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PCB BANCORP

PCB BANCORPPCBEarnings & Financial Report

Nasdaq · Financials · State Commercial Banks

PCB Bank is an American community bank that focuses on the Korean-American community based in California and offers commercial banking services. It has branches in 8 states and is the third largest Korean American Bank after Bank of Hope and Hanmi Bank.

What changed in PCB BANCORP's 10-K — 2023 vs 2024

Top changes in PCB BANCORP's 2024 10-K

263 paragraphs added · 258 removed · 208 edited across 9 sections

Item 1. Business

Business — how the company describes what it does

43 edited+5 added−7 removed192 unchanged
Board ALCO establishes risk limits and policy for conducting investment activities and approves investment strategies and meets quarterly to review investment reports and monitor investment activities. The Company also formed a management Asset Liability Committee (“Management ALCO,” together with Board ALCO, “ALCOs”), which is comprised of its senior management team and Chief Executive Officer, to proactively monitor investment activities.
Board ALCO establishes risk limits and policy for conducting investment activities and approves investment strategies and meets quarterly to review investment reports and monitor investment activities. The Company also formed a management Asset Liability Committee (“Management ALCO,” and together with Board ALCO, “ALCOs”), which is comprised of its senior management team and Chief Executive Officer, to proactively monitor investment activities.
Furthering the Company’s philosophy to attract and retain a pool of talented and motivated employees who will continue to advance the purpose and contribute to the Company’s overall success, compensation and benefits programs include: equity-based compensation plan, health/dental/vision insurances, life insurance, 401(K) plan, benefits under the Family Medical Leave Act, workers’ compensation, paid time off, holiday pay, training/education, leave for bereavement, wedding and jury duty.
Furthering the Company’s philosophy to attract and retain a pool of talented and motivated employees who will continue to advance the purpose and contribute to the Company’s overall success, compensation and benefits programs include: an equity-based compensation plan, health/dental/vision insurances, life insurance, 401(K) plan, benefits under the Family Medical Leave Act, workers’ compensation, paid time off, holiday pay, training/education, and leave for bereavement, wedding and jury duty.
In 2019, the federal bank regulators issued a rule establishing a “community bank leverage ratio” (the ratio of a bank’s Tier 1 capital to average total consolidated assets) that qualifying institutions with less than $10 billion in assets may elect to use in lieu of the generally applicable leverage and risk-based capital requirements under Basel III.
In 2019, the federal bank regulators issued a rule establishing a “community bank leverage ratio” (the ratio of a bank’s Tier 1 capital to average total consolidated assets) that qualifying institutions with less than $10 billion in assets may elect to use in lieu of the generally applicable leverage and risk-based capital requirements under the Basel III Capital Rules.
Small Business Administration (“SBA”) and construction loans, the maturities are generally up to seven years with payments determined on the basis of principal amortization schedules of up to 25 years with a balloon payment due at maturity. CRE SBA loans are typically fully amortized with terms up to 25 years.
Small Business Administration (“SBA”) and construction loans, the maturities are generally up to seven years with payments determined on the basis of principal amortization schedules of up to 30 years with a balloon payment due at maturity. CRE SBA loans are typically fully amortized with terms up to 25 years.
In 2013, the federal banking agencies issued final rules (the “Basel III Capital Rules”) establishing a new comprehensive capital framework for U.S. banking organizations. Generally, the Basel III Capital Rules apply to both banks and their holding companies, on a consolidated basis.
In 2013, the federal banking agencies issued final rules (the “Basel III Capital Rules”) establishing a new comprehensive capital framework for U.S. banking organizations. The Basel III Capital Rules apply to both banks and their holding companies, on a consolidated basis.
The Company’s employees’ desire for active community involvement enables the Company to sponsor a number of local community events and initiatives, including hosting annual PCB scholarship that provides financial assistance to local low-to-moderate income community, conducting financial literacy training to seniors in affordable housing facilities, and participating in the Volunteer Income Tax Assistance annually to assist the community in free tax preparation. 11 Supervision and Regulation General Depository institutions, their holding companies and their affiliates are extensively regulated under U.S. federal and state law.
The Company’s employees’ desire for active community involvement enables the Company to sponsor a number of local community events and initiatives, including hosting an annual PCB scholarship that provides financial assistance to local low-to-moderate income communities, conducting financial literacy training to seniors in affordable housing facilities, and participating in the Volunteer Income Tax Assistance annually to assist the community in free tax preparation. 11 Supervision and Regulation General Depository institutions, their holding companies and their affiliates are extensively regulated under U.S. federal and state law.
In addition, under the Basel III Rule, institutions must maintain a capital conservation buffer of 2.5% in CET1 attributable to avoid restrictions on dividend payments. See “Supervision and Regulation - Regulatory Capital Requirements” above. As described above, the Bank exceeded its minimum capital requirements under applicable regulatory guidelines as of December 31, 2023.
In addition, under the Basel III Capital Rule, institutions must maintain a capital conservation buffer of 2.5% in CET1 attributable to avoid restrictions on dividend payments. See “Supervision and Regulation - Regulatory Capital Requirements” above. As described above, the Bank exceeded its minimum capital requirements under applicable regulatory guidelines as of December 31, 2024.
The policy maximum LTV for construction loans is 70% and for land development loans is 50%. C&I Loans: C&I loans includes commercial term loans and commercial lines of credit. Commercial term loans are typically extended to finance business acquisitions, permanent working capital needs, and/or equipment purchases.
The policy maximum LTV for construction loans is 70% and for land development loans is 50%. C&I Loans: C&I loans include commercial term loans and commercial lines of credit. Commercial term loans are typically extended to finance business acquisitions, permanent working capital needs, and/or equipment purchases.
As of December 31, 2023, the Bank’s capital ratios exceeded the minimum required to be “well-capitalized” for purposes of the prompt corrective action regulations. The Company General The Company, as the sole shareholder of the Bank, is a registered bank holding company under the BHCA.
As of December 31, 2024, the Bank’s capital ratios exceeded the minimum required to be “well-capitalized” for purposes of the prompt corrective action regulations. The Company General The Company, as the sole shareholder of the Bank, is a registered bank holding company under the BHCA.
Undercapitalized institutions are generally not permitted to accept, renew, or roll over brokered deposits. As of December 31, 2023, the Bank was eligible to accept brokered deposits without a waiver from FDIC.
Undercapitalized institutions are generally not permitted to accept, renew, or roll over brokered deposits. As of December 31, 2024, the Bank was eligible to accept brokered deposits without a waiver from FDIC.
In addition, the loan policies provide guidelines for: personal guarantees; an environmental review; loans to employees, executive officers and directors; problem loan identification; maintenance of an adequate allowance for credit losses and other matters relating to lending practices. 5 Loan Category The Company’s loan portfolio consists primarily of three major categories: CRE loans, C&I and consumer loans.
In addition, the loan policies provide guidelines for: personal guarantees; an environmental review; loans to employees, executive officers and directors; problem loan identification; maintenance of an adequate ACL and other matters relating to lending practices. 5 Loan Category The Company’s loan portfolio consists primarily of three major categories: CRE, C&I and consumer loans.
As of December 31, 2023, the Bank’s capital ratios exceeded the required minimums under the Basel III Capital Rules, including the capital conservation buffer.
As of December 31, 2024, the Bank’s capital ratios exceeded the required minimums under the Basel III Capital Rules, including the capital conservation buffer.
Additionally, mortgage originators are prohibited from receiving compensation based on the terms of residential mortgage loans, other that the loan amount.
Additionally, mortgage originators are prohibited from receiving compensation based on the terms of residential mortgage loans, other than the loan amount.
The Company strives to retain an attractive deposit mix from both large and small customers as well as a broad market reach. As of December 31, 2023, the Company’s top 10 customers, excluding wholesale deposits, accounted for 8.7% of total deposits.
The Company strives to retain an attractive deposit mix from both large and small customers as well as a broad market reach. As of December 31, 2024, the Company’s top 10 customers, excluding wholesale deposits, accounted for 7.3% of total deposits.
The CET1 capital ratio is the ratio of the institution’s common equity Tier 1 capital to its total risk-weighted assets. The Tier 1 risk-based capital ratio is the ratio of the institution’s Tier 1 capital to its total risk-weighted assets.
The CET1 capital ratio is the ratio of the institution’s CET1 capital to its total risk-weighted assets. The Tier 1 risk-based capital ratio is the ratio of the institution’s Tier 1 capital to its total risk-weighted assets.
Loans to One Borrower With certain limited exceptions, the maximum amount that a California bank may lend to any borrower at any one time (including the obligations to the bank of certain related entities of the borrower) may not exceed 25% (and unsecured loans may not exceed 15%) of the bank’s shareholders’ equity, allowance for credit loss on loans, and any capital notes and debentures of the bank.
Loans to One Borrower With certain limited exceptions, the maximum amount that a California bank may lend to any borrower at any one time (including the obligations to the bank of certain related entities of the borrower) may not exceed 25% (and unsecured loans may not exceed 15%) of the bank’s shareholders’ equity, ACL on loans, and any capital notes and debentures of the bank.
While the Company believes it is well positioned within this highly competitive industry, the industry could become even more competitive as a result of legislative, regulatory, economic, and technological changes, as well as continued consolidation within the industry. Human Capital As of December 31, 2023, the Company had a total of 268 full-time employees and 3 part-time employees.
While the Company believes it is well positioned within this highly competitive industry, the industry could become even more competitive as a result of legislative, regulatory, economic, and technological changes, as well as continued consolidation within the industry. Human Capital As of December 31, 2024, the Company had a total of 259 full-time employees and 4 part-time employees.
During the year ended December 31, 2023, the Bank paid supervisory assessments to the CDFPI totaling $216 thousand. Dividend Payments The primary source of funds for the Company is dividends from the Bank.
During the year ended December 31, 2024, the Bank paid supervisory assessments to the CDFPI totaling $273 thousand. Dividend Payments The primary source of funds for the Company is dividends from the Bank.
As of December 31, 2023, the largest aggregate carrying value of loans that the Bank had outstanding to any one borrower and related entities was $45.9 million, which were performing at that date. Risk Governance The Company maintains a conservative credit culture with strict underwriting standards.
As of December 31, 2024, the largest aggregate carrying value of loans that the Bank had outstanding to any one borrower and related entities was $57.7 million, which were performing at that date. 4 Risk Governance The Company maintains a conservative credit culture with strict underwriting standards.
During the year ended December 31, 2023, the Bank paid $1.1 million in aggregate FDIC deposit insurance premiums.
During the year ended December 31, 2024, the Bank paid $1.3 million in aggregate FDIC deposit insurance premiums.
As of December 31, 2023, using regulatory definitions in the CRE Concentration Guidance, the Bank’s CRE loans represented 280.7% of total risk-based capital, as compared to 253.9%, 269.8% and 256.1% as of December 31, 2022, 2021 and 2020, respectively.
As of December 31, 2024, using regulatory definitions in the CRE Concentration Guidance, the Bank’s CRE loans represented 297.0% of total risk-based capital, as compared to 280.7%, 253.9% and 269.8% as of December 31, 2023, 2022 and 2021, respectively.
As of December 31, 2023, total deposits were $2.35 billion, and the average cost of deposits was 2.87% for the year ended December 31, 2023. For additional information, see Note 9 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
As of December 31, 2024, total deposits were $2.62 billion, and the average cost of deposits was 3.72% for the year ended December 31, 2024. For additional information, see Note 9 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
On November 23, 2021, the federal banking agencies issued a final rule requiring banking organizations that experience a computer-security incident to notify its primary Federal regulator of the occurrence of an event that rises to the level of a “notification incident” as soon as possible and no later than 36 hours after the banking organization has determined that a notification incident has occurred. 17 Community Reinvestment Act Requirements The CRA is intended to encourage banks to help meet the credit needs of their entire communities, including low- and moderate-income neighborhoods, consistent with safe and sound operations.
A banking organization that experiences a computer-security incident to notify its primary Federal regulator of the occurrence of an event that rises to the level of a “notification incident” as soon as possible and no later than 36 hours after the banking organization has determined that a notification incident has occurred. 17 Community Reinvestment Act Requirements The CRA is intended to encourage banks to help meet the credit needs of their entire communities, including low- and moderate-income neighborhoods, consistent with safe and sound operations.
Core deposits, defined as all deposits except for time deposits exceeding $250,000 and internet or brokered deposits, are the primary and most valuable low-cost funding source for the lending business, and represented 62.6% of total deposits as of December 31, 2023.
Core deposits, defined as all deposits except for time deposits exceeding $250,000 and internet or brokered deposits, are the primary and most valuable low-cost funding source for the lending business, and represented 57.7% of total deposits as of December 31, 2024.
Commercial term loans guaranteed by SBA are provided to small businesses to finance permanent working capital needs and/or equipment purchases. Commercial lines of credit are generally provided to finance short-term working capital needs and warehouse lending credit facilities.
Commercial term loans guaranteed by SBA are provided to small businesses to finance permanent working capital needs and/or equipment purchases. Commercial lines of credit are generally provided to finance short-term working capital needs and warehouse lending credit facilities. Warehouse lending is a line of credit given to a loan originator.
Future services may also be significantly influenced by improvements and developments in technology and evolving state and federal laws and regulations. 10 Market Area and Competition The Company is headquartered in Los Angeles, California and operates 11 full-service branches in Los Angeles and Orange Counties, California, three full-service branches on the East Coast (Bayside, New York; and Englewood Cliffs and Palisade Park, New Jersey), two full-service branches in Texas (Carrollton and Dallas), and seven LPOs located in Los Angeles and Orange Counties, California; Annandale, Virginia; Atlanta, Georgia; Aurora, Colorado; Bellevue, Washington; and Carrollton, Texas.
Future services may also be significantly influenced by improvements and developments in technology and evolving state and federal laws and regulations. 10 Market Area and Competition The Company is headquartered in Los Angeles, California and operates 11 full-service branches in Los Angeles and Orange Counties, California, three full-service branches on the East Coast (Bayside, New York; and Englewood Cliffs and Palisades Park, New Jersey), two full-service branches in Texas (Carrollton and Dallas), and four LPOs located in Los Angeles and Orange Counties, California; Bellevue, Washington; and Atlanta, Georgia as of December 31, 2024.
Most C&I loans are collateralized by perfected security interests on business assets. In general, C&I loans may involve increased credit risk and, therefore, typically yield a higher return. The increased risk in C&I loans derives from the expectation that such loans generally are serviced principally from the operations of the business, and those operations may not be successful.
In general, C&I loans may involve increased credit risk and, therefore, typically yield a higher return. The increased risk in C&I loans derives from the expectation that such loans generally are serviced principally from the operations of the business, and those operations may not be successful.
The Bank is a single operating segment that operates 11 full-service branches in Los Angeles and Orange Counties, California, three full-service branches on the East Coast (Bayside, New York; and Englewood Cliffs and Palisade Park, New Jersey), two full-service branches in Texas (Carrollton and Dallas), and seven loan production offices (“LPOs”) located in Los Angeles and Orange Counties, California; Annandale, Virginia; Atlanta, Georgia; Aurora, Colorado; Bellevue, Washington; and Carrollton, Texas.
As of December 31, 2024, the Bank is a single operating segment that operates 11 full-service branches in Los Angeles and Orange Counties, California, three full-service branches on the East Coast (Bayside, New York; and Englewood Cliffs and Palisades Park, New Jersey), two full-service branches in Texas (Carrollton and Dallas), and four loan production offices (“LPOs”) located in Los Angeles and Orange Counties, California; Bellevue, Washington; and Atlanta, Georgia.
SBA loans are originated through the branch staff, lending officers, LPO managers, marketing officers, and brokers. As of December 31, 2023, CRE SBA and C&I SBA loans totaled $130.7 million (including loans held-for-sale of $2.8 million) and $20.1 million (including loans held-for-sale of $2.4 million), respectively. 8 Loan Participations .
SBA loans are originated through the branch staff, lending officers, LPO managers, marketing officers, and brokers. As of December 31, 2024, CRE SBA and C&I SBA loans totaled $129.6 million (including loans held-for-sale of $4.0 million) and $23.6 million (including loans held-for-sale of $2.3 million), respectively. 8 Loan Participations .
Wholesale deposits are also utilized to supplement core retail deposits for funding purposes, including brokered accounts and California State Treasurer’s time deposits. As of December 31, 2023, wholesale deposits totaled $363.7 million, or 15.5% of total deposits.
Wholesale deposits are also utilized to supplement core retail deposits for funding purposes, including brokered accounts and California State Treasurer’s time deposits. As of December 31, 2024, wholesale deposits totaled $502.3 million, or 19.2% of total deposits.
SBA 7(a) loans are typically term loans with maturities up to 10 years for C&I SBA loans and up to 25 years for CRE SBA loans. SBA loans are fully amortizing with monthly payments of principal and interest. SBA 7(a) loans are typically floating rate loans that are secured by business assets and/or real estate.
SBA loans are fully amortizing with monthly payments of principal and interest. SBA 7(a) loans are typically floating rate loans that are secured by business assets and/or real estate.
The following table presents the composition of the Company’s loans held-for-investment as of the date indicated: December 31, 2023 ($ in thousands) Amount Percentage to Total Commercial real estate: Commercial property $ 855,270 36.8 % Business property 558,772 24.0 % Multifamily 132,500 5.7 % Construction 24,843 1.1 % Total commercial real estate 1,571,385 67.6 % Commercial and industrial 342,002 14.7 % Consumer: Residential mortgage 389,420 16.8 % Other consumer 20,645 0.9 % Total consumer 410,065 17.7 % Loans held-for-investment $ 2,323,452 100.0 % The following table presents the composition of the Company’s loans held-for-sale as of the date indicated: December 31, 2023 ($ in thousands) Amount Percentage to Total Commercial real estate: Business property $ 2,802 54.4 % Total commercial real estate 2,802 54.4 % Commercial and industrial 2,353 45.6 % Loans held-for-investment $ 5,155 100.0 % 6 CRE Loans.
The following table presents the composition of the Company’s loans held-for-investment as of the dates indicated: December 31, 2024 2023 ($ in thousands) Amount Percentage to Total Amount Percentage to Total Commercial real estate: Commercial property $ 940,931 35.9 % $ 855,270 36.8 % Business property 595,547 22.6 % 558,772 24.0 % Multifamily 194,220 7.4 % 132,500 5.7 % Construction 21,854 0.8 % 24,843 1.1 % Total commercial real estate 1,752,552 66.7 % 1,571,385 67.6 % Commercial and industrial 472,763 18.0 % 342,002 14.7 % Consumer: Residential mortgage 392,456 14.9 % 389,420 16.8 % Other consumer 11,616 0.4 % 20,645 0.9 % Total consumer 404,072 15.3 % 410,065 17.7 % Loans held-for-investment $ 2,629,387 100.0 % $ 2,323,452 100.0 % The following table presents the composition of the Company’s loans held-for-sale as of the date indicated: December 31, 2024 2023 ($ in thousands) Amount Percentage to Total Amount Percentage to Total Commercial real estate: Commercial property $ 3,307 52.6 % $ — — % Business property 713 11.3 % 2,802 54.4 % Total commercial real estate 4,020 63.9 % 2,802 54.4 % Commercial and industrial 2,272 36.1 % 2,353 45.6 % Loans held-for-investment $ 6,292 100.0 % $ 5,155 100.0 % 6 CRE Loans.
C&I SBA loans usually have a longer maturity (seven to ten years). Commercial lines of credit (generally payable within one year) typically provide for periodic interest payments, with principal payable at maturity. These C&I loans are reviewed on a periodic basis with the review frequencies commensurate with the size and complexity of the loans.
Commercial lines of credit (generally payable within one year) typically provide for periodic interest payments, with principal payable at maturity. These C&I loans are reviewed on a periodic basis with the review frequencies commensurate with the size and complexity of the loans. Most C&I loans are collateralized by perfected security interests on business assets.
In addition, all residential mortgage loans contain due-on-sale clauses providing that the Bank may declare the unpaid amount due and payable upon the sale of the property securing the loan.
In addition, all residential mortgage loans contain due-on-sale clauses providing that the Bank may declare the unpaid amount due and payable upon the sale of the property securing the loan. As of December 31, 2024 and 2023, approximately 87.0% and 86.2%, respectively, of residential mortgage loans were ARM loans.
The Bank primarily extends SBA loans known as SBA 7(a) loans and SBA 504 loans. SBA 7(a) loans are typically extended for working capital needs, purchase of inventory, purchases of machinery and equipment, debt refinance, business acquisitions, start-up financing or the purchase or construction of owner-occupied commercial property.
SBA 7(a) loans are typically extended for working capital needs, purchase of inventory, purchases of machinery and equipment, debt refinance, business acquisitions, start-up financing or the purchase or construction of owner-occupied commercial property. SBA 7(a) loans are typically term loans with maturities up to 10 years for C&I SBA loans and up to 25 years for CRE SBA loans.
Other Products and Services The Company offers banking products and services that are competitively priced with a focus on convenience and accessibility. A full suite of online banking solutions is available, which includes access to account balances, online transfers, online bill payment and electronic delivery of customer statements, mobile banking solutions, including remote check deposit and mobile bill pay.
A full suite of online banking solutions is available, which includes access to account balances, online transfers, online bill payment and electronic delivery of customer statements, mobile banking solutions, including remote check deposit and mobile bill pay.
Warehouse lending is a line of credit given to a loan originator, the funds from which are used to finance a mortgage that a borrower uses to purchase SFR property or refinance an existing mortgage. Commercial term loans (usually five to seven years) normally provide for monthly payments of both principal and interest.
The funds are used to finance a residential mortgage or CRE loan that a borrower uses to purchase property or refinance an existing loan. Commercial term loans (usually five to seven years) normally provide for monthly payments of both principal and interest. C&I SBA loans usually have a longer maturity (seven to ten years).
Auto loans have relatively higher LTV ratios on average and carry higher interest rates to offset for the inherently higher default risks associated with other consumer loans. SBA Loans (Reported as either CRE or C&I Loans) . The Bank offers SBA loans for qualifying businesses for amounts up to $5.0 million.
Other consumer loans are underwritten primarily based on the individual borrower’s income, current debt level, and past credit history. Auto loans have relatively higher LTV ratios on average and carry higher interest rates to offset for the inherently higher default risks associated with other consumer loans. SBA Loans (Reported as either CRE or C&I Loans) .
In addition to unsecured loans, the Bank is permitted to make collateral-secured loans in an additional amount of up to 10% (for combined total of 25%) for a total of approximately $92.3 million to one borrower as of December 31, 2023. 4 For lending limit purposes, a secured loan is defined as a loan secured by collateral having a current fair value of at least 100% of the amount of the loan or extension of credit at all times and satisfying certain other requirements.
For lending limit purposes, a secured loan is defined as a loan secured by collateral having a current fair value of at least 100% of the amount of the loan or extension of credit at all times and satisfying certain other requirements.
However, under the Federal Reserve’s Small Bank Holding and Savings and Loan Holding Company Policy Statement (the “Small Bank Holding Company Policy Statement”), qualifying bank holding companies with total consolidated assets of less than $3 billion, such as the Company, are exempt from the Basel III Capital Rules’ consolidated capital requirements.
Historically, the Company has operated under the Federal Reserve’s Small Bank Holding Company Policy Statement, which exempts bank holding companies with total consolidated assets of less than $3.0 billion from the Federal Reserve’s risk-based- and leverage consolidated capital requirements.
The Bank received a “satisfactory” rating on its most recent CRA performance evaluation, dated July 6, 2021. On May 5, 2022, the Federal Reserve, the FDIC and the OCC issued a joint notice of proposed rulemaking to strengthen and modernize the CRA regulatory framework.
The Bank received a “satisfactory” rating on its most recent CRA performance evaluation, dated July 29, 2024. On October 24, 2024, the federal banking agencies issued a final rule to strengthen and modernize the CRA regulations.
As of December 31, 2023, the Company had outstanding term FHLB advances of $39.0 million and maintained additional borrowing capacity of $603.0 million. For additional information, see Note 10 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K.
For additional information, see Note 10 to the Consolidated Financial Statements included in Item 8 of this Annual Report on Form 10-K. Other Products and Services The Company offers banking products and services that are competitively priced with a focus on convenience and accessibility.
As of December 31, 2023, the Bank’s lending limit was approximately $55.4 million per borrower for unsecured loans.
As of December 31, 2024, the Bank’s lending limit was approximately $57.9 million per borrower for unsecured loans. In addition to unsecured loans, the Bank is permitted to make collateral-secured loans in an additional amount of up to 10% (for combined total of 25%) for a total of approximately $96.4 million to one borrower as of December 31, 2024.
Removed
Subsidiary Name Change On August 25, 2022, the Bank changed its name to “PCB Bank” from “Pacific City Bank.” In addition, the Company introduced a new logo, which was also utilized by the Bank after its name change. In accordance with the name change, the Bank updated its website, branch signage and marketing collateral.
Added
The Bank offers SBA loans for qualifying businesses for amounts up to $5.0 million. The Bank primarily extends SBA loans known as SBA 7(a) loans and SBA 504 loans.
Removed
Corporate Name Change On July 1, 2019, the Company changed its corporate name to “PCB Bancorp” from “Pacific City Financial Corporation” in order to align the corporate name with the trading symbol of its common stock and simplify corporate communications while maintaining its core branding.
Added
As of December 31, 2024, the Company had no outstanding FHLB advances and maintained additional borrowing capacity of $722.4 million. The Company also maintains overnight federal funds lines with correspondent financial institutions. The Company had an overnight borrowing of $15.0 million and unused borrowing capacity of $50.0 million at December 31, 2024.
Removed
As of December 31, 2023 and 2022, approximately 86.2% and 90.8%, respectively, of residential mortgage loans were ARM loans Other consumer loans are underwritten primarily based on the individual borrower’s income, current debt level, and past credit history.
Added
Because the Company’s total consolidated assets exceeded the $3.0 billion as of December 31, 2024, the Company is now subject to Federal Reserve’s consolidated capital requirements separate and in addition to those of the Bank.
Removed
When the Company reaches the $3 billion asset level, the Company will be subject to the Basel III Capital Rules independent of the Bank.
Added
Under the final rule, banks with assets of at least $600 million as of December 31 in both of the prior two calendar years and less than $2 billion as of December 31 in either of the prior two calendar years will be an “intermediate bank,” and banks with assets of at least $2 billion as of December 31 in both of the prior two calendar years will be a “large bank.” The agencies will evaluate bank classified as large banks, such as the Bank, under four performance tests: the Retail Lending Test, the Retail Services and Products Test, the Community Development Financing Test, and the Community Development Services Test.
Removed
The proposal clarifies the activities and investments that qualify for credit under the CRA and would establish an evaluation framework tailored for differences in bank size and business models.
Added
The applicability date for the majority of the provisions in the CRA regulations is January 1, 2026, and additional requirements will be applicable on January 1, 2027.
Removed
On June 9, 2022, the CDFPI’s proposed commercial financing disclosure regulations were approved, which became effective on December 9, 2022.
Removed
The regulations require commercial financing providers to disclose certain information to assist small businesses in making more informed decisions, including the amount of funding the small business will receive, the Annual Percentage Rate calculated for the transaction, the term, details related to prepayment policies and an average monthly cost.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

54 edited+20 added−6 removed174 unchanged
As a result, we face that risk that customers may prefer to maintain deposits with larger financial institutions or invest in fixed income securities instead of deposits with the Bank, either of which could materially adversely impact our liquidity, cost of funding, capital, and results of operations.
As a result, we face that the risk that customers may prefer to maintain deposits with larger financial institutions or invest in fixed income securities instead of deposits with the Bank, either of which could materially adversely impact our liquidity, cost of funding, capital, and results of operations.
Various federal and state laws and regulations limit the amount of dividends that the Bank may pay to Company. In the event that the Bank is unable to pay dividends to Company, Company may not be able to pay dividends to its shareholders and pay interest on the subordinated debentures.
Various federal and state laws and regulations limit the amount of dividends that the Bank may pay to the Company. In the event that the Bank is unable to pay dividends to the Company, the Company may not be able to pay dividends to its shareholders and pay interest on the subordinated debentures.
If we fail to maintain capital to meet regulatory requirements or if we fail to raise capital for operations when needed or opportune, our financial condition, liquidity and results of operations would be materially and adversely affected. 31 The Company relies on dividends from the Bank to pay cash dividends, repurchase shares and fund its operating expenses.
If we fail to maintain capital to meet regulatory requirements or if we fail to raise capital for operations when needed or opportune, our financial condition, liquidity and results of operations would be materially and adversely affected. The Company relies on dividends from the Bank to pay cash dividends, repurchase shares and fund its operating expenses.
They increase our cost of doing business and, ultimately, may prevent us from making certain loans and cause us to reduce the average percentage rate or the points and fees on loans that we do make. 32 Monetary policies and regulations of the Federal Reserve could adversely affect our business, financial condition and results of operations.
They increase our cost of doing business and, ultimately, may prevent us from making certain loans and cause us to reduce the average percentage rate or the points and fees on loans that we do make. Monetary policies and regulations of the Federal Reserve could adversely affect our business, financial condition and results of operations.
Further, we generally retain the non-guaranteed portions of the SBA loans that we originate and sell, and to the extent the borrowers of such loans experience financial difficulties, our financial condition and results of operations could be adversely impacted. Many of our loans are to commercial borrowers, which have a higher degree of risk than other types of loans.
Further, we generally retain the non-guaranteed portions of the SBA loans that we originate and sell, and to the extent the borrowers of such loans experience financial difficulties, our financial condition and results of operations could be adversely impacted. 26 Many of our loans are to commercial borrowers, which have a higher degree of risk than other types of loans.
Any such failure in our analytical models could result in losses that could have a material adverse effect on our business, financial condition and results of operations. Our allowance for credit losses may not be adequate to cover actual losses in our loan portfolio.
Any such failure in our analytical models could result in losses that could have a material adverse effect on our business, financial condition and results of operations. 30 Our allowance for credit losses may not be adequate to cover actual losses in our loan portfolio.
We also currently have branch operations in New York, New Jersey and Texas, and LPO operations in various states, and would evaluate additional branch expansion opportunities in other Korean-American populated markets. In the course of this expansion, we will encounter significant risks and uncertainties that could have a material adverse effect on our operations.
We also currently have branch operations in New York, New Jersey and Texas, and LPO operations in various states and may evaluate additional branch expansion opportunities in other Korean-American populated markets. In the course of this expansion, we will encounter significant risks and uncertainties that could have a material adverse effect on our operations.
The impact of the Biden administration’s policy changes regarding international trade, tariffs, renewable energy, immigration, domestic taxation, among other actions and policies of the current administration, may have on economic and market conditions is uncertain.
The impact of the Trump administration’s policy changes regarding international trade, tariffs, renewable energy, immigration, domestic taxation, among other actions and policies of the current administration, may have on economic and market conditions is uncertain.
Real estate construction loans, including land development loans, comprised approximately 1.1% of our total loans held-for-investment portfolio as of December 31, 2023, and such lending involves additional risks because funds are advanced upon the security of the project, which is of uncertain value prior to its completion, and costs may exceed realizable values in declining real estate markets.
Real estate construction loans, including land development loans, comprised approximately 0.8% of our total loans held-for-investment portfolio as of December 31, 2024, and such lending involves additional risks because funds are advanced upon the security of the project, which is of uncertain value prior to its completion, and costs may exceed realizable values in declining real estate markets.
ACL on loans, expressed as a percentage of loans held-for-investment, was 1.19%, 1.22% and 1.29%, respectively, at December 31, 2023, 2022 and 2021. ACL is funded from a provision (reversal) for credit losses, which is a charge to our income statement.
ACL on loans, expressed as a percentage of loans held-for-investment, was 1.16%, 1.19% and 1.22%, respectively, at December 31, 2024, 2023 and 2022. ACL is funded from a provision (reversal) for credit losses, which is a charge to our income statement.
Our provision (reversal) for credit losses, was $(132) thousand, $3.6 million and $(4.6) million, respectively, for the years ended December 31, 2023, 2022 and 2021. The determination of an appropriate level of allowance for credit losses is an inherently difficult process and is based on numerous assumptions.
Our provision (reversal) for credit losses, was $3.4 million, $(132) thousand and $3.6 million, respectively, for the years ended December 31, 2024, 2023 and 2022. The determination of an appropriate level of ACL is an inherently difficult process and is based on numerous assumptions.
Our net interest income exhibited a positive 3.6% sensitivity to rising interest rates and a negative 4.3% sensitivity to declining interest rates in a twelve-month 100 basis point parallel shock at December 31, 2023. 21 Changes in interest rates also can affect the value of loans, securities and other assets.
Our net interest income exhibited a positive 4.7% sensitivity to rising interest rates and a negative 6.2% sensitivity to declining interest rates in a twelve-month 100 basis point parallel shock at December 31, 2024. 21 Changes in interest rates also can affect the value of loans, securities and other assets.
During the year ended December 31, 2023, these LPOs accounted for approximately 11.4% of new loans originated by the Bank. Sustaining the expansion of loan production through use of these out of state LPOs depends on a number of factors, including the continued strength of the markets in which our offices are located and identifying, hiring and retaining critical personnel.
During the year ended December 31, 2024, these LPOs accounted for approximately 12.3% of new loans originated by the Bank. Sustaining the expansion of loan production through use of these out of state LPOs depends on a number of factors, including the continued strength of the markets in which our offices are located and identifying, hiring and retaining critical personnel.
Pursuant to the CRE Concentration Guidelines, loans secured by owner-occupied CRE are not included for purposes of CRE Concentration calculation. As of December 31, 2023, using regulatory definitions in the CRE Concentration Guidance, our CRE loans represented 280.7% of our total risk-based capital, as compared to 253.9%, 269.8% and 256.1% as of December 31, 2022, 2021 and 2020, respectively.
Pursuant to the CRE Concentration Guidelines, loans secured by owner-occupied CRE are not included for purposes of CRE Concentration calculation. As of December 31, 2024, using regulatory definitions in the CRE Concentration Guidance, our CRE loans represented 297.0% of our total risk-based capital, as compared to 280.7%, 253.9% and 269.8% as of December 31, 2023, 2022 and 2021, respectively.
In addition, we had $1.4 million in accruing loans that were 30-89 days past due as of December 31, 2023. Our NPAs adversely affect our net income in various ways.
In addition, we had $4.9 million in accruing loans that were 30-89 days past due as of December 31, 2024. Our NPAs adversely affect our net income in various ways.
The non-guaranteed portion of SBA loans that we retain on our balance sheet as well as the guaranteed portion of SBA loans that we sell could expose us to various credit and default risks. We originated $83.0 million and $141.1 million, respectively, of SBA loans (total commitment basis) during the years ended December 31, 2023 and 2022.
The non-guaranteed portion of SBA loans that we retain on our balance sheet as well as the guaranteed portion of SBA loans that we sell could expose us to various credit and default risks. We originated $87.7 million and $83.0 million, respectively, of SBA loans (total commitment basis) during the years ended December 31, 2024 and 2023.
At December 31, 2023, approximately 84.4% of our loans held-for-investment portfolio was comprised of loans with real estate as a primary or secondary component of collateral. As a result, adverse developments affecting real estate values in our market areas could increase the credit risk associated with our real estate loan portfolio.
At December 31, 2024, approximately 81.6% of our loans held-for-investment portfolio was comprised of loans with real estate as a primary or secondary component of collateral. As a result, adverse developments affecting real estate values in our market areas could increase the credit risk associated with our real estate loan portfolio.
During the same time periods, we sold $82.3 million and $122.9 million, respectively, of the guaranteed portion of our SBA loans.
During the same time periods, we sold $71.1 million and $82.3 million, respectively, of the guaranteed portion of our SBA loans.
As of December 31, 2023, our residential mortgage loan portfolio amounted to $389.4 million or 16.8% of our total loans held-for-investment portfolio. As of such date, all of our residential mortgage loans consisted of non-qualified residential mortgage loans. Non-qualified loans are residential loans that do not comply with certain standards set by the Dodd-Frank Act and its related regulations.
As of December 31, 2024, our residential mortgage loan portfolio amounted to $392.5 million or 14.9% of our total loans held-for-investment portfolio. As of such date, all of our residential mortgage loans consisted of non-qualified residential mortgage loans. Non-qualified loans are residential loans that do not comply with certain standards set by the Dodd-Frank Act and its related regulations.
A general decline in real estate sales and prices across the U.S. or locally in the relevant real estate market, a decline in demand for residential property, economic weakness, high rates of unemployment and reduced availability of mortgage credit are some of the factors that can adversely affect the borrowers’ ability to repay their obligations to us and the value of our security interest in collateral, and thereby adversely affect our results of operations and financial results.
A general decline in real estate sales and prices across the U.S. or locally in the relevant real estate market, a decline in demand for residential property, economic weakness, high rates of unemployment and reduced availability of mortgage credit are some of the factors that can adversely affect the borrowers’ ability to repay their obligations to us and the value of our security interest in collateral, and thereby adversely affect our results of operations and financial results. 28 Nonperforming assets take significant time to resolve and adversely affect our results of operations and financial condition, and could result in further losses in the future.
Adverse economic conditions in Asia, and in South Korea in particular, may also negatively impact asset values and the profitability and liquidity of our customers who operate in this region. 24 Severe Weather, Natural Disasters or Other Climate Change Related Matters Could Significantly Impact Our Business.
This may adversely impact the recoverability of investments with, or loans made to, such entities. Adverse economic conditions in Asia, and in South Korea in particular, may also negatively impact asset values and the profitability and liquidity of our customers who operate in this region. Severe Weather, Natural Disasters or Other Climate Change Related Matters Could Significantly Impact Our Business.
We originated non-qualified residential mortgage loans of $63.4 million and $177.1 million, respectively, for the years ended December 31, 2023 and 2022. We originated qualified residential mortgage loans of $0 and $400 thousand, respectively, for the years ended December 31, 2023 and 2022.
We originated non-qualified residential mortgage loans of $36.0 million and $63.4 million, respectively, for the years ended December 31, 2024 and 2023. We originated qualified residential mortgage loans of $0 thousand and $0 thousand, respectively, for the years ended December 31, 2024 and 2023.
Operations in our LPOs have positively affected our results of operations, and sustaining these operations and growing loans may be more difficult than we expect, which could adversely affect our results of operations. We maintain seven LPOs that primarily originate SBA loans.
Operations in our LPOs have positively affected our results of operations, and sustaining these operations and growing loans may be more difficult than we expect, which could adversely affect our results of operations. We maintained four LPOs that primarily originate SBA loans as of December 31, 2024.
Thereafter, OREO is recorded at the lower of cost or fair value based on their subsequent changes in fair value. The fair value of OREO is generally based on recent real estate appraisals adjusted for estimated selling costs. Generally, in determining fair value, an orderly disposition of the property is assumed, unless a different disposition strategy is expected.
The fair value of OREO is generally based on recent real estate appraisals adjusted for estimated selling costs. Generally, in determining fair value, an orderly disposition of the property is assumed, unless a different disposition strategy is expected.
We expect that gains on the sale of U.S. government guaranteed loans, primarily 7(a) loans, will comprise a significant component of our revenue. The gains on such sales recognized for the year ended December 31, 2023 was $3.6 million.
The recognition of gains on the sale of loans and servicing asset valuations reflect certain assumptions. We expect that gains on the sale of U.S. government guaranteed loans, primarily 7(a) loans, will comprise a significant component of our revenue. The gains on such sales recognized for the year ended December 31, 2024 was $3.8 million.
Our cost of deposits increased from 0.62% for the year ended December 31, 2022, to 2.87% for the year ended December 31, 2023.
Our cost of deposits increased from 2.87% for the year ended December 31, 2023, to 3.72% for the year ended December 31, 2024.
As of December 31, 2023, our non-qualified residential mortgage loans had a weighted average LTV of 65.3% and a weighted average Fair Isaac Corporation (“FICO”) score of 761.
As of December 31, 2024, our non-qualified residential mortgage loans had a weighted average LTV of 62.1% and a weighted average Fair Isaac Corporation (“FICO”) score of 777.
For the year ended December 31, 2023, total loans were 86.3% of our average interest-earning assets.
For the year ended December 31, 2024, total loans were 87.5% of our average interest-earning assets.
Our largest depositor relationship accounted for approximately 1.4% of our deposits at December 31, 2023. The Bank maintained brokered deposits of $303.7 million and $87.0 million, respectively, and deposits from California State Treasurer of $60.0 million and $60.0 million, respectively, at December 31, 2023 and 2022. Federal banking law and regulation place restrictions on depository institutions regarding brokered deposits.
The Bank maintained brokered deposits of $442.3 million and $303.7 million, respectively, and deposits from California State Treasurer of $60.0 million and $60.0 million, respectively, at December 31, 2024 and 2023. Federal banking law and regulation place restrictions on depository institutions regarding brokered deposits.
As of December 31, 2023, we held $150.8 million of SBA loans on our balance sheet, $141.1 million of which consisted of the non-guaranteed portion of SBA loans and $9.6 million or 6.4% consisted of the guaranteed portion of SBA loans.
As of December 31, 2024, we held $153.2 million of SBA loans on our balance sheet, $144.8 million of which consisted of the non-guaranteed portion of SBA loans and $8.4 million or 5.5% consisted of the guaranteed portion of SBA loans.
At December 31, 2023 we had $1.91 billion of commercial loans, consisting of $1.57 billion of CRE loans and $342.0 million of C&I loans, for which real estate is not the primary source of collateral. Commercial loans represented 82.4% of our total loan portfolio at December 31, 2023.
At December 31, 2024 we had $2.23 billion of commercial loans, consisting of $1.75 billion of CRE loans and $472.8 million of C&I loans, for which real estate is not the primary source of collateral. Commercial loans represented 84.6% of our total loan portfolio at December 31, 2024.
For example, bank regulators have issued guidance which refer to as the CRE Concentration Guidance that identifies certain CRE concentration levels that, if exceeded, will expose an institution to additional supervisory analysis with regard to the institution’s CRE concentration risk. 26 The CRE Concentration Guidance is designed to promote appropriate levels of capital and sound loan and risk management practices for institutions with a concentration of CRE loans.
For example, bank regulators have issued guidance which refer to as the CRE Concentration Guidance that identifies certain CRE concentration levels that, if exceeded, will expose an institution to additional supervisory analysis with regard to the institution’s CRE concentration risk.
The failure to meet applicable regulatory capital requirements could result in one or more of our regulators placing limitations or conditions on our activities, including our growth initiatives, or restricting the commencement of new activities, and could affect customer and investor confidence, our costs of funds and FDIC insurance costs, our ability to pay dividends on our common stock, our ability to make acquisitions, and our business, results of operations and financial conditions, generally.
The failure to meet applicable regulatory capital requirements could result in one or more of our regulators placing limitations or conditions on our activities, including our growth initiatives, or restricting the commencement of new activities, and could affect customer and investor confidence, our costs of funds and FDIC insurance costs, our ability to pay dividends on our common stock, our ability to make acquisitions, and our business, results of operations and financial conditions, generally. 31 We may need to raise additional capital in the future, and if we fail to maintain sufficient capital, whether due to losses, an inability to raise additional capital or otherwise, our financial condition, liquidity and results of operations, as well as our ability to maintain regulatory compliance, would be adversely affected.
We have a continuing need for technological change, and we may not have the resources to effectively implement new technology or we may experience operational challenges when implementing new technology. The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services.
We have a continuing need for technological change, and we may not have the resources to effectively implement new technology or we may experience operational challenges when implementing new technology.
The demand for the deposit products we offer may also be reduced due to a variety of factors, such as demographic patterns, changes in customer preferences, reductions in consumers’ disposable income, regulatory actions that decrease customer access to particular products, or the availability of competing products.
The demand for the deposit products we offer may also be reduced due to a variety of factors, such as demographic patterns, changes in customer preferences, reductions in consumers’ disposable income, regulatory actions that decrease customer access to particular products, or the availability of competing products. 29 A large percentage of our deposits is attributable to a relatively small number of customers, which could adversely affect our liquidity, financial condition and results of operations.
If we experience increases in NPLs and NPAs, our net interest income may be negatively impacted and our loan administration costs could increase, each of which could have an adverse effect on our net income and related ratios, such as return on assets and equity. 28 Real estate market volatility and future changes in our disposition strategies could result in net proceeds that differ significantly from our other real estate owned fair value appraisals.
If we experience increases in NPLs and NPAs, our net interest income may be negatively impacted and our loan administration costs could increase, each of which could have an adverse effect on our net income and related ratios, such as return on assets and equity.
Depending on the interest rate environment and competitive factors, low cost deposits may need to be replaced with higher cost funding, resulting in a decrease in net interest income and net income. 29 Risks Related to Our Management We are highly dependent on key personnel and the loss of one or more of those key personnel may materially and adversely affect our ability to execute on our strategic plan, existing and prospective customer relationships, growth prospects, and results of operations.
Risks Related to Our Management We are highly dependent on key personnel and the loss of one or more of those key personnel may materially and adversely affect our ability to execute on our strategic plan, existing and prospective customer relationships, growth prospects, and results of operations.
Risks Related to Our Loans Because a significant portion of our loan portfolio is comprised of real estate loans, negative changes in the economy affecting real estate values and liquidity could impair the value of collateral securing our real estate loans and result in loan and other losses.
We have attempted to diversify some of our loan business through LPOs in two states; however, this diversification strategy may not be effective to reduce our geographic and ethnic concentrations. 25 Risks Related to Our Loans Because a significant portion of our loan portfolio is comprised of real estate loans, negative changes in the economy affecting real estate values and liquidity could impair the value of collateral securing our real estate loans and result in loan and other losses.
These risks may increase in the future as we continue to increase mobile payments and other internet-based product offerings and expand our internal usage of web-based products and applications. 23 Other potential attacks have attempted to obtain unauthorized access to confidential information, steal money, or manipulate or destroy data, often through the introduction of computer viruses or malware, cyber-attacks and other means.
The continued evolution and increased usage of artificial intelligence technologies may further increase these risks. 23 Other potential attacks have attempted to obtain unauthorized access to confidential information, steal money, or manipulate or destroy data, often through the introduction of computer viruses or malware, cyber-attacks and other means.
For these reasons, our allowance for credit losses may not be adequate to cover actual loan losses, and future provision for credit losses could materially and adversely affect our business, financial condition, results of operations and cash flows. 30 Risks Related to Our Growth Strategy We may not be able to continue growing our business, particularly if we cannot increase loans and deposits through organic growth because of constrained capital resources or other reasons.
Risks Related to Our Growth Strategy We may not be able to continue growing our business, particularly if we cannot increase loans and deposits through organic growth because of constrained capital resources or other reasons.
As of December 31, 2023, we had OREO of $2.6 million on our books. OREO typically consists of properties that we obtain through foreclosure or through an in-substance foreclosure in satisfaction of an outstanding loan. The Company initially records OREO at fair value at the time of foreclosure.
OREO typically consists of properties that we obtain through foreclosure or through an in-substance foreclosure in satisfaction of an outstanding loan. The Company initially records OREO at fair value at the time of foreclosure. Thereafter, OREO is recorded at the lower of cost or fair value based on their subsequent changes in fair value.
In addition, these agencies may change their rules for qualifying loans or Congress may adopt legislation that would have the effect of discontinuing or changing the loan guarantee programs. Therefore, if these changes occur, the volume of loans to small business and industrial borrowers of the types that now qualify for government guaranteed loans could decline.
In addition, from time to time, the government agencies that guarantee these loans reach their internal limits and cease to guarantee future loans. In addition, these agencies may change their rules for qualifying loans or Congress may adopt legislation that would have the effect of discontinuing or changing the loan guarantee programs.
We have grown our consolidated assets from $1.75 billion as of December 31, 2019 to $2.79 billion as of December 31, 2023, and our deposits from $1.48 billion as of December 31, 2019 to $2.35 billion as of December 31, 2023.
We have grown our consolidated assets from $1.92 billion as of December 31, 2020 to $3.06 billion as of December 31, 2024, and our deposits from $1.59 billion as of December 31, 2020 to $2.62 billion as of December 31, 2024.
The gain on sale of SBA loans was $3.6 million and $8.0 million, respectively, or 33.4% and 55.1%, respectively, of the total noninterest income, for the years ended December 31, 2023 and 2022. 27 The small- and medium-sized businesses that we lend to may have fewer resources to weather adverse business developments, which may impair a borrower’s ability to repay a loan, and such impairment could adversely affect our results of operations and financial condition.
The small- and medium-sized businesses that we lend to may have fewer resources to weather adverse business developments, which may impair a borrower’s ability to repay a loan, and such impairment could adversely affect our results of operations and financial condition.
The U.S. Department of Justice, federal banking agencies and other federal agencies are responsible for enforcing these laws and regulations.
The CRA, the Equal Credit Opportunity Act, the Fair Housing Act and other fair lending laws and regulations prohibit discriminatory lending practices by financial institutions. The U.S. Department of Justice, federal banking agencies and other federal agencies are responsible for enforcing these laws and regulations.
The effects of such policies upon our business, financial condition and results of operations cannot be predicted precisely, but the effects on our financial condition and results of operations could be severely and negatively impacted. Item 1B. Unresolved Staff Comments None. 33
The effects of such policies upon our business, financial condition and results of operations cannot be predicted precisely, but the effects on our financial condition and results of operations could be severely and negatively impacted. Changes in U.S. trade policies, such as the implementation of tariffs, control may adversely impact our business, financial condition and results of operations.
Accordingly, a risk exists that we will not be able to effectively implement new technology-driven products and services or be successful in marketing such products and services to our customers. Our business depends on our ability to attract and retain Korean-American immigrants as clients.
Accordingly, a risk exists that we will not be able to effectively implement new technology-driven products and services or be successful in marketing such products and services to our customers. The use of artificial intelligence in our marketplace may result in reputational harm or liability, or could otherwise adversely affect our business.
If we foreclose on and take title to such properties, we may be liable for remediation costs, as well as for personal injury and property damage.
If we foreclose on and take title to such properties, we may be liable for remediation costs, as well as for personal injury and property damage. Environmental laws may require us to incur substantial expenses to address unknown liabilities and may materially reduce the affected property’s value or limit our ability to use or sell the affected property.
Our NPAs, which include NPLs and other real estate owned (“OREO”), totaled $6.5 million, or 0.23% of total assets.
As of December 31, 2024, our nonperforming loans (“NPLs”) held-for-investment totaled $4.7 million, or 0.18% of our loans held-for-investment portfolio. Our NPAs, which include NPLs and other real estate owned (“OREO”), totaled $4.7 million, or 0.15% of total assets.
We are subject to numerous laws designed to protect consumers, including the Community Reinvestment Act and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions. The CRA, the Equal Credit Opportunity Act, the Fair Housing Act and other fair lending laws and regulations prohibit discriminatory lending practices by financial institutions.
Negative developments in the financial industry and the impact of new legislation and regulation in response to those developments could negatively impact our business operations and adversely impact our financial performance. 32 We are subject to numerous laws designed to protect consumers, including the Community Reinvestment Act and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions.
The U.S. government may not maintain the SBA 7(a) loan program, and even if it does, such guaranteed portion may not remain at its current level. In addition, from time to time, the government agencies that guarantee these loans reach their internal limits and cease to guarantee future loans.
Presently, the SBA guarantees 75% to 85% of the principal amount of each qualifying SBA loan originated under the SBA’s 7(a) loan program. The U.S. government may not maintain the SBA 7(a) loan program, and even if it does, such guaranteed portion may not remain at its current level.
Furthermore, government policy and regulation, particularly as implemented through the Federal Reserve, significantly affect credit conditions. Negative developments in the financial industry and the impact of new legislation and regulation in response to those developments could negatively impact our business operations and adversely impact our financial performance.
Furthermore, government policy and regulation, particularly as implemented through the Federal Reserve, significantly affect credit conditions.
A significant segment of our business consists of originating and periodically selling the U.S. government guaranteed loans, in particular those guaranteed by the SBA. Presently, the SBA guarantees 75% to 85% of the principal amount of each qualifying SBA loan originated under the SBA’s 7(a) loan program.
Consequently, if interest rates increase, our mortgage production may not continue at current levels. 27 Curtailment of government guaranteed loan programs could affect a segment of our business. A significant segment of our business consists of originating and periodically selling the U.S. government guaranteed loans, in particular those guaranteed by the SBA.
A large percentage of our deposits is attributable to a relatively small number of customers, which could adversely affect our liquidity, financial condition and results of operations. Our ten largest depositor relationships, excluding wholesale deposits, accounted for approximately 8.7% of our deposits at December 31, 2023.
Our ten largest depositor relationships, excluding wholesale deposits, accounted for approximately 7.3% of our deposits at December 31, 2024. Our largest depositor relationship accounted for approximately 1.3% of our deposits at December 31, 2024.
Removed
This may adversely impact the recoverability of investments with, or loans made to, such entities.
Added
These risks may increase in the future as we continue to increase mobile payments and other internet-based product offerings and expand our internal usage of web-based products and applications.
Removed
We have attempted to diversify some of our loan business through LPOs in five other states; however, this diversification strategy may not be effective to reduce our geographic and ethnic concentrations.
Added
The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services, including the use of artificial intelligence and machine learning to interact with customers and review to review and analyze data.
Removed
Environmental laws may require us to incur substantial expenses to address unknown liabilities and may materially reduce the affected property’s value or limit our ability to use or sell the affected property. 25 The recognition of gains on the sale of loans and servicing asset valuations reflect certain assumptions.
Added
Artificial intelligence, including generative artificial intelligence, is or may be enabled by or integrated into our products and services or those developed by our third-party partners. As with many developing technologies, artificial intelligence presents risks and challenges that could affect its further development, adoption, and use, and therefore our business.
Removed
While we have been experiencing historically low interest rates over the last five years, this low interest rate environment likely will not continue indefinitely. Consequently, when interest rates increase further, our mortgage production may not continue at current levels. Curtailment of government guaranteed loan programs could affect a segment of our business.
Added
Artificial intelligence algorithms may be flawed, for example datasets may contain biased information or otherwise be insufficient; and inappropriate or controversial data practices could impair the acceptance of artificial intelligence solutions and result in burdensome new regulations.
Removed
Nonperforming assets take significant time to resolve and adversely affect our results of operations and financial condition, and could result in further losses in the future. As of December 31, 2023, our nonperforming loans (“NPLs”) held-for-investment totaled $3.9 million, or 0.17% of our loans held-for-investment portfolio.
Added
If the analyses that products incorporating artificial intelligence assist in producing for us or our third-party partners are deficient, biased or inaccurate, we could be subject to competitive harm, potential legal liability and brand or reputational harm. The use of artificial intelligence may also present ethical issues.
Removed
We may need to raise additional capital in the future, and if we fail to maintain sufficient capital, whether due to losses, an inability to raise additional capital or otherwise, our financial condition, liquidity and results of operations, as well as our ability to maintain regulatory compliance, would be adversely affected.
Added
If we or our third-party partners offer artificial intelligence enabled products that are controversial because of their purported or real impact on human rights, privacy, or other issues, we may experience competitive harm, potential legal liability and brand or reputational harm.
Added
In addition, we expect that governments will continue to assess and implement new laws and regulations concerning the use of artificial intelligence, which may affect or impair the usability or efficiency of our products and services and those developed by our third-party partners. 24 Our business depends on our ability to attract and retain Korean-American immigrants as clients.
Added
The CRE Concentration Guidance is designed to promote appropriate levels of capital and sound loan and risk management practices for institutions with a concentration of CRE loans.
Added
Therefore, if these changes occur, the volume of loans to small business and industrial borrowers of the types that now qualify for government guaranteed loans could decline.
Added
The gain on sale of SBA loans was $3.8 million and $3.6 million, respectively, or 33.8% and 33.4%, respectively, of the total noninterest income, for the years ended December 31, 2024 and 2023.
Added
Real estate market volatility and future changes in our disposition strategies could result in net proceeds that differ significantly from our other real estate owned fair value appraisals. As of December 31, 2024, we had no OREO on our books.
Added
Depending on the interest rate environment and competitive factors, low cost deposits may need to be replaced with higher cost funding, resulting in a decrease in net interest income and net income.
Added
For these reasons, our ACL may not be adequate to cover actual loan losses, and future provision for credit losses could materially and adversely affect our business, financial condition, results of operations and cash flows.
Added
The trade policies and potential tariff initiatives being pursued by the U.S. government under the administration of President Trump may present risks to our borrowers and the markets within which we operate, particularly with respect to the threatened imposition of additional tariffs on certain products imported from countries such as Mexico, Canada, China and the European Union.
Added
Many of our commercial borrowers operate in manufacturing or distribution, which are industries that may be particularly sensitive to changes in trade policy.
Added
The imposition of tariffs on imports, including raw materials, the potential for retaliatory tariffs by foreign governments, or other similar restrictions on international trade could increase costs for manufacturers and resellers, reduce demand for U.S. exports and disrupt supply chains.
Added
We have a concentration of customers from the Korea-American community, whose businesses and incomes may tend to be more dependent on trade with the Republic of Korea and, more generally, Asia, so we may be more susceptible to international trade frictions than other depository organizations.
Added
If these factors lead to financial strain on our borrowers, we may experience increased credit risk, higher loan delinquencies, and a potential decline in loan demand. A prolonged trade tensions or the implementation of tariffs could negatively impact the broader economic environment, potentially leading to reduced consumer spending, lower economic growth, and decreased demand for other banking products and services.
Added
As a result, our financial performance, including credit quality and loan growth, could be adversely affected by these policy changes. While we actively monitor these developments and work closely with our agricultural customers, there is no assurance that we can fully mitigate the risks posed by potential tariff initiatives or other trade-related disruptions.
Added
These factors could materially affect our business, financial condition, and results of operations. Item 1B. Unresolved Staff Comments None. 33

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

3 edited+0 added−2 removed9 unchanged
The Information Security Officer has Security+ and Network+ certifications and is currently working on obtaining CISSP. The Company’s cybersecurity risk management is integrated as part of its overall risk management program, and the Company’s Chief Risk Officer, Information Security Officer in conjunction with Chief Information Officer work together to develop and maintain the cybersecurity program.
The Information Security Officer has Security+ and Network+ certifications and is currently working on obtaining CISSP. The Company’s cybersecurity risk management is integrated as part of its overall risk management program, and the Company’s Chief Risk Officer and Information Security Officer, in conjunction with Chief Information Officer, work together to develop and maintain the cybersecurity program.
The Chief Risk Officer and Information Security Officer regularly report to the Risk and Compliance Committee regarding management’s implementation of the cybersecurity program, cybersecurity risks and threat, assessments of the Company’s cybersecurity systems and the planning and status project to strength the Company’s information security.
The Chief Risk Officer and Information Security Officer regularly report to the Risk and Compliance Committee regarding management’s implementation of the cybersecurity program, cybersecurity risks and threat, assessments of the Company’s cybersecurity systems and the planning and status of projects to strength the Company’s information security.
While the Company has not identified other known risks from previous cybersecurity threats that have materially affected or are reasonably likely to materially affect the Company, like all financial institutions, the Company faces ongoing risks from certain cybersecurity threats that, if realized, are reasonably likely to materially affect its business, results of operations, or financial condition.
Like all financial institutions, the Company faces ongoing risks from certain cybersecurity threats that, if realized, are reasonably likely to materially affect its business, results of operations, or financial condition.
Removed
Like many financial institutions, the Company has experienced cyber-based attacks and other attempts to compromise its information systems and expects that it will continue to experience these attacks and attempts in the future. In 2021, the Bank was the target of a ransomware attack in which an external actor illegally accessed and/or acquired certain data on its network.
Removed
As a result, the Bank was sued in a purported class action lawsuit. The lawsuit is currently in process of settlement, subject to final court approval. See “Item 3. Legal Proceedings,” above.

Item 2. Properties

Properties — owned and leased real estate

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Item 2. Properties As of December 31, 2023, the Company’s headquarters office is located at 3701 Wilshire Boulevard, Suite 900, Los Angeles, California 90010.
Item 2. Properties As of December 31, 2024, the Company’s headquarters office is located at 3701 Wilshire Boulevard, Suite 900, Los Angeles, California 90010.
The Bank maintains 16 branch locations, with eight in Los Angeles County (three in Koreatown, Rowland Heights, Downtown Fashion District, Cerritos, Torrance and Little Tokyo), three in Orange County (Fullerton, Buena Park and Irvine), three on the East Coast (Bayside, New York; and Englewood Cliffs and Palisades Park, New Jersey), and two in Texas (Carrollton and Dallas) as of December 31, 2023.
As of December 31, 2024, the Bank maintained 16 branch locations, with eight in Los Angeles County (three in Koreatown, Rowland Heights, Downtown Fashion District, Cerritos, Torrance and Little Tokyo), three in Orange County (Fullerton, Buena Park and Irvine), three on the East Coast (Bayside, New York; and Englewood Cliffs and Palisades Park, New Jersey), and two in Texas (Carrollton and Dallas).
The Bank also maintains seven LPOs located in Los Angeles and Orange Counties, California; Annandale, Virginia; Atlanta, Georgia; Aurora, Colorado; Bellevue, Washington; and Carrollton, Texas.
The Bank also maintained four LPOs located in Los Angeles and Orange Counties, California; Bellevue, Washington; and Atlanta, Georgia.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Item 3. Legal Proceedings In the normal course of business, the Company is involved in various legal claims. The Company has reviewed all legal claims with counsel and has taken into consideration the views of such counsel as to the potential outcome of the claims in determining the accrued loss contingency.
Item 3. Legal Proceedings In the normal course of business, the Company and the Bank are involved in various legal claims. The Company has reviewed all legal claims with counsel and has taken into consideration the views of such counsel as to the potential outcome of the claims in determining its accrued loss contingency.
The Company had accrued loss contingencies of $40 thousand for certain legal claims at December 31, 2023. It is reasonably possible the Company may incur losses in addition to the amounts currently accrued.
It is reasonably possible the Company may incur losses in addition to the amounts currently accrued. However, at this time, the Company is unable to determine the ultimate outcome of each proceeding or the estimate of the range of additional losses that are reasonably possible.
Removed
However, at this time, the Company is unable to estimate the range of additional losses that are reasonably possible because of a number of factors, including the fact that certain of these litigation matters are still in their early stages and involve claims for which, at this point, the Company believes have little to no merit.
Added
There were, however, no legal proceedings pending or known to be contemplated against us that in the opinion of management, would be expected to have a material adverse effect on the financial condition or results of operations of the Company or the Bank at December 31, 2024. Item 4. Mine Safety Disclosures Not applicable. 35 Part II
Removed
Management has considered these and other possible loss contingencies and does not expect the amounts to be material to the consolidated financial statements. On August 30, 2021, the Bank identified unusual activity on its network. The Bank responded promptly to disable the activity, investigate its source and monitor the Bank’s network.
Removed
The Bank subsequently became aware of claims that it had been the target of a ransomware attack. On September 7, 2021, the Bank determined that an external actor had illegally accessed and/or acquired certain data on its network.
Removed
The Bank worked with third-party forensic investigators to understand the nature and scope of the incident and determine what information may have been accessed and/or acquired and who may have been impacted. The investigation revealed that this incident impacted certain files containing certain Bank customer information.
Removed
Some of these files contained documents related to loan applications, such as tax returns, Form W-2 information of their employees, and payroll records. The Bank has notified all individuals identified as impacted, consistent with applicable laws. All impacted individuals were offered free Equifax Complete Premier credit monitoring and identify theft protection services.
Removed
The Bank has notified law enforcement and appropriate authorities of the incident. On December 16, 2021, Plaintiff Min Woo Bae, individually and on behalf of all others similarly situated, filed in the Los Angeles County Superior Court a complaint based on the incident for damages, injunctive relief, and equitable relief, styled Min Woo Bae v.
Removed
Pacific City Bank , Case Number 21STCV45922 (“the Matter”). During the three months ended September 30, 2023, the Bank agreed to settle this matter in exchange for $700 thousand to the putative class members, including costs of settlement administration, and attorneys’ fees and costs.
Removed
The Bank received preliminary court approval of the settlement and notice was provided to members of the proposed class during the three months ended September 30, 2023. However, due to the low claims rate by the members of the proposed class, Plaintiff had requested and the Court had agreed to extend the claims deadline for another 45 days.
Removed
March 21, 2024 is now the new claims deadline. No new final approval hearing date has been set by the Court. The Company expects that the full amount of the final settlement will be covered under the Company’s applicable insurance policies. Item 4. Mine Safety Disclosures Not applicable. 35 Part II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Company’s common stock (symbol: PCB) is listed on the NASDAQ Global Select Market. The approximate number of holders of record of the Company’s common stock as of December 31, 2023 was 236.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Company’s common stock (symbol: PCB) is listed on the NASDAQ Global Select Market. The approximate number of holders of record of the Company’s common stock as of December 31, 2024 was 239.
Issuer Purchase of Equity Securities There were no unregistered sales of equity securities during the year ended December 31, 2023.
Issuer Purchase of Equity Securities There were no unregistered sales of equity securities during the year ended December 31, 2024.
The following table presents share repurchase activities during the periods indicated: ($ in thousands, except per share data) Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Program Number of Shares That May Yet Be Purchased Under the Program From October 1, 2023 to October 31, 2023 59,474 $ 15.39 59,474 $ 593,324 From November 1, 2023 to November 30, 2023 600 14.99 600 592,724 From December 1, 2023 to December 31, 2023 — — — 592,724 Total 60,074 $ 15.39 60,074 On July 28, 2022, the Company’s Board of Directors approved a repurchase program authorizing the repurchase of up to 5% of the Company’s outstanding common stock, which represented 747,938 shares, through February 1, 2023.
The following table presents share repurchase activities during the periods indicated: ($ in thousands, except per share data) Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Program Number of Shares That May Yet Be Purchased Under the Program From October 1, 2024 to October 31, 2024 — $ — — 577,777 From November 1, 2024 to November 30, 2024 — — — 577,777 From December 1, 2024 to December 31, 2024 — — — 577,777 Total — $ — — On August 2, 2023, the Company’s Board of Directors approved a new repurchase program authorizing the repurchase of up to 5% of the Company’s outstanding common stock, which represented 720,000 shares, through August 2, 2024.
The Company repurchased and retired 127,276 shares of common stock at a weighted-average price of $15.58 per share, totaling $2.0 million under this repurchase program through December 31, 2023. 36 Item 6. Reserved
On July 25, 2024, the Company announced the amendment of the 2023 stock repurchase program, which extended the program expiration from August 2, 2024 to August 1, 2025. During the year ended December 31, 2024, the Company repurchased and retired 14,947 shares of common stock at a weighted-average price of $14.88 per share.
Removed
On January 26, 2023, the Company announced that it has extended the program expiration from February 1, 2023 to February 1, 2024. The Company completed the repurchase of all shares under this program during the three months ended March 31, 2023.
Added
As of December 31, 2024, the Company was authorized to purchase 577,777 additional shares under the 2023 stock repurchase plan. Item 6. Reserved 36
Removed
The Company repurchased and retired 747,938 shares of common stock at a weighted-average price of $18.15 per share, totaling $13.6 million under this repurchase program under this program.
Removed
On August 2, 2023, the Company’s Board of Directors approved a new repurchase program authorizing the repurchase of up to 5% of the Company’s outstanding common stock, which represented 720,000 shares, through August 2, 2024.

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

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Item 6. Reserved 37 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 37 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 65 Item 8.
Item 6. Reserved 36 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 37 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 66 Item 8.
Financial Statements and Supplementary Data 67 Index to Consolidated Financial Statements 67 Report of Independent Registered Public Accounting Firm 68 Consolidated Balance Sheets as of December 31, 202 3 and 202 2 71 Consolidated Statements of Income for the Years Ended December 31, 202 3 , 202 2 and 202 1 72 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 202 3 , 202 2 and 202 1 73 Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 202 3 , 202 2 and 20 21 74 Consolidated Statements of Cash Flows for the Years Ended December 31, 202 3 , 202 2 and 202 1 75 Notes to Consolidated Financial Statements 77
Financial Statements and Supplementary Data 68 Index to Consolidated Financial Statements 68 Report of Independent Registered Public Accounting Firm 69 Consolidated Balance Sheets as of December 31, 202 4 and 202 3 72 Consolidated Statements of Income for the Years Ended December 31, 202 4 , 202 3 and 202 2 73 Consolidated Statements of Comprehensive Income for the Years Ended December 31, 202 4 , 202 3 and 20 2 2 74 Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31, 202 4 , 202 3 and 202 2 75 Consolidated Statements of Cash Flows for the Years Ended December 31, 202 4 , 202 3 and 202 2 76 Notes to Consolidated Financial Statements 78

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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The Company sold SBA loans of $122.9 million with a gain of $8.0 million and residential mortgage loans of $858 thousand with a gain of $8 thousand during the year ended December 31, 2022.
During the year ended December 31, 2022, the Company sold SBA loans of $122.9 million with a gain of $8.0 million and residential mortgage loans of $858 thousand with a gain of $8 thousand.
Payments on multifamily loans are dependent on the successful operation or management of the properties, and repayment of these loans may be subject to adverse conditions in the real estate market or the economy. 38 • Construction loans: Construction loans are considered to have higher risks due to construction completion and timing risk, and the ultimate repayment being sensitive to interest rate changes, government regulation of real property, and the availability of long-term financing.
Payments on multifamily loans are dependent on the successful operation or management of the properties, and repayment of these loans may be subject to adverse conditions in the real estate market or the economy. • Construction loans: Construction loans are considered to have higher risks due to construction completion and timing risk, and the ultimate repayment being sensitive to interest rate changes, government regulation of real property, and the availability of long-term financing.
Municipal and corporate bonds had an investment grade rating upon purchase. The issuers of these securities have not established any cause for default on these securities and various rating agencies have reaffirmed their long-term investment grade status as of December 31, 2023. These securities have fluctuated in value since their purchase dates as market interest rates fluctuated.
Municipal and corporate bonds had an investment grade rating upon purchase. The issuers of these securities have not established any cause for default on these securities and various rating agencies have reaffirmed their long-term investment grade status as of December 31, 2024 and 2023. These securities have fluctuated in value since their purchase dates as market interest rates fluctuated.
For the years ended December 31, 2023 and 2022, yield on total other interest-earning assets was 5.27% and 1.95%, respectively. Interest expense on deposits increased primarily due to a 38.4% increase in average balance of interest-bearing deposits and a 296 basis point increase in average cost of interest-bearing deposits.
For the years ended December 31, 2023 and 2022, yield on total other interest-earning assets was 5.27% and 1.95%, respectively. 47 Interest expense on deposits increased primarily due to a 38.4% increase in average balance of interest-bearing deposits and a 296 basis point increase in average cost of interest-bearing deposits.
For the years ended December 31, 2023 and 2022, average yield on total investment securities was 3.33% and 2.19%, respectively. 45 Interest income on other interest-earning assets increased primarily due to a 332 basis point increase in average yield and a 2.4% increase in average balance.
For the years ended December 31, 2023 and 2022, average yield on total investment securities was 3.33% and 2.19%, respectively. Interest income on other interest-earning assets increased primarily due to a 332 basis point increase in average yield and a 2.4% increase in average balance.
The increase in average yield was primarily due to new investment securities purchased at higher market rates and a decrease in net amortization. The Company purchased $17.3 million and $57.4 million, respectively, of investment securities during the years ended December 31, 2023 and 2022.
The increase in average yield was primarily due to new investment securities purchased at higher market rates and a decrease in net amortization of premium. The Company purchased $17.3 million and $57.4 million, respectively, of investment securities during the years ended December 31, 2023 and 2022.
Commercial term loans are typically extended to finance business acquisitions, permanent working capital needs, and/or equipment purchases. Commercial lines of credit are generally provided to finance short-term working capital needs and mortgage warehouse lending credit facilities.
Commercial term loans are typically extended to finance business acquisitions, permanent working capital needs, and/or equipment purchases. Commercial lines of credit are generally provided to finance short-term working capital needs and warehouse lending credit facilities.
Management believes that these limitations will not impact the Company’s ability to meet its ongoing short- and long-term cash obligations. 63 Off-Balance Sheet Arrangements The Company has limited off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on financial condition, results of operations, liquidity, capital expenditures or capital resources.
Management believes that these limitations will not impact the Company’s ability to meet its ongoing short- and long-term cash obligations. 64 Off-Balance Sheet Arrangements The Company has limited off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on financial condition, results of operations, liquidity, capital expenditures or capital resources.
Past due loans may or may not be adequately collateralized, but collection efforts are continuously pursued. Loans may be restructured by management when a borrower experiences changes to their financial condition, causing an inability to meet the original repayment terms, and where management believe the borrower will eventually overcome those circumstances and repay the loan in full.
Past due loans may or may not be adequately collateralized, but collection efforts are continuously pursued. Loans may be restructured by management when a borrower experiences changes to their financial condition, causing an inability to meet the original repayment terms, and where management believes the borrower will eventually overcome those circumstances and repay the loan in full.
Management expects to maintain adequate cash levels through profitability, loan and securities repayment and maturity activity and continued deposit gathering activities. The Company has in place various borrowing mechanisms for both short-term and long-term liquidity needs. 64
Management expects to maintain adequate cash levels through profitability, loan and securities repayment and maturity activity and continued deposit gathering activities. The Company has in place various borrowing mechanisms for both short-term and long-term liquidity needs. 65
(5) Cost of funds is calculated by dividing total interest expense by the sum of total interest-bearing liabilities and noninterest-bearing demand deposits. 44 The following table presents the changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities.
(5) Cost of funds is calculated by dividing total interest expense by the sum of total interest-bearing liabilities and noninterest-bearing demand deposits. 45 The following table presents the changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities.
Mortgage warehouse lending is a line of credit given to a loan originator, the funds from which are used to finance a mortgage that a borrower uses to purchase single-family residential property or refinance an existing mortgage. The primary risk associated with C&I loans is the difference between expected and actual cash flows of the borrowers.
Warehouse lending is a line of credit given to a loan originator, the funds from which are used to finance a residential mortgage or CRE loans that a borrower uses to purchase property or refinance an existing loan. The primary risk associated with C&I loans is the difference between expected and actual cash flows of the borrowers.
The CRE concentration contingency plan contains overview of the Bank’s strategies to mitigate and manage the concentration risks including the plans to maintain stable capital levels, having access to additional capital, maintaining adequate amount of ACL, potentially implementing more conservative growth/lending strategies if necessary, maintaining liquidity within the CRE portfolio, and strengthening the loan workout infrastructure.
The CRE concentration contingency plan contains an overview of the Bank’s strategies to mitigate and manage the concentration risks including the plans in maintaining stable capital levels, having access to additional capital, maintaining adequate amount of ACL, potentially implementing more conservative growth/lending strategies if necessary, maintaining liquidity within the CRE portfolio, and strengthening the loan workout infrastructure.
The loan segments are as following: Commercial Real Estate Loans: • Commercial property loans – Commercial property loans include loans for which the Company holds real property as collateral, but where the borrower does not occupy the underlying property.
The loan segments are as follows: Commercial Real Estate Loans: • Commercial property loans – Commercial property loans include loans for which the Company holds real property as collateral, but where the borrower does not occupy the underlying property.
See further discussion in “Allowance for Credit Losses.” Noninterest Income Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 The following table presents the components of noninterest income for the periods indicated: Year Ended December 31, Amount Change Percentage Change ($ in thousands) 2023 2022 Service charges and fees on deposits $ 1,475 $ 1,326 $ 149 11.2 % Loan servicing income 3,330 2,969 361 12.2 % Bank-owned life insurance income 753 706 47 6.7 % Gain on sale of loans 3,570 7,990 (4,420) (55.3) % Other income 1,555 1,508 47 3.1 % Total noninterest income $ 10,683 $ 14,499 $ (3,816) (26.3) % Service charges and fees on deposits increased primarily due to an increase in fee-based transactions.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 The following table presents the components of noninterest income for the periods indicated: Year Ended December 31, Amount Change Percentage Change ($ in thousands) 2023 2022 Service charges and fees on deposits $ 1,475 $ 1,326 $ 149 11.2 % Loan servicing income 3,330 2,969 361 12.2 % Bank-owned life insurance income 753 706 47 6.7 % Gain on sale of loans 3,570 7,990 (4,420) (55.3) % Other income 1,555 1,508 47 3.1 % Total noninterest income $ 10,683 $ 14,499 $ (3,816) (26.3) % Service charges and fees on deposits increased primarily due to an increase in fee-based transactions.
As of December 31, 2023, the Company recorded no ACL on securities available-for-sale. 51 The following table presents the contractual maturity schedule for securities, at amortized cost, and their weighted-average yields as of the date indicated.
As of December 31, 2024 and 2023, the Company recorded no ACL on securities available-for-sale. 52 The following table presents the contractual maturity schedule for securities, at amortized cost, and their weighted-average yields as of the date indicated.
Additional income of approximately $356 thousand would have been recorded during the year ended December 31, 2023, had these loans been paid in accordance with their original terms throughout the periods indicated. CRE Concentration The Bank has policies and procedures in place to monitor compliance with the CRE Concentration Guidance.
Additional income of approximately $547 thousand would have been recorded during the year ended December 31, 2024, had these loans been paid in accordance with their original terms throughout the periods indicated. CRE Concentration The Bank has policies and procedures in place to monitor compliance with the CRE Concentration Guidance.
The Bank’s construction and land development loans remain a small portion of the loan portfolio and as a percentage of total capital (as defined by the federal bank regulators) were 7.4% and 6.2%, respectively, at December 31, 2023 and 2022.
The Bank’s construction and land development loans remain a small portion of the loan portfolio and as a percentage of total capital (as defined by the federal bank regulators) were 6.3% and 7.4%, respectively, at December 31, 2024 and 2023.
Net amortization of deferred loan fees (cost) of $1.1 million, $2.2 million and $6.1 million, respectively, and net accretion of discount on loans of $2.2 million, $3.6 million and $3.5 million, respectively, are included in the interest income for the years ended December 31, 2023, 2022 and 2021, respectively.
Net amortization of deferred loan fees (cost) of $1.2 million, $1.1 million and $2.2 million, respectively, and net accretion of discount on loans of $2.8 million, $2.2 million and $3.6 million, respectively, are included in the interest income for the years ended December 31, 2024, 2023 and 2022, respectively.
Allowance for Credit Losses On January 1, 2023, the Company adopted the provisions of ASC 326, “Financial Instruments - Credit Losses (Topic 326)” Instruments . The adoption of ASC 326 changes the way the Company estimates the ACL on certain financial assets.
Allowance for Credit Losses On January 1, 2023, the Company adopted the provisions of Accounting Standards Codification (“ASC”) 326, “Financial Instruments - Credit Losses (Topic 326) . ” The adoption of ASC 326 changes the way the Company estimates the ACL on certain financial assets.
Beyond the one-year forecast time horizon, the Company’s ACL model reverts to historical long-term average loss rates over one-year period. 37 Within the various economic scenarios considered as of December 31, 2023, the quantitative estimate of the ACL would increase by approximately $7.7 million under sole consideration of the more adverse downside scenario.
Beyond the one-year forecast time horizon, the Company’s ACL model reverts to historical long-term average loss rates over a one-year period. Within the various economic scenarios considered as of December 31, 2024, the quantitative estimate of the ACL would increase by approximately $19.0 million under sole consideration of the more adverse downside scenario.
Because the decline in fair value is attributable to changes in interest rates and illiquidity, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell these securities before their anticipated recovery, the Company determined that these securities with unrealized losses did not warrant an ACL.
Because the decline in fair value is attributable to changes in interest rates, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell these securities before their anticipated recovery, the Company determined that these securities with unrealized losses did not warrant an ACL as of December 31, 2024 and 2023.
As of December 31, 2023, using regulatory definitions in the CRE Concentration Guidance, CRE loans represented 280.7% of total risk-based capital, as compared to 253.9%, 269.8%, 256.1% and 243.6% as of December 31, 2022, 2021, 2020 and 2019, respectively.
As of December 31, 2024, using regulatory definitions in the CRE Concentration Guidance, CRE loans represented 297.0% of total risk-based capital, as compared to 280.7%, 253.9%, 269.8% and 256.1% as of December 31, 2023, 2022, 2021 and 2020, respectively.
Income Tax Expense Income tax expense was $12.6 million, $14.4 million and $16.9 million, respectively, and the effective tax rate was 29.0%, 29.2% and 29.6%, respectively, for the years ended December 31, 2023, 2022 and 2021. 50 Financial Condition Investment Securities The Company’s investment strategy aims to maximize earnings while maintaining liquidity in securities with minimal credit risk.
Income Tax Expense Income tax expense was $10.5 million, $12.6 million and $14.4 million, respectively, and the effective tax rate was 28.9%, 29.0% and 29.2%, respectively, for the years ended December 31, 2024, 2023 and 2022. 51 Financial Condition Investment Securities The Company’s investment strategy aims to maximize earnings while maintaining liquidity in securities with minimal credit risk.
Year Ended December 31, ($ in thousands) 2023 2022 2021 2020 2019 Average total shareholders' equity $ 340,508 $ 306,440 $ 242,766 $ 228,553 $ 221,576 Less: average preferred stock 69,141 42,053 — — — Average tangible common equity $ 271,367 $ 264,387 $ 242,766 $ 228,553 $ 221,576 Net income $ 30,705 $ 34,987 $ 40,103 $ 16,175 $ 24,108 Return on average shareholders' equity 9.02 % 11.42 % 16.52 % 7.08 % 10.88 % Return on average tangible common equity 11.31 % 13.23 % 16.52 % 7.08 % 10.88 % December 31, ($ in thousands, except per share data) 2023 2022 2021 2020 2019 Total shareholders' equity $ 348,872 $ 335,442 $ 256,286 $ 233,788 $ 226,834 Less: preferred stock 69,141 69,141 — — — Tangible common equity $ 279,731 $ 266,301 $ 256,286 $ 233,788 $ 226,834 Outstanding common shares 14,260,440 14,625,474 14,865,825 15,385,878 15,707,016 Book value per common share $ 24.46 $ 22.94 $ 17.24 $ 15.19 $ 14.44 Tangible common equity per common share $ 19.62 $ 18.21 $ 17.24 $ 15.19 $ 14.44 Total assets $ 2,789,506 $ 2,420,036 $ 2,149,735 $ 1,922,853 $ 1,746,328 Total shareholders' equity to total assets 12.51 % 13.86 % 11.92 % 12.16 % 12.99 % Tangible common equity to total assets 10.03 % 11.00 % 11.92 % 12.16 % 12.99 % 40 Five-Year Summary of Selected Financial Data The following table presents certain selected financial data as of the dates or for the periods indicated: As of or For the Year Ended December 31, ($ in thousands, except per share data) 2023 2022 2021 2020 2019 Selected balance sheet data: Cash and cash equivalents $ 242,342 $ 147,031 $ 203,285 $ 194,098 $ 146,228 Securities available-for-sale 143,323 141,863 123,198 120,527 97,566 Securities held-to-maturity — — — — 20,154 Loans held-for-sale 5,155 22,811 37,026 1,979 1,975 Loans held-for-investment 2,323,452 2,046,063 1,732,205 1,583,578 1,450,831 ACL on loans (1) (27,533) (24,942) (22,381) (26,510) (14,380) Total assets 2,789,506 2,420,036 2,149,735 1,922,853 1,746,328 Total deposits 2,351,612 2,045,983 1,867,134 1,594,851 1,479,307 Shareholders’ equity 348,872 335,442 256,286 233,788 226,834 Selected income statement data: Interest income $ 151,177 $ 101,751 $ 81,472 $ 79,761 $ 92,945 Interest expense 62,673 12,119 4,335 13,572 23,911 Net interest income 88,504 89,632 77,137 66,189 69,034 Provision (reversal) for credit losses (1) (132) 3,602 (4,596) 13,219 4,237 Noninterest income 10,683 14,499 18,434 11,740 11,869 Noninterest expense 56,057 51,126 43,208 41,699 42,315 Income before income taxes 43,262 49,403 56,959 23,011 34,351 Income tax expense 12,557 14,416 16,856 6,836 10,243 Net income 30,705 34,987 40,103 16,175 24,108 Per share data: Earnings per common share, basic $ 2.14 $ 2.35 $ 2.66 $ 1.05 $ 1.52 Earnings per common share, diluted 2.12 2.31 2.62 1.04 1.49 Book value per common share (2) 24.46 22.94 17.24 15.19 14.44 Tangible common equity per common share (8) 19.62 18.21 17.24 15.19 14.44 Cash dividends declared per common share 0.69 0.60 0.44 0.40 0.25 Outstanding share data: Number of common shares outstanding 14,260,440 14,625,474 14,865,825 15,385,878 15,707,016 Weighted-average common shares outstanding, basic 14,301,691 14,822,018 15,017,637 15,384,231 15,873,383 Weighted-average common shares outstanding, diluted 14,417,938 15,065,175 15,253,820 15,448,892 16,172,282 Selected performance ratios: Return on average assets 1.20 % 1.54 % 1.96 % 0.84 % 1.40 % Return on average shareholders’ equity 9.02 % 11.42 % 16.52 % 7.08 % 10.88 % Return on average tangible common equity (8) 11.31 % 13.23 % 16.52 % 7.08 % 10.88 % Dividend payout ratio (3) 32.24 % 25.53 % 16.54 % 38.10 % 16.45 % Efficiency ratio (4) 56.52 % 49.10 % 45.21 % 53.51 % 52.30 % Yield on average interest-earning assets 6.10 % 4.63 % 4.05 % 4.25 % 5.53 % Cost of average interest-bearing liabilities 4.05 % 1.08 % 0.41 % 1.15 % 2.09 % Net interest spread 2.05 % 3.55 % 3.64 % 3.10 % 3.44 % Net interest margin (5) 3.57 % 4.08 % 3.83 % 3.53 % 4.11 % Total loans to total deposits ratio (6) 99.02 % 101.12 % 94.76 % 99.42 % 98.21 % 41 As of or For the Year Ended December 31, ($ in thousands, except per share data) 2023 2022 2021 2020 2019 Asset quality: Loans 30 to 89 days past due and still accruing $ 1,428 $ 134 $ 554 $ 338 $ 1,818 Loans past due 90 days or more and still accruing — — — — 287 Nonaccrual loans held-for-investment 3,916 3,360 994 3,163 2,537 NPLs held-for-investment 3,916 3,360 994 3,163 2,824 NPLs held-for-sale — 4,000 — — — Total NPLs 3,916 7,360 994 3,163 2,824 NPAs (7) 6,474 7,360 994 4,564 2,824 Net charge-offs (recoveries) (1,027) 1,041 (467) 1,089 3,024 Loans 30 to 89 days past due and still accruing to loans held-for-investment 0.06 % 0.01 % 0.03 % 0.02 % 0.13 % Nonaccrual loans held-for-investment to loans held-for-investment 0.17 % 0.16 % 0.06 % 0.20 % 0.17 % Nonaccrual loans held-for-investment to ACL on loans (1) 14.22 % 13.47 % 4.44 % 11.93 % 17.64 % NPLs held-for-investment to loans held-for-investment 0.17 % 0.16 % 0.06 % 0.20 % 0.19 % NPLs held-for-investment to ACL on loans (1) 14.22 % 13.47 % 4.44 % 11.93 % 19.64 % NPAs to total assets 0.23 % 0.30 % 0.05 % 0.24 % 0.16 % ACL on loans (1) to loans held-for-investment 1.19 % 1.22 % 1.29 % 1.67 % 0.99 % ACL on loans (1) to nonaccrual loans held-for-investment 703.09 % 742.32 % 2,251.61 % 838.13 % 566.81 % ACL on loans (1) to NPLs held-for-investment 703.09 % 742.32 % 2,251.61 % 838.13 % 509.21 % Net charge-offs (recoveries) to average loans held-for-investment (0.05) % 0.06 % (0.03) % 0.07 % 0.22 % Capital ratios: Shareholders’ equity to total assets 12.51 % 13.86 % 11.92 % 12.16 % 12.99 % Tangible common equity to total assets (8) 10.03 % 11.00 % 11.92 % 12.16 % 12.99 % Average equity to average assets 13.35 % 13.49 % 11.86 % 11.94 % 12.88 % PCB Bancorp Common tier 1 capital (to risk-weighted assets) 12.23 % 13.29 % 14.79 % 15.97 % 15.87 % Total capital (to risk-weighted assets) 16.39 % 17.83 % 16.04 % 17.22 % 16.90 % Tier 1 capital (to risk-weighted assets) 15.16 % 16.62 % 14.79 % 15.97 % 15.87 % Tier 1 capital (to average assets) 13.43 % 14.33 % 12.11 % 11.94 % 13.23 % PCB Bank Common tier 1 capital (to risk-weighted assets) 14.85 % 16.30 % 14.48 % 15.70 % 15.68 % Total capital (to risk-weighted assets) 16.07 % 17.52 % 15.73 % 16.95 % 16.71 % Tier 1 capital (to risk-weighted assets) 14.85 % 16.30 % 14.48 % 15.70 % 15.68 % Tier 1 capital (to average assets) 13.16 % 14.05 % 11.85 % 11.74 % 13.06 % (1) ACL and provision (reversal) for credit losses for the year ended December 31, 2023 are presented under ASC 326, while prior period comparisons continue to be presented under legacy ASC 450 and ASC 310.
Year Ended December 31, ($ in thousands) 2024 2023 2022 2021 2020 Average total shareholders' equity $ 355,620 $ 340,509 $ 306,440 $ 242,766 $ 228,553 Less: average preferred stock 69,141 69,141 42,053 — — Average tangible common equity $ 286,479 $ 271,368 $ 264,387 $ 242,766 $ 228,553 Net income $ 25,810 $ 30,705 $ 34,987 $ 40,103 $ 16,175 Return on average shareholders' equity 7.26 % 9.02 % 11.42 % 16.52 % 7.08 % Net income available to common shareholders $ 24,976 $ 30,705 $ 34,987 $ 40,103 $ 16,175 Return on average tangible common equity 8.72 % 11.31 % 13.23 % 16.52 % 7.08 % December 31, ($ in thousands, except per share data) 2024 2023 2022 2021 2020 Total shareholders' equity $ 363,814 $ 348,872 $ 335,442 $ 256,286 $ 233,788 Less: preferred stock 69,141 69,141 69,141 — — Tangible common equity $ 294,673 $ 279,731 $ 266,301 $ 256,286 $ 233,788 Outstanding common shares 14,380,651 14,260,440 14,625,474 14,865,825 15,385,878 Book value per common share $ 25.30 $ 24.46 $ 22.94 $ 17.24 $ 15.19 Tangible common equity per common share $ 20.49 $ 19.62 $ 18.21 $ 17.24 $ 15.19 Total assets $ 3,063,971 $ 2,789,506 $ 2,420,036 $ 2,149,735 $ 1,922,853 Total shareholders' equity to total assets 11.87 % 12.51 % 13.86 % 11.92 % 12.16 % Tangible common equity to total assets 9.62 % 10.03 % 11.00 % 11.92 % 12.16 % 41 Five-Year Summary of Selected Financial Data The following table presents certain selected financial data as of the dates or for the periods indicated: As of or For the Year Ended December 31, ($ in thousands, except per share data) 2024 2023 2022 2021 2020 Selected balance sheet data: Cash and cash equivalents $ 198,792 $ 242,342 $ 147,031 $ 203,285 $ 194,098 Securities available-for-sale 146,349 143,323 141,863 123,198 120,527 Loans held-for-sale 6,292 5,155 22,811 37,026 1,979 Loans held-for-investment 2,629,387 2,323,452 2,046,063 1,732,205 1,583,578 ACL on loans (1) (30,628) (27,533) (24,942) (22,381) (26,510) Total assets 3,063,971 2,789,506 2,420,036 2,149,735 1,922,853 Total deposits 2,615,791 2,351,612 2,045,983 1,867,134 1,594,851 Shareholders’ equity 363,814 348,872 335,442 256,286 233,788 Selected income statement data: Interest income $ 180,817 $ 151,177 $ 101,751 $ 81,472 $ 79,761 Interest expense 92,200 62,673 12,119 4,335 13,572 Net interest income 88,617 88,504 89,632 77,137 66,189 Provision (reversal) for credit losses (1) 3,401 (132) 3,602 (4,596) 13,219 Noninterest income 11,093 10,683 14,499 18,434 11,740 Noninterest expense 60,023 56,057 51,126 43,208 41,699 Income before income taxes 36,286 43,262 49,403 56,959 23,011 Income tax expense 10,476 12,557 14,416 16,856 6,836 Net income 25,810 30,705 34,987 40,103 16,175 Preferred stock dividends 834 — — — — Net income available to common shareholders 24,976 30,705 34,987 40,103 16,175 Per share data: Earnings per common share, basic $ 1.75 $ 2.14 $ 2.35 $ 2.66 $ 1.05 Earnings per common share, diluted 1.74 2.12 2.31 2.62 1.04 Book value per common share (2) 25.30 24.46 22.94 17.24 15.19 Tangible common equity per common share (8) 20.49 19.62 18.21 17.24 15.19 Cash dividends declared per common share 0.72 0.69 0.60 0.44 0.40 Outstanding share data: Number of common shares outstanding 14,380,651 14,260,440 14,625,474 14,865,825 15,385,878 Weighted-average common shares outstanding, basic 14,242,057 14,301,691 14,822,018 15,017,637 15,384,231 Weighted-average common shares outstanding, diluted 14,342,361 14,417,938 15,065,175 15,253,820 15,448,892 Selected performance ratios: Return on average assets 0.90 % 1.20 % 1.54 % 1.96 % 0.84 % Return on average shareholders’ equity 7.26 % 9.02 % 11.42 % 16.52 % 7.08 % Return on average tangible common equity (8) 8.72 % 11.31 % 13.23 % 16.52 % 7.08 % Dividend payout ratio (3) 41.14 % 32.24 % 25.53 % 16.54 % 38.10 % Efficiency ratio (4) 60.20 % 56.52 % 49.10 % 45.21 % 53.51 % Yield on average interest-earning assets 6.47 % 6.10 % 4.63 % 4.05 % 4.25 % Cost of average interest-bearing liabilities 4.79 % 4.05 % 1.08 % 0.41 % 1.15 % Net interest spread 1.68 % 2.05 % 3.55 % 3.64 % 3.10 % Net interest margin (5) 3.17 % 3.57 % 4.08 % 3.83 % 3.53 % Total loans to total deposits ratio (6) 100.76 % 99.02 % 101.12 % 94.76 % 99.42 % 42 As of or For the Year Ended December 31, ($ in thousands, except per share data) 2024 2023 2022 2021 2020 Asset quality: Loans 30 to 89 days past due and still accruing $ 4,902 $ 1,428 $ 134 $ 554 $ 338 Loans past due 90 days or more and still accruing — — — — — Nonaccrual loans held-for-investment 4,693 3,916 3,360 994 3,163 NPLs held-for-investment 4,693 3,916 3,360 994 3,163 NPLs held-for-sale — — 4,000 — — Total NPLs 4,693 3,916 7,360 994 3,163 NPAs (7) 4,693 6,474 7,360 994 4,564 Net charge-offs (recoveries) 393 (1,027) 1,041 (467) 1,089 Loans 30 to 89 days past due and still accruing to loans held-for-investment 0.19 % 0.06 % 0.01 % 0.03 % 0.02 % Nonaccrual loans held-for-investment to loans held-for-investment 0.18 % 0.17 % 0.16 % 0.06 % 0.20 % Nonaccrual loans held-for-investment to ACL on loans (1) 15.32 % 14.22 % 13.47 % 4.44 % 11.93 % NPLs held-for-investment to loans held-for-investment 0.18 % 0.17 % 0.16 % 0.06 % 0.20 % NPLs held-for-investment to ACL on loans (1) 15.32 % 14.22 % 13.47 % 4.44 % 11.93 % NPAs to total assets 0.15 % 0.23 % 0.30 % 0.05 % 0.24 % ACL on loans (1) to loans held-for-investment 1.16 % 1.19 % 1.22 % 1.29 % 1.67 % ACL on loans (1) to nonaccrual loans held-for-investment 652.63 % 703.09 % 742.32 % 2,251.61 % 838.13 % Net charge-offs (recoveries) to average loans held-for-investment 0.02 % (0.05) % 0.06 % (0.03) % 0.07 % Capital ratios: Shareholders’ equity to total assets 11.87 % 12.51 % 13.86 % 11.92 % 12.16 % Tangible common equity to total assets (8) 9.62 % 10.03 % 11.00 % 11.92 % 12.16 % Average equity to average assets 12.36 % 13.35 % 13.49 % 11.86 % 11.94 % PCB Bancorp Common tier 1 capital (to risk-weighted assets) 11.44 % 12.23 % 13.29 % 14.79 % 15.97 % Total capital (to risk-weighted assets) 15.24 % 16.39 % 17.83 % 16.04 % 17.22 % Tier 1 capital (to risk-weighted assets) 14.04 % 15.16 % 16.62 % 14.79 % 15.97 % Tier 1 capital (to average assets) 12.45 % 13.43 % 14.33 % 12.11 % 11.94 % PCB Bank Common tier 1 capital (to risk-weighted assets) 13.72 % 14.85 % 16.30 % 14.48 % 15.70 % Total capital (to risk-weighted assets) 14.92 % 16.07 % 17.52 % 15.73 % 16.95 % Tier 1 capital (to risk-weighted assets) 13.72 % 14.85 % 16.30 % 14.48 % 15.70 % Tier 1 capital (to average assets) 12.16 % 13.16 % 14.05 % 11.85 % 11.74 % (1) ACL and provision (reversal) for credit losses for the year ended December 31, 2024 and 2023 is presented under ASC 326, while prior period comparisons continue to be presented under legacy ASC 450 and ASC 310.
The increase in average yield was primarily due to the rising market rates and an increase in dividend on Federal Home Loan Bank stock. The increase in average balance was primarily due to an increase in average balance of deposits, partially offset by an increase in loans.
The increase in average yield was primarily due to the rising market rates and an increase in dividend on FHLB stock. The increase in average balance was primarily due to an increase in average balance of deposits, partially offset by an increase in loans.
Provision (reversal) for Credit Losses The following table presents a composition of provision (reversal) for credit losses for the periods indicated: Year Ended December 31, ($ in thousands) 2023 2022 2021 Provision (reversal) for credit losses on loans $ 497 $ 3,602 $ (4,596) Provision (reversal) for credit losses on off-balance sheet credit exposure (1) (629) 85 (24) Total provision (reversal) for credit losses $ (132) $ 3,687 $ (4,620) (1) Provision (reversal) for credit losses on off-balance sheet credit exposures for the years ended December, 2022 and 2021 was recorded in Other Expense on the Consolidated Income Statement.
Provision (reversal) for Credit Losses The following table presents a composition of provision (reversal) for credit losses for the periods indicated: Year Ended December 31, ($ in thousands) 2024 2023 2022 Provision (reversal) for credit losses on loans $ 3,488 $ 497 $ 3,602 Provision (reversal) for credit losses on off-balance sheet credit exposure (1) (87) (629) 85 Total provision (reversal) for credit losses $ 3,401 $ (132) $ 3,687 (1) Provision (reversal) for credit losses on off-balance sheet credit exposures for the years ended December, 2022 was recorded in Other Expense on the Consolidated Income Statement.
Provision (reversal) for credit losses on off-balance sheet credit exposures of $85 thousand, $(24) thousand, $(63) thousand and $162 thousand, respectively, for the years ended December 31, 2022, 2021, 2020 and 2019 were recorded in Other Expense on the Consolidated Income Statement. (2) Shareholders' equity divided by common shares outstanding.
Provision (reversal) for credit losses on off-balance sheet credit exposures of $85 thousand, $(24) thousand, and $(63) thousand, respectively, for the years ended December 31, 2022, 2021, and 2020 were recorded in Other Expense on the Consolidated Income Statement. (2) Shareholders' equity divided by common shares outstanding. (3) Dividends declared per common share divided by basic earnings per common share.
As of December 31, 2023 and 2022, total deposits were comprised of 25.3% and 35.9%, respectively, of noninterest-bearing demand accounts, 17.9% and 25.2%, respectively, of savings, NOW and money market accounts and 56.8% and 38.9%, respectively, of time deposits.
As of December 31, 2024 and 2023, total deposits were comprised of 20.9% and 25.3%, respectively, of noninterest-bearing demand accounts, 17.9% and 17.9%, respectively, of savings, NOW and money market accounts and 61.2% and 56.8%, respectively, of time deposits.
Provision for credit losses on loans for the year ended December 31, 2023 was primarily due to increases in loans held-for-investment and reserve related to qualitative adjustment factors, partially offset by a decrease in quantitatively measured loss reserve requirement.
Provision for credit losses on loans for the year ended December 31, 2024 was primarily due to increases in loans held-for-investment, partially offset by a decrease in quantitatively measured loss reserve requirement.
The increase in average balance of interest-earning assets was primarily due to growth in loans and investment securities, supported by deposit growth. The increases in average yield on interest-earning assets and average cost of interest-bearing liabilities were primarily due to the rising market rates during the year ended December 31, 2022.
The increase in average balance of interest-earning assets was primarily due to growth in loans and investment securities, supported by deposit growth. The increases in average yield on interest-earning assets and average cost of interest-bearing liabilities were primarily due to re-pricing at evaluated rates and originations at higher market rates during the year ended December 31, 2024.
The following table presents the composition of the Company’s loans held-for-sale as of the dates indicated: December 31, ($ in thousands) 2023 2022 2021 2020 2019 Commercial real estate: SBA property (1) N/A $ 16,473 $ 33,603 $ 1,411 $ 150 Business property $ 2,802 N/A N/A N/A N/A Total commercial real estate 2,802 16,473 33,603 1,411 150 Commercial and industrial 2,353 6,338 3,423 268 1,065 Consumer: Residential mortgage — — — 300 760 Total consumer — — — 300 760 Loans held-for-sale $ 5,155 $ 22,811 $ 37,026 $ 1,979 $ 1,975 (1) Under the legacy loan segments Loans held-for-sale were $5.2 million at December 31, 2023, a decrease of $17.7 million, or 77.4%, from $22.8 million at December 31, 2022.
The following table presents the composition of the Company’s loans held-for-sale as of the dates indicated: December 31, ($ in thousands) 2024 2023 2022 2021 2020 Commercial real estate: SBA property (1) N/A N/A $ 16,473 $ 33,603 $ 1,411 Commercial property $ 3,307 $ — N/A N/A N/A Business property 713 2,802 N/A N/A N/A Total commercial real estate 4,020 2,802 16,473 33,603 1,411 Commercial and industrial 2,272 2,353 6,338 3,423 268 Consumer: Residential mortgage — — — — 300 Total consumer — — — — 300 Loans held-for-sale $ 6,292 $ 5,155 $ 22,811 $ 37,026 $ 1,979 (1) Under the legacy loan segments Loans held-for-sale were $6.3 million at December 31, 2024, an increase of $1.1 million, or 22.1%, from $5.2 million at December 31, 2023.
See "Non-GAAP Measures" for a reconciliation to its most comparable GAAP measure. 42 Executive Summary Financial Highlights • Net income was $30.7 million for the year ended December 31, 2023, a decrease of $4.3 million, or 12.2%, from $35.0 million for the year ended December 31, 2022 and a decrease of $9.4 million, or 23.4%, from $40.1 million for the year ended December 31, 2021; ◦ Provision (reversal) for credit losses (1) was $(132) thousand, $3.6 million and $(4.6) million for the years ended December 31, 2023, 2022 and 2021, respectively. ◦ Diluted earnings per common share was $2.12, $2.31 and $2.62 for the years ended December 31, 2023, 2022 and 2021, respectively. ◦ Net interest margin was 3.57%, 4.08% and 3.83% for the years ended December 31, 2023, 2022 and 2021, respectively. • Total assets were $2.79 billion at December 31, 2023, an increase of $369.5 million, or 15.3%, from $2.42 billion at December 31, 2022; • Loans held-for-investment were $2.32 billion at December 31, 2023, an increase of $277.4 million, or 13.6%, from $2.05 billion at December 31, 2022; • Total deposits were $2.35 billion at December 31, 2023, an increase of $305.6 million, or 14.9%, from $2.05 billion at December 31, 2022; • The Company declared and paid cash dividends of $0.69, $0.60, and $0.44 per common share for the years ended December 31, 2023, 2022 and 2021, respectively; and • The Company purchased and retired 512,657, 362,557 and 680,269 shares of common stock for the years ended December 31, 2023, 2022 and 2021, respectively.
See "Non-GAAP Measures" for a reconciliation to its most comparable GAAP measure. 43 Executive Summary Financial Highlights • Net income was $25.8 million for the year ended December 31, 2024, a decrease of $4.9 million, or 15.9%, from $30.7 million for the year ended December 31, 2023 and a decrease of $9.2 million, or 26.2%, from $35.0 million for the year ended December 31, 2022; ◦ Provision (reversal) for credit losses (1) was $3.4 million, $(132) thousand and $3.6 million for the years ended December 31, 2024, 2023 and 2022, respectively. ◦ Diluted earnings per common share was $1.74, $2.12 and $2.31 for the years ended December 31, 2024, 2023 and 2022, respectively. ◦ Net interest margin was 3.17%, 3.57% and 4.08% for the years ended December 31, 2024, 2023 and 2022, respectively. • Total assets were $3.06 billion at December 31, 2024, an increase of $274.5 million, or 9.8%, from $2.79 billion at December 31, 2023; • Loans held-for-investment were $2.63 billion at December 31, 2024, an increase of $305.9 million, or 13.2%, from $2.32 billion at December 31, 2023; • Total deposits were $2.62 billion at December 31, 2024, an increase of $264.2 million, or 11.2%, from $2.35 billion at December 31, 2023; • The Company declared and paid cash dividends of $0.72, $0.69, and $0.60 per common share for the years ended December 31, 2024, 2023 and 2022, respectively; and • The Company purchased and retired 14,947, 512,657, and 362,557 shares of common stock for the years ended December 31, 2024, 2023 and 2022, respectively.
Provision (reversal) for credit losses on off-balance sheet credit exposures of $85 thousand and $(24) thousand, respectively, for the years ended December 31, 2022 and 2021 was recorded in Other Expense on the Consolidated Income Statement.
Provision for credit losses on off-balance sheet credit exposures of $85 thousand for the year ended December 31, 2022 was recorded in Other Expense on the Consolidated Income Statement.
As of December 31, 2023, 94.7%, at amortized cost basis, of the Company's securities available-for-sale were issued by U.S. government agency and U.S. government sponsored enterprise.
As of December 31, 2024 and 2023, 95.3% and 94.7%, respectively, of the Company's securities available-for-sale at amortized cost basis were issued by U.S. government agency and U.S. GSEs.
The Company is committed to making corporate decisions that directly benefit its shareholders, and during the year ended December 31, 2023, increased its dividend per common share by $0.09, or 15.0%, to $0.69 from $0.60 for the year ended December 31, 2022.
The Company is committed to making corporate decisions that directly benefit its shareholders, and during the year ended December 31, 2024, increased its dividend per common share by $0.03, or 4.3%, to $0.72 from $0.69 for the year ended December 31, 2023.
The increase was primarily due to loans placed on nonaccrual status during the year ended December 31, 2023 of $2.5 million, partially offset by payoffs and paydowns of $1.3 million, a loan transferred to OREO of $593 thousand and charge-offs of $45 thousand. 58 Loans are generally placed on nonaccrual status when they become 90 days past due, unless management believes the loan is well secured and in the process of collection.
The increase was primarily due to loans placed on nonaccrual status during the year ended December 31, 2024 of $7.3 million, partially offset by payoffs and paydowns of $3.8 million, loans returned to accrual status of $2.0 million, a loan transferred to OREO of $94 thousand, and charge-offs of $691 thousand. 59 Loans are generally placed on nonaccrual status when they become 90 days past due, unless management believes the loan is well secured and in the process of collection.
The increase in average yield was primarily due to new investment securities purchased at higher market rates and a decrease in net amortization. The Company purchased $57.4 million and $47.3 million, respectively, of investment securities during the years ended December 31, 2022 and 2021.
The increase in average yield was primarily due to new investment securities purchased at higher market rates and a decrease in net amortization. The Company purchased $23.5 million and $17.3 million, respectively, of investment securities during the years ended December 31, 2024 and 2023.
(1) Provision (reversal) for credit losses for the year ended December 31, 2023 is presented under ASC 326, while prior period comparisons continue to be presented under legacy ASC 450 and ASC 310.
(1) Provision (reversal) for credit losses for the years ended December 31, 2024 and 2023 is presented under ASC 326, while provision for credit losses for the year ended December 31, 2022 continues to be presented under legacy ASC 450 and ASC 310.
Other expense included other loan related legal expenses of $389 thousand and $302 thousand, respectively, armed guard expense of $656 thousand and $546 thousand, respectively, office expenses of $1.9 million and $1.4 million, respectively, and provision (reversal) for off-balance sheet credit exposures was $85 thousand and $(24) thousand, respectively, for the years ended December 31, 2022 and 2021.
Other expense included other loan related legal expenses of $534 thousand and $389 thousand, respectively, armed guard expense of $798 thousand and $656 thousand, respectively, office expenses of $2.2 million and $1.9 million, respectively, and provision for off-balance sheet credit exposures was $85 thousand for the year ended December 31, 2022.
Other income included wire and remittance fees of $643 thousand and $596 thousand, respectively, and debit card interchange fees of $335 thousand and $306 thousand, respectively, for the years ended December 31, 2022 and 2021. 48 Noninterest Expense Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 The following table presents the components of noninterest expense for the periods indicated: Year Ended December 31, Amount Change Percentage Change ($ in thousands) 2023 2022 Salaries and employee benefits $ 34,572 $ 33,056 $ 1,516 4.6 % Occupancy and equipment 7,924 6,481 1,443 22.3 % Professional fees 3,087 2,239 848 37.9 % Marketing and business promotion 2,327 2,150 177 8.2 % Data processing 1,552 1,706 (154) (9.0) % Director fees and expenses 756 706 50 7.1 % Regulatory assessments 1,103 597 506 84.8 % Other expenses 4,736 4,191 545 13.0 % Total noninterest expense $ 56,057 $ 51,126 $ 4,931 9.6 % Salaries and employee benefits increased primarily due to increases in wages and other employee benefits, partially offset by decreases in bonus and vacation accruals, and incentives tied to LPO originated SBA loan sales and loan origination cost, which offsets the recognition of salaries.
The Company has retained a law firm specializing in SBA recovery and intends to seek that SBA reconsider its decision so that the Company may recoup all or part of the reimbursement. 50 Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 The following table presents the components of noninterest expense for the periods indicated: Year Ended December 31, Amount Change Percentage Change ($ in thousands) 2023 2022 Salaries and employee benefits $ 34,572 $ 33,056 $ 1,516 4.6 % Occupancy and equipment 7,924 6,481 1,443 22.3 % Professional fees 3,087 2,239 848 37.9 % Marketing and business promotion 2,327 2,150 177 8.2 % Data processing 1,552 1,706 (154) (9.0) % Director fees and expenses 756 706 50 7.1 % Regulatory assessments 1,103 597 506 84.8 % Other expenses 4,736 4,191 545 13.0 % Total noninterest expense $ 56,057 $ 51,126 $ 4,931 9.6 % Salaries and employee benefits increased primarily due to increases in wages and other employee benefits, partially offset by decreases in bonus and vacation accruals, and incentives tied to LPO originated SBA loan sales and loan origination cost, which offsets the recognition of salaries.
As of December 31, 2023, the Company is authorized to purchase 592,724 additional shares under the 2023 stock repurchase program, which expires on August 2, 2024. For information regarding shares purchased during the three months ended December 31, 2023, please see “Item 5. - Item 5.
As of December 31, 2024, the Company was authorized to purchase 577,777 additional shares under the 2023 stock repurchase program. For information regarding shares purchased during the three months ended December 31, 2024, please see “Item 5. - Item 5.
The following table presents outstanding financial commitments whose contractual amount represents credit risk as of the dates indicated: December 31, 2023 2022 ($ in thousands) Fixed Rate Variable Rate Fixed Rate Variable Rate Unused lines of credit $ 2,808 $ 347,652 $ 3,117 $ 251,178 Unfunded loan commitments 4,020 47,038 692 38,486 Standby letters of credit 4,638 1,786 2,989 1,901 Commercial letters of credit — 160 — 502 Total $ 11,466 $ 396,636 $ 6,798 $ 292,067 The Company applies an expected credit loss estimation methodology applied to each respective loan segment for determining the ACL on off-balance sheet credit exposures.
The following table presents outstanding financial commitments whose contractual amount represents credit risk as of the dates indicated: December 31, 2024 2023 ($ in thousands) Fixed Rate Variable Rate Fixed Rate Variable Rate Unused lines of credit $ 12,923 $ 370,313 $ 2,808 $ 347,652 Unfunded loan commitments — 17,339 4,020 47,038 Standby letters of credit 5,279 1,516 4,638 1,786 Commercial letters of credit — — — 160 Total $ 18,202 $ 389,168 $ 11,466 $ 396,636 The Company applies an expected credit loss estimation methodology applied to each respective loan segment for determining the ACL on off-balance sheet credit exposures.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.” During the year ended December 31, 2022, the Company repurchased and retired 362,557 shares of common stock at a weighted-average price of $18.57 per share.
During the year ended December 31, 2022, the Company repurchased and retired 362,557 shares of common stock at a weighted-average price of $18.57 per share.
Interest and fees on loans increased primarily due to a 10.0% increase in average balance and a 43 basis point increase in average yield. The increase in average balance was primarily due to an increase in commercial real estate and residential mortgage loans, and commercial lines of credit, partially offset by a decrease in commercial term loans.
Interest and fees on loans increased primarily due to a 14.4% increase in average balance and a 36 basis point increase in average yield. The increase in average balance was primarily due to an increase in commercial real estate, commercial and industrial, and residential mortgage loans, partially offset by a decrease in other consumer loans.
Net interest income is affected by changes in the balances of interest-earning assets and interest-bearing liabilities and changes in the yields earned on interest-earning assets and the rates paid on interest-bearing liabilities. 43 The following table presents interest income, average interest-earning assets, interest expense, average interest-bearing liabilities, and their correspondent yields and costs expressed both in dollars and rates for the periods indicated: Year Ended December 31, 2023 2022 2021 ($ in thousands) Average Balance Interest Yield/Cost Average Balance Interest Yield/Cost Average Balance Interest Yield/Cost Interest-earning assets: Total loans (1) $ 2,137,851 $ 136,029 6.36 % $ 1,872,557 $ 95,054 5.08 % $ 1,702,073 $ 79,155 4.65 % Mortgage-backed securities 98,903 3,001 3.03 % 89,066 1,826 2.05 % 89,693 989 1.10 % Collateralized mortgage obligation 25,466 1,039 4.08 % 23,479 545 2.32 % 22,633 221 0.98 % SBA loan pool securities 8,166 325 3.98 % 10,309 208 2.02 % 10,515 189 1.80 % Municipal securities - tax exempt (2) 3,788 126 3.33 % 4,874 140 2.87 % 5,755 146 2.54 % Corporate bonds 4,273 188 4.40 % 4,810 188 3.91 % 1,841 68 3.69 % Interest-bearing deposits in other financial institutions 186,850 9,621 5.15 % 184,502 3,212 1.74 % 170,814 220 0.13 % FHLB and other bank stock 11,959 848 7.09 % 9,703 578 5.96 % 8,539 484 5.67 % Total interest-earning assets 2,477,256 151,177 6.10 % 2,199,300 101,751 4.63 % 2,011,863 81,472 4.05 % Noninterest-earning assets: Cash and due from banks 21,565 20,735 19,676 ACL on loans (25,495) (22,125) (25,270) Other assets 76,444 73,951 41,187 Total noninterest-earning assets 72,514 72,561 35,593 Total assets $ 2,549,770 $ 2,271,861 $ 2,047,456 Interest-bearing liabilities: Deposits: NOW and money market accounts $ 470,750 16,190 3.44 % $ 504,275 4,970 0.99 % $ 400,446 1,242 0.31 % Savings 7,499 18 0.24 % 14,068 9 0.06 % 12,302 6 0.05 % Time deposits 1,059,985 45,957 4.34 % 593,106 7,005 1.18 % 609,351 2,795 0.46 % Other borrowings 9,192 508 5.53 % 6,290 135 2.15 % 31,302 292 0.93 % Total interest-bearing liabilities 1,547,426 62,673 4.05 % 1,117,739 12,119 1.08 % 1,053,401 4,335 0.41 % Noninterest-bearing liabilities: Demand deposits 629,774 831,621 737,216 Other liabilities 32,061 16,061 14,073 Total noninterest-bearing liabilities 661,835 847,682 751,289 Total liabilities 2,209,261 1,965,421 1,804,690 Shareholders’ equity 340,509 306,440 242,766 Total liabilities and shareholders’ equity $ 2,549,770 $ 2,271,861 $ 2,047,456 Net interest income $ 88,504 $ 89,632 $ 77,137 Net interest spread (3) 2.05 % 3.55 % 3.64 % Net interest margin (4) 3.57 % 4.08 % 3.83 % Cost of funds (5) 2.88 % 0.62 % 0.24 % Cost of deposits 2.87 % 0.62 % 0.23 % (1) Average balance includes both loans held-for-sale and loans held-for-investment, as well as nonaccrual loans.
Net interest income is affected by changes in the balances of interest-earning assets and interest-bearing liabilities and changes in the yields earned on interest-earning assets and the rates paid on interest-bearing liabilities. 44 The following table presents interest income, average interest-earning assets, interest expense, average interest-bearing liabilities, and their correspondent yields and costs expressed both in dollars and rates for the periods indicated: Year Ended December 31, 2024 2023 2022 ($ in thousands) Average Balance Interest Yield/Cost Average Balance Interest Yield/Cost Average Balance Interest Yield/Cost Interest-earning assets: Total loans (1) $ 2,445,080 $ 164,301 6.72 % $ 2,137,851 $ 136,029 6.36 % $ 1,872,557 $ 95,054 5.08 % Mortgage-backed securities 107,768 3,780 3.51 % 98,903 3,001 3.03 % 89,066 1,826 2.05 % Collateralized mortgage obligation 22,806 975 4.28 % 25,466 1,039 4.08 % 23,479 545 2.32 % SBA loan pool securities 6,756 283 4.19 % 8,166 325 3.98 % 10,309 208 2.02 % Municipal securities - tax exempt (2) 2,917 102 3.50 % 3,788 126 3.33 % 4,874 140 2.87 % Corporate bonds 4,208 188 4.47 % 4,273 188 4.40 % 4,810 188 3.91 % Interest-bearing deposits in other financial institutions 189,628 10,031 5.29 % 186,850 9,621 5.15 % 184,502 3,212 1.74 % FHLB and other bank stock 13,651 1,157 8.48 % 11,959 848 7.09 % 9,703 578 5.96 % Total interest-earning assets 2,792,814 180,817 6.47 % 2,477,256 151,177 6.10 % 2,199,300 101,751 4.63 % Noninterest-earning assets: Cash and due from banks 23,044 21,565 20,735 ACL on loans (28,397) (25,495) (22,125) Other assets 90,425 76,444 73,951 Total noninterest-earning assets 85,072 72,514 72,561 Total assets $ 2,877,886 $ 2,549,770 $ 2,271,861 Interest-bearing liabilities: Deposits: NOW and money market accounts $ 475,754 19,149 4.02 % $ 470,750 16,190 3.44 % $ 504,275 4,970 0.99 % Savings 6,312 16 0.25 % 7,499 18 0.24 % 14,068 9 0.06 % Time deposits 1,410,878 71,322 5.06 % 1,059,985 45,957 4.34 % 593,106 7,005 1.18 % Other borrowings 31,033 1,713 5.52 % 9,192 508 5.53 % 6,290 135 2.15 % Total interest-bearing liabilities 1,923,977 92,200 4.79 % 1,547,426 62,673 4.05 % 1,117,739 12,119 1.08 % Noninterest-bearing liabilities: Demand deposits 539,263 629,774 831,621 Other liabilities 59,026 32,061 16,061 Total noninterest-bearing liabilities 598,289 661,835 847,682 Total liabilities 2,522,266 2,209,261 1,965,421 Shareholders’ equity 355,620 340,509 306,440 Total liabilities and shareholders’ equity $ 2,877,886 $ 2,549,770 $ 2,271,861 Net interest income $ 88,617 $ 88,504 $ 89,632 Net interest spread (3) 1.68 % 2.05 % 3.55 % Net interest margin (4) 3.17 % 3.57 % 4.08 % Cost of deposits 3.72 % 2.87 % 0.62 % Cost of funds (5) 3.74 % 2.88 % 0.62 % (1) Average balance includes both loans held-for-sale and loans held-for-investment, as well as nonaccrual loans.
During the year ended December 31, 2023, the Company also repurchased 512,657 shares of common stock, totaling $8.8 million. Overall, the Company returned 61.0% of its earnings to common shareholders through dividends and common share repurchases during the year ended December 31, 2023.
During the year ended December 31, 2024, the Company also repurchased 14,947 shares of common stock, totaling $222 thousand. Overall, the Company returned 42.0% of its earnings to common shareholders through dividends and common share repurchases during the year ended December 31, 2024.
The increase in ACL for the year ended December 31, 2023 was primarily due to increases in loans held-for-investment and reserve related to qualitative adjustment factors, partially offset by a decrease in quantitatively measured loss reserve requirement. The decrease in the quantitatively measured loss reserve requirement was primarily due to the improved economic forecasts by the FOMC.
The increase in ACL for the year ended December 31, 2024 was primarily due to increases in loans held-for-investment and reserve related to qualitative adjustment factors, partially offset by decreases in quantitatively measured loss reserves and reserves on individually evaluated loans.
The increase was primarily due to purchases of $17.3 million and an increase in fair value of securities available-for-sale of $2.3 million, partially offset by principal paydowns and calls of $17.9 million, and net premium amortization of $209 thousand.
The increase was primarily due to purchases of $23.5 million, partially offset by principal paydowns and calls of $19.8 million, a decrease in fair value of securities available-for-sale of $541 thousand, and net premium amortization of $159 thousand.
For the years ended December 31, 2022 and 2021, average yield on total investment securities was 2.19% and 1.24%, respectively. Interest income on other interest-earning assets increased primarily due to a 156 basis point increase in average yield and an 8.3% increase in average balance. The increase in average yield was primarily due to the rising market rates.
For the years ended December 31, 2024 and 2023, average yield on total investment securities was 3.69% and 3.33%, respectively. 46 Interest income on other interest-earning assets increased primarily due to a 23 basis point increase in average yield and a 2.2% increase in average balance.
The increase in average yield was primarily due to the rising market rates, partially offset by a decrease in net amortization of deferred fees on SBA PPP loans. Interest on investment securities increased primarily due to a 95 basis point increase in average yield and a 1.6% increase in average balance.
The increase in average yield was primarily due to the higher market rates, partially offset by a decrease in net accretion of discount on loans. Interest on investment securities increased primarily due to a 36 basis point increase in average yield and a 2.7% increase in average balance.
Shareholders’ equity was $348.9 million at December 31, 2023, an increase of $13.4 million, or 4.0%, from $335.4 million at December 31, 2022.
Shareholders’ equity was $363.8 million at December 31, 2024, an increase of $14.9 million, or 4.3%, from $348.9 million at December 31, 2023.
ACL and provision (reversal) for credit losses for reporting periods beginning with January 1, 2023 are presented under ASC 326, while prior period amounts, comparisons and related ratios continue to be presented under legacy ASC 450 and ASC 310 in this Annual Report on Form 10-K .
ACL and provision (reversal) for credit losses for reporting periods beginning with January 1, 2023 are presented under ASC 326, while prior period amounts, comparisons and related ratios continue to be presented under legacy ASC 450 and ASC 310 in this Annual Report on Form 10-K. 40 Non-GAAP Financial Measures The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance.
Under the CECL framework, current expected credit losses are recorded on financial assets within the scope of ASC 326 at the time of their origination or acquisition. Estimating expected credit losses requires management to use relevant forward-looking information, including the use of reasonable and supportable forecasts.
Under the CECL framework, current expected credit losses are recorded on financial assets within the scope of ASC 326 at the time of their origination or acquisition.
The decrease in net income for the year ended December 31, 2022 compared with the year ended December 31, 2021 was primarily due to an increase in noninterest expense, a decrease in noninterest income and additional provision for loan losses, partially offset by an increase in net interest income.
The decrease in net income for the year ended December 31, 2024 compared with the year ended December 31, 2023 was primarily due to an increase in noninterest expense, partially offset by increases in noninterest income and net interest income, and provision for credit losses of $3.4 million for the year ended December 31, 2024 compared with reversal for credit losses of $132 thousand for the year ended December 31, 2023.
Each loan segment bears varying degrees of risk based on, among other things, the type of loan and collateral, and the sensitivity of the borrower or industry to changes in external factors such as economic conditions and interest rate changes.
Loan portfolio segments identified by the Company include: commercial real estate (commercial property, business property, multifamily and construction), commercial and industrial, and consumer loans (residential mortgage and other consumer). 38 Each loan segment bears varying degrees of risk based on, among other things, the type of loan and collateral, and the sensitivity of the borrower or industry to changes in external factors such as economic conditions and interest rate changes.
Loan servicing income represents fees received on loans that the Company services, net of amortization of servicing assets. The increase was primarily due to an increase in servicing income received, partially offset by an increase in amortization of servicing assets from increased prepayments of loans being serviced. The Company purchased bank-owned life insurance of $29.3 million in November 2021.
Loan servicing income represents fees received on loans that the Company services, net of amortization of servicing assets. The increase was primarily due to a decrease in amortization of servicing assets from lower prepayments of loans being serviced. Bank-owned life insurance income represents the increase in cash surrender value of the insurance policy.
Year Ended December 31, 2023 vs. 2022 Year Ended December 31, 2022 vs. 2021 Increase (Decrease) Due to Net Increase (Decrease) Increase (Decrease) Due to Net Increase (Decrease) ($ in thousands) Volume Rate Volume Rate Interest earned on: Total loans $ 13,467 $ 27,508 $ 40,975 $ 7,928 $ 7,971 $ 15,899 Investment securities 177 1,595 1,772 26 1,268 1,294 Other interest-earning assets 90 6,589 6,679 58 3,028 3,086 Total interest income 13,734 35,692 49,426 8,012 12,267 20,279 Interest paid on: Savings, NOW, and money market deposits (385) 11,614 11,229 319 3,412 3,731 Time deposits 5,514 33,438 38,952 (75) 4,285 4,210 Other borrowings 62 311 373 (233) 76 (157) Total interest expense 5,191 45,363 50,554 11 7,773 7,784 Change in net interest income $ 8,543 $ (9,671) $ (1,128) $ 8,001 $ 4,494 $ 12,495 Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 The following table presents the components of net interest income for the periods indicated: Year Ended December 31, Amount Change Percentage Change ($ in thousands) 2023 2022 Interest income: Interest and fees on loans $ 136,029 $ 95,054 $ 40,975 43.1 % Interest on investment securities 4,679 2,907 1,772 61.0 % Interest and dividends on other interest-earning assets 10,469 3,790 6,679 176.2 % Total interest income 151,177 101,751 49,426 48.6 % Interest expense: Interest on deposits 62,165 11,984 50,181 418.7 % Interest on other borrowings 508 135 373 276.3 % Total interest expense 62,673 12,119 50,554 417.1 % Net interest income $ 88,504 $ 89,632 $ (1,128) (1.3) % Net interest income decreased primarily due to a 38.4% increase in average balance of interest-bearing liabilities and a 297 basis point increase in average cost of interest-bearing liabilities, partially offset by a 12.6% increase in average balance of interest-earning assets and a 147 basis point increase in average yield on interest-earning assets.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022 The following table presents the components of net interest income for the periods indicated: Year Ended December 31, Amount Change Percentage Change ($ in thousands) 2023 2022 Interest income: Interest and fees on loans $ 136,029 $ 95,054 $ 40,975 43.1 % Interest on investment securities 4,679 2,907 1,772 61.0 % Interest and dividends on other interest-earning assets 10,469 3,790 6,679 176.2 % Total interest income 151,177 101,751 49,426 48.6 % Interest expense: Interest on deposits 62,165 11,984 50,181 418.7 % Interest on borrowings 508 135 373 276.3 % Total interest expense 62,673 12,119 50,554 417.1 % Net interest income $ 88,504 $ 89,632 $ (1,128) (1.3) % Net interest income decreased primarily due to a 38.4% increase in average balance of interest-bearing liabilities and a 297 basis point increase in average cost of interest-bearing liabilities, partially offset by a 12.6% increase in average balance of interest-earning assets and a 147 basis point increase in average yield on interest-earning assets.
Contractual Obligations The following table presents supplemental information regarding total contractual obligations as of the dates indicated: ($ in thousands) Within One Year One to Three Years Three to Five Years Over Five Years Total December 31, 2023 Time deposits $ 1,330,271 $ 5,279 $ 186 $ — $ 1,335,736 FHLB advances 39,000 — — — 39,000 Operating leases 3,385 6,233 4,959 10,695 25,272 Total $ 1,372,656 $ 11,512 $ 5,145 $ 10,695 $ 1,400,008 December 31, 2022 Time deposits $ 785,056 $ 11,046 $ 151 $ — $ 796,253 FHLB advances 20,000 — — — 20,000 Operating leases 2,718 2,484 1,282 845 7,329 Total $ 807,774 $ 13,530 $ 1,433 $ 845 $ 823,582 Management believes that the Company will be able to meet its contractual obligations as they come due through the maintenance of adequate cash levels.
Contractual Obligations The following table presents supplemental information regarding total contractual obligations as of the dates indicated: ($ in thousands) Within One Year One to Three Years Three to Five Years Over Five Years Total December 31, 2024 Time deposits $ 1,596,769 $ 4,099 $ 183 $ — $ 1,601,051 Other short-term borrowings 15,000 — — — 15,000 Operating leases 3,397 5,716 4,910 9,111 23,134 Total $ 1,615,166 $ 9,815 $ 5,093 $ 9,111 $ 1,639,185 December 31, 2023 Time deposits $ 1,330,271 $ 5,279 $ 186 $ — $ 1,335,736 FHLB advances 39,000 — — — 39,000 Operating leases 3,385 6,233 4,959 10,695 25,272 Total $ 1,372,656 $ 11,512 $ 5,145 $ 10,695 $ 1,400,008 Management believes that the Company will be able to meet its contractual obligations as they come due through the maintenance of adequate cash levels.
The following table presents the amortized cost and fair value of the investment securities portfolio as of the dates indicated: December 31, 2023 2022 ($ in thousands) Amortized Cost Fair Value Unrealized Gain (Loss) Amortized Cost Fair Value Unrealized Gain (Loss) Securities available-for-sale: U.S. government agency and U.S. government sponsored enterprise securities: Mortgage-backed securities $ 114,485 $ 104,091 $ (10,394) $ 109,497 $ 96,900 $ (12,597) Collateralized mortgage obligations 25,611 24,173 (1,438) 28,515 26,956 (1,559) SBA loan pool securities 7,773 7,450 (323) 9,704 9,298 (406) Municipal bonds 3,306 3,329 23 4,262 4,186 (76) Corporate bonds 5,000 4,280 (720) 5,000 4,523 (477) Total securities available-for-sale $ 156,175 $ 143,323 $ (12,852) $ 156,978 $ 141,863 $ (15,115) Total carrying value of investment securities were $143.3 million at December 31, 2023, an increase of $1.5 million, or 1.0%, from $141.9 million at December 31, 2022.
The following table presents the amortized cost and fair value of the investment securities portfolio as of the dates indicated: December 31, 2024 2023 ($ in thousands) Amortized Cost Fair Value Unrealized Gain (Loss) Amortized Cost Fair Value Unrealized Gain (Loss) Securities available-for-sale: U.S. government agency and U.S. government sponsored enterprise securities: Mortgage-backed securities $ 123,209 $ 112,439 $ (10,770) $ 114,485 $ 104,091 $ (10,394) Collateralized mortgage obligations 22,753 21,237 (1,516) 25,611 24,173 (1,438) SBA loan pool securities 6,328 6,008 (320) 7,773 7,450 (323) Municipal bonds 2,452 2,420 (32) 3,306 3,329 23 Corporate bonds 5,000 4,245 (755) 5,000 4,280 (720) Total securities available-for-sale $ 159,742 $ 146,349 $ (13,393) $ 156,175 $ 143,323 $ (12,852) Total carrying value of investment securities were $146.3 million at December 31, 2024, an increase of $3.0 million, or 2.1%, from $143.3 million at December 31, 2023.
The following table present net charge-offs as a percentage to the average loan held for investment balances in each of the loan categories for the period indicated: Year Ended December 31, 2023 ($ in thousands) Average Balance Net Charge-offs (Recoveries) Percentage Commercial real estate: Commercial property $ 794,642 $ — — % Business property 537,044 (5) -0.01 % Multifamily 127,338 — — % Construction 18,565 — — % Total commercial real estate 1,477,589 (5) -0.01 % Commercial and industrial 263,447 (1,062) -0.40 % Consumer: Residential mortgage 358,303 — — % Other consumer 21,602 40 0.19 % Total consumer 379,905 40 0.01 % Total loans held-for-investment $ 2,120,941 $ (1,027) -0.05 % 56 The following tables present net charge-offs as a percentage to the average loan held for investment balances in each of the legacy loan categories for the periods indicated: For the Year Ended December 31, 2022 2021 ($ in thousands) Average Balance Net Charge-offs (Recoveries) Percentage Average Balance Net Charge-offs (Recoveries) Percentage Real estate loans: Commercial property $ 1,201,405 $ — — % $ 983,129 $ — — % Residential property 261,576 — — % 197,741 — — % SBA property 115,488 — — % 125,051 (39) (0.03) % Construction 12,202 — — % 12,715 — — % Total real estate loans 1,590,671 — — % 1,318,636 (39) (0.01) % Commercial and industrial loans: Commercial term 74,934 (8) (0.01) % 77,383 (200) (0.26) % Commercial lines of credit 111,864 1,063 0.95 % 92,874 (146) (0.16) % SBA commercial term 16,262 (21) (0.13) % 19,390 (104) (0.54) % SBA PPP 13,732 — — % 150,043 — — % Total commercial and industrial loans 216,792 1,034 0.48 % 339,690 (450) (0.13) % Other consumer loans 21,991 7 0.03 % 21,101 22 0.10 % Total loans held-for-investment $ 1,829,454 $ 1,041 0.06 % $ 1,679,427 $ (467) (0.03) % For the Year Ended December 31, 2020 2019 ($ in thousands) Average Balance Net Charge-offs (Recoveries) Percentage Average Balance Net Charge-offs (Recoveries) Percentage Real estate loans: Commercial property $ 826,288 $ — — % $ 744,513 $ — — % Residential property 221,296 — — % 237,825 — — % SBA property 124,996 117 0.09 % 125,785 25 0.02 % Construction 20,285 — — % 22,384 — — % Total real estate loans 1,192,865 117 0.01 % 1,130,507 25 0.01 % Commercial and industrial loans: Commercial term 97,247 (96) (0.10) % 104,427 179 0.17 % Commercial lines of credit 100,154 709 0.71 % 93,344 2,597 2.78 % SBA commercial term 23,868 255 1.07 % 25,911 196 0.76 % SBA PPP 92,818 — — % — — — % Total commercial and industrial loans 314,087 868 0.28 % 223,682 2,972 1.33 % Other consumer loans 22,033 104 0.47 % 22,884 27 0.12 % Total loans held-for-investment $ 1,528,985 $ 1,089 0.07 % $ 1,377,073 $ 3,024 0.22 % 57 Loans 30 to 89 Days Past Due and Still Accruing The following table presents a summary of loans 30 to 89 days past due and still accruing as of the dates indicated: December 31, ($ in thousands) 2023 2022 2021 2020 2019 Commercial real estate: SBA property (1) $ — $ — $ — $ — $ 794 Business property 560 N/A N/A N/A N/A Total commercial real estate 560 — — — 794 Commercial and industrial 217 — — — 189 Consumer: Residential mortgage 604 — 461 182 697 Other consumer 47 134 93 156 138 Total consumer 651 134 554 338 835 Total $ 1,428 $ 134 $ 554 $ 338 $ 1,818 (1) Under the legacy loan segments.
Management believes that the projections used are reasonable and align with the Company’s expectation of the economic environment over the next 4 quarters. 57 The following table presents net charge-offs as a percentage to the average loan held for investment balances in each of the loan categories for the periods indicated: For the Year Ended December 31, 2024 2023 ($ in thousands) Average Balance Net Charge-offs (Recoveries) Percentage Average Balance Net Charge-offs (Recoveries) Percentage Commercial real estate: Commercial property $ 862,697 $ — — % $ 794,642 $ — — % Business property 584,664 100 0.02 % 537,044 (5) -0.01 % Multifamily 156,965 20 0.01 % 127,338 — — % Construction 26,136 — — % 18,565 — — % Total commercial real estate 1,630,462 120 0.01 % 1,477,589 (5) -0.01 % Commercial and industrial 403,172 398 0.11 % 263,447 (1,062) -0.40 % Consumer: Residential mortgage 386,512 — — % 358,303 — — % Other consumer 16,923 (125) -0.92 % 21,602 40 0.19 % Total consumer 403,435 (125) -0.04 % 379,905 40 0.01 % Total loans held-for-investment $ 2,437,069 $ 393 0.02 % $ 2,120,941 $ (1,027) -0.05 % The following table presents net charge-offs as a percentage to the average loan held for investment balances in each of the legacy loan categories for the periods indicated: For the Year Ended December 31, 2022 2021 2020 ($ in thousands) Average Balance Net Charge-offs (Recoveries) Percentage Average Balance Net Charge-offs (Recoveries) Percentage Average Balance Net Charge-offs (Recoveries) Percentage Real estate loans: Commercial property $ 1,201,405 $ — — % $ 983,129 $ — — % $ 826,288 $ — — % Residential property 261,576 — — % 197,741 — — % 221,296 — — % SBA property 115,488 — — % 125,051 (39) (0.03) % 124,996 117 0.09 % Construction 12,202 — — % 12,715 — — % 20,285 — — % Total real estate loans 1,590,671 — — % 1,318,636 (39) (0.01) % 1,192,865 117 0.01 % Commercial and industrial loans: Commercial term 74,934 (8) (0.01) % 77,383 (200) (0.26) % 97,247 (96) (0.10) % Commercial lines of credit 111,864 1,063 0.95 % 92,874 (146) (0.16) % 100,154 709 0.71 % SBA commercial term 16,262 (21) (0.13) % 19,390 (104) (0.54) % 23,868 255 1.07 % SBA PPP 13,732 — — % 150,043 — — % 92,818 — — % Total commercial and industrial loans 216,792 1,034 0.48 % 339,690 (450) (0.13) % 314,087 868 0.28 % Other consumer loans 21,991 7 0.03 % 21,101 22 0.10 % 22,033 104 0.47 % Total loans held-for-investment $ 1,829,454 $ 1,041 0.06 % $ 1,679,427 $ (467) (0.03) % $ 1,528,985 $ 1,089 0.07 % 58 Loans 30 to 89 Days Past Due and Still Accruing The following table presents a summary of loans 30 to 89 days past due and still accruing as of the dates indicated: December 31, ($ in thousands) 2024 2023 2022 2021 2020 Commercial real estate: Commercial property $ 433 $ — N/A N/A N/A Business property 333 560 N/A N/A N/A Total commercial real estate 766 560 $ — $ — $ — Commercial and industrial — 217 — — — Consumer: Residential mortgage 3,982 604 — 461 182 Other consumer 154 47 134 93 156 Total consumer 4,136 651 134 554 338 Total $ 4,902 $ 1,428 $ 134 $ 554 $ 338 Nonperforming Loans and Nonperforming Assets The following table presents a summary of total NPLs and NPAs as of the dates indicated: December 31, ($ in thousands) 2024 2023 2022 2021 2020 Nonaccrual loans held-for-investment: Commercial real estate: Commercial property (1) N/A N/A $ 2,400 $ — $ 524 SBA property (1) N/A N/A 585 746 885 Commercial property $ 1,851 $ 958 N/A N/A N/A Business property 2,336 2,865 N/A N/A N/A Total commercial real estate 4,187 3,823 2,985 746 1,409 Commercial and industrial 79 68 — 213 1,499 Consumer: Residential property 403 — 372 — 189 Other consumer 24 25 3 35 66 Total consumer 427 25 375 35 255 Total nonaccrual loans held-for-investment 4,693 3,916 3,360 994 3,163 Loans past due 90 days or more still on accrual — — — — — NPLs held-for-investment 4,693 3,916 3,360 994 3,163 NPLs held-for-sale — — 4,000 — — Total NPLs 4,693 3,916 7,360 994 3,163 Other real estate owned — 2,558 — — 1,401 NPAs $ 4,693 $ 6,474 $ 7,360 $ 994 $ 4,564 Nonaccrual loans held-for-investment to loans held-for-investment 0.18 % 0.17 % 0.16 % 0.06 % 0.20 % NPLs held-for-investment to loans held-for-investment 0.18 % 0.17 % 0.16 % 0.06 % 0.20 % NPAs to total assets 0.15 % 0.23 % 0.30 % 0.05 % 0.24 % ACL on loans to: NPLs held-for-investment 652.63 % 703.09 % 742.32 % 2,251.61 % 838.13 % (1) Under the legacy loan segments Total nonaccrual loans held-for-investment were $4.7 million at December 31, 2024, an increase of $777 thousand, or 19.8%, from $3.9 million at December 31, 2023.
The increase was primarily due to the net income of $30.7 million, a decrease in other comprehensive loss from the fair value change in securities available-for-sale of $1.6 million and stock options exercised of $488 thousand, partially offset by repurchase of common stock of $8.8 million, cash dividends declared on common stock of $9.9 million, and cumulative effect adjustment upon adoption of ASC 326 of $1.9 million.
The increase was primarily due to the net income of $25.8 million and stock options exercised of $353 thousand, partially offset by cash dividends declared on common stock of $10.3 million, preferred stock dividends of $834 thousand, an increase in other comprehensive loss from the fair value change in securities available-for-sale of $395 thousand, and repurchase of common stock of $222 thousand.
The following table presents the maturity of time deposits as of the dates indicated: ($ in thousands) Three Months or Less Three to Six Months Six Months to One Year Over One Year Total December 31, 2023 Time deposits of $250,000 or less $ 316,356 $ 165,091 $ 276,145 $ 2,442 $ 760,034 Time deposits of more than $250,000 207,539 140,583 224,557 3,023 575,702 Total $ 523,895 $ 305,674 $ 500,702 $ 5,465 $ 1,335,736 Not covered by deposit insurance $ 147,680 $ 107,482 $ 151,070 $ 2,405 $ 408,637 December 31, 2022 Time deposits of $250,000 or less $ 71,740 $ 71,808 $ 229,127 $ 9,702 $ 382,377 Time deposits of more than $250,000 137,312 35,812 239,257 1,495 413,876 Total $ 209,052 $ 107,620 $ 468,384 $ 11,197 $ 796,253 Not covered by deposit insurance $ 112,437 $ 26,749 $ 153,209 $ 1,556 $ 293,951 60 Shareholders’ Equity and Regulatory Capital Capital Resources Shareholders’ equity is influenced primarily by earnings, dividends paid on common stock and preferred stock, sales and redemptions of common stock and preferred stock, and changes in accumulated other comprehensive income caused primarily by fluctuations in unrealized gains or losses, net of taxes, on securities available-for-sale.
The following table presents the maturity of time deposits as of the dates indicated: ($ in thousands) Three Months or Less Three to Six Months Six Months to One Year Over One Year Total December 31, 2024 Time deposits of $250,000 or less $ 310,662 $ 286,304 $ 336,629 $ 2,332 $ 935,927 Time deposits of more than $250,000 295,977 138,664 228,533 1,950 665,124 Total $ 606,639 $ 424,968 $ 565,162 $ 4,282 $ 1,601,051 Not covered by deposit insurance $ 217,542 $ 96,493 $ 144,232 $ 1,568 $ 459,835 December 31, 2023 Time deposits of $250,000 or less $ 316,356 $ 165,091 $ 276,145 $ 2,442 $ 760,034 Time deposits of more than $250,000 207,539 140,583 224,557 3,023 575,702 Total $ 523,895 $ 305,674 $ 500,702 $ 5,465 $ 1,335,736 Not covered by deposit insurance $ 147,680 $ 107,482 $ 151,070 $ 2,405 $ 408,637 61 Shareholders’ Equity and Regulatory Capital Capital Resources Shareholders’ equity is influenced primarily by earnings, dividends paid on common stock and preferred stock, sales and redemptions of common stock and preferred stock, and changes in accumulated other comprehensive income caused primarily by fluctuations in unrealized gains or losses, net of taxes, on securities available-for-sale.
The increase in retail time deposits was primarily due to new accounts of $657.0 million, renewals of the matured accounts of $555.3 million and balance increases of $26.7 million, partially offset by matured and closed accounts of $916.2 million.
The increase in retail time deposits was primarily due to new accounts of $367.4 million, renewals of the matured accounts of $898.6 million and balance increases of $44.1 million, partially offset by matured and closed accounts of $1.18 billion.
Established by the Consolidated Appropriations Act, 2021, the ECIP was created to encourage low- and moderate-income community financial institutions and minority depository institutions to provide loans, grants, and forbearance for small businesses, minority-owned businesses, and consumers, especially low-income and underserved communities, including persistent poverty counties, that may be disproportionately impacted by the economic effect of the COVID-19 pandemic by providing direct and indirect capital investments in low- and moderate-income community financial institutions. 61 Stock Repurchases During the year ended December 31, 2023, the Company repurchased and retired 512,657 shares of common stock at a weighted-average price of $17.22 per share under a stock repurchase program approved by the Board of Directors on August 2, 2023 and a legacy stock repurchase program approved on July 28, 2022.
Established by the Consolidated Appropriations Act, 2021, the ECIP was created to encourage low- and moderate-income community financial institutions and minority depository institutions to provide loans, grants, and forbearance for small businesses, minority-owned businesses, and consumers, especially low-income and underserved communities, including persistent poverty counties, that may be disproportionately impacted by the economic effect of the COVID-19 pandemic by providing direct and indirect capital investments in low- and moderate-income community financial institutions.
PCB Bancorp PCB Bank Minimum Regulatory Requirements Well Capitalized Requirements (Bank) December 31, 2023 Common tier 1 capital (to risk-weighted assets) 12.23 % 14.85 % 4.5 % 6.5 % Total capital (to risk-weighted assets) 16.39 % 16.07 % 8.0 % 10.0 % Tier 1 capital (to risk-weighted assets) 15.16 % 14.85 % 6.0 % 8.0 % Tier 1 capital (to average assets) 13.43 % 13.16 % 4.0 % 5.0 % December 31, 2022 Common tier 1 capital (to risk-weighted assets) 13.29 % 16.30 % 4.5 % 6.5 % Total capital (to risk-weighted assets) 17.83 % 17.52 % 8.0 % 10.0 % Tier 1 capital (to risk-weighted assets) 16.62 % 16.30 % 6.0 % 8.0 % Tier 1 capital (to average assets) 14.33 % 14.05 % 4.0 % 5.0 % The Company and the Bank’s capital conservation buffer was 7.73% and 8.07%, respectively, as of December 31, 2023, and 8.79% and 9.52%, respectively, as of December 31, 2022.
Regulatory Capital Requirements The following table presents a summary of the minimum capital requirements applicable to the Company and the Bank in order to be considered “well-capitalized” from a regulatory perspective as of the dates indicated: PCB Bancorp PCB Bank Minimum Regulatory Requirements Well Capitalized Requirements (Bank) December 31, 2024 Common tier 1 capital (to risk-weighted assets) 11.44 % 13.72 % 4.5 % 6.5 % Total capital (to risk-weighted assets) 15.24 % 14.92 % 8.0 % 10.0 % Tier 1 capital (to risk-weighted assets) 14.04 % 13.72 % 6.0 % 8.0 % Tier 1 capital (to average assets) 12.45 % 12.16 % 4.0 % 5.0 % December 31, 2023 Common tier 1 capital (to risk-weighted assets) 12.23 % 14.85 % 4.5 % 6.5 % Total capital (to risk-weighted assets) 16.39 % 16.07 % 8.0 % 10.0 % Tier 1 capital (to risk-weighted assets) 15.16 % 14.85 % 6.0 % 8.0 % Tier 1 capital (to average assets) 13.43 % 13.16 % 4.0 % 5.0 % The Company and the Bank’s capital conservation buffer was 6.94% and 6.92%, respectively, as of December 31, 2024, and 7.73% and 8.07%, respectively, as of December 31, 2023.
As of December 31, 2023 and 2022, the Company maintained an ACL on off-balance sheet credit exposures of $1.3 million and $299 thousand in Accrued Interest Payable and Other Liabilities in the Consolidated Balance Sheets, respectively.
The loss estimation process includes assumptions for utilization at default. These assumptions are based on the Company’s own historical internal loan data. As of December 31, 2024 and 2023, the Company maintained an ACL on off-balance sheet credit exposures of $1.2 million and $1.3 million in Accrued Interest Payable and Other Liabilities in the Consolidated Balance Sheets, respectively.
However, loan related disclosures for prior periods continue to be presented under the legacy loan segments in this Annual Report on Form 10-K. Loan portfolio segments identified by the Company include: commercial real estate (commercial property, business property, multifamily and construction), commercial and industrial, and consumer loans (residential mortgage and other consumer).
However, loan related disclosures for prior periods continue to be presented under the legacy loan segments in this Annual Report on Form 10-K.
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 the annual dividend rate up to 2%.
Thereafter, the dividend rate will be adjusted based on the lending growth criteria listed in the terms of the ECIP investment with the annual dividend rate 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 measurement of the ACL is performed by collectively evaluating loans with similar risk characteristics. The Company’s discounted cash flow methodology incorporates a probability of default (“PD”) and loss given default (“LGD”) model, as well as expectations of future economic conditions, using reasonable and supportable forecasts.
The Company’s discounted cash flow methodology incorporates a probability of default (“PD”) and loss given default (“LGD”) model, as well as expectations of future economic conditions, using reasonable and supportable forecasts. The use of reasonable and supportable forecasts requires significant judgment, such as selecting forecast scenarios, as well as determining the appropriate length of the forecast horizon.
The use of reasonable and supportable forecasts requires significant judgment, such as selecting forecast scenarios, as well as determining the appropriate length of the forecast horizon. Management leverages economic projections from a reputable and independent third party to inform and provide its reasonable and supportable economic forecasts.
Management leverages economic projections from a reputable and independent third party to inform and provide its reasonable and supportable economic forecasts.
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 ECIP. The ECIP investment is treated as tier 1 capital for regulatory capital purposes.
From January 1, 2020 through December 31, 2024, the Company has repurchased and retired at total of 1,998,904 shares of common stock at a weighted-average price of $16.58 per share under several stock repurchase programs. 62 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 $69.1 million from the U.S.
There are statutory, regulatory and debt covenant limitations that affect the ability of the Bank to pay dividends to the holding company.
PCB Bancorp, on a stand-alone holding company basis, must provide for its own liquidity and its main source of funding is dividends from the Bank. There are statutory, regulatory and debt covenant limitations that affect the ability of the Bank to pay dividends to the holding company.
The Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell before the recovery of its amortized cost basis. The Company therefore determined that the investment securities with unrealized losses did not warrant an ACL as of December 31, 2023.
The Company therefore determined that the investment securities with unrealized losses did not warrant an ACL as of December 31, 2024 and 2023.
The increase in average cost was primarily due to the rising market rates. For the years ended December 31, 2022 and 2021, average cost on total interest-bearing deposits was 1.08% and 0.40%, respectively. 46 Interest expense on other borrowings increased primarily due to a 122 basis point increase in average cost, partially offset by a 79.9% decrease in average balance.
For the years ended December 31, 2024 and 2023, yield on total other interest-earning assets was 5.50% and 5.27%, respectively. Interest expense on deposits increased primarily due to a 23.1% increase in average balance of interest-bearing deposits and a 74 basis point increase in average cost of interest-bearing deposits.
December 31, 2023 Within One Year More than One Year through Five Years More than Five Years through Ten Years More than Ten Years Total ($ in thousands) Amortized Cost Weighted-Average Yield Amortized Cost Weighted-Average Yield Amortized Cost Weighted-Average Yield Amortized Cost Weighted-Average Yield Amortized Cost Weighted-Average Yield Securities available-for-sale: U.S. government agency and U.S. government sponsored enterprise securities: Mortgage-backed securities $ 6 1.24 % $ 1,848 1.32 % $ 5,903 2.00 % $ 106,728 3.00 % $ 114,485 2.92 % Collateralized mortgage obligations — — % 1,876 4.29 % 5,513 6.01 % 18,222 3.38 % 25,611 4.01 % SBA loan pool securities — — % 723 4.71 % 2,829 3.60 % 4,221 4.05 % 7,773 3.95 % Municipal bonds 864 3.26 % 82 2.98 % 724 3.51 % 1,636 3.54 % 3,306 3.44 % Corporate bonds — — % — — % 5,000 3.75 % — — % 5,000 3.75 % Total securities available-for-sale $ 870 3.25 % $ 4,529 3.12 % $ 19,969 3.83 % $ 130,807 3.09 % $ 156,175 3.19 % 52 Loans Held-For-Investment and Allowance for Credit Losses On January 1, 2023, the Company adopted ASU 2016-13 using the modified retrospective method through a cumulative-effect adjustment to retained earnings.
December 31, 2024 Within One Year More than One Year through Five Years More than Five Years through Ten Years More than Ten Years Total ($ in thousands) Amortized Cost Weighted-Average Yield Amortized Cost Weighted-Average Yield Amortized Cost Weighted-Average Yield Amortized Cost Weighted-Average Yield Amortized Cost Weighted-Average Yield Securities available-for-sale: U.S. government agency and U.S. government sponsored enterprise securities: Mortgage-backed securities $ — — % $ 1,103 1.65 % $ 6,080 2.05 % $ 116,026 3.51 % $ 123,209 3.42 % Collateralized mortgage obligations — — % 5,196 4.92 % 1,530 5.12 % 16,027 3.31 % 22,753 3.80 % SBA loan pool securities 163 2.57 % 1,341 4.82 % 1,900 2.57 % 2,924 3.85 % 6,328 3.64 % Municipal bonds — — % 82 3.01 % 1,098 3.50 % 1,272 3.58 % 2,452 3.52 % Corporate bonds — — % — — % 5,000 3.75 % — — % 5,000 3.75 % Total securities available-for-sale $ 163 2.57 % $ 7,722 4.42 % $ 15,608 3.06 % $ 136,249 3.50 % $ 159,742 3.50 % 53 Loans Held-For-Investment and Allowance for Credit Losses On January 1, 2023, the Company adopted ASU 2016-13 using the modified retrospective method through a cumulative-effect adjustment to retained earnings.
(3) Dividends declared per common share divided by basic earnings per common share. (4) Noninterest expenses divided by the sum of net interest income and noninterest income. (5) Net interest income divided by average total interest-earning assets. (6) Total loans include both loans held-for-sale and loans held-for-investment.
(4) Noninterest expenses divided by the sum of net interest income and noninterest income. (5) Net interest income divided by average total interest-earning assets. (6) Total loans include both loans held-for-sale and loans held-for-investment. (7) NPAs include total NPLs (nonaccrual loans plus loans past due 90 days or more and still accruing) and OREO. (8) Non-GAAP measure.
Interest expense on deposits increased primarily due to an 8.7% increase in average balance of interest-bearing deposits and a 68 basis point increase in average cost of interest-bearing deposits. The increase in average balance was primarily due to increases in savings, NOW and money market accounts, partially offset by a decrease in time deposits.
The increase in average balance was primarily due to an increase in time deposits, and NOW and money market accounts, partially offset by decreases in savings. The increase in average cost was primarily due to the higher market rates. For the years ended December 31, 2024 and 2023, average cost on total interest-bearing deposits was 4.78% and 4.04%, respectively.
The following table presents a summary of the Company’s deposit as of the dates indicated: December 31, Amount Change Percentage Change ($ in thousands) 2023 2022 Noninterest-bearing demand deposits $ 594,673 $ 734,989 $ (140,316) (19.1) % Interest-bearing deposits: Savings 6,846 8,579 (1,733) (20.2) % NOW 16,825 11,405 5,420 47.5 % Retail money market accounts 397,531 494,749 (97,218) (19.6) % Brokered money market accounts 1 8 (7) (87.5) % Retail time deposits of: $250,000 or less 456,293 295,354 160,939 54.5 % More than $250,000 515,702 353,876 161,826 45.7 % Brokered time deposits 303,741 87,023 216,718 249.0 % Time deposits from California State Treasurer 60,000 60,000 — — % Total interest-bearing deposits 1,756,939 1,310,994 445,945 34.0 % Total deposits $ 2,351,612 $ 2,045,983 $ 305,629 14.9 % Total deposits not covered by deposit insurance $ 954,591 $ 1,062,111 $ (107,520) (10.1) % Time deposits not covered by deposit insurance $ 408,637 $ 293,951 $ 114,686 39.0 % The decrease in noninterest-bearing demand deposits was primarily due to strong deposit market competition and the migration of noninterest-bearing demand deposits to interest-bearing deposits attributable to the rising market rates.
The following table presents a summary of the Company’s deposits as of the dates indicated: December 31, Amount Change Percentage Change ($ in thousands) 2024 2023 Noninterest-bearing demand deposits $ 547,853 $ 594,673 $ (46,820) (7.9) % Interest-bearing deposits: Savings 5,765 6,846 (1,081) (15.8) % NOW 13,761 16,825 (3,064) (18.2) % Retail money market accounts 447,360 397,531 49,829 12.5 % Brokered money market accounts 1 1 — — % Retail time deposits of: $250,000 or less 493,644 456,293 37,351 8.2 % More than $250,000 605,124 515,702 89,422 17.3 % Brokered time deposits 442,283 303,741 138,542 45.6 % Time deposits from California State Treasurer 60,000 60,000 — — % Total interest-bearing deposits 2,067,938 1,756,939 310,999 17.7 % Total deposits $ 2,615,791 $ 2,351,612 $ 264,179 11.2 % Total deposits not covered by deposit insurance $ 1,036,451 $ 954,591 $ 81,860 8.6 % Time deposits not covered by deposit insurance $ 459,835 $ 408,637 $ 51,198 12.5 % The decrease in noninterest-bearing demand deposits was primarily due to strong deposit market competition and the migration of noninterest-bearing demand deposits to interest-bearing deposits attributable to the competitive market rates.
The increase in total assets for the year ended December 31, 2023 was primarily due to increases in cash and cash equivalents, loans held-for-investment and operating lease assets. The increase in operating lease assets was primarily due to renewal and expansion of the Company’s headquarters and a new location for relocation of a regional office and branches.
The increase in total assets for the year ended December 31, 2024 was primarily due to increases in loans held-for-investment and deferred tax assets.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+3 added−2 removed16 unchanged
The Company’s EVE sensitivity reflects a slightly liability sensitive profile due to the continuing deposit mix shift from non-maturity deposits to time deposits. The model result is highly sensitive to deposit behaviors as well as loan prepayment assumptions.
The Company’s EVE sensitivity reflects a slight liability sensitive profile due to the continuing deposit mix shift from non-maturity deposits to time deposits. The model result is highly sensitive to deposit behaviors as well as loan prepayment assumptions.
Net interest income is expected to increase when interest rates rise, as the Company has a large proportion of variable rate loans in its loan portfolio, primarily linked to Prime Rate indices, that are sensitive to changes in short-term interest rates.
Net interest income is expected to decrease when interest rates decline, as the Company has a large proportion of variable rate loans in its loan portfolio, primarily linked to Prime Rate indices, that are sensitive to changes in short-term interest rates.
Due to the uncertainty of the current economic forecast, and timing and direction of future interest rate movements, actual result may vary from the Company’s EVE sensitivity results. 66
Due to the uncertainty of the current economic forecast, and timing and direction of future interest rate movements, actual results may vary from the Company’s EVE sensitivity results. 67
The model change incorporated observed pricing and customer behavior in both rising and falling interest rate environments. 65 The following table presents the projected changes in NII at Risk and EVE that would occur upon an immediate change in interest rates based on independent analysis, but without giving effect to any steps that management might take to counteract that change as of the dates indicated: December 31, 2023 2022 Simulated Rate Changes Net Interest Income Sensitivity Economic Value of Equity Sensitivity Net Interest Income Sensitivity Economic Value of Equity Sensitivity +200 7.0 % (6.8) % 6.9 % (0.5) % +100 3.6 % (3.1) % 3.6 % 0.3 % -100 (4.3) % 1.8 % (4.6) % (1.5) % -200 (9.4) % — % (10.3) % (5.8) % On January 31, 2024, the FOMC kept the upper range of the Fed Funds Target Rate at 5.50% unchanged, a level which the Committee has maintained since July 26, 2023.
The model is updated annually and was last evaluated during the three months ended September 30, 2024. 66 The following table presents the projected changes in NII at Risk and EVE that would occur upon an immediate change in interest rates based on independent analysis, but without giving effect to any steps that management might take to counteract that change as of the dates indicated: December 31, 2024 2023 Simulated Rate Changes Net Interest Income Sensitivity Economic Value of Equity Sensitivity Net Interest Income Sensitivity Economic Value of Equity Sensitivity +200 9.5 % (4.1) % 7.0 % (6.8) % +100 4.7 % (1.9) % 3.6 % (3.1) % -100 (6.2) % (1.1) % (4.3) % 1.8 % -200 (12.8) % (4.5) % (9.4) % — % On December 18, 2024, the FOMC lowered the upper range of the Fed Funds Target Rate from 4.75% to 4.50%.
As part of the Company’s continuous evaluation and periodic enhancements to its NII and EVE calculations, the Company updated its model in the third quarter of 2023 to incorporate deposit repricing assumptions impacting both consumer and wholesale deposits, deposit behavior assumption related to its non-maturity deposits, and prepayment assumptions related to its loan portfolio.
The model incorporates deposit repricing assumptions impacting both consumer and wholesale deposits, deposit behavior assumption related to its non-maturity deposits, and prepayment assumptions related to its loan portfolio. The model modifications incorporated observed pricing and customer behavior in both rising and falling interest rate environments.
Removed
In the accompanying statement, the Committee added that “In considering any adjustments to the target range for the Federal Funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks.
Added
In the accompanying statement, they maintained their previous assessment that labor market conditions have generally eased while unemployment rate has moved up but remains low. They noted that inflation has made further progress towards the Committee’s 2 percent inflation objective but remain “somewhat elevated”.
Removed
The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent.” The Federal Reserve noted that it remains highly attentive to inflation risk. As of December 31, 2023, the Company’s net interest income sensitivity results exhibit an asset sensitive profile.
Added
They added that, “In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook.
Added
The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals.” As of December 31, 2024, the Company’s net interest income sensitivity results exhibit an asset sensitive profile.

Other PCB 10-K year-over-year comparisons