LOS ANGELES–(BUSINESS WIRE)–PCB Bancorp (the “Company”) (NASDAQ: PCB), the holding company of PCB Bank (the “Bank”), today reported net income of $5.9 million, or $0.41 per diluted common share, for the fourth quarter of 2023, compared with $7.0 million, or $0.49 per diluted common share, for the previous quarter and $8.7 million, or $0.58 per diluted common share, for the year-ago quarter. For 2023, net income was $30.7 million, or $2.12 per diluted common share, compared with $35.0 million and $2.31 per diluted common share, for the previous year.

Q4 2023 and Full Year Highlights

Net income totaled $5.9 million, or $0.41 per diluted common share, for the current quarter and $30.7 million, or $2.12 per diluted common share for the current year;
Recorded a provision for credit losses^(1),(2) of $1.7 million for the current quarter compared with $751 thousand for the previous quarter and $1.1 million for the year-ago quarter. For the current year, provision (reversal) for the credit losses was $(132) thousand compared with $3.6 million for the previous year;
Allowance for Credit Losses (“ACL”)⁽¹⁾ on loans to loans held-for-investment ratio was 1.19% at December 31, 2023 compared with 1.18% at September 30, 2023 and 1.22% at December 31, 2022;
Net interest income was $21.9 million for the current quarter compared with $22.4 million for the previous quarter and $24.3 million for the year-ago quarter. Net interest margin was 3.40% for the current quarter compared with 3.57% for the previous quarter and 4.15% for the year-ago quarter. For the current year, net interest income and net interest margin were $88.5 million and 3.57%, respectively, compared with $89.6 million and 4.08%, respectively, for the previous year;
Gain on sale of loans was $803 thousand for the current quarter compared with $689 thousand for the previous quarter and $759 thousand for the year-ago quarter. For the current year, gain on sale of loans was $3.6 million compared with $8.0 million for the previous year;
Total assets were $2.79 billion at December 31, 2023, an increase of $221.5 million, or 8.6%, from $2.57 billion at September 30, 2023, and 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 $155.8 million, or 7.2%, from $2.17 billion at September 30, 2023, and 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 $159.5 million, or 7.3%, from $2.19 billion at September 30, 2023, and an increase of $305.6 million, or 14.9%, from $2.05 billion at December 31, 2022; and
The Company repurchased and retired 60,074 shares of common stock during the current quarter. For the current year, the Company repurchased and retired 512,657 shares of common stock.

“We are pleased with our fourth quarter and full-year performance. Our results reflect our solid business strategy of strong relationship banking, which continues to provide strong loan funding opportunities and stable operating performance that has positioned us well to overcome the continued economic uncertainties,” said Henry Kim, President and Chief Executive Officer. “PCB’s performance for the fourth quarter of 2023 benefited from strong loan growth and higher yields on interest-earning assets. However, the continued higher interest rate environment and its effect on our funding costs resulted in moderate compression in net interest margin during the quarter. During the quarter loan balance increased 7.1% to $2.3 billion, deposit balance increased 7.3% to $2.4 billion, and we continue to maintain very strong credit metrics with ACL to loans ratio of 1.19%, and non-performing assets and classified assets to total assets ratios of 0.23% and 0.34%, respectively.”

Mr. Kim added, “As we look ahead in 2024, PCB is well positioned to continue delivering solid results with emphasis on strong balance sheet and sound asset quality with robust capital levels that are above our peers to operate in all economic cycles and changing market conditions.”

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(1)		Provision (reversal) for credit losses and ACL for reporting periods beginning with January 1, 2023 are presented under ASC 326, while prior period comparisons continue to be presented under legacy ASC 450 and ASC 310 in this release.
(2)		Provision for credit losses on off-balance sheet credit exposures of $57 thousand and $85 thousand, respectively, for the year-ago quarter and previous year were recorded in Other Expense on Consolidated Statements of Income (Unaudited).

Financial Highlights (Unaudited)

($ in thousands, except per share data)	Three Months Ended													Year Ended
($ in thousands, except per share data)	12/31/2023			9/30/2023			% Change		12/31/2022			% Change		12/31/2023			12/31/2022			% Change
Net income	$	5,908		$	7,023		(15.9	)%	$	8,702		(32.1	)%	$	30,705		$	34,987		(12.2	)%
Diluted earnings per common share	$	0.41		$	0.49		(16.3	)%	$	0.58		(29.3	)%	$	2.12		$	2.31		(8.2	)%

Net interest income	$	21,924		$	22,449		(2.3	)%	$	24,265		(9.6	)%	$	88,504		$	89,632		(1.3	)%
Provision (reversal) for credit losses ⁽¹⁾		1,698			751		126.1	%		1,149		47.8	%		(132	)		3,602		NM
Noninterest income		2,503			2,502		—	%		2,389		4.8	%		10,683			14,499		(26.3	)%
Noninterest expense		14,469			14,207		1.8	%		13,115		10.3	%		56,057			51,126		9.6	%

Return on average assets ⁽²⁾		0.89	%		1.09	%				1.44	%				1.20	%		1.54	%
Return on average shareholders’ equity ⁽²⁾		6.82	%		8.12	%				10.31	%				9.02	%		11.42	%
Return on average tangible common equity (“TCE”) ^(2),(3)		8.54	%		10.17	%				12.99	%				11.31	%		13.23	%
Net interest margin ⁽²⁾		3.40	%		3.57	%				4.15	%				3.57	%		4.08	%
Efficiency ratio ⁽⁴⁾		59.23	%		56.94	%				49.20	%				56.52	%		49.10	%

($ in thousands, except per share data)	12/31/2023			9/30/2023			% Change		12/31/2022			% Change
Total assets	$	2,789,506		$	2,567,974		8.6	%	$	2,420,036		15.3	%
Net loans held-for-investment		2,295,919			2,142,006		7.2	%		2,021,121		13.6	%
Total deposits		2,351,612			2,192,129		7.3	%		2,045,983		14.9	%
Book value per common share ⁽⁵⁾	$	24.46		$	23.87				$	22.94
TCE per common share⁽³⁾	$	19.62		$	19.05				$	18.21
Tier 1 leverage ratio (consolidated)		13.43	%		13.76	%				14.33	%
Total shareholders’ equity to total assets		12.51	%		13.31	%				13.86	%
TCE to total assets ^{(3), (6)}		10.03	%		10.62	%				11.00	%

(1)		Provision for credit losses on off-balance sheet credit exposures of $57 thousand and $85 thousand, respectively, for the year-ago quarter and previous year were recorded in Other Expense on Consolidated Statements of Income (Unaudited). See Provision (reversal) for credit losses included in the Result of Operations discussion for additional information.
(2)		Ratios are presented on an annualized basis.
(3)		Non-GAAP. See “Non-GAAP Measures” for reconciliation of this measure to its most comparable GAAP measure.
(4)		Calculated by dividing noninterest expense by the sum of net interest income and noninterest income.
(5)		Calculated by dividing total shareholders’ equity by the number of outstanding common shares.
(6)		The Company did not have any intangible asset component for the presented periods.

Result of Operations (Unaudited)

Net Interest Income and Net Interest Margin

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

	Three Months Ended													Year Ended
($ in thousands)	12/31/2023			9/30/2023			% Change		12/31/2022			% Change		12/31/2023			12/31/2022			% Change
Interest income/expense on
Loans	$	37,189		$	34,651		7.3	%	$	28,786		29.2	%	$	136,029		$	95,054		43.1	%
Investment securities		1,271			1,170		8.6	%		957		32.8	%		4,679			2,907		61.0	%
Other interest-earning assets		2,491			3,031		(17.8	)%		1,833		35.9	%		10,469			3,790		176.2	%
Total interest-earning assets		40,951			38,852		5.4	%		31,576		29.7	%		151,177			101,751		48.6	%
Interest-bearing deposits		18,728			16,403		14.2	%		7,295		156.7	%		62,165			11,984		418.7	%
Borrowings		299			—		—	%		16		1,768.8	%		508			135		276.3	%
Total interest-bearing liabilities		19,027			16,403		16.0	%		7,311		160.3	%		62,673			12,119		417.1	%
Net interest income	$	21,924		$	22,449		(2.3	)%	$	24,265		(9.6	)%	$	88,504		$	89,632		(1.3	)%
Average balance of
Loans	$	2,242,457		$	2,137,184		4.9	%	$	2,004,220		11.9	%	$	2,137,851		$	1,872,557		14.2	%
Investment securities		139,227			138,993		0.2	%		134,066		3.8	%		140,596			132,538		6.1	%
Other interest-earning assets		175,336			219,115		(20.0	)%		182,018		(3.7	)%		198,809			194,205		2.4	%
Total interest-earning assets	$	2,557,020		$	2,495,292		2.5	%	$	2,320,304		10.2	%	$	2,477,256		$	2,199,300		12.6	%
Interest-bearing deposits	$	1,650,132		$	1,561,582		5.7	%	$	1,269,739		30.0	%	$	1,538,234		$	1,111,449		38.4	%
Borrowings		21,000			—		—	%		1,739		1,107.6	%		9,192			6,290		46.1	%
Total interest-bearing liabilities	$	1,671,132		$	1,561,582		7.0	%	$	1,271,478		31.4	%	$	1,547,426		$	1,117,739		38.4	%
Total funding ⁽¹⁾	$	2,249,026		$	2,188,320		2.8	%	$	2,043,110		10.1	%	$	2,177,200		$	1,949,360		11.7	%
Annualized average yield/cost of
Loans		6.58	%		6.43	%				5.70	%				6.36	%		5.08	%
Investment securities		3.62	%		3.34	%				2.83	%				3.33	%		2.19	%
Other interest-earning assets		5.64	%		5.49	%				4.00	%				5.27	%		1.95	%
Total interest-earning assets		6.35	%		6.18	%				5.40	%				6.10	%		4.63	%
Interest-bearing deposits		4.50	%		4.17	%				2.28	%				4.04	%		1.08	%
Borrowings		5.65	%		—	%				3.65	%				5.53	%		2.15	%
Total interest-bearing liabilities		4.52	%		4.17	%				2.28	%				4.05	%		1.08	%
Net interest margin		3.40	%		3.57	%				4.15	%				3.57	%		4.08	%
Cost of total funding ⁽¹⁾		3.36	%		2.97	%				1.42	%				2.88	%		0.62	%
Supplementary information
Net accretion of discount on loans	$	806		$	775		4.0	%	$	869		(7.2	)%	$	3,003		$	3,551		(15.4	)%
Net amortization of deferred loan fees	$	449		$	226		98.7	%	$	167		168.9	%	$	1,097		$	2,181		(49.7	)%

(1)		Total funding is the sum of interest-bearing liabilities and noninterest-bearing deposits. The cost of total funding is calculated as annualized total interest expense divided by average total funding.

Loans. The increases in average yield for the current quarter compared with the previous and year-ago quarters were primarily due to increases in overall interest rates on loans from the rising interest rate environment and net amortization of deferred loan fees from the increased amount of prepayment penalties. The increase in average yield for the current year compared with the previous year was primarily due to the increase in overall interest rates on loans, partially offset by decreases in net accretion of discount on loans and net amortization of deferred loan fees from the decreased amount of SBA PPP loan payoffs.

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:

	12/31/2023				9/30/2023				12/31/2022
	% to Total Loans		Weighted-Average Contractual Rate		% to Total Loans		Weighted-Average Contractual Rate		% to Total Loans		Weighted-Average Contractual Rate
Fixed rate loans	21.2	%	4.86	%	22.4	%	4.75	%	23.2	%	4.51	%
Hybrid rate loans	39.0	%	4.93	%	38.8	%	4.71	%	39.1	%	4.40	%
Variable rate loans	39.8	%	8.51	%	38.8	%	8.52	%	37.7	%	7.86	%

Investment Securities. The increases in average yield for the current quarter and year were primarily due to a decrease in net amortization of premiums on securities and higher yield on newly purchased investment securities.

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

Interest-Bearing Deposits. The increases in average cost for the current quarter and year were primarily due to an increase in market rates and the migration of noninterest-bearing demand deposits to interest-bearing deposits attributable to the rising market rates. To retain existing and attract new customers, the Bank offers competitive rates on deposit products.

Provision (Reversal) for Credit Losses

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

	Three Months Ended												Year Ended
($ in thousands)	12/31/2023			9/30/2023			% Change		12/31/2022		% Change		12/31/2023			12/31/2022		% Change
Provision for credit losses on loans	$	1,935		$	822		135.4	%	$	1,149	68.4	%	$	497		$	3,602	(86.2	)%
Provision (reversal) for credit losses on off-balance sheet credit exposure ⁽¹⁾		(237	)		(71	)	233.8	%		57	NM			(629	)		85	NM
Total provision (reversal) for credit losses	$	1,698		$	751		126.1	%	$	1,206	40.8	%	$	(132	)	$	3,687	NM

(1)		Provision for credit losses on off-balance sheet credit exposures for year-ago quarter and previous year were recorded in Other Expense on Consolidated Statements of Income (Unaudited).

On January 1, 2023, the Company adopted the provisions of ASC 326, also known as the current expected credit losses (“CECL”) accounting standard, through the application of the modified retrospective transition approach. Provision (reversal) for credit losses and ACL for reporting periods beginning with January 1, 2023 are presented under ASC 326, while prior period comparisons continue to be presented under legacy ASC 450 and ASC 310 in this release. See CECL Adoption and Allowance for Credit Losses sections included in the Balance Sheet section of this release for additional information.

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

Noninterest Income

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

	Three Months Ended										Year Ended
($ in thousands)	12/31/2023		9/30/2023		% Change		12/31/2022		% Change		12/31/2023		12/31/2022		% Change
Gain on sale of loans	$	803	$	689	16.5	%	$	759	5.8	%	$	3,570	$	7,990	(55.3	)%
Service charges and fees on deposits		391		371	5.4	%		352	11.1	%		1,475		1,326	11.2	%
Loan servicing income		751		851	(11.8	)%		734	2.3	%		3,330		2,969	12.2	%
Bank-owned life insurance income		202		187	8.0	%		181	11.6	%		753		706	6.7	%
Other income		356		404	(11.9	)%		363	(1.9	)%		1,555		1,508	3.1	%
Total noninterest income	$	2,503	$	2,502	—	%	$	2,389	4.8	%	$	10,683	$	14,499	(26.3	)%

Gain on Sale of Loans. The following table presents information on gain on sale of loans for the periods indicated:

	Three Months Ended										Year Ended
($ in thousands)	12/31/2023		9/30/2023		% Change		12/31/2022		% Change		12/31/2023		12/31/2022		% Change
Gain on sale of SBA loans
Sold loan balance	$	20,751	$	17,697	17.3	%	$	17,448	18.9	%	$	82,343	$	122,886	(33.0	)%
Premium received		1,250		1,112	12.4	%		1,102	13.4	%		5,612		9,944	(43.6	)%
Gain recognized		803		689	16.5	%		759	5.8	%		3,570		7,982	(55.3	)%
Gain on sale of residential mortgage loans
Sold loan balance	$	—	$	—	—	%	$	858	(100.0	)%	$	—	$	858	(100.0	)%
Gain recognized		—		—	—	%		8	(100.0	)%		—		8	(100.0	)%

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

	Three Months Ended													Year Ended
($ in thousands)	12/31/2023			9/30/2023			% Change		12/31/2022			% Change		12/31/2023			12/31/2022			% Change
Loan servicing income
Servicing income received	$	1,290		$	1,321		(2.3	)%	$	1,284		0.5	%	$	5,212		$	5,103		2.1	%
Servicing assets amortization		(539	)		(470	)	14.7	%		(550	)	(2.0	)%		(1,882	)		(2,134	)	(11.8	)%
Loan servicing income	$	751		$	851		(11.8	)%	$	734		2.3	%	$	3,330		$	2,969		12.2	%
Underlying loans at end of period	$	532,231		$	536,424		(0.8	)%	$	531,095		0.2	%	$	532,231		$	531,095		0.2	%

The Company services SBA loans and certain residential property loans sold to the secondary market.

Noninterest Expense

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

	Three Months Ended										Year Ended
($ in thousands)	12/31/2023		9/30/2023		% Change		12/31/2022		% Change		12/31/2023		12/31/2022		% Change
Salaries and employee benefits	$	8,397	$	8,572	(2.0	)%	$	7,879	6.6	%	$	34,572	$	33,056	4.6	%
Occupancy and equipment		2,145		1,964	9.2	%		1,897	13.1	%		7,924		6,481	22.3	%
Professional fees		898		685	31.1	%		607	47.9	%		3,087		2,239	37.9	%
Marketing and business promotion		772		980	(21.2	)%		724	6.6	%		2,327		2,150	8.2	%
Data processing		393		367	7.1	%		434	(9.4	)%		1,552		1,706	(9.0	)%
Director fees and expenses		207		152	36.2	%		176	17.6	%		756		706	7.1	%
Regulatory assessments		285		281	1.4	%		159	79.2	%		1,103		597	84.8	%
Other expense		1,372		1,206	13.8	%		1,239	10.7	%		4,736		4,191	13.0	%
Total noninterest expense	$	14,469	$	14,207	1.8	%	$	13,115	10.3	%	$	56,057	$	51,126	9.6	%

Salaries and Employee Benefits. The decrease for the current quarter compared with the previous quarter was primarily due to a decrease in vacation accrual, partially offset by increases in salaries and other employee benefit expense, and incentives tied to sales of SBA loans originated at loan production offices. The increase for the current quarter compared with the year-ago quarter was primarily due to increases in salaries and other employee benefit expense, partially offset by a decrease in vacation accrual. The increase for the current year compared with the previous year was primarily due to increases in salaries and other employee benefit expense, partially offset by decreases in bonus and vacation accruals, and incentives tied to sales of SBA loans originated at loan production offices. The number of full-time equivalent employees was 270, 270 and 272 as of December 31, 2023, September 30, 2023 and December 31, 2022, respectively.

Occupancy and Equipment. The increases for the current quarter compared with the previous and year-ago quarters were primarily due to expansions of headquarters and relocation of a regional office and branches. The Company plans to relocate and consolidate a regional office and two branches into one location in Orange County, California in 2024. The increase for the current year compared with the previous year was primarily due to the expansions of headquarters and the relocation of a regional office and branches, as well as 3 new branch openings during the second half of 2022. The Company opened 3 new full-service branches in Dallas and Carrollton, Texas and Palisades Park, New Jersey during the second half of 2022.

Professional Fees. The increases for the current quarter and year were primarily due to increases in consulting and internal audit fees for enhancing internal controls and process, and professional fees related to a planned core system conversion.

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

Director Fees and Expenses. The increase for the current quarter compared with the previous quarter was primarily due to additional expenses related to stock options issued to directors during the current quarter.

Regulatory Assessments. The increases for the current quarter and year compared with the same periods of 2022 were due to an increase in FDIC assessment rates. The FDIC increased the initial base deposit insurance assessment rate schedules by two basis points beginning in the first quarterly assessment period of 2023.

Other Expense. The increase for the current quarter compared with the previous quarter was primarily due to increases in office expense and loan related expense. The increase for the current year was primarily due to increases in office expenses and armed guard expenses from the branch network expansion. Provision for credit losses on off-balance credit exposures of $57 thousand and $85 thousand was included in other expense for the year-ago quarter and previous year, respectively, while the provision (reversal) for the current reporting periods beginning January 1, 2023 was included in provision (reversal) for credit losses.

Balance Sheet (Unaudited)

Total assets were $2.79 billion at December 31, 2023, an increase of $221.5 million, or 8.6%, from $2.57 billion at September 30, 2023, and an increase of $369.5 million, or 15.3%, from $2.42 billion at December 31, 2022. The increases for the current quarter and year were 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 additional leases of the Company’s headquarters and a new location for the relocation of a regional office and branches.

CECL Adoption

On January 1, 2023, the Company adopted the provisions of ASC 326 through the application of the modified retrospective transition approach. The initial adjustment to the ACL reflects the expected lifetime credit losses associated with the composition of financial assets within the scope of ASC 326 as of January 1, 2023, as well as management’s current expectation of future economic conditions. The Company recorded a net decrease of $1.9 million to the beginning balance of retained earnings as of January 1, 2023 for the cumulative effect adjustment, reflecting an initial adjustment to the ACL on loans of $1.1 million and the ACL on off-balance sheet credit exposures of $1.6 million, net of related deferred tax assets arising from temporary differences of $788 thousand. As a part of the adoption of ASC 326, the Company reviewed and revised certain loan segments for the Company’s ACL model. See Loan Segments Revision section of this release for a reconciliation of revised loan segments to legacy loan segments, which were utilized before the adoption of ASC 326.

Loans

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

($ in thousands)	12/31/2023		9/30/2023		% Change		12/31/2022		% Change
Commercial real estate:
Commercial property	$	855,270	$	814,547	5.0	%	$	772,020	10.8	%
Business property		558,772		537,351	4.0	%		526,513	6.1	%
Multifamily		132,500		132,558	—	%		124,751	6.2	%
Construction		24,843		19,246	29.1	%		17,054	45.7	%
Total commercial real estate		1,571,385		1,503,702	4.5	%		1,440,338	9.1	%
Commercial and industrial		342,002		279,608	22.3	%		249,250	37.2	%
Consumer:
Residential mortgage		389,420		363,369	7.2	%		333,726	16.7	%
Other consumer		20,645		20,926	(1.3	)%		22,749	(9.2	)%
Total consumer		410,065		384,295	6.7	%		356,475	15.0	%
Loans held-for-investment		2,323,452		2,167,605	7.2	%		2,046,063	13.6	%
Loans held-for-sale		5,155		6,693	(23.0	)%		22,811	(77.4	)%
Total loans	$	2,328,607	$	2,174,298	7.1	%	$	2,068,874	12.6	%

Contacts

Timothy Chang

Executive Vice President & Chief Financial Officer

213-210-2000

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Business Wire

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Business Wire 25 January 2024

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