Business Context and Reporting Period
This Form 8-K is filed by Pacific City Financial Corporation (the "Company") on April 30, 2019. The Company is a California corporation and the parent of Pacific City Bank (the "Bank"). The filing reports a regulatory event involving the Bank's compliance with Bank Secrecy Act (BSA) and Anti-Money Laundering (AML) regulations.
Key Financial Metrics
The filing does not provide specific revenue, profit, cash flow, margin, debt, or liquidity figures for the reporting period. The document states that the Bank will incur additional non-interest expenses related to the regulatory order, but notes that some costs were already reflected in 2018 financial statements and the majority of ongoing expenses are included in 2019 and future budgets.
Material Changes and Regulatory Action
On April 30, 2019, the Federal Deposit Insurance Corporation (FDIC) and the California Department of Business Oversight (CDBO) issued a Consent Order against the Bank. This action followed a determination that the Bank had not satisfactorily addressed prior concerns regarding its BSA/AML compliance program, specifically:
- Failure to maintain a qualified individual as the BSA compliance officer.
- Inadequate resources provided to administer an effective BSA/AML compliance program.
The Order requires the Bank to correct violations, improve monitoring of high-risk accounts, and enhance Board oversight. Specific mandates include:
- Ensuring the BSA/AML program is managed by a qualified officer with sufficient experience.
- Seeking prior regulatory non-objection for changes to the compliance officer or material changes to their responsibilities.
- Conducting a "look back" review of transactions from a six-month period in 2018 to identify undetected suspicious activity.
- Obtaining prior non-objection for new branches, delivery channels, products, or lines of business.
- Providing periodic progress reports and undergoing independent testing of the compliance program.
Management Commentary and Outlook
Management and the Board of Directors have expressed full intention and ability to comply with the Order. Corrective actions began prior to the Order's entry. Notably, the Bank hired Susan Wahba, CAMS, as the new BSA officer on March 19, 2019, following receipt of regulatory non-objection. Ms. Wahba brings significant experience, including prior roles as a bank examiner and BSA/AML trainer for the FDIC.
Management states that the Order and associated expenses are not expected to have a material impact on the results of operations or financial position of the Bank or the Company. The Order remains in effect until terminated, modified, or suspended by the regulators.
Investor Verification Checklist
- Verify the full text of the Consent Order (Exhibit 99.1) for specific timelines and penalties.
- Monitor future regulatory examinations to confirm the Bank's compliance status.
- Review upcoming financial statements for the actual impact of non-interest expenses related to the Order.
- Track any requests for regulatory non-objection regarding new business lines or branches.
- Confirm the retention and performance of the newly appointed BSA officer, Susan Wahba.