PCB Bancorp Reports Earnings of $8.6 million for Q1 2021 and Declares $0.10 Quarterly Cash Dividend

Rhea-AI Summary

PCB Bancorp (NASDAQ: PCB) reported a strong first quarter of 2021 with net income of $8.6 million ($0.55 per diluted share), up 47.9% from the previous quarter and 139.6% year-over-year. The company reversed loan loss provisions by $1.1 million, improving its allowance for loan losses ratio to 1.51%. Total assets grew to $2.05 billion, reflecting a 13.9% increase year-over-year. Deposits rose 18.7% to $1.75 billion. A stock repurchase program was launched, alongside a $0.10 dividend, marking the 25th consecutive quarterly payment.

Positive

• Net income increased by 47.9% to $8.6 million.
• Allowance for loan losses improved to 1.51%.
• Total assets rose to $2.05 billion, 13.9% increase YoY.
• Deposits increased by 18.7% to $1.75 billion.
• Repurchase program for up to 5% of outstanding stock announced.

Negative

• Noninterest income decreased by 36.8% to $2.9 million.
• Net interest margin declined to 3.70% from 3.85% YoY.

PCB Bancorp (the “Company”) (NASDAQ: PCB), the holding company of Pacific City Bank (the “Bank”), today reported net income of $8.6 million, or $0.55 per diluted common share for the first quarter of 2021, compared with $5.8 million, or $0.38 per diluted common share, for the previous quarter and $3.6 million, or $0.23 per diluted common share, for the year-ago quarter.

Q1 2021 Highlights

• Net income totaled $8.6 million or $0.55 per diluted common share;
  • The Company recorded a provision (reversal) for loan losses of $(1.1) million for the current quarter compared with $2.1 million for the previous quarter and $2.9 million for the year-ago quarter.
  • Allowance for loan losses to total loans held-for-investment ratio was 1.51% at March 31, 2021 compared with 1.67% at December 31, 2020 and 1.15% at March 31, 2020. Excluding U.S. Small Business Administration (“SBA”) Paycheck Protection Program (“PPP”) loans, allowance for loan losses to total loans held-for-investment ratio was 1.74% and 1.83% at March 31, 2021 and December 31, 2020, respectively.
  • Net interest margin was 3.70% for the first quarter of 2021 compared with 3.64% for the previous quarter and 3.85% for the year-ago quarter.
• Total assets were $2.05 billion at March 31, 2021, an increase of $127.8 million, or 6.6%, from $1.92 billion at December 31, 2020 and an increase of $250.7 million, or 13.9%, from $1.80 billion at March 31, 2020;
• Loans held-for-investment, net of deferred costs (fees), were $1.69 billion at March 31, 2021, an increase of $102.3 million, or 6.5%, from $1.58 billion at December 31, 2020 and an increase of $234.9 million, or 16.2%, from $1.45 billion at March 31, 2020;
  • SBA PPP loans totaled $218.7 million and $135.7 million at March 31, 2021 and December 31, 2020, respectively. During the current quarter, the Company funded $104.3 million of SBA PPP loans.
  • Loans under modified terms related to COVID-19 totaled $19.8 million and $36.1 million at March 31, 2021 and December 31, 2020, respectively.
• Total deposits were $1.75 billion at March 31, 2021, an increase of $158.9 million from $1.59 billion at December 31, 2020 and an increase of $276.3 million, or 18.7%, from $1.48 billion at March 31, 2020;
• Announced a repurchase program on April 8, 2021 for the repurchase up to 5% of outstanding common stock, which represented 775,000 shares, through September 7, 2021; and
• Declared a cash dividend of $0.10 per share on April 22, 2021. This represents the 25th consecutive quarterly dividend paid by PCB Bancorp.

“We are pleased to announce a record quarter driven by strong core income, positive credit trends and an improving economic outlook that resulted in a release of loan loss reserves,” said Henry Kim, President and Chief Executive Officer. “Our allowance to loan losses remain robust at 1.74% excluding SBA PPP loans and we continue to successfully reduce our cost of deposits resulting an expansion of net interest margin to 3.70% compared with 3.64% in the fourth quarter of 2020. This solid performance is the result of our dedicated team of people who reached out to the customers at the height of the pandemic to genuinely serve and to find solutions to their unprecedented situations.”

“Our 2021 first quarter results reflect our sound underwriting and our focus on relationship banking. We are well prepared to expand on this successful momentum as the economy continues to reopen and look forward to the remainder of this year.”

Financial Highlights (Unaudited)

($ in thousands, except per share data)		Three Months Ended
		3/31/2021					12/31/2020				% Change				3/31/2020				% Change
Net income		$	8,560				$	5,787			47.9		%		$	3,572			139.6		%
Diluted earnings per common share		$	0.55				$	0.38			44.7		%		$	0.23			139.1		%
Net interest income		$	17,819				$	17,407			2.4		%		$	16,566			7.6		%
Provision (reversal) for loan losses		(1,147		)			2,142				(153.5	)	%		2,896				(139.6	)	%
Noninterest income		2,857					4,524				(36.8	)	%		2,026				41.0		%
Noninterest expense		9,669					11,550				(16.3	)	%		10,567				(8.5	)	%
Return on average assets (1)		1.75			%		1.19		%						0.81		%
Return on average shareholders’ equity (1), (2)		14.66			%		9.92		%						6.35		%
Net interest margin (1)		3.70			%		3.64		%						3.85		%
Efficiency ratio (3)		46.76			%		52.67		%						56.84		%

($ in thousands, except per share data)		3/31/2021				12/31/2020				% Change			3/31/2020				% Change
Total assets		$	2,050,672			$	1,922,853			6.6	%		$	1,799,937			13.9	%
Net loans held-for-investment		1,660,402				1,557,068				6.6	%		1,434,364				15.8	%
Total deposits		1,753,771				1,594,851				10.0	%		1,477,442				18.7	%
Book value per common share (2), (4)		$	15.53			$	15.19			2.2	%		$	14.58			6.5	%
Tier 1 leverage ratio (consolidated)		12.03		%		11.94		%					12.57		%
Total shareholders’ equity to total assets (2)		11.72		%		12.16		%					12.45		%

(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)		The ratios are 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 recent global economic and market conditions, including significant disruption of, and volatility in, financial markets; global supply chain disruptions; and the institution of social distancing and shelter-in-place requirements that have resulted in temporary closures of many businesses, lost revenues, and increased unemployment throughout the U.S., but also specifically in California, where most of the Company’s operations and a large majority of its customers are located.

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 its customers, 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. SBA PPP loans totaled $218.7 million (2,249 loans) and loans under modified terms related to the COVID-19 pandemic totaled $19.8 million (18 loan customers) as of March 31, 2021. The Company had received SBA PPP forgiveness of $23.7 million for 440 SBA PPP loans as of March 31, 2021. On January 13, 2021, SBA began accepting applications for second draw PPP loans and the Company had funded $104.3 million (1,072 loans) as of March 31, 2021. The Company is accepting applications and will continue to receive applications as long as funding remains available.

In addition, the Company has been monitoring its liquidity and capital closely. As of March 31, 2021, the Company maintained $211.8 million, or 10.3% of total assets, of cash and cash equivalents and $540.1 million, or 26.3% of total assets, of available borrowing capacity. All regulatory capital ratios were also well above the regulatory well capitalized requirements as of March 31, 2021.

At this time, the Company cannot estimate the long term impact of the COVID-19 pandemic, but these conditions impacted and are expected 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)		3/31/2021				12/31/2020				% Change				3/31/2020				% Change
Interest income/expense on
Loans		$	18,744			$	18,929			(1.0	)	%		$	20,406			(8.1	)	%
Investment securities		360				429				(16.1	)	%		644				(44.1	)	%
Other interest-earning assets		154				150				2.7		%		610				(74.8	)	%
Total interest-earning assets		19,258				19,508				(1.3	)	%		21,660				(11.1	)	%
Interest-bearing deposits		1,311				1,958				(33.0	)	%		4,992				(73.7	)	%
Borrowings		128				143				(10.5	)	%		102				25.5		%
Total interest-bearing liabilities		1,439				2,101				(31.5	)	%		5,094				(71.8	)	%
Net interest income		$	17,819			$	17,407			2.4		%		$	16,566			7.6		%
Average balance of
Loans		$	1,641,634			$	1,592,705			3.1		%		$	1,454,727			12.8		%
Investment securities		123,851				123,785				0.1		%		118,502				4.5		%
Other interest-earning assets		189,153				187,592				0.8		%		158,793				19.1		%
Total interest-earning assets		$	1,954,638			$	1,904,082			2.7		%		$	1,732,022			12.9		%
Interest-bearing deposits		$	1,053,845			$	1,050,369			0.3		%		$	1,129,699			(6.7	)	%
Borrowings		75,556				91,467				(17.4	)	%		25,117				200.8		%
Total interest-bearing liabilities		$	1,129,401			$	1,141,836			(1.1	)	%		$	1,154,816			(2.2	)	%
Total funding (1)		$	1,736,477			$	1,691,758			2.6		%		$	1,524,334			13.9		%
Annualized average yield/cost of
Loans		4.63		%		4.73		%						5.64		%
Investment securities		1.18		%		1.38		%						2.19		%
Other interest-earning assets		0.33		%		0.32		%						1.55		%
Total interest-earning assets		4.00		%		4.08		%						5.03		%
Interest-bearing deposits		0.50		%		0.74		%						1.78		%
Borrowings		0.69		%		0.62		%						1.63		%
Total interest-bearing liabilities		0.52		%		0.73		%						1.77		%
Net interest margin		3.70		%		3.64		%						3.85		%
Cost of total funding (1)		0.34		%		0.49		%						1.34		%
Supplementary information
Net accretion of discount on loans		$	745			$	991			(24.8	)	%		$	858			(13.2	)	%
Net amortization of deferred loan fees (costs)		$	1,220			$	913			33.6		%		$	121			908.3		%

(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 decrease in average yield for the current quarter compared with the previous quarter was primarily due to an increase in SBA PPP loans and a decrease in net accretion of discount on loans, partially offset by an increase in net amortization of deferred loan fees from the increased SBA PPP loan production. The decrease in average yield for the current quarter compared with the year-ago quarter was primarily due to the increase in SBA PPP loans, partially offset by the increase in net amortization of deferred loan 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:

		3/31/2021						12/31/2020						3/31/2020
		% to Total Loans			Weighted- Average Contractual Rate			% to Total Loans			Weighted- Average Contractual Rate			% to Total Loans			Weighted- Average Contractual Rate
Fixed rate loans		36.3	%		3.44	%		31.7	%		3.86	%		30.2	%		5.19	%
Hybrid rate loans		19.3	%		4.77	%		20.8	%		4.82	%		14.6	%		5.01	%
Variable rate loans		44.4	%		4.04	%		47.5	%		4.06	%		55.2	%		4.41	%

Investment Securities. The decreases in average yield for the current quarter compared with the previous and year-ago quarters were primarily due to new investment securities purchased at lower market rates and an increase in premium amortization. During the current quarter and past 12-months period, the Company purchased investment securities of $20.2 million and $52.1 million, respectively.

Other Interest-Earning Assets. The decrease in average yield for the current quarter compared with the year-ago quarter was primarily due to the lower market rates. The increase in average balance for the current quarter compared with the year-ago quarter was primarily due to an increase in deposits and other borrowings as the Company maintains most of its cash at the Federal Reserve Bank account. For additional detail, please see the discussion for the current quarter in “Deposits” under the “Balance Sheet” discussion.

Interest-Bearing Deposits. The decreases in average cost for the current quarter compared with the previous and year-ago quarters were primarily due to the continuing decreases in market rates.

Borrowings. The increase in average cost for the current quarter compared with the previous quarter was primarily due to matured borrowings with lower interest rates during the current quarter. During the current quarter, a FHLB advance of $40.0 million with a rate of 0.59% matured. At March 31, 2021, the Company had a total outstanding FHLB advances of $40.0 million with a weighted-average rate of 0.76%.

Provision (reversal) for Loan Losses

Provision (reversal) for loan losses was $(1.1) million for the current quarter compared with $2.1 million for the previous quarter and $2.9 million for the year-ago quarter. The reversal for the current quarter was primarily due to improvement in historical loss factors and qualitative adjustment factors reflecting general economic condition. The Company recorded net charge-offs (recoveries) of $(151) thousand for the current quarter compared with $178 thousand for the previous quarter and $601 thousand for the year-ago quarter.

The following table presents allowance for loan losses to total loans held-for-investment ratio for the dates indicated:

($ in thousands)		3/31/2021				12/31/2020				3/31/2020
Total loans held-for-investment		$	1,685,916			$	1,583,578			$	1,451,038
Less: SBA PPP loans		218,709				135,654				—
Total loans held-for-investment, excluding SBA PPP loans		$	1,467,207			$	1,447,924			$	1,451,038
Allowance for loan losses		$	25,514			$	26,510			$	16,674
Allowance for loan losses to total loans held-for-investment		1.51		%		1.67		%		1.15		%
Allowance for loan losses to total loans held-for-investment, excluding SBA PPP loans		1.74		%		1.83		%		1.15		%

Noninterest Income

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

		Three Months Ended
($ in thousands)		3/31/2021				12/31/2020				% Change				3/31/2020				% Change
Gain on sale of loans		$	1,322			$	3,483			(62.0	)	%		$	725			82.3		%
Service charges and fees on deposits		293				311				(5.8	)	%		390				(24.9	)	%
Loan servicing income		882				398				121.6		%		554				59.2		%
Other income		360				332				8.4		%		357				0.8		%
Total noninterest income		$	2,857			$	4,524			(36.8	)	%		$	2,026			41.0		%

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)		3/31/2021				12/31/2020				% Change				3/31/2020				% Change
Gain on sale of SBA loans
Sold loan balance		$	10,919			$	42,413			(74.3	)	%		$	11,715			(6.8	)	%
Premium received		1,309				4,441				(70.5	)	%		1,056				24.0		%
Gain recognized		1,195				3,197				(62.6	)	%		704				69.7		%
Gain on sale of residential property loans
Sold loan balance		$	8,279			$	27,139			(69.5	)	%		$	2,079			298.2		%
Gain recognized		127				286				(55.6	)	%		21				504.8		%

The decrease in gain on sale of SBA loans compared with the previous quarter was primarily due to a higher sales volume in the previous quarter from the SBA loans held-for-sale of $26.8 million at September 30, 2020. The decrease in gain on sale of residential property loans was primarily due to the sales of residential property loans held-for-sale of $4.0 million at September 30, 2020 and an increased origination resulted from a higher demand for refinancing from the lower market rates 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)		3/31/2021					12/31/2020					% Change				3/31/2020					% Change
Loan servicing income
Servicing income received		$	1,273				$	961				32.5		%		$	1,158				9.9		%
Servicing assets amortization		(391		)			(563		)			(30.6	)	%		(604		)			(35.3	)	%
Loan servicing income		$	882				$	398				121.6		%		$	554				59.2		%
Underlying loans at end of period		$	492,981				$	498,795				(1.2	)	%		$	478,748				3.0		%

The Company services SBA loans and certain residential property loans that are sold to the secondary market. The increases for the current quarter compared with the previous and year-ago quarters were primarily due to an increase in servicing income received and a decrease in servicing asset amortization from a decrease in loan payoffs.

Noninterest Expense

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

		Three Months Ended
($ in thousands)		3/31/2021				12/31/2020				% Change				3/31/2020				% Change
Salaries and employee benefits		$	6,182			$	7,397			(16.4	)	%		$	6,551			(5.6	)	%
Occupancy and equipment		1,371				1,424				(3.7	)	%		1,380				(0.7	)	%
Professional fees		494				625				(21.0	)	%		797				(38.0	)	%
Marketing and business promotion		138				440				(68.6	)	%		179				(22.9	)	%
Data processing		377				375				0.5		%		358				5.3		%
Director fees and expenses		138				146				(5.5	)	%		221				(37.6	)	%
Regulatory assessments		208				250				(16.8	)	%		219				(5.0	)	%
Other expenses		761				893				(14.8	)	%		862				(11.7	)	%
Total noninterest expense		$	9,669			$	11,550			(16.3	)	%		$	10,567			(8.5	)	%

Salaries and Employee Benefits. The decrease for the current quarter compared with the previous quarter was primarily due to direct loan origination cost of $750 thousand related to SBA PPP loan production, which offsets the recognition of salaries and benefits expense, and decreases in bonus accrual and other employee benefits during the current quarter. Compared with the year-ago quarter, the decrease was primarily due to the SBA PPP loan direct loan origination cost and a decrease in other employee benefits, partially offset by an increase in bonus accrual.

Professional Fees. The decrease for the current quarter compared with the previous quarter was primarily due to increased 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 expenses related to the Bank’s Bank Secrecy Act and Anti-Money Laundering (“BSA/AML”) compliance enhancements. The consent order related to the BSA/AML compliance was terminated on September 30, 2020.

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 and a decrease in advertisement. The decrease for the current quarter compared with the year-ago quarter was primarily due to fewer marketing activities related to the COVID-19 pandemic.

Regulatory Assessments. The decreases for the current quarter compared with the previous and year-ago quarters were primarily due to a decrease in the assessment base as SBA PPP loans are excluded from the assessment base.

Balance Sheet (Unaudited)

Total assets were $2.05 billion at March 31, 2021, an increase of $127.8 million, or 6.6%, from $1.92 billion at December 31, 2020 and an increase of $250.7 million, or 13.9%, from $1.80 billion at March 31, 2020. The increase for the current quarter was primarily due to increases in loans held-for-investment, cash and cash equivalents, and investment securities. The increase in cash and cash equivalents for the current quarter was primarily due to an increase in deposits, partially offset by increases in loans held-for-investment and investment securities and a decrease in other borrowings.

Loans

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

($ in thousands)		3/31/2021				12/31/2020				% Change				3/31/2020				% Change
Real estate loans
Commercial property		$	922,536			$	880,736			4.7		%		$	812,484			13.5		%
Residential property		190,990				198,431				(3.7	)	%		227,492				(16.0	)	%
SBA property		125,989				126,570				(0.5	)	%		125,322				0.5		%
Construction		13,151				15,199				(13.5	)	%		19,178				(31.4	)	%
Commercial and industrial loans
Commercial term		80,361				87,250				(7.9	)	%		101,943				(21.2	)	%
Commercial lines of credit		91,970				96,087				(4.3	)	%		116,873				(21.3	)	%
SBA commercial term		21,078				21,878				(3.7	)	%		24,745				(14.8	)	%
SBA PPP		218,709				135,654				61.2		%		—				—		%
Other consumer loans		21,132				21,773				(2.9	)	%		23,001				(8.1	)	%
Loans held-for-investment		1,685,916				1,583,578				6.5		%		1,451,038				16.2		%
Loans held-for-sale		3,569				1,979				80.3		%		16,191				(78.0	)	%
Total loans		$	1,689,485			$	1,585,557			6.6		%		$	1,467,229			15.1		%

The increase in loans held-for-investment for the current quarter was primarily due to new funding of $190.4 million and advances on lines of credit of $27.8 million, partially offset by pay-downs and pay-offs of $115.4 million. SBA PPP loan production contributed significantly to the Company’s loan growth for the current quarter.

The increase in loans held-for-sale for the current quarter was primarily due to new funding of $20.4 million, partially offset by sales of $19.2 million.

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

($ in thousands)		3/31/2021				12/31/2020				% Change				3/31/2020				% Change
Real estate loans
Commercial property		$	20,003			$	21,016			(4.8	)	%		$	14,393			39.0		%
SBA property		3,677				540				580.9		%		421				773.4		%
Construction		13,588				13,986				(2.8	)	%		17,761				(23.5	)	%
Commercial and industrial loans
Commercial term		1,000				1,000				—		%		1,034				(3.3	)	%
Commercial lines of credit		168,381				156,870				7.3		%		143,228				17.6		%
SBA commercial term		—				—				—		%		912				(100.0	)	%
Other consumer loans		96				84				14.3		%		38				152.6		%
Total commitments to extend credit		$	206,745			$	193,496			6.8		%		$	177,787			16.3		%

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)		3/31/2021				12/31/2020				% Change				3/31/2020				% Change
Nonaccrual loans
Real estate loans
Commercial property		$	—			$	524			(100.0	)	%		$	—			—		%
Residential property		—				189				(100.0	)	%		—				—		%
SBA property		841				885				(5.0	)	%		$	1,461			(42.4	)	%
Commercial and industrial loans
Commercial lines of credit		—				904				(100.0	)	%		2,182				(100.0	)	%
SBA commercial term		568				595				(4.5	)	%		430				32.1		%
Other consumer loans		52				66				(21.2	)	%		10				420.0		%
Total nonaccrual loans held-for-investment		1,461				3,163				(53.8	)	%		4,083				(64.2	)	%
Loans past due 90 days or more and still accruing		—				—				—		%		—				—		%
Non-performing loans (“NPLs”)		1,461				3,163				(53.8	)	%		4,083				(64.2	)	%
Other real estate owned (“OREO”)		2,336				1,401				66.7		%		376				521.3		%
Non-performing assets (“NPAs”)		$	3,797			$	4,564			(16.8	)	%		$	4,459			(14.8	)	%
Loans past due and still accruing
Past due 30 to 59 days		$	56			$	302			(81.5	)	%		$	1,584			(96.5	)	%
Past due 60 to 89 days		52				36				44.4		%		46				13.0		%
Past due 90 days or more		—				—				—		%		—				—		%
Total loans past due and still accruing		$	108			$	338			(68.0	)	%		$	1,630			(93.4	)	%
Troubled debt restructurings (“TDRs”)
Accruing TDRs		$	620			$	634			(2.2	)	%		$	679			(8.7	)	%
Nonaccrual TDRs		33				5				560.0		%		145				(77.2	)	%
Total TDRs		$	653			$	639			2.2		%		$	82			(20.8	)	%
Special mention loans		$	17,997			$	16,461			9.3		%		$	72			24,895.8		%
Classified assets
Classified loans		$	7,090			$	10,130			(30.0	)	%		$	6,519			8.8		%
OREO		2,336				1,401				66.7		%		376				521.3		%
Classified assets		$	9,426			$	11,531			(18.3	)	%		$	6,895			36.7		%
NPLs to loans held-for-investment		0.09		%		0.20		%						0.28		%
NPAs to total assets		0.19		%		0.24		%						0.25		%
Classified assets to total assets		0.46		%		0.60		%						0.38		%

The increase in special mention was primarily due to downgrades of loans under modified terms related to the COVID-19 pandemic. Loans that are granted modifications related to the COVID-19 pandemic in excess of 6 months, on a cumulative basis, are classified as special mention or classified.

Special mention loans included $16.4 million and $14.9 million of loans under modified terms related to the COVID-19 pandemic at March 31, 2021 and December 31, 2020, respectively. The special mention loans under modified terms related to the COVID-19 pandemic included 2 commercial property loans totaling $11.9 million, 4 commercial term loans totaling $4.3 million, and a SBA property loan of $252 thousand at March 31, 2021.

Classified loans included $1.2 million and $1.9 million of loans under modified terms related to the COVID-19 pandemic at March 31, 2021 and December 31, 2020, respectively.

Loan Modifications Related to the COVID-19 Pandemic

The Company 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 (“CARES Act”). Therefore, the modified loans were not considered TDRs. Total loans under modified terms related to the COVID-19 pandemic were $19.8 million at March 31, 2021, a decrease of $16.3 million, or 45.1%, from $36.1 million at December 31, 2020 and a decrease of $464.2 million, or 95.9%, from $484.0 million at June 30, 2020.

The following table presents a summary of loans under modified terms related to the COVID-19 pandemic by portfolio segment as of March 31, 2021:

		Modification Type												Weighted- Average Contractual Rate			Accrued Interest Receivable
($ in thousands)		Payment Deferment				Interest Only Payment				Total
Real estate loans
Commercial property		$	—			$	11,830			$	11,830			3.59	%		$	77
Residential property		349				—				349				3.25	%		5
SBA property		—				1,627				1,627				4.94	%		27
Commercial and industrial loans
Commercial term		—				5,506				5,506				3.88	%		92
SBA commercial term		—				513				513				5.50	%		3
Total		$	349			$	19,476			$	19,825			3.82	%		$	204

Investment Securities

Total investment securities were $127.1 million at March 31, 2021, an increase of $6.6 million, or 5.5%, from $120.5 million at December 31, 2020 and an increase of $8.8 million, or 7.5%, from $118.3 million at March 31, 2020.

The increase for the current quarter was primarily due to purchases of $20.2 million, partially offset by principal pay-downs and calls of $11.8 million and net premium amortization of $310 thousand.

On June 30, 2020, the Company transferred securities held-to-maturity to securities available-for-sale as a part of the Company’s liquidity management plan in response to the COVID-19 pandemic. The Company transferred all of securities held-to-maturity of $18.8 million to securities available-for-sale, which resulted in a pre-tax increase to accumulated other comprehensive income of $787 thousand.

Deposits

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

		3/31/2021							12/31/2020							3/31/2020
($ in thousands)		Amount				% to Total			Amount				% to Total			Amount				% to Total
Noninterest-bearing demand deposits		$	715,719			40.8	%		$	538,009			33.7	%		$	394,084			26.7	%
Interest-bearing deposits
Savings		11,271				0.6	%		10,481				0.7	%		6,569				0.4	%
NOW		19,380				1.1	%		21,604				1.4	%		18,608				1.3	%
Retail money market accounts		381,704				21.7	%		351,739				22.0	%		338,850				22.9	%
Brokered money market accounts		4				0.1	%		25,002				1.6	%		10,006				0.7	%
Retail time deposits of
$250,000 or less		276,232				15.8	%		299,431				18.7	%		362,408				24.5	%
More than $250,000		166,845				9.5	%		168,683				10.6	%		176,970				12.0	%
Time deposits from internet rate service providers		17,616				1.0	%		24,902				1.6	%		5,447				0.4	%
State and brokered time deposits		165,000				9.4	%		155,000				9.7	%		164,500				11.1	%
Total interest-bearing deposits		1,038,052				59.2	%		1,056,842				66.3	%		1,083,358				73.3	%
Total deposits		$	1,753,771			100.0	%		$	1,594,851			100.0	%		$	1,477,442			100.0	%

The increase in noninterest-bearing demand deposits for the current year was primarily due to the overall liquid deposit market. During the current quarter, a total of $91.4 million of SBA PPP loans were funded through the Bank’s noninterest-bearing demand deposits and deposit customers also received $10.1 million of SBA Economic Injury Disaster Loans.

The decrease in retail time deposits for the current quarter was primarily due to matured and closed accounts of $195.6 million, partially offset by new accounts of $31.6 million and renewals of the matured accounts of $136.2 million.

Liquidity

The following table presents a summary of the Company’s liquidity position as of March 31, 2021:

($ in thousands)		3/31/2021
Cash and cash equivalents		$	211,780
Cash and cash equivalents to total assets		10.3		%
Available borrowing capacity
FHLB advances		$	440,705
Federal Reserve Discount Window		34,373
Overnight federal funds lines		65,000
Total		$	540,078
Total available borrowing capacity to total assets		26.3		%

Shareholders’ Equity

Shareholders’ equity was $240.3 million at March 31, 2021, an increase of $6.5 million, or 2.8%, from $233.8 million at December 31, 2020 and an increase of $16.1 million, or 7.2%, from $224.1 million at March 31, 2020. The increase for the current quarter was primarily due to net income, partially offset by a cash dividend declared on common stock of $1.5 million.

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:

		3/31/2021			12/31/2020			3/31/2020			Well Capitalized Requirements
PCB Bancorp
Common tier 1 capital (to risk-weighted assets)		15.92	%		15.97	%		15.53	%		N/A
Total capital (to risk-weighted assets)		17.17	%		17.22	%		16.71	%		N/A
Tier 1 capital (to risk-weighted assets)		15.92	%		15.97	%		15.53	%		N/A
Tier 1 capital (to average assets)		12.03	%		11.94	%		12.57	%		N/A
Pacific City Bank
Common tier 1 capital (to risk-weighted assets)		15.62	%		15.70	%		15.28	%		6.5%
Total capital (to risk-weighted assets)		16.88	%		16.95	%		16.47	%		10.0%
Tier 1 capital (to risk-weighted assets)		15.62	%		15.70	%		15.28	%		8.0%
Tier 1 capital (to average assets)		11.81	%		11.74	%		12.37	%		5.0%

Declaration of Quarterly Cash Dividend

On April 22, 2021, the Company’s Board of Directors declared a quarterly cash dividend of $0.10 per common share. The dividend will be paid on or about May 14, 2021, to shareholders of record as of the close of business on May 7, 2021.

About PCB Bancorp

PCB Bancorp, formerly known as Pacific City Financial Corporation, 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. 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)

		3/31/2021					12/31/2020					% Change				3/31/2020					% Change
Assets
Cash and due from banks		$	16,764				$	19,605				(14.5	)	%		$	14,880				12.7		%
Interest-bearing deposits in other financial institutions		195,016					174,493					11.8		%		174,039					12.1		%
Total cash and cash equivalents		211,780					194,098					9.1		%		188,919					12.1		%
Securities available-for-sale, at fair value		127,114					120,527					5.5		%		98,568					29.0		%
Securities held-to-maturity		—					—					—		%		19,711					(100.0	)	%
Total investment securities		127,114					120,527					5.5		%		118,279					7.5		%
Loans held-for-sale		3,569					1,979					80.3		%		16,191					(78.0	)	%
Loans held-for-investment, net of deferred loan costs (fees)		1,685,916					1,583,578					6.5		%		1,451,038					16.2		%
Allowance for loan losses		(25,514		)			(26,510		)			(3.8	)	%		(16,674		)			53.0		%
Net loans held-for-investment		1,660,402					1,557,068					6.6		%		1,434,364					15.8		%
Premises and equipment, net		3,774					4,048					(6.8	)	%		4,797					(21.3	)	%
Federal Home Loan Bank and other bank stock		8,447					8,447					—		%		8,345					1.2		%
Other real estate owned, net		2,336					1,401					66.7		%		376					521.3		%
Deferred tax assets, net		8,170					8,120					0.6		%		5,140					58.9		%
Servicing assets		6,253					6,400					(2.3	)	%		6,358					(1.7	)	%
Operating lease assets		7,145					7,616					(6.2	)	%		8,393					(14.9	)	%
Accrued interest receivable		7,523					9,334					(19.4	)	%		4,706					59.9		%
Other assets		4,159					3,815					9.0		%		4,069					2.2		%
Total assets		$	2,050,672				$	1,922,853				6.6		%		$	1,799,937				13.9		%
Liabilities
Deposits
Noninterest-bearing demand		$	715,719				$	538,009				33.0		%		$	394,084				81.6		%
Savings, NOW and money market accounts		412,359					408,826					0.9		%		374,033					10.2		%
Time deposits of $250,000 or less		358,848					379,333					(5.4	)	%		442,355					(18.9	)	%
Time deposits of more than $250,000		266,845					268,683					(0.7	)	%		266,970					—		%
Total deposits		1,753,771					1,594,851					10.0		%		1,477,442					18.7		%
Federal Home Loan Bank advances		40,000					80,000					(50.0	)	%		80,000					(50.0	)	%
Operating lease liabilities		7,935					8,455					(6.2	)	%		9,349					(15.1	)	%
Accrued interest payable and other liabilities		8,703					5,759					51.1		%		9,021					(3.5	)	%
Total liabilities		1,810,409					1,689,065					7.2		%		1,575,812					14.9		%
Commitments and contingent liabilities
Shareholders’ equity
Common stock, no par value		164,698					164,140					0.3		%		163,532					0.7		%
Retained earnings		74,707					67,692					10.4		%		59,702					25.1		%
Accumulated other comprehensive income, net		858					1,956					(56.1	)	%		891					(3.7	)	%
Total shareholders’ equity		240,263					233,788					2.8		%		224,125					7.2		%
Total liabilities and shareholders’ equity		$	2,050,672				$	1,922,853				6.6		%		$	1,799,937				13.9		%
Outstanding common shares		15,468,242					15,385,878									15,370,086
Book value per common share (1)		$	15.53				$	15.19								$	14.58
Total loan to total deposit ratio		96.33			%		99.42			%						99.31			%
Noninterest-bearing deposits to total deposits		40.81			%		33.73			%						26.67			%

(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
		3/31/2021					12/31/2020				% Change				3/31/2020				% Change
Interest and dividend income
Loans, including fees		$	18,744				$	18,929			(1.0	)	%		$	20,406			(8.1	)	%
Investment securities		360					429				(16.1	)	%		644				(44.1	)	%
Other interest-earning assets		154					150				2.7		%		610				(74.8	)	%
Total interest income		19,258					19,508				(1.3	)	%		21,660				(11.1	)	%
Interest expense
Deposits		1,311					1,958				(33.0	)	%		4,992				(73.7	)	%
Other borrowings		128					143				(10.5	)	%		102				25.5		%
Total interest expense		1,439					2,101				(31.5	)	%		5,094				(71.8	)	%
Net interest income		17,819					17,407				2.4		%		16,566				7.6		%
Provision (reversal) for loan losses		(1,147		)			2,142				(153.5	)	%		2,896				(139.6	)	%
Net interest income after provision (reversal) for loan losses		18,966					15,265				24.2		%		13,670				38.7		%
Noninterest income
Gain on sale of loans		1,322					3,483				(62.0	)	%		725				82.3		%
Service charges and fees on deposits		293					311				(5.8	)	%		390				(24.9	)	%
Loan servicing income		882					398				121.6		%		554				59.2		%
Other income		360					332				8.4		%		357				0.8		%
Total noninterest income		2,857					4,524				(36.8	)	%		2,026				41.0		%
Noninterest expense
Salaries and employee benefits		6,182					7,397				(16.4	)	%		6,551				(5.6	)	%
Occupancy and equipment		1,371					1,424				(3.7	)	%		1,380				(0.7	)	%
Professional fees		494					625				(21.0	)	%		797				(38.0	)	%
Marketing and business promotion		138					440				(68.6	)	%		179				(22.9	)	%
Data processing		377					375				0.5		%		358				5.3		%
Director fees and expenses		138					146				(5.5	)	%		221				(37.6	)	%
Regulatory assessments		208					250				(16.8	)	%		219				(5.0	)	%
Other expenses		761					893				(14.8	)	%		862				(11.7	)	%
Total noninterest expense		9,669					11,550				(16.3	)	%		10,567				(8.5	)	%
Income before income taxes		12,154					8,239				47.5		%		5,129				137.0		%
Income tax expense		3,594					2,452				46.6		%		1,557				130.8		%
Net income		$	8,560				$	5,787			47.9		%		$	3,572			139.6		%
Earnings per common share
Basic		$	0.55				$	0.38							$	0.23
Diluted		$	0.55				$	0.38							$	0.23
Average common shares
Basic		15,384,343					15,350,742								15,505,699
Diluted		15,533,608					15,392,355								15,700,144
Dividend paid per common share		$	0.10				$	0.10							$	0.10
Return on average assets (1)		1.75			%		1.19		%						0.81		%
Return on average shareholders’ equity (1), (2)		14.66			%		9.92		%						6.35		%
Efficiency ratio (3)		46.76			%		52.67		%						56.84		%

(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
		3/31/2021												12/31/2020												3/31/2020
		Average Balance					Interest Income/ Expense				Avg. Yield/Rate			Average Balance					Interest Income/ Expense				Avg. Yield/Rate			Average Balance					Interest Income/ Expense				Avg. Yield/Rate
Assets
Interest-earning assets
Total loans (1)		$	1,641,634				$	18,744			4.63	%		$	1,592,705				$	18,929			4.73	%		$	1,454,727				$	20,406			5.64	%
Mortgage-backed securities		81,486					215				1.07	%		76,787					275				1.42	%		57,503					329				2.30	%
Collateralized mortgage obligation		24,888					57				0.93	%		28,743					60				0.83	%		41,408					198				1.92	%
SBA loan pool securities		11,673					52				1.81	%		12,432					57				1.82	%		13,872					79				2.29	%
Municipal bonds (2)		5,804					36				2.52	%		5,823					37				2.53	%		5,719					38				2.67	%
Other interest-earning assets		189,153					154				0.33	%		187,592					150				0.32	%		158,793					610				1.55	%
Total interest-earning assets		1,954,638					19,258				4.00	%		1,904,082					19,508				4.08	%		1,732,022					21,660				5.03	%
Noninterest-earning assets
Cash and cash equivalents		19,072												18,188												18,850
Allowance for loan losses		(26,870		)										(25,699		)										(14,399		)
Other assets		40,377												42,755												34,312
Total noninterest-earning assets		32,579												35,244												38,763
Total assets		$	1,987,217											$	1,939,326											$	1,770,785
Liabilities and Shareholders’ Equity
Interest-bearing liabilities
Deposits
NOW and money market accounts		$	407,623				333				0.33	%		$	383,507				327				0.34	%		$	364,604				1,119				1.23	%
Savings		10,609					1				0.04	%		11,037					1				0.04	%		6,614					3				0.18	%
Time deposits		635,613					977				0.62	%		655,825					1,630				0.99	%		758,481					3,870				2.05	%
Total interest-bearing deposits		1,053,845					1,311				0.50	%		1,050,369					1,958				0.74	%		1,129,699					4,992				1.78	%
Federal Home Loan Bank advances		75,556					128				0.69	%		91,467					143				0.62	%		25,117					102				1.63	%
Total interest-bearing liabilities		1,129,401					1,439				0.52	%		1,141,836					2,101				0.73	%		1,154,816					5,094				1.77	%
Noninterest-bearing liabilities
Noninterest-bearing demand		607,076												549,922												369,518
Other liabilities		13,950												15,412												20,365
Total noninterest-bearing liabilities		621,026												565,334												389,883
Total liabilities		1,750,427												1,707,170												1,544,699
Total shareholders’ equity		236,790												232,156												226,086
Total liabilities and shareholders’ equity		$	1,987,217											$	1,939,326											$	1,770,785
Net interest income							$	17,819											$	17,407											$	16,566
Net interest spread (3)											3.48	%											3.35	%											3.26	%
Net interest margin (4)											3.70	%											3.64	%											3.85	%
Total deposits		$	1,660,921				$	1,311			0.32	%		$	1,600,291				$	1,958			0.49	%		$	1,499,217				$	4,992			1.34	%
Total funding (5)		$	1,736,477				$	1,439			0.34	%		$	1,691,758				$	2,101			0.49	%		$	1,524,334				$	5,094			1.34	%

(1)		Total loans include both loans held-for-sale and loans held-for-investment, net of deferred loan costs (fees).
(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.

 

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FAQ

What was PCB Bancorp's net income for Q1 2021?

PCB Bancorp reported a net income of $8.6 million for Q1 2021.

How did PCB Bancorp's earnings per share change in Q1 2021?

The diluted earnings per share increased to $0.55, up 44.7% from the previous quarter.

What was the total asset value of PCB Bancorp as of March 31, 2021?

Total assets were $2.05 billion as of March 31, 2021.

What is the dividend declared by PCB Bancorp in Q1 2021?

PCB Bancorp declared a cash dividend of $0.10 per share in Q1 2021.

What was the provision for loan losses for PCB Bancorp in Q1 2021?

The company recorded a reversal of provision for loan losses of $1.1 million in Q1 2021.