PCB BANCORP
For the period ended Dec 31, 2024. Filed Mar 13, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 13, 2025
PCB$30.04-0.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-12.
0001423869-24-000006
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-13.
0001423869-25-000006
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 193 previous paragraphs and 204 current paragraphs.
118 unchanged; 59 reworded; 23 added; 12 removed; 4 previous and 4 current paragraphs rearranged.
Tables are not compared: 33 previous and 36 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (23)
Current report
The following table summarizes the initial adjustment to the ACL as of January 1, 2023:
Current report
In conjunction with the adoption of ASC 326, the Company made an accounting policy election not to measure an ACL on accrued interest receivables for the loans collectively evaluated. For the loans individually evaluated, the Company considers accrued interest receivables as a part of the amortized cost and measures an ACL.
Current report
When accrued interest receivable is deemed to be uncollectable, the Company promptly reverses such balances through current period interest income in the period they are deemed uncollectable. Additionally, the Company has also elected not to include the balance of accrued interest receivable in the amortized cost basis of financial assets within the scope of ASC 326. Accrued interest receivable will continue to be presented separately in the Consolidated Balance Sheets.
Current report
The following table presents a summary of reclassification of loans held-for-investment as of the date indicated:
Current report
(1) Commercial property loans under the legacy loan segments included all commercial property, business property and multifamily loans under the new loan segments.
Current report
The following table presents a summary of reclassification of ACL on loans as of the date indicated as well as the initial adjustment to the ACL as of January 1, 2023:
Current report
(1) Commercial property loans under the legacy loan segments included all commercial property, business property and multifamily loans under the new loan segments.
Current report
Non-GAAP Financial Measures
Current report
◦Provision (reversal) for credit losses(1) was $3.4 million, $(132) thousand and $3.6 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Current report
◦Net interest margin was 3.17%, 3.57% and 4.08% for the years ended December 31, 2024, 2023 and 2022, respectively.
Current report
•Loans held-for-investment were $2.63 billion at December 31, 2024, an increase of $305.9 million, or 13.2%, from $2.32 billion at December 31, 2023;
Current report
Interest expense on other borrowings increased primarily due to a 237.6% increase in average balance. The Company utilized additional borrowings to support its balance sheet growth.
Current report
Professional fees increased primarily due to additional professional fees related to a core system conversion, which was completed in April 2024.
Current report
Marketing and business promotion expense decreased primarily due to a higher, nonrecurring volume of advertisements in 2023 related to the Company’s 20th anniversary celebration.
Current report
Data processing expense decreased primarily due to one-time new relationship credit from the aforementioned core system conversion.
Current report
Director fees and expenses increased primarily due to an increase in stock-based compensation expense from stock options granted during the three months ended December 31, 2023.
Current report
Other expense included other loan related legal expenses of $432 thousand and $534 thousand, respectively, armed guard expense of $867 thousand and $798 thousand, respectively, office expenses of $2.2 million and $2.2 million, 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 guarantee during the second quarter of 2024. The Company has retained a law firm specializing in SBA recovery and intends to seek that SBA reconsider its decision so that the Company may recoup all or part of the reimbursement.
Current report
The following table presents activities in loans held-for-investment for the period indicated:
Current report
(1) Net of changes in deferred loan fees and discount on loans
Current report
(1) Under the legacy loan segments
Current report
On January 16, 2025, the Company entered into an ECIP Securities Purchase Option Agreement (the “Option Agreement”) with the U.S. Treasury, which grants the Company the option to repurchase the Series C Preferred Stock during the first 15 years following the Company’s issuance of the Series C Preferred Stock. The purchase price for the Preferred Stock under the Option Agreement is based on a formula equal to the present value of the Preferred Stock, calculated as set forth in the Option Agreement, together with any accrued and unpaid dividends thereon and could represent a discount from the Series C Preferred Stock’s liquidation amount.
Current report
The purchase option may not be exercised during the first 10 years following the Company’s sale of the Series C Preferred Stock (“the ECIP Period”) unless and until the Company meets at least one of the following three conditions (the “Threshold Conditions”): (1) an average of at least 60% of the Company’s loan originations qualify as “Deep Impact Lending” over any 16 consecutive quarters, (2) an average of at least 85% of the Company’s “total originations qualify as “Qualified Lending” over any 24 quarters or (3) the Series C Preferred Stock has a dividend rate of no more than 0.5% at each of six consecutive “Reset Dates,” in each case as defined in Option Agreement and the terms of the Series C Preferred. In addition to satisfying a Threshold Condition, the Option Agreement requires that the Company meet certain other eligibility conditions in order to exercise the purchase option in the future, including compliance with the terms of the original ECIP purchase agreement and the terms of the Series C Preferred Stock, maintaining qualification as either a certified community development financial institution or a minority depository institution and satisfying other legal and regulatory criteria.
Current report
The earliest possible date by which a Threshold Condition may be met is June 30, 2026. However, the Company does not currently meet any of the Threshold Conditions necessary to exercise the purchase option, and there can be no assurance if and when the Threshold Conditions will be met.
Removed paragraphs (12)
Previous report
Consumer Loans
Previous report
Non-GAAP Measures
Previous report
◦Provision (reversal) for credit losses(1) was $(132) thousand, $3.6 million and $(4.6) million for the years ended December 31, 2023, 2022 and 2021, respectively.
Previous report
◦Net interest margin was 3.57%, 4.08% and 3.83% for the years ended December 31, 2023, 2022 and 2021, respectively.
Previous report
•Loans held-for-investment were $2.32 billion at December 31, 2023, an increase of $277.4 million, or 13.6%, from $2.05 billion at December 31, 2022;
Previous report
Interest expense on other borrowings increased primarily due to a 122 basis point increase in average cost, partially offset by a 79.9% decrease in average balance. The increase in average cost was primarily due to the rising market rates.
Previous report
Professional fees increased primarily due to the additional legal expenses associated with the on-going legal matters related to the 2021 Network and Data Incident, partially offset by a decrease in internal audit fees.
Previous report
Data processing expense increased primarily due to an increase in processing costs from a greater number of accounts and transactions.
Previous report
Director fees and expenses increased primarily due to a new director appointed during the fourth quarter of 2021.
Previous report
Loans held-for-investment were $2.32 billion at December 31, 2023, an increase of $277.4 million, or 13.6%, from $2.05 billion at December 31, 2022. The increase was primarily due to new funding and advances of $1.19 billion and purchases of residential mortgage loans of $15.7 million, partially offset by paydowns and payoffs of $923.0 million, a loan transferred to OREO of $593 thousand and charge-offs of $132 thousand.
Previous report
ASC 326 adoption required additional ACL on both loans and off-balance sheet credit exposures primarily due to an increase in the quantitatively measured ACL under ASC 326 because the incurred loss model under the legacy ASC 450 and ASC 310 measures inherent losses in the loan portfolio on a 1-year loss horizon basis, while ASC 326 measures losses on “prepayment adjusted life of the loans” basis. In addition, historical loss rates used in legacy incurred loss model were low due to the Company’s low loss rates in recent years, while the Company also leverages peer group loss information under ASC 326.
Previous report
During the year ended December 31, 2023, the Company increased cash and cash equivalents by $95.3 million, or 64.8%, to $242.3 million and available borrowing capacity by $546.2 million, or 84.0%, to $1.20 billion. As of December 31, 2023, the Company's cash and cash equivalents and available borrowing capacity cover approximately 151.9% of deposits not covered by deposit insurance compared to 75.1% at December 31, 2022. During the year ended December 31, 2023, the Company updated its application in the Borrower-in Custody Program with Federal Reserve that provides additional borrowing capacity.
Reworded paragraphs (59)
Previous wording
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.
Current wording
On January 1, 2023, the Company adopted the provisions of Accounting Standards Codification (“ASC”) 326, “Financial Instruments - Credit Losses (Topic 326).” 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.
Previous wording
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 one-year period.
Current wording
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.
Previous wording
Within the various economic scenarios considered as of December 31, 2023, the quantitative estimate of the ACL would increase by approximately $7.7 million under sole consideration of the 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.
Current wording
Within the various economic scenarios considered as of December 31, 2024, the quantitative estimate of the ACL would increase by approximately $19.0 million under sole consideration of the 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.
Previous wording
Each loan segment bears varying degrees of risk based on, among other things, the type of loan and collateral, and the sensitivity of the borrower or industry to changes in external factors such as economic conditions and interest rate changes. The loan segments are as following:
Current wording
Each loan segment bears varying degrees of risk based on, among other things, the type of loan and collateral, and the sensitivity of the borrower or industry to changes in external factors such as economic conditions and interest rate changes. The loan segments are as follows:
Previous wording
•Commercial and industrial loans – The C&I loan category includes commercial term loans and commercial lines of credit. Commercial term loans are typically extended to finance business acquisitions, permanent working capital needs, and/or equipment purchases. Commercial lines of credit are generally provided to finance short-term working capital needs and mortgage warehouse lending credit facilities. Mortgage warehouse lending is a line of credit given to a loan originator, the funds from which are used to finance a mortgage that a borrower uses to purchase single-family residential property or refinance an existing mortgage. The primary risk associated with C&I loans is the difference between expected and actual cash flows of the borrowers. In addition, the recoverability of the Company’s investment in these loans is also dependent on other factors primarily dictated by the type of collateral securing these loans, and occasionally upon other borrower assets and guarantor assets.
Current wording
•Commercial and industrial loans – The C&I loan category includes commercial term loans and commercial lines of credit. Commercial term loans are typically extended to finance business acquisitions, permanent working capital needs, and/or equipment purchases. Commercial lines of credit are generally provided to finance short-term working capital needs and warehouse lending credit facilities. Warehouse lending is a line of credit given to a loan originator, the funds from which are used to finance a residential mortgage or CRE loans that a borrower uses to purchase property or refinance an existing loan. The primary risk associated with C&I loans is the difference between expected and actual cash flows of the borrowers. In addition, the recoverability of the Company’s investment in these loans is also dependent on other factors primarily dictated by the type of collateral securing these loans, and occasionally upon other borrower assets and guarantor assets.
Previous wording
(1) ACL and provision (reversal) for credit losses for the year ended December 31, 2023 are presented under ASC 326, while prior period comparisons continue to be presented under legacy ASC 450 and ASC 310. Provision (reversal) for credit losses on off-balance sheet credit exposures of $85 thousand, $(24) thousand, $(63) thousand and $162 thousand, respectively, for the years ended December 31, 2022, 2021, 2020 and 2019 were recorded in Other Expense on the Consolidated Income Statement.
Current wording
(1) ACL and provision (reversal) for credit losses for the year ended December 31, 2024 and 2023 is presented under ASC 326, while prior period comparisons continue to be presented under legacy ASC 450 and ASC 310. Provision (reversal) for credit losses on off-balance sheet credit exposures of $85 thousand, $(24) thousand, and $(63) thousand, respectively, for the years ended December 31, 2022, 2021, and 2020 were recorded in Other Expense on the Consolidated Income Statement.
Previous wording
(7) NPAs include total NPLs (nonaccrual loans plus loans past due 90 days or more and still accruing) and other real estate owned.
Current wording
(7) NPAs include total NPLs (nonaccrual loans plus loans past due 90 days or more and still accruing) and OREO.
Previous wording
•Net income was $30.7 million for the year ended December 31, 2023, a decrease of $4.3 million, or 12.2%, from $35.0 million for the year ended December 31, 2022 and a decrease of $9.4 million, or 23.4%, from $40.1 million for the year ended December 31, 2021;
Current wording
•Net income was $25.8 million for the year ended December 31, 2024, a decrease of $4.9 million, or 15.9%, from $30.7 million for the year ended December 31, 2023 and a decrease of $9.2 million, or 26.2%, from $35.0 million for the year ended December 31, 2022;
Previous wording
◦Diluted earnings per common share was $2.12, $2.31 and $2.62 for the years ended December 31, 2023, 2022 and 2021, respectively.
Current wording
◦Diluted earnings per common share was $1.74, $2.12 and $2.31 for the years ended December 31, 2024, 2023 and 2022, respectively.
Previous wording
•Total assets were $2.79 billion at December 31, 2023, an increase of $369.5 million, or 15.3%, from $2.42 billion at December 31, 2022;
Current wording
•Total assets were $3.06 billion at December 31, 2024, an increase of $274.5 million, or 9.8%, from $2.79 billion at December 31, 2023;
Previous wording
•Total deposits were $2.35 billion at December 31, 2023, an increase of $305.6 million, or 14.9%, from $2.05 billion at December 31, 2022;
Current wording
•Total deposits were $2.62 billion at December 31, 2024, an increase of $264.2 million, or 11.2%, from $2.35 billion at December 31, 2023;
Previous wording
•The Company declared and paid cash dividends of $0.69, $0.60, and $0.44 per common share for the years ended December 31, 2023, 2022 and 2021, respectively; and
Current wording
•The Company declared and paid cash dividends of $0.72, $0.69, and $0.60 per common share for the years ended December 31, 2024, 2023 and 2022, respectively; and
Previous wording
•The Company purchased and retired 512,657, 362,557 and 680,269 shares of common stock for the years ended December 31, 2023, 2022 and 2021, respectively.
Current wording
•The Company purchased and retired 14,947, 512,657, and 362,557 shares of common stock for the years ended December 31, 2024, 2023 and 2022, respectively.
Previous wording
(1) Provision (reversal) for credit losses for the year ended December 31, 2023 is presented under ASC 326, while prior period comparisons continue to be presented under legacy ASC 450 and ASC 310. Provision (reversal) for credit losses on off-balance sheet credit exposures of $85 thousand and $(24) thousand, respectively, for the years ended December 31, 2022 and 2021 was recorded in Other Expense on the Consolidated Income Statement.
Current wording
(1) Provision (reversal) for credit losses for the years ended December 31, 2024 and 2023 is presented under ASC 326, while provision for credit losses for the year ended December 31, 2022 continues to be presented under legacy ASC 450 and ASC 310. Provision for credit losses on off-balance sheet credit exposures of $85 thousand for the year ended December 31, 2022 was recorded in Other Expense on the Consolidated Income Statement.
Previous wording
The decrease in net income for the year ended December 31, 2022 compared with the year ended December 31, 2021 was primarily due to an increase in noninterest expense, a decrease in noninterest income and additional provision for loan losses, partially offset by an increase in net interest income.
Current wording
The decrease in net income for the year ended December 31, 2024 compared with the year ended December 31, 2023 was primarily due to an increase in noninterest expense, partially offset by increases in noninterest income and net interest income, and provision for credit losses of $3.4 million for the year ended December 31, 2024 compared with reversal for credit losses of $132 thousand for the year ended December 31, 2023.
Previous wording
The increase in total assets for the year ended December 31, 2023 was primarily due to increases in cash and cash equivalents, loans held-for-investment and operating lease assets. The increase in operating lease assets was primarily due to renewal and expansion of the Company’s headquarters and a new location for relocation of a regional office and branches. The Company plans to relocate and consolidate a regional office and two branches into one location in Orange County, California in 2024.
Current wording
The increase in total assets for the year ended December 31, 2024 was primarily due to increases in loans held-for-investment and deferred tax assets.
Previous wording
The Company is committed to making corporate decisions that directly benefit its shareholders, and during the year ended December 31, 2023, increased its dividend per common share by $0.09, or 15.0%, to $0.69 from $0.60 for the year ended December 31, 2022. During the year ended December 31, 2023, the Company also repurchased 512,657 shares of common stock, totaling $8.8 million. Overall, the Company returned 61.0% of its earnings to common shareholders through dividends and common share repurchases during the year ended December 31, 2023.
Current wording
The Company is committed to making corporate decisions that directly benefit its shareholders, and during the year ended December 31, 2024, increased its dividend per common share by $0.03, or 4.3%, to $0.72 from $0.69 for the year ended December 31, 2023. During the year ended December 31, 2024, the Company also repurchased 14,947 shares of common stock, totaling $222 thousand. Overall, the Company returned 42.0% of its earnings to common shareholders through dividends and common share repurchases during the year ended December 31, 2024.
Previous wording
(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 (cost) of $1.1 million, $2.2 million and $6.1 million, respectively, and net accretion of discount on loans of $2.2 million, $3.6 million and $3.5 million, respectively, are included in the interest income for the years ended December 31, 2023, 2022 and 2021, respectively.
Current wording
(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 (cost) of $1.2 million, $1.1 million and $2.2 million, respectively, and net accretion of discount on loans of $2.8 million, $2.2 million and $3.6 million, respectively, are included in the interest income for the years ended December 31, 2024, 2023 and 2022, respectively.
Previous wording
Net interest income increased primarily due to a 9.3% increase in average balance of interest-earning assets and a 58 basis point increase in average yield on interest-earning assets, partially offset by a 6.1% increase in average balance of interest-bearing liabilities and a 67 basis point increase in average cost of interest-bearing liabilities. The increase in average balance of interest-earning assets was primarily due to growth in loans and investment securities, supported by deposit growth. The increases in average yield on interest-earning assets and average cost of interest-bearing liabilities were primarily due to the rising market rates during the year ended December 31, 2022.
Current wording
Net interest income increased primarily due to a 12.7% increase in average balance of interest-earning assets and a 37 basis point increase in average yield on interest-earning assets, partially offset by a 24.3% increase in average balance of interest-bearing liabilities and a 74 basis point increase in average cost of interest-bearing liabilities. The increase in average balance of interest-earning assets was primarily due to growth in loans and investment securities, supported by deposit growth. The increases in average yield on interest-earning assets and average cost of interest-bearing liabilities were primarily due to re-pricing at evaluated rates and originations at higher market rates during the year ended December 31, 2024.
Previous wording
Interest and fees on loans increased primarily due to a 10.0% increase in average balance and a 43 basis point increase in average yield. The increase in average balance was primarily due to an increase in commercial real estate and residential mortgage loans, and commercial lines of credit, partially offset by a decrease in commercial term loans. The increase in average yield was primarily due to the rising market rates, partially offset by a decrease in net amortization of deferred fees on SBA PPP loans.
Current wording
Interest and fees on loans increased primarily due to a 14.4% increase in average balance and a 36 basis point increase in average yield. The increase in average balance was primarily due to an increase in commercial real estate, commercial and industrial, and residential mortgage loans, partially offset by a decrease in other consumer loans. The increase in average yield was primarily due to the higher market rates, partially offset by a decrease in net accretion of discount on loans.
Previous wording
Interest on investment securities increased primarily due to a 95 basis point increase in average yield and a 1.6% increase in average balance. The increase in average yield was primarily due to new investment securities purchased at higher market rates and a decrease in net amortization. The Company purchased $57.4 million and $47.3 million, respectively, of investment securities during the years ended December 31, 2022 and 2021. For the years ended December 31, 2022 and 2021, average yield on total investment securities was 2.19% and 1.24%, respectively.
Current wording
Interest on investment securities increased primarily due to a 36 basis point increase in average yield and a 2.7% increase in average balance. The increase in average yield was primarily due to new investment securities purchased at higher market rates and a decrease in net amortization. The Company purchased $23.5 million and $17.3 million, respectively, of investment securities during the years ended December 31, 2024 and 2023. For the years ended December 31, 2024 and 2023, average yield on total investment securities was 3.69% and 3.33%, respectively.
Previous wording
Interest income on other interest-earning assets increased primarily due to a 156 basis point increase in average yield and an 8.3% increase in average balance. The increase in average yield was primarily due to the rising market rates. The increase in average balance was primarily due to an increase in average balance of deposits and the Emergency Capital Investment Program (“ECIP”) capital investment, partially offset by an increase in loans. For the years ended December 31, 2022 and 2021, yield on total other interest-earning assets was 1.95% and 0.39%, respectively.
Current wording
Interest income on other interest-earning assets increased primarily due to a 23 basis point increase in average yield and a 2.2% increase in average balance. The increase in average yield was primarily due to the higher market rates and an increase in dividend on FHLB stock. The increase in average balance was primarily due to an increase in average balance of deposits, partially offset by an increase in loans. For the years ended December 31, 2024 and 2023, yield on total other interest-earning assets was 5.50% and 5.27%, respectively.
Previous wording
Interest expense on deposits increased primarily due to an 8.7% increase in average balance of interest-bearing deposits and a 68 basis point increase in average cost of interest-bearing deposits. The increase in average balance was primarily due to increases in savings, NOW and money market accounts, partially offset by a decrease in time deposits. The increase in average cost was primarily due to the rising market rates. For the years ended December 31, 2022 and 2021, average cost on total interest-bearing deposits was 1.08% and 0.40%, respectively.
Current wording
Interest expense on deposits increased primarily due to a 23.1% increase in average balance of interest-bearing deposits and a 74 basis point increase in average cost of interest-bearing deposits. The increase in average balance was primarily due to an increase in time deposits, and NOW and money market accounts, partially offset by decreases in savings. The increase in average cost was primarily due to the higher market rates. For the years ended December 31, 2024 and 2023, average cost on total interest-bearing deposits was 4.78% and 4.04%, respectively.
Previous wording
Interest on investment securities increased primarily due to a 114 basis point increase in average yield and a 6.1% increase in average balance. The increase in average yield was primarily due to new investment securities purchased at higher market rates and a decrease in net amortization. The Company purchased $17.3 million and $57.4 million, respectively, of investment securities during the years ended December 31, 2023 and 2022. For the years ended December 31, 2023 and 2022, average yield on total investment securities was 3.33% and 2.19%, respectively.
Current wording
Interest on investment securities increased primarily due to a 114 basis point increase in average yield and a 6.1% increase in average balance. The increase in average yield was primarily due to new investment securities purchased at higher market rates and a decrease in net amortization of premium. The Company purchased $17.3 million and $57.4 million, respectively, of investment securities during the years ended December 31, 2023 and 2022. For the years ended December 31, 2023 and 2022, average yield on total investment securities was 3.33% and 2.19%, respectively.
Previous wording
Interest income on other interest-earning assets increased primarily due to a 332 basis point increase in average yield and a 2.4% increase in average balance. The increase in average yield was primarily due to the rising market rates and an increase in dividend on Federal Home Loan Bank stock. The increase in average balance was primarily due to an increase in average balance of deposits, partially offset by an increase in loans. For the years ended December 31, 2023 and 2022, yield on total other interest-earning assets was 5.27% and 1.95%, respectively.
Current wording
Interest income on other interest-earning assets increased primarily due to a 332 basis point increase in average yield and a 2.4% increase in average balance. The increase in average yield was primarily due to the rising market rates and an increase in dividend on FHLB stock. The increase in average balance was primarily due to an increase in average balance of deposits, partially offset by an increase in loans. For the years ended December 31, 2023 and 2022, yield on total other interest-earning assets was 5.27% and 1.95%, respectively.
Previous wording
(1)Provision (reversal) for credit losses on off-balance sheet credit exposures for the years ended December, 2022 and 2021 was recorded in Other Expense on the Consolidated Income Statement.
Current wording
(1)Provision (reversal) for credit losses on off-balance sheet credit exposures for the years ended December, 2022 was recorded in Other Expense on the Consolidated Income Statement.
Previous wording
Provision for credit losses on loans for the year ended December 31, 2023 was primarily due to increases in loans held-for-investment and reserve related to qualitative adjustment factors, partially offset by a decrease in quantitatively measured loss reserve requirement. See further discussion in “Allowance for Credit Losses.”
Current wording
Provision for credit losses on loans for the year ended December 31, 2024 was primarily due to increases in loans held-for-investment, partially offset by a decrease in quantitatively measured loss reserve requirement. See further discussion in “Allowance for Credit Losses.”
Previous wording
Loan servicing income represents fees received on loans that the Company services, net of amortization of servicing assets. The increase was primarily due to an increase in servicing income received, partially offset by an increase in amortization of servicing assets from increased prepayments of loans being serviced.
Current wording
Loan servicing income represents fees received on loans that the Company services, net of amortization of servicing assets. The increase was primarily due to a decrease in amortization of servicing assets from lower prepayments of loans being serviced.
Previous wording
Gain on sale of loans decreased primarily due to decreases in sales volume and gain margin. During the year ended December 31, 2021, SBA guaranteed portion was temporarily increased until September 30, 2021 under the Economic Aid Act, which resulted in a higher gain margin on sold SBA loans. The Company sold SBA loans of $122.9 million with a gain of $8.0 million and residential mortgage loans of $858 thousand with a gain of $8 thousand during the year ended December 31, 2022. During the year ended December 31, 2021, the Company sold SBA loans of $126.8 million with a gain of $12.8 million and residential mortgage loans of $10.4 million with a gain of $151 thousand and certain commercial property loans of $8.6 million with a gain of $6 thousand.
Current wording
Gain on sale of loans increased primarily due to an increase in gain margin, partially offset by a decrease in sales volume. The Company sold SBA loans of $71.1 million with a gain of $3.8 million and a residential mortgage loan of $676 thousand with no gain during the year ended December 31, 2024. During the year ended December 31, 2023, SBA loans of $82.3 million with a gain of $3.6 million during the year ended December 31, 2023.
Previous wording
Other income included wire and remittance fees of $643 thousand and $596 thousand, respectively, and debit card interchange fees of $335 thousand and $306 thousand, respectively, for the years ended December 31, 2022 and 2021.
Current wording
Other income included wire and remittance fees of $626 thousand and $625 thousand, respectively, and debit card interchange fees of $340 thousand and $339 thousand, respectively, for the years ended December 31, 2024 and 2023.
Previous wording
The Company purchased bank-owned life insurance of $29.3 million in November 2021. Bank-owned life insurance income represents the increase in cash surrender value of the insurance policy.
Current wording
Bank-owned life insurance income represents the increase in cash surrender value of the insurance policy.
Previous wording
Gain on sale of loans decreased primarily due to decreases in sales volume and gain margin. The Company sold SBA loans of $82.3 million with a gain of $3.6 million during the year ended December 31, 2023. During the year ended December 31, 2022, SBA loans of $122.9 million with a gain of $8.0 million and residential mortgage loans of $858 thousand with a gain of $8 thousand.
Current wording
Gain on sale of loans decreased primarily due to decreases in sales volume and gain margin. The Company sold SBA loans of $82.3 million with a gain of $3.6 million during the year ended December 31, 2023. During the year ended December 31, 2022, the Company sold SBA loans of $122.9 million with a gain of $8.0 million and residential mortgage loans of $858 thousand with a gain of $8 thousand.
Previous wording
Salaries and employee benefits increased primarily due to increases in wages, vacation accrual, and other employee benefits, partially offset by decreases in incentives tied to LPO originated SBA loan sales and loan origination cost, which offsets the recognition of salaries. The number of full-time equivalent employees averaged 268.3 for the year ended December 31, 2022 compared to 247.9 for the year ended December 31, 2021.
Current wording
Salaries and employee benefits increased primarily due to increases in salaries, bonus accrual, and incentives tied to LPO originated SBA loan sales, partially offset by a decrease in vacation accruals. The number of full-time equivalent employees averaged 265.8 for the year ended December 31, 2024 compared to 272.5 for the year ended December 31, 2023.
Previous wording
Income tax expense was $12.6 million, $14.4 million and $16.9 million, respectively, and the effective tax rate was 29.0%, 29.2% and 29.6%, respectively, for the years ended December 31, 2023, 2022 and 2021.
Current wording
Income tax expense was $10.5 million, $12.6 million and $14.4 million, respectively, and the effective tax rate was 28.9%, 29.0% and 29.2%, respectively, for the years ended December 31, 2024, 2023 and 2022.
Previous wording
Total carrying value of investment securities were $143.3 million at December 31, 2023, an increase of $1.5 million, or 1.0%, from $141.9 million at December 31, 2022. The increase was primarily due to purchases of $17.3 million and an increase in fair value of securities available-for-sale of $2.3 million, partially offset by principal paydowns and calls of $17.9 million, and net premium amortization of $209 thousand.
Current wording
Total carrying value of investment securities were $146.3 million at December 31, 2024, an increase of $3.0 million, or 2.1%, from $143.3 million at December 31, 2023. The increase was primarily due to purchases of $23.5 million, partially offset by principal paydowns and calls of $19.8 million, a decrease in fair value of securities available-for-sale of $541 thousand, and net premium amortization of $159 thousand.
Previous wording
As of December 31, 2023, 94.7%, 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 illiquidity, 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.
Current wording
As of December 31, 2024 and 2023, 95.3% and 94.7%, respectively, of the Company's securities available-for-sale at amortized cost basis were issued by U.S. government agency and U.S. GSEs. 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 as of December 31, 2024 and 2023.
Previous wording
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 December 31, 2023. These securities have fluctuated in value since their purchase dates as market interest rates fluctuated. 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 December 31, 2023.
Current wording
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 December 31, 2024 and 2023. 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 December 31, 2024 and 2023.
Previous wording
As of December 31, 2023, the Company recorded no ACL on securities available-for-sale.
Current wording
As of December 31, 2024 and 2023, the Company recorded no ACL on securities available-for-sale.
Previous wording
The following table shows the contractual maturities of loans held-for-investment and the distribution between fixed and floating interest rate loans at the date indicated:
Current wording
The following table presents the contractual maturities of loans held-for-investment and the distribution between fixed and floating interest rate loans at the date indicated:
Previous wording
The increase in ACL for the year ended December 31, 2023 was primarily due to increases in loans held-for-investment and reserve related to qualitative adjustment factors, partially offset by a decrease in quantitatively measured loss reserve requirement. The decrease in the quantitatively measured loss reserve requirement was primarily due to the improved economic forecasts by the FOMC. The projected 2023 year-end national unemployment rate improved from 4.6% in the December 2022 FOMC meeting to 4.1% in the December 2023 meeting. The projected year-over-year change in real GDP improved from 0.5% in the December 2022 meeting to 1.4% in the December 2023 meeting. These improved macroeconomic projections resulted in the decreases of PD and LGD rates across majority of the loan segments leading to lower overall expected loss measurements. Management believes that the projections used are reasonable and aligns with the Company’s expectation of the economic environment over the next 4 quarters.
Current wording
The increase in qualitative reserve was primarily due to increases in maximum loss rate and charge-offs of commercial and industrial loans. The decrease in the quantitatively measured loss reserve requirement was primarily due to the improved year-over-year change in real GDP forecast, partially offset by the increased unemployment rate forecast. The Company utilizes these forecasts published by the Federal Open Market Committee (“FOMC”). The next year-end year-over-year change in forecasted real GDP increased to 2.1% in the December 2024 FOMC meeting from 1.4% in December 2023. The forecasted next year-end national unemployment rate increased to 4.3% in the December 2024 FOMC meeting from 4.1% in December 2023. Overall changes in macroeconomic projections resulted the decreases of PD and LGD rates across majority of the loan segments leading to lower overall expected loss measurements. Loans individually evaluated for impairment totaled $52.0 million and $40.3 million, respectively, and related reserve totaled $59 thousand and $264 thousand, respectively, at December 31, 2024 and 2023.
Showing the first 40 of 59 pairs. Open the source sections for the rest.
Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
Occupancy and equipment expense increased primarily due to an expansion of headquarters location in the second half of 2023 and a relocation of a regional office and two branches into one location in Orange County, California in 2024.
Current report — wording carried from elsewhere
The increase in ACL for the year ended December 31, 2024 was primarily due to increases in loans held-for-investment and reserve related to qualitative adjustment factors, partially offset by decreases in quantitatively measured loss reserves and reserves on individually evaluated loans.
Current report — wording carried from elsewhere
Management believes that the projections used are reasonable and align with the Company’s expectation of the economic environment over the next 4 quarters.
Current report — wording carried from elsewhere
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.
Rearranged previous paragraphs (4)
Previous report — wording carried elsewhere
Please also see Note 1 to the Consolidated Financial Statements included in Item 1 of this Annual Report on Form 10-K for additional discussion.
Previous report — wording carried elsewhere
Occupancy and equipment expense increased primarily due to new branch openings. The Company opened three new branches in Dallas and Carrollton, Texas, and Palisades Park, New Jersey during the year ended December 31, 2022.
Previous report — wording carried elsewhere
Marketing and business promotion expense increased primarily due to increased marketing activities and advertisement.
Previous report — wording carried elsewhere
Other expense included other loan related legal expenses of $389 thousand and $302 thousand, respectively, armed guard expense of $656 thousand and $546 thousand, respectively, office expenses of $1.9 million and $1.4 million, respectively, and provision (reversal) for off-balance sheet credit exposures was $85 thousand and $(24) thousand, respectively, for the years ended December 31, 2022 and 2021.