   $ 265   $ 10   26 %   nm  
  Net income per common share, basic (1)   $ 0.13   $ 0.11   $ -   18 %   nm  
  Net income per common share, fully diluted (1)   $ 0.13   $ 0.10   $ -   30 %   nm  
Basic average common shares outstanding     2,514,778     2,513,558     2,231,736            
Fully diluted average common shares outstanding     2,584,651     2,522,749     2,231,736            
                               
                               
   
Capital Pacific Bancorp  
(unaudited and dollars in thousands, except per share data)  
                   
Condensed Consolidated Income Statements   For the nine months ending Sept 30, 2012     For the nine months ending Sept 30, 2011     Year over year % change  
Interest income   $ 6,056     $ 6,072     0 %
Interest expense     413       634     -35 %
  Net interest income     5,643       5,438     4 %
Provision for loan losses     35       143     -76 %
  Net interest income, net of provision for loan losses     5,608       5,295     6 %
Deposit fees and other non-interest income     586       453     29 %
Income associated with the sale of loans and investments     23       43     -47 %
  Total non-interest income     609       496     23 %
Salaries and benefits     2,824       2,484     14 %
Occupancy     469       453     4 %
Net expense associated with non-performing assets     135       91     48 %
Net loss on sale or impairment of other real estate owned     54       834     -94 %
Other non-interest expense     1,365       1,353     1 %
  Total non-interest expense     4,847       5,215     -7 %
  Net income before tax expense     1,370       576     138 %
Income tax expense     411       148     178 %
  Net income   $ 959     $ 428     124 %
Preferred stock dividends     (194 )     (194 )   0 %
  Net income to common shareholders   $ 765     $ 234     227 %
  Net income per common share, basic (1)   $ 0.31     $ 0.12     158 %
  Net income per common share, fully diluted (1)   $ 0.30     $ 0.12     150 %
Basic average common shares outstanding     2,510,564       1,926,870        
Fully diluted average common shares outstanding     2,535,492       1,926,870        
                       
                       
                         
Capital Pacific Bancorp  
(unaudited and dollars in thousands, except per share data)  
                         
Performance by Quarter   9/30/12     6/30/12   3/31/12   12/31/11   9/30/11  
                                   
Actual loans, gross   $ 145,081     $ 144,525   $ 134,630   $ 133,475   $ 131,696  
Average loans, gross   $ 145,845     $ 137,260   $ 131,503   $ 131,829   $ 132,405  
                                   
Loans past due 30-89 days (2)   $ 395     $ -   $ -   $ -   $ 904  
Loans past due 90 days or more   $ -     $ -   $ -   $ -   $ -  
Loans on non-accrual status   $ 2,500     $ 2,393   $ 2,333   $ 2,701   $ 2,063  
Other real estate owned   $ 198     $ 320   $ 320   $ 724   $ 1,413  
Total non-performing assets   $ 2,698     $ 2,713   $ 2,653   $ 3,425   $ 3,476  
Total non-performing assets as a percentage of total assets     1.31 %     1.46 %   1.39 %   1.89 %   1.76 %
                                   
Loan loss reserve   $ 2,691     $ 2,683   $ 2,673   $ 2,893   $ 2,844  
Loans charged off, net of recoveries / (recoveries, net of loans charged off)   $ (8 )   $ 25   $ 220   $ 76   $ 72  
Loan loss reserve as a percentage of loans     1.86 %     1.86 %   1.99 %   2.17 %   2.16 %
Loan loss reserve as a percentage of non-performing loans     100 %     112 %   115 %   107 %   138 %
                                   
Actual client deposits   $ 180,245     $ 160,872   $ 159,244   $ 157,798   $ 170,274  
Average client deposits   $ 179,254     $ 160,659   $ 158,031   $ 168,369   $ 166,918  
                                   
Net income   $ 399     $ 330   $ 231   $ 267   $ 75  
Net income available to common shareholders (1)   $ 334     $ 265   $ 166   $ 202   $ 10  
Net earnings per common share, basic (1)   $ 0.13     $ 0.11   $ 0.07   $ 0.08   $ -  
Net earnings per common share, fully diluted (1)   $ 0.13     $ 0.10   $ 0.07   $ 0.08   $ -  
                                   
Actual common shares outstanding     2,515,868       2,513,558     2,513,558     2,501,289     2,501,289  
Book value per common share   $ 7.64     $ 7.49   $ 7.38   $ 7.36   $ 7.26  
                                   
Return on average common equity (1)     6.98 %     5.69 %   3.60 %   4.39 %   0.24 %
Return on average assets     0.77 %     0.70 %   0.50 %   0.54 %   0.15 %
Net interest margin (3)     4.08 %     4.21 %   4.17 %   3.98 %   4.24 %
Efficiency ratio (4)     73 %     76 %   84 %   79 %   95 %
                                   
   
(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 $89,000 and $80,000 for the three months ended September 30, 2012 and 2011, respectively and approximately $252,000 and $233,000 for the nine months ended September 30, 2012 and 2011, respectively.
   
(4) Calculated by dividing non-interest expense by the sum of net interest income and non-interest income.
 
nm = not meaningful
 

Contact Information

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