Exhibit

EX-99.1 2 pcber20180930.htm EXHIBIT 99.1 Exhibit

Pacific City Financial Corporation Reports Earnings of $6.5 million for Q3 2018

Los Angeles, California - October 23, 2018 - Pacific City Financial Corporation (the “Company”) (NASDAQ: PCB), the holding company of Pacific City Bank (the “Bank”), today reported net income of $6.5 million, or $0.44 per diluted common share for the third quarter of 2018, compared with $4.8 million, or $0.35 per diluted common share, in the previous quarter and $4.8 million, or $0.35 per diluted common share, in the third quarter of 2017.

During the third quarter of 2018, the Company successfully completed its initial public offering ("IPO") for net proceeds of $45.5 million and its common stock began trading on the Nasdaq Global Select Market under the symbol "PCB."

Q3 2018 Financial Highlights


•	Net income totaled $6.5 million or $0.44 per diluted common share;


•	Total assets were $1.66 billion at September 30, 2018, an increase of $44.6 million, or 2.8%, from $1.62 billion at June 30, 2018 and an increase of $221.8 million, or 15.4%, from $1.44 billion at December 31, 2017;


•	Loans held-for-investment, net of deferred costs (fees), were $1.31 billion at September 30, 2018, an increase of $54.3 million, or 4.3%, from $1.25 billion at June 30, 2018 and an increase of $119.1 million, or 10.0%, from $1.19 billion at December 31, 2017; and


•	Total deposits were $1.42 billion at September 30, 2018, a decrease of $7.7 million, or 0.5%, from $1.43 billion at June 30, 2018, but an increase of $168.2 million, or 13.4%, from $1.25 billion at December 31, 2017.

"We are pleased to announce a solid 2018 third quarter results that coincided with our successful IPO. The new capital from the IPO is providing us with strong capital ratios and a base to continue to increase the value of our franchise," stated Henry Kim, President and Chief Executive Officer. "We like the direction that our profitability measurements are headed. Our net interest margin increased to 4.17%, our efficiency ratio improved to 49.34%, and our return on average assets improved to 1.60% for the third quarter of 2018 from the prior quarter."

Financial Highlights



	Three Months Ended													Nine Months Ended
	(Unaudited)			(Unaudited)					(Unaudited)					(Unaudited)			(Unaudited)
($ in thousands, except per share data)	9/30/2018			6/30/2018			% Change		9/30/2017			% Change		9/30/2018			9/30/2017			% Change
Net income	$	6,543		$	4,762		37.4	%	$	4,806		36.1	%	$	17,569		$	14,064		24.9	%
Diluted earnings per common share	$	0.44		$	0.35		25.5	%	$	0.35		23.6	%	$	1.25		$	1.04		20.3	%

Net interest income	$	16,716		$	15,882		5.3	%	$	14,383		16.2	%	$	47,892		$	40,237		19.0	%
Provision for loan losses	417			425			(1.9	)%	586			(28.8	)%	937			114			721.9	%
Noninterest income	2,580			2,273			13.5	%	3,461			(25.5	)%	8,215			10,532			(22.0	)%
Noninterest expense	9,520			10,940			(13.0	)%	8,958			6.3	%	30,091			26,275			14.5	%

Return on average assets ⁽¹⁾	1.60		%	1.20		%			1.38		%			1.50		%	1.43		%
Return on average shareholders' equity ^{(1), (2)}	14.50		%	12.74		%			13.69		%			14.85		%	13.98		%
Net interest margin ⁽¹⁾	4.17		%	4.08		%			4.24		%			4.19		%	4.20		%
Efficiency ratio ⁽³⁾	49.34		%	60.26		%			50.20		%			53.63		%	51.75		%



	(Unaudited)			(Unaudited)										(Unaudited)
($ in thousands, except per share data)	9/30/2018			6/30/2018			% Change		12/31/2017			% Change		9/30/2017			% Change
Total assets	$	1,663,787		$	1,619,169		2.8	%	$	1,441,999		15.4	%	$	1,403,816		18.5	%
Net loans held-for-investment	1,296,027			1,242,235			4.3	%	1,177,775			10.0	%	1,135,093			14.2	%
Total deposits	1,419,526			1,427,245			(0.5	)%	1,251,290			13.4	%	1,213,274			17.0	%
Book value per common share ^{(2), (4)}	$	12.71		$	11.27		12.7	%	$	10.60		19.9	%	$	10.48		21.3	%
Tier 1 leverage ratio (consolidated)	12.59		%	9.58		%			10.01		%			10.15		%
Total shareholders' equity to total assets ⁽²⁾	12.20		%	9.35		%			9.86		%			10.01		%


(1)	Ratios are presented on an annualized basis.


(2)	The Company did not have any intangible equity components for the presented periods.


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


(4)	The ratios are calculated by dividing total shareholders' equity by the number of outstanding common shares.

Result of Operations

Net Income

Net income was $6.5 million for the three months ended September 30, 2018, an increase of $1.8 million, or 37.4%, from $4.8 million for the three months ended June 30, 2018, and an increase of $1.7 million, or 36.1%, from $4.8 million for the three months ended September 30, 2017. Diluted earnings per common share were $0.44, $0.35 and $0.35, respectively, for the three months ended September 30, 2018, June 30, 2018 and September 30, 2017.

For the nine months ended September 30, 2018, net income was $17.6 million, an increase of $3.5 million, or 24.9%, from $14.1 million for the nine months ended September 30, 2017. Diluted earnings per common share were $1.25 and $1.04 for the nine months ended September 30, 2018 and 2017, respectively.

Net Interest Income and Net Interest Margin

Net interest income was $16.7 million for the three months ended September 30, 2018, an increase of $834 thousand, or 5.3%, from $15.9 million for the three months ended June 30, 2018, and an increase of $2.3 million, or 16.2%, from $14.4 million for the three months ended September 30, 2017.

For the nine months ended September 30, 2018, net interest income was $47.9 million, an increase of $7.7 million, or 19.0%, from $40.2 million for the nine months ended September 30, 2017. These increases were primarily due to increases in average balance and average yield of interest-earning assets, partially offset by increases in average balance and average cost of interest-bearing liabilities.

Interest income on loans was $19.7 million for the three months ended September 30, 2018, an increase of $1.1 million, or 5.9%, from $18.6 million for the three months ended June 30, 2018, and an increase of $3.7 million, or 23.1%, from $16.0 million for the three months ended September 30, 2017. For the nine months ended September 30, 2018, interest income on loans was $55.7 million, an increase of $11.1 million, or 24.8%, from $44.7 million for the nine months ended September 30, 2017. The increases were primarily due to increases in average balance and average yield of total loans (which includes both loans held-for-sale and loans held-for-investment, net of deferred cost (fees)). The increase in average yield on total loans was due to the Company's high proportion of variable rate loans that have repriced in the current rising interest rate environment. Average balance of total loans was $1.28 billion for the three months ended September 30, 2018, compared with $1.24 billion for the three months ended June 30, 2018 and $1.12 billion for the three months ended September 30, 2017, and average yield was 6.10% for the three months ended September 30, 2018 compared with 6.04% for the three months ended June 30, 2018 and 5.65% for the three months ended September 30, 2017. For the nine months ended September 30, 2018, average balance and average yield were $1.25 billion and 5.98%, respectively, compared with $1.09 billion and 5.50%, respectively, for the nine months ended September 30, 2017.

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



	(Unaudited)				(Unaudited)								(Unaudited)
	9/30/2018				6/30/2018				12/31/2017				9/30/2017
	% 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	32.3	%	5.10	%	27.0	%	5.08	%	26.6	%	5.09	%	26.5	%	5.09	%
Variable rate loans	67.7	%	6.03	%	73.0	%	5.84	%	73.4	%	5.38	%	73.5	%	5.14	%

Interest income on investment securities was $931 thousand for the three months ended September 30, 2018, an increase of $62 thousand, or 7.1%, from $869 thousand for the three months ended June 30, 2018 and an increase of $185 thousand, or 24.8%, from $746 thousand for the three months ended September 30, 2017. For the nine months ended September 30, 2018, interest income on investment securities was $2.6 million, an increase of $806 thousand, or 43.8%, from $1.8 million for the nine months ended September 30, 2017. The increases 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 $154.0 million for the three months ended September 30, 2018, compared with $147.9 million for the three months ended June 30, 2018 and $140.0 million for the three months ended September 30, 2017, and average yield was 2.40% for the three months ended September 30, 2018 compared with 2.36% for the three months ended June 30, 2018 and 2.11% for the three months ended September 30, 2017. For the nine months ended September 30, 2018, average balance and average yield were $150.5 million and 2.35%, respectively, compared with $120.0 million and 2.05%, respectively, for the nine months ended September 30, 2017.

Total interest expense was $4.8 million for the three months ended September 30, 2018, an increase of $318 thousand, or 7.1%, from $4.5 million for the three months ended June 30, 2018 and an increase of $2.1 million, or 76.6%, compared with $2.7 million in the three months ended September 30, 2017. For the nine months ended September 30, 2018, total interest expense was $12.6 million, an increase of $5.4 million or 75.7%, from $7.2 million for the nine months ended September 30, 2017.

The increase compared with the three months ended June 30, 2018 was primarily due to an increase in average cost of interest-bearing liabilities, partially offset by a decrease in average balance of interest bearing liabilities. The increases compared with the three and nine months ended September 30, 2017 was primarily due to increases in both average balance and average cost of interest-bearing liabilities.

Net interest margin was 4.17% for the three months ended September 30, 2018 compared with 4.08% for the three months ended June 30, 2018, and 4.24% for the three months ended September 30, 2017. For the nine months ended September 30, 2018, net interest margin was 4.19% compared with 4.20% for the nine months ended September 30, 2017.

Provision for Loan Losses

Provision for loan losses was $417 thousand for the three months ended September 30, 2018 compared with $425 thousand for the three months ended June 30, 2018 and $586 thousand for the three months ended September 30, 2017. For the nine months ended September 30, 2018, provision for loan losses was $937 thousand compared with $114 thousand for the nine months ended September 30, 2017. The Company has recognized additional provision for loan losses primarily due to an increase in the loans held-for-investment balance. During the three months ended September 30, 2018, the Company recorded a net recovery of $58 thousand compared with a net charge-off of $175 thousand for the three months ended June 30, 2018 and a net recovery of $36 thousand for the three months ended September 30, 2017. Allowance for loan losses to total loans held-for-investment ratio was 1.00% at September 30, 2018, 1.01% at June 30, 2018, 1.03% at December 31, 2017, and 1.02% at September 30, 2017.

Noninterest Income

Noninterest income was $2.6 million for the three months ended September 30, 2018, an increase of $307 thousand, or 13.5%, from $2.3 million for the three months ended June 30, 2018, but a decrease of $881 thousand, or 25.5%, from $3.5 million for the three months ended September 30, 2017. For the nine months ended September 30, 2018, noninterest income was $8.2 million, a decrease of $2.3 million, or 22.0%, from $10.5 million for the nine months ended September 30, 2017.

The increase compared with the three months ended June 30, 2018 was primarily due to increases in gain on sale of Small Business Administration ("SBA") loans, service charges and fees on deposits and other income, partially offset by decreases in gain on sale of residential property loans and servicing income. The increase in gain on sale of SBA loans was primarily due to SBA loan sales commitments of $16.7 million that were not settled and included in loans held-for-sale at June 30, 2018, and subsequently settled during July 2018. The decrease compared with the three months ended September 30, 2017 was primarily due to decreases in gain on sale of SBA and residential property loans and servicing income, partially offset by an increase in service charges, fees on deposits and other income. The decrease compared with the nine months ended September 30, 2017 was primarily due to decreases in gain on sale of SBA loans and servicing income, partially offset by increases in gain on sale of residential property and other loans, service charges and fees on deposits, and other income.

The Company sold the guaranteed portion of SBA loans of $23.1 million, $12.6 million and $29.5 million, respectively, and residential property loans of $2.2 million, $7.5 million and $4.3 million, respectively, for the three months ended September 30, 2018, June 30, 2018 and September 30, 2017. For the nine months ended September 30, 2018 and 2017, the Company sold the guaranteed portion of SBA loans of $65.6 million and $98.1 million, respectively, residential property loans of $10.9 million and $10.7 million, respectively, and commercial property loans of $1.1 million and none, respectively. The decreases in servicing income were due to an increase in servicing asset amortization from a higher prepayment trend, partially offset by an increase in servicing fee income resulting from an increase in the amount of loans being serviced. The increases in service charges and fees on deposits were primarily due to an increased transactions in deposits.

Noninterest Expense

Noninterest expense was $9.5 million for the three months ended September 30, 2018, a decrease of $1.4 million, or 13.0%, from $10.9 million for the three months ended June 30, 2018 and an increase of $562 thousand, or 6.3%, from $9.0 million for the three months ended September 30, 2017. For the nine months ended September 30, 2018, noninterest expense was $30.1 million, an increase of $3.8 million, or 14.5%, from $26.3 million for the nine months ended September 30, 2017.

The decrease compared with the three months ended June 30, 2018 was primarily due to decreases in salaries and employee benefits, professional fees and other expenses, partially offset by increases in data processing, loan related expense and a regulatory assessment. The decrease in salaries and employee benefits was due primarily to adjustments made to compensation related accruals of $486 thousand. The decrease in professional fees was primarily due to a true-up of expenses that are directly related to the stock offering during the three months ended September 30, 2018. The decrease in other expenses was primarily due to a one-time expense of $577 thousand incurred during the three months ended June 30, 2018 for a reimbursement for a SBA loan guarantee previously paid by the SBA on a loan originated in 2017 that subsequently defaulted and was ultimately determined to be ineligible for the SBA guaranty. The increases in data processing, loan related expense and regulatory assessment were primarily due to growth in operations.

The increases compared to the three and nine months ended September 30, 2017 were primarily due to growth in operations, as well additional expenses related to the listing of our shares of common stock on the Nasdaq Global Select Market, and a reimbursement paid to SBA.

Efficiency ratio was 49.34% for the three months ended September 30, 2018 compared with 60.26% for the three months ended June 30, 2018 and 50.20% for the three months ended September 30, 2017. For the nine months ended September 30, 2018, efficiency ratio was 53.63% compared with 51.75% for the nine months ended September 30, 2017.

Income Tax Provision

Effective income tax rate was 30.1% and 29.9%, respectively, for the three and nine months ended September 30, 2018 compared with 42.1% and 42.3%, respectively, for the three and nine months ended September 30, 2017. The decreases were 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 $1.66 billion at September 30, 2018, an increase of $44.6 million, or 2.8%, from $1.62 billion at June 30, 2018, an increase of $221.8 million, or 15.4%, from $1.44 billion at December 31, 2017, and an increase of $260.0 million, or 18.5%, from $1.40 billion at September 30, 2017.

Loans

Loans held-for-investment, net of deferred costs (fees) ("total loans held-for-investment"), were $1.31 billion at September 30, 2018, an increase of $54.3 million, or 4.3%, from $1.25 billion at June 30, 2018, an increase of $119.1 million, or 10.0%, from $1.19 billion at December 31, 2017, and an increase of $162.4 million, or 14.2%, from $1.15 billion at September 30, 2017. The increase for the three months ended September 30, 2018 was primarily due to new funding of $159.2 million and advances on lines of credit of $27.2 million, partially offset by pay-downs and pay-offs of $132.2 million, and charge-offs of $45 thousand. The increase for the nine months ended September 30, 2018 was primarily due to new funding of $352.3 million and advances on lines of credit of $96.9 million, partially offset by pay-downs and pay-offs of $322.6 million and charge-offs of $480 thousand.

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



	(Unaudited)		(Unaudited)								(Unaudited)
($ in thousands)	9/30/2018		6/30/2018		% Change		12/31/2017		% Change		9/30/2017		% Change
Commercial property	$	703,250	$	674,599	4.2	%	$	662,840	6.1	%	$	644,954	9.0	%
Residential property	215,340		197,598		9.0	%	168,898		27.5	%	154,812		39.1	%
SBA property	126,816		133,081		(4.7	)%	130,438		(2.8	)%	125,010		1.4	%
Construction	28,895		28,659		0.8	%	23,215		24.5	%	23,703		21.9	%
Commercial term	96,102		80,791		19.0	%	77,438		24.1	%	78,659		22.2	%
Commercial lines of credit	72,219		72,799		(0.8	)%	60,850		18.7	%	54,802		31.8	%
SBA commercial term	28,312		28,276		0.1	%	30,199		(6.2	)%	31,283		(9.5	)%
International	10,353		7,734		33.9	%	1,920		439.2	%	1,103		838.6	%
Consumer loans	27,472		30,775		(10.7	)%	33,870		(18.9	)%	32,053		(14.3	)%
Loans held-for-investment	1,308,759		1,254,312		4.3	%	1,189,668		10.0	%	1,146,379		14.2	%
Deferred loan costs (fees)	365		544		(32.9	)%	331		10.3	%	365		—	%
Total loans held-for-investment	1,309,124		1,254,856		4.3	%	1,189,999		10.0	%	1,146,744		14.2	%
Loans held-for-sale	12,957		20,331		(36.3	)%	5,297		144.6	%	2,501		418.1	%
Total loans	$	1,322,081	$	1,275,187	3.7	%	$	1,195,296	10.6	%	$	1,149,245	15.0	%

Non-Performing Assets

Non-performing loans (“NPLs”) were $1.6 million at September 30, 2018, a decrease of $454 thousand, or 22.4%, from $2.0 million at June 30, 2018 and a decrease of $1.7 million, or 51.4%, from $3.2 million at December 31, 2017, but an increase of $61 thousand, or 4.0%, from $1.5 million at September 30, 2017. NPLs to total loans held-for-investment ratio was 0.12% at September 30, 2018, 0.16% at June 30, 2018, 0.27% at December 31, 2017, and 0.13% at September 30, 2017.

The Company had no other real estate owned (“OREO”) at September 30, 2018 and June 30, 2018 compared with $99 thousand at December 31, 2017 and $141 thousand at September 30, 2017.

Non-performing assets (“NPAs”), which consist of NPL and OREO, and the NPAs to total assets ratio were $1.6 million and 0.09%, respectively, at September 30, 2018, $2.0 million and 0.13%, respectively, at June 30, 2018, $3.3 million and 0.23%, respectively, at December 31, 2017, and $1.7 million and 0.12%, respectively, at September 30, 2017.

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



	(Unaudited)			(Unaudited)										(Unaudited)
($ in thousands)	9/30/2018			6/30/2018			% Change		12/31/2017			% Change		9/30/2017			% Change
Nonaccrual loans:
Commercial property	$	234		$	240		(2.5	)%	$	318		(26.4	)%	$	330		(29.1	)%
Residential property	—			—			—	%	730			(100.0	)%	—			—	%
SBA property	970			1,203			(19.4	)%	1,810			(46.4	)%	592			63.9	%
Commercial term	—			—			—	%	4			(100.0	)%	118			(100.0	)%
Commercial lines of credit	—			39			(100.0	)%	10			(100.0	)%	31			(100.0	)%
SBA commercial term	254			519			(51.1	)%	338			(24.9	)%	414			(38.6	)%
Consumer loans	114			25			356.0	%	24			375.0	%	26			338.5	%
Total nonaccrual loans held-for-investment	1,572			2,026			(22.4	)%	3,234			(51.4	)%	1,511			4.0	%
Loans past due 90 days or more and still accruing	—			—			—	%	—			—	%	—			—	%
NPLs	1,572			2,026			(22.4	)%	3,234			(51.4	)%	1,511			4.0	%
OREO	—			—			—	%	99			(100.0	)%	141			(100.0	)%
NPAs	$	1,572		$	2,026		(22.4	)%	$	3,333		(52.8	)%	$	1,652		(4.8	)%
Loans modified as troubled debt restructurings ("TDRs"):
Accruing TDRs	$	467		$	453		3.1	%	$	592		(21.1	)%	$	1,676		(72.1	)%
Nonaccrual TDRs	458			548			(16.4	)%	1,675			(72.7	)%	609			(24.8	)%
Total TDRs	$	925		$	1,001		(7.6	)%	$	2,267		(59.2	)%	$	2,285		(59.5	)%
NPLs to total loans held-for-investment	0.12		%	0.16		%			0.27		%			0.13		%
NPAs to total assets	0.09		%	0.13		%			0.23		%			0.12		%

Classified Assets

Classified loans were $6.2 million at September 30, 2018, an increase of $1.9 million, or 43.9%, from $4.3 million at June 30, 2018, an increase of $1.3 million, or 25.2%, from $5.0 million at December 31, 2017 and an increase of $418 thousand, or 7.2%, from $5.8 million at September 30, 2017. Classified assets, which consist of classified loans and OREO, and the classified assets to total assets ratios were $6.2 million and 0.37%, respectively, at September 30, 2018, $4.3 million and 0.27%, respectively, at June 30, 2018, $5.1 million and 0.35%, respectively, at December 31, 2017, and $6.0 million and 0.42%, respectively, at September 30, 2017.

Investment Securities

Total investment securities were $157.1 million at September 30, 2018, an increase of $4.6 million, or 3.0%, from $152.5 million at June 30, 2018, an increase of $6.3 million, or 4.2%, from $150.8 million at December 31, 2017 and an increase of $14.2 million, or 9.9%, from $142.9 million at September 30, 2017. The increase for the three months ended September 30, 2018 was primarily due to purchases of $12.0 million, partially offset by principal pay-downs and calls of $6.7 million, net premium amortization of $172 thousand and a decrease in fair value of securities available-for-sale of $604 thousand. The increase for the nine months ended September 30, 2018 was primarily due to purchases of $28.1 million, partially offset by principal pay-downs and calls of $18.6 million, net premium amortization of $578 thousand and a decrease in fair value of securities available-for-sale of $2.6 million.

Deposits

Total deposits were $1.42 billion at September 30, 2018, a decrease of $7.7 million, or 0.5%, from $1.43 billion at June 30, 2018, an increase of $168.2 million, or 13.4%, from $1.25 billion at December 31, 2017 and an increase of $206.3 million, or 17.0%, from $1.21 billion at September 30, 2017. The decrease for the three months ended September 30, 2018 was primarily due to closed accounts of $87.1 million and net balance decreases of $42.5 million, partially offset by new accounts of $121.9 million. The increase for the nine months ended September 30, 2018 was primarily due to new accounts of $505.3 million, partially offset by closed accounts of $255.9 million and net balance decreases of $81.2 million.

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



	(Unaudited)				(Unaudited)								(Unaudited)
	9/30/2018				6/30/2018				12/31/2017				9/30/2017
($ in thousands)	Amount		% to Total		Amount		% to Total		Amount		% to Total		Amount		% to Total
Noninterest-bearing demand deposits	$	350,346	24.7	%	$	347,342	24.3	%	$	319,026	25.5	%	$	324,690	26.8	%
Interest-bearing deposits:
NOW	11,638		0.8	%	13,812		1.0	%	10,324		0.8	%	8,908		0.7	%
Money market accounts	263,704		18.6	%	259,098		18.2	%	299,390		23.9	%	307,046		25.3	%
Savings	8,417		0.6	%	9,886		0.7	%	8,164		0.7	%	9,250		0.8	%
Time deposits under $250,000	381,870		26.9	%	393,053		27.5	%	295,274		23.6	%	288,830		23.8	%
Time deposits of $250,000 and over	256,051		18.0	%	251,554		17.6	%	166,612		13.3	%	157,044		12.9	%
State and brokered time deposits	147,500		10.4	%	152,500		10.7	%	152,500		12.2	%	117,506		9.7	%
Total interest-bearing deposits	1,069,180		75.3	%	1,079,903		75.7	%	932,264		74.5	%	888,584		73.2	%
Total deposits	$	1,419,526	100.0	%	$	1,427,245	100.0	%	$	1,251,290	100.0	%	$	1,213,274	100.0	%

Borrowings

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

Shareholders’ Equity

Shareholders’ equity was $202.9 million at September 30, 2018, an increase of $51.5 million, or 34.0%, from $151.4 million at June 30, 2018, an increase of $60.8 million, or 42.7%, from $142.2 million at December 31, 2017 and an increase of $62.4 million, or 44.4%, from $140.5 million at September 30, 2017. The increases were primarily due to the net proceeds of $45.5 million from the completion of the Company's underwritten initial public offering as well as the exercise of the underwriters' 30-day option, which resulted an issuance of 2,508,234 shares of the Company's common stock, during the three months ended September 30, 2018.

Capital Ratios

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



	(Unaudited)		(Unaudited)				(Unaudited)
	9/30/2018		6/30/2018		12/31/2017		9/30/2017
Pacific City Financial Corporation
Common tier 1 capital (to risk-weighted assets)	16.08	%	12.43	%	12.15	%	12.36	%
Total capital (to risk-weighted assets)	17.12	%	13.46	%	13.20	%	13.40	%
Tier 1 capital (to risk-weighted assets)	16.08	%	12.43	%	12.15	%	12.36	%
Tier 1 capital (to average assets)	12.59	%	9.58	%	10.01	%	10.15	%
Pacific City Bank
Common tier 1 capital (to risk-weighted assets)	15.89	%	12.37	%	12.06	%	12.28	%
Total capital (to risk-weighted assets)	16.93	%	13.40	%	13.12	%	13.32	%
Tier 1 capital (to risk-weighted assets)	15.89	%	12.37	%	12.06	%	12.28	%
Tier 1 capital (to average assets)	12.45	%	9.53	%	9.94	%	10.08	%

About Pacific City Financial Corporation

Pacific City Financial Corporation is the bank holding company for Pacific City Bank, a $1.66 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. These and other important factors are detailed in various securities law filings made periodically by the Company, copies of which are available from the Company without charge. Actual results, performance or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements. Any forward-looking statements presented herein are made only as of the date of this press release, and we do not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise, except as required by law.

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)			(Unaudited)										(Unaudited)
	9/30/2018			6/30/2018			% Change		12/31/2017			% Change		9/30/2017			% Change
Assets
Cash and due from banks	$	27,532		$	33,800		(18.5	)%	$	16,662		65.2	%	$	18,182		51.4	%
Interest-bearing deposits in financial institutions	136,524			134,846			1.2	%	56,996			139.5	%	69,684			95.9	%
Total cash and cash equivalents	164,056			168,646			(2.7	)%	73,658			122.7	%	87,866			86.7	%
Securities available-for-sale, at fair value	135,089			132,106			2.3	%	129,689			4.2	%	123,170			9.7	%
Securities held-to-maturity	21,991			20,390			7.9	%	21,070			4.4	%	19,720			11.5	%
Total investment securities	157,080			152,496			3.0	%	150,759			4.2	%	142,890			9.9	%
Loans held-for-sale	12,957			20,331			(36.3	)%	5,297			144.6	%	2,501			418.1	%
Loans held-for-investment, net of deferred loan costs (fees)	1,309,124			1,254,856			4.3	%	1,189,999			10.0	%	1,146,744			14.2	%
Allowance for loan losses	(13,097		)	(12,621		)	3.8	%	(12,224		)	7.1	%	(11,651		)	12.4	%
Net loans held-for-investments	1,296,027			1,242,235			4.3	%	1,177,775			10.0	%	1,135,093			14.2	%
Premises and equipment, net	4,615			4,892			(5.7	)%	4,723			(2.3	)%	4,734			(2.5	)%
Federal Home Loan Bank and other bank stock	7,433			7,433			—	%	6,589			12.8	%	6,589			12.8	%
Other real estate owned, net	—			—			—	%	99			(100.0	)%	141			(100.0	)%
Deferred tax assets, net	4,209			4,360			(3.5	)%	3,847			9.4	%	6,540			(35.6	)%
Servicing assets	8,114			8,390			(3.3	)%	8,973			(9.6	)%	8,939			(9.2	)%
Accrued interest receivable and other assets	9,296			10,386			(10.5	)%	10,279			(9.6	)%	8,523			9.1	%
Total assets	$	1,663,787		$	1,619,169		2.8	%	$	1,441,999		15.4	%	$	1,403,816		18.5	%
Liabilities
Deposits:
Noninterest-bearing demand	$	350,346		$	347,342		0.9	%	$	319,026		9.8	%	$	324,690		7.9	%
Savings, NOW and money market accounts	283,759			282,796			0.3	%	317,878			(10.7	)%	325,204			(12.7	)%
Time deposits under $250,000	429,370			445,553			(3.6	)%	347,774			23.5	%	306,337			40.2	%
Time deposits $250,000 and over	356,051			351,554			1.3	%	266,612			33.5	%	257,043			38.5	%
Total deposits	1,419,526			1,427,245			(0.5	)%	1,251,290			13.4	%	1,213,274			17.0	%
Borrowings from Federal Home Loan Bank	30,000			30,000			—	%	40,000			(25.0	)%	40,000			(25.0	)%
Accrued interest payable and other liabilities	11,323			10,493			7.9	%	8,525			32.8	%	10,001			13.2	%
Total liabilities	1,460,849			1,467,738			(0.5	)%	1,299,815			12.4	%	1,263,275			15.6	%
Commitments and contingent liabilities
Shareholders' equity
Common stock	171,495			125,579			36.6	%	125,430			36.7	%	125,359			36.8	%
Additional paid-in capital	3,158			3,206			(1.5	)%	2,941			7.4	%	2,785			13.4	%
Retained earnings	31,325			25,258			24.0	%	15,036			108.3	%	12,857			143.6	%
Accumulated other comprehensive loss, net	(3,040		)	(2,612		)	16.4	%	(1,223		)	148.6	%	(460		)	560.9	%
Total shareholders’ equity	202,938			151,431			34.0	%	142,184			42.7	%	140,541			44.4	%
Total liabilities and shareholders’ equity	$	1,663,787		$	1,619,169		2.8	%	$	1,441,999		15.4	%	$	1,403,816		18.5	%

Outstanding common share	15,972,914			13,435,214					13,417,899					13,413,059
Book value per common share ⁽¹⁾	$	12.71		$	11.27				$	10.60				$	10.48
Total loan to total deposit ratio	93.14		%	89.35		%			95.53		%			94.72		%
Noninterest-bearing deposits to total deposits	24.68		%	24.34		%			25.50		%			26.76		%


(1)	The ratios are calculated by dividing total shareholders' equity by the number of outstanding common shares. The Company did not have any intangible equity components for the presented periods.

Pacific City Financial Corporation and Subsidiary

Consolidated Statements of Income

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



	Three Months Ended													Nine Months Ended
	(Unaudited)			(Unaudited)					(Unaudited)					(Unaudited)			(Unaudited)
	9/30/2018			6/30/2018			% Change		9/30/2017			% Change		9/30/2018			9/30/2017			% Change
Interest income:
Interest and fees on loans	$	19,699		$	18,610		5.9	%	$	16,000		23.1	%	$	55,749		$	44,684		24.8	%
Interest on investment securities	931			869			7.1	%	746			24.8	%	2,648			1,842			43.8	%
Interest and dividend on other interest-earning assets	866			865			0.1	%	344			151.7	%	2,071			870			138.0	%
Total interest income	21,496			20,344			5.7	%	17,090			25.8	%	60,468			47,396			27.6	%
Interest expense:
Interest on deposits	4,643			4,292			8.2	%	2,534			83.2	%	12,101			6,983			73.3	%
Interest on other borrowings	137			170			(19.4	)%	173			(20.8	)%	475			176			169.9	%
Total interest expense	4,780			4,462			7.1	%	2,707			76.6	%	12,576			7,159			75.7	%
Net interest income	16,716			15,882			5.3	%	14,383			16.2	%	47,892			40,237			19.0	%
Provision for loan losses	417			425			(1.9	)%	586			(28.8	)%	937			114			721.9	%
Net interest income after provision for loan losses	16,299			15,457			5.4	%	13,797			18.1	%	46,955			40,123			17.0	%
Noninterest income:
Gain on sale of SBA loans	1,306			863			51.3	%	2,125			(38.5	)%	4,219			6,760			(37.6	)%
Gain on sale of residential property loans	22			170			(87.1	)%	34			(35.3	)%	213			113			88.5	%
Gain on sale of other loans	—			—			—	%	—			—	%	45			—			—	%
Service charges and fees on deposits	377			376			0.3	%	333			13.2	%	1,102			1,020			8.0	%
Servicing income	578			585			(1.2	)%	674			(14.2	)%	1,789			1,841			(2.8	)%
Other income	297			279			6.5	%	295			0.7	%	847			798			6.1	%
Total noninterest income	2,580			2,273			13.5	%	3,461			(25.5	)%	8,215			10,532			(22.0	)%
Noninterest expense:
Salaries and employee benefits	5,840			6,153			(5.1	)%	5,594			4.4	%	18,239			16,689			9.3	%
Occupancy and equipment	1,244			1,246			(0.2	)%	1,073			15.9	%	3,634			3,259			11.5	%
Professional fees	213			988			(78.4	)%	445			(52.1	)%	1,724			1,341			28.6	%
Marketing and business promotion	555			541			2.6	%	500			11.0	%	1,484			1,220			21.6	%
Data processing	314			295			6.4	%	276			13.8	%	911			786			15.9	%
Director fees and expenses	220			211			4.3	%	198			11.1	%	661			541			22.2	%
Loan related expense	83			63			31.7	%	98			(15.3	)%	205			301			(31.9	)%
Regulatory assessments	192			145			32.4	%	108			77.8	%	469			309			51.8	%
Other expenses	859			1,298			(33.8	)%	666			29.0	%	2,764			1,829			51.1	%
Total noninterest expense	9,520			10,940			(13.0	)%	8,958			6.3	%	30,091			26,275			14.5	%
Income before income taxes	9,359			6,790			37.8	%	8,300			12.8	%	25,079			24,380			2.9	%
Income tax expense	2,816			2,028			38.9	%	3,494			(19.4	)%	7,510			10,316			(27.2	)%
Net income	$	6,543		$	4,762		37.4	%	$	4,806		36.1	%	$	17,569		$	14,064		24.9	%
Earnings per common share
Basic	$	0.44		$	0.35				$	0.36				$	1.27		$	1.05
Diluted	$	0.44		$	0.35				$	0.35				$	1.25		$	1.04
Average common shares outstanding
Basic	14,730,120			13,432,775					13,412,407					13,865,190			13,405,413
Diluted	14,924,546			13,628,677					13,544,855					14,051,561			13,530,450

Dividend paid per common share	$	0.03		$	0.03				$	0.03				$	0.09		$	0.09
Return on average assets ⁽¹⁾	1.60		%	1.20		%			1.38		%			1.50		%	1.43		%
Return on average shareholders’ equity^{(1), (2)}	14.50		%	12.74		%			13.69		%			14.85		%	13.98		%
Efficiency ratio⁽³⁾	49.34		%	60.26		%			50.20		%			53.63		%	51.75		%


(1)	Ratios are presented on an annualized basis.


(2)	The Company did not have any intangible equity components for the presented periods.


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

Pacific City Financial Corporation and Subsidiary

Average Balance, Average Yield, and Average Rate

($ in thousands)



	Three Months Ended
	(Unaudited)							(Unaudited)							(Unaudited)
	9/30/2018							6/30/2018							9/30/2017
	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⁾	$	1,280,352		$	19,699	6.10	%	$	1,236,075		$	18,610	6.04	%	$	1,123,725		$	16,000	5.65	%
U.S. government agency securities	24,102			154		2.53	%	23,212			141		2.44	%	26,214			152		2.30	%
Mortgage-backed securities	69,592			414		2.36	%	65,708			378		2.31	%	60,922			312		2.03	%
Collateralized mortgage obligation	54,094			324		2.38	%	52,455			309		2.36	%	44,771			236		2.09	%
Municipal bonds ⁽²⁾	6,232			39		2.48	%	6,552			41		2.51	%	8,057			46		2.27	%
Other interest-earning assets	156,831			866		2.19	%	175,615			865		1.98	%	81,222			344		1.68	%
Total interest-earning assets	1,591,203			21,496		5.36	%	1,559,617			20,344		5.23	%	1,344,911			17,090		5.04	%
Noninterest-earning assets:
Cash and cash equivalents	18,596							18,530							17,414
Allowance for loan losses	(12,774		)					(12,446		)					(11,327		)
Other assets	26,828							27,460							28,019
Total noninterest-earning assets	32,650							33,544							34,106
Total assets	$	1,623,853						$	1,593,161						$	1,379,017
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Deposits:
NOW and money market accounts	$	269,514		834		1.23	%	$	279,515		773		1.11	%	$	322,714		842		1.04	%
Savings	8,717			6		0.27	%	8,739			6		0.28	%	9,094			6		0.26	%
Time deposits	795,202			3,803		1.90	%	790,430			3,513		1.78	%	538,359			1,686		1.24	%
Total interest-bearing deposits	1,073,433			4,643		1.72	%	1,078,684			4,292		1.60	%	870,167			2,534		1.16	%
Borrowings from Federal Home Loan Bank	30,000			137		1.81	%	39,782			170		1.71	%	40,000			173		1.72	%
Total interest-bearing liabilities	1,103,433			4,780		1.72	%	1,118,466			4,462		1.60	%	910,167			2,707		1.18	%
Noninterest-bearing liabilities
Noninterest-bearing demand	330,021							315,232							320,153
Other liabilities	11,325							9,533							9,407
Total noninterest-bearing liabilities	341,346							324,765							329,560
Total liabilities	1,444,779							1,443,231							1,239,727
Total shareholders' equity	179,074							149,930							139,290
Total liabilities and shareholders’ equity	$	1,623,853						$	1,593,161						$	1,379,017
Net interest income				$	16,716						$	15,882						$	14,383
Net interest spread⁽³⁾						3.64	%						3.63	%						3.86	%
Net interest margin ⁽⁴⁾						4.17	%						4.08	%						4.24	%
Total deposits	$	1,403,454		$	4,643	1.31	%	$	1,393,916		$	4,292	1.24	%	$	1,190,320		$	2,534	0.84	%
Total funding ⁽⁵⁾	$	1,433,454		$	4,780	1.32	%	$	1,433,698		$	4,462	1.25	%	$	1,230,320		$	2,707	0.87	%


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


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


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


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


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

Pacific City Financial Corporation and Subsidiary

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

($ in thousands)



	Nine Months Ended
	(Unaudited)							(Unaudited)
	9/30/2018							9/30/2017
	Average Balance			Interest Income/ Expense		Avg. Yield/Rate		Average Balance			Interest Income/ Expense		Avg. Yield/Rate
Assets
Interest-earning assets:
Total loans⁽¹⁾	$	1,245,551		$	55,749	5.98	%	$	1,086,050		$	44,684	5.50	%
U.S. government agency securities	23,887			432		2.42	%	24,569			427		2.32	%
Mortgage-backed securities	67,602			1,183		2.34	%	53,996			778		1.93	%
Collateralized mortgage obligation	52,519			913		2.32	%	32,879			495		2.01	%
Municipal bonds⁽²⁾	6,454			120		2.49	%	8,540			142		2.22	%
Other interest-earning assets	132,483			2,071		2.09	%	73,614			870		1.58	%
Total interest-earning assets	1,528,496			60,468		5.29	%	1,279,648			47,396		4.95	%
Noninterest-earning assets:
Cash and cash equivalents	19,145							16,816
Allowance for loan losses	(12,530		)					(11,357		)
Other assets	27,115							27,439
Total noninterest-earning assets	33,730							32,898
Total assets	$	1,562,226						$	1,312,546
Liabilities and Shareholders’ Equity
Interest-bearing liabilities:
Deposits:
NOW and money market accounts	$	282,221		2,367		1.12	%	$	322,879		2,431		1.01	%
Savings	8,696			18		0.28	%	8,874			18		0.27	%
Time deposits	747,102			9,716		1.74	%	523,534			4,534		1.16	%
Total interest-bearing deposits	1,038,019			12,101		1.56	%	855,287			6,983		1.09	%
Borrowings from Federal Home Loan Bank	36,557			475		1.74	%	13,773			176		1.71	%
Total interest-bearing liabilities	1,074,576			12,576		1.56	%	869,060			7,159		1.10	%
Noninterest-bearing liabilities
Noninterest-bearing demand	319,697							300,360
Other liabilities	9,759							8,654
Total noninterest-bearing liabilities	329,456							309,014
Total liabilities	1,404,032							1,178,074
Total shareholders' equity	158,194							134,472
Total liabilities and shareholders’ equity	$	1,562,226						$	1,312,546
Net interest income				$	47,892						$	40,237
Net interest spread ⁽³⁾						3.73	%						3.85	%
Net interest margin ⁽⁴⁾						4.19	%						4.20	%
Total deposits	$	1,357,716		$	12,101	1.19	%	$	1,155,647		$	6,983	0.81	%
Total funding ⁽⁵⁾	$	1,394,273		$	12,576	1.21	%	$	1,169,420		$	7,159	0.82	%


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


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


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


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


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