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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): October 24, 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))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common stock, no par value
PCB
Nasdaq Global Select Market
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 October 24, 2019, PCB Bancorp, a California corporation (the “Company”), issued a press release concerning its unaudited results for the third 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 October 24, 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:
October 24, 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


400640139_pcbbancorpofficiallogoa.jpg
PCB Bancorp Reports Record Earnings of $6.8 million for Q3 2019
Los Angeles, California - October 24, 2019 - PCB Bancorp (the “Company”) (NASDAQ: PCB), the holding company of Pacific City Bank (the “Bank”), today reported net income of $6.8 million, or $0.42 per diluted common share for the third quarter of 2019, compared with $6.6 million, or $0.40 per diluted common share, for the previous quarter and $6.5 million, or $0.44 per diluted common share, for the year-ago quarter.
Q3 2019 Financial Highlights
Net income totaled $6.8 million or $0.42 per diluted common share;
Total assets were $1.70 billion at September 30, 2019, a decrease of $27.0 million, or 1.6%, from $1.73 billion at June 30, 2019, an increase of $2.4 million, or 0.1%, from $1.70 billion at December 31, 2018, and an increase of $35.7 million, or 2.1%, from $1.66 billion at September 30, 2018;
Loans held-for-investment, net of deferred costs (fees), were $1.39 billion at September 30, 2019, a decrease of $5.7 million, or 0.4%, from $1.40 billion at June 30, 2019, an increase of $51.1 million, or 3.8%, from $1.34 billion at December 31, 2018, and an increase of $80.7 million, or 6.2%, from $1.31 billion at September 30, 2018;
Total deposits were $1.43 billion at September 30, 2019, a decrease of $14.3 million, or 1.0%, from $1.45 billion at June 30, 2019, a decrease of $11.5 million, or 0.8%, from $1.44 billion at December 31, 2018 and an increase of $12.7 million, or 0.9%, from $1.42 billion at September 30, 2018;
The Company repurchased 374,069 shares of its common stock totaling $6.1 million under the publicly announced $6.5 million share repurchase program through September 30, 2019; and
The Company declared a cash dividend of $0.06 per common share.
“We are pleased to report another strong quarterly financial performance for the third quarter of 2019 highlighted by $6.8 million net income, or $0.42 per diluted common share,” stated Henry Kim, President and Chief Executive Officer. “In spite of the challenging environment of declining interest rates, we maintained a net interest margin of 4.11% during the third quarter of 2019. Year-to-date, we maintained a net interest margin of 4.16%.”


1


Financial Highlights (Unaudited)
 
 
Three Months Ended
 
Nine Months Ended
($ in thousands, except per share data)
 
9/30/2019
 
6/30/2019
 
% Change
 
9/30/2018
 
% Change
 
9/30/2019
 
9/30/2018
 
% Change
Net income
 
$
6,785

 
$
6,601

 
2.8
 %
 
$
6,543

 
3.7
 %
 
$
19,950

 
$
17,569

 
13.6
 %
Diluted earnings per common share
 
$
0.42

 
$
0.40

 
5.0
 %
 
$
0.44

 
(4.5
)%
 
$
1.23

 
$
1.25

 
(1.6
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net interest income
 
$
17,529

 
$
17,692

 
(0.9
)%
 
$
16,716

 
4.9
 %
 
$
52,374

 
$
47,892

 
9.4
 %
Provision (reversal) for loan losses
 
(102
)
 
394

 
(125.9
)%
 
417

 
(124.5
)%
 
207

 
937

 
(77.9
)%
Noninterest income
 
2,802

 
3,054

 
(8.3
)%
 
2,580

 
8.6
 %
 
8,265

 
8,215

 
0.6
 %
Noninterest expense
 
10,777

 
10,984

 
(1.9
)%
 
9,520

 
13.2
 %
 
32,050

 
30,091

 
6.5
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Return on average assets (1)
 
1.55
%
 
1.52
%
 
 
 
1.60
%
 
 
 
1.55
%
 
1.50
%
 
 
Return on average shareholders’ equity (1), (2)
 
12.02
%
 
12.01
%
 
 
 
14.50
%
 
 
 
12.15
%
 
14.85
%
 
 
Net interest margin (1)
 
4.11
%
 
4.17
%
 
 
 
4.17
%
 
 
 
4.16
%
 
4.19
%
 
 
Efficiency ratio (3)
 
53.01
%
 
52.95
%
 
 
 
49.34
%
 
 
 
52.85
%
 
53.63
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
($ in thousands, except per share data)
 
9/30/2019
 
6/30/2019
 
% Change
 
12/31/2018
 
% Change
 
9/30/2018
 
% Change
Total assets
 
$
1,699,446

 
$
1,726,486

 
(1.6
)%
 
$
1,697,028

 
0.1
 %
 
$
1,663,787

 
2.1
%
Net loans held-for-investment
 
1,376,736

 
1,382,229

 
(0.4
)%
 
1,325,515

 
3.9
 %
 
1,296,027

 
6.2
%
Total deposits
 
1,432,262

 
1,446,526

 
(1.0
)%
 
1,443,753

 
(0.8
)%
 
1,419,526

 
0.9
%
Book value per common share (2), (4)
 
$
14.30

 
$
13.98

 
2.3
 %
 
$
13.16

 
8.7
 %
 
$
12.71

 
12.5
%
Tier 1 leverage ratio (consolidated)
 
12.87
%
 
12.74
%
 
 
 
12.60
%
 
 
 
12.59
%
 
 
Total shareholders’ equity to total assets (2)
 
13.22
%
 
12.94
%
 
 
 
12.39
%
 
 
 
12.20
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(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.

2


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
 
Nine Months Ended
($ in thousands)
 
9/30/2019
 
6/30/2019
 
% Change
 
9/30/2018
 
% Change
 
9/30/2019
 
9/30/2018
 
% Change
Interest income/expense on:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans
 
$
21,876

 
$
21,969

 
(0.4
)%
 
$
19,699

 
11.1
 %
 
$
64,779

 
$
55,749

 
16.2
 %
Investment securities
 
978

 
1,062

 
(7.9
)%
 
931

 
5.0
 %
 
3,133

 
2,648

 
18.3
 %
Other interest-earning assets
 
833

 
999

 
(16.6
)%
 
866

 
(3.8
)%
 
2,757

 
2,071

 
33.1
 %
Total interest-earning assets
 
23,687

 
24,030

 
(1.4
)%
 
21,496

 
10.2
 %
 
70,669

 
60,468

 
16.9
 %
Interest-bearing deposits
 
6,060

 
6,200

 
(2.3
)%
 
4,643

 
30.5
 %
 
17,925

 
12,101

 
48.1
 %
Borrowings
 
98

 
138

 
(29.0
)%
 
137

 
(28.5
)%
 
370

 
475

 
(22.1
)%
Total interest-bearing liabilities
 
6,158

 
6,338

 
(2.8
)%
 
4,780

 
28.8
 %
 
18,295

 
12,576

 
45.5
 %
Net interest income
 
$
17,529

 
$
17,692

 
(0.9
)%
 
$
16,716

 
4.9
 %
 
$
52,374

 
$
47,892

 
9.4
 %
Average balance of:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans
 
$
1,396,437

 
$
1,378,910

 
1.3
 %
 
$
1,280,352

 
9.1
 %
 
$
1,372,704

 
$
1,245,551

 
10.2
 %
Investment securities
 
161,528

 
167,991

 
(3.8
)%
 
154,020

 
4.9
 %
 
165,638

 
150,462

 
10.1
 %
Other interest-earning assets
 
135,774

 
154,661

 
(12.2
)%
 
156,831

 
(13.4
)%
 
143,616

 
132,483

 
8.4
 %
Total interest-earning assets
 
$
1,693,739

 
$
1,701,562

 
(0.5
)%
 
$
1,591,203

 
6.4
 %
 
$
1,681,958

 
$
1,528,496

 
10.0
 %
Interest-bearing deposits
 
$
1,126,376

 
$
1,143,678

 
(1.5
)%
 
$
1,073,433

 
4.9
 %
 
$
1,128,606

 
$
1,038,019

 
8.7
 %
Borrowings
 
20,326

 
30,166

 
(32.6
)%
 
30,000

 
(32.2
)%
 
26,820

 
36,557

 
(26.6
)%
Total interest-bearing liabilities
 
$
1,146,702

 
$
1,173,844

 
(2.3
)%
 
$
1,103,433

 
3.9
 %
 
$
1,155,426

 
$
1,074,576

 
7.5
 %
Annualized average yield/cost of:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans
 
6.22
%
 
6.39
%
 


 
6.10
%
 


 
6.31
%
 
5.98
%
 


Investment securities
 
2.40
%
 
2.54
%
 


 
2.40
%
 


 
2.53
%
 
2.35
%
 


Other interest-earning assets
 
2.43
%
 
2.59
%
 


 
2.19
%
 


 
2.57
%
 
2.09
%
 


Total interest-earning assets
 
5.55
%
 
5.66
%
 


 
5.36
%
 


 
5.62
%
 
5.29
%
 


Interest-bearing deposits
 
2.13
%
 
2.17
%
 


 
1.72
%
 


 
2.12
%
 
1.56
%
 


Borrowings
 
1.91
%
 
1.83
%
 


 
1.81
%
 


 
1.84
%
 
1.74
%
 


Total interest-bearing liabilities
 
2.13
%
 
2.17
%
 


 
1.72
%
 


 
2.12
%
 
1.56
%
 


Net interest margin
 
4.11
%
 
4.17
%
 


 
4.17
%
 


 
4.16
%
 
4.19
%
 


Supplementary information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net accretion of discount (premium) on loans included in interest on loans
 
$
1,031

 
$
1,194

 
(13.7
)%
 
$
1,090

 
(5.4
)%
 
$
3,083

 
$
3,057

 
0.9
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans. The decrease in average yield for the current quarter compared with the previous quarter was primarily due to the recent decreases in market rates. The increases in average yield for the three and nine months ended September 30, 2019 compared with the same periods of 2018 were primarily due to the rising interest rate environment in 2018 and higher market rates in 2019. The Company had benefited from its high proportion of variable rate loans that had repriced along with such interest rate environment; however, the Company strategically had increased the proportion of fixed rate loans throughout the current year in order to better-position its balance sheet to match the current and potential future interest rate environment.
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:
 
 
9/30/2019
 
6/30/2019
 
12/31/2018
 
9/30/2018
 
 
% 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
 
40.5
%
 
5.26
%
 
37.8
%
 
5.24
%
 
34.4
%
 
5.13
%
 
32.3
%
 
5.10
%
Variable rate loans
 
59.5
%
 
5.88
%
 
62.2
%
 
6.29
%
 
65.6
%
 
6.30
%
 
67.7
%
 
6.03
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

3


Investment Securities. The decrease in average yield for the current quarter compared with the previous quarter was primarily due to an increase in premium amortization from a higher prepayment trend in the current quarter. The increase in average yield for the nine months ended September 30, 2019 compared with the same periods of 2018 was primarily due to additional purchases of investment securities along with the rising interest rate environment in 2018 and higher market rates in 2019. The Company did not purchase any investment securities during the current quarter, but purchased new investment securities of $24.3 million during the last 12-month period.
Other Interest-Earning Assets. The average yield on other interest-bearing assets is closely related to the changes in market rates, as the Company maintains most of its cash at the Federal Reserve Bank account. The average balance for the current quarter decreased as loan growth was mainly supported by the Company’s cash on deposit at the Federal Reserve Bank.
Interest-Bearing Deposits. The decrease in average cost for the current quarter was primarily due to the recent decreases in market rates; however, the impact was smaller than the change in average yield on interest-earning assets due to high competition in the Company’s deposit target markets.
Borrowings. The Company had fixed rate term advances from FHLB of $20.0 million with a weighted average rate of 1.92% and original maturity terms ranging from 3 to 5 years at September 30, 2019.
Provision (Reversal) for Loan Losses
Provision (reversal) for loan losses was $(102) thousand for the current quarter compared with $394 thousand for the previous quarter and $417 thousand for the year-ago quarter. The reversal for the current quarter was primarily due to a decrease in loans held-for-investment as well as a decrease in historical loss rates and changes in qualitative adjustment factors. For the nine months ended September 30, 2019 and 2018, the Company recognized provision for loan losses of $207 thousand and $937 thousand, respectively. The Company recorded net charge-offs of $132 thousand for the current quarter compared with net charge-offs of $203 thousand for the previous quarter and net recoveries of $59 thousand for the year-ago quarter. For the nine months ended September 30, 2019 and 2018, the Company recorded net charge-offs of $280 thousand and $64 thousand, respectively.
Allowance for loan losses to total loans held-for-investment ratio was 0.94% at September 30, 2019, 0.96% at June 30, 2019, 0.98% at December 31, 2018, and 1.00% at September 30, 2018. The decrease in this ratio was primarily due to a decrease in historical loss rates and changes in qualitative adjustment factors.
Noninterest Income
The following table presents the components of noninterest income for the periods indicated:
 
 
Three Months Ended
 
Nine Months Ended
($ in thousands)
 
9/30/2019
 
6/30/2019
 
% Change
 
9/30/2018
 
% Change
 
9/30/2019
 
9/30/2018
 
% Change
Gain on sale of loans
 
1,540

 
1,891

 
(18.6
)%
 
1,328

 
16.0
 %
 
4,551

 
4,477

 
1.7
 %
Service charges and fees on deposits
 
405

 
368

 
10.1
 %
 
377

 
7.4
 %
 
1,137

 
1,102

 
3.2
 %
Loan servicing income
 
534

 
492

 
8.5
 %
 
578

 
(7.6
)%
 
1,657

 
1,789

 
(7.4
)%
Other income
 
323

 
303

 
6.6
 %
 
297

 
8.8
 %
 
920

 
847

 
8.6
 %
Total noninterest income
 
$
2,802

 
$
3,054

 
(8.3
)%
 
$
2,580

 
8.6
 %
 
$
8,265

 
$
8,215

 
0.6
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gain on Sale of Loans. The following table presents information on gain on sale of loans for the periods indicated:
 
 
Three Months Ended
 
Nine Months Ended
($ in thousands)
 
9/30/2019
 
6/30/2019
 
% Change
 
9/30/2018
 
% Change
 
9/30/2019
 
9/30/2018
 
% Change
Gain on sale of SBA loans
 
 
 
 
 


 
 
 


 
 
 
 
 


Sold loan balance
 
$
22,186

 
$
29,168

 
(23.9
)%
 
$
23,108

 
(4.0
)%
 
$
72,537

 
$
65,591

 
10.6
 %
Premium received
 
2,061

 
2,665

 
(22.7
)%
 
1,915

 
7.6
 %
 
6,288

 
6,041

 
4.1
 %
Gain recognized
 
1,498

 
1,884

 
(20.5
)%
 
1,306

 
14.7
 %
 
4,487

 
4,219

 
6.4
 %
Gain on sale of residential property loans
 
 
 
 
 


 
 
 


 
 
 
 
 


Sold loan balance
 
$
4,661

 
$
375

 
1,142.9
 %
 
$
2,217

 
110.2
 %
 
$
7,432

 
$
10,899

 
(31.8
)%
Gain recognized
 
42

 
7

 
500.0
 %
 
22

 
90.9
 %
 
64

 
213

 
(70.0
)%
Gain on sale of other loans
 
 
 
 
 


 
 
 


 
 
 
 
 


Sold loan balance
 
$

 
$

 
 %
 
$

 
 %
 
$

 
$
1,084

 
(100.0
)%
Gain recognized
 

 

 
 %
 

 
 %
 

 
45

 
(100.0
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


4


Service Charges and Fees on Deposits. The increases were primarily due to an increase in non-sufficient fund charges during the current quarter.
Loan Servicing Income. The Company services SBA loans and certain residential property loans that are sold to the secondary market. The increase for the current quarter compared with the previous quarter was primarily due to a decrease in servicing asset amortization. During the previous quarter, servicing asset amortization was increased from a higher prepayment trend. The following table presents information on loan servicing income for the periods indicated.
 
 
Three Months Ended
 
Nine Months Ended
($ in thousands)
 
9/30/2019
 
6/30/2019
 
% Change
 
9/30/2018
 
% Change
 
9/30/2019
 
9/30/2018
 
% Change
Loan servicing income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Servicing income received
 
$
1,195

 
$
1,190

 
0.4
 %
 
$
1,265

 
(5.5
)%
 
$
3,532

 
$
3,719

 
(5.0
)%
Servicing assets amortization
 
(661
)
 
(698
)
 
(5.3
)%
 
(687
)
 
(3.8
)%
 
(1,875
)
 
(1,930
)
 
(2.8
)%
Loan servicing income
 
$
534

 
$
492

 
8.5
 %
 
$
578

 
(7.6
)%
 
$
1,657

 
$
1,789

 
(7.4
)%
Underlying loans at end of period
 
$
493,923

 
$
504,094

 
(2.0
)%
 
$
533,860

 
(7.5
)%
 
$
493,923

 
$
533,860

 
(7.5
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other Income. The increases were primarily due to increases in wire and remittance fees, and debit card interchanges fees.
Noninterest Expense
The following table presents the components of noninterest expense for the periods indicated:
 
 
Three Months Ended
 
Nine Months Ended
($ in thousands)
 
9/30/2019
 
6/30/2019
 
% Change
 
9/30/2018
 
% Change
 
9/30/2019
 
9/30/2018
 
% Change
Salaries and employee benefits
 
$
6,901

 
$
6,600

 
4.6
 %
 
$
5,840

 
18.2
 %
 
$
20,123

 
$
18,239

 
10.3
 %
Occupancy and equipment
 
1,408

 
1,407

 
0.1
 %
 
1,244

 
13.2
 %
 
4,128

 
3,634

 
13.6
 %
Professional fees
 
664

 
686

 
(3.2
)%
 
213

 
211.7
 %
 
2,108

 
1,724

 
22.3
 %
Marketing and business promotion
 
292

 
529

 
(44.8
)%
 
555

 
(47.4
)%
 
1,049

 
1,484

 
(29.3
)%
Data processing
 
348

 
338

 
3.0
 %
 
314

 
10.8
 %
 
1,004

 
911

 
10.2
 %
Director fees and expenses
 
188

 
185

 
1.6
 %
 
220

 
(14.5
)%
 
562

 
661

 
(15.0
)%
Regulatory assessments
 

 
309

 
(100.0
)%
 
192

 
(100.0
)%
 
425

 
469

 
(9.4
)%
Other expenses
 
976

 
930

 
4.9
 %
 
942

 
3.6
 %
 
2,651

 
2,969

 
(10.7
)%
Total noninterest expense
 
$
10,777

 
$
10,984

 
(1.9
)%
 
$
9,520

 
13.2
 %
 
$
32,050

 
$
30,091

 
6.5
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Salaries and Employee Benefits. Overall, the increases were primarily due to the hiring of new experienced employees with higher salaries in order to support the expansion of the Company's infrastructure for being a public company and to enhance the controls and processes on Bank Secrecy Act and Anti-Money Laundering (“BSA/AML”) compliance.
Occupancy and Equipment. The increases for the three and nine months ended September 30, 2019 compared with same periods of 2018 were primarily due to an establishment of new loan production office in Artesia, California in December 2018 and an increase in equipment maintenance expense.
Professional Fees. The increases for the three and nine months ended September 30, 2019 compared with the same periods of 2018 were primarily due to increases in audit and other professional fees for being a public company and expense related to enhancement of the Bank's controls and processes on BSA/AML compliance programs, and a true-up of expenses that were directly related to the initial public offering during the year-ago quarter.
Regulatory Assessments. The decreases were primarily due to a small bank assessment credit from the FDIC during the current quarter, partially offset by an increase in assessment rate from the recent consent order relating to the Bank’s compliance with BSA/AML. The Company would have recognized regulatory assessments expense of $228 thousand without the small bank assessment credit for the current quarter. Regulatory assessments expense for the next quarter is also expected to be reduced by approximately $116 thousand, which is the remaining portion of small bank assessment credit that exceeded the current quarter expense. Regulatory assessment for the previous quarter included an adjustment made for the assessment rate increase for the first quarter of 2019.
Other Expenses. The decrease for the nine months ended September 30, 2019 compared with the same period of 2018 was primarily due to a $577 thousand reimbursement paid to the SBA during the second quarter of 2018, partially offset by increases in other loan related legal and office expenses.

5


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)
 
9/30/2019
 
6/30/2019
 
% Change
 
12/31/2018
 
% Change
 
9/30/2018
 
% Change
Real estate loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial property
 
$
759,881

 
$
748,526

 
1.5
 %
 
$
709,409

 
7.1
 %
 
$
702,487

 
8.2
 %
Residential property
 
236,382

 
240,630

 
(1.8
)%
 
233,816

 
1.1
 %
 
214,960

 
10.0
 %
SBA property
 
126,347

 
128,208

 
(1.5
)%
 
120,939

 
4.5
 %
 
128,149

 
(1.4
)%
Construction
 
17,175

 
22,455

 
(23.5
)%
 
27,323

 
(37.1
)%
 
28,838

 
(40.4
)%
Commercial and industrial loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial term
 
105,433

 
105,651

 
(0.2
)%
 
102,133

 
3.2
 %
 
96,017

 
9.8
 %
Commercial lines of credit
 
95,997

 
101,531

 
(5.5
)%
 
91,994

 
4.4
 %
 
82,591

 
16.2
 %
SBA commercial term
 
25,326

 
24,762

 
2.3
 %
 
27,147

 
(6.7
)%
 
28,493

 
(11.1
)%
Other consumer loans
 
23,289

 
23,794

 
(2.1
)%
 
25,921

 
(10.2
)%
 
27,589

 
(15.6
)%
Loans held-for-investment
 
1,389,830

 
1,395,557

 
(0.4
)%
 
1,338,682

 
3.8
 %
 
1,309,124

 
6.2
 %
Loans held-for-sale
 
1,583

 
440

 
259.8
 %
 
5,781

 
(72.6
)%
 
12,957

 
(87.8
)%
Total loans
 
$
1,391,413

 
$
1,395,997

 
(0.3
)%
 
$
1,344,463

 
3.5
 %
 
$
1,322,081

 
5.2
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The decrease in loans held-for-investment for the current quarter was primarily due to pay-downs and pay-offs of $102.0 million, partially offset by new funding of $70.4 million and advances on lines of credit of $26.6 million. During the current quarter, new funding decreased by $38.8 million compared with the previous quarter primarily due to higher competition and pay-downs and pay-offs also increased by $14.9 million compared with the previous quarter. The increase for the nine months ended September 30, 2019 was primarily due to new funding of $252.9 million and advances on lines of credit of $80.5 million, partially offset by pay-downs and pay-offs of $280.8 million.
The increase in loans held-for-sale for the current quarter was primarily due to new funding of $27.5 million, partially offset by sales of $26.8 million. The decrease in loans held-for-sale for the nine months ended September 30, 2019 was primarily due to sales of $80.0 million, partially offset by new funding of $75.0 million and a loan transferred from loans held-for-investment of $824 thousand.

6


Credit Quality
The following table presents compositions of non-performing loans and non-performing assets as of the dates indicated:
($ in thousands)
 
9/30/2019
 
6/30/2019
 
% Change
 
12/31/2018
 
% Change
 
9/30/2018
 
% Change
Nonaccrual loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial property
 
$

 
$

 
 %
 
$

 
 %
 
$
234

 
(100.0
)%
Residential property
 

 

 
 %
 
302

 
(100.0
)%
 

 
 %
SBA property
 
1,441

 
1,372

 
5.0
 %
 
540

 
166.9
 %
 
970

 
48.6
 %
Commercial and industrial loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial lines of credit
 
327

 

 
 %
 

 
 %
 

 
 %
SBA commercial term
 
68

 
16

 
325.0
 %
 
203

 
(66.5
)%
 
254

 
(73.2
)%
Consumer loans
 
7

 
41

 
(82.9
)%
 
16

 
(56.3
)%
 
114

 
(93.9
)%
Total nonaccrual loans held-for-investment
 
1,843

 
1,429

 
29.0
 %
 
1,061

 
73.7
 %
 
1,572

 
17.2
 %
Loans past due 90 days or more and still accruing
 

 

 
 %
 

 
 %
 

 
 %
Non-performing loans (“NPLs”)
 
1,843

 
1,429

 
29.0
 %
 
1,061

 
73.7
 %
 
1,572

 
17.2
 %
Other real estate owned (“OREO”)
 

 
395

 
(100.0
)%
 

 
 %
 

 
 %
Non-performing assets (“NPAs”)
 
$
1,843

 
$
1,824

 
1.0
 %
 
$
1,061

 
73.7
 %
 
$
1,572

 
17.2
 %
Loans past due and still accruing:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loans past due 30 to 59 days and still accruing
 
$
664

 
$
804

 
(17.4
)%
 
$
368

 
80.4
 %
 
$
337

 
97.0
 %
Loans past due 60 to 89 days and still accruing
 
59

 
5

 
1,080.0
 %
 
9

 
555.6
 %
 
426

 
(86.2
)%
Loans past due 90 days or more and still accruing
 

 

 
 %
 

 
 %
 

 
 %
Total loans past due and still accruing
 
$
723

 
$
809

 
(10.6
)%
 
377

 
91.8
 %
 
$
763

 
(5.2
)%
Troubled debt restructurings (“TDRs”):
 
 
 
 
 
 
 
 
 
 
 
 
 
Accruing TDRs
 
$
713

 
$
391

 
82.4
 %
 
$
432

 
65.0
 %
 
$
467

 
52.7
 %
Nonaccrual TDRs
 
249

 
131

 
90.1
 %
 
131

 
90.1
 %
 
458

 
(45.6
)%
Total TDRs
 
$
962

 
$
522

 
84.3
 %
 
$
563

 
70.9
 %
 
$
925

 
4.0
 %
NPLs to loans held-for-investment
 
0.13
%
 
0.10
%
 
 
 
0.08
%
 
 
 
0.12
%
 
 
NPAs to total assets
 
0.11
%
 
0.11
%
 
 
 
0.06
%
 
 
 
0.09
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Classified Assets
Classified loans were $7.9 million at September 30, 2019, an increase of $394 thousand, or 5.3%, from $7.5 million at June 30, 2019, an increase of $1.0 million, or 14.8%, from $6.9 million at December 31, 2018, and an increase of $1.6 million, or 26.4%, from $6.2 million at September 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 September 30, 2019, $7.9 million and 0.46%, respectively, at June 30, 2019, $6.9 million and 0.40%, respectively, at December 31, 2018, and $6.2 million and 0.37%, respectively, at September 30, 2018.
Investment Securities
Total investment securities were $156.2 million at September 30, 2019, a decrease of $9.0 million, or 5.5%, from $165.2 million at June 30, 2019, a decrease of $12.5 million, or 7.4%, from $168.8 million at December 31, 2018, and a decrease of $877 thousand, or 0.6%, from $157.1 million at September 30, 2018. The decrease for the current quarter was primarily due to principal pay-downs and calls of $9.2 million and net premium amortization of $234 thousand, partially offset by an increase in fair value of securities available-for-sale of $442 thousand. The decrease for the nine months ended September 30, 2019 was primarily due to principal pay-downs and calls of $23.6 million and net premium amortization of $641 thousand, partially offset by purchases of $8.4 million and an increase in fair value of securities available-for-sale of $3.3 million.

7


Deposits
The following table presents deposit mix as of the dates indicated:
 
 
9/30/2019
 
6/30/2019
 
12/31/2018
 
9/30/2018
($ in thousands)
 
Amount
 
% to Total
 
Amount
 
% to Total
 
Amount
 
% to Total
 
Amount
 
% to Total
Noninterest-bearing demand deposits
 
$
353,448

 
24.7
%
 
$
339,603

 
23.5
%
 
$
329,270

 
22.8
%
 
$
350,346

 
24.7
%
Interest-bearing deposits:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
NOW
 
16,108

 
1.1
%
 
12,638

 
0.9
%
 
24,683

 
1.7
%
 
11,638

 
0.8
%
Money market accounts
 
307,663

 
21.5
%
 
311,865

 
21.6
%
 
280,733

 
19.4
%
 
263,704

 
18.6
%
Savings
 
8,206

 
0.6
%
 
6,844

 
0.5
%
 
8,194

 
0.6
%
 
8,417

 
0.6
%
Time deposits of $250,000 or less
 
417,549

 
29.1
%
 
453,286

 
31.2
%
 
477,134

 
33.0
%
 
476,370

 
33.5
%
Time deposits of more than $250,000
 
206,785

 
14.4
%
 
204,780

 
14.2
%
 
181,239

 
12.6
%
 
161,551

 
11.4
%
State and brokered deposits
 
122,503

 
8.6
%
 
117,510

 
8.1
%
 
142,500

 
9.9
%
 
147,500

 
10.4
%
Total interest-bearing deposits
 
1,078,814

 
75.3
%
 
1,106,923

 
76.5
%
 
1,114,483

 
77.2
%
 
1,069,180

 
75.3
%
Total deposits
 
$
1,432,262

 
100.0
%
 
$
1,446,526

 
100.0
%
 
$
1,443,753

 
100.0
%
 
$
1,419,526

 
100.0
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The decrease for the current quarter was primarily due to closed accounts of $103.0 million and net balance decreases of $2.1 million on existing accounts, partially offset by new accounts of $90.8 million. The increase for the nine months ended September 30, 2019 was primarily due to new accounts of $320.5 million, partially offset by closed accounts of $297.6 million and net balance decreases of $10.2 million on existing accounts. During the current quarter, the Company strategically reduced time deposits for balance sheet and earnings management. The Company also began utilizing brokered money market accounts in order to diversify its funding source and had a total outstanding balance of $10.0 million at September 30, 2019.
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 $224.6 million at September 30, 2019, an increase of $1.2 million, or 0.6%, from $223.4 million at June 30, 2019, an increase of $14.3 million, or 6.8%, from $210.3 million at December 31, 2018, and an increase of $21.7 million, or 10.7%, from $202.9 million at September 30, 2018. The increases 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.
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. The Company had repurchased 374,069 shares of its common stock totaling $6.1 million through September 30, 2019.

8


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:
 
 
9/30/2019
 
6/30/2019
 
12/31/2018
 
9/30/2018
PCB Bancorp
 
 
 
 
 
 
 
 
Common tier 1 capital (to risk-weighted assets)
 
16.30
%
 
16.20
%
 
16.28
%
 
16.08
%
Total capital (to risk-weighted assets)
 
17.27
%
 
17.18
%
 
17.31
%
 
17.12
%
Tier 1 capital (to risk-weighted assets)
 
16.30
%
 
16.20
%
 
16.28
%
 
16.08
%
Tier 1 capital (to average assets)
 
12.87
%
 
12.74
%
 
12.60
%
 
12.59
%
Pacific City Bank
 
 
 
 
 
 
 
 
Common tier 1 capital (to risk-weighted assets)
 
16.11
%
 
16.07
%
 
16.19
%
 
15.89
%
Total capital (to risk-weighted assets)
 
17.08
%
 
17.05
%
 
17.21
%
 
16.93
%
Tier 1 capital (to risk-weighted assets)
 
16.11
%
 
16.07
%
 
16.19
%
 
15.89
%
Tier 1 capital (to average assets)
 
12.72
%
 
12.64
%
 
12.53
%
 
12.45
%
 
 
 
 
 
 
 
 
 
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


9


PCB Bancorp and Subsidiary
Consolidated Balance Sheets (Unaudited)
($ in thousands, except share and per share data)
 
 
9/30/2019
 
6/30/2019
 
% Change
 
12/31/2018
 
% Change
 
9/30/2018
 
% Change
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and due from banks
 
$
22,546

 
$
19,080

 
18.2
 %
 
$
24,121

 
(6.5
)%
 
$
27,532

 
(18.1
)%
Interest-bearing deposits in financial institutions
 
99,366

 
114,205

 
(13.0
)%
 
138,152

 
(28.1
)%
 
136,524

 
(27.2
)%
Total cash and cash equivalents
 
121,912

 
133,285

 
(8.5
)%
 
162,273

 
(24.9
)%
 
164,056

 
(25.7
)%
Securities available-for-sale, at fair value
 
134,602

 
142,539

 
(5.6
)%
 
146,991

 
(8.4
)%
 
135,089

 
(0.4
)%
Securities held-to-maturity
 
21,601

 
22,685

 
(4.8
)%
 
21,760

 
(0.7
)%
 
21,991

 
(1.8
)%
Total investment securities
 
156,203

 
165,224

 
(5.5
)%
 
168,751

 
(7.4
)%
 
157,080

 
(0.6
)%
Loans held-for-sale
 
1,583

 
440

 
259.8
 %
 
5,781

 
(72.6
)%
 
12,957

 
(87.8
)%
Loans held-for-investment, net of deferred loan costs (fees)
 
1,389,830

 
1,395,557

 
(0.4
)%
 
1,338,682

 
3.8
 %
 
1,309,124

 
6.2
 %
Allowance for loan losses
 
(13,094
)
 
(13,328
)
 
(1.8
)%
 
(13,167
)
 
(0.6
)%
 
(13,097
)
 
 %
Net loans held-for-investment
 
1,376,736

 
1,382,229

 
(0.4
)%
 
1,325,515

 
3.9
 %
 
1,296,027

 
6.2
 %
Premises and equipment, net
 
4,008

 
4,334

 
(7.5
)%
 
4,588

 
(12.6
)%
 
4,615

 
(13.2
)%
Federal Home Loan Bank and other bank stock
 
8,345

 
8,345

 
 %
 
7,433

 
12.3
 %
 
7,433

 
12.3
 %
Other real estate owned, net
 

 
395

 
(100.0
)%
 

 
 %
 

 
 %
Deferred tax assets, net
 
3,389

 
3,241

 
4.6
 %
 
3,377

 
0.4
 %
 
4,209

 
(19.5
)%
Servicing assets
 
6,899

 
7,230

 
(4.6
)%
 
7,666

 
(10.0
)%
 
8,114

 
(15.0
)%
Operating lease assets
 
9,561

 
10,105

 
(5.4
)%
 

 
 %
 

 
 %
Accrued interest receivable and other assets
 
10,810

 
11,658

 
(7.3
)%
 
11,644

 
(7.2
)%
 
9,296

 
16.3
 %
Total assets
 
$
1,699,446

 
$
1,726,486

 
(1.6
)%
 
$
1,697,028

 
0.1
 %
 
$
1,663,787

 
2.1
 %
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Deposits:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noninterest-bearing demand
 
$
353,448

 
$
339,603

 
4.1
 %
 
$
329,270

 
7.3
 %
 
$
350,346

 
0.9
 %
Savings, NOW and money market a