U.S. Markets closed

PCB Bancorp Reports Earnings of $4.2 million for Q4 2019 and Announces Stock Repurchase

PCB Bancorp (the "Company") (NASDAQ: PCB), the holding company of Pacific City Bank (the "Bank"), today reported net income of $4.2 million, or $0.26 per diluted common share for the fourth quarter of 2019, compared with $6.8 million, or $0.42 per diluted common share, for the previous quarter and $6.7 million, or $0.41 per diluted common share, for the year-ago quarter.

Q4 2019 Financial Highlights

  • Net income totaled $4.2 million or $0.26 per diluted common share;
    • The Company recorded a provision for loan losses of $4.0 million for the fourth quarter of 2019.
  • Total assets were $1.75 billion at December 31, 2019, an increase of $46.9 million, or 2.8%, from $1.70 billion at September 30, 2019, and an increase of $49.3 million, or 2.9%, from $1.70 billion at December 31, 2018;
  • Loans held-for-investment, net of deferred costs (fees), were $1.45 billion at December 31, 2019, an increase of $61.0 million, or 4.4%, from $1.39 billion at September 30, 2019, and an increase of $112.1 million, or 8.4%, from $1.34 billion at December 31, 2018;
  • Total deposits were $1.48 billion at December 31, 2019, an increase of $47.0 million, or 3.3%, from $1.43 billion at September 30, 2019, and an increase of $35.6 million, or 2.5%, from $1.44 billion at December 31, 2018;
  • The Company completed the publicly announced $6.5 million share repurchase program in October 2019 (repurchased 396,715 shares of its common stock since its commencement in March 2019) and the Board of Directors approved a new repurchase program of $6.5 million to commence shortly following issuance of this press release and continuing until November 20, 2021; and
  • The Company declared a cash dividend of $0.08 per common share for the fourth quarter of 2019 compared with $0.06 per common share for the third quarter of 2019 and $0.03 per common share for the fourth quarter of 2018.

"We are pleased to report a disciplined loan and deposit growth. During the fourth quarter of 2019, our loan portfolio increased $61.4 million or 17.6% annualized to $1.45 billion and our deposit balance increased $47.0 million or 13.1% annualized to $1.48 billion," stated Henry Kim, President and Chief Executive Officer. "Our net income decreased $2.6 million to $4.2 million compared with third quarter of 2019 and the fourth quarter of 2018 primarily due to a $2.5 million charge-off related to a single credit relationship."

Financial Highlights (Unaudited)

 

 

Three Months Ended

 

Year Ended

($ in thousands, except per share data)

 

12/31/2019

 

9/30/2019

 

% Change

 

12/31/2018

 

% Change

 

12/31/2019

 

12/31/2018

 

% Change

Net income

 

$

4,158

 

 

$

6,785

 

 

(38.7

)%

 

$

6,732

 

 

(38.2

)%

 

$

24,108

 

 

$

24,301

 

 

(0.8

)%

Diluted earnings per common share

 

$

0.26

 

 

$

0.42

 

 

(38.1

)%

 

$

0.41

 

 

(36.6

)%

 

$

1.49

 

 

$

1.65

 

 

(9.7

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income

 

$

16,660

 

 

$

17,529

 

 

(5.0

)%

 

$

17,856

 

 

(6.7

)%

 

$

69,034

 

 

$

65,748

 

 

5.0

%

Provision (reversal) for loan losses

 

4,030

 

 

(102

)

 

NM

 

294

 

 

1,270.7

%

 

4,237

 

 

1,231

 

 

244.2

%

Noninterest income

 

3,604

 

 

2,802

 

 

28.6

%

 

2,239

 

 

61.0

%

 

11,869

 

 

10,454

 

 

13.5

%

Noninterest expense

 

10,265

 

 

10,777

 

 

(4.8

)%

 

10,135

 

 

1.3

%

 

42,315

 

 

40,226

 

 

5.2

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets (1)

 

0.96

%

 

1.55

%

 

 

 

1.60

%

 

 

 

1.40

%

 

1.53

%

 

 

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

 

7.25

%

 

12.02

%

 

 

 

12.92

%

 

 

 

10.88

%

 

14.26

%

 

 

Net interest margin (1)

 

3.96

%

 

4.11

%

 

 

 

4.33

%

 

 

 

4.11

%

 

4.23

%

 

 

Efficiency ratio (3)

 

50.66

%

 

53.01

%

 

 

 

50.44

%

 

 

 

52.30

%

 

52.79

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

($ in thousands, except per share data)

 

12/31/2019

 

9/30/2019

 

% Change

 

12/31/2018

 

% Change

Total assets

 

$

1,746,328

 

 

$

1,699,446

 

 

2.8

%

 

$

1,697,028

 

 

2.9

%

Net loans held-for-investment

 

1,436,451

 

 

1,376,736

 

 

4.3

%

 

1,325,515

 

 

8.4

%

Total deposits

 

1,479,307

 

 

1,432,262

 

 

3.3

%

 

1,443,753

 

 

2.5

%

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

 

$

14.44

 

 

$

14.30

 

 

1.0

%

 

$

13.16

 

 

9.7

%

Tier 1 leverage ratio (consolidated)

 

13.23

%

 

12.87

%

 

 

 

12.60

%

 

 

Total shareholders’ equity to total assets (2)

 

12.99

%

 

13.22

%

 

 

 

12.39

%

 

 

 

 

 

 

 

 

 

 

 

 

 

(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:

 

 

Three Months Ended

 

Year Ended

($ in thousands)

 

12/31/2019

 

9/30/2019

 

% Change

 

12/31/2018

 

% Change

 

12/31/2019

 

12/31/2018

 

% Change

Interest income/expense on:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

$

20,888

 

 

$

21,876

 

 

(4.5

)%

 

$

21,088

 

 

(0.9

)%

 

$

85,667

 

 

$

76,837

 

 

11.5

%

Investment securities

 

823

 

 

978

 

 

(15.8

)%

 

1,076

 

 

(23.5

)%

 

3,956

 

 

3,724

 

 

6.2

%

Other interest-earning assets

 

565

 

 

833

 

 

(32.2

)%

 

1,067

 

 

(47.0

)%

 

3,322

 

 

3,138

 

 

5.9

%

Total interest-earning assets

 

22,276

 

 

23,687

 

 

(6.0

)%

 

23,231

 

 

(4.1

)%

 

92,945

 

 

83,699

 

 

11.0

%

Interest-bearing deposits

 

5,514

 

 

6,060

 

 

(9.0

)%

 

5,239

 

 

5.2

%

 

23,439

 

 

17,340

 

 

35.2

%

Borrowings

 

102

 

 

98

 

 

4.1

%

 

136

 

 

(25.0

)%

 

472

 

 

611

 

 

(22.7

)%

Total interest-bearing liabilities

 

5,616

 

 

6,158

 

 

(8.8

)%

 

5,375

 

 

4.5

%

 

23,911

 

 

17,951

 

 

33.2

%

Net interest income

 

$

16,660

 

 

$

17,529

 

 

(5.0

)%

 

$

17,856

 

 

(6.7

)%

 

$

69,034

 

 

$

65,748

 

 

5.0

%

Average balance of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

$

1,415,781

 

 

$

1,396,437

 

 

1.4

%

 

$

1,319,403

 

 

7.3

%

 

$

1,383,562

 

 

$

1,264,166

 

 

9.4

%

Investment securities

 

146,454

 

 

161,528

 

 

(9.3

)%

 

165,554

 

 

(11.5

)%

 

160,803

 

 

154,266

 

 

4.2

%

Other interest-earning assets

 

108,919

 

 

135,774

 

 

(19.8

)%

 

152,894

 

 

(28.8

)%

 

134,870

 

 

137,627

 

 

(2.0

)%

Total interest-earning assets

 

$

1,671,154

 

 

$

1,693,739

 

 

(1.3

)%

 

$

1,637,851

 

 

2.0

%

 

$

1,679,235

 

 

$

1,556,059

 

 

7.9

%

Interest-bearing deposits

 

$

1,097,957

 

 

$

1,126,376

 

 

(2.5

)%

 

$

1,100,517

 

 

(0.2

)%

 

$

1,120,880

 

 

$

1,053,773

 

 

6.4

%

Borrowings

 

21,141

 

 

20,326

 

 

4.0

%

 

30,000

 

 

(29.5

)%

 

25,388

 

 

34,904

 

 

(27.3

)%

Total interest-bearing liabilities

 

$

1,119,098

 

 

$

1,146,702

 

 

(2.4

)%

 

$

1,130,517

 

 

(1.0

)%

 

$

1,146,268

 

 

$

1,088,677

 

 

5.3

%

Annualized average yield/cost of:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans

 

5.85

%

 

6.22

%

 

 

 

6.34

%

 

 

 

6.19

%

 

6.08

%

 

 

Investment securities

 

2.23

%

 

2.40

%

 

 

 

2.58

%

 

 

 

2.46

%

 

2.41

%

 

 

Other interest-earning assets

 

2.06

%

 

2.43

%

 

 

 

2.77

%

 

 

 

2.46

%

 

2.28

%

 

 

Total interest-earning assets

 

5.29

%

 

5.55

%

 

 

 

5.63

%

 

 

 

5.53

%

 

5.38

%

 

 

Interest-bearing deposits

 

1.99

%

 

2.13

%

 

 

 

1.89

%

 

 

 

2.09

%

 

1.65

%

 

 

Borrowings

 

1.91

%

 

1.91

%

 

 

 

1.80

%

 

 

 

1.86

%

 

1.75

%

 

 

Total interest-bearing liabilities

 

1.99

%

 

2.13

%

 

 

 

1.89

%

 

 

 

2.09

%

 

1.65

%

 

 

Net interest margin

 

3.96

%

 

4.11

%

 

 

 

4.33

%

 

 

 

4.11

%

 

4.23

%

 

 

Supplementary information

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net accretion of discount (premium) on loans included in interest on loans

 

$

938

 

 

$

1,031

 

 

(9.0

)%

 

$

1,340

 

 

(30.0

)%

 

$

4,022

 

 

$

4,397

 

 

(8.5

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans. The decreases in average yield for the current quarter compared with the previous and year-ago quarters were primarily due to the lower market rates. The increase in average yield for the current year compared with the previous year was primarily due to the rising interest rate environment in 2018 and higher average market rates in 2019. The Company had benefited from its high proportion of variable rate loans that had repriced along with such interest rate environment; however, the Company strategically had increased the proportion of fixed rate loans throughout the current year in order to better-position its balance sheet to match the current and potential future interest rate environment.

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:

 

 

12/31/2019

 

9/30/2019

 

12/31/2018

 

 

% to Total

Loans

 

Weighted-

Average

Contractual

Rate

 

% to Total

Loans

 

Weighted-

Average

Contractual

Rate

 

% to Total

Loans

 

Weighted-

Average

Contractual

Rate

Fixed rate loans

 

43.4

%

 

5.20

%

 

40.5

%

 

5.26

%

 

34.4

%

 

5.13

%

Variable rate loans

 

56.6

%

 

5.51

%

 

59.5

%

 

5.88

%

 

65.6

%

 

6.30

%

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Securities. The decreases in average yield for the current quarter compared with the previous and year-ago quarters were primarily due to an increase in premium amortization from a higher prepayment trend in the current quarter. The increase in average yield for the current year compared with the previous year was primarily due to additional purchases of investment securities along with the higher average market rates in 2019. During the current year, the Company purchased $14.1 million of investment securities.

Other Interest-Earning Assets. The average yield on other interest-bearing assets is closely related to the changes in market rates, as the Company maintains most of its cash at the Federal Reserve Bank account. The decreases in average yield for the current quarter compared with the previous and year-ago quarters were primarily due to the lower market rates. The increase in average yield for the current year compared with the previous year was primarily due to the rising interest rate environment in 2018 and higher average market rates in 2019. The average balance for the current quarter decreased as loan growth was mainly supported by the Company’s cash on deposit at the Federal Reserve Bank.

Interest-Bearing Deposits. The decrease in average cost for the current quarter compared with the previous quarter was primarily due to the recent decreases in market rates; however, the impact was smaller than the change in average yield on interest-earning assets due to high competition in the Company’s deposit target markets. The increase in average cost for the current year compared with the previous year was primarily due to the higher average market rates in 2019.

Borrowings. The Company had fixed rate term advances from FHLB of $20.0 million with a weighted average rate of 1.92% and original maturity terms ranging from 3 to 5 years at December 31, 2019.

Provision (Reversal) for Loan Losses

Provision (reversal) for loan losses was $4.0 million for the current quarter compared with $(102) thousand for the previous quarter and $294 thousand for the year-ago quarter. For the current and previous years, the Company recognized provision for loan losses of $4.2 million and $1.2 million, respectively. The increase was primarily due to an increase in charge-offs in the current quarter with the increase in associated historical loss rates and organic loan growth for the current quarter.

During the current quarter, due to the borrower's financial hardship, the Company recorded a charge-off of $2.5 million on a commercial line of credit, which was originated in 2011, with an outstanding balance of $4.0 million at the time of charge-off. This line had an outstanding balance of $1.6 million at December 31, 2019 and the management believes that the remaining outstanding balance is well collateralized. Due to the increased charge-offs, the reserve for unfunded commitments also increased to $301 thousand at December 31, 2019 from $146 thousand at September 30, 2019 and $139 thousand at December 31, 2018. Provision for unfunded loan commitments was $155 thousand for the current quarter compared with $5 thousand for the previous quarter and $17 thousand for the year-ago quarter. For the current and previous years, the Company recognized provision for unfunded loan commitments of $162 thousand and $18 thousand, respectively.

The Company recorded net charge-offs of $2.7 million for the current quarter compared with $132 thousand for the previous quarter and $223 thousand for the year-ago quarter. For the current and previous years, the Company recorded net charge-offs of $3.0 million and $288 thousand, respectively.

Allowance for loan losses to total loans held-for-investment ratio was 0.99% at December 31, 2019, 0.94% at September 30, 2019, and 0.98% at December 31, 2018. The increase in this ratio was primarily due to an increase in historical loss rates due to the aforementioned charge-off.

Noninterest Income

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

 

 

Three Months Ended

 

Year Ended

($ in thousands)

 

12/31/2019

 

9/30/2019

 

% Change

 

12/31/2018

 

% Change

 

12/31/2019

 

12/31/2018

 

% Change

Gain on sale of loans

 

1,445

 

 

1,540

 

 

(6.2

)%

 

1,083

 

 

33.4

%

 

5,996

 

 

5,560

 

 

7.8

%

Gain on sale of securities available-for-sale

 

786

 

 

 

 

%

 

 

 

%

 

786

 

 

 

 

%

Service charges and fees on deposits

 

407

 

 

405

 

 

0.5

%

 

398

 

 

2.3

%

 

1,544

 

 

1,500

 

 

2.9

%

Loan servicing income

 

652

 

 

534

 

 

22.1

%

 

371

 

 

75.7

%

 

2,309

 

 

2,160

 

 

6.9

%

Other income

 

314

 

 

323

 

 

(2.8

)%

 

387

 

 

(18.9

)%

 

1,234

 

 

1,234

 

 

%

Total noninterest income

 

$

3,604

 

 

$

2,802

 

 

28.6

%

 

$

2,239

 

 

61.0

%

 

$

11,869

 

 

$

10,454

 

 

13.5

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

...

 

 

Three Months Ended

 

Year Ended

($ in thousands)

 

12/31/2019

 

9/30/2019

 

% Change

 

12/31/2018

 

% Change

 

12/31/2019

 

12/31/2018

 

% Change

Gain on sale of SBA loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sold loan balance

 

$

27,072

 

 

$

22,186

 

 

22.0

%

 

$

26,158

 

 

3.5

%

 

$

99,609

 

 

$

91,700

 

 

8.6

%

Premium received

 

2,067

 

 

2,061

 

 

0.3

%

 

1,630

 

 

26.8

%

 

8,355

 

 

7,671

 

 

8.9

%

Gain recognized

 

1,428

 

 

1,498

 

 

(4.7

)%

 

1,059

 

 

34.8

%

 

5,915

 

 

5,278

 

 

12.1

%

Gain on sale of residential property loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sold loan balance

 

$

2,636