Press Release

Pacific City Financial Corporation Reports Earnings of $6.6 million for Q1 2019 and Increased Cash Dividend

Company Release - 4/26/2019 4:15 PM ET

LOS ANGELES--(BUSINESS WIRE)-- 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.”

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 shareholders’ equity 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.

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.

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.

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 %
                                               

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.

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.

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.

 
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.

 
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) 4.22 % 4.33 % 4.33 %
Total deposits $ 1,423,719 $ 5,665 1.61 % $ 1,420,749 $ 5,239 1.46 % $ 1,274,363 $ 3,166 1.01 %
Total funding (5) $ 1,453,793 $ 5,799 1.62 % $ 1,450,749 $ 5,375 1.47 % $ 1,314,363 $ 3,334 1.03 %
                                                                                                       

(1)

   

Total loans include both loans held-for-sale and loans held-for-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.

Timothy Chang
Executive Vice President & Chief Financial Officer
213-210-2000

Source: Pacific City Financial Corporation

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