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Section 1: 8-K (8-K)

Document


 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 8-K
 
CURRENT REPORT
Pursuant to Section 13 OR 15(d)
of The Securities Exchange Act of 1934

Date of Report (Date of earliest event Reported): April 25, 2019
 
PACIFIC CITY FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
 

California
(State or other jurisdiction of
incorporation)
 
001-38621
(Commission
File Number)
 
20-8856755
(I.R.S. Employer
Identification No.)
 
 
 
 
 
3701 Wilshire Boulevard, Suite 900
Los Angeles, California
(Address of principal offices)
 
 
 
90010
(Zip Code)
Registrant’s telephone number, including area code: (213) 210-2000
Not Applicable
(Former name or former address, if changed since last report)
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒





Item 2.02 Results of Operations and Financial Condition.
On April 26, 2019, Pacific City Financial Corporation, a California corporation (the “Company”), issued a press release concerning its unaudited results for the first quarter of 2019. A copy of the press release is attached as Exhibit 99.1 to this Current Report and is incorporated herein by reference.
The information in this report set forth under this Item 2.02 shall not be treated as “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as expressly stated by specific reference in such filing.
Item 8.01 Other Events.
On April 25, 2019, the Company’s Board of Directors declared a quarterly cash dividend of $0.06 per common share, an increase of 20% from $0.05 per share in the prior quarter. The dividend will be paid on or about June 14, 2019, to shareholders of record as of the close of business on May 31, 2019.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits.
99.1
Press Release of Pacific City Financial Corporation, issued April 26, 2019


2



EXHIBIT INDEX
Exhibit No.
 
Description
99.1
 


3



SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
Pacific City Financial Corporation
 
 
 
 
Date:
April 26, 2019
 
/s/ Timothy Chang
 
 
 
Timothy Chang
 
 
 
Executive Vice President and Chief Financial Officer



4
(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit

Exhibit 99.1


397680532_pcblogo.jpg
Pacific City Financial Corporation Reports Earnings of $6.6 million for Q1 2019 and Increased Cash Dividend
Los Angeles, California - April 26, 2019 - Pacific City Financial Corporation (the “Company”) (NASDAQ: PCB), the holding company of Pacific City Bank (the “Bank”), today reported net income of $6.6 million, or $0.40 per diluted common share for the first quarter of 2019, compared with $6.7 million, or $0.41 per diluted common share, in the previous quarter and $6.3 million, or $0.46 per diluted common share, in the year-ago quarter.
Q1 2019 Financial Highlights
Net income totaled $6.6 million or $0.40 per diluted common share;
Total assets were $1.72 billion at March 31, 2019, an increase of $20.7 million, or 1.2%, from $1.70 billion at December 31, 2018 and an increase of $138.8 million, or 8.8%, from $1.58 billion at March 31, 2018;
Loans held-for-investment, net of deferred costs (fees), were $1.34 billion at March 31, 2019, an increase of $4.5 million, or 0.3%, from $1.34 billion at December 31, 2018 and an increase of $119.9 million, or 9.8%, from $1.22 billion at March 31, 2018;
Total deposits were $1.45 billion at March 31, 2019, an increase of $4.0 million, or 0.3%, from $1.44 billion at December 31, 2018, and an increase of $65.8 million, or 4.8%, from $1.38 billion at March 31, 2018;
The board of directors approved a $6.5 million share repurchase program to begin in the second quarter of 2019; and
Reflecting the Company’s continued earnings performance in the first quarter of 2019, the Company declared an increased cash dividend of $0.06 per common share for shareholders of record on May 31, 2019, and payable on June 14, 2019.
“I am pleased with another strong financial performance for the quarter that is highlighted by earnings of $6.6 million, or $0.40 per diluted common share. I am also pleased with board’s declaration of quarterly cash dividend of $0.06 per common share, or an increase of 20% from first quarter cash dividend of $0.05, that will be paid in June,” stated Henry Kim, President and Chief Executive Officer. “Although our loan and deposit growth moderated during the quarter, we maintained net interest margin of 4.22% and efficiency ratio of 52.60%. Since the tail end of the first quarter, we are experiencing an increase in loan demand and stabilization in deposit costs, which lead us to be optimistic on our ability to deliver a continued strong financial performance for the remainder of 2019.”

1


Financial Highlights (Unaudited)
 
 
Three Months Ended
($ in thousands, except per share data)
 
3/31/2019
 
12/31/2018
 
% Change
 
3/31/2018
 
% Change
Net income
 
$
6,564

 
$
6,732

 
(2.5
)%
 
$
6,264

 
4.8
 %
Diluted earnings per common share
 
$
0.40

 
$
0.41

 
(2.4
)%
 
$
0.46

 
(13.0
)%
 
 
 
 
 
 
 
 
 
 
 
Net interest income
 
$
17,153

 
$
17,856

 
(3.9
)%
 
$
15,294

 
12.2
 %
Provision (reversal) for loan losses
 
(85
)
 
294

 
(128.9
)%
 
95

 
(189.5
)%
Noninterest income
 
2,409

 
2,239

 
7.6
 %
 
3,362

 
(28.3
)%
Noninterest expense
 
10,289

 
10,135

 
1.5
 %
 
9,631

 
6.8
 %
 
 
 
 
 
 
 
 
 
 
 
Return on average assets (1)
 
1.57
%
 
1.60
%
 
 
 
1.73
%
 
 
Return on average shareholders’ equity (1), (2)
 
12.43
%
 
12.92
%
 
 
 
17.50
%
 
 
Net interest margin (1)
 
4.22
%
 
4.33
%
 
 
 
4.33
%
 
 
Efficiency ratio (3)
 
52.60
%
 
50.44
%
 
 
 
51.62
%
 
 
 
 
 
 
 
 
 
 
 
 
 
($ in thousands, except per share data)
 
3/31/2019
 
12/31/2018
 
% Change
 
3/31/2018
 
% Change
Total assets
 
$
1,717,774

 
$
1,697,028

 
1.2
%
 
$
1,578,970

 
8.8
%
Net loans held-for-investment
 
1,330,035

 
1,325,515

 
0.3
%
 
1,210,901

 
9.8
%
Total deposits
 
1,447,758

 
1,443,753

 
0.3
%
 
1,381,925

 
4.8
%
Book value per common share (2), (4)
 
$
13.57

 
$
13.16

 
3.1
%
 
$
10.97

 
23.7
%
Tier 1 leverage ratio (consolidated)
 
12.83
%
 
12.60
%
 
 
 
10.09
%
 
 
Total shareholders’ equity to total assets (2)
 
12.64
%
 
12.39
%
 
 
 
9.32
%
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Ratios are presented on an annualized basis.
(2)
The Company did not have any intangible equity components for the presented periods.
(3)
The ratios are calculated by dividing noninterest expense by the sum of net interest income and noninterest income.
(4)
The ratios are calculated by dividing total shareholdersequity by the number of outstanding common shares.
Result of Operations (Unaudited)
Net Interest Income and Net Interest Margin
The following table presents the components of net interest income for the periods indicated:
 
 
Three Months Ended
($ in thousands)
 
3/31/2019
 
12/31/2018
 
% Change
 
3/31/2018
 
% Change
Interest income:
 
 
 
 
 
 
 
 
 
 
Interest and fees on loans
 
$
20,934

 
$
21,088

 
(0.7
)%
 
$
17,440

 
20.0
 %
Interest on investment securities
 
1,093

 
1,076

 
1.6
 %
 
848

 
28.9
 %
Interest and dividend on other interest-earning assets
 
925

 
1,067

 
(13.3
)%
 
340

 
172.1
 %
Total interest income
 
22,952

 
23,231

 
(1.2
)%
 
18,628

 
23.2
 %
Interest expense:
 
 
 
 
 
 
 
 
 
 
Interest on deposits
 
5,665

 
5,239

 
8.1
 %
 
3,166

 
78.9
 %
Interest on other borrowings
 
134

 
136

 
(1.5
)%
 
168

 
(20.2
)%
Total interest expense
 
5,799

 
5,375

 
7.9
 %
 
3,334

 
73.9
 %
Net interest income
 
$
17,153

 
$
17,856

 
(3.9
)%
 
$
15,294

 
12.2
 %
 
 
 
 
 
 
 
 
 
 
 
The decrease in net interest income compared with the previous quarter was primarily due to decreases in number of days and dividend on Federal Home Loan Bank (“FHLB”) stock, and an increase in deposit cost in the current quarter. The increase compared with the year-ago quarter was primarily due to increases in average balance and average yield of interest-earning assets, partially offset by increases in average balance and average cost of interest-bearing liabilities.

2


The decrease in interest and fees on loans compared with the previous quarter was primarily due to a decrease in number of days, partially offset by an increase in average loan balance. The increase compared with the year-ago quarter was primarily due to increases in both average balance and average yield of loans. The increase in average yield on loans was primarily due to the Company’s high proportion of variable rate loans that had repriced along with the rising interest rate environment in 2018. The following table presents a composition of total loans by interest rate type accompanied with the weighted-average contractual rates as of the dates indicated:
 
 
3/31/2019
 
12/31/2018
 
3/31/2018
 
 
% to Total Loans
 
Weighted-Average Contractual Rate
 
% to Total Loans
 
Weighted-Average Contractual Rate
 
% to Total Loans
 
Weighted-Average Contractual Rate
Fixed rate loans
 
34.6
%
 
5.17
%
 
34.4
%
 
5.13
%
 
26.8
%
 
5.07
%
Variable rate loans
 
65.4
%
 
6.29
%
 
65.6
%
 
6.30
%
 
73.2
%
 
5.62
%
 
 
 
 
 
 
 
 
 
 
 
 
 
The increases in interest on investment securities were primarily due to increases in both average balance and average yield of investment securities. The increase in average yield on investment securities was primarily due to additional purchases of investment securities during the rising rate environment. The Company purchased investment securities of $4.1 million and $44.1 million, respectively, during the current quarter and last 12-month period.
The decrease in interest and dividend on other interest-earning assets compared with the previous quarter was primarily due to decreases in dividend on FHLB stock and average balance of interest-bearing deposits in other financial institutions. The increase compared with the year-ago quarter was primarily due to an increase in average balance of interest-bearing deposits in other financial institutions from excess cash generated from deposit growth and initial public offering (“IPO”) completed in 2018, and higher interest rates earned on these deposits during the rising rate environment.
The increases in total interest expense were primarily due to increases in average balance and average cost of interest-bearing deposits. The increase in average cost on interest-bearing deposits was primarily due to the rising interest rate environment in 2018 and high competition in the Company’s deposit target markets.
Provision (Reversal) for Loan Losses
Provision (reversal) for loan losses was $(85) thousand for the current quarter compared with $294 thousand for the previous quarter and $95 thousand for the year-ago quarter. The Company recognized reversal for loan losses primarily due to a decrease in historical loss rates, changes in qualitative adjustment factors and a net recovery during the current quarter. The Company recorded a net recovery of $55 thousand during the current quarter compared with a net charge-off of $223 thousand for the previous quarter and a net recovery of $52 thousand for the year-ago quarter. Allowance for loan losses to total loans held-for-investment ratio was 0.98% at March 31, 2019, 0.98% at December 31, 2018, and 1.01% at March 31, 2018.
Noninterest Income
The following table presents the components of noninterest income for the periods indicated:
 
 
Three Months Ended
($ in thousands)
 
3/31/2019
 
12/31/2018
 
% Change
 
3/31/2018
 
% Change
Gain on sale of SBA loans
 
$
1,104

 
$
1,059

 
4.2
 %
 
$
2,049

 
(46.1
)%
Gain on sale of residential property loans
 
16

 
6

 
166.7
 %
 
22

 
(27.3
)%
Gain on sale of other loans
 

 
18

 
(100.0
)%
 
45

 
(100.0
)%
Total gain on sale of loans
 
1,120

 
1,083

 
3.4
 %
 
2,116

 
(47.1
)%
Service charges and fees on deposits
 
364

 
398

 
(8.5
)%
 
349

 
4.3
 %
Loan servicing income
 
631

 
371

 
70.1
 %
 
626

 
0.8
 %
Other income
 
294

 
387

 
(24.0
)%
 
271

 
8.5
 %
Total noninterest income
 
$
2,409

 
$
2,239

 
7.6
 %
 
$
3,362

 
(28.3
)%
 
 
 
 
 
 
 
 
 
 
 
The increase in total noninterest income compared with the previous quarter was primarily due to increases in gain on sale of loans and loan servicing income, partially offset by decreases in other income and service charges and fees on deposits. The decrease compared with the year-ago quarter was primarily due to a decrease in gain on sale of loans, partially offset by increases in the other noninterest income components.

3


The decreases in gain on sale of SBA loans in the current and previous quarters compared with the year-ago quarter were primarily due to decreases in sales volume and premium rates due to the conditions in the secondary market. The Company sold the guaranteed portion of SBA loans of $21.2 million, $26.2 million and $29.9 million, respectively, for the three months ended March 31, 2019, December 31, 2018 and March 31, 2018. The Company also sold residential property loans of $2.4 million, $702 thousand and $1.2 million, respectively, and other real estate loans of none, $1.0 million and $1.1 million, respectively, for the three months ended March 31, 2019, December 31, 2018 and March 31, 2018.
The increase in loan servicing income compared with the previous quarter was primarily due to lower loan servicing income during the previous quarter from an increase in servicing asset amortization from a higher prepayment trend.
The decrease in other income compared with previous quarter was primarily due to decreases in wire fees and a non-recurring loan referral fee income of $33 thousand during the previous quarter.
Noninterest Expense
The following table presents the components of noninterest expense for the periods indicated:
 
 
Three Months Ended
($ in thousands)
 
3/31/2019
 
12/31/2018
 
% Change
 
3/31/2018
 
% Change
Salaries and employee benefits
 
$
6,622

 
$
6,234

 
6.2
 %
 
$
6,246

 
6.0
 %
Occupancy and equipment
 
1,313

 
1,358

 
(3.3
)%
 
1,144

 
14.8
 %
Professional fees
 
758

 
452

 
67.7
 %
 
523

 
44.9
 %
Marketing and business promotion
 
228

 
526

 
(56.7
)%
 
388

 
(41.2
)%
Data processing
 
318

 
309

 
2.9
 %
 
302

 
5.3
 %
Director fees and expenses
 
189

 
281

 
(32.7
)%
 
230

 
(17.8
)%
Regulatory assessments
 
116

 
75

 
54.7
 %
 
132

 
(12.1
)%
Other expenses
 
745

 
900

 
(17.2
)%
 
666

 
11.9
 %
Total noninterest expense
 
$
10,289

 
$
10,135

 
1.5
 %
 
$
9,631

 
6.8
 %
 
 
 
 
 
 
 
 
 
 
 
The increase in salaries and employee benefits compared with the previous quarter was primarily due to an increase in vacation accrual and a decrease in direct loan origination cost, which reduces salaries and benefits at origination, from a lower loan production during the current quarter. The increase compared with the year-ago quarter was primarily due to increases in number of employees, partially offset by a decrease in bonus accruals and a retirement bonus paid to the former chief executive officer of $192 thousand in the year-ago quarter.
The increases in occupancy and equipment in the current and previous quarters compared with the year-ago quarter was primarily due to increases in depreciation, occupancy lease, and maintenance expenses.
The increases in professional fees were primarily due to increased audit fees for the year-end process as the Company became a public company and increased professional fees for enhancement of the Bank's controls and processes on Bank Secrecy Act and Anti-Money Laundering compliance programs.
The decrease in market and business promotion compared with the previous quarter was primarily due to an additional expense incurred during the previous quarter for the year-end promotions and gifts for customers. The decrease compared with the year-ago quarter was due to a decrease in advertising expense.
The decreases in director fees and expenses was primarily due to a fewer number of directors during the current quarter as well as a severance payment of $68 thousand paid to the estate of former director and chairman, Kwang Jin Chung, who passed away during the previous quarter.
The increase in regulatory assessments compared with the previous quarter was due to an adjustment made for the assessment rate reduction in previous quarter. The decrease compared with the year-ago quarter was primarily due to a decrease in assessment rate, partially offset by balance sheet growth.
The decrease in other expenses compared with the previous quarter was primarily due to decreases in other loan related legal and office expenses. The increase compared with the year-ago period was primarily due to growth in operations.

4


Balance Sheet (Unaudited)
Loans
The following table presents a composition of total loans (includes both loans held-for-sale and loans held-for-investment, net of deferred costs (fees)) as of the dates indicated:
($ in thousands)
 
3/31/2019
 
12/31/2018
 
% Change
 
3/31/2018
 
% Change
Real estate loans:
 
 
 
 
 
 
 
 
 
 
Commercial property
 
$
715,488

 
$
709,409

 
0.9
 %
 
$
674,958

 
6.0
 %
Residential property
 
237,115

 
233,816

 
1.4
 %
 
184,396

 
28.6
 %
SBA property
 
124,751

 
120,939

 
3.2
 %
 
135,581

 
(8.0
)%
Construction
 
19,983

 
27,323

 
(26.9
)%
 
25,969

 
(23.1
)%
Commercial and industrial loans:
 
 
 
 
 
 
 
 
 
 
Commercial term
 
103,866

 
102,133

 
1.7
 %
 
79,707

 
30.3
 %
Commercial lines of credit
 
77,022

 
80,473

 
(4.3
)%
 
58,184

 
32.4
 %
SBA commercial term
 
26,347

 
27,147

 
(2.9
)%
 
29,508

 
(10.7
)%
Trade finance
 
14,046

 
11,521

 
21.9
 %
 
2,124

 
561.3
 %
Other consumer loans
 
24,554

 
25,921

 
(5.3
)%
 
32,845

 
(25.2
)%
Loans held-for-investment
 
1,343,172

 
1,338,682

 
0.3
 %
 
1,223,272

 
9.8
 %
Loans held-for-sale
 
3,915

 
5,781

 
(32.3
)%
 
6,182

 
(36.7
)%
Total loans
 
$
1,347,087

 
$
1,344,463

 
0.2
 %
 
$
1,229,454

 
9.6
 %
 
 
 
 
 
 
 
 
 
 
 
The increase in loans held-for-investment for the current quarter was primarily due to new funding of $73.2 million and advances on lines of credit of $23.5 million, partially offset by pay-downs and pay-offs of $91.8 million.
The decrease in loans held-for-sale for the current quarter was primarily due to sales of $23.6 million, partially offset by new funding of $21.5 million and a loan transferred from loans held-for-investment of $303 thousand.
Credit Quality
The following table presents compositions of non-performing loans and non-performing assets as of the dates indicated:
($ in thousands)
 
3/31/2019
 
12/31/2018
 
% Change
 
3/31/2018
 
% Change
Nonaccrual loans:
 
 
 
 
 
 
 
 
 
 
Real estate loans:
 
 
 
 
 
 
 
 
 
 
Commercial property
 
$

 
$

 
 %
 
$
311

 
(100.0
)%
Residential property
 

 
302

 
(100.0
)%
 
730

 
(100.0
)%
SBA property
 
1,011

 
540

 
87.2
 %
 
1,022

 
(1.1
)%
Commercial and industrial loans:
 
 
 
 
 
 
 
 
 
 
SBA commercial term
 
186

 
203

 
(8.4
)%
 
318

 
(41.5
)%
Consumer loans
 
74

 
16

 
362.5
 %
 
16

 
362.5
 %
Total nonaccrual loans held-for-investment
 
1,271

 
1,061

 
19.8
 %
 
2,397

 
(47.0
)%
Loans past due 90 days or more and still accruing
 

 

 
 %
 

 
 %
Non-performing loans (“NPLs”)
 
1,271

 
1,061

 
19.8
 %
 
2,397

 
(47.0
)%
Other real estate owned
 
395

 

 
 %
 

 
 %
Non-performing assets (“NPAs”)
 
$
1,666

 
$
1,061

 
57.0
 %
 
$
2,397

 
(30.5
)%
Loans past due and still accruing:
 
 
 
 
 
 
 
 
 
 
Loans past due 30 to 59 days and still accruing
 
$
950

 
$
368

 
158.2
 %
 
$
864

 
10.0
 %
Loans past due 60 to 89 days and still accruing
 
12

 
9

 
33.3
 %
 
128

 
(90.6
)%
Loans past due 90 days or more and still accruing
 

 

 
 %
 

 
 %
Total loans past due and still accruing
 
$
962

 
$
377

 
155.2
 %
 
$
992

 
(3.0
)%
Troubled debt restructurings (“TDRs”):
 
 
 
 
 
 
 
 
 
Accruing TDRs
 
$
412

 
$
432

 
(4.6
)%
 
$
554

 
(25.6
)%
Nonaccrual TDRs
 
127

 
131

 
(3.1
)%
 
595

 
(78.7
)%
Total TDRs
 
$
539

 
$
563

 
(4.3
)%
 
$
1,149

 
(53.1
)%
NPLs to loans held-for-investment
 
0.09
%
 
0.08
%
 
 
 
0.20
%
 
 
NPAs to total assets
 
0.10
%
 
0.06
%
 
 
 
0.15
%
 
 
 
 
 
 
 
 
 
 
 
 
 


5


Classified Assets
Classified loans were $7.0 million at March 31, 2019, an increase of $814 thousand, or 13.1%, from $6.2 million at December 31, 2018, and an increase of $2.1 million, or 41.5%, from $5.0 million at March 31, 2018. Classified assets, which consist of classified loans and OREO, and the classified assets to total assets ratios were $7.4 million and 0.43%, respectively, at March 31, 2019, $6.2 million and 0.37%, respectively, at December 31, 2018, and $5.0 million and 0.32%, respectively, at March 31, 2018.
Investment Securities
Total investment securities were $167.7 million at March 31, 2019, a decrease of $1.1 million, or 0.6%, from $168.8 million at December 31, 2018, and an increase of $20.9 million, or 14.2%, from $146.8 million at March 31, 2018. The decrease for the current quarter was primarily due to principal pay-downs and calls of $6.2 million and net premium amortization of $188 thousand, partially offset by purchases of $4.1 million and an increase in fair value of securities available-for-sale of $1.2 million.
Deposits
The following table presents deposit mix as of the dates indicated:
 
 
3/31/2019
 
12/31/2018
 
3/31/2018
($ in thousands)
 
Amount
 
% to Total
 
Amount
 
% to Total
 
Amount
 
% to Total
Noninterest-bearing demand deposits
 
$
330,645

 
22.8
%
 
$
329,270

 
22.8
%
 
$
321,109

 
23.2
%
Interest-bearing deposits:
 
 
 
 
 
 
 
 
 
 
 
 
NOW
 
13,045

 
0.9
%
 
24,683

 
1.7
%
 
9,716

 
0.7
%
Money market accounts
 
272,085

 
18.8
%
 
280,733

 
19.4
%
 
272,208

 
19.7
%
Savings
 
9,510

 
0.7
%
 
8,194

 
0.6
%
 
8,181

 
0.6
%
Time deposits of $250,000 or less
 
455,270

 
31.4
%
 
477,134

 
33.0
%
 
477,575

 
34.6
%
Time deposits of more than $250,000
 
209,693

 
14.5
%
 
181,239

 
12.6
%
 
140,636

 
10.2
%
State and brokered deposits
 
157,510

 
10.9
%
 
142,500

 
9.9
%
 
152,500

 
11.0
%
Total interest-bearing deposits
 
1,117,113

 
77.2
%
 
1,114,483

 
77.2
%
 
1,060,816

 
76.8
%
Total deposits
 
$
1,447,758

 
100.0
%
 
$
1,443,753

 
100.0
%
 
$
1,381,925

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
The increase for the current quarter was primarily due to new accounts of $133.1 million, partially offset by closed accounts of $95.4 million and net balance decreases of $33.6 million on existing accounts.
Operating Lease Assets and Liabilities
During the current quarter, the Company adopted Accounting Standard Update (“ASU”) 2016-02, “Leases (Topic 842),” and all subsequent ASUs that are related to Topic 842. The Company adopted this ASU using the optional transition method with a cumulative effect adjustment to retained earnings without restating prior financial statements for comparable amounts. As a result, the Company recognized right-of-use assets and liabilities of $9.6 million and $10.6 million, respectively, with a cumulative effect adjustment of $53 thousand to retained earnings at the date of adoption.
Shareholders’ Equity
Shareholders’ equity was $217.2 million at March 31, 2019, an increase of $6.9 million, or 3.3%, from $210.3 million at December 31, 2018, and an increase of $70.0 million, or 47.5%, from $147.2 million at March 31, 2018. The increase for the current quarter was primarily due to retention of earnings, partially offset by cash dividends paid on common stock. The year-over-year increase was primarily due to the IPO completed in August 2018 and retention of earnings, partially offset by cash dividends paid on common stock.
On March 28, 2019, the Company’s Board of Directors approved the repurchase of up to $6.5 million of the Company’s common stock through March 27, 2020.

6


Capital Ratios
The following table presents capital ratios for the Company and the Bank as of dates indicated:
 
 
3/31/2019
 
12/31/2018
 
3/31/2018
Pacific City Financial Corporation
 
 
 
 
 
 
Common tier 1 capital (to risk-weighted assets)
 
16.52
%
 
16.28
%
 
12.32
%
Total capital (to risk-weighted assets)
 
17.53
%
 
17.31
%
 
13.36
%
Tier 1 capital (to risk-weighted assets)
 
16.52
%
 
16.28
%
 
12.32
%
Tier 1 capital (to average assets)
 
12.83
%
 
12.60
%
 
10.09
%
Pacific City Bank
 
 
 
 
 
 
Common tier 1 capital (to risk-weighted assets)
 
16.41
%
 
16.19
%
 
12.25
%
Total capital (to risk-weighted assets)
 
17.42
%
 
17.21
%
 
13.29
%
Tier 1 capital (to risk-weighted assets)
 
16.41
%
 
16.19
%
 
12.25
%
Tier 1 capital (to average assets)
 
12.74
%
 
12.53
%
 
10.03
%
 
 
 
 
 
 
 
Declaration of Increased Cash Dividend
On April 25, 2019, the Company’s Board of Directors declared a quarterly cash dividend of $0.06 per common share, an increase of 20% from $0.05 per share in the prior quarter. The dividend will be paid on or about June 14, 2019, to shareholders of record as of the close of business on May 31, 2019.
“I am pleased to announce our seventeenth consecutive quarterly cash dividend and an increase in that cash dividend to $0.06 per share,” said Henry Kim, President and Chief Executive Officer. “The decision is based on our strong financial performance and the Board of Directors’ continuing confidence in our anticipated growth in 2019 and beyond.”
About Pacific City Financial Corporation
Pacific City Financial Corporation is the bank holding company for Pacific City Bank, a California state chartered bank, offering a full suite of commercial banking services to small to medium-sized businesses, individuals and professionals, primarily in Southern California, and predominantly in Korean-American and other minority communities.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections and statements of our beliefs concerning future events, business plans, objectives, expected operating results and the assumptions upon which those statements are based. Forward-looking statements include without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and are typically identified with words such as ‘‘may,’’ “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “aim,” “intend,” “plan,” or words or phases of similar meaning. We caution that the forward-looking statements are based largely on our expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond our control. These and other important factors are detailed in various securities law filings made periodically by the Company, copies of which are available from the Company without charge. Actual results, performance or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements. Any forward-looking statements presented herein are made only as of the date of this press release, and we do not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise, except as required by law.
Contact:
Timothy Chang
Executive Vice President & Chief Financial Officer
213-210-2000

7


Pacific City Financial Corporation and Subsidiary
Consolidated Balance Sheets (Unaudited)
($ in thousands, except share and per share data)
 
 
3/31/2019
 
12/31/2018
 
% Change
 
3/31/2018
 
% Change
Assets
 
 
 
 
 
 
 
 
 
 
Cash and due from banks
 
$
22,106

 
$
24,121

 
(8.4
)%
 
$
16,765

 
31.9
 %
Interest-bearing deposits in financial institutions
 
151,481

 
138,152

 
9.6
 %
 
164,788

 
(8.1
)%
Total cash and cash equivalents
 
173,587

 
162,273

 
7.0
 %
 
181,553

 
(4.4
)%
Securities available-for-sale, at fair value
 
144,353

 
146,991

 
(1.8
)%
 
125,940

 
14.6
 %
Securities held-to-maturity
 
23,311

 
21,760

 
7.1
 %
 
20,826

 
11.9
 %
Total investment securities
 
167,664

 
168,751

 
(0.6
)%
 
146,766

 
14.2
 %
Loans held-for-sale
 
3,915

 
5,781

 
(32.3
)%
 
6,182

 
(36.7
)%
Loans held-for-investment, net of deferred loan costs (fees)
 
1,343,172

 
1,338,682

 
0.3
 %
 
1,223,272

 
9.8
 %
Allowance for loan losses
 
(13,137
)
 
(13,167
)
 
(0.2
)%
 
(12,371
)
 
6.2
 %
Net loans held-for-investments
 
1,330,035

 
1,325,515

 
0.3
 %
 
1,210,901

 
9.8
 %
Premises and equipment, net
 
4,259

 
4,588

 
(7.2
)%
 
5,069

 
(16.0
)%
Federal Home Loan Bank and other bank stock
 
7,433

 
7,433

 
 %
 
6,589

 
12.8
 %
Other real estate owned, net
 
395

 

 
 %
 

 
 %
Deferred tax assets, net
 
3,251

 
3,377

 
(3.7
)%
 
4,239

 
(23.3
)%
Servicing assets
 
7,485

 
7,666

 
(2.4
)%
 
8,890

 
(15.8
)%
Operating lease assets
 
9,132

 

 
 %
 

 
 %
Accrued interest receivable and other assets
 
10,618

 
11,644

 
(8.8
)%
 
8,781

 
20.9
 %
Total assets
 
$
1,717,774

 
$
1,697,028

 
1.2
 %
 
$
1,578,970

 
8.8
 %
Liabilities
 
 
 
 
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
 
 
 
Noninterest-bearing demand
 
$
330,645

 
$
329,270

 
0.4
 %
 
$
321,109

 
3.0
 %
Savings, NOW and money market accounts
 
294,650

 
313,610

 
(6.0
)%
 
290,105

 
1.6
 %
Time deposits of $250,000 or less
 
492,770

 
519,634

 
(5.2
)%
 
530,075

 
(7.0
)%
Time deposits of more than $250,000
 
329,693

 
281,239

 
17.2
 %
 
240,636

 
37.0
 %
Total deposits
 
1,447,758

 
1,443,753

 
0.3
 %
 
1,381,925

 
4.8
 %
Federal Home Loan Bank advances
 
30,000

 
30,000

 
 %
 
40,000

 
(25.0
)%
Operating lease liabilities
 
10,133

 

 
 %
 

 
 %
Accrued interest payable and other liabilities
 
12,672

 
12,979

 
(2.4
)%
 
9,812

 
29.1
 %
Total liabilities
 
1,500,563

 
1,486,732

 
0.9
 %
 
1,431,737

 
4.8
 %
Commitments and contingent liabilities
 
 
 
 
 
 
 
 
 
 
Shareholders’ equity
 
 
 
 
 
 
 
 
 
 
Common stock
 
171,407

 
171,067

 
0.2
 %
 
125,511

 
36.6
 %
Additional paid-in capital
 
3,336

 
3,299

 
1.1
 %
 
3,072

 
8.6
 %
Retained earnings
 
43,288

 
37,577

 
15.2
 %
 
20,898

 
107.1
 %
Accumulated other comprehensive loss, net
 
(820
)
 
(1,647
)
 
(50.2
)%
 
(2,248
)
 
(63.5
)%
Total shareholders’ equity
 
217,211

 
210,296

 
3.3
 %
 
147,233

 
47.5
 %
Total liabilities and shareholders’ equity
 
$
1,717,774

 
$
1,697,028

 
1.2
 %
 
$
1,578,970

 
8.8
 %
 
 
 
 
 
 
 
 
 
 
 
Outstanding common shares
 
16,011,151

 
15,977,754

 
 
 
13,424,777

 
 
Book value per common share (1)
 
$
13.57

 
$
13.16

 
 
 
$
10.97

 
 
Total loan to total deposit ratio
 
93.05
%
 
93.12
%
 
 
 
88.97
%
 
 
Noninterest-bearing deposits to total deposits
 
22.84
%
 
22.81
%
 
 
 
23.24
%
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
The ratios are calculated by dividing total shareholders equity by the number of outstanding common shares. The Company did not have any intangible equity components for the presented periods.

8


Pacific City Financial Corporation and Subsidiary
Consolidated Statements of Income (Unaudited)
($ in thousands, except share and per share data)
 
Three Months Ended
 
3/31/2019
 
12/31/2018
 
% Change
 
3/31/2018
 
% Change
Interest income:
 
 
 
 
 
 
 
 
 
Interest and fees on loans
$
20,934

 
$
21,088

 
(0.7
)%
 
$
17,440

 
20.0
 %
Interest on investment securities
1,093

 
1,076

 
1.6
 %
 
848

 
28.9
 %
Interest and dividend on other interest-earning assets
925

 
1,067

 
(13.3
)%
 
340

 
172.1
 %
Total interest income
22,952

 
23,231

 
(1.2
)%
 
18,628

 
23.2
 %
Interest expense:
 
 
 
 
 
 
 
 
 
Interest on deposits
5,665

 
5,239

 
8.1
 %
 
3,166

 
78.9
 %
Interest on other borrowings
134

 
136

 
(1.5
)%
 
168

 
(20.2
)%
Total interest expense
5,799

 
5,375

 
7.9
 %
 
3,334

 
73.9
 %
Net interest income
17,153

 
17,856

 
(3.9
)%
 
15,294

 
12.2
 %
Provision (reversal) for loan losses
(85
)
 
294

 
(128.9
)%
 
95

 
(189.5
)%
Net interest income after provision for loan losses
17,238

 
17,562

 
(1.8
)%
 
15,199

 
13.4
 %
Noninterest income:
 
 
 
 
 
 
 
 
 
Gain on sale of SBA loans
1,104

 
1,059

 
4.2
 %
 
2,049

 
(46.1
)%
Gain on sale of residential property loans
16

 
6

 
166.7
 %
 
22

 
(27.3
)%
Gain on sale of other loans

 
18

 
(100.0
)%
 
45

 
(100.0
)%
Service charges and fees on deposits
364

 
398

 
(8.5
)%
 
349

 
4.3
 %
Servicing income
631

 
371

 
70.1
 %
 
626

 
0.8
 %
Other income
294

 
387

 
(24.0
)%
 
271

 
8.5
 %
Total noninterest income
2,409

 
2,239

 
7.6
 %
 
3,362

 
(28.3
)%
Noninterest expense:
 
 
 
 
 
 
 
 
 
Salaries and employee benefits
6,622

 
6,234

 
6.2
 %
 
6,246

 
6.0
 %
Occupancy and equipment
1,313

 
1,358

 
(3.3
)%
 
1,144

 
14.8
 %
Professional fees
758

 
452

 
67.7
 %
 
523

 
44.9
 %
Marketing and business promotion
228

 
526

 
(56.7
)%
 
388

 
(41.2
)%
Data processing
318

 
309

 
2.9
 %
 
302

 
5.3
 %
Director fees and expenses
189

 
281

 
(32.7
)%
 
230

 
(17.8
)%
Regulatory assessments
116

 
75

 
54.7
 %
 
132

 
(12.1
)%
Other expenses
745

 
900

 
(17.2
)%
 
666

 
11.9
 %
Total noninterest expense
10,289

 
10,135

 
1.5
 %
 
9,631

 
6.8
 %
Income before income taxes
9,358

 
9,666

 
(3.2
)%
 
8,930

 
4.8
 %
Income tax expense
2,794

 
2,934

 
(4.8
)%
 
2,666

 
4.8
 %
Net income
$
6,564

 
$
6,732

 
(2.5
)%
 
$
6,264

 
4.8
 %
Earnings per common share
 
 
 
 
 
 
 
 
 
Basic
$
0.41

 
$
0.42

 
 
 
$
0.47

 
 
Diluted
$
0.40

 
$
0.41

 
 
 
$
0.46

 
 
Average common shares outstanding
 
 
 
 
 
 
 
 
 
Basic
15,999,464

 
15,975,387

 
 
 
13,418,259

 
 
Diluted
16,271,269

 
16,244,837

 
 
 
13,586,759

 
 
 
 
 
 
 
 
 
 
 
 
Dividend paid per common share
$
0.05

 
$
0.03

 
 
 
$
0.03

 
 
Return on average assets (1)
1.57
%
 
1.60
%
 
 
 
1.73
%
 
 
Return on average shareholders’ equity (1), (2)
12.43
%
 
12.92
%
 
 
 
17.50
%
 
 
Efficiency ratio (3)
52.60
%
 
50.44
%
 
 
 
51.62
%
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Ratios are presented on an annualized basis.
(2)
The Company did not have any intangible equity components for the presented periods.
(3)
The ratios are calculated by dividing noninterest expense by the sum of net interest income and noninterest income.


9


Pacific City Financial Corporation and Subsidiary
Average Balance, Average Yield, and Average Rate (Unaudited)
($ in thousands)
 
 
Three Months Ended
 
 
3/31/2019
 
12/31/2018
 
3/31/2018
 
 
Average Balance
 
Interest Income/ Expense
 
Avg. Yield/Rate
 
Average Balance
 
Interest Income/ Expense
 
Avg. Yield/Rate
 
Average Balance
 
Interest Income/ Expense
 
Avg. Yield/Rate
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total loans (1)
 
$
1,342,168

 
$
20,934

 
6.33
%
 
$
1,319,403

 
$
21,088

 
6.34
%
 
$
1,219,867

 
$
17,440

 
5.80
%
Mortgage-backed securities
 
84,523

 
549

 
2.63
%
 
80,967

 
534

 
2.62
%
 
67,484

 
391

 
2.35
%
Collateralized mortgage obligation
 
54,908

 
358

 
2.64
%
 
55,666

 
359

 
2.56
%
 
50,974

 
280

 
2.23
%
SBA loan pool securities
 
22,142

 
147

 
2.69
%
 
23,029

 
144

 
2.48
%
 
24,350

 
137

 
2.28
%
Municipal bonds (2)
 
5,888

 
39

 
2.69
%
 
5,892

 
39

 
2.63
%
 
6,583

 
40

 
2.46
%
Other interest-earning assets
 
140,464

 
925

 
2.67
%
 
152,894

 
1,067

 
2.77
%
 
63,981

 
340

 
2.16
%
Total interest-earning assets
 
1,650,093

 
22,952

 
5.64
%
 
1,637,851

 
23,231

 
5.63
%
 
1,433,239

 
18,628

 
5.27
%
Noninterest-earning assets:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
 
18,678

 
 
 
 
 
18,882

 
 
 
 
 
20,329

 
 
 
 
Allowance for loan losses
 
(13,118
)
 
 
 
 
 
(12,935
)
 
 
 
 
 
(12,366
)
 
 
 
 
Other assets
 
34,696

 
 
 
 
 
25,972

 
 
 
 
 
26,746

 
 
 
 
Total noninterest-earning assets
 
40,256

 
 
 
 
 
31,919

 
 
 
 
 
34,709

 
 
 
 
Total assets
 
$
1,690,349

 
 
 
 
 
$
1,669,770

 
 
 
 
 
$
1,467,948

 
 
 
 
Liabilities and Shareholders’ Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest-bearing liabilities:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NOW and money market accounts
 
$
293,245

 
1,132

 
1.57
%
 
$
301,700

 
1,110

 
1.46
%
 
$
297,947

 
760

 
1.03
%
Savings
 
8,469

 
8

 
0.38
%
 
8,364

 
8

 
0.38
%
 
8,632

 
6

 
0.28
%
Time deposits
 
813,934

 
4,525

 
2.25
%
 
790,453

 
4,121

 
2.07
%
 
654,124

 
2,400

 
1.49
%
Total interest-bearing deposits
 
1,115,648

 
5,665

 
2.06
%
 
1,100,517

 
5,239

 
1.89
%
 
960,703

 
3,166

 
1.34
%
Federal Home Loan Bank advances
 
30,074

 
134

 
1.81
%
 
30,000

 
136

 
1.80
%
 
40,000

 
168

 
1.70
%
Total interest-bearing liabilities
 
1,145,722

 
5,799

 
2.05
%
 
1,130,517

 
5,375

 
1.89
%
 
1,000,703

 
3,334

 
1.35
%
Noninterest-bearing liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest-bearing demand
 
308,071

 
 
 
 
 
320,232

 
 
 
 
 
313,660

 
 
 
 
Other liabilities
 
22,322

 
 
 
 
 
12,281

 
 
 
 
 
8,384

 
 
 
 
Total noninterest-bearing liabilities
 
330,393

 
 
 
 
 
332,513

 
 
 
 
 
322,044

 
 
 
 
Total liabilities
 
1,476,115

 
 
 
 
 
1,463,030

 
 
 
 
 
1,322,747

 
 
 
 
Total shareholders’ equity
 
214,234

 
 
 
 
 
206,740

 
 
 
 
 
145,201

 
 
 
 
Total liabilities and shareholders’ equity
 
$
1,690,349

 
 
 
 
 
$
1,669,770

 
 
 
 
 
$
1,467,948

 
 
 
 
Net interest income
 
 
 
$
17,153

 
 
 
 
 
$
17,856

 
 
 
 
 
$
15,294

 
 
Net interest spread (3)
 
 
 
 
 
3.59
%
 
 
 
 
 
3.74
%
 
 
 
 
 
3.92
%
Net interest margin (4)