Market Overview

Pacific City Financial Corporation Reports Earnings of $4.8 million for Q2 2018

Share:

Pacific City Financial Corporation (the "Company") (NASDAQ:PCB), the
holding company of Pacific City Bank (the "Bank"), today reported net
income of $4.8 million, or $0.35 per diluted common share for the second
quarter of 2018, compared with $6.3 million, or $0.46 per diluted common
share, in the previous quarter and $4.9 million, or $0.36 per diluted
common share, in the second quarter of 2017.

On August 14, 2018, the Company issued and sold 2,385,000 shares of its
common stock in an underwritten public offering, for net proceeds of
approximately $43.2 million after deducting underwriting discounts and
commissions and estimated offering expenses. The underwriters have a
30-day option to purchase up to an additional 357,750 shares of common
stock at the initial public offering price less the underwriting
discount. The Company intends to use the proceeds for general corporate
purposes, including maintenance of its required regulatory capital, to
support future organic growth and other strategic alternatives.

Q2 2018 Highlights

  • Net income totaled $4.8 million or $0.35 per diluted common share;
  • Total assets were $1.62 billion at June 30, 2018, an increase of $40.2
    million, or 2.5%, from $1.58 billion at March 31, 2018 and an increase
    of $177.2 million, or 12.3%, from $1.44 billion at December 31, 2017;
  • Loans held-for-investment, net of deferred costs (fees), were $1.25
    billion at June 30, 2018, an increase of $31.6 million, or 2.6%, from
    $1.22 billion at March 31, 2018 and an increase of $64.9 million, or
    5.5%, from $1.19 billion at December 31, 2017; and
  • Total deposits were $1.43 billion, an increase of $45.3 million, or
    3.3%, from $1.38 billion at March 31, 2018 and an increase of $176.0
    million, or 14.1%, from $1.25 billion at December 31, 2017.

"We are pleased to report another strong quarter that was highlighted by
the continuing growth in our total assets supported by strong growth in
loans and deposits," stated Henry Kim, President and CEO. "Our total
loans and deposits increased by $79.9 million and $176.0 million,
respectively, which represented annualized growth rates of 13.4% and
28.1%, respectively, for the current year." Mr. Kim continued, "We were
able to maintain net interest margin above 4%, while growing our deposit
accounts, despite the increase in our deposit cost due to the strong
competition in our deposit target markets, as our asset-sensitive
balance sheet continues to contribute positive impacts to our net
interest margin."

 
Financial Highlights
 
    As of or For the Three Months Ended       Six Months Ended
($ in thousands, except per share data) (Unaudited)

6/30/2018

(Unaudited)

3/31/2018

  % Change     (Unaudited)

6/30/2017

  % Change   (Unaudited)

6/30/2018

  (Unaudited)

6/30/2017

  % Change  
Net income $ 4,762 $ 6,264   -24.0 % $ 4,860   -2.0 % $ 11,026   $ 9,258   19.1 %
Diluted earnings per common share 0.35 0.46

 

 

0.36

 

 

0.81 0.68

 

 

 
Net interest income $ 15,882 $ 15,294 3.8 % $ 13,384 18.7 % $ 31,176 $ 25,854 20.6 %
Provision (reversal) for loan losses 425 95 347.4 % (274 ) -255.1 % 520 (472 ) -210.2 %
Noninterest income 2,273 3,362 -32.4 % 3,582 -36.5 % 5,635 7,071 -20.3 %
Noninterest expense 10,940 9,631 13.6 % 8,796 24.4 % 20,571 17,317 18.8 %
 
Return on average assets (1) 1.20 % 1.73 % 1.49 % 1.45 % 1.46 %
Return on average shareholders' equity (1), (2) 12.74 % 17.50 % 14.49 % 15.07 % 14.14 %
Net interest margin (1) 4.08 % 4.33 % 4.21 % 4.20 % 4.18 %
Efficiency ratio (3) 60.26 % 51.62 % 51.84 % 55.88 % 52.60 %
 
 
Financial Highlights
 
($ in thousands, except per share data)     (Unaudited)

6/30/2018

  (Unaudited)

3/31/2018

  % Change       12/31/2017   % Change     (Unaudited)

6/30/2017

  % Change  
Total assets $ 1,619,169 $ 1,578,970 2.5 % $ 1,441,999 12.3 % $ 1,363,130 18.8 %
Net loans held-for-investment 1,242,235 1,210,901 2.6 % 1,177,775 5.5 % 1,068,620 16.2 %
Total deposits 1,427,245 1,381,925 3.3 % 1,251,290 14.1 % 1,178,211 21.1 %
Book value per common share (2), (4) $ 11.27 $ 10.97

 

 

$ 10.60

 

 

$ 10.14

 

 

Tier 1 leverage ratio (consolidated) 9.58 % 10.09 % 10.01 % 10.37 %
Total shareholders' equity to total assets (2) 9.35 % 9.32 % 9.86 % 9.97 %
 

(1)

   

Ratios are presented on an annualized basis.

(2)

The Company did not have any intangible equity component 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 shareholders'
equity by the number of outstanding common shares.

 

Result of Operations

Net Income

Net income was $4.8 million for the three months ended June 30, 2018, a
decrease of $1.5 million, or 24.0%, from $6.3 million for the three
months ended March 31, 2018, and a decrease of $98 thousand, or 2.0%,
from $4.9 million for the three months ended June 30, 2017. Diluted
earnings per common share was $0.35, $0.46 and $0.36, respectively, for
the three months ended June 30, 2018, March 31, 2018 and June 30, 2017.
These decreases were primarily due to increases in noninterest expense
and provision for loan losses and a decrease in noninterest income,
partially offset by an increase in net interest income and a decrease in
income tax expense. For the six months ended June 30, 2018, net income
was $11.0 million, an increase of $1.8 million, or 19.1%, from $9.3
million for the six months ended June 30, 2017. Diluted earnings per
common share was $0.81 and $0.68 for the six months ended June 30, 2018
and 2017, respectively. The increase was primarily due to an increase in
net interest income and a decrease in income tax expense, partially
offset by increases in noninterest expense and provision for loan losses
and a decrease in noninterest income.

Net Interest Income and Net Interest Margin

Net interest income was $15.9 million for the three months ended June
30, 2018, an increase of $588 thousand, or 3.8%, from $15.3 million for
the three months ended March 31, 2018, and an increase of $2.5 million,
or 18.7%, from $13.4 million for the three months ended June 30, 2017.
For the six months ended June 30, 2018, net interest income was $31.2
million, an increase of $5.3 million, or 20.6%, from $25.9 million for
the six months ended June 30, 2017. These increases were primarily due
to an increase in average balance of interest-earning assets, partially
offset by increases in average balance and average cost of
interest-bearing liabilities.

Interest income on loans was $18.6 million for the three months ended
June 30, 2018, an increase of $1.2 million, or 6.7%, from $17.4 million
for the three months ended March 31, 2018, and an increase of $3.8
million, or 25.7%, from $14.8 million for the three months ended June
30, 2017. For the six months ended June 30, 2018, interest income on
loans was $36.1 million, an increase of $7.4 million, or 25.7%, from
$28.7 million for the six months ended June 30, 2017. These increases
were primarily due to increases in average balance and average yield of
total loans. The increase in average yield on total loans was due to the
Company's high proportion of variable rates loans that reprice in the
current rising interest rate environment. Average balance of loans was
$1.24 billion for the three months ended June 30, 2018, compared with
$1.22 billion for the three months ended March 31, 2018 and $1.08
billion for the three months ended June 30, 2017, and average yield was
6.04% for the three months ended June 30, 2018 compared with 5.80% for
the three months ended March 31, 2018 and 5.51% for the three months
ended June 30, 2017. For the six months ended June 30, 2018, average
balance and average yield were $1.23 billion and 5.92%, respectively,
compared with $1.07 billion and 5.42%, respectively, for the six months
ended June 30, 2017.

The following table presents a composition of total loans by interest
rate type accompanied with the weighted-average contractual rates as of
dates indicated:

 
Loan Rate Composition
 
    (Unaudited)

6/30/2018

  (Unaudited)

3/31/2018

  12/31/2017       (Unaudited)

6/30/2017

  % to Gross Loans  

Weighted-
Average
Contractual
Interest
Rate

 

% to Gross
Loans

 

Weighted-
Average
Contractual
Interest
Rate

 

% to Gross
Loans

 

Weighted-
Average
Contractual
Interest
Rate

 

% to Gross
Loans

 

Weighted-
Average
Contractual
Interest
Rate

Fixed rate loans 26.6 % 5.08 % 26.8 % 5.07 % 26.6 % 5.09 % 28.1 % 5.09 %
Variable rate loans 73.4 % 5.85 % 73.2 % 5.62 % 73.4 % 5.38 % 71.9 % 5.16 %
 

Interest income on investment securities was $869 thousand for the three
months ended June 30, 2018, an increase of $21 thousand, or 2.5%, from
$848 thousand for the three months ended March 31, 2018 and an increase
of $281 thousand, or 47.8%, from $588 thousand for the three months
ended June 30, 2017. For the six months ended June 30, 2018, interest
income on investment securities was $1.7 million, an increase of $621
thousand, or 56.7%, from $1.1 million for the six months ended June 30,
2017. The increase compared with the three months ended March 31, 2018
was primarily due to an increase in average yield, partially offset by a
decrease in average balance. The increases compared with the three and
six month ended June 30, 2017 were primarily due to increases in average
balance and average yield. The increase in average yield was due to
additional purchases of investment securities in the current rising rate
environment. Average balance of investment securities was $147.9 million
for the three months ended June 30, 2018, compared with $149.4 million
for the three months ended March 31, 2018 and $115.3 million for the
three months ended June 30, 2017, and average yield was 2.36% for the
three months ended June 30, 2018 compared with 2.30% for the three
months ended March 31, 2018 and 2.07% for the three months ended June
30, 2017. For the six months ended June 30, 2018, average balance and
average yield were $148.7 million and 2.33%, respectively, compared with
$109.8 million and 2.01%, respectively, for the six months ended June
30, 2018.

Total interest expense was $4.5 million for the three months ended June
30, 2018, an increase of $1.1 million, or 33.8%, from $3.3 million for
the three months ended March 31, 2018 and an increase $2.2 million, or
93.6%, compared with $2.3 million in the three months ended June 30,
2017. For the six months ended June 30, 2018, total interest expense was
$7.8 million, an increase of $3.3 million or 75.1%, from $4.5 million
for the six months ended June 30, 2017. These increases were primarily
due to increases in average balance and average cost of interest-bearing
liabilities that resulted from the Company's deposit promotion during
the three months ended March 31, 2018 as well as a continuous growth in
deposits. During the promotion, the Company raised $122.7 million of
interest-bearing deposits at a weighted average rate of 2.21%.

Net interest margin was 4.08% for the three months ended June 30, 2018
compared with 4.33% for the three months ended March 31, 2018, and 4.21%
for the year-ago quarter. For the six months ended June 30, 2018, net
interest margin was 4.20% compared with 4.18% for the six months ended
June 30, 2017.

Provision for Loan Losses

Provision (reversal) for loan losses was $425 thousand for the three
months ended June 30, 2018 compared with $95 thousand for the three
months ended March 31, 2018 and $(274) thousand for the three months
ended June 30, 2017. For the six months ended June 30, 2018, provision
for loan losses was $520 thousand compared with $(472) thousand for the
six months ended June 30, 2017. The increases were primarily due to an
increase in loans held-for-investment balance. During the three months
June 30, 2018, the Company recorded a net charge-off of $175 thousand
compared with a net recovery of $52 thousand for the three months ended
March 31, 2018 and a net charge-off of $12 thousand for the three months
ended June 30, 2017. Allowance for loan losses to total loans
held-for-investment ratio was 1.01% at June 30, 2018 and March 31, 2018,
1.03% at December 31, 2017, and 1.02% at June 30, 2017.

Noninterest Income

Noninterest income was $2.3 million for the three months ended June 30,
2018, a decrease of $1.1 million, or 32.4%, from $3.4 million for the
three months ended March 31, 2018 and a decrease of $1.3 million, or
36.5%, from $3.6 million for the three months ended June 30, 2017. For
the six months ended June 30, 2018, noninterest income was $5.6 million,
a decrease of $1.4 million, or 20.3%, from $7.1 million for the six
months ended June 30, 2017. These decreases were primarily due to a
decrease in gain on sale of SBA loans. At June 30, 2018, SBA loan sales
commitments of $16.7 million were not settled, all of which were
included in loans held-for-sale at June 30, 2018 and subsequently
settled during early July 2018. The Company sold guaranteed portion of
SBA loans of $12.6 million, $29.9 million, $32.2 million, respectively,
and recognized gain on sale of SBA loans of $863 thousand, $2.0 million
and $2.3 million, respectively, for the three months ended June 30,
2018, March 31, 2018 and June 30, 2017. For the six months ended June
30, 2018 and 2017, The Company sold guaranteed portion of SBA loans of
$42.5 million and $68.3 million, respectively, and recognized gain on
sale of SBA loans of $2.9 million and $4.6 million, respectively.

Noninterest Expense

Noninterest expense was $10.9 million for the three months ended June
30, 2018, an increase of $1.3 million, or 13.6%, from $9.6 million for
the three months ended March 31, 2018 and an increase of $2.1 million,
or 24.4%, from $8.8 million for the three months ended June 30, 2017.
For the six months ended June 30, 2018, noninterest expense was $20.6
million, an increase of $3.3 million, or 18.8%, from $17.3 million for
the six months ended June 30, 2017. These increases were primarily due
to growth in operations, as well as increases of additional legal and
professional expense related to the preparation and filing of our S-1
registration statement with the SEC and listing our shares of common
stock on the Nasdaq Global Select Market, and a reimbursement paid to
SBA. During the three months ended June 30, 2018, the SBA requested us
to reimburse for a SBA loan guarantee previously paid by the SBA on a
loan we originated in 2007 that subsequently defaulted, which ultimately
was determined to be ineligible for SBA guaranty. We incurred a one-time
expense of $577 thousand for this reimbursement and a write-off of
certain receivables related to collection activities of the loan.

Efficiency ratio was 60.26% for the three months ended June 30, 2018
compared with 51.62% for the three months ended March 31, 2018 and
51.84% for the three months ended June 30, 2017. For the six months
ended June 30, 2018, efficiency ratio was 55.88% compared with 52.60%
for the six months ended June 30, 2017.

Income Tax Provision

Effective income tax rate was 29.9% for the three and six months ended
June 30, 2018, as well as the previous quarter, compared with 42.4% for
the three and six months ended June 30, 2017. The decrease was primarily
due to the enactment of H.R. 1, also known as the Tax Cuts and Jobs Act,
on December 22, 2017. Beginning in 2018, H.R. 1 reduced the U.S. federal
corporate tax rate from 35% to 21% and changed or limited certain tax
deductions.

Balance Sheet

Total Assets

Total assets were $1.62 billion at June 30, 2018, an increase of $40.2
million, or 2.5%, from $1.58 billion at March 31, 2018, an increase of
$177.2 million, or 12.3%, from $1.44 billion at December 31, 2017, and
an increase of $256.0 million, or 18.8%, from $1.36 billion at June 30,
2017.

Loans

Loans held-for-investment, net of deferred costs (fees), were $1.25
billion at June 30, 2018, an increase of $31.6 million, or 2.6%, from
$1.22 billion at March 31, 2018 and an increase of $64.9 million, or
5.5%, from $1.19 billion at December 31, 2017, and an increase of $175.2
million, or 16.2%, from $1.08 billion at June 30, 2017. The increase for
the three months ended June 30, 2018 was primarily due to new funding of
$137.9 million and advances on lines of credit of $38.3 million,
partially offset by pay-downs and pay-offs of $110.8 million, sales of
$20.1 million and charge-offs of $296 thousand. The increase for the six
months ended June 30, 2018 was primarily due to new funding of $271.6
million and advances on lines of credit of $69.7 million, partially
offset by pay-downs and pay-offs of $209.3 million, sales of $52.3
million and charge-offs of $435 thousand.

The table presents a composition of total loans by loan type as of the
dates indicated:

 
Loan Composition
 
($ in thousands)     (Unaudited)

6/30/2018

  (Unaudited)

3/31/2018

  % Change       12/31/2017   % Change     (Unaudited)

6/30/2017

  % Change  
Real estate loans:
Commercial property $ 674,599 $ 675,729 -0.2 % $ 662,840 1.8 % $ 606,952 11.1 %
Residential property 197,598 184,752 7.0 % 168,898 17.0 % 143,117 38.1 %
SBA property 133,081 134,240 -0.9 % 130,438 2.0 % 115,683 15.0 %
Construction 28,659 26,089 9.9 % 23,215 23.5 % 22,355 28.2 %
Commercial and industrial loans:
Commercial term 80,791 79,763 1.3 % 77,438 4.3 % 77,998 3.6 %
Commercial lines of credit 72,799 58,195 25.1 % 60,850 19.6 % 49,473 47.1 %
SBA commercial term 28,276 29,337 -3.6 % 30,199 -6.4 % 29,463 -4.0 %
International 7,734 2,115 265.7 % 1,920 302.8 % 1,638 372.2 %
Consumer loans   30,775   32,704 -5.9 %   33,870 -9.1 %   32,375 -4.9 %
Loans held-for-investment 1,254,312 1,222,924 2.6 % 1,189,668 5.4 % 1,079,054 16.2 %
Deferred loan costs (fees)   544   348 56.3 %   331 64.4 %   595 -8.6 %
Loans held-for-investment, net of deferred loan costs (fees) (1) 1,254,856 1,223,272 2.6 % 1,189,999 5.5 % 1,079,649 16.2 %
Loans held-for-sale   20,331   6,182 228.9 %   5,297 283.8 %   9,888 105.6 %
Total loans $ 1,275,187 $ 1,229,454 3.7 % $ 1,195,296 6.7 % $ 1,089,537 17.0 %
 

(1)

   

Referred as total loans held-for-investment elsewhere in this
report.

 

Non-Performing Assets

Non-performing loans ("NPLs") were $2.0 million at June 30, 2018, a
decrease of $371 thousand, or 15.5%, from $2.4 million at March 31, 2018
and a decrease of $1.2 million, or 37.4%, from $3.2 million at December
31, 2017, but an increase of $584 thousand, or 40.5%, from $1.4 million
at June 30, 2017. NPLs to total loans held-for-investment ratio was
0.16% at June 30, 2018, 0.20% at March 31, 2018, 0.27% at December 31,
2017, and 0.13% at June 30, 2017.

The Company had no other real estate owned ("OREO") at June 30, 2018 and
March 31, 2018 compared with $99 thousand at December 31, 2017 and $209
thousand at June 30, 2017. The Company sold an OREO with a gain of $3
thousand during the three months ended March 31, 2018.

Non-performing assets ("NPAs"), which consist of NPL and OREO, and the
NPAs to total assets ratio were $2.0 million and 0.13%, respectively, at
June 30, 2018, $2.4 million and 0.15%, respectively, at March 31, 2018,
$3.3 million and 0.23%, respectively, at December 31, 2017, and $1.7
million and 0.12%, respectively, at June 30, 2017.

The following table presents compositions of NPLs and NPAs as of the
dates indicated:

 
NPLs and NPAs
 
($ in thousands)     (Unaudited)

6/30/2018

  (Unaudited)

3/31/2018

  % Change       12/31/2017     % Change     (Unaudited)

6/30/2017

  % Change  

Nonaccrual loans:

     
Commercial property $ 240 $ 311 -22.8 % $ 318 -24.5 % $ 338 -29.0 %
Residential property - 730 -100.0 % 730 -100.0 % - -
SBA property 1,203 1,022 17.7 % 1,810 -33.5 % 483 149.1 %
Commercial term - - - 4 -100.0 % 128 -100.0 %
Commercial lines of credit 39 - - 10 290.0 % 41 -4.9 %
SBA commercial term 519 318 63.2 % 338 53.6 % 449 15.6 %
Consumer loans   25     16   56.3 %   24   4.2 %   3   733.3 %
Total nonaccrual loans held-for-investment 2,026 2,397 -15.5 % 3,234 -37.4 % 1,442 40.5 %
Loans past due 90 days or more and still accruing   -     -   -   -   -   -   -
NPLs 2,026 2,397 -15.5 % 3,234 -37.4 % 1,442 40.5 %
OREO   -     -   -   99   -100.0 %   209   -100.0 %
NPAs $ 2,026   $ 2,397   -15.5 % $ 3,333   -39.2 % $ 1,651   22.7 %
Loans modified as troubled debt restructurings (TDRs)
Accruing TDRs $ 453 $ 554 -18.2 % $ 592 -23.5 % $ 1,704 -73.4 %
Nonaccrual TDRs   548     595   -7.9 %   1,675   -67.3 %   695   -21.2 %
Total TDRs $ 1,001   $ 1,149   -12.9 % $ 2,267   -55.8 % $ 2,399   -58.3 %
NPLs to total loans held-for-investment 0.16 % 0.20 % 0.27 % 0.13 %
NPAs to total assets 0.13 % 0.15 % 0.23 % 0.12 %
 

Classified Assets

Classified loans were $4.3 million, a decrease of $45 thousand, or 1.0%,
from $4.4 million at March 31, 2018, a decrease of $648 thousand, or
13.0%, from $5.0 million at December 31, 2017 and a decrease of $2.0
million, or 31.7%, from $6.4 million at June 30, 2017. Classified
assets, which consist of classified loans and OREO, and the classified
assets to total assets ratios were $4.3 million and 0.27%, respectively,
at June 30, 2018, $4.4 million and 0.28%, respectively, at March 31,
2018, $5.1 million and 0.35%, respectively, at December 31, 2017, and
$6.6 million and 0.48%, respectively, at June 30, 2017.

Investment Securities

Total investment securities were $152.5 million, an increase of $5.7
million, or 3.9%, from $146.8 million at March 31, 2018, an increase of
$1.7 million, or 1.2%, from $150.8 million at December 31, 2017 and an
increase of $23.8 million, or 18.5%, from $128.7 million at June 30,
2017. The increase for the three months ended June 30, 2018 was
primarily due to purchases of $12.8 million, partially offset by
principal pay-downs of $5.5 million, net premium amortization of $209
thousand and a decrease in fair value of securities available-for-sale
of $514 thousand during the three months ended June 30, 2018. The
increase for the six months ended June 30, 2018 was primarily due to
purchases of $16.1 million, partially offset by principal pay-downs of
$12.0 million, net premium amortization of $424 thousand and a decrease
in fair value of securities available-for-sale of $2.0 million.

Deposits

Total deposits were $1.43 billion at June 30, 2018, an increase of $45.3
million, or 3.3%, from $1.38 billion at March 31, 2018, an increase of
$176.0 million, or 14.1%, from $1.25 billion at December 31, 2017 and an
increase of $249.0 million, or 21.1%, from $1.18 billion at June 30,
2017. The increase for the three months ended June 30, 2018 was
primarily due to new accounts of $118.6 million, partially offset by
closed accounts of $71.4 million and net balance decreases of $2.1
million. The increase for the six months ended June 30, 2018 was
primarily due to new accounts of $383.4 million, partially offset by
closed accounts of $168.7 million and net balance decreases of $39.0
million. During the three months ended March 31, 2018, the Company
launched a deposit promotion that resulted new interest-bearing deposits
of $122.7 million at a weighted average rate of 2.21%.

The following table presents deposit mix as of the dates indicated:

 
Deposit Mix
 
    (Unaudited)

6/30/2018

  (Unaudited)

3/31/2018

    12/31/2017       (Unaudited)

6/30/2017

($ in thousands) Amount   % to Total Amount   % to Total Amount   % to Total Amount   % to Total
Noninterest-bearing demand deposits $ 347,342 24.3 % $ 321,109 23.2 % $ 319,026 25.5 % $ 318,901 27.1 %
Interest-bearing deposits
NOW accounts 13,812 1.0 % 9,716 0.7 % 10,324 0.8 % 9,195 0.8 %
Money market accounts 259,098 18.2 % 272,208 19.7 % 299,390 23.9 % 317,409 26.9 %
Savings 9,886 0.7 % 8,181 0.6 % 8,164 0.7 % 8,668 0.7 %
Time deposits under $250,000 393,053 27.5 % 382,826 27.8 % 295,274 23.6 % 267,655 22.8 %
Time deposits of $250,000 or more 251,554 17.6 % 235,385 17.0 % 166,612 13.3 % 143,877 12.2 %
State and brokered time deposits   152,500 10.7 %   152,500 11.0 %   152,500 12.2 %   112,506 9.5 %
Total interest-bearing deposits   1,079,903 75.7 %   1,060,816 76.8 %   932,264 74.5 %   859,310 72.9 %
Total deposits $ 1,427,245 100.0 % $ 1,381,925 100.0 % $ 1,251,290 100.0 % $ 1,178,211 100.0 %
 

Borrowings

Borrowings from Federal Home Loan Bank ("FHLB") were $30.0 million at
June 30, 2018 and $40.0 million at March 31, 2018, December 31, 2017 and
June 30, 2017. At June 30, 2018, borrowings from FHLB bore fixed
interest rates with original maturity terms ranging from two to five
years.

Shareholders' Equity

Shareholders' equity were $151.4 million, an increase of $4.2 million,
or 2.9%, from $147.2 million at March 31, 2018, an increase of $9.2
million, or 6.5%, from $142.2 million at December 31, 2017 and an
increase of $15.5 million, or 11.4%, from $136.0 million at June 30,
2017.

Capital Ratios

The following table presents capital ratios for the Company and the Bank
as of dates indicated:

 
Capital Ratios
 
($ in thousands)     (Unaudited)

6/30/2018

  (Unaudited)

3/31/2018

  12/31/2017     (Unaudited)

6/30/2017

Pacific City Financial Corporation
Common tier 1 capital (to risk-weighted assets) 12.43 % 12.32 % 12.15 % 12.64 %
Total capital (to risk-weighted assets) 13.46 % 13.36 % 13.20 % 13.69 %
Tier 1 capital (to risk-weighted assets) 12.43 % 12.32 % 12.15 % 12.64 %
Tier 1 capital (to average assets) 9.58 % 10.09 % 10.01 % 10.37 %
Pacific City Bank
Common tier 1 capital (to risk-weighted assets) 12.37 % 12.25 % 12.06 % 12.56 %
Total capital (to risk-weighted assets) 13.40 % 13.29 % 13.12 % 13.61 %
Tier 1 capital (to risk-weighted assets) 12.37 % 12.25 % 12.06 % 12.56 %
Tier 1 capital (to average assets) 9.53 % 10.03 % 9.94 % 10.31 %
 

About Pacific City Financial Corporation

Pacific City is the bank holding company for Pacific City Bank, a $1.6
billion asset bank, offering a full suite of commercial banking services
through its wholly owned subsidiary, Pacific City Bank, a California
state chartered bank, 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. 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.

 

PACIFIC CITY FINANCIAL CORPORATION AND SUBSIDIARY
Consolidated
Balance Sheets

(in thousands, except share data)

 
    (Unaudited)

6/30/2018

  (Unaudited)

3/31/2018

  % Change       12/31/2017     % Change     (Unaudited)

6/30/2017

  % Change  
Assets      
Cash and due from banks $ 33,800 $ 16,765 101.6 % $ 16,662 102.9 % $ 22,591 49.6 %
Interest-bearing deposits in other financial institutions   134,846     164,788   -18.2 %   56,996   136.6 %   99,035   36.2 %
Total cash and cash equivalents   168,646     181,553   -7.1 %   73,658   129.0 %   121,626   38.7 %
Securities available-for-sale, at fair value 132,106 125,940 4.9 % 129,689 1.9 % 110,015 20.1 %
Securities held-to-maturity   20,390     20,826   -2.1 %   21,070   -3.2 %   18,663   9.3 %
Total investment securities   152,496     146,766   3.9 %   150,759   1.2 %   128,678   18.5 %
Loans held-for-sale 20,331 6,182 228.9 % 5,297 283.8 % 9,888 105.6 %
Loans held-for-investment, net of deferred loan costs (fees) 1,254,856 1,223,272 2.6 % 1,189,999 5.5 % 1,079,649 16.2 %
Allowance for loan losses   (12,621 )   (12,371 ) 2.0 %   (12,224 ) 3.2 %   (11,029 ) 14.4 %
Net loans held-for-investments   1,242,235     1,210,901   2.6 %   1,177,775   5.5 %   1,068,620   16.2 %
Premises and equipment, net 4,892 5,069 -3.5 % 4,723 3.6 % 4,317 13.3 %
Federal Home Loan Bank and other restricted stock, at cost 7,433 6,589 12.8 % 6,589 12.8 % 6,589 12.8 %
Other real estate owned, net of valuation allowance - - - 99 -100.0 % 209 -100.0 %
Deferred tax assets, net 4,360 4,239 2.9 % 3,847 13.3 % 5,791 -24.7 %
Servicing assets 8,390 8,890 -5.6 % 8,973 -6.5 % 8,801 -4.7 %
Accrued interest receivable and other assets   10,386     8,781   18.3 %   10,279   1.0 %   8,611   20.6 %
Total assets $ 1,619,169   $ 1,578,970   2.5 % $ 1,441,999   12.3 % $ 1,363,130   18.8 %
Liabilities
Deposits:
Noninterest-bearing demand $ 347,342 $ 321,109 8.2 % $ 319,026 8.9 % $ 318,901 8.9 %
Savings, NOW and money market accounts 282,796 290,105 -2.5 % 317,878 -11.0 % 335,272 -15.7 %
Time deposits under $250,000 445,553 435,326 2.3 % 347,774 28.1 % 280,161 59.0 %
Time deposits $250,000 and over   351,554     335,385   4.8 %   266,612   31.9 %   243,877   44.2 %
Total deposits 1,427,245 1,381,925 3.3 % 1,251,290 14.1 % 1,178,211 21.1 %
Borrowings from Federal Home Loan Bank 30,000 40,000 -25.0 % 40,000 -25.0 % 40,000 -25.0 %
Accrued interest payable and other liabilities   10,493     9,812   6.9 %   8,525   23.1 %   8,966   17.0 %
Total liabilities   1,467,738     1,431,737   2.5 %   1,299,815   12.9 %   1,227,177   19.6 %
Commitments and contingent liabilities
Shareholders' Equity
Common stock 125,579 125,511 0.1 % 125,430 0.1 % 125,354 0.2 %
Additional paid-in capital 3,206 3,072 4.4 % 2,941 9.0 % 2,611 22.8 %
Retained earnings 25,258 20,898 20.9 % 15,036 68.0 % 8,454 198.8 %
Accumulated other comprehensive loss, net   (2,612 )   (2,248 ) 16.2 %   (1,223 ) 113.6 %   (466 ) 460.5 %
Total shareholders' equity   151,431     147,233   2.9 %   142,184   6.5 %   135,953   11.4 %
Total liabilities and shareholders' equity $ 1,619,169   $ 1,578,970   2.5 % $ 1,441,999   12.3 % $ 1,363,130   18.8 %
 
Outstanding common share 13,435,214 13,424,777 13,417,899 13,412,059
Book value per common share (1) $ 11.27 $ 10.97 $ 10.60 $ 10.14
Total loan to total deposit ratio 89.35 % 88.97 % 95.53 % 92.47 %
Noninterest-bearing deposits to total deposits 24.34 % 23.24 % 25.50 % 27.07 %
 

(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 component for the presented periods.

 

Pacific City Financial Corporation and Subsidiary

Consolidated Statements of Income

($ in thousands, except share and per share data)

 
    Three Months Ended   Six Months Ended
  6/30/2018       3/31/2018     % Change       6/30/2017     % Change     6/30/2018       6/30/2017     % Change  
Interest income:
Interest and fees on loans $ 18,610 $ 17,440 6.7 % $ 14,807 25.7 % $ 36,050 $ 28,684 25.7 %
Interest on investment securities 869 848 2.5 % 588 47.8 % 1,717 1,096 56.7 %
Interest and dividend on other interest-earning assets   865     340   154.4 %   294   194.2 %   1,205     526   129.1 %
Total interest income 20,344 18,628 9.2 % 15,689 29.7 % 38,972 30,306 28.6 %
Interest expense:
Interest on deposits 4,292 3,166 35.6 % 2,302 86.4 % 7,458 4,449 67.6 %
Interest on other borrowings   170     168   1.2 %   3   5566.7 %   338     3   11166.7 %
Total interest expense   4,462     3,334   33.8 %   2,305   93.6 %   7,796     4,452   75.1 %
Net interest income 15,882 15,294 3.8 % 13,384 18.7 % 31,176 25,854 20.6 %
Provision (reversal) for loan losses   425     95   347.4 %   (274 ) -255.1 %   520     (472 ) -210.2 %
Net interest income after provision (reversal) for loan losses 15,457 15,199 1.7 % 13,658 13.2 % 30,656 26,326 16.4 %
Noninterest income:
Gain on sale of SBA loans 863 2,049 -57.9 % 2,320 -62.8 % 2,912 4,635 -37.2 %
Gain on sale of residential property loans 170 22 672.7 % 50 240.0 % 192 79 143.0 %
Gain on sale of other loans - 45 -100.0 % - - 45 - -
Service charges and fees on deposits 376 349 7.7 % 337 11.6 % 725 687 5.5 %
Servicing income 585 626 -6.5 % 601 -2.7 % 1,211 1,167 3.8 %
Other income   279     271   3.0 %   274   1.8 %   550     503   9.3 %
Total noninterest income 2,273 3,362 -32.4 % 3,582 -36.5 % 5,635 7,071 -20.3 %
Noninterest expense:
Salaries and employee benefits 6,153 6,246 -1.5 % 5,574 10.4 % 12,399 11,095 11.8 %
Occupancy and equipment 1,246 1,144 8.9 % 1,090 14.3 % 2,390 2,186 9.3 %
Professional fees 988 523 88.9 % 476 107.6 % 1,511 896 68.6 %
Marketing and business promotion 541 388 39.4 % 419 29.1 % 929 720 29.0 %
Data processing 295 302 -2.3 % 261 13.0 % 597 510 17.1 %
Director fees and expenses 211 230 -8.3 % 180 17.2 % 441 343 28.6 %
Loan related expense 63 59 6.8 % 92 -31.5 % 122 203 -39.9 %
Regulatory assessments 145 132 9.8 % 103 40.8 % 277 201 37.8 %
Other expenses   1,298     607   113.8 %   601   116.0 %   1,905     1,163   63.8 %
Total noninterest expense   10,940     9,631   13.6 %   8,796   24.4 %   20,571     17,317   18.8 %
Income before income taxes 6,790 8,930 -24.0 % 8,444 -19.6 % 15,720 16,080 -2.2 %
Income tax expense   2,028     2,666   -23.9 %   3,584   -43.4 %   4,694     6,822   -31.2 %
Net income $ 4,762   $ 6,264   -24.0 % $ 4,860   -2.0 % $ 11,026   $ 9,258   19.1 %
 
Earnings per share available to common shareholders, basic $ 0.35 $ 0.47 $ 0.36 $ 0.82 $ 0.69
Earnings per share available to common shareholders, diluted $ 0.35 $ 0.46 $ 0.36 $ 0.81 $ 0.68
 
Weighted-average common shares outstanding, basic 13,432,775 13,418,259 13,408,282 13,425,557 13,401,859
Weighted-average common shares outstanding, diluted 13,628,677 13,586,759 13,542,538 13,607,834 13,523,128
 
Dividend paid per common share $ 0.03 $ 0.03 $ 0.03 $ 0.06 $ 0.06
Common stock dividend payout ratio (1) 8.57 % 6.38 % 8.33 % 7.32 % 8.70 %
Return on average assets (2) 1.20 % 1.73 % 1.49 % 1.45 % 1.46 %
Return on average shareholders' equity (2), (3) 12.74 % 17.50 % 14.49 % 15.07 % 14.14 %
Efficiency ratio (2), (4) 60.26 % 51.62 % 51.84 % 55.88 % 52.60 %
 

(1)

   

The ratios are calculated by dividing dividends declared per
common share by basic earnings per share.

(2)

Ratios are presented on an annualized basis.

(3)

The Company did not have any intangible equity component for
the presented periods.

(4)

The ratios are calculated by dividing noninterest expense by
the sum of net interest income and noninterest income.

 
 

Pacific City Financial Corporation and Subsidiary

Average Balance, Average Yield, and Average Rate

($ in thousands)

 
    Three Months Ended
6/30/2018   3/31/2018   6/30/2017

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) $ 1,236,075 $ 18,610 6.04 % $ 1,219,867 $ 17,440 5.80 % $ 1,077,835 $ 14,807 5.51 %
U.S. government agency securities 23,212 141 2.44 % 24,350 137 2.28 % 24,753 145 2.35 %
Mortgage-backed securities 65,708 378 2.31 % 67,484 391 2.35 % 51,808 246 1.90 %
Collateralized mortgage obligation 52,455 309 2.36 % 50,974 280 2.23 % 29,977 149 1.99 %
Municipal bonds (2) 6,552 41 2.51 % 6,583 40 2.46 % 8,777 48 2.19 %
Other interest-earning assets   175,615     865 1.98 %   63,981     340 2.16 %   80,676     294 1.46 %
Total interest-earning assets   1,559,617     20,344 5.23 %   1,433,239     18,628 5.27 %   1,273,826     15,689 4.94 %
Noninterest-earning assets:
Cash and cash equivalents 18,530 20,329 16,085
Allowance for loan losses (12,446 ) (12,366 ) (11,266 )
Other assets   27,460     26,746     26,839  
Total noninterest-earning assets   33,544     34,709     31,658  
Total assets $ 1,593,161   $ 1,467,948   $ 1,305,484  
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Deposits:
NOW and money market accounts $ 279,515 773 1.11 % $ 297,947 760 1.03 % $ 323,657 813 1.01 %
Savings 8,739 6 0.28 % 8,632 6 0.28 % 8,810 6 0.27 %
Time deposits   790,430     3,513 1.78 %   654,124     2,400 1.49 %   523,502     1,483 1.14 %
Total interest-bearing deposits 1,078,684 4,292 1.60 % 960,703 3,166 1.34 % 855,969 2,302 1.08 %
Borrowings from Federal Home Loan Bank   39,782     170 1.71 %   40,000     168 1.70 %   879     3 1.37 %
Total interest-bearing liabilities   1,118,466     4,462 1.60 %   1,000,703     3,334 1.35 %   856,848     2,305 1.08 %
Noninterest-bearing liabilities
Noninterest-bearing demand 315,232 313,660 305,267
Other liabilities   9,533     8,384     8,837  
Total noninterest-bearing liabilities   324,765     322,044     314,104  
Total liabilities 1,443,231 1,322,747 1,170,952
Total shareholders' equity   149,930     145,201     134,532  
Total liabilities and shareholders' equity $ 1,593,161   $ 1,467,948   $ 1,305,484  
Net interest income $ 15,882 $ 15,294 $ 13,384
Net interest spread (3) 3.63 % 3.92 % 3.86 %
Net interest margin (4) 4.08 % 4.33 % 4.21 %
Total deposits $ 1,393,916 $ 4,292 1.24 % $ 1,274,363 $ 3,166 1.01 % $ 1,161,236 $ 2,302 0.80 %
Total funding (5) $ 1,433,698 $ 4,462 1.25 % $ 1,314,363 $ 3,334 1.03 % $ 1,162,115 $ 2,305 0.80 %
 

(1)

   

Total loans include both loans held-for-sale and loans
held-to-investment, net of deferred loan costs (fees).

(2)

The yield on municipal bonds has not been computed on a
tax-equivalent basis.

(3)

Net interest spread is calculated by subtracting average rate
on interest-bearing liabilities from average yield on
interest-earning assets.

(4)

Net interest margin is calculated by dividing annualized net
interest income by average interest-earning assets.

(5)

Total funding is the sum of interest-bearing liabilities and
noninterest-bearing deposits. The cost of total funding is
calculated as annualized total interest expense divided by average
total funding.

 
 

Pacific City Financial Corporation and Subsidiary

Average Balance, Average Yield, and Average Rate (Continued)

($ in thousands)

 
    Three Months Ended
6/30/2018   3/31/2018

Average
Balance

 

Interest
Income/
Expense

  Avg. Yield/Rate

Average
Balance

 

Interest
Income/
Expense

  Avg. Yield/Rate
Assets
Interest-earning assets:
Total loans (1) $ 1,228,015 $ 36,050 5.92 % $ 1,066,900 $ 28,684 5.42 %
U.S. government agency securities 23,778 278 2.36 % 23,733 275 2.34 %
Mortgage-backed securities 66,591 769 2.33 % 50,476 466 1.86 %
Collateralized mortgage obligation 51,719 589 2.30 % 26,834 259 1.95 %
Municipal bonds (2) 6,567 81 2.49 % 8,785 96 2.20 %
Other interest-earning assets   120,107     1,205 2.02 %   69,746     526 1.52 %
Total interest-earning assets   1,496,777     38,972 5.25 %   1,246,474     30,306 4.90 %
Noninterest-earning assets:
Cash and cash equivalents 19,425 16,513
Allowance for loan losses (12,406 ) (11,372 )
Other assets   27,105     27,145  
Total noninterest-earning assets   34,124     32,286  
Total assets $ 1,530,901   $ 1,278,760  
Liabilities and Shareholders' Equity
Interest-bearing liabilities:
Deposits:
NOW and money market accounts $ 288,680 1,533 1.07 % $ 322,963 $ 1,589 0.99 %
Savings 8,686 12 0.28 % 8,762 12 0.28 %
Time deposits   722,654     5,913 1.65 %   515,998     2,848 1.11 %
Total interest-bearing deposits 1,020,020 7,458 1.47 % 847,723 4,449 1.06 %
Borrowings from Federal Home Loan Bank   39,890     338 1.71 %   442     3 1.37 %
Total interest-bearing liabilities   1,059,910     7,796 1.48 %   848,165     4,452 1.06 %
Noninterest-bearing liabilities
Noninterest-bearing demand 314,450 290,292
Other liabilities   8,962     8,267  
Total noninterest-bearing liabilities   323,412     298,559  
Total liabilities 1,383,322 1,146,724
Total shareholders' equity   147,579     132,036  
Total liabilities and shareholders' equity $ 1,530,901   $ 1,278,760  
Net interest income $ 31,176 $ 25,854
Net interest spread (3) 3.77 % 3.84 %
Net interest margin (4) 4.20 % 4.18 %
Total deposits $ 1,334,470 $ 7,458 1.13 % $ 1,138,015 $ 4,449 0.79 %
Total funding (5) $ 1,374,360 $ 7,796 1.14 % $ 1,138,457 $ 4,452 0.79 %
 

(1)

   

Total loans include both loans held-for-sale and loans
held-to-investment, net of deferred loan costs (fees).

(2)

The yield on municipal bonds has not been computed on a
tax-equivalent basis.

(3)

Net interest spread is calculated by subtracting average rate
on interest-bearing liabilities from average yield on
interest-earning assets.

(4)

Net interest margin is calculated by dividing annualized net
interest income by average interest-earning assets.

(5)

Total funding is the sum of interest-bearing liabilities and
noninterest-bearing deposits. The cost of total funding is
calculated as annualized total interest expense divided by average
total funding.

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