PCB Bancorp Reports Earnings of $7.0 million for Q3 2023

October 25, 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 $7.0 million, or $0.49 per diluted common share, for the third quarter of 2023, compared with $7.5 million, or $0.52 per diluted common share, for the previous quarter and $7.0 million, or $0.46 per diluted common share, for the year-ago quarter.

Q3 2023 Highlights

Net income totaled $7.0 million, or $0.49 per diluted common share, for the current quarter;
Recorded a provision for credit losses^(1),(2) of $751 thousand for the current quarter compared with $197 thousand for the previous quarter and $3.8 million for the year-ago quarter;
Allowance for Credit Losses (“ACL”)⁽¹⁾ on loans to loans held-for-investment ratio was 1.18% at September 30, 2023 compared with 1.17% at June 30, 2023 and 1.21% at September 30, 2022;
Net interest income was $22.4 million for the current quarter compared with $21.7 million for the previous quarter and $24.0 million for the year-ago quarter. Net interest margin was 3.57% for the current quarter compared with 3.55% for the previous quarter and 4.25% for the year-ago quarter;
Gain on sale of loans was $689 thousand for the current quarter compared with $769 thousand for the previous quarter and $1.4 million for the year-ago quarter;
Total assets were $2.57 billion at September 30, 2023, an increase of $11.6 million, or 0.5%, from $2.56 billion at June 30, 2023, an increase of $147.9 million, or 6.1%, from $2.42 billion at December 31, 2022, and an increase of $240.9 million, or 10.4%, from $2.33 billion at September 30, 2022;
Loans held-for-investment were $2.17 billion at September 30, 2023, an increase of $45.2 million, or 2.1%, from $2.12 billion at June 30, 2023, an increase of $121.5 million, or 5.9%, from $2.05 billion at December 31, 2022, and an increase of $208.4 million, or 10.6%, from $1.96 billion at September 30, 2022;
Total deposits were $2.19 billion at September 30, 2023, an increase of $3.9 million, or 0.2%, from $2.19 billion at June 30, 2023, an increase of $146.1 million, or 7.1%, from $2.05 billion at December 31, 2022, and an increase of $214.0 million, or 10.8%, from $1.98 billion at September 30, 2022; and
Announced a stock repurchase program on August 2, 2023 for the repurchase of up to 720,000 shares of the Company’s outstanding common stock through August 2, 2024. During the current quarter, the Company repurchased and retired 67,202 shares of common stock.

“We are pleased with our continued solid earnings, modest loan growth, and a slight increase in net interest margin and net interest income during the third quarter,” said Henry Kim, President and Chief Executive Officer. “Our loan balance increased 2.1% to $2.17 billion, deposit balance remained steady and our asset quality continued to be strong with non-performing assets and classified assets to total assets ratios of 0.15% and 0.26%, respectively.”

Mr. Kim added, “We announced a new stock repurchase program and repurchased 67,202 shares. The Company continued to maintain a strong capital position with the Bank’s tier 1 capital to average assets ratio of 13.44% and the Company’s tangible common equity to total assets ratio of 10.62%. These robust ratios provide us with extensive confidence to maneuver through these uncharted times and enable us to prudently manage our capital to maximize shareholder value.”

Mr. Kim concluded, “This past September, we celebrated our 20^th anniversary of PCB Bank. We will continue to build a strong franchise by focusing on maintaining a strong balance sheet and asset quality, disciplined expense management, repurchasing our shares whenever feasible, and maintainable cash dividend.”

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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 (reversal) for credit losses on off-balance sheet credit exposures of $(10) thousand and $28 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													Nine Months Ended
($ in thousands, except per share data)	9/30/2023			6/30/2023			% Change		9/30/2022			% Change		9/30/2023			9/30/2022			% Change
Net income	$	7,023		$	7,477		(6.1	)%	$	6,953		1.0	%	$	24,797		$	26,285		(5.7	)%
Diluted earnings per common share	$	0.49		$	0.52		(5.8	)%	$	0.46		6.5	%	$	1.71		$	1.73		(1.2	)%

Net interest income	$	22,449		$	21,717		3.4	%	$	24,023		(6.6	)%	$	66,580		$	65,367		1.9	%
Provision (reversal) for credit losses ⁽¹⁾		751			197		281.2	%		3,753		(80.0	)%		(1,830	)		2,453		NM
Noninterest income		2,502			2,657		(5.8	)%		3,176		(21.2	)%		8,180			12,110		(32.5	)%
Noninterest expense		14,207			13,627		4.3	%		13,695		3.7	%		41,588			38,011		9.4	%

Return on average assets ⁽²⁾		1.09	%		1.19	%				1.19	%				1.32	%		1.58	%
Return on average shareholders’ equity ⁽²⁾		8.12	%		8.82	%				8.16	%				9.77	%		11.84	%
Return on average tangible common equity (“TCE”) ^(2),(3)		10.17	%		11.08	%				10.25	%				12.27	%		13.31	%
Net interest margin ⁽²⁾		3.57	%		3.55	%				4.25	%				3.63	%		4.05	%
Efficiency ratio ⁽⁴⁾		56.94	%		55.91	%				50.35	%				55.63	%		49.06	%

($ in thousands, except per share data)	9/30/2023			6/30/2023			% Change		12/31/2022			% Change		9/30/2022			% Change
Total assets	$	2,567,974		$	2,556,345		0.5	%	$	2,420,036		6.1	%	$	2,327,051		10.4	%
Net loans held-for-investment		2,142,006			2,097,560		2.1	%		2,021,121		6.0	%		1,935,476		10.7	%
Total deposits		2,192,129			2,188,232		0.2	%		2,045,983		7.1	%		1,978,098		10.8	%
Book value per common share ⁽⁵⁾	$	23.87		$	23.77				$	22.94				$	22.40
TCE per common share⁽³⁾	$	19.05		$	18.94				$	18.21				$	17.75
Tier 1 leverage ratio (consolidated)		13.76	%		13.84	%				14.33	%				14.74	%
Total shareholders’ equity to total assets		13.31	%		13.32	%				13.86	%				14.30	%
TCE to total assets ^{(3), (6)}		10.62	%		10.61	%				11.00	%				11.33	%

(1)	Provision (reversal) for credit losses on off-balance sheet credit exposures of $(10) thousand and $28 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													Nine Months Ended
($ in thousands)	9/30/2023			6/30/2023			% Change		9/30/2022			% Change		9/30/2023			9/30/2022			% Change
Interest income/expense on
Loans	$	34,651		$	32,960		5.1	%	$	24,835		39.5	%	$	98,840		$	66,268		49.2	%
Investment securities		1,170			1,136		3.0	%		806		45.2	%		3,408			1,950		74.8	%
Other interest-earning assets		3,031			2,742		10.5	%		1,194		153.9	%		7,978			1,957		307.7	%
Total interest-earning assets		38,852			36,838		5.5	%		26,835		44.8	%		110,226			70,175		57.1	%
Interest-bearing deposits		16,403			15,121		8.5	%		2,798		486.2	%		43,437			4,689		826.4	%
Borrowings		—			—		—	%		14		(100.0	)%		209			119		75.6	%
Total interest-bearing liabilities		16,403			15,121		8.5	%		2,812		483.3	%		43,646			4,808		807.8	%
Net interest income	$	22,449		$	21,717		3.4	%	$	24,023		(6.6	)%	$	66,580		$	65,367		1.9	%
Average balance of
Loans	$	2,137,184		$	2,097,489		1.9	%	$	1,905,366		12.2	%	$	2,102,600		$	1,828,187		15.0	%
Investment securities		138,993			142,136		(2.2	)%		137,363		1.2	%		141,057			132,023		6.8	%
Other interest-earning assets		219,115			213,883		2.4	%		200,367		9.4	%		206,720			198,311		4.2	%
Total interest-earning assets	$	2,495,292		$	2,453,508		1.7	%	$	2,243,096		11.2	%	$	2,450,377		$	2,158,521		13.5	%
Interest-bearing deposits	$	1,561,582		$	1,527,522		2.2	%	$	1,137,739		37.3	%	$	1,500,523		$	1,058,105		41.8	%
Borrowings		—			—		—	%		2,033		(100.0	)%		5,212			7,824		(33.4	)%
Total interest-bearing liabilities	$	1,561,582		$	1,527,522		2.2	%	$	1,139,772		37.0	%	$	1,505,735		$	1,065,929		41.3	%
Total funding ⁽¹⁾	$	2,188,320		$	2,155,649		1.5	%	$	1,965,134		11.4	%	$	2,152,993		$	1,917,766		12.3	%
Annualized average yield/cost of
Loans		6.43	%		6.30	%				5.17	%				6.29	%		4.85	%
Investment securities		3.34	%		3.21	%				2.33	%				3.23	%		1.97	%
Other interest-earning assets		5.49	%		5.14	%				2.36	%				5.16	%		1.32	%
Total interest-earning assets		6.18	%		6.02	%				4.75	%				6.01	%		4.35	%
Interest-bearing deposits		4.17	%		3.97	%				0.98	%				3.87	%		0.59	%
Borrowings		—	%		—	%				2.73	%				5.36	%		2.03	%
Total interest-bearing liabilities		4.17	%		3.97	%				0.98	%				3.88	%		0.60	%
Net interest margin		3.57	%		3.55	%				4.25	%				3.63	%		4.05	%
Cost of total funding ⁽¹⁾		2.97	%		2.81	%				0.57	%				2.71	%		0.34	%
Supplementary information
Net accretion of discount on loans	$	775		$	751		3.2	%	$	867		(10.6	)%	$	2,197		$	2,682		(18.1	)%
Net amortization of deferred loan fees	$	226		$	247		(8.5	)%	$	243		(7.0	)%	$	648		$	2,014		(67.8	)%

(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:

	9/30/2023				6/30/2023				12/31/2022				9/30/2022
	% 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	22.4	%	4.75	%	22.6	%	4.64	%	23.2	%	4.51	%	24.0	%	4.43	%
Hybrid rate loans	38.8	%	4.71	%	39.2	%	4.62	%	39.1	%	4.40	%	38.0	%	4.23	%
Variable rate loans	38.8	%	8.52	%	38.2	%	8.39	%	37.7	%	7.86	%	38.0	%	6.75	%

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.

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												Nine Months Ended
($ in thousands)	9/30/2023			6/30/2023		% Change		9/30/2022			% Change		9/30/2023			9/30/2022		% Change
Provision (reversal) for credit losses on loans	$	822		$	157	423.6	%	$	3,753		(78.1	)%	$	(1,438	)	$	2,453	NM
Provision (reversal) for credit losses on off-balance sheet credit exposure ⁽¹⁾		(71	)		40	NM			(10	)	610.0	%		(392	)		28	NM
Total provision (reversal) for credit losses	$	751		$	197	281.2	%	$	3,743		(79.9	)%	$	(1,830	)	$	2,481	NM

(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, also known as the current expected credit losses (“CECL”) accounting standard, 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 provision for credit losses on loans for the current quarter was primarily due to an increase in loan held-for-investment. 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										Nine Months Ended
($ in thousands)	9/30/2023		6/30/2023		% Change		9/30/2022		% Change		9/30/2023		9/30/2022		% Change
Gain on sale of loans	$	689	$	769	(10.4	)%	$	1,415	(51.3	)%	$	2,767	$	7,231	(61.7	)%
Service charges and fees on deposits		371		369	0.5	%		341	8.8	%		1,084		974	11.3	%
Loan servicing income		851		868	(2.0	)%		780	9.1	%		2,579		2,235	15.4	%
Bank-owned life insurance income		187		184	1.6	%		178	5.1	%		551		525	5.0	%
Other income		404		467	(13.5	)%		462	(12.6	)%		1,199		1,145	4.7	%
Total noninterest income	$	2,502	$	2,657	(5.8	)%	$	3,176	(21.2	)%	$	8,180	$	12,110	(32.5	)%

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

	Three Months Ended										Nine Months Ended
($ in thousands)	9/30/2023		6/30/2023		% Change		9/30/2022		% Change		9/30/2023		9/30/2022		% Change
Gain on sale of SBA loans
Sold loan balance	$	17,697	$	16,762	5.6	%	$	27,313	(35.2	)%	$	61,592	$	105,438	(41.6	)%
Premium received		1,112		1,209	(8.0	)%		2,036	(45.4	)%		4,362		8,842	(50.7	)%
Gain recognized		689		769	(10.4	)%		1,407	(51.0	)%		2,767		7,223	(61.7	)%
Gain on sale of residential property loans
Sold loan balance	$	—	$	—	—	%	$	858	(100.0	)%	$	—	$	858	(100.0	)%
Gain recognized		—		—	—	%		8	(100.0	)%		—		8	(100.0	)%

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

	Three Months Ended													Nine Months Ended
($ in thousands)	9/30/2023			6/30/2023			% Change		9/30/2022			% Change		9/30/2023			9/30/2022			% Change
Loan servicing income
Servicing income received	$	1,321		$	1,317		0.3	%	$	1,302		1.5	%	$	3,922		$	3,819		2.7	%
Servicing assets amortization		(470	)		(449	)	4.7	%		(522	)	(10.0	)%		(1,343	)		(1,584	)	(15.2	)%
Loan servicing income	$	851		$	868		(2.0	)%	$	780		9.1	%	$	2,579		$	2,235		15.4	%
Underlying loans at end of period	$	536,424		$	539,160		(0.5	)%	$	538,904		(0.5	)%	$	536,424		$	538,904		(0.5	)%

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										Nine Months Ended
($ in thousands)	9/30/2023		6/30/2023		% Change		9/30/2022		% Change		9/30/2023		9/30/2022		% Change
Salaries and employee benefits	$	8,572	$	8,675	(1.2	)%	$	8,457	1.4	%	$	26,175	$	25,177	4.0	%
Occupancy and equipment		1,964		1,919	2.3	%		1,650	19.0	%		5,779		4,584	26.1	%
Professional fees		685		772	(11.3	)%		587	16.7	%		2,189		1,632	34.1	%
Marketing and business promotion		980		203	382.8	%		909	7.8	%		1,555		1,426	9.0	%
Data processing		367		380	(3.4	)%		427	(14.1	)%		1,159		1,272	(8.9	)%
Director fees and expenses		152		217	(30.0	)%		179	(15.1	)%		549		530	3.6	%
Regulatory assessments		281		382	(26.4	)%		150	87.3	%		818		438	86.8	%
Other expense		1,206		1,079	11.8	%		1,336	(9.7	)%		3,364		2,952	14.0	%
Total noninterest expense	$	14,207	$	13,627	4.3	%	$	13,695	3.7	%	$	41,588	$	38,011	9.4	%

Salaries and Employee Benefits. 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 accruals and incentives tied to sales of SBA loans originated at loan production offices. The number of full-time equivalent employees was 270, 272 and 274 as of September 30, 2023, June 30, 2023 and September 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. 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 compared with the same periods of 2022 were primarily due to increases in audit and consulting fees.

Marketing and Business Promotion. The increase for the current quarter compared with the previous quarter was primarily due to an increase in advertisements and the Company’s 20^th anniversary celebration.

Director fees and expenses. The decrease for the current quarter compared with the previous quarter was primarily due to the retirement of a director during the previous quarter.

Regulatory Assessments. The increases for the current quarter and year-to-date period compared with the same periods of 2022 were due to an increase in FDIC assessment rates. During the previous quarter, an adjustment of $113 thousand was made for the first quarter of 2023. 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 were primarily due to increases in office expenses and armed guard expenses attributable to the branch network expansion. Provision (reversal) for credit losses on off-balance credit exposures of $(10) thousand and $28 thousand was included in other expense for the year-ago quarter and previous year-to-date period, respectively, while the provision (reversal) for the current reporting periods beginning January 1, 2023 was included in provision (reversal) for credit losses.

Balance Sheet (Unaudited)

Total assets were $2.57 billion at September 30, 2023, an increase of $11.6 million, or 0.5%, from $2.56 billion at June 30, 2023, an increase of $147.9 million, or 6.1%, from $2.42 billion at December 31, 2022, and an increase of $240.9 million, or 10.4%, from $2.33 billion at September 30, 2022. The increase for the current quarter was primarily due to an increase in loans held-for-investment, partially offset by decreases in cash and cash equivalents and loans held-for-sale. The increase for the year-to-date period was 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)	9/30/2023		6/30/2023		% Change		12/31/2022		% Change		9/30/2022		% Change
Commercial real estate:
Commercial property	$	814,547	$	793,946	2.6	%	$	772,020	5.5	%	$	759,644	7.2	%
Business property		537,351		533,592	0.7	%		526,513	2.1	%		526,395	2.1	%
Multifamily		132,558		124,029	6.9	%		124,751	6.3	%		121,830	8.8	%
Construction		19,246		16,942	13.6	%		17,054	12.9	%		14,592	31.9	%
Total commercial real estate		1,503,702		1,468,509	2.4	%		1,440,338	4.4	%		1,422,461	5.7	%
Commercial and industrial		279,608		272,278	2.7	%		249,250	12.2	%		216,036	29.4	%
Consumer:
Residential mortgage		363,369		359,655	1.0	%		333,726	8.9	%		297,506	22.1	%
Other consumer		20,926		21,985	(4.8	)%		22,749	(8.0	)%		23,234	(9.9	)%
Total consumer		384,295		381,640	0.7	%		356,475	7.8	%		320,740	19.8	%
Loans held-for-investment		2,167,605		2,122,427	2.1	%		2,046,063	5.9	%		1,959,237	10.6	%
Loans held-for-sale		6,693		13,065	(48.8	)%		22,811	(70.7	)%		18,982	(64.7	)%
Total loans	$	2,174,298	$	2,135,492	1.8	%	$	2,068,874	5.1	%	$	1,978,219	9.9	%

The increase in loans held-for-investment for the current quarter was primarily due to new funding and advances on lines of credit of $259.3 million, partially offset by pay-downs and pay-offs of $214.1 million. The increase for the current year-to-date period was primarily due to new funding and advances on lines of credit of $717.0 million and purchases of residential mortgage loans of $15.7 million, partially offset by pay-downs and pay-offs of $611.2 million.

The decrease in loans held-for-sale for the current quarter was primarily due to sales of $17.7 million, partially offset by new funding of $11.5 million. The decrease for the current year-to-date was primarily due to sales of $61.6 million and pay-downs and pay-offs of $4.3 million, partially offset by new funding of $49.8 million.

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

($ in thousands)	9/30/2023		6/30/2023		% Change		12/31/2022		% Change		9/30/2022		% Change
Commercial property	$	9,827	$	11,118	(11.6	)%	$	7,006	40.3	%	$	6,283	56.4	%
Business property		8,388		9,487	(11.6	)%		8,396	(0.1	)%		10,847	(22.7	)%
Multifamily		1,800		4,500	(60.0	)%		4,500	(60.0	)%		5,000	(64.0	)%
Construction		29,293		30,865	(5.1	)%		18,211	60.9	%		11,093	164.1	%
Commercial and industrial		283,119		279,584	1.3	%		254,668	11.2	%		257,337	10.0	%
Other consumer		271		445	(39.1	)%		692	(60.8	)%		847	(68.0	)%
Total commitments to extend credit		332,698		335,999	(1.0	)%		293,473	13.4	%		291,407	14.2	%
Letters of credit		6,083		6,027	0.9	%		5,392	12.8	%		5,096	19.4	%
Total off-balance sheet credit exposure	$	338,781	$	342,026	(0.9	)%	$	298,865	13.4	%	$	296,503	14.3	%

Credit Quality

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

($ in thousands)	9/30/2023			6/30/2023			% Change		12/31/2022			% Change		9/30/2022			% Change
Nonaccrual loans
Commercial real estate:
Commercial property	$	686		$	699		(1.9	)%	$	—		—	%	$	—		—	%
Business property		2,964			3,007		(1.4	)%		2,985		(0.7	)%		2,996		(1.1	)%
Total commercial real estate		3,650			3,706		(1.5	)%		2,985		22.3	%		2,996		21.8	%
Commercial and industrial		72			88		(18.2	)%		—		—	%		4,003		(98.2	)%
Consumer:
Residential mortgage		—			—		—	%		372		(100.0	)%		372		(100.0	)%
Other consumer		8			51		(84.3	)%		3		166.7	%		25		(68.0	)%
Total consumer		8			51		(84.3	)%		375		(97.9	)%		397		(98.0	)%
Total nonaccrual loans held-for-investment		3,730			3,845		(3.0	)%		3,360		11.0	%		7,396		(49.6	)%
Loans past due 90 days or more and still accruing		—			—		—	%		—		—	%		—		—	%
Non-performing loans (“NPLs”) held-for-investment		3,730			3,845		(3.0	)%		3,360		11.0	%		7,396		(49.6	)%
NPLs held-for-sale		—			—		—	%		4,000		(100.0	)%		—		—	%
Total NPLs		3,730			3,845		(3.0	)%		7,360		(49.3	)%		7,396		(49.6	)%
Other real estate owned (“OREO”)		—			—		—	%		—		—	%		—		—	%
Non-performing assets (“NPAs”)	$	3,730		$	3,845		(3.0	)%	$	7,360		(49.3	)%	$	7,396		(49.6	)%
Loans past due and still accruing
Past due 30 to 59 days	$	654		$	428		52.8	%	$	47		1,291.5	%	$	215		204.2	%
Past due 60 to 89 days		54			—		—	%		87		(37.9	)%		195		(72.3	)%
Past due 90 days or more		—			—		—	%		—		—	%		—		—	%
Total loans past due and still accruing	$	708		$	428		65.4	%		134		428.4	%	$	410		72.7	%
Special mention loans	$	5,281		$	5,406		(2.3	)%	$	6,857		(23.0	)%	$	5,986		(11.8	)%
Classified assets
Classified loans held-for-investment	$	6,742		$	6,901		(2.3	)%	$	6,211		8.5	%	$	10,293		(34.5	)%
Classified loans held-for-sale		—			—		—	%		4,000		(100.0	)%		—		—	%
OREO		—			—		—	%		—		—	%		—		—	%
Classified assets	$	6,742		$	6,901		(2.3	)%	$	10,211		(34.0	)%	$	10,293		(34.5	)%
NPLs held-for-investment to loans held-for-investment		0.17	%		0.18	%				0.16	%				0.38	%
NPAs to total assets		0.15	%		0.15	%				0.30	%				0.32	%
Classified assets to total assets		0.26	%		0.27	%				0.42	%				0.44	%

During the first quarter of 2023, 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													Nine Months Ended
($ in thousands)	9/30/2023			6/30/2023			% Change		9/30/2022			% Change		9/30/2023			9/30/2022			% Change
ACL on loans
Balance at beginning of period	$	24,867		$	24,694		0.7	%	$	21,071		18.0	%	$	24,942		$	22,381		11.4	%
Impact of ASC 326 adoption		—			—		NM			—		NM			1,067			—		NM
Charge-offs		(112	)		(7	)	1,500.0	%		(1,112	)	(89.9	)%		(119	)		(1,171	)	(89.8	)%
Recoveries		22			23		(4.3	)%		49		(55.1	)%		1,147			98		1,070.4	%
Provision (reversal) for credit losses on loans		822			157		423.6	%		3,753		(78.1	)%		(1,438	)		2,453		NM
Balance at end of period	$	25,599		$	24,867		2.9	%	$	23,761		7.7	%	$	25,599		$	23,761		7.7	%
Percentage to loans held-for-investment at end of period		1.18	%		1.17	%				1.22	%							1.22	%
ACL on off-balance sheet credit exposure ⁽¹⁾
Balance at beginning of period	$	1,585		$	1,545		2.6	%	$	252		529.0	%	$	299		$	214		39.7	%
Impact of ASC 326 adoption		—			—		NM			—		NM			1,607			—		NM
Provision (reversal) for credit losses on off-balance sheet credit exposure		(71	)		40		NM			(10	)	610.0	%		(392	)		28		NM
Balance at end of period	$	1,514		$	1,585		(4.5	)%	$	242		525.6	%	$	1,514		$	242		525.6	%

(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 $139.2 million at September 30, 2023, an increase of $545 thousand, or 0.4%, from $138.7 million at June 30, 2023, a decrease of $2.6 million, or 1.9%, from $141.9 million at December 31, 2022, and an increase of $9.8 million, or 7.6%, from $129.4 million at September 30, 2022. The increase for the current quarter was primarily due to purchases of $10.0 million, partially offset by principal pay-downs and calls of $5.6 million, a fair value decrease of $3.8 million and net premium amortization of $53 thousand. The decrease for the current year-to-date period was primarily due to principal pay-downs and calls of $14.3 million, a fair value decrease of $4.1 million and net premium amortization of $169 thousand, partially offset by purchases of $16.0 million.

Deposits

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

	9/30/2023				6/30/2023				12/31/2022				9/30/2022
($ in thousands)	Amount		% to Total		Amount		% to Total		Amount		% to Total		Amount		% to Total
Noninterest-bearing demand deposits	$	611,021	27.9	%	$	635,329	29.0	%	$	734,989	35.9	%	$	809,842	40.9	%
Interest-bearing deposits
Savings		6,846	0.3	%		7,504	0.3	%		8,579	0.4	%		13,028	0.7	%
NOW		16,076	0.7	%		16,993	0.8	%		11,405	0.6	%		17,550	0.9	%
Retail money market accounts		436,115	19.8	%		464,655	21.1	%		494,749	24.1	%		522,412	26.4	%
Brokered money market accounts		1	0.1	%		1	0.1	%		8	0.1	%		10,010	0.5	%
Retail time deposits of
$250,000 or less		406,407	18.5	%		392,012	17.9	%		295,354	14.4	%		236,864	12.0	%
More than $250,000		454,406	20.8	%		451,590	20.7	%		353,876	17.3	%		239,271	12.1	%
State and brokered time deposits		261,257	11.9	%		220,148	10.1	%		147,023	7.2	%		129,121	6.5	%
Total interest-bearing deposits		1,581,108	72.1	%		1,552,903	71.0	%		1,310,994	64.1	%		1,168,256	59.1	%
Total deposits	$	2,192,129	100.0	%	$	2,188,232	100.0	%	$	2,045,983	100.0	%	$	1,978,098	100.0	%

Estimated total deposits not covered by deposit insurance	$	983,851	44.9	%	$	1,034,148	47.3	%	$	1,062,111	51.9	%	$	1,199,502	60.6	%

The decrease in noninterest-bearing demand deposits was primarily due to strong deposit market competition and the migration 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.

The increase in retail time deposits for the current quarter was primarily due to new accounts of $60.8 million, renewals of the matured accounts of $85.1 million and balance increases of $5.3 million, partially offset by matured and closed accounts of $133.9 million. The increase for the current year-to-date period was primarily due to new accounts of $469.0 million, renewals of the matured accounts of $291.3 million and balance increases of $17.1 million, partially offset by matured and closed accounts of $565.8 million.

Liquidity

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

($ in thousands)	9/30/2023			12/31/2022			% Change
Cash and cash equivalents	$	192,350		$	147,031		30.8	%
Cash and cash equivalents to total assets		7.5	%		6.1	%

Available borrowing capacity
FHLB advances	$	639,072		$	561,745		13.8	%
Federal Reserve Discount Window		490,633			23,902		1952.7	%
Overnight federal funds lines		65,000			65,000		—	%
Total	$	1,194,705		$	650,647		83.6	%
Total available borrowing capacity to total assets		46.5	%		26.9	%

During the current year-to-date period, the Company increased cash and cash equivalents by $45.3 million, or 30.8%, to $192.4 million and available borrowing capacity by $544.1 million, or 83.6%, to $1.19 billion. During the current quarter, the Company began participating in the Borrower-in Custody Program with the Federal Reserve Bank providing additional borrowing capacity. As of September 30, 2023, the Company's cash and cash equivalents and available borrowing capacity covered approximately 141.0% of deposits not covered by deposit insurance compared to 75.1% at December 31, 2022.

Shareholders’ Equity

Shareholders’ equity was $341.9 million at September 30, 2023, an increase of $1.4 million, or 0.4%, from $340.4 million at June 30, 2023, an increase of $6.4 million, or 1.9%, from $335.4 million at December 31, 2022, and an increase of $9.1 million, or 2.7%, from $332.7 million at September 30, 2022. The increase for the current quarter was primarily due to net income and cash proceeds from exercise of stock options of $662 thousand, partially offset by cash dividends declared on common stock of $2.6 million, repurchase of common stock of $1.1 million and an increase in other comprehensive loss of $2.7 million. The increase for the current year-to-date period was primarily due to net income and cash proceeds from exercise of stock options of $1.3 million, partially offset by cash dividend declared on common stock of $7.3 million, repurchase of common stock of $7.9 million, an increase in other comprehensive loss of $2.9 million, and cumulative effect adjustment upon adoption of ASC 326 of $1.9 million.

Stock Repurchases

On July 28, 2022, the Company’s Board of Directors approved a stock repurchase program authorizing 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 first quarter of 2023. 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.

On August 2, 2023, the Company’s Board of Directors approved a new stock repurchase program authorizing the repurchase of up to 5% of the Company’s outstanding common stock, which represented 720,000 shares, through August 2, 2024. The Company repurchased and retired 67,202 shares of common stock at a weighted-average price of $15.75 per share, totaling $1.1 million under this repurchase program through September 30, 2023.

For the current year-to-date period, the Company repurchased and retired 452,583 shares of common stock at a weighted-average price of $17.46, totaling $7.9 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”). The 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:

	9/30/2023		6/30/2023		12/31/2022		9/30/2022		Well Capitalized Requirements
PCB Bancorp
Common tier 1 capital (to risk-weighted assets)	13.07	%	13.12	%	13.29	%	13.69	%	N/A
Total capital (to risk-weighted assets)	17.48	%	17.57	%	17.83	%	18.34	%	N/A
Tier 1 capital (to risk-weighted assets)	16.24	%	16.34	%	16.62	%	17.14	%	N/A
Tier 1 capital (to average assets)	13.76	%	13.84	%	14.33	%	14.74	%	N/A
PCB Bank
Common tier 1 capital (to risk-weighted assets)	15.87	%	16.00	%	16.30	%	16.82	%	6.5	%
Total capital (to risk-weighted assets)	17.11	%	17.23	%	17.52	%	18.02	%	10.0	%
Tier 1 capital (to risk-weighted assets)	15.87	%	16.00	%	16.30	%	16.82	%	8.0	%
Tier 1 capital (to average assets)	13.44	%	13.55	%	14.05	%	14.47	%	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)

	9/30/2023			6/30/2023			% Change		12/31/2022			% Change		9/30/2022			% Change
Assets
Cash and due from banks	$	22,691		$	22,159		2.4	%	$	23,202		(2.2	)%	$	22,252		2.0	%
Interest-bearing deposits in other financial institutions		169,659			199,987		(15.2	)%		123,829		37.0	%		131,786		28.7	%
Total cash and cash equivalents		192,350			222,146		(13.4	)%		147,031		30.8	%		154,038		24.9	%
Securities available-for-sale, at fair value		139,218			138,673		0.4	%		141,863		(1.9	)%		129,401		7.6	%
Loans held-for-sale		6,693			13,065		(48.8	)%		22,811		(70.7	)%		18,982		(64.7	)%
Loans held-for-investment		2,167,605			2,122,427		2.1	%		2,046,063		5.9	%		1,959,237		10.6	%
Allowance for credit losses on loans		(25,599	)		(24,867	)	2.9	%		(24,942	)	2.6	%		(23,761	)	7.7	%
Net loans held-for-investment		2,142,006			2,097,560		2.1	%		2,021,121		6.0	%		1,935,476		10.7	%
Premises and equipment, net		6,229			6,394		(2.6	)%		6,916		(9.9	)%		4,671		33.4	%
Federal Home Loan Bank and other bank stock		12,716			12,716		—	%		10,183		24.9	%		10,183		24.9	%
Bank-owned life insurance		30,615			30,428		0.6	%		30,064		1.8	%		29,883		2.4	%
Deferred tax assets, net		4,486			4,348		3.2	%		3,115		44.0	%		12,135		(63.0	)%
Servicing assets		6,920			7,142		(3.1	)%		7,347		(5.8	)%		7,627		(9.3	)%
Operating lease assets		5,626			5,182		8.6	%		6,358		(11.5	)%		6,897		(18.4	)%
Accrued interest receivable		8,731			8,040		8.6	%		7,472		16.8	%		6,070		43.8	%
Other assets		12,384			10,651		16.3	%		15,755		(21.4	)%		11,688		6.0	%
Total assets	$	2,567,974		$	2,556,345		0.5	%	$	2,420,036		6.1	%	$	2,327,051		10.4	%
Liabilities
Deposits
Noninterest-bearing demand	$	611,021		$	635,329		(3.8	)%	$	734,989		(16.9	)%	$	809,842		(24.6	)%
Savings, NOW and money market accounts		459,038			489,153		(6.2	)%		514,741		(10.8	)%		563,000		(18.5	)%
Time deposits of $250,000 or less		607,664			552,160		10.1	%		382,377		58.9	%		305,985		98.6	%
Time deposits of more than $250,000		514,406			511,590		0.6	%		413,876		24.3	%		299,271		71.9	%
Total deposits		2,192,129			2,188,232		0.2	%		2,045,983		7.1	%		1,978,098		10.8	%
Federal Home Loan Bank advances		—			—		—	%		20,000		(100.0	)%		—		—	%
Operating lease liabilities		5,852			5,495		6.5	%		6,809		(14.1	)%		7,402		(20.9	)%
Accrued interest payable and other liabilities		28,141			22,207		26.7	%		11,802		138.4	%		8,832		218.6	%
Total liabilities		2,226,122			2,215,934		0.5	%		2,084,594		6.8	%		1,994,332		11.6	%
Commitments and contingent liabilities
Shareholders’ equity
Preferred stock		69,141			69,141		—	%		69,141		—	%		69,141		—	%
Common stock		143,401			143,686		(0.2	)%		149,631		(4.2	)%		153,890		(6.8	)%
Retained earnings		142,750			138,315		3.2	%		127,181		12.2	%		120,699		18.3	%
Accumulated other comprehensive loss, net		(13,440	)		(10,731	)	25.2	%		(10,511	)	27.9	%		(11,011	)	22.1	%
Total shareholders’ equity		341,852			340,411		0.4	%		335,442		1.9	%		332,719		2.7	%
Total liabilities and shareholders’ equity	$	2,567,974		$	2,556,345		0.5	%	$	2,420,036		6.1	%	$	2,327,051		10.4	%

Outstanding common shares		14,319,014			14,318,890					14,625,474					14,853,140
Book value per common share ⁽¹⁾	$	23.87		$	23.77				$	22.94				$	22.40
TCE per common share⁽²⁾	$	19.05		$	18.94				$	18.21				$	17.75
Total loan to total deposit ratio		99.19	%		97.59	%				101.12	%				100.01	%
Noninterest-bearing deposits to total deposits		27.87	%		29.03	%				35.92	%				40.94	%

(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													Nine Months Ended
	9/30/2023			6/30/2023			% Change		9/30/2022			% Change		9/30/2023			9/30/2022			% Change
Interest and dividend income
Loans, including fees	$	34,651		$	32,960		5.1	%	$	24,835		39.5	%	$	98,840		$	66,268		49.2	%
Investment securities		1,170			1,136		3.0	%		806		45.2	%		3,408			1,950		74.8	%
Other interest-earning assets		3,031			2,742		10.5	%		1,194		153.9	%		7,978			1,957		307.7	%
Total interest income		38,852			36,838		5.5	%		26,835		44.8	%		110,226			70,175		57.1	%
Interest expense
Deposits		16,403			15,121		8.5	%		2,798		486.2	%		43,437			4,689		826.4	%
Other borrowings		—			—		—	%		14		(100.0	)%		209			119		75.6	%
Total interest expense		16,403			15,121		8.5	%		2,812		483.3	%		43,646			4,808		807.8	%
Net interest income		22,449			21,717		3.4	%		24,023		(6.6	)%		66,580			65,367		1.9	%
Provision (reversal) for credit losses		751			197		281.2	%		3,753		(80.0	)%		(1,830	)		2,453		NM
Net interest income after provision (reversal) for credit losses		21,698			21,520		0.8	%		20,270		7.0	%		68,410			62,914		8.7	%
Noninterest income
Gain on sale of loans		689			769		(10.4	)%		1,415		(51.3	)%		2,767			7,231		(61.7	)%
Service charges and fees on deposits		371			369		0.5	%		341		8.8	%		1,084			974		11.3	%
Loan servicing income		851			868		(2.0	)%		780		9.1	%		2,579			2,235		15.4	%
Bank-owned life insurance income		187			184		1.6	%		178		5.1	%		551			525		5.0	%
Other income		404			467		(13.5	)%		462		(12.6	)%		1,199			1,145		4.7	%
Total noninterest income		2,502			2,657		(5.8	)%		3,176		(21.2	)%		8,180			12,110		(32.5	)%
Noninterest expense
Salaries and employee benefits		8,572			8,675		(1.2	)%		8,457		1.4	%		26,175			25,177		4.0	%
Occupancy and equipment		1,964			1,919		2.3	%		1,650		19.0	%		5,779			4,584		26.1	%
Professional fees		685			772		(11.3	)%		587		16.7	%		2,189			1,632		34.1	%
Marketing and business promotion		980			203		382.8	%		909		7.8	%		1,555			1,426		9.0	%
Data processing		367			380		(3.4	)%		427		(14.1	)%		1,159			1,272		(8.9	)%
Director fees and expenses		152			217		(30.0	)%		179		(15.1	)%		549			530		3.6	%
Regulatory assessments		281			382		(26.4	)%		150		87.3	%		818			438		86.8	%
Other expense		1,206			1,079		11.8	%		1,336		(9.7	)%		3,364			2,952		14.0	%
Total noninterest expense		14,207			13,627		4.3	%		13,695		3.7	%		41,588			38,011		9.4	%
Income before income taxes		9,993			10,550		(5.3	)%		9,751		2.5	%		35,002			37,013		(5.4	)%
Income tax expense		2,970			3,073		(3.4	)%		2,798		6.1	%		10,205			10,728		(4.9	)%
Net income	$	7,023		$	7,477		(6.1	)%	$	6,953		1.0	%	$	24,797		$	26,285		(5.7	)%

Earnings per common share
Basic	$	0.49		$	0.52				$	0.47				$	1.73		$	1.76
Diluted	$	0.49		$	0.52				$	0.46				$	1.71		$	1.73
Average common shares
Basic		14,294,802			14,271,200					14,877,879					14,327,930			14,869,997
Diluted		14,396,216			14,356,776					15,088,089					14,441,960			15,126,863

Dividend paid per common share	$	0.18		$	0.18				$	0.15				$	0.51		$	0.45
Return on average assets ⁽¹⁾		1.09	%		1.19	%				1.19	%				1.32	%		1.58	%
Return on average shareholders’ equity⁽¹⁾		8.12	%		8.82	%				8.16	%				9.77	%		11.84	%
Return on average TCE ^{(1), (2)}		10.17	%		11.08	%				10.25	%				12.27	%		13.31	%
Efficiency ratio⁽³⁾		56.94	%		55.91	%				50.35	%				55.63	%		49.06	%

(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
	9/30/2023							6/30/2023							9/30/2022
	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⁾	$	2,137,184		$	34,651	6.43	%	$	2,097,489		$	32,960	6.30	%	$	1,905,366		$	24,835	5.17	%
Mortgage-backed securities		98,534			750	3.02	%		98,971			713	2.89	%		93,546			518	2.20	%
Collateralized mortgage obligation		24,959			262	4.16	%		26,228			262	4.01	%		24,090			151	2.49	%
SBA loan pool securities		7,842			81	4.10	%		8,364			81	3.88	%		10,435			56	2.13	%
Municipal bonds ⁽²⁾		3,602			30	3.30	%		4,234			33	3.13	%		4,491			34	3.00	%
Corporate bonds		4,056			47	4.60	%		4,339			47	4.34	%		4,801			47	3.88	%
Other interest-earning assets		219,115			3,031	5.49	%		213,883			2,742	5.14	%		200,367			1,194	2.36	%
Total interest-earning assets		2,495,292			38,852	6.18	%		2,453,508			36,838	6.02	%		2,243,096			26,835	4.75	%
Noninterest-earning assets
Cash and due from banks		21,298							20,754							20,609
ACL on loans		(24,869	)						(24,710	)						(21,117	)
Other assets		71,512							71,200							76,851
Total noninterest-earning assets		67,941							67,244							76,343
Total assets	$	2,563,233						$	2,520,752						$	2,319,439
Liabilities and Shareholders’ Equity
Interest-bearing liabilities
Deposits
NOW and money market accounts	$	481,341			4,398	3.62	%	$	465,564			3,929	3.38	%	$	577,975			1,375	0.94	%
Savings		7,197			4	0.22	%		7,767			5	0.26	%		14,990			2	0.05	%
Time deposits		1,073,044			12,001	4.44	%		1,054,191			11,187	4.26	%		544,774			1,421	1.03	%
Total interest-bearing deposits		1,561,582			16,403	4.17	%		1,527,522			15,121	3.97	%		1,137,739			2,798	0.98	%
Other borrowings		—			—	0.00	%		—			—	—	%		2,033			14	2.73	%
Total interest-bearing liabilities		1,561,582			16,403	4.17	%		1,527,522			15,121	3.97	%		1,139,772			2,812	0.98	%
Noninterest-bearing liabilities
Noninterest-bearing demand		626,738							628,127							825,362
Other liabilities		31,769							25,234							16,057
Total noninterest-bearing liabilities		658,507							653,361							841,419
Total liabilities		2,220,089							2,180,883							1,981,191
Total shareholders’ equity		343,144							339,869							338,248
Total liabilities and shareholders’ equity	$	2,563,233						$	2,520,752						$	2,319,439
Net interest income				$	22,449						$	21,717						$	24,023
Net interest spread⁽³⁾						2.01	%						2.05	%						3.77	%
Net interest margin ⁽⁴⁾						3.57	%						3.55	%						4.25	%
Total deposits	$	2,188,320		$	16,403	2.97	%	$	2,155,649		$	15,121	2.81	%	$	1,963,101		$	2,798	0.57	%
Total funding ⁽⁵⁾	$	2,188,320		$	16,403	2.97	%	$	2,155,649		$	15,121	2.81	%	$	1,965,134		$	2,812	0.57	%

(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)

	Nine Months Ended
	9/30/2023							9/30/2022
	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⁾	$	2,102,600		$	98,840	6.29	%	$	1,828,187		$	66,268	4.85	%
Mortgage-backed securities		98,364			2,146	2.92	%		88,634			1,241	1.87	%
Collateralized mortgage obligation		25,970			780	4.02	%		22,775			324	1.90	%
SBA loan pool securities		8,406			244	3.88	%		10,566			137	1.73	%
Municipal bonds ⁽²⁾		4,017			97	3.23	%		5,152			107	2.78	%
Corporate bonds		4,300			141	4.38	%		4,896			141	3.85	%
Other interest-earning assets		206,720			7,978	5.16	%		198,311			1,957	1.32	%
Total interest-earning assets		2,450,377			110,226	6.01	%		2,158,521			70,175	4.35	%
Noninterest-earning assets
Cash and due from banks		21,069							20,599
ACL on loans		(25,438	)						(21,561	)
Other assets		72,616							72,563
Total noninterest-earning assets		68,247							71,601
Total assets	$	2,518,624						$	2,230,122
Liabilities and Shareholders’ Equity
Interest-bearing liabilities
Deposits
NOW and money market accounts	$	477,605			11,772	3.30	%	$	492,130			2,118	0.58	%
Savings		7,684			14	0.24	%		15,205			6	0.05	%
Time deposits		1,015,234			31,651	4.17	%		550,770			2,565	0.62	%
Total interest-bearing deposits		1,500,523			43,437	3.87	%		1,058,105			4,689	0.59	%
Other borrowings		5,212			209	5.36	%		7,824			119	2.03	%
Total interest-bearing liabilities		1,505,735			43,646	3.88	%		1,065,929			4,808	0.60	%
Noninterest-bearing liabilities
Noninterest-bearing demand		647,258							851,837
Other liabilities		26,208							15,485
Total noninterest-bearing liabilities		673,466							867,322
Total liabilities		2,179,201							1,933,251
Total shareholders’ equity		339,423							296,871
Total liabilities and shareholders’ equity	$	2,518,624						$	2,230,122
Net interest income				$	66,580						$	65,367
Net interest spread⁽³⁾						2.13	%						3.75	%
Net interest margin ⁽⁴⁾						3.63	%						4.05	%
Total deposits	$	2,147,781		$	43,437	2.70	%	$	1,909,942		$	4,689	0.33	%
Total funding ⁽⁵⁾	$	2,152,993		$	43,646	2.71	%	$	1,917,766		$	4,808	0.34	%

(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)	9/30/2023		6/30/2023		12/31/2022		9/30/2022
Revision for commercial real estate loans
Revised loan segments:
Commercial property	$	814,547	$	793,946	$	772,020	$	759,644
Business property		537,351		533,592		526,513		526,395
Multifamily		132,558		124,029		124,751		121,830
Total	$	1,484,456	$	1,451,567	$	1,423,284	$	1,407,869
Legacy loan segments:
Commercial property	$	1,354,590	$	1,320,110	$	1,288,392	$	1,271,781
SBA property		129,866		131,457		134,892		136,088
Total	$	1,484,456	$	1,451,567	$	1,423,284	$	1,407,869

Revision for commercial and industrial loans
Revised loan segments:
Commercial and industrial	$	279,608	$	272,278	$	249,250	$	216,036
Legacy loan segments:
Commercial term	$	87,892	$	90,213	$	77,700	$	80,225
Commercial lines of credit		174,585		165,162		154,142		117,960
SBA commercial term		16,272		15,900		16,211		16,542
SBA PPP		859		1,003		1,197		1,309
Total	$	279,608	$	272,278	$	249,250	$	216,036

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									Nine Months Ended
($ in thousands)		9/30/2023			6/30/2023			9/30/2022			9/30/2023			9/30/2022
Average total shareholders' equity	(a)	$	343,144		$	339,869		$	338,248		$	339,423		$	296,871
Less: average preferred stock	(b)		69,141			69,141			69,141			69,141			32,924
Average TCE	(c)=(a)-(b)	$	274,003		$	270,728		$	269,107		$	270,282		$	263,947
Net income	(d)	$	7,023		$	7,477		$	6,953		$	24,797		$	26,285
Return on average shareholder's equity ⁽¹⁾	(d)/(a)		8.12	%		8.82	%		8.16	%		9.77	%		11.84	%
Return on average TCE ⁽¹⁾	(d)/(c)		10.17	%		11.08	%		10.25	%		12.27	%		13.31	%

(1) Annualized.

($ in thousands, except per share data)		9/30/2023			6/30/2023			12/31/2022			9/30/2022
Total shareholders' equity	(a)	$	341,852		$	340,411		$	335,442		$	332,719
Less: preferred stock	(b)		69,141			69,141			69,141			69,141
TCE	(c)=(a)-(b)	$	272,711		$	271,270		$	266,301		$	263,578
Outstanding common shares	(d)		14,319,014			14,318,890			14,625,474			14,853,140
Book value per common share	(a)/(d)	$	23.87		$	23.77		$	22.94		$	22.40
TCE per common share	(c)/(d)	$	19.05		$	18.94		$	18.21		$	17.75
Total assets	(e)	$	2,567,974		$	2,556,345		$	2,420,036		$	2,327,051
Total shareholders' equity to total assets	(a)/(e)		13.31	%		13.32	%		13.86	%		14.30	%
TCE to total assets	(c)/(e)		10.62	%		10.61	%		11.00	%		11.33	%

View source version on businesswire.com: https://www.businesswire.com/news/home/20231025803263/en/

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Timothy Chang

Executive Vice President & Chief Financial Officer

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PCB Bancorp Reports Earnings of $7.0 million for Q3 2023

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Middle Point, OH (45863)

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PCB Bancorp Reports Earnings of $7.0 million for Q3 2023

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