PCB Bancorp(PCB) - 2022 Q2 - Quarterly Report

Part I - Financial Information Consolidated Financial Statements Presents PCB Bancorp's unaudited Q2 2022 consolidated financial statements, detailing financial position, performance, and cash flows Consolidated Balance Sheets Details PCB Bancorp's financial position as of June 30, 2022, reflecting growth in assets, liabilities, and shareholders' equity Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2022 (Unaudited) | December 31, 2021 | | :--- | :--- | :--- | | Total Assets | $2,344,560 | $2,149,735 | | Total cash and cash equivalents | $299,910 | $203,285 | | Net loans held-for-investment | $1,811,939 | $1,709,824 | | Total Liabilities | $2,010,185 | $1,893,449 | | Total deposits | $1,997,607 | $1,867,134 | | Total Shareholders' Equity | $334,375 | $256,286 | - A key change in equity was the issuance of 69,141 shares of Series C Preferred Stock with a liquidation preference of $69.1 million[10] Consolidated Statements of Income Presents PCB Bancorp's income statement for Q2 2022, detailing changes in net income, net interest income, and other revenue Key Income Statement Data (in thousands, except per share data) | Metric | Q2 2022 | Q2 2021 | Six Months 2022 | Six Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $21,351 | $18,996 | $41,344 | $36,815 | | Reversal for loan losses | $(109) | $(934) | $(1,300) | $(2,081) | | Gain on sale of loans | $2,039 | $3,967 | $5,816 | $5,289 | | Net Income | $9,092 | $9,844 | $19,332 | $18,404 | | Diluted EPS | $0.60 | $0.64 | $1.27 | $1.19 | Consolidated Statements of Comprehensive Income Details PCB Bancorp's comprehensive income for Q2 2022, highlighting the impact of unrealized gains or losses Comprehensive Income (in thousands) | Metric | Q2 2022 | Q2 2021 | Six Months 2022 | Six Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $9,092 | $9,844 | $19,332 | $18,404 | | Other comprehensive income (loss), net of tax | $(2,902) | $285 | $(6,754) | $(813) | | Total Comprehensive Income | $6,190 | $10,129 | $12,578 | $17,591 | Consolidated Statements of Changes in Shareholders' Equity Outlines changes in PCB Bancorp's shareholders' equity, driven by preferred stock issuance, net income, and dividends - The company issued 69,141 shares of preferred stock in Q2 2022, adding $69.1 million to shareholders' equity[16] - Cash dividends declared on common stock totaled $2.2 million ($0.15 per share) in Q2 2022 and $4.5 million ($0.30 per share) for the first six months of 2022[16][17] Consolidated Statements of Cash Flows Summarizes PCB Bancorp's cash flows for the six months ended June 30, 2022, across operating, investing, and financing Cash Flow Summary - Six Months Ended June 30 (in thousands) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $38,778 | $7,205 | | Net cash used in investing activities | $(127,854) | $(146,834) | | Net cash provided by financing activities | $185,701 | $120,152 | | Net increase (decrease) in cash | $96,625 | $(19,477) | Notes to Consolidated Financial Statements (Unaudited) Provides detailed explanations of PCB Bancorp's accounting policies, financial components, and significant subsequent events - The company plans to adopt ASU 2016-13 (CECL) on January 1, 2023, and expects a one-time cumulative effect adjustment to the allowance for loan losses which could be material[37][38] - As of June 30, 2022, the company had no loans under modified terms related to the COVID-19 pandemic[32][57] - On May 24, 2022, the company issued 69,141 shares of Series C Preferred Stock for a capital investment of $69.1 million from the U.S. Treasury under the ECIP[88] - Subsequent to quarter-end, the Board approved a new stock repurchase program for up to 5% of outstanding common stock and declared a quarterly cash dividend of $0.15 per share[114][115] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses PCB Bancorp's financial condition and results, highlighting key trends in income, assets, and capital Executive Summary Summarizes PCB Bancorp's key financial results for Q2 2022, including net income, asset growth, and capital events Q2 2022 Financial Highlights (in millions) | Metric | Q2 2022 | Change from Q2 2021 | | :--- | :--- | :--- | | Net Income | $9.1 million | -7.6% | | Net Interest Income | $21.4 million | +12.6% (from $19.0M) | | Gain on Sale of Loans | $2.0 million | -48.6% (from $4.0M) | | Total Assets (vs 12/31/21) | $2.34 billion | +9.1% | | Loans Held-for-Investment (vs 12/31/21) | $1.83 billion | +5.8% | - The company issued $69.1 million in preferred stock through the U.S. Treasury's Emergency Capital Investment Program (ECIP)[136] - Pacific City Bank will change its name to PCB Bank, effective August 25, 2022[132] Results of Operations Analyzes PCB Bancorp's Q2 2022 operational performance, focusing on net interest income, loan loss provisions, and expenses Net Interest Income Analysis (Q2 2022 vs Q2 2021) (in millions) | Metric | Q2 2022 | Q2 2021 | | :--- | :--- | :--- | | Net Interest Income | $21.4 million | $19.0 million | | Net Interest Margin | 4.01% | 3.83% | | Net Interest Spread | 3.79% | 3.64% | - The reversal for loan losses was $109 thousand in Q2 2022, compared to $934 thousand in Q2 2021, primarily due to improving economic conditions offset by loan growth[167] - Gain on sale of loans decreased to $2.0 million in Q2 2022 from $4.0 million in Q2 2021, due to lower premiums on SBA loans in the secondary market[171] - Salaries and employee benefits increased by $1.0 million (14.0%) YoY in Q2 2022, due to annual merit increases and a higher number of employees (271 vs 248)[176] Financial Condition Assesses PCB Bancorp's financial condition as of June 30, 2022, detailing asset composition, loan portfolio, and capital Loan Portfolio Composition (in thousands) | Loan Type | June 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Total real estate loans | $1,606,416 | $1,453,241 | | Total commercial and industrial loans | $204,369 | $257,343 | | SBA PPP | $1,583 | $65,329 | | Total loans held-for-investment | $1,833,010 | $1,732,205 | Asset Quality Ratios | Metric | June 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Nonperforming assets to total assets | 0.09% | 0.05% | | Allowance for loan losses to loans HFI | 1.15% | 1.29% | | Total nonperforming assets | $2,031 thousand | $994 thousand | - Total deposits increased by $130.5 million (7.0%) to $2.0 billion, with noninterest-bearing demand deposits growing by $158.1 million (19.0%)[208] - Shareholders' equity increased by $78.1 million (30.5%) to $334.4 million, primarily due to a $69.1 million preferred stock issuance and $19.3 million in net income[212] Quantitative and Qualitative Disclosures About Market Risk Discusses PCB Bancorp's management of interest rate risk using simulation models for Net Interest Income and Economic Value of Equity Interest Rate Sensitivity Analysis (June 30, 2022) | Simulated Rate Change | Net Interest Income Sensitivity | Economic Value of Equity Sensitivity | | :--- | :--- | :--- | | +300 bps | +17.2% | +4.3% | | +200 bps | +11.7% | +3.7% | | +100 bps | +5.9% | +2.2% | - The company's interest rate risk management is overseen by the Board ALCO and a monthly Management ALCO, aiming to minimize the impact of rate changes on net interest income and economic value[235] Controls and Procedures Management evaluated PCB Bancorp's disclosure controls and procedures, concluding effectiveness with no material Q2 2022 changes - The CEO and CFO concluded that as of June 30, 2022, the company's disclosure controls and procedures were effective[242] - No changes occurred during Q2 2022 that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[243] Part II - Other Information Legal Proceedings Details PCB Bancorp's involvement in legal claims, including a data incident class action, with no material expected effect - A class action lawsuit was filed against the Bank on December 16, 2021, following a network data incident. The Bank intends to vigorously defend itself[247] - Expenses related to the data incident totaled $100 thousand in 2021, representing the insurance retention amount. No additional expenses were incurred in the first six months of 2022[248] Risk Factors States no material changes to risk factors previously disclosed in PCB Bancorp's 2021 Annual Report on Form 10-K - Management is not aware of any material changes to the risk factors disclosed in the 2021 Annual Report on Form 10-K[249] Unregistered Sales of Equity Securities and Use of Proceeds Reports the unregistered sale of $69.1 million in Series C Preferred Stock to the U.S. Treasury under ECIP, with no repurchases - On May 24, 2022, the Company issued 69,141 shares of Series C Preferred Stock for $69.1 million to the U.S. Treasury under the ECIP in an unregistered transaction[252] - No shares were repurchased during the three months ended June 30, 2022[252] Defaults Upon Senior Securities None - None[253] Mine Safety Disclosures Not applicable - Not applicable[254] Other Information None - None[255] Exhibits Lists the exhibits filed with the Form 10-Q, including articles of incorporation, bylaws, agreements, and certifications Signatures