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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 | Quote | Chart | News | PowerRating) 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.
Contact: Mark Stevenson President and CEO Felice Belfiore CFO (503) 796-0100
SOURCE: Capital Pacific Bancorp
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