PCB Bancorp Reports Earnings of $7.5 Million for Q2 2023

July 27, 2023 at 16:10 PM EDT

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.

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(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)		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).

Financial Highlights (Unaudited)

($ in thousands, except per share data)	Three Months Ended													Six Months Ended
($ in thousands, except per share data)	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)		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.
(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)		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.
(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
($ in thousands)		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/

Contacts

Timothy Chang

Executive Vice President & Chief Financial Officer

213-210-2000

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PCB Bancorp Reports Earnings of $7.5 Million for Q2 2023

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