PCB - PCB Bancorp Reports Earnings of $7.5 Million for Q2 2023

July, 27 2023 04:10 PM Pacific City Financial Corporation

PCB Bancorp (the “Company”) (NASDAQ: PCB), the holding company of PCB Bank (the “Bank”), today reported net income of $7.5 million, or $0.52 per diluted common share, for the second quarter of 2023, compared with $10.3 million, or $0.70 per diluted common share, for the previous quarter and $9.1 million, or $0.60 per diluted common share, for the year-ago quarter.

Q2 2023 Highlights

Net income totaled $7.5 million, or $0.52 per diluted common share, for the current quarter;
Recorded a provision (reversal) for credit losses ^(1),(2) of $197 thousand for the current quarter compared with $(2.8) million for the previous quarter and $(109) thousand for the year-ago quarter;
Allowance for Credit Losses (“ACL”) ⁽¹⁾ on loans to loans held-for-investment ratio was 1.17% at June 30, 2023 compared with 1.18% at March 31, 2023 and 1.15% at June 30, 2022;
Net interest income was $21.7 million for the current quarter compared with $22.4 million for the previous quarter and $21.4 million for the year-ago quarter. Net interest margin was 3.55% for the current quarter compared with 3.79% for the previous quarter and 4.01% for the year-ago quarter;
Gain on sale of loans was $769 thousand for the current quarter compared with $1.3 million for the previous quarter and $2.0 million for the year-ago quarter;
Total assets were $2.56 billion at June 30, 2023, an increase of $55.8 million, or 2.2%, from $2.50 billion at March 31, 2023, an increase of $136.3 million, or 5.6%, from $2.42 billion at December 31, 2022, and an increase of $211.8 million, or 9.0%, from $2.34 billion at June 30, 2022;
Loans held-for-investment were $2.12 billion at June 30, 2023, an increase of $30.0 million, or 1.4%, from $2.09 billion at March 31, 2023, an increase of $76.4 million, or 3.7%, from $2.05 billion at December 31, 2022, and an increase of $289.4 million, or 15.8%, from $1.83 billion at June 30, 2022; and
Total deposits were $2.19 billion at June 30, 2023, an increase of $46.5 million, or 2.2%, from $2.14 billion at March 31, 2023, an increase of $142.2 million, or 7.0%, from $2.05 billion at December 31, 2022, and an increase of $190.6 million, or 9.5%, from $2.00 billion at June 30, 2022.

“I am pleased with our solid results in the second quarter,” said Henry Kim, President and Chief Executive Officer. “In spite of the challenging macroeconomic environment, our continued focus on maintaining fundamentals in our institution provided stable level of liquidity, robust capital, and strong asset quality.”

“During the second quarter, our cash and cash equivalents to total assets increased to 8.7% of total assets and our deposit balances increased $46.5 million, or 2.2%. Several days after June 30, 2023, we established Borrower-in Custody Program with Federal Reserve Bank that provided an additional borrowing capacity of $268.9 million. Such additional borrowing capacity in combination of other borrowing capacities and cash and cash equivalent would have covered approximately 117.1% of deposits not covered by deposit insurance compared with 91.1% without the additional borrowing capacity at June 30, 2023.”

“Tangible common equity per share increased to $18.94 and our total capital ratio was 17.57%. Our loan balance increased 1.4% to $2.12 billion compared with $2.09 billion at March 31, 2023, and our asset quality continues to be strong with non-performing assets to total asset ratio of 0.15% and classified assets to total assets ratio of 0.27%.”

“Our commitment to deliver exceptional service with precise banking products to our customers and the opportunities to expand our geographical footprint gives us motivation to be excited about our prospects for continued growth in the second half of 2023 and beyond,” concluded Kim.

-------------------------------------------------------------------------------------

(1)

Provision (reversal) for credit losses and ACL for reporting periods beginning with January 1, 2023 are presented under ASC 326, while prior period comparisons continue to be presented under legacy ASC 450 and ASC 310 in this release.

(2)

Financial Highlights (Unaudited)

($ in thousands, except per share data)

Three Months Ended

Six Months Ended

6/30/2023

3/31/2023

% Change

6/30/2022

% Change

6/30/2023

6/30/2022

% Change
Net income

$
7,477


$
10,297


(27.4
)%

$
9,092


(17.8
)%

$
17,774


$
19,332


(8.1
)%
Diluted earnings per common share

$
0.52


$
0.70


(25.7
)%

$
0.60


(13.3
)%

$
1.22


$
1.27


(3.9
)%

















Net interest income

$
21,717


$
22,414


(3.1
)%

$
21,351


1.7
%

$
44,131


$
41,344


6.7
%
Provision (reversal) for credit losses ⁽¹⁾


197



(2,778
)

NM



(109
)

NM



(2,581
)


(1,300
)

98.5
%
Noninterest income


2,657



3,021


(12.0
)%


3,648


(27.2
)%


5,678



8,934


(36.4
)%
Noninterest expense


13,627



13,754


(0.9
)%


12,245


11.3
%


27,381



24,316


12.6
%

















Return on average assets ⁽²⁾


1.19
%


1.69
%




1.65
%




1.44
%


1.78
%


Return on average shareholders’ equity ⁽²⁾


8.82
%


12.46
%




12.48
%




10.62
%


14.13
%


Return on average tangible common equity (“TCE”) ^(2),(3)


11.08
%


15.70
%




13.85
%




13.35
%


14.92
%


Net interest margin ⁽²⁾


3.55
%


3.79
%




4.01
%




3.67
%


3.94
%


Efficiency ratio ⁽⁴⁾


55.91
%


54.08
%




48.98
%




54.97
%


48.36
%

($ in thousands, except per share data)

6/30/2023

3/31/2023

% Change

12/31/2022

% Change

6/30/2022

% Change
Total assets

$
2,556,345


$
2,500,524


2.2
%

$
2,420,036


5.6
%

$
2,344,560


9.0
%
Net loans held-for-investment


2,097,560



2,067,748


1.4
%


2,021,121


3.8
%


1,811,939


15.8
%
Total deposits


2,188,232



2,141,689


2.2
%


2,045,983


7.0
%


1,997,607


9.5
%
Book value per common share ⁽⁵⁾

$
23.77


$
23.56




$
22.94




$
22.36



TCE per common share ⁽³⁾

$
18.94


$
18.72




$
18.21




$
17.73



Tier 1 leverage ratio (consolidated)


13.84
%


13.90
%




14.33
%




15.37
%


Total shareholders’ equity to total assets


13.32
%


13.47
%




13.86
%




14.26
%


TCE to total assets ^{(3), (6)}


10.61
%


10.71
%




11.00
%




11.31
%

(1)

Provision for credit losses on off-balance sheet credit exposures of $36 thousand and $38 thousand, respectively, for the year-ago quarter and previous year-to-date period were recorded in Other Expense on Consolidated Statements of Income (Unaudited). See Provision (reversal) for credit losses included in the Result of Operations discussion for additional information.

(2)

Ratios are presented on an annualized basis.

(3)

Non-GAAP. See “Non-GAAP Measures” for reconciliation of this measure to its most comparable GAAP measure.

(4)

Calculated by dividing noninterest expense by the sum of net interest income and noninterest income.

(5)

Calculated by dividing total shareholders ’ equity by the number of outstanding common shares.

(6)

The Company did not have any intangible asset component for the presented periods.

Result of Operations (Unaudited)

Net Interest Income and Net Interest Margin

The following table presents the components of net interest income for the periods indicated:



Three Months Ended

Six Months Ended
($ in thousands)

6/30/2023

3/31/2023

% Change

6/30/2022

% Change

6/30/2023

6/30/2022

% Change
Interest income/expense on
















Loans

$
32,960


$
31,229


5.5
%

$
21,243


55.2
%

$
64,189


$
41,433


54.9
%
Investment securities


1,136



1,102


3.1
%


668


70.1
%


2,238



1,144


95.6
%
Other interest-earning assets


2,742



2,205


24.4
%


535


412.5
%


4,947



763


548.4
%
Total interest-earning assets


36,838



34,536


6.7
%


22,446


64.1
%


71,374



43,340


64.7
%
Interest-bearing deposits


15,121



11,913


26.9
%


1,041


1,352.5
%


27,034



1,891


1,329.6
%
Borrowings


—



209


(100.0
)%


54


(100.0
)%


209



105


99.0
%
Total interest-bearing liabilities


15,121



12,122


24.7
%


1,095


1,280.9
%


27,243



1,996


1,264.9
%
Net interest income

$
21,717


$
22,414


(3.1
)%

$
21,351


1.7
%

$
44,131


$
41,344


6.7
%
Average balance of
















Loans

$
2,097,489


$
2,072,415


1.2
%

$
1,804,368


16.2
%

$
2,085,021


$
1,788,958


16.5
%
Investment securities


142,136



142,079


—
%


135,324


5.0
%


142,107



129,310


9.9
%
Other interest-earning assets


213,883



186,809


14.5
%


195,633


9.3
%


200,420



197,267


1.6
%
Total interest-earning assets

$
2,453,508


$
2,401,303


2.2
%

$
2,135,325


14.9
%

$
2,427,548


$
2,115,535


14.7
%
Interest-bearing deposits

$
1,527,522


$
1,410,812


8.3
%

$
1,001,424


52.5
%

$
1,469,490


$
1,017,629


44.4
%
Borrowings


—



15,811


(100.0
)%


11,132


(100.0
)%


7,862



10,768


(27.0
)%
Total interest-bearing liabilities

$
1,527,522


$
1,426,623


7.1
%

$
1,012,556


50.9
%

$
1,477,352


$
1,028,397


43.7
%
Total funding ⁽¹⁾

$
2,155,649


$
2,114,198


2.0
%

$
1,902,247


13.3
%

$
2,135,039


$
1,893,691


12.7
%
Annualized average yield/cost of















Loans


6.30
%


6.11
%




4.72
%




6.21
%


4.67
%


Investment securities


3.21
%


3.15
%




1.98
%




3.18
%


1.78
%


Other interest-earning assets


5.14
%


4.79
%




1.10
%




4.98
%


0.78
%


Total interest-earning assets


6.02
%


5.83
%




4.22
%




5.93
%


4.13
%


Interest-bearing deposits


3.97
%


3.42
%




0.42
%




3.71
%


0.37
%


Borrowings


—
%


5.36
%




1.95
%




5.36
%


1.97
%


Total interest-bearing liabilities


3.97
%


3.45
%




0.43
%




3.72
%


0.39
%


Net interest margin


3.55
%


3.79
%




4.01
%




3.67
%


3.94
%


Cost of total funding ⁽¹⁾


2.81
%


2.33
%




0.23
%




2.57
%


0.21
%


Supplementary information
















Net accretion of discount on loans

$
751


$
671


11.9
%

$
907


(17.2
)%

$
1,422


$
1,815


(21.7
)%
Net amortization of deferred loan fees

$
247


$
175


41.1
%

$
606


(59.2
)%

$
422


$
1,771


(76.2
)%

(1)

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

Loans. The increases in average yield for the current quarter and year-to-date period compared with the same periods of 2022 were primarily due to an increase in overall interest rates on loans from the rising interest rate environment, partially offset by decreases in net accretion of discount on loans and net amortization of deferred loan fees from the decreased amount of SBA PPP loan payoffs.

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



6/30/2023

3/31/2023

12/31/2022

6/30/2022


% to Total Loans

Weighted- Average Contractual Rate

% to Total Loans

Weighted- Average Contractual Rate

% to Total Loans

Weighted- Average Contractual Rate

% to Total Loans

Weighted- Average Contractual Rate
Fixed rate loans

22.6
%

4.64
%

23.4
%

4.64
%

23.2
%

4.51
%

24.5
%

4.35
%
Hybrid rate loans

39.2
%

4.62
%

39.0
%

4.51
%

39.1
%

4.40
%

37.0
%

4.11
%
Variable rate loans

38.2
%

8.39
%

37.6
%

8.23
%

37.7
%

7.86
%

38.5
%

5.12
%

Investment Securities. The increases in average yield for the current quarter and year-to-date period were primarily due to a decrease in net amortization of premiums on securities and higher yield on newly purchased investment securities.

Other Interest-Earning Assets. The increases in average yield for the current quarter and year-to-date period were primarily due to an increased interest rate on cash held at the Federal Reserve Bank account.

Interest-Bearing Deposits. The increases in average cost for the current quarter and year-to-date period were primarily due to an increase in market rates and the migration of noninterest-bearing demand deposits to interest-bearing deposits attributable to the rising market rates. To retain existing and attract new customers, the Bank offers competitive rates on deposit products in the rising interest rate environment.

Provision (Reversal) for Credit Losses

The following table presents a composition of provision (reversal) for credit losses for the periods indicated:



Three Months Ended

Six Months Ended
($ in thousands)

6/30/2023

3/31/2023

% Change

6/30/2022

% Change

6/30/2023

6/30/2022

% Change
Provision (reversal) for credit losses on loans

$
157


$
(2,417
)

NM


$
(109
)

NM


$
(2,260
)

$
(1,300
)

73.8
%
Provision (reversal) for credit losses on off-balance sheet credit exposure ⁽¹⁾


40



(361
)

NM



36


11.1
%


(321
)


38


NM

Total provision (reversal) for credit losses

$
197


$
(2,778
)

NM


$
(73
)

NM


$
(2,581
)

$
(1,262
)

104.5
%

(1)

Provision for credit losses on off-balance sheet credit exposures for previous and year-ago quarters were recorded in Other Expense on Consolidated Statements of Income (Unaudited).

On January 1, 2023, the Company adopted the provisions of ASC 326 through the application of the modified retrospective transition approach. Provision (reversal) for credit losses and ACL for reporting periods beginning with January 1, 2023 are presented under ASC 326, while prior period comparisons continue to be presented under legacy ASC 450 and ASC 310 in this release. See CECL Adoption and Allowance for Credit Losses sections included in the Balance Sheet section of this release for additional information.

The reversal for credit losses for the current year-to-date period was primarily due to net recoveries and the improvement in the economic forecast.

Noninterest Income

The following table presents the components of noninterest income for the periods indicated:



Three Months Ended

Six Months Ended
($ in thousands)

6/30/2023

3/31/2023

% Change

6/30/2022

% Change

6/30/2023

6/30/2022

% Change
Gain on sale of loans

$
769


$
1,309


(41.3
)%

$
2,039


(62.3
)%

$
2,078


$
5,816


(64.3
)%
Service charges and fees on deposits


369



344


7.3
%


330


11.8
%


713



633


12.6
%
Loan servicing income


868



860


0.9
%


755


15.0
%


1,728



1,455


18.8
%
Bank-owned life insurance income


184



180


2.2
%


175


5.1
%


364



347


4.9
%
Other income


467



328


42.4
%


349


33.8
%


795



683


16.4
%
Total noninterest income

$
2,657


$
3,021


(12.0
)%

$
3,648


(27.2
)%

$
5,678


$
8,934


(36.4
)%

Gain on Sale of Loans. The following table presents information on gain on sale of loans for the periods indicated:



Three Months Ended

Six Months Ended
($ in thousands)

6/30/2023

3/31/2023

% Change

6/30/2022

% Change

6/30/2023

6/30/2022

% Change
Gain on sale of SBA loans
















Sold loan balance

$
16,762


$
27,133


(38.2
)%

$
38,442


(56.4
)%

$
43,895


$
78,125


(43.8
)%
Premium received


1,209



2,041


(40.8
)%


2,600


(53.5
)%


3,250



6,806


(52.2
)%
Gain recognized


769



1,309


(41.3
)%


2,039


(62.3
)%


2,078



5,816


(64.3
)%

Loan Servicing Income. The following table presents information on loan servicing income for the periods indicated:



Three Months Ended

Six Months Ended
($ in thousands)

6/30/2023

3/31/2023

% Change

6/30/2022

% Change

6/30/2023

6/30/2022

% Change
Loan servicing income
















Servicing income received

$
1,317


$
1,284


2.6
%

$
1,287


2.3
%

$
2,601


$
2,517


3.3
%
Servicing assets amortization


(449
)


(424
)

5.9
%


(532
)

(15.6
)%


(873
)


(1,062
)

(17.8
)%
Loan servicing income

$
868


$
860


0.9
%

$
755


15.0
%

$
1,728


$
1,455


18.8
%
Underlying loans at end of period

$
539,160


$
540,502


(0.2
)%

$
537,990


0.2
%

$
539,160


$
537,990


0.2
%

The Company services SBA loans and certain residential property loans sold to the secondary market.

Noninterest Expense

The following table presents the components of noninterest expense for the periods indicated:



Three Months Ended

Six Months Ended
($ in thousands)

6/30/2023

3/31/2023

% Change

6/30/2022

% Change

6/30/2023

6/30/2022

% Change
Salaries and employee benefits

$
8,675


$
8,928


(2.8
)%

$
8,125


6.8
%

$
17,603


$
16,720


5.3
%
Occupancy and equipment


1,919



1,896


1.2
%


1,537


24.9
%


3,815



2,934


30.0
%
Professional fees


772



732


5.5
%


642


20.2
%


1,504



1,045


43.9
%
Marketing and business promotion


203



372


(45.4
)%


310


(34.5
)%


575



517


11.2
%
Data processing


380



412


(7.8
)%


441


(13.8
)%


792



845


(6.3
)%
Director fees and expenses


217



180


20.6
%


182


19.2
%


397



351


13.1
%
Regulatory assessments


382



155


146.5
%


147


159.9
%


537



288


86.5
%
Other expense


1,079



1,079


—
%


861


25.3
%


2,158



1,616


33.5
%
Total noninterest expense

$
13,627


$
13,754


(0.9
)%

$
12,245


11.3
%

$
27,381


$
24,316


12.6
%

Salaries and Employee Benefits. The decrease for the current quarter compared with the previous quarter was primarily due to decreases in vacation accrual and other employee benefit expenses, partially offset by increases in salaries and bonus accrual. The increases for the current quarter and year-to-date period compared with the same periods of 2022 were primarily due to increases in salaries and other employee benefit expense, partially offset by decreases in bonus and vacation accruals, and incentives tied to sales of SBA loans originated at loan production offices. The number of full-time equivalent employees was 272, 276 and 271 as of June 30, 2023, March 31, 2023 and June 30, 2022, respectively.

Occupancy and Equipment. The increases for the current quarter and year-to-date period compared with the same periods of 2022 were primarily due to new branch openings during the second half of 2022. The Company opened 3 new full-service branches in Dallas and Carrollton, Texas and Palisades Park, New Jersey.

Professional Fees. The increases for the current quarter and year-to-date period were primarily due to increases in internal audit and consulting fees.

Marketing and Business Promotion. The decreases for the current quarter compared with the previous and year-ago quarters were primarily due to the decreased marketing activities and advertisements.

Regulatory Assessments. The increases in the current quarter and year-to-date period were due to an increase in FDIC assessment rates and an adjustment of $113 thousand made for the previous quarter. The FDIC increased the initial base deposit insurance assessment rate schedules by two basis points beginning in the first quarterly assessment period of 2023.

Other Expense. The increases for the current quarter and year-to-date period compared with the same periods of 2022 were primarily due to increases in office expenses, other loan related expenses and armed guard expenses attributable to the branch network expansion. Provision for credit losses on off-balance credit exposures of $36 thousand and $38 thousand was included in other expense for the year-ago quarter and previous year-to-date period, respectively, while the current quarter and year-to-date period provision was included in provision (reversal) for credit losses.

Balance Sheet (Unaudited)

Total assets were $2.56 billion at June 30, 2023, an increase of $55.8 million, or 2.2%, from $2.50 billion at March 31, 2023, an increase of $136.3 million, or 5.6%, from $2.42 billion at December 31, 2022, and an increase of $211.8 million, or 9.0%, from $2.34 billion at June 30, 2022. The increases for the current quarter and year-to-date period were primarily due to increases in cash and cash equivalents and loans held-for-investment, partially offset by a decrease in loans held-for-sale.

CECL Adoption

On January 1, 2023, the Company adopted the provisions of ASC 326 through the application of the modified retrospective transition approach. The initial adjustment to the ACL reflects the expected lifetime credit losses associated with the composition of financial assets within in the scope of ASC 326 as of January 1, 2023, as well as management’s current expectation of future economic conditions. The Company recorded a net decrease of $1.9 million to the beginning balance of retained earnings as of January 1, 2023 for the cumulative effect adjustment, reflecting an initial adjustment to the ACL on loans of $1.1 million and the ACL on off-balance sheet credit exposures of $1.6 million, net of related deferred tax assets arising from temporary differences of $788 thousand. As a part of the adoption of ASC 326, the Company reviewed and revised certain loan segments for the Company’s ACL model. See Loan Segments Revision section of this release for a reconciliation of revised loan segments to legacy loan segments, which were utilized before the adoption of ASC 326.

Loans

The following table presents a composition of total loans (includes both loans held-for-sale and loans held-for-investment) as of the dates indicated:

($ in thousands)

6/30/2023

3/31/2023

% Change

12/31/2022

% Change

6/30/2022

% Change
Commercial real estate:














Commercial property

$
793,946


$
780,282


1.8
%

$
772,020


2.8
%

$
692,817


14.6
%
Business property


533,592



521,965


2.2
%


526,513


1.3
%


524,406


1.8
%
Multifamily


124,029



127,012


(2.3
)%


124,751


(0.6
)%


118,339


4.8
%
Construction


16,942



15,930


6.4
%


17,054


(0.7
)%


12,595


34.5
%
Total commercial real estate


1,468,509



1,445,189


1.6
%


1,440,338


2.0
%


1,348,157


8.9
%
Commercial and industrial


272,278



267,674


1.7
%


249,250


9.2
%


204,369


33.2
%
Consumer:














Residential mortgage


359,655



356,967


0.8
%


333,726


7.8
%


258,259


39.3
%
Other consumer


21,985



22,612


(2.8
)%


22,749


(3.4
)%


22,225


(1.1
)%
Total consumer


381,640



379,579


0.5
%


356,475


7.1
%


280,484


36.1
%
Loans held-for-investment


2,122,427



2,092,442


1.4
%


2,046,063


3.7
%


1,833,010


15.8
%
Loans held-for-sale


13,065



14,352


(9.0
)%


22,811


(42.7
)%


9,627


35.7
%
Total loans

$
2,135,492


$
2,106,794


1.4
%

$
2,068,874


3.2
%

$
1,842,637


15.9
%

The increase in loans held-for-investment for the current quarter was primarily due to new funding and advances on lines of credit of $252.8 million, partially offset by pay-downs and pay-offs of $222.8 million. The increase for the current year-to-date period was primarily due to new funding and advances on lines of credit of $457.7 million and purchases of residential mortgage loans of $15.7 million, partially offset by pay-downs and pay-offs of $397.1 million.

The decrease in loans held-for-sale for the current quarter was primarily due to sales of $16.8 million, partially offset by new funding of $15.6 million. The decrease for the current year-to-date was primarily due to sales of $43.9 million and pay-downs and pay-offs of $4.1 million, partially offset by new funding of $38.3 million.

The following table presents a composition of off-balance sheet credit exposure as of the dates indicated:

($ in thousands)

6/30/2023

3/31/2023

% Change

12/31/2022

% Change

6/30/2022

% Change
Commercial property

$
11,118


$
6,811


63.2
%

$
7,006


58.7
%

$
8,587


29.5
%
Business property


9,487



12,307


(22.9
)%


8,396


13.0
%


10,603


(10.5
)%
Multifamily


4,500



4,500


—
%


4,500


—
%


5,500


(18.2
)%
Construction


30,865



16,563


86.3
%


18,211


69.5
%


12,080


155.5
%
Commercial and industrial


279,584



279,543


—
%


254,668


9.8
%


221,580


26.2
%
Other consumer


445



399


11.5
%


692


(35.7
)%


1,086


(59.0
)%
Total commitments to extend credit


335,999



320,123


5.0
%


293,473


14.5
%


259,436


29.5
%
Letters of credit


6,027



5,400


11.6
%


5,392


11.8
%


4,984


20.9
%
Total off-balance sheet credit exposure

$
342,026


$
325,523


5.1
%

$
298,865


14.4
%

$
264,420


29.3
%

Credit Quality

The following table presents a summary of non-performing loans and assets, and classified assets as of the dates indicated:

($ in thousands)

6/30/2023

3/31/2023

% Change

12/31/2022

% Change

6/30/2022

% Change
Nonaccrual loans














Commercial real estate:














Commercial property

$
699


$
—


—
%

$
—


—
%

$
—


—
%
Business property


3,007



2,904


3.5
%


2,985


0.7
%


564


433.2
%
Total commercial real estate


3,706



2,904


27.6
%


2,985


24.2
%


564


557.1
%
Commercial and industrial


88



11


700.0
%


—


—
%


185


(52.4
)%
Consumer:














Residential mortgage


—



—


—
%


372


(100.0
)%


450


(100.0
)%
Other consumer


51



45


13.3
%


3


1,600.0
%


24


112.5
%
Total consumer


51



45


13.3
%


375


(86.4
)%


474


(89.2
)%
Total nonaccrual loans held-for-investment


3,845



2,960


29.9
%


3,360


14.4
%


1,223


214.4
%
Loans past due 90 days or more and still accruing


—



—


—
%


—


—
%


—


—
%
Non-performing loans (“NPLs”) held-for-investment


3,845



2,960


29.9
%


3,360


14.4
%


1,223


214.4
%
NPLs held-for-sale


—



—


—
%


4,000


(100.0
)%


—


—
%
Total NPLs


3,845



2,960


29.9
%


7,360


(47.8
)%


1,223


214.4
%
Other real estate owned (“OREO”)


—



—


—
%


—


—
%


808


(100.0
)%
Non-performing assets (“NPAs”)

$
3,845


$
2,960


29.9
%

$
7,360


(47.8
)%

$
2,031


89.3
%
Loans past due and still accruing














Past due 30 to 59 days

$
428


$
779


(45.1
)%

$
47


810.6
%

$
682


(37.2
)%
Past due 60 to 89 days


—



13


(100.0
)%


87


(100.0
)%


—


—
%
Past due 90 days or more


—



—


—
%


—


—
%


—


—
%
Total loans past due and still accruing

$
428


$
792


(46.0
)%


134


219.4
%

$
682


(37.2
)%
Special mention loans

$
5,406


$
5,527


(2.2
)%

$
6,857


(21.2
)%

$
6,313


(14.4
)%
Classified assets














Classified loans held-for-investment

$
6,901


$
6,060


13.9
%

$
6,211


11.1
%

$
3,980


73.4
%
Classified loans held-for-sale


—



—


—
%


4,000


(100.0
)%


—


—
%
OREO


—



—


—
%


—


—
%


808


(100.0
)%
Classified assets

$
6,901


$
6,060


13.9
%

$
10,211


(32.4
)%

$
4,788


44.1
%
NPLs held-for-investment to loans held-for-investment


0.18
%


0.14
%




0.16
%




0.07
%


NPAs to total assets


0.15
%


0.12
%




0.30
%




0.09
%


Classified assets to total assets


0.27
%


0.24
%




0.42
%




0.20
%

During the previous quarter, NPLs held-for-sale of $4.0 million were paid-off.

Allowance for Credit Losses

The following table presents activities in ACL for the periods indicated:



Three Months Ended

Six Months Ended
($ in thousands)

6/30/2023

3/31/2023

% Change

6/30/2022

% Change

6/30/2023

6/30/2022

% Change
ACL on loans
















Balance at beginning of period

$
24,694


$
24,942


(1.0
)%

$
21,198


16.5
%

$
24,942


$
22,381


11.4
%
Impact of ASC 326 adoption


—



1,067


NM



—


NM



1,067



—


NM

Charge-offs


(7
)


—


—
%


(47
)

(85.1
)%


(7
)


(59
)

(88.1
)%
Recoveries


23



1,102


(97.9
)%


29


(20.7
)%


1,125



49


2,195.9
%
Provision (reversal) for credit losses on loans


157



(2,417
)

NM



(109
)

NM



(2,260
)


(1,300
)

73.8
%
Balance at end of period

$
24,867


$
24,694


0.7
%

$
21,071


18.0
%

$
24,867


$
21,071


18.0
%
Percentage to loans held-for-investment at end of period


1.17
%


1.18
%




1.15
%






1.15
%


ACL on off-balance sheet credit exposure ⁽¹⁾
















Balance at beginning of period

$
1,545


$
299


416.7
%

$
216


615.3
%

$
299


$
214


39.7
%
Impact of ASC 326 adoption


—



1,607


NM



—


NM



1,607



—


NM

Provision (reversal) for credit losses on off-balance sheet credit exposure


40



(361
)

NM



36


11.1
%


(321
)


38


NM

Balance at end of period

$
1,585


$
1,545


2.6
%

$
252


529.0
%

$
1,585


$
252


529.0
%

(1)

ACL on off-balance sheet credit exposures was recorded in Accrued Interest Payable and Other Liabilities on Consolidated Balance Sheets (Unaudited).

Investment Securities

Total investment securities were $138.7 million at June 30, 2023, a decrease of $6.0 million, or 4.1%, from $144.7 million at March 31, 2023, a decrease of $3.2 million, or 2.2%, from $141.9 million at December 31, 2022, and a decrease of $394 thousand, or 0.3%, from $139.1 million at June 30, 2022. The decrease for the current quarter was primarily due to principal pay-downs and calls of $4.6 million, a fair value decrease of $2.3 million and net premium amortization of $59 thousand, partially offset by purchases of $1.0 million. The decrease for the current year-to-date period was primarily due to principal pay-downs and calls of $8.7 million, a fair value decrease of $312 thousand and net premium amortization of $116 thousand, partially offset by purchases of $5.9 million.

Deposits

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



6/30/2023

3/31/2023

12/31/2022

6/30/2022
($ in thousands)

Amount

% to Total

Amount

% to Total

Amount

% to Total

Amount

% to Total
Noninterest-bearing demand deposits

$
635,329


29.0
%

$
653,970


30.5
%

$
734,989


35.9
%

$
988,454


49.5
%
Interest-bearing deposits
















Savings


7,504


0.3
%


7,584


0.4
%


8,579


0.4
%


14,686


0.7
%
NOW


16,993


0.8
%


15,696


0.7
%


11,405


0.6
%


18,881


0.9
%
Retail money market accounts


464,655


21.1
%


436,906


20.3
%


494,749


24.1
%


458,605


22.9
%
Brokered money market accounts


1


0.1
%


1


0.1
%


8


0.1
%


1


0.1
%
Retail time deposits of
















$250,000 or less


392,012


17.9
%


356,049


16.6
%


295,354


14.4
%


235,956


11.8
%
More than $250,000


451,590


20.7
%


454,464


21.3
%


353,876


17.3
%


186,024


9.3
%
State and brokered time deposits


220,148


10.1
%


217,019


10.1
%


147,023


7.2
%


95,000


4.8
%
Total interest-bearing deposits


1,552,903


71.0
%


1,487,719


69.5
%


1,310,994


64.1
%


1,009,153


50.5
%
Total deposits

$
2,188,232


100.0
%

$
2,141,689


100.0
%

$
2,045,983


100.0
%

$
1,997,607


100.0
%

















Estimated total deposits not covered by deposit insurance

$
1,034,148


47.3
%

$
1,019,689


47.6
%

$
1,062,111


51.9
%

$
1,199,502


60.0
%

The decrease in noninterest-bearing demand deposits was primarily due to strong deposit market competition and the migration of noninterest-bearing demand deposits to money market accounts and time deposits attributable to the rising market rates. To retain existing and attract new customers, the Bank offers competitive rates on deposit products in the rising interest rate environment.

The increase in retail time deposits for the current quarter was primarily due to new accounts of $107.9 million, renewals of the matured accounts of $88.8 million and balance increases of $4.9 million, partially offset by matured and closed accounts of $168.5 million. The increase for the current year-to-date period was primarily due to new accounts of $408.2 million, renewals of the matured accounts of $206.2 million and balance increases of $11.9 million, partially offset by matured and closed accounts of $431.9 million.

Liquidity

The following table presents a summary of the Company’s liquidity position as of June 30, 2023:

($ in thousands)

6/30/2023

12/31/2022

% Change
Cash and cash equivalents

$
222,146


$
147,031


51.1
%
Cash and cash equivalents to total assets


8.7
%


6.1
%









Available borrowing capacity






FHLB advances

$
625,115


$
561,745


11.3
%
Federal Reserve Discount Window


30,285



23,902


26.7
%
Overnight federal funds lines


65,000



65,000


—
%
Total

$
720,400


$
650,647


10.7
%
Total available borrowing capacity to total assets


28.2
%


26.9
%

During the current year-to-date period, the Company increased cash and cash equivalents by $75.1 million, or 51.1%, to $222.1 million and available borrowing capacity by $69.8 million, or 10.7%, to $720.4 million. As of June 30, 2023, the Company's cash and cash equivalents and available borrowing capacity cover approximately 91.1% of deposits not covered by deposit insurance compared to 75.1% at December 31, 2022.

Shareholders’ Equity

Shareholders’ equity was $340.4 million at June 30, 2023, an increase of $3.6 million, or 1.1%, from $336.8 million at March 31, 2023, an increase of $5.0 million, or 1.5%, from $335.4 million at December 31, 2022, and an increase of $6.0 million, or 1.8%, from $334.4 million at June 30, 2022. The increase for the current quarter was primarily due to net income, partially offset by cash dividends declared on common stock of $2.6 million and an increase in other comprehensive loss of $1.6 million. The increase for the current year-to-date period was primarily due to net income, partially offset by cash dividend declared on common stock of $4.8 million, repurchase of 385,381 shares of common stock at a weighted-average price of $17.76, totaling $6.8 million, and cumulative effect adjustment upon adoption of ASC 326 of $1.9 million.

Stock Repurchase

On July 28, 2022, the Company’s Board of Directors approved a repurchase program authorizing for the repurchase of up to 5% of the Company’s outstanding common stock, which represented 747,938 shares, through February 1, 2023. On January 26, 2023, the Company announced the amendment to the repurchase program, which extended the program expiration from February 1, 2023 to February 1, 2024. The Company completed the repurchase program during the previous quarter. Under this repurchase program, the Company repurchased and retired 747,938 shares of common stock at a weighted-average price of $18.15 per share, totaling $13.6 million.

Issuance of Preferred Stock Under the Emergency Capital Investment Program

On May 24, 2022, the Company issued 69,141 shares of Senior Non-Cumulative Perpetual Preferred Stock, Series C, liquidation preference of $1,000 per share (“Series C Preferred Stock”) for the capital investment of $69.1 million from the U.S. Treasury under the Emergency Capital Investment Program (“ECIP”). ECIP investment is treated as tier 1 capital for regulatory capital purposes.

The Series C Preferred Stock bears no dividend for the first 24 months following the investment date. Thereafter, the dividend rate will be adjusted based on the lending growth criteria listed in the terms of the ECIP investment with an annual dividend rate up to 2%. After the tenth anniversary of the investment date, the dividend rate will be fixed based on average annual amount of lending in years 2 through 10.

Capital Ratios

Based on the Federal Reserve’s Small Bank Holding Company policy, the Company is not currently subject to consolidated minimum capital measurements. At such time as the Company reaches the $3 billion asset level, it will be subject to consolidated capital requirements independent of the Bank. For comparison purposes, the Company’s capital ratios are included in following table, which presents capital ratios for the Company and the Bank as of the dates indicated:



6/30/2023

3/31/2023

12/31/2022

6/30/2022

Well Capitalized Requirements
PCB Bancorp










Common tier 1 capital (to risk-weighted assets)

13.12
%

13.09
%

13.29
%

14.44
%

N/A

Total capital (to risk-weighted assets)

17.57
%

17.61
%

17.83
%

19.25
%

N/A

Tier 1 capital (to risk-weighted assets)

16.34
%

16.37
%

16.62
%

18.11
%

N/A

Tier 1 capital (to average assets)

13.84
%

13.90
%

14.33
%

15.37
%

N/A

PCB Bank










Common tier 1 capital (to risk-weighted assets)

16.00
%

16.03
%

16.30
%

17.79
%

6.5
%
Total capital (to risk-weighted assets)

17.23
%

17.27
%

17.52
%

18.92
%

10.0
%
Tier 1 capital (to risk-weighted assets)

16.00
%

16.03
%

16.30
%

17.79
%

8.0
%
Tier 1 capital (to average assets)

13.55
%

13.62
%

14.05
%

15.09
%

5.0
%

About PCB Bancorp

PCB Bancorp is the bank holding company for PCB Bank, a California state chartered bank, offering a full suite of commercial banking services to small to medium-sized businesses, individuals and professionals, primarily in Southern California, and predominantly in Korean-American and other minority communities.

Cautionary Note Regarding Forward-Looking Statements

This press release contains forward-looking statements. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections and statements of our beliefs concerning future events, business plans, objectives, expected operating results and the assumptions upon which those statements are based. Forward-looking statements include without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and are typically identified with words such as “may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “aim,” “intend,” “plan,” or words or phases of similar meaning. We caution that the forward-looking statements are based largely on our expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond our control, including but not limited to the health of the national and local economies including the impact to the Company and its customers resulting from changes to, and the level of, inflation and interest rates; the Company’s ability to maintain and grow its deposit base; loan demand and continued portfolio performance; the impact of adverse developments at other banks, including bank failures, that impact general sentiment regarding the stability and liquidity of banks that could affect the Company’s financial performance and stock price; changes to valuations of the Company’s assets and liabilities including the allowance for credit losses, earning assets, and intangible assets; changes to the availability of liquidity sources including borrowing lines and the ability to pledge or sell certain assets; the Company's ability to attract and retain skilled employees, customers' service expectations; cyber security risks; the Company's ability to successfully deploy new technology; acquisitions and branch and loan production office expansions; operational risks including the ability to detect and prevent errors and fraud; the effectiveness of the Company’s enterprise risk management framework; costs related to litigation; changes in laws, rules, regulations, or interpretations to which the Company is subject; the effects of severe weather events, pandemics, other public health crises, acts of war or terrorism, and other external events on our business. These and other important factors are detailed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 and other filings the Company makes with the SEC, which are available at the SEC’s Internet site ( http://www.sec.gov ) or from the Company without charge. Actual results, performance or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements. Any forward-looking statements presented herein are made only as of the date of this press release, and the Company does not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise, except as required by law.

PCB Bancorp and Subsidiary Consolidated Balance Sheets (Unaudited) ($ in thousands, except share and per share data)

















6/30/2023

3/31/2023

% Change

12/31/2022

% Change

6/30/2022

% Change
Assets














Cash and due from banks

$
22,159


$
25,801


(14.1
)%

$
23,202


(4.5
)%

$
23,125


(4.2
)%
Interest-bearing deposits in other financial institutions


199,987



164,718


21.4
%


123,829


61.5
%


276,785


(27.7
)%
Total cash and cash equivalents


222,146



190,519


16.6
%


147,031


51.1
%


299,910


(25.9
)%
Securities available-for-sale, at fair value


138,673



144,665


(4.1
)%


141,863


(2.2
)%


139,067


(0.3
)%
Loans held-for-sale


13,065



14,352


(9.0
)%


22,811


(42.7
)%


9,627


35.7
%
Loans held-for-investment


2,122,427



2,092,442


1.4
%


2,046,063


3.7
%


1,833,010


15.8
%
Allowance for credit losses on loans


(24,867
)


(24,694
)

0.7
%


(24,942
)

(0.3
)%


(21,071
)

18.0
%
Net loans held-for-investment


2,097,560



2,067,748


1.4
%


2,021,121


3.8
%


1,811,939


15.8
%
Premises and equipment, net


6,394



6,473


(1.2
)%


6,916


(7.5
)%


3,633


76.0
%
Federal Home Loan Bank and other bank stock


12,716



10,183


24.9
%


10,183


24.9
%


10,183


24.9
%
Other real estate owned, net


—



—


—
%


—


—
%


808


(100.0
)%
Bank-owned life insurance


30,428



30,244


0.6
%


30,064


1.2
%


29,705


2.4
%
Deferred tax assets, net


4,342



3,753


15.7
%


3,115


39.4
%


11,869


(63.4
)%
Servicing assets


7,142



7,345


(2.8
)%


7,347


(2.8
)%


7,716


(7.4
)%
Operating lease assets


5,182



5,854


(11.5
)%


6,358


(18.5
)%


6,512


(20.4
)%
Accrued interest receivable


8,040



7,998


0.5
%


7,472


7.6
%


5,212


54.3
%
Other assets


10,657



11,390


(6.4
)%


15,755


(32.4
)%


8,379


27.2
%
Total assets

$
2,556,345


$
2,500,524


2.2
%

$
2,420,036


5.6
%

$
2,344,560


9.0
%
Liabilities














Deposits














Noninterest-bearing demand

$
635,329


$
653,970


(2.9
)%

$
734,989


(13.6
)%

$
988,454


(35.7
)%
Savings, NOW and money market accounts


489,153



460,187


6.3
%


514,741


(5.0
)%


492,173


(0.6
)%
Time deposits of $250,000 or less


552,160



513,068


7.6
%


382,377


44.4
%


270,956


103.8
%
Time deposits of more than $250,000


511,590



514,464


(0.6
)%


413,876


23.6
%


246,024


107.9
%
Total deposits


2,188,232



2,141,689


2.2
%


2,045,983


7.0
%


1,997,607


9.5
%
Federal Home Loan Bank advances


—



—


—
%


20,000


(100.0
)%


—


—
%
Operating lease liabilities


5,495



6,238


(11.9
)%


6,809


(19.3
)%


7,067


(22.2
)%
Accrued interest payable and other liabilities


22,207



15,767


40.8
%


11,802


88.2
%


5,511


303.0
%
Total liabilities


2,215,934



2,163,694


2.4
%


2,084,594


6.3
%


2,010,185


10.2
%
Commitments and contingent liabilities














Shareholders’ equity














Preferred stock


69,141



69,141


—
%


69,141


—
%


69,141


—
%
Common stock


143,686



143,356


0.2
%


149,631


(4.0
)%


155,842


(7.8
)%
Retained earnings


138,315



133,415


3.7
%


127,181


8.8
%


115,992


19.2
%
Accumulated other comprehensive loss, net


(10,731
)


(9,082
)

18.2
%


(10,511
)

2.1
%


(6,600
)

62.6
%
Total shareholders’ equity


340,411



336,830


1.1
%


335,442


1.5
%


334,375


1.8
%
Total liabilities and shareholders’ equity

$
2,556,345


$
2,500,524


2.2
%

$
2,420,036


5.6
%

$
2,344,560


9.0
%















Outstanding common shares


14,318,890



14,297,870





14,625,474





14,956,760



Book value per common share ⁽¹⁾

$
23.77


$
23.56




$
22.94




$
22.36



TCE per common share ⁽²⁾

$
18.94


$
18.72




$
18.21




$
17.73



Total loan to total deposit ratio


97.59
%


98.37
%




101.12
%




92.24
%


Noninterest-bearing deposits to total deposits


29.03
%


30.54
%




35.92
%




49.48
%

(1)

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

(2)

Non-GAAP. See “Non-GAAP Measures” for reconciliation of this measure to its most comparable GAAP measure.

PCB Bancorp and Subsidiary Consolidated Statements of Income (Unaudited) ($ in thousands, except share and per share data)







Three Months Ended

Six Months Ended


6/30/2023

3/31/2023

% Change

6/30/2022

% Change

6/30/2023

6/30/2022

% Change
Interest and dividend income
















Loans, including fees

$
32,960


$
31,229


5.5
%

$
21,243


55.2
%

$
64,189


$
41,433


54.9
%
Investment securities


1,136



1,102


3.1
%


668


70.1
%


2,238



1,144


95.6
%
Other interest-earning assets


2,742



2,205


24.4
%


535


412.5
%


4,947



763


548.4
%
Total interest income


36,838



34,536


6.7
%


22,446


64.1
%


71,374



43,340


64.7
%
Interest expense
















Deposits


15,121



11,913


26.9
%


1,041


1,352.5
%


27,034



1,891


1,329.6
%
Other borrowings


—



209


(100.0
)%


54


(100.0
)%


209



105


99.0
%
Total interest expense


15,121



12,122


24.7
%


1,095


1,280.9
%


27,243



1,996


1,264.9
%
Net interest income


21,717



22,414


(3.1
)%


21,351


1.7
%


44,131



41,344


6.7
%
Provision (reversal) for credit losses


197



(2,778
)

NM



(109
)

NM



(2,581
)


(1,300
)

98.5
%
Net interest income after provision (reversal) for credit losses


21,520



25,192


(14.6
)%


21,460


0.3
%


46,712



42,644


9.5
%
Noninterest income
















Gain on sale of loans


769



1,309


(41.3
)%


2,039


(62.3
)%


2,078



5,816


(64.3
)%
Service charges and fees on deposits


369



344


7.3
%


330


11.8
%


713



633


12.6
%
Loan servicing income


868



860


0.9
%


755


15.0
%


1,728



1,455


18.8
%
Bank-owned life insurance income


184



180


2.2
%


175


5.1
%


364



347


4.9
%
Other income


467



328


42.4
%


349


33.8
%


795



683


16.4
%
Total noninterest income


2,657



3,021


(12.0
)%


3,648


(27.2
)%


5,678



8,934


(36.4
)%
Noninterest expense
















Salaries and employee benefits


8,675



8,928


(2.8
)%


8,125


6.8
%


17,603



16,720


5.3
%
Occupancy and equipment


1,919



1,896


1.2
%


1,537


24.9
%


3,815



2,934


30.0
%
Professional fees


772



732


5.5
%


642


20.2
%


1,504



1,045


43.9
%
Marketing and business promotion


203



372


(45.4
)%


310


(34.5
)%


575



517


11.2
%
Data processing


380



412


(7.8
)%


441


(13.8
)%


792



845


(6.3
)%
Director fees and expenses


217



180


20.6
%


182


19.2
%


397



351


13.1
%
Regulatory assessments


382



155


146.5
%


147


159.9
%


537



288


86.5
%
Other expense


1,079



1,079


—
%


861


25.3
%


2,158



1,616


33.5
%
Total noninterest expense


13,627



13,754


(0.9
)%


12,245


11.3
%


27,381



24,316


12.6
%
Income before income taxes


10,550



14,459


(27.0
)%


12,863


(18.0
)%


25,009



27,262


(8.3
)%
Income tax expense


3,073



4,162


(26.2
)%


3,771


(18.5
)%


7,235



7,930


(8.8
)%
Net income

$
7,477


$
10,297


(27.4
)%

$
9,092


(17.8
)%

$
17,774


$
19,332


(8.1
)%

















Earnings per common share
















Basic

$
0.52


$
0.71




$
0.61




$
1.24


$
1.29



Diluted

$
0.52


$
0.70




$
0.60




$
1.22


$
1.27



Average common shares
















Basic


14,271,200



14,419,155





14,883,768





14,344,769



14,865,990



Diluted


14,356,776



14,574,929





15,122,452





14,468,981



15,138,493




















Dividend paid per common share

$
0.18


$
0.15




$
0.15




$
0.33


$
0.30



Return on average assets ⁽¹⁾


1.19
%


1.69
%




1.65
%




1.44
%


1.78
%


Return on average shareholders’ equity ⁽¹⁾


8.82
%


12.46
%




12.48
%




10.62
%


14.13
%


Return on average TCE ^{(1), (2)}


11.08
%


15.70
%




13.85
%




13.35
%


14.92
%


Efficiency ratio ⁽³⁾


55.91
%


54.08
%




48.98
%




54.97
%


48.36
%

(1)

Ratios are presented on an annualized basis.

(2)

Non-GAAP. See “Non-GAAP Measures” for reconciliation of this measure to its most comparable GAAP measure.

(3)

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

PCB Bancorp and Subsidiary Average Balance, Average Yield, and Average Rate (Unaudited) ($ in thousands)





Three Months Ended


6/30/2023

3/31/2023

6/30/2022


Average Balance

Interest Income/ Expense

Avg. Yield/ Rate ⁽⁶⁾

Average Balance

Interest Income/ Expense

Avg. Yield/ Rate ⁽⁶⁾

Average Balance

Interest Income/ Expense

Avg. Yield/ Rate ⁽⁶⁾
Assets


















Interest-earning assets


















Total loans ⁽¹⁾

$
2,097,489


$
32,960


6.30
%

$
2,072,415


$
31,229


6.11
%

$
1,804,368


$
21,243


4.72
%
Mortgage-backed securities


98,971



713


2.89
%


97,578



683


2.84
%


88,032



416


1.90
%
Collateralized mortgage obligation


26,228



262


4.01
%


26,743



256


3.88
%


25,929



125


1.93
%
SBA loan pool securities


8,364



81


3.88
%


9,027



82


3.68
%


11,164



43


1.54
%
Municipal bonds ⁽²⁾


4,234



33


3.13
%


4,221



34


3.27
%


5,347



37


2.78
%
Corporate bonds


4,339



47


4.34
%


4,510



47


4.23
%


4,852



47


3.89
%
Other interest-earning assets


213,883



2,742


5.14
%


186,809



2,205


4.79
%


195,633



535


1.10
%
Total interest-earning assets


2,453,508



36,838


6.02
%


2,401,303



34,536


5.83
%


2,135,325



22,446


4.22
%
Noninterest-earning assets


















Cash and due from banks


20,754







21,155







20,801





ACL on loans


(24,710
)






(26,757
)






(21,204
)




Other assets


71,200







75,175







73,137





Total noninterest-earning assets


67,244







69,573







72,734





Total assets

$
2,520,752






$
2,470,876






$
2,208,059





Liabilities and Shareholders’ Equity


















Interest-bearing liabilities


















Deposits


















NOW and money market accounts

$
465,564



3,929


3.38
%

$
485,962



3,445


2.87
%

$
464,829



430


0.37
%
Savings


7,767



5


0.26
%


8,099



5


0.25
%


14,989



2


0.05
%
Time deposits


1,054,191



11,187


4.26
%


916,751



8,463


3.74
%


521,606



609


0.47
%
Total interest-bearing deposits


1,527,522



15,121


3.97
%


1,410,812



11,913


3.42
%


1,001,424



1,041


0.42
%
Other borrowings


—



—


0.00
%


15,811



209


5.36
%


11,132



54


1.95
%
Total interest-bearing liabilities


1,527,522



15,121


3.97
%


1,426,623



12,122


3.45
%


1,012,556



1,095


0.43
%
Noninterest-bearing liabilities


















Noninterest-bearing demand


628,127







687,575







889,691





Other liabilities


25,234







21,509







13,677





Total noninterest-bearing liabilities


653,361







709,084







903,368





Total liabilities


2,180,883







2,135,707







1,915,924





Total shareholders’ equity


339,869







335,169







292,135





Total liabilities and shareholders’ equity

$
2,520,752






$
2,470,876






$
2,208,059





Net interest income



$
21,717






$
22,414






$
21,351



Net interest spread ⁽³⁾





2.05
%





2.38
%





3.79
%
Net interest margin ⁽⁴⁾





3.55
%





3.79
%





4.01
%
Total deposits

$
2,155,649


$
15,121


2.81
%

$
2,098,387


$
11,913


2.30
%

$
1,891,115


$
1,041


0.22
%
Total funding ⁽⁵⁾

$
2,155,649


$
15,121


2.81
%

$
2,114,198


$
12,122


2.33
%

$
1,902,247


$
1,095


0.23
%

(1)

Total loans include both loans held-for-sale and loans held-for-investment.

(2)

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

(3)

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

(4)

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

(5)

(6)

Annualized.

PCB Bancorp and Subsidiary Average Balance, Average Yield, and Average Rate (Unaudited) ($ in thousands)





Six Months Ended


6/30/2023

6/30/2022


Average Balance

Interest Income/ Expense

Avg. Yield/ Rate ⁽⁶⁾

Average Balance

Interest Income/ Expense

Avg. Yield/ Rate ⁽⁶⁾
Assets












Interest-earning assets












Total loans ⁽¹⁾

$
2,085,021


$
64,189


6.21
%

$
1,788,958


$
41,433


4.67
%
Mortgage-backed securities


98,278



1,396


2.86
%


86,138



723


1.69
%
Collateralized mortgage obligation


26,484



518


3.94
%


22,106



173


1.58
%
SBA loan pool securities


8,693



163


3.78
%


10,633



81


1.54
%
Municipal bonds ⁽²⁾


4,228



67


3.20
%


5,489



73


2.68
%
Corporate bonds


4,424



94


4.28
%


4,944



94


3.83
%
Other interest-earning assets


200,420



4,947


4.98
%


197,267



763


0.78
%
Total interest-earning assets


2,427,548



71,374


5.93
%


2,115,535



43,340


4.13
%
Noninterest-earning assets












Cash and due from banks


20,953







20,594





ACL on loans


(25,727
)






(21,787
)




Other assets


73,177







70,384





Total noninterest-earning assets


68,403







69,191





Total assets

$
2,495,951






$
2,184,726





Liabilities and Shareholders’ Equity












Interest-bearing liabilities












Deposits












NOW and money market accounts

$
475,707



7,374


3.13
%

$
448,496



743


0.33
%
Savings


7,932



10


0.25
%


15,315



4


0.05
%
Time deposits


985,851



19,650


4.02
%


553,818



1,144


0.42
%
Total interest-bearing deposits


1,469,490



27,034


3.71
%


1,017,629



1,891


0.37
%
Other borrowings


7,862



209


5.36
%


10,768



105


1.97
%
Total interest-bearing liabilities


1,477,352



27,243


3.72
%


1,028,397



1,996


0.39
%
Noninterest-bearing liabilities












Noninterest-bearing demand


657,687







865,294





Other liabilities


23,382







15,194





Total noninterest-bearing liabilities


681,069







880,488





Total liabilities


2,158,421







1,908,885





Total shareholders’ equity


337,530







275,841





Total liabilities and shareholders’ equity

$
2,495,951






$
2,184,726





Net interest income



$
44,131






$
41,344



Net interest spread ⁽³⁾





2.21
%





3.74
%
Net interest margin ⁽⁴⁾





3.67
%





3.94
%
Total deposits

$
2,127,177


$
27,034


2.56
%

$
1,882,923


$
1,891


0.20
%
Total funding ⁽⁵⁾

$
2,135,039


$
27,243


2.57
%

$
1,893,691


$
1,996


0.21
%

(1)

Total loans include both loans held-for-sale and loans held-for-investment.

(2)

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

(3)

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

(4)

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

(5)

(6)

Annualized.

PCB Bancorp and Subsidiary Loan Segments Revision (Unaudited) ($ in thousands)









As a part of the adoption of ASC 326, the Company reviewed and revised certain loan segments for the Company’s ACL model. Before the adoption of ASC 326, commercial property and SBA property loans were separately presented and represented 63.0% and 6.6% of loans held-for-investment at December 31, 2022, respectively. The Company re-divided these loan segments into commercial property (non-owner occupied), business property (owner occupied) and multifamily loans as these new loan segments are determined to share similar characteristics under the Company’s ACL model. In addition, four loan segments before the adoption of ASC 326 (commercial term loans, commercial lines of credit, SBA term loans and SBA PPP loans), which represented 12.2% of loans held-for-investment at December 31, 2022, are combined into a single loan segment, commercial and industrial loans, as these loans are determined to share similar risk characteristics under the Company’s ACL model. In this release, loan segments on loan related disclosures for prior period comparisons are revised accordingly in order to be comparable to the Company’s new loan segments.









The following table presents a reconciliation of revised loan segments to legacy loan segments, which were utilized before the adoption of ASC 326:









($ in thousands)

6/30/2023

3/31/2023

12/31/2022

6/30/2022
Revision for commercial real estate loans








Revised loan segments:








Commercial property

$
793,946


$
780,282


$
772,020


$
692,817

Business property


533,592



521,965



526,513



524,406

Multifamily


124,029



127,012



124,751



118,339

Total

$
1,451,567


$
1,429,259


$
1,423,284


$
1,335,562

Legacy loan segments:








Commercial property

$
1,320,110


$
1,300,719


$
1,288,392


$
1,204,142

SBA property


131,457



128,540



134,892



131,420

Total

$
1,451,567


$
1,429,259


$
1,423,284


$
1,335,562










Revision for commercial and industrial loans








Revised loan segments:








Commercial and industrial

$
272,278


$
267,674


$
249,250


$
204,369

Legacy loan segments:








Commercial term

$
90,213


$
91,740


$
77,700


$
73,885

Commercial lines of credit


165,162



159,268



154,142



111,916

SBA commercial term


15,900



15,566



16,211



16,985

SBA PPP


1,003



1,100



1,197



1,583

Total

$
272,278


$
267,674


$
249,250


$
204,369

PCB Bancorp and Subsidiary Non-GAAP Measures ($ in thousands)





Return on average tangible common equity, tangible common equity per common share and tangible common equity to total assets ratios





The Company's TCE is calculated by subtracting preferred stock from shareholders’ equity. The Company does not have any intangible assets for the presented periods. Return on average TCE, TCE per common share, and TCE to total assets constitute supplemental financial information determined by methods other than in accordance with GAAP. These non-GAAP measures are used by management in its analysis of the Company's performance. These non-GAAP measures should not be viewed as substitutes for results determined in accordance with GAAP, nor are they necessarily comparable to non-GAAP measures that may be presented by other companies. The following tables provide reconciliations of the non-GAAP measures with financial measures defined by GAAP.





($ in thousands)


Three Months Ended
Six Months Ended


6/30/2023

3/31/2023

6/30/2022

6/30/2023

6/30/2022
Average total shareholders' equity
(a)

$
339,869


$
335,169


$
292,135


$
337,530


$
275,841

Less: average preferred stock
(b)


69,141



69,141



28,872



69,141



14,516

Average TCE
(c)=(a)-(b)

$
270,728


$
266,028


$
263,263


$
268,389


$
261,325

Net income
(d)

$
7,477


$
10,297


$
9,092


$
17,774


$
19,332

Return on average shareholder's equity ⁽¹⁾
(d)/(a)


8.82
%


12.46
%


12.48
%


10.62
%


14.13
%
Return on average TCE ⁽¹⁾
(d)/(c)


11.08
%


15.70
%


13.85
%


13.35
%


14.92
%

(1)

Annualized.

($ in thousands, except per share data)


6/30/2023

3/31/2023

12/31/2022

6/30/2022
Total shareholders' equity
(a)

$
340,411


$
336,830


$
335,442


$
334,375

Less: preferred stock
(b)


69,141



69,141



69,141



69,141

TCE
(c)=(a)-(b)

$
271,270


$
267,689


$
266,301


$
265,234

Outstanding common shares
(d)


14,318,890



14,297,870



14,625,474



14,956,760

Book value per common share
(a)/(d)

$
23.77


$
23.56


$
22.94


$
22.36

TCE per common share
(c)/(d)

$
18.94


$
18.72


$
18.21


$
17.73

Total assets
(e)

$
2,556,345


$
2,500,524


$
2,420,036


$
2,344,560

Total shareholders' equity to total assets
(a)/(e)


13.32
%


13.47
%


13.86
%


14.26
%
TCE to total assets
(c)/(e)


10.61
%


10.71
%


11.00
%


11.31
%

View source version on businesswire.com: https://www.businesswire.com/news/home/20230727619099/en/

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

Company Name:	Pacific City Financial Corporation
Stock Symbol:	PCB
Market:	NASDAQ
Website:	paccitybank.com

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