Press Release

PCB Bancorp Reports Earnings of $6.6 million for Q2 2019

Company Release - 7/25/2019 4:05 PM ET

LOS ANGELES--(BUSINESS WIRE)-- PCB Bancorp (the “Company”) (NASDAQ: PCB), the holding company of Pacific City Bank (the “Bank”), today reported net income of $6.6 million, or $0.40 per diluted common share for the second quarter of 2019, compared with $6.6 million, or $0.40 per diluted common share, for the previous quarter and $4.8 million, or $0.35 per diluted common share, for the year-ago quarter.

On July 1, 2019, the Company changed its corporate name to “PCB Bancorp” from “Pacific City Financial Corporation” to reflect the Company's goal to align the corporate name with the trading symbol of its common stock and simplify corporate communications while maintaining the Company's core branding.

Q2 2019 Financial Highlights

  • Net income totaled $6.6 million or $0.40 per diluted common share;
  • Total assets were $1.73 billion at June 30, 2019, an increase of $8.7 million, or 0.5%, from $1.72 billion at March 31, 2019, an increase of $29.5 million, or 1.7%, from $1.70 billion at December 31, 2018, and an increase of $107.3 million, or 6.6%, from $1.62 billion at June 30, 2018;
  • Loans held-for-investment, net of deferred costs (fees), were $1.40 billion at June 30, 2019, an increase of $52.4 million, or 3.9%, from $1.34 billion at March 31, 2019, an increase of $56.9 million, or 4.2%, from $1.34 billion at December 31, 2018, and an increase of $140.7 million, or 11.2%, from $1.25 billion at June 30, 2018;
  • Total deposits were $1.45 billion at June 30, 2019, a decrease of $1.2 million, or 0.1%, from $1.45 billion at March 31, 2019, but an increase of $2.8 million, or 0.2%, from $1.44 billion at December 31, 2018 and an increase of $19.3 million, or 1.4%, from $1.43 billion at June 30, 2018;
    • State and Brokered deposits were $117.5 million at June 30, 2019 compared to $157.5 million, $142.5 million and $152.5 million, respectively, at March 31, 2019, December 31, 2018 and June 30, 2018.
  • The Company repurchased 57,551 shares of its common stock totaling $974 thousand under the publicly announced $6.5 million share repurchase program; and
  • The Company declared an increased cash dividend of $0.06 per common share.

“We are pleased to report another strong quarterly financial performance highlighted by earnings of $6.6 million, or $0.40 per diluted common share,” stated Henry Kim, President and Chief Executive Officer. “In spite of the uncertain interest rate environment coupled with intense competition on deposits and credits, during the second quarter our held-for-investment loan balance increased $52.4 million, or 3.9%, and our retail deposit balance, excluding wholesale deposits, increased $38.8 million, or 3.0%. We maintained our net interest margin at 4.17% during the quarter and we are successfully carrying our initiative on reducing our asset sensitive balance sheet by increasing the percentage of fixed rate loans to 37.8% at June 30, 2019 compared with 34.6% at March 31, 2019.”

Financial Highlights (Unaudited)

 

 

ThreeMonthsEnded

 

Six Months Ended

($ in thousands, except per share data)

 

6/30/2019

 

3/31/2019

 

% Change

 

6/30/2018

 

% Change

 

6/30/2019

 

6/30/2018

 

% Change

Net income

 

$

 

6,601

 

 

$

 

6,564

 

 

 

0.6

%

 

$

 

4,762

 

 

 

38.6

%

 

$

 

13,165

 

 

$

 

11,026

 

 

19.4

%

Diluted earnings per common share

 

$

 

0.40

 

 

$

 

0.40

 

 

%

 

$

 

0.35

 

 

 

14.3

%

 

$

 

0.81

 

 

$

 

0.81

 

 

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

 

17,692

 

 

$

 

17,153

 

 

 

3.1

%

 

$

 

15,882

 

 

 

11.4

%

 

$

 

34,845

 

 

$

 

31,176

 

 

11.8

%

Provision (reversal) for loan losses

 

 

394

 

 

 

(85

)

 

 

(563.5

)%

 

 

425

 

 

 

(7.3

)%

 

 

309

 

 

 

520

 

 

(40.6

)%

Noninterest income

 

 

3,054

 

 

 

2,409

 

 

 

26.8

%

 

 

2,273

 

 

 

34.4

%

 

 

5,463

 

 

 

5,635

 

 

(3.1

)%

Noninterest expense

 

 

10,984

 

 

 

10,289

 

 

 

6.8

%

 

 

10,940

 

 

 

0.4

%

 

 

21,273

 

 

 

20,571

 

 

3.4

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets (1)

 

 

1.52

%

 

 

1.57

%

 

 

 

 

1.20

%

 

 

 

 

1.55

%

 

 

1.45

%

 

 

Return on average shareholders’ equity (1), (2)

 

 

12.01

%

 

 

12.43

%

 

 

 

 

12.74

%

 

 

 

 

12.22

%

 

 

15.07

%

 

 

Net interest margin (1)

 

 

4.17

%

 

 

4.22

%

 

 

 

 

4.08

%

 

 

 

 

4.19

%

 

 

4.20

%

 

 

Efficiency ratio (3)

 

 

52.95

%

 

 

52.60

%

 

 

 

 

60.26

%

 

 

 

 

52.78

%

 

 

55.88

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in thousands, except per share data)

 

6/30/2019

 

3/31/2019

 

% Change

 

12/31/2018

 

% Change

 

6/30/2018

 

% Change

Total assets

 

$

 

1,726,486

 

 

$

 

1,717,774

 

 

0.5

%

 

$

 

1,697,028

 

 

1.7

%

 

$

 

1,619,169

 

 

6.6

%

Net loans held-for-investment

 

 

1,382,229

 

 

 

1,330,035

 

 

3.9

%

 

 

1,325,515

 

 

4.3

%

 

 

1,242,235

 

 

11.3

%

Total deposits

 

 

1,446,526

 

 

 

1,447,758

 

 

(0.1

)%

 

 

1,443,753

 

 

0.2

%

 

 

1,427,245

 

 

1.4

%

Book value per common share (2), (4)

 

$

 

13.98

 

 

$

 

13.57

 

 

3.0

%

 

$

 

13.16

 

 

6.2

%

 

$

 

11.27

 

 

24.0

%

Tier 1 leverage ratio (consolidated)

 

 

12.74

%

 

 

12.83

%

 

 

 

 

12.60

%

 

 

 

 

9.58

%

 

 

Total shareholders’ equity to total assets (2)

 

 

12.94

%

 

 

12.64

%

 

 

 

 

12.39

%

 

 

 

 

9.35

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1)

Ratios are presented on an annualized basis.

(2)

The Company did not have any intangible equity components for the presented periods.

(3)

The ratios are calculated by dividing noninterest expense by the sum of net interest income and noninterest income.

(4)

The ratios are calculated by dividing total shareholdersequity by the number of outstanding common shares.

Result of Operations (Unaudited)

Net Interest Income and Net Interest Margin

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

 

 

ThreeMonthsEnded

 

Six Months Ended

($ in thousands)

 

6/30/2019

 

3/31/2019

 

% Change

 

6/30/2018

 

% Change

 

6/30/2019

 

6/30/2018

 

% Change

Interest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

 

21,969

 

 

$

 

20,934

 

 

4.9

%

 

$

 

18,610

 

 

18.0

%

 

$

 

42,903

 

 

$

 

36,050

 

 

19.0

%

Interest on investment securities

 

 

1,062

 

 

 

1,093

 

 

(2.8

)%

 

 

869

 

 

22.2

%

 

 

2,155

 

 

 

1,717

 

 

25.5

%

Interest and dividend on other interest-earning assets

 

 

999

 

 

 

925

 

 

8.0

%

 

 

865

 

 

15.5

%

 

 

1,924

 

 

 

1,205

 

 

59.7

%

Total interest income

 

 

24,030

 

 

 

22,952

 

 

4.7

%

 

 

20,344

 

 

18.1

%

 

 

46,982

 

 

 

38,972

 

 

20.6

%

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on deposits

 

 

6,200

 

 

 

5,665

 

 

9.4

%

 

 

4,292

 

 

44.5

%

 

 

11,865

 

 

 

7,458

 

 

59.1

%

Interest on borrowings

 

 

138

 

 

 

134

 

 

3.0

%

 

 

170

 

 

(18.8

)%

 

 

272

 

 

 

338

 

 

(19.5

)%

Total interest expense

 

 

6,338

 

 

 

5,799

 

 

9.3

%

 

 

4,462

 

 

42.0

%

 

 

12,137

 

 

 

7,796

 

 

55.7

%

Net interest income

 

$

 

17,692

 

 

$

 

17,153

 

 

3.1

%

 

$

 

15,882

 

 

11.4

%

 

$

 

34,845

 

 

$

 

31,176

 

 

11.8

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Overall, the increases in net interest income were primarily due to increases in average balance and average yield on loans, partially offset by increases in average balance and average cost of interest-bearing deposits.

The increases in interest and fees on loans were primarily due to increases in both average balance and average yield of loans. The increase in average yield on loans for the current quarter compared with the previous quarter was primarily due to an increase in discount accretion on retained portion of sold SBA loans due to a higher prepayment trend. The increases in average yield on loans for the three and six months ended June 30, 2019 compared with the same periods of 2018 were primarily due to new loan production with higher interest rates than the existing portfolio and Company’s high proportion of variable rate loans that had repriced along with the rising interest rate environment in 2018 and current higher market rate. The following table presents a composition of total loans by interest rate type accompanied with the weighted-average contractual rates as of the dates indicated:

 

 

6/30/2019

 

3/31/2019

 

12/31/2018

 

6/30/2018

 

 

% to Total
Loans

 

Weighted-
Average
Contractual
Rate

 

% to Total
Loans

 

Weighted-
Average
Contractual
Rate

 

% to Total
Loans

 

Weighted-
Average
Contractual
Rate

 

% to Total
Loans

 

Weighted-
Average
Contractual
Rate

Fixed rate loans

 

37.8

%

 

5.24

%

 

34.6

%

 

5.17

%

 

34.4

%

 

5.13

%

 

27.0

%

 

5.08

%

Variable rate loans

 

62.2

%

 

6.29

%

 

65.4

%

 

6.29

%

 

65.6

%

 

6.30

%

 

73.0

%

 

5.84

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Company strategically increased the proportion of fixed rate loans during the current quarter as the interest rate environment had become stabilized and in order to better-position its balance sheet to match potential rate changes in the future.

The decrease in interest on investment securities for the current quarter compared with the previous quarter was primarily due to an increase in premium amortization on mortgage-backed securities from a higher prepayment trend in the current quarter. The increases in the three and six months ended June 30, 2019 compared with the same periods of 2018 were primarily due to increases in both average balance and average yield of investment securities. The increase in average yield on investment securities was primarily due to additional purchases of investment securities along with the rising interest rate environment in 2018 and current higher market rate. The Company purchased investment securities of $4.3 million and $36.4 million, respectively, during the current quarter and last 12-month period.

The increase in interest and dividend on other interest-earning assets for the current quarter compared with the previous quarter was primarily due to an increase in average balance, partially offset by a decrease in average yield on interest-bearing deposits in other financial institutions, as the Federal Reserve lowered its interest rate on excess reserve balance from 2.40% to 2.35% in May. The increase in the current quarter compared with the year-ago quarter was primarily due to an increase in average yield on interest-bearing deposits in other financial institutions in the current higher market rates, partially offset by a decrease in average balance. The increase for the six months ended June 30, 2019 compared with the same period of 2018 was primarily due to increases in both average balance and average yield.

The increases in total interest expense were primarily due to increases in average balance and average cost of interest-bearing deposits. The increase in average cost on interest-bearing deposits was primarily due to the rising interest rate environment in 2018 and current higher market rates, and high competition in the Company’s deposit target markets.

Provision (Reversal) for Loan Losses

Provision (reversal) for loan losses was $394 thousand for the current quarter compared with $(85) thousand for the previous quarter and $425 thousand for the year-ago quarter. For the six months ended June 30, 2019 and 2018, the Company recognized provision for loan losses of $309 thousand and $520 thousand, respectively. The Company recorded net charge-offs of $203 thousand for the current quarter compared with net recoveries of $55 thousand for the previous quarter and net charge-offs of $175 thousand for the year-ago quarter. For the six months ended June 30, 2019 and 2018, the Company recorded net charge-offs of $148 thousand and $123 thousand, respectively.

Allowance for loan losses to total loans held-for-investment ratio was 0.96% at June 30, 2019, 0.98% at March 31, 2019, 0.98% at December 31, 2018, and 1.01% at June 30, 2018. The decrease in allowance for loan losses to total loans held-for-investment ratio was primarily due to a decrease in historical loss rates and changes in qualitative adjustment factors.

Noninterest Income

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

 

 

ThreeMonthsEnded

 

Six Months Ended

($ in thousands)

 

6/30/2019

 

3/31/2019

 

% Change

 

6/30/2018

 

% Change

 

6/30/2019

 

6/30/2018

 

% Change

Gain on sale of SBA loans

 

$

 

 

1,884

 

 

$

 

 

1,104

 

 

70.7

%

 

$

 

 

863

 

 

118.3

%

 

$

 

 

2,988

 

 

$

 

 

2,912

 

 

2.6

%

Gain on sale of residential property loans

 

 

7

 

 

 

16

 

 

(56.3

)%

 

 

170

 

 

(95.9

)%

 

 

23

 

 

 

192

 

 

(88.0

)%

Gain on sale of other loans

 

 

 

 

 

%

 

 

 

%

 

 

 

 

45

 

 

(100.0

)%

Total gain on sale of loans

 

 

1,891

 

 

 

1,120

 

 

68.8

%

 

 

1,033

 

 

83.1

%

 

 

3,011

 

 

 

3,149

 

 

(4.4

)%

Service charges and fees on deposits

 

 

368

 

 

 

364

 

 

1.1

%

 

 

376

 

 

(2.1

)%

 

 

732

 

 

 

725

 

 

1.0

%

Loan servicing income

 

 

492

 

 

 

631

 

 

(22.0

)%

 

 

585