Los Angeles, California - October 27, 2022 - PCB Bancorp (the “Company”) (NASDAQ: PCB), the holding company of PCB Bank (the “Bank”), today reported net income of $7.0 million, or $0.46 per diluted common share, for the third quarter of 2022, compared with $9.1 million, or $0.60 per diluted common share, for the previous quarter and $11.0 million, or $0.73 per diluted common share, for the year-ago quarter.

•Net income totaled $7.0 million, or $0.46 per diluted common share, for the current quarter;

◦The Company recorded a provision (reversal) for loan losses of $3.8 million for the current quarter compared with $(109) thousand for the previous quarter and $(1.1) million for the year-ago quarter.

◦Allowance for loan losses (“Allowance”) to loans held-for-investment(1) ratio was 1.21% at September 30, 2022 compared with 1.15% at June 30, 2022, 1.29% at December 31, 2021 and 1.39% at September 30, 2021. Adjusted Allowance to loans held-for-investment ratio(2) was 1.21% at September 30, 2022 compared with 1.15% at June 30, 2022, 1.34% at December 31, 2021 and 1.48% at September 30, 2021.

◦Net interest income was $24.0 million for the current quarter compared with $21.4 million for the previous quarter and $20.2 million for the year-ago quarter. Net interest margin was 4.25% for the current quarter compared with 4.01% for the previous quarter and 3.93% for the year-ago quarter.

◦Gain on sale of loans was $1.4 million for the current quarter compared with $2.0 million for the previous quarter and $4.3 million for the year-ago quarter.

•Total assets were $2.33 billion at September 30, 2022, a decrease of $17.5 million, or 0.7%, from $2.34 billion at June 30, 2022, but an increase of $177.3 million, or 8.2%, from $2.15 billion at December 31, 2021 and an increase of $222.4 million, or 10.6%, from $2.10 billion at September 30, 2021;

•Loans held-for-investment were $1.96 billion at September 30, 2022, an increase of $126.2 million, or 6.9%, from $1.83 billion at June 30, 2022, an increase of $227.0 million, or 13.1%, from $1.73 billion at December 31, 2021, and an increase of $251.4 million, or 14.7%, from $1.71 billion at September 30, 2021;

•Total deposits were $1.98 billion at September 30, 2022, a decrease of $19.5 million, or 1.0%, from $2.00 billion at June 30, 2022, but an increase of $111.0 million, or 5.9%, from $1.87 billion at December 31, 2021 and an increase of $145.4 million, or 7.9%, from $1.83 billion at September 30, 2021;

•The Company announced a repurchase program on July 28, 2022 for the repurchase up to 5% of outstanding common stock. As of September 30, 2022, the Company repurchased and retired 119,941 shares of common stock for an aggregate cost of $2.2 million; and

•The Bank changed its name from Pacific City Bank to PCB Bank and opened 2 new full-service branches in Dallas, Texas and Palisades Park, New Jersey.

“We are pleased to announce our continued solid financial performance for the third quarter of 2022,” stated Henry Kim, President and Chief Executive Officer. “We funded $172 million in loans held-for-investment during the third quarter, resulting in a loan balance increase of 6.9% quarter-over-quarter or 13.1% year-to-date. Compared with the second quarter of 2022, our net interest margin expanded 24 basis points to 4.25% and our net interest income increased 12.5% to $24.0 million for the third quarter. In keeping with our expansion strategic initiative to increase the value of our franchise, we successfully opened two new full-service branches in Dallas, Texas, and Palisades Park, New Jersey during the third quarter of 2022.”

“As we look ahead into the fourth quarter of this year, we will continue to remain opportunistic with our strong capital position and invest in our long-term franchise value by strategically expanding our footprint. We are on schedule to open one more full-service branch in Carrollton, Texas during the fourth quarter of this year,” concluded Kim.

(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)Calculated by dividing noninterest expense by the sum of net interest income and noninterest income.

(4)Calculated by dividing total shareholders’ equity by the number of outstanding common shares.

(5)The Company did not have any intangible asset component for the presented periods.

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

(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 and year-to-date period were primarily due to an increase in overall interest rates on loans from the rising interest rate environment, partially offset by a decrease in 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:

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

Other Interest-Earning Assets. The increases in average yield for the current quarter and year-to-date period were primarily due to an increased interest rate on cash held at the Federal Reserve Bank (“FRB”) account. The increases in average balance for the current quarter and year-to-date period compared with the same periods of 2021 were primarily due to an increase in average balance of deposits and the Emergency Capital Investment Program (“ECIP”) capital investment, partially offset by an increase in loans. The Company maintains most of its cash at the FRB account.

Interest-Bearing Deposits. The increases in average cost for the current quarter and year-to-date period were primarily due to an increase in market rates.

Provision (reversal) for loan losses was $3.8 million for the current quarter compared with $(109) thousand for the previous quarter and $(1.1) million for the year-ago quarter. For the current and previous year-to-date periods, provision (reversal) for loan losses was $2.5 million and $(3.1) million, respectively. The increase in provision for loan losses was primarily due to increases in gross loan balance, and qualitative adjustment factors related to current economic condition and increased charge-offs during the current quarter.

The Company recorded net charge-offs of $1.1 million for the current quarter compared with $18 thousand for the previous quarter and $29 thousand for the year-ago quarter. For the current and previous year-to-date periods, the Company recorded net charge-offs (recoveries) of $1.1 million and $(431) thousand, respectively.

Adjusted Allowance to loans held-for-investment ratio(1) was 1.21%, 1.15%, 1.34%, and 1.48% at September 30, 2022, June 30, 2022, December 31, 2021, and September 30, 2021, respectively.

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

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

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

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

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

Salaries and Employee Benefits. The increases for the current quarter compared with the previous and year-ago quarters were primarily due to increases in salaries and other employee benefit expense from the increased number of employees, partially offset by a decrease in incentives tied to the sales of Loan Production Offices (“LPO”) originated SBA loans and an increase in loan origination cost, which offsets the recognition of salaries. The increase for the current year-to-date period compared with the previous year-to-date period was due to increases in salaries, other employee benefit expense, the incentives tied to sales of LPO originated SBA loans, and a decrease in loan origination cost.

Total loan origination cost included in salaries and employee benefits were $488 thousand, $461 thousand, and $421 thousand for the current, previous, and year-ago quarters, respectively, and $1.3 million and $1.8 million for the current and previous year-to-date periods, respectively. The Company recognized a higher loan origination cost for the previous year-to-date period primarily due to the SBA PPP loan production in the first quarter of 2021. The number of full-time equivalent employees was 274, 271, and 249 as of September 30, 2022, June 30, 2022, and September 30, 2021, respectively.

Occupancy and Equipment. The increases for the current quarter and year-to-date period were primarily due to new branch openings. The Company opened 2 new branches in Dallas, Texas and Palisades Park, New Jersey during the current quarter and plans to open one more branch in Carrollton, Texas during the fourth quarter of 2022.

Marketing and Business Promotion. The increases for the current quarter and year-to-date period were primarily due to increases in marketing activities and advertisement for the Bank's name change to PCB Bank, and new branch openings.

Director Fees and Expenses. The increases for the current quarter and year-to-date periods compared with the same periods of 2021 were primarily due to a new director appointed during the fourth quarter of 2021.

Regulatory Assessments. During the year-ago quarter, an adjustment was made for the assessment rate decrease.

Other Expense. The increases for the current quarter and year-to-date period were primarily due to an increase in office expense for the new branches and a legal settlement of $150 thousand for the current quarter.

Total assets were $2.33 billion at September 30, 2022, a decrease of $17.5 million, or 0.7%, from $2.34 billion at June 30, 2022, but an increase of $177.3 million, or 8.2%, from $2.15 billion at December 31, 2021 and an increase of $222.4 million, or 10.6%, from $2.10 billion at September 30, 2021. The decrease for the current quarter was primarily due to decreases in cash and cash equivalents and securities available-for-sale, partially offset by increases in loans held-for-sale and loans held-for-investment. The increase for the current year-to-date period was primarily due to increases in loans held-for-investment and securities available-for-sale, partially offset by decreases in cash and cash equivalents and loans held-for-sale.

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:

The increase in loans held-for-investment for the current quarter was primarily due to new funding of $171.9 million and advances on lines of credit of $42.0 million, partially offset by pay-downs and pay-offs of $86.6 million. The increase for the current year-to-date period was primarily due to new funding of $450.8 million and advances of lines of credit of $111.3 million, partially offset by pay-downs and pay-offs of $333.9 million. SBA PPP loans of $274 thousand and $64.0 million were paid off through regular payments or forgiveness from SBA during the current quarter and year-to-date period, respectively.

The increase in loans held-for-sale for the current quarter was primarily due to new funding of $37.1 million, partially offset by sales of $27.7 million. The decrease for the current year-to-date period was primarily due to sales of $105.8 million, partially offset by new funding of $88.2 million.

The following table presents a composition of commitments to extend credit as of the dates indicated:

The following table presents a summary of non-performing loans, non-performing assets and classified assets as of the dates indicated:

The decrease in special mention loans for the current year-to-date period was primarily due to improvements of 2 loans with an aggregated carrying value of $11.3 million at December 31, 2021. The increases in nonaccrual commercial property loans and commercial lines of credit, and classified loans for the current quarter were primarily due to downgrades of loans to a single credit relationship.

Total investment securities were $129.4 million at September 30, 2022, a decrease of $9.7 million, or 6.95%, from $139.1 million at June 30, 2022 and a decrease of $3.7 million, or 2.8%, from $133.1 million at September 30, 2021, but an increase of $6.2 million, or 5.03%, from $123.2 million at December 31, 2021. The decrease for the current quarter was primarily due to principal pay-downs and calls of $6.4 million, a fair value decrease of $6.3 million, and net premium amortization of $75 thousand, partially offset by purchases of $3.1 million. The increase for the current year-to-date period was primarily due to purchases of $41.1 million, partially offset by principal pay-downs and calls of $18.8 million, a fair value decrease of $15.8 million, and net premium amortization of $307 thousand.

The following table presents the Company’s deposit mix as of the dates indicated:

The decrease in noninterest-bearing demand deposits for the current quarter was primarily due to strong deposit market competition and the migration of large amount of noninterest-bearing demand deposits to money market accounts and time deposits attributable to the rising market rates. To remain competitive in this rising interest rate environment, the Bank started to offer higher rates on deposit products to retain and attract new customers.

The increase in retail time deposits for the current quarter was primarily due to new accounts of $152.8 million, renewals of the matured accounts of $182.6 million and balance increases of $6.3 million, partially offset by matured and closed accounts of $287.7 million. The increase for the current year-to-date period was primarily due to new accounts of $252.2 million, renewals of the matured accounts of $480.2 million and balance increases of $15.8 million, partially offset by matured and closed accounts of $701.4 million.

The following table presents a summary of the Company’s liquidity position as of September 30, 2022:

Shareholders’ equity was $332.7 million at September 30, 2022, a decrease of $1.7 million, or 0.5%, from $334.4 million at June 30, 2022, but an increase of $76.4 million, or 29.8%, from $256.3 million at December 31, 2021 and an increase of $85.1 million, or 34.4%, from $247.6 million at September 30, 2021. The decrease for the current quarter and year-to-date period were primarily due to cash dividends declared on common stock, an increase in accumulated other comprehensive loss, and repurchase of common stock, partially offset by net income. The increase for the current year-to-date period was primarily due to net income and issuance of preferred stock (as discussed below), partially offset by cash dividends declared on common stock, repurchase of common stock and an increase in accumulated other comprehensive loss. The Company declared cash dividends of $2.2 million and $6.7 million for the current quarter and year-to-date period, respectively.

On April 8, 2021, the Company’s Board of Directors approved a repurchase program authorizing the repurchase of up to 5% of the Company’s outstanding common stock as of the date of the board meeting, which represented 775,000 shares, through September 7, 2021. The Company repurchased and retired 680,269 shares of common stock totaling $10.9 million at a weighted-average price of $15.99 per share under this program.

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. The Company repurchased and retired 119,941 shares of common stock at a weighted-average price of $18.75 per share, totaling $2.2 million under this repurchase program as of September 30, 2022.

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.

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:

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.

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(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.