PCB BANCORP - FORM 8-K - EX-99.1 - EXHIBIT 99.1

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

Los Angeles, California - August 21, 2018 - 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



	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		(24.0	)%	$	0.36		(2.8	)%	$	0.81		$	0.68		19.1	%

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	)%
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		%



($ 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		2.8	%	$	10.60		6.4	%	$	10.14		11.2	%
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:



	(Unaudited) 6/30/2018				(Unaudited) 3/31/2018				12/31/2017				(Unaudited) 6/30/2017
	% to Total Loans		Weighted-Average Contractual Rate		% to Total Loans		Weighted-Average Contractual Rate		% to Total Loans		Weighted-Average Contractual Rate		% to Total Loans		Weighted-Average Contractual 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:



($ in thousands)	(Unaudited) 6/30/2018		(Unaudited) 3/31/2018		% Change		12/31/2017		% Change		(Unaudited) 6/30/2017		% Change
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 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:



($ 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:



	(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	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 and over	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:



	(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.

Contact:

Timothy Chang

Executive Vice President & Chief Financial Officer

213-210-2000

Pacific City Financial Corporation and Subsidiary

Consolidated Balance Sheets

($ in thousands, except share and per 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 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 bank stock	7,433			6,589			12.8	%	6,589			12.8	%	6,589			12.8	%
Other real estate owned, net	—			—			—	%	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
	(Unaudited) 6/30/2018			(Unaudited) 3/31/2018			% Change		(Unaudited) 6/30/2017			% Change		(Unaudited) 6/30/2018			(Unaudited) 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			5,566.7	%	338			3			11,166.7	%
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 common share
Basic	$	0.35		$	0.47				$	0.36				$	0.82		$	0.69
Diluted	$	0.35		$	0.46				$	0.36				$	0.81		$	0.68
Average common shares outstanding
Basic	13,432,775			13,418,259					13,408,282					13,425,557			13,401,859
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
	(Unaudited) 6/30/2018							(Unaudited) 3/31/2018							(Unaudited) 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)



	Six Months Ended
	(Unaudited) 6/30/2018							(Unaudited) 6/30/2017
	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.

PCB BANCORP - FORM 8-K - EX-99.1 - EXHIBIT 99.1 - August 21, 2018

Attached files

PCB BANCORP Reports