Bank's Earnings Drop 12%

Article excerpt

Byline: Ilene Aleshire The Register-Guard

Pacific Continental Corp.'s profits dropped by 12 percent in the third quarter compared with a year ago, going from $3.4 million to $3 million, the company announced Tuesday. Year to date, they are down 9 percent, to $9.1 million. Earnings per share for the Eugene-based parent of Pacific Continental Bank were 25 cents for the quarter that ended Sept. 30, compared with 29 cents a year ago.

Both deposits and loans were up at the bank, however, compared with a year ago, in contrast to many larger financial institutions. "We're bucking the trend if you will," said Chief Executive Hal Brown. Loans increased by 15 percent, while average core deposits - which include savings and checking accounts and local time deposits - were up by about 5 percent compared with a year ago.

Analyst Tim O'Brien said it was a very satisfying quarter for the bank. "They did several things very well," he said.

"Despite a troubled economy and a lot of banks pulling back, they were able, first of all, to attract solid core deposit growth," said O'Brien, a research analyst with the financial firm of Sandler O'Neill + Partners, which is based in New York. "That's a big positive in this environment; competition for deposits has been historically unprecedented. They also were able to satisfy demand for loans, find and make good loans."

At the same time, Pacific Continental was able to keep from being squeezed between how much the bank was earning from its assets, and the costs of funding, he said. "They do a better job than many other banks as far as lending at higher levels and garnering higher returns on their investments, and doing that while paying lower funding costs. They've proven to be exceptional at that."

The bulk of the bank's deposits come from the Eugene market, while the biggest loan market is Portland, according to its earnings report.

Pacific Continental increas-ed its allowance for loan losses to $1.05 million in the third quarter, up significantly from $125,000 a year ago.

Brown said the increase was made for two reasons. First, the bank has made more loans, so it needed to increase loss reserves to support them, he said. Second, the bank felt it was prudent to add to its unA allocated reserves "just to reflect the current economic climate," he said. These would cover loans that might have problems that haven't been identified yet by the bank, he said.

O'Brien also praised the bank for increasing its reserves. Increasing its reserves lopped a couple of cents off the company's earnings per share, he said. The consensus forecast among analysts was that earnings would be 28 cents per share in the third quarter, O'Brien said. …