PCB Bancorp (the “Company”) (NASDAQ: PCB), the holding company
of PCB Bank (the “Bank”), today reported net income of $10.3
million, or $0.70 per diluted common share, for the first quarter
of 2023, compared with $8.7 million, or $0.58 per diluted common
share, for the previous quarter and $10.2 million, or $0.67 per
diluted common share, for the year-ago quarter.
Q1 2023 Highlights
- Net income totaled $10.3 million, or $0.70 per diluted common
share, for the current quarter;
- Adopted Current Expected Credit Losses (“CECL”) accounting
standard effective January 1, 2023, resulting in a cumulative
effect adjustment to the allowance for credit losses (“ACL”)(1) of
$2.7 million;
- Recorded a provision (reversal) for credit losses(1),(2) of
$(2.8) million for the current quarter compared with $1.1 million
for the previous quarter and $(1.2) million for the year-ago
quarter;
- ACL to loans held-for-investment ratio was 1.18% at March 31,
2023 compared with 1.22% at December 31, 2022 and 1.22% at March
31, 2022;
- Net interest income was $22.4 million for the current quarter
compared with $24.3 million for the previous quarter and $20.0
million for the year-ago quarter. Net interest margin was 3.79% for
the current quarter compared with 4.15% for the previous quarter
and 3.87% for the year-ago quarter;
- Gain on sale of loans was $1.3 million for the current quarter
compared with $759 thousand for the previous quarter and $3.8
million for the year-ago quarter;
- Total assets were $2.50 billion at March 31, 2023, an increase
of $80.5 million, or 3.3%, from $2.42 billion at December 31, 2022
and an increase of $300.8 million, or 13.7%, from $2.20 billion at
March 31, 2022;
- Loans held-for-investment were $2.09 billion at March 31, 2023,
an increase of $46.4 million, or 2.3%, from $2.05 billion at
December 31, 2022 and an increase of $349.5 million, or 20.1%, from
$1.74 billion at March 31, 2022;
- Total deposits were $2.14 billion at March 31, 2023, an
increase of $95.7 million, or 4.7%, from $2.05 billion at December
31, 2022 and an increase of $231.3 million, or 12.1%, from $1.91
billion at March 31, 2022; and
- Completed the repurchase program that was announced on July 28,
2022. Repurchased and retired 747,938 shares of common stock at a
weighted-average price of $18.15 under this program.
“Our 2023 first quarter results, highlighted by our strong
earnings, continued strong capital position, stable deposit
balance, and disciplined credit culture, contributed to the
steadfast value of our franchise,” stated Henry Kim, President and
Chief Executive Officer. “We did not experience any meaningful
deposit outflows immediately following the closure of regional
banks. Instead, during the quarter, our deposit balances increased
$95.7 million, of which, $25.7 million represented an increase in
retail deposits.”
“Despite ongoing economic uncertainty, we began the year with
another solid quarterly financial results highlighted by $10.3
million net income, or $0.70 per diluted shares, a 2.8% increase in
tangible common equity per share to $18.72 from year-end, and a
common equity tier 1 capital ratio of 16.03% at the bank
level.”
“Although recent bank failures may disrupt the banking industry
for a period of time, we are seeing this as an opportunity for our
franchise to differentiate itself and provide a sanctuary to
customers to put their trust in PCB and in the community banks. Our
customers can rely on our ample liquidity and strong capital to
withstand any economic uncertainty, and we are well-positioned to
accommodate our customers’ lending and deposit needs,” concluded
Kim.
-------------------------------------------------------------------------------------
(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 on this report
(2)
Provision for credit losses on off-balance
sheet credit exposures of $57 thousand and $2 thousand,
respectively, for the previous and year-ago quarters were recorded
in Other Expense on Consolidated Statements of Income
(Unaudited).
Financial
Highlights (Unaudited)
($ in thousands, except per share
data)
Three Months
Ended
3/31/2023
12/31/2022
% Change
3/31/2022
% Change
Net income
$
10,297
$
8,702
18.3
%
$
10,240
0.6
%
Diluted earnings per common share
$
0.70
$
0.58
20.7
%
$
0.67
4.5
%
Net interest income
$
22,414
$
24,265
(7.6
)%
$
19,993
12.1
%
Provision (reversal) for credit losses
(1)
(2,778
)
1,149
NM
(1,191
)
133.2
%
Noninterest income
3,021
2,389
26.5
%
5,286
(42.8
)%
Noninterest expense
13,754
13,115
4.9
%
12,071
13.9
%
Return on average assets (2)
1.69
%
1.44
%
1.92
%
Return on average shareholders’ equity
(2)
12.46
%
10.31
%
16.01
%
Return on average tangible common equity
(“TCE”) (2),(3)
15.70
%
12.99
%
16.01
%
Net interest margin (2)
3.79
%
4.15
%
3.87
%
Efficiency ratio (4)
54.08
%
49.20
%
47.75
%
($ in thousands, except per share
data)
3/31/2023
12/31/2022
% Change
3/31/2022
% Change
Total assets
$
2,500,524
$
2,420,036
3.3
%
$
2,199,742
13.7
%
Net loans held-for-investment
2,067,748
2,021,121
2.3
%
1,721,757
20.1
%
Total deposits
2,141,689
2,045,983
4.7
%
1,910,379
12.1
%
Book value per common share (5)
$
23.56
$
22.94
$
17.47
TCE per common share (3)
$
18.72
$
18.21
$
17.47
Tier 1 leverage ratio (consolidated)
13.90
%
14.33
%
12.22
%
Total shareholders’ equity to total
assets
13.47
%
13.86
%
11.87
%
TCE to total assets (3), (6)
10.71
%
11.00
%
11.87
%
(1)
Provision for credit losses on off-balance
sheet credit exposures of $57 thousand and $2 thousand,
respectively, for the previous and year-ago quarters were recorded
in Other Expense on Consolidated Statements of Income (Unaudited).
See Provision (reversal) for credit losses included in the Result
of Operations discussion for additional information.
(2)
Ratios are presented on an annualized
basis.
(3)
Non-GAAP. See “Non-GAAP Measures” for
reconciliation of this measure to its most comparable GAAP
measure.
(4)
Calculated by dividing noninterest expense
by the sum of net interest income and noninterest income.
(5)
Calculated by dividing total shareholders’
equity by the number of outstanding common shares.
(6)
The Company did not have any intangible
asset component for the presented periods.
Result of Operations
(Unaudited)
Net Interest Income and Net Interest Margin
The following table presents the components of net interest
income for the periods indicated:
Three Months
Ended
($ in thousands)
3/31/2023
12/31/2022
% Change
3/31/2022
% Change
Interest income/expense on
Loans
$
31,229
$
28,786
8.5
%
$
20,190
54.7
%
Investment securities
1,102
957
15.2
%
476
131.5
%
Other interest-earning assets
2,205
1,833
20.3
%
228
867.1
%
Total interest-earning assets
34,536
31,576
9.4
%
20,894
65.3
%
Interest-bearing deposits
11,913
7,295
63.3
%
850
1,301.5
%
Borrowings
209
16
1,206.3
%
51
309.8
%
Total interest-bearing liabilities
12,122
7,311
65.8
%
901
1,245.4
%
Net interest income
$
22,414
$
24,265
(7.6
)%
$
19,993
12.1
%
Average balance of
Loans
$
2,072,415
$
2,004,220
3.4
%
$
1,773,376
16.9
%
Investment securities
142,079
134,066
6.0
%
123,230
15.3
%
Other interest-earning assets
186,809
182,018
2.6
%
198,918
(6.1
)%
Total interest-earning assets
$
2,401,303
$
2,320,304
3.5
%
$
2,095,524
14.6
%
Interest-bearing deposits
$
1,410,812
$
1,269,739
11.1
%
$
1,034,012
36.4
%
Borrowings
15,811
1,739
809.2
%
10,400
52.0
%
Total interest-bearing liabilities
$
1,426,623
$
1,271,478
12.2
%
$
1,044,412
36.6
%
Total funding (1)
$
2,114,198
$
2,043,110
3.5
%
$
1,885,038
12.2
%
Annualized average yield/cost
of
Loans
6.11
%
5.70
%
4.62
%
Investment securities
3.15
%
2.83
%
1.57
%
Other interest-earning assets
4.79
%
4.00
%
0.46
%
Total interest-earning assets
5.83
%
5.40
%
4.04
%
Interest-bearing deposits
3.42
%
2.28
%
0.33
%
Borrowings
5.36
%
3.65
%
1.99
%
Total interest-bearing liabilities
3.45
%
2.28
%
0.35
%
Net interest margin
3.79
%
4.15
%
3.87
%
Cost of total funding (1)
2.33
%
1.42
%
0.19
%
Supplementary information
Net accretion of discount on loans
$
671
$
869
(22.8
)%
$
908
(26.1
)%
Net amortization of deferred loan fees
$
175
$
167
4.8
%
$
1,165
(85.0
)%
(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 an increase in overall
interest rates on loans from the rising 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:
3/31/2023
12/31/2022
3/31/2022
% to Total Loans
Weighted-Average Contractual
Rate
% to Total Loans
Weighted-Average Contractual
Rate
% to Total Loans
Weighted-Average Contractual
Rate
Fixed rate loans
23.4
%
4.64
%
23.2
%
4.51
%
26.7
%
4.25
%
Hybrid rate loans
39.0
%
4.51
%
39.1
%
4.40
%
31.5
%
4.07
%
Variable rate loans
37.6
%
8.26
%
37.7
%
7.86
%
41.8
%
4.14
%
Investment Securities. The
increases in average yield for the current quarter compared with
the previous and year-ago quarters 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 compared with
the previous and year-ago quarters were primarily due to an
increased interest rate on cash held at the Federal Reserve Bank
(“FRB”) account.
Interest-Bearing Deposits. The
increases in average cost for the current quarter compared with the
previous and year-ago quarters were primarily due to an increase in
market rates.
Provision (Reversal) for Credit Losses
The following table presents a composition of provision
(reversal) for credit losses for the periods indicated:
Three Months
Ended
($ in thousands)
3/31/2023
12/31/2022
% Change
3/31/2022
% Change
Provision (reversal) for credit losses on
loans
$
(2,417
)
$
1,149
NM
$
(1,191
)
102.9
%
Provision (reversal) for credit losses on
off-balance sheet credit exposure (1)
(361
)
57
NM
2
NM
Total provision (reversal) for credit
losses
$
(2,778
)
$
1,206
NM
$
(1,189
)
133.6
%
(1)
Provision for credit losses on off-balance
sheet credit exposures for previous and year-ago quarters were
recorded in Other Expense on Consolidated Statements of Income
(Unaudited).
On January 1, 2023, the Company adopted the provisions of ASC
326 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 on this report. See CECL
Adoption and Allowance for Credit Losses sections included in the
Balance Sheet discussion for additional information.
The reversal for credit losses for the current quarter was
primarily due to net recoveries of $1.1 million and decreases in
classified and nonaccrual loans during the current quarter.
Noninterest Income
The following table presents the components of noninterest
income for the periods indicated:
Three Months
Ended
($ in thousands)
3/31/2023
12/31/2022
% Change
3/31/2022
% Change
Gain on sale of loans
$
1,309
$
759
72.5
%
$
3,777
(65.3
)%
Service charges and fees on deposits
344
352
(2.3
)%
303
13.5
%
Loan servicing income
860
734
17.2
%
700
22.9
%
Bank-owned life insurance income
180
181
(0.6
)%
172
4.7
%
Other income
328
363
(9.6
)%
334
(1.8
)%
Total noninterest income
$
3,021
$
2,389
26.5
%
$
5,286
(42.8
)%
Gain on Sale of Loans. The
following table presents information on gain on sale of loans for
the periods indicated:
Three Months
Ended
($ in thousands)
3/31/2023
12/31/2022
% Change
3/31/2022
% Change
Gain on sale of SBA loans
Sold loan balance
$
27,133
$
17,448
55.5
%
$
39,683
(31.6
)%
Premium received
2,041
1,102
85.2
%
4,206
(51.5
)%
Gain recognized
1,309
759
72.5
%
3,777
(65.3
)%
Loan Servicing Income. The
following table presents information on loan servicing income for
the periods indicated:
Three Months
Ended
($ in thousands)
3/31/2023
12/31/2022
% Change
3/31/2022
% Change
Loan servicing income
Servicing income received
$
1,284
$
1,284
—
%
$
1,230
4.4
%
Servicing assets amortization
(424
)
(550
)
(22.9
)%
(530
)
(20.0
)%
Loan servicing income
$
860
$
734
17.2
%
$
700
22.9
%
Underlying loans at end of period
$
540,502
$
531,095
1.8
%
$
531,183
1.8
%
The Company services SBA loans and certain residential property
loans that are sold to the secondary market.
Noninterest Expense
The following table presents the components of noninterest
expense for the periods indicated:
Three Months
Ended
($ in thousands)
3/31/2023
12/31/2022
% Change
3/31/2022
% Change
Salaries and employee benefits
$
8,928
$
7,879
13.3
%
$
8,595
3.9
%
Occupancy and equipment
1,896
1,897
(0.1
)%
1,397
35.7
%
Professional fees
732
607
20.6
%
403
81.6
%
Marketing and business promotion
372
724
(48.6
)%
207
79.7
%
Data processing
412
434
(5.1
)%
404
2.0
%
Director fees and expenses
180
176
2.3
%
169
6.5
%
Regulatory assessments
155
159
(2.5
)%
141
9.9
%
Other expense
1,079
1,239
(12.9
)%
755
42.9
%
Total noninterest expense
$
13,754
$
13,115
4.9
%
$
12,071
13.9
%
Salaries and Employee Benefits. The
increase for the current quarter compared with the previous quarter
was primarily due to increases in salaries and other employee
benefit expense, including bonus and vacation accruals, from an
increase in number of employees, as well as annual merit increases,
partially offset by a decrease in incentives tied to sales of Loan
Production Offices (“LPO”) originated SBA loans. 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 decreases in bonus accrual and
incentives tied to the sales of LPO originated SBA loans. The
number of full-time equivalent employees was 276, 272 and 256 as of
March 31, 2023, December 31, 2022 and March 31, 2022,
respectively.
Occupancy and Equipment. The
increase for the current quarter compared with the year-ago quarter
was primarily due to 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.
Professional Fees. The increases
for the current quarter and year were primarily due to an increase
in internal audit fees.
Marketing and Business Promotion.
The decreases for the current quarter compared with the previous
quarter was primarily due to the larger marketing activities and
advertisements for the Bank's name change to PCB Bank and new
branch openings during the previous quarter.
Other Expense. The decrease for the
current quarter compared with the previous quarter was primarily
due to an increased office expense for the new branches during the
previous quarter. The increase for the current quarter compared
with the year-ago quarter was primarily due to increases in office
expenses, other loan related expenses and armed guard expenses from
the branch network expansion. Provision for credit losses on
off-balance credit exposures of $57 thousand and $2 thousand was
included in other expense for the previous and year-ago quarters,
respectively, while the current quarter provision was included in
provision (reversal) for credit losses.
Balance Sheet
(Unaudited)
Total assets were $2.50 billion at March 31, 2023, an increase
of $80.5 million, or 3.3%, from $2.42 billion at December 31, 2022
and an increase of $300.8 million, or 13.7%, from $2.20 billion at
March 31, 2022. The increase for the current quarter was primarily
due to increases in cash and cash equivalents and loans
held-for-investment, partially offset by a decrease in loans
held-for-sale.
CECL Adoption
On January 1, 2023, the Company adopted the provisions of ASC
326 through the application of the modified retrospective
transition approach. The initial adjustment to the ACL is
reflective of expected lifetime credit losses associated with the
composition of financial assets within in the scope of ASC 326 as
of January 1, 2023, as well as management’s current expectation of
future economic conditions. The following table summarizes the
initial adjustment to the ACL as of January 1, 2023:
($ in thousands)
Pre-ASC 326 Adoption
Impact of ASC 326
Adoption
As Reported Under ASC
326
Assets
Commercial real estate loans
$
15,536
$
(610
)
$
14,926
Commercial and industrial loans
5,502
4,344
9,846
Consumer loans
3,904
(2,667
)
1,237
Total ACL on loans
24,942
1,067
26,009
Deferred tax assets
3,115
788
3,903
Liabilities
ACL on off-balance sheet credit exposures
(1)
$
299
$
1,607
$
1,906
Shareholders’ equity
Retained earnings
$
127,181
$
(1,886
)
$
125,295
(1)
ACL on off-balance sheet credit exposures
was recorded in Accrued Interest Payable and Other Liabilities on
Consolidated Balance Sheets (Unaudited).
In conjunction with the adoption of ASC 326, the Company made an
accounting policy election not to measure an ACL on accrued
interest receivables. When accrued interest receivable is deemed to
be uncollectable, the Company promptly reverses such balances
through current period interest income in the period they are
deemed uncollectable. Additionally, the Company has also elected
not to include the balance of accrued interest receivable in the
amortized cost basis of financial assets within the scope of ASC
326. Accrued interest receivable will continue to be presented
separately in the Consolidated Balance Sheets.
The measurement of the ACL on loans is performed by collectively
evaluating loans with similar risk characteristics using a
discounted cash flow approach. The discounted cash flow methodology
incorporates a probability of default (“PD”) and loss given default
(“LGD”) model, as well as reasonable and supportable forecasts, and
generates estimate of the contractual cash flows that are not
expected to be collected over the life of the loan.
As a part of the adoption of ASC 326, the Company reviewed loan
segmentation and revised certain loan segmentations for the
Company’s ACL model. Before the adoption of ASC 326, commercial
property and SBA property loans were separately presented and
represented 63.0% and 6.6% of loans held-for-investment at December
31, 2022, respectively. The Company re-divided these loan segments
into commercial property (non-owner occupied), business property
(owner occupied) and multifamily loans as these new loan segments
are determined to share similar characteristics under the Company’s
ACL model. In addition, four loan segments before the adoption of
ASC 326 (commercial term loans, commercial lines of credit, SBA
term loans and SBA PPP loans), which represented 12.2% of loans
held-for-investment at December 31, 2022, are combined into a
single loan segment, commercial and industrial loans, as these
loans are determined to share similar risk characteristics under
the Company’s ACL model. In this report, loan segments on loan
related disclosures for prior period comparisons are revised
accordingly in order to be comparable to the Company’s new loan
segmentations.
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)
3/31/2023
12/31/2022
% Change
3/31/2022
% Change
Commercial real estate:
Commercial property
$
780,282
$
772,020
1.1
%
$
646,764
20.6
%
Business property
521,965
526,513
(0.9
)%
536,107
(2.6
)%
Multifamily
127,012
124,751
1.8
%
96,630
31.4
%
Construction
15,930
17,054
(6.6
)%
9,522
67.3
%
Total commercial real estate
1,445,189
1,440,338
0.3
%
1,289,023
12.1
%
Commercial and industrial
267,674
249,250
7.4
%
217,048
23.3
%
Consumer:
Residential mortgage
356,967
333,726
7.0
%
215,132
65.9
%
Other consumer
22,612
22,749
(0.6
)%
21,752
4.0
%
Total consumer
379,579
356,475
6.5
%
236,884
60.2
%
Loans held-for-investment
2,092,442
2,046,063
2.3
%
1,742,955
20.1
%
Loans held-for-sale
14,352
22,811
(37.1
)%
18,340
(21.7
)%
Total loans
$
2,106,794
$
2,068,874
1.8
%
$
1,761,295
19.6
%
The increase in loans held-for-investment for the current
quarter was primarily due to new funding and advances on lines of
credit of $189.6 million and purchases of residential mortgage
loans of $15.7 million, partially offset by pay-downs and pay-offs
of $159.0 million.
The decrease in loans held-for-sale for the current quarter was
primarily due to sales of $27.1 million and pay-downs and pay-offs
of $4.1 million, partially offset by new funding of $22.7
million.
The following table presents a composition of off-balance sheet
credit exposure as of the dates indicated:
($ in thousands)
3/31/2023
12/31/2022
% Change
3/31/2022
% Change
Commercial property
$
6,811
$
7,006
(2.8
)%
$
8,319
(18.1
)%
Business property
12,307
8,396
46.6
%
10,518
17.0
%
Multifamily
4,500
4,500
—
%
5,500
(18.2
)%
Construction
16,563
18,211
(9.0
)%
6,528
153.7
%
Commercial and industrial
279,543
254,668
9.8
%
179,366
55.9
%
Other consumer
399
692
(42.3
)%
1,080
(63.1
)%
Total commitments to extend credit
320,123
293,473
9.1
%
211,311
51.5
%
Letters of credit
5,400
5,392
0.1
%
5,505
(1.9
)%
Total off-balance sheet credit
exposure
$
325,523
$
298,865
8.9
%
$
216,816
50.1
%
Allowance for Credit Losses
The following table presents activities in ACL for the periods
indicated:
Three Months
Ended
($ in thousands)
3/31/2023
12/31/2022
% Change
3/31/2022
% Change
ACL on loans
Balance at beginning of period
$
24,942
$
23,761
5.0
%
$
22,381
11.4
%
Impact of ASC 326 adoption
1,067
—
NM
—
NM
Charge-offs
—
(28
)
(100.0
)%
(12
)
(100.0
)%
Recoveries
1,102
60
1,736.7
%
20
5,410.0
%
Provision (reversal) for credit losses on
loans
(2,417
)
1,149
NM
(1,191
)
102.9
%
Balance at end of period
$
24,694
$
24,942
(1.0
)%
$
21,198
16.5
%
Percentage to loans held-for-investment
at end of period
1.18
%
1.22
%
1.22
%
ACL on off-balance sheet credit
exposure (1)
Balance at beginning of period
$
299
$
242
23.6
%
$
214
39.7
%
Impact of ASC 326 adoption
1,607
—
NM
—
NM
Provision (reversal) for credit losses on
off-balance sheet credit exposure
(361
)
57
NM
2
NM
Balance at end of period
$
1,545
$
299
416.7
%
$
216
615.3
%
(1)
ACL on off-balance sheet credit exposures
was recorded in Accrued Interest Payable and Other Liabilities on
Consolidated Balance Sheets (Unaudited).
Credit Quality
The following table presents a summary of non-performing loans,
non-performing assets and classified assets as of the dates
indicated:
($ in thousands)
3/31/2023
12/31/2022
% Change
3/31/2022
% Change
Nonaccrual loans
Commercial real estate:
Commercial property
$
—
$
—
—
%
$
166
(100.0
)%
Business property
2,904
2,985
(2.7
)%
567
412.2
%
Total commercial real estate
2,904
2,985
(2.7
)%
733
296.2
%
Commercial and industrial
11
—
—
%
199
(94.5
)%
Consumer:
Residential mortgage
—
372
(100.0
)%
461
(100.0
)%
Other consumer
45
3
1,400.0
%
25
80.0
%
Total consumer
45
375
(88.0
)%
486
(90.7
)%
Total nonaccrual loans
held-for-investment
2,960
3,360
(11.9
)%
1,418
108.7
%
Loans past due 90 days or more and still
accruing
—
—
—
%
—
—
%
Non-performing loans (“NPLs”)
held-for-investment
2,960
3,360
(11.9
)%
1,418
108.7
%
NPLs held-for-sale
—
4,000
(100.0
)%
—
—
%
Total NPLs
2,960
7,360
(59.8
)%
1,418
108.7
%
Other real estate owned (“OREO”)
—
—
—
%
—
—
%
Non-performing assets (“NPAs”)
$
2,960
$
7,360
(59.8
)%
$
1,418
108.7
%
Loans past due and still accruing
Past due 30 to 59 days
$
779
$
47
1,557.4
%
$
119
554.6
%
Past due 60 to 89 days
13
87
(85.1
)%
1
1,200.0
%
Past due 90 days or more
—
—
—
%
—
—
%
Total loans past due and still
accruing
$
792
$
134
491.0
%
$
120
560.0
%
Special mention loans
$
5,527
$
6,857
(19.4
)%
$
5,562
(0.6
)%
Classified assets
Classified loans held-for-investment
$
6,060
$
6,211
(2.4
)%
$
5,377
12.7
%
Classified loans held-for-sale
—
4,000
(100.0
)%
—
—
%
OREO
—
—
—
%
—
—
%
Classified assets
$
6,060
$
10,211
(40.7
)%
$
5,377
12.7
%
NPLs held-for-investment to loans
held-for-investment
0.14
%
0.16
%
0.08
%
NPAs to total assets
0.12
%
0.30
%
0.06
%
Classified assets to total assets
0.24
%
0.42
%
0.24
%
During the current quarter, NPLs held-for-sale of $4.0 million
were paid-off.
Investment Securities
Total investment securities were $144.7 million at March 31,
2023, an increase of $2.8 million, or 2.0%, from $141.9 million at
December 31, 2022 and an increase of $13.3 million, or 10.1%, from
$131.3 million at March 31, 2022. The increase for the current
quarter was primarily due to purchases of $4.9 million and a fair
value increase of $2.0 million, partially offset by principal
pay-downs and calls of $4.1 million and net premium amortization of
$57 thousand.
Deposits
The following table presents the Company’s deposit mix as of the
dates indicated:
3/31/2023
12/31/2022
3/31/2022
($ in thousands)
Amount
% to Total
Amount
% to Total
Amount
% to Total
Noninterest-bearing demand deposits
$
653,970
30.5
%
$
734,989
35.9
%
$
891,797
46.7
%
Interest-bearing deposits
Savings
7,584
0.4
%
8,579
0.4
%
15,037
0.8
%
NOW
15,696
0.7
%
11,405
0.6
%
17,543
0.9
%
Retail money market accounts
436,906
20.3
%
494,749
24.1
%
431,057
22.5
%
Brokered money market accounts
1
0.1
%
8
0.1
%
1
0.1
%
Retail time deposits of
$250,000 or less
356,049
16.6
%
295,354
14.4
%
246,100
12.8
%
More than $250,000
454,464
21.3
%
353,876
17.3
%
173,844
9.1
%
State and brokered time deposits
217,019
10.1
%
147,023
7.2
%
135,000
7.1
%
Total interest-bearing deposits
1,487,719
69.5
%
1,310,994
64.1
%
1,018,582
53.3
%
Total deposits
$
2,141,689
100.0
%
$
2,045,983
100.0
%
$
1,910,379
100.0
%
Estimated total deposits not covered by
deposit insurance
$
1,019,689
47.6
%
$
1,062,111
51.9
%
$
1,015,255
53.1
%
The decrease in noninterest-bearing demand deposits was
primarily due to strong deposit market competition and the
migration of noninterest-bearing demand deposits to money market
accounts and time deposits attributable to the rising market rates.
To retain existing and attract new customers, the Bank offers
competitive rates on deposit products in the rising interest rate
environment.
The increase in retail time deposits for the current quarter was
primarily due to new accounts of $300.3 million, renewals of the
matured accounts of $117.4 million and balance increases of $6.9
million, partially offset by matured and closed accounts of $263.3
million.
Liquidity
The following table presents a summary of the Company’s
liquidity position as of March 31, 2023:
($ in thousands)
3/31/2023
12/31/2022
% Change
Cash and cash equivalents
$
190,519
$
147,031
29.6
%
Cash and cash equivalents to total
assets
7.6
%
6.1
%
Available borrowing capacity
FHLB advances
$
604,999
$
561,745
7.7
%
Federal Reserve Discount Window
29,776
23,902
24.6
%
Overnight federal funds lines
65,000
65,000
—
%
Total
$
699,775
$
650,647
7.6
%
Total available borrowing capacity to
total assets
28.0
%
26.9
%
During the current quarter, the Company increased cash and cash
equivalents by $43.5 million, or 29.6%, to $190.5 million and
available borrowing capacity by $49.1 million, or 7.6%, to $699.8
million. As of March 31, 2023, the Company's cash and cash
equivalents and available borrowing capacity cover approximately
87.3% of deposits not covered by deposit insurance compared to
75.1% at December 31, 2022.
Shareholders’ Equity
Shareholders’ equity was $336.8 million at March 31, 2023, an
increase of $1.4 million, or 0.4%, from $335.4 million at December
31, 2022 and an increase of $75.8 million, or 29.0%, from $261.1
million at March 31, 2022. The increase for the current quarter was
primarily due to net income, partially offset by cash dividends
declared on common stock of $2.2 million and repurchase of 385,381
shares of common stock at a weighted-average price of $17.76,
totaling $6.8 million.
Stock Repurchase
On July 28, 2022, the Company’s Board of Directors approved a
repurchase program authorizing for the repurchase of up to 5% of
the Company’s outstanding common stock as of the date of the board
meeting, which represented 747,938 shares, through February 1,
2023. On January 26, 2023, the Company announced the amendment to
the repurchase program, which extended the program expiration from
February 1, 2023 to February 1, 2024. The Company completed the
repurchase program during the current quarter. Under this
repurchase program, the Company repurchased and retired 747,938
shares of common stock at a weighted-average price of $18.15 per
share, totaling $13.6 million.
Issuance of Preferred Stock Under the
Emergency Capital Investment Program
On May 24, 2022, the Company issued 69,141 shares of Senior
Non-Cumulative Perpetual Preferred Stock, Series C, liquidation
preference of $1,000 per share (“Series C Preferred Stock”) for the
capital investment of $69.1 million from the U.S. Treasury under
the Emergency Capital Investment Program (“ECIP”). ECIP investment
is treated as tier 1 capital for regulatory capital purposes.
The Series C Preferred Stock bears no dividend for the first 24
months following the investment date. Thereafter, the dividend rate
will be adjusted based on the lending growth criteria listed in the
terms of the ECIP investment with an annual dividend rate up to 2%.
After the tenth anniversary of the investment date, the dividend
rate will be fixed based on average annual amount of lending in
years 2 through 10.
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 the dates indicated:
3/31/2023
12/31/2022
3/31/2022
Well Capitalized
Requirements
PCB Bancorp
Common tier 1 capital (to risk-weighted
assets)
13.09
%
13.29
%
14.77
%
N/A
Total capital (to risk-weighted
assets)
17.61
%
17.83
%
15.97
%
N/A
Tier 1 capital (to risk-weighted
assets)
16.37
%
16.62
%
14.77
%
N/A
Tier 1 capital (to average assets)
13.90
%
14.33
%
12.22
%
N/A
PCB Bank
Common tier 1 capital (to risk-weighted
assets)
16.03
%
16.30
%
14.43
%
6.5
%
Total capital (to risk-weighted
assets)
17.27
%
17.52
%
15.63
%
10.0
%
Tier 1 capital (to risk-weighted
assets)
16.03
%
16.30
%
14.43
%
8.0
%
Tier 1 capital (to average assets)
13.62
%
14.05
%
11.94
%
5.0
%
About PCB Bancorp
PCB Bancorp is the bank holding company for PCB Bank, a
California state chartered bank, offering a full suite of
commercial banking services to small to medium-sized businesses,
individuals and professionals, primarily in Southern California,
and predominantly in Korean-American and other minority
communities.
Cautionary Note Regarding
Forward-Looking Statements
This press release contains forward-looking statements. These
forward-looking statements represent plans, estimates, objectives,
goals, guidelines, expectations, intentions, projections and
statements of our beliefs concerning future events, business plans,
objectives, expected operating results and the assumptions upon
which those statements are based. Forward-looking statements
include without limitation, any statement that may predict,
forecast, indicate or imply future results, performance or
achievements, and are typically identified with words such as
“may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,”
“estimate,” “expect,” “aim,” “intend,” “plan,” or words or phases
of similar meaning. We caution that the forward-looking statements
are based largely on our expectations and are subject to a number
of known and unknown risks and uncertainties that are subject to
change based on factors which are, in many instances, beyond our
control, including but not limited to general economic uncertainty
in the United States and abroad, the impact of inflation, changes
in interest rates (including actions taken by the Federal Reserve
to address inflation), deposit flows, and real estate values, and
their corresponding impact on our customers, and the network and
data incident discovered on August 30, 2021. These and other
important factors are detailed in various securities law filings
made periodically by the Company, copies of which are available
from the Company without charge. Actual results, performance or
achievements could differ materially from those contemplated,
expressed, or implied by the forward-looking statements. Any
forward-looking statements presented herein are made only as of the
date of this press release, and we do not undertake any obligation
to update or revise any forward-looking statements to reflect
changes in assumptions, the occurrence of unanticipated events, or
otherwise, except as required by law.
PCB Bancorp and Subsidiary
Consolidated Balance Sheets
(Unaudited)
($ in thousands, except share and per
share data)
3/31/2023
12/31/2022
% Change
3/31/2022
% Change
Assets
Cash and due from banks
$
25,801
$
23,202
11.2
%
$
19,693
31.0
%
Interest-bearing deposits in other
financial institutions
164,718
123,829
33.0
%
230,519
(28.5
)%
Total cash and cash equivalents
190,519
147,031
29.6
%
250,212
(23.9
)%
Securities available-for-sale, at fair
value
144,665
141,863
2.0
%
131,345
10.1
%
Loans held-for-sale
14,352
22,811
(37.1
)%
18,340
(21.7
)%
Loans held-for-investment
2,092,442
2,046,063
2.3
%
1,742,955
20.1
%
Allowance for credit losses on loans
(24,694
)
(24,942
)
(1.0
)%
(21,198
)
16.5
%
Net loans held-for-investment
2,067,748
2,021,121
2.3
%
1,721,757
20.1
%
Premises and equipment, net
6,473
6,916
(6.4
)%
3,106
108.4
%
Federal Home Loan Bank and other bank
stock
10,183
10,183
—
%
8,577
18.7
%
Bank-owned life insurance
30,244
30,064
0.6
%
29,530
2.4
%
Deferred tax assets, net
3,753
3,115
20.5
%
11,895
(68.4
)%
Servicing assets
7,345
7,347
—
%
7,533
(2.5
)%
Operating lease assets
5,854
6,358
(7.9
)%
6,511
(10.1
)%
Accrued interest receivable
7,998
7,472
7.0
%
5,050
58.4
%
Other assets
11,390
15,755
(27.7
)%
5,886
93.5
%
Total assets
$
2,500,524
$
2,420,036
3.3
%
$
2,199,742
13.7
%
Liabilities
Deposits
Noninterest-bearing demand
$
653,970
$
734,989
(11.0
)%
$
891,797
(26.7
)%
Savings, NOW and money market accounts
460,187
514,741
(10.6
)%
463,638
(0.7
)%
Time deposits of $250,000 or less
513,068
382,377
34.2
%
281,100
82.5
%
Time deposits of more than $250,000
514,464
413,876
24.3
%
273,844
87.9
%
Total deposits
2,141,689
2,045,983
4.7
%
1,910,379
12.1
%
Federal Home Loan Bank advances
—
20,000
(100.0
)%
10,000
(100.0
)%
Operating lease liabilities
6,238
6,809
(8.4
)%
7,176
(13.1
)%
Accrued interest payable and other
liabilities
15,767
11,802
33.6
%
11,129
41.7
%
Total liabilities
2,163,694
2,084,594
3.8
%
1,938,684
11.6
%
Commitments and contingent liabilities
Shareholders’ equity
Preferred stock
69,141
69,141
—
%
—
—
%
Common stock
143,356
149,631
(4.2
)%
155,614
(7.9
)%
Retained earnings
133,415
127,181
4.9
%
109,142
22.2
%
Accumulated other comprehensive loss,
net
(9,082
)
(10,511
)
(13.6
)%
(3,698
)
145.6
%
Total shareholders’ equity
336,830
335,442
0.4
%
261,058
29.0
%
Total liabilities and shareholders’
equity
$
2,500,524
$
2,420,036
3.3
%
$
2,199,742
13.7
%
Outstanding common shares
14,297,870
14,625,474
14,944,663
Book value per common share (1)
$
23.56
$
22.94
$
17.47
TCE per common share (2)
$
18.72
$
18.21
$
17.47
Total loan to total deposit ratio
98.37
%
101.12
%
92.20
%
Noninterest-bearing deposits to total
deposits
30.54
%
35.92
%
46.68
%
(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.
(2)
Non-GAAP. See “Non-GAAP Measures” for
reconciliation of this measure to its most comparable GAAP
measure.
PCB Bancorp and Subsidiary
Consolidated Statements of Income
(Unaudited)
($ in thousands, except share and per
share data)
Three Months
Ended
3/31/2023
12/31/2022
% Change
3/31/2022
% Change
Interest and dividend income
Loans, including fees
$
31,229
$
28,786
8.5
%
$
20,190
54.7
%
Investment securities
1,102
957
15.2
%
476
131.5
%
Other interest-earning assets
2,205
1,833
20.3
%
228
867.1
%
Total interest income
34,536
31,576
9.4
%
20,894
65.3
%
Interest expense
Deposits
11,913
7,295
63.3
%
850
1,301.5
%
Other borrowings
209
16
1,206.3
%
51
309.8
%
Total interest expense
12,122
7,311
65.8
%
901
1,245.4
%
Net interest income
22,414
24,265
(7.6
)%
19,993
12.1
%
Provision (reversal) for credit losses
(2,778
)
1,149
NM
(1,191
)
133.2
%
Net interest income after provision
(reversal) for credit losses
25,192
23,116
9.0
%
21,184
18.9
%
Noninterest income
Gain on sale of loans
1,309
759
72.5
%
3,777
(65.3
)%
Service charges and fees on deposits
344
352
(2.3
)%
303
13.5
%
Loan servicing income
860
734
17.2
%
700
22.9
%
Bank-owned life insurance income
180
181
(0.6
)%
172
4.7
%
Other income
328
363
(9.6
)%
334
(1.8
)%
Total noninterest income
3,021
2,389
26.5
%
5,286
(42.8
)%
Noninterest expense
Salaries and employee benefits
8,928
7,879
13.3
%
8,595
3.9
%
Occupancy and equipment
1,896
1,897
(0.1
)%
1,397
35.7
%
Professional fees
732
607
20.6
%
403
81.6
%
Marketing and business promotion
372
724
(48.6
)%
207
79.7
%
Data processing
412
434
(5.1
)%
404
2.0
%
Director fees and expenses
180
176
2.3
%
169
6.5
%
Regulatory assessments
155
159
(2.5
)%
141
9.9
%
Other expense
1,079
1,239
(12.9
)%
755
42.9
%
Total noninterest expense
13,754
13,115
4.9
%
12,071
13.9
%
Income before income taxes
14,459
12,390
16.7
%
14,399
0.4
%
Income tax expense
4,162
3,688
12.9
%
4,159
0.1
%
Net income
$
10,297
$
8,702
18.3
%
$
10,240
0.6
%
Earnings per common share
Basic
$
0.71
$
0.59
$
0.69
Diluted
$
0.70
$
0.58
$
0.67
Average common shares
Basic
14,419,155
14,700,010
14,848,014
Diluted
14,574,929
14,904,106
15,141,693
Dividend paid per common share
$
0.15
$
0.15
$
0.15
Return on average assets (1)
1.69
%
1.44
%
1.92
%
Return on average shareholders’ equity
(1)
12.46
%
10.31
%
16.01
%
Return on average TCE (1), (2)
15.70
%
12.99
%
16.01
%
Efficiency ratio (3)
54.08
%
49.20
%
47.75
%
(1)
Ratios are presented on an annualized
basis.
(2)
Non-GAAP. See “Non-GAAP Measures” for
reconciliation of this measure to its most comparable GAAP
measure.
(3)
The ratios are calculated by dividing
noninterest expense by the sum of net interest income and
noninterest income.
PCB Bancorp and Subsidiary
Average Balance, Average Yield, and
Average Rate (Unaudited)
($ in thousands)
Three Months Ended
3/31/2023
12/31/2022
3/31/2022
Average Balance
Interest Income/
Expense
Avg. Yield/Rate(6)
Average Balance
Interest Income/
Expense
Avg. Yield/Rate(6)
Average Balance
Interest Income/
Expense
Avg. Yield/Rate(6)
Assets
Interest-earning assets
Total loans (1)
$
2,072,415
$
31,229
6.11
%
$
2,004,220
$
28,786
5.70
%
$
1,773,376
$
20,190
4.62
%
Mortgage-backed securities
97,578
683
2.84
%
90,346
585
2.57
%
84,223
307
1.48
%
Collateralized mortgage obligation
26,743
256
3.88
%
25,570
221
3.43
%
18,242
48
1.07
%
SBA loan pool securities
9,027
82
3.68
%
9,545
71
2.95
%
10,095
38
1.53
%
Municipal bonds (2)
4,221
34
3.27
%
4,050
33
3.23
%
5,632
36
2.59
%
Corporate bonds
4,510
47
4.23
%
4,555
47
4.09
%
5,038
47
3.78
%
Other interest-earning assets
186,809
2,205
4.79
%
182,018
1,833
4.00
%
198,918
228
0.46
%
Total interest-earning assets
2,401,303
34,536
5.83
%
2,320,304
31,576
5.40
%
2,095,524
20,894
4.04
%
Noninterest-earning assets
Cash and due from banks
21,155
21,139
20,385
ACL on loans
(26,757
)
(23,800
)
(22,377
)
Other assets
75,175
78,069
67,600
Total noninterest-earning assets
69,573
75,408
65,608
Total assets
$
2,470,876
$
2,395,712
$
2,161,132
Liabilities and Shareholders’
Equity
Interest-bearing liabilities
Deposits
NOW and money market accounts
$
485,962
3,445
2.87
%
$
540,312
2,852
2.09
%
$
431,981
313
0.29
%
Savings
8,099
5
0.25
%
10,692
3
0.11
%
15,644
2
0.05
%
Time deposits
916,751
8,463
3.74
%
718,735
4,440
2.45
%
586,387
535
0.37
%
Total interest-bearing deposits
1,410,812
11,913
3.42
%
1,269,739
7,295
2.28
%
1,034,012
850
0.33
%
Other borrowings
15,811
209
5.36
%
1,739
16
3.65
%
10,400
51
1.99
%
Total interest-bearing liabilities
1,426,623
12,122
3.45
%
1,271,478
7,311
2.28
%
1,044,412
901
0.35
%
Noninterest-bearing liabilities
Noninterest-bearing demand
687,575
771,632
840,626
Other liabilities
21,509
17,770
16,727
Total noninterest-bearing liabilities
709,084
789,402
857,353
Total liabilities
2,135,707
2,060,880
1,901,765
Total shareholders’ equity
335,169
334,832
259,367
Total liabilities and shareholders’
equity
$
2,470,876
$
2,395,712
$
2,161,132
Net interest income
$
22,414
$
24,265
$
19,993
Net interest spread (3)
2.38
%
3.12
%
3.69
%
Net interest margin (4)
3.79
%
4.15
%
3.87
%
Total deposits
$
2,098,387
$
11,913
2.30
%
$
2,041,371
$
7,295
1.42
%
$
1,874,638
$
850
0.18
%
Total funding (5)
$
2,114,198
$
12,122
2.33
%
$
2,043,110
$
7,311
1.42
%
$
1,885,038
$
901
0.19
%
(1)
Total loans include both loans
held-for-sale and loans held-for-investment..
(2)
The yield on municipal bonds has not been
computed on a tax-equivalent basis.
(3)
Net interest spread is calculated by
subtracting average rate on interest-bearing liabilities from
average yield on interest-earning assets.
(4)
Net interest margin is calculated by
dividing annualized net interest income by average interest-earning
assets.
(5)
Total funding is the sum of
interest-bearing liabilities and noninterest-bearing deposits. The
cost of total funding is calculated as annualized total interest
expense divided by average total funding.
(6)
Annualized.
PCB Bancorp and Subsidiary
Non-GAAP Measures
($ in thousands)
Adjusted ACL on loans to loans held-for-investment
ratio
Adjusted ACL on loans to loans held-for-investment ratio is
calculated by removing SBA PPP loans from loans held-for-investment
from the ACL on loans to loans held-for-investment ratio
calculation. Management believed this non-GAAP measure enhanced
comparability to prior periods and provided supplemental
information regarding the Company’s credit trends; however, this
non-GAAP measure had become less significant as most of SBA PPP
loan balance were forgiven or paid off during 2022. This disclosure
should not be viewed as a substitute for results determined in
accordance with GAAP, nor is it necessarily comparable to non-GAAP
performance measures that may be presented by other companies. The
following table provides reconciliations of this non-GAAP measure
with financial measure defined by GAAP.
($ in thousands)
3/31/2023
12/31/2022
3/31/2022
Loans held-for-investment
(a)
$
2,092,442
$
2,046,063
$
1,742,955
Less: SBA PPP loans
(b)
1,100
1,197
22,926
Loans held-for-investment, excluding SBA
PPP loans
(c)=(a)-(b)
$
2,091,342
$
2,044,866
$
1,720,029
ACL on Loans
(d)
$
24,694
$
24,942
$
21,198
ACL on loans to loans held-for-investment
ratio
(d)/(a)
1.18
%
1.22
%
1.22
%
Adjusted ACL on loans to loans
held-for-investment ratio
(d)/(c)
1.18
%
1.22
%
1.23
%
Return on average tangible common equity, tangible common
equity per common share and tangible common equity to total assets
ratios
The Company's TCE is calculated by subtracting preferred stock
from stockholders’ equity. The Company does not have any intangible
assets for the presented periods. Return on average TCE, TCE per
common share, and TCE to total assets constitute supplemental
financial information determined by methods other than in
accordance with GAAP. These non-GAAP measures are used by
management in its analysis of the Company's performance. This
disclosure should not be viewed as a substitute for results
determined in accordance with GAAP, nor is it necessarily
comparable to non-GAAP performance measures that may be presented
by other companies. The following tables provide reconciliations of
the non-GAAP measures with financial measures defined by GAAP.
($ in thousands)
Three Months
Ended
3/31/2023
12/31/2022
3/31/2022
Average total shareholders' equity
(a)
$
335,169
$
334,832
$
259,367
Less: average preferred stock
(b)
69,141
69,141
—
Average TCE
(c)=(a)-(b)
$
266,028
$
265,691
$
259,367
Net income
(d)
$
10,297
$
8,702
$
10,240
Return on average shareholder's equity
(1)
(d)/(a)
12.46
%
10.31
%
16.01
%
Return on average TCE (1)
(d)/(c)
15.70
%
12.99
%
16.01
%
(1) Annualized.
($ in thousands, except per share
data)
3/31/2023
12/31/2022
3/31/2022
Total shareholders' equity
(a)
$
336,830
$
335,442
$
261,058
Less: preferred stock
(b)
69,141
69,141
—
TCE
(c)=(a)-(b)
$
267,689
$
266,301
$
261,058
Outstanding common shares
(d)
14,297,870
14,625,474
14,944,663
Book value per common share
(a)/(d)
$
23.56
$
22.94
$
17.47
TCE per common share
(c)/(d)
$
18.72
$
18.21
$
17.47
Total assets
(e)
$
2,500,524
$
2,420,036
$
2,199,742
Total shareholders' equity to total
assets
(a)/(e)
13.47
%
13.86
%
11.87
%
TCE to total assets
(c)/(e)
10.71
%
11.00
%
11.87
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230421005103/en/
Timothy Chang Executive Vice President & Chief Financial
Officer 213-210-2000
PCB Bancorp (NASDAQ:PCB)
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