UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No.)
Filed by the Registrant ☒
Filed by a Party other than the Registrant ☐
Check the appropriate box:
☐ Preliminary Proxy Statement
☐ Confidential, for use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☒ Definitive Proxy Statement
☐ Definitive Additional Materials
☐ Soliciting Material Pursuant to § 240.14a-11(c) or § 240.14a-12
Pacific City Financial Corporation
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
☒ No fee required.
☐ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
|
(1)
|
Title of each class of securities to which transaction applies:
|
|
(2)
|
Aggregate number of securities to which transaction applies:
|
|
(3)
|
Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
|
|
(4)
|
Proposed maximum aggregate value of transaction:
|
|
(5)
|
Total fee paid:
|
☐ Fee paid previously with preliminary materials.
☐ Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
PACIFIC CITY FINANCIAL CORPORATION
3701 Wilshire Boulevard, Suite 900
Los Angeles, CA 90010
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF PACIFIC CITY FINANCIAL CORPORATION:
NOTICE IS HEREBY GIVEN that, pursuant to its Bylaws and the call of its Board of Directors, the Annual Meeting (“Meeting”) of Shareholders of Pacific City Financial Corporation (“Company”) will be held as follows:
Date: Thursday, September 27, 2018
Time: 10:00 a.m.
Place: The Board Room
3701 Wilshire Boulevard, Suite 900
Los Angeles, California
|
1.
|
Election of Directors.
To consider and vote upon a proposal to elect eight (8) persons to the Board of Directors of the Company to serve until the next Annual Meeting and until their successors have been elected and have qualified. The Board of Directors has nominated the following persons for election:
|
|
Kijun Ahn
|
Haeyoung Cho
|
|
Kwang Jin Chung
|
Henry Kim
|
|
Sang Young Lee
|
Hong Kyun "Daniel" Park
|
|
Don Rhee
|
Suk Won Youn
|
|
2.
|
Independent Registered Public Accounting Firm.
To ratify the appointment of Crowe LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018.
|
|
3.
|
Other Business.
Any other matters that may properly be brought before the meeting by order of the Board of Directors.
|
Only those shareholders of record at the close of business on July 31, 2018 are entitled to notice of and to vote at the meeting or any adjournments or postponements thereof.
The Bylaws of the Company provide for the nomination of directors in accordance with the following procedures:
“Section 2.14.
Nominations of Directors.
Nominations for election to the Board of Directors of the corporation may be made by the Board of Directors or by any shareholder of the corporation’s stock entitled to vote for the election of directors. Nominations, other than those made by or on behalf of the existing management of the corporation, shall be made in writing and shall be delivered or mailed to the president of the corporation not less than 14 days nor more than 50 days prior to any meeting of shareholders called for the election of directors;
provided, however
, that if less than 21 days’ notice of the meeting is given to shareholders, such nomination shall be mailed or delivered to the president of the corporation not later than the close of business on the seventh day following the day on which the notice of meeting was mailed. Such notification shall contain the following information to the extent known by the notifying shareholder: (a) the name and address of each proposed nominee; (b) the principal occupation of each proposed nominee; (c) the total number of shares of common stock of the corporation that will be voted for each proposed nominee; (d) the name and residence address of the notifying shareholder; and (e) the number of shares of common stock of the corporation owned by the notifying shareholder. Nominations not made in accordance herewith shall, in his/her discretion, be disregarded by the chairman of the meeting, and upon his/her instructions, the inspectors of election shall disregard all votes cast for each such nominee.”
1
IT IS VERY IMPORTANT THAT EVERY SHAREHOLDER VOTE. WE URGE YOU TO SIGN AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON. IF YOU DO ATTEND THE MEETING AND YOU WISH TO CHANGE YOUR VOTE, YOU MAY WITHDRAW YOUR PROXY AND VOTE IN PERSON AT THAT TIME. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO ITS EXERCISE.
PLEASE INDICATE ON THE PROXY CARD WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING SO WE CAN PROVIDE ADEQUATE ACCOMMODATIONS.
We appreciate your continuing support and look forward to seeing you at the annual meeting.
|
DATED:
|
August 24, 2018
|
By Order of the Board of Directors
|
|
|
/s/ Timothy Chang
|
|||
|
Timothy Chang
Secretary
|
|||
Please vote promptly.
2
Table of Contents
|
Page
|
|
3
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON SEPTEMBER 27, 2018
This proxy statement relates to the solicitation of proxies for the Annual Meeting of Shareholders of Pacific City Financial Corporation to be held at the Company’s headquarters at 3701 Wilshire Boulevard, Suite 900, Los Angeles, California on September 27, 2018, at 10:00 a.m. and at any adjournments thereof (the “Annual Meeting”). At the Annual Meeting, if you are a shareholder of record on July 31, 2018, you will:
|
•
|
Vote on the election of eight directors.
|
|
•
|
Vote on the ratification of the selection of the Company’s independent public accounting firm.
|
|
•
|
Vote on any other matters that may properly come before the Annual Meeting.
|
We began mailing this proxy statement, the Notice of Annual Meeting of Shareholders and the enclosed proxy card on or about August 24, 2018 to all shareholders entitled to vote. If you owned common stock of the Company at the close of business on July 31, 2018 (the “Record Date”) you are entitled to vote at the Annual Meeting. On the Record Date, there were 13,445,894 shares of Company common stock outstanding entitled to vote.
General Information about the 2018 Annual Meeting
Pacific City Financial Corporation, a corporation existing and organized under the laws of the State of California, is authorized to issue up to 60,000,000 shares of common stock and 10,000,000 shares of preferred stock. Only those common shareholders of record as of the Record Date will be entitled to notice of, and to vote at, the Annual Meeting. The determination of shareholders entitled to vote at the Annual Meeting and the number of votes to which they are entitled was made on the basis of the Company’s records as of the Record Date. The presence in person or by proxy (including web and telephone voting) of a majority of the outstanding shares of stock entitled to vote at the Annual Meeting will constitute a quorum for the purpose of transacting business at the Annual Meeting.
How Votes Will Be Counted
Shareholders are entitled to one vote for each share held, except that for the election of directors each shareholder has cumulative voting rights and is entitled to as many votes as shall equal the number of shares held by such shareholder multiplied by the number of directors to be elected. Each shareholder may cast all his or her votes for a single candidate or distribute such votes among any or all of the candidates as he or she chooses. However, no shareholder shall be entitled to cumulate votes (in other words, cast for any candidate a number of votes greater than the number of shares of stock held by such shareholder) unless such candidate’s name has been placed in nomination prior to the voting and a shareholder has given notice at the Annual Meeting prior to the voting of the shareholder's intention to cumulate his or her votes. If any shareholder has given such notice, all shareholders may cumulate their votes for candidates in nomination. The proxy holders are given, under the terms of the proxy, discretionary authority to cumulate votes on shares for which they hold a proxy.
Revoking your Proxy
You may revoke your previously submitted proxy at any time prior to its exercise at the Annual Meeting by: (1) filing a notice to revoke the proxy with the Secretary of the Company, (ii) filing a subsequently dated proxy (whether by proxy card, internet, or telephone), or (iii) by attending the Annual Meeting and electing to vote your shares in person. Even if you plan to attend the Annual Meeting in person, you are encouraged to vote your shares by proxy. Your mere presence at the Annual Meeting will not automatically revoke your previously submitted proxy and allow you to vote in person at the Annual Meeting.
4
Voting of Proxies
Votes cast by proxy or in person at the Annual Meeting will be counted by the Inspectors of Election for the Annual Meeting. The Inspectors will treat abstentions and “broker non‑votes” (shares held by brokers or nominees as to which instructions have not been received from the beneficial owners or persons entitled to vote and the broker or nominee does not have discretionary voting power under applicable rules of the stock exchange or other self-regulatory organization of which the broker or nominee is a member) as shares that are present and entitled to vote for purposes of determining the presence of a quorum. Abstentions and “broker non‑votes” will not be counted as shares voted for purposes of determining the outcome of any matter as may properly come before the Annual Meeting.
Unless otherwise instructed and subject to their discretionary authority to cumulate votes, the proxy holders will vote each valid proxy, which is not revoked,
|
▪
|
“FOR” the Company’s nominees for the Board of Directors.
|
|
▪
|
“FOR” ratification of the selection of the Company’s independent public accounting firm for 2018.
|
|
▪
|
In accordance with the Board of Directors’ recommendation on any other matters that may properly come before the Annual Meeting.
|
Nominees receiving the most votes, up to the number of directors to be elected, are elected to the Board of Directors. Abstentions and broker non-votes do not have the effect of votes in opposition to a nominee. A majority of the shares represented and voting at the Annual Meeting is required to ratify the appointment of the Bank’s independent accountants for 2018. Abstentions and broker non-votes will therefore have no effect on this vote, unless there are a number of abstentions or broker non-votes such that the votes in favor represent less than a majority of the shares needed for a quorum. In that rare case, abstentions and broker non-votes will have the same effect as a vote against ratification of the Company’s independent public accounting firm for 2018.
Cost of Proxy Solicitation
This solicitation of proxies is being made by the Board of Directors of the Company. The Company will bear the entire cost of preparing, assembling, printing, and mailing proxy materials furnished by the Board of Directors to shareholders. Copies of proxy materials will be furnished to brokerage houses, fiduciaries and custodians to be forwarded to the beneficial owners of the common stock. In addition to the solicitation of proxies by use of the mail, some of the officers, directors and regular employees of the Company, may (without additional compensation) solicit proxies by telephone or personal interview, the costs of which will be borne by the Company. Although there is no formal agreement to do so, the Company may reimburse banks, brokerage houses, and other custodians, nominees, and fiduciaries for their reasonable expense in forwarding these proxy materials to their principals.
5
PROPOSAL NO. 1
ELECTION OF DIRECTORS OF THE COMPANY
EXECUTIVE SUMMARY
In accordance with the Company’s Bylaws, the number of directors may be no less than five and no more than nine. Currently, the Board of Directors has eight members. The number of directors authorized for election at the Annual Meeting is eight (8). Each director will hold office until the next Annual Meeting of Shareholders and until his or her successor is elected and qualified.
Unless authority to vote for the election of any directors is withheld, all proxies will be voted for the election of the eight (8) nominees listed below and recommended by the Board of Directors, or as many as possible as can be elected under rules of cumulative voting. The nominees receiving the highest number of affirmative votes of the shares entitled to be voted for them shall be elected as directors. Abstentions and votes cast against nominees have no effect on the election of directors. If any of the nominees should unexpectedly decline or be unable to act as a director, their proxies may be voted for a substitute nominee to be designated by the Board of Directors. The Board of Directors has no reason to believe that any nominee will become unavailable and has no present intention to nominate persons in addition to or in lieu of those named below.
DIRECTOR NOMINATION PROCESS
The Board of Directors formed a Nominating and Governance Committee to, among other things, assist the Board in identifying appropriate candidates for Board membership. As specified in its charter, the Nominating and Governance Committee is appointed by the Board of Directors of the Company to help the Board of Directors identify qualified individuals to become members of the Board of Directors, consistent with criteria approved by the Board of Directors, and to recommend to the Board of Directors the director nominees for the annual meetings of shareholders. All nominees for director identified in this proxy statement were approved by the Nominating and Governance Committee for inclusion on the proxy card and were recommended for such inclusion by the Committee. The Nominating and Governance Committee will utilize the same standards for evaluating director candidates recommended by shareholders as it does for candidates proposed by the Board of Directors or members thereof.
The Nominating and Governance Committee considers many factors in nominating individuals to serve on the Board of Directors, including the following:
|
•
|
satisfactory results of any background investigation;
|
|
•
|
experience and expertise;
|
|
•
|
financial resources;
|
|
•
|
ability to devote the time and effort necessary to fulfill the responsibilities of a director;
|
|
•
|
involvement in community activities in the market areas served by the Company and its affiliates that may enhance the reputation of the Company and its affiliates;
|
|
•
|
a candidate’s contribution to an appropriate balance on the Board of Directors of professional knowledge, business expertise, varied industry knowledge, and financial expertise;
|
|
•
|
basic knowledge of the banking industry, financial regulatory system, and laws and regulation that govern the Company and its subsidiaries; and
|
|
•
|
“independence” and “financial literacy,” as defined under applicable rules promulgated by the Securities and Exchange Commission pursuant to the Sarbanes-Oxley Act of 2002, and NASDAQ Listing Rules.
|
Shareholders who wish to make such suggestions or recommendations should forward their written suggestions to the Chairman of the Board addressed to Pacific City Financial Corporation, Attn: Corporate Secretary, 3701 Wilshire Blvd., Suite 900, Los Angeles, CA 90010. Submission of a recommendation in this fashion does not constitute a formal nomination under the Company’s Bylaws. While the Board carefully considers diversity when evaluating director candidates, it has not adopted a formal diversity policy. At present, the Board does not engage a third party to identify and evaluate potential director candidates.
6
DIRECTOR NOMINEE QUALIFICATIONS AND EXPERIENCE
Our Board of Directors currently consists of eight (8) members, all of whom are nominees for election at the Annual Meeting, and each of whom is elected annually at the annual meeting of shareholders and serve one-year terms, until their successors are duly elected and qualified. Pursuant to our bylaws, our Board of Directors is authorized to have a range of between five and nine directors, unless changed by resolution of our Board of Directors. Our directors are not required to be a shareholder of the Company in order to qualify to serve as a director. All directors of the Company except Don Rhee and Suk Won Youn also serve as directors of the Bank. Sarah Jun and Daniel Cho serve as directors of the Bank, but not of the Company. As discussed in greater detail below, our Board of Directors has affirmatively determined that six of our eight current directors qualify as independent directors based upon the rules of the Nasdaq and the SEC. There are no arrangements or understandings between any of the directors and any other person pursuant to which he or she was selected as a director.
The following table sets forth certain summary information about our current directors, including their names, ages, and year in which they began serving as a director and committee memberships. No current director has any family relationship, as defined in Item 401 of Regulation S-K, with any other director or with any of our executive officers.
|
Committee Membership
|
||||||||||
|
Name and Position
|
Age
|
Director Since
|
Audit
|
Compensation
|
Nominating and Governance
|
|||||
|
Henry Kim, President & CEO
|
51
|
2018
|
||||||||
|
Kijun Ahn, Ph.D.
|
62
|
2007
(1)
|
Member
|
Chair
|
||||||
|
Kwang Jin Chung
|
71
|
2007
|
Member
|
Member
|
||||||
|
Sang Young Lee, Chairman
|
67
|
2007
|
Chair
|
|||||||
|
Suk Won Youn
|
70
|
2007
|
Member
|
|||||||
|
Haeyoung Cho
|
63
|
2011
|
||||||||
|
Hong Kyun “Daniel” Park
|
59
|
2015
|
Chair
(2)
|
|||||||
|
Don Rhee
|
62
|
2015
|
Member
|
Member
|
||||||
|
(1)
|
Dr. Ahn has been a director for the Company since 2007, except the year of 2014.
|
|
(2)
|
Mr. Park serves as the Audit Committee financial expert.
|
None of the Company’s directors is a director of any other company with a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended, or subject to the requirements of Section 15(d) of such Act or any company registered as an investment company under the Investment Company Act of 1940, whose common stock is registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended.
The business experience of each of the current directors, all of whom are nominees for election at the Annual Meeting, is set forth below.
Kijun Ahn, Ph.D.
As one of the founding board members of the Bank, Dr. Ahn has extensive knowledge and experience in the fields of civil engineering and construction and provides the board with valuable insights with regards to the Bank customers and issues involving these industries since 1990. Dr. Ahn is currently a project manager at Moffatt and Nichol, a global infrastructure advisory firm that specializes in structural, coastal, and civil engineering; environmental sciences; economics analysis; inspection & rehabilitation; and program management solutions. Throughout his 30 plus years of experience in the construction and development field, Dr. Ahn has managed many major projects, including public infrastructure projects in the state of California and Hawaii. Dr. Ahn earned his B.S. degree from Seoul National University in Korea and Ph.D. in Civil Engineering from Washington University in St. Louis, Missouri.
Kwang Jin Chung
.
As one of the founding board members of the Bank, Mr. Chung brings several decades of successful business management experience to the board, especially in the wholesale trade industry. Mr. Chung is now retired, having served as President and Chief Executive Officer of Kei Trading Co., Inc. ("Kei") since 1983. Kei is a Los Angeles based wholesale distribution company that specializes in various consumer electronic appliances. Prior to Kei, Mr. Chung founded and successfully operated numerous business ventures that specialized in import, export, and wholesale distribution of consumer electronic products. Mr. Chung also served as the President and Chief Executive Officer of Otron International, a subsidiary of Olympus Electronics Company, a manufacturer of consumer electronic products in South Korea. Mr. Chung has served as the Chairman of both the Company and the Bank between 2006 and 2009 and again between 2015 and 2017. Mr. Chung earned his B.A. degree in Sociology from Korea University in Seoul, Korea.
7
Sang Young Lee.
Mr. Lee is one of the founding board members of the Bank and the current Chairman of the board of the Company and the Bank. Mr. Lee is the President and Chief Executive Officer of Lee’s Gold & Diamond Import, Inc. since 1988. Founded in 1988, Lee’s Gold & Diamond Import, Inc. specializes in wholesale distribution of various jewelry products in the greater Los Angeles area. Mr. Lee provides the board with extensive insight into the trade industry and also possesses the business acumen and knowledge of the economic environment in that industry which is a tremendous asset to the board. Mr. Lee also previously served as the Chairman of the Board of Company and Bank from 2009 to 2012. Mr. Lee earned his B.A. degree in law from Han Yang University and an MBA in International Trade from Korea University in Seoul, Korea.
Suk Won Youn.
Mr. Youn has served as a member of the Board of Directors of the Bank since 2005 and the Company since its formation in 2007. He also served as the Chairman of both the Company and the Bank from 2012 to 2014. Mr. Youn is the founder, President and Chief Executive Officer of Unique Spectronix, Inc. (“USI”), an Irvine, California-based company. Founded in 1983, USI facilitates R&D, sourcing, procurement and liaison services for appliance conglomerates headquartered in Korea as well as appliance OEM’s in the U.S. Mr. Youn also serves as the Chief Financial Officer of Kkottongnae, a worldwide Catholic Charitable Organization, which attends to the needs and hopes of the abandoned and neglected of society. Mr. Youn conducted various fundraisers that eventually led to the launching of additional Kkottongnae facilities in various locations, including Lynwood and Temecula, California, Jersey City, New Jersey, Atlanta, Georgia, Toronto, Canada and Haiti. Mr. Youn was a student of the Hankuk University of Foreign Studies in 1966 and in 2009 was awarded the Global Award by the Alumni Association. Mr. Youn was a member of the inaugural class of Los Angeles Executive MBA of Hankuk University of Foreign Studies and served as its first Chairman in 2008. As a member of the Board of Directors since 2005, Mr. Youn provides the board with invaluable guidance and leadership in the areas of business and financial strategies with his vast knowledge of domestic and international commerce. He also possesses significant insight into the local business and philanthropic community where the Bank operates.
Haeyoung Cho
.
Ms. Cho was the President and Chief Executive Officer of the Company and the Bank
from October 2011 until her retirement in December 2017. She also served as President and Chief Operating Officer from May 2010 to September 2011, Executive Vice President and Chief Operating Officer of the Bank from January 2006 to April 2010, and Executive Vice President and Chief Portfolio Officer of the Bank from September 2003 to December 2005. Ms. Cho is one of the founding executives of the Bank and played an instrumental role in successfully navigating the institution through the financial crisis and growing the Bank into an institution with over a billion dollars in assets. Ms. Cho earned her B.A. degree in business administration from Duksung University in Seoul, Korea and a Master’s degree in business administration from University of Phoenix. Ms. Cho also attended the Graduate School of Banking at Colorado in Denver, Colorado. Ms. Cho began her banking career in 1983 at one of the original Korean-American banks that has since merged into Hanmi Bank and brings over 35 years of Korean-American community banking experience to the board.
Hong Kyun “Daniel” Park.
Mr. Park began serving as a board member of both the Company and the Bank in 2015. He is a Certified Public Accountant and a managing partner of KNP, LLP, a greater Los Angeles-based accounting firm where he serves both international and domestic middle market companies since April 2017. Prior to that, Mr. Park was a partner of CKP, LLP from 2012 to 2017. Mr. Park brings over 30 years of business and accounting experience to the board, having previously served with such prestigious accounting firms as Ernst & Young, Arthur Andersen, PwC, Deloitte & Touche, and also served as the Chief Financial Officer of several private companies. Mr. Park’s in-depth knowledge of accounting principles and auditing standards generally accepted in the U.S., as well as his valuable prospective on various industries is a tremendous asset to the board. Mr. Park is currently a member of AICPA and the California CPA Society. He has also served over 10 years on the Board of Governors at City Club Los Angeles. Mr. Park earned his B.A. degree in Economics and Business from University of California at Los Angeles.
Don Rhee.
Mr. Rhee began serving as a director of the Company in 2015. Mr. Rhee founded Active USA, Inc., a Los Angeles-based apparel manufacturer in 1988, and currently serves as the President and Chief Executive Officer. Mr. Rhee is a prominent leader in the Korean-American apparel business owners’ community, becoming the President of San Pedro Fashion Mart Association in 2013 and CEO of The World Korean Business Convention in 2015. Mr. Rhee was a director at Saehan Bancorp from 1999 to 2011. Saehan Bancorp merged into a bank that eventually became part of Bank of Hope. Mr. Rhee has extensive experience in the apparel manufacturing industry and a deep understanding of commercial customers’ banking needs. Mr. Rhee earned his B.S. in Architecture and an honorary doctorate in business administration from Yeungnam University in Korea.
8
Henry Kim
. Mr. Kim, who was promoted to President and Chief Executive Officer in January of 2018, has served as an executive officer of the Bank since its formation in 2003. He is a member of the Company’s and Bank’s boards of directors. During his 15-plus years with the Bank, Mr. Kim has held the positions of Chief Credit Officer, Chief Operating Officer and Corporate Secretary of the Bank from 2003 to 2017, and Corporate Secretary of the Company from 2007 to 2017. While serving as the Bank’s Chief Operating Officer, Mr. Kim spearheaded initiatives that have resulted in our total assets increasing from $755.9 million at December 31, 2013 to $1.6 billion at March 31, 2018, our equity increasing from $76.5 million to $147.2 million over that same time period, the expansion of our branch network in Southern California and into the greater New York City metropolitan market and the establishment and expansion of our extensive LPO network in eight different states.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" EACH OF THE DIRECTORS NOMINATED FOR RE-ELECTION IN PROPOSAL ONE.
COMPENSATION OF DIRECTORS
The following table sets forth information regarding 2017 compensation for each of our non-employee directors and the two Bank directors that do not serve on the Company’s board.
|
Name
|
Fees earned and paid in Cash
(1)
|
Option Awards
(2)
|
All Other Compensation
(2)
|
Total
|
||||||||||||
|
Kwang Jin Chung
|
$
|
59,500
|
|
$
|
—
|
|
$
|
21,072
|
|
$
|
80,572
|
|
||||
|
Sang Young Lee
|
59,000
|
|
—
|
|
21,072
|
|
80,072
|
|
||||||||
|
Kijun Ahn
|
53,500
|
|
—
|
|
30,401
|
|
83,901
|
|
||||||||
|
Suk Won Youn
|
22,500
|
|
—
|
|
21,072
|
|
43,572
|
|
||||||||
|
Hong Kyun "Daniel" Park
|
54,700
|
|
—
|
|
22,733
|
|
77,433
|
|
||||||||
|
Don Rhee
|
22,500
|
|
—
|
|
21,072
|
|
43,572
|
|
||||||||
|
Daniel Cho (Bank Director)
|
33,500
|
|
115,378
|
|
22,732
|
|
171,610
|
|
||||||||
|
Sarah Jun (Bank Director)
|
55,500
|
|
—
|
|
21,072
|
|
76,572
|
|
||||||||
|
(1)
|
All Other Compensation reflects health insurance benefits.
|
|
(2)
|
The amounts set forth in the “Option Awards” column reflect the aggregate grant date fair value of option awards for the years ended December 31, 2017 calculated in accordance with FASB ASC Topic 718. The assumptions used in calculating the option award amounts are set forth in Note 11 to our consolidated financial statements as of December 31, 2017 and 2016 and for each of the years in the three-year period ended December 31, 2017.
|
Non-executive director fees for 2017 were based upon fees for service on the Company and Bank boards of directors. Non-executive directors of the Bank are paid a monthly retainer of $4,500, while the Chairman of the Bank’s Board of Directors is paid a monthly retainer of $6,000. In addition, non-executive directors of the Bank that also serve on the director’s loan committee are paid an additional monthly retainer of $500. The two members of the Company’s Board of Directors who do not also serve on the Bank’s Board of Directors (Directors Rhee and Youn) are paid a monthly retainer of $3,000.
9
CORPORATE GOVERNANCE PRINCIPLES AND BOARD MATTERS
Corporate Governance Guidelines
We are committed to having sound corporate governance principles, which are essential to running our business efficiently and maintaining our integrity in the marketplace. Our Board of Directors has adopted Corporate Governance Guidelines, which set forth the framework within which our Board of Directors, assisted by the committees of our Board of Directors, oversees the affairs of our organization. The Corporate Governance Guidelines address, among other things, the composition and functions of our Board of Directors, director independence, compensation of directors, management succession and review, committees of our Board of Directors and selection of new directors. Our Corporate Governance Guidelines are available on our website at
www.paccitybank.com
under the “Investor Relations” tab.
Director Qualifications
We believe that our directors should have the highest professional and personal ethics and values. They should have broad experience at the policy-making level in business, government or banking. They should be committed to enhancing shareholder value and should have sufficient time to carry out their duties and to provide insight and practical wisdom based on experience. Their service on boards of other companies should be limited to a number that permits them, given their individual circumstances, to perform responsibly all director duties. Each director must represent the interests of all shareholders. When considering potential director candidates, our Board of Directors also considers the candidate’s character, judgment, diversity, skill-sets, specific business background and global or international experience in the context of our needs and those of the Board of Directors.
Director Independence
Our common stock is currently listed on the Nasdaq Global Select Market and, as a result, we are required to comply with the rules of Nasdaq with respect to the independence of directors who serve on our Board of Directors and its committees. Under the rules of Nasdaq, independent directors must comprise a majority of our Board of Directors. The rules of Nasdaq, as well as those of the SEC, also impose several other requirements with respect to the independence of our directors.
Our Board of Directors has evaluated the independence of its members based upon the rules of Nasdaq and the SEC. Applying these standards, our Board of Directors has affirmatively determined that six of the eight directors qualify as independent directors: Kijun Ahn, Kwang Jin Chung, Sang Young Lee, Suk Won Youn, Hong Kyun "Daniel" Park, and Don Rhee. Haeyoung Cho and Henry Kim do not qualify as independent directors because each individual is an executive officer of the Company and/or the Bank, or has served in such capacity within the three year look-back period.
In addition, our corporate governance guidelines require that the positions of Chairman of the Board of Directors and the Chief Executive Officer of the Company be held by different individuals and that the Chairman satisfy the requirements for an independent director under the Nasdaq rules.
Code of Ethics and Business Conduct
Our Board of Directors has adopted a Code of Ethics and Business Conduct, which became effective September 22, 2016, and undergoes periodic review and revision. This code applies to all of our directors and employees. The code provides fundamental ethical principles to which these individuals are expected to adhere to and will operate as a tool to help our directors, officers and employees understand the high ethical standards required for employment by, or association with, the Company. Our Code of Ethics and Business Conduct is available on our website at
www.paccitybank.com
under the “Investor Relations” tab. We expect that any amendments to the code, or any waivers of its requirements, will be disclosed on our website, as well as any other means required by Nasdaq.
Compensation Committee Interlocks and Insider Participation.
No member of our Compensation Committee (i) is or has ever been an employee of ours, (ii) was, during the last completed fiscal year, a participant in any related party transaction requiring disclosure under “Certain Relationships and Related Party Transactions,” except with respects to loans made to such committee members in the ordinary course of business on substantially the same terms as those prevailing at the time for comparable transactions with unrelated parties or (iii) had, during the last completed fiscal year, any other interlocking relationship requiring disclosure under applicable SEC rules.
10
Risk Management and Oversight.
Our Board of Directors oversees our risk management process, which is a company-wide approach to risk management that is carried out by our management. Our full Board of Directors determines the appropriate risk for us generally, assesses the specific risks faced by us, and reviews the steps taken by management to manage those risks. While our full Board of Directors maintains the ultimate oversight responsibility for the risk management process, its committees oversee risk within their particular area of concern. In particular, our Compensation Committee is responsible for overseeing the management of risks relating to our executive compensation plans and arrangements, and the incentives created by the compensation awards it administers. Our Audit Committee is responsible for overseeing the management of risks associated with, among other things, related party transactions, internal controls and financial reporting.
Our Nominating and Governance Committee oversees risks related to the nominees for election as directors, the functioning of our standing committees, and the compliance with our corporate governance guidelines. Our Board of Directors monitors capital adequacy in relation to risk. Pursuant to our Board of Directors’ instruction, management regularly reports on applicable risks to the relevant committee or the full board, as appropriate, with additional review or reporting on risks conducted as needed or as requested by our Board of Directors and its committees.
Meetings and Attendance
Directors are expected to attend all Board meetings, all meetings of committees on which they serve, and the annual shareholders’ meeting. There were five (5) regular meetings and three (3) special meetings of the Board of Directors of the Company during 2017. Each director standing for re-election to the Board attended at least 75% of the aggregate number of meetings of the Board of Directors and meetings held by all committees of the Board on which he/she served. Except one director, all current directors attended our 2017 annual shareholders’ meeting.
Shareholder Communications with the Board
Given the Company’s relatively small number of shareholders and infrequency of communication from shareholders to the Board, there is currently no formal process for shareholders to send communications directly to the Board. However, any shareholder may communicate directly to Board members, or to any individual Board member, by sending correspondence or communication addressed to the particular member or members in care of Pacific City Financial Corporation, Attn: Corporate Secretary, 3701 Wilshire Boulevard, Suite 900, Los Angeles, California 90010.
Board Committees
Our Board of Directors currently has three (3) standing committees: an Audit Committee, a Compensation Committee, and a Nominating and Governance Committee. Each committee is comprised solely of directors that meet the definition of “independent director” under the Nasdaq rules, and each member of the audit committee is independent under applicable SEC rules. Each of the committees of the Board of Directors meets at such times as determined to be necessary.
Our Board of Directors also may establish such other committees as it deems appropriate, in accordance with applicable law and regulations and our articles and bylaws. We are not considered a “controlled company” within the meaning of the corporate governance standards of Nasdaq.
Audit Committee
Our Audit Committee currently consists of Hong Kyun "Daniel" Park (Chairperson), Kijun Ahn, and Don Rhee. Our Board of Directors has affirmatively determined that each member of the Audit Committee also satisfies the additional independence standards under the Nasdaq rules and applicable SEC rules for audit committee service and has the ability to read and understand fundamental financial statements. In addition, our board has determined that Hong Kyun "Daniel" Park, CPA qualifies as an “audit committee financial expert,” as that term is defined under the applicable SEC rules.
Our Audit Committee has adopted a written charter, which sets forth the committee’s duties and responsibilities. As described in its charter, our Audit Committee has responsibility for, among other things:
|
•
|
selecting and reviewing the performance of our independent auditors and approving, in advance, all engagements and fee arrangements;
|
|
•
|
reviewing the independence of our independent auditors;
|
|
•
|
reviewing actions by management on recommendations of the independent auditors and internal auditors; meeting with management, the internal auditors and the independent auditors to review the effectiveness of our system of internal control and internal audit procedures and results;
|
11
|
•
|
reviewing earnings releases, financial statements and reports to be filed with the SEC or otherwise;
|
|
•
|
reviewing and approving transactions for potential conflicts of interest under our Code of Ethics and Business Conduct; and
|
|
•
|
preparing an audit committee report and handling other such matters that are specifically delegated to the Audit Committee by our Board of Directors from time to time.
|
The committee held seven (7) meetings during fiscal year 2017.
Nominating and Governance Committee
Our Nominating and Governance Committee currently consists of Sang Young Lee (Chairperson), Kwang Jin Chung and Suk Won Youn. Each of the members of the Nominating and Governance Committee is “independent” as defined by our policy and Nasdaq rules. The Nominating and Governance Committee held three (3) meetings during fiscal year 2017.
Our Nominating and Governance Committee has adopted a written charter, which sets forth the committee’s duties and responsibilities. The current charter of the Nominating and Governance Committee is available on our website at www.paccitybank.com. As described in its charter, our Nominating and Governance Committee has responsibility for, among other things:
|
•
|
recommending persons to be selected by our Board of Directors as nominees for election as directors or to fill any vacancies on our Board of Directors;
|
|
•
|
monitoring the functioning of our standing committees and recommending any changes, including the creation or elimination of any committee;
|
|
•
|
conducting annual performance evaluations of the Board, including through requests and comments from all directors of the Board;
|
|
•
|
developing, reviewing and monitoring compliance with our corporate governance guidelines, requirements of applicable laws, regulations, the Nasdaq rules, the Sarbanes-Oxley Act, and other federal banking laws;
|
|
•
|
reviewing annually the composition of our Board of Directors and committees as a whole and making recommendations on the qualifications, independence, structure, and reporting of the same;
|
|
•
|
reviewing Company’s shareholder proposals properly submitted, including any proposed amendments to our articles of incorporation or bylaws; and
|
|
•
|
handling such other matters that are specifically delegated to the Nominating and Governance Committee by our Board of Directors from time to time.
|
Compensation Committee
Our Compensation Committee currently consists of Kijun Ahn (Chairperson), Kwang Jin Chung and Don Rhee. Although the Bank has had a compensation committee for some time, the Company only recently established the Compensation Committee. Accordingly, the committee at the Company level did not meet in 2017, but the Bank compensation committee held five (5) meetings during fiscal year 2017. Each of the directors serving on the Compensation Committee has been determined by the Board of Directors to be “independent” as such term is defined by Rule 5605(a)(2) of the Nasdaq’s current listing rules.
Our Compensation Committee has adopted a written charter, which sets forth the committee’s duties and responsibilities. As described in its charter, our Compensation Committee has responsibility for, among other things:
|
•
|
reviewing, monitoring and approving our overall compensation structure, policies and programs (including benefit plans) and assessing whether the compensation structure establishes appropriate incentives for our executive officers and other employees and meets our corporate objectives;
|
|
•
|
determining the annual compensation of our Chief Executive Officer;
|
|
•
|
establishing subjective and objective criteria to serve as the basis for other executive officers’ compensation and reviewing the compensation decisions made by our Chief Executive Officer with respect to our other named executive officers;
|
|
•
|
reviewing the talent development and executive succession planning process with our Chief Executive Officer;
|
|
•
|
overseeing the administration of our equity plans and other incentive compensation plans and programs and preparing recommendations and periodic reports to our Board of Directors relating to these matters;
|
|
•
|
preparing the Compensation Committee report required by SEC rules to be included in our annual report; and
|
|
•
|
handling such other matters that are specifically delegated to the Compensation Committee by our Board of Directors from time to time.
|
12
Board Committee Charters
The Compensation, Audit, and Nominating and Governance Committee charters are available on the Company’s website at www.paccitybank.com under the “Investor Relations” tab.
Board Leadership Structure
It is the role of the Nominating and Governance Committee to annually review, and when appropriate make recommendations to the Board of Directors concerning board composition, structure, and functions. The Board has deemed it appropriate to have two separate individuals serve as Chairman of the Board and Chief Executive Officer. According to the Company’s bylaws, the Chairman of the Board shall preside at meetings of the Board of Directors and shareholders and exercise and perform such other powers and duties as may be from time to time assigned to him/her by the Board of Directors. The bylaws further provide that the President of the Company will be the Chief Executive Officer and shall, subject to the control of the Board of Directors, have general supervision, direction, and control of the business and the officers of the Company. As the oversight responsibilities of the Board of Directors grow, the Board believes it is beneficial to have an independent Chairman with the sole job of leading the Board, while allowing the President to focus his efforts on the day-to-day management of the Company and the Bank. The Board does believe that it is important to have the President as a director. The Company aims to foster an appropriate level of separation between these two distinct levels of leadership of the Company. In addition to the Chairman, leadership is also provided through the respective chairs of the Board’s various committees.
13
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners
As of July 31, 2018, no individual known to the Company owned more than five percent (5%) of the outstanding shares of its common stock except for Sang Young Lee. The ownership of Mr. Lee is set forth in the Security Ownership of Management table in the next section.
Security Ownership of Management
The following table sets forth information as of July 31, 2018, concerning beneficial ownership of our common stock as of the record date owned by the Company's directors, nominee for director, the current executive officers
(1)
and all directors, nominee and executive officers as a group. Beneficial ownership includes shared voting or dispositive power and options that are currently exercisable or exercisable within 60 days. All of the shares shown in the following table are owned both of record and beneficially except as indicated in the notes to the table. Each director has furnished to us information with respect to beneficial ownership of common stock.
|
Name, Address of Beneficial Owner,
and Relationship with Company
(2)
|
Amount and Nature of
Beneficial Ownership
(3)
|
Percent
of Class
|
||||
|
Kijun Ahn
Director
|
127,146
|
|
(4)
|
**
|
||
|
Haeyoung Cho
Director
|
238,524
|
|
(5)
|
1.76%
|
||
|
Kwang Jin Chung
Director
|
568,239
|
|
(6)
|
4.22%
|
||
|
Sang Young Lee
Chairman of the Board
|
1,486,930
|
|
(7)
|
11.05%
|
||
|
Hong Kyun "Daniel" Park
Director
|
9,680
|
|
(8)
|
**
|
||
|
Don Rhee
Director
|
430,245
|
|
(9)
|
3.20%
|
||
|
Suk Won Youn
Director
|
625,669
|
|
(10)
|
4.65%
|
||
|
Sarah Jun
Bank Director
|
276,208
|
|
(11)
|
2.05%
|
||
|
Daniel Cho
Bank Director
|
14,000
|
|
(12)
|
**
|
||
|
Henry Kim
President, Chief Executive Officer and Director
|
137,962
|
|
(13)
|
1.03%
|
||
|
Timothy Chang
Executive Vice President and Chief Financial Officer
|
26,624
|
|
(14)
|
**
|
||
|
Andrew Chung
Executive Vice President and Chief Risk Officer
|
0
|
|
**
|
|||
|
Brian Bang
Senior Vice President and Chief Credit Officer
|
10,430
|
|
(15)
|
**
|
||
|
All Directors and Executive Officers
combined (As a group of 13)
|
3,951,657
|
|
29.39%
|
|||
|
**
|
Represents less than 1% of outstanding.
|
|
(1)
|
As used throughout, the term “executive officers” means the President and Chief Executive Officer, the Executive Vice President and Chief Financial Officer, the Executive Vice President and Chief Risk Officer, and the Senior Vice President and Chief Credit Officer. The Chairman of the Board and our other officers are not treated as executive officers.
|
|
(2)
|
Unless otherwise indicated, the address for all persons listed is c/o Pacific City Bank, 3701 Wilshire Blvd., Suite 900, Los Angeles, CA 90010.
|
14
|
(3)
|
The table includes all shares beneficially owned on July 31, 2018, whether directly or indirectly, individually or together with associates, jointly or as community property with a spouse, as well as any shares, including through the exercise of stock options, as to which beneficial ownership may be acquired within 60 days of July 31, 2018. The options are described in more detail in “Executive Compensation,” below.
|
|
(4)
|
Includes 88,731 shares held jointly by him and his spouse, 7,151 shares in a Uniform Transfer to Minors Trust for his daughter, 7,151 shares held by his son, 1,827 shares held by his daughter, and 22,286 stock options exercisable under the 2003 and 2013 Equity Plans.
|
|
(5)
|
Includes 128,478 shares held by The 2016 Hae Young Cho Trust dated May 11, 2016, 20,983 shares held by Raymond James & Associates, Inc. Cust FBO Haeyoung Cho IRA, and 89,063 stock options exercisable under the 2003 and 2013 Equity Plans.
|
|
(6)
|
Includes 517,206 shares held in the Chung Revocable Family Trust dated May 27, 2008, 29,502 shares held by Dad & Co. for benefit of Chung Revocable Family Trust dated May 27, 2008, 3,547 shares held by his son, 3,547 shares held by his daughter, and 14,437 stock options exercisable under the 2003 and 2013 Equity Plans.
|
|
(7)
|
Includes 1,052,978 shares held by Sang Young Lee and Chun Young Lee TR UA dated April 22, 1999 Lee Family Trust, 416,016 shares held by Lee’s Gold and Diamond Import, Inc, 9,570 held by Charles Schwab & Co. Inc., for benefit of Sang Young Lee, and 8,366 stock options exercisable under the 2003 Equity Plan.
|
|
(8)
|
Includes 9,680 shares held individually.
|
|
(9)
|
Includes 310,565 shares held by Rhee Family Venture LLC where his spouse is a president, 110,000 shares held by The Rhee Family Trust dated July 9, 2004, and 9,680 shares held individually.
|
|
(10)
|
Includes 334,763 shares held by Suk Won Youn and Sook Hee Youn 2004 Revocable Trust, 276,369 shares held in a Dtd. Jan 01.95 Defined Benefit Pension Plan administered by Unique Spectronix Inc. of which Mr. Youn is the President, and 14,537 stock options exercisable under the 2003 and 2013 Equity Plans.
|
|
(11)
|
Includes 177,465 shares held by Ms. Jun individually, 77,832 held by her spouse, 10,000 shares held by her son, 300 shares held by Kayan Securities Inc., for the benefit of her spouse, 931 shares held by Kayan Securities Inc., for her benefit, and 9,680 stock options exercisable under the 2013 Equity Plan.
|
|
(12)
|
Includes 10,000 shares held by Daniel Cho and Keo En Hyun TR UA dated December 17, 2017, and 4,000 stock options exercisable under the 2013 Equity Plan.
|
|
(13)
|
Includes 59,992 shares held jointly by him and his spouse, 29,282 shares held individually, 19,785 shares held by Raymond James & Associates, Inc. Cust FBO Henry H. Kim IRA, 8,518 shares held by Raymond James & Associates, Inc. Cust FBO June C. Kim IRA, 9,295 shares held by Charles Schwab & Co, Inc. for benefit of his spouse, 442 shares held by Charles Schwab & Co, Inc. for his benefit, and 10,648 stock options exercisable under the 2003 Equity Plan.
|
|
(14)
|
Includes 4,000 shares held individually and 22,624 stock options exercisable under the 2003 Equity Plan.
|
|
(15)
|
Includes 6,567 shares held individually and 3,863 stock options exercisable under the 2003 Equity Plan.
|
15
EXECUTIVE COMPENSATION
As an emerging growth company under the JOBS Act, we have opted to comply with the executive compensation disclosure rules applicable to “smaller reporting companies” as such term is defined in the rules promulgated under the Securities Act, which permit us to limit reporting of executive compensation to our principal executive officer and our two other most highly compensated executive officers, which are referred to as our “named executive officers.”
The compensation reported in the Summary Compensation Table below is not necessarily indicative of how we will compensate our named executive officers in the future. We will continue to review, evaluate and modify our compensation framework to maintain a competitive total compensation package.
Executive Officers
Our named executive officers for 2017, which consist of our principal executive officer, our former principal executive officer, our principal financial officer and the other most highly compensated executive officer, are:
|
Name
|
Age
|
Position
|
||
|
Henry Kim
|
51
|
President and Chief Executive Officer
|
||
|
Haeyoung Cho
|
63
|
Former President and Chief Executive Officer
|
||
|
Timothy Chang
|
49
|
Executive Vice President and Chief Financial Officer
|
||
|
Brian Bang
|
44
|
Senior Vice President and Chief Credit Officer of the Bank
|
||
The business experience of each of the executives who are not otherwise directors of the Company is set forth below.
Timothy Chang.
Mr. Chang serves as the Executive Vice President, Chief Financial Officer and Corporate Secretary of the Company and the Bank. Mr. Chang has served as the Chief Financial Officer of the Company and the Bank since he joined us in 2010. In this role, he oversees all aspects of financial reporting including strategic planning, asset/liability management, taxation and regulatory filings. Mr. Chang has over 18 years of commercial banking experience. Prior to joining us, Mr. Chang served as the Executive Vice President and Chief Financial Officer of Mirae Bank, the Senior Vice President and Chief Planning Officer of Hanmi Bank, and the Senior Vice President, Chief Financial Officer and Treasurer of Nara Bank. Mr. Chang is a Certified Public Accountant (inactive) and holds a Bachelor’s Degree in Economics from University of California, Los Angeles.
Brian Bang.
Mr. Bang serves as the Senior Vice President and Chief Credit Officer of the Bank. He joined the Bank in 2005 and served as Senior Vice President & Deputy Chief Credit Officer since 2014 before assuming his current role in January 2018. Prior to 2014, Mr. Bang served as Senior Loan Officer and Credit Administration Manager. Mr. Bang also held loan officer positions in other Korean-American banks in Southern California. He has extensive experience in community banking as commercial, consumer, SBA lender and credit administrator. Mr. Bang received his Bachelor’s Degree in Business Administration from California State University, Fullerton. He also graduated from Pacific Coast Banking School, in partnership with the Graduate School of Business at the University of Washington.
Summary Compensation Table
The following table sets forth information regarding the compensation paid, awarded to, or earned for our fiscal years ended December 31, 2017 and 2016 for each of our named executive officers. All compensation is paid by the Bank.
|
Name
|
Year
|
Salary
|
Bonus
|
Option Award
(1)
|
All Other Compensation
(2)
|
Total
|
||||||||||||||||
|
Henry Kim
(3)
|
2017
|
$
|
255,485
|
|
$
|
221,459
|
|
$
|
—
|
|
$
|
35,893
|
|
$
|
512,837
|
|
||||||
|
2016
|
242,318
|
|
200,834
|
|
—
|
|
32,977
|
|
476,129
|
|
||||||||||||
|
Haeyoung Cho
(4)
|
2017
|
338,596
|
|
288,750
|
|
—
|
|
44,580
|
|
671,926
|
|
|||||||||||
|
2016
|
312,347
|
|
301,250
|
|
—
|
|
42,538
|
|
656,135
|
|
||||||||||||
|
Timothy Chang
|
2017
|
201,286
|
|
116,906
|
|
—
|
|
31,124
|
|
349,316
|
|
|||||||||||
|
2016
|
194,800
|
|
101,414
|
|
—
|
|
30,998
|
|
327,212
|
|
||||||||||||
|
Brian Bang
|
2017
|
117,117
|
|
32,000
|
|
—
|
|
11,430
|
|
160,547
|
|
|||||||||||
|
2016
|
108,286
|
|
29,107
|
|
—
|
|
10,994
|
|
148,387
|
|
||||||||||||
16
|
(1)
|
The amounts set forth in the “Option Awards” column reflect the aggregate grant date fair value of option awards for the years ended December 31, 2017 calculated in accordance with FASB ASC Topic 718. The assumptions used in calculating the option award amounts are set forth in Note 11 to our consolidated financial statements as of December 31, 2017 and 2016 and for each of the years in the three-year period ended December 31, 2017.
|
|
(2)
|
“All Other Compensation” for the named executive officers during fiscal 2017 and 2016 is summarized below.
|
|
2017
|
Auto Allowance
|
Company 401(k) Match(i)
|
Cellphone Reimbursement
|
Club Dues
|
Total “All Other Compensation”
|
|||||||||||||||
|
Henry Kim
|
$
|
15,766
|
|
$
|
15,329
|
|
$
|
1,128
|
|
$
|
3,670
|
|
$
|
35,893
|
|
|||||
|
Haeyoung Cho
|
13,918
|
|
18,000
|
|
782
|
|
11,880
|
|
44,580
|
|
||||||||||
|
Timothy Chang
|
17,847
|
|
12,077
|
|
1,200
|
|
—
|
|
31,124
|
|
||||||||||
|
Brian Bang
|
10,800
|
|
—
|
|
630
|
|
—
|
|
11,430
|
|
||||||||||
|
2016
|
Auto Allowance
|
Company 401(k) Match(i)
|
Cellphone Reimbursement
|
Club Dues
|
Total “All Other Compensation”
|
|||||||||||||||
|
Henry Kim
|
$
|
14,840
|
|
$
|
13,500
|
|
$
|
1,100
|
|
$
|
3,537
|
|
$
|
32,977
|
|
|||||
|
Haeyoung Cho
|
13,219
|
|
18,000
|
|
1,841
|
|
9,478
|
|
42,538
|
|
||||||||||
|
Timothy Chang
|
16,398
|
|
13,500
|
|
1,100
|
|
—
|
|
30,998
|
|
||||||||||
|
Brian Bang
|
10,154
|
|
—
|
|
840
|
|
—
|
|
10,994
|
|
||||||||||
(i) Amount reflects Company matching contribution under the 401(k) Plan.
|
(3)
|
Henry Kim was promoted to President and Chief Executive Officer effective January 1, 2018. Prior to that date, Mr. Kim served as Senior Executive Vice President, Chief Credit Officer, and Chief Operating Officer of the Bank.
|
|
(4)
|
Haeyoung Cho retired as President and Chief Executive Officer effective January 1, 2018, and now serves only as a director on both the Company’s and Bank’s Board of Directors.
|
General
We compensate our named executive officers through a combination of base salary, annual bonuses, equity awards, and other benefits. Our Compensation Committee believes the executive compensation packages that we provide to our executives, including the named executive officers, should include both cash and equity compensation that reward performance as measured against established corporate goals. Each element of compensation is designed to achieve a specific purpose and to contribute to a total package that is competitive with similar packages provided by other institutions that compete for the services of individuals like our named executive officers.
Base Salary
The Compensation Committee reviews and approves base salaries of our named executive officers and sets the compensation of our Chief Executive Officer. Base salary is the fixed portion of cash compensation and is intended to reward the day-to-day aspects of an executive’s roles and responsibilities. Our executives’ annual salaries originally are set at the time they were first hired. The initial salaries were established by taking into account several factors including, but not limited to, the executive’s experience, responsibilities, management abilities and past job performance. The Compensation Committee also retains independent consultants as it deems appropriate to advise on executive and employee compensation matters. Salary levels are typically considered annually as part of our performance review process and upon a promotion or other change in job responsibility. Our President and Chief Executive Officer is the only executive officer who has an employment agreement with the Company. All other executive officers are employed at-will.
Short Term Cash Incentive
Short term cash incentives in the form of annual cash bonuses are approved by the Compensation Committee and our Board of Directors annually. Generally, the Compensation Committee and our Board of Directors review performance against pre-established financial and non-financial goals on an annual basis to determine the short-term cash incentive compensation of our executive officers. The annual short-term cash incentive payable to our President and Chief Executive Officer is provided for in his employment agreement and is equal to the lesser of 1.5% of pre-tax profit for that year or his then current base salary, plus discretionary bonuses to be determined by the Board of Directors, if any. There are no agreements controlling the participation of our other named executive officers in the annual cash bonus pool and bonuses are subject to board discretion.
17
Equity Awards
Equity awards, such as stock options and restricted stock, are the third key component of our executive officers’ total compensation. The Board of Directors believes that employee stock ownership is a significant incentive for our executive officers to build shareholders wealth, thereby aligning the interests of employees and shareholders. The Board of Directors also believes that equity-based compensation complements the short-term cash incentive compensation by forcing executives to recognize the impact their short-term decisions might have on long-term outcomes. This compensation approach limits an executive’s ability to reap short-term gains at the expense of the Company’s long-term success. This is also an important tool in retaining executive officers.
Benefits
401(k) Plan.
The 401(k) Plan is designed to provide retirement benefits to all eligible full-time and part-time employees (including those of our subsidiaries). The 401(k) Plan provides employees with the opportunity to save for retirement on a tax-favored basis. Named executive officers, all of whom were eligible during 2017, may elect to participate in the 401(k) Plan on the same basis as all other employees. Employees may defer between 1% and 100% of their compensation to the 401(k) Plan, up to the applicable Internal Revenue Service (“IRS”) limit. We currently match, dollar for dollar, 75% of the first 8% of an employee’s contribution to the 401(k) Plan. Our match is contributed in the form of cash and is invested according to the employee’s current investment allocation.
Health and Welfare Benefits.
Our named executive officers are eligible to participate in our standard health and welfare benefits program, which offers medical, dental, vision, life, accident, and disability coverage to all of our eligible employees. We do not provide the named executive officers with any health and welfare benefits that are not generally available to our other employees.
Perquisites.
We pay monthly dues and assessments for country club memberships for the CEO which he uses primarily to entertain current and prospective customers. Our named executive officers also receive a monthly car allowance. We do not provide any other perquisites to our other named executive officers.
Employment Agreements
The Company and the Bank has entered into a written employment agreement with its President and Chief Executive Officer, Henry Kim. The provisions of his agreement are summarized below.
On January 1, 2018, Mr. Kim was appointed President and Chief Executive Officer after serving as the Bank’s Chief Credit Officer and Chief Operating Officer for the prior 14 years. Under the written employment agreement entered with the Company and the Bank, Mr. Kim’s employment shall continue for 4 years from January 1, 2018 through December 31, 2021, unless sooner terminated. Based on this employment agreement, Mr. Kim is entitled to receive an annual base salary of $350,000. Mr. Kim’s agreement also calls for an annual incentive bonus equal to the lesser of 1.5% of pre-tax profit for that year or his then current base salary. In addition, Mr. Kim is eligible for discretionary bonuses to be determined by the Board of Directors, if any. The annual base salary shall be reviewed at least annually by the Board of Directors or the Compensation Committee, and shall be adjusted based upon job performance and the Bank’s financial condition and performance provided, however, that in no event shall the annual base salary be less than the amount specified above and such adjustments, if any, shall be in the sole discretion of the Board of Directors.
Mr. Kim’s current employment agreement entitles him to participate in any retirement, profit-sharing, salary deferral and other similar plans at such time as the Bank offers these benefits to its employees and to receive certain compensation in the event his employment is terminated, with certain benefits payable upon severance under specific circumstances. Mr. Kim is also entitled to the use of a company car; however, he elected instead to receive an auto allowance. Mr. Kim’s employment agreement also provides for a lump sum payment of compensation at his base salary then in effect equal to the remaining term of his contract if he is terminated without cause or “resigns for good reason” following a “change in control” of the Bank and the Company. Absent a “change in control” of the Bank and the Company, termination without cause entitles Mr. Kim to a lump sum payment equal to the remaining term of his contract, not to exceed six months’ salary.
18
For purposes of Mr. Kim’s employment agreement, the following terms are defined as follows:
“
Cause
” means: (i) Executive’s personal dishonesty, incompetence or willful misconduct; (ii) Executive commits an act or acts or an omission to act which constitutes: (a) a willful breach of duty in the course of executive’s employment; (b) a habitual neglect of duty; (c) a willful violation of any applicable banking law or regulation; or (d) a willful violation of any policy, procedure, practice, method of operation or specific mode of conduct established by the board or as set forth in the Bank’s employee manual, if any; (iii) executive engages in activity which, in the opinion of the board, could materially adversely affect Bank’s or Company’s reputation in the community or which evidences the lack of executive’s fitness or ability to perform executive’s duties as determined by the board, in good faith; or (iv) executive commits any act or acts or an omission to act which would cause termination of coverage under the Bank’s bankers blanket bond as to executive or as to Bank as a whole or any act, which would give rise to a colorable claim by the Bank under its Bankers Blanket Bond as determined by the Board in good faith.
“
Change in Control
” means a change, in control of the Bank or Company of a nature that would be required to be the subject of prior approval by (A) the Federal Reserve Board pursuant to the Bank Holding Bank Act of 1956, as amended, (B) the Federal Deposit Insurance Corporation under the Change In Bank Control Act, (C) the appropriate federal bank regulatory agency under the Bank Merger Act or (D) the California Department of Financial Institutions pursuant to provisions of the California Financial Code; provided, that without limitation, and without consideration of regulatory exemptions from prior approval, such a Change in Control will be deemed to have occurred if and when any of the following occur: (i) there is a transfer, voluntarily or by hostile takeover or proxy contest, operation of law or otherwise, of control of the Bank or Company, (ii) individuals, who were members of the board of the Bank or Company immediately prior to a meeting of the shareholders of the Bank or Company, as the case may be, which meeting involved a contest for the election of directors, do not constitute a majority of the Board of the Bank or Company, as the case may be, following such election or meeting, (iii) an acquisition, directly or indirectly, of more than 25% of the outstanding shares of any class of voting securities of the Bank or Company by any Person, (iv) a merger (in which the Bank or Company is not the surviving entity), consolidation or sale of all, or substantially all, of the assets of the Bank or Company, or (v) there is a change, during any period of two consecutive years, of a majority of the Board of the Bank or Company as constituted as of the beginning of such period, unless the election of each director who is not a director at the beginning of such period was approved by a vote of at least two-thirds of the directors then in office who were directors at the beginning of such period. For purposes of this definition, the term “Person” shall mean and include any individual, corporation, partnership, group, association or other “person,” as such term is used in Section 14(d) of the Securities Exchange Act of 1934, other than the Bank or any employee benefit plan(s) sponsored by the Bank.
“
Good Reason
” means the termination by executive of executive’s employment for based on: (i) an adverse change in executive’s status or position(s) as an executive officer of the Bank or Company as in effect immediately prior to the Change in Control, including, without limitation, any adverse change in executive’s status or position as a result of a material diminution in executive’s duties or responsibilities (other than, if applicable, any such change directly attributable to the fact that the Bank or Company is no longer publicly owned) or the assignment to executive of any duties or responsibilities which, in executive’s reasonable judgment, are inconsistent with such status or position(s), or any removal of executive from or any failure to reappoint or reelect executive to such position(s) (except in connection with the termination of executive’s employment for cause, disability or retirement or as a result of executive’s death or by executive other than for Good Reason); (ii) a reduction by the Bank or Company in executive’s base salary as in effect immediately prior to the Change in Control; (iii) the failure by the Bank or Company to continue in effect any executive compensation plan in which executive is participating at the time of the Change in Control of the Bank or Company (or a comparable plan) other than as a result of the normal expiration of any such plan in accordance with its terms as in effect at the time of the Change in Control, or the taking of any action, or the failure to act, by the Bank or Company which would adversely affect Executive’s continued participation in any of such plans on at least as favorable a basis to executive as is the case on the date of the Change in Control or which would materially reduce executive’s benefits in the future under any of such Plans or deprive executive of any material benefit under any plan enjoyed by executive at the time of the Change in Control; (iv) the failure by the Bank or Company to provide and credit Executive with the number of paid vacation days to which executive is then entitled in accordance with the Bank’s or Company’s normal vacation policy as in effect immediately prior to the Change in Control; (v) the Bank’s or Company’s requiring Executive to be based at an office that is greater than 25 miles from where executive’s office is located immediately prior to the Change in Control except for required travel on the Bank’s or Company’s business to an extent substantially consistent with the business travel obligations which executive undertook on behalf of the Bank or Company prior to the Change in Control; or (vi) the failure by the Bank or Company to obtain from any successor the assent to continue executive’s existing employment agreement.
Mr. Kim was granted 50,000 stock options on January 2, 2018 with an exercise price of $14.75 under the Company’s 2013 Equity Based Compensation Plan, which vest equally over four years. In accordance with the standard practice of the Company, the exercise price for such stock options was determined by the closing price of the shares of common stock of the Company on the OTC Pink Market on the day of the grant.
19
EQUITY COMPENSATION PLANS
Equity based incentive awards are currently made though our 2013 Equity Based Compensation Plan (the “2013 Equity Plan”), which replaced our 2003 Stock Option Plan (the “2003 Equity Plan”). As of the effective date of the 2013 Equity Plan, no further awards were granted under the 2003 Equity Plan. However, any previously outstanding option award granted under the 2003 Equity Plan remains subject to the terms of such plan until the time it is no longer outstanding.
2003 Equity Plan
As part of the formation of the Company as a bank holding company, it assumed the 2003 Equity Plan pursuant to which incentive stock options were granted to selected employees and non-qualified stock options granted to directors and selected key salaried employees. Options granted under the 2003 Equity Plan were either incentive options or non-qualified stock options. Upon adoption of the 2013 Equity Based Compensation Plan, discussed below, no further grants were made from the 2003 Equity Plan.
2013 Equity Based Compensation Plan
The 2013 Equity Plan was adopted by our board on July 25, 2013 and approved at the 2013 shareholder’s meeting held on July 25, 2013 to replace the 2003 stock option plan, which expired on September 16, 2013. Upon the 2013 Equity Plan’s formation, there were 1,341,206 options subject to the 2013 Equity Plan. Under the original terms of the 2013 Equity Plan, the number of shares available for issuance was to be adjusted to be 10% of the then issued and outstanding common stock on each June 30 during the term of the 2013 Equity Plan. The Board of Directors recently amended the 2013 Equity Plan to eliminate this feature and fixed the number of shares that remained available under the 2013 Equity Plan at 686,853 at December 31, 2017.
The 2013 Equity Plan provides for grants of the stock options and shares of restricted stock. The 2013 Equity Plan is administered by the Compensation Committee. Grants of stock options may be either of incentive stock options or non-qualified options. A stock option is a privilege granted to plan participants to purchase stock from the Company on a future date at the fair market value of the stock when the stock option was granted. Incentive stock options are subject to certain limitations not applicable to non-qualified options. The exercise price of all stock options may not be less than the fair market value of the Company’s common stock on the date of grant. The aggregate fair market value (determined at the date of grant) of the stock subject to all incentive stock options held by an optionee that vest in any single calendar year cannot exceed $100,000. Except in limited circumstances, neither the Board of Directors nor the Compensation Committee may reduce the exercise price of any option granted under the 2013 Equity Plan. The Compensation Committee may grant one or more restricted stock awards to plan participants, and at the time of grant shall determine the consideration to be paid, if any, and the period over which the restrictions shall lapse. Restricted stock is stock granted to a plan participant which may not be traded or sold until its restrictions lapse. Should any restriction fail to lapse for any reason, the plan participant would forfeit the restricted stock. However, the restrictions may not lapse with respect to any restricted stock award over a period of less than six months. Unless otherwise provided in the applicable award agreement, an employee receiving a restricted stock award shall be entitled to cash dividend and voting rights for all restricted shares issued even though still subject to forfeiture, provided that such rights shall terminate immediately as to any restricted stock which cease to be eligible for vesting. Any award may include financial criteria or other performance measures that must be met in order for the award to vest and/or become exercisable. The Compensation Committee may provide for full or partial credit for the satisfaction of criteria before the end of the period of time specified or the attainment of the specified goal, in the event of the employee’s death, retirement or disability or under such circumstances as the Compensation Committee may determine.
The Compensation Committee has the authority to determine the effect of various events on awards granted under the 2013 Equity Plan. The Compensation Committee will determine the effect of the termination of employment on awards, depending on the nature of the termination, including changing the exercise period or the number of shares for which an award is vested or exercisable at the time of termination or thereafter. In the event of an extraordinary corporate transaction, such as a stock split or a stock dividend, the Compensation Committee may proportionately adjust the shares subject to the 2013 Equity Plan and outstanding awards as to the number or kind of shares to which they relate, the price payable upon the exercise of awards or the applicable performance standards or criteria. Upon the giving of notice of a change in control event, as defined in the 2013 Equity Plan, in which the Company is not the surviving Company, then all outstanding options become exercisable and all restricted stock award restrictions lapse, unless the Compensation Committee determines otherwise, in which event the Compensation Committee will make provision for continuation and, if required, assumption of the 2013 Equity Plan and outstanding awards or for the substitution of new awards therefor. The 2013 Equity Plan also provides for the issuance of substitute awards in the event the Company acquires another entity and the terms of the acquisition require issuance of substitute awards for existing equity compensation of the acquired Company.
20
In 2016, the Company did not grant any incentive stock options.
In 2017, the Company granted 8,000 shares of incentive stock options to employees with the grant price of $13.75. The term of each option is 10 years, 60% to vest on March 2, 2020 and 20% to vest on each of the following two anniversary dates. The Company granted 20,000 shares of non-qualified stock options to a Bank director with the grant price of $14.00. The term of option is 10 years, 20% to vest on each anniversary date.
The number of shares of common stock issuable upon the exercise of outstanding stock options, the number of shares of common stock eligible for issuance, and the per share exercise price, set forth in the preceding two paragraphs, were adjusted retroactively for the 1-for-3 reverse stock split that occurred on February 28, 2014, and 10% stock dividends that occurred on February 27, 2015, January 29, 2016, and December 30, 2016, respectively.
As of July 31, 2018, there were a total of 911,597 options outstanding, no shares of restricted stock outstanding, and up to 606,896 shares remained available for grant under the 2013 Equity Plan.
U.S. Federal Income Tax Treatment.
Under present U.S. federal income tax laws, awards granted under the 2013 Equity Plan generally should have the following tax consequences:
Non-Qualified Stock Options.
The grant of a non-qualified option generally will not result in taxable income to the participant. The participant generally will realize ordinary income at the time of exercise in an amount equal to the excess of the fair market value of the shares acquired over the exercise price for those shares and we will be entitled to a corresponding income tax deduction. Gains or losses realized by the participant upon disposition of such shares generally will be treated as capital gains and losses, with the basis in such shares equal to the fair market value of the shares at the time of exercise.
Incentive Stock Options.
The grant of an incentive stock option generally will not result in taxable income to the participant. The exercise of an incentive stock option generally will not result in taxable income to the participant provided that the participant was (without a break in service) an employee during the period beginning on the date of the grant of the option and ending on the date three months prior to the date of exercise (one year prior to the date of exercise if the participant is “disabled,” as that term is defined in the Internal Revenue Code).
The excess of the fair market value of the shares at the time of the exercise of an incentive stock option over the exercise price generally will be an adjustment that is included in the calculation of the participant’s alternative minimum taxable income for the tax year in which the incentive stock option is exercised. For purposes of determining the participant’s alternative minimum income tax liability for the year of disposition of the shares acquired pursuant to the incentive stock option exercise, the participant will have a basis in those shares equal to the fair market value of the shares at the time of exercise.
If the participant does not sell or otherwise dispose of the shares within two years from the date of the grant of the incentive stock option or within one year after the transfer of such stock to the participant, then, upon disposition of such shares, any amount realized in excess of the exercise price generally will be taxed to the participant as capital gain. A capital loss will be recognized to the extent that the amount realized is less than the exercise price.
If the foregoing holding period requirements are not met, the participant generally will realize ordinary income at the time of the disposition of the shares, in an amount equal to the lesser of (i) the excess of the fair market value of the shares on the date of exercise over the exercise price, or (ii) the excess, if any, of the amount realized upon disposition of the shares over the exercise price and we generally will be entitled to a corresponding deduction. If the amount realized exceeds the value of the shares on the date of exercise, any additional amount generally will be capital gain. If the amount realized is less than the exercise price, the participant generally will recognize no income, and a capital loss will be recognized equal to the excess of the exercise price over the amount realized upon the disposition of the shares.
Stock Awards.
A participant who has been granted a stock award generally will not realize taxable income at the time of grant, provided that the stock subject to the award is not delivered at the time of grant, or if the stock is delivered, it is subject to restrictions that constitute a “substantial risk of forfeiture” for U.S. federal income tax purposes and the participant has not filed an Internal Revenue Code Section 83(b) election to be taxed at the time of grant. Upon the later of delivery or vesting of shares subject to an award (or the filing of a Code Section 83(b) election), the participant generally will realize ordinary income in an amount equal to the then fair market value of those shares and we will be entitled to a corresponding deduction. Gains or losses realized by the participant upon disposition of such shares generally will be treated as capital gains and losses, with the basis in such shares equal to the fair market value of the shares at the time of delivery or vesting (or the filing of an Internal Revenue Code Section 83(b) election). In the case of stock awards settled in cash, the participant generally will realize taxable income at the time the cash is distributed and we will be entitled to a corresponding income tax deduction.
21
Withholding of Taxes.
All distributions under the 2013 Equity Plan are subject to withholding of all applicable taxes and the Committee may condition the delivery of any shares or other benefits under the 2013 Equity Plan on satisfaction of the applicable withholding obligations. Except as otherwise provided by the Committee, such withholding obligations generally may be satisfied through cash payment by the participant, through the surrender of shares of our common stock that the participant already owns or through the surrender of shares of our common stock to which the participant is otherwise entitled under the 2013 Equity Plan.
Outstanding Equity Awards at Fiscal Year End
The following table provides information for each of our named executive officers regarding outstanding awards held by the officers as of December 31, 2017, as adjusted for stock splits. Market values are presented as of the end of 2017 (based on the assumed per share fair market value of our common stock of $15.50 on December 31, 2017).
|
Option Awards
|
||||||||||||
|
Number of Securities Underlying Unexercised Options
(1)
|
||||||||||||
|
Name
|
Grant Date
|
Expiration Date
|
Exercisable
(#)
|
Unexercisable
(#)
|
Option Exercise Price
($)
|
Intrinsic Value
($)
|
||||||
|
Henry Kim
|
03/29/13
|
03/29/23
|
5,324
|
5,324
|
4.51
|
117,022
|
||||||
|
10/28/15
|
10/28/25
|
54,451
|
10.33
|
281,512
|
||||||||
|
Haeyoung Cho
|
02/23/12
|
02/23/22
|
4,761
|
3.38
|
57,703
|
|||||||
|
03/29/13
|
03/29/23
|
8,874
|
8,875
|
4.51
|
195,062
|
|||||||
|
10/01/14
|
10/01/24
|
66,553
|
9.30
|
412,629
|
||||||||
|
Timothy Chang
|
10/21/11
|
10/21/21
|
6,875
|
3.38
|
83,325
|
|||||||
|
03/29/13
|
03/29/23
|
14,198
|
3,551
|
4.51
|
195,062
|
|||||||
|
10/28/15
|
10/28/25
|
36,301
|
10.33
|
187,676
|
||||||||
|
Brian Bang
|
02/23/12
|
02/23/22
|
312
|
3.38
|
3,781
|
|||||||
|
03/29/13
|
03/29/23
|
1,775
|
1,776
|
4.51
|
39,025
|
|||||||
|
10/28/15
|
10/28/25
|
15,126
|
10.33
|
78,201
|
||||||||
|
(1)
|
All unexercised options are subject to vesting; 20% to vest on each anniversary of the date of grant for options granted on October 21, 2011, February 23, 2012 and March 29, 2013, 1/3 to vest on each anniversary date for options granted on October 1, 2014, and 60% to vest on third anniversary date and 20% to vest on following anniversary dates for options granted on October 28, 2015.
|
22
TRANSACTIONS WITH RELATED PERSONS, PROMOTERS, AND CERTAIN CONTROL PERSONS
In accordance with the Audit Committee Charter, the Audit Committee is responsible for reviewing and acting upon all related party transactions required to be disclosed by Item 404 of Regulation S-K for potential conflicts of interest. Additionally, the Company’s Code of Ethical Conduct provides rules that restrict transactions with affiliated persons.
In determining whether to approve a related party transaction, the Audit Committee will consider, among other things, the following:
|
•
|
Whether the terms of the transaction are fair to the Company;
|
|
•
|
Whether the transaction is material to the Company;
|
|
•
|
The importance of the related person to the transaction;
|
|
•
|
The role the related person has played in arranging the transaction;
|
|
•
|
The structure of the transaction; and,
|
|
•
|
The interests of all related persons in the transaction.
|
The Company will only enter into a related party transaction if the Audit Committee determines that any interested director has abstained from voting on the matter and that the transaction is beneficial to the Company, and the terms of the transaction are fair to the Company.
Except as set forth below, the Company did not have any transactions with its directors or executive officers or any shareholder owning of record or beneficially 5% or more of our common stock, or their affiliates.
The Bank has had and expects in the future to have banking transactions in the ordinary course of its business with many of the Company’s and Bank’s directors and officers and their associates, including transactions with corporations of which such persons are directors, officers or controlling shareholders, on substantially the same terms (including interest rates and collateral) as those prevailing for comparable transactions with others. Management believes that in 2018 such transactions comprising loans did not involve more than the normal risk of collectability or present other unfavorable features. Loans to executive officers of the Bank are subject to limitations as to amount and purposes prescribed in part by the Federal Reserve Act, as amended, the regulations of the Federal Deposit Insurance Corporation and the California Financial Code.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors and executive officers and persons who own more than 10% of the Company's common stock to file with the SEC initial reports of ownership and reports of changes in ownership of common stock of the Company. Directors, officers, and greater than 10% shareholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.
During 2017, our officers, directors, and 10% shareholders were not subject to Section 16(a), and accordingly filed no forms pursuant to Section 16(a) in 2017 or prior. Upon the effectiveness of our registration statement on Form S-1 on August 9, 2018, for our recently completed initial public offering, our officers and directors filed their initial reports required by Section 16(a).
23
PROPOSAL NO. 2
INDEPENDENT PUBLIC ACCOUNTANTS
We are asking shareholders to ratify the appointment of Crowe LLP (“Crowe”) as our independent registered public accounting firm for the fiscal year ending December 31, 2018. Crowe served as our independent registered public accounting firm for the fiscal year ended December 31, 2017. Crowe advised the Company that Crowe has no direct or indirect financial interest in either the Company or the Bank. The services rendered by Crowe during the 2017 fiscal year were audit services and preparation of corporation income tax return. The Audit Committee approved each professional service rendered by Crowe during the 2017 fiscal year.
Report of the Audit Committee of the Board of Directors
The Audit Committee oversees relevant accounting, risk assessment, risk management and regulatory matters. It meets with the Bank’s and the Company’s internal auditors and the independent auditors to review the scope of their work as well as to review quarterly and annual financial statements and regulatory and public disclosures with the officers in charge of financial reporting, control and disclosure functions. After reviewing the independent auditor’s qualifications, partner rotation and independence, the Audit Committee also makes an annual decision regarding selection of the independent auditors. In addition, the Audit Committee reviews reports of examination conducted by regulatory agencies and follows up with management concerning recommendations and required corrective action.
The Audit Committee reports regularly to the Boards of Directors of the Bank and the Company and has the authority to select, retain, terminate and approve the fees and other retention terms of special counsel or other experts or consultants as it deems appropriate and necessary to perform its duties.
In performing its functions, the Audit Committee acts in an oversight capacity and necessarily relies on the work and assurances of management, which has the primary responsibility for financial statements and reports, and of the independent auditors, who, in their report, express an opinion on the conformity of the Company’s annual financial statements to generally accepted accounting principles.
In connection with the December 31, 2017 financial statements of the Company, the Audit Committee: (1) reviewed and discussed the audited financial statements with management and the independent auditors; (2) discussed the matters required to be discussed with the independent registered public accounting firm by applicable PCAOB rules regarding "Communication with Audit Committees"; and (3) received and discussed with the independent auditors the matters required by PCAOB requirements. The Audit Committee has also considered whether the independent auditors’ provision of non-audit services to the Company is compatible with maintaining the auditors’ independence.
Respectfully Submitted,
|
/s/ Hong Kyun "Daniel" Park
|
/s/ Kijun Ahn
|
/s/ Don Rhee
|
||
|
Hong Kyun "Daniel" Park (Chairperson)
|
Kijun Ahn
|
Don Rhee
|
||
The following table sets forth information regarding the aggregate fees incurred for professional services rendered by Crowe for the fiscal year ended December 31, 2017 and 2016:
|
2017
|
2016
|
|||||||
|
Audit Fees
(1)
|
$
|
207,900
|
|
$
|
198,000
|
|
||
|
Audit Related Fees
(2)
|
28,918
|
|
—
|
|
||||
|
Tax Fees
(3)
|
46,200
|
|
46,290
|
|
||||
|
Total
|
$
|
283,018
|
|
$
|
244,290
|
|
||
|
(1)
|
Includes fees incurred for the audit of our annual consolidated financial statements for the fiscal years 2017 and 2016.
|
|
(2)
|
Includes fees incurred for the Form S-1 registration statement procedures.
|
|
(3)
|
Includes fees incurred for professional services rendered for the 2017 and 2016 fiscal years for tax compliance, tax advice, and preparation of corporation income tax return.
|
24
For the fiscal year 2017, the Board considered and deemed the services provided by Crowe compatible with maintaining the principle accountant’s independence. The Audit Committee approved all services described above in the discussion of fees paid to Crowe.
Preapproval of Services by Independent Auditor
The Audit Committee will consider annually and, if appropriate, approve audit services by its independent auditor. In addition, the Audit Committee will consider and, if appropriate, preapprove certain defined audit and non-audit services. The Audit Committee will also consider on a case-by-case basis and, if appropriate, approve specific engagements. The Audit Committee preapproved Tax fees and audit related and other fees based on engagement. The services performed by Crowe for the 2017 audit engagement were pre-approved by the Audit Committee, in accordance with the Committee's procedures.
Vote Required
The approval of a majority of the shares represented at the Annual Meeting is required to ratify the selection of Crowe, provided that such majority also represents a majority of the shares needed for quorum. Abstentions and broker non-votes will therefore have no effect on this vote, unless there are a number of abstentions or broker non-votes such that the votes in favor represent less than a majority of the shares needed for a quorum. It is anticipated that a representative of Crowe will be present at the Annual Meeting and will be available to answer questions.
Audited Financial Statements
The Company’s 2017 annual report including audited financial statements as of and for the years ended December 31, 2017 and 2016 are included with these proxy materials.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" PROPOSAL TWO.
OTHER MATTERS
If any other matters come before the Annual Meeting, not referred to in the enclosed proxy, including matters incident to the conduct of the meeting, the proxy holders will vote the shares represented by the proxies in accordance with their best judgment. Management is not aware of any other business to come before the meeting, and as of the date of the preparation of this proxy statement, no shareholder has submitted to management any proposal to be acted upon at the meeting.
Shareholder Proposals
If a shareholder intends to present any proposal for consideration at the 2019 Annual Meeting of Shareholders and wishes for that proposal to be included in the proxy and proxy statement to be prepared by the Company, the proposal must be received by the Company at its corporate office not later than April 26, 2019.
Shareholder Communication
Any shareholder may communicate directly to Board members, or to any individual Board member, by sending correspondence or communication addressed to the particular member or members in care of Pacific City Financial Corporation, Attn: Corporate Secretary, 3701 Wilshire Boulevard, Suite 900, Los Angeles, California 90010.
|
By Order of the Board of Directors
|
|||
|
Los Angeles, California
|
PACIFIC CITY FINANCIAL CORPORATION
|
||
|
DATED:
|
August 24, 2018
|
||
|
/s/ Henry Kim
|
|||
|
Henry Kim
President and Chief Executive Officer
|
|||
25
26
27
TABLE OF CONTENTS
Notice of Annual Meeting of ShareholdersProxy Statement SummaryGeneral Information about the 2018 Annual MeetingProposal No. 1: Election of Directors of the CompanyExecutive SummaryDirector Nomination ProcessDirector Nominee Qualifications and ExperienceCompensation of DirectorsCorporate Governance Principles and Board MattersSecurity Ownership of Certain Beneficial Owners and ManagementExecutive CompensationTransactions With Related Persons, Promoters, and Certain Control PersonsProposal No. 2: Independent Public AccountantsOther Matters