SOURCE: Capital Pacific Bancorp

July 17, 2008 12:00 ET

Capital Pacific Bancorp's Profits Up in Second Quarter of 2008

PORTLAND, OR--(Marketwire - July 17, 2008) - Capital Pacific Bancorp (OTCBB: CPBO) reported net income of $704,000 or $0.40 per diluted share in the second quarter of 2008, compared to net income of $8,000 and $0.01 per diluted share in the second quarter last year.

Second quarter 2008 earnings include a pre-tax $1.0 million recovery related to a $2.0 million loan that was charged off in 2007. The recovery is the result of a settlement that includes real estate. This real estate is classified as other real estate owned with an estimated net realizable value based upon a 2008 appraisal. Management believes the recovery amount may increase in future periods based upon the outcome of external events, but any additional recovery is subject to significant uncertainty. Excluding the recovery, net income for the second quarter of 2008 totaled $86,000, or $.05 per share.

"The outlook on asset quality continues to evolve. Although we are pleased with this recovery, we remain cautious about the current economic cycle and how it might impact our loan portfolio in the future," said Mark Stevenson, CEO of Capital Pacific Bancorp.

Loans and credit quality

As of June 30, 2008, loans totaled $130.5 million, unchanged when compared to the first quarter of 2008 and up $9.0 million when compared to the same quarter last year. Second quarter 2008 loan growth has been influenced by the soft economy and orchestrated declines in certain portfolio segments.

The Company's reserve for potential loan losses increased to $2.9 million in the second quarter of 2008, or 2.19% of total loans. Management believes its reserve for potential loan losses is appropriate given prevailing economic conditions.

Other credit related events in the second quarter of 2008 were as follow:

--  Successful refinance with new borrower and guarantors of a $934,000
    non-performing loan.
--  Non-performing loans and loans past due 90 days declined to less than
    $500,000, or .34% of total loans as of the end of the quarter.
--  Loans related to residential development have reduced to approximately
    $6 million. This segment of the portfolio now equals less than 5% of total
    loans.
--  Conservatively increased the reserve for potential loan losses by
    $400,000.
    

Deposits

As of June 30, 2008, average client deposits were $92.1 million, up $13.8 million compared to the same quarter last year and up $4.3 million on a linked-quarter basis. Deposit activity has been supported by modest growth in new clients in the not-for-profit sector. Client deposits are defined as total deposits excluding brokered or nationally sourced deposits.

Net interest margin

The net interest margin was down 67 basis points compared to the same quarter last year but unchanged at 4.73% compared to the first quarter 2008. Interest recoveries on the settlement of non-performing loans totaled $35,000 in the second quarter 2008. Excluding one-time interest recoveries, the net interest margin was 4.62%. The decline in net interest margin is the result of the rapid decline in interest rates driven by the actions of the Federal Reserve Bank and a very competitive deposit market.

Other financial highlights

--  Income associated with the sale of loans increased to $216,000
    compared to $82,000 for the same quarter last year and $87,000 on a linked
    quarter basis. Higher income in the second quarter was attributable to one
    transaction that accounted for 63% of the total. Management believes that
    income associated with the sale of loans will revert back to historical
    averages in future periods.
--  Non-interest expenses totaled $1.4 million, up 11% when compared to
    the same quarter last year and down 3% on a linked-quarter basis. Growth in
    non-interest expenses is expected to be modest for the remainder of 2008.
--  Tax-exempt loan originations grew by $3.4 million in the second
    quarter. The company was heavily involved with the Oregon Facilities
    Authority in the formation of this unique program benefiting non-profit
    organizations. Capital Pacific Bank is the market leader in originations.
    

Capital adequacy

The company continues to be classified as well capitalized by regulatory standards. The company successfully raised $1.8 million in additional capital in the first quarter of 2008.

About Capital Pacific Bancorp

Capital Pacific Bancorp (OTCBB: CPBO) is the parent company of Capital Pacific Bank, which serves businesses, professionals and nonprofit organizations with comprehensive banking expertise and an elite level of service. Headquartered in the Fox Tower in downtown Portland, the bank's full array of products and services are delivered through a strategic combination of highly experienced 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, deteriorating asset values caused by changing market conditions, loan losses that exceed our allowance for loan losses, 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.

(unaudited and dollars in thousands, except per
 share data)
                                                     As of        As of
                                                    June 30,   December 31,
Condensed Balance Sheets                             2008         2007
                                                  -----------  -----------
Cash and due from banks                           $     2,555  $       517
Investments                                             1,648        5,569
Loans:
Commercial                                             53,115       59,023
Real estate                                            67,333       60,913
Other                                                  10,037        8,598
                                                  -----------  -----------
  Total loans                                         130,485      128,534
Loan loss reserve                                      (2,857)      (2,403)
                                                  -----------  -----------
  Total loans, net of loan loss reserve               127,628      126,131
Other assets                                            2,813        2,341
                                                  -----------  -----------
  Total assets                                    $   134,644  $   134,558
                                                  ===========  ===========

Deposits:
Non interest-bearing demand                       $    16,919  $    19,531
Interest-bearing demand                                50,899       58,074
Certificates of deposit                                38,422       35,769
                                                  -----------  -----------
  Total deposits                                      106,240      113,374

Other liabilities                                      12,207        7,697
Shareholders' equity                                   16,197       13,487
                                                  -----------  -----------
  Total liabilities and shareholders' equity      $   134,644  $   134,558
                                                  ===========  ===========

Condensed Statements of Operations              For the three For the three
                                                months ending months ending
                                                   June 30,     June 30,
                                                     2008         2007
                                                  -----------  -----------
Interest income                                   $     2,276  $     2,539
Interest expense                                          743          970
                                                  -----------  -----------
  Net interest income                                   1,533        1,569
Provision for (recovery of) loan losses                  (603)         543
                                                  -----------  -----------
  Net interest income, net of provision for loan
   losses                                               2,136        1,026
Deposit fees and other non-interest income                242          173
Income associated with the sale of loans                  216           82
Non-interest expense                                    1,443        1,271
                                                  -----------  -----------
  Net income (loss) before tax expense                  1,151           10
Income tax expense  (benefit)                             447            2
                                                  -----------  -----------
  Net income (loss)                               $       704  $         8
                                                  ===========  ===========
  Net income (loss) per share, basic              $      0.40  $      0.01
                                                  ===========  ===========
  Net income (loss) per share, fully diluted      $      0.40  $      0.01
                                                  ===========  ===========

Basic average shares outstanding                    1,748,594    1,551,178
                                                  ===========  ===========
Fully diluted average shares outstanding            1,748,594    1,596,548
                                                  ===========  ===========

Condensed Statements of Operations               For the six   For the six
                                                months ending months ending
                                                   June 30,     June 30,
                                                     2008         2007
                                                  -----------  -----------
Interest income                                   $     4,744  $     4,935
Interest expense                                        1,661        1,877
                                                  -----------  -----------
  Net interest income                                   3,083        3,058
Provision for (recovery of) loan losses                  (563)         642
                                                  -----------  -----------
  Net interest income, net of provision for loan
   losses                                               3,646        2,416
Deposit fees and other non-interest income                469          341
Income associated with the sale of loans                  303          151
Non-interest expense                                    2,904        2,580
                                                  -----------  -----------
  Net income before tax expense                         1,514          328
Income tax expense                                        584          129
                                                  -----------  -----------
  Net income                                      $       930  $       199
                                                  ===========  ===========
  Net income per share, basic                     $      0.56  $      0.13
                                                  ===========  ===========
  Net income per share, fully diluted             $      0.56  $      0.12
                                                  ===========  ===========

Basic average shares outstanding                    1,665,495    1,551,178
                                                  ===========  ===========
Fully diluted average shares outstanding            1,665,495    1,602,148
                                                  ===========  ===========


Performance by Quarter        6/30/08     3/31/08    12/31/07     9/30/07
                            ----------  ----------  ----------  ----------

Actual Loans                $  130,485  $  131,020  $  128,534  $  128,158
Average Loans               $  129,127  $  130,393  $  131,383  $  125,388

Non-performing loans  and
 loans past due 90 days     $      441  $    1,375  $    1,375  $    3,029
Other real estate owned     $    1,066  $        -  $        -  $        -
Loan loss reserve as a
 percentage of loans              2.19%       1.87%       1.87%       1.80%
Loans charged off, net of
 recoveries                 $   (1,016) $       (2) $    2,012  $       (6)
Loan loss reserves as a
 percentage of
 non-performing loans              648%        178%        175%         76%

Actual Client and Wholesale
 Deposits                   $  106,240  $  110,184  $  113,374  $  103,682
Average Client and
 Wholesale Deposits         $  113,624  $  112,013  $  110,641  $  111,607

Actual Client Deposits      $   90,717  $   87,399  $   88,604  $   79,489
Average Client Deposits     $   92,106  $   87,840  $   88,056  $   88,053

Net interest income         $    1,533  $    1,550  $    1,670  $    1,607
Net income (loss) before
 tax expense                $    1,151  $      362  $   (1,438) $      266
Net income (loss)           $      704  $      225  $     (855) $      170
Net income (loss) per
 share, basic               $     0.40  $     0.14  $    (0.55) $     0.11
Net income (loss) per
 share, fully diluted       $     0.40  $     0.14  $    (0.55) $     0.11

Actual shares outstanding    1,748,594   1,748,594   1,552,178   1,552,178
Book value per share        $     9.26  $     8.86  $     8.69  $     9.20

Return on average equity         17.99%       6.59%     -23.31%       4.71%
Return on average assets          2.14%       0.67%      -2.49%       0.52%
Net interest margin (1)           4.73%       4.73%       5.01%       5.00%
Efficiency ratio (2)                72%         78%         66%         62%

(1) Calculated on a tax equivalent basis
(2) Calculated by dividing non-interest expense by net interest income
    and non-interest income.

Contact Information

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