What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-03-04 compared with 2021-03-11 · 132 added, 176 removed, 1355 unchanged (19% of the section changed)

Item 8 - Financial Statements

Financial Statements

PCB Bancorp and Subsidiary

Index to Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID 173 )

Consolidated Balance Sheets as of December 31, 202 1 and 20 20

32 unchanged sentences

Securities available-for-sale, at fair value 123,198 120,527

Securities held-to-maturity, at amortized cost (fair value of $ 20,480 at December 31, 2019)

Total investment securities 120,527 117,720

Loans held-for-sale 37,026 1,979

5 unchanged sentences

Other real estate owned, net — 1,401

Bank-owned life insurance 29,358 —

Deferred tax assets, net 10,824 8,120

20 unchanged sentences

Retained earnings 101,140 67,692

Accumulated other comprehensive income (loss), net 1,956 ( 57 )

Accumulated other comprehensive income, net 154 1,956

Total shareholders’ equity 256,286 233,788

17 unchanged sentences

Net interest income 77,137 66,189 69,034

Provision for loan losses 13,219 4,237 1,231

Net interest income after provision for loan losses 52,970 64,797 64,517

Provision (reversal) for loan losses ( 4,596 ) 13,219 4,237

Net interest income after provision (reversal) for loan losses 81,733 52,970 64,797

Noninterest income:

1 unchanged sentence

Loan servicing income 2,770 2,710 2,309

Bank-owned life insurance income 108 — —

Gain on sale of loans 12,932 6,527 5,996

41 unchanged sentences

Balance at January 1, 2019 15,977,754 $ 174,366 $ 37,577 $ ( 1,647 ) $ 210,296

Comprehensive income (loss)

Cumulative effect adjustment upon adoption of new lease accounting standard — — ( 53 ) — ( 53 )

Adjusted balance at January 1, 2019 15,977,754 174,366 37,524 ( 1,647 ) 210,243

Comprehensive income

Net income — — 24,108 — 24,108

Other comprehensive loss, net of tax — — — ( 424 ) ( 424 )

Stock issued under stock offering, net of expenses 2,508,234 45,037 — — 45,037

Other comprehensive income, net of tax — — — 1,590 1,590

Issuance of restricted stock 37,700 — — — —

Repurchase of common stock ( 396,715 ) ( 6,480 ) — — ( 6,480 )

Share-based compensation expense — 709 — — 709

3 unchanged sentences

Balance at December 31, 2019 15,707,016 169,221 57,670 ( 57 ) 226,834

Cumulative effect adjustment upon adoption of new lease accounting standard — — ( 53 ) — ( 53 )

Adjusted balance at December 31, 2018 15,977,754 174,366 37,524 ( 1,647 ) 210,243

Comprehensive income

2 unchanged sentences

Issuance of restricted stock 1,900 — — — —

Restricted stock surrendered due to employee tax liability ( 165 ) ( 2 ) — — ( 2 )

Repurchase of common stock ( 428,474 ) ( 6,487 ) — — ( 6,487 )

4 unchanged sentences

Balance at December 31, 2020 15,385,878 164,140 67,692 1,956 233,788

Comprehensive income

Comprehensive income (loss)

Net income — — 40,103 — 40,103

Other comprehensive income, net of tax — — — 2,013 2,013

Other comprehensive loss, net of tax — — — ( 1,802 ) ( 1,802 )

Issuance of restricted stock 35,584 — — — —

Forfeiture of restricted stock ( 1,300 ) — — — —

Restricted stock surrendered due to employee tax liability ( 231 ) ( 4 ) — — ( 4 )

13 unchanged sentences

Net income $ 40,103 $ 16,175 $ 24,108

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Depreciation of premises and equipment 1,375 1,487 1,534

3 unchanged sentences

Amortization of servicing assets 2,009 1,948 2,382

Provision for loan losses 13,219 4,237 1,231

Deferred tax expense (benefit) ( 3,670 ) ( 2,573 ) 641

Provision (reversal) for loan losses ( 4,596 ) 13,219 4,237

Bank-owned life insurance income ( 108 ) — —

Deferred tax benefit ( 1,953 ) ( 3,670 ) ( 2,573 )

Share-based compensation 453 715 709

5 unchanged sentences

Change in accrued interest payable and other liabilities 1,943 ( 6,834 ) ( 2,096 )

Net cash provided by operating activities 17,091 30,120 30,683

Net cash provided by (used in) operating activities ( 1,617 ) 17,093 30,120

Cash flows from investing activities:

10 unchanged sentences

Purchases of premises and equipment ( 430 ) ( 1,784 ) ( 710 )

Purchase of bank-owned life insurance ( 29,250 ) — —

Net cash used in investing activities ( 175,223 ) ( 132,818 ) ( 61,903 )

4 unchanged sentences

Stock options exercised 1,279 693 626

Stock issued under stock offering, net of expenses — — 45,037

Restricted stock surrendered due to employee tax liability ( 4 ) ( 2 ) —

Repurchase of common stock ( 10,876 ) ( 6,487 ) ( 6,480 )

24 unchanged sentences

PCB Bancorp is a bank holding company whose subsidiary is Pacific City Bank.

On July 1, 2019, the Company changed its corporate name to “PCB Bancorp” from “Pacific City Financial Corporation.” The Bank is a single operating segment that operates 11 full-service branches in Los Angeles and Orange counties, California, one full-service branch in each of Englewood Cliffs, New Jersey and Bayside, New York, and nine LPOs in Irvine, Artesia and Los Angeles, California;

On July 1, 2019, the Company changed its corporate name to “PCB Bancorp” from “Pacific City Financial Corporation.” The Bank is a single operating segment that operates 11 full-service branches in Los Angeles and Orange counties, California, one full-service branch in each of Englewood Cliffs, New Jersey and Bayside, New York, and 10 LPOs in Irvine, Artesia and Los Angeles, California;

Annandale, Virginia;

Atlanta, Georgia;

Chicago, Illinois;

20 unchanged sentences

In response to the COVID-19 pandemic, on March 26, 2020, the Federal Reserve reduced reserve requirement ratios to 0%, eliminating the reserve requirement for all depository institutions, an action that provides liquidity in the banking system to support lending to households and businesses.

The reserve and clearing requirement balance was $ 0 at December 31, 2019.

There was no reserve and clearing requirement balance at December 31, 2021 and 2020.

Investment Securities

4 unchanged sentences

On June 30, 2020, the Company transferred securities held-to-maturity to securities available-for-sale as a part of the Company’s liquidity management plan in response to the COVID-19 pandemic.

Management determined that its securities held-to-maturity no longer adhere to the Company’s current liquidity management plan and could be sold to potentially improve liquidity position.

Management determined that its securities held-to-maturity no longer adhere to the Company’s current liquidity management plan and could be sold to potentially improve its liquidity position.

Accordingly, the Company was no longer able to assert that it had the intent to hold these securities until maturity and the Company’s ability to assert that it has the intent and ability to hold to maturity debt securities will be limited for up to two years from the date of transfer.

19 unchanged sentences

If a determination is made that a loan held-for-sale cannot be sold in the foreseeable future, it is transferred to loans held-for-investment at lower of cost or fair value on the transfer date with a charge made to noninterest income when the fair value is lower than the cost.

Realized gains and losses from sales of loans included in noninterest income.

Realized gains and losses from sales of loans are included in noninterest income.

For sales of guaranteed portion of SBA and certain residential property loans, the loan servicing rights are retained.

29 unchanged sentences

On December 27, 2020, the Economic Aid Act was signed into law, which extended the applicable period of the temporary relief from TDRs under the CARES Act to the earlier of 60 days after the date of the COVID-19 National Emergency comes to an end or January 1, 2022.

As of December 31, 2020, the Company’s loans under modified terms related to the COVID-19 pandemic, including payment deferments and interest only payments, totaled $ 36.1 million.

As of December 31, 2021 and 2020, total loans under modified terms related to the COVID-19 pandemic, including payment deferments and interest only payments, were none and $ 36.1 million, respectively.

All of these loans under modified terms related to the COVID-19 pandemic were accounted for under section 4013 of the CARES Act and not considered TDRs.

All types of modifications have initial modification terms of 6 -months or less and loans that are granted modifications related to the COVID-19 pandemic in excess of 6 months, on a cumulative basis, are classified as special mention or substandard.

All types of modifications have initial modification terms of 6 -months or less and loans that were granted modifications related to the COVID-19 pandemic in excess of 6 months, on a cumulative basis, were classified as special mention or substandard.

In addition, all loans under modified terms related to the COVID-19 pandemic were current and accrual status as of December 31, 2020;

however, all of these loans are monitored on an ongoing basis in accordance with each loan’s covenants and conditions for potential downgrade or change in accrual status.

however, all of these loans were monitored on an ongoing basis in accordance with each loan’s covenants and conditions for potential downgrade or change in accrual status.

Small Business Administration Paycheck Protection Program :

2 unchanged sentences

These loans are included in the C&I portfolio and have an interest rate of 1%.

The substantial majority of the PPP loans in our portfolio have a maturity of two years .

As of December 31, 2020, the Company had 1,585 SBA PPP loans totaling $ 135.7 million, net of unamortized deferred fees and costs.

The Company deferred loan origination fees of $ 5.7 million and direct origination costs of $ 1.1 million on SBA PPP loans.

The substantial majority of the PPP loans funded during the year ended December 31, 2020 in the Company’s portfolio have a maturity of two years .

On January 13, 2021, the SBA began accepting applications for second draw PPP loans.

SBA PPP loans funded during the year ended December 31, 2021 have a maturity of five years .

As of December 31, 2021 and 2020, the Company had 354 and 1,585 SBA PPP loans totaling $ 65.3 million and $ 135.7 million, net of unamortized deferred fees and costs, respectively.

As of December 31, 2021, the Company recognized $ 181.8 million in forgiveness.

The Company amortizes these deferred fees and costs without prepayment assumption using the contractual lives of SBA PPP loans.

The SBA guarantee on PPP loans cannot be separated from the loan and therefore is not a separate unit of account.

The Company considered the SBA guarantee in the allowance for loan losses evaluation and determined that it is not required to reserve an allowance on SBA PPP loans at December 31, 2020.

The Company considered the SBA guarantee in the allowance for loan losses evaluation and determined that it is not required to reserve an allowance on SBA PPP loans at December 31, 2021 and 2020.

Allowance for Loan Losses

37 unchanged sentences

Most leases include one or more options to renew, with renewal terms that can extend the lease term from one to five years.

The exercise of lease renewal option is at the Company’s sole discretion.

The exercise of a lease renewal option is at the Company’s sole discretion.

Certain leases with an initial term of 12 months or less are not recorded on the balance sheet and lease expenses for these leases are recognized on a straight-line basis over the lease term.

15 unchanged sentences

Servicing Assets

Servicing assets are recognized when servicing rights are retained from the sale of loans, such as sales of guaranteed portion of SBA and certain residential property loans, and are initially recorded at fair value.

Servicing assets are recognized when servicing rights are retained from the sale of loans, such as sales of the guaranteed portion of SBA and certain residential property loans, and are initially recorded at fair value.

Fair value is calculated as the present value of estimated future cash flows from the servicing rights based on current market sources, such as the cost to service, discount rates, and prepayment speeds.

13 unchanged sentences

The recorded investment amount was $ 1.6 million and $ 1.9 million, respectively, and unfunded commitments were $ 51 thousand and $ 57 thousand, respectively, at December 31, 2021 and 2020.

The recorded investment amount is included in Accrued Interest Receivable and Other Assets and unfunded commitment is included in Accrued Interest Payable and Other Liabilities on the Consolidated Statements of Financial Condition.

The recorded investment amount is included in Other Assets and unfunded commitment is included in Accrued Interest Payable and Other Liabilities on the Consolidated Statements of Financial Condition.

As components of income tax expense, the Company recognized amortizations of $ 247 thousand, $ 240 thousand and $ 261 thousand, respectively, and federal tax credits and other benefits of $ 299 thousand, $ 300 thousand and $ 304 thousand, respectively, for the years ended December 31, 2021, 2020 and 2019.

1 unchanged sentence

Therefore, no impairment was recorded at December 31, 2021 and 2020.

Bank-owned Life Insurance

The Company purchased life insurance policies on certain officers and directors during the year ended December 31, 2021.

The Bank and named beneficiaries of various current covered officers are the beneficiaries under each policy.

In the event of the death of a covered officer, the Bank and named beneficiaries of the covered officer will receive the specified insurance benefit from the insurance carrier.

Bank-owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due, if any, that are probable at settlement.

Earnings Per Share

62 unchanged sentences

The Company plans to adopt this ASU at the delayed effective date of January 1, 2023.

The Company has formed a committee, developed an implementation plan, and engaged a software vendor to assist the Company to build a model.

The Company is in the process of completing a readiness assessment and is engaged in the implementation phase of the project.

The Company is working on:

(i) developing a new expected loss model with supportable assumptions;

(ii) identifying data, reporting, and disclosure gaps;

(iii) assessing updates to accounting and credit risk policies;

and (iv) documenting new processes and controls.

Based on the Company’s initial assessment of this ASU, the Company expects to recognize a one-time cumulative effect adjustment to the allowance for loan losses which could potentially have a material impact on its consolidated financial statements as of the beginning of the first reporting period in which this ASU is effective.

Fair Value Measurements

19 unchanged sentences

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 :

35 unchanged sentences

Municipal bonds — 5,686 — 5,686

Corporate bonds — 5,071 — 5,071

Total securities available-for-sale — 123,198 — 123,198

26 unchanged sentences

SBA property $ — $ — $ 17 $ 17

Commercial lines of credit — — 904 904

SBA commercial term — — 255 255

Total impaired loans — — 17 17

6 unchanged sentences

Commercial lines of credit — — 904 904

SBA commercial term — — 255 255

Total impaired loans — — 1,377 1,377

7 unchanged sentences

SBA property $ 17 Fair value of collateral NM NM

Commercial lines of credit $ 904 Sales comparison approach Adjustment for differences between the comparable estate sales 5% to 9% (7.6%)

SBA commercial term $ 255 Fair value of collateral NM NM

December 31, 2020

2 unchanged sentences

Commercial lines of credit $ 904 Sales comparison approach Adjustment for differences between the comparable estate sales 5 % to 9 % ( 7.6 %)

Income approach Adjustment for differences in net operating income expectations -11% to -4% (-6.20%)

Capitalization rate 5%

SBA commercial term $ 255 Fair value of collateral NM NM

For assets measured at fair value, the following table presents the total net losses, which include charge-offs, recoveries, specific reserves, impairment on servicing assets, gain (loss) on sale of OREO, and OREO valuation write-downs recorded for the periods indicated:

2 unchanged sentences

Collateral dependent impaired loans:

Commercial property $ — $ — $ ( 53 )

SBA property $ ( 8 ) $ ( 138 ) $ ( 31 )

2 unchanged sentences

Other real estate owned

Net losses recognized $ ( 1,070 ) $ ( 2,524 ) $ ( 288 )

Net gain (losses) recognized $ 196 $ ( 1,070 ) $ ( 2,524 )

Fair Value of Financial Instruments

44 unchanged sentences

Securities available-for-sale 120,527 120,527 — 120,527 —

Securities held-to-maturity 20,154 20,480 — 20,480 —

Loans held-for-sale 1,979 2,112 — 2,112 —

9 unchanged sentences

On June 30, 2020, the Company transferred securities held-to-maturity to securities available-for-sale as a part of the Company’s liquidity management plan in response to the COVID-19 pandemic.

Management determined that its securities held-to-maturity no longer adhere to the Company’s current liquidity management plan and could be sold to potentially improve liquidity position.

Management determined that its securities held-to-maturity no longer adhere to the Company’s current liquidity management plan and could be sold to potentially improve its liquidity position.

10 unchanged sentences

Municipal bonds 5,329 357 — 5,686

Corporate bonds 5,000 71 — 5,071

Total securities available-for-sale $ 123,185 $ 1,322 $ ( 1,309 ) $ 123,198

7 unchanged sentences

Municipal bonds

5,370 456 — 5,826

Total securities available-for-sale $ 117,961 $ 2,657 $ ( 91 ) $ 120,527

Securities held-to-maturity:

government agency and U.S.

government sponsored enterprise mortgage-backed securities $ 15,215 $ 70 $ ( 81 ) $ 15,204

Municipal bonds 4,939 337 — 5,276

Total securities held-to-maturity $ 20,154 $ 407 $ ( 81 ) $ 20,480

As of December 31, 2021 and 2020, pledged securities were $ 110.9 million and $ 117.8 million, respectively.

46 unchanged sentences

Total securities available-for-sale $ 9,874 $ ( 34 ) 9 $ 6,996 $ ( 57 ) 10 $ 16,870 $ ( 91 ) 19

Securities held-to-maturity:

government agency and U.S.

government sponsored enterprise mortgage-backed securities $ — $ — — $ 6,842 $ ( 81 ) 7 $ 6,842 $ ( 81 ) 7

Total securities held-to-maturity $ — $ — — $ 6,842 $ ( 81 ) 7 $ 6,842 $ ( 81 ) 7

In accordance with FASB ASC 320, Investments - Debt and Equity Securities , the Company performs an OTTI assessment at least on a quarterly basis.

33 unchanged sentences

In the ordinary course of business, the Company may grant loans to certain officers and directors, and the companies with which they are associated.

As of December 31, 2020 and 2019, the Company had $ 3.9 million and $ 3.8 million, respectively, of such loans outstanding.

SBA PPP Loans

The following table presents a summary of SBA PPP loans as of December 31, 2020:

December 31, 2020

($ in thousands) Number of Loans Amount

$50,000 or less 1,017 $ 20,518

Over $50,000 and less than $350,000 496 60,692

Over $350,000 and less than $2,000,000 69 46,054

$2,000,000 or more 3 8,390

Total 1,585 $ 135,654

Loan Modifications Related to the COVID-19 Pandemic

The following table presents a summary of loans under modified terms related to the COVID-19 pandemic by portfolio segment as of December 31, 2020:

December 31, 2020

Modification Type

($ in thousands) Payment Deferment Interest Only Payment Total

Real estate loans:

Commercial property $ 9,688 $ 14,444 $ 24,132

Residential property 425 — 425

SBA property — 4,192 4,192

Commercial and industrial loans:

Commercial term 2,462 3,065 5,527

SBA commercial term — 1,841 1,841

Total $ 12,575 $ 23,542 $ 36,117

As of December 31, 2021 and 2020, the Company had $ 398 thousand and $ 3.9 million, respectively, of such loans outstanding.

Allowance for Loan Losses

T he following table presents the activities in allowance for loan losses by portfolio segment, which is consistent with the Company’s methodology for determining allowance for loan losses, for the periods indicated:

The following table presents the activities in allowance for loan losses by portfolio segment, which is consistent with the Company’s methodology for determining allowance for loan losses, for the periods indicated:

($ in thousands) Real Estate Commercial and Industrial Consumer Total

3 unchanged sentences

6 378 171 555

Provision (reversal) for loan losses

Provision for loan losses

775 3,449 13 4,237

9 unchanged sentences

63 565 66 694

Provision for loan losses

9,157 3,736 326 13,219

Reversal for loan losses ( 2,136 ) ( 2,362 ) ( 98 ) ( 4,596 )

Balance at December 31, 2021 $ 16,797 $ 5,310 $ 274 $ 22,381

46 unchanged sentences

SBA commercial term 20,922 281 675 — 21,878

SBA PPP 135,654 — — — 135,654

Other consumer loans 21,707 — 66 — 21,773

Total $ 1,556,987 $ 16,461 $ 10,130 $ — $ 1,583,578

Substandard SBA property loans included $ 113 thousand and $ 2.4 million of guaranteed portion by the U.S.

Substandard SBA property loans included $ 109 thousand and $ 113 thousand of guaranteed portion by the U.S.

government agency at December 31, 2021 and 2020, respectively.

The following table presents the risk categories for the recorded investment in loans under modified terms related to the COVID-19 pandemic by portfolio segment as of dates indicated:

The Company had no loans under modified terms related to the COVID-19 pandemic as of December 31, 2021.

The following table presents the risk categories for the recorded investment in loans under modified terms related to the COVID-19 pandemic by portfolio segment as of December 31, 2020:

($ in thousands) Pass Special Mention Substandard Doubtful Total

8 unchanged sentences

Total $ 19,293 $ 14,881 $ 1,943 $ — $ 36,117

Loans that were granted modifications related to the COVID-19 pandemic in excess of 6 months, on a cumulative basis, were

classified as special mention or substandard.

Past Due and Nonaccrual Loans

4 unchanged sentences

Real estate loans:

Commercial property $ — $ — $ — $ 524 $ 524

Residential property $ 461 $ — $ — $ — $ 461

1 unchanged sentence

Commercial and industrial loans:

Commercial lines of credit — — — 904 904

SBA commercial term — — — 213 213

3 unchanged sentences

Real estate loans:

Commercial property $ — $ — $ — $ 524 $ 524

Residential property 182 — — 189 371

16 unchanged sentences

Commercial property $ 326 $ 325 $ — $ — $ —

Residential property 189 189 — — —

SBA property 988 1,033 — — —

1 unchanged sentence

Commercial term 2 2 — — —

Commercial lines of credit 904 904 — — —

SBA commercial term 219 227 — — —

3 unchanged sentences

Commercial property $ 856 $ 855 $ — $ — $ —

Residential property 189 189 — — —

SBA property 1,108 1,198 47 45 3

41 unchanged sentences

The determination of the allowance for loan losses related to TDRs depends on the collectability of principal and interest, according to the modified repayment terms.

Loans that were modified as TDRs were individually evaluated for impairment and the Company allocated $ 0 and $ 4 thousand of allowance for loan losses as of December 31, 2020 and 2019, respectively.

Loans that were modified as TDRs were individually evaluated for impairment and the Company allocated $ 0 and $ 0 of allowance for loan losses as of December 31, 2021 and 2020, respectively.

There were no new TDRs for the year ended December 31, 2021.

The following table presents new loans that were modified as TDRs by portfolio segment for the periods indicated:

Year Ended December 31,

2020 2019 2018

($ in thousands) Number of Loans Pre-Modification Recorded Investment Post-Modification Recorded Investment Number of Loans Pre-Modification Recorded Investment Post-Modification Recorded Investment Number of Loans Pre-Modification Recorded Investment Post-Modification Recorded Investment

($ in thousands) Number of Loans

Pre-Modification Recorded Investment Post-Modification Recorded Investment Number of Loans

Pre-Modification Recorded Investment Post-Modification Recorded Investment

Real estate loans:

24 unchanged sentences

(2) Includes principal and interest deferments or reductions.

There was one SBA commercial term loan of $26 thousand that was modified as a TDR for which there was a payment default within twelve months following the modification for the year ended December 31, 2020.

There were no loans that were modified as TDRs for which there was a payment default within twelve months following the modification for the years ended December 31, 2021 and 2019.

There was one SBA commercial term loan of $ 26 thousand that was modified as a TDR for which there was a payment default within twelve months following the modification for the year ended December 31, 2020.

Purchases, Sales, and Transfers

53 unchanged sentences

Right-of-use assets obtained in exchange for lease obligations

1,459 950 1,616

(1) Included in Occupancy and Equipment on the Consolidated Statements of Income.

Operating lease cost for the year ended December 31, 2018 was under Topic 840.

The Company used the incremental borrowing rate based on the information available in determining the present value of lease payment.

48 unchanged sentences

$ 1,401 $ — $ —

1,960 5,316 395

( 3,361 ) ( 3,915 ) ( 329 )

Net change in valuation allowance

5 unchanged sentences

Net direct write-downs and removal from sale

— ( 66 ) ( 111 )

Balance at end of year $ — $ — $ —

6 unchanged sentences

Total $ 8 $ 51 $ 1

The Company provided a loan of $ 1.5 million to finance the sale of its OREO property during the year ended December 31, 2020.

The Company did no t provide loans to finance the sale of its OREO properties during the years ended December 31, 2019 or 2018.

The Company provided a loan of $ 250 thousand and $ 1.5 million to finance the sale of its OREO property during the year ended December 31, 2021 and 2020, respectively.

The Company did no t provide loans to finance the sale of its OREO properties during the year ended December 31, 2019.

At December 31, 2021 and 2020, total deposits were $ 1.87 billion and $ 1.59 billion, respectively, and total interest-bearing deposits were $ 1.04 billion and $ 1.06 billion, respectively.

The aggregate amount of deposits reclassified as loans, such as overdrafts, was $ 39 thousand and $ 98 thousand at December 31, 2021 and 2020, respectively.

Total deposits not covered by deposit insurance were $ 919.6 million and $ 737.2 million, respectively, and total time deposits not covered by deposit insurance were $ 216.3 million and $ 224.7 million, respectively, at December 31, 2021 and 2020.

The Company had California State Treasurer’s deposits of $ 100.0 million and $ 100.0 million in time deposits of more than $250,000 at December 31, 2021 and 2020, respectively.

13 unchanged sentences

The Company had $ 10.0 million and $ 80.0 million in FHLB advances at December 31, 2021 and 2020, respectively.

FHLB advances consisted of fixed interest rates with original maturity terms ranging from one to five years at December 31, 2020.

FHLB advances consisted of a fixed rate term borrowing with with a maturity date of June 29, 2022 (original maturity term of five years ) at December 31, 2021.

The following table presents scheduled maturities of FHLB advances as of December 31, 2021:

24 unchanged sentences

Shareholders’ Equity

Initial Public Offering

On August 14, 2018, the Company issued and sold 2,385,000 shares of its common stock at an offering price of $ 20.00 in an underwritten IPO, for gross proceeds of $ 47.7 million.

The underwriters were granted a 30 -day option to purchase up to an additional 357,750 shares of common stock at the IPO price less the underwriting discount.

Concurrently with the IPO, the Company’s common stock began trading on the Nasdaq Global Select Market under the symbol “PCB.”

On September 5, 2018, the Company issued an additional 123,234 shares of its common stock upon the exercise by the underwriters of a portion of their 30 -day option, for additional gross proceeds of $ 2.5 million.

Aggregate net proceeds from the IPO were $ 45.0 million after deducting underwriting discounts, commissions and offering expenses.

Stock Repurchase

Stock Repurchases

On March 28, 2019, the Company’s Board of Directors approved the repurchase of up to $ 6.5 million of the Company’s common stock through March 27, 2020.

3 unchanged sentences

The Company repurchased and retired 428,474 shares of common stock at a weighted-average price of $ 15.14 per share.

On April 8, 2021, the Company’s Board of Directors approved a repurchase program authorizing the repurchase of up to 5 % of the Company’s outstanding common stock as of the date of the board meeting, which represented 775,000 shares, through September 7, 2021.

The Company repurchased and retired 680,269 shares of common stock at a weighted-average price of $ 15.99 per share, totaling $ 10.9 million under this repurchase program.

Share-Based Compensation

20 unchanged sentences

Stock options are issued at the closing market price on the grant date, and generally have a three -to five-year vesting period and contractual terms of ten years .

The Company recognizes an income tax deduction upon exercise of the stock option by the option holder in an amount equal to the taxable income reported by the option holders.

The option holder recognizes taxable income based on the closing market price immediately before the exercise date less the exercise price stated in the grant agreement.

The Company recognizes an income tax deduction upon exercise of the non-qualified stock option by the option holder in an amount equal to the taxable income reported by the option holders.

The option holder of non-qualified stock option recognizes taxable income based on the closing market price immediately before the exercise date less the exercise price stated in the grant agreement.

The following table presents the weighted-average assumptions used to determine the fair value of options granted for the periods indicated:

4 unchanged sentences

Expected term

N/A 5.00 years 6.18 years

6.71 years N/A 5.00 years

Expected stock price volatility

21 unchanged sentences

( 126,163 ) $ 10.14 4.22 years

( 10,000 ) $ 17.47 8.00 years

Balance at end of year 632,772 $ 11.47 4.54 years $ 6,641

7 unchanged sentences

( 54,100 ) $ 15.41

( 10,000 ) $ 17.47

Balance at end of year 107,099 $ 16.70

2 unchanged sentences

The RSAs are valued at the closing market price of the Company's stock on the grant date and generally have a three -to five -year vesting period.

The Company recognizes an income tax deduction in an amount equal to the taxable income reported by the holders of the restricted stock, when vested.

The following table represents RSAs activity for the year ended December 31, 2021:

5 unchanged sentences

( 9,300 ) $ 16.46

( 1,300 ) $ 13.23

Outstanding at end of period 55,284 $ 12.79

3 unchanged sentences

The Board of Directors may make a discretionary contribution to the plan annually.

The Company’s contribution to the plan was $ 807 thousand, $ 831 thousand and $ 739 thousand for the years ended December 31, 2020, 2019 and 2018.

The Company’s contribution to the plan was $ 901 thousand, $ 807 thousand and $ 831 thousand for the years ended December 31, 2021, 2020 and 2019, respectively.

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

5 unchanged sentences

Federal ( 1,428 ) ( 2,223 ) ( 1,747 )

Adjustment of deferred tax assets for enacted changes in tax rate — — 25

State ( 525 ) ( 1,447 ) ( 826 )

Total deferred income tax expense (benefit) ( 3,670 ) ( 2,573 ) 641

Change in valuation allowance

Total deferred income tax benefit ( 1,953 ) ( 3,670 ) ( 2,573 )

$ 16,856 $ 6,836 $ 10,243

4 unchanged sentences

21.00 % 21.00 % 21.00 %

State franchise tax, net of federal tax benefit

8.45 % 8.45 % 8.48 %

State and local income taxes, net of federal tax benefit 8.55 % 8.45 % 8.45 %

Share-based compensation

0.05 % 0.39 % 0.10 %

Remeasurement from the Tax Cuts and Jobs Act

— % — % 0.07 %

Other items, net

7 unchanged sentences

Share-based compensation 303 335

Unrealized loss on investment securities — 84

Loans held-for-sale market adjustment 2,445 419

16 unchanged sentences

The Company does not expect the total amount of unrecognized tax benefit to significantly increase or decrease in the next twelve months.

The Company and its subsidiaries are subject to U.S.

The Company and the Bank are subject to U.S.

federal and various state jurisdictions income tax examinations.

26 unchanged sentences

The following table presents outstanding financial commitments whose contractual amount represents credit risk as of the dates indicated:

($ in thousands) 2020 2019

Commitments to extend credit

$ 193,496 $ 171,608

($ in thousands) Fixed Rate Variable Rate Fixed Rate Variable Rate

Unused lines of credit $ 8,261 $ 160,739 $ 6,623 $ 150,247

Unfunded loan commitments 595 29,688 1,752 34,874

Standby letters of credit

3,078 1,431 2,971 1,814

Commercial letters of credit

Total $ 12,025 $ 192,382 $ 11,346 $ 186,935

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’s exposure to loan loss in the event of nonperformance on commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments.

8 unchanged sentences

COVID-19 Pandemic

The ongoing COVID-19 pandemic, and governmental and societal responses thereto, have had a severe impact on global economic and market conditions, including significant disruption of, and volatility in, financial markets;

global supply chain disruptions;

and the institution of social distancing and shelter-in-place requirements that have resulted in temporary closures of many businesses, lost revenues, and increased unemployment throughout the U.S., but also specifically in California, where most of the Company’s operations and a large majority of its customers are located.

These conditions have impacted and may in the future impact its business, results of operations, and financial condition negatively.

The ongoing COVID-19 pandemic, and governmental and societal responses thereto, have had a severe impact on global economic and market conditions.

government has enacted a number of monetary and fiscal policies to provide fiscal stimulus and relief in order to mitigate the impact of the COVID-19 pandemic.

However, the COVID-19 pandemic continues to be a challenge to public health, including the emergence of new variants, and impact global economic and market conditions, including global supply chain disruptions and high inflation.

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 has been working 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.

The Bank expresses no opinion on the merits of the Matter and intends to answer, respond, and/or otherwise vigorously defend itself from the claims and causes of action asserted in the complaint to the fullest extent permitted by applicable law.

Those defenses will be based in part on the fact that the Bank has implemented security procedures, practices, and a robust information security program pursuant to guidance from financial regulators.

The Company continues to monitor and evaluate the data incident for its magnitude and concomitant financial, legal or reputational consequences.

During the year ended December 31, 2021, expenses associated with the data incident, all of which are included in Other Expense in Consolidated Statements of Income, totaled $ 100 thousand, which represents the retention amount on its insurance claims.

The Company anticipates additional expenses will be incurred in future periods;

however, the Company does have a cyber-liability insurance policy that should provide insurance coverage for this incident.

To date, no litigation has resulted from the data incident.

Regulatory Matters

30 unchanged sentences

Tier 1 capital (to average assets) 227,268 11.74 % 77,450 4.0 % 96,813 5.0 %

On December 16, 2021, the Treasury informed the Company, that the Treasury has reviewed the Company’s application to receive a capital investment from the Treasury under the ECIP, and that the Company would be eligible to receive an ECIP investment in an amount up to approximately $ 69.1 million in the form of non-dilutive Tier 1 senior perpetual preferred capital.

The Company determined to accept the offer to receive the ECIP investment for the full amount and it expects to close in the second quarter of 2022, both of which are subject to final determination by the U.S.

Established by the Consolidated Appropriations Act, 2021, the ECIP was created to encourage low- and moderate-income community financial institutions and minority depository institutions such as the Bank to augment their efforts to support small businesses and consumers in their communities.

The California Financial Code provides that a bank 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 shareholder during the same period.

34 unchanged sentences

Liabilities and Shareholders’ Equity

Other liabilities

Total liabilities — —

30 unchanged sentences

Cash flows from financing activities:

Stock issued under stock offering, net of expenses — — 45,037

Restricted stock surrendered due to employee tax liability ( 4 ) ( 2 ) —

Repurchase of common stock ( 10,876 ) ( 6,487 ) ( 6,480 )

1 unchanged sentence

Cash dividends paid on common stock ( 6,655 ) ( 6,153 ) ( 3,962 )

Net cash provided by (used in) financing activities ( 11,947 ) ( 9,816 ) 43,587

Net cash used in financing activities ( 16,256 ) ( 11,949 ) ( 9,816 )

Net increase in cash and cash equivalents 1,578 1,134 1,485

1 unchanged sentence

Cash and cash equivalents at end of year $ 5,451 $ 3,873 $ 2,739

Quarterly Results of Operations (Unaudited)

The following table presents the unaudited quarterly results of operations for the year ended December 31, 2020:

Three Months Ended

($ in thousands, except per share)

March 31, 2020

June 30, 2020

September 30, 2020 December 31, 2020

Interest income

$ 21,660 $ 18,973 $ 19,620 $ 19,508

Interest expense

5,094 3,610 2,767 2,101

Net interest income 16,566 15,363 16,853 17,407

Provision for loan losses

2,896 3,855 4,326 2,142

Noninterest income

2,026 2,918 2,272 4,524

Noninterest expense

10,567 9,696 9,886 11,550

Income before income taxes 5,129 4,730 4,913 8,239

Income tax expense

1,557 1,363 1,464 2,452

$ 3,572 $ 3,367 $ 3,449 $ 5,787

Earnings per common share, basic

$ 0.23 $ 0.22 $ 0.22 $ 0.38

Earnings per common share, diluted

$ 0.23 $ 0.22 $ 0.22 $ 0.38

The following table presents the unaudited quarterly results of operations for the year ended December 31, 2019:

Three Months Ended

($ in thousands, except per share)

March 31, 2019

June 30, 2019

September 30, 2019 December 31, 2019

Interest income

$ 22,952 $ 24,030 $ 23,687 $ 22,276

Interest expense

5,799 6,338 6,158 5,616

Net interest income 17,153 17,692 17,529 16,660

Provision (reversal) for loan losses

( 85 ) 394 ( 102 ) 4,030

Noninterest income

2,409 3,054 2,802 3,604

Noninterest expense

10,289 10,984 10,777 10,265

Income before income taxes 9,358 9,368 9,656 5,969

Income tax expense

2,794 2,767 2,871 1,811

$ 6,564 $ 6,601 $ 6,785 $ 4,158

Earnings per common share, basic

$ 0.41 $ 0.41 $ 0.43 $ 0.26

Earnings per common share, diluted

$ 0.40 $ 0.40 $ 0.42 $ 0.26

Subsequent Events

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data