SOURCE: Capital Pacific Bancorp

April 19, 2012 14:23 ET

UPDATE: Capital Pacific Bancorp Reports Positive Financial Results for 1st Quarter of 2012

PORTLAND, OR--(Marketwire - Apr 19, 2012) - Capital Pacific Bancorp (OTCQB: CPBO) (OTCBB: CPBO) ("the Company") today reported financial results for the first quarter of 2012.

Net income
The Company reported net income of $231,000 for the three months ended March 31, 2012, or $.07 per common diluted share. This compares favorably to the first quarter of 2011 when the Company earned $194,000, or $.07 per common diluted share on fewer shares outstanding.

"Earnings have remained positive over the last eight quarters," said Mark Stevenson, President and CEO of Capital Pacific Bancorp. "The dramatic improvement that we have achieved in our asset quality has stabilized earnings."

Loans
Loans totaled $134.6 million as of March 31, 2012, up $1.2 million in the first quarter and up $6.8 million from one year ago. "We're pleased with this modest uptick in lending activity given the market's tough competition for quality loans, as more banks are looking to grow their loan portfolios, despite weak economic trends," said Stevenson. "While we acknowledge this fundamental challenge, we are energized about our opportunities and believe that our expertise in business lending will continue to bear positive results in 2012."

Deposits
Client deposits totaled $159.2 million, an increase of $1.4 million in the first quarter of 2012 and up $8.6 million from one year ago. On an average basis, client deposits declined $10.3 million in the current quarter. "The first quarter had a notable amount of volatility in deposit balances, in particular for some of our larger clients," said Mr. Stevenson. "In addition, the first quarter is typically a seasonal low point for our private school clients and other professional firms."

"Despite the slower start to the year, our pipeline supports significant opportunity to grow client deposits in 2012," said Stevenson. "Non interest-bearing demand deposits, an underlying indicator of core deposit growth, grew 19% when compared to the prior quarter and now stands at 35% of total client deposits."

Non-performing assets and credit quality
At March 31, 2012, non-performing assets totaled $2.7 million, a decline of 23% when compared to the prior quarter. Non-performing assets as a percentage of total assets have dropped from 5.81% at its peak in 2010 to 1.39% at the end of the current quarter. "Our improvement in asset quality is a real tribute to our staff and their ability to successfully strategize, execute and reduce our non-performing assets to a satisfactory level," said Stevenson.

The composition of non-performing assets is as follows:

  • During the first quarter of 2012, non-performing loans declined from $2.7 million to $2.3 million. The Company charged-off $253,000 in loans. The losses associated with these charge-offs were fully recognized in 2011. The Company also received $115,000 in payments. There were no new loans placed on non-accrual status in the quarter. Forty-four percent of the loans on non-accrual status at March 31, 2012 are paid current. Loans on non-accrual status are evaluated for potential upgrade when the borrower has demonstrated a history of performance and the risk of loss has decreased.

  • During the first quarter of 2012, other real estate owned declined from $724,000 to $320,000. The decline is due to the sale of two properties at their approximate carrying value of $336,000. The Company also recognized $68,000 in property value impairments on one of its two remaining properties.

Non-performing assets as of March 31, 2012 by sector were as follows:

No. of Borrowers or Properties Commercial Commercial Real
Estate (1)
Land Development
and Construction
Residential Total
Non-performing loans 8 $ 400,000 $ 1,057,000 $ - $ 876,000 $ 2,333,000
Other real estate owned 2 $ - $ - $ 320,000 $ - $ 320,000
Total $ 2,653,000
(1) Sixty-nine percent of non-performing commercial real estate loans are guaranteed by the Small Business Administration.

At March 31, 2012, the Company's reserve for loan losses totaled $2.7 million, or 1.99% of total loans, compared to $2.9 million, or 2.17% of total loans, as of December 31, 2011. The decline is the result of net loan charge-offs of $220,000. The Company took no loan loss provision in the first quarter as a result of stable asset quality and low loan growth.

Capital adequacy
The Company is well-capitalized by regulatory standards as of March 31, 2012. The Company's total risk-based capital ratio is estimated at 16.9%. To be considered well-capitalized, a bank holding company must have total risked-based capital of at least 10.0% of risk-weighted assets.

Net interest income
Net interest income (interest income less interest expense) declined 2% in the three months ended March 31, 2012 when compared to the prior quarter. The decline is the result of lower average loan yields, which dropped 21 basis points. The decline in loan yields was partially offset with an 11 basis point decline in the cost of interest-bearing deposits and other liabilities.

"Loan yields have trended down over the last several quarters, the result of low interest rates and aggressive price competition," said Stevenson. "We have addressed some of this lost revenue by lowering the rates we pay on deposits, and deploying excess cash balances into longer term investments." The Company's investment portfolio is a mix of investment grade securities issued by the government, and government sponsored entities.

The net interest margin which measures the net yield on earning assets totaled 4.17% in the first quarter of 2012, up from 3.98% when compared to the three months ending December 30, 2011. The improvement is primarily due to a marginal shift in the mix of average assets, with fewer balances residing in cash and short-term investments.

Non-interest income
Non-interest income in the first quarter of 2012 totaled $193,000, an increase of 8% when compared to the preceding quarter and an increase of 32% over the same quarter last year. The increase is the result of the investment of $2.7 million in bank owned life insurance in the 4th quarter of 2011 and an increase in deposit and loan service charges.

Non-interest expense
Non-interest expense in the first quarter of 2012 totaled $1.7 million, up 7% when compared to the preceding quarter and an increase of 18% over the same quarter last year. The change is due primarily to additional salary costs that reflect strategic increases in sales staff that took place in 2011.

About Capital Pacific Bancorp
Capital Pacific Bancorp (OTCQB: CPBO) (OTCBB: CPBO) is the parent company of Capital Pacific Bank, which serves businesses, professionals and non-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 3/31/2012 As of 12/31/2011 % change
Cash and due from banks $ 16,763 $ 11,773 42 %
Time certificates of deposits at other banks 6,899 7,144 -3 %
Investments 28,720 28,792 0 %
Loans:
Construction and land development 4,982 4,758 5 %
Real estate 94,154 94,771 -1 %
Commercial 35,434 33,875 5 %
Other 60 71 -15 %
Total loans 134,630 133,475 1 %
Loan loss reserve (2,673 ) (2,893 ) -8 %
Total loans, net of loan loss reserve 131,957 130,582 1 %
Other real estate owned 320 724 -56 %
Other assets 5,569 5,832 -5 %
Total assets $ 190,228 $ 184,847 3 %
Deposits:
Non interest-bearing demand $ 54,979 $ 46,088 19 %
Interest-bearing demand 64,231 58,899 9 %
Certificates of deposit 40,034 52,811 -24 %
Total client deposits 159,244 157,798 1 %
Brokered certificates of deposit 888 888 0 %
Total deposits 160,132 158,686 1 %
Other liabilities 7,423 3,656 103 %
Shareholders' equity 22,673 22,505 1 %
Total liabilities and shareholders' equity $ 190,228 $ 184,847 3 %
Capital Pacific Bancorp
(unaudited and dollars in thousands, except per share data)
Condensed Consolidated Statements of Operations For the three months ending March 31, 2012 For the three months ending December 31, 2011 For the three months ending March 31, 2011 Sequential quarter % change Year over year % change
Interest income $ 1,960 $ 2,040 $ 1,938 -4 % 1 %
Interest expense 155 197 221 -21 % -30 %
Net interest income 1,805 1,843 1,717 -2 % 5 %
Provision for loan losses - 124 123 -100 % -100 %
Net interest income, net of provision for loan losses 1,805 1,719 1,594 5 % 13 %
Deposit fees and other non-interest income 193 178 146 8 % 32 %
Income associated with the sale of loans and investments - - - 0 % 0 %
Total non-interest income 193 178 146 8 % 32 %
Salaries and benefits 944 916 764 3 % 24 %
Occupancy 148 145 149 2 % -1 %
Net expense associated with non-performing assets 33 68 (43 ) -51 % -177 %
Net loss (income) on sale or impairment of other real estate owned 73 (19 ) 31 nm 135 %
FDIC assessments 78 71 95 10 % -18 %
Other non-interest expense 403 383 424 5 % -5 %
Total non-interest expense 1,679 1,564 1,420 7 % 18 %
Net income before tax expense 319 333 320 -4 % 0 %
Income tax expense (benefit) 88 66 126 33 % -30 %
Net income $ 231 $ 267 $ 194 -13 % 19 %
Preferred stock dividends (65 ) (65 ) (65 ) 0 % 0 %
Net income to common shareholders $ 166 $ 202 $ 129 -18 % 29 %
Net income per common share, basic (1) $ 0.07 $ 0.08 $ 0.07 -13 % 0 %
Net income per common share, fully diluted (1) $ 0.07 $ 0.08 $ 0.07 -13 % 0 %
Basic average common shares outstanding 2,501,289 2,501,289 1,771,911
Fully diluted average common shares outstanding 2,520,663 2,501,289 1,771,911
Capital Pacific Bancorp
(unaudited and dollars in thousands, except per share data)
Performance by Quarter 3/31/12 12/31/11 9/30/11 6/30/11 3/31/11
Actual loans, gross $ 134,630 $ 133,475 $ 131,696 $ 131,971 $ 127,798
Average loans, gross $ 131,503 $ 131,829 $ 132,405 $ 130,404 $ 124,726
Loans past due 30-89 days (2) $ - $ - $ 904 $ 1,812 $ 194
Loans past due 90 days or more $ - $ - $ - $ - $ -
Loans on non-accrual status $ 2,333 $ 2,701 $ 2,063 $ 2,601 $ 2,456
Other real estate owned $ 320 $ 724 $ 1,413 $ 4,661 $ 5,346
Total non-performing assets $ 2,653 $ 3,425 $ 3,476 $ 7,262 $ 7,802
Total non-performing assets as a percentage of total assets 1.39 % 1.89 % 1.76 % 3.95 % 4.39 %
Loan loss reserve $ 2,673 $ 2,893 $ 2,844 $ 2,897 $ 3,039
Loans charged off, net of recoveries / (recoveries, net of loans charged off) $ 220 $ 76 $ 72 $ 142 $ (11 )
Loan loss reserve as a percentage of loans 1.99 % 2.17 % 2.16 % 2.19 % 2.38 %
Loan loss reserve as a percentage of non-performing loans 115 % 107 % 138 % 111 % 124 %
Actual client deposits $ 159,244 $ 157,798 $ 170,274 $ 160,245 $ 150,629
Average client deposits $ 158,031 $ 168,369 $ 166,918 $ 154,489 $ 143,465
Net income $ 231 $ 267 $ 75 $ 158 $ 194
Net income available to common shareholders (1) $ 166 $ 202 $ 10 $ 93 $ 129
Net earnings per common share, basic (1) $ 0.07 $ 0.08 $ - $ 0.05 $ 0.07
Net earnings per common share, fully diluted (1) $ 0.07 $ 0.08 $ - $ 0.05 $ 0.07
Actual common shares outstanding 2,501,289 2,501,289 2,501,289 1,771,911 1,771,911
Book value per common share $ 7.41 $ 7.36 $ 7.26 $ 8.54 $ 8.43
Return on average common equity (1) 3.60 % 4.39 % 0.24 % 2.50 % 3.55 %
Return on average assets 0.50 % 0.54 % 0.15 % 0.35 % 0.46 %
Net interest margin (3) 4.17 % 3.98 % 4.24 % 4.37 % 4.39 %
Efficiency ratio (4) 81 % 79 % 95 % 91 % 76 %
(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 $78,000 and $71,000 for the three months ended March 31, 2012 and 2011, respectively.
(4) Calculated by dividing non-interest expense by the sum of net interest income and non-interest income.
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Contact Information

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