Capital Pacific Bancorp’s Profits Up in Second Quarter of 2008

SOURCE:

Capital Pacific Bancorp

2008-07-17 11:00:00

PORTLAND, OR–(EMWNews – July 17, 2008) – Capital Pacific Bancorp (OTCBB: CPBO) reported

net income of $704,000 or $0.40 per diluted share in the second quarter of

2008, compared to net income of $8,000 and $0.01 per diluted share in the

second quarter last year.

Second quarter 2008 earnings include a pre-tax $1.0 million recovery

related to a $2.0 million loan that was charged off in 2007. The recovery

is the result of a settlement that includes real estate. This real estate

is classified as other real estate owned with an estimated net realizable

value based upon a 2008 appraisal. Management believes the recovery amount

may increase in future periods based upon the outcome of external events,

but any additional recovery is subject to significant uncertainty.

Excluding the recovery, net income for the second quarter of 2008 totaled

$86,000, or $.05 per share.

“The outlook on asset quality continues to evolve. Although we are pleased

with this recovery, we remain cautious about the current economic cycle and

how it might impact our loan portfolio in the future,” said Mark Stevenson,

CEO of Capital Pacific Bancorp.

Loans and credit quality

As of June 30, 2008, loans totaled $130.5 million, unchanged when compared

to the first quarter of 2008 and up $9.0 million when compared to the same

quarter last year. Second quarter 2008 loan growth has been influenced by

the soft economy and orchestrated declines in certain portfolio segments.

The Company’s reserve for potential loan losses increased to $2.9 million

in the second quarter of 2008, or 2.19% of total loans. Management believes

its reserve for potential loan losses is appropriate given prevailing

economic conditions.

Other credit related events in the second quarter of 2008 were as follow:


--  Successful refinance with new borrower and guarantors of a $934,000

    non-performing loan.

--  Non-performing loans and loans past due 90 days declined to less than

    $500,000, or .34% of total loans as of the end of the quarter.

--  Loans related to residential development have reduced to approximately

    $6 million. This segment of the portfolio now equals less than 5% of total

    loans.

--  Conservatively increased the reserve for potential loan losses by

    $400,000.

    

Deposits

As of June 30, 2008, average client deposits were $92.1 million, up $13.8

million compared to the same quarter last year and up $4.3 million on a

linked-quarter basis. Deposit activity has been supported by modest growth

in new clients in the not-for-profit sector. Client deposits are defined

as total deposits excluding brokered or nationally sourced deposits.

Net interest margin

The net interest margin was down 67 basis points compared to the same

quarter last year but unchanged at 4.73% compared to the first quarter

2008. Interest recoveries on the settlement of non-performing loans

totaled $35,000 in the second quarter 2008. Excluding one-time interest

recoveries, the net interest margin was 4.62%. The decline in net interest

margin is the result of the rapid decline in interest rates driven by the

actions of the Federal Reserve Bank and a very competitive deposit market.

Other financial highlights


--  Income associated with the sale of loans increased to $216,000

    compared to $82,000 for the same quarter last year and $87,000 on a linked

    quarter basis. Higher income in the second quarter was attributable to one

    transaction that accounted for 63% of the total. Management believes that

    income associated with the sale of loans will revert back to historical

    averages in future periods.

--  Non-interest expenses totaled $1.4 million, up 11% when compared to

    the same quarter last year and down 3% on a linked-quarter basis. Growth in

    non-interest expenses is expected to be modest for the remainder of 2008.

--  Tax-exempt loan originations grew by $3.4 million in the second

    quarter. The company was heavily involved with the Oregon Facilities

    Authority in the formation of this unique program benefiting non-profit

    organizations. Capital Pacific Bank is the market leader in originations.

    

Capital adequacy

The company continues to be classified as well capitalized by regulatory

standards. The company successfully raised $1.8 million in additional

capital in the first quarter of 2008.

About Capital Pacific Bancorp

Capital Pacific Bancorp (OTCBB: CPBO) is the parent company of Capital

Pacific Bank, which serves businesses, professionals and nonprofit

organizations with comprehensive banking expertise and an elite level of

service. Headquartered in the Fox Tower in downtown Portland, the bank’s

full array of products and services are delivered through a strategic

combination of highly experienced 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, 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

                                                    June 30,   December 31,

Condensed Balance Sheets                             2008         2007

                                                  -----------  -----------

Cash and due from banks                           $     2,555  $       517

Investments                                             1,648        5,569

Loans:

Commercial                                             53,115       59,023

Real estate                                            67,333       60,913

Other                                                  10,037        8,598

                                                  -----------  -----------

  Total loans                                         130,485      128,534

Loan loss reserve                                      (2,857)      (2,403)

                                                  -----------  -----------

  Total loans, net of loan loss reserve               127,628      126,131

Other assets                                            2,813        2,341

                                                  -----------  -----------

  Total assets                                    $   134,644  $   134,558

                                                  ===========  ===========



Deposits:

Non interest-bearing demand                       $    16,919  $    19,531

Interest-bearing demand                                50,899       58,074

Certificates of deposit                                38,422       35,769

                                                  -----------  -----------

  Total deposits                                      106,240      113,374



Other liabilities                                      12,207        7,697

Shareholders' equity                                   16,197       13,487

                                                  -----------  -----------

  Total liabilities and shareholders' equity      $   134,644  $   134,558

                                                  ===========  ===========



Condensed Statements of Operations              For the three For the three

                                                months ending months ending

                                                   June 30,     June 30,

                                                     2008         2007

                                                  -----------  -----------

Interest income                                   $     2,276  $     2,539

Interest expense                                          743          970

                                                  -----------  -----------

  Net interest income                                   1,533        1,569

Provision for (recovery of) loan losses                  (603)         543

                                                  -----------  -----------

  Net interest income, net of provision for loan

   losses                                               2,136        1,026

Deposit fees and other non-interest income                242          173

Income associated with the sale of loans                  216           82

Non-interest expense                                    1,443        1,271

                                                  -----------  -----------

  Net income (loss) before tax expense                  1,151           10

Income tax expense  (benefit)                             447            2

                                                  -----------  -----------

  Net income (loss)                               $       704  $         8

                                                  ===========  ===========

  Net income (loss) per share, basic              $      0.40  $      0.01

                                                  ===========  ===========

  Net income (loss) per share, fully diluted      $      0.40  $      0.01

                                                  ===========  ===========



Basic average shares outstanding                    1,748,594    1,551,178

                                                  ===========  ===========

Fully diluted average shares outstanding            1,748,594    1,596,548

                                                  ===========  ===========



Condensed Statements of Operations               For the six   For the six

                                                months ending months ending

                                                   June 30,     June 30,

                                                     2008         2007

                                                  -----------  -----------

Interest income                                   $     4,744  $     4,935

Interest expense                                        1,661        1,877

                                                  -----------  -----------

  Net interest income                                   3,083        3,058

Provision for (recovery of) loan losses                  (563)         642

                                                  -----------  -----------

  Net interest income, net of provision for loan

   losses                                               3,646        2,416

Deposit fees and other non-interest income                469          341

Income associated with the sale of loans                  303          151

Non-interest expense                                    2,904        2,580

                                                  -----------  -----------

  Net income before tax expense                         1,514          328

Income tax expense                                        584          129

                                                  -----------  -----------

  Net income                                      $       930  $       199

                                                  ===========  ===========

  Net income per share, basic                     $      0.56  $      0.13

                                                  ===========  ===========

  Net income per share, fully diluted             $      0.56  $      0.12

                                                  ===========  ===========



Basic average shares outstanding                    1,665,495    1,551,178

                                                  ===========  ===========

Fully diluted average shares outstanding            1,665,495    1,602,148

                                                  ===========  ===========





Performance by Quarter        6/30/08     3/31/08    12/31/07     9/30/07

                            ----------  ----------  ----------  ----------



Actual Loans                $  130,485  $  131,020  $  128,534  $  128,158

Average Loans               $  129,127  $  130,393  $  131,383  $  125,388



Non-performing loans  and

 loans past due 90 days     $      441  $    1,375  $    1,375  $    3,029

Other real estate owned     $    1,066  $        -  $        -  $        -

Loan loss reserve as a

 percentage of loans              2.19%       1.87%       1.87%       1.80%

Loans charged off, net of

 recoveries                 $   (1,016) $       (2) $    2,012  $       (6)

Loan loss reserves as a

 percentage of

 non-performing loans              648%        178%        175%         76%



Actual Client and Wholesale

 Deposits                   $  106,240  $  110,184  $  113,374  $  103,682

Average Client and

 Wholesale Deposits         $  113,624  $  112,013  $  110,641  $  111,607



Actual Client Deposits      $   90,717  $   87,399  $   88,604  $   79,489

Average Client Deposits     $   92,106  $   87,840  $   88,056  $   88,053



Net interest income         $    1,533  $    1,550  $    1,670  $    1,607

Net income (loss) before

 tax expense                $    1,151  $      362  $   (1,438) $      266

Net income (loss)           $      704  $      225  $     (855) $      170

Net income (loss) per

 share, basic               $     0.40  $     0.14  $    (0.55) $     0.11

Net income (loss) per

 share, fully diluted       $     0.40  $     0.14  $    (0.55) $     0.11



Actual shares outstanding    1,748,594   1,748,594   1,552,178   1,552,178

Book value per share        $     9.26  $     8.86  $     8.69  $     9.20



Return on average equity         17.99%       6.59%     -23.31%       4.71%

Return on average assets          2.14%       0.67%      -2.49%       0.52%

Net interest margin (1)           4.73%       4.73%       5.01%       5.00%

Efficiency ratio (2)                72%         78%         66%         62%



(1) Calculated on a tax equivalent basis

(2) Calculated by dividing non-interest expense by net interest income

    and non-interest income.

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

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