PCB 10-K & 10-Q changes, risk factors and insider trading
Pcb Bancorp · Nasdaq · State Commercial Banks · CIK 1423869 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
New heading “We may not qualify to repurchase our Series C Preferred Stock on favorable terms.”
Removed heading “Operations in our LPOs have positively affected our results of operations, and sustaining these operations and growing loans may be more difficult than we expect, which could adversely affect our results of operations.”
Largest changes
“Operations in our LPOs have positively affected our results of operations, and sustaining these operations and growing loans may be more difficult than we expect, which could adversely affect our results of operations.”see in full comparison
“We maintained four LPOs that primarily originate SBA loans as of December 31, 2024. During the year ended December 31, 2024, these LPOs accounted for approximately 12.3% of new loans originated by the Bank. Sustaining the expansion of loan production through use of these out of state LPOs depends on a number of factors, including the continued strength of the markets in which our offices are located and identifying, hiring and retaining critical personnel. The strength of these markets could be weakened by anticipated increases in interest rates and any economic downturn. …”see in full comparison
“We may not qualify to repurchase our Series C Preferred Stock on favorable terms.”see in full comparison
“In January of 2025, we entered into an ECIP Securities Purchase Option Agreement with Treasury that grants us or our qualifying designee may repurchase the Series C Preferred Stock, potentially at a substantial discount if we meet certain conditions (the “Repurchase Option”). …”see in full comparison
“On May 24, 2022, we sold shares of our Series C Preferred Stock to the U.S. Treasury for the purchase price of $69.1 million under the Emergency Capital Investment Program, or “ECIP.” Under the ECIP program, the Treasury invested in depository institutions that are Community Development Financial Institutions or minority depository institutions (“MDIs”) to encourage lending to small businesses, minority-owned businesses and consumers in low-income and underserved communities.”see in full comparison
Our operations are conducted throughsee in full comparison1615 branches located principally in Los Angeles and Orange Counties of Southern California and to a lesser extent in Georgia, Texas and the New York/New Jerseyregion.regions. Our business focuses on Korean-American individuals and businesses in these markets. As a result of these geographic and demographics concentrations, our results depend largely upon economic and business conditions in these areas. Any significant deterioration in economic and business conditions in our service areas or in the Korean-American community could have a material adverse impact on the quality of our loan portfolio and the demand for our products and services, which in turn could have a material adverse effect on our results of operations.We have attempted to diversify some of our loan business through LPOs in two states; however, this diversification strategy may not be effective to reduce our geographic and ethnic concentrations.
Full comparison: every changed paragraph (23)
Liquidity is essential to our business. An inability to raise funds through deposits, borrowings, the sale of loans and/or investment securities, and from other sourcessources, could have a substantial negative effect on our liquidity. Our most important source of funds consists of our customer deposits, a significant portion of which are time deposits. Such deposit balances can decrease when customers perceive they can earn higher interest on their interest-bearing deposits elsewhere, or alternative investments, such as the stock market, provide a better risk/return tradeoff. If customers move money to other financial institutions, or out of bank deposits and into other investments, we could lose a relatively low cost source of funds, which would require us to seek wholesale funding alternatives in order to continue to grow, thereby increasing our funding costs and reducing our net interest income and net income.
The BSA, the Patriot Act and other laws and regulations require financial institutions, among other duties, to institute and maintain an effective AML/CFT program and to file reports such as suspicious activity reports and currency transaction reports. We are required to comply with these and other AML/CFT requirements. The federal banking agencies and Financial Crimes Enforcement Network are authorized to impose significant civil money penalties for violations of those requirements and have recently engaged in coordinated enforcement efforts against banks and other financial services providers with the U.S. Department of Justice, Drug Enforcement Administration and IRS. We are also subject to increased scrutiny of compliance with the rules enforced by the OFAC. If our policies, procedures and systems are deemed deficient, we would be subject to liabilities, including fines and regulatory actions, which may include restrictions on our ability to pay dividends and the necessity to obtain regulatory approvals to proceed acquisitionwith acquisitions and certain aspects of our business plan.
Failures to maintain and implement adequate AML/CFT programs to combat money laundering and terrorist financing could also have serious reputational consequences for us. Any of these results could reduce the Company’s ability to receive any necessary regulatory approvals for acquisitions or new branch openings. ThisAny of these circumstances could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
Our business and operations are sensitive to general business and economic conditions in the U.S., generally, and particularly the state of California and the Los Angeles/Orange County region, as well as the greater New York City/New Jersey metropolitan areaarea, Texas and Dallas, Texas,Georgia,, where our branch offices are located. Unfavorable or uncertain economic and market conditions in these areas could lead to credit quality concerns related to repayment ability and collateral protection as well as reduced demand for the products and services we offer. The impact of the Trumpcurrent administration’s ongoing policy changes regarding international trade, tariffs, renewable energy, immigration, domestic taxation, among other actions and policies of the current administration, may have on economic and market conditions is uncertain.
The financial services industry is undergoing rapid technological changes with frequent introductions of new technology-driven products and services, including the use of artificial intelligence and machine learning to interact with customers and review to review and analyze data. In addition to allowing us to better serve customers, the effective use of technology increases efficiency and enables financial institutions to reduce costs. Our future success will depend in part upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy customer demands for convenience as well as to create additional efficiencies in our operations as we continue to grow and expand our market area.
Our primary market is located in an earthquake-prone zone in California, which is also subject to earthquakes and other weather or disasters, such as severe rainstorms, wildfire or flood, as well as health epidemics or pandemics (or expectations about them). These events could interrupt our business operations unexpectedly. Climate-related physical changes and hazards could also pose credit risks for us. For example, our borrowers may have collateral properties located in coastal areas at risk to rise in sea level. The properties pledged as collateral onin our loan portfolio could also be damaged by tsunamis, floods, earthquakes or wildfires and thereby the recoverability of loans could be impaired. A number of factors can affect credit losses, including the extent of damage to the collateral, the extent of damage not covered by insurance, the extent to which unemployment and other economic conditions caused by the natural disaster adversely affect the ability of borrowers to repay their loans, and the cost of collection and foreclosure to us. Lastly, there could be increased insurance premiums and deductibles, or a decrease in the availability of coverage, due to severe weather-related losses. The ultimate impact on our business of a natural disaster, whether or not caused by climate change, is difficult to predict.
We primarily operate in California markets with a concentration of Korean-American individuals and businesses as customers. We also currently have branch operations in New York, New JerseyJersey, Georgia and Texas, and LPO operations in various states and may evaluate additional branch expansion opportunities in other Korean-American populated markets. In the course of this expansion, we will encounter significant risks and uncertainties that could have a material adverse effect on our operations. These risks and uncertainties include increased expenses and operational difficulties arising from, among other things, our need to hire adequate staffing, attract sufficient business in new markets, to manage operations in non-contiguous market areas, to comply with all of the various local laws and regulations, and to anticipate events or differences in markets in which we have no current experience.
Our operations are conducted through 1615 branches located principally in Los Angeles and Orange Counties of Southern California and to a lesser extent in Georgia, Texas and the New York/New Jersey region.regions. Our business focuses on Korean-American individuals and businesses in these markets. As a result of these geographic and demographics concentrations, our results depend largely upon economic and business conditions in these areas. Any significant deterioration in economic and business conditions in our service areas or in the Korean-American community could have a material adverse impact on the quality of our loan portfolio and the demand for our products and services, which in turn could have a material adverse effect on our results of operations. We have attempted to diversify some of our loan business through LPOs in two states; however, this diversification strategy may not be effective to reduce our geographic and ethnic concentrations.
We may not qualify to repurchase our Series C Preferred Stock on favorable terms.
On May 24, 2022, we sold shares of our Series C Preferred Stock to the U.S. Treasury for the purchase price of $69.1 million under the Emergency Capital Investment Program, or “ECIP.” Under the ECIP program, the Treasury invested in depository institutions that are Community Development Financial Institutions or minority depository institutions (“MDIs”) to encourage lending to small businesses, minority-owned businesses and consumers in low-income and underserved communities.
In January of 2025, we entered into an ECIP Securities Purchase Option Agreement with Treasury that grants us or our qualifying designee may repurchase the Series C Preferred Stock, potentially at a substantial discount if we meet certain conditions (the “Repurchase Option”). To be eligible to exercise the Repurchase Option, we must, among other things, meet certain thresholds for “deep impact lending” or “qualified lending” (as defined in the ECIP’s guidelines), comply with the ECIP agreements and rules, continue to qualify as an MDI, and be “well-capitalized” under federal Prompt Corrective Action guidelines. The earliest possible date by which we could exercise the repurchase options (assuming we meet all required conditions) is June 30, 2026. There can be no assurance that we will ever satisfy the lending and other requirements necessary to exercise the Repurchase Option.
For additional information, see “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations - Financial Condition - Shareholders’ Equity and Regulatory Capital - Emergency Capital Investment Program”
CRE lending continues to be a significant focus of federal and state bank regulators with multiple guidelines issued in an attempt by regulators to manage CRE lending risk across the banking system. These various guidelines and pronouncements were issued in response to the agencies’ concerns that rising CRE concentrations might expose institutions to unanticipated earnings and capital volatility in the event of adverse changes in the CRE market. For example, bank regulators have issued guidance which refer(referred to as the CRE Concentration Guidance) that identifies certain CRE concentration levels that, if exceeded, will expose an institution to additional supervisory analysis with regard to the institution’s CRE concentration risk.
We originated non-qualified residential mortgage loans of $36.0$65.3 million and $63.4$36.0 million, respectively, for the years ended December 31, 20242025 and 2023.2024. We originated no qualified residential mortgage loans of $0 thousand and $0 thousand, respectively, for the years ended December 31, 20242025 andor 2023.2024. As of December 31, 2024,2025, our non-qualified residential mortgage loans had a weighted average LTV of 62.1%62.0% and a weighted average Fair Isaac Corporation (“FICO”) score of 777.771.
Real estate construction loans, including land development loans, comprised approximately 0.8%0.7% of our total loans held-for-investment portfolio as of December 31, 2024,2025, and such lending involves additional risks because funds are advanced upon the security of the project, which is of uncertain value prior to its completion, and costs may exceed realizable values in declining real estate markets. Because of the uncertainties inherent in estimating construction costs and the realizable market value of the completed project and the effects of governmental regulation of real property, it is relatively difficult to evaluate accurately the total funds required to complete a project and the related LTV ratio.
As of December 31, 2024,2025, our nonperforming loans (“NPLs”) held-for-investment totaled $4.7$7.9 million, or 0.18%0.28% of our loans held-for-investment portfolio. Our NPAs, which include NPLs and other real estate owned (“OREO”), totaled $4.7$7.9 million, or 0.15%0.24% of total assets. A loan is placed on nonaccrual status if: (i) it is maintained on a cash basis because of deterioration in the financial condition of the borrower, (ii) payment in full of principal or interest is not expected, or (iii) principal or interest has been in default for a period of 90 days or more, unless the loan is both well secured and in the process of collection. In addition, we had $4.9$955 millionthousand in accruing loans that were 30-89 days past due as of December 31, 2024.2025.
Any changes we make to the rates offered on our deposit products to remain competitive with other financial institutions may adversely affect our profitability and liquidity. Interest-bearing deposit accounts earn interest at rates established by management based on competitive market factors. Our cost of deposits increaseddecreased from 2.87% for the year ended December 31, 2023, to 3.72% for the year ended December 31, 2024.2024, to 3.33% for the year ended December 31, 2025. The demand for the deposit products we offer may also be reduced due to a variety of factors, such as demographic patterns, changes in customer preferences, reductions in consumers’ disposable income, regulatory actions that decrease customer access to particular products, or the availability of competing products.
Like all financial institutions, the Bank maintains an ACL to provide for loan defaults and non-performance. ACL on loans, expressed as a percentage of loans held-for-investment, was 1.16%,1.18%, 1.19%1.16% and 1.22%,1.19%, respectively, at December 31, 2024,2025, 20232024 and 2022.2023. ACL is funded from a provision (reversal) for credit losses, which is a charge to our income statement. Our provision (reversal) for credit losses, was $4.0 million, $3.4 million,million and $(132) thousand and $3.6 million,thousand, respectively, for the years ended December 31, 2024,2025, 20232024 and 2022.2023.
We have grown our consolidated assets from $1.92$2.15 billion as of December 31, 20202021 to $3.06$3.28 billion as of December 31, 2024,2025, and our deposits from $1.59$1.87 billion as of December 31, 20202021 to $2.62$2.80 billion as of December 31, 2024.2025. We intend to continue to grow our business through organic loan and deposit growth, and we anticipate that much of our future growth will be dependent on our ability to successfully implement our organic growth strategy, which may include establishing additional branches or LPOsnew loan production offices in new or existing markets. A risk exists, however, that we will not be able to gain regulatory approval or identify suitable locations and management teams to execute this strategy. Further, our ability to grow organically loan and deposits is dependent on the financial health of our target demographic of Korean-Americans, which is in turn based on the financial health not only of their relevant geographic locations in the U.S. but also more broadly on the economic health of Korea. A decline in economic and business conditions in our market areas or in Korea could have a material impact on our loan portfolio or the demand for our products or services, which in turn may have a material adverse effect on our financial condition and results of operations.
Operations in our LPOs have positively affected our results of operations, and sustaining these operations and growing loans may be more difficult than we expect, which could adversely affect our results of operations.
We maintained four LPOs that primarily originate SBA loans as of December 31, 2024. During the year ended December 31, 2024, these LPOs accounted for approximately 12.3% of new loans originated by the Bank. Sustaining the expansion of loan production through use of these out of state LPOs depends on a number of factors, including the continued strength of the markets in which our offices are located and identifying, hiring and retaining critical personnel. The strength of these markets could be weakened by anticipated increases in interest rates and any economic downturn. Moreover, competition for successful business developers and relationship managers in the SBA loan industry is fierce, and we may not be able to attract and retain the personnel we need to profitably operate our LPOs. Unsuccessful operation of our out of state LPOs could negatively impact our financial condition and results of operation.
The Company is a separate legal entity from its subsidiary, the Bank. The Company receives substantially all of its revenue from the Bank in the form of dividends, which is the Company’s principal source of funds to pay cash dividends to the Company's shareholders, repurchase shares and cover operational expenses of the holding company. Various federal and state laws and regulations limit the amount of dividends that the Bank may pay to the Company. In the event that the Bank is unable to pay dividends to the Company, the Company may not be able to pay dividends to its shareholders andor payrepurchase interestits onoutstanding the subordinated debentures.shares. As a result, it could have an adverse effect on Company's stock price and investment value.
A prolongedProlonged trade tensions or the ongoing implementation of tariffs could negatively impact the broader economic environment, potentially leading to reduced consumer spending, lower economic growth, and decreased demand for other banking products and services. As a result, our financial performance, including credit quality and loan growth, could be adversely affected by these policy changes. While we actively monitor these developments and work closely with our agricultural customers, there is no assurance that we can fully mitigate the risks posed by potential tariff initiatives or other trade-related disruptions. These factors could materially affect our business, financial condition, and results of operations.
Management's Discussion & Analysis (MD&A)
New heading “Year Ended December 31, 2025 Compared to Year Ended December 31, 2024”
New heading “Year Ended December 31, 2025 Compared to Year Ended December 31, 2024”
New heading “Year Ended December 31, 2025 Compared to Year Ended December 31, 2024”
Removed heading “(1) Commercial property loans under the legacy loan segments included all commercial property, business property and multifamily loans under the new loan segments.”
Removed heading “(1) Commercial property loans under the legacy loan segments included all commercial property, business property and multifamily loans under the new loan segments.”
Removed heading “(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.”
Removed heading “Year Ended December 31, 2023 Compared to Year Ended December 31, 2022”
Removed heading “(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.”
Removed heading “Year Ended December 31, 2023 Compared to Year Ended December 31, 2022”
Removed heading “Year Ended December 31, 2023 Compared to Year Ended December 31, 2022”
Largest changes
“Other expense included other loan related legal expenses of $505 thousand and $432 thousand, respectively, armed guard expense of $760 thousand and $867 thousand, respectively, office expenses of $2.0 million and $2.2 million, respectively, for the years ended December 31, 2025 and 2024. During the year ended December 31, 2025, the Company recognized the impairment on operating lease assets of $238 thousand and contingent accrual for legal settlements of $217 thousand. …”see in full comparison
“(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.”see in full comparison
“(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.”see in full comparison
“(1) Commercial property loans under the legacy loan segments included all commercial property, business property and multifamily loans under the new loan segments.”see in full comparison
“(1) Commercial property loans under the legacy loan segments included all commercial property, business property and multifamily loans under the new loan segments.”see in full comparison
“Year Ended December 31, 2025 Compared to Year Ended December 31, 2024”see in full comparison
Full comparison: every changed paragraph (90)
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 for 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.
As a part of the adoption of ASC 326, the Company reviewed and revised certain loan segments for the Company’s ACL model. Before the adoption of ASC 326, commercial property and SBA property loans were separately presented and represented 63.0% and 6.6% of loans held-for-investment at December 31, 2022, respectively. The Company re-divided these loan segments into commercial property, business property and multifamily loans, as described below, as these new loan segments are determined to share similar characteristics under the Company’s ACL model. In addition, four loan segments before the adoption of ASC 326 (commercial term loans, commercial lines of credit, SBA term loans and SBA PPP loans), which represented 12.2% of loans held-for-investment at December 31, 2022, are combined into a single loan segment, commercial and industrial loans, as these loans are determined to share similar risk characteristics under the Company’s ACL model. However, loan related disclosures for prior periods continue to be presented under the legacy loan segments in this Annual Report on Form 10-K.
The following table presents a summary of reclassification of loans held-for-investment as of the date indicated:
(1) Commercial property loans under the legacy loan segments included all commercial property, business property and multifamily loans under the new loan segments.
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:
(1) Commercial property loans under the legacy loan segments included all commercial property, business property and multifamily loans under the new loan segments.
ACL and provision (reversal) for credit losses for reporting periods beginning with January 1, 2023 are presented under ASC 326, while prior period amounts, comparisons and related ratios continue to be presented under legacy ASC 450 and ASC 310 in this Annual Report on Form 10-K.
(1) ACL and provision (reversal) for credit losses for the yearyears ended December 31, 2025, 2024 and 2023 isare 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,thousand and $(6324) thousand, respectively, for the years ended December 31, 2022, 2021,2022 and 20202021 wereis recorded in Other Expense on the Consolidated Income Statement.
•Net income available for common shareholders was $25.8$37.2 million for the year ended December 31, 2024,2025, aan decreaseincrease of $4.9$12.2 million, or 15.9%,48.8%, from $25.0 million for the year ended December 31, 2024 and an increase of $6.4 million, or 21.0%, 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;
◦Provision (reversal) for credit losses (1)was was$4.0 million, $3.4 million,million and $(132) thousand and $3.6 million for the years ended December 31, 2024,2025, 20232024 and 2022,2023, respectively.
•Total assets were $3.28 billion at December 31, 2025, an increase of $217.8 million, or 7.1%, from $3.06 billion at December 31, 2024;
•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;
•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;
•TotalLoans depositsheld-for-investment were $2.62$2.82 billion at December 31, 2024,2025, an increase of $264.2$191.0 million, or 11.2%,7.3%, from $2.35$2.63 billion at December 31, 20232024;
•Total deposits were $2.80 billion at December 31, 2025, an increase of $179.6 million, or 6.9%, from $2.62 billion at December 31, 2024;
The increase in net income for the year ended December 31, 2025 compared with the year ended December 31, 2024 was primarily due to an increase in net interest income and noninterest income and a decrease in noninterest expense, partially offset by an increase in provision for credit losses of $4.0 million for the year ended December 31, 2025 compared with $3.4 million for the year ended December 31, 2024.
(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.
The decrease in net income for the year ended December 31, 2023 compared with the year ended December 31, 2022 was primarily due to an increase in noninterest expense, decreases in noninterest income and net interest income, partially offset by reversal for credit losses of $132 thousand for the year ended December 31, 2023 compared with provision for credit losses of $3.6 million for the year ended December 31, 2022.
The increase in total assets for the year ended December 31, 20242025 was primarily due to increases in loans held-for-investment and deferredsecurities tax assets.available-for-sale.
The Company is committed to making corporate decisions that directly benefit its shareholders, and during the year ended December 31, 2024,2025, increased its dividend per common share by $0.03,$0.08, or 4.3%,11.1%, to $0.72$0.80 from $0.69$0.72 for the year ended December 31, 2023.2024. During the year ended December 31, 2024,2025, the Company also repurchased 14,947358,251 shares of common stock, totaling $222$7.1 thousand.million. Overall, the Company returned 42.0%49.6% of its earnings to common shareholders through dividends and common share repurchases during the year ended December 31, 2024.2025.
Year Ended December 31, 2025 Compared to Year Ended December 31, 2024
Net interest income increased primarily due to a 13.0% increase in average balance of interest-earning assets and a 67 basis point decrease in average cost of interest-bearing liabilities, partially offset by an 18.1% increase in average balance of interest-bearing liabilities and a 21 basis point decrease in average yield on interest-earning assets. The increase in average balance of interest-earning assets was primarily due to growth in loans and investment securities as well as other interest-earning assets, supported by deposit growth. The decreases 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 lower market rates during the year ended December 31, 2025.
Interest and fees on loans increased primarily due to a 12.8% increase in average balance, partially offset by an 18 basis point decrease 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 decrease in average yield was primarily due to the lower market rates.
Interest on investment securities increased primarily due to a 5.0% increase in average balance and a 17 basis point increase in average yield. The Company purchased $31.7 million and $23.5 million, respectively, of investment securities during the years ended December 31, 2025 and 2024. The increase in average yield was primarily due to new investment securities purchased at higher rates and a decrease in net amortization of premium on investment securities. For the years ended December 31, 2025 and 2024, average yield on total investment securities was 3.86% and 3.69%, respectively.
Interest income on other interest-earning assets increased primarily due to a 21.7% increase in average balance, partially offset by a 92 basis point decrease in average yield. The decrease in average yield was primarily due to the lower market rates, partially offset by 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, 2025 and 2024, yield on total other interest-earning assets was 4.58% and 5.50%, respectively.
Interest expense on deposits increased primarily due to an 18.4% increase in average balance of interest-bearing deposits, partially offset by a 66 basis point decrease 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 decrease in average cost was primarily due to the lower market rates. For the years ended December 31, 2025 and 2024, average cost on total interest-bearing deposits was 4.12% and 4.78%, respectively.
Interest expense on other borrowings decreased primarily due to a 1.3% decrease in average balance and a 96 basis point decrease in average cost.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
Net interest income decreased primarily due to a 38.4% increase in average balance of interest-bearing liabilities and a 297 basis point increase in average cost of interest-bearing liabilities, partially offset by a 12.6% increase in average balance of interest-earning assets and a 147 basis point increase in average yield on interest-earning assets. 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, 2023.
Interest and fees on loans increased primarily due to a 14.2% increase in average balance and a 128 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 rising market rates, partially offset by a decrease in net amortization of deferred fees on SBA PPP loans.
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.
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.
Interest expense on deposits increased primarily due to a 38.4% increase in average balance of interest-bearing deposits and a 296 basis point increase in average cost of interest-bearing deposits. The increase in average balance was primarily due to an increase in time deposits, partially offset by decreases in savings, NOW and money market accounts. The increase in average cost was primarily due to the rising market rates. For the years ended December 31, 2023 and 2022, average cost on total interest-bearing deposits was 4.04% and 1.08%, respectively.
Interest expense on other borrowings increased primarily due to a 46.1% increase in average balance and a 338 basis point increase in average cost. The increase in average cost was primarily due to the rising market rates.
(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.
Provision for credit losses on loans for the year ended December 31, 20242025 was primarily due to increases in loans held-for-investment, quantitatively measured loss reserves and reserves on individually evaluated loans, partially offset by a decrease in quantitatively measured lossoverall reserve requirement.related to qualitative adjustment factors. See further discussion in “Allowance for Credit Losses.”
Year Ended December 31, 2025 Compared to Year Ended December 31, 2024
Service charges and fees on deposits decreased primarily due to a decrease in fee-based transactions.
Loan servicing income represents fees received on loans that the Company services, net of amortization of servicing assets. The decrease was primarily due to an increase in amortization of servicing assets from higher prepayments of loans being serviced.
Gain on sale of loans increased primarily due to increases in gain margin and sales volume. The Company sold SBA loans of $85.8 million with a gain of $4.6 million during the year ended December 31, 2025. During the year ended December 31, 2024, 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.
Other income included wire and remittance fees of $699 thousand and $626 thousand, respectively, and debit card interchange fees of $396 thousand and $340 thousand, respectively, for the years ended December 31, 2025 and 2024.
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, the Company sold SBA loans of $82.3 million with a gain of $3.6 million during the year ended December 31, 2023.million.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
Service charges and fees on deposits increased primarily due to an increase in fee-based transactions.
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 and a decrease in amortization of servicing assets from lower prepayments of loans being serviced.
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.
Other income included wire and remittance fees of $625 thousand and $643 thousand, respectively, and debit card interchange fees of $339 thousand and $335 thousand, respectively, for the years ended December 31, 2023 and 2022.
Year Ended December 31, 2025 Compared to Year Ended December 31, 2024
Salaries and employee benefits increased primarily due to increases in bonus accrual, group insurance and stock compensation expenses, 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 averaged 264.3 for the year ended December 31, 2025 compared to 265.8 for the year ended December 31, 2024.
Occupancy and equipment expense increased primarily due to increases in rent expenses and additional fixture, furniture and equipment purchases.
Professional fees decreased primarily due to additional professional fees related to a core system conversion completed in April 2024 for the year ended December 31, 2024, partially offset by professional fees related to evaluating the accounting for a preferred stock purchase option for the year ended December 31, 2025.
Marketing and business promotion expense increased primarily due to a higher volume of advertisements.
Data processing expense decreased primarily due to a decrease in overall service charges after the core system conversion, partially offset by one-time new relationship credit recognized during the year-ago quarter from the core system conversion completed during the year ended December 31, 2024.
Regulatory assessment expense increased primarily due to an increase in balance sheet.
Other expense included other loan related legal expenses of $505 thousand and $432 thousand, respectively, armed guard expense of $760 thousand and $867 thousand, respectively, office expenses of $2.0 million and $2.2 million, respectively, for the years ended December 31, 2025 and 2024. During the year ended December 31, 2025, the Company recognized the impairment on operating lease assets of $238 thousand and contingent accrual for legal settlements of $217 thousand. During the year ended December 31, 2024, 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.
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.
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 the consolidation of two branches into one location in Orange County, California in 2024.
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.respectively, for the years ended December 31, 2024 and 2023. In addition, during the year ended December 31, 2024, 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 ultimatelydetermined determinedby the SBA 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.guarantee.
Year Ended December 31, 2023 Compared to Year Ended December 31, 2022
Salaries and employee benefits increased primarily due to increases in wages and other employee benefits, partially offset by decreases in bonus and vacation accruals, and 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 272.5 for the year ended December 31, 2023 compared to 268.3 for the year ended December 31, 2022.
What changed in the latest 10-Q
Risk Factors
Management is not aware of any material changes to the risk factors that appeared under “Part I, Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. You should carefully consider such risks and the other information in this Quarterly Report on Form 10-Q, any of which could materially and adversely affect the Company’s business, financial condition, results of operations and stock price. The risks described in this Quarterly Report on Form 10-Q and in the Annual Report on Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not presently known to management or that management presently believes not to be material may also result in material and adverse effects on the Company’s business, financial condition, and results of operations.
No wording changes found in this section.
Full comparison: every changed paragraph (0)
Management's Discussion & Analysis (MD&A)
New heading “(2) The yield on municipal bonds has not been computed on a tax-equivalent basis.”
New heading “(3) Net interest spread is calculated by subtracting average rate on interest-bearing liabilities from average yield on interest-earning assets.”
New heading “(4) Net interest margin is calculated by dividing net interest income by average interest-earning assets.”
New heading “(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.”
New heading “(6) Annualized.”
New heading “(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 $710 thousand and $680 thousand, respectively, and net accretion of discount on loans of $1.1 million and $1.5 million, respectively, are included in the interest income for the six months ended June 30, 2026 and 2025.”
New heading “Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025”
New heading “Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025”
New heading “Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025”
Largest changes
“(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 $710 thousand and $680 thousand, respectively, and net accretion of discount on loans of $1.1 million and $1.5 million, respectively, are included in the interest income for the six months ended June 30, 2026 and 2025.”see in full comparison
“The decrease in quantitatively measured loss reserve requirement was primarily due to an improved year-over-year change in real GDP forecast. The Company utilizes year-over-year change in real GDP and unemployment rate forecasts published by the Federal Open Market Committee (“FOMC”). The 2026 year-end year-over-year change in forecasted real GDP increased to 2.4% in the March 2026 FOMC meeting from 2.3% in December 2025. The forecasted year-end national unemployment rate was maintained at 4.4% in both March 2026 and December 2025 FOMC meetings. …”see in full comparison
“Quantitatively measured expected credit loss reserve decreased for the six months ended June 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.”see in full comparison
“(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.”see in full comparison
“(3) Net interest spread is calculated by subtracting average rate on interest-bearing liabilities from average yield on interest-earning assets.”see in full comparison
“(4) Net interest margin is calculated by dividing net interest income by average interest-earning assets.”see in full comparison
Full comparison: every changed paragraph (80)
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 six months ended MarchJune 31,30, 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.
Within the various economic scenarios considered as of MarchJune 31,30, 2026, the quantitative estimate of the ACL would increase by approximately $20.7$21.4 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 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.
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.
•Net income available for common shareholders was $10.6$10.4 million for the three months ended MarchJune 31,30, 2026, an increase of $2.9$1.4 million, or 37.3%,16.0%, from $7.7$9.0 million for the three months ended MarchJune 31,30, 2025;
▪Recorded a provision for credit losses of $467$926 thousand for the three months ended MarchJune 31,30, 2026 compared with $1.6$1.8 million for the three months ended MarchJune 31,30, 2025;
▪ACL on loans to loans held-for-investment ratio was 1.18% at MarchJune 31,30, 2026 compared with 1.18% at December 31, 2025;
•Net interest income was $26.8$27.5 million for the three months ended MarchJune 31,30, 2026 compared with $24.3$26.0 million for the three months ended MarchJune 31,30, 2025. Net interest margin was 3.36%3.33% for the three months ended MarchJune 31,30, 2026 compared with 3.28%3.33% for the three months ended MarchJune 31,30, 2025;
•Gain on sale of loans was $1.4$1.2 million for the three months ended MarchJune 31,30, 2026 compared with $887$1.5 thousandmillion for the three months ended MarchJune 31,30, 2025;
•Total assets were $3.40$3.47 billion at MarchJune 31,30, 2026, an increase of $114.4$188.4 million, or 3.5%,5.7%, from $3.28 billion at December 31, 2025;
•Loans held-for-investment were $2.87$2.93 billion at MarchJune 31,30, 2026, an increase of $53.2$111.6 million, or 1.9%,4.0%, from $2.82 billion at December 31, 2025; and
•Total deposits were $2.89$2.92 billion at MarchJune 31,30, 2026, an increase of $92.6$127.2 million, or 3.3%,4.6%, from $2.80 billion at December 31, 2025.
(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 $353$357 thousand and $266$414 thousand, respectively, and net accretion of discount on loans of $517$584 thousand and $872$610 thousand, respectively, are included in the interest income for the three months ended MarchJune 31,30, 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.
(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 $710 thousand and $680 thousand, respectively, and net accretion of discount on loans of $1.1 million and $1.5 million, respectively, are included in the interest income for the six months ended June 30, 2026 and 2025.
Three Months Ended MarchJune 31,30, 2026 Compared to Three Months Ended MarchJune 31,30, 2025
Net interest income increased primarily due to a 7.7%5.8% increase in average balance of interest-earning assets and a 4638 basis point decrease in average cost, partially offset by ana 8.9%6.4% increase in average balance of interest-bearing liabilities and a 2125 basis point decrease in average yield.
Interest and fees on loans increased primarily due to a 7.2%3.7% increase in average balance, partially offset by aan 2418 basis point decrease in average yield. The decrease in average yield was primarily due to decreases in market rates andrates, net accretion of discount on loans,loans partially offset by an increase inand net amortization of deferred loan fees.
Interest on investment securities increased primarily due to aan 9.7%18.3% increase in average balance and a 715 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 MarchJune 31,30, 2026 and 2025, the average yield on total investment securities was 3.97%4.03% and 3.90%,3.88%, respectively.
Interest income on other interest-earning assets increaseddecreased primarily due to a 12.8%94 basis point decrease in average yield, partially offset by a 24.3% increase in average balance. The decrease in interest rate on cash held at the Federal Reserve Bank was offset by an increase in dividend received on FHLB stock. For the three months ended MarchJune 31,30, 2026 and 2025, the average yield on total other interest-earning assets was 4.76%3.79% and 4.76%,4.73%, respectively.
Interest expense on deposits decreased primarily due to a 4637 basis point decrease in average cost of interest-bearing deposits, partially offset by a 6.5%6.4% 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 MarchJune 31,30, 2026 and 2025, average cost on total interest-bearing deposits was 3.82%3.76% and 4.28%,4.13%, respectively, and average cost on total deposits were 3.10%3.05% and 3.44%,3.32%, respectively.
Interest expense on other borrowings increased primarily due to a $52.1 million7.1% increase in average balance, partially offset by a 7163 basis point decrease in average cost.
Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025
The following table presents the components of net interest income for the periods indicated:
Net interest income increased primarily due to a 6.7% increase in average balance of interest-earning assets and a 42 basis point decrease in average cost, partially offset by a 7.6% increase in average balance of interest-bearing liabilities and a 23 basis point decrease in average yield.
Interest and fees on loans increased primarily due to a 5.4% increase in average balance, partially offset by a 21 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 14.1% increase in average balance and an 11 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 six months ended June 30, 2026 and 2025, the average yield on total investment securities was 4.00% and 3.89%, respectively.
Interest income on other interest-earning assets increased primarily due to an 18.5% increase in average balance, partially offset by a 48 basis point decrease in average yield. 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 six months ended June 30, 2026 and 2025, the average yield on total other interest-earning assets was 4.26% and 4.74%, respectively.
Interest expense on deposits decreased primarily due to a 41 basis point decrease in average cost of interest-bearing deposits, partially offset by a 6.4% increase in average balance of interest-bearing deposits. The decrease in average cost was primarily due to a decrease in market rates. For the six months ended June 30, 2026 and 2025, average cost on total interest-bearing deposits was 3.79% and 4.20%, respectively, and average cost on total deposits were 3.07% and 3.38%, respectively.
Interest expense on other borrowings increased primarily due to a 75.3% increase in average balance, partially offset by a 64 basis point decrease in average cost.
Provision for credit losses for the three and six months ended MarchJune 31,30, 2026 was primarily due to increasesgrowth in loans held-for-investment and overall reserve related to qualitative adjustment factors, partially offset by decreases in quantitatively measured loss reserve requirement and reserves on individually evaluated loans.held-for-investment. See further discussion in “Loans Held-For-Investment and Allowance for Credit Losses.”
Three Months Ended MarchJune 31,30, 2026 Compared to Three Months Ended MarchJune 31,30, 2025
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 $417$441 thousand and $549$490 thousand, respectively, for the three months ended MarchJune 31,30, 2026 and 2025.
Gain on sale of loans increaseddecreased primarily due to ana increasedecrease in sale volume, partially offset by aan decreaseincrease in level of premium on SBA loans in the secondary market. The Company sold SBA loans of $21.8$17.1 million with a gain of $1.4$1.2 million and a certain commercial property loan of $1.1 million with a loss of $37 thousand during the three months ended June 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 three months ended MarchJune 31,30, 2025, the Company sold SBA loans of $16.6$26.9 million with a gain of $887$1.5 thousand.million.
Other income primarily included wire transfer fees of $169$181 thousand and $153$173 thousand, respectively, and debit card interchange fees of $102$109 thousand and $86$117 thousand, respectively, for the three months ended MarchJune 31,30, 2026 and 2025.
Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025
The following table presents the components of noninterest income for the periods indicated:
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 $858 thousand and $1.0 million, respectively, for the six months ended June 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 $38.9 million with a gain of $2.6 million and a certain commercial property loan of $1.1 million with a loss of $37 thousand during the six months ended June 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 six months ended June 30, 2025, the Company sold SBA loans of $43.6 million with a gain of $2.4 million.
Other income primarily included wire transfer fees of $350 thousand and $326 thousand, respectively, and debit card interchange fees of $211 thousand and $203 thousand, respectively, for the six months ended June 30, 2026 and 2025.
Three Months Ended MarchJune 31,30, 2026 Compared to Three Months Ended MarchJune 31,30, 2025
Salaries and employee benefits increased primarily due to increases in salariessalaries, bonus and vacation accruals, and group insurance, and a decrease in loan origination cost, which offsets and defers the recognition of salaries and benefits expense.insurance. The number of full-time equivalent employees was 264274 at MarchJune 31,30, 2026 compared to 257266 at MarchJune 31,30, 2025.
Professional fees decreased primarily due to additional professional fees incurred related to evaluating the accounting for a preferred stock purchase option during the three months ended June 30, 2025.
Marketing and business promotion increaseddecreased primarily due to ana increasedecrease in advertising.
Other expenses included $86$143 thousand and $92$132 thousand in loan related expenses, $370$476 thousand and $478$613 thousand in office operating expense, and $180$205 thousand and $183$179 thousand in armed guard expense for the three months ended MarchJune 31,30, 2026 and 2025, respectively. During the three months ended MarchJune 31,30, 2025, the Company recognized an impairment on operating lease assets of $146$82 thousand for a sublease contract and recognition of contingent liabilities for legal settlements of $183 thousand.contract.
Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025
The following table presents the components of noninterest expense for the periods indicated:
Salaries and employee benefits increased primarily due to increases in salaries, bonus and vacation accruals, and group insurance. The number of full-time equivalent employees was 274 at June 30, 2026 compared to 266 at June 30, 2025.
Professional fees decreased primarily due to additional professional fees incurred related to evaluating the accounting for a preferred stock purchase option during the six months ended June 30, 2025.
Other expenses included $229 thousand and $224 thousand in loan related expenses, $846 thousand and $1.1 million in office operating expense, and $385 thousand and $362 thousand in armed guard expense for the six months ended June 30, 2026 and 2025, respectively. During the six months ended June 30, 2025, the Company recognized an impairment on operating lease assets of $228 thousand for a sublease contract and recognition of contingent liabilities for legal settlements of $183 thousand.
Income tax expense was $4.3$4.2 million and $3.1$3.6 million, respectively, and the effective tax rate was 28.5%28.3% and 28.3%,28.4%, respectively, for the three months ended MarchJune 31,30, 2026 and 2025. For the six months ended June 30, 2026 and 2025, income tax expense was $8.4 million and $6.7 million, respectively, and the effective tax rate was 28.4% and 28.4%, respectively.
The fair value of total investment securities available-for-sale were $170.5$184.3 million at MarchJune 31,30, 2026, an increase of $10.5$24.3 million, or 6.5%,15.2%, from $160.0 million at December 31, 2025. The increase was primarily due to purchases of $18.7$41.0 million, partially offset by principal paydowns of $6.9$14.8 million, net premium amortization of $24$72 thousand, and a decrease in fair value of securities available-for-sale of $1.3$1.8 million.
As of MarchJune 31,30, 2026 and December 31, 2025, 95.8%96.1% 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 MarchJune 31,30, 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 MarchJune 31,30, 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 MarchJune 31,30, 2026 and December 31, 2025.
As of MarchJune 31,30, 2026 and December 31, 2025, the Company recorded no ACL on securities available-for-sale.
Loans held-for-sale were $3.6$2.9 million at MarchJune 31,30, 2026, a decrease of $8.5$9.1 million, or 70.2%,75.7%, from $12.1 million at December 31, 2025. The decrease was primarily due to sales of $21.8$40.0 million and pay-offs and pay-downs of $149$258 thousand, partially offset by new funding of $12.4$30.0 million and a nonaccrual loan transferred from loans held-for-investment of $1.1 million.
Loans held-for-investment were $2.87$2.93 billion at MarchJune 31,30, 2026, an increase of $53.2$111.6 million, or 1.9%,4.0%, from $2.82 billion at December 31, 2025. The increase was primarily due to new funding of term loans of $112.9 million and net increase of lines of credit of $20.1$290.9 million, partially offset by pay-downs and pay-offs of term loans of $78.7$154.5 million, net decrease of lines of credit of $23.6 million, charge-offs of $76$94 thousandthousand, and a nonaccrual loan transferred to loans held-for-sale of $1.1 million.
PCB insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 0 filings. Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-08-28 | Kim Henry |
Option exercise | 1,000 | $14.75 | $14.8K |
| 2026-08-19 | Kim Henry |
Option exercise | 3,000 | $14.75 | $44.2K |
| 2026-08-17 | Kim Henry |
Option exercise | 3,000 | $14.75 | $44.2K |
Well-known investors holding PCB (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Renaissance Technologies | 2026-06-30 | 71,102 | $2.0M | 0.0% | Reduced 4% |
| AQR Capital Management (Cliff Asness) | 2026-06-30 | 63,243 | $1.8M | 0.0% | Added 11% |
| Millennium Management (Israel Englander) | 2026-06-30 | 7,709 | $218.7K | 0.0% | Reduced 64% |