Regulatory Matters

9 Months Ended

Sep. 30, 2020

Under the final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (“Basel III rules”), the Bank must hold a capital conservation buffer of 2.50% above the adequately capitalized risk-based capital ratios. Management believes as of September 30, 2020 and December 31, 2019, the Bank met all capital adequacy requirements to which they are subject to. Based on changes to the Federal Reserve’s definition of a “Small Bank Holding Company” that increased the threshold to $3 billion in assets in August 2018, the Company is not currently subject to separate minimum capital measurements. At such time as the Company reaches the $3 billion asset level, it will again be subject to capital measurements independent of the Bank. For comparison purposes, the Company’s ratios are included in following discussion as well, all of which would have exceeded the “well-capitalized” level had the Company been subject to separate capital minimums. The Company and the Bank’s capital conservation buffer was 8.86% and 8.60%, respectively, as of September 30, 2020, and 8.90% and 8.71%, respectively, as of December 31, 2019. Unrealized gain or loss on securities available-for-sale is not included in computing regulatory capital. The following table presents the regulatory capital amounts and ratios for the Company and the Bank as of dates indicated:


	Actual				Minimum Capital Requirement				To Be Well Capitalized Under Prompt Corrective Provisions
($ in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
September 30, 2020
PCB Bancorp
Common tier 1 capital (to risk-weighted assets)	$	226,728	15.60	%	$	65,404	4.5	%	N/A		N/A
Total capital (to risk-weighted assets)	244,978		16.86	%	116,274		8.0	%	N/A		N/A
Tier 1 capital (to risk-weighted assets)	226,728		15.60	%	87,206		6.0	%	N/A		N/A
Tier 1 capital (to average assets)	226,728		11.40	%	79,532		4.0	%	N/A		N/A
Pacific City Bank
Common tier 1 capital (to risk-weighted assets)	$	222,960	15.34	%	$	65,401	4.5	%	$	94,468	6.5	%
Total capital (to risk-weighted assets)	241,209		16.60	%	116,269		8.0	%	145,336		10.0	%
Tier 1 capital (to risk-weighted assets)	222,960		15.34	%	87,202		6.0	%	116,269		8.0	%
Tier 1 capital (to average assets)	222,960		11.21	%	79,529		4.0	%	99,412		5.0	%
December 31, 2019
PCB Bancorp
Common tier 1 capital (to risk-weighted assets)	$	226,069	15.87	%	$	64,087	4.5	%	N/A		N/A
Total capital (to risk-weighted assets)	240,750		16.90	%	113,933		8.0	%	N/A		N/A
Tier 1 capital (to risk-weighted assets)	226,069		15.87	%	85,450		6.0	%	N/A		N/A
Tier 1 capital (to average assets)	226,069		13.23	%	68,355		4.0	%	N/A		N/A
Pacific City Bank
Common tier 1 capital (to risk-weighted assets)	$	223,241	15.68	%	$	64,084	4.5	%	$	92,566	6.5	%
Total capital (to risk-weighted assets)	237,922		16.71	%	113,928		8.0	%	142,410		10.0	%
Tier 1 capital (to risk-weighted assets)	223,241		15.68	%	85,446		6.0	%	113,928		8.0	%
Tier 1 capital (to average assets)	223,241		13.06	%	68,354		4.0	%	85,442		5.0	%

The California Financial Code provides that a bank may not make a cash distribution to its shareholders in excess of the lesser of the bank’s undivided profits or the bank’s net income for its last three fiscal years less the amount of any distribution made to the bank’s shareholder during the same period. As a California corporation, the Company is subject to the limitations of California law, which allows a corporation to distribute cash or property to shareholders, including a dividend or repurchase or redemption of shares, if the corporation meets either a retained earnings test or a “balance sheet” test. Under the retained earnings test, the Company may make a distribution from retained earnings to the extent that its retained earnings exceed the sum of (a) the amount of the distribution plus (b) the amount, if any, of dividends in arrears on shares with preferential dividend rights. The Company may also make a distribution if, immediately after the distribution, the value of its assets equals or exceeds the sum of (a) its total liabilities plus (b) the liquidation preference of any shares which have a preference upon dissolution over the rights of shareholders receiving the distribution. Indebtedness is not considered a liability if the terms of such indebtedness provide that payment of principal and interest thereon are to be made only if, and to the extent that, a distribution to shareholders could be made under the balance sheet test.

The Federal Reserve, the Federal Deposit Insurance Corporation (the “FDIC”) and the California Department of Financial Protection and Innovation (the “CDFPI”) periodically examine the Company’s business, including compliance with laws and regulations. If, as a result of an examination, a banking agency were to determine that the Company’s financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of any of the Company’s operations had become unsatisfactory, or that the Company was in violation of any law or regulation, they may take a number of different remedial actions as they deem appropriate. These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative action to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in Company’s capital, to restrict growth, to assess civil money penalties, to fine or remove officers and directors and, if it is concluded that such conditions cannot be corrected or there is an imminent risk of loss to depositors, to terminate the Company’s deposit insurance and place the Company into receivership or conservatorship.

On April 30, 2019, the FDIC, the CDFPI and the Bank entered into a stipulation consenting to the issuance of a consent order (the “Order”) relating to the Bank’s BSA/AML. Subsequent to the Order, the Bank implemented many actions to respond to the requirements of the Order and submitted all required reports to the FDIC and CDFPI. On September 30, 2020, the FDIC and CDFPI terminated the Order upon the Bank