PCB BancorpNASDAQ: PCB

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Nov 5, 2026 at 7:58 PM EST · Issued by PCB Bancorp

On 6ix: 6ix.com/news/pcb-bancorp-quarterly-report-for-quarter-ending-september-30-2026-form-10-q

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following is management's discussion and analysis of the major factors that influenced the Company's results of operations and financial condition as of and for the three and nine months ended September 30, 2026. This analysis should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended December 31, 2025 and with the unaudited consolidated financial statements and notes (unaudited) thereto set forth in this Quarterly Report on Form 10-Q.

Critical Accounting Estimates

The Company's consolidated financial statements are prepared in accordance with GAAP and general practices within the banking industry. Within these financial statements, certain financial information contains approximate measurements of financial effects of transactions and impacts at the consolidated statements of financial condition dates and the Company's results of operations for the reporting periods. As certain accounting policies require significant estimates and assumptions that have a material impact on the carrying value of assets and liabilities, the Company has established critical accounting policies to facilitate making the judgment necessary to prepare financial statements. The Company's critical accounting policies are described in Note 1 to Consolidated Financial Statements and in the "Critical Accounting Estimates" section of Management's Discussion and Analysis of Financial Condition and Results of Operations in its Annual Report on Form 10-K for the year ended December 31, 2025 and in Note 1 to Consolidated Financial Statements (unaudited) included in Part I of this Quarterly Report on Form 10-Q.

Allowance for Credit Losses

The Company accounts for credit losses on loans, off-balance sheet credit exposures and securities available-for-sale in accordance with ASC 326, "Financial Instruments - Credit Losses (Topic 326)." 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.

Estimating expected credit losses requires management to use relevant forward-looking information, including the use of reasonable and supportable forecasts. The measurement of the ACL is performed by collectively evaluating loans with similar risk characteristics. The Company's discounted cash flow methodology incorporates a probability of default and loss given default model, as well as expectations of future economic conditions, using reasonable and supportable forecasts.

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.

Within the various economic scenarios considered as of September 30, 2026, the quantitative estimate of the ACL would increase by approximately $20.2 million under sole consideration of a more adverse downside scenario. The quoted sensitivity calculation reflects the sensitivity of the modeled ACL estimate to macroeconomic forecast data, but 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.

A portion of the collectively evaluated ACL on loans also includes qualitative adjustments for risk factors not reflected or captured by the quantitative modeled ACL but are relevant in estimating future expected credit losses. Qualitative adjustments may be related to and include, but are not limited to factors such as: (i) management's assessment of economic forecasts used in the model and how those forecasts align with management's overall evaluation of current and expected economic conditions, (ii) organization-specific risks such as credit concentrations, collateral specific risks, regulatory risks, and external factors that may ultimately impact credit quality, (iii) potential model limitations such as limitations identified through back-testing, and other limitations associated with factors such as underwriting changes, acquisition of new portfolios and changes in portfolio segmentation, and (iv) management's overall assessment of the adequacy of the ACL, including an assessment of ACL model data inputs.

Although management uses the best information reasonably available to derive estimates and assumptions necessary to measure an appropriate level of the ACL, these estimates and assumptions are subject to change in future periods, which may have a material impact on the level of the ACL and the Company's results of operations.

Non-GAAP Measures

The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company's operational performance and to enhance investors' overall understanding of such financial performance. Generally, a non-GAAP financial measure is a numerical measure of a company's financial performance, financial position or cash flows that excludes (or includes) amounts that are included in (or excluded from) the most directly comparable measure calculated, and presented in accordance with GAAP. However, these non-GAAP financial measures are supplemental and are not a substitute for an analysis based on GAAP measures and may not be comparable to non-GAAP financial measures that may be presented by other companies.

The following tables present a reconciliation of average tangible common equity, annualized return on average tangible common equity, tangible common equity per common share and tangible common equity to tangible assets ratios to their most comparable GAAP measures as of the dates or for the periods indicated. These non-GAAP measures, which are presented in this Quarterly Report on Form 10-Q, are used by management in its analysis of the Company's performance.

	Three Months Ended September 30,						Nine Months Ended September 30,
($ in thousands)	2026			2025			2026			2025
Average total shareholders' equity	$	402,661		$	379,834		$	398,931		$	373,439
Less: average preferred stock	69,141			69,141			69,141			69,141
Average tangible common equity	$	333,520		$	310,693		$	329,790		$	304,298
Net income	$	12,208		$	11,412		$	33,368		$	28,218
Return on average shareholders' equity (1)	12.03		%	11.92		%	11.18		%	10.10		%
Net income available to common shareholders	$	12,122		$	11,326		$	33,109		$	28,005
Return on average tangible common equity (1)	14.42		%	14.46		%	13.42		%	12.30		%

(1) Annualized.

($ in thousands, except per share data)	September 30, 2026			December 31, 2025			September 30, 2025
Total shareholders' equity	$	402,130		$	390,026		$	384,501
Less: preferred stock	69,141			69,141			69,141
Tangible common equity	$	332,989		$	320,885		$	315,360
Outstanding common shares	14,056,981			14,230,428			14,277,164
Book value per common share	$	28.61		$	27.41		$	26.93
Tangible common equity per common share	$	23.69		$	22.55		$	22.09
Total assets	$	3,537,672		$	3,281,771		$	3,363,506
Total shareholders' equity to total assets	11.37		%	11.88		%	11.43		%
Tangible common equity to total assets	9.41		%	9.78		%	9.38		%

Selected Financial Data

The following table presents certain selected financial data as of the dates or for the periods indicated:

	As of or For the Three Months Ended September 30,						As of or For the Nine Months Ended September 30,
($ in thousands, except per share data)	2026			2025			2026			2025
Selected balance sheet data:
Cash and cash equivalents	$	413,199		$	369,498		$	413,199		$	369,498
Securities available-for-sale	190,185			150,279			190,185			150,279
Loans held-for-sale	2,318			9,634			2,318			9,634
Loans held-for-investment	2,844,856			2,752,514			2,844,856			2,752,514
ACL on loans	(34,087)			(32,960)			(34,087)			(32,960)
Total assets	3,537,672			3,363,506			3,537,672			3,363,506
Total deposits	3,076,593			2,913,502			3,076,593			2,913,502
Shareholders' equity	402,130			384,501			402,130			384,501
Selected income statement data:
Interest income	$	52,482		$	51,471		$	151,353		$	147,671
Interest expense	23,663			24,493			68,230			70,420
Net interest income	28,819			26,978			83,123			77,251
Provision for credit losses	(705)			(381)			688			3,004
Noninterest income	3,573			3,414			10,150			9,291
Noninterest expense	16,052			14,869			45,979			44,172
Income before income taxes	17,045			15,904			46,606			39,366
Income tax expense	4,837			4,492			13,238			11,148
Net income	12,208			11,412			33,368			28,218
Preferred stock dividends	86			86			259			213
Net income available to common shareholders	12,122			11,326			33,109			28,005
Per share data:
Earnings per common share, basic	$	0.86		$	0.79		$	2.34		$	1.95
Earnings per common share, diluted	0.85			0.78			2.32			1.94
Book value per common share (1)	28.61			26.93			28.61			26.93
Tangible common equity per common share (9)	23.69			22.09			23.69			22.09
Cash dividends declared per common share	0.22			0.20			0.66			0.60
Outstanding share data:
Number of common shares outstanding	14,056,981			14,277,164			14,056,981			14,277,164
Weighted-average common shares outstanding, basic	13,972,293			14,201,054			14,073,270			14,228,524
Weighted-average common shares outstanding, diluted	14,095,095			14,325,956			14,193,697			14,354,284
Selected performance ratios:
Return on average assets (2)	1.38		%	1.35		%	1.31		%	1.17		%
Return on average shareholders' equity (2)	12.03		%	11.92		%	11.18		%	10.10		%
Return on average tangible common equity (2), (9)	14.42		%	14.46		%	13.42		%	12.30		%
Dividend payout ratio (3)	25.58		%	25.32		%	28.21		%	30.77		%
Efficiency ratio (4)	49.56		%	48.92		%	49.30		%	51.04		%
Yield on average interest-earning assets (2)	6.11		%	6.26		%	6.09		%	6.30		%
Cost of average interest-bearing liabilities (2)	3.77		%	4.10		%	3.79		%	4.17		%
Net interest spread (2)	2.34		%	2.16		%	2.30		%	2.13		%
Net interest margin (2), (5)	3.35		%	3.28		%	3.35		%	3.29		%
Total loans to total deposits ratio (6)	92.54		%	94.81		%	92.54		%	94.81		%

	As of or For the Three Months Ended September 30,						As of or For the Nine Months Ended September 30,
($ in thousands, except per share data)	2026			2025			2026			2025
Asset quality:
Loans 30 to 89 days past due and still accruing	$	652		$	1,548		$	652		$	1,548
Nonaccrual loans held-for-investment	12,250			8,158			12,250			8,158
Nonperforming loans held-for-investment (7)	12,250			8,158			12,250			8,158
Nonperforming assets (8)	12,250			8,158			12,250			8,158
Net charge-offs	-			166			59			552
Loans 30 to 89 days past due and still accruing to loans held-for-investment	0.02		%	0.06		%	0.02		%	0.06		%
Nonperforming loans held-for-investment to loans held-for-investment	0.43		%	0.30		%	0.43		%	0.30		%
Nonperforming loans held-for-investment to ACL on loans	35.94		%	24.75		%	35.94		%	24.75		%
Nonperforming assets to total assets	0.35		%	0.24		%	0.35		%	0.24		%
ACL on loans to loans held-for-investment	1.20		%	1.20		%	1.20		%	1.20		%
ACL on loans to nonperforming loans held-for-investment	278.26		%	404.02		%	278.26		%	404.02		%
Net charge-offs to average loans held-for-investment (2)	-		%	0.02		%	0.01		%	0.03		%
Capital ratios:
Shareholders' equity to total assets	11.37		%	11.43		%	11.37		%	11.43		%
Tangible common equity to total assets (9)	9.41		%	9.38		%	9.41		%	9.38		%
Average shareholders' equity to average total assets	11.50		%	11.32		%	11.69		%	11.57		%
PCB Bancorp
Common tier 1 capital (to risk-weighted assets)	11.98		%	11.52		%	11.98		%	11.52		%
Total capital (to risk-weighted assets)	15.63		%	15.24		%	15.63		%	15.24		%
Tier 1 capital (to risk-weighted assets)	14.39		%	14.00		%	14.39		%	14.00		%
Tier 1 capital (to average assets)	11.77		%	11.57		%	11.77		%	11.57		%
PCB Bank
Common tier 1 capital (to risk-weighted assets)	13.96		%	13.61		%	13.96		%	13.61		%
Total capital (to risk-weighted assets)	15.20		%	14.85		%	15.20		%	14.85		%
Tier 1 capital (to risk-weighted assets)	13.96		%	13.61		%	13.96		%	13.61		%
Tier 1 capital (to average assets)	11.42		%	11.25		%	11.42		%	11.25		%

(1) Shareholders' equity divided by common shares outstanding.

(2) Annualized.

(3) Dividends declared per common share divided by basic earnings per common share.

(4) Noninterest expenses divided by the sum of net interest income and noninterest income.

(5) Net interest income divided by average total interest-earning assets.

(6) Total loans include both loans held-for-sale and loans held-for-investment.

(7) Nonperforming loans include nonaccrual loans and loans past due 90 days or more and still accruing.

(8) Nonperforming assets include nonperforming loans and other real estate owned.

(9) Non-GAAP measure. See "Non-GAAP Measures" for a reconciliation to its most comparable GAAP measure.

Executive Summary

Q3 2026 Financial Highlights

•Net income available for common shareholders was $12.1 million for the three months ended September 30, 2026, an increase of $0.8 million, or 7.0%, from $11.3 million for the three months ended September 30, 2025;

▪Recorded a reversal for credit losses of $705 thousand for the three months ended September 30, 2026 compared with $381 thousand for the three months ended September 30, 2025;

▪ACL on loans to loans held-for-investment ratio was 1.20% at September 30, 2026 compared with 1.18% at December 31, 2025;

•Net interest income was $28.8 million for the three months ended September 30, 2026 compared with $27.0 million for the three months ended September 30, 2025. Net interest margin was 3.35% for the three months ended September 30, 2026 compared with 3.28% for the three months ended September 30, 2025;

•Gain on sale of loans was $1.6 million for the three months ended September 30, 2026 compared with $1.6 million for the three months ended September 30, 2025;

•Total assets were $3.54 billion at September 30, 2026, an increase of $255.9 million, or 7.8%, from $3.28 billion at December 31, 2025;

•Loans held-for-investment were $2.84 billion at September 30, 2026, an increase of $24.5 million, or 0.9%, from $2.82 billion at December 31, 2025; and

•Total deposits were $3.08 billion at September 30, 2026, an increase of $281.2 million, or 10.1%, from $2.80 billion at December 31, 2025.

Results of Operations

Net Interest Income

A principal component of the Company's earnings is net interest income, which is the difference between the interest and fees earned on loans and investments and the interest paid on deposits and borrowed funds. Net interest income expressed as a percentage of average interest earning assets is referred to as the net interest margin. The net interest spread is the yield on average interest earning assets less the cost of average interest bearing liabilities. Net interest income is affected by changes in the balances of interest earning assets and interest bearing liabilities and changes in the yields earned on interest earning assets and the rates paid on interest bearing liabilities.

The following tables present interest income, average interest-earning assets, interest expense, average interest-bearing liabilities, and their corresponding yields and costs expressed both in dollars and rates, on a consolidated operations basis, for the periods indicated:

	Three Months Ended September 30,
	2026						2025
($ in thousands)	Average Balance		Interest		Yield/ Cost (6)		Average Balance		Interest		Yield/ Cost (6)
Interest-earning assets:
Total loans (1)	$	2,902,481	$	47,154	6.45	%	$	2,784,148	$	46,193	6.58	%
Mortgage backed securities	164,122		1,754		4.24	%	120,226		1,167		3.85	%
Collateralized mortgage obligation	17,019		158		3.68	%	19,957		197		3.92	%
SBA loan pool securities	3,356		25		2.96	%	4,686		41		3.47	%
Municipal bonds - tax exempt (2)	2,446		22		3.57	%	2,411		22		3.62	%
Corporate bonds	8,369		114		5.40	%	4,804		47		3.88	%
Interest-bearing deposits in other financial institutions	296,247		2,798		3.75	%	312,659		3,484		4.42	%
FHLB and other bank stock	15,170		457		11.95	%	14,978		320		8.48	%
Total interest-earning assets	3,409,210		52,482		6.11	%	3,263,869		51,471		6.26	%
Noninterest-earning assets:
Cash and due from banks	24,291						23,539
Allowance for credit losses on loans	(34,732)						(33,548)
Other assets	104,124						100,728
Total noninterest earning assets	93,683						90,719
Total assets	$	3,502,893					$	3,354,588
Interest-bearing liabilities:
Deposits:
NOW and money market accounts	$	774,135	6,865		3.52	%	$	612,527	5,698		3.69	%
Savings	4,904		3		0.24	%	5,519		3		0.22	%
Time deposits	1,666,591		16,374		3.90	%	1,708,124		18,294		4.25	%
Borrowings	42,000		421		3.98	%	43,109		498		4.58	%
Total interest-bearing liabilities	2,487,630		23,663		3.77	%	2,369,279		24,493		4.10	%
Noninterest-bearing liabilities:
Demand deposits	554,348						541,243
Other liabilities	58,254						64,232
Total noninterest-bearing liabilities	612,602						605,475
Total liabilities	3,100,232						2,974,754
Shareholders' equity	402,661						379,834
Total liabilities and shareholders' equity	$	3,502,893					$	3,354,588
Net interest income			$	28,819					$	26,978
Net interest spread (3)					2.34	%					2.16	%
Net interest margin (4)					3.35	%					3.28	%
Cost of deposits					3.07	%					3.32	%
Cost of funds (5)					3.09	%					3.34	%

(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 of $579 thousand and $433 thousand, respectively, and net accretion of discount on loans of $759 thousand and $563 thousand, respectively, are included in the interest income for the three months ended September 30, 2026 and 2025.

(2) The yield on municipal bonds has not been computed on a tax-equivalent basis.

(3) Net interest spread is calculated by subtracting average rate on interest-bearing liabilities from average yield on interest-earning assets.

(4) Net interest margin is calculated by dividing net interest income by average interest-earning assets.

(5) Cost of funds is calculated by dividing annualized interest expense on total interest-bearing liabilities by the sum of average total interest-bearing liabilities and noninterest-bearing demand deposits.

(6) Annualized.

	Nine Months Ended September 30,
	2026						2025
($ in thousands)	Average Balance		Interest		Yield/ Cost (6)		Average Balance		Interest		Yield/ Cost (6)
Interest-earning assets:
Total loans (1)	$	2,876,614	$	137,524	6.39	%	$	2,738,957	$	134,697	6.58	%
Mortgage backed securities	148,525		4,593		4.13	%	117,040		3,387		3.87	%
Collateralized mortgage obligation	17,720		490		3.70	%	20,530		610		3.97	%
SBA loan pool securities	3,701		85		3.07	%	5,322		141		3.54	%
Municipal bonds - tax exempt (2)	2,469		66		3.57	%	2,405		65		3.61	%
Corporate bonds	5,987		208		4.64	%	4,617		141		4.08	%
Interest-bearing deposits in other financial institutions	250,944		6,980		3.72	%	231,781		7,701		4.44	%
FHLB and other bank stock	15,096		1,407		12.46	%	14,615		929		8.50	%
Total interest-earning assets	3,321,056		151,353		6.09	%	3,135,267		147,671		6.30	%
Noninterest-earning assets:
Cash and due from banks	23,676						23,817
Allowance for credit losses on loans	(34,014)						(32,063)
Other assets	100,853						100,101
Total noninterest earning assets	90,515						91,855
Total assets	$	3,411,571					$	3,227,122
Interest-bearing liabilities:
Deposits:
NOW and money market accounts	$	712,343	18,480		3.47	%	$	543,570	14,767		3.63	%
Savings	5,085		9		0.24	%	5,488		10		0.24	%
Time deposits	1,633,481		48,026		3.93	%	1,669,484		54,287		4.35	%
Borrowings	58,073		1,715		3.95	%	39,586		1,356		4.58	%
Total interest-bearing liabilities	2,408,982		68,230		3.79	%	2,258,128		70,420		4.17	%
Noninterest-bearing liabilities:
Demand deposits	544,436						530,558
Other liabilities	59,222						64,997
Total noninterest-bearing liabilities	603,658						595,555
Total liabilities	3,012,640						2,853,683
Shareholders' equity	398,931						373,439
Total liabilities and shareholders' equity	$	3,411,571					$	3,227,122
Net interest income			$	83,123					$	77,251
Net interest spread (3)					2.30	%					2.13	%
Net interest margin (4)					3.35	%					3.29	%
Cost of deposits					3.07	%					3.36	%
Cost of funds (5)					3.09	%					3.38	%

(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 of $1.3 million and $1.1 million, respectively, and net accretion of discount on loans of $1.9 million and $2.0 million, respectively, are included in the interest income for the nine months ended September 30, 2026 and 2025.

(2) The yield on municipal bonds has not been computed on a tax-equivalent basis.

(3) Net interest spread is calculated by subtracting average rate on interest-bearing liabilities from average yield on interest-earning assets.

(4) Net interest margin is calculated by dividing net interest income by average interest-earning assets.

(6) Annualized.

The following table presents the changes in interest income and interest expense for major components of interest-earning assets and interest-bearing liabilities. Information is provided on changes attributable to: (i) changes in volume multiplied by the prior rate; and (ii) changes in rate multiplied by the prior volume. Changes attributable to both rate and volume which cannot be segregated have been allocated proportionately to the change due to volume and the change due to rate.

	Three Months Ended September 30, 2026 vs. 2025						Nine Months Ended September 30, 2026 vs. 2025
	Increase (Decrease) Due to				Net Increase (Decrease)		Increase (Decrease) Due to				Net Increase (Decrease)
($ in thousands)	Volume		Rate				Volume		Rate
Interest earned on:
Total loans	$	1,963	$	(1,002)	$	961	$	6,770	$	(3,943)	$	2,827
Investment securities	419		180		599		825		273		1,098
Other interest-earning assets	(188)		(361)		(549)		688		(931)		(243)
Total interest income	2,194		(1,183)		1,011		8,283		(4,601)		3,682
Interest incurred on:
Savings, NOW, and money market deposits	1,485		(318)		1,167		4,531		(819)		3,712
Time deposits	(445)		(1,475)		(1,920)		(1,171)		(5,090)		(6,261)
Borrowings	(13)		(64)		(77)		633		(274)		359
Total interest expense	1,027		(1,857)		(830)		3,993		(6,183)		(2,190)
Change in net interest income	$	1,167	$	674	$	1,841	$	4,290	$	1,582	$	5,872

Three Months Ended September 30, 2026 Compared to Three Months Ended September 30, 2025

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

	Three Months Ended September 30,				Amount Change		Percentage Change
($ in thousands)	2026		2025
Interest and dividend income:
Loans, including fees	$	47,154	$	46,193	$	961	2.1	%
Investment securities	2,073		1,474		599		40.6	%
Other interest-earning assets	3,255		3,804		(549)		(14.4)	%
Total interest income	52,482		51,471		1,011		2.0	%
Interest expense:
Deposits	23,242		23,995		(753)		(3.1)	%
Borrowings	421		498		(77)		(15.5)	%
Total interest expense	23,663		24,493		(830)		(3.4)	%
Net interest income	$	28,819	$	26,978	$	1,841	6.8	%

Net interest income increased primarily due to a 4.5% increase in average balance of interest-earning assets and a 33 basis point decrease in average cost, partially offset by a 5.0% increase in average balance of interest-bearing liabilities and a 15 basis point decrease in average yield.

Interest and fees on loans increased primarily due to a 4.3% increase in average balance, partially offset by a 13 basis point decrease in average yield. The decrease in average yield was primarily due to a decrease in market rates, partially offset by increases in net accretion of discount on loans and net amortization of deferred loan fees.

Interest on investment securities increased primarily due to a 28.4% increase in average balance and a 36 basis point increase in average yield. The increase in average yield was primarily due to a higher yield on newly purchased investment securities. For the three months ended September 30, 2026 and 2025, the average yield on total investment securities was 4.21% and 3.85%, respectively.

Interest income on other interest-earning assets decreased primarily due to a 46 basis point decrease in average yield and a 5.0% decrease in average balance. The decrease in interest rate on cash held at the Federal Reserve Bank was offset by an increase in dividends received on FHLB stock. For the three months ended September 30, 2026 and 2025, the average yield on total other interest-earning assets was 4.15% and 4.61%, respectively.

Interest expense on deposits decreased primarily due to a 32 basis point decrease in average cost of interest-bearing deposits, partially offset by a 5.1% increase in average balance of interest-bearing deposits. The decrease in average cost was primarily due to a decrease in market rates. For the three months ended September 30, 2026 and 2025, average cost on total interest-bearing deposits was 3.77% and 4.09%, respectively, and average cost on total deposits were 3.07% and 3.32%, respectively.

Interest expense on other borrowings decreased primarily due to a 2.6% decrease in average balance and a 60 basis point decrease in average cost.

Nine Months Ended September 30, 2026 Compared to Nine Months Ended September 30, 2025

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

	Nine Months Ended September 30,				Amount Change		Percentage Change
($ in thousands)	2026		2025
Interest and dividend income:
Loans, including fees	$	137,524	$	134,697	$	2,827	2.1	%
Investment securities	5,442		4,344		1,098		25.3	%
Other interest-earning assets	8,387		8,630		(243)		(2.8)	%
Total interest income	151,353		147,671		3,682		2.5	%
Interest expense:
Deposits	66,515		69,064		(2,549)		(3.7)	%
Borrowings	1,715		1,356		359		26.5	%
Total interest expense	68,230		70,420		(2,190)		(3.1)	%
Net interest income	$	83,123	$	77,251	$	5,872	7.6	%

Net interest income increased primarily due to a 5.9% increase in average balance of interest-earning assets and a 38 basis point decrease in average cost, partially offset by a 6.7% increase in average balance of interest-bearing liabilities and a 21 basis point decrease in average yield.

Interest and fees on loans increased primarily due to a 5.0% increase in average balance, partially offset by a 19 basis point decrease in average yield. The decrease in average yield was primarily due to decreases in market rates and net accretion of discount on loans, partially offset by an increase in net amortization of deferred loan fees.

Interest on investment securities increased primarily due to a 19.0% increase in average balance and a 21 basis point increase in average yield. The increase in average yield was primarily due to a higher yield on newly purchased investment securities. For the nine months ended September 30, 2026 and 2025, the average yield on total investment securities was 4.08% and 3.87%, respectively.

Interest income on other interest-earning assets decreased primarily due to a 47 basis point decrease in average yield, partially offset by an 8.0% increase in average balance. The decrease in interest rate on cash held at the Federal Reserve Bank was offset by an increase in dividends received on FHLB stock. For the nine months ended September 30, 2026 and 2025, the average yield on total other interest-earning assets was 4.21% and 4.68%, respectively.

Interest expense on deposits decreased primarily due to a 38 basis point decrease in average cost of interest-bearing deposits, partially offset by a 6.0% increase in average balance of interest-bearing deposits. The decrease in average cost was primarily due to a decrease in market rates. For the nine months ended September 30, 2026 and 2025, average cost on total interest-bearing deposits was 3.78% and 4.16%, respectively, and average cost on total deposits were 3.07% and 3.36%, respectively.

Interest expense on other borrowings increased primarily due to a 46.7% increase in average balance, partially offset by a 63 basis point decrease in average cost.

Provision for Credit Losses

The following tables present a composition of provision for credit losses for the periods indicated:

	Three Months Ended September 30,				Amount Change		Percentage Change
($ in thousands)	2026		2025
Reversal for credit losses on loans	$	(651)	$	(428)	$	(223)	52.1	%
Provision (reversal) for credit losses on off-balance sheet credit exposures	(54)		47		(101)		NM
Total reversal for credit losses	$	(705)	$	(381)	$	(324)	85.0	%
	Nine Months Ended September 30,				Amount Change		Percentage Change
($ in thousands)	2026		2025
Provision for credit losses on loans	$	765	$	2,884	$	(2,119)	(73.5)	%
Provision (reversal) for credit losses on off-balance sheet credit exposures	(77)		120		(197)		NM
Total provision for credit losses	$	688	$	3,004	$	(2,316)	(77.1)	%

Reversal for credit losses for the three months ended September 30, 2026 was primarily due to a decrease in loans held-for-investment, partially offset by an increase in nonaccrual loans held-for-investment. Provision for credit losses for the nine months ended September 30, 2026 was primarily due to an increase in loans held-for-investment, as well as the increase in nonaccrual loans held-for-investment. See further discussion in "Loans Held-For-Investment and Allowance for Credit Losses."

Noninterest Income

Three Months Ended September 30, 2026 Compared to Three Months Ended September 30, 2025

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

	Three Months Ended September 30,				Amount Change		Percentage Change
($ in thousands)	2026		2025
Service charges and fees on deposits	$	457	$	377	$	80	21.2	%
Loan servicing income	650		719		(69)		(9.6)	%
Bank-owned life insurance income	287		259		28		10.8	%
Gain on sale of loans	1,626		1,617		9		0.6	%
Other income	553		442		111		25.1	%
Total noninterest income	$	3,573	$	3,414	$	159	4.7	%

Loan servicing income decreased primarily due to an increase in servicing asset amortization and a decrease in servicing fee income. Servicing asset amortization was $565 thousand and $528 thousand, respectively, for the three months ended September 30, 2026 and 2025.

Gain on sale of loans increased primarily due to an increase in level of premium on SBA loans in the secondary market, partially offset by a decrease in sale volume. The Company sold SBA loans of $23.0 million with a gain of $1.6 million during the three months ended September 30, 2026. During the three months ended September 30, 2025, the Company sold SBA loans of $29.0 million with a gain of $1.6 million.

Other income primarily included wire transfer fees of $195 thousand and $180 thousand, respectively, and debit card interchange fees of $127 thousand and $100 thousand, respectively, for the three months ended September 30, 2026 and 2025.

Nine Months Ended September 30, 2026 Compared to Nine Months Ended September 30, 2025

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

	Nine Months Ended September 30,				Amount Change		Percentage Change
($ in thousands)	2026		2025
Service charges and fees on deposits	$	1,337	$	1,124	$	213	19.0	%
Loan servicing income	2,253		2,204		49		2.2	%
Bank-owned life insurance income	842		759		83		10.9	%
Gain on sale of loans	4,217		3,969		248		6.2	%
Other income	1,501		1,235		266		21.5	%
Total noninterest income	$	10,150	$	9,291	$	859	9.2	%

Loan servicing income increased primarily due to a decrease in servicing asset amortization, partially offset by a decrease in servicing fee income. Servicing asset amortization was $1.4 million and $1.6 million, respectively, for the nine months ended September 30, 2026 and 2025.

Gain on sale of loans increased primarily due to an increase in level of premium on SBA loans in the secondary market, partially offset by a decrease in sale volume. The Company sold SBA loans of $62.0 million with a gain of $4.3 million and a certain commercial property loan of $1.1 million with a loss of $37 thousand during the nine months ended September 30, 2026. The sold commercial property loan was transferred to loans held-for-sale from loans held-for-investment during the three months ended March 31, 2026. During the nine months ended September 30, 2025, the Company sold SBA loans of $72.6 million with a gain of $4.0 million.

Other income primarily included wire transfer fees of $545 thousand and $506 thousand, respectively, and debit card interchange fees of $338 thousand and $303 thousand, respectively, for the nine months ended September 30, 2026 and 2025.

Noninterest Expense

Three Months Ended September 30, 2026 Compared to Three Months Ended September 30, 2025

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

	Three Months Ended September 30,				Amount Change		Percentage Change
($ in thousands)	2026		2025
Salaries and employee benefits	$	10,026	$	9,293	$	733	7.9	%
Occupancy and equipment	2,283		2,372		(89)		(3.8)	%
Professional fees	834		541		293		54.2	%
Marketing and business promotion	636		669		(33)		(4.9)	%
Data processing	359		333		26		7.8	%
Director fees and expenses	224		223		1		0.4	%
Regulatory assessments	386		373		13		3.5	%
Other expenses	1,304		1,065		239		22.4	%
Total noninterest expense	$	16,052	$	14,869	$	1,183	8.0	%

Salaries and employee benefits increased primarily due to increases in wages, incentives tied to sales of SBA loans, vacation accrual and group insurance, partially offset by an increase in direct loan origination cost, which offsets and defers the recognition of salaries and benefits expense. The number of full-time equivalent employees was 276 at September 30, 2026 compared to 270 at September 30, 2025.

Professional fees increased primarily due to increases in legal fees related to a legal settlement during the three months ended September 30, 2026 and internal audit fees.

Other expenses increased primarily due to an increase in legal settlements related expenses, partially offset by a decrease in office operating expense. Other expenses included $146 thousand and $140 thousand in loan related expenses, $411 thousand and $467 thousand in office operating expense, and $200 thousand and $191 thousand in armed guard expense for the three months ended September 30, 2026 and 2025, respectively.

Nine Months Ended September 30, 2026 Compared to Nine Months Ended September 30, 2025

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

	Nine Months Ended September 30,				Amount Change		Percentage Change
($ in thousands)	2026		2025
Salaries and employee benefits	$	29,297	$	27,212	$	2,085	7.7	%
Occupancy and equipment	6,929		7,040		(111)		(1.6)	%
Professional fees	2,013		1,974		39		2.0	%
Marketing and business promotion	1,538		1,509		29		1.9	%
Data processing	1,038		983		55		5.6	%
Director fees and expenses	670		674		(4)		(0.6)	%
Regulatory assessments	1,115		1,075		40		3.7	%
Other expenses	3,379		3,705		(326)		(8.8)	%
Total noninterest expense	$	45,979	$	44,172	$	1,807	4.1	%

Salaries and employee benefits increased primarily due to increases in wages, incentives tied to sales of SBA loans, vacation accrual and group insurance, partially offset by an increase in direct loan origination cost, which offsets and defers the recognition of salaries and benefits expense. . The number of full-time equivalent employees was 276 at September 30, 2026 compared to 270 at September 30, 2025.

Professional fees increased primarily due to increases in legal fees and internal audit during the nine months ended September 30, 2026, partially offset by additional professional fees incurred related to evaluating the accounting for a preferred stock purchase option during the nine months ended September 30, 2025.

Other expenses decreased primarily due to impairments on operating lease assets of $238 thousand for sublease contracts and a decrease in office operating expense, partially offset by an increase in legal settlement related expenses. Other expenses included $375 thousand and $364 thousand in loan related expenses, $1.3 million and $1.6 million in office operating expense, and $585 thousand and $553 thousand in armed guard expense for the nine months ended September 30, 2026 and 2025, respectively.

Income Tax Expense

Income tax expense was $4.8 million and $4.5 million, respectively, and the effective tax rate was 28.4% and 28.2%, respectively, for the three months ended September 30, 2026 and 2025. For the nine months ended September 30, 2026 and 2025, income tax expense was $13.2 million and $11.1 million, respectively, and the effective tax rate was 28.4% and 28.3%, respectively.

Financial Condition

Investment Securities

The Company's investment strategy aims to maximize earnings while maintaining liquidity in securities with minimal credit risk. The types and maturities of securities purchased are primarily based on current and projected liquidity and interest rate sensitivity positions.

The following table presents the amortized cost and fair value of the investment securities available-for-sale portfolio as of the dates indicated:

	September 30, 2026						December 31, 2025
($ in thousands)	Amortized Cost		Fair Value		Net Unrealized Gain (Loss)		Amortized Cost		Fair Value		Net Unrealized Gain (Loss)
Securities available-for-sale:
U.S. government agency and U.S. government sponsored enterprise securities:
Residential mortgage-backed securities	$	176,367	$	161,187	$	(15,180)	$	135,728	$	129,822	$	(5,906)
Residential collateralized mortgage obligations	17,623		16,410		(1,213)		19,499		18,762		(737)
SBA loan pool securities	3,313		3,090		(223)		4,363		4,193		(170)
Municipal bonds	2,472		2,311		(161)		2,463		2,484		21
Corporate bonds	7,500		7,187		(313)		5,000		4,748		(252)
Total securities available-for-sale	$	207,275	$	190,185	$	(17,090)	$	167,053	$	160,009	$	(7,044)

The fair value of total investment securities available-for-sale were $190.2 million at September 30, 2026, an increase of $30.2 million, or 18.9%, from $160.0 million at December 31, 2025. The increase was primarily due to purchases of $66.9 million, partially offset by principal paydowns of $26.5 million, net premium amortization of $114 thousand, and a decrease in fair value of securities available-for-sale of $10.0 million.

As of September 30, 2026 and December 31, 2025, 95.2% and 95.5%, 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 September 30, 2026 and December 31, 2025.

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 September 30, 2026 and December 31, 2025. 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 September 30, 2026 and December 31, 2025.

As of September 30, 2026 and December 31, 2025, the Company recorded no ACL on securities available-for-sale.

The following table presents the contractual maturity schedule for securities, at amortized cost, and their weighted-average yields as of the date indicated:

	September 30, 2026
	Within One Year				More than One Year through Five Years				More than Five Years through Ten Years				More than Ten Years				Total
($ in thousands)	Amortized Cost		Weighted-Average Yield		Amortized Cost		Weighted-Average Yield		Amortized Cost		Weighted-Average Yield		Amortized Cost		Weighted-Average Yield		Amortized Cost		Weighted-Average Yield
Securities available-for-sale:
U.S. government agency and U.S. government sponsored enterprise securities:
Residential mortgage-backed securities	$	63	1.35	%	$	1,446	1.72	%	$	27,084	1.26	%	$	147,774	4.66	%	$	176,367	4.11	%
Residential collateralized mortgage obligations	11		1.48	%	5,348		4.20	%	-		-	%	12,264		3.21	%	17,623		3.51	%
SBA loan pool securities	-		-	%	297		3.49	%	1,664		2.30	%	1,352		3.30	%	3,313		2.82	%
Municipal bonds	-		-	%	84		2.99	%	2,388		3.57	%	-		-	%	2,472		3.55	%
Corporate bonds	-		-	%	-		-	%	7,500		6.50	%	-		-	%	7,500		6.50	%
Total securities available-for-sale	$	74	1.37	%	$	7,175	3.66	%	$	38,636	2.46	%	$	161,390	4.54	%	$	207,275	4.12	%

Weighted-average yields are based upon the amortized cost of securities and are calculated using the interest method which takes into consideration of premium amortization and discount accretion. Weighted-average yields on tax-exempt debt securities exclude the federal income tax benefit.

Loans Held-For-Sale

Loans held-for-sale are carried at the lower of cost or fair value. When a determination is made at the time of commitment to originate as held-for-investment, it is the Company's intent to hold these loans to maturity or for the foreseeable future, subject to periodic reviews under the Company's management evaluation processes, including asset/liability management and credit risk management. When the Company subsequently changes its intent to hold certain loans, the loans are transferred to held-for-sale at the lower of cost or fair value. Certain loans are transferred to held-for-sale with write-downs to the allowance for credit losses on loans.

Loans held-for-sale were $2.3 million at September 30, 2026, a decrease of $9.8 million, or 80.8%, from $12.1 million at December 31, 2025. The decrease was primarily due to sales of $63.0 million and pay-offs and pay-downs of $310 thousand, partially offset by new funding of $52.5 million and a nonaccrual loan transferred from loans held-for-investment of $1.1 million.

Loans Held-For-Investment and Allowance for Credit Losses

The following table presents the composition of the Company's loans held-for-investment as of the dates indicated:

	September 30, 2026					December 31, 2025
($ in thousands)	Amount			Percentage to Total		Amount			Percentage to Total
Commercial real estate:
Commercial property	$	1,100,476		38.6	%	$	1,071,396		38.0	%
Business property	650,596			22.9	%	638,063			22.6	%
Multifamily	213,592			7.5	%	175,579			6.2	%
Construction	11,142			0.4	%	18,561			0.7	%
Total commercial real estate	1,975,806			69.4	%	1,903,599			67.5	%
Commercial and industrial	449,325			15.8	%	508,662			18.0	%
Consumer:
Residential mortgage	414,487			14.6	%	401,337			14.3	%
Other consumer	5,238			0.2	%	6,802			0.2	%
Total consumer	419,725			14.8	%	408,139			14.5	%
Loans held-for-investment	2,844,856			100.0	%	2,820,400			100.0	%
Allowance for credit losses on loans	(34,087)					(33,381)
Net loans held-for-investment	$	2,810,769				$	2,787,019
ACL on loans to loans held-for-investment	1.20		%			1.18		%

Loans held-for-investment were $2.84 billion at September 30, 2026, an increase of $24.5 million, or 0.9%, from $2.82 billion at December 31, 2025. The increase was primarily due to new funding of term loans of $416.5 million, partially offset by pay-downs and pay-offs of term loans of $329.6 million, net decrease of lines of credit of $61.2 million, charge-offs of $130 thousand, and a nonaccrual loan transferred to loans held-for-sale of $1.1 million.

Commercial Real Estate Loans Concentration

The following table presents the property type composition of commercial real estate loans held-for-investment as of the dates indicated:

	September 30, 2026				December 31, 2025
($ in thousands)	Amount		Percentage to Total		Amount		Percentage to Total
Retail property	$	446,040	22.7	%	$	394,800	20.6	%
Industrial property	295,719		15.0	%	285,383		15.0	%
Mixed-use property	204,316		10.3	%	204,722		10.8	%
Apartments	192,754		9.8	%	156,482		8.2	%
Hotel and Motel	159,611		8.1	%	152,321		8.0	%
Office property	135,851		6.9	%	150,662		7.9	%
Gas Station	111,524		5.6	%	122,681		6.4	%
Other property types (1)	429,991		21.6	%	436,548		23.1	%
Total commercial real estate	$	1,975,806	100.0	%	$	1,903,599	100.0	%

(1) Each of other property types represented less than 5% of total commercial real estate loans as of September 30, 2026 and December 31, 2025.

The following table presents the geographical composition of commercial real estate loans held-for-investment as of the dates indicated:

	September 30, 2026				December 31, 2025
($ in thousands)	Amount		Percentage to Total		Amount		Percentage to Total
California
Los Angeles County	$	1,180,271	59.7	%	$	1,160,738	61.0	%
Orange County	173,697		8.8	%	164,388		8.6	%
Other Counties in California	154,457		7.8	%	184,444		9.7	%
Total California	1,508,425		76.3	%	1,509,570		79.3	%
New York and New Jersey	154,659		7.8	%	140,303		7.4	%
Texas	137,679		7.0	%	118,960		6.2	%
Washington	64,706		3.3	%	60,563		3.2	%
Other states	110,337		5.6	%	74,203		3.9	%
Total commercial real estate	$	1,975,806	100.0	%	$	1,903,599	100.0	%

The following table presents activities in ACL for the periods indicated:

	Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	2026		2025		2026		2025
ACL on loans
Balance at beginning of period	$	34,738	$	33,554	$	33,381	$	30,628
Charge-offs	(35)		(454)		(130)		(927)
Recoveries	35		288		71		375
Provision for credit losses on loans	(651)		(428)		765		2,884
Balance at end of period	$	34,087	$	32,960	$	34,087	$	32,960
ACL on off-balance sheet credit exposures
Balance at beginning of period	$	1,520	$	1,263	$	1,543	$	1,190
Provision (reversal) for credit losses on off-balance sheet credit exposures	(54)		47		(77)		120
Balance at end of period	$	1,466	$	1,310	$	1,466	$	1,310

The decrease for the three months ended September 30, 2026 was primarily due to a decrease in loans held-for-investment, partially offset by an increase in nonaccrual loans held-for-investment. The increase for the nine months ended September 30, 2026 was primarily due to an increase in loans held-for-investment, as well as the increase in nonaccrual loans held-for-investment.

Qualitative adjustment factors increased for the three and nine months ended September 30, 2026 primarily due to updates to risk status ratings that reflected changes in credit quality across loan segments. More specifically, the increases in nonaccrual and classified loans within the commercial property and business property loan segments were the primary contributors to the increase in the overall qualitative reserve.

Quantitatively measured expected credit loss reserve decreased for the nine months ended September 30, 2026 primarily due to improvement in the forecasted national unemployment rate. The Company utilizes the year-over-year percentage change in real GDP and the national unemployment rate based on forward-looking year-end projections published by the Federal Open Market Committee ("FOMC"). Using these forecasted year-end rates as anchors, the Company extrapolates quarterly rates for application in its loss model, which determines probability of default ("PD") and loss given default ("LGD") rates. The forecasted 2026 year-end national unemployment rate improved to 4.1% in the September 2026 FOMC meeting from 4.3% and 4.4% in the June 2026 and December 2025 FOMC meetings, respectively. The forecasted 2026 year-end year-over-year percentage change in real GDP increased to 2.3% in the September 2026 FOMC meeting from 2.2% in the June 2026 FOMC meeting, but maintained at 2.3% in the December 2025 FOMC meeting. As a result, lower PD and LGD rates were applied across most loan segments, leading to a lower overall expected loss measurement. Management believes that the projections used are reasonable and align with the Company's expectations regarding the economic environment over the next four quarters.

Loans individually evaluated for impairment totaled $29.2 million and $53.2 million, respectively, and related reserve totaled $446 thousand and $226 thousand, respectively, at September 30, 2026 and December 31, 2025.

The following tables present net charge-offs (recoveries) as a percentage to the average loans held-for-investment balances in each of the loan segments for the periods indicated:

	Three Months Ended September 30,
	2026						2025
($ in thousands)	Average Balance		Net Charge-Offs (Recoveries)		Percentage		Average Balance		Net Charge-Offs (Recoveries)		Percentage
Commercial real estate:
Commercial property	$	975,580	$	-	-	%	$	927,979	$	-	-	%
Business property	825,719		(1)		(0.01)	%	763,592		306		0.15	%
Multifamily	192,675		-		-	%	166,206		-		-	%
Construction	11,130		-		-	%	27,636		-		-	%
Total commercial real estate	2,005,104		(1)		(0.01)	%	1,885,413		306		0.05	%
Commercial and industrial	477,150		13		0.01	%	471,871		(140)		(0.12)	%
Consumer:
Residential mortgage	403,254		-		-	%	402,225		-		-	%
Other consumer	5,568		(12)		(0.86)	%	8,668		-		-	%
Total consumer	408,822		(12)		(0.01)	%	410,893		-		-	%
Total	$	2,891,076	$	-	-	%	$	2,768,177	$	166	0.02	%
	Nine Months Ended September 30,
	2026						2025
($ in thousands)	Average Balance		Net Charge-Offs (Recoveries)		Percentage		Average Balance		Net Charge-Offs (Recoveries)		Percentage
Commercial real estate:
Commercial property	$	973,001	$	-	-	%	$	922,750	$	-	-	%
Business property	806,669		(3)		(0.01)	%	708,970		304		0.06	%
Multifamily	183,471		-		-	%	184,978		-		-	%
Construction	15,278		-		-	%	25,127		-		-	%
Total commercial real estate	1,978,419		(3)		(0.01)	%	1,841,825		304		0.02	%
Commercial and industrial	481,429		71		0.02	%	469,134		177		0.05	%
Consumer:
Residential mortgage	397,595		-		-	%	403,195		-		-	%
Other consumer	6,025		(9)		(0.20)	%	9,839		71		0.96	%
Total consumer	403,620		(9)		(0.01)	%	413,034		71		0.02	%
Total	$	2,863,468	$	59	0.01	%	$	2,723,993	$	552	0.03	%

Nonperforming Loans and Nonperforming Assets

The following table presents a summary of total non-performing assets as of the dates indicated:

($ in thousands)	September 30, 2026			December 31, 2025			Amount Change		Percentage Change
Nonaccrual loans held-for-investment
Commercial real estate:
Commercial property	$	4,642		$	1,403		$	3,239	230.9	%
Business property	1,598			938			660		70.4	%
Total commercial real estate	6,240			2,341			3,899		166.6	%
Commercial and industrial	652			161			491		305.0	%
Consumer:
Residential mortgage	5,355			5,403			(48)		(0.9)	%
Other consumer	3			5			(2)		(40.0)	%
Total consumer	5,358			5,408			(50)		(0.9)	%
Total nonaccrual loans held-for-investment	12,250			7,910			4,340		54.9	%
Loans past due 90 days or more still on accrual	-			-			-		-	%
Nonperforming loans held-for-investment	12,250			7,910			4,340		54.9	%
Nonperforming loans held-for-sale	-			-			-		-	%
Total nonperforming loans	12,250			7,910			4,340		54.9	%
Other real estate owned	-			-			-		-	%
Nonperforming assets	$	12,250		$	7,910		$	4,340	54.9	%
Nonaccrual loans held-for-investment to loans held-for-investment	0.43		%	0.28		%
Nonperforming assets to total assets	0.35		%	0.24		%
ACL on loans to nonaccrual loans held-for-investment	278.26		%	422.01		%

The increase in nonaccrual loans held-for-investment was primarily due to a loan placed on nonaccrual status of $6.3 million, partially offset by paydowns and a loan transferred to loans held-for-sale of $1.1 million, payoffs of $703 thousand and charge-offs of $130 thousand during the nine months ended September 30, 2026.

Loans are generally placed on nonaccrual status when they become 90 days past due, unless management believes the loan is well secured and in the process of collection. In all cases, loans are placed on nonaccrual if collection of principal or interest is considered doubtful. Past due loans may or may not be adequately collateralized, but collection efforts are continuously pursued. Loans may be restructured by management when a borrower experiences changes to their financial condition, causing an inability to meet the original repayment terms, and where management believes the borrower will eventually overcome those circumstances and repay the loan in full. Additional income of approximately $241 thousand and $604 thousand would have been recorded during the three and nine months ended September 30, 2026, respectively, had these loans been paid in accordance with their original terms throughout the periods indicated.

Deposits

The Bank gathers deposits primarily through its branch locations. The Bank offers a variety of deposit products including demand deposits accounts, NOW and money market accounts, savings accounts and time deposits. The following table presents a summary of the Company's deposits as of the dates indicated:

($ in thousands)	September 30, 2026		December 31, 2025		Amount Change		Percentage Change
Noninterest-bearing demand deposits	$	579,783	$	555,645	$	24,138	4.3	%
Interest-bearing deposits:
Savings, NOW and money market accounts
Retail	816,128		676,074		140,054		20.7	%
Wholesale - brokered	1		1		-		-	%
Time deposits of $250,000 or less
Retail	587,744		574,519		13,225		2.3	%
Wholesale - brokered	245,829		280,540		(34,711)		(12.4)	%
Time deposits of more than $250,000
Retail	727,108		648,633		78,475		12.1	%
Wholesale - California State Treasurer	120,000		60,000		60,000		100.0	%
Total interest-bearing deposits	2,496,810		2,239,767		257,043		11.5	%
Total deposits	$	3,076,593	$	2,795,412	$	281,181	10.1	%
Total retail deposits	$	2,710,763	$	2,454,871	$	255,892	10.4	%
Total wholesale deposits	$	365,830	$	340,541	$	25,289	7.4	%
Estimated total deposits not covered by deposit insurance	$	1,527,426	$	1,270,159	$	257,267	20.3	%
Estimated time deposits not covered by deposit insurance	$	617,430	$	499,745	$	117,685	23.5	%

The increase in retail time deposits was primarily due to new accounts of $325.0 million and renewals of the matured accounts of $997.8 million, partially offset by matured and closed accounts of $1.28 billion.

As of September 30, 2026 and December 31, 2025, total deposits were comprised of 18.8% and 19.9%, respectively, of noninterest-bearing demand accounts, 26.5% and 24.2%, respectively, of savings, NOW and money market accounts, and 54.7% and 55.9%, respectively, of time deposits.

Deposits from certain officers, directors and their related interests with which they are associated held by the Company were $16.4 million and $8.9 million, respectively, at September 30, 2026 and December 31, 2025.

The following table presents the maturity of time deposits as of the dates indicated:

($ in thousands)	Three Months or Less		Over Three Months through Six Months		Over Six Months through Twelve Months		Over Twelve Months		Total
September 30, 2026
Time deposits of $250,000 or less	$	328,732	$	224,586	$	278,994	$	1,261	$	833,573
Time deposits of more than $250,000	339,908		299,460		207,055		685		847,108
Total	$	668,640	$	524,046	$	486,049	$	1,946	$	1,680,681
Not covered by deposit insurance	$	260,880	$	215,909	$	140,016	$	625	$	617,430
December 31, 2025
Time deposits of $250,000 or less	$	243,468	$	316,179	$	293,888	$	1,524	$	855,059
Time deposits of more than $250,000	309,465		147,875		248,401		2,892		708,633
Total	$	552,933	$	464,054	$	542,289	$	4,416	$	1,563,692
Not covered by deposit insurance	$	233,697	$	103,783	$	159,928	$	2,337	$	499,745

Shareholders' Equity and Regulatory Capital

Capital Resources

Shareholders' equity is influenced primarily by earnings, dividends paid on common stock and preferred stock, sales and redemptions of common stock and preferred stock, and changes in accumulated other comprehensive income caused primarily by fluctuations in unrealized gains or losses, net of taxes, on securities available-for-sale.

Shareholders' equity was $402.1 million at September 30, 2026, an increase of $12.1 million, or 3.1%, from $390.0 million at December 31, 2025. The increase was primarily due to net income of $33.4 million, proceeds from stock option exercises of $654 thousand and share-based compensation expense of $694 thousand, partially offset by dividends declared on common stock of $9.3 million, repurchases of common stock of $5.8 million, preferred stock dividends of $259 thousand, and an increase in accumulated other comprehensive loss of $7.2 million.

Regulatory Capital Requirements

The following table presents a summary of the minimum capital adequacy requirements applicable to the Company and the Bank and the minimum capital requirements for the Bank to be considered "well-capitalized" from a regulatory perspective as of the dates indicated:

	PCB Bancorp		PCB Bank		Minimum Regulatory Requirements		Well Capitalized Requirements
September 30, 2026
Common tier 1 capital (to risk-weighted assets)	11.98	%	13.96	%	4.5	%	6.5	%
Total capital (to risk-weighted assets)	15.63	%	15.20	%	8.0	%	10.0	%
Tier 1 capital (to risk-weighted assets)	14.39	%	13.96	%	6.0	%	8.0	%
Tier 1 capital (to average assets)	11.77	%	11.42	%	4.0	%	5.0	%
December 31, 2025
Common tier 1 capital (to risk-weighted assets)	11.46	%	13.49	%	4.5	%	6.5	%
Total capital (to risk-weighted assets)	15.13	%	14.72	%	8.0	%	10.0	%
Tier 1 capital (to risk-weighted assets)	13.89	%	13.49	%	6.0	%	8.0	%
Tier 1 capital (to average assets)	11.89	%	11.55	%	4.0	%	5.0	%

To avoid restrictions on dividends, share repurchases and discretionary compensation payments to executives, the federal banking agencies require a banking organization to maintain a capital conservation buffer of 2.50% in common tier 1 capital, in addition to the minimum capital ratios adequacy requirements. The capital conservation buffer increases the minimum common equity Tier 1 capital ratio to 7%, the minimum Tier 1 capital (to risk-weighted assets) ratio to 8.5% and the minimum total capital ratio (to risk-weighted assets) to 10.5% for banking organizations seeking to avoid the limitations on dividends, share repurchases and discretionary compensation payments to executives. The Company's and the Bank's capital conservation buffers were 7.48% and 7.20%, respectively, as of September 30, 2026, and 6.96% and 6.72%, respectively, as of December 31, 2025.

Emergency Capital Investment Program

On May 24, 2022, the Company issued 69,141 shares of Series C Preferred Stock with a liquidation preference of $1,000 per share for the capital investment of $69.1 million from the U.S. Treasury under the ECIP. The ECIP investment qualifies as tier 1 capital for the purposes of the bank regulatory capital requirements.

The following table presents the estimated purchase price based on the formula set forth in the Option Agreement as if the Company met all Threshold Conditions as of September 30, 2026:

	Dividend Rate at the Reset Date Immediately Preceding the Purchase Date
($ in thousands)	0.50%		1.25%		2.00%
Purchase price	$	4,268	$	10,670	$	17,072
Discount	64,873		58,471		52,069

The Company began paying quarterly dividends on the Series C Preferred Stock at 2% beginning in the three months ended June 30, 2024 and the dividend rate decreased to 0.50% from the three months ended March 31, 2025. Dividends on the Series C Preferred Stock totaled $86 thousand and $86 thousand for the three months ended September 30, 2026 and 2025, respectively. For the nine months ended September 30, 2026 and 2025, dividends on the Series C Preferred Stock totaled $259 thousand and $213 thousand, respectively.

Stock Repurchases

During the year ended December 31, 2025, the Company repurchased and retired 358,251 shares of common stock at a weighted-average price of $19.82 per share under a stock repurchase program first approved by the Board of Directors on August 2, 2023 authorizing the repurchase of up to 720,000 shares. On July 23, 2025, the Company announced that the term of the stock repurchase program would be extended to July 31, 2026.

During the nine months ended September 30, 2026, the Company repurchased and retired 219,526 shares of common stock at a weighted-average price of $26.51 per share. This stock repurchase program had been completed as of July 23, 2026. On September 28, 2026, the Company's Board of Directors approved a new stock repurchase program authorizing the repurchase of up to 700,000 shares of common stock through September 22, 2027. As of September 30, 2026, the Company is authorized to purchase 700,000 shares under this new stock repurchase program.

Liquidity

Liquidity refers to the measure of ability to meet the cash flow requirements of depositors and borrowers, while at the same time meeting operating cash flow and capital and strategic cash flow needs, all at a reasonable cost. The Company continuously monitors its liquidity position to ensure that assets and liabilities are managed in a manner that will meet all short-term and long-term cash requirements, while maintaining an appropriate balance between assets and liabilities to meet the return on investment objectives of the Company's shareholders.

The Company's liquidity position is supported by management of liquid assets and liabilities and access to alternative sources of funds. Liquid assets include cash, interest-bearing deposits in financial institutions, federal funds sold, and unpledged securities available-for-sale. Liquid liabilities may include core deposits, federal funds purchased, securities sold under repurchase agreements and other borrowings. Other sources of liquidity include the sale of loans, the ability to acquire additional national market non-core deposits, additional collateralized borrowings such as FHLB advances and Federal Reserve Discount Window, and the issuance of debt securities and preferred or common securities.

The Company's short-term and long-term liquidity requirements are primarily to fund on-going operations, including payment of interest on deposits and debt, extensions of credit to borrowers, capital expenditures and shareholder dividends. These liquidity requirements are met primarily through cash flow from operations, redeployment of prepaying and maturing balances in loan and investment securities portfolios, increases in debt financing and other borrowings, and increases in customer deposits.

Integral to the Company's liquidity management is the administration of borrowings. To the extent the Company is unable to obtain sufficient liquidity through core deposits, the Company seeks to meet its liquidity needs through wholesale funding or other borrowings on either a short or long-term basis.

The following table presents a summary of the Company's liquidity position as of the dates indicated:

($ in thousands)	September 30, 2026			December 31, 2025			Amount Change		Percentage Change
Cash and cash equivalents	$	413,199		$	207,142		$	206,057	99.5	%
Cash and cash equivalents to total assets	11.7		%	6.3		%
Available borrowing capacity:
FHLB advances	$	867,226		$	840,607		$	26,619	3.2	%
Federal Reserve Discount Window	941,227			841,563			99,664		11.8	%
Overnight federal funds lines	65,000			65,000			-		-	%
Total available borrowing capacity	$	1,873,453		$	1,747,170		$	126,283	7.2	%
Total available borrowing capacity to total assets	53.0		%	53.2		%

The Company also maintains relationships in the capital markets with brokers and dealers to issue time deposits and money market accounts.

PCB Bancorp, on a stand-alone holding company basis, must provide for its own liquidity and its main source of funding is dividends from the Bank. There are statutory, regulatory and debt covenant limitations that affect the ability of the Bank to pay dividends to the holding company. Management believes that these limitations will not impact the Company's ability to meet its ongoing short- and long-term cash obligations.

Off-Balance Credit Exposures and Contractual Obligations

Off-Balance Sheet Credit Exposures

The Company has limited off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on financial condition, results of operations, liquidity, capital expenditures or capital resources.

In the ordinary course of business, the Company enters into financial commitments to meet the financing needs of its customers. These financial commitments include commitments to extend credit, unused lines of credit, commercial and similar letters of credit and standby letters of credit. Those instruments involve to varying degrees, elements of credit and interest rate risk not recognized in the Company's financial statements.

The Company's exposure to loan loss in the event of nonperformance on these financial commitments is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments as it does for loans reflected in the consolidated financial statements.

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total amounts do not necessarily represent future cash requirements. The Company evaluates each client's creditworthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary is based on management's credit evaluation of the customer. The following table presents outstanding financial commitments whose contractual amount represents credit risk as of the dates indicated:

	September 30, 2026				December 31, 2025
($ in thousands)	Fixed Rate		Variable Rate		Fixed Rate		Variable Rate
Unused lines of credit	$	8,631	$	384,999	$	12,663	$	348,287
Unfunded loan commitments	-		5,250		-		7,132
Standby letters of credit	6,925		8,175		5,705		1,625
Commercial letters of credit	-		633		-		-
Total	$	15,556	$	399,057	$	18,368	$	357,044

Contractual Obligations

The following table presents supplemental information regarding total contractual obligations as of the dates indicated:

($ in thousands)	Within One Year		One to Three Years		Three to Five Years		Over Five Years		Total
September 30, 2026
Time deposits	$	1,678,735	$	1,831	$	115	$	-	$	1,680,681
Operating leases	3,459		6,474		5,815		5,625		21,373
Total	$	1,682,194	$	8,305	$	5,930	$	5,625	$	1,702,054
December 31, 2025
Time deposits	$	1,559,276	$	4,293	$	123	$	-	$	1,563,692
FHLB advances	34,000		-		-		-		34,000
Operating leases	3,562		6,277		5,708		7,585		23,132
Total	$	1,596,838	$	10,570	$	5,831	$	7,585	$	1,620,824

Management believes that the Company will be able to meet its contractual obligations as they come due through the maintenance of adequate cash levels. Management expects to maintain adequate cash levels through profitability, loan and securities repayment and maturity activity and continued deposit gathering activities. The Company has in place various borrowing mechanisms for both short-term and long-term liquidity needs.

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