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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                   to                  
Commission file number 001-38621
PCB BANCORP
(Exact name of registrant as specified in its charter)
California20-8856755
(State or other jurisdiction of incorporation or organization)(IRS Employer Identification No.)
3701 Wilshire Boulevard, Suite 900, Los Angeles, California 90010
(Address of principal executive offices) (Zip Code)
(213) 210-2000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stock, no par valuePCBNasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
Accelerated filer
Non-accelerated filer
(Do not check if a smaller reporting company)Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.) Yes No
As of April 28, 2022, the registrant had outstanding 14,951,760 shares of common stock.



PCB Bancorp and Subsidiary
Quarterly Report on Form 10-Q
March 31, 2022
Table of Contents
Part I - Financial Information
Item 1.
Item 2.
Item 3.
Item 4.
Part II - Other Information
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.


2


Forward-looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements which reflect current views of PCB Bancorp, (collectively, with its consolidated subsidiary, the “Company,” “we,” “us” or “our”) with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “might,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “goal,” “target,” “aim,” “would,” and “annualized” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.
A number of important factors could cause our actual results to differ materially from those indicated in these forward-looking statements, but are not limited to, the following:
business and economic conditions, particularly those affecting the financial services industry and our primary market areas and arising from current COVID-19 pandemic and governmental and societal responses thereto;
our ability to successfully manage our credit risk and the sufficiency of our allowance for loan loss;
factors that can impact the performance of our loan portfolio, including real estate values and liquidity in our primary market areas, the financial health of our commercial borrowers and the success of construction projects that we finance and our borrowers' actual payment performance as loan deferrals related to the COVID-19 pandemic expire;
governmental monetary and fiscal policies, and changes in market interest rates;
the current inflationary environment and government and regulatory responses thereto;
compliance with governmental and regulatory requirements, including the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), the Economic Aid to Hard-Hit Small Businesses, Nonprofits, and Venues Act of 2020, the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Economic Growth, Regulatory Relief and Consumer Protection Act and others relating to banking, consumer protection, securities and tax matters including, but not limited to the potential adverse impact of loan modifications and payment deferrals implemented consistent with recent regulatory guidance;
the significant portion of our loan portfolio that is comprised of real estate loans;
our ability to attract and retain Korean-American customers;
our ability to identify and address cyber-security risks, fraud and systems errors;
our ability to effectively execute our strategic plan and manage our growth;
changes in our senior management team and our ability to attract, motivate and retain qualified personnel;
cyber-attacks, ransomware attacks, computer viruses or other malware that may breach the security of our websites or other systems to obtain unauthorized access to confidential information, destroy data, disable or degrade service, or sabotage our systems;
liquidity issues, including fluctuations in the fair value and liquidity of the securities we hold for sale and our ability to raise additional capital, if necessary;
costs and obligations associated with operating as a public company;
effects of competition from a wide variety of local, regional, national and other providers of financial, investment and insurance services;
the effects of severe weather, natural disasters, acts of war or terrorism, health epidemics or pandemics (or expectations about them) and other external events on our business;
the impact of any claims or legal actions to which we may be subject, including any effect on our reputation; and
changes in federal tax law or policy.

3


The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements and the risks described under “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 and our other documents filed with the United States (“U.S.”) Securities Exchange Commission (“SEC”). Because of these risks and other uncertainties, our actual future results, performance or achievement, or industry results, may be materially different from the results indicated by the forward looking statements in this report. In addition, our past results of operations are not necessarily indicative of our future results. You should not rely on any forward looking statements, which represent our beliefs, assumptions and estimates only as of the dates on which they were made, as predictions of future events. Any forward-looking statement speaks only as of the date on which it is initially made, and we do not undertake any obligation to update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.
4


Part I - Financial Information
Item 1 - Consolidated Financial Statements

PCB Bancorp and Subsidiary
Consolidated Balance Sheets
($ in thousands, except share data)
March 31, 2022December 31, 2021
(Unaudited)
Assets
Cash and due from banks
$19,693 $15,222 
Interest-bearing deposits in other financial institutions
230,519 188,063 
Total cash and cash equivalents
250,212 203,285 
Securities available-for-sale, at fair value
131,345 123,198 
Loans held-for-sale
18,340 37,026 
Loans held-for-investment, net of deferred loan costs (fees)
1,742,955 1,732,205 
Allowance for loan losses
(21,198)(22,381)
Net loans held-for-investment
1,721,757 1,709,824 
Premises and equipment, net
3,106 3,098 
Federal Home Loan Bank and other restricted stock, at cost
8,577 8,577 
Bank-owned life insurance29,530 29,358 
Deferred tax assets, net
11,895 10,824 
Servicing assets
7,533 7,269 
Operating lease assets
6,511 6,786 
Accrued interest receivable
5,050 5,368 
Other assets
5,886 5,122 
Total assets
$2,199,742 $2,149,735 
Liabilities and Shareholders’ Equity
Deposits:
Noninterest-bearing demand
$891,797 $830,383 
Savings, NOW and money market accounts
463,638 422,526 
Time deposits of $250,000 or less
281,100 341,956 
Time deposits of more than $250,000
273,844 272,269 
Total deposits
1,910,379 1,867,134 
Federal Home Loan Bank advances
10,000 10,000 
Operating lease liabilities
7,176 7,444 
Accrued interest payable and other liabilities
11,129 8,871 
Total liabilities
1,938,684 1,893,449 
Commitments and contingencies
Preferred stock, 10,000,000 shares authorized, no par value, no issued and outstanding shares
  
Common stock, 60,000,000 shares authorized, no par value; 14,944,663 and 14,865,825 shares issued and outstanding, respectively, and included 68,822 and 55,284 shares of unvested restricted stock, respectively, at March 31, 2022 and December 31, 2021
155,614 154,992 
Retained earnings
109,142 101,140 
Accumulated other comprehensive income (loss), net(3,698)154 
Total shareholders’ equity
261,058 256,286 
Total liabilities and shareholders’ equity
$2,199,742 $2,149,735 
See Accompanying Notes to Consolidated Financial Statements (Unaudited)
5


PCB Bancorp and Subsidiary
Consolidated Statements of Income (Unaudited)
($ in thousands, except share and per share data)
Three Months Ended March 31,
20222021
Interest and dividend income:
Loans, including fees$20,190 $18,744 
Tax-exempt investment securities36 36 
Taxable investment securities440 324 
Other interest-earning assets228 154 
Total interest income
20,894 19,258 
Interest expense:
Deposits850 1,311 
Other borrowings51 128 
Total interest expense
901 1,439 
Net interest income
19,993 17,819 
Reversal for loan losses(1,191)(1,147)
Net interest income after reversal for loan losses21,184 18,966 
Noninterest income:
Service charges and fees on deposits
303 293 
Loan servicing income
700 882 
Bank-owned life insurance income172  
Gain on sale of loans
3,777 1,322 
Other income
334 360 
Total noninterest income
5,286 2,857 
Noninterest expense:
Salaries and employee benefits
8,595 6,182 
Occupancy and equipment
1,397 1,371 
Professional fees
403 494 
Marketing and business promotion
207 138 
Data processing
404 377 
Director fees and expenses
169 138 
Regulatory assessments
141 208 
Other expenses
755 761 
Total noninterest expense
12,071 9,669 
Income before income taxes
14,399 12,154 
Income tax expense
4,159 3,594 
Net income
$10,240 $8,560 
Earnings per common share, basic
$0.69 $0.55 
Earnings per common share, diluted
$0.67 $0.55 
Weighted-average common shares outstanding, basic
14,848,014 15,384,343 
Weighted-average common shares outstanding, diluted
15,141,693 15,533,608 
See Accompanying Notes to Consolidated Financial Statements (Unaudited)
6


PCB Bancorp and Subsidiary
Consolidated Statements of Comprehensive Income (Unaudited)
($ in thousands)
Three Months Ended March 31,
20222021
Net income$10,240 $8,560 
Other comprehensive loss:
Unrealized loss on securities available-for-sale arising during the period(5,467)(1,556)
Income tax benefit related to items of other comprehensive loss1,615 458 
Total other comprehensive loss, net of tax(3,852)(1,098)
Total comprehensive income$6,388 $7,462 
See Accompanying Notes to Consolidated Financial Statements (Unaudited)
7


PCB Bancorp and Subsidiary
Consolidated Statements of Changes in Shareholders’ Equity (Unaudited)
($ in thousands, except share and per share data)
Shareholders Equity
Common Stock
Outstanding Shares
Common StockRetained EarningsAccumulated Other Comprehensive Income (Loss)Total
Balance at January 1, 202115,385,878 $164,140 $67,692 $1,956 $233,788 
Comprehensive income (loss)
Net income
— — 8,560 — 8,560 
Other comprehensive loss, net of tax— — — (1,098)(1,098)
Issuance of restricted stock33,784 — — — — 
Forfeiture of restricted stock(1,000)— — — — 
Share-based compensation expense
— 90 — — 90 
Stock options exercised
49,580 468 — — 468 
Cash dividends declared on common stock ($0.10 per share)
— — (1,545)— (1,545)
Balance at March 31, 202115,468,242 $164,698 $74,707 $858 $240,263 
Balance at January 1, 202214,865,825 $154,992 $101,140 $154 $256,286 
Comprehensive income (loss)
Net income
— — 10,240 — 10,240 
Other comprehensive loss, net of tax— — — (3,852)(3,852)
Issuance of restricted stock25,000 — — — — 
Forfeiture of restricted stock(200)— — — — 
Share-based compensation expense
— 141 — — 141 
Stock options exercised
54,038 481 — — 481 
Cash dividends declared on common stock ($0.15 per share)
— — (2,238)— (2,238)
Balance at March 31, 202214,944,663 $155,614 $109,142 $(3,698)$261,058 
See Accompanying Notes to Consolidated Financial Statements (Unaudited)

8


PCB Bancorp and Subsidiary
Consolidated Statements of Cash Flows (Unaudited)
($ in thousands)
Three Months Ended March 31,
20222021
Cash flows from operating activities
Net income$10,240 $8,560 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of premises and equipment309 368 
Net amortization of premiums on securities135 310 
Net accretion of discounts on loans(908)(745)
Net accretion of deferred loan fees(1,165)(1,220)
Amortization of servicing assets531 391 
Reversal for loan losses(1,191)(1,147)
Bank-owned life insurance income(172) 
Deferred tax expense544 408 
Stock-based compensation141 90 
Gain on sale of loans(3,777)(1,322)
Originations of loans held-for-sale(21,240)(20,425)
Proceeds from sales of and principal collected on loans held-for-sale43,894 20,150 
Change in accrued interest receivable and other assets(780)1,467 
Change in accrued interest payable and other liabilities2,601 1,905 
Net cash provided by operating activities29,162 8,790 
Cash flows from investing activities
Purchase of securities available-for-sale(19,915)(20,223)
Proceeds from maturities and paydowns of securities available-for-sale6,166 11,770 
Net change in loans held-for-investment(9,655)(101,500)
Proceeds from sale of other real estate owned 1,100 
Purchases of premises and equipment(319)(98)
Net cash used in investing activities(23,723)(108,951)
Cash flows from financing activities
Net change in deposits43,245 158,920 
Repayment of long-term Federal Home Loan Bank advances (40,000)
Stock options exercised481 468 
Cash dividends paid on common stock(2,238)(1,545)
Net cash provided by financing activities41,488 117,843 
Net increase in cash and cash equivalents46,927 17,682 
Cash and cash equivalents at beginning of period203,285 194,098 
Cash and cash equivalents at end of period$250,212 $211,780 
See Accompanying Notes to Consolidated Financial Statements (Unaudited)
9


PCB Bancorp and Subsidiary
Consolidated Statements of Cash Flows, Continued (Unaudited)
(in thousands)
Three Months Ended March 31,
20222021
Supplemental disclosures of cash flow information:
Interest paid
$1,102 $2,678 
Income taxes paid
36 24 
Supplemental disclosures of non-cash investment activities:
Loans transferred to other real estate owned
 905 
Right of use assets obtained in exchange for lease obligations
335 105 
See Accompanying Notes to Consolidated Financial Statements (Unaudited)

10


PCB Bancorp and Subsidiary
Notes to Consolidated Financial Statements (Unaudited)
Note 1 - Basis of Presentation and Significant Accounting Policies
Nature of Operations
PCB Bancorp is a bank holding company whose subsidiary is Pacific City Bank (the “Bank”), which is a single operating segment. As of March 31, 2022, the Bank operated 11 full-service branches and two regional offices in Los Angeles and Orange counties, California, one full-service branch in each of Englewood Cliffs, New Jersey and Bayside, New York, and 7 out-of-state loan production offices (“LPOs”) in Annandale, Virginia; Atlanta, Georgia; Chicago, Illinois; Bellevue, Washington; Aurora, Colorado; and Carrollton, Texas. The Bank offers a broad range of loans, deposits, and other products and services predominantly to small and middle market businesses and individuals.
Basis of Presentation
The accompanying unaudited interim consolidated financial statements have been prepared pursuant to Article 10 of SEC Regulation S-X and other SEC rules and regulations for reporting on the Quarterly Report on Form 10-Q. Accordingly, certain disclosures required by U.S. generally accepted accounting principles (“GAAP”) are not included herein. These interim statements should be read in conjunction with the audited consolidated financial statements and notes included in the Annual Report on Form 10-K for the year ended December 31, 2021 filed by the Company with the SEC. The December 31, 2021 balance sheet presented herein has been derived from the audited financial statements included in the Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC, but does not include all of the disclosures required by GAAP for complete financial statements.
In the opinion of management of the Company, the accompanying unaudited interim consolidated financial statements reflect all of the adjustments (consisting of normal recurring adjustments) necessary for a fair presentation of the consolidated financial condition and consolidated results of operations as of the dates and for the periods presented. Certain reclassifications have been made in the prior period financial statements to conform to the current period presentation. The results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.
Principles of Consolidation
The consolidated financial statements include the accounts of PCB Bancorp and its wholly owned subsidiary as of March 31, 2022 and December 31, 2021, and for the three months ended March 31, 2022 and 2021. Significant inter-company accounts and transactions have been eliminated in consolidation. Unless the context requires otherwise, all references to the Company include its wholly owned subsidiary.
Significant Accounting Policies
The accounting and reporting policies of the Company are based upon GAAP and conform to predominant practices within the banking industry. The Company has not made any significant changes in its critical accounting policies from those disclosed in its Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC.
Use of Estimates in the Preparation of Financial Statements
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. These estimates are subject to change and such change could have a material effect on the consolidated financial statements. Actual results may differ from those estimates.

11


Loan Modifications Related to the COVID-19 Pandemic
As a part of the CARES Act, the temporary relief from troubled debt restructurings (“TDRs”) provided an option for financial institutions to suspend the GAAP requirements and regulatory determinations for loan modifications related to the COVID-19 pandemic that would otherwise be categorized as a TDR from March 1, 2020, through the earlier of 60 days after the date of the COVID-19 National Emergency comes to an end or December 31, 2020, if the loan was not more than 30 days past due as of December 31, 2019.
On April 7, 2020, the federal banking regulators also issued the Interagency Statement to encourage banks to work prudently with borrowers and describe the banking regulators’ interpretation of how accounting rules for TDR apply to certain modifications related to the COVID-19 pandemic.
On December 27, 2020, the Economic Aid Act was signed into law, which extended the applicable period of the temporary relief from TDRs under the CARES Act to the earlier of 60 days after the date of the COVID-19 National Emergency comes to an end or January 1, 2022.
As of March 31, 2022 and December 31, 2021, the Company had no loans under modified terms related to the COVID-19 pandemic. All loans under modified terms related to the COVID-19 pandemic were accounted for under section 4013 of the CARES Act and not considered TDRs. All types of modifications had initial modification terms of 6-months or less and loans that were granted modifications related to the COVID-19 pandemic in excess of 6 months, on a cumulative basis, were classified as special mention or substandard. All of these loans were monitored on an ongoing basis in accordance with each loan’s covenants and conditions for potential changes in risk rating or accrual status.
Small Business Administration Paycheck Protection Program
The Small Business Administration (“SBA”) launched the Paycheck Protection Program (“PPP”) to provide a direct incentive for small businesses to keep their workers on the payroll in response to the COVID-19 pandemic. The SBA guarantees 100% of the PPP loans made to eligible borrowers, and the loans are eligible to be forgiven if certain conditions are met, at which point the SBA will make payments to the Bank for the forgiven amounts. These loans are included in the commercial and industrial loans portfolio and have an interest rate of 1%. The substantial majority of the SBA PPP loans funded in 2020 in the Company’s portfolio have a maturity of two years. On January 13, 2021, the SBA began accepting applications for second draw PPP loans. SBA PPP loans funded in 2021 have a maturity of five years. The Company defers loan origination fees on SBA PPP loans and amortizes these deferred fees and costs without prepayment assumption using the contractual lives of SBA PPP loans. As of March 31, 2022 and December 31, 2021, the Company had SBA PPP loans of $22.9 million and $65.3 million, respectively.
The SBA guarantee on PPP loans cannot be separated from the loan and therefore is not a separate unit of account. The Company considered the SBA guarantee in the allowance for loan losses evaluation and determined that it is not required to reserve an allowance on SBA PPP loans at March 31, 2022 and December 31, 2021.
12


Adopted Accounting Pronouncements
During the three months ended March 31, 2022, there were no significant accounting pronouncements applicable to the Company that became effective.
Recent Accounting Pronouncements Not Yet Adopted
The following is recently issued accounting pronouncements applicable to the Company that has not yet been adopted:
In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, “Financial Instruments-Credit Losses (Topic 326).” The amendments in this ASU require that entities change the impairment model for most financial assets that are measured at amortized cost and certain other instruments from an incurred loss model to an expected loss model. Under this model, entities will estimate credit losses over the entire contractual term of the instrument from the date of initial recognition of that instrument. It includes financial assets such as loan receivables, held-to-maturity debt securities, net investment in leases that are not accounted for at fair value through net income, and certain off-balance sheet credit exposures. This ASU was effective for public business entities that are SEC filers for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. In 2019, the FASB amended this ASU, which delays the effective date to 2023 for certain SEC filers that are Smaller Reporting Companies, which would apply to the Company. The Company plans to adopt this ASU, as well as any subsequent ASUs related to this ASU, at the delayed effective date of January 1, 2023.
The Company has formed a committee, developed an implementation plan, and engaged a software vendor to assist the Company to build a model. The Company is in the process of completing a readiness assessment and is engaged in the implementation phase of the project. The Company is working on: (i) developing a new expected loss model with supportable assumptions; (ii) identifying data, reporting, and disclosure gaps; (iii) assessing updates to accounting and credit risk policies; and (iv) documenting new processes and controls. Based on the Company’s initial assessment of this ASU, the Company expects to recognize a one-time cumulative effect adjustment to the allowance for loan losses which could potentially have a material impact on its consolidated financial statements as of the beginning of the first reporting period in which this ASU is effective.
In March 2022, the FASB issued ASU 2022-02, “Financial Instruments-Credit Losses (Topic 326) - Troubled Debt Restructuring and Vintage Disclosures.” The amendments in this ASU eliminates the accounting guidance for TDRs by creditors in ASC 310-40, Receivables - Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for restructurings involving borrowers that are experiencing financial difficulty. This Update also requires public business entities to disclose current-period gross write-offs by year of origination for financing receivables and net investments in leases. The Company will adopt this ASU at January 1, 2023, the effective date of ASU 2016-13.

13


Note 2 - Fair Value Measurements
Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value including a three-level valuation hierarchy, and expands disclosures about fair value measurements. Fair value is the exchange price that would be received for an asset or paid to transfer a liability (i.e. an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The three-level fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are defined as follows:
Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
Level 2: Significant observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
Fair value is measured on a recurring basis for certain assets and liabilities in which fair value is the primary basis of accounting. Additionally, fair value is used on a non-recurring basis to evaluate certain assets or liabilities for impairment or for disclosure purposes. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company records securities available-for-sale at fair value on a recurring basis. Certain other assets, such as loans held-for-sale, impaired loans, servicing assets and other real estate owned (“OREO”) are recorded at fair value on a non-recurring basis. Non-recurring fair value measurements typically involve assets that are periodically evaluated for impairment and for which any impairment is recorded in the period in which the re-measurement is performed. The following is a description of valuation methodologies used for assets and liabilities recorded at fair value:
Investment securities: The fair values of securities available-for-sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1) or matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2). Management reviews the valuation techniques and assumptions used by the provider and determines that the provider uses widely accepted valuation techniques based on observable market inputs appropriate for the type of security being measured. Securities held-to-maturity are not measured at fair value on a recurring basis.
Loans held-for-sale: The Company records SBA loans held-for-sale, residential property loans held-for-sale and certain non-residential real estate loans held-for-sale at the lower of cost or fair value, on an aggregate basis. The Company obtains fair values from a third party independent valuation service provider. Loans held-for-sale accounted for at the lower of cost or fair value are considered to be recognized at fair value when they are recorded at below cost, on an aggregate basis, and are classified as Level 2.
Impaired loans: Certain collateral-dependent impaired loans are recognized at fair value when they reflect partial write-downs, through charge-offs or specific reserve allowances, that are based on the current appraised or market-quoted value of the underlying collateral. In some cases, the properties for which market quotes or appraised values have been obtained are located in areas where comparable sales data is limited, outdated, or unavailable. Fair value estimates for collateral-dependent impaired loans are obtained from real estate brokers or other third-party consultants, and are classified as Level 3.
Other real estate owned: The Company initially records OREO at fair value at the time of foreclosure. Thereafter, OREO is recorded at the lower of cost or fair value based on their subsequent changes in fair value. The fair value of OREO is generally based on recent real estate appraisals adjusted for estimated selling costs. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments may be significant and result in a Level 3 classification due to the unobservable inputs used for determining fair value. Only OREO with a valuation allowance are considered to be carried at fair value.
Servicing Assets: Servicing assets represent the value associated with servicing loans that have been sold. The fair value for servicing assets is determined through discounted cash flow analysis and utilizes discount rates and prepayment speed assumptions as inputs. All of these assumptions require a significant degree of management estimation and judgment. The fair market valuation is performed on a quarterly basis for servicing assets. Servicing assets are accounted for at the lower of cost or market value and considered to be recognized at fair value when they are recorded at below cost and are classified as Level 3.
14


Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis as of dates indicated:
Fair Value Measurement Level
($ in thousands)
Quoted Prices in Active Markets for Identical Assets
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Total
March 31, 2022
Securities available-for-sale:
U.S. government agency and U.S. government sponsored enterprise securities:
Residential mortgage-backed securities
$ $82,232 $ $82,232 
Residential collateralized mortgage obligations
 27,097  27,097 
SBA loan pool securities
 11,627  11,627 
Municipal bonds
 5,471  5,471 
Corporate bonds 4,918  4,918 
Total securities available-for-sale
 131,345  131,345 
Total assets measured at fair value on a recurring basis
$ $131,345 $ $131,345 
Total liabilities measured at fair value on a recurring basis
$ $ $ $ 
December 31, 2021
Securities available-for-sale:
U.S. government agency and U.S. government sponsored enterprise securities:
Residential mortgage-backed securities
$ $84,713 $ $84,713 
Residential collateralized mortgage obligations
 19,056  19,056 
SBA loan pool securities
 8,672  8,672 
Municipal bonds
 5,686  5,686 
Corporate bonds 5,071  5,071 
Total securities available-for-sale
 123,198  123,198 
Total assets measured at fair value on a recurring basis
$ $123,198 $ $123,198 
Total liabilities measured at fair value on a recurring basis
$ $ $ $ 
15


Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
The following table presents the Company’s assets and liabilities measured at fair value on a non-recurring basis as of dates indicated:
Fair Value Measurement Level
($ in thousands)
Quoted Prices in Active Markets for Identical Assets
(Level 1)
Significant Other Observable Inputs
(Level 2)
Significant Unobservable Inputs
(Level 3)
Total
March 31, 2022
Total assets measured at fair value on a non-recurring basis
$ $ $ $ 
Total liabilities measured at fair value on a non-recurring basis
$ $ $ $ 
December 31, 2021
Impaired loans:
SBA property
$ $ $17 $17 
Total impaired loans
  17 17 
Total assets measured at fair value on a non-recurring basis
$ $ $17 $17 
Total liabilities measured at fair value on a non-recurring basis
$ $ $ $ 
The following table presents quantitative information about level 3 fair value measurements for assets measured at fair value on a non-recurring basis as of the date indicated:
($ in thousands)Fair ValueValuation Technique(s)Unobservable Input(s)Range (Weighted-Average)
December 31, 2021
Impaired loans:
SBA property
$17 Fair value of collateralNMNM
For assets measured at fair value, the following table presents the total net gains (losses), which include charge-offs, recoveries, and specific reserves recorded for the periods indicated:
Three Months Ended March 31,
($ in thousands)20222021
Collateral dependent impaired loans:
SBA property
$ $(17)
Commercial lines of credit
 136 
SBA commercial term
 (5)
Other real estate owned
 75 
Net gains (losses) recognized$ $189 
16


Fair Value of Financial Instruments
The following table presents the carrying value and estimated fair values of financial assets and liabilities as of the dates indicated:
Carrying Value
Fair Value
Fair Value Measurements
($ in thousands)Level 1Level 2Level 3
March 31, 2022
Financial assets:
Interest-bearing deposits in other financial institutions
$230,519 $230,519 $230,519 $ $ 
Securities available-for-sale
131,345 131,345  131,345  
Loans held-for-sale
18,340 20,286  20,286  
Net loans held-for-investment
1,721,757 1,726,579   1,726,579 
Federal Home Loan Bank (“FHLB”) and other restricted stock
8,577  N/A N/A N/AN/A
Accrued interest receivable
5,050 5,050 21 281 4,748 
Financial liabilities:
Deposits
$1,910,379 $1,908,619 $ $ $1,908,619 
FHLB advances
10,000 10,027  10,027  
Accrued interest payable
570 571  1 570 
December 31, 2021
Financial assets:
Interest-bearing deposits in other financial institutions
$188,063 $188,063 $188,063 $ $ 
Securities available-for-sale
123,198 123,198  123,198  
Loans held-for-sale
37,026 41,079  41,079  
Net loans held-for-investment
1,709,824 1,725,022   1,725,022 
FHLB and other restricted stock
8,577  N/A N/A N/A N/A
Accrued interest receivable
5,368 5,368 1 337 5,030 
Financial liabilities:
Deposits
$1,867,134 $1,867,635 $ $ $1,867,635 
FHLB advances
10,000 10,087  10,087  
Accrued interest payable
771 771  1 770 

17


Note 3 - Investment Securities
The following table presents the amortized cost and fair value of the securities available-for-sale as of the dates indicated:
($ in thousands)
Amortized Cost
Gross Unrealized GainGross Unrealized Loss
Fair Value
March 31, 2022
Securities available-for-sale:
U.S. government agency and U.S. government sponsored enterprise securities:
Residential mortgage-backed securities
$87,288 $3 $(5,059)$82,232 
Residential collateralized mortgage obligations
27,419 22 (344)27,097 
SBA loan pool securities
11,774 33 (180)11,627 
Municipal bonds
5,318 154 (1)5,471 
Corporate bonds5,000  (82)4,918 
Total securities available-for-sale
$136,799 $212 $(5,666)$131,345 
December 31, 2021
Securities available-for-sale:
U.S. government agency and U.S. government sponsored enterprise securities:
Residential mortgage-backed securities
$85,346 $625 $(1,258)$84,713 
Residential collateralized mortgage obligations
18,990 113 (47)19,056 
SBA loan pool securities
8,520 156 (4)8,672 
Municipal bonds
5,329 357  5,686 
Corporate bonds5,000 71  5,071 
Total securities available-for-sale
$123,185 $1,322 $(1,309)$123,198 
As of March 31, 2022 and December 31, 2021, pledged securities were $110.7 million and $