Capital Pacific Bancorp Posts Profitable Third Quarter of 2008
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"Earnings have remained solid in each of the last three quarters despite unprecedented market disruption and declining real estate valuations," said Mark Stevenson, CEO of Capital Pacific Bancorp. "Overall, our loan portfolio remains well diversified by sector. Loans related to residential development are less than five percent of total loans, which is limiting our downside exposure in this market sector."
Loans and credit quality
As of September 30, 2008, loans totaled $130.2 million, unchanged when compared to the second quarter of 2008 and up $1.9 million when compared to the same quarter last year. Loan growth has softened when compared to prior periods, with new originations primarily focused in multi-family and owner-occupied commercial real estate loans.
The Company's reserve for potential loan losses increased slightly to $2.9 million in the third quarter of 2008, or 2.24% of total loans. Management believes the Company's reserve for potential loan losses is appropriate given prevailing economic conditions.
The Company did see some growth in non-performing loans in the third quarter of 2008 when compared to the previous quarter. In total, the Company has three non-performing loans including one loan in the amount of $441,000 for a condominium development in Portland, Oregon, one commercial real estate loan for $429,000 in St. Helens, Oregon, and one loan valued at $970,000 for a residential development in Vancouver, Washington. Each loan is believed to be well secured by the underlying collateral based upon recent appraisals and other market considerations. The Company is proceeding with foreclosure on two of the loans. In the case of each of these credits, the Company set aside specific reserves in previous reporting periods. Thus, no additional reserves were necessary in the third quarter of 2008. The Company also owns land in southern Oregon valued at $1,066,000 which is classified as other real estate owned and is supported by a current appraisal. In total, non-performing assets equal $2.9 million, or 2.13% of total assets, and 17.7% of total capital. There were no loans past due 90 days or more.
Deposits
Average client deposits of $89.9 million are virtually unchanged when compared to the last several reporting periods; client deposits totaled $90.2 million at quarter-end. The Company has posted solid growth in new clients, and overall account retention is strong. However, new deposit growth has been offset by fluctuations in client accounts driven by client-specific circumstances and other economic factors. Client deposits are defined as total deposits excluding brokered or nationally sourced deposits.
Net interest margin
The net interest margin was 4.74% in the third quarter of 2008, virtually unchanged from the previous quarter and down 27 basis points compared to the same quarter last year. The net interest margin included approximately $25,000 in interest recognized in a previous period that had to be reversed because of the increase in non-performing loans. Excluding the interest reversal, the interest margin was 4.86% in the current quarter.
Other financial highlights
-- Income associated with the sale of loans totaled $102,000 compared to
$216,000 for the previous quarter, and $28,000 in the same quarter last
year. While income from the sale of loans has been a consistent source of
revenue for the Company, counterparty interest in this type of transaction
is uncertain in the current market.
-- Non-interest expenses totaled $1.4 million, unchanged when compared to
the prior quarter. Non-interest expenses are up 26% when compared to the
same quarter last year, a period that included one-time valuation
adjustments to both short and long term incentive programs. Growth in non-
interest expenses is expected to be limited for the remainder of 2008.
-- The Company has no holdings in Fannie Mae or Freddie Mac preferred
stock.
Capital adequacy
The company continues to be classified as well-capitalized by regulatory standards. Total risk-based capital was approximately 13.3% at the end of the third quarter of 2008.
About Capital Pacific Bancorp
Capital Pacific Bancorp
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
Sept. 30, December 31,
Condensed Balance Sheets 2008 2007
--------- ------------
Cash and due from banks $ 5,336 $ 517
Investments 913 5,569
Loans:
Commercial 51,006 59,023
Real estate 66,635 60,913
Other 12,514 8,598
--------- ------------
Total loans 130,155 128,534
Loan loss reserve (2,917) (2,403)
--------- ------------
Total loans, net of loan loss reserve 127,238 126,131
Other assets 2,808 2,341
--------- ------------
Total assets $ 136,295 $ 134,558
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Deposits:
Non interest-bearing demand $ 19,694 $ 19,531
Interest-bearing demand 40,802 58,074
Certificates of deposit 49,776 35,769
--------- ------------
Total deposits 110,272 113,374
Other liabilities 9,603 7,697
Shareholders' equity 16,420 13,487
--------- ------------
Total liabilities and shareholders' equity $ 136,295 $ 134,558
========= ============
For the For the
three three
months months
ending ending
Sept. 30, Sept. 30,
Condensed Statements of Income 2008 2007
--------- ---------
Interest income $ 2,180 $ 2,744
Interest expense 673 1,137
--------- ---------
Net interest income 1,507 1,607
Provision for loan losses 60 445
--------- ---------
Net interest income, net of provision for loan losses 1,447 1,162
Deposit fees and other non-interest income 202 207
Income associated with the sale of loans 102 28
Non-interest expense 1,424 1,131
--------- ---------
Net income before tax expense 327 266
Income tax expense 115 96
--------- ---------
Net income $ 212 $ 170
========= =========
Net income per share, basic $ 0.12 $ 0.11
========= =========
Net income per share, fully diluted $ 0.12 $ 0.11
========= =========
Basic average shares outstanding 1,748,594 1,552,048
========= =========
Fully diluted average shares outstanding 1,748,594 1,555,927
========= =========
For the For the
nine nine
months months
ending ending
Sept. 30, Sept. 30,
Condensed Statements of Income 2008 2007
--------- ----------
Interest income $ 6,924 $ 7,679
Interest expense 2,334 3,014
--------- ----------
Net interest income 4,590 4,665
Provision for (recovery of) loan losses (503) 1,087
--------- ----------
Net interest income, net of provision for loan
losses 5,093 3,578
Deposit fees and other non-interest income 671 548
Income associated with the sale of loans 405 179
Non-interest expense 4,329 3,711
--------- ----------
Net income before tax expense 1,840 594
Income tax expense 699 225
--------- ----------
Net income $ 1,141 $ 369
========= ==========
Net income per share, basic $ 0.67 $ 0.24
========= ==========
Net income per share, fully diluted $ 0.67 $ 0.23
========= ==========
Basic average shares outstanding 1,693,397 1,551,471
========= ==========
Fully diluted average shares outstanding 1,693,397 1,589,080
========= ==========
Performance by Quarter 9/30/08 6/30/08 3/31/08 12/31/07
--------- --------- --------- ---------
Actual Loans $ 130,155 $ 130,485 $ 131,020 $ 128,534
Average Loans $ 128,129 $ 129,127 $ 130,393 $ 131,383
Non-performing loans $ 1,840 $ 441 $ 1,375 $ 1,375
Loans past due 90 days or more $ - $ - $ - $ -
Loans charged off, net of
recoveries $ (1) $ (1,016) $ (2) $ 2,012
Other real estate owned $ 1,066 $ 1,066 $ - $ -
Loan loss reserve as a
percentage of loans 2.24% 2.19% 1.87% 1.87%
Loan loss reserve as a
percentage of non-performing
loans 159% 648% 178% 175%
Non-performing loans as a
percentage of total loans 1.41% 0.34% 1.05% 1.07%
Actual Client and Wholesale
Deposits $ 110,272 $ 106,240 $ 110,184 $ 113,374
Average Client and Wholesale
Deposits $ 109,672 $ 113,624 $ 112,013 $ 110,641
Actual Client Deposits $ 90,228 $ 90,717 $ 87,399 $ 88,604
Average Client Deposits $ 89,971 $ 92,106 $ 87,840 $ 88,056
Net interest income $ 1,507 $ 1,533 $ 1,550 $ 1,670
Net income (loss) before tax
expense $ 327 $ 1,151 $ 362 $ (1,438)
Net income (loss) $ 212 $ 704 $ 225 $ (855)
Net income (loss) per share,
basic $ 0.12 $ 0.40 $ 0.14 $ (0.55)
Net income (loss) per share,
fully diluted $ 0.12 $ 0.40 $ 0.14 $ (0.55)
Actual shares outstanding 1,748,594 1,748,594 1,748,594 1,552,178
Book value per share $ 9.39 $ 9.26 $ 8.86 $ 8.69
Return on average equity 5.14% 17.99% 6.59% -23.31%
Return on average assets 0.63% 2.11% 0.67% -2.49%
Net interest margin (1) 4.74% 4.74% 4.74% 5.02%
Efficiency ratio (2) 78% 72% 78% 66%
(1) Calculated on a tax equivalent basis
(2) Calculated by dividing non-interest expense by net interest income and
non-interest income.
