PCB Bancorp Reports Earnings of $10.2 million for Q1 2022

Rhea-AI Summary

PCB Bancorp (NASDAQ: PCB) reported a net income of $10.2 million, or $0.67 per diluted share, for Q1 2022, a slight decrease from $10.7 million in Q4 2021 but an increase from $8.6 million in Q1 2021. Total assets rose to $2.20 billion, marking a 2.3% increase from the prior quarter and 7.3% year-over-year. The company saw an 8.1% annualized total loan growth and recorded net recoveries for the quarter. PCB plans to open three new branches, enhancing its growth trajectory in a challenging economic environment.

Positive

• Q1 2022 net income of $10.2 million, up 19.6% YoY.
• Total assets increased by 2.3% from Q4 2021 and 7.3% YoY.
• 8.1% annualized loan growth, reflecting strong demand.
• Significant improvement in book value per share, up 12.5% YoY.

Negative

• Net income decreased by 4.1% from Q4 2021.
• Loan loss reversals declined from $1.5 million to $1.2 million quarter-over-quarter.
• Noninterest expense increased by 8.1% compared to the previous quarter.

LOS ANGELES--(BUSINESS WIRE)-- PCB Bancorp (the “Company”) (NASDAQ: PCB), the holding company of Pacific City Bank (the “Bank”), today reported net income of $10.2 million, or $0.67 per diluted common share, for the first quarter of 2022, compared with $10.7 million, or $0.70 per diluted common share, for the previous quarter and $8.6 million, or $0.55 per diluted common share, for the year-ago quarter.

Q1 2022 Highlights

• Net income totaled $10.2 million, or $0.67 per diluted common share, for the current quarter;
  • The Company recorded a reversal for loan losses of $1.2 million for the current quarter compared with $1.5 million for the previous quarter and $1.1 million for the year-ago quarter.
  • Allowance for loan losses to loans held-for-investment⁽¹⁾ ratio was 1.22% at March 31, 2022 compared with 1.29% at December 31, 2021 and 1.51% at March 31, 2021. Adjusted allowance for loan losses to loans held-for-investment ratio⁽²⁾ was 1.23% at March 31, 2022 compared with 1.34% at December 31, 2021 and 1.74% at March 31, 2021.
  • Net interest income was $20.0 million for the current quarter compared with $20.1 million for the previous quarter and $17.8 million for the year-ago quarter. Net interest margin was 3.87% for the current quarter compared with 3.87% for the previous quarter and 3.70% for the year-ago quarter.
  • Gain on sale of loans was $3.8 million for the current quarter compared with $3.4 million for the previous quarter and $1.3 million for the year-ago quarter.
• Total assets were $2.20 billion at March 31, 2022, an increase of $50.0 million, or 2.3%, from $2.15 billion at December 31, 2021 and an increase of $149.1 million, or 7.3%, from $2.05 billion at March 31, 2021;
• Loans held-for-investment were $1.74 billion at March 31, 2022, an increase of $10.8 million, or 0.6%, from $1.73 billion at December 31, 2021 and an increase of $57.0 million, or 3.4%, from $1.69 billion at March 31, 2021; and
  • SBA PPP loans totaled $22.9 million, $65.3 million and $218.7 million at March 31, 2022, December 31, 2021 and March 31, 2021, respectively.
  • The Company had no loans under modified terms related to COVID-19 at March 31, 2022 and December 31, 2021. Loans under modified terms related to the COVID-19 pandemic totaled $19.8 million at March 31, 2021.
• Total deposits were $1.91 billion at March 31, 2022, an increase of $43.2 million, or 2.3%, from $1.87 billion at December 31, 2021 and an increase of $156.6 million, or 8.9%, from $1.75 billion at March 31, 2021.

Henry Kim, President and Chief Executive Officer, commented, “PCB kicked off the year with another solid quarterly financial results that were highlighted by the net income of $10.2 million or $0.67 per diluted share, an 8.1% annualized total loan growth, excluding SBA PPP, a 22.2% annualized retail deposit growth, and a 12.5% increase in book value per share to $17.47, compared with March 31, 2021. In addition, with 41.8% of our loans in variable rate, our asset sensitive balance sheet is well position to benefit from the current rising interest rate environment. Our exceptional credit quality continued with recognition of net recoveries for the quarter, and non-performing loans to loans held-for-investment ratio of 0.08%, and classified assets to total assets ratio of 0.24%.”

“In spite of the ongoing challenging economic environment from the pandemic and global conflict, we will continue to execute our focused expansion initiatives of opening three new full-service branches during the second half of this year; two in Dallas, Texas area, and one in Palisades Park, New Jersey. We are optimistic in our outlook and expect to continue to deliver strong growth and earnings for the rest of the year and beyond,” concluded Kim.

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(1)		Loans held-for-investment are presented net of deferred fees and costs in this press release.
(2)		Adjusted allowance for loan losses to loans held-for-investment ratio is a non-GAAP measure, which excludes U.S. Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans from loans held-for-investment. See “Non-GAAP Measures” for reconciliation of this measure to its most comparable GAAP measure.

Financial Highlights (Unaudited)

($ in thousands, except per share data)		Three Months Ended
		3/31/2022				12/31/2021				% Change		3/31/2021				% Change
Net income		$	10,240			$	10,676			(4.1)%		$	8,560			19.6%
Diluted earnings per common share		$	0.67			$	0.70			(4.3)%		$	0.55			21.8%
Net interest income		$	19,993			$	20,095			(0.5)%		$	17,819			12.2%
Reversal for loan losses			(1,191	)			(1,462	)		(18.5)%			(1,147	)		3.8%
Noninterest income			5,286				4,838			9.3%			2,857			85.0%
Noninterest expense			12,071				11,168			8.1%			9,669			24.8%
Return on average assets (1)			1.92	%			2.01	%					1.75	%
Return on average shareholders’ equity (1), (2)			16.01	%			16.84	%					14.66	%
Net interest margin (1)			3.87	%			3.87	%					3.70	%
Efficiency ratio (3)			47.75	%			44.79	%					46.76	%

($ in thousands, except per share data)		3/31/2022				12/31/2021				% Change		3/31/2021				% Change
Total assets		$	2,199,742			$	2,149,735			2.3%		$	2,050,672			7.3%
Net loans held-for-investment			1,721,757				1,709,824			0.7%			1,660,402			3.7%
Total deposits			1,910,379				1,867,134			2.3%			1,753,771			8.9%
Book value per common share (2), (4)		$	17.47			$	17.24			1.3%		$	15.53			12.5%
Tier 1 leverage ratio (consolidated)			12.22	%			12.11	%					12.03	%
Total shareholders’ equity to total assets (2)			11.87	%			11.92	%					11.72	%

(1)		Ratios are presented on an annualized basis.
(2)		The Company did not have any intangible equity components for the presented periods.
(3)		The ratios are calculated by dividing noninterest expense by the sum of net interest income and noninterest income.
(4)		Calculated by dividing total shareholders’ equity by the number of outstanding common shares.

COVID-19 Pandemic

The ongoing COVID-19 pandemic, and governmental and societal responses thereto, have had a severe impact on global economic and market conditions. The U.S. government has enacted a number of monetary and fiscal policies to provide fiscal stimulus and relief in order to mitigate the impact of the COVID-19 pandemic. However, the COVID-19 pandemic continues to be a challenge to public health, including the emergence of new variants, and impact global economic and market conditions, including global supply chain disruptions and high inflation.

Since the beginning of the crisis, the Company has taken a number of steps to protect the safety of its employees and to support its customers. The Company has enabled its staff to work remotely and established safety measures within its bank premises and branches for both employees and customers. In order to support its customers, the Company has been in close contact with them, assessing the level of impact on their businesses, and putting a process in place to evaluate each client’s specific situation and provide relief programs where appropriate, including SBA PPP loans and loan modifications related to the COVID-19 pandemic.

At this time, the Company cannot estimate the long term impact of the COVID-19 pandemic, but these conditions are expected to continue to impact its business, results of operations, and financial condition negatively.

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
($ in thousands)		3/31/2022				12/31/2021				% Change		3/31/2021				% Change
Interest income/expense on
Loans		$	20,190			$	20,363			(0.8)%		$	18,744			7.7%
Investment securities			476				441			7.9%			360			32.2%
Other interest-earning assets			228				191			19.4%			154			48.1%
Total interest-earning assets			20,894				20,995			(0.5)%			19,258			8.5%
Interest-bearing deposits			850				847			0.4%			1,311			(35.2)%
Borrowings			51				53			(3.8)%			128			(60.2)%
Total interest-bearing liabilities			901				900			0.1%			1,439			(37.4)%
Net interest income		$	19,993			$	20,095			(0.5)%		$	17,819			12.2%
Average balance of
Loans		$	1,773,376			$	1,758,421			0.9%		$	1,641,634			8.0%
Investment securities			123,230				128,650			(4.2)%			123,851			(0.5)%
Other interest-earning assets			198,918				175,468			13.4%			189,153			5.2%
Total interest-earning assets		$	2,095,524			$	2,062,539			1.6%		$	1,954,638			7.2%
Interest-bearing deposits		$	1,034,012			$	1,008,027			2.6%		$	1,053,845			(1.9)%
Borrowings			10,400				13,315			(21.9)%			75,556			(86.2)%
Total interest-bearing liabilities		$	1,044,412			$	1,021,342			2.3%		$	1,129,401			(7.5)%
Total funding (1)		$	1,885,038			$	1,845,846			2.1%		$	1,736,477			8.6%
Annualized average yield/cost of
Loans			4.62	%			4.59	%					4.63	%
Investment securities			1.57	%			1.36	%					1.18	%
Other interest-earning assets			0.46	%			0.43	%					0.33	%
Total interest-earning assets			4.04	%			4.04	%					4.00	%
Interest-bearing deposits			0.33	%			0.33	%					0.50	%
Borrowings			1.99	%			1.58	%					0.69	%
Total interest-bearing liabilities			0.35	%			0.35	%					0.52	%
Net interest margin			3.87	%			3.87	%					3.70	%
Cost of total funding (1)			0.19	%			0.19	%					0.34	%
Supplementary information
Net accretion of discount on loans		$	908			$	815			11.4%		$	745			21.9%
Net amortization of deferred loan fees		$	1,165			$	1,434			(18.8)%		$	1,220			(4.5)%

(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 increase in average yield for the current quarter compared with the previous quarter was primarily due to increases in net accretion of discount on loans, prepayment penalties and late-charges, partially offset by a decrease in net deferred loan fee amortization during the current quarter. Compared with the year-ago quarter, the decrease in average yield was primarily due to a decrease in overall interest rates on loans from lower market rates throughout 2021, partially offset by an increase in net accretion of discount on loans.

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:

		3/31/2022				12/31/2021				3/31/2021
		% to Total Loans		Weighted- Average Contractual Rate		% to Total Loans		Weighted- Average Contractual Rate		% to Total Loans		Weighted- Average Contractual Rate
Fixed rate loans		26.7 %		4.25 %		28.4 %		3.98 %		36.3 %		3.44 %
Hybrid rate loans		31.5 %		4.07 %		29.1 %		4.16 %		19.3 %		4.77 %
Variable rate loans		41.8 %		4.14 %		42.5 %		3.95 %		44.4 %		4.04 %

Investment Securities. The increases in average yield for the current quarter compared with the previous and year-ago quarters were primarily due to a decrease in net amortization of premiums on mortgage-backed securities and collateralized mortgage obligations.

Other Interest-Earning Assets. The increases in average yield for the current quarter compared with the previous and year-ago quarters were primarily due to increases in dividend income on Federal Home Loan Bank (“FHLB”) stock and interest rate on cash held at the Federal Reserve Bank (“FRB”) account. The increases in average balance for the current quarter compared with the previous and year-ago quarters were primarily due to an increase in deposits, partially offset by an increase in loans. The Company maintains most of its cash at the FRB account. For additional detail, please see the discussion in “Loans” and “Deposits” under the “Balance Sheet” discussion.

Interest-Bearing Deposits. The decrease in average cost for the current quarter compared with the year-ago quarter was primarily due to the decreases in market rates.

Borrowings. The increase in average cost for the current quarter compared with the year-ago quarter was primarily due to matured borrowings with lower interest rates during 2021. At March 31, 2022, the Company had a term FHLB advance of $10.0 million with an interest rate of 2.07% that matures on June 29, 2022.

Reversal for Loan Losses

Reversal for loan losses was $1.2 million for the current quarter compared with $1.5 million for the previous quarter and $1.1 million for the year-ago quarter. The reversal for the current quarter was primarily due to a decrease in qualitative adjustment factor allocations related to economic implications of the COVID-19 pandemic. The Company recorded net recoveries of $8 thousand for the current quarter compared with $36 thousand for the previous quarter and $151 thousand for the year-ago quarter.

Adjusted allowance for loan losses to loans held-for-investment ratio⁽¹⁾ was 1.23%, 1.34%, and 1.74% at March 31, 2022, December 31, 2021, and March 31, 2021, respectively.

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(1)

Adjusted allowance for loan losses to loans held-for-investment ratio is a non-GAAP measure, which excludes SBA PPP loans from loans held-for-investment. See “Non-GAAP Measures” for reconciliation of this measure to its most comparable GAAP measure.

Noninterest Income

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

		Three Months Ended
($ in thousands)		3/31/2022			12/31/2021			% Change		3/31/2021			% Change
Gain on sale of loans		$	3,777		$	3,374		11.9%		$	1,322		185.7%
Service charges and fees on deposits			303			308		(1.6)%			293		3.4%
Loan servicing income			700			688		1.7%			882		(20.6)%
Bank-owned life insurance income			172			108		59.3%			—		NM
Other income			334			360		(7.2)%			360		(7.2)%
Total noninterest income		$	5,286		$	4,838		9.3%		$	2,857		85.0%

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

		Three Months Ended
($ in thousands)		3/31/2022			12/31/2021			% Change		3/31/2021			% Change
Gain on sale of SBA loans
Sold loan balance		$	39,683		$	36,765		7.9%		$	10,919		263.4%
Premium received			4,206			3,683		14.2%			1,309		221.3%
Gain recognized			3,777			3,363		12.3%			1,195		216.1%
Gain on sale of residential property loans
Sold loan balance		$	—		$	559		(100.0)%		$	7,907		(100.0)%
Gain recognized			—			9		(100.0)%			127		(100.0)%

The Company also sold certain commercial property loans of $3.4 million during the previous quarter.

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

		Three Months Ended
($ in thousands)		3/31/2022				12/31/2021				% Change		3/31/2021				% Change
Loan servicing income
Servicing income received		$	1,230			$	1,202			2.3%		$	1,273			(3.4)%
Servicing assets amortization			(530	)			(514	)		3.1%			(391	)		35.5%
Loan servicing income		$	700			$	688			1.7%		$	882			(20.6)%
Underlying loans at end of period		$	531,183			$	519,706			2.2%		$	492,981			7.7%

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

Noninterest Expense

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

		Three Months Ended
($ in thousands)		3/31/2022			12/31/2021			% Change		3/31/2021			% Change
Salaries and employee benefits		$	8,595		$	7,061		21.7%		$	6,182		39.0%
Occupancy and equipment			1,397			1,417		(1.4)%			1,371		1.9%
Professional fees			403			585		(31.1)%			494		(18.4)%
Marketing and business promotion			207			586		(64.7)%			138		50.0%
Data processing			404			408		(1.0)%			377		7.2%
Director fees and expenses			169			161		5.0%			138		22.5%
Regulatory assessments			141			138		2.2%			208		(32.2)%
Other expenses			755			812		(7.0)%			761		(0.8)%
Total noninterest expense		$	12,071		$	11,168		8.1%		$	9,669		24.8%

Salaries and Employee Benefits. The increases for the current quarter compared with the previous and year-ago quarters were primarily due to increases in salaries from the annual merit increase and number of employees increase, incentives tied to the sales of Loan Production Offices originated SBA loans, vacation accrual, and a decrease in loan origination cost, which offsets the recognition of salaries and employee benefits expense. The Company recognized a higher loan origination cost for the year-ago quarter primarily due to the SBA PPP loan production. Total loan origination cost included in salaries and employee benefits were $365 thousand, $435 thousand, and $986 thousand for the current, previous and year-ago quarters, respectively. The number of full-time equivalent employees was 256, 248 and 246 as of March 31, 2022, December 31, 2021 and March 31, 2021, respectively.

Professional Fees. The decrease for the current quarter compared with the previous quarter was primarily due to increased internal audit and other professional fees during the previous quarter as a part of the year-end processes. Compared with the year-ago quarter, the decrease was primarily due to a decrease in internal audit fees.

Marketing and Business Promotion. The decrease for the current quarter compared with the previous quarter was primarily due to the year-end promotion during the previous quarter. Compared with the year-ago quarter, the increase was primarily due to more marketing activities and advertisement for the current quarter.

Director Fees and Expenses. The increase for the current quarter compared with the year-ago quarter was primarily due to a new director appointed during the fourth quarter of 2021.

Regulatory Assessments. The decrease for the current quarter compared with the year-ago quarter was primarily due to a decrease in assessment rate, partially offset by an increase in balance sheet.

Balance Sheet (Unaudited)

Total assets were $2.20 billion at March 31, 2022, an increase of $50.0 million, or 2.3%, from $2.15 billion at December 31, 2021 and an increase of $149.1 million, or 7.3%, from $2.05 billion at March 31, 2021. The increase for the current quarter was primarily due to increases in cash and cash equivalents and securities available-for-sale, partially offset by a decrease in loans held-for-sale.

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)		3/31/2022			12/31/2021			% Change		3/31/2021			% Change
Real estate loans
Commercial property		$	1,150,101		$	1,105,843		4.0%		$	922,536		24.7%
Residential property			215,132			209,485		2.7%			190,990		12.6%
SBA property			129,400			129,661		(0.2)%			125,989		2.7%
Construction			9,522			8,252		15.4%			13,151		(27.6)%
Commercial and industrial loans
Commercial term			69,836			73,438		(4.9)%			80,361		(13.1)%
Commercial lines of credit			107,406			100,936		6.4%			91,970		16.8%
SBA commercial term			16,880			17,640		(4.3)%			21,078		(19.9)%
SBA PPP			22,926			65,329		(64.9)%			218,709		(89.5)%
Other consumer loans			21,752			21,621		0.6%			21,132		2.9%
Loans held-for-investment			1,742,955			1,732,205		0.6%			1,685,916		3.4%
Loans held-for-sale			18,340			37,026		(50.5)%			3,569		413.9%
Total loans		$	1,761,295		$	1,769,231		(0.4)%		$	1,689,485		4.3%

The increase in loans held-for-investment for the current quarter was primarily due to new funding of $117.9 million and advances on lines of credit of $29.2 million, partially offset by pay-downs and pay-offs of $136.4 million. SBA PPP loans of $42.4 million were paid off through regular payments or forgiveness from SBA during the current quarter.

The decrease in loans held-for-sale for the current quarter was primarily due to sales of $39.7 million, partially offset by new funding of $21.2 million.

The following table presents a composition of commitments to extend credit as of the dates indicated:

($ in thousands)		3/31/2022			12/31/2021			% Change		3/31/2021			% Change
Real estate loans
Commercial property		$	21,195		$	20,194		5.0%		$	20,003		6.0%
SBA property			3,142			3,068		2.4%			3,677		(14.5)%
Construction			6,528			5,180		26.0%			13,588		(52.0)%
Commercial and industrial loans
Commercial term			2,674			1,097		143.8%			1,000		167.4%
Commercial lines of credit			175,742			169,000		4.0%			168,381		4.4%
SBA commercial term			950			149		537.6%			—		—%
Other consumer loans			1,080			595		81.5%			96		1,025.0%
Total commitments to extend credit		$	211,311		$	199,283		6.0%		$	206,745		2.2%

Credit Quality

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

($ in thousands)		3/31/2022				12/31/2021				% Change		3/31/2021				% Change
Nonaccrual loans
Real estate loans
Residential property		$	461			$	—			—%		$	—			—%
SBA property			733				746			(1.7)%			841			(12.8)%
Commercial and industrial loans
SBA commercial term			199				213			(6.6)%			568			(65.0)%
Other consumer loans			25				35			(28.6)%			52			(51.9)%
Total nonaccrual loans held-for-investment			1,418				994			42.7%			1,461			(2.9)%
Loans past due 90 days or more and still accruing			—				—			—%			—			—%
Non-performing loans (“NPLs”)			1,418				994			42.7%			1,461			(2.9)%
Other real estate owned (“OREO”)			—				—			—%			2,336			(100.0)%
Non-performing assets (“NPAs”)		$	1,418			$	994			42.7%		$	3,797			(62.7)%
Loans past due and still accruing
Past due 30 to 59 days		$	119			$	549			(78.3)%		$	56			112.5%
Past due 60 to 89 days			1				5			(80.0)%			52			(98.1)%
Past due 90 days or more			—				—			—%			—			—%
Total loans past due and still accruing		$	120			$	554			(78.3)%		$	108			11.1%
Troubled debt restructurings (“TDRs”)
Accruing TDRs		$	565			$	576			(1.9)%		$	620			(8.9)%
Nonaccrual TDRs			15				17			(11.8)%			33			(54.5)%
Total TDRs		$	580			$	593			(2.2)%		$	653			(11.2)%
Special mention loans		$	5,562			$	18,092			(69.3)%		$	17,997			(69.1)%
Classified assets
Classified loans		$	5,377			$	5,168			4.0%		$	7,090			(24.2)%
OREO			—				—			—%			2,336			(100.0)%
Classified assets		$	5,377			$	5,168			4.0%		$	9,426			(43.0)%
NPLs to loans held-for-investment			0.08	%			0.06	%					0.09	%
NPAs to total assets			0.06	%			0.05	%					0.19	%
Classified assets to total assets			0.24	%			0.24	%					0.46	%

Loan Modifications Related to the COVID-19 Pandemic

The Company had provided modifications, including interest only payments or payment deferrals, to customers that were adversely affected by the COVID-19 pandemic. The loan modifications met all criteria under the Coronavirus Aid, Relief, and Economic Security Act. Therefore, the modified loans were not considered TDRs. As of March 31, 2022 and December 31, 2021, the Company had no loans under modified terms related to the COVID-19 pandemic. Total loans under modified terms related to the COVID-19 pandemic totaled $19.8 million at March 31, 2021.

The Company had classified the loans that were granted modifications related to the COVID-19 pandemic in excess of 6 months on a cumulative basis as special mention or classified. Special mention and classified loans included $4.1 million and $2.7 million, respectively, at March 31, 2022, $15.6 million and $2.7 million, respectively, at December 31, 2021, and $16.4 million and $2.8 million, respectively, at March 31, 2021, of the loans that were granted such modifications. The decrease in special mention loans for the current quarter was primarily due to improvements of 2 loans with an aggregated carrying value of $11.3 million.

Investment Securities

Total investment securities were $131.3 million at March 31, 2022, an increase of $8.1 million, or 6.6%, from $123.2 million at December 31, 2021, and an increase of $4.2 million, or 3.3%, from $127.1 million at March 31, 2021. The increase for the current quarter was primarily due to purchases of $19.9 million, partially offset by principal pay-downs and calls of $6.2 million and net premium amortization of $135 thousand.

Deposits

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

		3/31/2022					12/31/2021					3/31/2021
($ in thousands)		Amount			% to Total		Amount			% to Total		Amount			% to Total
Noninterest-bearing demand deposits		$	891,797		46.7%		$	830,383		44.5%		$	715,719		40.8%
Interest-bearing deposits
Savings			15,037		0.8%			16,299		0.9%			11,271		0.6%
NOW			17,543		0.9%			20,185		1.1%			19,380		1.1%
Retail money market accounts			431,057		22.5%			386,041		20.5%			381,704		21.7%
Brokered money market accounts			1		0.1%			1		0.1%			4		0.1%
Retail time deposits of
$250,000 or less			246,100		12.8%			256,956		13.8%			276,232		15.8%
More than $250,000			173,844		9.1%			172,269		9.2%			166,845		9.5%
Time deposits from internet rate service providers			—		—%			—		—%			17,616		1.0%
State and brokered time deposits			135,000		7.1%			185,000		9.9%			165,000		9.4%
Total interest-bearing deposits			1,018,582		53.3%			1,036,751		55.5%			1,038,052		59.2%
Total deposits		$	1,910,379		100.0%		$	1,867,134		100.0%		$	1,753,771		100.0%

The increase in noninterest-bearing demand deposits and retail money market accounts for the current quarter was primarily due to the overall liquid deposit market.

The decrease in retail time deposits for the current quarter was primarily due to matured and closed accounts of $188.5 million, partially offset by new accounts of $30.6 million, renewals of the matured accounts of $143.6 million, and balance increases of $5.1 million.

Liquidity

The following table presents a summary of the Company’s liquidity position as of March 31, 2022:

($ in thousands)		3/31/2022
Cash and cash equivalents		$	250,212
Cash and cash equivalents to total assets			11.4	%
Available borrowing capacity
FHLB advances		$	527,426
Federal Reserve Discount Window			26,455
Overnight federal funds lines			65,000
Total		$	618,881
Total available borrowing capacity to total assets			28.1	%

Shareholders’ Equity

Shareholders’ equity was $261.1 million at March 31, 2022, an increase of $4.8 million, or 1.9%, from $256.3 million at December 31, 2021 and an increase of $20.8 million, or 8.7%, from $240.3 million at March 31, 2021. The increase for the current quarter was primarily due to net income, partially offset by cash dividends declared on common stock of $2.2 million and a decrease in accumulated other comprehensive income (loss).

Stock Repurchase

On April 8, 2021, the Company’s Board of Directors approved a repurchase program authorizing the repurchase of up to 5% of the Company’s outstanding common stock as of the date of the board meeting, which represented 775,000 shares, through September 7, 2021. The Company repurchased and retired 680,269 shares of common stock totaling $10.9 million at a weighted-average price of $15.99 per share under this program.

Emergency Capital Investment Program

On December 14, 2021, the U.S. Treasury informed the Company that the U.S Treasury has reviewed the Company’s application to receive a capital investment from the U.S Treasury under the Emergency Capital Investment Program (“ECIP”), and that the Company would be eligible to receive an ECIP investment in an amount up to $69.1 million in the form of non-dilutive Tier 1 senior perpetual preferred capital. The Company determined to accept the offer to receive the ECIP investment for the full amount. The Company expects to close the investment in the second quarter of 2022.

Established by the Consolidated Appropriations Act, 2021, the ECIP was created to encourage low- and moderate-income community financial institutions and minority depository institutions such as the Bank to augment their efforts to support small businesses and consumers in their communities.

Capital Ratios

Based on changes to the Federal Reserve’s definition of a “Small Bank Holding Company” that increased the threshold to $3 billion in assets in August 2018, the Company is not currently subject to separate minimum capital measurements. At such time as the Company reaches the $3 billion asset level, it will again be subject to capital measurements independent of the Bank. For comparison purposes, the Company’s ratios are included in following discussion. The following table presents capital ratios for the Company and the Bank as of dates indicated:

		3/31/2022		12/31/2021		3/31/2021		Well Capitalized Requirements
PCB Bancorp
Common tier 1 capital (to risk-weighted assets)		14.77%		14.79%		15.92%		N/A
Total capital (to risk-weighted assets)		15.97%		16.04%		17.17%		N/A
Tier 1 capital (to risk-weighted assets)		14.77%		14.79%		15.92%		N/A
Tier 1 capital (to average assets)		12.22%		12.11%		12.03%		N/A
Pacific City Bank
Common tier 1 capital (to risk-weighted assets)		14.43%		14.48%		15.62%		6.5%
Total capital (to risk-weighted assets)		15.63%		15.73%		16.88%		10.0%
Tier 1 capital (to risk-weighted assets)		14.43%		14.48%		15.62%		8.0%
Tier 1 capital (to average assets)		11.94%		11.85%		11.81%		5.0%

About PCB Bancorp

PCB Bancorp is the bank holding company for Pacific City 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 our borrowers’ actual payment performance as loan deferrals related to the COVID-19 pandemic expire, changes to statutes, regulations, or regulatory policies or practices as a result of, or in response to the COVID-19 pandemic, including the potential adverse impact of loan modifications and payment deferrals implemented consistent with recent regulatory guidance, and the general economic uncertainty caused by the COVID-19 pandemic, and government and societal responses thereto, general economic uncertainty in the United States and abroad, the impact of inflation, changes in interest rates, deposit flows, and real estate values, and their corresponding impact on our customers, and the network and data incident discovered on August 30, 2021. These and other important factors are detailed in various securities law filings made periodically by the Company, copies of which are available 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 we do 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)
		3/31/2022				12/31/2021				% Change		3/31/2021				% Change
Assets
Cash and due from banks		$	19,693			$	15,222			29.4%		$	16,764			17.5%
Interest-bearing deposits in other financial institutions			230,519				188,063			22.6%			195,016			18.2%
Total cash and cash equivalents			250,212				203,285			23.1%			211,780			18.1%
Securities available-for-sale, at fair value			131,345				123,198			6.6%			127,114			3.3%
Loans held-for-sale			18,340				37,026			(50.5)%			3,569			413.9%
Loans held-for-investment			1,742,955				1,732,205			0.6%			1,685,916			3.4%
Allowance for loan losses			(21,198	)			(22,381	)		(5.3)%			(25,514	)		(16.9)%
Net loans held-for-investment			1,721,757				1,709,824			0.7%			1,660,402			3.7%
Premises and equipment, net			3,106				3,098			0.3%			3,774			(17.7) %
Federal Home Loan Bank and other bank stock			8,577				8,577			—%			8,447			1.5%
Other real estate owned, net			—				—			—%			2,336			(100.0) %
Bank-owned life insurance			29,530				29,358			0.6%			—			NM
Deferred tax assets, net			11,895				10,824			9.9%			8,170			45.6%
Servicing assets			7,533				7,269			3.6%			6,253			20.5%
Operating lease assets			6,511				6,786			(4.1)%			7,145			(8.9)%
Accrued interest receivable			5,050				5,368			(5.9)%			7,523			(32.9)%
Other assets			5,886				5,122			14.9%			4,159			41.5%
Total assets		$	2,199,742			$	2,149,735			2.3%		$	2,050,672			7.3%
Liabilities
Deposits
Noninterest-bearing demand		$	891,797			$	830,383			7.4%		$	715,719			24.6%
Savings, NOW and money market accounts			463,638				422,526			9.7%			412,359			12.4%
Time deposits of $250,000 or less			281,100				341,956			(17.8)%			358,848			(21.7)%
Time deposits of more than $250,000			273,844				272,269			0.6%			266,845			2.6%
Total deposits			1,910,379				1,867,134			2.3%			1,753,771			8.9%
Federal Home Loan Bank advances			10,000				10,000			—%			40,000			(75.0)%
Operating lease liabilities			7,176				7,444			(3.6)%			7,935			(9.6)%
Accrued interest payable and other liabilities			11,129				8,871			25.5%			8,703			27.9%
Total liabilities			1,938,684				1,893,449			2.4%			1,810,409			7.1%
Commitments and contingent liabilities
Shareholders’ equity
Common stock, no par value			155,614				154,992			0.4%			164,698			(5.5)%
Retained earnings			109,142				101,140			7.9%			74,707			46.1%
Accumulated other comprehensive income (loss), net			(3,698	)			154			NM			858			NM
Total shareholders’ equity			261,058				256,286			1.9%			240,263			8.7%
Total liabilities and shareholders’ equity		$	2,199,742			$	2,149,735			2.3%		$	2,050,672			7.3%
Outstanding common shares			14,944,663				14,865,825						15,468,242
Book value per common share (1)		$	17.47			$	17.24					$	15.53
Total loan to total deposit ratio			92.20	%			94.76	%					96.33	%
Noninterest-bearing deposits to total deposits			46.68	%			44.47	%					40.81	%

(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.

PCB Bancorp and Subsidiary
Consolidated Statements of Income (Unaudited)
($ in thousands, except share and per share data)
		Three Months Ended
		3/31/2022				12/31/2021				% Change		3/31/2021				% Change
Interest and dividend income
Loans, including fees		$	20,190			$	20,363			(0.8)%		$	18,744			7.7%
Investment securities			476				441			7.9%			360			32.2%
Other interest-earning assets			228				191			19.4%			154			48.1%
Total interest income			20,894				20,995			(0.5)%			19,258			8.5%
Interest expense
Deposits			850				847			0.4%			1,311			(35.2)%
Other borrowings			51				53			(3.8)%			128			(60.2)%
Total interest expense			901				900			0.1%			1,439			(37.4)%
Net interest income			19,993				20,095			(0.5)%			17,819			12.2%
Reversal for loan losses			(1,191	)			(1,462	)		(18.5)%			(1,147	)		3.8%
Net interest income after reversal for loan losses			21,184				21,557			(1.7)%			18,966			11.7%
Noninterest income
Gain on sale of loans			3,777				3,374			11.9%			1,322			185.7%
Service charges and fees on deposits			303				308			(1.6)%			293			3.4%
Loan servicing income			700				688			1.7%			882			(20.6)%
Bank-owned life insurance income			172				108			59.3%			—			NM
Other income			334				360			(7.2)%			360			(7.2)%
Total noninterest income			5,286				4,838			9.3%			2,857			85.0%
Noninterest expense
Salaries and employee benefits			8,595				7,061			21.7%			6,182			39.0%
Occupancy and equipment			1,397				1,417			(1.4)%			1,371			1.9%
Professional fees			403				585			(31.1)%			494			(18.4)%
Marketing and business promotion			207				586			(64.7)%			138			50.0%
Data processing			404				408			(1.0)%			377			7.2%
Director fees and expenses			169				161			5.0%			138			22.5%
Regulatory assessments			141				138			2.2%			208			(32.2)%
Other expenses			755				812			(7.0)%			761			(0.8)%
Total noninterest expense			12,071				11,168			8.1%			9,669			24.8%
Income before income taxes			14,399				15,227			(5.4)%			12,154			18.5%
Income tax expense			4,159				4,551			(8.6)%			3,594			15.7%
Net income		$	10,240			$	10,676			(4.1)%		$	8,560			19.6%
Earnings per common share
Basic		$	0.69			$	0.72					$	0.55
Diluted		$	0.67			$	0.70					$	0.55
Average common shares
Basic			14,848,014				14,799,973						15,384,343
Diluted			15,141,693				15,093,351						15,533,608
Dividend paid per common share		$	0.15			$	0.12					$	0.10
Return on average assets (1)			1.92	%			2.01	%					1.75	%
Return on average shareholders’ equity (1), (2)			16.01	%			16.84	%					14.66	%
Efficiency ratio (3)			47.75	%			44.79	%					46.76	%

(1)		Ratios are presented on an annualized basis.
(2)		The Company did not have any intangible equity components for the presented periods.
(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
		3/31/2022									12/31/2021									3/31/2021
		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)		$	1,773,376			$	20,190		4.62%		$	1,758,421			$	20,363		4.59%		$	1,641,634			$	18,744		4.63%
Mortgage-backed securities			84,223				307		1.48%			88,501				263		1.18%			81,486				215		1.07%
Collateralized mortgage obligation			18,242				48		1.07%			20,233				53		1.04%			24,888				57		0.93%
SBA loan pool securities			10,095				38		1.53%			9,199				41		1.77%			11,673				52		1.81%
Municipal bonds (2)			5,632				36		2.59%			5,698				37		2.58%			5,804				36		2.52%
Corporate bonds			5,038				47		3.78%			5,019				47		3.72%			—				—		—%
Other interest-earning assets			198,918				228		0.46%			175,468				191		0.43%			189,153				154		0.33%
Total interest-earning assets			2,095,524				20,894		4.04%			2,062,539				20,995		4.04%			1,954,638				19,258		4.00%
Noninterest-earning assets
Cash and due from banks			20,385									20,618									19,072
Allowance for loan losses			(22,377	)								(23,835	)								(26,870	)
Other assets			67,600									52,512									40,377
Total noninterest-earning assets			65,608									49,295									32,579
Total assets		$	2,161,132								$	2,111,834								$	1,987,217
Liabilities and Shareholders’ Equity
Interest-bearing liabilities
Deposits
NOW and money market accounts		$	431,981				313		0.29%		$	406,343				301		0.29%		$	407,623				333		0.33%
Savings			15,644				2		0.05%			14,161				2		0.06%			10,609				1		0.04%
Time deposits			586,387				535		0.37%			587,523				544		0.37%			635,613				977		0.62%
Total interest-bearing deposits			1,034,012				850		0.33%			1,008,027				847		0.33%			1,053,845				1,311		0.50%
Other borrowings			10,400				51		1.99%			13,315				53		1.58%			75,556				128		0.69%
Total interest-bearing liabilities			1,044,412				901		0.35%			1,021,342				900		0.35%			1,129,401				1,439		0.52%
Noninterest-bearing liabilities
Noninterest-bearing demand			840,626									824,504									607,076
Other liabilities			16,727									14,511									13,950
Total noninterest-bearing liabilities			857,353									839,015									621,026
Total liabilities			1,901,765									1,860,357									1,750,427
Total shareholders’ equity			259,367									251,477									236,790
Total liabilities and shareholders’ equity		$	2,161,132								$	2,111,834								$	1,987,217
Net interest income						$	19,993								$	20,095								$	17,819
Net interest spread (3)									3.69%									3.69%									3.48%
Net interest margin (4)									3.87%									3.87%									3.70%
Total deposits		$	1,874,638			$	850		0.18%		$	1,832,531			$	847		0.18%		$	1,660,921			$	1,311		0.32%
Total funding (5)		$	1,885,038			$	901		0.19%		$	1,845,846			$	900		0.19%		$	1,736,477			$	1,439		0.34%

(1)		Total loans include both loans held-for-sale and loans held-for-investment, net of deferred loan fees and costs.
(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
Non-GAAP Measures
($ in thousands)

Adjusted allowance for loan losses to loans held-for-investment ratio

Adjusted allowance for loan losses to loans held-for-investment ratio is calculated by removing SBA PPP loans from loans held-for-investment from the allowance for loan losses to loans held-for-investment ratio calculation. The SBA launched the PPP to provide a direct incentive for small businesses to keep their workers on the payroll in response to the COVID-19 pandemic. The SBA guarantees 100% of the PPP loans made to eligible borrowers, and the loans are eligible to be forgiven if certain conditions are met, at which point the SBA will make payments to the Bank for the forgiven amounts. The SBA guarantee on PPP loans cannot be separated from the loan and therefore is not a separate unit of account. The Company considered the SBA guarantee in the allowance for loan losses evaluation and determined that it is not required to reserve an allowance on SBA PPP loans. Management believes this non-GAAP measure enhances comparability to prior periods and provide supplemental information regarding the Company’s credit trends.

			3/31/2022				12/31/2021				3/31/2021
Loans held-for-investment	(a)		$	1,742,955			$	1,732,205			$	1,685,916
Less: SBA PPP loans	(b)			22,926				65,329				218,709
Loans held-for-investment, excluding SBA PPP loans	(c)=(a)-(b)		$	1,720,029			$	1,666,876			$	1,467,207
Allowance for loan losses	(d)		$	21,198			$	22,381			$	25,514
Allowance for loan losses to loans held-for-investment ratio	(d)/(a)			1.22	%			1.29	%			1.51	%
Adjusted allowance for loan losses to loans held-for-investment ratio	(d)/(c)			1.23	%			1.34	%			1.74	%

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220428005239/en/

Timothy Chang

Executive Vice President & Chief Financial Officer

213-210-2000

Source: PCB Bancorp

FAQ

What were PCB Bancorp's earnings for Q1 2022?

PCB Bancorp reported earnings of $10.2 million, or $0.67 per diluted share for Q1 2022.

How did PCB Bancorp's total assets change in Q1 2022?

Total assets rose to $2.20 billion, an increase of 2.3% from Q4 2021.

What is the loan growth rate for PCB Bancorp in Q1 2022?

PCB Bancorp experienced an annualized total loan growth of 8.1% in Q1 2022.

How does PCB Bancorp's current financial position compare to last year?

Compared to Q1 2021, PCB Bancorp's net income increased by 19.6% and total assets by 7.3%.