PCB Bancorp Reports Earnings of $4.7 million for Q1 2024

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Insights

The recent performance update from PCB Bancorp, showing a decline in net income to $4.7 million compared to both the previous quarter and the year-ago quarter, is indicative of the challenges the company faces. A significant factor to consider is the reported net interest margin compression, which has decreased to 3.10%, reflecting the current high-interest-rate environment's impact on funding costs.

From a balance sheet perspective, PCB Bancorp's assets have grown by 14.1% year-over-year, indicating an aggressive growth strategy. However, the net interest income decline alongside higher provisions for credit losses, which stand at $1.1 million this quarter, suggests a cautious anticipation of potential credit risks. This conservative positioning could be a double-edged sword: while it may protect the bank against future defaults, it might also dampen profitability if the economic landscape improves.

For retail investors, the growth in assets and deposits could be seen as positive signs of the bank's operational effectiveness. Still, the declining profitability metrics and the impact of non-recurring expenses, like the core conversion charges and the SBA recovery demand, highlight the importance of scrutinizing one-off costs and their implications for the bank's core performance.

An aspect that investors should watch closely is the Allowance for Credit Losses (ACL) which has remained relatively stable at 1.18% of loans held-for-investment. This stability, in the face of growing loan portfolios and assets, suggests robust credit management. However, the rise in non-performing assets, from 0.12% to 0.17% year-over-year, could signal emerging vulnerabilities in loan quality, which may require closer monitoring in subsequent quarters.

Moreover, the bank’s provision for credit losses shows a considerable decrease compared to the substantial reversal in the year-ago period. This provision adjustment is reflective of the bank’s shifting expectations with regard to potential loan defaults and portfolio risk profile changes.

From an investor standpoint, the nuanced understanding of PCB Bancorp’s credit risk appetite and management is crucial, especially in an economic climate fraught with uncertainties. How the bank manages these credit risks in forthcoming periods will be pivotal to its financial health and investor confidence.

04/25/2024 - 04:10 PM

LOS ANGELES--(BUSINESS WIRE)-- PCB Bancorp (the “Company”) (NASDAQ: PCB), the holding company of PCB Bank (the “Bank”), today reported net income of $4.7 million, or $0.33 per diluted common share, for the first quarter of 2024, compared with $5.9 million, or $0.41 per diluted common share, for the previous quarter and $10.3 million, or $0.70 per diluted common share, for the year-ago quarter.

Q1 2024 Highlights

Net income totaled $4.7 million, or $0.33 per diluted common share;
Recorded a provision (reversal) for credit losses of $1.1 million for the current quarter compared with $1.7 million for the previous quarter and $(2.8) million for the year-ago quarter;
Allowance for Credit Losses (“ACL”) on loans to loans held-for-investment ratio was 1.18% at March 31, 2024 compared with 1.19% at December 31, 2023 and 1.18% at March 31, 2023;
Net interest income was $21.0 million for the current quarter compared with $21.9 million for the previous quarter and $22.4 million for the year-ago quarter. Net interest margin was 3.10% for the current quarter compared with 3.40% for the previous quarter and 3.79% for the year-ago quarter;
Gain on sale of loans was $1.1 million for the current quarter compared with $803 thousand for the previous quarter and $1.3 million for the year-ago quarter;
Total assets were $2.85 billion at March 31, 2024, an increase of $64.8 million, or 2.3%, from $2.79 billion at December 31, 2023, and an increase of $353.8 million, or 14.1%, from $2.50 billion at March 31, 2023;
Loans held-for-investment were $2.40 billion at March 31, 2024, an increase of $74.5 million, or 3.2%, from $2.32 billion at December 31, 2023, and an increase of $305.5 million, or 14.6%, from $2.09 billion at March 31, 2023; and
Total deposits were $2.40 billion at March 31, 2024, an increase of $51.2 million, or 2.2%, from $2.35 billion at December 31, 2023, and an increase of $261.2 million, or 12.2%, from $2.14 billion at March 31, 2023.

“PCB continued to deliver strong first quarter results with momentum in loan and deposit growth stemming from our ongoing focus on relationship banking and strategic expansions, while maintaining very strong credit metrics,” said Henry Kim, President and Chief Executive Officer. “Currently, we are successfully undergoing our core system conversion that will enhance operational efficiency, functionality, and customer experience.”

“Our first quarter net income of $4.7 million included a total of $1.8 million in non-recurring expenses consisting of core conversion charges of $1.0 million and a SBA recovery demand of $815 thousand. During the quarter loan balance increased 3.1% to $2.4 billion, deposit balance increased 2.2% to $2.4 billion, and we continued to maintain robust ACL to loans ratio of 1.18%, and non-performing assets and classified assets to total assets ratios of 0.17% and 0.27%, respectively. The persistently higher interest rate environment and its effect on our funding costs resulted in further compression in our net interest margin during the quarter. However, we feel that our funding costs have peaked in the first quarter and our net interest margin is at near the bottom.”

Mr. Kim added, “As we look ahead for the rest of the year, PCB continues to be well positioned to deliver solid financial results with strong balance sheet growth and maintain sound asset quality with robust capital levels that are above our peers to operate in uncertain economic circumstances.”

Financial Highlights (Unaudited)

($ in thousands, except per share data)	Three Months Ended
($ in thousands, except per share data)	3/31/2024			12/31/2023			% Change	3/31/2023			% Change
Net income	$	4,685		$	5,908		(20.7)%	$	10,297		(54.5)%
Diluted earnings per common share	$	0.33		$	0.41		(19.5)%	$	0.70		(52.9)%

Net interest income	$	20,999		$	21,924		(4.2)%	$	22,414		(6.3)%
Provision (reversal) for credit losses		1,090			1,698		(35.8)%		(2,778	)	NM
Noninterest income		2,945			2,503		17.7%		3,021		(2.5)%
Noninterest expense		16,352			14,469		13.0%		13,754		18.9%

Return on average assets ⁽¹⁾		0.67	%		0.89	%			1.69	%
Return on average shareholders’ equity ⁽¹⁾		5.39	%		6.82	%			12.46	%
Return on average tangible common equity (“TCE”) ^(1),(2)		6.72	%		8.54	%			15.70	%
Net interest margin ⁽¹⁾		3.10	%		3.40	%			3.79	%
Efficiency ratio ⁽³⁾		68.29	%		59.23	%			54.08	%


($ in thousands, except per share data)	3/31/2024			12/31/2023			% Change	3/31/2023			% Change
Total assets	$	2,854,292		$	2,789,506		2.3%	$	2,500,524		14.1%
Net loans held-for-investment		2,369,632			2,295,919		3.2%		2,067,748		14.6%
Total deposits		2,402,840			2,351,612		2.2%		2,141,689		12.2%
Book value per common share ⁽⁴⁾	$	24.54		$	24.46			$	23.56
TCE per common share⁽²⁾	$	19.69		$	19.62			$	18.72
Tier 1 leverage ratio (consolidated)		12.73	%		13.43	%			13.90	%
Total shareholders’ equity to total assets		12.26	%		12.51	%			13.47	%
TCE to total assets ^{(2), (5)}		9.84	%		10.03	%			10.71	%

(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)		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.
(5)		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
($ in thousands)	3/31/2024			12/31/2023			% Change	3/31/2023			% Change
Interest income/expense on
Loans	$	39,251		$	37,189		5.5%	$	31,229		25.7%
Investment securities		1,246			1,271		(2.0)%		1,102		13.1%
Other interest-earning assets		3,058			2,491		22.8%		2,205		38.7%
Total interest-earning assets		43,555			40,951		6.4%		34,536		26.1%
Interest-bearing deposits		21,967			18,728		17.3%		11,913		84.4%
Borrowings		589			299		97.0%		209		181.8%
Total interest-bearing liabilities		22,556			19,027		18.5%		12,122		86.1%
Net interest income	$	20,999		$	21,924		(4.2)%	$	22,414		(6.3)%
Average balance of
Loans	$	2,370,027		$	2,242,457		5.7%	$	2,072,415		14.4%
Investment securities		140,459			139,227		0.9%		142,079		(1.1)%
Other interest-earning assets		217,002			175,336		23.8%		186,809		16.2%
Total interest-earning assets	$	2,727,488		$	2,557,020		6.7%	$	2,401,303		13.6%
Interest-bearing deposits	$	1,827,209		$	1,650,132		10.7%	$	1,410,812		29.5%
Borrowings		42,187			21,000		100.9%		15,811		166.8%
Total interest-bearing liabilities	$	1,869,396		$	1,671,132		11.9%	$	1,426,623		31.0%
Total funding ⁽¹⁾	$	2,412,207		$	2,249,026		7.3%	$	2,114,198		14.1%
Annualized average yield/cost of
Loans		6.66	%		6.58	%			6.11	%
Investment securities		3.57	%		3.62	%			3.15	%
Other interest-earning assets		5.67	%		5.64	%			4.79	%
Total interest-earning assets		6.42	%		6.35	%			5.83	%
Interest-bearing deposits		4.84	%		4.50	%			3.42	%
Borrowings		5.62	%		5.65	%			5.36	%
Total interest-bearing liabilities		4.85	%		4.52	%			3.45	%
Net interest margin		3.10	%		3.40	%			3.79	%
Cost of total funding ⁽¹⁾		3.76	%		3.36	%			2.33	%
Supplementary information
Net accretion of discount on loans	$	573		$	806		(28.9)%	$	671		(14.6)%
Net amortization of deferred loan fees	$	334		$	449		(25.6)%	$	175		90.9%

(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 was primarily due to increases in overall interest rates on loans, partially offset by decreases in accretion of discount on loans and prepayment fees.

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:

	3/31/2024		12/31/2023		3/31/2023
	% to Total Loans	Weighted- Average Contractual Rate	% to Total Loans	Weighted- Average Contractual Rate	% to Total Loans	Weighted- Average Contractual Rate
Fixed rate loans	20.0%	4.92%	21.2%	4.86%	23.4%	4.64%
Hybrid rate loans	38.6%	5.01%	39.0%	4.93%	39.0%	4.51%
Variable rate loans	41.4%	8.46%	39.8%	8.51%	37.6%	8.26%

Investment Securities. The decrease in average yield for the current quarter compared with the previous quarter was primarily due to a decrease in average balance of net unrealized losses on investment securities. The increase for the current quarter compared with the year-ago quarter was primarily due to higher yield on newly purchased investment securities.

Other Interest-Earning Assets. The increase in average yield for the current quarter was primarily due to increases in interest rate on cash held at the Federal Reserve Bank and dividends received on Federal Home Loan Bank stock.

Interest-Bearing Deposits. The increase in average cost for the current quarter was primarily due to an increase in market rates.

Provision (Reversal) for Credit Losses

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

	Three Months Ended
($ in thousands)	3/31/2024		12/31/2023			% Change	3/31/2023			% Change
Provision (reversal) for credit losses on loans	$	922	$	1,935		(52.4)%	$	(2,417	)	(138.1)%
Provision (reversal) for credit losses on off-balance sheet credit exposure		168		(237	)	(170.9)%		(361	)	NM
Total provision (reversal) for credit losses	$	1,090	$	1,698		(35.8)%	$	(2,778	)	(139.2)%

The provision for credit losses on loans for the current quarter was primarily due to an increase in loan held-for-investment.

Noninterest Income

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

	Three Months Ended
($ in thousands)	3/31/2024		12/31/2023		% Change	3/31/2023		% Change
Gain on sale of loans	$	1,078	$	803	34.2%	$	1,309	(17.6)%
Service charges and fees on deposits		378		391	(3.3)%		344	9.9%
Loan servicing income		919		751	22.4%		860	6.9%
Bank-owned life insurance income		228		202	12.9%		180	26.7%
Other income		342		356	(3.9)%		328	4.3%
Total noninterest income	$	2,945	$	2,503	17.7%	$	3,021	(2.5)%

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)	3/31/2024		12/31/2023		% Change	3/31/2023		% Change
Gain on sale of SBA loans
Sold loan balance	$	19,414	$	20,751	(6.4)%	$	27,133	(28.4)%
Premium received		1,596		1,250	27.7%		2,041	(21.8)%
Gain recognized		1,078		803	34.2%		1,309	(17.6)%

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

	Three Months Ended
($ in thousands)	3/31/2024			12/31/2023			% Change	3/31/2023			% Change
Loan servicing income
Servicing income received	$	1,293		$	1,290		0.2%	$	1,284		0.7%
Servicing assets amortization		(374	)		(539	)	(30.6)%		(424	)	(11.8)%
Loan servicing income	$	919		$	751		22.4%	$	860		6.9%
Underlying loans at end of period	$	540,039		$	532,231		1.5%	$	540,502		(0.1)%

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
($ in thousands)	3/31/2024		12/31/2023		% Change	3/31/2023		% Change
Salaries and employee benefits	$	9,218	$	8,397	9.8%	$	8,928	3.2%
Occupancy and equipment		2,358		2,145	9.9%		1,896	24.4%
Professional fees		1,084		898	20.7%		732	48.1%
Marketing and business promotion		319		772	(58.7)%		372	(14.2)%
Data processing		402		393	2.3%		412	(2.4)%
Director fees and expenses		232		207	12.1%		180	28.9%
Regulatory assessments		298		285	4.6%		155	92.3%
Other expense		2,441		1,372	77.9%		1,079	126.2%
Total noninterest expense	$	16,352	$	14,469	13.0%	$	13,754	18.9%

Salaries and Employee Benefits. The increase for the current quarter compared with the previous quarter was primarily due to increases in vacation accrual and other employee benefits. The increase for the current quarter compared with the year-ago quarter was primarily due to increases in salaries and incentives tied to sales of SBA loans originated at loan production offices, partially offset by decreases in bonus and vacation accruals. The number of full-time equivalent employees was 272, 270 and 276 as of March 31, 2024, December 31, 2023 and March 31, 2023, respectively.

Occupancy and Equipment. The increase for the current quarter was primarily due to an expansion of headquarters location in the second half of 2023 and the preparation of a relocation of a regional office and two branches into one location in Orange County, California.

Professional Fees. The increase for the current quarter was primarily due to increases in professional fees related to a core system conversion that was completed in April 2024.

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

Other Expense. The increase for the current quarter was primarily due to a termination charge for the legacy core system of $508 thousand and an expense of $815 thousand for a reimbursement for an SBA loan guarantee previously paid by the SBA on a loan originated in 2014 that subsequently defaulted and was ultimately determined to be ineligible for the SBA guaranty. The Company retained the legal services of a law firm specializing on matters equivalent to our recovery demand for SBA to reconsider all the evidences in order for us to recoup it ranging from partial to full amount.

Balance Sheet (Unaudited)

Total assets were $2.85 billion at March 31, 2024, an increase of $64.8 million, or 2.3%, from $2.79 billion at December 31, 2023, and an increase of $353.8 million, or 14.1%, from $2.50 billion at March 31, 2023. The increase for the current quarter was primarily due to increases in loans held-for-investment.

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)	3/31/2024		12/31/2023		% Change	3/31/2023		% Change
Commercial real estate:
Commercial property	$	874,300	$	855,270	2.2%	$	780,282	12.0%
Business property		578,903		558,772	3.6%		521,965	10.9%
Multifamily		131,742		132,500	(0.6)%		127,012	3.7%
Construction		29,212		24,843	17.6%		15,930	83.4%
Total commercial real estate		1,614,157		1,571,385	2.7%		1,445,189	11.7%
Commercial and industrial		371,934		342,002	8.8%		267,674	39.0%
Consumer:
Residential mortgage		389,888		389,420	0.1%		356,967	9.2%
Other consumer		21,985		20,645	6.5%		22,612	(2.8)%
Total consumer		411,873		410,065	0.4%		379,579	8.5%
Loans held-for-investment		2,397,964		2,323,452	3.2%		2,092,442	14.6%
Loans held-for-sale		3,256		5,155	(36.8)%		14,352	(77.3)%
Total loans	$	2,401,220	$	2,328,607	3.1%	$	2,106,794	14.0%

SBA loans included in:
Loans held-for-investment	$	148,316	$	145,603	1.9%	$	144,106	2.9%
Loans held-for-sale	$	3,256	$	5,155	(36.8)%	$	14,352	(77.3)%

The increase in loans held-for-investment for the current quarter was primarily due to new funding and advances on lines of credit of $468.6 million, partially offset by pay-downs and pay-offs of $393.9 million. The decrease in loans held-for-sale for the current quarter was primarily due to sales of $19.4 million, and pay-downs and pay-offs of $1.6 million, partially offset by new funding of $19.1 million.

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

($ in thousands)	3/31/2024		12/31/2023		% Change	3/31/2023		% Change
Commercial property	$	8,687	$	11,634	(25.3)%	$	6,811	27.5%
Business property		10,196		9,899	3.0%		12,307	(17.2)%
Multifamily		1,800		1,800	—%		4,500	(60.0)%
Construction		22,895		23,739	(3.6)%		16,563	38.2%
Commercial and industrial		384,034		351,025	9.4%		279,543	37.4%
Other consumer		992		3,421	(71.0)%		399	148.6%
Total commitments to extend credit		428,604		401,518	6.7%		320,123	33.9%
Letters of credit		6,558		6,583	(0.4)%		5,400	21.4%
Total off-balance sheet credit exposure	$	435,162	$	408,101	6.6%	$	325,523	33.7%

Credit Quality

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

($ in thousands)	3/31/2024			12/31/2023			% Change	3/31/2023			% Change
Nonaccrual loans
Commercial real estate:
Commercial property	$	932		$	958		(2.7)%	$	—		NM
Business property		3,455			2,865		20.6%		2,904		19.0%
Total commercial real estate		4,387			3,823		14.8%		2,904		51.1%
Commercial and industrial		111			68		63.2%		11		909.1%
Consumer:
Residential mortgage		436			—		NM		—		NM
Other consumer		6			25		(76.0)%		45		(86.7)%
Total consumer		442			25		1,668.0%		45		882.2%
Total nonaccrual loans held-for-investment		4,940			3,916		26.1%		2,960		66.9%
Loans past due 90 days or more and still accruing		—			—		—%		—		—%
Non-performing loans (“NPLs”)		4,940			3,916		26.1%		2,960		66.9%
Other real estate owned (“OREO”)		—			2,558		(100.0)%		—		—%
Non-performing assets (“NPAs”)	$	4,940		$	6,474		(23.7)%	$	2,960		66.9%
Loans past due and still accruing
Past due 30 to 59 days	$	3,412		$	1,394		144.8%	$	779		338.0%
Past due 60 to 89 days		1,103			34		3,144.1%		13		8,384.6%
Past due 90 days or more		—			—		—%		—		—%
Total loans past due and still accruing	$	4,515		$	1,428		216.2%	$	792		470.1%
Special mention loans	$	1,101		$	5,156		(78.6)%	$	5,527		(80.1)%
Classified assets
Classified loans held-for-investment	$	7,771		$	7,000		11.0%	$	6,060		28.2%
OREO		—			2,558		(100.0)%		—		—%
Classified assets	$	7,771		$	9,558		(18.7)%	$	6,060		28.2%
NPLs to loans held-for-investment		0.21	%		0.17	%			0.14	%
NPAs to total assets		0.17	%		0.23	%			0.12	%
Classified assets to total assets		0.27	%		0.34	%			0.24	%

During the previous quarter, the Company recognized an OREO of $2.6 million by transferring a SBA 7(a) loan, of which its guaranteed portion was previously sold. The Company’s exposure was 25% of the OREO and the SBA was entitled to 75% of the sale price upon the sale of property. The Company sold the property and recognized a gain of $13 thousand during the current quarter.

Allowance for Credit Losses

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

	Three Months Ended
($ in thousands)	3/31/2024			12/31/2023			% Change	3/31/2023			% Change
ACL on loans
Balance at beginning of period	$	27,533		$	25,599		7.6%	$	24,942		10.4%
Impact of ASC 326 adoption		—			—		NM		1,067		NM
Charge-offs		(185	)		(13	)	1,323.1%		—		NM
Recoveries		62			12		416.7%		1,102		(94.4)%
Provision (reversal) for credit losses on loans		922			1,935		(52.4)%		(2,417	)	NM
Balance at end of period	$	28,332		$	27,533		2.9%	$	24,694		14.7%
Percentage to loans held-for-investment at end of period		1.18	%		1.19	%			1.18	%
ACL on off-balance sheet credit exposure
Balance at beginning of period	$	1,277		$	1,514		(15.7)%	$	299		327.1%
Impact of ASC 326 adoption		—			—		NM		1,607		NM
Provision (reversal) for credit losses on off-balance sheet credit exposure		168			(237	)	NM		(361	)	NM
Balance at end of period	$	1,445		$	1,277		13.2%	$	1,545		(6.5)%

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 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.

Investment Securities

Total investment securities were $138.2 million at March 31, 2024, a decrease of $5.2 million, or 3.6%, from $143.3 million at December 31, 2023, and a decrease of $6.5 million, or 4.5%, from $144.7 million at March 31, 2023. The decrease for the current quarter was primarily due to a fair value decrease of $1.6 million, principal pay-downs of $3.5 million and net premium amortization of $41 thousand.

Deposits

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

	3/31/2024			12/31/2023			3/31/2023
($ in thousands)	Amount		% to Total	Amount		% to Total	Amount		% to Total
Noninterest-bearing demand deposits	$	538,380	22.4%	$	594,673	25.3%	$	653,970	30.5%
Interest-bearing deposits
Savings		6,153	0.3%		6,846	0.3%		7,584	0.4%
NOW		16,232	0.7%		16,825	0.7%		15,696	0.7%
Retail money market accounts		461,221	19.0%		397,531	16.8%		436,906	20.3%
Brokered money market accounts		1	0.1%		1	0.1%		1	0.1%
Retail time deposits of
$250,000 or less		471,528	19.6%		456,293	19.4%		356,049	16.6%
More than $250,000		549,550	22.9%		515,702	21.9%		454,464	21.3%
State and brokered time deposits		359,775	15.0%		363,741	15.5%		217,019	10.1%
Total interest-bearing deposits		1,864,460	77.6%		1,756,939	74.7%		1,487,719	69.5%
Total deposits	$	2,402,840	100.0%	$	2,351,612	100.0%	$	2,141,689	100.0%

Estimated total deposits not covered by deposit insurance	$	1,017,696	42.4%	$	947,294	40.3%	$	1,019,689	47.6%

Total retail deposits were $2.04 billion at March 31, 2024, an increase of $55.2 million, or 2.8%, from $1.99 billion at December 31, 2023, and an increase of $118.4 million, or 6.2%, from $1.92 billion at March 31, 2023.

The decrease in noninterest-bearing demand deposits was primarily due to strong deposit market competition and the migration to interest-bearing deposits. 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 $123.2 million, renewals of the matured accounts of $259.1 million and balance increases of $8.7 million, partially offset by matured and closed accounts of $341.9 million.

Liquidity

The following table presents a summary of the Company’s liquidity position as of March 31, 2024:

($ in thousands)	3/31/2024			12/31/2023			% Change
Cash and cash equivalents	$	239,791		$	242,342		(1.1)%
Cash and cash equivalents to total assets		8.4	%		8.7	%

Available borrowing capacity
FHLB advances	$	642,726		$	602,976		6.6%
Federal Reserve Discount Window		574,245			528,893		8.6%
Overnight federal funds lines		65,000			65,000		—%
Total	$	1,281,971		$	1,196,869		7.1%
Total available borrowing capacity to total assets		44.9	%		42.9	%

Shareholders’ Equity

Shareholders’ equity was $350.0 million at March 31, 2024, an increase of $1.1 million, or 0.3%, from $348.9 million at December 31, 2023, and an increase of $13.2 million, or 3.9%, from $336.8 million at March 31, 2023. The increase for the current quarter was primarily due to net income, partially offset by an increase in other comprehensive loss of $1.2 million and cash dividends declared on common stock of $2.6 million.

Stock Repurchases

In 2023, the Company repurchased and retired 512,657 shares of common stock at a weighted-average price of $17.22, totaling $8.8 million. The Company did not repurchase any shares of common stock during the current quarter. As of March 31, 2024, the Company is authorized to purchase 592,724 additional shares under the 2023 stock repurchase program, which expires on August 2, 2024.

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 of up to 2%. After the tenth anniversary of the investment date, the dividend rate will be fixed based on the average annual amount of lending in years 2 through 10.

The Company expects to pay the initial quarterly dividend at an annualized dividend rate of 2% beginning in the second quarter of 2024.

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:

	3/31/2024	12/31/2023	3/31/2023	Well Capitalized Requirements
PCB Bancorp
Common tier 1 capital (to risk-weighted assets)	11.88%	12.23%	13.09%	N/A
Total capital (to risk-weighted assets)	15.93%	16.39%	17.61%	N/A
Tier 1 capital (to risk-weighted assets)	14.71%	15.16%	16.37%	N/A
Tier 1 capital (to average assets)	12.73%	13.43%	13.90%	N/A
PCB Bank
Common tier 1 capital (to risk-weighted assets)	14.37%	14.85%	16.03%	6.5%
Total capital (to risk-weighted assets)	15.59%	16.07%	17.27%	10.0%
Tier 1 capital (to risk-weighted assets)	14.37%	14.85%	16.03%	8.0%
Tier 1 capital (to average assets)	12.44%	13.16%	13.62%	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 liquidity, 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, 2023 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)

	3/31/2024			12/31/2023			% Change	3/31/2023			% Change
Assets
Cash and due from banks	$	29,432		$	26,518		11.0%	$	25,801		14.1%
Interest-bearing deposits in other financial institutions		210,359			215,824		(2.5)%		164,718		27.7%
Total cash and cash equivalents		239,791			242,342		(1.1)%		190,519		25.9%
Securities available-for-sale, at fair value		138,170			143,323		(3.6)%		144,665		(4.5)%
Loans held-for-sale		3,256			5,155		(36.8)%		14,352		(77.3)%
Loans held-for-investment		2,397,964			2,323,452		3.2%		2,092,442		14.6%
Allowance for credit losses on loans		(28,332	)		(27,533	)	2.9%		(24,694	)	14.7%
Net loans held-for-investment		2,369,632			2,295,919		3.2%		2,067,748		14.6%
Premises and equipment, net		8,892			5,999		48.2%		6,473		37.4%
Federal Home Loan Bank and other bank stock		12,716			12,716		—%		10,183		24.9%
Other real estate owned, net		—			2,558		(100.0)%		—		—%
Bank-owned life insurance		31,045			30,817		0.7%		30,244		2.6%
Deferred tax assets, net		—			—		—%		3,753		(100.0)%
Servicing assets		6,544			6,666		(1.8)%		7,345		(10.9)%
Operating lease assets		18,255			18,913		(3.5)%		5,854		211.8%
Accrued interest receivable		10,394			9,468		9.8%		7,998		30.0%
Other assets		15,597			15,630		(0.2)%		11,390		36.9%
Total assets	$	2,854,292		$	2,789,506		2.3%	$	2,500,524		14.1%
Liabilities
Deposits
Noninterest-bearing demand	$	538,380		$	594,673		(9.5)%	$	653,970		(17.7)%
Savings, NOW and money market accounts		483,607			421,203		14.8%		460,187		5.1%
Time deposits of $250,000 or less		771,303			760,034		1.5%		513,068		50.3%
Time deposits of more than $250,000		609,550			575,702		5.9%		514,464		18.5%
Total deposits		2,402,840			2,351,612		2.2%		2,141,689		12.2%
Federal Home Loan Bank advances		50,000			39,000		28.2%		—		NM
Deferred tax liabilities, net		266			876		(69.6)%		—		NM
Operating lease liabilities		19,555			20,137		(2.9)%		6,238		213.5%
Accrued interest payable and other liabilities		31,626			29,009		9.0%		15,767		100.6%
Total liabilities		2,504,287			2,440,634		2.6%		2,163,694		15.7%
Commitments and contingent liabilities
Shareholders’ equity
Preferred stock		69,141			69,141		—%		69,141		—%
Common stock		142,734			142,563		0.1%		143,356		(0.4)%
Retained earnings		148,209			146,092		1.4%		133,415		11.1%
Accumulated other comprehensive loss, net		(10,079	)		(8,924	)	12.9%		(9,082	)	11.0%
Total shareholders’ equity		350,005			348,872		0.3%		336,830		3.9%
Total liabilities and shareholders’ equity	$	2,854,292		$	2,789,506		2.3%	$	2,500,524		14.1%

Outstanding common shares		14,263,791			14,260,440				14,297,870
Book value per common share ⁽¹⁾	$	24.54		$	24.46			$	23.56
TCE per common share⁽²⁾	$	19.69		$	19.62			$	18.72
Total loan to total deposit ratio		99.93	%		99.02	%			98.37	%
Noninterest-bearing deposits to total deposits		22.41	%		25.29	%			30.54	%

(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
	3/31/2024			12/31/2023			% Change	3/31/2023			% Change
Interest and dividend income
Loans, including fees	$	39,251		$	37,189		5.5%	$	31,229		25.7%
Investment securities		1,246			1,271		(2.0)%		1,102		13.1%
Other interest-earning assets		3,058			2,491		22.8%		2,205		38.7%
Total interest income		43,555			40,951		6.4%		34,536		26.1%
Interest expense
Deposits		21,967			18,728		17.3%		11,913		84.4%
Other borrowings		589			299		97.0%		209		181.8%
Total interest expense		22,556			19,027		18.5%		12,122		86.1%
Net interest income		20,999			21,924		(4.2)%		22,414		(6.3)%
Provision (reversal) for credit losses		1,090			1,698		(35.8)%		(2,778	)	NM
Net interest income after provision (reversal) for credit losses		19,909			20,226		(1.6)%		25,192		(21.0)%
Noninterest income
Gain on sale of loans		1,078			803		34.2%		1,309		(17.6)%
Service charges and fees on deposits		378			391		(3.3)%		344		9.9%
Loan servicing income		919			751		22.4%		860		6.9%
Bank-owned life insurance income		228			202		12.9%		180		26.7%
Other income		342			356		(3.9)%		328		4.3%
Total noninterest income		2,945			2,503		17.7%		3,021		(2.5)%
Noninterest expense
Salaries and employee benefits		9,218			8,397		9.8%		8,928		3.2%
Occupancy and equipment		2,358			2,145		9.9%		1,896		24.4%
Professional fees		1,084			898		20.7%		732		48.1%
Marketing and business promotion		319			772		(58.7)%		372		(14.2)%
Data processing		402			393		2.3%		412		(2.4)%
Director fees and expenses		232			207		12.1%		180		28.9%
Regulatory assessments		298			285		4.6%		155		92.3%
Other expense		2,441			1,372		77.9%		1,079		126.2%
Total noninterest expense		16,352			14,469		13.0%		13,754		18.9%
Income before income taxes		6,502			8,260		(21.3)%		14,459		(55.0)%
Income tax expense		1,817			2,352		(22.7)%		4,162		(56.3)%
Net income	$	4,685		$	5,908		(20.7)%	$	10,297		(54.5)%

Earnings per common share
Basic	$	0.33		$	0.41			$	0.71
Diluted	$	0.33		$	0.41			$	0.70
Average common shares
Basic		14,235,419			14,223,831				14,419,155
Diluted		14,330,204			14,316,581				14,574,929

Dividend paid per common share	$	0.18		$	0.18			$	0.15
Return on average assets ⁽¹⁾		0.67	%		0.89	%			1.69	%
Return on average shareholders’ equity⁽¹⁾		5.39	%		6.82	%			12.46	%
Return on average TCE ^{(1), (2)}		6.72	%		8.54	%			15.70	%
Efficiency ratio⁽³⁾		68.29	%		59.23	%			54.08	%

(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
	3/31/2024						12/31/2023						3/31/2023
	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⁾	$	2,370,027		$	39,251	6.66%	$	2,242,457		$	37,189	6.58%	$	2,072,415		$	31,229	6.11%
Mortgage-backed securities		101,852			839	3.31%		100,500			855	3.38%		97,578			683	2.84%
Collateralized mortgage obligation		23,763			254	4.30%		23,970			259	4.29%		26,743			256	3.88%
SBA loan pool securities		7,317			78	4.29%		7,453			81	4.31%		9,027			82	3.68%
Municipal bonds ⁽²⁾		3,300			28	3.41%		3,110			29	3.70%		4,221			34	3.27%
Corporate bonds		4,227			47	4.47%		4,194			47	4.45%		4,510			47	4.23%
Other interest-earning assets		217,002			3,058	5.67%		175,336			2,491	5.64%		186,809			2,205	4.79%
Total interest-earning assets		2,727,488			43,555	6.42%		2,557,020			40,951	6.35%		2,401,303			34,536	5.83%
Noninterest-earning assets
Cash and due from banks		21,365						23,034						21,155
ACL on loans		(27,577	)					(25,663	)					(26,757	)
Other assets		88,532						87,759						75,175
Total noninterest-earning assets		82,320						85,130						69,573
Total assets	$	2,809,808					$	2,642,150					$	2,470,876
Liabilities and Shareholders’ Equity
Interest-bearing liabilities
Deposits
NOW and money market accounts	$	453,801			4,665	4.13%	$	450,408			4,418	3.89%	$	485,962			3,445	2.87%
Savings		6,196			4	0.26%		6,947			4	0.23%		8,099			5	0.25%
Time deposits		1,367,212			17,298	5.09%		1,192,777			14,306	4.76%		916,751			8,463	3.74%
Total interest-bearing deposits		1,827,209			21,967	4.84%		1,650,132			18,728	4.50%		1,410,812			11,913	3.42%
Other borrowings		42,187			589	5.62%		21,000			299	5.65%		15,811			209	5.36%
Total interest-bearing liabilities		1,869,396			22,556	4.85%		1,671,132			19,027	4.52%		1,426,623			12,122	3.45%
Noninterest-bearing liabilities
Noninterest-bearing demand		542,811						577,894						687,575
Other liabilities		47,957						49,389						21,509
Total noninterest-bearing liabilities		590,768						627,283						709,084
Total liabilities		2,460,164						2,298,415						2,135,707
Total shareholders’ equity		349,644						343,735						335,169
Total liabilities and shareholders’ equity	$	2,809,808					$	2,642,150					$	2,470,876
Net interest income				$	20,999					$	21,924					$	22,414
Net interest spread⁽³⁾						1.57%						1.83%						2.38%
Net interest margin ⁽⁴⁾						3.10%						3.40%						3.79%
Total deposits	$	2,370,020		$	21,967	3.73%	$	2,228,026		$	18,728	3.33%	$	2,098,387		$	11,913	2.30%
Total funding ⁽⁵⁾	$	2,412,207		$	22,556	3.76%	$	2,249,026		$	19,027	3.36%	$	2,114,198		$	12,122	2.33%

(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
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
($ in thousands)		3/31/2024			12/31/2023			3/31/2023
Average total shareholders' equity	(a)	$	349,644		$	343,735		$	335,169
Less: average preferred stock	(b)		69,141			69,141			69,141
Average TCE	(c)=(a)-(b)	$	280,503		$	274,594		$	266,028
Net income	(d)	$	4,685		$	5,908		$	10,297
Return on average shareholder's equity ⁽¹⁾	(d)/(a)		5.39	%		6.82	%		12.46	%
Return on average TCE ⁽¹⁾	(d)/(c)		6.72	%		8.54	%		15.70	%

(1) Annualized.

($ in thousands, except per share data)		3/31/2024			12/31/2023			3/31/2023
Total shareholders' equity	(a)	$	350,005		$	348,872		$	336,830
Less: preferred stock	(b)		69,141			69,141			69,141
TCE	(c)=(a)-(b)	$	280,864		$	279,731		$	267,689
Outstanding common shares	(d)		14,263,791			14,260,440			14,297,870
Book value per common share	(a)/(d)	$	24.54		$	24.46		$	23.56
TCE per common share	(c)/(d)	$	19.69		$	19.62		$	18.72
Total assets	(e)	$	2,854,292		$	2,789,506		$	2,500,524
Total shareholders' equity to total assets	(a)/(e)		12.26	%		12.51	%		13.47	%
TCE to total assets	(c)/(e)		9.84	%		10.03	%		10.71	%

View source version on businesswire.com: https://www.businesswire.com/news/home/20240425818605/en/

Timothy Chang

Executive Vice President & Chief Financial Officer

213-210-2000

Source: PCB Bancorp

FAQ

What were PCB Bancorp's net income and earnings per share for Q1 2024?

PCB Bancorp reported net income of $4.7 million and earnings per share of $0.33 for Q1 2024.

How did PCB Bancorp's net interest margin change in Q1 2024 compared to the previous quarter and the year-ago quarter?

PCB Bancorp's net interest margin decreased to 3.10% in Q1 2024 from 3.40% in the previous quarter and 3.79% in the year-ago quarter.

What was the percentage change in PCB Bancorp's total assets from Q1 2023 to Q1 2024?

PCB Bancorp's total assets increased by 14.1% from Q1 2023 to Q1 2024.

What was the increase in loans held-for-investment for PCB Bancorp in Q1 2024 compared to the previous quarter?

PCB Bancorp's loans held-for-investment increased by 3.2% in Q1 2024 compared to the previous quarter.

How did PCB Bancorp's total deposits change in Q1 2024 compared to the year-ago quarter?

PCB Bancorp's total deposits increased by 12.2% in Q1 2024 compared to the year-ago quarter.

What impact did non-recurring expenses have on PCB Bancorp's net income in Q1 2024?

Non-recurring expenses of $1.8 million, including core conversion charges and a SBA recovery demand, impacted PCB Bancorp's net income in Q1 2024.

PCB Bancorp Reports Earnings of $4.7 million for Q1 2024

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What were PCB Bancorp's net income and earnings per share for Q1 2024?

How did PCB Bancorp's net interest margin change in Q1 2024 compared to the previous quarter and the year-ago quarter?

What was the percentage change in PCB Bancorp's total assets from Q1 2023 to Q1 2024?

What was the increase in loans held-for-investment for PCB Bancorp in Q1 2024 compared to the previous quarter?

How did PCB Bancorp's total deposits change in Q1 2024 compared to the year-ago quarter?

What impact did non-recurring expenses have on PCB Bancorp's net income in Q1 2024?

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PCB Bancorp Reports Earnings of $4.7 million for Q1 2024

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What were PCB Bancorp's net income and earnings per share for Q1 2024?

How did PCB Bancorp's net interest margin change in Q1 2024 compared to the previous quarter and the year-ago quarter?

What was the percentage change in PCB Bancorp's total assets from Q1 2023 to Q1 2024?

What was the increase in loans held-for-investment for PCB Bancorp in Q1 2024 compared to the previous quarter?

How did PCB Bancorp's total deposits change in Q1 2024 compared to the year-ago quarter?

What impact did non-recurring expenses have on PCB Bancorp's net income in Q1 2024?

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