Pacific City Financial Corporation Reports Record Earnings of $16.4 Million for 2017

LOS ANGELES--()--Pacific City Financial Corporation (the “Company”) (OTC Pink: PFCF), the holding company of Pacific City Bank, today reported net income of $16.4 million, or $1.21 per diluted common share compared with $14.0 million, or $1.11 per diluted common shares for the 2016 year. For the fourth quarter of 2017, net income was $2.3 million, or $0.17 per diluted common share, compared with $4.8 million, or $0.35 per diluted common share, in the previous quarter and $4.3 million, or $0.32 per diluted common share, in the year-ago quarter.

2017 Highlights

  • Net income totaled $16.4 million or $1.21 per diluted common share;
  • Total assets increased $215.4 million, or 17.6%, to $1,442.0 million at December 31, 2017 compared with $1,226.6 million at December 31, 2016;
  • Total loans, including loans held-for-sale and net of unearned fee/cost, increased $162.0 million, or 15.7%, to $1,195.3 million at December 31, 2017 compared with $1,033.3 million at December 31, 2016;
  • Total deposits increased $159.5 million, or 14.6%, to $1,251.3 million at December 31, 2017 compared with $1,091.8 million at December 31, 2016;
  • Classified loans decreased $4.1 million, or 45.0%, to $5.0 million at December 31, 2017 compared with $9.1 million at December 31, 2016; and
  • Loans originated totaled $591.5 million in 2017 year compared with $588.2 million in 2016 year.
  • Net interest margin for 2017 increased 7 bps to 4.21% compared with 4.14% for 2016.

"We are pleased to report a strong quarter that was highlighted by the expansion in net interest income and a consistent growth in loan portfolio and deposits,” stated by Henry Kim, President and CEO. “Our net interest income in the fourth quarter of 2017 increased 3.8% to $14.9 million compared with $14.4 million in the previous quarter and increased 18.7% compared with $12.6 million in the year-ago quarter. Net interest income for 2017 increased 21.0% to $55.2 million compared with $45.6 million in 2006.”

Mr. Kim continued, “As evidenced by our loan portfolio increase of 3.8% to $1,177.8 million compared with $1,135.1 million in the third quarter of 2017 and increase of 15.5% compared with $1,019.8 million in the year-ago quarter, we are heading into 2018 with a solid momentum. Although accumulating low cost deposit continues to be a challenge in our marketplace, we managed to increase our deposits 3.1% to $1,251.3 million compared with $1,213.3 million in the third quarter of 2017 and increase 14.6% compared with $1,091.8 million in the year-ago quarter.

2017 Fourth Quarter Financial Highlights          
(dollars in thousands, except per share data)
 
At or for the Three Months Ended
Dec. 31,

2017

Sept. 30,

2017

%

change

Dec. 31,

2016

%

change

 
Net income $ 2,339 $ 4,806 -51.3 % $ 4,312 -45.8 %
Earnings per common share (diluted)* 0.17 0.35 -51.4 % 0.32 -46.9 %
 
Net interest income $ 14,933 $ 14,383 3.8 % $ 12,579 18.7 %
Provision for loan loss 1,713 586 192.3 % 621 175.8 %
Non-interest income 3,362 3,461 -2.9 % 3,645 -7.8 %
Non-interest expense 9,620 8,959 7.4 % 8,071 19.2 %
 
Total assets $ 1,441,998 $ 1,403,816 2.7 % $ 1,226,642 17.6 %
Net loans receivable, net of allowance and loan fee/cost 1,177,775 1,135,093 3.8 % 1,019,792 15.5 %
Total deposits 1,251,289 1,213,274 3.1 % 1,091,812 14.6 %
 
Return on average assets 0.65 % 1.38 % 1.42 %
Return on average stockholders' equity 6.47 % 13.69 % 13.59 %
Net interest margin 4.26 % 4.23 % 4.16 %
Efficiency ratio 52.58 % 50.20 % 49.75 %
Tangible common equity to tangible assets 9.86 % 10.01 % 10.35 %
Tangible common equity per common share * $ 10.60 $ 10.48 $ 9.48
 
Tier 1 leverage ratio (consolidated) 10.01 % 10.15 % 10.48 %
 
* 10% stock dividend declared in January 2017 reflected retroactively as of December 31, 2016.
 

RESULTS OF OPERATIONS

Net Income

Net income for 2017 increased $2.4 million, or 17.1%, to $16.4 million compared with $14.0 million in the previous year. Diluted earnings per share for 2017 was $1.21 compared with $1.11 in 2016 year. The increase in net income compared with 2016 year was primarily due to an increase of $9.6 million in net interest income, an increase of $275,000 in noninterest income, and a decrease of $456,000 in provision for loan losses, partially offset by an increase of $4.5 million in provision for income tax and an increase of $3.4 million in noninterest expense.

Comparing quarterly results, net income in the fourth quarter of 2017 decreased $2.5 million, or 51.3%, to $2.3 million compared with $4.8 million in the previous quarter and decreased $2.0 million, or 45.8%, compared with $4.3 million in the year-ago quarter. Diluted earnings per share were $0.17 in the fourth quarter of 2017 compared with $0.35 in the previous quarter and $0.32 in the year-ago quarter. The decrease of $2.5 million in net income compared with the previous quarter is primarily due to the recognition of $1.6 million in additional tax expense attributed to a re-measurement of our deferred tax assets and liabilities, an increase of $1.1 million in provision for loan losses, and an increase of $661,000 in non-interest expense, partially offset by an increase of $550,000 in net interest income.

Net Interest Income and Net Interest Margin

Net interest income before provision for loan losses for 2017 increased $9.6 million, or 21.0%, to $55.2 million compared with $45.6 million in 2016 year. Net interest income before provision for loan losses in the fourth quarter of 2017 increased $550,000, or 3.8%, to $14.9 million compared with $14.4 million in the previous quarter, and increased $2.4 million, or 18.7%, compared with $12.6 million in the year-ago quarter. The increase in net interest income compared with the previous year and the previous quarters was primarily due to an increase in interest-earning assets and multiple increases in market interest rates since December 2016.

Interest income on loans in 2017 increased $11.5 million, or 22.9%, to $61.5 million compared with $50.1 million in the previous year. The increase on interest income on loans compared with the 2016 year was primarily due to an increase in loan balance and an increase in loan yield. The average total loan balance, including loans held for sale (“LHFS”), was $1,111.2 million in 2017 compared with $961.5 million in 2016. Loan yield was 5.54% in 2017 and 5.21% in 2016.

Interest income on loans increased $832,000, or 5.2%, to $16.8 million in the fourth quarter of 2017 compared with $16.0 million in the previous quarter and increased $3.0 million, or 22.0%, compared with $13.8 million in the year-ago quarter. The increase on interest income on loans compared with the previous quarters was primarily due to an increase in loan balance. The average total loan balance, including LHFS, was $1,186.0 million in the fourth quarter of 2017 compared with $1,123.7 million in the previous quarter, and $1,040.8 million in the year-ago quarter. Loan yield was 5.63% in 2017 fourth quarter, 5.65% in 2017 third quarter, and 5.27% in 2016 fourth quarter.

Below is a table of fixed and variable interest rate loan mix accompanied by weighted average contractual rates:

  December 31, 2017   September 30, 2017   December 31, 2016
% to Gross

Loans *

 

WAVG

Contractual
Rate

% to Gross

Loans *

 

WAVG

Contractual
Rate

% to Gross

Loans *

 

WAVG

Contractual
Rate

Fixed rate loans 26.6% 5.09% 26.5% 5.09% 30.9% 5.10%
Variable rate loans 73.4% 5.38% 73.5% 5.14% 69.1% 4.68%
 
* Includes LHFS of $5.3 million, $2.5 million, and $2.2 million at December, 31, 2107, September 30, 2017, and December 31, 2016, respectively.
 

Interest income on investment securities for 2017 increased $873,000, or 50.1%, to $2.6 million compared with $1.7 million in the previous year. Interest income on investment securities in the fourth quarter of 2017 increased $25,000, or 3.3%, to $772,000 compared with $747,000 in the previous quarter and increased $344,000, or 80.4% compared with $428,000 in the year-ago quarter. The increases compared with the previous year and quarters were primarily due to an increase in the size of the investment portfolio. The average balance of investment securities in 2017 was $126.9 million, compared to $95.4 million for 2016, while the yield for 2017 was 2.06% compared to 1.83% for 2016.

The average balance of investment securities was $147.5 million in the fourth quarter of 2017 compared with $140.0 million in the previous quarter, and $95.7 million in the year-ago quarter. Investment yield was 2.07% in the fourth quarter 2017 compared with 2.13% in the previous quarter, and 1.79% in the year-ago quarter.

Total interest expense in 2017 increased $3.1 million, or 44.0%, to $10.1 million compared with $7.0 million in 2016 primarily due to an increase in the average balance of interest bearing liabilities and an increase in cost of funds. The average balance of interest bearing liabilities was $868.6 million in 2017 compared with $729.2 million for 2016. The cost of funds increased primarily due to multiple increases in short term market interest rates since December 2016 combined with continuing competition for deposit customers. The cost of interest-bearing liabilities was 1.14% in 2017 compared with 0.96% in 2016. The cost of funds including non-interest bearing deposits was 0.85% in 2017 compared with 0.70% in 2016.

Total interest expense in the fourth quarter of 2017 increased $231,000, or 8.5%, to $2.9 million compared with $2.7 million in the previous quarter and increased $928,000, or 46.2%, compared with $2.0 million in the year-ago quarter. The increase was primarily due to an increase in the balance of interest bearing liabilities and an increase in the cost of interest bearing deposits. The average balance of interest bearing liabilities was $948.3 million in the fourth quarter of 2017 compared with $910.2 million in the previous quarter, and $798.4 million in the year-ago quarter. The cost of interest-bearing liabilities was 1.23% in the fourth quarter of 2017 compared with 1.18% in the previous quarter, and 1.00% in the year-ago quarter. The cost of funds including non-interest bearing deposits was 0.92% in the fourth quarter of 2017 compared with 0.87% in the previous quarter, and 0.74% in the year-ago quarter.

Net interest margin for 2017 increased 7 basis points to 4.21% compared with 4.14% in 2016 primarily due to an increase in yield on interest earning assets attributable to the several increases in prime rates since December 2016.

Net interest margin was 4.26% in the fourth quarter of 2017 compared with 4.23% in the previous quarter, and 4.16% in the year-ago quarter.

Loan Loss Provision

In 2017, the Company recognized a provision for loan losses of $1.8 million compared with $2.3 million in 2016. The provision for loan losses in the fourth quarter of 2017 increased $1.1 million to $1.7 million compared with $585,000 in the previous quarter, and increased $1.1 million compared with $621,000 in the year-ago quarter. The provision in the fourth quarter of 2017 was primarily due to an increase in charged-off loans and an increase in the size of the loan portfolio. The allowance for loan losses to gross loan ratio was 1.03% at December 31, 2017, 1.02% at September 30, 2017, and 1.10% at December 31, 2016.

In 2017, the Company recognized a net charge-off of $923,000 compared with a net charge-off of $309,000 in 2016. During the fourth quarter of 2017, the Company recognized a net charge-off of $1.1 million compared with a net recovery of $37,000 in the previous quarter, and a net charge-off of $293,000 in the year ago-quarter.

Non-interest Income

Non-interest income in 2017 increased $275,000, or 2.0%, to $13.9 million compared with $13.6 million in 2016 primarily due to an increase of $790,000 in gain on sale of SBA loans and an increase of $287,000 in servicing fees, partially offset by a decrease of $702,000 in gain on sale of home mortgage loans.

Non-interest income in the fourth quarter of 2017 decreased $99,000, or 2.9%, to $3.4 million compared with $3.5 million in the previous quarter, and decreased $283,000, or 7.8%, compared with $3.6 million in the year-ago quarter. The decrease compared with the year-ago quarter was primarily due to a decrease of $352,000 in gain on sale of SBA and residential home mortgage loans to $2.1 million compared with $2.5 million, partially offset by an increase of $99,000 in loan servicing fees.

The Bank originated $185.9 million of SBA loans and sold $127.3 million of guaranteed portion of SBA loans in 2017 compared with $153.8 million in origination and $119.3 million sold in 2016. The Bank originated $81.0 million in residential mortgage loans and sold $13.2 million of them in 2017 compared with $91.0 million in origination and $45.3 million sold in 2016.

The Bank originated $43.8 million in SBA loans and sold $29.2 million of guaranteed portion of SBA loans in the fourth quarter of 2017 compared with $39.0 million in origination and $29.5 million sold during the previous quarter, and $28.3 million in origination and $38.9 million sold during the year-ago quarter. The Bank originated $24.0 million in residential mortgage loans and sold $2.1 million of them in the fourth quarter of 2017 compared with $26.2 million in origination and $4.6 million sold in the previous quarter and $18.4 million in origination and $4.4 million sold in the year-ago quarter.

Non-interest Expenses

Non-interest expenses in 2017 increased $3.4 million, or 10.3%, to $35.9 million compared with $32.5 million in 2016, primarily due to an increase of $2.9 million in salary and employee benefits expenses, an increase of $166,000 in marketing expenses, and an increase of $131,000 in data and item processing expenses, partially offset by a decrease of $108,000 in legal and professional fees. The $2.9 million increase in salary and employee benefit expenses consisted of $728,000 due to an increase in employee headcount, $499,000 in annual salary adjustments, $973,000 in employee bonus and incentive expenses, $280,000 in employee payroll taxes, and $252,000 in employee group insurance expenses.

Non-interest expenses in the fourth quarter of 2017 increased $661,000, or 7.4%, to $9.6 million compared with $9.0 million in the previous quarter and increased $1.5 million, or 19.2%, compared with $8.1 million in the year-ago quarter. The increase compared with the previous quarter was primarily due to an increase of $546,000 in employee benefits and bonus expenses, partially offset by a decrease of $133,000 in advertisement expense. The increase compared with the year-ago quarter was primarily due to an increase of $1.2 million in salary and employee benefit expenses. The increase in salary and employee benefit expenses compared with a year ago quarter consisted of $354,000 in an increase in employee headcount and annual salary adjustments and $846,000 in employee bonuses and incentive compensation.

The Company’s efficiency ratio in 2017 was 51.97% compared with 54.92% in 2016. The Company’s efficiency ratio was 52.58% in the fourth quarter of 2017 compared with 50.20% in the previous quarter, and 49.75% in the year-ago quarter.

Income Tax Provision

The Company’s effective income tax rate was 66.41% in the fourth quarter of 2017 compared with 42.09% in the previous quarter and 42.75% in the year-ago quarter. The Company’s effective income tax rate in 2017 was 47.66% compared with 42.62% in 2016. The effective income tax rate for the fourth quarter of 2017 and full year 2017 increased compared with the previous quarters and full year 2016 primarily due to a re-measurement of deferred tax assets and liability related to the enactment of the Tax Cuts and Jobs Act (the “Tax Reform Act”) on December 22, 2017. Beginning in 2018, the Tax Reform Act reduces the Federal tax rate for corporations from 35% to 21% and changes or limits certain tax deductions. As a result of the lower corporate tax rate, during the fourth quarter of 2017, the Company recorded a onetime revaluation adjustment of $1.6 million to reduce its deferred tax assets, which incurred income tax expense and reduced fourth quarter and full year earnings.

BALANCE SHEET SUMMARY

Total Assets

Total assets increased $38.2 million, or 2.7%, to $1,442.0 million at December 31, 2017 compared with $1,403.8 million at September 30, 2017, and increased $215.4 million, or 17.6%, compared with $1,226.6 million at December 31, 2016.

Loans

Total loans receivable including loans held-for-sale, net of deferred costs and fees, increased $46.1 million, or 4.0%, to $1,195.3 million at December 31, 2017 compared with $1,149.2 million at September 30, 2017, and increased $162.0 million, or 15.7%, compared with $1,033.3 million at December 31, 2016.

During the fourth quarter of 2017, the Company originated $154.3 million in loans, sold $29.2 million of SBA guaranteed portion of the loans and $2.1 million in residential mortgage loans, recognized $75.7 million in loan principal paydown/payoff, and charged-off $1.2 million. During the previous quarter, the Company originated $160.2 million in loans, sold $29.5 million of SBA guaranteed portion of the loans and $4.6 million in residential mortgage loans, recognized $65.7 million in loan principal paydown/payoff, and charged-off $93,000.

The table below consists of gross loan balance by type:

Loan type (dollars in thousands)        
  Dec. 31,

2017

Sept. 30,

2017

Percentage

Change

Dec. 31,

2016

Percentage

Change

Real estate loans $ 686,863 $ 668,657 2.7 % $ 612,301 12.2 %
Residential mortgage loans 168,091 154,812 8.6 % 140,688 19.5 %
SBA loans 160,637 156,293 2.8 % 130,577 23.0 %
Commercial industrial loans 140,208 134,564 4.2 % 113,642 23.4 %
Consumer loans 33,869 32,053 5.7 % 33,723 0.4 %
Deferred loan fees/costs   331   365 -9.3 %   181 82.9 %
Gross loans receivables 1,189,999 1,146,744 3.8 % 1,031,112 15.4 %
Loans held for sale   5,297   2,501 111.8 %   2,150 146.4 %
Total loans $ 1,195,296 $ 1,149,245 4.0 % $ 1,033,262 15.7 %
 

Investment Securities

Total investment securities increased $7.9 million, or 5.5%, to $150.8 million at December 31, 2017 compared with $142.9 million at September 30, 2017, and increased $50.3 million, or 50.1%, compared with $100.4 million at December 31, 2016. The increase in investment securities portfolio compared with the previous quarter was primarily due to the purchase of $15.4 million in investment securities, partially offset by $6.4 million in principal pay-downs, $248,000 in net premium amortization, and $899,000 in decline-in fair market value. The increase in investment securities portfolio compared with the year-ago quarter was primarily due to the purchase of $73.0 million in investment securities, partially offset by $21.0 million in principal pay-downs or called securities, $818,000 in net premium amortization, and $778,000 in decline-in fair market value. $73.0 million in investment securities purchased consisted of $6.9 million US government agency securities, $32.5 million in Mortgage-backed securities, and $33.6 million in Collateralized mortgage obligations.

Deposits

Total deposits increased $38.0 million, or 3.1%, to $1,251.3 million at December 31, 2017 compared with $1,213.3 million at September 30, 2017, and increased $159.5 million, or 14.6%, compared with $1,091.8 million at December 31, 2016. The demand deposit to total deposit ratio was 25.5% at December 31, 2017 compared with 26.8% at September 30, 2017, and 25.1% at December 31, 2016.

The table below consists of deposit mix by period:

Deposit mix (Dollars in thousands)          
 
    December 31, 2017 September 30, 2017 December 31, 2016
Amount Percentage Amount Percentage Amount Percentage
Demand deposits $ 319,025 25.5 % $ 324,690 26.8 % $ 274,003 25.1 %
Now accounts 10,324 0.8 % 8,908 0.7 % 7,837 0.7 %
Money market accounts 299,390 23.9 % 307,046 25.3 % 303,234 27.8 %
Savings 8,164 0.7 % 9,250 0.8 % 8,858 0.8 %
Time deposits under $250K 295,274 23.6 % 288,830 23.8 % 252,491 23.1 %
Time deposits of $250K and over 166,612 13.3 % 157,044 12.9 % 127,623 11.7 %
State & Broker CDs   152,500 12.2 %   117,506 9.7 %   117,766 10.8 %
Total deposits $ 1,251,289 100.0 % $ 1,213,274 100.0 % $ 1,091,812 100.0 %
 

Borrowings

The balance of borrowings from the Federal Home Loan Bank of San Francisco (FHLBSF) at December 31, 2017 and at September 30, 2017 was $40.0 million and none at December 31, 2016. The FHLBSF borrowings consist of fixed interest rates with original maturity terms ranging from one to five years.

Stockholders’ Equity

Stockholders’ equity increased $1.6 million, or 1.2% to $142.2 million at December 31, 2017 compared with $140.5 million at September 30, 2017, and increased $15.2 million, or 11.9% compared with $127.0 million at December 31, 2016. On November 13, 2017, the Company declared a cash dividend of $0.03 per common share that was paid on December 15, 2017.

CREDIT QUALITY

Non-performing Assets

Non-performing loans (“NPL”) increased $1.7 million at December 31, 2017 to $3.2 million compared with $1.5 million at September 30, 2017, and increased $1.4 million compared with $1.8 million at December 31, 2016. The increase of $1.7 million compared with the previous quarter was primarily due to the placement of $3.0 million of loans on nonaccrual status, partially offset by a charge-off of $984,000 and pay-down and pay-off of $265,000 in non-accrual loans. The NPL to gross loans ratios was 0.27% at December 31, 2017, 0.13% at September 30, 2017, and 0.18% at December 31, 2016.

OREO decreased $42,000 to $99,000 at December 31, 2017 compared with $141,000 at September 30, 2017 and decreased $407,000 compared with $506,000 at December 31, 2016. The decreases compared with the previous quarters was due to the recognition of valuation allowance and the sale of one OREO during the second quarter of 2017.

The tables below summarize composition of non-performing loans and non-performing assets:

Non-performing loans composition (Dollars in thousands)      
     
Dec. 31,

2017

Sept. 30,

2017

Percentage

Change

Dec. 31,

2016

Percentage

Change

Real estate loans $ 318 $ 330 -3.6 % $ 57 457.9 %
Commercial and industrial loans 14 149 -90.6 % 284 -95.1 %
SBA loans 2,148 1,006 113.5 % 1,468 46.3 %
Home mortgage loans 730 - 0.0 % - 0.0 %
Consumer loans & others   24   26 -7.7 %   39 -38.5 %
$ 3,234 $ 1,511 114.0 % $ 1,848 75.0 %
 
Non-performing assets (Dollars in thousands)        
   
Dec. 31,

2017

Sept. 30,

2017

%

Change

Dec. 31,

2016

%

Change

 
Non-performing loans (NPL) $ 3,234 $ 1,511 114.0 % $ 1,848 75.0 %
Non-performing TDR (included in NPL) 1,675 609 175.0 % 663 152.6 %
Gross loans including deferred loan fees/cost 1,189,999 1,146,744 3.8 % 1,031,112 15.4 %
NPL/Gross loans 0.27 % 0.13 % 0.18 %
OREO $ 99 $ 141 -29.8 % $ 506 -80.4 %
Performing TDR 592 1,676 -64.7 % 2,196 -73.0 %
NPA (NPL+OREO) 3,333 1,652 101.8 % 2,353 41.6 %
Total assets $ 1,441,998 $ 1,403,816 2.7 % $ 1,226,642 17.6 %
 
NPA (NPL+OREO)/Gross loans 0.28 % 0.14 % 0.23 %
NPA (NPL+OREO)/Total assets 0.23 % 0.12 % 0.19 %
 

Classified Assets

Classified loans decreased $835,000, or 14.4%, to $5.0 million compared with $5.8 million at September 30, 2017 and decreased $4.1 million, or 45.0%, compared with $9.1 million at December 31, 2016. Classified assets to total assets ratio was 0.35% at December 31, 2017 compared with 0.42% at September 30, 2017 and 0.78% at December 31, 2016.

The tables below provide certain details on classified assets.

Classified assets (Dollars in thousands)        
 
Dec. 31,

2017

Sept. 30,

2017

%

Change

  Dec. 31,

2016

%

Change

 
Classified loans $ 4,982 $ 5,817 -14.4 % $ 9,066 -45.0 %
OREO 99 141 -29.8 % 506 -80.4 %
Classified assets 5,081 5,958 -14.7 % 9,572 -46.9 %
Classified loans/Gross loans 0.42 % 0.51 % 0.88 %
Tier 1 + ALLL $ 154,594 $ 151,583 2.0 % $ 138,136 11.9 %
Classified assets/Tier 1 + ALLL 3.29 % 3.93 % 6.93 %
Classified assets/Total assets 0.35 % 0.42 % 0.78 %
 

Capital Ratios

       
December 31, 2017 September 30, 2017 December 31, 2016
Tier 1 Leverage Capital Ratio (Consolidate) 10.01% 10.15% 10.48%
Common Equity Tier 1 Capital Ratio (Consolidate) 12.15% 12.36% 12.47%
Tier 1 Risk-Based Capital Ratio (Consolidate) 12.15% 12.36% 12.47%
Total Risk-Based Capital Ratio (Consolidate) 13.20% 13.40% 13.59%
 

The table below illustrates Pacific City Bank capital ratios:

    December 31, 2017   September 30, 2017   December 31, 2016
Tier 1 Leverage Capital Ratio (Bank) 9.94% 10.08% 10.38%
Common Equity Tier 1 Capital Ratio (Bank) 12.06% 12.28% 12.35%
Tier 1 Risk-Based Capital Ratio (Bank) 12.06% 12.28% 12.35%
Total Risk-Based Capital Ratio (Bank) 13.12% 13.32% 13.48%

About Pacific City Financial Corporation

Headquartered in Los Angeles, California, Pacific City Financial Corporation is the parent company of Pacific City Bank, a full-service commercial bank with thirteen branch offices and nine loan production offices in Lynwood and Bellevue, Washington; Denver, Colorado, Chicago, Illinois; Annandale, Virginia; Atlanta, Georgia; Orange County, California; Los Angeles, California; and Carrollton, Texas. Pacific City Bank specializes in commercial banking for small to medium-size businesses by providing commercial real estate loans, small business loans and lines of credit, trade finance loans, auto loans, residential mortgage loans, and SBA loans. Pacific City Bank serves a diverse customer base through its branches in the Greater Los Angeles Area, Fort Lee, New Jersey, and Bayside, New York and its Loan Production Offices in eight States.

Safe Harbor Statement

This press release may contain forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from the projected, including descriptions of plans or objectives of its management for future operations, products or services, and forecasts of its revenues, earnings or other measures of economic performance. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include the words “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” or words of similar meaning, or future or conditional verbs such as “will,” “would,” “should,” “could,” or “may.” Factors that could cause future results to vary materially from current management expectations include, but are not limited to, general economic conditions, economic uncertainty in the United States and abroad, changes in interest rates, deposit flows, real estate values, competition, changes in accounting principles, policies or guidelines, legislation or regulation (including the Tax Cuts & Jobs Act of 2017), and other economic, competitive, governmental, regulatory and technological factors (including external fraud and cyber-security threats) affecting Company’s operations, pricing, products and services. Company undertakes no obligation to release publicly the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date of this press release or to reflect the occurrence of unanticipated events.

Pacific City Financial Corporation
Consolidated Balance Sheets
(Dollars In thousands)
             
December 31,

2017

(Unaudited)

September 30,

2017

(Unaudited)

  %

change

  December 31,

2016

%

change

 
Assets
Cash and due from banks $ 16,662 $ 18,182 -8.4 % $ 18,488 -9.9 %
Interest-bearing deposits in financial institutions   56,996     69,684   -18.2 %   51,463   10.8 %
Total cash and cash equivalents   73,658     87,866   -16.2 %   69,951   5.3 %
 
Investment securities, available-for-sale 129,689 123,170 5.3 % 82,838 56.6 %
Investment securities, held-to-maturity   21,070     19,720   6.8 %   17,584   19.8 %
Total investment securities   150,759     142,890   5.5 %   100,422   50.1 %
 
Loans held for sale 5,297 2,501 111.8 % 2,150 146.4 %
 
Loans receivable, net of deferred loan costs (fees) 1,189,999 1,146,744 3.8 % 1,031,112 15.4 %
Less: allowance for loan losses   (12,224 )   (11,651 ) 4.9 %   (11,320 ) 8.0 %
Net loans receivables   1,177,775     1,135,093   3.8 %   1,019,792   15.5 %
 
Premises and equipment, net 4,723 4,734 -0.2 % 4,562 3.5 %
Other real estate owned, net 99 141 -29.8 % 506 -80.4 %
Federal Home Loan Bank and other bank stock 6,589 6,589 0.0 % 5,686 15.9 %
Deferred tax assets, net 3,847 6,540 -41.2 % 5,254 -26.8 %
Servicing assets 8,973 8,939 0.4 % 8,302 8.1 %
Accrued interest receivables 4,251 3,670 15.8 % 3,150 35.0 %
Others   6,027     4,853   24.2 %   6,867   -12.2 %
Total assets $ 1,441,998   $ 1,403,816   2.7 % $ 1,226,642  

 

17.6 %
 
Liabilities
Deposits
Noninterest-bearing demand $ 319,025 $ 324,690 -1.7 % $ 274,003 16.4 %
Savings, NOW, and money market accounts 317,878 325,204 -2.3 % 319,929 -0.6 %
Time deposits under $250,000 347,774 306,337 13.5 % 291,557 19.3 %
Time deposits of $250,000 and over   266,612     257,043   3.7 %   206,323   29.2 %
Total deposits   1,251,289     1,213,274   3.1 %   1,091,812   14.6 %
Borrowings 40,000 40,000 0.0 % - NA
Accrued interest payable 2,251 1,741 29.3 % 1,559 44.4 %
Other liabilities   6,274     8,260   -24.0 %   6,264   0.2 %
Total liabilities $ 1,299,814   $ 1,263,275   2.9 % $ 1,099,635   18.2 %
 
Capital
Common stock 125,430 125,359 0.1 % 125,094 0.3 %
Additional paid in capital 2,941 2,785 5.6 % 2,443 20.4 %
Retained earnings 15,036 12,857 16.9 % - NA
Other comprehensive (loss) income   (1,223 )   (460 ) 165.9 %   (530 ) 130.8 %
Total capital   142,184     140,541   1.2 %   127,007   11.9 %
 
Total liabilities & capital $ 1,441,998   $ 1,403,816   2.7 % $ 1,226,642   17.6 %
 
Pacific City Financial Corporation
Consolidated Income Statements (Unaudited)
(Dollars in thousands, except share and per share data)
           
Three Months Ended
Dec. 31,

2017

Sept. 30,

2017

Percentage

Change

Dec. 31,

2016

Percentage

Change

Interest income
Interest and fees on loans $ 16,832 $ 16,000 5.2 % $ 13,793 22.0 %
Interest on investments 772 747 3.3 % 428 80.4 %
Interest on others   267     343   -22.2 %   368   -27.4 %
Total interest income   17,871     17,090   4.6 %   14,589   22.5 %
 
Interest expense
Interest on deposits 2,766 2,535 9.1 % 2,010 37.6 %
Interest on borrowings   172     172   0.0 %   -   NA
Total interest expenses   2,938     2,707   8.5 %   2,010   46.2 %
 
Net interest income 14,933 14,383 3.8 % 12,579 18.7 %
 
Provision for loan losses (PLL) 1,713 586 192.3 % 621 175.8 %
 
Net interest income after PLL   13,220     13,797   -4.2 %   11,958   10.6 %
 
Non-interest income
Gain on sale of SBA loans 2,109 2,124 -0.7 % 2,427 -13.1 %
Gain on sale of residential mortgage loans 18 34 -47.1 % 52 -65.4 %
Service charges on deposits 357 334 6.9 % 369 -3.3 %
Loan servicing fees 605 674 -10.2 % 505 19.8 %
Other   273     295   -7.5 %   292   -6.5 %
Total non-interest income   3,362     3,461   -2.9 %   3,645   -7.8 %
 
Non-interest expense
Employee salaries & benefits 6,140 5,594 9.8 % 4,901 25.3 %
Occupancies and fixed assets 1,167 1,074 8.7 % 1,150 1.5 %
Legal & professional 716 644 11.2 % 651 10.0 %
FDIC assessment 114 108 5.6 % 50 128.0 %
Marketing expenses 321 454 -29.3 % 269 19.3 %
Data and item processing expenses 288 276 4.3 % 241 19.5 %
Loan related expenses 128 93 37.6 % 70 82.9 %
Net loss on sale of OREO 11 4 175.0 % - NA
Others   735     712   3.2 %   739   -0.5 %
Total non-interest expenses   9,620     8,959   7.4 %   8,071   19.2 %
 
Net income before taxes 6,962 8,299 -16.1 % 7,532 -7.6 %
 
Income tax provision   4,623     3,493   32.4 %   3,220   43.6 %
 
Net income $ 2,339   $ 4,806   -51.3 % $ 4,312   -45.8 %
 
 
Earnings per common shares
 
Basic $ 0.17 $ 0.36 $ 0.32
Diluted $ 0.17 $ 0.35 $ 0.32
 
Average shares outstanding
 
Basic 13,415,795 13,412,407 13,386,503
Diluted 13,569,503 13,544,855 13,461,259
 
 
Return on average assets 0.65 % 1.38 % 1.42 %
Return on average stockholders' equity 6.47 % 13.69 % 13.59 %
Net interest margin 4.26 % 4.23 % 4.16 %
Efficiency ratio 52.58 % 50.20 % 49.75 %
 
Pacific City Financial Corporation
Consolidated Income Statements
(Dollars in thousands)
         
Twelve Months Ended
December 31, 2017

(Unaudited)

December 31, 2016 Amount Change   % Change  
Interest income
Interest and fees on loans $ 61,516 $ 50,058 11,458 22.9 %
Interest on investments 2,614 1,741 873 50.1 %
Interest on others   1,137     796   341   42.8 %
Total interest income   65,267     52,595   12,672   24.1 %
Interest expenses
Interest on deposits 9,749 7,009 2,740 39.1 %
Interest on borrowings   348     5   343   6860.0 %
Total interest expenses   10,097     7,014   3,083   44.0 %
 
Net interest income 55,170 45,581 9,589 21.0 %
 
Provision for loan losses (PLL) 1,827 2,283 (456 ) -20.0 %
 
Net interest income after PLL   53,343     43,298   10,045   23.2 %
Non-interest income
Gain on sale of SBA loans 8,869 8,079 790 9.8 %
Gain on sale of HM loans 131 833 (702 ) -84.3 %
Service charges on deposits 1,377 1,457 (80 ) -5.5 %
Loans servicing fees 2,446 2,159 287 13.3 %
Other   1,071     1,091   (20 ) -1.8 %
Total non-interest income   13,894     13,619   275   2.0 %
Non-interest expenses
Employee salaries & benefits 22,829 19,944 2,885 14.5 %
Occupancies and fixed assets 4,426 4,337 89 2.1 %
Legal & professional 2,598 2,706 (108 ) -4.0 %
FDIC assessment 423 460 (37 ) -8.0 %
Marketing expenses 1,412 1,246 166 13.3 %
Data and item processing expenses 1,074 943 131 13.9 %
Loan related expenses 444 344 100 29.1 %
Net loss on OREO 20 - (10 ) NA
Others   2,669     2,534   135   5.3 %
Total non-interest expenses   35,895     32,514   3,351   10.3 %
 
Net income before tax   31,342     24,403   6,939   28.4 %
 
Income tax provision   14,939     10,401   4,538   43.6 %
 
Net income after tax $ 16,403   $ 14,002   2,401   17.1 %
 
Earnings per common shares
Basic $ 1.22 $ 1.12
Diluted $ 1.21 $ 1.11
 
Average shares outstanding
Basic 13,408,030 12,532,807
Diluted 13,540,293 12,607,990
 
Return on average assets 1.22 % 1.25 %
Return on average stockholders' equity 12.00 % 12.47 %
Net interest margin 4.21 % 4.14 %
Efficiency ratio 51.97 % 54.92 %
 
Pacific City Financial Corporation
Average Balance, Average Yield, and Average Rate
(Dollars in thousands)
                           
Three Months Ended
December 31, 2017 September 30, 2017 December 31, 2016
Average

Balance

Interest

Income/

Expense

  Average

Yield/

Rate

Average

Balance

Interest

Income/

Expense

  Average

Yield/

Rate

Average

Balance

Interest

Income/

Expense

Average

Yield/

Rate

Assets
Interest-earning assets:
Gross loans, net of deferred loan fees $ 1,186,020 $ 16,832 5.63 % $ 1,123,725 $ 16,000 5.65 % $ 1,040,783 $ 13,793 5.27 %
US government agencies 25,333 144 2.28 % 26,214 153 2.33 % 20,298 112 2.21 %
Mortgage backed securities 66,594 332 1.99 % 60,922 313 2.06 % 46,629 187 1.60 %
Collateralized mortgage obligation 47,878 251 2.10 % 44,771 236 2.11 % 20,775 89 1.71 %
Muni bonds 7,666 44 2.31 % 8,057 46 2.28 % 8,037 41 2.06 %
Interest bearing deposit & others   47,283     154 1.30 %   74,633     235 1.26 %   35,561     49 0.56 %
Total interest-earning assets $ 1,380,774   $ 17,757 5.10 % $ 1,338,322   $ 16,983 5.03 % $ 1,172,083   $ 14,271 4.84 %
Noninterest-earning assets:
Cash and cash equivalents $ 17,440 $ 17,413 $ 16,479
Allowances for loan losses (11,665 ) (11,327 ) (11,212 )
Other assets   35,426     34,609     33,864  
$ 41,201   $ 40,695   $ 39,131  
 
Total assets $ 1,421,975   $ 1,379,017   $ 1,211,214  
 
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Money market & NOW accounts $ 314,237 $ 813 1.03 % $ 322,714 $ 842 1.04 % $ 296,593 $ 712 0.95 %
Savings 8,870 6 0.27 % 9,094 6 0.26 % 8,880 6 0.27 %
Time deposits   585,163     1,946 1.32 %   538,359     1,687 1.24 %   492,909     1,292 1.04 %
Total interest-bearing deposits $ 908,270   $ 2,765 1.21 % $ 870,167   $ 2,535 1.16 % $ 798,382   $ 2,010 1.00 %
Borrowings:
Other borrowings   40,000     172 1.71 %   40,000     172 1.71 %   -     - NA
$ 40,000   $ 172 1.71 % $ 40,000   $ 172 1.71 % $ -   $ - NA
 
Total interest-bearing liabilities $ 948,270   $ 2,937 1.23 % $ 910,167   $ 2,707 1.18 % $ 798,382     2,010 1.00 %
Noninterest-bearing liabilities:
Demand deposits $ 320,174 $ 320,167 $ 278,001
Other liabilities   10,131     9,418     8,646  
$ 330,305   $ 329,585   $ 286,647  
 
Total liabilities $ 1,278,575   $ 1,239,752   $ 1,085,029  
 
Stockholders' equity $ 143,400   $ 139,265   $ 126,185  
 
Total liabilities and stockholders' equity $ 1,421,975   $ 1,379,017   $ 1,211,214  
 
Net interest income $ 14,820 $ 14,276 $ 12,261
 
Cost of funds 0.92 % 0.87 % 0.74 %
 
Net interest spread 3.87 % 3.85 % 3.84 %
 
Net interest margin 4.26 % 4.23 % 4.16 %
 
Pacific City Financial Corporation
Average Balance, Average Yield, and Average Rate
(Dollars in thousands)
               

Twelve Months Ended

December 31, 2017 December 31, 2016
Average

Balance

  Interest

Income/

Expense

Average

Yield

Rate

Average

Balance

Interest

Income/

Expense

Average

Yield

Rate

Assets
Interest-earning assets:
Gross loans, net of deferred loan fees $ 1,111,248 $ 61,518 5.54 % $ 961,482 $ 50,058 5.21 %
US government agencies 24,762 571 3.08 % 20,928 460 2.93 %
Mortgage backed securities 57,171 1,110 2.59 % 45,822 797 2.32 %
Collateralized mortgage obligation 36,660 746 2.71 % 21,032 338 2.14 %
Muni bonds 8,319 186 2.99 % 7,613 147 2.58 %
Interest bearing deposit & others   62,327     690 1.11 %   28,413     145 0.68 %
Total interest earning assets $ 1,300,487   $ 64,821 4.98 % $ 1,085,290   $ 51,945 4.79 %
 
Noninterest-earning assets:
Cash and cash equivalents $ 16,973 $ 15,848
Allowances for loan losses (11,435 ) (10,170 )
Other assets   34,124     31,442  
Total noninterest-earning assets $ 39,662   $ 37,120  
 
Total assets $ 1,340,149   $ 1,122,410  
 
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Deposits:
Money market & NOW accounts $ 320,701 $ 3,244 1.01 % $ 250,736 $ 2,264 0.90 %
Savings 8,873 25 0.28 % 9,500 26 0.27 %
Time deposits   539,068     6,480 1.20 %   468,953     4,719 1.01 %
Total interest-bearing deposits $ 868,642   $ 9,749 1.12 % $ 729,189   $ 7,009 0.96 %
Borrowings:
Other borrowings   20,384     348 1.71 %   1,194     5 0.42 %
Total borrowings: $ 20,384   $ 348 1.71 % $ 1,194   $ 5 0.42 %
 
Total interest-bearing liabilities $ 889,026   $ 10,097 1.14 % $ 730,383   $ 7,014 0.96 %
Noninterest-bearing liabilities:
Demand deposits $ 305,354 $ 271,628
Other liabilities   9,027     8,092  
Total noninterest-bearing liabilities $ 314,381   $ 279,720  
 
Total liabilities $ 1,203,407   $ 1,010,103  
 
Stockholders' equity $ 136,742   $ 112,307  
 
Total liabilities and stockholders' equity $ 1,340,149   $ 1,122,410  
 
Net interest income $ 54,724 $ 44,931
 
Cost of deposits 0.85 % 0.70 %
Net interest spread 3.86 % 3.83 %
Net interest margin 4.21 % 4.14 %

Contacts

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

Contacts

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