Company Website: https://www.paccity.net/
LOS ANGELES -- (Business Wire)

Pacific City Financial Corporation (the “Company”) (OTC Pink: PFCF), the holding company of Pacific City Bank, today reported net income of $3.5 million, or $0.30 per diluted common share, compared with $3.2 million, or $0.29 per diluted common share, in the previous quarter and $3.2 million, or $0.29 per diluted common share, in the year-ago quarter. Year-to-date net income totaled $9.7 million, or $0.87 per diluted common share, in the nine months period of 2016 compared with $9.3 million, or $0.86 per diluted common share, in the same period of 2015.

2016 Third Quarter Highlights

• The Company raised $15.3 million in new capital by issuing company’s common stock through a private placement
• Pacific City Bank opened two new full-service branches in Los Angeles, California
• Net income totaled $3.5 million, or $0.30 per diluted common share
• Loan origination during the third quarter increased $48.8 million to $159.0 million compared with $110.2 million in the year-ago quarter
• Total assets increased $148.3 million, or 14.4%, to $1.2 billion at September 30, 2016 compared with $1.0 billion at September 30, 2015
• Total loans, including loans held-for-sale and unearned fee/cost, increased $200.1 million, or 24.7%, to $1,011.5 million at September 30, 2016 compared with $811.5 million at September 30, 2015
• Total deposits increased $116.6 million, or 12.6%, to $1,045.0 million at September 30, 2016 compared with $928.4 million at September 30, 2015

"We are pleased to announce another solid quarter with strong net income and loan growth. We opened two new full-service branches in Los Angeles and successfully raised $15.3 million in new capital through a private placement during the quarter,” said Haeyoung Cho, President and CEO. “Our net income for the third quarter of 2016 increased nicely compared with the previous and the year-ago quarters. Our loan portfolio increased $44.4 million, or 4.6%, to $1,011.5 million at September 30, 2016 compared with $967.1 million at June 30, 2016, and increased $200.1 million, or 24.7%, compared with $811.5 million at September 30, 2015.”

RESULTS OF OPERATIONS

Net Income

Net income in the third quarter of 2016 increased $257,000, or 8.0%, to $3.5 million compared with $3.2 million in the previous quarter and increased $295,000, or 9.3%, compared with $3.2 million in the year-ago quarter. Diluted earnings per share was $0.30 in the third quarter of 2016 compared with $0.29 in the previous and year-ago quarters. Net income for the first nine months of 2016 increased $408,000, or 4.4% to $9.7 million compared with $9.3 million for the first nine months of 2015.

Net Interest Income and Net Interest Margin

Net interest income before provision for loan losses in the third quarter of 2016 increased $476,000, or 4.4%, to $11.4 million compared with $10.9 million in the previous quarter and increased $2.0 million, or 21.3%, compared with $9.4 million in the year-ago quarter. The increase was primarily due to a steady growth of loan portfolio balance. Net interest income before provision for loan losses for the first nine months of 2016 increased $5.8 million, or 21.4%, to $33.0 million compared with $27.2 million for the first nine months of 2015 primarily due to an increase in loan portfolio balance.

Interest income on loans increased $684,000, or 5.7%, to $12.7 million in the third quarter of 2016 compared with $12.0 million in the previous quarter and increased $2.2 million, or 20.5%, compared with $10.5 million in the year-ago quarter. The average gross loan balance was $978.5 million in the third quarter of 2016 compared with $925.8 million in the previous quarter, and $813.6 million in the year-ago quarter. The Bank originated $158.9 million in new loans in the third quarter of 2016 compared with $153.7 million in the previous quarter, and $110.2 million in the year-ago quarter. Interest income on loans for the nine months of 2016 increased $5.9 million, or 19.6%, to $36.3 million compared with $30.3 million for the first nine months of 2015. Year-to-date average gross loan balance was $934.9 million in the first nine months of 2016 compared with $791.5 million in the first nine months of 2015.

The loan yield decreased 5 basis points to 5.15% for the third quarter of 2016 compared with 5.20% for the previous quarter, but increased 3 basis points compared with 5.12% for the year-ago quarter. Loan yields for the first nine months of 2016 increased 6 basis points to 5.18% compared with 5.12% for the first nine months of 2015. The increase compared with the first nine months of 2015 was primarily due to an increase in accelerated discount accretion on paid-off Small Business Administration (“SBA”) loans and an increase of 0.25% in Wall Street Journal Prime rate in December 2015.

Below is a table of fixed and variable interest rate loans accompanied with weighted average contractual rates:

The interest income on investment securities decreased $73,000, or 16.6%, to $367,000 compared with $440,000 in the previous quarter and increased $6,000, or 1.6%, compared with $361,000 in the year-ago quarter. The decrease compared with the previous quarter was primarily due to a decrease in investment portfolio balance resulting from principal pay-down and premium amortization, partially offset by interest income from the newly purchased investment securities. The average balance of investment securities was $88.0 million in the third quarter of 2016 compared with $96.5 million in the previous quarter, and $84.3 million in the year-ago quarter. Interest income on investment securities for the first nine months of 2016 increased $368,000, or 39.0% to $1.3 million compared with $945,000 for the nine months of 2015 due to an increase of $21.5 million in average balance of investment portfolio.

Total interest expense in the third quarter of 2016 increased $171,000, or 10.5%, to $1.8 million compared with $1.6 million in the previous quarter and increased $165,000, or 10.0%, compared with $1.6 million in the year-ago quarter. The increase was primarily due to an increase in average balance of interest bearing deposits. The average balance of interest bearing deposits was $745.6 million in the third quarter of 2016 compared with $695.8 million in the previous quarter, and $689.1 million in the year-ago quarter. The cost of interest-bearing deposits was 0.96% for the third quarter of 2016 compared with 0.94% for the previous and year-ago quarters. Total interest expenses for the first nine months of 2016 increased $391,000, or 8.5%, to $5.0 million compared with $4.6 million for the first nine months of 2015 primarily due to an increase of $60.9 million in average balance of interest bearing deposits.

The cost of total deposits including non-interest bearing deposits was 0.70% for the third quarter of 2016 compared with 0.68% for the previous quarter, and 0.71% for the year-ago quarter.

Net interest margin was 4.05% in the third quarter of 2016 compared with 4.16% in the previous quarter, and 3.73% in the year-ago quarter. The decrease in net interest margin in the 2016 third quarter compared with the previous quarter was primarily due an increase in the balance of fed funds sold. Net interest margin increase in the 2016 third quarter compared with the year-ago quarter was primarily due to the reduction of fed funds sold. The fed funds sold average balance decreased $49.7 million to $40.3 million in the third quarter of 2016 compared with $89.9 million in the year-ago quarter, while the average loan portfolio balance increased $164.9 million to $978.5 million compared with $813.6 million in the year-ago quarter. Year-to-date net interest margin increased 26 basis points to 4.13% compared with 3.87% for the first nine months of 2015 primarily due to the deployment of lower yielding fed funds to the higher yielding loans.

Loan Loss Provision

The provision for loan losses in the third quarter of 2016 increased $433,000 to $802,000 compared with $369,000 in the previous quarter, and increased $707,000 compared with $95,000 in the year-ago quarter primarily due to an increase in the loan portfolio balance and an increase in the loss look back period in the loan loss reserve calculation. The allowance for loan losses to gross loan ratio was 1.11% at September 30, 2016 compared with 1.09% at June 30, 2016 and 1.14% at September 30, 2015. For the first nine months of 2016, the Company recorded a provision for loan losses of $1.7 million compared with $20,000 negative provision for the first nine months of 2015.

During the third quarter of 2016, the Company recognized a net recovery of $3,000 compared with a net charge-off of $125,000 in the previous quarter, and a net charge-off of $154,000 in the year-ago quarter. For the first nine months of 2016, the Company recognized a net charge-off of $16,000 compared with $213,000 for the first nine months of 2015.

Non-interest Income

Non-interest income for the third quarter of 2016 increased $1.0 million, or 34.5%, to $4.0 million compared with $3.0 million for the previous quarter, and increased $884,000, or 28.2%, compared with $3.1 million for the year-ago quarter. The increases were primarily due to an increase in gain on sale of SBA and residential home mortgage loans where it totaled $2.8 million for the third quarter of 2016, $1.8 million for the second quarter of 2016, and $1.9 million for the year-ago quarter. Non-interest income for the first nine months of 2016 increased $333,000, or 3.5%, to $10.0 million compared with $9.6 million for the first nine months of 2015 primarily due to an increase of $382,000 in gain on sale of SBA and an increase of $113,000 in loan servicing income, partially offset by a decrease of $183,000 in gain on sale of residential home mortgage loans.

The Bank originated $39.0 million in SBA loans and sold $34.5 million in the third quarter of 2016 compared with $47.4 million in origination and $19.8 million sold during the previous quarter, and $32.6 million in origination and sold $25.4 million during the year-ago quarter. The Bank originated $29.5 million in residential mortgage loans and sold $21.9 million in the third quarter of 2016 compared with $25.1 million in origination and sold $14.9 million in the previous quarter and $23.5 million in origination and sold $13.6 million in the year-ago quarter.

Non-interest Expenses

Non-interest expenses for the third quarter of 2016 increased $602,000, or 7.6%, to $8.5 million compared with $7.9 million in the previous quarter, and increased $1.7 million, or 24.8%, compared with $6.8 million in the year-ago quarter. The increase compared with the previous quarter was primarily due to an increase of $406,000 in salary and benefits expenses. The increase compared with the year-ago quarter was primarily due to an increase of $1.2 million in salary and employee benefits expenses resulting from an increase in headcount in conjunction with asset growth and an increase of $147,000 in occupancies and fixed assets expenses attributable to the opening of a new full-service branch in Fort Lee, New Jersey in August 2015, opening of two new full-service branches in Los Angeles, California in August 2016, and relocation of headquarter office to a larger space in December 2015 to accommodate growth in the number of employees. Non-interest expenses for the first nine months of 2016 increased $3.7 million, or 17.7% to $24.4 million compared with $20.8 million for the first nine months of 2015 primarily due to an increase in employee salaries and benefits, occupancies and fixed assets, legal and professional fees, and marketing expenses.

The Company’s efficiency ratio was 55.37% in the third quarter of 2016 compared with 57.04% for the second quarter 2016, and 54.58% for the third quarter 2015. The Company’s efficiency ratio for the first nine months of 2016 was 56.88% compared with 56.41% for the first nine months of 2015.

Income Tax Provision

The Company’s effective income tax rate was 42.70% for the third quarter of 2016 compared with 42.49% for the previous quarter and 43.06% for the year-ago quarter. The Company’s effective income tax rate for the first nine months of 2016 was 42.56% compared with 42.25% for the first nine months of 2015.

BALANCE SHEET SUMMARY

Total Assets

Total assets at September 30, 2016 increased $61.1 million, or 5.5%, to $1,177.2 million compared with $1,116.1 million at June 30, 2016, and increased $148.3 million, or 14.4%, compared with $1,028.9 million at September 30, 2015.

Loans

Total loans receivable including loan held-for-sale, net of deferred costs and fees, increased $44.4 million, or 4.6%, to $1,011.5 million at September 30, 2016 compared with $967.1 million at June 30, 2016, and increased $200.1 million, or 24.7%, compared with $811.5 million at September 30, 2015.

During the third quarter of 2016, the Company originated $159.0 million in loans and sold $34.5 million in SBA and $21.9 million in residential mortgage loans. During the quarter, loan principal reduction was $57.4 million and principal charge-off was $162,000. For the first nine months of 2016, the Company originated $469.5 million in loans, sold $80.4 million in SBA and $40.8 million in residential mortgage loans, and recognized $182.0 million in pay-down or paid-off loans.

The following table illustrates details of gross loan balance by type:

Investment Securities

Total investment securities at September 30, 2016 decreased $817,000, or 0.9%, to $88.0 million compared with $88.9 million at June 30, 2016, and decreased $3.7 million, or 4.1%, compared with $91.7 million at September 30, 2015. The decrease in investment securities portfolio compared with the previous quarter was primarily due to $4.6 million in principal pay-downs or called securities, $201,000 in premium amortization, and $198,000 decline in fair market value, partially offset by purchase of $4.2 million in new investment securities. The decrease in investment securities portfolio compared with the year-ago quarter was primarily due to the $12.6 million in principal pay-downs and $6.9 million in investment securities sold, partially offset by the $15.7 million in purchase of new investment securities.

Deposits

Total deposit balance increased $42.4 million, or 4.2%, to $1,045.0 million at September 30, 2016 compared with $1,002.6 million at June 30, 2016, and increased $116.6 million, or 12.6%, compared with $928.4 million at September 30, 2015. The demand deposit to total deposit ratio was 26.5% at September 30, 2016 compared with 27.1% at June 30, 2016, and 25.3% at September 30, 2015.

The table below consists of deposit mix by period:

Stockholders’ Equity

On August 5, 2016, the Company raised $15.3 million in new capital through a private placement by issuing Company’s common stock. The proceed will be used for general corporate purposes and supporting the asset growth of Pacific City Bank. The Company issued 1,273,000 shares of common stock with no par value at a price of $12.00 per share.

The Stockholders’ equity increased $18.4 million, or 17.5%, to $123.8 million at September 30, 2016 compared with $105.4 million at June 30, 2016, and increased $28.1 million, or 29.4%, compared with $95.7 million at September 30, 2015. The increase compared with the previous quarter was primarily due to the aforementioned $15.3 million in capital contribution and an increase of $3.1 million in retained earnings.

CREDIT QUALITY

Non-performing Assets

Non-performing loans (“NPL”) balance at September 30, 2016 decreased $116,000 to $2.1 million compared with $2.2 million at June 30, 2016, and decreased $681,000 compared with $2.8 million at September 30, 2015. Non-performing loans to gross loans ratios were 0.21% at September 30, 2016 compared with 0.24% at June 30, 2016 and 0.35% at September 30, 2015.

The OREO balance of $506,000 was the same at September 30, 2016 and at June 30, 2016, and none at September 30, 2015.

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

Classified Assets

Classified loans at September 30, 2016 increased $369,000 to $7.4 million compared with $7.0 million at June 30, 2016 and increased $980,000 compared with $6.4 million at September 30, 2015. Classified assets to total assets ratio was 0.67% at September 30, 2016 compared with 0.68% at June 30, 2016 and 0.62% at September 30, 2015.

The following tables provide certain detail on classified loans and classified assets.

Capital

The following table illustrates Pacific City Bank capital ratios:

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 twelve branch offices and eight loan production offices in Lynwood and Bellevue, Washington; Denver, Colorado, Chicago, Illinois; Annandale, Virginia; Atlanta, Georgia; Orange County, California; and Bayside, New York. 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 and Fort Lee, New Jersey and its Loan Production Offices in seven 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.”

View source version on businesswire.com: http://www.businesswire.com/news/home/20161028005943/en/

Contacts:

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

Source: Pacific City Financial Corporation