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美國
證券交易委員會
華盛頓特區20549
表格 10-Q
（在以下選項中加上一個）
☒ 根據1934年證券交易法第13或15(d)節的季度報告
截至季度結束日期的財務報告2024年9月30日
or
☐ 根據1934年證券交易法第13或15(d)節的轉型報告書
過渡期從                 至                 
佣金文件號 001-38621
pcb bancorp
(根據其章程規定的註冊人準確名稱)
加利福尼亞州20-8856755
（設立或組織的其他管轄區域）（國稅局僱員身份證號碼）
3701 Wilshire Boulevard, 套間900, 洛杉磯, 加利福尼亞州 90010
（總部地址）（郵政編碼）
(213) 210-2000
(註冊人電話號碼，包括區號)
不適用
（前名稱、地址及財政年度，如果自上次報告以來有更改）
在法案第12(b)條的規定下注冊的證券：
每一類的名稱交易標誌在其上註冊的交易所的名稱
普通股，無面值蘋果pcb。納斯達克全球精選市場
請勾選以下選項以指示註冊人是否在過去12個月內(或在註冊人需要提交此類報告的較短時間內)已提交證券交易法1934年第13或15(d)條所要求提交的所有報告，並且在過去90天內已受到此類報告提交要求的影響。Yes ☒ 否 ☐
請使用覈對標記來表明註冊人是否在過去的12個月內（或註冊人需要提交這些文件的更短期間）根據規則405及本章232.405部分的規定提交了每個要求提交的交互式數據文件。 Yes ☒ 否 ☐
請勾選標記以說明註冊人是大型快速申報人、加速申報人、非加速申報人、較小的報告公司還是新興成長型公司。請查看《交易所法》第120億.2條中「大型快速申報人」、「加速申報人」、「較小的報告公司」和「新興成長型公司」的定義。
大型加速報告人
☐
加速文件提交人
☐
非加速文件提交人
☒
較小的報告公司☒
新興成長公司☐
如果是新興成長型企業，請勾選此項，表示註冊者已選擇不使用根據《交易所法》第13(a)條提供的任何新的或修訂後的財務會計準則的延長過渡期進行遵守。☐
用勾選標記表示註冊機構是否爲殼公司（如證券交易所法規定的第120億.2條所定義的）是 ☐ 否 ☒
截至2024年10月31日，註冊人持有優秀的 14,266,725股普通股。


pcb bancorp及其子公司
第10-Q表的季度報告
2024年9月30日
目錄
第I部分-財務信息
項目1。
綜合收益表（未經審計）- 三個 有九起類似訴訟針對JAVELIN的要約收購和合並被提起，稱違反信託責任，尋求公正補償，包括但不限於，禁止交易的達成、撤銷、解除已經交易的事項，以及發送費用、補貼成本，包括合理的律師費和費用。唯一的佛羅里達州訴訟從未向被告送達，該案件於2017年1月20日自願撤回並關閉。2016年4月25日，馬里蘭法院頒佈了一項命令，將馬里蘭案件合併成一起訴訟，標題爲JAVELIN Mortgage Investment Corp.股東訴訟（案號24-C-16-001542），並指定一個馬里蘭案件的律師作爲臨時首席聯合法律顧問。2016年5月26日，臨時首席律師提交了經修訂的釩化鐵質量投訴，聲稱違反信託責任的集體索賠，教唆和共謀違反信託責任以及浪費。2016年6月27日，被告提出了駁回合併修訂集體投訴申請的動議，聲稱未陳述可以獲得救濟的規定。在2017年3月3日，聽證會召開了駁回動議，法院保留了裁定。法院數次推遲動議陳述的裁定。2024年2月14日，法院頒佈裁定，支持被告的駁回動議，並駁回所有原告的權利，無需上訴。在2024年3月11日，原告提出了對法院裁定的上訴通知。2024年7月3日，原告自願撤回之前提出的上訴通知。 截至 九月 30、2024和2023年
股東權益變動綜合表（未經審計）- 三 有九起類似訴訟針對JAVELIN的要約收購和合並被提起，稱違反信託責任，尋求公正補償，包括但不限於，禁止交易的達成、撤銷、解除已經交易的事項，以及發送費用、補貼成本，包括合理的律師費和費用。唯一的佛羅里達州訴訟從未向被告送達，該案件於2017年1月20日自願撤回並關閉。2016年4月25日，馬里蘭法院頒佈了一項命令，將馬里蘭案件合併成一起訴訟，標題爲JAVELIN Mortgage Investment Corp.股東訴訟（案號24-C-16-001542），並指定一個馬里蘭案件的律師作爲臨時首席聯合法律顧問。2016年5月26日，臨時首席律師提交了經修訂的釩化鐵質量投訴，聲稱違反信託責任的集體索賠，教唆和共謀違反信託責任以及浪費。2016年6月27日，被告提出了駁回合併修訂集體投訴申請的動議，聲稱未陳述可以獲得救濟的規定。在2017年3月3日，聽證會召開了駁回動議，法院保留了裁定。法院數次推遲動議陳述的裁定。2024年2月14日，法院頒佈裁定，支持被告的駁回動議，並駁回所有原告的權利，無需上訴。在2024年3月11日，原告提出了對法院裁定的上訴通知。2024年7月3日，原告自願撤回之前提出的上訴通知。 截至 九月 30、2024和2023年
現金流量綜合表（未經審計）- 有九起類似訴訟針對JAVELIN的要約收購和合並被提起，稱違反信託責任，尋求公正補償，包括但不限於，禁止交易的達成、撤銷、解除已經交易的事項，以及發送費用、補貼成本，包括合理的律師費和費用。唯一的佛羅里達州訴訟從未向被告送達，該案件於2017年1月20日自願撤回並關閉。2016年4月25日，馬里蘭法院頒佈了一項命令，將馬里蘭案件合併成一起訴訟，標題爲JAVELIN Mortgage Investment Corp.股東訴訟（案號24-C-16-001542），並指定一個馬里蘭案件的律師作爲臨時首席聯合法律顧問。2016年5月26日，臨時首席律師提交了經修訂的釩化鐵質量投訴，聲稱違反信託責任的集體索賠，教唆和共謀違反信託責任以及浪費。2016年6月27日，被告提出了駁回合併修訂集體投訴申請的動議，聲稱未陳述可以獲得救濟的規定。在2017年3月3日，聽證會召開了駁回動議，法院保留了裁定。法院數次推遲動議陳述的裁定。2024年2月14日，法院頒佈裁定，支持被告的駁回動議，並駁回所有原告的權利，無需上訴。在2024年3月11日，原告提出了對法院裁定的上訴通知。2024年7月3日，原告自願撤回之前提出的上訴通知。 截至 九月 30、2024和2023年
事項二
第3項。
事項4。
第II部分-其他信息
項目1。
項目1A。
事項二
第3項。
事項4。
項目5。
項目6。


2

前瞻性聲明
本季度10-Q表格中包含反映PCB Bancorp（統稱爲其合併子公司的「公司」，「我們」，「我們」或「我們」的）當前觀點的前瞻性聲明，涉及未來事件和我們的財務表現。這些聲明通常，但並非總是，通過使用諸如「可能」，「也許」，「應該」，「可能」，「預測」，「潛在」，「相信」，「預計」，「繼續」，「將」，「預期」，「尋求」，「估計」，「打算」，「計劃」，「投影」，「目標」，「目標」，「將」和「年化」以及「展望」之類的詞或短語進行。這些前瞻性聲明並非歷史事實，基於對我們的業務和行業，管理層的信念以及管理層做出的某些假設的當前期望，估計和預測，其中許多本質上是不確定的並且超出我們的控制範圍。因此，我們警告您，任何此類前瞻性聲明都不是未來績效的保證，而且可能面臨難以預測的風險，假設，估計和不確定性。儘管我們認爲，截至製作日期，這些前瞻性聲明中體現的期望是合理的，但實際結果可能證明與前瞻性聲明所反映或暗示的結果存在重大差異。
許多重要因素可能導致我們的實際結果與這些前瞻性陳述中所示的結果有實質性差異，但不限於以下:
•業務和經濟條件，特別是那些影響金融服務行業和我們主要市場領域的條件，以及最近通貨膨脹壓力及政府和社會應對措施引起的影響；
•我們成功管理信用風險的能力和信用損失準備金的充分性；
•可能影響我們貸款組合表現的因素包括房地產價值和我們主要市場區域的流動性，商業借款人的財務健康狀況以及我們提供資金支持的施工項目的成功；
•政府的貨幣和財政政策，以及市場利率期貨的變化;
•當前的通貨膨脹環境以及政府和監管機構對此的應對;
•其他銀行出現不利發展，包括銀行倒閉，這可能影響對銀行的穩定性和流動性的一般情緒，並可能影響我們客戶的行爲和我們的股價；
•我們貸款組合中的重要部分是由房地產貸款組成的;
•我們吸引和留住韓裔美國顧客的能力;
•我們能夠識別和解決網絡安防-半導體風險、欺詐和系統錯誤；
•我們有效執行戰略計劃並管理增長的能力;
•我們的高級管理團隊發生變動，以及我們吸引、激勵和留住合格人員的能力；
•網絡攻擊、勒索軟件攻擊、計算機病毒或其他惡意軟件可能會侵犯我們網站或其他系統的安防-半導體，以獲取未經授權的訪問權限以獲取機密信息、銷燬數據、禁用或降低服務，或者破壞我們的系統；
•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.
3

Part I - Financial Information
Item 1 - Consolidated Financial Statements

PCB Bancorp and Subsidiary
Consolidated Balance Sheets
($ in thousands, except share data)
September 30, 2024December 31, 2023
(Unaudited)
Assets
Cash and due from banks
$29,981 $26,518 
Interest-bearing deposits in other financial institutions
163,083 215,824 
Total cash and cash equivalents
193,064 242,342 
Securities available-for-sale, at fair value (amortized cost of $156,960 and $156,175, respectively, and allowance for credit losses of $0 and $0, respectively, at September 30, 2024 and December 31, 2023)
147,635 143,323 
Loans held-for-sale, at lower of cost or fair value5,170 5,155 
Loans held-for-investment, net of deferred fees and costs2,466,174 2,323,452 
Allowance for credit losses on loans(28,930)(27,533)
Net loans held-for-investment
2,437,244 2,295,919 
Premises and equipment, net
8,414 5,999 
Federal Home Loan Bank and other restricted stock, at cost
14,042 12,716 
Other real estate owned, net
466 2,558 
Bank-owned life insurance31,520 30,817 
Servicing assets
5,902 6,666 
Operating lease assets
17,932 18,913 
Accrued interest receivable
9,896 9,468 
Other assets
18,548 15,630 
Total assets
$2,889,833 $2,789,506 
Liabilities and Shareholders’ Equity
Deposits:
Noninterest-bearing demand$540,068 $594,673 
Savings, NOW and money market accounts
491,939 421,203 
Time deposits of $250,000 or less
787,509 760,034 
Time deposits of more than $250,000
640,166 575,702 
Total deposits
2,459,682 2,351,612 
Federal Home Loan Bank advances
— 39,000 
Deferred tax liabilities, net1,168 876 
Operating lease liabilities
19,301 20,137 
Accrued interest payable and other liabilities
47,382 29,009 
Total liabilities
2,527,533 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 September 30, 2024 and December 31, 2023, respectively.
69,141 69,141 
Common stock, 60,000,000 shares authorized, no par value; 14,266,725 and 14,260,440 shares issued and outstanding, respectively, and included 19,100 and 41,661 shares of unvested restricted stock, respectively, at September 30, 2024 and December 31, 2023
142,926 142,563 
Retained earnings
156,680 146,092 
Accumulated other comprehensive loss, net(6,447)(8,924)
Total shareholders’ equity
362,300 348,872 
Total liabilities and shareholders’ equity
$2,889,833 $2,789,506 
See Accompanying Notes to Consolidated Financial Statements (Unaudited)
4

PCB Bancorp and Subsidiary
Consolidated Statements of Income (Unaudited)
($ in thousands, except share and per share data)
Three Months Ended September 30,
Nine Months Ended September 30,
2024202320242023
Interest and dividend income:
Loans, including fees$42,115 $34,651 $121,992 $98,840 
Tax-exempt investment securities24 30 81 97 
Taxable investment securities1,360 1,140 3,859 3,311 
Other interest-earning assets2,499 3,031 8,566 7,978 
Total interest income
45,998 38,852 134,498 110,226 
Interest expense:
Deposits23,057 16,403 67,560 43,437 
Borrowings
222 — 1,485 209 
Total interest expense
23,279 16,403 69,045 43,646 
Net interest income22,719 22,449 65,453 66,580 
Provision (reversal) for credit losses50 751 1,399 (1,830)
Net interest income after provision (reversal) for credit losses22,669 21,698 64,054 68,410 
Noninterest income:
Service charges and fees on deposits
399 371 1,141 1,084 
Loan servicing income
786 851 2,504 2,579 
Bank-owned life insurance income239 187 703 551 
Gain on sale of loans
750 689 2,591 2,767 
Other income
446 404 1,111 1,199 
Total noninterest income
2,620 2,502 8,050 8,180 
Noninterest expense:
Salaries and employee benefits
8,801 8,572 27,244 26,175 
Occupancy and equipment
2,261 1,964 6,919 5,779 
Professional fees
599 685 2,656 2,189 
Marketing and business promotion
667 980 1,304 1,555 
Data processing
397 367 1,294 1,159 
Director fees and expenses
226 152 679 549 
Regulatory assessments
309 281 934 818 
Other expense1,342 1,206 5,099 3,364 
Total noninterest expense
14,602 14,207 46,129 41,588 
Income before income taxes
10,687 9,993 25,975 35,002 
Income tax expense
2,873 2,970 7,195 10,205 
Net income
7,814 7,023 18,780 24,797 
Preferred stock dividends346 — 488 — 
Net income available to common shareholders$7,468 $7,023 $18,292 $24,797 
Earnings per common share, basic
$0.52 $0.49 $1.28 $1.73 
Earnings per common share, diluted
$0.52 $0.49 $1.27 $1.71 
Weighted-average common shares outstanding, basic
14,241,014 14,294,802 14,237,851 14,327,930 
Weighted-average common shares outstanding, diluted
14,356,384 14,396,216 14,328,510 14,441,960 
See Accompanying Notes to Consolidated Financial Statements (Unaudited)
5

PCB Bancorp and Subsidiary
Consolidated Statements of Comprehensive Income (Unaudited)
($ in thousands)
Three Months Ended September 30,Nine Months Ended September 30,
2024202320242023
Net income$7,814 $7,023 $18,780 $24,797 
Other comprehensive income (loss):
Unrealized gain (loss) on securities available-for-sale arising during the period5,256 (3,827)3,527 (4,137)
Income tax benefit (expense) related to items of other comprehensive income (loss)(1,552)1,118 (1,050)1,208 
Total other comprehensive income (loss), net of tax3,704 (2,709)2,477 (2,929)
Total comprehensive income$11,518 $4,314 $21,257 $21,868 
See Accompanying Notes to Consolidated Financial Statements (Unaudited)
6

PCB Bancorp and Subsidiary
Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)
($ in thousands, except share and per share data)
Three Months Ended
Shares OutstandingShareholders’ Equity
Preferred StockCommon Stock
Preferred Stock
Common Stock
Retained EarningsAccumulated Other Comprehensive Income (Loss)Total
Balance at July 1, 202369,141 14,318,890 $69,141 $143,686 $138,315 $(10,731)$340,411 
Comprehensive income (loss)
Net income
— — — — 7,023 — 7,023 
Other comprehensive loss, net of tax— — — — — (2,709)(2,709)
Issuance of restricted stock— 3,300 — — — — — 
Restricted stock surrendered due to employee tax liability— (99)— (2)— — (2)
Repurchase of common stock
— (67,202)— (1,058)— — (1,058)
Share-based compensation expense
— — — 113 — — 113 
Stock options exercised
— 64,125 — 662 — — 662 
Cash dividends declared on common stock ($0.18 per share)
— — — — (2,588)— (2,588)
Balance at September 30, 202369,141 14,319,014 $69,141 $143,401 $142,750 $(13,440)$341,852 
Balance at July 1, 202469,141 14,254,024 $69,141 $142,698 $151,781 $(10,151)$353,469 
Comprehensive income
Net income
— — — — 7,814 — 7,814 
Other comprehensive income, net of tax— — — — — 3,704 3,704 
Issuance of restricted stock— 1,500 — — — — — 
Restricted stock surrendered due to employee tax liability— (150)— (3)— — (3)
Share-based compensation expense
— — — 113 — — 113 
Stock options exercised
— 11,351 — 118 — — 118 
Preferred stock dividends— — — — (346)— (346)
Cash dividends declared on common stock ($0.18 per share)
— — — — (2,569)— (2,569)
Balance at September 30, 202469,141 14,266,725 $69,141 $142,926 $156,680 $(6,447)$362,300 
See Accompanying Notes to Consolidated Financial Statements (Unaudited)

7

PCB Bancorp and Subsidiary
Consolidated Statements of Changes in Shareholders’ Equity, Continued (Unaudited)
($ in thousands, except share and per share data)
Nine Months Ended
Shares OutstandingShareholders’ Equity
Preferred StockCommon Stock
Preferred Stock
Common Stock
Retained EarningsAccumulated 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, 202369,141 14,625,474 69,141 149,631 125,295 (10,511)333,556 
Comprehensive income (loss)
Net income
— — — — 24,797 — 24,797 
Other comprehensive loss, net of tax— — — — — (2,929)(2,929)
Issuance of restricted stock— 3,300 — — — — — 
Restricted stock surrendered due to employee tax liability— (99)— (2)— — (2)
Repurchase of common stock
— (452,583)— (7,903)— — (7,903)
Share-based compensation expense
— — — 346 — — 346 
Stock options exercised
— 142,922 — 1,329 — — 1,329 
Cash dividends declared on common stock ($0.51 per share)
— — — — (7,342)— (7,342)
Balance at September 30, 202369,141 14,319,014 $69,141 $143,401 $142,750 $(13,440)$341,852 
Balance at January 1, 2024
69,141 14,260,440 $69,141 $142,563 $146,092 $(8,924)$348,872 
Comprehensive income
Net income
— — — — 18,780 — 18,780 
Other comprehensive income, net of tax— — — — — 2,477 2,477 
Issuance of restricted stock— 1,500 — — — — — 
Forfeiture of restricted stock— (420)— — — — — 
Restricted stock surrendered due to employee tax liability— (150)— (3)— — (3)
Repurchase of common stock— (14,947)— (222)— — (222)
Share-based compensation expense
— — — 378 — — 378 
Stock options exercised
— 20,302 — 210 — — 210 
Preferred stock dividends— — — — (488)— (488)
Cash dividends declared on common stock ($0.54 per share)
— — — — (7,704)— (7,704)
Balance at September 30, 202469,141 14,266,725 $69,141 $142,926 $156,680 $(6,447)$362,300 
See Accompanying Notes to Consolidated Financial Statements (Unaudited)
8

PCB Bancorp and Subsidiary
Consolidated Statements of Cash Flows (Unaudited)
($ in thousands)
Nine Months Ended September 30,
20242023
Cash flows from operating activities
Net income$18,780 $24,797 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of premises and equipment1,677 1,699 
Net amortization of premiums on securities123 169 
Net accretion of discounts on loans(2,137)(2,197)
Net accretion of deferred loan fees(919)(648)
Amortization of servicing assets1,372 1,344 
Provision (reversal) for credit losses1,399 (1,830)
Bank-owned life insurance income(703)(551)
Deferred tax expense (benefit)(459)625 
Stock-based compensation378 346 
Gain on sale of loans(2,591)(2,767)
Originations of loans held-for-sale(48,328)(49,753)
Proceeds from sales of and principal collected on loans held-for-sale51,761 65,550 
Change in accrued interest receivable and other assets(3,409)2,100 
Change in accrued interest payable and other liabilities17,818 14,566 
Net cash provided by operating activities34,762 53,450 
Cash flows from investing activities
Purchase of securities available-for-sale(14,774)(15,959)
Proceeds from maturities and paydowns of securities available-for-sale13,866 14,298 
Proceeds from principal collected on loans held-for-sale previously classified as held-for-investment676 5,074 
Net change in loans held-for-investment(141,948)(104,439)
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 owned2,571 — 
Purchases of premises and equipment(4,029)(1,059)
Net cash used in investing activities(144,964)(120,359)
Cash flows from financing activities
Net change in deposits108,070 146,146 
Net change in short-term Federal Home Loan Bank advances and other borrowings— (20,000)
Proceeds from long-term Federal Home Loan Bank advances50,000 — 
Repayment of long-term Federal Home Loan Bank advances(89,000)— 
Stock options exercised210 1,329 
Restricted stock surrendered due to employee tax liability(3)(2)
Repurchase of common stock(222)(7,903)
Cash dividends paid on preferred stock(427)— 
Cash dividends paid on common stock(7,704)(7,342)
Net cash provided by financing activities60,924 112,228 
Net increase (decrease) in cash and cash equivalents(49,278)45,319 
Cash and cash equivalents at beginning of period242,342 147,031 
Cash and cash equivalents at end of period$193,064 $192,350 
See Accompanying Notes to Consolidated Financial Statements (Unaudited)
9

PCB Bancorp and Subsidiary
Consolidated Statements of Cash Flows, Continued (Unaudited)
($ in thousands)
Nine Months Ended September 30,
20242023
Supplemental disclosures of cash flow information:
Interest paid
$59,112 $28,008 
Income taxes paid
4,187 4,023 
Supplemental disclosures of non-cash investment activities:
Loans transferred to loans held-for-sale
$676 $— 
Loans transferred to other real estate owned
94 — 
Right of use assets obtained in exchange for lease obligations
973 1,360 
See Accompanying Notes to Consolidated Financial Statements (Unaudited)

10

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 September 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 four loan production offices (“LPOs”) in Los Angeles and Orange Counties, California; Atlanta, Georgia; and Bellevue, Washington. 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 nine months ended September 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 September 30, 2024 and December 31, 2023, and for the three and nine months ended September 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.


11

Adopted Accounting Pronouncements
During the nine months ended September 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.
12

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.
13

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
September 30, 2024
Securities available-for-sale:
U.S. government agency and U.S. government sponsored enterprise securities:
Residential mortgage-backed securities$— $112,153 $— $112,153 
Residential collateralized mortgage obligations— 22,386 — 22,386 
SBA loan pool securities— 6,431 — 6,431 
Municipal bonds— 2,473 — 2,473 
Corporate bonds— 4,192 — 4,192 
Total securities available-for-sale— 147,635 — 147,635 
Total assets measured at fair value on a recurring basis$— $147,635 $— $147,635 
Total liabilities measured at fair value on a recurring basis$— $— $— $— 
December 31, 2023
Securities available-for-sale:
U.S. government agency and U.S. government sponsored enterprise securities:
Residential mortgage-backed securities$— $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 $— $143,323 
Total liabilities measured at fair value on a recurring basis$— $— $— $— 
14

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
September 30, 2024
Loans individually evaluated:
Business property$— $— $1,274 $1,274 
Commercial and industrial— — 16 16 
Total loans individually evaluated— — 1,290 1,290 
Total assets measured at fair value on a non-recurring basis
$— $— $1,290 $1,290 
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 ValueValuation Technique(s)Unobservable Input(s)
Weighted-Average
September 30, 2024
Loans individually evaluated:
Business property$1,274 Fair value of collateral
Selling cost
6%
Commercial and industrial16 Discounted cash flowNMNM
December 31, 2023
Loans individually evaluated:
Business property$425 Fair value of collateralNMNM
The following table presents gains or losses, including charge-offs, recoveries, and specific reserves recorded, for assets measured at fair value for the periods indicated:
Three Months Ended September 30,Nine Months Ended September 30,
($ in thousands)2024202320242023
Loans individually evaluated:
Business property$3 $(15)$47 $(47)
Commercial and industrial(1)— 31 1,074 
Net gains (losses) recognized$2 $(15)$78 $1,027 
15

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 1Level 2Level 3
September 30, 2024
Financial assets:
Interest-bearing deposits in other financial institutions
$163,083 $163,083 $163,083 $— $— 
Securities available-for-sale
147,635 147,635 — 147,635 — 
Loans held-for-sale
5,170 5,625 — 5,625 — 
Net loans held-for-investment
2,437,244 2,382,466 — — 2,382,466 
Federal Home Loan Bank (“FHLB”) and other restricted stock
14,042  N/A N/A N/AN/A
Accrued interest receivable
9,896 9,896 275 488 9,133 
Financial liabilities:
Deposits
$2,459,682 $2,466,010 $— $— $2,466,010 
Accrued interest payable
27,985 27,985 — — 27,985 
December 31, 2023
Financial assets:
Interest-bearing deposits in other financial institutions
$215,824 $215,824 $215,824 $— $— 
Securities available-for-sale
143,323 143,323 — 143,323 — 
Loans held-for-sale
5,155 5,472 — 5,472 — 
Net loans held-for-investment
2,295,919 2,225,573 — — 2,225,573 
FHLB and other restricted stock
12,716 N/AN/AN/AN/A
Accrued interest receivable
9,468 9,468 128 513 8,827 
Financial liabilities:
Deposits
$2,351,612 $2,353,465 $— $— $2,353,465 
FHLB advances
39,000 39,013 — 39,013 — 
Accrued interest payable
18,052 18,052 — 192 17,860 

16

Note 3 - Investment Securities
The following table presents the amortized cost and fair value of the securities available-for-sale as of the dates indicated:
($ in thousands)
Amortized Cost
Gross Unrealized GainGross Unrealized Loss
Fair Value
September 30, 2024
Securities available-for-sale:
U.S. government agency and U.S. government sponsored enterprise securities:
Residential mortgage-backed securities
$119,363 $692 $(7,902)$112,153 
Residential collateralized mortgage obligations
23,459 101 (1,174)22,386 
SBA loan pool securities
6,688 2 (259)6,431 
Municipal bonds
2,450 23 — 2,473 
Corporate bonds5,000 — (808)4,192 
Total securities available-for-sale
$156,960 $818 $(10,143)$147,635 
December 31, 2023
Securities available-for-sale:
U.S. government agency and U.S. government sponsored enterprise securities:
Residential mortgage-backed securities
$114,485 $199 $(10,593)$104,091 
Residential collateralized mortgage obligations
25,611 63 (1,501)24,173 
SBA loan pool securities
7,773 3 (326)7,450 
Municipal bonds
3,306 25 (2)3,329 
Corporate bonds5,000 — (720)4,280 
Total securities available-for-sale
$156,175 $290 $(13,142)$143,323 
As of September 30, 2024 and December 31, 2023, pledged securities were $75.4 million and $70.9 million, respectively. These securities were pledged for the State Deposit from the California State Treasurer.
The Company elected to exclude accrued interest receivable from the amortized cost of its securities available-for-sale. Accrued interest receivable on securities available-for-sale totaled $488 thousand and $513 thousand at September 30, 2024 and December 31, 2023, respectively.
As of September 30, 2024 and December 31, 2023, there were no holdings of securities available-for-sale of any one issuer, other than the U.S. government agency and U.S. government sponsored enterprise, in an amount greater than 10% of shareholder’s equity.
The following table presents the amortized cost and fair value of the securities available-for-sale by contractual maturity as of the date indicated. Expected maturities may differ from contractual maturities, if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Securities not due at a single maturity date are shown separately.
September 30, 2024
($ in thousands)
Amortized Cost
Fair Value
Within one year
$— $— 
One to five years
82 83 
Five to ten years
6,097 5,297 
Greater than ten years
1,271 1,285 
Residential mortgage-backed securities, residential collateralized mortgage obligations and SBA loan pool securities
149,510 140,970 
Total
$156,960 $147,635 
The Company had no proceeds from sales and calls of securities available-for-sale for the three and nine months ended September 30, 2024 or 2023.
17

The following table summarizes the investment securities with unrealized losses by security type and length of time in a continuous unrealized loss position for which an allowance for credit losses (“ACL”) was not recorded as of the dates indicated:
Length of Time that Individual Securities Have Been In a Continuous Unrealized Loss Position
Less Than 12 Months12 Months or LongerTotal
($ in thousands)
Fair Value
Gross Unrealized Losses
Number of Securities
Fair Value
Gross Unrealized Losses
Number of Securities
Fair Value
Gross Unrealized Losses
Number of Securities
September 30, 2024
Securities available-for-sale:
U.S. government agency and U.S. government sponsored enterprise securities:
Residential mortgage-backed securities
$59 $(1)3 $72,529 $(7,901)108 $72,588 $(7,902)111 
Residential collateralized mortgage obligations
991 (3)1 14,206 (1,171)36 15,197 (1,174)37 
SBA loan pool securities
55 — 1 5,705 (259)13 5,760 (259)14 
Corporate bonds— — — 4,192 (808)1 4,192 (808)1 
Total securities available-for-sale
$1,105 $(4)5 $96,632 $(10,139)158 $97,737 $(10,143)163 
December 31, 2023
Securities available-for-sale:
U.S. government agency and U.S. government sponsored enterprise securities:
Residential mortgage-backed securities
$9,252 $(41)8 $78,958 $(10,552)110 $88,210 $(10,593)118 
Residential collateralized mortgage obligations
5,660 (62)4 13,919 (1,439)35 19,579 (1,501)39 
SBA loan pool securities
— — — 6,627 (326)14 6,627 (326)14 
Municipal bonds81 — 1 362 (2)1 443 (2)2 
Corporate bonds— — — 4,280 (720)1 4,280 (720)1 
Total securities available-for-sale
$14,993 $(103)13 $104,146 $(13,040)161 $119,139 $(13,142)174 
As of September 30, 2024, 95.3%, at amortized cost basis, of the Company's securities available-for-sale were issued by U.S. government agency and U.S. government sponsored enterprise. Because the decline in fair value is attributable to changes in interest rates, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell these securities before their anticipated recovery, the Company determined that these securities with unrealized losses did not warrant an ACL.
Municipal and corporate bonds had an investment grade rating upon purchase. The issuers of these securities have not established any cause for default on these securities and various rating agencies have reaffirmed their long-term investment grade status as of September 30, 2024. These securities have fluctuated in value since their purchase dates as market interest rates fluctuated. Additionally, the Company continues to receive contractual principal and interest payments in a timely manner. The Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell before the recovery of its amortized cost basis. The Company therefore determined that the investment securities with unrealized losses did not warrant an ACL as of September 30, 2024.
As of September 30, 2024, the Company recorded no ACL on securities available-for-sale.
18

Note 4 - Loans and Allowance for Credit Losses on Loans
Loans Held-For-Investment
The following table presents the composition of the Company’s loans held-for-investment as of the dates indicated.
($ in thousands)September 30, 2024December 31, 2023
Commercial real estate:
Commercial property
$874,824 $855,270 
Business property579,461 558,772 
Multifamily185,485 132,500 
Construction
21,150 24,843 
Total commercial real estate1,660,920 1,571,385 
Commercial and industrial407,024 342,002 
Consumer:
Residential mortgage383,377 389,420 
Other consumer14,853 20,645 
Total consumer398,230 410,065 
Loans held-for-investment
2,466,174 2,323,452 
Allowance for credit losses on loans(28,930)(27,533)
Net loans held-for-investment
$2,437,244 $2,295,919 
In the ordinary course of business, the Company may grant loans to certain of its officers and directors, and the companies with which they are associated. As of September 30, 2024 and December 31, 2023, the Company had $108 thousand and $111 thousand of such loans outstanding, respectively,
Allowance for Credit Losses on Loans
The following table presents a composition of provision (reversal) for credit losses for the periods indicated:
Three Months Ended September 30,Nine Months Ended September 30,
($ in thousands)2024202320242023
Provision (reversal) for credit losses on loans $193 $822 $1,444 $(1,438)
Provision (reversal) for credit losses on off-balance sheet credit exposures(143)(71)(45)(392)
Total provision (reversal) for credit losses$50 $751 $1,399 $(1,830)


19

The following tables present the activities in ACL on loans for the periods indicated:
($ in thousands)Commercial PropertyBusiness PropertyMultifamilyConstructionCommercial and IndustrialResidential MortgageOther ConsumerTotal
Balance at July 1, 2024$11,900 $4,848 $1,661 $131 $7,186 $2,957 $64 $28,747 
Charge-offs— (104)— — — — (7)(111)
Recoveries— 1 — — 8 — 92 101 
Provision (reversal) for credit losses on loans(1,515)779 (14)(38)1,056 6 (81)193 
Balance at September 30, 2024$10,385 $5,524 $1,647 $93 $8,250 $2,963 $68 $28,930 
Balance at July 1, 2023$9,601 $6,077 $1,259 $125 $6,513 $1,216 $76 $24,867 
Charge-offs— — — — (45)— (67)(112)
Recoveries— 2 — — 8 — 12 22 
Provision (reversal) for credit losses on loans1,747 (1,922)554 (30)(468)877 64 822 
Balance at September 30, 2023$11,348 $4,157 $1,813 $95 $6,008 $2,093 $85 $25,599 
($ in thousands)Commercial PropertyBusiness PropertyMultifamilyConstructionCommercial and IndustrialResidential MortgageOther ConsumerTotal
Balance at January 1, 2024$12,665 $4,739 $1,441 $135 $6,245 $2,226 $82 $27,533 
Charge-offs— (104)— — (155)— (37)(296)
Recoveries— 3 — — 87 — 159 249 
Provision (reversal) for credit losses on loans(2,280)886 206 (42)2,073 737 (136)1,444 
Balance at September 30, 2024$10,385 $5,524 $1,647 $93 $8,250 $2,963 $68 $28,930 
Balance at January 1, 2023$8,502 $5,749 $1,134 $151 $5,502 $3,691 $213 $24,942 
Impact of ASC 326 adoption(1,762)896 256 — 4,344 (2,534)(133)1,067 
Charge-offs— (4)— — (45)— (70)(119)
Recoveries— 8 — — 1,100 — 39 1,147 
Provision (reversal) for credit losses on loans4,608 (2,492)423 (56)(4,893)936 36 (1,438)
Balance at September 30, 2023$11,348 $4,157 $1,813 $95 $6,008 $2,093 $85 $25,599 
The increase in overall ACL for the three and nine months ended September 30, 2024 was primarily due to increases in loans held-for-investment and quantitatively measured loss reserve requirement, as well as, an ACL increase on commercial and industrial loans related to qualitative adjustment factors from the increase of past due loans. ACL on commercial property loans decreased primarily due to a decrease in reserve related to qualitative adjustment factors from the improvement in the credit metrics.

20

Credit Quality Indicators
The Company classifies loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, historical payment experience, collateral adequacy, credit documentation, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans in regards to credit risk. This analysis typically includes non-homogeneous loans, such as commercial property and commercial and industrial loans, and is performed on an ongoing basis as new information is obtained. The Company uses the following definitions for risk ratings:
Pass - Loans classified as pass include non-homogeneous loans not meeting the risk ratings defined below and smaller, homogeneous loans not assessed on an individual basis.
Special Mention - Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of repayment prospects for the loan or of the institution’s credit position at some future date.
Substandard - Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
Doubtful - Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or repayment in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
21

The following table summarizes the Company’s loans held-for-investment by loan segment, internal risk ratings and vintage year as of September 30, 2024 and gross write offs for the nine months ended September 30, 2024. The vintage year is the year of origination, renewal or major modification. Revolving loans that are converted to term loans presented in the table below are excluded from the Term Loans by Origination Year columns.
Term Loans by Origination YearRevolving LoansRevolving Loans Converted to Term
($ in thousands)20242023202220212020PriorTotal
September 30, 2024
Commercial Real Estate:
Commercial property
Pass$90,144 $143,673 $260,646 $149,104 $77,092 $130,013 $20,556 $387 $871,615 
Special mention— — — — — — — — — 
Substandard— 133 410 — — 2,666 — — 3,209 
Doubtful— — — — — — — — — 
Total$90,144 $143,806 $261,056 $149,104 $77,092 $132,679 $20,556 $387 $874,824 
Current period gross write offs$— $— $— $— $— $— $— $— $— 
Business property
Pass$65,709 $100,737 $95,856 $151,769 $45,463 $105,797 $2,256 $3,780 $571,367 
Special mention— — 5,057 — — — — — 5,057 
Substandard— — 448 865 — 1,724 — — 3,037 
Doubtful— — — — — — — — — 
Total$65,709 $100,737 $101,361 $152,634 $45,463 $107,521 $2,256 $3,780 $579,461 
Current period gross write offs$— $— $77 $— $— $27 $— $— $104 
Multifamily
Pass$19,920 $53,051 $40,063 $38,358 $25,937 $5,117 $1,001 $— $183,447 
Special mention— — — — — — — — — 
Substandard— — — 2,038 — — — — 2,038 
Doubtful— — — — — — — — — 
Total$19,920 $53,051 $40,063 $40,396 $25,937 $5,117 $1,001 $— $185,485 
Current period gross write offs$— $— $— $— $— $— $— $— $— 
Construction
Pass$29 $8,461 $12,660 $— $— $— $— $— $21,150 
Special mention— — — — — — — — — 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
Total$29 $8,461 $12,660 $— $— $— $— $— $21,150 
Current period gross write offs$— $— $— $— $— $— $— $— $— 


22

Term Loans by Origination YearRevolving LoansRevolving Loans Converted to Term
($ in thousands)20242023202220212020PriorTotal
September 30, 2024 (Continued)
Commercial and Industrial
Pass$28,303 $35,694 $23,060 $9,848 $3,423 $9,009 $294,168 $3,395 $406,900 
Special mention— — — — — — — — — 
Substandard— — — — — 124 — — 124 
Doubtful— — — — — — — — — 
Total$28,303 $35,694 $23,060 $9,848 $3,423 $9,133 $294,168 $3,395 $407,024 
Current period gross write offs$— $— $— $— $— $5 $— $150 $155 
Consumer
Residential mortgage
Pass$17,670 $75,436 $154,579 $74,455 $10,913 $49,910 $— $— $382,963 
Special mention— — — — — — — — — 
Substandard— — — — — 414 — — 414 
Doubtful— — — — — — — — — 
Total$17,670 $75,436 $154,579 $74,455 $10,913 $50,324 $— $— $383,377 
Current period gross write offs$— $— $— $— $— $— $— $— $— 
Other consumer
Pass$274 $3,331 $5,007 $1,894 $565 $50 $3,694 $— $14,815 
Special mention— — — — — — — — — 
Substandard— 38 — — — — — — 38 
Doubtful— — — — — — — — — 
Total$274 $3,369 $5,007 $1,894 $565 $50 $3,694 $— $14,853 
Current period gross write offs$— $12 $15 $— $10 $— $— $— $37 
Total loans held-for-investment
Pass$222,049 $420,383 $591,871 $425,428 $163,393 $299,896 $321,675 $7,562 $2,452,257 
Special mention— — 5,057 — — — — — 5,057 
Substandard— 171 858 2,903 — 4,928 — — 8,860 
Doubtful— — — — — — — — — 
Total$222,049 $420,554 $597,786 $428,331 $163,393 $304,824 $321,675 $7,562 $2,466,174 
Current period gross write offs$— $12 $92 $— $10 $32 $— $150 $296 


23

The following table summarizes the Company’s loans held-for-investment by loan segment, internal risk ratings and vintage year as of December 31, 2023. The vintage year is the year of origination, renewal or major modification. Revolving loans that are converted to term loans presented in the table below are excluded from term loans by vintage year columns.
Term Loans by Origination YearRevolving LoansRevolving Loans Converted to Term
($ in thousands)20232022202120202019PriorTotal
December 31, 2023
Commercial Real Estate:
Commercial property
Pass$154,563 $268,369 $155,817 $83,461 $70,425 $107,879 $8,807 $— $849,321 
Special mention— — 484 — — 2,952 — — 3,436 
Substandard— — — — 311 2,202 — — 2,513 
Doubtful— — — — — — — — — 
Total$154,563 $268,369 $156,301 $83,461 $70,736 $113,033 $8,807 $— $855,270 
Business property
Pass$103,364 $103,549 $163,136 $50,362 $69,852 $59,765 $882 $4,327 $555,237 
Special mention— — — — — — — — — 
Substandard— 452 193 — 2,254 636 — — 3,535 
Doubtful— — — — — — — — — 
Total$103,364 $104,001 $163,329 $50,362 $72,106 $60,401 $882 $4,327 $558,772 
Multifamily
Pass$14,219 $40,618 $42,848 $26,472 $2,419 $5,924 $— $— $132,500 
Special mention— — — — — — — — — 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
Total$14,219 $40,618 $42,848 $26,472 $2,419 $5,924 $— $— $132,500 
Construction
Pass$4,617 $9,120 $— $7,500 $3,606 $— $— $— $24,843 
Special mention— — — — — — — — — 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
Total$4,617 $9,120 $— $7,500 $3,606 $— $— $— $24,843 


24

Term Loans by Origination YearRevolving LoansRevolving Loans Converted to Term
($ in thousands)20232022202120202019PriorTotal
December 31, 2023 (Continued)
Commercial and Industrial
Pass$77,957 $28,638 $11,950 $4,354 $6,323 $8,327 $198,010 $3,796 $339,355 
Special mention— — — 379 314 27 1,000 — 1,720 
Substandard— — — — 142 785 — — 927 
Doubtful— — — — — — — — — 
Total$77,957 $28,638 $11,950 $4,733 $6,779 $9,139 $199,010 $3,796 $342,002 
Consumer
Residential mortgage
Pass$79,581 $163,734 $78,499 $11,363 $10,865 $45,378 $— $— $389,420 
Special mention— — — — — — — — — 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
Total$79,581 $163,734 $78,499 $11,363 $10,865 $45,378 $— $— $389,420 
Other consumer
Pass$4,837 $7,527 $3,275 $1,326 $458 $7 $3,190 $— $20,620 
Special mention— — — — — — — — — 
Substandard— 15 — 10 — — — — 25 
Doubtful— — — — — — — — — 
Total$4,837 $7,542 $3,275 $1,336 $458 $7 $3,190 $— $20,645 
Total loans held-for-investment
Pass$439,138 $621,555 $455,525 $184,838 $163,948 $227,280 $210,889 $8,123 $2,311,296 
Special mention— — 484 379 314 2,979 1,000 — 5,156 
Substandard— 467 193 10 2,707 3,623 — — 7,000 
Doubtful— — — — — — — — — 
Total$439,138 $622,022 $456,202 $185,227 $166,969 $233,882 $211,889 $8,123 $2,323,452 
25

Nonaccrual Loans
The following table presents the loans on nonaccrual status by loan segments as of the date indicated:
($ in thousands)Total Nonaccrual LoansNonaccrual Loans with ACLACL on Nonaccrual LoansCollateral Dependent Nonaccrual LoansACL on Collateral Dependent Nonaccrual Loans
September 30, 2024
Commercial real estate:
Commercial property
$1,633 $— $— $1,633 $— 
Business property2,367 1,560 286 2,367 286 
Multifamily2,038 — — 2,038 — 
Total commercial real estate6,038 1,560 286 6,038 286 
Commercial and industrial124 47 31 77 — 
Consumer:
Residential mortgage414 — — 414 — 
Other consumer38 38 — — — 
Total consumer452 38 — 414 — 
Total
$6,614 $1,645 $317 $6,529 $286 
December 31, 2023
Commercial real estate:
Commercial property
$958 $— $— $958 $— 
Business property2,865 689 264 2,865 264 
Total commercial real estate3,823 689 264 3,823 264 
Commercial and industrial68 — — 68 — 
Consumer:
Other consumer25 25 — — — 
Total consumer25 25 — — — 
Total
$3,916 $714 $264 $3,891 $264 
There were no nonaccrual loans guaranteed by a U.S. government agency at September 30, 2024 and December 31, 2023.


26

Collateral Dependent Loans
Loans that have been classified as collateral dependent are loans where substantially all repayment of the loan is expected to come from the operation of or eventual liquidation of the collateral. Collateral dependent loans are evaluated individually for purposes of determining the ACL, which is determined based on the estimated fair value of the collateral. Estimates for costs to sell are included in the determination of the ACL when liquidation of the collateral is anticipated. In cases where the loan is well secured and the estimated value of the collateral exceeds the amortized cost of the loan, no ACL is recorded. The following table presents the collateral dependent loans by loan segments as of the date indicated:
($ in thousands)Hotel / MotelWarehouseCar WashRetailApartmentSingle Family ResidentialOtherTotal
September 30, 2024
Commercial real estate:
Commercial property$1,633 $— $— $— $— $— $— $1,633 
Business property— — 1,718 613 — — 36 2,367 
Multifamily— — — — 2,038 — — 2,038 
Total commercial real estate1,633 — 1,718 613 2,038 — 36 6,038 
Commercial and industrial11 — — — — 66 — 77 
Consumer:
Residential mortgage— — — — — 414 — 414 
Total consumer— — — — — 414 — 414 
Total$1,644 $— $1,718 $613 $2,038 $480 $36 $6,529 
December 31, 2023
Commercial real estate:
Commercial property$958 $— $— $— $— $— $— $958 
Business property— 2,137 — 689 — — 39 2,865 
Total commercial real estate958 2,137 — 689 — — 39 3,823 
Commercial and industrial13 — — — — 55 — 68 
Total$971 $2,137 $— $689 $— $55 $39 $3,891 
27

Past Due Loans
The following table presents the aging of past due in accruing loans and nonaccrual loans by loan segments as of date indicated:
Still AccruingNonaccrual
($ in thousands)30 to 59 Days Past Due60 to 89 Days Past Due90 or More Days Past DueTotal30 to 59 Days Past Due60 to 89 Days Past Due90 or More Days Past DueTotalTotal Loans Past Due
September 30, 2024
Commercial real estate:
Commercial property$257 $— $— $257 $607 $— $276 $883 $1,140 
Business property680 — — 680 — — 707 707 1,387 
Multifamily— — — — — — 2,038 2,038 2,038 
Total commercial real estate937 — — 937 607 — 3,021 3,628 4,565 
Commercial and industrial698 — — 698 34 46 44 124 822 
Consumer:
Residential mortgage1,212 — — 1,212 — 414 — 414 1,626 
Other consumer126 21 — 147 — — 38 38 185 
Total consumer1,338 21 — 1,359 — 414 38 452 1,811 
Total$2,973 $21 $— $2,994 $641 $460 $3,103 $4,204 $7,198 
December 31, 2023
Commercial real estate:
Commercial property$— $— $— $— $— $296 $— $296 $296 
Business property560 — — 560 — 39 168 207 767 
Total commercial real estate560 — — 560 — 335 168 503 1,063 
Commercial and industrial217 — — 217 — — — — 217 
Consumer:
Residential mortgage604 — — 604 — — — — 604 
Other consumer13 34 — 47 — 15 3 18 65 
Total consumer617 34 — 651 — 15 3 18 669 
Total$1,394 $34 $— $1,428 $— $350 $171 $521 $1,949 

28

Loan Modification
Occasionally, the Company modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, an other-than-insignificant payment delay, interest rate reduction or combination of at above mentioned modifications. When principal forgiveness is provided, the amount of forgiveness is charged-off against the ACL. These loans are placed on nonaccrual status at the time of such modification.
The following tables present loans that the borrowers were both experiencing financial difficulty and modified during the periods indicated by loan segments and modification type:
Three Months Ended
($ in thousands)
Combination of Other-Than-Insignificant Payment Delay and Term Extension
TotalPercentage to Each Loan Segment
September 30, 2024
Commercial real estate:
Business property$1,183 $1,183 0.2 %
Total commercial real estate1,183 1,183 0.1 %
Total$1,183 $1,183 0.1 %
Nine Months Ended
($ in thousands)
Combination of Other-Than-Insignificant Payment Delay and Term Extension
TotalPercentage to Each Loan Segment
September 30, 2024
Commercial real estate:
Commercial property$410 $410 0.1 %
Business property2,230 2,230 0.4 %
Total commercial real estate2,640 2,640 0.2 %
Commercial and industrial$44 $44 0.1 %
Total$2,684 $2,684 0.1 %
The following tables present the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the periods indicates:
Three Months Ended September 30, 2024
Nine Months Ended September 30, 2024
($ in thousands)
Combination of Other-Than-Insignificant Payment Delay and Term Extension
Combination of Other-Than-Insignificant Payment Delay and Term Extension
Commercial property
6-month fixed payment and 6-month term extension
Business property
6-month fixed payment and 6-month term extension
6-month fixed payment and 6-month term extension
Commercial and industrial
6-month interest-only payment and 6-month term extension
There were no loans that were both experiencing financial difficulty and modified during the three and nine months ended September 30, 2023.
The Company had no commitments to lend to any borrower included in the above table as of September 30, 2024.

29

The following table presents the performance of loans that the borrowers were both experiencing financial difficulty and modified in the last 12 months:
($ in thousands)30 to 59 Days Past Due60 to 89 Days Past Due90 or More Days Past DueTotal
September 30, 2024
Commercial real estate:
Business property$— $— $671 $671 
Total commercial real estate— — 671 671 
Commercial and industrial— — 44 44 
Total$— $— $715 $715 
Purchases, Sales, and Transfers
The following table presents a summary of loans that were transferred from loans held-for-investment to loans held-for-sale for the periods indicate:
Three Months Ended September 30,Nine Months Ended September 30,
($ in thousands)2024202320242023
Consumer:
Residential mortgage$676 $— $676 $— 
Total consumer676 — 676 — 
Total$676 $— $676 $— 
The Company had no loans that were transferred from loans held-for-sale to loans held-for investment during three and nine months ended September 30, 2024 or 2023.
The following table presents a summary of purchases of loans held-for-investment for the periods indicated:
Three Months Ended September 30,Nine Months Ended September 30,
($ in thousands)2024202320242023
Consumer:
Residential mortgage$— $— $— $15,741 
Total consumer— — — 15,741 
Total$— $— $— $15,741 
Loans Held-For-Sale
The following table presents a composition of loans held-for-sale as of the date indicated:
($ in thousands)September 30, 2024December 31, 2023
Commercial real estate:
Business property$4,500 $2,802 
Total commercial real estate4,500 2,802 
Commercial and industrial670 2,353 
Total$5,170 $5,155 
Loans held-for-sale are carried at the lower of cost or fair value. When a determination is made at the time of commitment to originate as held-for-investment, it is the Company’s intent to hold these loans to maturity or for the “foreseeable future,” subject to periodic reviews under the Company’s management evaluation processes, including asset/liability management and credit risk management. When the Company subsequently changes its intent to hold certain loans, the loans are transferred to held-for-sale at the lower of cost or fair value. Certain loans are transferred to held-for-sale with write-downs to ACL on loans.
30

Note 5. Other Real Estate Owned
The following table presents activity in OREO for the periods indicated:
Three Months Ended September 30,Nine Months Ended September 30,
($ in thousands)2024202320242023
Balance at beginning of year
$— $— $2,558 $— 
Additions
466 — 466 — 
Sales
— — (2,558)— 
Balance at end of year$466 $— $466 $— 
During the year ended December 31, 2023, the Company recognized an OREO of $2.6 million by transferring a SBA 7(a) loan of $593 thousand, of which its guaranteed portion was previously sold. The Company’s exposure was 25% of the OREO and the SBA was entitled to 75% of the sale price upon the sale of property. The Company sold the property during the three months ended March 31, 2024.
The following table presents activity in OREO valuation allowance for the periods indicated:
Three Months Ended September 30,Nine Months Ended September 30,
($ in thousands)2024202320242023
Balance at beginning of year
$— $— $— $— 
Additions
— — — — 
Net direct write-downs and removal from sale
— — — — 
Balance at end of year$— $— $— $— 
The following table presents expenses related to OREO for the periods indicated:
Three Months Ended September 30,Nine Months Ended September 30,
($ in thousands)2024202320242023
Net (gain) loss on sales
$— $— $(13)$— 
Operating expenses, net of rental income
5 — 7 — 
Total$5 $— $(6)$— 
The Company did not provide loans to finance the sale of its OREO properties during the nine months ended September 30, 2024.
31

Note 6 - Servicing Assets
The Company sells SBA and certain residential mortgage loans with servicing retained. SBA loans are included in commercial real estate loans (“CRE SBA”) and commercial and industrial loans (“C&I SBA”). The Company sold loans of $13.5 million and $17.7 million, respectively, with the servicing rights retained and recognized a net gain on sale of $750 thousand and $689 thousand, respectively, during the three months ended September 30, 2024 and 2023. During the nine months ended September 30, 2024 and 2023, the Company sold loans of $46.5 million and $61.6 million, respectively, with the servicing rights retained and recognized a net gain on sale of $2.6 million and $2.8 million, respectively. Loan servicing income was $786 thousand and $851 thousand, respectively, for the three months ended September 30, 2024 and 2023, and $2.5 million and $2.6 million, respectively, for the nine months ended September 30, 2024 and 2023.
The following table presents the composition of servicing assets with key assumptions used to estimate the fair value as of the dates indicated:
September 30, 2024December 31, 2023
($ in thousands)Residential MortgageCRE SBAC&I SBATotalResidential MortgageCRE SBAC&I SBATotal
Carrying amount
$43 $5,343 $516 $5,902 $49 $6,135 $482 $6,666 
Fair value
$95 $7,580 $807 $8,482 $104 $8,284 $728 $9,116 
Discount rate
7.85 %12.14 %15.85 %9.93 %12.30 %15.46 %
Prepayment speed
14.62 %18.46 %14.10 %12.75 %16.71 %13.97 %
Weighted-average remaining life19.0 years20.7 years7.3 years19.8 years21.0 years7.1 years
Underlying loans being serviced
$9,560 $453,823 $63,679 $527,062 $10,666 $461,300 $60,265 $532,231 
The following tables present activity in servicing assets for the periods indicated:
Three Months Ended September 30,
20242023
($ in thousands)Residential MortgageCRE SBAC&I SBATotalResidential MortgageCRE SBAC&I SBATotal
Balance at beginning of period
$45 $5,656 $504 $6,205 $55 $6,655 $432 $7,142 
Additions
— 107 69 176 — 199 50 249 
Amortization
(2)(420)(57)(479)(4)(420)(47)(471)
Balance at end of period
$43 $5,343 $516 $5,902 $51 $6,434 $435 $6,920 
Nine Months Ended September 30,
20242023
($ in thousands)Residential MortgageCRE SBAC&I SBATotalResidential MortgageCRE SBAC&I SBATotal
Balance at beginning of period$49 $6,135 $482 $6,666 $64 $6,831 $452 $7,347 
Additions— 427 181 608 — 787 130 917 
Amortization(6)(1,219)(147)(1,372)(13)(1,184)(147)(1,344)
Balance at end of period$43 $5,343 $516 $5,902 $51 $6,434 $435 $6,920 

32

Note 7 - Operating Leases
The following table presents operating lease cost and supplemental cash flow information related to leases for the periods indicated:
Three Months Ended September 30,Nine Months Ended September 30,
($ in thousands)2024202320242023
Operating lease cost (1)
$889 $744 $2,716 $2,237 
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases
$849 $809 $2,577 $2,440 
Right of use assets obtained in exchange for lease obligations
$973 $1,134 $973 $1,360 
(1)    Included in Occupancy and Equipment on the Consolidated Statements of Income (Unaudited).
The Company used the incremental borrowing rate based on the information available at lease commencement in determining the present value of lease payments. The following table presents supplemental balance sheet information related to leases as of the dates indicated:
($ in thousands)September 30, 2024December 31, 2023
Operating leases:
Operating lease assets
$17,932 $18,913 
Operating lease liabilities
$19,301 $20,137 
Weighted-average remaining lease term
7.9 years8.3 years
Weighted-average discount rate
4.70 %4.63 %
The following table presents maturities of operating lease liabilities as of the date indicated:
($ in thousands)September 30, 2024
Maturities:
2024$862 
20253,397 
20263,051 
20272,665 
20282,541 
After 202811,480 
Total lease payment
23,996 
Imputed Interest
(4,695)
Present value of operating lease liabilities
$19,301 
33

Note 8 - Federal Home Loan Bank Advances and Other Borrowings
FHLB Advances
The Company had no FHLB advances at September 30, 2024. At December 31, 2023, the Company had a term FHLB advance of $39.0 million with an interest rate of 5.63% and a maturity date of February 21, 2024 (term of 92 days). The Company repaid the advance upon maturity.
At September 30, 2024 and December 31, 2023, loans pledged to secure borrowings from the FHLB were $979.7 million and $1.04 billion, respectively. The Company’s investment in capital stock of the FHLB of San Francisco totaled $13.9 million and $12.5 million at September 30, 2024 and December 31, 2023, respectively. The Company had additional borrowing capacity of $703.0 million and $603.0 million from the FHLB as of September 30, 2024 and December 31, 2023, respectively.
Federal Reserve Discount Window
The Company had $578.7 million of unused borrowing capacity from the Federal Reserve Discount Window, to which the Company pledged loans with a carrying value of $712.4 million with no outstanding borrowings at September 30, 2024. At December 31, 2023, the Company had $528.9 million of unused borrowing capacity from the Federal Reserve Discount Window, to which the Company pledged loans with a carrying value of $681.8 million with no outstanding borrowings.
Overnight Federal Funds Lines
The Company maintains overnight federal funds lines with correspondent financial institutions. The Company maintained available borrowing capacity of $65.0 million and had no overnight borrowing at both September 30, 2024 and December 31, 2023.
Note 9 - Shareholders’ Equity
Series C, Senior Non-Cumulative Perpetual Preferred Stock
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”). The ECIP investment qualifies as tier 1 capital for purposes of the bank regulatory capital requirements.
The Series C Preferred Stock accrued no dividend for the first 24 months following the investment date. Beginning on May 24, 2024, holders of the Series C Preferred Stock are entitled to quarterly non-cumulative cash dividends as declared by the Company’s Board of Directors. The Series C Preferred Stock dividend rate adjusts annually based on the lending growth criteria listed in the terms of the ECIP investment with the 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. Dividends will be payable quarterly in arrears on March 15, June 15, September 15, and December 15. The terms of the Series C Preferred Stock prohibit the Company from paying dividends on or repurchasing shares of its common stock unless it has paid or contemporaneously pays the full Series C Preferred Stock dividend with respect to the preceding quarterly dividend period.
The Series C Preferred Stock may be redeemed at the option of the Company on or after the fifth anniversary of issuance (or earlier in the event of loss of regulatory capital treatment), subject to the approval of the appropriate federal banking regulator and in accordance with the federal banking agencies’ regulatory capital regulations.
The Company began paying quarterly dividends on the Series C Preferred Stock at 2% beginning in the three months ended June 30, 2024. Dividends on the Series C Preferred Stock totaled $346 thousand and $488 thousand for the three and nine months ended September 30, 2024, respectively.
Stock Repurchases
During the year ended December 31, 2023, the Company repurchased and retired 512,657 shares of common stock at a weighted-average price of $17.22 per share under a stock repurchase program approved by the Board of Directors on August 2, 2023 and a legacy stock repurchase program approved on July 28, 2022.
During the nine months ended September 30, 2024, the Company repurchased and retired 14,947 shares of common stock at a weighted-average price of $14.88 per share. On July 25, 2024, the Company announced the amendment of the 2023 stock repurchase program, which extended the program expiration from August 2, 2024 to August 1, 2025. As of September 30, 2024, the Company was authorized to purchase 577,777 additional shares under the 2023 stock repurchase program.
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Note 10 - Share-Based Compensation
On May 25, 2023, the Company adopted the 2023 Equity Based Compensation Plan (“2023 EBC Plan”) approved by its shareholders to replace the 2013 Equity Based Stock Compensation Plan. The 2023 EBC Plan provides 700,000 shares of common stock for equity based compensation awards including incentive and non-qualified stock options, and restricted stock awards. As of September 30, 2024, there were 482,800 shares available for future grants.
Share-Based Compensation Expense
The following table presents share-based compensation expense and the related tax benefits for the periods indicated:
Three Months Ended September 30,Nine Months Ended September 30,
($ in thousands)2024202320242023
Share-based compensation expense related to:
Stock options
$69 $27 $213 $90 
Restricted stock awards
44 86 165 256 
Total share-based compensation expense
$113 $113 $378 $346 
Related tax benefits
$26 $25 $89 $75 
The following table presents unrecognized share-based compensation expense as of the date indicated:
September 30, 2024
($ in thousands)Unrecognized ExpenseWeighted-Average Remaining Expected Recognition Period
Unrecognized share-based compensation expense related to:
Stock options
$591 2.3 years
Restricted stock awards
321 2.0 years
Total unrecognized share-based compensation expense
$912 2.2 years
Stock Options
The following tables represent stock option activity for the periods indicated:
Three Months Ended September 30, 2024
($ in thousands except per share data)
Number of SharesWeighted-Average Exercise Price Per ShareWeighted-Average Contractual TermAggregated Intrinsic Value
Outstanding at beginning of period
605,764 $13.95 5.2 years$1,413 
Granted
5,000 $18.25 10.0 years
Exercised
(11,351)$10.33 1.1 years
Forfeited
(9,075)$10.33 1.1 years
Outstanding at end of period
590,338 $14.11 5.2 years$2,763 
Exercisable at end of period
342,338 $12.90 2.5 years$2,017 
Nine Months Ended September 30, 2024
($ in thousands except per share data)
Number of SharesWeighted-Average Exercise Price Per ShareWeighted-Average Contractual TermAggregated Intrinsic Value
Outstanding at beginning of period614,715 $13.90 5.7 years$2,788 
Granted5,000 $18.25 10.0 years
Exercised(20,302)$10.33 1.1 years
Forfeited(9,075)$10.33 1.1 years
Outstanding at end of period590,338 $14.11 5.2 years$2,763 
Exercisable at end of period342,338 $12.90 2.5 years$2,017 
35


The following table represents information regarding unvested stock options for the periods indicated:
Three Months Ended September 30, 2024
Nine Months Ended September 30, 2024
Number of SharesWeighted-Average Exercise Price Per ShareNumber of SharesWeighted-Average Exercise Price Per Share
Outstanding at beginning of period
255,000 $15.90 271,000 $15.85 
Granted
5,000 $18.25 5,000 $18.25 
Vested(12,000)$19.36 (28,000)$16.84 
Outstanding at end of period
248,000 $15.78 248,000 $15.78 
Restricted Stock Awards
The following table represents restricted stock award activity for the periods indicated:
Three Months Ended September 30, 2024Nine Months Ended September 30, 2024
Number of SharesWeighted-Average Grant Date Fair Value Per ShareNumber of SharesWeighted-Average Grant Date Fair Value Per Share
Outstanding at beginning of period
24,980 $19.90 41,661 $17.53 
Granted
1,500 $18.74 1,500 $18.74 
Vested(7,380)$16.82 (23,641)$14.83 
Forfeited
— $— (420)$15.97 
Outstanding at end of period
19,100 $21.00 19,100 $21.00 
Note 11 - Income Taxes
Income tax expense was $2.9 million and $3.0 million, respectively, and the effective tax rate was 26.9% and 29.7%, respectively, for the three months ended September 30, 2024 and 2023. For nine months ended September 30, 2024 and 2023, income tax expense was $7.2 million and $10.2 million, respectively, and the effective tax rate was 27.7% and 29.2%, respectively.
At September 30, 2024 and December 31, 2023, the Company had no unrecognized tax benefits or related accrued interest.
The Company and its subsidiaries are subject to U.S. federal and various state jurisdictions income tax examinations. As of September 30, 2024, the Company is no longer subject to examination by taxing authorities for tax years before 2021 for federal taxes and before 2020 for various state jurisdictions. The statute of limitations vary by state, and state taxes other than California have been minimal and immaterial to the Company’s financial results.
36

Note 12 - Earnings Per Share
Earnings per share (“EPS”) is computed under the two-class method. Net income allocated to common stock is computed by
subtracting income allocated to unvested restricted stock from net income available to common shareholders. Income allocated to unvested restricted stock includes cash dividends paid and undistributed income available to holders of unvested restricted stock, if any. Basic EPS is computed by dividing net income allocated to common stock by the weighted-average common shares outstanding excluding the weighted-average unvested restricted stock. Diluted EPS is computed by dividing net income allocated to common stock by the weighted-average common stock outstanding, excluding the weighted-average unvested restricted stock, adjusted for the dilutive effect of stock options.
The following table presents the computations of basic and diluted EPS for the periods indicated:
Three Months Ended September 30,Nine Months Ended September 30,
($ in thousands, except per share)
2024202320242023
Basic earnings per share:
Net income available to common shareholders$7,468 $7,023 $18,292 $24,797 
Less: income allocated to unvested restricted stock
(11)(21)(31)(78)
Net income allocated to common stock
$7,457 $7,002 $18,261 $24,719 
Weighted-average total common shares outstanding
14,262,513 14,337,341 14,262,340 14,372,908 
Less: weighted-average unvested restricted stock
(21,499)(42,539)(24,489)(44,978)
Weighted-average common shares outstanding, basic
14,241,014 14,294,802 14,237,851 14,327,930 
Basic earnings per share
$0.52 $0.49 $1.28 $1.73 
Diluted earnings per share:
Net income allocated to common stock
$7,457 $7,002 $18,261 $24,719 
Weighted-average common shares outstanding, basic
14,241,014 14,294,802 14,237,851 14,327,930 
Diluted effect of stock options
115,370 101,414 90,659 114,030 
Weighted-average common shares outstanding, diluted
14,356,384 14,396,216 14,328,510 14,441,960 
Diluted earnings per share
$0.52 $0.49 $1.27 $1.71 
There were 291,700 and 93,700 stock options excluded in computing diluted EPS because they were anti-dilutive for three months ended September 30, 2024 and 2023, respectively. For the nine months ended September 30, 2024 and 2023, there were 283,000 and 93,700 stock options excluded in computing diluted EPS because they were anti-dilutive, respectively.
37

Note 13 - Off-Balance Sheet Credit Exposures, Commitments and Other Contingencies
In the ordinary course of business, the Company enters into financial commitments to meet the financing needs of its customers. These financial commitments include commitments to extend credit and letters of credit. Those instruments involve to varying degrees, elements of credit, and interest rate risk not recognized in the Company’s consolidated financial statements.
The Company had the following outstanding financial commitments whose contractual amount represents credit risk as of the dates indicated:
September 30, 2024December 31, 2023
($ in thousands)Fixed RateVariable RateFixed RateVariable Rate
Unused lines of credit$11,828 $381,302 $2,808 $347,652 
Unfunded loan commitments5,590 34,839 4,020 47,038 
Standby letters of credit
5,158 1,516 4,638 1,786 
Commercial letters of credit
— — — 160 
Total
$22,576 $417,657 $11,466 $396,636 
Unfunded loan commitments are generally made for periods of 90 days or less, except for SBA loans that are generally made for periods of 180 days or less.
The Company applies an expected credit loss estimation methodology applied to each respective loan segment for determining the ACL on off-balance sheet credit exposures. The loss estimation process includes assumptions for utilization at default. These assumptions are based on the Company’s own historical internal loan data. As a part of adoption of ASC 326, the Company recorded an initial adjustment to the ACL on off-balance sheet credit exposures of $1.6 million on January 1, 2023. As of September 30, 2024 and December 31, 2023, the Company maintained an ACL on off-balance sheet credit exposures of $1.2 million and $1.3 million in Accrued Interest Payable and Other Liabilities in the Consolidated Balance Sheets, respectively.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total amounts do not necessarily represent future cash requirements. The Company evaluates each client’s credit worthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Company is based on management’s credit evaluation of the customer.
Litigation
The Company is involved in various matters of litigation, which have arisen in the ordinary course of business. In the opinion of management, the disposition of pending matters of litigation will not have a material effect on the Company’s consolidated financial statements.
Network and Data Incident
On August 30, 2021, the Bank identified unusual activity on its network. The Bank responded promptly to disable the activity, investigate its source and monitor the Bank’s network. The Bank subsequently became aware of claims that it had been the target of a ransomware attack. On September 7, 2021, the Bank determined that an external actor had illegally accessed and/or acquired certain data on its network. The Bank worked with third-party forensic investigators to understand the nature and scope of the incident and determine what information may have been accessed and/or acquired and who may have been impacted. The investigation revealed that this incident impacted certain files containing certain Bank customer information. Some of these files contained documents related to loan applications, such as tax returns, Form W-2 information of their employees, and payroll records. The Bank has notified all individuals identified as impacted, consistent with applicable laws. All impacted individuals were offered free Equifax Complete Premier credit monitoring and identify theft protection services. The Bank has notified law enforcement and appropriate authorities of the incident.
On December 16, 2021, a complaint based on the incident was filed in the Los Angeles County Superior Court seeking damages, injunctive relief, and equitable relief. During the three months ended September 30, 2023, the Bank agreed to settle this matter in exchange for $700 thousand to the putative class members, including costs of settlement administration, and attorneys’ fees and costs. The Bank received preliminary court approval of the settlement and notice was provided to members of the proposed class during the three months ended September 30, 2023. The court issued an order granting final approval on June 20, 2024.
The Company expects that the full amount of the final settlement will be covered under the Company’s applicable insurance policies.
38

Note 14 - Regulatory Matters
Under the final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (“Basel III rules”), the Bank must hold a capital conservation buffer of 2.50% above the adequately capitalized risk-based capital ratios to avoid restrictions on dividends, stock repurchase, discretionary bonuses and other payments. Management believes as of September 30, 2024 and December 31, 2023, the Bank met all capital adequacy requirements to which it is subject. Under the Federal Reserve’s “Small Bank Holding Company” policy, the Company is not currently subject to separate minimum capital requirements under the Basel III rules. At such time as the Company reaches the $3 billion asset level, it will be subject to consolidated capital requirements under the Basel III rules independent of the Bank. For comparison purposes, the Company’s ratios are included in the following discussion as well, all of which would have exceeded the “well-capitalized” level had the Company been subject to separate capital minimums. The Company and the Bank’s capital conservation buffer was 7.42% and 7.54%, respectively, as of September 30, 2024, and 7.73% and 8.07%, respectively, as of December 31, 2023. Unrealized gain or loss on securities available-for-sale is not included in computing regulatory capital. The following table presents the regulatory capital amounts and ratios for the Company and the Bank as of dates indicated:
ActualMinimum Capital RequirementTo Be Well Capitalized Under Prompt Corrective Provisions
($ in thousands)AmountRatioAmountRatioAmountRatio
September 30, 2024
PCB Bancorp
Common tier 1 capital (to risk-weighted assets)
$299,090 11.92 %$112,909 4.5 % N/A  N/A
Total capital (to risk-weighted assets)
398,395 15.88 %200,727 8.0 % N/A  N/A
Tier 1 capital (to risk-weighted assets)
368,231 14.68 %150,545 6.0 % N/A  N/A
Tier 1 capital (to average assets)
368,231 12.79 %115,148 4.0 % N/A  N/A
PCB Bank
Common tier 1 capital (to risk-weighted assets)
$359,655 14.33 %$112,905 4.5 %$163,086 6.5 %
Total capital (to risk-weighted assets)
389,818 15.54 %200,721 8.0 %250,901 10.0 %
Tier 1 capital (to risk-weighted assets)
359,655 14.33 %150,541 6.0 %200,721 8.0 %
Tier 1 capital (to average assets)
359,655 12.49 %115,146 4.0 %143,933 5.0 %
December 31, 2023
PCB Bancorp
Common tier 1 capital (to risk-weighted assets)
$288,174 12.23 %$106,043 4.5 %N/AN/A
Total capital (to risk-weighted assets)
386,125 16.39 %188,521 8.0 %N/AN/A
Tier 1 capital (to risk-weighted assets)
357,315 15.16 %141,391 6.0 %N/AN/A
Tier 1 capital (to average assets)
357,315 13.43 %106,423 4.0 %N/AN/A
PCB Bank
Common tier 1 capital (to risk-weighted assets)
$350,038 14.85 %$106,081 4.5 %$153,228 6.5 %
Total capital (to risk-weighted assets)
378,849 16.07 %188,588 8.0 %235,735 10.0 %
Tier 1 capital (to risk-weighted assets)
350,038 14.85 %141,441 6.0 %188,588 8.0 %
Tier 1 capital (to average assets)
350,038 13.16 %106,421 4.0 %133,026 5.0 %
The California Financial Code provides that a bank generally may not make a cash distribution to its shareholders in excess of the lesser of the bank’s undivided profits or the bank’s net income for its last three fiscal years less the amount of any distribution made to the bank’s shareholders during the same period. This law limits the distributions the Bank is permitted to make to the Company. As a California corporation, the Company is subject to the limitations of the California Corporations Code, which allows a corporation to distribute cash or property to shareholders, including a dividend or repurchase or redemption of shares, if the corporation meets either a retained earnings test or a balance sheet test. Under the retained earnings test, the Company may make a distribution from retained earnings to the extent that its retained earnings exceed the sum of (a) the amount of the distribution plus (b) the amount, if any, of dividends in arrears on shares with preferential dividend rights. Under the balance sheet test, the Company may also make a distribution if, immediately after the distribution, the value of its assets equals or exceeds the sum of (a) its total liabilities plus (b) the liquidation preference of any shares which have a preference upon dissolution over the rights of shareholders receiving the distribution. Indebtedness is not considered a liability if the terms of such indebtedness provide that payment of principal and interest thereon are to be made only if, and to the extent that, a distribution to shareholders could be made under the balance sheet test.
39

The Federal Reserve, the Federal Deposit Insurance Corporation (the “FDIC”) and the California Department of Financial Protection and Innovation periodically examine the Company, the Bank and their businesses, including for compliance with laws and regulations. If, as a result of an examination, a banking agency were to determine that the Company’s or the Bank’s financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of any of their operations had become unsatisfactory, or that the Company or the Bank was in violation of any law or regulation, they may take a number of different remedial actions as they deem appropriate. These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative action to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in the Company’s or the Bank’s capital, to restrict growth, to assess civil money penalties, to fine or remove officers and directors and, if it is concluded that such conditions cannot be corrected or there is an imminent risk of loss to depositors, to terminate the Bank’s deposit insurance and place the Bank into receivership or conservatorship.
Note 15 - Revenue Recognition
The following table presents revenue from contracts with customers within the scope of ASC 606, Revenue from Contracts with Customers, for the periods indicated:
Three Months Ended September 30,Nine Months Ended September 30,
($ in thousands)2024202320242023
Noninterest income in-scope of Topic 606
Service charges and fees on deposits:
Monthly service fees
$27 $27 $77 $79 
Account analysis fees
250 239 715 699 
Non-sufficient funds charges
96 81 272 241 
Other deposit related fees
26 24 77 65 
Total service charges and fees on deposits
399 371 1,141 1,084 
Debit card fees
154 103 253 254 
Gain (loss) on sale of other real estate owned— — 13 — 
Wire transfer fees
156 162 462 467 
Other service charges
61 54 177 157 
Total
$770 $690 $2,046 $1,962 
Note 16 - Subsequent Events
Dividend Declared on Common Stock
On October 23, 2024, the Company’s Board of Directors declared a quarterly cash dividend of $0.18 per common share. The dividend will be paid on or about November 15, 2024, to shareholders of record as of the close of business on November 8, 2024.

40

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following is management’s discussion and analysis of the major factors that influenced the Company’s results of operations and financial condition as of and for the three and nine months ended September 30, 2024. This analysis should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 and with the unaudited consolidated financial statements and notes (unaudited) thereto set forth in this Quarterly Report on Form 10-Q.
Critical Accounting Estimates
The Company’s consolidated financial statements are prepared in accordance with GAAP and general practices within the banking industry. Within these financial statements, certain financial information contains approximate measurements of financial effects of transactions and impacts at the consolidated statements of financial condition dates and the Company’s results of operations for the reporting periods. As certain accounting policies require significant estimates and assumptions that have a material impact on the carrying value of assets and liabilities, the Company has established critical accounting policies to facilitate making the judgment necessary to prepare financial statements. The Company’s critical accounting policies are described in Note 1 to Consolidated Financial Statements and in the “Critical Accounting Estimates” section of Management’s Discussion and Analysis of Financial Condition and Results of Operations in its Annual Report on Form 10-K for the year ended December 31, 2023 and in Note 1 to Consolidated Financial Statements (unaudited) included in Part I of this Quarterly Report on Form 10-Q.
Allowance for Credit Losses
On January 1, 2023, the Company adopted the provisions of ASC 326, “Financial Instruments - Credit Losses (Topic 326)” Instruments. The adoption of ASC 326 changes the way the Company estimates the ACL on certain financial assets. The adoption of ASC 326 requires the Company to measure and record current expected credit losses for financial assets within the scope of ASC 326, which the Company currently consist substantially of loans, off-balance sheet credit exposures and securities available-for-sale. Measuring credit losses under the current expected credit losses (“CECL”) framework requires a significant amount of judgment, including the incorporation of reasonable and supportable forecasts about future conditions that may ultimately impact the level of credit losses the Company may recognize. Under the CECL framework, current expected credit losses are recorded on financial assets within the scope of ASC 326 at the time of their origination or acquisition.
Estimating expected credit losses requires management to use relevant forward-looking information, including the use of reasonable and supportable forecasts. The measurement of the ACL is performed by collectively evaluating loans with similar risk characteristics. The Company’s discounted cash flow methodology incorporates a probability of default and loss given default model, as well as expectations of future economic conditions, using reasonable and supportable forecasts.
The use of reasonable and supportable forecasts requires significant judgment, such as selecting forecast scenarios, as well as determining the appropriate length of the forecast horizon. Management leverages economic projections from a reputable and independent third party to inform and provide its reasonable and supportable economic forecasts. Although no one economic variable can fully demonstrate the sensitivity of the ACL estimate to changes in economic variables used in the ACL model, the Company utilized changes in U.S. unemployment rate and year-over-year change in real gross domestic product (“GDP”) growth rate as its key economic variables. Other internal and external indicators of economic forecasts may also be considered by management when developing the forecast metrics. The Company’s ACL model reverts to long-term average loss rates for purposes of estimating expected cash flows beyond a period deemed reasonable and supportable. The Company forecasts economic conditions and expected credit losses over a one-year time horizon. Beyond the one-year forecast time horizon, the Company’s ACL model reverts to historical long-term average loss rates over a one-year period.
Within the various economic scenarios considered as of September 30, 2024, the quantitative estimate of the ACL would increase by approximately $8.4 million under sole consideration of a more adverse downside scenario. The quoted sensitivity calculation reflects the sensitivity of the modeled ACL estimate to macroeconomic forecast data, but is absent of qualitative overlays and other qualitative adjustments that are part of the quarterly reserving process and does not necessarily reflect the nature and extent of future changes in the ACL for reasons including increases or decreases in qualitative adjustments, changes in the risk profile and size of the portfolio, changes in the severity of the macroeconomic scenario and the range of scenarios under management consideration.

41

A portion of the collectively evaluated ACL on loans also includes qualitative adjustments for risk factors not reflected or captured by the quantitative modeled ACL but are relevant in estimating future expected credit losses. Qualitative adjustments may be related to and include, but not limited to factors such as: (i) management’s assessment of economic forecasts used in the model and how those forecasts align with management’s overall evaluation of current and expected economic conditions, (ii) organization-specific risks such as credit concentrations, collateral specific risks, regulatory risks, and external factors that may ultimately impact credit quality, (iii) potential model limitations such as limitations identified through back-testing, and other limitations associated with factors such as underwriting changes, acquisition of new portfolios and changes in portfolio segmentation, and (iv) management’s overall assessment of the adequacy of the ACL, including an assessment of ACL model data inputs.
Although management uses the best information reasonably available to derive estimates and assumptions necessary to measure an appropriate level of the ACL, these estimates and assumptions are subject to change in future periods, which may have a material impact on the level of the ACL and the Company’s results of operations.
Non-GAAP Measures
The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance. Generally, a non-GAAP financial measure is a numerical measure of a company’s financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated, and presented in accordance with GAAP. However, these non-GAAP financial measures are supplemental and are not a substitute for an analysis based on GAAP measures and may not be comparable to non-GAAP financial measures that may be presented by other companies.
The following tables present reconciliation of return on average tangible common equity, tangible common equity per common share and tangible common equity to tangible assets ratios to their most comparable GAAP measures as of the dates or for the periods indicated. These non-GAAP measures, which are presented in this Quarterly Report on Form 10-Q, are used by management in its analysis of the Company's performance.
Three Months Ended September 30,Nine Months Ended September 30,
($ in thousands)2024202320242023
Average total shareholders' equity$357,376 $343,144 $352,866 $339,423 
Less: average preferred stock69,141 69,141 69,141 69,141 
Average tangible common equity$288,235 $274,003 $283,725 $270,282 
Net income$7,814 $7,023 $18,780 $24,797 
Annualized return on average shareholders’ equity8.70 %8.12 %7.11 %9.77 %
Net income available to common shareholders
$7,468 $7,023 $18,292 $24,797 
Annualized return on average tangible common equity10.31 %10.17 %8.61 %12.27 %
($ in thousands, except per share data)September 30, 2024December 31, 2023September 30, 2023
Total shareholders' equity$362,300 $348,872 $341,852 
Less: preferred stock69,141 69,141 69,141 
Tangible common equity$293,159 $279,731 $272,711 
Outstanding common shares14,266,725 14,260,440 14,319,014 
Book value per common share$25.39 $24.46 $23.87 
Tangible common equity per common share$20.55 $19.62 $19.05 
Total assets$2,889,833 $2,789,506 $2,567,974 
Total shareholders' equity to total assets12.54 %12.51 %13.31 %
Tangible common equity to total assets10.14 %10.03 %10.62 %

42

Selected Financial Data
The following table presents certain selected financial data as of the dates or for the periods indicated:
As of or For the Three Months Ended September 30,
As of or For the Nine Months Ended September 30,
($ in thousands, except per share data)2024202320242023
Selected balance sheet data:
Cash and cash equivalents
$193,064 $192,350 $193,064 $192,350 
Securities available-for-sale
147,635 139,218 147,635 139,218 
Loans held-for-sale
5,170 6,693 5,170 6,693 
Loans held-for-investment
2,466,174 2,167,605 2,466,174 2,167,605 
ACL on loans(28,930)(25,599)(28,930)(25,599)
Total assets
2,889,833 2,567,974 2,889,833 2,567,974 
Total deposits
2,459,682 2,192,129 2,459,682 2,192,129 
Shareholders’ equity
362,300 341,852 362,300 341,852 
Selected income statement data:
Interest income
$45,998 $38,852 $134,498 $110,226 
Interest expense
23,279 16,403 69,045 43,646 
Net interest income
22,719 22,449 65,453 66,580 
Provision (reversal) for credit losses50 751 1,399 (1,830)
Noninterest income
2,620 2,502 8,050 8,180 
Noninterest expense
14,602 14,207 46,129 41,588 
Income before income taxes
10,687 9,993 25,975 35,002 
Income tax expense
2,873 2,970 7,195 10,205 
Net income
7,814 7,023 18,780 24,797 
Preferred stock dividends346 — 488 — 
Net income available to common shareholders7,468 7,023 18,292 24,797 
Per share data:
Earnings per common share, basic
$0.52 $0.49 $1.28 $1.73 
Earnings per common share, diluted
0.52 0.49 1.27 1.71 
Book value per common share (1)
25.39 23.87 25.39 23.87 
Tangible common equity per common share (9)
20.55 19.05 20.55 19.05 
Cash dividends declared per common share
0.18 0.18 0.54 0.51 
Outstanding share data:
Number of common shares outstanding
14,266,725 14,319,014 14,266,725 14,319,014 
Weighted-average common shares outstanding, basic14,241,014 14,294,802 14,237,851 14,327,930 
Weighted-average common shares outstanding, diluted14,356,384 14,396,216 14,328,510 14,441,960 
Selected performance ratios:
Return on average assets (2)
1.08 %1.09 %0.88 %1.32 %
Return on average shareholders’ equity (2)
8.70 %8.12 %7.11 %9.77 %
Dividend payout ratio (3)
34.62 %36.73 %42.19 %29.48 %
Efficiency ratio (4)
57.63 %56.94 %62.76 %55.63 %
Yield on average interest-earning assets (2)
6.58 %6.18 %6.51 %6.01 %
Cost of average interest-bearing liabilities (2)
4.85 %4.17 %4.86 %3.88 %
Net interest spread (2)
1.73 %2.01 %1.65 %2.13 %
Net interest margin (2), (5)
3.25 %3.57 %3.17 %3.63 %
Total loans to total deposits ratio (6)
100.47 %99.19 %100.47 %99.19 %
43

As of or For the Three Months Ended September 30,As of or For the Nine Months Ended September 30,
($ in thousands, except per share data)2024202320242023
Asset quality:
Loans 30 to 89 days past due and still accruing
$2,994 $708 $2,994 $708 
Nonperforming loans (7)
6,614 3,730 6,614 3,730 
Nonperforming assets (8)
7,080 3,730 7,080 3,730 
Net charge-offs (recoveries)10 90 47 (1,028)
Loans 30 to 89 days past due and still accruing to loans held-for-investment
0.12 %0.03 %0.12 %0.03 %
Nonperforming loans to loans held-for-investment
0.27 %0.17 %0.27 %0.17 %
Nonperforming loans to ACL on loans22.86 %14.57 %22.86 %14.57 %
Nonperforming assets to total assets
0.24 %0.15 %0.24 %0.15 %
ACL on loans to loans held-for-investment1.17 %1.18 %1.17 %1.18 %
ACL on loans to nonperforming loans437.41 %686.30 %437.41 %686.30 %
Net charge-offs (recoveries) to average loans held-for-investment (2)
0.01 %0.01 %0.01 %(0.07)%
Capital ratios:
Shareholders’ equity to total assets
12.54 %13.31 %12.54 %13.31 %
Tangible common equity to total assets (9)
10.14 %10.62 %10.14 %10.62 %
Average shareholders’ equity to average total assets12.47 %13.39 %12.41 %13.48 %
PCB Bancorp
Common tier 1 capital (to risk-weighted assets)
11.92 %13.07 %11.92 %13.07 %
Total capital (to risk-weighted assets)
15.88 %17.48 %15.88 %17.48 %
Tier 1 capital (to risk-weighted assets)
14.68 %16.24 %14.68 %16.24 %
Tier 1 capital (to average assets)
12.79 %13.76 %12.79 %13.76 %
PCB Bank
Common tier 1 capital (to risk-weighted assets)
14.33 %15.87 %14.33 %15.87 %
Total capital (to risk-weighted assets)
15.54 %17.11 %15.54 %17.11 %
Tier 1 capital (to risk-weighted assets)
14.33 %15.87 %14.33 %15.87 %
Tier 1 capital (to average assets)
12.49 %13.44 %12.49 %13.44 %
(1)    Shareholders’ equity divided by common shares outstanding.
(2)    Annualized.
(3)    Dividends declared per common share divided by basic earnings per common share.
(4)    Noninterest expenses divided by the sum of net interest income and noninterest income.
(5)    Net interest income divided by average total interest-earning assets.
(6)    Total loans include both loans held-for-sale and loans held-for-investment.
(7)    Nonperforming loans include nonaccrual loans and loans past due 90 days or more and still accruing.
(8)    Nonperforming assets include nonperforming loans and other real estate owned.
(9)    Non-GAAP measure. See "Non-GAAP Measures" for a reconciliation to its most comparable GAAP measure.
44

Executive Summary
Q3 2024 Financial Highlights
•Net income available for common shareholders was $7.5 million for the three months ended September 30, 2024, an increase of $445 thousand, or 6.3%, from $7.0 million for the three months ended September 30, 2023;
▪Recorded a provision for credit losses of $50 thousand for the three months ended September 30, 2024 compared with $751 thousand for the three months ended September 30, 2023.
▪ACL on loan to loans held-for-investment ratio was 1.17% at September 30, 2024 compared with 1.19% at December 31, 2023.
•Net interest income was $22.7 million for the three months ended September 30, 2024 compared with $22.4 million for the three months ended September 30, 2023. Net interest margin was 3.25% for the three months ended September 30, 2024 compared with 3.57% for the three months ended September 30, 2023.
•Gain on sale of loans was $750 thousand for the three months ended September 30, 2024 compared with $689 thousand for the three months ended September 30, 2023.
•Total assets were $2.89 billion at September 30, 2024, an increase of $100.3 million, or 3.6%, from $2.79 billion at December 31, 2023;
•Loans held-for-investment were $2.47 billion at September 30, 2024, an increase of $142.7 million, or 6.1%, from $2.32 billion at December 31, 2023; and
•Total deposits were $2.46 billion at September 30, 2024, an increase of $108.1 million, or 4.6%, from $2.35 billion at December 31, 2023.
Results of Operations
Net Interest Income
A principal component of the Company’s earnings is net interest income, which is the difference between the interest and fees earned on loans and investments and the interest paid on deposits and borrowed funds. Net interest income expressed as a percentage of average interest earning assets is referred to as the net interest margin. The net interest spread is the yield on average interest earning assets less the cost of average interest bearing liabilities. Net interest income is affected by changes in the balances of interest earning assets and interest bearing liabilities and changes in the yields earned on interest earning assets and the rates paid on interest bearing liabilities.
45

The following table presents interest income, average interest-earning assets, interest expense, average interest-bearing liabilities, and their corresponding yields and costs expressed both in dollars and rates, on a consolidated operations basis, for the periods indicated:
Three Months Ended September 30,
20242023
($ in thousands)Average BalanceInterest
Yield/ Cost (6)
Average BalanceInterest
Yield/ Cost (6)
Interest-earning assets:
Total loans (1)
$2,456,015 $42,115 6.82 %$2,137,184 $34,651 6.43 %
Mortgage backed securities
111,350 1,000 3.57 %98,534 750 3.02 %
Collateralized mortgage obligation
22,661 244 4.28 %24,959 262 4.16 %
SBA loan pool securities
6,571 69 4.18 %7,842 81 4.10 %
Municipal bonds - tax exempt (2)
2,698 24 3.54 %3,602 30 3.30 %
Corporate bonds4,248 47 4.40 %4,056 47 4.60 %
Interest-bearing deposits in other financial institutions
161,669 2,202 5.42 %206,399 2,798 5.38 %
FHLB and other bank stock
14,042 297 8.41 %12,716 233 7.27 %
Total interest-earning assets
2,779,254 45,998 6.58 %2,495,292 38,852 6.18 %
Noninterest-earning assets:
Cash and due from banks24,098 21,298 
Allowance for credit losses on loans(28,797)(24,869)
Other assets
92,152 71,512 
Total noninterest earning assets
87,453 67,941 
Total assets
$2,866,707 $2,563,233 
Interest-bearing liabilities:
Deposits:
NOW and money market accounts
$496,158 5,129 4.11 %$481,341 4,398 3.62 %
Savings
6,204 4 0.26 %7,197 4 0.22 %
Time deposits
1,390,644 17,924 5.13 %1,073,044 12,001 4.44 %
Borrowings
15,848 222 5.57 %— — — %
Total interest-bearing liabilities
1,908,854 23,279 4.85 %1,561,582 16,403 4.17 %
Noninterest-bearing liabilities:
Demand deposits
534,761 626,738 
Other liabilities
65,716 31,769 
Total noninterest-bearing liabilities
600,477 658,507 
Total liabilities2,509,331 2,220,089 
Shareholders’ equity357,376 343,144 
Total liabilities and shareholders’ equity$2,866,707 $2,563,233 
Net interest income$22,719 $22,449 
Net interest spread (3)
1.73 %2.01 %
Net interest margin (4)
3.25 %3.57 %
Cost of deposits3.78 %2.97 %
Cost of funds (5)
3.79 %2.97 %
(1)    Average balance includes both loans held-for-sale and loans held-for-investment, as well as nonaccrual loans. Net amortization of deferred loan fees of $246 thousand and $226 thousand, respectively, and net accretion of discount on loans of $773 thousand and $775 thousand, respectively, are included in the interest income for the three months ended September 30, 2024 and 2023.
(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 net interest income by average interest-earning assets.
(5)    Cost of funds is calculated by dividing annualized interest expense on total interest-bearing liabilities by the sum of average total interest-bearing liabilities and noninterest-bearing demand deposits.
(6)    Annualized.


46

The following table presents interest income, average interest-earning assets, interest expense, average interest-bearing liabilities, and their corresponding yields and costs expressed both in dollars and rates, on a consolidated operations basis, for the periods indicated:
Nine Months Ended September 30,
20242023
($ in thousands)Average BalanceInterest
Yield/ Cost (6)
Average BalanceInterest
Yield/ Cost (6)
Interest-earning assets:
Total loans (1)
$2,413,777 $121,992 6.75 %$2,102,600 $98,840 6.29 %
Mortgage backed securities
105,933 2,750 3.47 %98,364 2,146 2.92 %
Collateralized mortgage obligation
23,137 747 4.31 %25,970 780 4.02 %
SBA loan pool securities
6,925 221 4.26 %8,406 244 3.88 %
Municipal bonds - tax exempt (2)
3,077 81 3.52 %4,017 97 3.23 %
Corporate bonds4,211 141 4.47 %4,300 141 4.38 %
Interest-bearing deposits in other financial institutions
188,432 7,714 5.47 %195,016 7,391 5.07 %
FHLB and other bank stock
13,519 852 8.42 %11,704 587 6.71 %
Total interest-earning assets
2,759,011 134,498 6.51 %2,450,377 110,226 6.01 %
Noninterest-earning assets:
Cash and due from banks22,845 21,069 
Allowance for credit losses on loans(28,251)(25,438)
Other assets
89,784 72,616 
Total noninterest earning assets
84,378 68,247 
Total assets
$2,843,389 $2,518,624 
Interest-bearing liabilities:
Deposits:
NOW and money market accounts
$474,584 14,670 4.13 %$477,605 11,772 3.30 %
Savings
6,432 12 0.25 %7,684 14 0.24 %
Time deposits
1,380,379 52,878 5.12 %1,015,234 31,651 4.17 %
Borrowings
35,427 1,485 5.60 %5,212 209 5.36 %
Total interest-bearing liabilities
1,896,822 69,045 4.86 %1,505,735 43,646 3.88 %
Noninterest-bearing liabilities:
Demand deposits
537,682 647,258 
Other liabilities
56,019 26,208 
Total noninterest-bearing liabilities
593,701 673,466 
Total liabilities2,490,523 2,179,201 
Shareholders’ equity352,866 339,423 
Total liabilities and shareholders’ equity$2,843,389 $2,518,624 
Net interest income$65,453 $66,580 
Net interest spread (3)
1.65 %2.13 %
Net interest margin (4)
3.17 %3.63 %
Cost of deposits3.76 %2.70 %
Cost of funds (5)
3.79 %2.71 %
(1)    Average balance includes both loans held-for-sale and loans held-for-investment, as well as nonaccrual loans. Net amortization of deferred loan fees of $919 thousand and $648 thousand, respectively, and net accretion of discount on loans of $2.1 million and $2.2 million, respectively, are included in the interest income for the nine months ended September 30, 2024 and 2023.
(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 net interest income by average interest-earning assets.
(5)    Cost of funds is calculated by dividing annualized interest expense on total interest-bearing liabilities by the sum of average total interest-bearing liabilities and noninterest-bearing demand deposits.
(6)    Annualized.

47

The following table presents the changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. Information is provided on changes attributable to: (i) changes in volume multiplied by the prior rate; and (ii) changes in rate multiplied by the prior volume. Changes attributable to both rate and volume which cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.
Three Months Ended September 30, Nine Months Ended September 30,
2024 vs. 20232024 vs. 2023
Increase (Decrease) Due toNet Increase (Decrease)Increase (Decrease) Due toNet Increase (Decrease)
($ in thousands)VolumeRateVolumeRate
Interest earned on:
Total loans
$5,091 $2,373 $7,464 $14,699 $8,453 $23,152 
Investment securities
71 143 214 54 478 532 
Other interest-earning assets
(608)76 (532)(186)774 588 
Total interest income
4,554 2,592 7,146 14,567 9,705 24,272 
Interest incurred on:
Savings, NOW, and money market deposits
122 609 731 (104)3,000 2,896 
Time deposits
3,523 2,400 5,923 11,410 9,817 21,227 
Borrowings
222 — 222 1,213 63 1,276 
Total interest expense
3,867 3,009 6,876 12,519 12,880 25,399 
Change in net interest income
$687 $(417)$270 $2,048 $(3,175)$(1,127)
Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023
The following table presents the components of net interest income for the periods indicated:
Three Months Ended September 30,
Amount ChangePercentage Change
($ in thousands)20242023
Interest and dividend income:
Loans, including fees$42,115 $34,651 $7,464 21.5 %
Investment securities1,384 1,170 214 18.3 %
Other interest-earning assets2,499 3,031 (532)(17.6)%
Total interest income
45,998 38,852 7,146 18.4 %
Interest expense:
Deposits23,057 16,403 6,654 40.6 %
Borrowings222 — 222 NM
Total interest expense
23,279 16,403 6,876 41.9 %
Net interest income
$22,719 $22,449 $270 1.2 %
Net interest income increased primarily due to an 11.4% increase in average balance of interest-earning assets and a 40 basis point increase in average yield, partially offset by a 22.2% increase in average balance of interest-bearing liabilities and a 68 basis point increase in average cost.
Interest and fees on loans increased primarily due to a 14.9% increase in average balance and a 39 basis point increase in average yield. The increase in average yield was primarily due to increases in overall interest rates on loans and net amortization of deferred loan fees.
Interest on investment securities increased primarily due to a 39 basis point increase in average yield and a 6.1% increase in average balance. The increase in average yield was primarily due to a higher yield on newly purchased investment securities. For the three months ended September 30, 2024 and 2023, the average yield on total investment securities was 3.73% and 3.34%, respectively.
Interest income on other interest-earning assets increased primarily due to a 17 basis point increase in average yield, partially offset by a 19.8% decrease in average balance. The increase in average yield was primarily due to an increase in dividends received on FHLB stock. For the three months ended September 30, 2024 and 2023, the average yield on total other interest-earning assets was 5.66% and 5.49%, respectively.
48

Interest expense on deposits increased primarily due to a 21.2% increase in average balance of interest-bearing deposits and an 68 basis point increase in average cost of interest-bearing deposits. The increase in average balance was primarily due to the migration of noninterest-bearing deposits to money market accounts and time deposits attributable to the rising market rates. The increase in average cost was primarily due to an increase in market rates. For the three months ended September 30, 2024 and 2023, average cost on total interest-bearing deposits was 4.85% and 4.17%, respectively, and average cost on total deposits were 3.78% and 2.97%, respectively.
The Company did not utilize borrowings during the three months ended September 30, 2023.
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
The following table presents the components of net interest income for the periods indicated:
Nine Months Ended September 30,Amount ChangePercentage Change
($ in thousands)20242023
Interest and dividend income:
Loans, including fees$121,992 $98,840 $23,152 23.4 %
Investment securities3,940 3,408 532 15.6 %
Other interest-earning assets8,566 7,978 588 7.4 %
Total interest income
134,498 110,226 24,272 22.0 %
Interest expense:
Deposits67,560 43,437 24,123 55.5 %
Borrowings1,485 209 1,276 610.5 %
Total interest expense
69,045 43,646 25,399 58.2 %
Net interest income
$65,453 $66,580 $(1,127)(1.7)%
Net interest income decreased primarily due to a 26.0% increase in average balance of interest-bearing liabilities and a 98 basis point increase in average cost, partially offset by a 12.6% increase in average balance of interest-earning assets and a 50 basis point increase in average yield.
Interest and fees on loans increased primarily due to a 14.8% increase in average balance and a 46 basis point increase in average yield. The increase in average yield was primarily due to increases in overall interest rates on loans and net amortization of deferred loan fees.
Interest on investment securities increased primarily due to a 44 basis point increase in average yield and a 1.6% increase in average balance. The increase in average yield was primarily due to a decrease in net amortization of premiums on securities and a higher yield on newly purchased investment securities. For the nine months ended September 30, 2024 and 2023, the average yield on total investment securities was 3.67% and 3.23%, respectively.
Interest income on other interest-earning assets increased primarily due to a 51 basis point increase in average yield, partially offset by a 2.3% decrease in average balance. The increase in average yield was primarily due to an increase in interest rate on cash held at the Federal Reserve Bank and dividends received on FHLB stock. For the nine months ended September 30, 2024 and 2023, the average yield on total other interest-earning assets was 5.67% and 5.16%, respectively.
Interest expense on deposits increased primarily due to a 24.0% increase in average balance of interest-bearing deposits and a 98 basis point increase in average cost of interest-bearing deposits. The increase in average balance was primarily due to the migration of noninterest-bearing deposits to money market accounts and time deposits attributable to the rising market rates. The increase in average cost was primarily due to an increase in market rates. For the nine months ended September 30, 2024 and 2023, average cost on total interest-bearing deposits was 4.85% and 3.87%, respectively, and average cost on total deposits were 3.76% and 2.70%, respectively.
Interest expense on borrowings increased primarily due to a 579.7% increase in average balance and a 24 basis point increase in average cost of interest-bearing deposits. The increase in average cost was primarily due to an increase in market rates.
49

Provision (reversal) for Credit Losses
The following tables present a composition of provision (reversal) for credit losses for the periods indicated:
Three Months Ended September 30,Amount ChangePercentage Change
($ in thousands)20242023
Provision for credit losses on loans$193 $822 $(629)(76.5)%
Provision (reversal) for credit losses on off-balance sheet credit exposure
(143)(71)(72)NM
Total provision for credit losses$50 $751 $(701)(93.3)%
Nine Months Ended September 30,Amount ChangePercentage Change
($ in thousands)20242023
Provision (reversal) for credit losses on loans$1,444 $(1,438)$2,882 NM
Provision (reversal) for credit losses on off-balance sheet credit exposure
(45)(392)347 NM
Total provision (reversal) for credit losses$1,399 $(1,830)$3,229 NM
The provision for credit losses for the three and nine months ended September 30, 2024 was primarily due to increases in loans held-for-investment and quantitatively measured loss reserve requirement, partially offset by a decrease in reserve related to qualitative adjustment factors. See further discussion in “Allowance for Credit Losses.”
50

Noninterest Income
Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023
The following table presents the components of noninterest income for the periods indicated:
Three Months Ended September 30,Amount ChangePercentage Change
($ in thousands)20242023
Service charges and fees on deposits
$399 $371 $28 7.5 %
Loan servicing income
786 851 (65)(7.6)%
Bank-owned life insurance income239 187 52 27.8 %
Gain on sale of loans
750 689 61 8.9 %
Other income
446 404 42 10.4 %
Total noninterest income
$2,620 $2,502 $118 4.7 %
Loan servicing income decreased primarily due to a decrease in servicing fee income and an increase in servicing asset amortization. Servicing asset amortization was $478 thousand and $470 thousand, respectively, for the three months ended September 30, 2024 and 2023.
Gain on sale of loans increased primarily due to an increase in level of premium on SBA loans in the secondary market, partially offset by a decrease in sales volume. The Company sold SBA loans of $13.5 million with a gain of $750 thousand and a residential mortgage loan of $676 thousand at par during the three months ended September 30, 2024. During the three months ended September 30, 2023, the Company sold SBA loans of $17.7 million with a gain of $689 thousand.
Other income primarily included wire transfer fees of $156 thousand and $162 thousand, respectively, and debit card interchange fees of $154 thousand and $103 thousand, respectively, for the three months ended September 30, 2024 and 2023.
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
The following table presents the components of noninterest income for the periods indicated:
Nine Months Ended September 30,Amount ChangePercentage Change
($ in thousands)20242023
Service charges and fees on deposits
$1,141 $1,084 $57 5.3 %
Loan servicing income
2,504 2,579 (75)(2.9)%
Bank-owned life insurance income703 551 152 27.6 %
Gain on sale of loans
2,591 2,767 (176)(6.4)%
Other income
1,111 1,199 (88)(7.3)%
Total noninterest income
$8,050 $8,180 $(130)(1.6)%
Loan servicing income decreased primarily due to a decrease in servicing fee income and an increase in servicing asset amortization. Servicing asset amortization was $1.4 million and $1.3 million, respectively, for the nine months ended September 30, 2024 and 2023.
Gain on sale of loans decreased primarily due to an increase in level of premium on SBA loans in the secondary market, partially offset by a decrease in sales volume. The Company sold SBA loans of $46.5 million with a gain of $2.6 million and a residential mortgage loan of $676 thousand at par during the nine months ended September 30, 2024. During the nine months ended September 30, 2023, the Company sold SBA loans of $61.6 million with a gain of $2.8 million.
Other income primarily included wire transfer fees of $462 thousand and $467 thousand, respectively, and debit card interchange fees of $253 thousand and $254 thousand, respectively, for the nine months ended September 30, 2024 and 2023.
51

Noninterest Expense
Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023
The following table presents the components of noninterest expense for the periods indicated:
Three Months Ended September 30,Amount ChangePercentage Change
($ in thousands)20242023
Salaries and employee benefits
$8,801 $8,572 $229 2.7 %
Occupancy and equipment
2,261 1,964 297 15.1 %
Professional fees
599 685 (86)(12.6)%
Marketing and business promotion
667 980 (313)(31.9)%
Data processing
397 367 30 8.2 %
Director fees and expenses
226 152 74 48.7 %
Regulatory assessments
309 281 28 10.0 %
Other expenses
1,342 1,206 136 11.3 %
Total noninterest expense
$14,602 $14,207 $395 2.8 %
Salaries and employee benefits increased primarily due to increases in salaries, bonus accrual, incentives tied to sales of SBA loans originated at LPOs, and other employee benefits, partially offset by a decrease in vacation accrual. The number of full-time equivalent employees was 264 at September 30, 2024 compared to 270 at September 30, 2023.
Occupancy and equipment increased primarily due to an expansion of headquarters location in the second half of 2023, the relocation of a regional office and the consolidation of two branches into a new location in Orange County, California starting from the three months ended June 30, 2024.
Professional fees decreased primarily due to the completion a core system conversion that was completed in April 2024, resulting in high professional fees during the three months ended September 30, 2024.
Marketing and business promotion expense decreased primarily due to a decrease in advertisements.
Regulatory assessments increased primarily due to an increase in the balance sheet.
Other expenses included $97 thousand and $114 thousand in loan related expenses, $625 thousand and $565 thousand in office expense, and $221 thousand and $206 thousand in armed guard expense for the three months ended September 30, 2024 and 2023, respectively.
52

Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
The following table presents the components of noninterest expense for the periods indicated:
Nine Months Ended September 30,Amount ChangePercentage Change
($ in thousands)20242023
Salaries and employee benefits
$27,244 $26,175 $1,069 4.1 %
Occupancy and equipment
6,919 5,779 1,140 19.7 %
Professional fees
2,656 2,189 467 21.3 %
Marketing and business promotion
1,304 1,555 (251)(16.1)%
Data processing
1,294 1,159 135 11.6 %
Director fees and expenses
679 549 130 23.7 %
Regulatory assessments
934 818 116 14.2 %
Other expenses
5,099 3,364 1,735 51.6 %
Total noninterest expense
$46,129 $41,588 $4,541 10.9 %
Salaries and employee benefits increased primarily due to salaries, bonus accrual, incentives tied to sales of SBA loans originated at LPOs, and other employee benefits, partially offset by a decrease in vacation accrual. The number of full-time equivalent employees was 264 at September 30, 2024 compared to 270 at September 30, 2023.
Occupancy and equipment increased primarily due to an expansion of headquarters location in the second half of 2023, and the relocation of a regional office and the consolidation of two branches into a new location in Orange County, California starting from the three months ended June 30, 2024.
Professional fees decreased primarily due to the completion a core system conversion that was completed in April 2024, resulting in high professional fees during the nine months ended September 30, 2024.
Marketing and business promotion expense decreased primarily due to a decrease in advertisements.
Regulatory assessments increased primarily due to an increase in the balance sheet.
Other expenses included $315 thousand and $311 thousand in loan related expenses, $1.7 million and $1.6 million in office expense, and $635 thousand and $588 thousand in armed guard expense for the nine months ended September 30, 2024 and 2023, respectively. In addition, the Company recognized a termination charge for the legacy core system of $508 thousand and an expense of $815 thousand for a reimbursement for an SBA loan guarantee previously paid by the SBA on a loan originated in 2014 that subsequently defaulted and was ultimately determined to be ineligible for the SBA guaranty during the nine months ended September 30, 2024.
Income Tax Expense
Income tax expense was $2.9 million and $3.0 million, respectively, and the effective tax rate was 26.9% and 29.7%, respectively, for the three months ended September 30, 2024 and 2023. For nine months ended September 30, 2024 and 2023, income tax expense was $7.2 million and $10.2 million, respectively, and the effective tax rate was 27.7% and 29.2%, respectively.
53

Financial Condition
Investment Securities
The Company’s investment strategy aims to maximize earnings while maintaining liquidity in securities with minimal credit risk. The types and maturities of securities purchased are primarily based on current and projected liquidity and interest rate sensitivity positions.
The following table presents the amortized cost and fair value of the investment securities portfolio as of the dates indicated:
September 30, 2024December 31, 2023
($ in thousands)Amortized Cost
Fair Value
Unrealized Gain (Loss)Amortized Cost
Fair Value
Unrealized Gain (Loss)
Securities available-for-sale:
U.S. government agency and U.S. government sponsored enterprise securities:
Residential mortgage-backed securities
$119,363 $112,153 $(7,210)$114,485 $104,091 $(10,394)
Residential collateralized mortgage obligations
23,459 22,386 (1,073)25,611 24,173 (1,438)
SBA loan pool securities
6,688 6,431 (257)7,773 7,450 (323)
Municipal bonds
2,450 2,473 23 3,306 3,329 23 
Corporate bonds5,000 4,192 (808)5,000 4,280 (720)
Total securities available-for-sale
$156,960 $147,635 $(9,325)$156,175 $143,323 $(12,852)
Total investment securities were $147.6 million at September 30, 2024, an increase of $4.3 million, or 3.0%, from $143.3 million at December 31, 2023. The increase was primarily due to purchases of $14.8 million and an increase in fair value of securities available-for-sale of $3.5 million, partially offset by principal paydowns of $13.9 million and net premium amortization of $123 thousand.
As of September 30, 2024, 95.3%, at amortized cost basis, of the Company's securities available-for-sale were issued by U.S. government agency and U.S. government sponsored enterprise. Because the decline in fair value is attributable to changes in interest rates, and not credit quality, and because the Company does not have the intent to sell these securities and it is likely that it will not be required to sell these securities before their anticipated recovery, the Company determined that these securities with unrealized losses did not warrant an ACL.
Municipal and corporate bonds had an investment grade rating upon purchase. The issuers of these securities have not established any cause for default on these securities and various rating agencies have reaffirmed their long-term investment grade status as of September 30, 2024. These securities have fluctuated in value since their purchase dates as market interest rates fluctuated. Additionally, the Company continues to receive contractual principal and interest payments in a timely manner. The Company does not intend to sell these securities and it is more likely than not that the Company will not be required to sell before the recovery of its amortized cost basis. The Company determined that the investment securities with unrealized losses did not warrant an ACL as of September 30, 2024.
As of September 30, 2024, the Company recorded no ACL on securities available-for-sale.
54

The following table presents the contractual maturity schedule for securities, at amortized cost, and their weighted-average yields as of the date indicated:
September 30, 2024
Within One YearMore than One Year through Five YearsMore than Five Years through Ten YearsMore than Ten YearsTotal
($ in thousands)Amortized CostWeighted-Average YieldAmortized CostWeighted-Average YieldAmortized CostWeighted-Average YieldAmortized CostWeighted-Average YieldAmortized CostWeighted-Average Yield
Securities available-for-sale:
U.S. government agency and U.S. government sponsored enterprise securities:
Residential mortgage-backed securities
$— — %$1,278 1.66 %$5,125 2.01 %$112,960 3.37 %$119,363 3.29 %
Residential collateralized mortgage obligations
— — %5,302 5.64 %1,565 5.86 %16,592 3.36 %23,459 4.04 %
SBA loan pool securities
163 2.58 %1,481 5.31 %1,857 2.38 %3,187 4.22 %6,688 3.91 %
Municipal bonds
— — %82 3.00 %1,097 3.50 %1,271 3.57 %2,450 3.52 %
Corporate bonds— — %— — %5,000 3.75 %— — %5,000 3.75 %
Total securities available-for-sale
$163 2.58 %$8,143 4.93 %$14,644 3.18 %$134,010 3.39 %$156,960 3.45 %
Weighted-average yields are based upon the amortized cost of securities and are calculated using the interest method which takes into consideration of premium amortization and discount accretion. Weighted-average yields on tax-exempt debt securities exclude the federal income tax benefit.
Loans Held-For-Sale
Loans held-for-sale are carried at the lower of cost or fair value. When a determination is made at the time of commitment to originate as held-for-investment, it is the Company’s intent to hold these loans to maturity or for the foreseeable future, subject to periodic reviews under the Company’s management evaluation processes, including asset/liability management and credit risk management. When the Company subsequently changes its intent to hold certain loans, the loans are transferred to held-for-sale at the lower of cost or fair value. Certain loans are transferred to held-for-sale with write-downs to allowance for credit losses on loans.
Loans held-for-sale were $5.2 million at September 30, 2024, an increase of $15 thousand, or 0.3%, from $5.2 million at December 31, 2023. The increase was primarily due to new funding of $48.3 million and a loan transferred from loan held-for-investment of $676 thousand, partially offset by sales of $47.2 million and pay-offs and pay-downs of $1.8 million.
55

Loans Held-For-Investment and Allowance for Credit Losses
The following table presents the composition of the Company’s loans held-for-investment as of the dates indicated:
September 30, 2024December 31, 2023
($ in thousands)AmountPercentage to TotalAmountPercentage to Total
Commercial real estate:
Commercial property
$874,824 35.5 %$855,270 36.8 %
Business property579,461 23.5 %558,772 24.0 %
Multifamily185,485 7.5 %132,500 5.7 %
Construction
21,150 0.9 %24,843 1.1 %
Total commercial real estate1,660,920 67.4 %1,571,385 67.6 %
Commercial and industrial407,024 16.5 %342,002 14.7 %
Consumer:
Residential mortgage383,377 15.5 %389,420 16.8 %
Other consumer14,853 0.6 %20,645 0.9 %
Total consumer398,230 16.1 %410,065 17.7 %
Loans held-for-investment
$2,466,174 100.0 %$2,323,452 100.0 %
Allowance for credit losses on loans(28,930)(27,533)
Net loans held-for-investment
$2,437,244 $2,295,919 
ACL on loans to loans held-for-investment1.17 %1.19 %
Loans held-for-investment were $2.47 billion at September 30, 2024, an increase of $142.7 million, or 6.1%, from $2.32 billion at December 31, 2023. The increase was primarily due to new funding and advances of $1.83 billion, partially offset by paydowns and payoffs of $1.69 billion.
The following table presents activities in ACL for the periods indicated:
Three Months Ended September 30,Nine Months Ended September 30,
($ in thousands)2024202320242023
ACL on loans
Balance at beginning of period$28,747 $24,867 $27,533 $24,942 
Impact of ASC 326 adoption— — — 1,067 
Charge-offs(111)(112)(296)(119)
Recoveries101 22 249 1,147 
Provision (reversal) for credit losses on loans193 822 1,444 (1,438)
Balance at end of period$28,930 $25,599 $28,930 $25,599 
ACL on off-balance sheet credit exposures
Balance at beginning of period$1,375 $1,585 $1,277 $299 
Impact of ASC 326 adoption— — — 1,607 
Provision (reversal) for credit losses on off-balance sheet credit exposure(143)(71)(45)(392)
Balance at end of period$1,232 $1,514 $1,232 $1,514 
The increase in ACL for the three months ended September 30, 2024 was primarily due to increases in loans held-for-investment and quantitatively measured loss reserve requirement, partially offset by a decrease in reserve related to qualitative adjustment factors. The increase in the quantitatively measured loss reserve requirement was primarily due to the increased unemployment rate forecasts by the Federal Open Market Committee (“FOMC”). The projected 2024 and 2025 year-end national unemployment rate increased to 4.4% and 4.4%, respectively, in the September 2024 meeting from 4.0% and 4.2%, respectively, in the June 2024 meetings, which resulted an increase in probability of default (“PD”) rates for the 4-quarter projected period. The projected 2024 year-end year-over-year change in real GDP decreased to 2.0% in the September 2024 meeting from 2.1% in the June 2024 meetings. The projected 2025 year-end year-over-year change in real GDP was maintained at 2.0% at both meetings. Management believes that the projections used are reasonable and aligns with the Company’s expectation of the economic environment over the next 4 quarters.
56

The following tables present net charge-offs (recoveries) as a percentage to the average loan held-for-investment balances in each of the loan segments for the periods indicated:
Three Months Ended September 30,
20242023
($ in thousands)Average BalanceNet Charge-Offs (Recoveries)PercentageAverage BalanceNet Charge-Offs (Recoveries)Percentage
Commercial real estate:
Commercial property
$840,158 $— — %$797,244 $— — %
Business property600,435 103 0.07 %538,583 (2)0.01 %
Multifamily129,307 — — %129,193 — — %
Construction
30,528 — — %17,993 — — %
Total commercial real estate1,600,428 103 0.03 %1,483,013 (2)0.01 %
Commercial and industrial401,268 (8)(0.01)%256,553 37 0.06 %
Consumer:— 
Residential mortgage386,490 — — %359,156 — — %
Other consumer19,000 (85)(1.79)%21,676 55 1.01 %
Total consumer405,490 (85)(0.08)%380,832 55 0.06 %
Total$2,407,186 $10 0.01 %$2,120,398 $90 0.01 %
Nine Months Ended September 30,
20242023
($ in thousands)Average BalanceNet Charge-Offs (Recoveries)PercentageAverage BalanceNet Charge-Offs (Recoveries)Percentage
Commercial real estate:
Commercial property
$854,822 $— — %$782,089 $— — %
Business property584,282 101 0.02 %530,820 (4)(0.01)%
Multifamily146,934 — — %125,909 — — %
Construction
27,756 — — %17,428 — — %
Total commercial real estate1,613,794 101 0.01 %1,456,246 (4)(0.01)%
Commercial and industrial386,714 68 0.02 %252,795 (1,055)(0.56)%
Consumer:— 
Residential mortgage386,845 — — %351,988 — — %
Other consumer18,334 (122)(0.89)%22,154 31 0.19 %
Total consumer405,179 (122)(0.04)%374,142 31 0.01 %
Total$2,405,687 $47 0.01 %$2,083,183 $(1,028)(0.07)%


57

Nonperforming Loans and Nonperforming Assets
The following table presents a summary of total non-performing assets as of the dates indicated:
($ in thousands)September 30, 2024December 31, 2023Amount ChangePercentage Change
Nonaccrual loans held-for-investment
Commercial real estate:
Commercial property
$1,633 $958 $675 70.5 %
Business property2,367 2,865 (498)(17.4)%
Multifamily2,038 — 2,038 NM
Total commercial real estate6,038 3,823 2,215 57.9 %
Commercial and industrial124 68 56 82.4 %
Consumer:
Residential mortgage414 — 414 NM
Other consumer38 25 13 52.0 %
Total consumer452 25 427 1,708.0 %
Total nonaccrual loans6,614 3,916 2,698 68.9 %
Loans past due 90 days or more still on accrual
— — — — %
Nonperforming loans6,614 3,916 2,698 68.9 %
Nonperforming loans held-for-sale— — — — %
Total nonperforming loans6,614 3,916 2,698 68.9 %
Other real estate owned
466 2,558 (2,092)(81.8)%
Nonperforming assets$7,080 $6,474 $606 9.4 %
Nonaccrual loans to loans held-for-investment0.27 %0.17 %
Nonperforming assets to total assets0.24 %0.23 %
ACL on loans to nonaccrual loans437.41 %703.09 %
The increase in nonaccrual loans held-for-investment was primarily due to loans placed on nonaccrual status of $6.6 million, partially offset by paydowns and payoffs of $1.6 million, loans returned to accrual status of $2.0 million, charge-offs of $126 thousand, and a loan transferred to OREO of $94 thousand during the nine months ended September 30, 2024.
Loans are generally placed on nonaccrual status when they become 90 days past due, unless management believes the loan is well secured and in the process of collection. In all cases, loans are placed on nonaccrual if collection of principal or interest is considered doubtful. Past due loans may or may not be adequately collateralized, but collection efforts are continuously pursued. Loans may be restructured by management when a borrower experiences changes to their financial condition, causing an inability to meet the original repayment terms, and where management believes the borrower will eventually overcome those circumstances and repay the loan in full. Additional income of approximately $171 thousand and $432 thousand would have been recorded during the three and nine months ended September 30, 2024, respectively, had these loans been paid in accordance with their original terms throughout the periods indicated.
58

Deposits
The Bank gathers deposits primarily through its branch locations. The Bank offers a variety of deposit products including demand deposits accounts, NOW and money market accounts, savings accounts and time deposits. The following table presents a summary of the Company’s deposits as of the dates indicated:
($ in thousands)September 30, 2024December 31, 2023Amount ChangePercentage Change
Noninterest-bearing demand deposits
$540,068 $594,673 $(54,605)(9.2)%
Interest-bearing deposits:
Savings
5,718 6,846 (1,128)(16.5)%
NOW
15,873 16,825 (952)(5.7)%
Retail money market accounts
470,347 397,531 72,816 18.3 %
Brokered money market accounts
1 1 — — %
Retail time deposits of:
$250,000 or less
492,430 456,293 36,137 7.9 %
More than $250,000
580,166 515,702 64,464 12.5 %
Brokered time deposits
295,079 303,741 (8,662)(2.9)%
Time deposits from California State Treasurer
60,000 60,000 — — %
Total interest-bearing deposits
1,919,614 1,756,939 162,675 9.3 %
Total deposits
$2,459,682 $2,351,612 $108,070 4.6 %
Estimated total deposits not covered by deposit insurance
$1,042,366 $954,591 87,775 9.2 %
Estimated time deposits not covered by deposit insurance
$444,683 $408,637 36,046 8.8 %
The decrease in noninterest-bearing demand deposits was primarily due to strong deposit market competition and the migration of noninterest-bearing demand deposits to interest-bearing deposits. To retain existing and attract new customers, the Bank offers competitive rates on deposit products.
The increase in retail time deposits was primarily due to new accounts of $272.7 million and renewals of the matured accounts of $560.4 million, partially offset by matured and closed accounts of $760.8 million.
As of September 30, 2024 and December 31, 2023, total deposits were comprised of 22.0% and 25.3%, respectively, of noninterest-bearing demand accounts, 20.0% and 17.9%, respectively, of savings, NOW and money market accounts, and 58.0% and 56.8%, respectively, of time deposits.
Deposits from certain officers, directors and their related interests with which they are associated held by the Company were $3.3 million and $3.7 million, respectively, at September 30, 2024 and December 31, 2023.
The following table presents the maturity of time deposits as of the dates indicated:
($ in thousands)Three Months or LessThree to Six MonthsSix Months to One YearOver One YearTotal
September 30, 2024
Time deposits of $250,000 or less$311,432 $307,473 $166,065 $2,539 $787,509 
Time deposits of more than $250,000
278,950 214,268 143,774 3,174 640,166 
Total
$590,382 $521,741 $309,839 $5,713 $1,427,675 
Not covered by deposit insurance$205,831 $138,864 $97,729 $2,259 $444,683 
December 31, 2023
Time deposits of $250,000 or less$316,356 $165,091 $276,145 $2,442 $760,034 
Time deposits of more than $250,000
207,539 140,583 224,557 3,023 575,702 
Total
$523,895 $305,674 $500,702 $5,465 $1,335,736 
Not covered by deposit insurance$147,680 $107,482 $151,070 $2,405 $408,637 
59

Shareholders’ Equity and Regulatory Capital
Capital Resources
Shareholders’ equity is influenced primarily by earnings, dividends paid on common stock and preferred stock, sales and redemptions of common stock and preferred stock, and changes in accumulated other comprehensive income caused primarily by fluctuations in unrealized gains or losses, net of taxes, on securities available-for-sale.
Shareholders’ equity was $362.3 million at September 30, 2024, an increase of $13.4 million, or 3.8%, from $348.9 million at December 31, 2023. The increase was primarily due to net income of $18.8 million and a decrease in accumulated other comprehensive loss of $2.5 million, partially offset by dividends declared on common stock of $7.7 million, repurchases of common stock of $222 thousand and preferred stock dividends of $488 thousand.
Regulatory Capital Requirements
The Bank is subject to various regulatory capital requirements administered by the federal and state banking regulators. The Company is not currently subject to separate minimum capital requirements under the Federal Reserve’s “Small Bank Holding Company” policy. At such time as the Company reaches the $3 billion asset level, it will be subject to consolidated capital requirements independent of the Bank.
Failure to meet regulatory capital requirements may result in certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s financial statements. Under capital adequacy guidelines and the regulatory framework for the prompt corrective action (“PCA”), the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance sheet items as calculated under regulatory accounting policies. In addition to these uniform risk-based capital guidelines and leverage ratios that apply across the industry, the regulators have the discretion to set individual minimum capital requirements for specific institutions at rates significantly above the minimum guidelines and ratios.
The following table presents a summary of the capital requirements applicable to the Bank in order to be considered “well-capitalized” from a regulatory perspective, as well as the Bank’s capital ratios as of the dates indicated. For comparison purpose, the Company’s ratios are included as well, all of which would have exceeded the “well-capitalized” level under PCA had the Company been subject to separate capital minimums.
PCB BancorpPCB BankMinimum Regulatory RequirementsWell Capitalized Requirements (Bank)
September 30, 2024
Common tier 1 capital (to risk-weighted assets)
11.92 %14.33 %4.5 %6.5 %
Total capital (to risk-weighted assets)
15.88 %15.54 %8.0 %10.0 %
Tier 1 capital (to risk-weighted assets)
14.68 %14.33 %6.0 %8.0 %
Tier 1 capital (to average assets)
12.79 %12.49 %4.0 %5.0 %
December 31, 2023
Common tier 1 capital (to risk-weighted assets)
12.23 %14.85 %4.5 %6.5 %
Total capital (to risk-weighted assets)
16.39 %16.07 %8.0 %10.0 %
Tier 1 capital (to risk-weighted assets)
15.16 %14.85 %6.0 %8.0 %
Tier 1 capital (to average assets)
13.43 %13.16 %4.0 %5.0 %
To avoid restrictions on dividends, share repurchases and discretionary compensation payments to executives, the federal banking agencies require a banking organization to maintain a capital conservation buffer of 2.50% in common tier 1 capital, in addition to the minimum capital ratios necessary to minimum regulatory requirements. The capital conservation buffer increases the minimum common equity Tier 1 capital ratio to 7%, the minimum Tier 1 capital (to risk-weighted assets) ratio to 8.5% and the minimum total capital ratio (to risk-weighted assets) to 10.5% for banking organizations seeking to avoid the limitations on dividends, share repurchases and discretionary compensation payments to executives. The Company’s and the Bank’s capital conservation buffer were 7.42% and 7.54%, respectively, as of September 30, 2024, and 7.73% and 8.07%, respectively, as of December 31, 2023.

60

Emergency Capital Investment Program
On May 24, 2022, the Company issued 69,141 shares of Series C Preferred Stock for the capital investment of $69.1 million from the U.S. Treasury under the ECIP. The ECIP investment qualifies as tier 1 capital for purposes of the bank regulatory capital requirements.
The Series C Preferred Stock accrued no dividend for the first 24 months following the investment date. Beginning on May 24, 2024, holders of the Series C Preferred Stock are entitled to quarterly non-cumulative cash dividends as declared by the Company’s Board of Directors. The Series C Preferred Stock dividend rate adjusts annually based on the lending growth criteria listed in the terms of the ECIP investment with the 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. Dividends will be payable quarterly in arrears on March 15, June 15, September 15, and December 15. The terms of the Series C Preferred Stock prohibit the Company from paying dividends on or repurchasing shares of its common stock unless it has paid or contemporaneously pays the full Series C Preferred Stock dividend with respect to the preceding quarterly dividend period.
The Series C Preferred Stock may be redeemed at the option of the Company on or after the fifth anniversary of issuance (or earlier in the event of loss of regulatory capital treatment), subject to the approval of the appropriate federal banking regulator and in accordance with the federal banking agencies’ regulatory capital regulations.
Established by the Consolidated Appropriations Act of 2021, the ECIP was created to encourage low- and moderate-income community financial institutions and minority depository institutions to provide loans, grants, and forbearance for small businesses, minority-owned businesses, and consumers, especially low-income and underserved communities, including persistent poverty counties, that may be disproportionately impacted by the economic effect of the COVID-19 pandemic by providing direct and indirect capital investments in low- and moderate-income community financial institutions.
The Company began paying quarterly dividends on the Series C Preferred Stock at 2% beginning in the three months ended June 30, 2024. Dividends on the Series C Preferred Stock totaled $346 thousand and $488 thousand for the three and nine months ended September 30, 2024, respectively.
Stock Repurchases
During the year ended December 31, 2023, the Company repurchased and retired 512,657 shares of common stock at a weighted-average price of $17.22 per share under a stock repurchase program approved by the Board of Directors on August 2, 2023 and a legacy stock repurchase program approved on July 28, 2022.
During the nine months ended September 30, 2024, the Company repurchased and retired 14,947 shares of common stock at a weighted-average price of $14.88 per share. On July 25, 2024, the Company announced the amendment of the 2023 stock repurchase program, which extended the program expiration from August 2, 2024 to August 1, 2025. As of September 30, 2024, the Company was authorized to purchase 577,777 additional shares under the 2023 stock repurchase program.
61

Liquidity
Liquidity refers to the measure of ability to meet the cash flow requirements of depositors and borrowers, while at the same time meeting operating cash flow and capital and strategic cash flow needs, all at a reasonable cost. The Company continuously monitors its liquidity position to ensure that assets and liabilities are managed in a manner that will meet all short-term and long-term cash requirements, while maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives of the Company’s shareholders.
The Company’s liquidity position is supported by management of liquid assets and liabilities and access to alternative sources of funds. Liquid assets include cash, interest-bearing deposits in financial institutions, federal funds sold, and unpledged securities available-for-sale. Liquid liabilities may include core deposits, federal funds purchased, securities sold under repurchase agreements and other borrowings. Other sources of liquidity include the sale of loans, the ability to acquire additional national market non-core deposits, additional collateralized borrowings such as FHLB advances and Federal Reserve Discount Window, and the issuance of debt securities and preferred or common securities.
The Company’s short-term and long-term liquidity requirements are primarily to fund on-going operations, including payment of interest on deposits and debt, extensions of credit to borrowers, capital expenditures and shareholder dividends. These liquidity requirements are met primarily through cash flow from operations, redeployment of prepaying and maturing balances in loan and investment securities portfolios, increases in debt financing and other borrowings, and increases in customer deposits.
Integral to the Company’s liquidity management is the administration of borrowings. To the extent the Company is unable to obtain sufficient liquidity through core deposits, the Company seeks to meet its liquidity needs through wholesale funding or other borrowings on either a short or long-term basis.
The following table presents a summary of the Company’s liquidity position as of the dates indicated:
($ in thousands)September 30, 2024December 31, 2023Amount ChangePercentage Change
Cash and cash equivalents$193,064 $242,342 $(49,278)(20.3)%
Cash and cash equivalents to total assets6.7 %8.7 %
Available borrowing capacity:
FHLB advances$702,986 $602,976 100,010 16.6 %
Federal Reserve Discount Window578,713 528,893 49,820 9.4 %
Overnight federal funds lines65,000 65,000 — — %
Total$1,346,699 $1,196,869 $149,830 12.5 %
Total available borrowing capacity to total assets46.6 %42.9 %
The Company also maintains relationships in the capital markets with brokers and dealers to issue time deposits and money market accounts.
PCB Bancorp, on a stand-alone holding company basis, must provide for its own liquidity and its main source of funding is dividends from the Bank. There are statutory, regulatory and debt covenant limitations that affect the ability of the Bank to pay dividends to the holding company. Management believes that these limitations will not impact the Company’s ability to meet its ongoing short- and long-term cash obligations.
62

Off-Balance Credit Exposures and Contractual Obligations
Off-Balance Sheet Credit Exposures
The Company has limited off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on financial condition, results of operations, liquidity, capital expenditures or capital resources.
In the ordinary course of business, the Company enters into financial commitments to meet the financing needs of its customers. These financial commitments include commitments to extend credit, unused lines of credit, commercial and similar letters of credit and standby letters of credit. Those instruments involve to varying degrees, elements of credit and interest rate risk not recognized in the Company’s financial statements.
The Company’s exposure to loan loss in the event of nonperformance on these financial commitments is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments as it does for loans reflected in the consolidated financial statements.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total amounts do not necessarily represent future cash requirements. The Company evaluates each client’s credit worthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary is based on management’s credit evaluation of the customer. The following table presents outstanding financial commitments whose contractual amount represents credit risk as of the dates indicated:
September 30, 2024December 31, 2023
($ in thousands)Fixed RateVariable RateFixed RateVariable Rate
Unused lines of credit$11,828 $381,302 $2,808 $347,652 
Unfunded loan commitments5,590 34,839 4,020 47,038 
Standby letters of credit
5,158 1,516 4,638 1,786 
Commercial letters of credit
— — — 160 
Total
$22,576 $417,657 $11,466 $396,636 
Contractual Obligations
The following table presents supplemental information regarding total contractual obligations as of the dates indicated:
($ in thousands)Within One YearOne to Three YearsThree to Five YearsOver Five YearsTotal
September 30, 2024
Time deposits
$1,421,962 $5,489 $224 $— $1,427,675 
Operating leases
3,434 5,892 4,971 9,699 23,996 
Total
$1,425,396 $11,381 $5,195 $9,699 $1,451,671 
December 31, 2023
Time deposits
$1,330,271 $5,279 $186 $— $1,335,736 
FHLB advances
39,000 — — — 39,000 
Operating leases
3,385 6,233 4,959 10,695 25,272 
Total
$1,372,656 $11,512 $5,145 $10,695 $1,400,008 
Management believes that the Company will be able to meet its contractual obligations as they come due through the maintenance of adequate cash levels. Management expects to maintain adequate cash levels through profitability, loan and securities repayment and maturity activity and continued deposit gathering activities. The Company has in place various borrowing mechanisms for both short-term and long-term liquidity needs.

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Item 3 - Quantitative and Qualitative Disclosures About Market Risk
Market risk represents the risk of loss due to changes in market values of assets and liabilities. Market risk occurs in the normal course of business through exposures to market interest rates, equity prices, and credit spreads.
Overview
Interest rate risk is the risk to earnings and value arising from changes in market interest rates. Interest rate risk arises from timing differences in the repricings and maturities of interest-earning assets and interest-bearing liabilities (repricing risk), changes in the expected maturities of assets and liabilities arising from embedded options, such as borrowers’ ability to prepay residential mortgage loans at any time and depositors’ ability to redeem certificates of deposit before maturity (option risk), changes in the shape of the yield curve where interest rates increase or decrease in a nonparallel fashion (yield curve risk), and changes in spread relationships between different yield curves, such as U.S. Treasuries and Secured Overnight Financing Rate (“SOFR”) (basis risk).
The Company’s Board Asset Liability Committee (“ALCO”) establishes broad policy limits with respect to interest rate risk. Board ALCO establishes specific operating guidelines within the parameters of the Board of Directors’ policies. In general, the Company seeks to minimize the impact of changing interest rates on net interest income and the economic values of assets and liabilities. Board ALCO meets quarterly to monitor the level of interest rate risk sensitivity to ensure compliance with the Board of Directors’ approved risk limits. The Company also has a Management ALCO, which is comprised of the senior management team and the Chief Executive Officer, to proactively monitor interest rate risk.
Interest rate risk management is an active process that encompasses monitoring loan and deposit flows complemented by investment and funding activities. Effective management of interest rate risk begins with understanding the dynamic characteristics of assets and liabilities and determining the appropriate interest rate risk posture given business forecasts, management objectives, market expectations, and policy constraints.
An asset sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate higher net interest income, as rates earned on interest-earning assets would reprice upward more quickly than rates paid on interest-bearing liabilities, thus expanding net interest margin. Conversely, a liability sensitive position refers to a balance sheet position in which an increase in short-term interest rates is expected to generate lower net interest income, as rates paid on interest-bearing liabilities would reprice upward more quickly than rates earned on interest-earning assets, thus compressing net interest margin.
Measurement
Interest rate risk exposure is measured and monitored through various risk management tools, which include a simulation model that performs interest rate sensitivity analyses under multiple interest rate scenarios. Interest rate risk measurement is calculated and reported to the Board ALCO at least quarterly. The information reported includes period-end results and identifies any policy limits exceeded, along with an assessment of the policy limit breach and the action plan and timeline for resolution, mitigation, or assumption of the risk.
The Company uses two approaches to model interest rate risk: Net Interest Income at Risk (“NII at Risk”), and Economic Value of Equity (“EVE”). Under NII at Risk, net interest income is modeled utilizing various assumptions for assets, liabilities, and derivatives. The Company uses a static balance sheet to perform these analyses. EVE measures the period end market value of assets minus the market value of liabilities and the change in this value as rates change. EVE simulation reflects the effect of interest rate shifts on the value of the Company. In contrast to NII simulation, EVE simulation identifies risks arising from repricing or maturity gaps over the life of the balance sheet. The EVE approach provides a comparatively broader scope than the NII at Risk approach since it captures all anticipated cash flows.
Simulation results are highly dependent on input assumptions. To the extent the actual behavior is different from the assumption used in the models, there could be material changes in results. The assumptions applied in the model are documented, supported, and periodically back-tested to assess the reasonableness and effectiveness. The Company makes appropriate changes to the model as needed and these changes are reviewed by Board and Management ALCOs. The Company also continuously validates the model, methodology and results. Scenario results do not reflect strategies that the management could employ to limit the impact of changing interest rate expectations.
As part of the Company’s continuous evaluation and periodic enhancements to its NII and EVE calculations. The model incorporates deposit repricing assumptions impacting both consumer and wholesale deposits, deposit behavior assumption related to its non-maturity deposits, and prepayment assumptions related to its loan portfolio. The model modifications incorporated observed pricing and customer behavior in both rising and falling interest rate environments. The model is updated annually and was last evaluated during the three months ended September 30, 2024.

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The following table presents the projected changes in NII at Risk and EVE that would occur upon an immediate change in interest rates based on independent analysis as of the dates indicated, but without giving effect to any steps that management might take to counteract changes:
September 30, 2024December 31, 2023
Simulated Rate ChangesNet Interest Income SensitivityEconomic Value of Equity SensitivityNet Interest Income SensitivityEconomic Value of Equity Sensitivity
+200
5.7 %(3.0)%7.0 %(6.8)%
+100
2.9 %(1.2)%3.6 %(3.1)%
-100
(4.3)%(1.4)%(4.3)%1.8 %
-200(9.2)%(5.5)%(9.4)%— %
On September 18, 2024, the FOMC lowered the upper range of the Fed Funds Target Rate from 5.5% to 5.0%. In the accompanying statement, they added, “The Committee has gained greater confidence that inflation is moving sustainably toward 2%, and judges that the risks to achieving its employment and inflation goals are roughly in balance.” The Committee added that they remain attentive to the risks to both sides of its dual mandate, and will carefully assess incoming data, the evolving outlook and balance of risks.
As of September 30, 2024, the Company’s net interest income sensitivity results exhibit an asset sensitive profile. Net interest income is expected to increase when interest rates rise, as the Company has a large proportion of variable rate loans in its loan portfolio, primarily linked to Prime Rate indices, that are sensitive to changes in short-term interest rates. The Company’s deposit portfolio is also sensitive to changes in short-term interest rates, even though a large portion of its deposit mix is composed of non-maturity deposits that are not directly tied to short-term interest rate indices. The modeled results are highly sensitive to reinvestment yield and deposit beta assumptions. Actual results in net interest income during a period of rising interest rates may vary from the Company’s net interest income sensitivity results, as the actual result reflects earnings asset growth and deposit mix changes based on customer preferences relative to the interest rate environment.
The Company’s EVE sensitivity reflects a slight liability sensitive profile due to the continuing deposit mix shift from non-maturity deposits to time deposits. The model result is highly sensitive to deposit behaviors as well as loan prepayment assumptions. Due to the uncertainty of the current economic forecast, and timing and direction of future interest rate movements, actual result may vary from the Company’s EVE sensitivity results.
Item 4 - Controls and Procedures
Evaluation of Disclosure Controls and Procedures
An evaluation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the “Act”), as of September 30, 2024 was carried out under the supervision and with the participation of the Company’s Chief Executive Officer, Chief Financial Officer and other members of the Company’s senior management. The Company’s Chief Executive Officer and Chief Financial Officer concluded that, as of September 30, 2024, the Company’s disclosure controls and procedures were effective in ensuring that the information required to be disclosed by the Company in the reports it files or submits under the Act is: (i) accumulated and communicated to the Company’s management (including the Chief Executive Officer and Chief Financial Officer) to allow timely decisions regarding required disclosure; and (ii) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting (as defined in Rules 13a-15(f) under the Exchange Act) during the three months ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
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Part II - Other Information
Item 1 - Legal Proceedings
In the normal course of business, the Company is involved in various legal claims. Management has reviewed all legal claims against the Company with counsel and have taken into consideration the views of such counsel as to the potential outcome of the claims in determining the accrued loss contingency. The Company did not have any accrued loss contingencies for legal claims at September 30, 2024. It is reasonably possible the Company may incur losses in addition to the amounts currently accrued. However, at this time, the Company is unable to estimate the range of additional losses that are reasonably possible because of a number of factors, including the fact that certain of these litigation matters are still in their early stages and involve claims for which, at this point, the Company believes have little to no merit. Management has considered these and other possible loss contingencies and does not expect the amounts to be material to the consolidated financial statements.
Network and Data Incident
On August 30, 2021, the Bank identified unusual activity on its network. The Bank responded promptly to disable the activity, investigate its source and monitor the Bank’s network. The Bank subsequently became aware of claims that it had been the target of a ransomware attack. On September 7, 2021, the Bank determined that an external actor had illegally accessed and/or acquired certain data on its network. The Bank worked with third-party forensic investigators to understand the nature and scope of the incident and determine what information may have been accessed and/or acquired and who may have been impacted. The investigation revealed that this incident impacted certain files containing certain Bank customer information. Some of these files contained documents related to loan applications, such as tax returns, Form W-2 information of their employees, and payroll records. The Bank has notified all individuals identified as impacted, consistent with applicable laws. All impacted individuals were offered free Equifax Complete Premier credit monitoring and identify theft protection services. The Bank has notified law enforcement and appropriate authorities of the incident.
On December 16, 2021, Plaintiff Min Woo Bae, individually and on behalf of all others similarly situated, filed in the Los Angeles County Superior Court a complaint based on the incident for damages, injunctive relief, and equitable relief, styled Min Woo Bae v. Pacific City Bank, Case Number 21STCV45922 (“the Matter”). During the three months ended September 30, 2023, the Bank agreed to settle this matter in exchange for $700 thousand to the putative class members, including costs of settlement administration, and attorneys’ fees and costs. The Bank received preliminary court approval of the settlement and notice was provided to members of the proposed class during the three months ended September 30, 2023. The court issued an order granting final approval on June 20, 2024.
The Company expects that the full amount of the final settlement will be covered under the Company’s applicable insurance policies.
Item 1A - Risk Factors
Management is not aware of any material changes to the risk factors that appeared under “Part I, Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the risk factors discussed in Part 1, Item 1A, of the Annual Report on Form 10-K for the year ended December 31, 2023, which could materially and adversely affect the Company’s business, financial condition, results of operations and stock price. The risks described in this Quarterly Report on Form 10-Q and in the Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not presently known to management or that management presently believes not to be material may also result in material and adverse effects on the Company’s business, financial condition, and results of operations.


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Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds
There were no unregistered sales of equity securities during the three months ended September 30, 2024.
The following table presents share repurchase activities during the periods indicated:
($ in thousands, except per share data)Total Number of Shares PurchasedAverage Price Paid Per ShareTotal Number of Shares Purchased as Part of Publicly Announced ProgramNumber of Shares That May Yet Be Purchased Under the Program
From July 1, 2024 to July 31, 2024— $— — 577,777 
From August 1, 2024 to August 31, 2024— — — 577,777 
From September 1, 2024 to September 30, 2024— — — 577,777 
Total— $— — 
During the year ended December 31, 2023, the Company repurchased and retired 512,657 shares of common stock at a weighted-average price of $17.22 per share under a stock repurchase program approved by the Board of Directors on August 2, 2023 and a legacy stock repurchase program approved on July 28, 2022.
During the nine months ended September 30, 2024, the Company repurchased and retired 14,947 shares of common stock at a weighted-average price of $14.88 per share.
Item 3 - Defaults Upon Senior Securities
None.
Item 4 - Mine Safety Disclosures
Not applicable.
Item 5 - Other Information
During the three months ended September 30, 2024, no officer or director of the Company adopted or terminated any contract, instruction, or written plan for the purchase or sale of securities of the Company’s common stock that is intended to satisfy the affirmative defense conditions of Securities Exchange Act Rule 10b5-1(c) or any non-Rule 10b5-1 trading arrangement as defined in 17 CFR § 229.408(c).
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Item 6 - Exhibits
Exhibit NumberDescriptionFormFile No.ExhibitFiling Date
3.110-Q001-386213.1August 8, 2019
3.28-K001-386213.1May 23, 2024
3.38-K001-386213.1May 24, 2022
4.110-Q001-386214.1August 8, 2019
4.210-Q001-386214.2August 4, 2022
4.38-K001-386214.1May 24, 2022
10.1S-1333-22620810.1July 17, 2018
10.1A10-Q001-3862110.1ANovember 8, 2021
10.1B10-K001-3862110.1BMarch 4, 2022
10.2S-8333-2728744.1June 23, 2023
10.38-K001-3862110.1July 27, 2023
10.48-K001-3862110.2July 27, 2023
10.5S-1333-22620810.2July 17, 2018
10.6S-1333-22620810.3July 17, 2018
10.7S-1333-22620810.4July 17, 2018
10.88-K001-3862110.1May 24, 2022
31.1
31.2
32.1
32.2
9710-K001-386213.2March 12, 2024
101.INSThe instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCHInline XBRL Taxonomy Extension Schema Document*
101.CALInline XBRL Taxonomy Extension Calculation Linkbase Document*
101.DEFInline XBRL Taxonomy Extension Definition Linkbase Document*
101.LABInline XBRL Taxonomy Extension Label Linkbase Document*
101.PREInline XBRL Taxonomy Extension Presentation Linkbase Document*
104Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101)*
* Filed herewith
** Furnished herewith
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
PCB Bancorp
Date:November 7, 2024/s/ Henry Kim
Henry Kim
President and Chief Executive Officer
(Principal Executive Officer)
Date:November 7, 2024/s/ Timothy Chang
Timothy Chang
Executive Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)

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