D.A. Davidson 17 th Annual Financial Institutions Conference May 11 13, 2015 Denver, Colorado Roger Busse President and Chief Executive Officer Roger.Busse@therightbank.com Casey Hogan Executive Vice President and Chief Operating Officer Casey.Hogan@therightbank.com
2 Forward-Looking Statement This document contains "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"). These statements can be identified by the fact that they do not relate strictly to historical or current facts. Forwardlooking statements often use words such as "anticipates," "targets," "expects," "estimates," "intends," "plans," "goals," "believes" and other similar expressions or future or conditional verbs such as "will," "should," "would" and "could." The forward-looking statements made represent Pacific Continental s current estimates, projections, expectations, plans or forecasts of its future results and revenues, including but not limited to statements about performance, loan growth, capital position, liquidity, credit quality, credit quality trends, competition and economic conditions generally. These statements are not guarantees of future results or performance and involve certain risks, uncertainties and assumptions and expectations regarding the timing and financial impact of Pacific Continental s announced acquisition of Capital Pacific and plans to open a new office in Vancouver, Washington that are difficult to predict and are often beyond Pacific Continental s control. Actual outcomes and results may differ materially from those expressed in, or implied by, any of these forward-looking statements. You should not place undue reliance on any forward-looking statement and should consider all of the following uncertainties and risks, as well as those more fully discussed under "Risk Factors", "Business", and "Management s Discussion and Analysis of Financial Condition and Results of Operations" in Pacific Continental s most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q, and in any of Pacific Continental s subsequent SEC filings, including the high concentration of loans of the Company's banking subsidiary in commercial and residential real estate lending and our concentration in loans to dental professionals; adverse economic trends in the United States and the markets we serve affecting the Bank s borrower base; continued erosion or sustained low levels of consumer confidence; changes in the Federal Reserve s monetary policies and the regulatory environment and increases in associated costs, particularly ongoing compliance expenses and resource allocation needs; vendor quality and efficiency; the Company's ability to control risks associated with rapidly changing technology both from an internal perspective as well as for external providers; operational systems or infrastructure failures; increased competition; fluctuating interest rates; a tightening of available credit; the potential adverse impact of legal or regulatory proceedings; and risks related to acquisitions, including integration, retention of key personnel and business, anticipated cost savings and results and performance of the acquired company or the combined entity. Pacific Continental Corporation undertakes no obligation to publicly revise or update any forward-looking statement to reflect the impact of events or circumstances that arise after the date of this release. This statement is included for the express purpose of invoking PSLRA's safe harbor provisions.
PCBK Company Profile Market Metrics Established 1972 Assets (3/31/15): Shares Outstanding: 43 years Tangible Book Value (3/31/15): $8.58 Market Cap (4/30/15): Price to Tangible Book (4/30/15): Daily Trading Volume (3/31/15): Dividend Yield: (1/22/15): excludes special dividends $1.780 billion 19.497 million $251.5 million 154% 54,800 3.00%
Q1-2015 Financial Results Q1-2014 Q1-2015 (as reported) Q1-2015 (excluding merger expenses) Net Income $3.83MM $2.8MM $4.0MM Diluted Earnings Per Share $0.21 $0.15 $0.22 Return on Assets (incl. merger costs) 1.06% 0.72% 1.03% Return on Avg. Equity 9.90% 5.91% 8.44% Efficiency Ratio 60.86% 72.47% 62.38% Net Interest Margin (TEY) 4.32% 4.27% 4.16% (1) Source: SNL Financial - Noninterest expense before foreclosed property expense, amortization of intangibles, and goodwill impairments as a percent of net interest income and noninterest revenues, excluding only gains from securities transactions and nonrecurring items.
Acquisition and Conversion Completed Q1 Close and Conversion Quick Regulatory Approval on Capital Pacific Bank, Portland, OR Asset increase of $255.9 million. Immediately accretive to earnings per share. Four Months Record Effort to Get to Accretive Earnings in 15 Attributes PCB now has $516.9 million in period end deposits/$612.8 million in loans within Portland/Vancouver MSA. Staff of 100 Similar focus on business banking/niche focus; added 200+ nonprofits. Significant talent additions and market growth opportunities.
PCB Growth Initiative: Positive Momentum into Q2 Core Deposit base is growing in all markets Up $83.5MM, 7.5% just during the first quarter. Demand Deposits Represent 37% of core deposits Very strong unfunded loan commitments boarded $59.2MM in Q1-2015 vs. $21.1MM in Q1-2014 Health Care Dental + new Vet association relationship, $40MM in pipeline. Seattle loan approvals up, +$25.2MM expected in Q2 Harlan Barcus and chief lending officer role. Sustainability initiatives expanding, led by Mark Stevenson.
Credit Quality Strong Credit Quality Drives Reserves Expectations 7 Classified Assets (in dollars) NPAs as a % of Total Assets* Q1 15 Asset Quality Ratios 90.0 80.0 70.0 60.0 50.0 40.0 30.0 5.00% 4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1 '11 '11'12'12'12'12'13'13'13'13'14'14'14'14'15 Classified Assets in dollars Nonperforming Assets as a percent of total assets Reserve to total loan loss: 1.25% Reserve coverage: 589% Net NPLs % total loans: 0.21% NPAs % total assets:.94% Consolidated classified asset ratio: 27.6% Annualized YTD net loan Recoveries:.03% OREOs: patient resolution December 31, 2014, dollars in millions.
Business Model Strategic Differentiation The Right Bank 8 Specialized business segments - Community based business - Health care and Professional services - Nonprofit clients 1,300 Operating in the 3 largest markets in the Pacific Northwest - Approximately $365 Billion in combined Gross Metropolitan Product* - More than 100,000 nonfarm businesses** Economically, Offices in the right locations - 14 Offices, 2 LPO s PLUS Dental, 37 States * Source: US Bureau of Economic Analysis ** Source, US Census
Business Model Specialized Business Segments 9 Community-Based Businesses Consultative relationships with the business owner Sweet spot: credit facilities of generally $5-10 million Professional Service Providers Dental, medical, legal and financial Health care expertise Nonprofit Organizations Excellent deposit source Under-served and under-appreciated segment Business Owners and Key Employees Community connections Bank advocates
Business Model Funding Science 10 Professionals Community-Based Businesses Loans Deposits 68% 32% 63% 37% Business Owners / Key Employees 2% Nonprofit Organizations 20% Net Borrowers Net Depositors 98% 80%
Business Model Funded by Non-Maturing Core Deposits 11 Funding Sources Core Deposits (1) Wholesale Non-core Deposits 3% 2% Core Deposits (1) Money Market Demand Time Deposits 6% 36% 58% 95% March 31, 2015, period-end liabilities (1) Core Deposits are company defined as all local deposits, regardless of size, excluding public deposits
Financial Performance Earning Assets 12 Construction Consumer 0.28% Fully 63% of portfolio is C & I- related. Other Real Estate 30% 6% 27% Owner-Occupied Real Estate Commercial & Industrial 36% Recourse Lender Expertise Personal guarantees Cash-flow lender Health care expertise National Preferred SBA Lender Small business resource Community Based Businesses $1MM-10MM March 31, 2015, period-end gross loans.
Financial Performance NIM 4.27% Q1 15 Margin, Asset Mix Drives Change 13 Loans Investments Net Interest Margin (1) 100% 5.00% 95% 90% 4.50% 85% 80% 4.00% 75% 70% 3.50% 65% 60% Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 3.00% (1) Excludes material nonrecurring interest recoveries in Q3 and Q4 2013 NIM reported on a tax-equivalent yield basis at a 35% tax rate.
Financial Performance 2014 Efficiency Ratio: 58.60% 14 Despite 147 basis point decline in NIM, the efficiency ratio remains relatively stable. 65% 60% 55% 50% 45% 40% 35% 30% 25% '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 Q1 '15 Company-Wide Support What If suggestions Reviewing processes Employing technology Expense Control NIE/Assets: 2.48% NII/Assets: 0.33% Employee Metrics PCBK: 5.00 FTE: 317
Niche Focus Specific Expertise is the Plus" 15 We know what it is we do. We do it very well. We do a lot of it.
Niche Focus Leverage Dental Expertise to Drive Healthcare Growth Demonstrated Dental Expertise $400 $350 $300 $250 $200 $150 $100 $50 $75 Dental Local Dental National Other Healthcare Local Other Healthcare National $122 $20 $10 $42 $160 $158 $166 $25 $79 $192 $8 $54 $62 $129 $179 $9 $14 $76 $147 $151 $159 $160 2007 2008 2009 2010 2011 2012 2013 2014 Q1 '15 Period-end dollars in millions. 10 plus years demonstrated expertise. More than 500 practices. Through recession, annual losses less than 0.20% Represents 29.4% of portfolio Expanding Healthcare Services Veterinary services Ophthalmology Podiatry Additional 6.8% of portfolio 16
Niche Focus Healthcare Expertise Drives National Growth Thoughtful, deliberate expansion based on quality. 17 Clients in 37 states.
Niche Focus Best Practices Drive Confidence 18 Vetted referral network, no broker fees Sales force has no credit authority Dedicated portfolio and special credit managers Financial statement requirements Homogeneous portfolio Specific state due diligence
Niche Focus Nonprofit Banking 19 Low cost, sticky deposits Bankers must know their business Builds advocacy among lines of business and markets Consultative outreach and education a must Compliments PCB s Giving with Heart culture Slow sales cycle can be discouraging
Niche Focus Nonprofit Banking Currently 18% of core deposits Net Depositors $197 million in deposits 20 Approx. 1,300 Social Assistance Arts Professional Org relationships 16 bps cost of funds Susceptible to recession Faith-based Outreach Public Adm Civic Org Dedicated bankers Foundations Education Educational forums Fraud check ups E-newsletters Volunteerism Q4 14 average nonprofit core deposits.
Strategic Objectives Five Concurrent Strategies 1. Capital management 2. Grow organically (Seattle initiatives) 3. Drive Efficiencies 4. Acquisition and Expansion 5. Drive future bank initiatives
PCB Third Party Recognition 100 Best Places to Work in both Oregon and Washington 2014 Raymond James Community Bankers Cup, PCBK being in the top 10% of Community Banks in the Nation Industry Recognition FDIC Community Bank Advisory Board (Roger) ICBO Board (Casey) OBA Board (Mitch, incoming chair)
Business Model Strong Corporate Culture Supports Success 23 100 Best Companies to Work for: Washington Hall of Fame: Fourteen appearances in Ore. s 100 Best Companies to Work for competition Oregon Governor s Awards: Volunteer Program Most Admired CEO, Financial Services
Conclusion Pacific Continental is The Right Bank 24 Proven Business Model Growth Opportunities Leverage Equity Strong Brand and Culture Large, regional commercial markets Health care and nonprofit areas Acquisition opportunities Recruit and retain Areas of expertise Large-market economies Regular and special dividends Consultative client relationships Rational funding strategy Organic- plus Buy-back program 3 rd -party recognized