PCB BANCORP [PCB] Filings

10-Q 1 pcb-20240630.htm 10-Q pcb-20240630

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-38621

PCB BANCORP

(Exact name of registrant as specified in its charter)


California			20-8856755
(State or other jurisdiction of incorporation or organization)			(IRS Employer Identification No.)

3701 Wilshire Boulevard, Suite 900, Los Angeles, California 90010

(Address of principal executive offices) (Zip Code)

(213) 210-2000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☐

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes ☐ No ☒

As of July 31, 2024, the registrant had outstanding 14,254,024 shares of common stock.

PCB Bancorp and Subsidiary

Quarterly Report on Form 10-Q

June 30, 2024

Table of Contents


Part I - Financial Information

Item 1.	Consolidated Financial Statements	4

	Consolidated Balance Sheets - June 30 , 2024 (Unaudited) and December 31, 2023	4
	Consolidated Statements of Income (Unaudited) - Three and Six Months Ended June 30 , 2024 and 2023	5
	Consolidated Statements of Comprehensive Income (Unaudited) - Three and Six Months Ended June 3 0 , 2024 and 2023	6
	Consolidated Statements of Changes in Shareholders’ Equity (Unaudited) - Three and Six Months Ended June 3 0 , 2024 and 2023	7
	Consolidated Statements of Cash Flows (Unaudited) - Six Months Ended June 30 , 2024 and 2023	9
	Notes to Consolidated Financial Statements (Unaudited)	11

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	63

Item 4.	Controls and Procedures	64

Part II - Other Information

Item 1.	Legal Proceedings	65

Item 1A.	Risk Factors	65

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66

Item 3.	Defaults Upon Senior Securities	66

Item 4.	Mine Safety Disclosures	66

Item 5.	Other Information	66

Item 6.	Exhibits	67

Signatures		68

Forward-looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements which reflect current views of PCB Bancorp (collectively, with its consolidated subsidiary, the “Company,” “we,” “us” or “our”) with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “might,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “goal,” “target,” “aim,” “would,” and “annualized” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our business and industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

A number of important factors could cause our actual results to differ materially from those indicated in these forward-looking statements, but are not limited to, the following:

•business and economic conditions, particularly those affecting the financial services industry and our primary market areas and arising from recent inflationary pressures and governmental and societal responses thereto;

•our ability to successfully manage our credit risk and the sufficiency of our allowance for credit loss;

•factors that can impact the performance of our loan portfolio, including real estate values and liquidity in our primary market areas, the financial health of our commercial borrowers and the success of construction projects that we finance;

•governmental monetary and fiscal policies, and changes in market interest rates;

•the current inflationary environment and government and regulatory responses thereto;

•adverse developments at other banks, including bank failures, that impact general sentiment regarding the stability and liquidity of banks and may affect our customers’ behavior and our stock price;

•the significant portion of our loan portfolio that is comprised of real estate loans;

•our ability to attract and retain Korean-American customers;

•our ability to identify and address cyber-security risks, fraud and systems errors;

•our ability to effectively execute our strategic plan and manage our growth;

•changes in our senior management team and our ability to attract, motivate and retain qualified personnel;

•cyber-attacks, ransomware attacks, computer viruses or other malware that may breach the security of our websites or other systems to obtain unauthorized access to confidential information, destroy data, disable or degrade service, or sabotage our systems;

•liquidity issues, including fluctuations in the fair value and liquidity of the securities we hold and our ability to raise additional capital, if necessary;

•costs and obligations associated with operating as a public company;

•effects of competition from a wide variety of local, regional, national and other providers of financial, investment and insurance services;

•the effects of severe weather, natural disasters, acts of war or terrorism, health epidemics or pandemics (or expectations about them) and other external events on our business;

•the impact of any claims or legal actions to which we may be subject, including any effect on our reputation, and the availability of insurance coverage for such claims and actions; and

•changes in federal tax laws or policies.

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements and the risks described under “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 and our other documents that we file with the United States (“U.S.”) Securities and Exchange Commission (“SEC”). Because of these risks and other uncertainties, our actual future results, performance or achievement, or industry results, may be materially different from the results indicated by the forward looking statements in this report. In addition, our past results of operations are not necessarily indicative of our future results. You should not rely on any forward looking statements, which represent our beliefs, assumptions and estimates only as of the dates on which they were made, as predictions of future events. Any forward-looking statement speaks only as of the date on which it is initially made, and we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

Part I - Financial Information

Item 1 - Consolidated Financial Statements

PCB Bancorp and Subsidiary

Consolidated Balance Sheets

($ in thousands, except share data)


	June 30, 2024		December 31, 2023
	(Unaudited)
Assets
Cash and due from banks	$	23,247	$	26,518
Interest-bearing deposits in other financial institutions	154,383		215,824
Total cash and cash equivalents	177,630		242,342
Securities available-for-sale, at fair value (amortized cost of $162,590 and $156,175, respectively, and allowance for credit losses of $0 and $0, respectively, at June 30, 2024 and December 31, 2023)	148,009		143,323
Loans held-for-sale, at lower of cost or fair value	2,959		5,155
Loans held-for-investment, net of deferred fees and costs	2,449,074		2,323,452
Allowance for credit losses on loans	(28,747)		(27,533)
Net loans held-for-investment	2,420,327		2,295,919
Premises and equipment, net	8,923		5,999
Federal Home Loan Bank and other restricted stock, at cost	14,042		12,716
Other real estate owned, net	—		2,558
Bank-owned life insurance	31,281		30,817

Servicing assets	6,205		6,666
Operating lease assets	17,609		18,913
Accrued interest receivable	10,464		9,468
Other assets	15,515		15,630
Total assets	$	2,852,964	$	2,789,506
Liabilities and Shareholders’ Equity
Deposits:
Noninterest-bearing demand	$	543,538	$	594,673
Savings, NOW and money market accounts	483,928		421,203
Time deposits of $250,000 or less	758,956		760,034
Time deposits of more than $250,000	619,832		575,702
Total deposits	2,406,254		2,351,612
Other short-term borrowings	4,000		—
Federal Home Loan Bank advances	32,000		39,000
Deferred tax liabilities, net	577		876
Operating lease liabilities	18,939		20,137
Accrued interest payable and other liabilities	37,725		29,009
Total liabilities	2,499,495		2,440,634
Commitments and contingencies
Preferred stock, 10,000,000 shares authorized, no par value:
Series C, senior non-cumulative perpetual, $1,000 per share liquidation preference, 69,141 and 69,141 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively.	69,141		69,141
Common stock, 60,000,000 shares authorized, no par value; 14,254,024 and 14,260,440 shares issued and outstanding, respectively, and included 25,400 and 41,661 shares of unvested restricted stock, respectively, at June 30, 2024 and December 31, 2023	142,698		142,563
Retained earnings	151,781		146,092
Accumulated other comprehensive loss, net	(10,151)		(8,924)
Total shareholders’ equity	353,469		348,872
Total liabilities and shareholders’ equity	$	2,852,964	$	2,789,506

See Accompanying Notes to Consolidated Financial Statements (Unaudited)

PCB Bancorp and Subsidiary

Consolidated Statements of Income (Unaudited)

($ in thousands, except share and per share data)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Interest and dividend income:
Loans, including fees	$	40,626	$	32,960	$	79,877	$	64,189
Tax-exempt investment securities	29		33		57		67
Taxable investment securities	1,281		1,103		2,499		2,171
Other interest-earning assets	3,009		2,742		6,067		4,947
Total interest income	44,945		36,838		88,500		71,374
Interest expense:
Deposits	22,536		15,121		44,503		27,034
Borrowings	674		—		1,263		209
Total interest expense	23,210		15,121		45,766		27,243
Net interest income	21,735		21,717		42,734		44,131
Provision (reversal) for credit losses	259		197		1,349		(2,581)
Net interest income after provision (reversal) for credit losses	21,476		21,520		41,385		46,712
Noninterest income:
Service charges and fees on deposits	364		369		742		713
Loan servicing income	799		868		1,718		1,728
Bank-owned life insurance income	236		184		464		364
Gain on sale of loans	763		769		1,841		2,078

Other income	323		467		665		795
Total noninterest income	2,485		2,657		5,430		5,678
Noninterest expense:
Salaries and employee benefits	9,225		8,675		18,443		17,603
Occupancy and equipment	2,300		1,919		4,658		3,815
Professional fees	973		772		2,057		1,504
Marketing and business promotion	318		203		637		575
Data processing	495		380		897		792
Director fees and expenses	221		217		453		397
Regulatory assessments	327		382		625		537
Other expense	1,316		1,079		3,757		2,158
Total noninterest expense	15,175		13,627		31,527		27,381
Income before income taxes	8,786		10,550		15,288		25,009
Income tax expense	2,505		3,073		4,322		7,235
Net income	6,281		7,477		10,966		17,774
Preferred stock dividends	142		—		142		—
Net income available to common shareholders	$	6,139	$	7,477	$	10,824	$	17,774

Earnings per common share, basic	$	0.43	$	0.52	$	0.76	$	1.24
Earnings per common share, diluted	$	0.43	$	0.52	$	0.75	$	1.22

Weighted-average common shares outstanding, basic	14,237,083		14,271,200		14,236,251		14,344,769
Weighted-average common shares outstanding, diluted	14,312,949		14,356,776		14,323,171		14,468,981

See Accompanying Notes to Consolidated Financial Statements (Unaudited)

PCB Bancorp and Subsidiary

Consolidated Statements of Comprehensive Income (Unaudited)

($ in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2024		2023		2024		2023
Net income	$	6,281	$	7,477	$	10,966	$	17,774
Other comprehensive loss:
Unrealized loss on securities available-for-sale arising during the period	(102)		(2,340)		(1,729)		(312)
Income tax benefit related to items of other comprehensive loss	30		691		502		92
Total other comprehensive loss, net of tax	(72)		(1,649)		(1,227)		(220)
Total comprehensive income	$	6,209	$	5,828	$	9,739	$	17,554

See Accompanying Notes to Consolidated Financial Statements (Unaudited)

PCB Bancorp and Subsidiary

Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)

($ in thousands, except share and per share data)


	Three Months Ended
	Shares Outstanding		Shareholders’ Equity
	Preferred Stock	Common Stock	Preferred Stock		Common Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
Balance at April 1, 2023	69,141	14,297,870	$	69,141	$	143,356	$	133,415	$	(9,082)	$	336,830


Comprehensive income (loss)
Net income	—	—	—		—		7,477		—		7,477
Other comprehensive loss, net of tax	—	—	—		—		—		(1,649)		(1,649)






Share-based compensation expense	—	—	—		113		—		—		113
Stock options exercised	—	21,020	—		217		—		—		217
Cash dividends declared on common stock ($0.18 per share)	—	—	—		—		(2,577)		—		(2,577)
Balance at June 30, 2023	69,141	14,318,890	$	69,141	$	143,686	$	138,315	$	(10,731)	$	340,411

Balance at April 1, 2024	69,141	14,263,791	$	69,141	$	142,734	$	148,209	$	(10,079)	$	350,005
Comprehensive income (loss)
Net income	—	—	—		—		6,281		—		6,281
Other comprehensive loss, net of tax	—	—	—		—		—		(72)		(72)



Forfeiture of restricted stock	—	(420)	—		—		—		—		—

Repurchase of common stock	—	(14,947)	—		(222)		—		—		(222)
Share-based compensation expense	—	—	—		129		—		—		129
Stock options exercised	—	5,600	—		57		—		—		57
Preferred stock dividends	—	—	—		—		(142)		—		(142)
Cash dividends declared on common stock ($0.18 per share)	—	—	—		—		(2,567)		—		(2,567)
Balance at June 30, 2024	69,141	14,254,024	$	69,141	$	142,698	$	151,781	$	(10,151)	$	353,469

See Accompanying Notes to Consolidated Financial Statements (Unaudited)

PCB Bancorp and Subsidiary

Consolidated Statements of Changes in Shareholders’ Equity, Continued (Unaudited)

($ in thousands, except share and per share data)


	Six Months Ended
	Shares Outstanding		Shareholders’ Equity
	Preferred Stock	Common Stock	Preferred Stock		Common Stock		Retained Earnings		Accumulated Other Comprehensive Income (Loss)		Total
Balance at January 1, 2023	69,141	14,625,474	$	69,141	$	149,631	$	127,181	$	(10,511)	$	335,442
Cumulative effect adjustment upon adoption of ASC 326	—	—	—		—		(1,886)		—		(1,886)
Adjusted balance at January 1, 2023	69,141	14,625,474	69,141		149,631		125,295		(10,511)		333,556
Comprehensive income (loss)
Net income	—	—	—		—		17,774		—		17,774
Other comprehensive loss, net of tax	—	—	—		—		—		(220)		(220)





Repurchase of common stock	—	(385,381)	—		(6,845)		—		—		(6,845)
Share-based compensation expense	—	—	—		233		—		—		233
Stock options exercised	—	78,797	—		667		—		—		667
Cash dividends declared on common stock ($0.33 per share)	—	—	—		—		(4,754)		—		(4,754)
Balance at June 30, 2023	69,141	14,318,890	$	69,141	$	143,686	$	138,315	$	(10,731)	$	340,411

Balance at January 1, 2024	69,141	14,260,440	$	69,141	$	142,563	$	146,092	$	(8,924)	$	348,872
Comprehensive income (loss)
Net income	—	—	—		—		10,966		—		10,966
Other comprehensive loss, net of tax	—	—	—		—		—		(1,227)		(1,227)



Forfeiture of restricted stock	—	(420)	—		—		—		—		—

Repurchase of common stock	—	(14,947)	—		(222)		—		—		(222)
Share-based compensation expense	—	—	—		265		—		—		265
Stock options exercised	—	8,951	—		92		—		—		92
Preferred stock dividends	—	—	—		—		(142)		—		(142)
Cash dividends declared on common stock ($0.36 per share)	—	—	—		—		(5,135)		—		(5,135)
Balance at June 30, 2024	69,141	14,254,024	$	69,141	$	142,698	$	151,781	$	(10,151)	$	353,469

See Accompanying Notes to Consolidated Financial Statements (Unaudited)

PCB Bancorp and Subsidiary

Consolidated Statements of Cash Flows (Unaudited)

($ in thousands)


	Six Months Ended June 30,
	2024		2023
Cash flows from operating activities
Net income	$	10,966	$	17,774
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of premises and equipment	1,101		1,131
Net amortization of premiums on securities	82		116
Net accretion of discounts on loans	(1,364)		(1,422)
Net accretion of deferred loan fees	(673)		(422)
Amortization of servicing assets	893		873
Provision (reversal) for credit losses	1,349		(2,581)
Bank-owned life insurance income	(464)		(364)
Deferred tax expense (benefit)	813		(353)
Stock-based compensation	265		233

Gain on sale of loans	(1,841)		(2,078)
Originations of loans held-for-sale	(32,437)		(38,293)
Proceeds from sales of and principal collected on loans held-for-sale	37,052		46,793
Change in accrued interest receivable and other assets	(906)		4,545
Change in accrued interest payable and other liabilities	8,040		8,674
Net cash provided by operating activities	22,876		34,626
Cash flows from investing activities
Purchase of securities available-for-sale	(14,774)		(5,931)

Proceeds from maturities and paydowns of securities available-for-sale	8,277		8,693
Proceeds from principal collected on loans held-for-sale previously classified as held-for-investment	—		5,074
Net change in loans held-for-investment	(124,632)		(59,758)
Purchase of loans held-for-investment	—		(15,741)
Purchase of Federal Home Loan Bank stock	(1,326)		(2,533)
Proceeds from sale of other real estate owned	2,571		—
Purchases of premises and equipment	(4,000)		(632)

Net cash used in investing activities	(133,884)		(70,828)
Cash flows from financing activities
Net change in deposits	54,642		142,249
Net change in short-term Federal Home Loan Bank advances and other borrowings	36,000		(20,000)
Proceeds from long-term Federal Home Loan Bank advances	50,000		—
Repayment of long-term Federal Home Loan Bank advances	(89,000)		—
Stock options exercised	92		667




Repurchase of common stock	(222)		(6,845)
Cash dividends paid on preferred stock	(81)		—
Cash dividends paid on common stock	(5,135)		(4,754)
Net cash provided by financing activities	46,296		111,317
Net increase (decrease) in cash and cash equivalents	(64,712)		75,115
Cash and cash equivalents at beginning of period	242,342		147,031
Cash and cash equivalents at end of period	$	177,630	$	222,146

See Accompanying Notes to Consolidated Financial Statements (Unaudited)

PCB Bancorp and Subsidiary

Consolidated Statements of Cash Flows, Continued (Unaudited)

($ in thousands)


	Six Months Ended June 30,
	2024		2023
Supplemental disclosures of cash flow information:
Interest paid	$	42,138	$	17,299
Income taxes paid	2,407		1,706
Supplemental disclosures of non-cash investment activities:


Right of use assets obtained in exchange for lease obligations	$	—	$	226

See Accompanying Notes to Consolidated Financial Statements (Unaudited)

PCB Bancorp and Subsidiary

Notes to Consolidated Financial Statements (Unaudited)

Note 1 - Basis of Presentation and Significant Accounting Policies

Nature of Operations

PCB Bancorp is a bank holding company whose subsidiary is PCB Bank (the “Bank”), which is a single operating segment. As of June 30, 2024, the Bank operated 11 full-service branches in Los Angeles and Orange counties, California, three full-service branches on the East Coast (Bayside, New York; and Englewood Cliffs and Palisades Park, New Jersey), and two full-service branches in Texas (Carrollton and Dallas), and seven loan production offices (“LPOs”) in Los Angeles and Orange Counties, California; Annandale, Virginia; Atlanta, Georgia; Aurora, Colorado; Bellevue, Washington; and Carrollton, Texas. The Bank offers a broad range of loans, deposits, and other products and services predominantly to small and middle market businesses and individuals.

Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared pursuant to Article 10 of SEC Regulation S-X and other SEC rules and regulations for reporting on the Quarterly Report on Form 10-Q. Accordingly, certain disclosures required by U.S. generally accepted accounting principles (“GAAP”) are not included herein. These interim statements should be read in conjunction with the audited consolidated financial statements and notes included in the Annual Report on Form 10-K for the year ended December 31, 2023 filed by the Company with the SEC. The December 31, 2023 balance sheet presented herein has been derived from the audited financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC, but does not include all of the disclosures required by GAAP for complete financial statements.

In the opinion of management of the Company, the accompanying unaudited interim consolidated financial statements reflect all of the adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the consolidated financial condition and consolidated results of operations as of the dates and for the periods presented. Certain reclassifications have been made in the prior period financial statements to conform to the current period presentation. The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

Principles of Consolidation

The consolidated financial statements include the accounts of PCB Bancorp and its wholly owned subsidiary as of June 30, 2024 and December 31, 2023, and for the three and six months ended June 30, 2024 and 2023. Significant inter-company accounts and transactions have been eliminated in consolidation. Unless the context requires otherwise, all references to the Company include its wholly owned subsidiary.

Significant Accounting Policies

The accounting and reporting policies of the Company are based upon GAAP and conform to predominant practices within the banking industry. The Company has not made any significant changes in its critical accounting policies from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC.

Use of Estimates in the Preparation of Financial Statements

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. These estimates are subject to change and such change could have a material effect on the consolidated financial statements. Actual results may differ from those estimates.

Adopted Accounting Pronouncements

During the six months ended June 30, 2024, there were no significant accounting pronouncements applicable to the Company that were adopted or became effective.

Recent Accounting Pronouncements Not Yet Adopted

The following recently issued accounting pronouncement applicable to the Company has not yet been adopted:

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 780) - Improvements to Income Tax Disclosures.” The amendments in this ASU require public entities to disclose in their rate reconciliation table additional categories of information about federal, state and foreign income taxes and to provide more details about the reconciling items in some categories if items meet a quantitative threshold. This ASU also requires all entities to disclose income taxes paid, net of refunds, disaggregated by federal, state and foreign taxes for annual periods and to disaggregate the information by jurisdiction based on a quantitative threshold, among other things. This ASU is effective for the Company for fiscal years beginning after December 15, 2024 with early adoption permitted. The Company will update its income tax disclosure upon adoption.

Note 2 - Fair Value Measurements

Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value including a three-level valuation hierarchy, and expands disclosures about fair value measurements. Fair value is the exchange price that would be received for an asset or paid to transfer a liability (i.e. an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The three-level fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are defined as follows:

•Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

•Level 2: Significant observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

•Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

Fair value is measured on a recurring basis for certain assets and liabilities in which fair value is the primary basis of accounting. Additionally, fair value is used on a non-recurring basis to evaluate certain assets or liabilities for impairment or for disclosure purposes. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company records securities available-for-sale at fair value on a recurring basis. Certain other assets, such as loans held-for-sale, loans individually evaluated, servicing assets and other real estate owned (“OREO”) are recorded at fair value on a non-recurring basis. Non-recurring fair value measurements typically involve assets that are periodically evaluated for impairment and for which any impairment is recorded in the period in which the re-measurement is performed. The following is a description of valuation methodologies used for assets and liabilities recorded at fair value:

Investment securities: The fair values of securities available-for-sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1) or matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2). Management reviews the valuation techniques and assumptions used by the provider and determines that the provider uses widely accepted valuation techniques based on observable market inputs appropriate for the type of security being measured. Securities held-to-maturity are not measured at fair value on a recurring basis.

Loans held-for-sale: The Company records SBA loans held-for-sale, residential property loans held-for-sale and certain non-residential real estate loans held-for-sale at the lower of cost or fair value, on an aggregate basis. The Company obtains fair values from a third party independent valuation service provider. Loans held-for-sale accounted for at the lower of cost or fair value are considered to be recognized at fair value when they are recorded at below cost, on an aggregate basis, and are classified as Level 2.

Loans individually evaluated: Certain collateral-dependent loans individually evaluated are recognized at fair value when they reflect partial write-downs, through charge-offs or specific reserve allowances, that are based on the current appraised or market-quoted value of the underlying collateral. In some cases, the properties for which market quotes or appraised values have been obtained are located in areas where comparable sales data is limited, outdated, or unavailable. Fair value estimates for collateral-dependent loans individually evaluated are obtained from real estate brokers or other third-party consultants, and are classified as Level 3.

Other real estate owned: The Company initially records OREO at fair value at the time of foreclosure. Thereafter, OREO is recorded at the lower of cost or fair value based on their subsequent changes in fair value. The fair value of OREO is generally based on recent real estate appraisals adjusted for estimated selling costs. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments may be significant and result in a Level 3 classification due to the unobservable inputs used for determining fair value. Only OREO with a valuation allowance are considered to be carried at fair value.

Servicing Assets: Servicing assets represent the value associated with servicing loans that have been sold. The fair value for servicing assets is determined through discounted cash flow analysis and utilizes discount rates and prepayment speed assumptions as inputs. All of these assumptions require a significant degree of management estimation and judgment. The fair market valuation is performed on a quarterly basis for servicing assets. Servicing assets are accounted for at the lower of cost or market value and considered to be recognized at fair value when they are recorded at below cost and are classified as Level 3.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis as of dates indicated:


	Fair Value Measurement Level
($ in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
June 30, 2024
Securities available-for-sale:
U.S. government agency and U.S. government sponsored enterprise securities:
Residential mortgage-backed securities	$	—	$	110,953	$	—	$	110,953
Residential collateralized mortgage obligations	—		22,709		—		22,709
SBA loan pool securities	—		6,685		—		6,685
Municipal bonds	—		3,232		—		3,232
Corporate bonds	—		4,430		—		4,430
Total securities available-for-sale	—		148,009		—		148,009
Total assets measured at fair value on a recurring basis	$	—	$	148,009	$	—	$	148,009
Total liabilities measured at fair value on a recurring basis	$	—	$	—	$	—	$	—
December 31, 2023
Securities available-for-sale:
U.S. government agency and U.S. government sponsored enterprise securities:
Residential mortgage-backed securities	$	—	$	104,091	$	—	$	104,091
Residential collateralized mortgage obligations	—		24,173		—		24,173
SBA loan pool securities	—		7,450		—		7,450
Municipal bonds	—		3,329		—		3,329
Corporate bonds	—		4,280		—		4,280
Total securities available-for-sale	—		143,323		—		143,323
Total assets measured at fair value on a recurring basis	$	—	$	143,323	$	—	$	143,323
Total liabilities measured at fair value on a recurring basis	$	—	$	—	$	—	$	—

Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

The following table presents the Company’s assets and liabilities measured at fair value on a non-recurring basis as of dates indicated:


	Fair Value Measurement Level
($ in thousands)	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
June 30, 2024
Loans individually evaluated:
Business property	$	—	$	—	$	1,490	$	1,490
Commercial and industrial	$	—	$	—	$	18	$	18

Total loans individually evaluated	—		—		1,508		1,508


Total assets measured at fair value on a non-recurring basis	$	—	$	—	$	1,508	$	1,508
Total liabilities measured at fair value on a non-recurring basis	$	—	$	—	$	—	$	—
December 31, 2023
Loans individually evaluated:
Business property	$	—	$	—	$	425	$	425


Total loans individually evaluated	—		—		425		425
Total assets measured at fair value on a non-recurring basis	$	—	$	—	$	425	$	425
Total liabilities measured at fair value on a non-recurring basis	$	—	$	—	$	—	$	—

The following table presents quantitative information about level 3 fair value measurements for assets measured at fair value on a non-recurring basis as of the date indicated:

($ in thousands)

Fair Value

Valuation Technique(s)

Unobservable Input(s)

Weighted-Average

June 30, 2024

Loans individually evaluated:

Business property

1,490

Fair value of collateral

Selling cost

Commercial and industrial

Discounted cash flow

December 31, 2023

Loans individually evaluated:

Business property

425

Fair value of collateral

The following table presents gains or losses, including charge-offs, recoveries, and specific reserves recorded, for assets measured at fair value for the periods indicated:


	Three Months Ended June 30,				Six Months Ended June 30,
($ in thousands)	2024		2023		2024		2023
Loans individually evaluated:

Business property	$	31	$	(3)	$	44	$	(32)
Commercial and industrial	32		—		32		1,074




Net gains recognized	$	63	$	(3)	$	76	$	1,042

Fair Value of Financial Instruments

The following table presents the carrying value and estimated fair values of financial assets and liabilities as of the dates indicated:


	Carrying Value		Fair Value		Fair Value Measurements
($ in thousands)					Level 1		Level 2		Level 3
June 30, 2024
Financial assets:
Interest-bearing deposits in other financial institutions	$	154,383	$	154,383	$	154,383	$	—	$	—
Securities available-for-sale	148,009		148,009		—		148,009		—
Loans held-for-sale	2,959		3,192		—		3,192

PCB BANCORP [PCB] Filings
10-Q	[2024-08-08]
10-Q	[2024-05-07]
10-K	[2024-03-12]
10-Q	[2023-11-08]
10-Q	[2023-08-07]
10-Q	[2023-05-09]
10-K	[2023-03-09]
10-Q	[2022-11-03]
10-Q	[2022-08-04]
10-Q	[2022-05-05]
10-K	[2022-03-04]
10-Q	[2021-11-08]
10-Q	[2021-08-05]
10-Q	[2021-05-06]
10-K	[2021-03-11]
10-Q	[2020-11-06]
10-Q	[2020-08-10]
10-Q	[2020-05-11]
10-K	[2020-03-09]
10-Q	[2019-11-06]
10-Q	[2019-08-08]
10-Q	[2019-05-09]
10-K	[2019-03-18]
10-Q	[2018-11-08]
10-Q	[2018-09-20]
S-1	[2018-07-17]