Capital Pacific Bancorp (OTCQB: CPBO), (the Company), today reported financial
results for the three months and six months ended June 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 second quarter of 2014 was
$547,000 or $0.21 per common diluted share, up 50% compared with
$364,000 or $0.14 per common diluted share in the second quarter of
2013.
-- Net income to common shareholders in the first half of 2014 was $1.09
million or $0.42 per common diluted share, an increase of 41% compared
with $772,000 or $0.30 per common diluted share in the first half of
2013, primarily reflecting higher net interest income. Net income in the
six months of 2014 represented record first-half earnings for the
Company.
-- Total assets were $237.65 million at June 30, 2014, a 13% increase from
$209.65 million at June 30, 2013, primarily reflecting a 15% year-over-
year growth in total loans to $193.45 million at June 30, 2014 compared
with $168.56 million at June 30, 2013.
-- Total client deposits increased to $209.82 million at June 30, 2014,
compared with $183.56 million at June 30, 2013, reflecting the Company's
focus on building relationship business with its commercial and
nonprofit client base.
-- The net interest margin was 4.01% in the second quarter of 2014,
reflecting an emphasis on managing interest expense, and identifying
niche lending opportunities that reduce the impact of rate-based
competition for quality loans.
-- Reflecting continuing positive trends in asset quality, total non-
performing assets, including troubled debt restructurings, were 1.55% of
total assets at June 30, 2014, stable compared with the prior two
consecutive quarters, and down from 2.16% of total assets at June 30,
2013.
-- The Company's loan loss reserve was 191% of non-performing loans at June
30, 2014, while total non-performing assets (not including troubled debt
restructurings) declined to 1.09% of total assets compared with 1.72% a
year ago.
-- Return on average common equity (annualized) was 9.84% in the second
quarter of 2014 compared with 7.16% in the prior year's second quarter,
while return on average assets (annualized) was 0.92% in the second
quarter of 2014 compared with 0.71% in the second quarter of 2013.
-- Reflecting enhanced shareholder value, the Company's book value per
common share increased to $8.82 at June 30, 2014 compared with $8.00 a
year earlier, an increase in value of approximately 10%.
"Our focus is to build Capital Pacific Bancorp through prudent organic growth by
offering industry expertise and customized financial solutions," said Mark
Stevenson, President and CEO. "Our relationship approach to banking has resulted
in loan and deposit growth of 15% and 14% as compared with a year ago."
Stevenson said the Company's specialty in serving the needs of
sustainability-focused corporations and nonprofit organizations has enhanced the
Company's visibility throughout the Portland business community. The Bank's own
commitment to social and environmental stewardship for the benefit of all
stakeholders, including becoming a Certified B Corporation (B Corp) in the first
half of 2014, has increased awareness of the Company's unique capabilities and
approach to doing business, he added.
Income Statement Highlights
Net income to common shareholders in the second quarter of 2014 was $547,000 or
$0.21 per common diluted share, compared with $364,000 or $0.14 per common
diluted share in the second quarter of 2013.
Net interest income for the second quarter of 2014 was $2.22 million compared
with $1.93 million for the second quarter of 2013, a 15% increase. On a
sequential quarter basis, net interest income was comparable to the first
quarter of 2014. Interest expense was stable year-over-year, and the Company had
no provision for loan losses in either reporting period.
Total non-interest expense in the second quarter of 2014 was $1.66 million
compared with $1.63 million in the second quarter of 2013. The modest
year-over-year increase primarily reflects the Company's investment in retaining
experienced staff.
The Company reported a 4.01% net interest margin in the second quarter of 2014,
compared with 4.02% in the second quarter of 2013. Stevenson explained the
stability in the Company's net interest margin during the past four quarters
reflects the Company's attention to interest expense management and targeting
lending customers that value the Company's industry expertise and personal
customer service.
For the six months ended June 30, 2014, net income to common shareholders was
$1.09 million or $0.42 per common diluted share, compared with $772,000, or
$0.30 per diluted common share for the six months ended June 30, 2013, a 41%
increase. The increased earnings primarily reflect loan growth and the
elimination of preferred stock dividends.
Net interest income in the first half of 2014 was $4.46 million, a 10%
year-over-year increase compared with net interest income of $4.07 million in
the first half of 2013. The Company had no provision for loan losses in either
first-half periods.
Balance Sheet Highlights
Total loans at June 30, 2014 were $193.45 million, up 15% compared with $168.56
million at June 30, 2013. Total loans increased 3% from $187.98 million at
December 31, 2013. Expansion in the Company's loan portfolio was due to growth
in commercial real estate loans.
"Our commercial real estate loan portfolio is very diverse, with limits on
exposure to any single industry segment or asset class," commented Stevenson.
He added that a key goal in the second half of 2014 is to expand the commercial
lending segment, which the Company defines as owner-occupied commercial real
estate, working capital lines of credit, and equipment lending. "We expect a
strong summer season. Our loan pipeline has depth, and approximately $4 million
in commercial loans previously slated for June are expected to close in July,"
Stevenson explained.
Total client deposits at June 30, 2014 were $209.82 million compared with
$183.56 million at June 30, 2013 and $207.0 million at December 31, 2013. "I
would characterize our opportunities for future deposit growth as very
positive," said Stevenson.
Demand deposits equal 50% of total client deposits, providing a granular source
of inexpensive funds. The Company had a 28 basis point cost of funds in the
second quarter of 2014, consistent with the last four quarters.
Asset quality remained high, with total non-performing assets declining to $2.58
million or 1.09% of total assets at June 30, 2014 compared with $3.61 million or
1.72% of total assets at June 30, 2013. Non-performing assets, including
performing troubled debt restructurings, declined to $3.68 million or 1.55% of
total assets at June 30, 2014, compared with $4.54 million or 2.16% of total
assets at June 30, 2013.
Other real estate owned (OREO), a sub category of non-preforming assets, was
$1.13 million at June 30, 2014 compared with $157,000 at June 30, 2013,
reflecting the expected migration of a non-performing loan to OREO. The Company
charged off $247,000 of this loan with reserves set aside in a prior period, and
anticipates its sale without additional loss.
"The overall credit profile of our loan portfolio is strong, and the number of
underperforming loans is vastly reduced from recession era totals," said
Stevenson. "Our few remaining problem credits are headed toward final
resolution, releasing resources to focus on other initiatives."
Operational Efficiency Improvement, Capital Adequacy, and Outlook
The Company's efficiency ratio was 67.09% for the second quarter of 2014 as
compared to 76.64% in the second quarter of 2013, the result of growth in
interest income. Stevenson noted the Company anticipates ongoing asset growth
will make a positive contribution to the efficiency ratio in future quarters.
The Bank remained well-capitalized by accepted regulatory standards as of June
30, 2014, with a tier 1 leverage ratio of 10.56%, a tier 1 capital ratio of
12.33%, and a total risk based capital ratio of 13.59%.
"The Portland area economy and business environment is in greater health than
many parts of the country," Stevenson concluded. "Our financial results
demonstrate our ability to increase shareholder value as well as act as a strong
socially responsible partner for our clients. We are enthusiastic about the
Company's outlook for the remainder of 2014."
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) As of As of
Condensed Consolidated Balance Sheets 6/30/2014 12/31/2013 % change
---------------------------------------- ----------- ----------- --------
Cash and due from banks $ 7,972 $ 17,073 -53%
Investments 29,622 28,608 4%
Loans:
Construction 7,376 8,373 -12%
Real estate 149,712 148,048 1%
Commercial 34,120 29,058 17%
Other 2,237 2,501 -11%
----------- -----------
Total loans 193,445 187,980 3%
Loan loss reserve (2,769) (2,986) -7%
----------- -----------
Total loans, net of loan loss reserve 190,676 184,994 3%
Other real estate owned 1,129 157 nm
Other assets 8,250 8,292 -1%
----------- -----------
Total assets $ 237,649 $ 239,124 -1%
=========== ===========
Deposits:
Non interest-bearing demand deposits $ 69,826 $ 66,205 5%
Interest-bearing demand deposits 35,411 43,259 -18%
Money market deposits 61,701 56,499 9%
Certificates of deposit 42,885 41,032 5%
----------- -----------
Total client deposits 209,823 206,995 1%
Brokered deposits - 5,000 -100%
----------- -----------
Total deposits 209,823 211,995 -1%
Other liabilities 1,759 2,298 -23%
Long-term debt 3,486 3,655 -5%
Common equity 22,581 21,176 7%
----------- -----------
Total liabilities and shareholders'
equity $ 237,649 $ 239,124 -1%
=========== ===========
Capital Pacific Bancorp
(unaudited and dollars in thousands, except
per share data)
For the For the For the
three three three Year
Condensed months months months Sequential over
Consolidated Income ending ending ending quarter % year %
Statements 6/30/2014 3/31/2014 6/30/2013 change change
--------------------- ----------- ----------- ----------- ---------- ------
Interest income $ 2,373 $ 2,386 $ 2,081 -1% 14%
Interest expense 150 148 149 1% 1%
----------- ----------- -----------
Net interest income 2,223 2,238 1,932 -1% 15%
----------- ----------- -----------
Provision for loan
losses - - - 0% 0%
----------- ----------- -----------
Net interest
income, net of
provision for loan
losses 2,223 2,238 1,932 -1% 15%
----------- ----------- -----------
Deposit fees and
other non-interest
income 224 212 189 6% 19%
----------- ----------- -----------
Salaries and benefits 1,019 1,043 933 -2% 9%
Occupancy 168 165 164 2% 2%
Net expense
(recovery)
associated with non-
performing assets 39 40 (1) -3% nm
Other non-interest
expense 438 444 530 -1% -17%
----------- ----------- -----------
Total non-interest
expense 1,664 1,692 1,626 -2% 2%
----------- ----------- -----------
Net income before
tax expense 783 758 495 3% 58%
----------- ----------- -----------
Income tax expense 236 217 131 9% 80%
----------- ----------- -----------
Net income $ 547 $ 541 $ 364 1% 50%
=========== =========== ===========
Preferred stock
dividends - - - nm nm
----------- ----------- -----------
Net income to
common
shareholders $ 547 $ 541 $ 364 1% 50%
=========== =========== ===========
Net income per
common share,
basic (1) $ 0.21 $ 0.21 $ 0.14 0% 50%
=========== =========== ===========
Net income per
common share,
fully diluted (1) $ 0.21 $ 0.21 $ 0.14 0% 50%
=========== =========== ===========
Basic average common
shares outstanding 2,560,689 2,541,726 2,532,345
=========== =========== ===========
Fully diluted average
common shares
outstanding 2,625,308 2,593,560 2,598,288
=========== =========== ===========
Capital Pacific Bancorp
(unaudited and dollars in thousands,
except per share data)
For the six For the six
months months
ending ending
Condensed Consolidated Income Statements 6/30/2014 6/30/2013 % change
----------------------------------------- ----------- ----------- --------
Interest income $ 4,759 $ 4,353 9%
Interest expense 297 286 4%
----------- -----------
Net interest income 4,462 4,067 10%
----------- -----------
Provision for loan losses - - 0%
----------- -----------
Net interest income, net of provision
for loan losses 4,462 4,067 10%
----------- -----------
Deposit fees and other non-interest
income 437 378 16%
----------- -----------
Salaries and benefits 2,063 1,865 11%
Occupancy 334 321 4%
Net expense (recovery) associated with
non-performing assets 79 28 nm
Other non-interest expense 883 1,081 -18%
----------- -----------
Total non-interest expense 3,359 3,295 2%
----------- -----------
Net income before tax expense 1,540 1,150 34%
----------- -----------
Income tax expense 452 336 35%
----------- -----------
Net income $ 1,088 $ 814 34%
=========== ===========
Preferred stock dividends - (42) -100%
----------- -----------
Net income to common shareholders $ 1,088 $ 772 41%
=========== ===========
Net income per common share, basic (1) $ 0.43 $ 0.31 39%
=========== ===========
Net income per common share, fully
diluted (1) $ 0.42 $ 0.30 40%
=========== ===========
Basic average common shares outstanding 2,551,260 2,528,735
=========== ===========
Fully diluted average common shares
outstanding 2,605,138 2,604,382
=========== ===========
Capital Pacific Bancorp
(unaudited and dollars in thousands,
except per share data)
Performance by
Quarter 6/30/2014 3/31/2014 12/31/2013 9/30/2013 6/30/2013
---------------- ---------- ---------- ---------- ---------- ----------
Actual loans,
gross $ 193,445 $ 186,724 $ 187,980 $ 179,318 $ 168,560
Average loans,
gross $ 189,739 $ 187,953 $ 181,518 $ 174,158 $ 157,989
Loans past due
90 days or more
(2) $ - $ - $ - $ - $ -
Loans on non-
accrual status $ 1,450 $ 2,781 $ 2,832 $ 3,663 $ 3,456
Other real
estate owned $ 1,129 $ 157 $ 157 $ 157 $ 157
Total non-
performing
assets $ 2,579 $ 2,938 $ 2,989 $ 3,820 $ 3,613
Total non-
performing
assets as a
percentage of
total assets 1.09% 1.27% 1.27% 1.66% 1.72%
Performing
troubled debt
restructurings
(not included
in non-
performing
assets) $ 1,096 $ 908 $ 913 $ 918 $ 922
Total non-
performing
assets plus
performing
troubled debt
restructurings $ 3,675 $ 3,846 $ 3,902 $ 4,738 $ 4,535
Total non-
performing
assets plus
troubled debt
restructurings
as a percentage
of total assets 1.55% 1.66% 1.63% 2.06% 2.16%
Loan loss
reserve $ 2,769 $ 3,001 $ 2,986 $ 2,891 $ 2,739
Loans charged
off, net of
recoveries /
(recoveries,
net of loans
charged off) $ 232 $ (15) $ (95) $ (9) $ (19)
Loan loss
reserve as a
percentage of
loans 1.43% 1.61% 1.59% 1.61% 1.62%
Loan loss
reserve as a
percentage of
non-performing
loans 190.97% 107.91% 105.44% 78.92% 79.25%
Actual client
deposits $ 209,823 $ 203,085 $ 206,995 $ 204,127 $ 183,557
Average client
deposits $ 211,942 $ 205,642 $ 203,529 $ 199,549 $ 178,058
Net income $ 547 $ 541 $ 595 $ 431 $ 364
Net income
available to
common
shareholders
(1) $ 547 $ 541 $ 595 $ 431 $ 364
Net earnings per
common share,
basic (1) $ 0.21 $ 0.21 $ 0.24 $ 0.17 $ 0.14
Net earnings per
common share,
fully diluted
(1) $ 0.21 $ 0.21 $ 0.23 $ 0.17 $ 0.14
Actual common
shares
outstanding 2,560,689 2,560,689 2,532,985 2,532,119 2,531,064
Book value per
common share $ 8.82 $ 8.58 $ 8.36 $ 8.17 $ 8.00
Tier 1 risk-
based capital
ratio (bank) 12.33% 12.45% 11.95% 11.92% 12.96%
Tier 1 risk-
based capital
ratio (company) 11.00% 11.08% 10.50% 10.45% 11.09%
Return on
average common
equity (1) 9.84% 10.18% 11.24% 8.37% 7.16%
Return on
average assets 0.92% 0.92% 1.02% 0.76% 0.71%
Net interest
margin (3) 4.01% 4.12% 4.08% 3.92% 4.02%
Efficiency ratio
(4) 67.09% 69.11% 65.12% 68.14% 76.64%
(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 $94,000 for the three months ended June
30, 2014 and 2013, respectively, and $222,000 and $192,000 for the six
months ended June 30, 2043 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
FOR FURTHER INFORMATION PLEASE CONTACT:
Contact:
Mark Stevenson
President and CEO
Felice Belfiore
CFO
(503) 796-0100