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Section 1: 8-K (8-K)

Document


 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Form 8-K
 
CURRENT REPORT
Pursuant to Section 13 OR 15(d)
of The Securities Exchange Act of 1934

Date of Report (Date of earliest event Reported): July 25, 2019
 
PCB BANCORP
(Exact name of registrant as specified in its charter)
 

California
(State or other jurisdiction of
incorporation)
 
001-38621
(Commission
File Number)
 
20-8856755
(I.R.S. Employer
Identification No.)
 
 
 
 
 
3701 Wilshire Boulevard, Suite 900
Los Angeles, California
(Address of principal offices)
 
 
 
90010
(Zip Code)
Registrant’s telephone number, including area code: (213) 210-2000
Not Applicable
(Former name or former address, if changed since last report)
 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. x





Item 2.02 Results of Operations and Financial Condition.
On July 25, 2019, PCB Bancorp, a California corporation (the “Company”), issued a press release concerning its unaudited results for the second quarter of 2019. A copy of the press release is attached as Exhibit 99.1 to this Current Report and is incorporated herein by reference.
The information in this report set forth under this Item 2.02 shall not be treated as “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except as expressly stated by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits.
99.1
Press Release of PCB Bancorp, issued July 25, 2019


2



EXHIBIT INDEX
Exhibit No.
 
Description
99.1
 


3



SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
PCB Bancorp
 
 
 
 
Date:
July 25, 2019
 
/s/ Timothy Chang
 
 
 
Timothy Chang
 
 
 
Executive Vice President and Chief Financial Officer



4
(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit

Exhibit 99.1


398893381_pcbbancorpofficiallogo.jpg
PCB Bancorp Reports Earnings of $6.6 million for Q2 2019
Los Angeles, California - July 25, 2019 - PCB Bancorp (the “Company”) (NASDAQ: PCB), the holding company of Pacific City Bank (the “Bank”), today reported net income of $6.6 million, or $0.40 per diluted common share for the second quarter of 2019, compared with $6.6 million, or $0.40 per diluted common share, for the previous quarter and $4.8 million, or $0.35 per diluted common share, for the year-ago quarter.
On July 1, 2019, the Company changed its corporate name to “PCB Bancorp” from “Pacific City Financial Corporation” to reflect the Company's goal to align the corporate name with the trading symbol of its common stock and simplify corporate communications while maintaining the Company's core branding.
Q2 2019 Financial Highlights
Net income totaled $6.6 million or $0.40 per diluted common share;
Total assets were $1.73 billion at June 30, 2019, an increase of $8.7 million, or 0.5%, from $1.72 billion at March 31, 2019, an increase of $29.5 million, or 1.7%, from $1.70 billion at December 31, 2018, and an increase of $107.3 million, or 6.6%, from $1.62 billion at June 30, 2018;
Loans held-for-investment, net of deferred costs (fees), were $1.40 billion at June 30, 2019, an increase of $52.4 million, or 3.9%, from $1.34 billion at March 31, 2019, an increase of $56.9 million, or 4.2%, from $1.34 billion at December 31, 2018, and an increase of $140.7 million, or 11.2%, from $1.25 billion at June 30, 2018;
Total deposits were $1.45 billion at June 30, 2019, a decrease of $1.2 million, or 0.1%, from $1.45 billion at March 31, 2019, but an increase of $2.8 million, or 0.2%, from $1.44 billion at December 31, 2018 and an increase of $19.3 million, or 1.4%, from $1.43 billion at June 30, 2018;
State and Brokered deposits were $117.5 million at June 30, 2019 compared to $157.5 million, $142.5 million and $152.5 million, respectively, at March 31, 2019, December 31, 2018 and June 30, 2018.
The Company repurchased 57,551 shares of its common stock totaling $974 thousand under the publicly announced $6.5 million share repurchase program; and
The Company declared an increased cash dividend of $0.06 per common share.
“We are pleased to report another strong quarterly financial performance highlighted by earnings of $6.6 million, or $0.40 per diluted common share,” stated Henry Kim, President and Chief Executive Officer. “In spite of the uncertain interest rate environment coupled with intense competition on deposits and credits, during the second quarter our held-for-investment loan balance increased $52.4 million, or 3.9%, and our retail deposit balance, excluding wholesale deposits, increased $38.8 million, or 3.0%. We maintained our net interest margin at 4.17% during the quarter and we are successfully carrying our initiative on reducing our asset sensitive balance sheet by increasing the percentage of fixed rate loans to 37.8% at June 30, 2019 compared with 34.6% at March 31, 2019.”

1


Financial Highlights (Unaudited)
 
 
Three Months Ended
 
Six Months Ended
($ in thousands, except per share data)
 
6/30/2019
 
3/31/2019
 
% Change
 
6/30/2018
 
% Change
 
6/30/2019
 
6/30/2018
 
% Change
Net income
 
$
6,601

 
$
6,564

 
0.6
 %
 
$
4,762

 
38.6
 %
 
$
13,165

 
$
11,026

 
19.4
 %
Diluted earnings per common share
 
$
0.40

 
$
0.40

 
 %
 
$
0.35

 
14.3
 %
 
$
0.81

 
$
0.81

 
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income
 
$
17,692

 
$
17,153

 
3.1
 %
 
$
15,882

 
11.4
 %
 
$
34,845

 
$
31,176

 
11.8
 %
Provision (reversal) for loan losses
 
394

 
(85
)
 
(563.5
)%
 
425

 
(7.3
)%
 
309

 
520

 
(40.6
)%
Noninterest income
 
3,054

 
2,409

 
26.8
 %
 
2,273

 
34.4
 %
 
5,463

 
5,635

 
(3.1
)%
Noninterest expense
 
10,984

 
10,289

 
6.8
 %
 
10,940

 
0.4
 %
 
21,273

 
20,571

 
3.4
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Return on average assets (1)
 
1.52
%
 
1.57
%
 
 
 
1.20
%
 
 
 
1.55
%
 
1.45
%
 
 
Return on average shareholders’ equity (1), (2)
 
12.01
%
 
12.43
%
 
 
 
12.74
%
 
 
 
12.22
%
 
15.07
%
 
 
Net interest margin (1)
 
4.17
%
 
4.22
%
 
 
 
4.08
%
 
 
 
4.19
%
 
4.20
%
 
 
Efficiency ratio (3)
 
52.95
%
 
52.60
%
 
 
 
60.26
%
 
 
 
52.78
%
 
55.88
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
($ in thousands, except per share data)
 
6/30/2019
 
3/31/2019
 
% Change
 
12/31/2018
 
% Change
 
6/30/2018
 
% Change
Total assets
 
$
1,726,486

 
$
1,717,774

 
0.5
 %
 
$
1,697,028

 
1.7
%
 
$
1,619,169

 
6.6
%
Net loans held-for-investment
 
1,382,229

 
1,330,035

 
3.9
 %
 
1,325,515

 
4.3
%
 
1,242,235

 
11.3
%
Total deposits
 
1,446,526

 
1,447,758

 
(0.1
)%
 
1,443,753

 
0.2
%
 
1,427,245

 
1.4
%
Book value per common share (2), (4)
 
$
13.98

 
$
13.57

 
3.0
 %
 
$
13.16

 
6.2
%
 
$
11.27

 
24.0
%
Tier 1 leverage ratio (consolidated)
 
12.74
%
 
12.83
%
 
 
 
12.60
%
 
 
 
9.58
%
 
 
Total shareholders’ equity to total assets (2)
 
12.94
%
 
12.64
%
 
 
 
12.39
%
 
 
 
9.35
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
Ratios are presented on an annualized basis.
(2)
The Company did not have any intangible equity components for the presented periods.
(3)
The ratios are calculated by dividing noninterest expense by the sum of net interest income and noninterest income.
(4)
The ratios are calculated by dividing total shareholdersequity by the number of outstanding common shares.
Result of Operations (Unaudited)
Net Interest Income and Net Interest Margin
The following table presents the components of net interest income for the periods indicated:
 
 
Three Months Ended
 
Six Months Ended
($ in thousands)
 
6/30/2019
 
3/31/2019
 
% Change
 
6/30/2018
 
% Change
 
6/30/2019
 
6/30/2018
 
% Change
Interest income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest and fees on loans
 
$
21,969

 
$
20,934

 
4.9
 %
 
$
18,610

 
18.0
 %
 
$
42,903

 
$
36,050

 
19.0
 %
Interest on investment securities
 
1,062

 
1,093

 
(2.8
)%
 
869

 
22.2
 %
 
2,155

 
1,717

 
25.5
 %
Interest and dividend on other interest-earning assets
 
999

 
925

 
8.0
 %
 
865

 
15.5
 %
 
1,924

 
1,205

 
59.7
 %
Total interest income
 
24,030

 
22,952

 
4.7
 %
 
20,344

 
18.1
 %
 
46,982

 
38,972

 
20.6
 %
Interest expense:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest on deposits
 
6,200

 
5,665

 
9.4
 %
 
4,292

 
44.5
 %
 
11,865

 
7,458

 
59.1
 %
Interest on borrowings
 
138

 
134

 
3.0
 %
 
170

 
(18.8
)%
 
272

 
338

 
(19.5
)%
Total interest expense
 
6,338

 
5,799

 
9.3
 %
 
4,462

 
42.0
 %
 
12,137

 
7,796

 
55.7
 %
Net interest income
 
$
17,692

 
$
17,153

 
3.1
 %
 
$
15,882

 
11.4
 %
 
$
34,845

 
$
31,176

 
11.8
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Overall, the increases in net interest income were primarily due to increases in average balance and average yield on loans, partially offset by increases in average balance and average cost of interest-bearing deposits.

2


The increases in interest and fees on loans were primarily due to increases in both average balance and average yield of loans. The increase in average yield on loans for the current quarter compared with the previous quarter was primarily due to an increase in discount accretion on retained portion of sold SBA loans due to a higher prepayment trend. The increases in average yield on loans for the three and six months ended June 30, 2019 compared with the same periods of 2018 were primarily due to new loan production with higher interest rates than the existing portfolio and Company’s high proportion of variable rate loans that had repriced along with the rising interest rate environment in 2018 and current higher market rate. The following table presents a composition of total loans by interest rate type accompanied with the weighted-average contractual rates as of the dates indicated:
 
 
6/30/2019
 
3/31/2019
 
12/31/2018
 
6/30/2018
 
 
% to Total Loans
 
Weighted-Average Contractual Rate
 
% to Total Loans
 
Weighted-Average Contractual Rate
 
% to Total Loans
 
Weighted-Average Contractual Rate
 
% to Total Loans
 
Weighted-Average Contractual Rate
Fixed rate loans
 
37.8
%
 
5.24
%
 
34.6
%
 
5.17
%
 
34.4
%
 
5.13
%
 
27.0
%
 
5.08
%
Variable rate loans
 
62.2
%
 
6.29
%
 
65.4
%
 
6.29
%
 
65.6
%
 
6.30
%
 
73.0
%
 
5.84
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The Company strategically increased the proportion of fixed rate loans during the current quarter as the interest rate environment had become stabilized and in order to better-position its balance sheet to match potential rate changes in the future.
The decrease in interest on investment securities for the current quarter compared with the previous quarter was primarily due to an increase in premium amortization on mortgage-backed securities from a higher prepayment trend in the current quarter. The increases in the three and six months ended June 30, 2019 compared with the same periods of 2018 were primarily due to increases in both average balance and average yield of investment securities. The increase in average yield on investment securities was primarily due to additional purchases of investment securities along with the rising interest rate environment in 2018 and current higher market rate. The Company purchased investment securities of $4.3 million and $36.4 million, respectively, during the current quarter and last 12-month period.
The increase in interest and dividend on other interest-earning assets for the current quarter compared with the previous quarter was primarily due to an increase in average balance, partially offset by a decrease in average yield on interest-bearing deposits in other financial institutions, as the Federal Reserve lowered its interest rate on excess reserve balance from 2.40% to 2.35% in May. The increase in the current quarter compared with the year-ago quarter was primarily due to an increase in average yield on interest-bearing deposits in other financial institutions in the current higher market rates, partially offset by a decrease in average balance. The increase for the six months ended June 30, 2019 compared with the same period of 2018 was primarily due to increases in both average balance and average yield.
The increases in total interest expense were primarily due to increases in average balance and average cost of interest-bearing deposits. The increase in average cost on interest-bearing deposits was primarily due to the rising interest rate environment in 2018 and current higher market rates, and high competition in the Company’s deposit target markets.
Provision (Reversal) for Loan Losses
Provision (reversal) for loan losses was $394 thousand for the current quarter compared with $(85) thousand for the previous quarter and $425 thousand for the year-ago quarter. For the six months ended June 30, 2019 and 2018, the Company recognized provision for loan losses of $309 thousand and $520 thousand, respectively. The Company recorded net charge-offs of $203 thousand for the current quarter compared with net recoveries of $55 thousand for the previous quarter and net charge-offs of $175 thousand for the year-ago quarter. For the six months ended June 30, 2019 and 2018, the Company recorded net charge-offs of $148 thousand and $123 thousand, respectively.
Allowance for loan losses to total loans held-for-investment ratio was 0.96% at June 30, 2019, 0.98% at March 31, 2019, 0.98% at December 31, 2018, and 1.01% at June 30, 2018. The decrease in allowance for loan losses to total loans held-for-investment ratio was primarily due to a decrease in historical loss rates and changes in qualitative adjustment factors.

3


Noninterest Income
The following table presents the components of noninterest income for the periods indicated:
 
 
Three Months Ended
 
Six Months Ended
($ in thousands)
 
6/30/2019
 
3/31/2019
 
% Change
 
6/30/2018
 
% Change
 
6/30/2019
 
6/30/2018
 
% Change
Gain on sale of SBA loans
 
$
1,884

 
$
1,104

 
70.7
 %
 
$
863

 
118.3
 %
 
$
2,988

 
$
2,912

 
2.6
 %
Gain on sale of residential property loans
 
7

 
16

 
(56.3
)%
 
170

 
(95.9
)%
 
23

 
192

 
(88.0
)%
Gain on sale of other loans
 

 

 
 %
 

 
 %
 

 
45

 
(100.0
)%
Total gain on sale of loans
 
1,891

 
1,120

 
68.8
 %
 
1,033

 
83.1
 %
 
3,011

 
3,149

 
(4.4
)%
Service charges and fees on deposits
 
368

 
364

 
1.1
 %
 
376

 
(2.1
)%
 
732

 
725

 
1.0
 %
Loan servicing income
 
492

 
631

 
(22.0
)%
 
585

 
(15.9
)%
 
1,123

 
1,211

 
(7.3
)%
Other income
 
303

 
294

 
3.1
 %
 
279

 
8.6
 %
 
597

 
550

 
8.5
 %
Total noninterest income
 
$
3,054

 
$
2,409

 
26.8
 %
 
$
2,273

 
34.4
 %
 
$
5,463

 
$
5,635

 
(3.1
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The increases in gain on sale of SBA loans for the three and six months ended June 30, 2019 compared with the same periods of 2018 were primarily due to an increase in sales volume, partially offset by a decrease in premium rates in the secondary market. The increase for the current quarter compared with the previous quarter was primarily due to increases in both sales volume and premium rates. The Company sold the guaranteed portion of SBA loans of $29.2 million, $21.2 million and $12.6 million, respectively, for the three months ended June 30, 2019, March 31, 2019 and June 30, 2018, and $50.4 million and $42.5 million, respectively, for the six months ended June 30, 2019 and 2018. The Company also sold residential property loans of $375 thousand, $2.4 million and $7.5 million, respectively, for the three months ended June 30, 2019, March 31, 2019 and June 30, 2018, and $2.8 million and $8.7 million, respectively, for the six months ended June 30, 2019 and 2018, as well as other real estate loans of $1.1 million for the six months ended June 30, 2018.
The decreases in loan servicing income for the three and six months ended June 30, 2019 compared with the same periods of 2018 were primarily due to a lower balance of underlying loans being serviced. Underlying loans being serviced totaled $502.1 million and $540.0 million, respectively, at June 30, 2019 and 2018. The decrease for the current quarter compared with the previous quarter was primarily due to an increase in servicing asset amortization from a higher prepayment trend.
Noninterest Expense
The following table presents the components of noninterest expense for the periods indicated:
 
 
Three Months Ended
 
Six Months Ended
($ in thousands)
 
6/30/2019
 
3/31/2019
 
% Change
 
6/30/2018
 
% Change
 
6/30/2019
 
6/30/2018
 
% Change
Salaries and employee benefits
 
$
6,600

 
$
6,622

 
(0.3
)%
 
$
6,153

 
7.3
 %
 
$
13,222

 
$
12,399

 
6.6
 %
Occupancy and equipment
 
1,407

 
1,313

 
7.2
 %
 
1,246

 
12.9
 %
 
2,720

 
2,390

 
13.8
 %
Professional fees
 
686

 
758

 
(9.5
)%
 
988

 
(30.6
)%
 
1,444

 
1,511

 
(4.4
)%
Marketing and business promotion
 
529

 
228

 
132.0
 %
 
541

 
(2.2
)%
 
757

 
929

 
(18.5
)%
Data processing
 
338

 
318

 
6.3
 %
 
295

 
14.6
 %
 
656

 
597

 
9.9
 %
Director fees and expenses
 
185

 
189

 
(2.1
)%
 
211

 
(12.3
)%
 
374

 
441

 
(15.2
)%
Regulatory assessments
 
309

 
116

 
166.4
 %
 
145

 
113.1
 %
 
425

 
277

 
53.4
 %
Other expenses
 
930

 
745

 
24.8
 %
 
1,361

 
(31.7
)%
 
1,675

 
2,027

 
(17.4
)%
Total noninterest expense
 
$
10,984

 
$
10,289

 
6.8
 %
 
$
10,940

 
0.4
 %
 
$
21,273

 
$
20,571

 
3.4
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Overall, the increases in salaries and employee benefits were primarily due to an increase in number of employees for supporting the expansion of the Company's infrastructure for being a public company and an enhancement of the controls and processes on Bank Secrecy Act and Anti-Money Laundering (“BSA/AML”) compliance. Comparing the current quarter with the previous quarter, the decrease was primarily due to a decrease in vacation accrual and an increase of deferred loan origination cost, which reduces salaries and benefits at origination, for a higher loan production during the current quarter, partially offset by the increase in number of employees. Comparing the three and six months ended June 30, 2019 with same periods of 2018, the increases were partially offset by decreases in bonus and vacation accruals, as well as a retirement bonus paid to the former chief executive officer of $192 thousand in the three months ended March 31, 2018.
The increases in occupancy and equipment was primarily due to increases in depreciation, occupancy lease and equipment maintenance expense. The Company opened a loan production office in Artesia, California in December 2018.

4


The decrease in professional fees for the current quarter compared with the previous quarter was primarily due to increased professional fees for enhancement of the Bank's controls and processes on BSA/AML compliance programs during the previous quarter, partially offset by an increase in legal fees for the Annual Meeting of Shareholders and the corporate name change. The decreases for the three and six months ended June 30, 2019 compared with the same periods of 2018 were primarily due to expenses related to the initial public offering (“IPO”) in 2018, partially offset by increases in audit fees for being a public company and expenses related to BSA/AML enhancements.
The increase in market and business promotion for the current quarter compared with the previous quarter was primarily due to an increase in advertising expense.
The increases in regulatory assessments for the three and six months ended June 30, 2019 were due to an increase in assessment rate and an adjustment made for the assessment rate increase for the previous quarter. The increase in assessment rate was primarily due to the recent consent order relating to the Bank’s compliance with BSA/AML.
The increase in other expenses for the current quarter compared with the previous quarter was primarily due to increases in other loan related legal and office expenses. The decrease for the three and six months ended June 30, 2019 compared with the same periods of 2018 was primarily due to a reimbursement paid to the SBA of $577 thousand during the year-ago quarter, partially offset by increases in other loan related legal and office expenses.
Balance Sheet (Unaudited)
Loans
The following table presents a composition of total loans (includes both loans held-for-sale and loans held-for-investment, net of deferred costs (fees)) as of the dates indicated:
($ in thousands)
 
6/30/2019
 
3/31/2019
 
% Change
 
12/31/2018
 
% Change
 
6/30/2018
 
% Change
Real estate loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial property
 
$
748,526

 
$
715,488

 
4.6
 %
 
$
709,409

 
5.5
 %
 
$
673,871

 
11.1
 %
Residential property
 
240,630

 
237,115

 
1.5
 %
 
233,816

 
2.9
 %
 
197,229

 
22.0
 %
SBA property
 
128,208

 
124,751

 
2.8
 %
 
120,939

 
6.0
 %
 
134,531

 
(4.7
)%
Construction
 
22,455

 
19,983

 
12.4
 %
 
27,323

 
(17.8
)%
 
28,578

 
(21.4
)%
Commercial and industrial loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial term
 
105,651

 
103,866

 
1.7
 %
 
102,133

 
3.4
 %
 
80,730

 
30.9
 %
Commercial lines of credit
 
85,197

 
77,022

 
10.6
 %
 
80,473

 
5.9
 %
 
72,805

 
17.0
 %
SBA commercial term
 
24,762

 
26,347

 
(6.0
)%
 
27,147

 
(8.8
)%
 
28,464

 
(13.0
)%
Trade finance
 
16,334

 
14,046

 
16.3
 %
 
11,521

 
41.8
 %
 
7,741

 
111.0
 %
Other consumer loans
 
23,794

 
24,554

 
(3.1
)%
 
25,921

 
(8.2
)%
 
30,907

 
(23.0
)%
Loans held-for-investment
 
1,395,557

 
1,343,172

 
3.9
 %
 
1,338,682

 
4.2
 %
 
1,254,856

 
11.2
 %
Loans held-for-sale
 
440

 
3,915

 
(88.8
)%
 
5,781

 
(92.4
)%
 
20,331

 
(97.8
)%
Total loans
 
$
1,395,997

 
$
1,347,087

 
3.6
 %
 
$
1,344,463

 
3.8
 %
 
$
1,275,187

 
9.5
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The increase in loans held-for-investment for the current quarter was primarily due to new funding of $109.2 million and advances on lines of credit of $30.5 million, partially offset by pay-downs and pay-offs of $87.1 million. The increase for the six months ended June 30, 2019 was primarily due to new funds of $182.4 million and advances on lines of credit of $53.9 million, partially offset by pay-downs and pay-offs of $178.9 million.
The decrease in loans held-for-sale for the current quarter was primarily due to sales of $29.5 million, partially offset by new funding of $26.1 million. The decrease in loans held-for-sale for the six months ended June 30, 2019 was primarily due to sales of $53.1 million, partially offset by new funding of $47.5 million and a loan transferred from loans held-for-investment of $303 thousand.

5


Credit Quality
The following table presents compositions of non-performing loans and non-performing assets as of the dates indicated:
($ in thousands)
 
6/30/2019
 
3/31/2019
 
% Change
 
12/31/2018
 
% Change
 
6/30/2018
 
% Change
Nonaccrual loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial property
 
$

 
$

 
 %
 
$

 
 %
 
$
240

 
(100.0
)%
Residential property
 

 

 
 %
 
302

 
(100.0
)%
 

 
 %
SBA property
 
1,372

 
1,011

 
35.7
 %
 
540

 
154.1
 %
 
1,203

 
14.0
 %
Commercial and industrial loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial lines of credit
 

 

 
 %
 

 
 %
 
39

 
(100.0
)%
SBA commercial term
 
16

 
186

 
(91.4
)%
 
203

 
(92.1
)%
 
519

 
(96.9
)%
Consumer loans
 
41

 
74

 
(44.6
)%
 
16

 
156.3
 %
 
25

 
64.0
 %
Total nonaccrual loans held-for-investment
 
1,429

 
1,271

 
12.4
 %
 
1,061

 
34.7
 %
 
2,026

 
(29.5
)%
Loans past due 90 days or more and still accruing
 

 

 
 %
 

 
 %
 

 
 %
Non-performing loans (“NPLs”)
 
1,429

 
1,271

 
12.4
 %
 
1,061

 
34.7
 %
 
2,026

 
(29.5
)%
Other real estate owned (“OREO”)
 
395

 
395

 
 %
 

 
 %
 

 
 %
Non-performing assets (“NPAs”)
 
$
1,824

 
$
1,666

 
9.5
 %
 
$
1,061

 
71.9
 %
 
$
2,026

 
(10.0
)%
Loans past due and still accruing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans past due 30 to 59 days and still accruing
 
$
804

 
$
950

 
(15.4
)%
 
$
368

 
118.5
 %
 
$
145

 
454.5
 %
Loans past due 60 to 89 days and still accruing
 
5

 
12

 
(58.3
)%
 
9

 
(44.4
)%
 
185

 
(97.3
)%
Loans past due 90 days or more and still accruing
 

 

 
 %
 

 
 %
 

 
 %
Total loans past due and still accruing
 
$
809

 
$
962

 
(15.9
)%
 
377

 
114.6
 %
 
$
330

 
145.2
 %
Troubled debt restructurings (“TDRs”):
 
 
 
 
 
 
 
 
 
 
 
 
 
Accruing TDRs
 
$
391

 
$
412

 
(5.1
)%
 
$
432

 
(9.5
)%
 
$
453

 
(13.7
)%
Nonaccrual TDRs
 
131

 
127

 
3.1
 %
 
131

 
 %
 
548

 
(76.1
)%
Total TDRs
 
$
522

 
$
539

 
(3.2
)%
 
$
563

 
(7.3
)%
 
$
1,001

 
(47.9
)%
NPLs to loans held-for-investment
 
0.10
%
 
0.09
%
 
 
 
0.08
%
 
 
 
0.16
%
 
 
NPAs to total assets
 
0.11
%
 
0.10
%
 
 
 
0.06
%
 
 
 
0.13
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Classified Assets
Classified loans were $7.5 million at June 30, 2019, an increase of $435 thousand, or 6.2%, from $7.0 million at March 31, 2019, an increase of $1.2 million, or 20.0%, from $6.2 million at December 31, 2018, and an increase of $3.2 million, or 72.7%, from $4.3 million at June 30, 2018. Classified assets, which consist of classified loans and OREO, and the classified assets to total assets ratios were $7.9 million and 0.46%, respectively, at June 30, 2019, $7.4 million and 0.43%, respectively, at March 31, 2019, and $4.3 million and 0.27%, respectively, at June 30, 2018.
Investment Securities
Total investment securities were $165.2 million at June 30, 2019, a decrease of $2.4 million, or 1.5%, from $167.7 million at March 31, 2019, a decrease of $3.5 million, or 2.1%, from $168.8 million at December 31, 2018, but an increase of $12.7 million, or 8.3%, from $152.5 million at June 30, 2018. The decrease for the current quarter was primarily due to principal pay-downs and calls of $8.1 million and net premium amortization of $218 thousand, partially offset by purchases of $4.3 million and an increase in fair value of securities available-for-sale of $1.6 million. The decrease for the six months ended June 30, 2019 was primarily due to principal pay-downs and calls of $14.3 million and net premium amortization of $407 thousand, partially offset by purchases of $8.4 million and an increase in fair value of securities available-for-sale of $2.8 million.

6


Deposits
The following table presents deposit mix as of the dates indicated:
 
 
6/30/2019
 
3/31/2019
 
12/31/2018
 
6/30/2018
($ in thousands)
 
Amount
 
% to Total
 
Amount
 
% to Total
 
Amount
 
% to Total
 
Amount
 
% to Total
Noninterest-bearing demand deposits
 
$
339,603

 
23.5
%
 
$
330,645

 
22.8
%
 
$
329,270

 
22.8
%
 
$
347,342

 
24.3
%
Interest-bearing deposits:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NOW
 
12,638

 
0.9
%
 
13,045

 
0.9
%
 
24,683

 
1.7
%
 
13,812

 
1.0
%
Money market accounts
 
311,865

 
21.6
%
 
272,085

 
18.8
%
 
280,733

 
19.4
%
 
259,098

 
18.2
%
Savings
 
6,844

 
0.5
%
 
9,510

 
0.7
%
 
8,194

 
0.6
%
 
9,886

 
0.7
%
Time deposits of $250,000 or less
 
453,286

 
31.2
%
 
455,270

 
31.4
%
 
477,134

 
33.0
%
 
492,053

 
34.4
%
Time deposits of more than $250,000
 
204,780

 
14.2
%
 
209,693

 
14.5
%
 
181,239

 
12.6
%
 
152,554

 
10.7
%
State and brokered deposits
 
117,510

 
8.1
%
 
157,510

 
10.9
%
 
142,500

 
9.9
%
 
152,500

 
10.7
%
Total interest-bearing deposits
 
1,106,923

 
76.5
%
 
1,117,113

 
77.2
%
 
1,114,483

 
77.2
%
 
1,079,903

 
75.7
%
Total deposits
 
$
1,446,526

 
100.0
%
 
$
1,447,758

 
100.0
%
 
$
1,443,753

 
100.0
%
 
$
1,427,245

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The decrease for the current quarter was primarily due to closed accounts of $99.2 million and net balance decreases of $1.3 million on existing accounts, partially offset by new accounts of $96.6 million. The increase for the six months ended June 30, 2019 was primarily due to new accounts of $229.7 million, partially offset by closed accounts of $194.6 million and net balance decreases of $15.8 million on existing accounts. In order to reduce the reliance on wholesale deposits, the Company reduced state and brokered deposits by $40.0 million, or 34.0%, during the current quarter.
Operating Lease Assets and Liabilities
On January 1, 2019, the Company adopted Accounting Standard Update (“ASU”) 2016-02, “Leases (Topic 842),” and all subsequent ASUs that are related to Topic 842. The Company adopted this ASU using the optional transition method with a cumulative effect adjustment to retained earnings without restating prior financial statements for comparable amounts. As a result, the Company recognized right-of-use assets and liabilities of $9.6 million and $10.6 million, respectively, with a cumulative effect adjustment of $53 thousand to retained earnings at the date of adoption.
Shareholders’ Equity
Shareholders’ equity was $223.4 million at June 30, 2019, an increase of $6.2 million, or 2.8%, from $217.2 million at March 31, 2019, an increase of $13.1 million, or 6.2%, from $210.3 million at December 31, 2018, and an increase of $72.0 million, or 47.5%, from $151.4 million at June 30, 2018. The increases for the three and six months ended June 30, 2019 were primarily due to retention of earnings and increases in other comprehensive income, share-based compensation expense and stock options exercised, partially offset by repurchase of common stock and cash dividends paid on common stock. The year-over-year increase was primarily due to the IPO completed in August 2018 and retention of earnings, partially offset by repurchase of common stock and cash dividends paid on common stock.
On March 28, 2019, the Company’s Board of Directors approved the repurchase of up to $6.5 million of the Company’s common stock through March 27, 2020. During the current quarter, the Company repurchased 57,551 shares of its common stock totaling $974 thousand.

7


Capital Ratios
Based on changes to the Federal Reserve’s definition of a “Small Bank Holding Company” that increased the threshold to $3 billion in assets in August 2018, the Company is not currently subject to separate minimum capital measurements. At such time as the Company reaches the $3 billion asset level, it will again be subject to capital measurements independent of the Bank. For comparison purposes, the Company’s ratios are included in following discussion. The following table presents capital ratios for the Company and the Bank as of dates indicated:
 
 
6/30/2019
 
3/31/2019
 
12/31/2018
 
6/30/2018
PCB Bancorp
 
 
 
 
 
 
 
 
Common tier 1 capital (to risk-weighted assets)
 
16.20
%
 
16.52
%
 
16.28
%
 
12.43
%
Total capital (to risk-weighted assets)
 
17.18
%
 
17.53
%
 
17.31
%
 
13.46
%
Tier 1 capital (to risk-weighted assets)
 
16.20
%
 
16.52
%
 
16.28
%
 
12.43
%
Tier 1 capital (to average assets)
 
12.74
%
 
12.83
%
 
12.60
%
 
9.58
%
Pacific City Bank
 
 
 
 
 
 
 
 
Common tier 1 capital (to risk-weighted assets)
 
16.07
%
 
16.41
%
 
16.19
%
 
12.37
%
Total capital (to risk-weighted assets)
 
17.05
%
 
17.42
%
 
17.21
%
 
13.40
%
Tier 1 capital (to risk-weighted assets)
 
16.07
%
 
16.41
%
 
16.19
%
 
12.37
%
Tier 1 capital (to average assets)
 
12.64
%
 
12.74
%
 
12.53
%
 
9.53
%
 
 
 
 
 
 
 
 
 
About PCB Bancorp
PCB Bancorp, formerly known as Pacific City Financial Corporation, is the bank holding company for Pacific City Bank, a California state chartered bank, offering a full suite of commercial banking services to small to medium-sized businesses, individuals and professionals, primarily in Southern California, and predominantly in Korean-American and other minority communities.
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections and statements of our beliefs concerning future events, business plans, objectives, expected operating results and the assumptions upon which those statements are based. Forward-looking statements include without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and are typically identified with words such as ‘‘may,’’ “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “aim,” “intend,” “plan,” or words or phases of similar meaning. We caution that the forward-looking statements are based largely on our expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond our control. These and other important factors are detailed in various securities law filings made periodically by the Company, copies of which are available from the Company without charge. Actual results, performance or achievements could differ materially from those contemplated, expressed, or implied by the forward-looking statements. Any forward-looking statements presented herein are made only as of the date of this press release, and we do not undertake any obligation to update or revise any forward-looking statements to reflect changes in assumptions, the occurrence of unanticipated events, or otherwise, except as required by law.
Contact:
Timothy Chang
Executive Vice President & Chief Financial Officer
213-210-2000

8


PCB Bancorp and Subsidiary
Consolidated Balance Sheets (Unaudited)
($ in thousands, except share and per share data)
 
 
6/30/2019
 
3/31/2019
 
% Change
 
12/31/2018
 
% Change
 
6/30/2018
 
% Change
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and due from banks
 
$
19,080

 
$
22,106

 
(13.7
)%
 
$
24,121

 
(20.9
)%
 
$
33,800

 
(43.6
)%
Interest-bearing deposits in financial institutions
 
114,205

 
151,481

 
(24.6
)%
 
138,152

 
(17.3
)%
 
134,846

 
(15.3
)%
Total cash and cash equivalents
 
133,285

 
173,587

 
(23.2
)%
 
162,273

 
(17.9
)%
 
168,646

 
(21.0
)%
Securities available-for-sale, at fair value
 
142,539

 
144,353

 
(1.3
)%
 
146,991

 
(3.0
)%
 
132,106

 
7.9
 %
Securities held-to-maturity
 
22,685

 
23,311

 
(2.7
)%
 
21,760

 
4.3
 %
 
20,390

 
11.3
 %
Total investment securities
 
165,224

 
167,664

 
(1.5
)%
 
168,751

 
(2.1
)%
 
152,496

 
8.3
 %
Loans held-for-sale
 
440

 
3,915

 
(88.8
)%
 
5,781

 
(92.4
)%
 
20,331

 
(97.8
)%
Loans held-for-investment, net of deferred loan costs (fees)
 
1,395,557

 
1,343,172

 
3.9
 %
 
1,338,682

 
4.2
 %
 
1,254,856

 
11.2
 %
Allowance for loan losses
 
(13,328
)
 
(13,137
)
 
1.5
 %
 
(13,167
)
 
1.2
 %
 
(12,621
)
 
5.6
 %
Net loans held-for-investment
 
1,382,229

 
1,330,035

 
3.9
 %
 
1,325,515

 
4.3
 %
 
1,242,235

 
11.3
 %
Premises and equipment, net
 
4,334

 
4,259

 
1.8
 %
 
4,588

 
(5.5
)%
 
4,892

 
(11.4
)%
Federal Home Loan Bank and other bank stock
 
8,345

 
7,433

 
12.3
 %
 
7,433

 
12.3
 %
 
7,433

 
12.3
 %
Other real estate owned, net
 
395

 
395

 
 %
 

 
 %
 

 
 %
Deferred tax assets, net
 
3,241

 
3,251

 
(0.3
)%
 
3,377

 
(4.0
)%
 
4,360

 
(25.7
)%
Servicing assets
 
7,230

 
7,485

 
(3.4
)%
 
7,666

 
(5.7
)%
 
8,390

 
(13.8
)%
Operating lease assets
 
10,105

 
9,132

 
10.7
 %
 

 
 %
 

 
 %
Accrued interest receivable and other assets
 
11,658

 
10,618

 
9.8
 %
 
11,644

 
0.1
 %
 
10,386

 
12.2
 %
Total assets
 
$
1,726,486

 
$
1,717,774

 
0.5
 %
 
$
1,697,028

 
1.7
 %
 
$
1,619,169

 
6.6
 %
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest-bearing demand
 
$
339,603

 
$
330,645

 
2.7
 %
 
$
329,270

 
3.1
 %
 
$
347,342

 
(2.2
)%
Savings, NOW and money market accounts
 
331,357

 
294,650

 
12.5
 %
 
313,610

 
5.7
 %
 
282,796

 
17.2
 %
Time deposits of $250,000 or less
 
480,786

 
492,770

 
(2.4
)%
 
519,634

 
(7.5
)%
 
544,553

 
(11.7
)%
Time deposits of more than $250,000
 
294,780

 
329,693

 
(10.6
)%
 
281,239

 
4.8
 %
 
252,554

 
16.7
 %
Total deposits
 
1,446,526

 
1,447,758

 
(0.1
)%
 
1,443,753

 
0.2
 %
 
1,427,245

 
1.4
 %
Federal Home Loan Bank advances
 
35,000

 
30,000

 
16.7
 %
 
30,000

 
16.7
 %
 
30,000

 
16.7
 %
Operating lease liabilities
 
11,131

 
10,133

 
9.8
 %
 

 
 %
 

 
 %
Accrued interest payable and other liabilities
 
10,429

 
12,672

 
(17.7
)%
 
12,979

 
(19.6
)%
 
10,493

 
(0.6
)%
Total liabilities
 
1,503,086

 
1,500,563

 
0.2
 %
 
1,486,732

 
1.1
 %
 
1,467,738

 
2.4
 %
Commitments and contingent liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Shareholders’ equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock
 
170,769

 
171,407

 
(0.4
)%
 
171,067

 
(0.2
)%
 
125,579

 
36.0
 %
Additional paid-in capital
 
3,366

 
3,336

 
0.9
 %
 
3,299

 
2.0
 %
 
3,206

 
5.0
 %
Retained earnings
 
48,927

 
43,288

 
13.0
 %
 
37,577

 
30.2
 %
 
25,258

 
93.7
 %
Accumulated other comprehensive loss, net
 
338

 
(820
)
 
(141.2
)%
 
(1,647
)
 
(120.5
)%
 
(2,612
)
 
(112.9
)%
Total shareholders’ equity
 
223,400

 
217,211

 
2.8
 %
 
210,296

 
6.2
 %
 
151,431

 
47.5
 %
Total liabilities and shareholders’ equity
 
$
1,726,486

 
$
1,717,774

 
0.5
 %
 
$
1,697,028

 
1.7
 %
 
$
1,619,169

 
6.6
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Outstanding common shares
 
15,980,655

 
16,011,151

 
 
 
15,977,754

 
 
 
13,435,214

 
 
Book value per common share (1)
 
$
13.98

 
$
13.57

 
 
 
$
13.16

 
 
 
$
11.27

 
 
Total loan to total deposit ratio
 
96.51
%
 
93.05
%
 
 
 
93.12
%
 
 
 
89.35
%
 
 
Noninterest-bearing deposits to total deposits
 
23.48
%
 
22.84
%
 
 
 
22.81
%
 
 
 
24.34
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(1)
The ratios are calculated by dividing total shareholders equity by the number of outstanding common shares. The Company did not have any intangible equity components for the presented periods.

9


PCB Bancorp and Subsidiary
Consolidated Statements of Income (Unaudited)
($ in thousands, except share and per share data)
 
Three Months Ended
 
Six Months Ended
 
6/30/2019
 
3/31/2019
 
% Change
 
6/30/2018
 
% Change
 
6/30/2019
 
6/30/2018
 
% Change
Interest income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest and fees on loans
$
21,969

 
$
20,934

 
4.9
 %
 
$
18,610

 
18.0
 %
 
$
42,903

 
$
36,050

 
19.0
 %
Interest on investment securities
1,062

 
1,093

 
(2.8
)%
 
869

 
22.2
 %
 
2,155

 
1,717

 
25.5
 %
Interest and dividend on other interest-earning assets
999

 
925

 
8.0
 %
 
865

 
15.5
 %
 
1,924

 
1,205

 
59.7
 %
Total interest income
24,030

 
22,952

 
4.7
 %
 
20,344

 
18.1
 %
 
46,982

 
38,972

 
20.6
 %
Interest expense:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest on deposits
6,200

 
5,665

 
9.4
 %
 
4,292

 
44.5
 %
 
11,865

 
7,458

 
59.1
 %
Interest on other borrowings
138

 
134

 
3.0
 %
 
170

 
(18.8
)%
 
272

 
338

 
(19.5
)%
Total interest expense
6,338

 
5,799

 
9.3
 %
 
4,462

 
42.0
 %
 
12,137

 
7,796

 
55.7
 %
Net interest income
17,692

 
17,153

 
3.1
 %
 
15,882

 
11.4
 %
 
34,845

 
31,176

 
11.8
 %
Provision (reversal) for loan losses
394

 
(85
)
 
(563.5
)%
 
425

 
(7.3
)%
 
309

 
520

 
(40.6
)%
Net interest income after provision for loan losses
17,298

 
17,238

 
0.3
 %
 
15,457

 
11.9
 %
 
34,536

 
30,656

 
12.7
 %
Noninterest income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gain on sale of SBA loans
1,884

 
1,104

 
70.7
 %
 
863

 
118.3
 %
 
2,988

 
2,912

 
2.6
 %
Gain on sale of residential property loans
7

 
16

 
(56.3
)%
 
170

 
(95.9
)%
 
23