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Capital Pacific Bancorp Announces Results for Third Quarter of 2009

^{Published on 2009-10-28 10:10:05 - Market Wire}
 

PORTLAND, OR--(Marketwire - October 28, 2009) - Capital Pacific Bancorp (OTCBB: [ CPBO ]) ("the Company") reported a net loss of $2.0 million for the three months ended September 30, 2009. Including the effect of preferred stock dividends, the Company reported a net loss to common shareholders of $2.1 million, or $1.19 loss per diluted share.

For the nine months ended September 30, 2009, the Company reported a net loss of $1.9 million. Including dividends, the net loss to common shareholders was $2.1 million, or $1.20 loss per diluted share.

The third quarter net loss was primarily a result of (1) a significant increase in the provision for loan losses which was the result of charge-offs on non-performing loans to reflect current real estate values, (2) an increase in the loan loss reserve for potential future credit deterioration in light of the prolonged economic downturn, and (3) write downs of other real estate owned.

Significant financial disclosures for the third quarter of 2009 include:

 -- Strong deposit growth of $20.1 million, an increase of 20% for the quarter -- Provision for loan losses of $3.8 million and increase in the loan loss reserve to 2.8% of total loans -- Total net loan charge-offs of $2.6 million -- Increase in non-performing assets to $8.3 million, or 5.2% of total assets -- Gain on the sale of other real estate owned of $446,000 -- Impairment charges on other real estate owned totaling $716,000 -- Total risk-based capital ratio estimated at 13.9% 

"In anticipation of today's economic conditions, over the past year and a half we raised private equity, participated in the U.S. Department of Treasury's Capital Purchase Program, made strategic personnel adjustments and continued to focus on growth of deposits at the bank", said Mark Stevenson, President and CEO of Capital Pacific Bancorp. "While we remain acutely focused on the resolution of our non-performing assets, we also continue to focus our efforts on strengthening the bank through new client development and increasing deposits."

Credit quality

At September 30, 2009, the Company's reserve for loan losses totaled $3.7 million, or 2.8% of total loans. The increase in the reserve for loan losses was $1.2 million in the third quarter, net of $2.6 million in charge-offs. Charge-offs include aggressive write downs on collateral dependent loans to net realizable value, absent further decline in market prices. During this economic cycle, the Company has consistently replenished the reserve for all charge-offs.

Non-performing assets

At September 30, 2009, non-performing assets totaled $8.3 million, or 5.2% of total assets. This is an increase of $2.8 million when compared to the previous quarter. Non-performing assets include loans 90 days past due and still accruing interest, loans on non-accrual status and other real estate owned as follows:

 -- As of September 30, 2009, there were no loans 90 days past due and still accruing interest. -- At September 30, 2009, the Company had $6.7 million in loans on non- accrual status, an increase of $5.2 million from the prior quarter which reflects an increase in the number of borrowers demonstrating financial stress due to the duration of the economic downturn. -- At September 30, 2009, the Company had $1.6 million in other real estate owned, down $2.4 million when compared to the prior quarter. Other real estate owned declined in part due to an impairment charge of $716,000 in the third quarter. In addition, the Company disposed of a $1.8 million property for a gain of $446,000. 

Non-performing assets as of September 30, 2009 by sector were as follows:

 Land Commercial Development Commercial Real Estate and Construction Residential ---------- ----------- ---------------- ----------- Loans 90 days past due - - - - Non-performing loans $1,603,000 $1,634,000 $1,801,000 $1,669,000 Other real estate owned - - 1,421,000 165,000 

Loans

As of September 30, 2009, loans totaled $133.4 million, up $3.1 million for the quarter and down $1.9 million for the year. Loan growth has abated in 2009 reflecting weak economic conditions and planned reductions in certain loan sectors. During the first nine months ended September 30, 2009, the Company originated $25.8 million in new loan commitments and renewed another $38.9 million in loan commitments. Total new and renewed loan commitments are approximately 80% of volumes experienced for the same period in 2008.

Land Development and Construction

Construction loans totaled $16.0 million, unchanged when compared to the balance in the previous quarter. The construction portfolio includes $7.9 million in land development, of which 23% is non-performing. The remaining balance is commercial construction, all of which is currently performing.

Commercial real estate

Commercial real estate loans totaled $65.6 million, up $4.7 million when compared to the balance in the previous quarter. Roughly half of the balance is owner-occupied. In total, $1.6 million, or 3% of the balance is non-performing.

The Company performs a stress test of its non-owner occupied commercial real estate portfolio twice a year. The results of the most recent test showed weakness under combined assumptions of increasing capitalization rates, interest rates and vacancy rates. Given the economic climate, the Company significantly increased the reserve for loan losses in the third quarter to address the potential deterioration that may occur in this sector.

Commercial

Commercial loans totaled $44.9 million, down $5.1 million when compared to the balance in the previous quarter and 4% of the balance is non-performing.

Residential

Residential loans comprise a relatively small percentage of the portfolio with a balance totaling $3.2 million, approximately half of which is non-performing.

Deposits

As of September 30, 2009, actual client deposits totaled $119.2 million, up $20.1 million for the quarter, and up $29.1 million for the year. The growth is attributable to a diverse array of customers and account types and is a result of the Company's focus on client development and increasing deposits.

Capital adequacy

The Company continues to be classified as well-capitalized by regulatory standards. The Company's total risk-based capital ratio is estimated at 13.9% at September 30, 2009. To be considered well-capitalized, a company must have total risked-based capital of at least 10.0% of risk-weighted assets.

The Company is a participant in the U.S. Department of the Treasury's Capital Purchase Program and currently has $4 million in preferred stock outstanding under this program. Preferred dividends accrued total $193,000 for the nine months ended September 30, 2009.

Net interest margin

The net interest margin was 4.21% in the third quarter of 2009, a decline of 41 basis points from the previous quarter's net interest margin of 4.62%. The decline was primarily due to a sizable increase in cash held at the Federal Reserve Bank currently earning .25%. The Company will likely continue to maintain a large cash position (interest-bearing) until the economic climate and the return on investment alternatives improve.

Non interest expense

Non-interest expense in the third quarter of 2009 totaled $2.0 million compared to $1.4 million in the second quarter of 2009. This category includes losses on the impairment or sale of other real estate owned. Excluding the impairment or sale of other real estate owned, non interest expense declined to $1.3 million which is slightly lower than amounts for the last several quarters.

Total FDIC assessments dropped to $52,000 compared to $123,000 in the prior quarter, which included a one time special assessment of $64,000.

About Capital Pacific Bancorp

Capital Pacific Bancorp (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, except per share data) As of As of Sept. 30, Dec. 31, Condensed Consolidated Balance Sheets 2009 2008 --------- --------- Cash and due from banks $ 25,705 $ 3,804 Investments 846 993 Loans: Construction 15,993 16,114 Real estate 68,769 57,143 Commercial 44,917 58,430 Other 3,683 3,593 --------- --------- Total loans 133,362 135,280 Loan loss reserve (3,739) (2,929) --------- --------- Total loans, net of loan loss reserve 129,623 132,351 Other real estate owned 1,586 1,651 Other assets 3,382 1,901 --------- --------- Total assets $ 161,142 $ 140,700 ========= ========= Deposits: Non interest-bearing demand $ 29,775 $ 19,142 Interest-bearing demand 52,373 38,720 Certificates of deposit 37,070 32,229 --------- --------- Total client deposits 119,218 90,091 Brokered certificates of deposit 18,984 24,396 --------- --------- Total deposits 138,202 114,487 Other liabilities 4,381 5,663 Shareholders' equity 18,559 20,550 --------- --------- Total liabilities and shareholders' equity $ 161,142 $ 140,700 ========= ========= For the three For the three months ending months ending Sept. 30, Sept. 30, Condensed Consolidated Statements of Income 2009 2008 ------------- -------------- Interest income $ 1,984 $ 2,180 Interest expense 447 673 ------------- -------------- Net interest income 1,537 1,507 Provision for loan losses 3,755 60 ------------- -------------- Net interest income, net of provision for loan losses (2,218) 1,447 Deposit fees and other non-interest income 673 202 Income associated with the sale of loans 26 102 Non-interest expense 2,042 1,424 ------------- -------------- Net income (loss) before tax expense (benefit) (3,561) 327 Income tax expense (benefit) (1,517) 115 ------------- -------------- Net income (loss) $ (2,044) $ 212 ============= ============== Preferred stock dividends (65) - ------------- -------------- Net income (loss) available to common shareholders $ (2,109) $ 212 ============= ============== Earnings (loss) per common share, basic (2) $ (1.19) $ 0.01 ============= ============== Earnings (loss) per common share, fully diluted (2) $ (1.19) $ 0.01 ============= ============== Basic average common shares outstanding 1,771,910 1,748,594 ============= ============== Fully diluted average common shares outstanding 1,771,910 1,748,594 ============= ============== Capital Pacific Bancorp For the nine For the nine months ending months ending Sept. 30, Sept. 30, Condensed Consolidated Statements of Income 2009 2008 (1) ------------- ------------- Interest income $ 5,891 $ 6,924 Interest expense 1,375 2,334 ------------- ------------- Net interest income 4,516 4,590 Provision for (recovery of) loan losses 4,442 (503) ------------- ------------- Net interest income, net of provision for loan losses 74 5,093 Deposit fees and other non-interest income 1,084 671 Income associated with the sale of loans 205 405 Non-interest expense 4,751 4,329 ------------- ------------- Net income (loss) before tax expense (benefit) (3,388) 1,840 Income tax expense (benefit) (1,458) 699 ------------- ------------- Net income (loss) $ (1,930) $ 1,141 ============= ============= Preferred stock dividends (193) - ------------- ------------- Net income (loss) available to common shareholders $ (2,123) $ 1,141 ============= ============= Earnings (loss) per common share, basic (2) $ (1.20) $ 0.67 ============= ============= Earnings (loss) per common share, fully diluted (2) $ (1.20) $ 0.67 ============= ============= Basic average common shares outstanding 1,765,419 1,693,397 ============= ============= Fully diluted average common shares outstanding 1,765,419 1,693,397 ============= ============= Performance by Quarter 9/30/09 6/30/09 3/31/09 12/31/08 ---------- ---------- ---------- ---------- Actual Loans $ 133,362 $ 130,292 $ 130,067 $ 135,280 Average Loans $ 133,460 $ 131,645 $ 136,984 $ 136,486 Loans past due 90 days or more and still accruing interest $ - $ - $ - $ - Loans on non accrual $ 6,707 $ 1,484 $ 3,129 $ 970 Other real estate owned $ 1,586 $ 3,976 $ 2,041 $ 1,652 Total non-performing assets $ 8,293 $ 5,460 $ 5,170 $ 2,622 Total non-performing assets as a percentage of total assets 5.15% 3.81% 3.61% 1.86% Loan loss reserve $ 3,739 $ 2,573 $ 3,001 $ 2,929 Loans charged off, net of recoveries $ 2,588 $ 853 $ 190 $ 451 Loan loss reserve as a percentage of loans 2.80% 1.97% 2.31% 2.17% Loan loss reserve as a percentage of non-performing loans 56% 173% 96% 302% Actual Client Deposits $ 119,218 $ 99,080 $ 99,489 $ 90,091 Average Client Deposits $ 108,662 $ 98,680 $ 93,739 $ 89,574 Net interest income $ 1,537 $ 1,544 $ 1,435 $ 1,593 Net income (loss) $ (2,044) $ 1 $ 113 $ 114 Net income (loss) available to common shareholders (2) $ (2,109) $ (63) $ 49 $ 113 Net earnings (loss) per common share, basic (2) $ (1.19) $ (0.04) $ 0.03 $ 0.07 Net earnings (loss) per common share, fully diluted (2) $ (1.19) $ (0.04) $ 0.03 $ 0.07 Actual common shares outstanding 1,771,910 1,771,910 1,771,910 1,748,594 Book value per common share $ 8.20 $ 9.38 $ 9.42 $ 9.46 Return on average common equity (2) -52.60% -1.52% 1.19% 2.77% Return on average assets -5.26% 0.00% 0.32% 0.32% Net interest margin (3) 4.21% 4.62% 4.32% 4.69% Efficiency ratio (4) 91% 76% 75% 69% (1) Results in 2008 include a $1.0 million one-time pre-tax recovery of a loan that was previously charged off. Excluding the recovery, net income was $522,000, or $0.31 per diluted common share for the nine months ending Sept. 30, 2008 (2) Includes the dilutive effect of preferred stock dividends accrued during the period (3) Calculated on a tax equivalent basis (4) Calculated by dividing non-interest expense by net interest income and non-interest income.