Rising earnings estimates on the back of strong second-quarter results – including a 21.4% earnings surprise – helped Pacific Continental Corp. achieve a Zacks #1 Rank (Strong Buy) on September 22. Moreover, this commercial and retail banking service provider has delivered positive earnings surprises in the last five consecutive quarters with an average beat of 20.2%.
With a solid return of 35.6% in a year’s time and a history of beating quarterly earnings estimates, this stock offers an attractive investment opportunity.
The Rank Driver
Better-than-expected second-quarter earnings, steady loan growth and fundamental strength – including strong credit quality and capital ratios, are the primary rank drivers for this stock.
Pacific Continental reported its second-quarter results on July 18 with earnings per share of 17 cents, beating the Zacks Consensus Estimate of 14 cents by 21.4% and year-ago earnings of 12 cents by 41.7%. Strong results for the quarter were primarily aided by lower non-interest expenses and reduced provision for loan losses. However, a decline in non-interest income was the downside for the quarter.
Net interest income remained almost flat at $12.5 million. However, non-interest income declined 10.3% year over year to $1.5 million. The decline was primarily due to absence of gains on the sale of securities that occurred during the second quarter 2011. Non-interest expense decreased 2.8% from the year-ago period to $8.8 million. Provision for loan losses decreased 70% from the year-ago quarter to $0.6 million.
Credit quality continued to improve. Nonperforming assets were 2.30% of total assets, down 230 basis points (bps) from 4.60% as of June 30, 2011. Net charge-offs came in at $0.3 million compared with $1.9 million in the year-ago quarter.
As of June 30, 2012, Pacific Continental’s total risk-based capital ratio was 18.99%, Tier 1 risk-based capital ratio was 17.73% and Tier 1 leverage ratio was 12.70%. Tangible book value per share came in at $8.77 against $8.41 in the year-ago quarter.
Earnings Estimate Revisions
The Zacks Consensus Estimate for 2012 increased 3.2% to 64 cents per share over the last 60 days. The current estimate implies year-over-year growth of 120.0%.
For 2013, over the same time frame, the Zacks Consensus Estimate increased by 4.8% to 66 cents per share.
Pacific Continental currently trades at a forward P/E of 14.2x, a 13.4% discount to the peer group average of 16.4x. Also, on a price-to-book basis, the shares are trading at 0.9x, an 18.2% discount to the peer group average of 1.1x.
The company has a trailing 12-month ROE of 4.2% compared with the peer group average of 6.1%.
About the Company
Headquartered in Eugene, Oregon, Pacific Continental Corporation is a bank holding company. It operates 14 commercial banking offices in Oregon and Washington and a loan production office in Tacoma, Washington through its subsidiary – Pacific Continental Bank – which offers a wide range of consumer and business banking deposit products and services. The company has a market capitalization of roughly $163.1 million.
Other Zacks #1 Rank bank stocks include BofI Holding Inc. (BOFI - Free Report) and Hanmi Financial Corporation (HAFC - Free Report) .