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Home›Pooling of interests›PCB BANCORP Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-K)

PCB BANCORP Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-K)

By Pia
March 4, 2022
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You should read the following discussion and analysis of financial condition and
results of operations together with the Consolidated Financial Statements and
accompanying notes included in Item 8 of this Annual Report on Form 10-K. This
discussion and analysis contains forward-looking statements that involve risks,
uncertainties and assumptions. Actual results may differ materially from those
anticipated in these forward-looking statements as a result of many factors,
including those set forth under Item 1A "Risk Factors" and "Forward Looking
Statements" immediately preceding Part I of this Annual Report on Form 10-K.

Critical accounting estimates

The Company follows accounting and reporting policies and procedures that
conform, in all material respects, to GAAP and to practices generally applicable
to the financial services industry, the most significant of which are described
in Note 1 to the Consolidated Financial Statements included in Item 8 of this
Annual Report on Form 10-K. The preparation of Consolidated Financial Statements
in conformity with GAAP requires management to make judgments and accounting
estimates that affect the amounts reported for assets, liabilities, revenues and
expenses on the Consolidated Financial Statements and accompanying notes, and
amounts disclosed as contingent assets and liabilities. While the Company bases
estimates on historical experience, current information and other factors deemed
to be relevant, actual results could differ from those estimates. Accounting
estimates are necessary in the application of certain accounting policies and
procedures that are particularly susceptible to significant change. Critical
accounting policies are defined as those that require the most complex or
subjective judgment and are reflective of significant uncertainties, and could
potentially result in materially different results under different assumptions
and conditions

The following is a summary of the more subjective and complex accounting
estimates and principles affecting the financial condition and results reported
in financial statements. In each area, the Company has identified the variables
that management believes to be the most important in the estimation process. The
Company uses the best information available to make the estimations necessary to
value the related assets and liabilities in each of these areas.

Allowance for loan losses

Allowance for loan losses is a valuation allowance for probable incurred credit
losses. Loan losses are charged against the allowance for loan losses when
management believes the uncollectability of a loan balance is confirmed.
Subsequent recoveries, if any, are credited to the allowance for loan losses.
The Company estimates the allowance for loan losses required using past loan
loss experience, the nature and volume of the portfolio, information about
specific borrower situations and estimated collateral values, economic
conditions, and other factors. Allocations of the allowance for loan losses may
be made for specific loans, but the entire allowance for loan losses is
available for any loan that, in management's judgment, should be charged-off.
Amounts are charged-off when available information confirms that specific loans
or portions thereof, are uncollectible. This methodology for determining
charge-offs is consistently applied to each segment.

The Company determines a separate allowance for loan losses for each portfolio
segment. The allowance for loan losses consists of specific and general
reserves. Specific reserves relate to loans that are individually classified as
impaired. A loan is impaired when, based on current information and events, it
is probable that the Company will be unable to collect all amounts due according
to the contractual terms of the loan agreement. Factors considered in
determining impairment include payment status, collateral value and the
probability of collecting all amounts when due. Measurement of impairment is
based on the expected future cash flows of an impaired loan, which are to be
discounted at the loan's effective interest rate, or measured by reference to an
observable market value, if one exists, or the fair value of the collateral for
a collateral-dependent loan. The Company selects the measurement method on a
loan-by-loan basis except that collateral-dependent loans for which foreclosure
is probable are measured at the fair value of the collateral.

The Company recognizes interest income on impaired loans based on its existing
methods of recognizing interest income on nonaccrual loans. Loans, for which the
terms have been modified resulting in a concession, and for which the borrower
is experiencing financial difficulties, are considered TDRs and classified as
impaired with measurement of impairment as described above.

If a loan is impaired, a portion of the allowance is allocated so that the loan
is reported, net, at the present value of estimated future cash flows using the
loan's existing rate or at the fair value of collateral if repayment is expected
solely from the collateral.

General reserves cover non-impaired loans and are based on the Company's
historical loss rates for each portfolio segment, adjusted for the effects of
qualitative factors that are likely to cause estimated credit losses as of the
evaluation date to differ from the portfolio segment's historical loss
experience.
                                       46
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Qualitative factors include consideration of the following: changes in lending
policies and procedures; changes in economic conditions, changes in the nature
and volume of the portfolio; changes in the experience, ability and depth of
lending management and other relevant staff; changes in the volume and severity
of past due, nonaccrual and other adversely graded loans; changes in the loan
review system; changes in the value of the underlying collateral for
collateral-dependent loans; concentrations of credit and the effect of other
external factors such as competition and legal and regulatory requirements.

In June 2016, the FASB issued 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 is 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 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.

Non-GAAP Measures

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

The following table presents reconciliation of allowance for loan losses to
loans held-for-investment, excluding SBA PPP loans to its most comparable GAAP
measure. The Company believes that this non-GAAP measure enhances comparability
to prior periods in which there were no SBA PPP loans and provides supplemental
information regarding the Company's credit quality trend.

                                                                                             December 31,
($ in thousands)                                       2021                 2020                 2019                 2018                 2017
Loans held-for-investment                         $ 1,732,205          $ 

1,583,578 $1,450,831 $1,338,682 $1,189,999
Less: SBA PPP loans

                                    65,329              135,654                    -                    -                    -
Loans held-for-investment, excluding SBA
PPP loans                                         $ 1,666,876          $ 

1,447,924 $1,450,831 $1,338,682 $1,189,999
Allowance for loan losses

                         $    22,381          $    

26,510 $14,380 $13,167 $12,224
Allowance for loan losses on loans held for investment

                                      1.29  %              1.67  %              0.99  %              0.98  %              1.03  %
Allowance for loan losses to loans
held-for-investment, excluding SBA PPP
loans                                                    1.34  %              1.83  %              0.99  %              0.98  %              1.03  %



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Five-year summary of selected financial data

The following table presents selected financial data on the dates or for the periods indicated:

                                                                           As of or For the Year Ended December 31,
($ in thousands, except per share data)            2021                 2020                 2019                 2018                 2017
Selected balance sheet data:
Cash and cash equivalents                     $   203,285          $   

194,098 $146,228 $162,273 $73,658
Titles available for sale

                     123,198              120,527               97,566              146,991              129,689
Securities held-to-maturity                             -                    -               20,154               21,760               21,070
Loans held-for-sale                                37,026                1,979                1,975                5,781                5,297
Loans held-for-investment                       1,732,205            1,583,578            1,450,831            1,338,682            1,189,999
Allowance for loan losses                         (22,381)             (26,510)             (14,380)             (13,167)             (12,224)
Total assets                                    2,149,735            1,922,853            1,746,328            1,697,028            1,441,999
Total deposits                                  1,867,134            1,594,851            1,479,307            1,443,753            1,251,290
Shareholders' equity                              256,286              233,788              226,834              210,296              142,184
Selected income statement data:
Interest income                               $    81,472          $    79,761          $    92,945          $    83,699          $    65,267
Interest expense                                    4,335               13,572               23,911               17,951               10,097
Net interest income                                77,137               66,189               69,034               65,748               55,170
Provision for loan losses                          (4,596)              13,219                4,237                1,231                1,827
Noninterest income                                 18,434               11,740               11,869               10,454               13,894
Noninterest expense                                43,208               41,699               42,315               40,226               35,895
Income before income taxes                         56,959               23,011               34,351               34,745               31,342
Income tax expense                                 16,856                6,836               10,243               10,444               14,939
Net income                                         40,103               16,175               24,108               24,301               16,403

Per share data:
Earnings per common share, basic              $      2.66          $      

1.05 $1.52 $1.69 $1.22
Earnings per common share, diluted

                   2.62                 1.04                 1.49                 1.65                 1.21
Book value per common share (1)                     17.24                15.19                14.44                13.16                10.60
Cash dividends declared per common
share                                                0.44                 0.40                 0.25                 0.12                 0.12
Outstanding share data:
Number of common shares outstanding            14,865,825           15,385,878           15,707,016           15,977,754           13,417,899
Weighted-average common shares
outstanding, basic                             15,017,637           15,384,231           15,873,383           14,397,075           13,408,030
Weighted-average common shares
outstanding, diluted                           15,253,820           15,448,892           16,172,282           14,691,370           13,540,293
Selected performance ratios:
Return on average assets                             1.96  %              0.84  %              1.40  %              1.53  %              1.22  %
Return on average shareholders' equity              16.52  %              7.08  %             10.88  %             14.26  %             12.00  %
Dividend payout ratio (2)                           16.54  %             38.10  %             16.45  %              7.10  %              9.84  %
Efficiency ratio (3)                                45.21  %             53.51  %             52.30  %             52.79  %             51.97  %
Yield on average interest-earning
assets                                               4.05  %              4.25  %              5.53  %              5.38  %              4.99  %
Cost of average interest-bearing
liabilities                                          0.41  %              1.15  %              2.09  %              1.65  %              1.14  %
Net interest spread                                  3.64  %              3.10  %              3.44  %              3.73  %              3.85  %
Net interest margin (4)                              3.83  %              3.53  %              4.11  %              4.23  %              4.22  %
Total loans to total deposits ratio (5)             94.76  %             99.42  %             98.21  %             93.12  %             95.53  %


                                       48
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                                                                              As of or For the Year Ended December 31,
($ in thousands, except per share data)                2021                      2020               2019               2018               2017
Asset quality:
Loans 30 to 89 days past due and still
accruing                                          $       554               

$338 $1,818 $377 $1,341
Loans 90 days or more past due and still outstanding

                                                    -                         -               287                   -                 -
Nonaccrual loans                                          994                     3,163             2,537               1,061             3,234
Nonperforming loans                                       994                     3,163             2,824               1,061             3,234
Nonperforming assets (6)                                  994                     4,564             2,824               1,061             3,333
Net charge-offs (recoveries)                             (467)                    1,089             3,024                 288               923
Loans 30 to 89 days past due and still
accruing to loans held-for-investment                    0.03   %                  0.02  %           0.13  %             0.03  %           0.11  %
Nonaccrual loans to loans
held-for-investment                                      0.06   %                  0.20  %           0.17  %             0.08  %           0.27  %
Nonaccrual loans to allowance for loan
losses                                                   4.44   %                 11.93  %          17.64  %             8.06  %          26.46  %
Nonperforming loans to loans
held-for-investment                                      0.06   %                  0.20  %           0.19  %             0.08  %           0.27  %
Nonperforming loans to allowance for loan
losses                                                   4.44   %                 11.93  %          19.64  %             8.06  %          26.46  %
Nonperforming assets to total assets                     0.05   %                  0.24  %           0.16  %             0.06  %           0.23  %
Allowance for loan losses to loans
held-for-investment                                      1.29   %                  1.67  %           0.99  %             0.98  %           1.03  %
Allowance for loan losses to loans
held-for-investment, excluding SBA PPP
loans (7)                                                1.34   %                  1.83  %           0.99  %             0.98  %           1.03  %
Allowance for loan losses to nonaccrual
loans                                                2,251.61   %           

838.13% 566.81% 1,241.00% 377.98% Provision for loan losses on non-performing loans

                                                2,251.61   %           

838.13% 509.21% 1,241.00% 377.98% Net charges (recoveries) on average loans held for investment

                               (0.03)  %                  0.07  %           0.22  %             0.02  %           0.08  %
Capital ratios:
Shareholders' equity to total assets                    11.92   %                 12.16  %          12.99  %            12.39  %           9.86  %
Average equity to average assets                        11.86   %                 11.94  %          12.88  %            10.72  %          10.20  %
PCB Bancorp
Common tier 1 capital (to risk-weighted
assets)                                                 14.79   %                 15.97  %          15.87  %            16.28  %          12.15  %
Total capital (to risk-weighted assets)                 16.04   %                 17.22  %          16.90  %            17.31  %          13.20  %
Tier 1 capital (to risk-weighted assets)                14.79   %                 15.97  %          15.87  %            16.28  %          12.15  %
Tier 1 capital (to average assets)                      12.11   %                 11.94  %          13.23  %            12.60  %          10.01  %
Pacific City Bank
Common tier 1 capital (to risk-weighted
assets)                                                 14.48   %                 15.70  %          15.68  %            16.19  %          12.06  %
Total capital (to risk-weighted assets)                 15.73   %                 16.95  %          16.71  %            17.21  %          13.12  %
Tier 1 capital (to risk-weighted assets)                14.48   %                 15.70  %          15.68  %            16.19  %          12.06  %
Tier 1 capital (to average assets)                      11.85   %                 11.74  %          13.06  %            12.53  %           9.94  %


(1)  Shareholders' equity divided by common shares outstanding
(2)  Dividends declared per common share divided by basic earnings per common
share.
(3)  Noninterest expenses divided by the sum of net interest income and
noninterest income.
(4)  Net interest income divided by average total interest-earning assets.
(5)  Total loans include both loans held-for-sale and loans held-for-investment,
net of unearned loan costs (fees).
(6)  Nonperforming assets include nonperforming loans (nonaccrual loans plus
loans past due 90 days or more and still accruing) and other real estate owned.
(7)  This ratio is not presented in accordance with GAAP. See "Non-GAAP measure"
for reconciliation of this measure to its most comparable GAAP measure.
                                       49
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Executive Summary

Financial Highlights

•Net income was $40.1 million for the year ended December 31, 2021, an increase
of $23.9 million, or 147.9%, from $16.2 million for the year ended December 31,
2020;

• The allowance (reversal) for loan losses has been ($4.6) million, $13.2 million and $4.2 million for the years ended December 31, 20212020 and 2019, respectively.

• Diluted earnings per common share were $2.62, $1.04 and $1.49 for the years ended December 31, 20212020 and 2019, respectively.

• The net interest margin was 3.83%, 3.53% and 4.11% for the years ended December 31, 20212020 and 2019, respectively.

• Total assets were $2.15 billion at December 31, 2021an augmentation of $226.9 millioni.e. 11.8%, of $1.92 billion at December 31, 2020;

•Loans held-for-investment, net of deferred costs (fees), were $1.73 billion at
December 31, 2021, an increase of $148.6 million, or 9.4%, from $1.58 billion at
December 31, 2020. Excluding SBA PPP loans, loans held-for-investment were $1.67
billion at December 31, 2021, an increase of $219.0 million, or 15.1%, from
$1.45 billion at December 31, 2020;

• SBA PPP loans have been $65.3 million and $135.7 million at December 31, 2021 and 2020, respectively.

• Loans with modifications related to COVID-19 were void and $36.1 million at
December 31, 2021 and 2020, respectively.

• Total deposits were $1.87 billion at December 31, 2021an augmentation of $272.3 millioni.e. 17.1%, of $1.59 billion at December 31, 2020;

•BOLI of $29.3 million was purchased during the year ended December 31, 2021; and

• The Company declared and paid cash dividends of $0.44, $0.40and $0.25 per common share for the years ended December 31, 20212020 and 2019, respectively.

The increase in net income for the year ended December 31, 2021 compared with
the year ended December 31, 2020 was primarily due to increases in net interest
income and noninterest income and the reversal for loan losses. Net interest
income increased primarily due to a decrease in cost of interest-bearing
liabilities and an increase in average earning assets. Noninterest income
increased primarily due to an increase in gain on sale of SBA loans. Reversal
for loan losses was primarily due to a decrease in qualitative adjustment factor
allocations related to economic implications of the COVID-19 pandemic during the
year ended December 31, 2021.

The decrease in net income for the year ended December 31, 2020 compared with
the year ended December 31, 2019 was primarily due to an increase in provision
for loan losses and a decrease in net interest income. Provision for loan losses
increased primarily due to the increase in risks associated with economic and
business conditions, as well an increases in special mention and substandard
loans, as a result of the COVID-19 pandemic, and net interest income decreased
primarily due to the lower market rates during the year ended December 31, 2020.

The increase in total assets for the year ended December 31, 2021 was primarily
due to increases in loans held-for-investment and loans held-for-sale and the
BOLI purchase of $29.3 million. Loans held-for-investment increased primarily
due to the increased commercial property and residential property loan
production. Loans held-for-sale increased primarily due to the increased SBA
loan production.

The Company is committed to making corporate decisions that directly benefit its
shareholders, and during the year ended December 31, 2021, increased its
dividend per common share by $0.04, or 10.0%, to $0.44 from $0.40 for the year
ended December 31, 2020. During the year ended December 31, 2021, the Company
also repurchased 680,269 shares of common stock, totaling $10.9 million.
Overall, the Company returned 43.7% of its earnings to common shareholders
through dividends and common share repurchases during the year ended December
31, 2021.

COVID-19 Pandemic

The ongoing COVID-19 pandemic, and governmental and societal responses thereto,
have had a severe impact on global economic and market conditions. The U.S.
government has enacted a number of monetary and fiscal policies to provide
fiscal stimulus and relief in order to mitigate the impact of the COVID-19
pandemic. However, the COVID-19 pandemic continues to be a challenge to public
health, including the emergence of new variants, and impact global economic and
market conditions, including global supply chain disruptions and high inflation.
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Since the beginning of the crisis, the Company has taken a number of steps to
protect the safety of its employees and to support its customers. The Company
has enabled its staff to work remotely and established safety measures within
its bank premises and branches for both employees and customers. In order to
support its customers, the Company has been in close contact with them,
assessing the level of impact on their businesses, and putting a process in
place to evaluate each client's specific situation and provide relief programs
where appropriate, including SBA PPP loans and loan modifications related to the
COVID-19 pandemic.

In addition, the Company has been monitoring its liquidity and capital closely.
As of December 31, 2021, the Company maintained $203.3 million, or 9.5% of total
assets, of cash and cash equivalents and $610.4 million, or 28.4% of total
assets, of available borrowing capacity. All regulatory capital ratios were also
well above the regulatory well-capitalized requirements as of December 31, 2021.

At this time, the Company cannot estimate the long term impact of the COVID-19
pandemic, but these conditions are expected to continue to impact its business,
results of operations, and financial condition negatively.

Network and data incident

On August 30, 2021, the Bank identified unusual activity on its network. The
Bank responded promptly to disable the activity, investigate its source and
monitor the Bank's network. The Bank subsequently became aware of claims that it
had been the target of a ransomware attack. On September 7, 2021, the Bank
determined that an external actor had illegally accessed and/or acquired certain
data on its network. The Bank has been working with third-party forensic
investigators to understand the nature and scope of the incident and determine
what information may have been accessed and/or acquired and who may have been
impacted. The investigation revealed that this incident impacted certain files
containing certain Bank customer information. Some of these files contained
documents related to loan applications, such as tax returns, Form W-2
information of their employees, and payroll records. The Bank has notified all
individuals identified as impacted, consistent with applicable laws. All
impacted individuals were offered free Equifax Complete Premier credit
monitoring and identify theft protection services. The Bank has notified law
enforcement and appropriate authorities of the incident.

On December 16, 2021, a complaint based on the incident was filed in the Los
Angeles County Superior Court seeking damages, injunctive relief, and equitable
relief. The Bank expresses no opinion on the merits of the Matter and intends to
answer, respond, and/or otherwise vigorously defend itself from the claims and
causes of action asserted in the complaint to the fullest extent permitted by
applicable law. Those defenses will be based in part on the fact that the Bank
has implemented security procedures, practices, and a robust information
security program pursuant to guidance from financial regulators. Please see Part
I Item 3 for more information about the litigation.

The Company continues to monitor and evaluate the data incident for its
magnitude and concomitant financial, legal or reputational consequences. To
date, such consequences are not material, however the data incident is still
recent and notices to affected individuals only recently began and the lawsuit
mentioned above is in its very early stages. During the year ended December 31,
2021, expenses associated with the data incident, all of which are included in
Other Expense in Consolidated Statements of Income (Unaudited), totaled $100
thousand, which represents the retention amount on its insurance claims. The
Company anticipates additional expenses will be incurred in future periods;
however, the Company does have a cyber-liability insurance policy that should
provide insurance coverage for this incident.

During its most recent review of disclosure controls and procedures, the Company
considered the data incident and concluded that its disclosure controls and
procedures were effective. Nevertheless, the Company continues to enhance and
update its disclosure controls and procedures, including as part of its efforts
to enhance its cybersecurity safeguards and measures. With respect to the data
incident, upon discovery the Bank engaged experienced outside counsel and
continues to work with its experienced third-party forensics firm to investigate
and remediate the matter. The Board of Directors was kept apprised of, and a
director with experience in data security participated in, the investigation and
remediation efforts. As a result of this incident and based on information known
at this date, the Company determined that its disclosure controls and procedures
were effective and the data incident did not materially affect, nor was it
reasonably likely to affect, the Company's internal control over financial
reporting.

Result of Operations

Net Interest Income

A principal component of the Company's earnings is net interest income, which is
the difference between the interest and fees earned on loans and investments and
the interest paid on deposits and borrowed funds. Net interest income expressed
as a percentage of average interest-earning assets is referred to as the net
interest margin. The net interest spread is the yield on average
interest-earning assets less the cost of average interest-bearing liabilities.
Net interest income is affected by changes in the balances of interest-earning
assets and interest-bearing liabilities and changes in the yields earned on
interest-earning assets and the rates paid on interest-bearing liabilities.
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The following table presents interest income, average interest-earning assets,
interest expense, average interest-bearing liabilities, and their correspondent
yields and costs expressed both in dollars and rates for the periods indicated:

                                                                                                                                 Year Ended December 31,
                                                                      2021                                                                2020                                                                2019
($ in thousands)                            Average Balance          Interest            Yield/Cost             Average Balance          Interest            Yield/Cost             Average Balance          Interest            Yield/Cost
Interest-earning assets:
Total loans (1)                           $      1,702,073          $ 79,155                    4.65  %       $      1,541,740          $ 76,546                    4.96  %       $      1,383,562          $ 85,667                    6.19  %
Mortgage-backed securities                          89,693               989                    1.10  %                 68,496             1,260                    1.84  %                 82,848             2,081                    2.51  %
Collateralized mortgage obligation                  22,633               221                    0.98  %                 35,299               462                    1.31  %                 51,441             1,185                    2.30  %
SBA loan pool securities                            10,515               189                    1.80  %                 13,120               255                    1.94  %                 20,681               536                    2.59  %
Municipal securities - tax exempt
(2)                                                  5,755               146                    2.54  %                  5,811               150                    2.58  %                  5,833               154                    2.64  %
Corporate bonds                                      1,841                68                    3.69  %                      -                 -                       -  %                      -                 -                       -  %
Interest-bearing deposits in other
financial institutions                             170,814               220                    0.13  %                204,708               631                    0.31  %                126,803             2,781                    2.19  %
FHLB and other bank stock                            8,539               484                    5.67  %                  8,416               457                    5.43  %                  8,067               541                    6.71  %
Total interest-earning assets                    2,011,863            81,472                    4.05  %              1,877,590            79,761                    4.25  %              1,679,235            92,945                    5.53  %
Noninterest-earning assets:
Cash and cash equivalents                           19,676                                                              17,542                                                              18,614
Allowances for loan losses                         (25,270)                                                            (19,693)                                                            (13,197)
Other assets                                        41,187                                                              39,385                                                              35,010
Total noninterest-earning assets                    35,593                                                              37,234                                                              40,427
Total assets                              $      2,047,456                                                    $      1,914,824                                                    $      1,719,662
Interest-bearing liabilities:
Deposits:
NOW and money market accounts             $        400,446             1,242                    0.31  %       $        371,315             2,385                    0.64  %       $        329,562             5,162                    1.57  %
Savings                                             12,302                 6                    0.05  %                  8,543                 9                    0.11  %                  7,965                32                    0.40  %
Time deposits                                      609,351             2,795                    0.46  %                708,306            10,564  
                 1.49  %                783,353            18,245                    2.33  %
Other borrowings                                    31,302               292                    0.93  %                 94,319               614                    0.65  %                 25,388               472                    1.86  %
Total interest-bearing liabilities               1,053,401             4,335                    0.41  %              1,182,483            13,572                    1.15  %              1,146,268            23,911                    2.09  %
Noninterest-bearing liabilities:
Demand deposits                                    737,216                                                             486,820                                                             329,731
Other liabilities                                   14,073                                                              16,968                                                              22,087
Total noninterest-bearing
liabilities                                        751,289                                                             503,788                                                             351,818
Total liabilities                                1,804,690                                                           1,686,271                                                           1,498,086
Shareholders' equity                               242,766                                                             228,553                                                             221,576
Total liabilities and shareholders'
equity                                    $      2,047,456                                                    $      1,914,824                                                    $      1,719,662
Net interest income                                                 $ 77,137                                                            $ 66,189                                                            $ 69,034
Net interest spread (3)                                                                         3.64  %                                                             3.10  %                                                             3.44  %
Net interest margin (4)                                                                         3.83  %                                                             3.53  %                                                             4.11  %
Cost of funds (5)                                                                               0.24  %                                                             0.81  %                                                             1.62  %


(1)  Average balance includes both loans held-for-sale and loans
held-for-investment, as well as nonaccrual loans. Net amortization of deferred
loan fees (cost) of $6.1 million, $2.9 million and $452 thousand, respectively,
and net accretion of discount on loans of $3.5 million, $3.3 million and $4.0
million, respectively, are included in the interest income for the years ended
December 31, 2021, 2020 and 2019, respectively.
(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 interest expense on deposits by the
sum of interest-bearing and noninterest-bearing demand deposits.
                                       52
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The following table presents the changes in interest income and interest expense
for major components of interest-earning assets and interest-bearing
liabilities. Information is provided on changes attributable to: (i) changes in
volume multiplied by the prior rate; and (ii) changes in rate multiplied by the
prior volume. Changes attributable to both rate and volume which cannot be
segregated have been allocated proportionately to the change due to volume and
the change due to rate.

                                                Year Ended December 31, 2021 vs. 2020                          Year Ended December 31, 2020 vs. 2019
                                          Increase (Decrease) Due to            Net Increase             Increase (Decrease) Due to             Net Increase
($ in thousands)                           Volume               Rate             (Decrease)               Volume                Rate             (Decrease)
Interest earned on:
Total loans                            $      7,960          $ (5,351)         $      2,609          $       9,794          $ (18,915)         $     (9,121)
Investment securities                           134              (648)                 (514)                  (937)              (892)               (1,829)
Other interest-earning assets                  (172)             (212)                 (384)                 1,927             (4,161)               (2,234)
Total interest income                         7,922            (6,211)                1,711                 10,784            (23,968)              (13,184)
Interest paid on:
Savings, NOW, and money market
deposits                                        207            (1,353)               (1,146)                   651             (3,451)               (2,800)
Time deposits                                (1,476)           (6,293)               (7,769)                (1,748)            (5,933)               (7,681)
Other borrowings                               (410)               88                  (322)                 1,282             (1,140)                  142
Total interest expense                       (1,679)           (7,558)               (9,237)                   185            (10,524)              (10,339)

Change in net interest income $9,601 $1,347

$10,948 $10,599 ($13,444) ($2,845)

Year ended December 31, 2021 Compared to the year ended December 31, 2020

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

                                                        Year Ended December 31,
($ in thousands)                                        2021                 2020             Amount Change          Percentage Change
Interest income:
Interest and fees on loans                        $      79,155          $  76,546          $        2,609                        3.4  %
Interest on investment securities                         1,613              2,127                    (514)                     (24.2) %
Interest and dividends on other
interest-earning assets                                     704              1,088                    (384)                     (35.3) %
Total interest income                                    81,472             79,761                   1,711                        2.1  %
Interest expense:
Interest on deposits                                      4,043             12,958                  (8,915)                     (68.8) %
Interest on other borrowings                                292                614                    (322)                     (52.4) %
Total interest expense                                    4,335             13,572                  (9,237)                     (68.1) %
Net interest income                               $      77,137          $  66,189          $       10,948                       16.5  %


Net interest income increased primarily due to a 7.2% increase in average
balance of interest-earning assets and a 74 basis point decrease in average cost
of interest-bearing liabilities, partially offset by a 20 basis point decrease
in average yield on interest-earning assets and a 10.9% decrease in average
balance of interest-bearing liabilities. The increase in average balance of
interest-earning assets was primarily due to growth in the loan and investment
securities, supported by deposit growth. The decreases in average yield on
interest-earning assets and average cost of interest-bearing liabilities were
primarily due to the lower market rates during the year ended December 31, 2021.

Interest and fees on loans increased primarily due to a 10.4% increase in
average balance, partially offset by a 31 basis point decrease in average yield.
The increase in average balance was primarily due to an increase in commercial
property loans, partially offset by decreases in commercial term and SBA PPP
loans. The decrease in average yield was primarily due to the lower market
rates, partially offset by increases in net amortization of deferred fees on SBA
PPP loans and net accretion of discount.

Interest on investment securities decreased primarily due to a 49 basis point
decrease in average yield, partially offset by a 6.3% increase in average
balance. The decrease in average yield was primarily due to new investment
securities purchased at lower market rates. The Company purchased $47.3 million
and $39.4 million, respectively, of investment securities during the years ended
December 31, 2021 and 2020. For the years ended December 31, 2021 and 2020,
average yield on total investment securities was 1.24% and 1.73%, respectively.


                                       53
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Interest income on other interest-earning assets decreased primarily due to a 12
basis point decrease in average yield and a 15.8% decrease in average balance.
The decrease in average yield was primarily due to the lower market rates. The
decrease in average balance was primarily due to increases in loans and
investment securities. For the years ended December 31, 2021 and 2020, yield on
total other interest-earning assets was 0.39% and 0.51%, respectively.

Interest expense on deposits decreased primarily due to a 6.1% decrease in
average balance of interest-bearing deposits and a 79 basis point decrease in
average cost of interest-bearing deposits. The decrease in average balance was
primarily due to a decrease in time deposits, partially offset by increases in
savings, NOW and money market accounts. The decrease in average cost was
primarily due to the lower market rates. For the years ended December 31, 2021
and 2020, average cost on total interest-bearing deposits was 0.40% and 1.19%,
respectively.

Interest expense on other borrowings decreased primarily due to a 66.8% decrease
in average balance, partially offset by a 28 basis point increase in average
cost. The increase in average cost was primarily due to matured borrowings with
lower interest rates during the year ended December 31, 2021. Matured FHLB
advances totaled $70.0 million with a weighted-average rate of 0.47% for the
year ended December 31, 2021.

Year ended December 31, 2020 Compared to the year ended December 31, 2019

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

                                                        Year Ended December 31,
($ in thousands)                                        2020                 2019             Amount Change          Percentage Change
Interest income:
Interest and fees on loans                        $      76,546          $  85,667          $       (9,121)                     (10.6) %
Interest on investment securities                         2,127              3,956                  (1,829)                     (46.2) %
Interest and dividends on other
interest-earning assets                                   1,088              3,322                  (2,234)                     (67.2) %
Total interest income                                    79,761             92,945                 (13,184)                     (14.2) %
Interest expense:
Interest on deposits                                     12,958             23,439                 (10,481)                     (44.7) %
Interest on borrowings                                      614                472                     142                       30.1  %
Total interest expense                                   13,572             23,911                 (10,339)                     (43.2) %
Net interest income                               $      66,189          $  69,034          $       (2,845)                      (4.1) %


Net interest income decreased primarily due to a 128 basis point decrease in
average yield on interest-earning assets and a 3.2% increase in average balance
of interest-bearing liabilities, partially offset by a 11.8% increase in average
balance of interest-earning assets and a 94 basis point decrease in average cost
of interest-bearing liabilities. The increase in average balance of
interest-earning assets was primarily due to growth in the loan and 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 the lower market rates during the year ended
December 31, 2020.

Interest and fees on loans decreased primarily due to a 123 basis point decrease
in average yield, partially offset by an 11.4% increase in average balance. The
decrease in average yield was primarily due to the lower market rates, the 1%
interest rate on SBA PPP loans, and a decrease in net accretion of discount,
partially offset by an increase in net amortization of deferred fees on SBA PPP
loans. The increase in average balance was primarily due to the SBA PPP loan
production as well as an increase in commercial property loans.

Interest on investment securities decreased primarily due to a 23.7% decrease in
average balance and a 73 basis point decrease in average yield. The decrease in
average balance was primarily due to a sale of investment securities of $32.8
million in December 2019, which lead to a lower average balance in 2020,
partially offset by new investment securities purchased in 2020. The decrease in
average yield was primarily due to new investment securities purchased at lower
market rates, as well as the sales of securities available-for-sale in December
2019 with a weighted-average book yield of 3.02%. The Company purchased $39.4
million and $14.1 million, respectively, of investment securities during the
years ended December 31, 2020 and 2019. For the years ended December 31, 2020
and 2019, average yield on total investment securities was 1.73% and 2.46%,
respectively.

Interest income on other interest-earning assets decreased primarily due to a
195 basis point decrease in average yield, partially offset by a 58.0% increase
in average balance. The decrease in average yield was primarily due to the lower
market rates. The increase in average balance was primarily due to increases in
deposits and other borrowings as the Company maintains most of its cash at the
Federal Reserve Bank account. For the years ended December 31, 2020 and 2019,
yield on total other interest-earning assets was 0.51% and 2.46%, respectively.


                                       54
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Interest expense on deposits decreased primarily due to a 2.9% decrease in
average balance of interest-bearing deposits and a 90 basis point decrease in
average cost of interest-bearing deposits. The decrease in average balance was
primarily due to a decrease in time deposits, partially offset by increases in
savings, NOW and money market accounts. The decrease in average cost was
primarily due to the lower market rates. For the years ended December 31, 2020
and 2019, average cost on total interest-bearing deposits was 1.19% and 2.09%,
respectively.

Interest expense on other borrowings increased primarily due to a 271.5%
increase in average balance, partially offset by a 121 basis point decrease in
average cost. The decrease in average cost was primarily due to the lower market
rates. The increase in average balance was primarily due to the Company's
liquidity management plan in response to the COVID-19 pandemic.

Allowance (reversal) for loan losses

Provision (reversal) for loan losses was $(4.6) million, $13.2 million and $4.2
million for the years ended December 31, 2021, 2020 and 2019. The reversal for
loan losses for the year ended December 31, 2021 was primarily due to a decrease
in qualitative adjustment factor allocations related to economic implications of
the COVID-19 pandemic. The increase for the year ended December 31, 2020 in
provision for loan losses was primarily due to the increase in risks associated
with economic and business conditions and uncertainty, as well as the increases
in special mention and classified loans, as a result of the COVID-19 pandemic.

See further discussion in “Loans Held for Investment Purposes and Allowance for Loan Losses”.

                                       55
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Non-interest income

Year ended December 31, 2021 Compared to the year ended December 31, 2020

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

                                                      Year Ended December 31,
($ in thousands)                                      2021                 2020             Amount Change          Percentage Change
Service charges and fees on deposits            $       1,195          $   1,256          $          (61)                      (4.9) %
Loan servicing income                                   2,770              2,710                      60                        2.2  %
Bank-owned life insurance income                          108                  -                     108                          -  %
Gain on sale of loans                                  12,932              6,527                   6,405                       98.1  %

Other income                                            1,429              1,247                     182                       14.6  %
Total noninterest income                        $      18,434          $  11,740          $        6,694                       57.0  %


Service charges and deposit fees decreased primarily due to a decrease in commission-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, partially offset by an increase
in amortization of servicing assets from increased prepayments of loans being
serviced.

The Company purchased bank-owned life insurance of $29.3 million during November
2021. Bank-owned life insurance income represents the increase in cash surrender
value of the insurance policy.

Gain on sale of loans increased primarily due to increases in sales volume and
gain margin. The increase in gain margin on SBA loans was primarily due to the
temporary increase of SBA guaranteed portion until September 30, 2021 under the
Economic Aid Act. The Company sold SBA loans of $126.8 million with a gain of
$12.8 million, residential property loans of $10.4 million with a gain of $151
thousand and certain commercial property loans of $8.6 million with a gain of
$6 thousand during the year ended December 31, 2021. During the year ended
December 31, 2020, the Company sold SBA loans of $89.8 million with a gain of
$6.0 million and residential property loans of $51.9 million with a gain of $489
thousand.

Other income included transfer and remittance fees $596,000 and $530,000respectively, and interchange fees on debit cards from $306,000 and
$252,000respectively, for completed fiscal years December 31, 2021 and 2020.

Year ended December 31, 2020 Compared to the year ended December 31, 2019

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

                                                          Year Ended December 31,
($ in thousands)                                          2020                 2019             Amount Change          Percentage Change
Service charges and fees on deposits                $       1,256          $   1,544          $         (288)                     (18.7) %
Loan servicing income                                       2,710              2,309                     401                       17.4  %
Gain on sale of loans                                       6,527              5,996                     531                        8.9  %
Gain on sale of securities available-for-sale                   -                786                    (786)                    (100.0) %
Other income                                                1,247              1,234                      13                        1.1  %
Total noninterest income                            $      11,740          $  11,869          $         (129)                      (1.1) %


Service charges and deposit fees decreased primarily due to a decrease in commission-based transactions.

The increase is mainly attributable to a decrease in the amortization of management assets due to the decrease in prepayments of loans under management.

Gain on sale of loans increased primarily due to increases in sales volume and
premium. The increase in premium on SBA loans was primarily due to the market
condition and the increase in sale volume of residential property loans was
primarily due to increased refinancing activities during the year ended December
31, 2020. The Company sold SBA loans of $89.8 million with a gain of $6.0
million and residential property loans of $51.9 million with a gain of $489
thousand during the year ended December 31, 2020. During the year ended December
31, 2019, the Company sold SBA loans of $99.6 million with a gain of $5.9
million and residential property loans of $10.1 million with a gain of $81
thousand.

The Company sold securities available-for-sale of $32.8 million during the year
ended December 31, 2019, while the Company did not sell any securities for the
year ended December 31, 2020.

Other income included transfer and remittance fees $529,000 and $515,000respectively, and interchange fees on debit cards from $252,000 and
$272,000respectively, for completed fiscal years December 31, 2020 and 2019.

                                       56
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Non-interest expenses

Year ended December 31, 2021 Compared to the year ended December 31, 2020

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

                                                      Year Ended December 31,
($ in thousands)                                      2021                 2020             Amount Change          Percentage Change
Salaries and employee benefits                  $      27,974          $  26,147          $        1,827                        7.0  %
Occupancy and equipment                                 5,575              5,620                     (45)                      (0.8) %
Professional fees                                       2,159              2,256                     (97)                      (4.3) %
Marketing and business promotion                        1,656              1,360                     296                       21.8  %
Data processing                                         1,572              1,472                     100                        6.8  %
Director fees and expenses                                594                599                      (5)                      (0.8) %

Regulatory assessments                                    537                978                    (441)                     (45.1) %

Other expenses                                          3,141              3,267                    (126)                      (3.9) %
Total noninterest expense                       $      43,208          $  41,699          $        1,509                        3.6  %


Salaries and employee benefits increased primarily due to increases in wages,
bonus accrual, and incentives tied to LPO originated SBA loan sales, partially
offset by decreases in vacation and stock compensation expense. The number of
full-time equivalent employees averaged 247.9 for the year ended December 31,
2021 compared to 251.8 for the year ended December 31, 2020.

Occupancy and equipment expenses decreased primarily due to lower depreciation, partially offset by an increase in equipment maintenance expenses.

Professional fees decreased primarily due to a decrease in expense related to
enhancement of the Bank's controls and processes on BSA/AML compliance programs,
partially offset by an increase in audit fees.

Marketing and trade promotion expenses increased primarily due to increased marketing and advertising activities.

Data processing fees increased primarily due to an increase in the costs of processing more accounts and transactions.

Directors’ fees and expenses decreased mainly due to a severance payment of $45,000 for a former director during the financial year ended December 31, 2020.

Regulatory valuation expense decreased primarily due to a lower valuation rate, partially offset by an increase in the balance sheet.

Other expense decreased primarily due to a decrease in other loan related legal
expense, partially offset by an increase in armed guard expenses. Other loan
related legal expenses were $302 thousand and $426 thousand, respectively, and
armed guard expense of $546 thousand and $506 thousand, respectively, for the
years ended December 31, 2021 and 2020, respectively. Other expenses also
included office expenses of $1.4 million and $1.4 million, respectively, and
reversal for unfunded loan commitments was $24 thousand and $63 thousand,
respectively for the years ended December 31, 2021 and 2020, respectively.


                                       57
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Year ended December 31, 2020 Compared to the year ended December 31, 2019

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

                                                      Year Ended December 31,
($ in thousands)                                      2020                 2019             Amount Change          Percentage Change
Salaries and employee benefits                  $      26,147          $  26,139          $            8                          -  %
Occupancy and equipment                                 5,620              5,545                      75                        1.4  %
Professional fees                                       2,256              2,730                    (474)                     (17.4) %
Marketing and business promotion                        1,360              1,550                    (190)                     (12.3) %
Data processing                                         1,472              1,365                     107                        7.8  %
Director fees and expenses                                599                751                    (152)                     (20.2) %

Regulatory assessments                                    978                551                     427                       77.5  %

Other expenses                                          3,267              3,684                    (417)                     (11.3) %
Total noninterest expense                       $      41,699          $  42,315          $         (616)                      (1.5) %


Salaries and employee benefits increased primarily due to increases in wages,
other employee benefits and vacation accrual, partially offset by a direct loan
origination cost of $1.1 million related to SBA PPP loan production and a
decrease in bonus accrual. The number of full-time equivalent employees averaged
251.8 for the year ended December 31, 2020 compared to 250.2 for the year ended
December 31, 2019.

Occupancy and equipment expenses increased primarily due to increased rent and equipment maintenance expenses.

Professional fees decreased primarily due to a decrease in expense related to
enhancement of the Bank's controls and processes on BSA/AML compliance programs.
The consent order with the FDIC and CDFPI related to the BSA/AML compliance was
terminated on September 30, 2020.

Marketing and trade promotion expenses decreased primarily due to lower marketing activities related to the COVID-19 pandemic for the year ended
December 31, 2020.

Data processing fees increased primarily due to an increase in the costs of processing more accounts and transactions.

Director fees and expenses decreased primarily due to the Company's Board of
Directors decision to temporarily decrease director fees from the second quarter
of 2020, partially offset by a severance payment of $45 thousand for a former
director during the year ended December 31, 2020.

Regulatory assessment expense increased primarily due to a small bank credit of
$345 thousand received from the FDIC during the year ended December 31, 2019, as
well as an increase in balance sheet.

Other expense decreased primarily due to decreases in office expenses, provision
for unfunded loan commitments, other loan related legal expenses, and armed
guard expenses. Other expenses included office expenses of $1.4 million and $1.7
million, respectively, provision (reversal) for unfunded loan commitments was
$(63) thousand and $162 thousand, respectively, Other loan related legal
expenses were $426 thousand and $486 thousand, respectively, and armed guard
expense of $506 thousand and $555 thousand, respectively, for the years ended
December 31, 2020 and 2019, respectively.

income tax expense

The income tax expense was $16.9 million, $6.8 million and $10.2 millionrespectively, and the effective tax rate was 29.6%, 29.7% and 29.8%, respectively, for the years ended December 31, 20212020 and 2019.

                                       58
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Financial condition

Investment security

On June 30, 2020, the Company transferred securities held-to-maturity to
securities available-for-sale as a part of the Company's liquidity management
plan in response to the COVID-19 pandemic. Management determined that its
securities held-to-maturity no longer adhere to the Company's current liquidity
management plan and could be sold to potentially improve the Company's liquidity
position. Accordingly, the Company was no longer able to assert that it had the
intent to hold these securities until maturity and the Company's ability to
assert that it has the intent and ability to hold to maturity debt securities
will be limited for up to two years from the date of transfer. The Company
transferred all securities held-to-maturity of $18.8 million to securities
available-for-sale, which resulted in a pre-tax increase to accumulated other
comprehensive income of $787 thousand.

The following table shows the amortized cost and fair value of the investment securities portfolio at the dates indicated:

                                                                                                December 31,
                                                                  2021                                                                2020
                                                                                   Unrealized Gain                                                     Unrealized Gain
($ in thousands)                        Amortized Cost          Fair Value              (Loss)              Amortized Cost          Fair Value              (Loss)
Securities available-for-sale:
U.S. government agency and U.S.
government sponsored enterprise
securities:
Mortgage-backed securities            $        85,346          $   84,713          $        (633)         $        74,622          $   76,154          $       1,532
Collateralized mortgage
obligations                                    18,990              19,056                     66                   26,216              26,467                    251
SBA loan pool securities                        8,520               8,672                    152                   11,753              12,080                    327
Municipal bonds                                 5,329               5,686                    357                    5,370               5,826                    456
Corporate bonds                                 5,000               5,071                     71                        -                   -                      -
Total securities
available-for-sale                    $       123,185          $  123,198          $          13          $       117,961          $  120,527          $       2,566


Total carrying value of investment securities were $123.2 million at
December 31, 2021, an increase of $2.7 million, or 2.2%, from $120.5 million at
December 31, 2020. The increase was primarily due to purchases of $47.3 million,
partially offset by principal paydowns and calls of $41.1 million, a decrease in
fair value of securities available-for-sale of $2.6 million and net premium
amortization of $1.0 million.

All individual securities in a continuous unrealized loss position for 12 months
or more as of December 31, 2021 and December 31, 2020 had an investment grade
rating upon purchase. The issuers of these securities have not established any
cause for default on these securities and various rating agencies have
reaffirmed their long-term investment grade status as of December 31, 2021 and
2020. These securities have fluctuated in value since their purchase dates as
market interest rates fluctuated. The Company does not intend to sell these
securities and it is more likely than not that the Company will not be required
to sell before the recovery of its amortized cost basis. The Company determined
that the investment securities with unrealized losses for twelve months or more
are not other-than-temporary impaired, and, therefore, no impairment was
recognized at December 31, 2021 and 2020.

                                       59
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The following table presents the contractual maturity schedule for securities,
at amortized cost, and their weighted-average yields as of December 31, 2021.
Weighted-average yields are based upon the amortized cost of securities and are
calculated using the interest method which takes into consideration of premium
amortization and discount accretion. Weighted-average yields on tax-exempt debt
securities exclude the federal income tax benefit.

                                                                                                                                                                                December 31, 2021
                                                                   Within One Year                             More than One Year through Five Years                  More than Five Years through Ten Years                         More than Ten Years                                           Total
($ in thousands)                                    Amortized Cost         

Weighted average return Amortized cost Weighted average return Amortized cost Weighted average return Amortized cost Weighted average return

           Amortized Cost          Weighted-Average Yield
Securities available-for-sale:
U.S. government agency and U.S. government
sponsored enterprise securities:
Mortgage-backed securities                         $           -                               -  %       $         623                            1.56  %       $       7,932                            1.59  %       $    76,791                            1.45  %       $        85,346                            1.47  %
Collateralized mortgage obligations                            -                               -  %                   -                               -  %               9,927                            0.71  %             9,063                            1.51  %                18,990                            1.09  %
SBA loan pool securities                                       -                               -  %                 519                            2.57  %               1,426                            0.66  %             6,575                            2.03  %                 8,520                            1.84  %
Municipal bonds                                              305                            1.72  %               1,851                            2.07  %                 830                            2.27  %             2,343                            3.53  %                 5,329                            2.72  %
Corporate bonds                                                -                               -  %                   -                               -  %               5,000                            3.75  %                 -                               -  %                 5,000                            3.75  %
Total securities available-for-sale                $         305                            1.72  %       $       2,993                            2.05  %       $      25,115                            1.64  %       $    94,772                            1.55  %       $       123,185                            1.58  %



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Loans held for investment and allowance for loan losses

The following table shows the composition of the Company’s loans held for investment purposes on the dates indicated:

                                                                                                                                                         December 31,
                                                                 2021                                          2020                                          2019                                          2018                                          2017
                                                                       Percentage to                                 Percentage to                                 Percentage to                                 Percentage to                                 Percentage to
($ in thousands)                                    Amount                 Total                  Amount                 Total                  Amount                 Total                  Amount                 Total                  Amount                 Total
Real estate loans:
Commercial property                               1,105,843                     63.9  %           880,736                     55.5  %           803,014                     55.4  %           709,409                     53.1  %           662,031                     55.5  %
Residential property                                209,485                     12.1  %           198,431                     12.5  %           235,046                     16.3  %           233,816                     17.5  %           168,560                     14.2  %
SBA property                                        129,661                      7.5  %           126,570                      8.0  %           129,837                      8.9  %           120,939                      9.0  %           131,740                     11.1  %
Construction                                          8,252                      0.5  %            15,199                      1.0  %            19,164                      1.3  %            27,323                      2.0  %            23,117                      1.9  %
Total real estate loans                           1,453,241                     84.0  %         1,220,936                     77.0  %         1,187,061                     81.9  %         1,091,487                     81.6  %           985,448                     82.7  %
Commercial and industrial loans:
Commercial term                                      73,438                      4.2  %            87,250                      5.5  %           103,380                      7.1  %           102,133                      7.6  %            77,402                      6.5  %
Commercial lines of credit                          100,936                      5.8  %            96,087                      6.1  %           111,768                      7.7  %            91,994                      6.9  %            62,751                      5.3  %
SBA commercial term                                  17,640                      1.0  %            21,878                      1.4  %            25,332                      1.7  %            27,147                      2.0  %            30,376                      2.6  %
SBA PPP                                              65,329                      3.8  %           135,654                      8.6  %                 -                        -  %                 -                        -  %                 -                        -  %
Total commercial and industrial loans               257,343                     14.8  %           340,869                     21.6  %           240,480                     16.5  %           221,274                     16.5  %           170,529                     14.4  %
Other consumer loans                                 21,621                      1.2  %            21,773                      1.4  %            23,290                      1.6  %            25,921                      1.9  %            34,022                      2.9  %
Loans held-for-investment                         1,732,205                    100.0  %         1,583,578                    100.0  %         1,450,831                    100.0  %         1,338,682                    100.0  %         1,189,999                    100.0  %
Allowance for loan losses                           (22,381)                                      (26,510)                                      (14,380)                                      (13,167)                                      (12,224)
Net loans held-for-investment                   $ 1,709,824                                   $ 1,557,068                                   $ 1,436,451                                   $ 1,325,515                                   $ 1,177,775


Loans held-for-investment were $1.73 billion at December 31, 2021, an increase
of $148.6 million, or 9.4%, from $1.58 billion at December 31, 2020. The
increase was primarily due to new funding of $619.7 million and advances of
$118.9 million, partially offset by paydowns and payoffs of $581.0 million,
transfers to loans held-for-sale of $8.8 million and charge-offs of $227
thousand. The increase for the year ended December 31, 2021 was primarily due to
increases in commercial property and residential property loans, partially
offset by decreases in SBA PPP and commercial term loans. As of December 31,
2021, the Company recognized $181.8 million in forgiveness.
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The following table shows the contractual maturities of loans held for investment purposes and the breakdown between fixed and variable interest rate loans at December 31, 2021:

                                                                                       December 31, 2021
                                                                    Due 

After a due after five

                                                Within One          Year to Five           Years to 15         Due After 15
($ in thousands)                                   Year                 Years                 Years                Years               Total
Real estate loans:
Commercial property                            $   96,753          $    669,819          $    338,503          $      768          $ 1,105,843
Residential property                                    -                     -                     -             209,485              209,485
SBA property                                           10                   116                10,011             119,524              129,661
Construction                                        8,252                     -                     -                   -                8,252
Total real estate loans                           105,015               669,935               348,514             329,777            1,453,241
Commercial and industrial loans:
Commercial term                                     3,401                55,900                14,137                   -               73,438
Commercial lines of credit                        100,936                     -                     -                   -              100,936
SBA commercial term                                    52                 5,597                11,991                   -               17,640
SBA PPP                                             5,158                60,171                     -                   -               65,329
Total commercial and industrial loans             109,547               121,668                26,128                   -              257,343
Other consumer loans                                3,079                17,930                   612                   -               21,621
Loans held-for-investment                      $  217,641          $    

809 533 $375,254 $329,777 $1,732,205
Loans with variable (floating) interest rates

                                          $  187,046          $    

307 905 $91,050 $150,224 $736,225
Adjustable interest rate loans (fixed to variable)

                                -                62,899               263,135             178,606              504,640
Loans with predetermined (fixed)
interest rates                                     30,595               438,729                21,069                 947              491,340
Total                                          $  217,641          $    746,634          $    112,119          $  329,777          $ 1,732,205

SBA Paycheck Protection Program

The following table presents a summary of SBA PPP loans as of the dates
indicated:

                                                                                                 December 31,
                                                                 2021                                                                  2020
                                                                Carrying           Contractual                                                              Contractual
($ in thousands)                      Number of Loans            Value               Balance             Number of Loans           Carrying Value             Balance
Loan amount:
$50,000 or less                              145              $   2,915          $       3,074                1,017              $        20,518          $      20,632
Over $50,000 and less than
$350,000                                     156                 25,417                 26,146                  496                       60,692                 62,011
Over $350,000 and less than
$2,000,000                                    52                 33,812                 34,432                   69                       46,054                 46,718
$2,000,000 or more                             1                  3,185                  3,187                    3                        8,390                  8,427
Total                                        354              $  65,329          $      66,839                1,585              $       135,654          $     137,788



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Loan modifications related to the COVID-19 pandemic

The Company started providing modifications related to the COVID-19 pandemic
during the three months ended June 30, 2020. The Company had no outstanding
modification since September 30, 2021. The following table presents activity in
loans under modified terms related to the COVID-19 pandemic for the year ended
December 31, 2021.

                                                            Real Estate Loans                                  Commercial and Industrial Loans
                                        Commercial            Residential                                                            SBA Commercial
($ in thousands)                         Property               Property             SBA Property           Commercial Term               Term                      Total
Balance at December 31, 2020          $     24,132          $         425          $       4,192          $           5,527          $      1,841                $ 36,117
Modification early
terminated(1)                                    -                      -                 (2,576)                         -                (1,338)                 (3,914)
Modification expired                       (33,943)                (1,100)                (1,627)                    (8,330)                 (513)                (45,513)
Subsequent modification                     11,829                    328                      -                      2,878                     -                  15,035
New modification                                 -                    349                      -                          -                     -                     349
Amortization                                (2,018)                    (2)                    11                        (75)                   10                  (2,074)
Balance at December 31, 2021          $          -          $           -          $           -          $               -          $          -                $      -

(1) Termination of Amendments at Borrower’s Request.

The following table presents the risk categories and accrued interest receivable
for loans previously modified in response to the COVID-19 pandemic, but that
have reverted back to previous contractual payment terms as of December 31,
2021:

                                                                                     December 31, 2021
                                                                  Carrying Value Per Risk Category
                                                          Special                                                                      Accrued Interest
($ in thousands)                         Pass             Mention            Substandard           Doubtful            Total              Receivable
Real estate loans:
Commercial property                  $ 291,759          $  11,739          $      1,525          $       -          $ 305,023          $         730
Residential property                    25,620                  -                     -                  -             25,620                    537
SBA property                             3,683                251                     -                  -              3,934                     15

Commercial and industrial
loans:
Commercial term                         29,744              3,563                 1,114                  -             34,421                     84

SBA commercial term                      1,663                  -                    57                  -              1,720                      6

Other consumer loans                       699                  -                     -                  -                699                      2
Total                                $ 353,168          $  15,553          $      2,696          $       -          $ 371,417          $       1,374


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. There were no past due or nonaccrual loans that were previously
modified in response to the COVID-19 pandemic, but that had reverted back to
previous contractual payment terms as of December 31, 2021.
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Allowance for loan losses

The following table reflects allocation of the allowance for loan losses by loan
category and the ratio of each loan category to total loans as of the dates
indicated:

                                                                                                                                                    December 31,
                                                            2021                                          2020                                          2019                                          2018                                          2017
                                                                   Percentage of                                 Percentage of                                 Percentage of                                 Percentage of                                 Percentage of
                                            Allowance for         Loans to Total          Allowance for         Loans to Total          Allowance for 

Loans in total Allowance for loans in total

  Allowance for         Loans to Total
($ in thousands)                             Loan Losses               Loans               Loan Losses               Loans               Loan Losses               Loans               Loan Losses               Loans               Loan Losses               Loans
Real estate loans:
Commercial property                        $   13,586                      63.9  %       $   13,810                      55.5  %       $    6,942                      55.4  %       $    6,216                      53.1  %       $    6,366                      55.5  %
Residential property                            1,869                      12.1  %            2,680                      12.5  %            1,167                      16.3  %            1,152                      17.5  %              833                      14.2  %
SBA property                                    1,253                       7.5  %            2,179                       8.0  %            1,446                       8.9  %            1,225                       9.0  %            1,124                      11.1  %
Construction                                       89                       0.5  %              225                       1.0  %              299                       1.3  %              511                       2.0  %              184                       1.9  %
Total real estate loans                        16,797                      84.0  %           18,894                      77.0  %            9,854                      81.9  %            9,104                      81.6  %            8,507                      82.7  %
Commercial and industrial loans:
Commercial term                                 2,715                       4.2  %            4,090                       5.5  %            1,848                       7.1  %            1,525                       7.6  %            1,513                       6.5  %
Commercial lines of credit                      2,071                       5.8  %            2,359                       6.1  %            1,805                       7.7  %            1,443                       6.9  %            1,126                       5.3  %
SBA commercial term                               524                       1.0  %              773                       1.4  %              701                       1.7  %              909                       2.0  %              909                       2.6  %
SBA PPP                                             -                       3.8  %                -                       8.6  %                -                         -  %                -                         -  %                -                         -  %
Total commercial and industrial
loans                                           5,310                      14.8  %            7,222                      21.6  %            4,354                      16.5  %            3,877                      16.5  %            3,548                      14.4  %
Other consumer loans                              274                       1.2  %              394                       1.4  %              172                       1.6  %              186                       1.9  %              169                       2.9  %
Total                                      $   22,381                     100.0  %       $   26,510                     100.0  %       $   14,380                     100.0  %       $   13,167                     100.0  %       $   12,224                     100.0  %
Allowance for loan losses to loans
held-for-investment                              1.29    %                                     1.67    %                                     0.99    %                                     0.98    %                                     1.03    %
Allowance for loan losses to loans
held-for-investment, excluding SBA
PPP loans (1)                                    1.34    %                                     1.83    %                                     0.99    %                                     0.98    %                                     1.03    %

(1) This ratio is not presented in accordance with GAAP. See “Non-GAAP Measure” for a reconciliation of this measure to its most comparable GAAP measure.

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 December 31, 2021 and 2020.

The decrease in allowance for loan losses for the year ended December 31, 2021
was primarily due to a decrease in qualitative adjustment factor allocations
related to economic implications of the COVID-19 pandemic.

The increase in allowance for loan losses for the year ended December 31, 2020
was primarily due to increased risks associated with economic and business
conditions, as well as increases in special mention and substandard loans, as a
result of the COVID-19 pandemic.



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

                                                                                                                                                 For the Year Ended December 31,
                                                                                  2021                                                                         2020                                                                         2019
                                                                            Net Charge-offs                                                              Net Charge-offs                                                              Net Charge-offs
($ in thousands)                                   Average Balance            (Recoveries)              Percentage              Average Balance            (Recoveries)              Percentage              Average Balance            (Recoveries)              Percentage
Real estate loans:
Commercial property                              $        983,129          $             -                         -  %       $        826,288          $             -                         -  %       $        744,513          $             -                         -  %
Residential property                                      197,741                        -                         -  %                221,296                        -                         -  %                237,825                        -                         -  %
SBA property                                              125,051                      (39)                    (0.03) %                124,996                      117                      0.09  %                125,785                       25                      0.02  %
Construction                                               12,715                        -                         -  %                 20,285                        -                         -  %                 22,384                        -                         -  %
Total real estate loans                                 1,318,636                      (39)                    (0.01) %              1,192,865                      117                      0.01  %              1,130,507                       25                      0.01  %
Commercial and industrial loans:
Commercial term                                            77,383                     (200)                    (0.26) %                 97,247                      (96)                    (0.10) %                104,427                      179                      0.17  %
Commercial lines of credit                                 92,874                     (146)                    (0.16) %                100,154                      709                      0.71  %                 93,344                    2,597                      2.78  %
SBA commercial term                                        19,390                     (104)                    (0.54) %                 23,868                      255                      1.07  %                 25,911                      196                      0.76  %
SBA PPP                                                   150,043                        -                         -  %                 92,818                        -                         -  %                      -                        -                         -  %
Total commercial and industrial loans                     339,690                     (450)                    (0.13) %                314,087                      868                      0.28  %                223,682                    2,972                      1.33  %
Other consumer loans                                       21,101                       22                      0.10  %                 22,033                      104                      0.47  %                 22,884                       27                      0.12  %
Total loans held-for-investment                  $      1,679,427          $          (467)                    (0.03) %       $      1,528,985          $         1,089                      0.07  %       $      1,377,073          $         3,024                      0.22  %


                                                                                                                     For the Year Ended December 31,
                                                                                             2018                                                                       2017
                                                                                         Net Charge-offs                                                            Net Charge-offs
($ in thousands)                                               Average Balance            (Recoveries)              Percentage            Average Balance            (Recoveries)              Percentage
Real estate loans:
Commercial property                                          $        683,739          $              4                   0.01  %       $        623,203          $              -                      -  %
Residential property                                                  200,061                         -                      -  %                149,168                         -                      -  %
SBA property                                                          129,472                       164                   0.13  %                117,154                       167                   0.14  %
Construction                                                           26,907                         -                      -  %                 21,035                         -                      -  %
Total real estate loans                                             1,040,179                       168                   0.02  %                910,560                       167                   0.02  %
Commercial and industrial loans:
Commercial term                                                        86,168                      (170)                 (0.20) %                 73,239                       281                   0.38  %
Commercial lines of credit                                             69,080                       (28)                 (0.04) %                 53,782                         -                      -  %
SBA commercial term                                                    28,950                       114                   0.39  %                 29,193                       459                   1.57  %

Total commercial and industrial loans                                 184,198                       (84)                 (0.05) %                156,214                       740                   0.47  %
Other consumer loans                                                   30,135                       204                   0.68  %                 32,951                        16                   0.05  %
Total loans held-for-investment                              $      1,254,512          $            288                   0.02  %       $      1,099,725          $            923                   0.08  %


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Loans 30 to 89 days past due and still in progress

The following table provides a summary of loans 30 to 89 days past due and still outstanding on the dates indicated:

                                                                       December 31,
      ($ in thousands)                             2021       2020        2019        2018        2017
      Real estate loans:

      Residential property                        $ 461      $ 182      $   697      $  95      $ 1,045
      SBA property                                    -          -          794        183            -

      Total real estate loans                       461        182        1,491        278        1,045
      Commercial and industrial loans:

      SBA commercial term                             -          -          189          -            2

      Total commercial and industrial loans           -          -          189          -            2
      Other consumer loans                           93        156          138         99          294
      Total                                       $ 554      $ 338      $ 1,818      $ 377      $ 1,341


Non-performing loans and non-performing assets

The following table presents a summary of total NPLs and NPAs as of the dates
indicated:

                                                                                    December 31,
($ in thousands)                                   2021               2020              2019               2018               2017
Nonaccrual loans:
Real estate loans:
Commercial property                            $        -          $    524          $      -          $        -          $    318
Residential property                                    -               189                 -                 302               730
SBA property                                          746               885               442                 540             1,810

Total real estate loans                               746             1,598               442                 842             2,858
Commercial and industrial loans:
Commercial term                                         -                 -                 -                   -                 4
Commercial lines of credit                              -               904             1,888                   -                10
SBA commercial term                                   213               595               159                 203               338

Total commercial and industrial loans                 213             1,499             2,047                 203               352
Other consumer loans                                   35                66                48                  16                24
Total nonaccrual loans                                994             3,163             2,537               1,061             3,234
Loans past due 90 days or more still on
accrual                                                 -                 -               287                   -                 -
Total nonperforming loans                             994             3,163             2,824               1,061             3,234
Other real estate owned                                 -             1,401                 -                   -                99
Total nonperforming assets                     $      994          $  4,564 

$2,824 $1,061 $3,333

Nonaccrual loans to loans
held-for-investment                                  0.06  %           0.20  %           0.17  %             0.08  %           0.27  %
Nonperforming loans to loans
held-for-investment                                  0.06  %           0.20  %           0.19  %             0.08  %           0.27  %
Allowance for loan losses to:
Nonaccrual loans                                 2,251.61  %         838.13 

% 566.81% 1,241.00% 377.98% Delinquent loans

                              2,251.61  %         838.13 

% 509.21% 1,241.00% 377.98% Non-performing assets to total assets

                 0.05  %           0.24  %           0.16  %             0.06  %           0.23  %


Total nonaccrual loans were $994 thousand at December 31, 2021, a decrease of
$2.2 million, or 68.6%, from $3.2 million at December 31, 2020. The decrease was
primarily due to payoffs and paydowns of $2.1 million, a loan transferred to
OREO of $905 thousand and charge-offs of $86 thousand, partially offset by loans
placed on nonaccrual status during the year ended December 31, 2021 of $958
thousand.


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Loans are generally placed on nonaccrual status when they become 90 days past
due, unless management believes the loan is well secured and in the process of
collection. Past due loans may or may not be adequately collateralized, but
collection efforts are continuously pursued. Loans may be restructured by
management when a borrower experiences changes to their financial condition,
causing an inability to meet the original repayment terms, and where management
believe the borrower will eventually overcome those circumstances and repay the
loan in full.

Additional income of approximately $54 thousand would have been recorded during
the year ended December 31, 2021, had these loans been paid in accordance with
their original terms throughout the periods indicated.

CRE concentration

The Bank has policies and procedures in place to monitor compliance with the CRE
Concentration Guidance. The Bank has set targets for CRE concentration limits as
a percentage of total capital in accordance with interagency guidelines and
actively manages the Bank's exposure to CRE lending. The Bank's construction and
land development loans remain a small portion of the loan portfolio and as a
percentage of total capital (as defined by the federal bank regulators) were
5.8% and 9.5%, respectively, at December 31, 2021 and 2020. As of December 31,
2021, using regulatory definitions in the CRE Concentration Guidance, CRE loans
represented 269.8% of total risk-based capital, as compared to 256.1%, 243.6%,
253.6% and 355.1% as of December 31, 2020, 2019, 2018 and 2017, respectively.
The reduction in CRE concentration ratio in 2018 was primarily due to the
additional capital from the Company's IPO during the year ended December 31,
2018.

The management believes that the Bank has a robust risk management framework in
place for CRE concentration issues including board approved CRE concentration
contingency plans. The CRE concentration contingency plan contains overview of
the Bank's strategies to mitigate and manage the concentration risks including
the plans to maintain stable capital levels, having access to additional
capital, maintaining adequate amount of allowance for loan losses, potentially
implementing more conservative growth/lending strategies if necessary,
maintaining liquidity within the CRE portfolio, and strengthening the loan
workout infrastructure.

Distressed Debt Restructurings

Loans that the Bank modifies or restructures where the debtor is experiencing
financial difficulties and makes a concession to the borrower in the form of
changes in the amortization terms, reductions in the interest rates, the
acceptance of interest only payments and, in limited cases, reductions in the
outstanding loan balances are classified as TDRs. TDRs are loans modified for
the purpose of alleviating temporary impairments to the borrower's financial
condition. A workout plan between a borrower and the Bank is designed to provide
a bridge for the cash flow shortfalls in the near term. If the borrower works
through the near term issues, in most cases, the original contractual terms of
the loan will be reinstated. The following table presents the composition of
loans that were modified as TDRs by portfolio segment as of the dates indicated:

                                                                       December 31,
       ($ in thousands)                             2021       2020       2019       2018        2017
       Real estate loans:
       Commercial property                         $ 326      $ 333      $ 339      $   -      $   318

       SBA property                                  259        275        415        315        1,373
       Total real estate loans                       585        608       

754 315 1,691

Commercial and industrial loans:

       Commercial term                                 2         18         

28 68 199

       Commercial lines of credit                      -          -          -          -           10
       SBA commercial term                             6         13         

39 180 367

       Total commercial and industrial loans           8         31         

67,248,576

       Total TDRs                                  $ 593      $ 639      $

821 $563 $2,267

Total unaccounted RDTs, included above $17 $5 $121 $131 $1,675


Total TDRs were $593 thousand at December 31, 2021, a decrease of $46 thousand,
or 7.2%, from $639 thousand at December 31, 2020. The decrease was primarily due
to payoffs and paydowns of $39 thousand and charge-offs of $6 thousand. There
were no new TDRs for the year ended December 31, 2021.
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Loans held for sale

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

The following table presents the composition of the loans held for sale of the Company on the dates indicated:

                                                                December 31,
($ in thousands)                           2021         2020        2019         2018         2017
Real estate loans:

Residential property                    $      -         300      $   760      $     -      $   270
SBA property                              33,603       1,411          150        5,481        3,857

Commercial and industrial loans:

SBA commercial term                        3,423         268        1,065          300        1,170

Loans held-for-sale                     $ 37,026       1,979      $ 1,975      $ 5,781      $ 5,297


Loans held-for-sale were $37.0 million at December 31, 2021, an increase of
$35.0 million, or 1,770.9%, from $2.0 million at December 31, 2020. The increase
was primarily due to originations of $172.2 million and transfers from loans
held-for-investment of $8.8 million, partially offset by sales of $145.8
million.


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Deposits

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

                                                                 December 

31,

($ in thousands)                                           2021                 2020              Amount Change          Percentage Change
Noninterest-bearing demand deposits                   $   830,383          $   538,009          $      292,374                       54.3  %
Interest-bearing deposits:
Savings                                                    16,299               10,481                   5,818                       55.5  %
NOW                                                        20,185               21,604                  (1,419)                      (6.6) %
Retail money market accounts                              386,041              351,739                  34,302                        9.8  %
Brokered money market accounts                                  1               25,002                 (25,001)                    (100.0) %
Retail time deposits of:
$250,000 or less                                          256,956              299,431                 (42,475)                     (14.2) %
More than $250,000                                        172,269              168,683                   3,586                        2.1  %
Time deposits from internet rate service
providers                                                       -               24,902                 (24,902)                         -  %
Brokered time deposits                                     85,000               55,000                  30,000                       54.5  %
Time deposits from California State Treasurer             100,000              100,000                       -                          -  %
Total interest-bearing deposits                         1,036,751            1,056,842                 (20,091)                      (1.9) %
Total deposits                                        $ 1,867,134          $ 1,594,851          $      272,283                       17.1  %

Total deposits not covered by deposit insurance $919,584 $737,215 $182,369

                       24.7  %

Term deposits not covered by deposit insurance $216,269 $224,718 ($8,449)

                      (3.8) %


The increase in noninterest-bearing demand deposits was primarily due to the
overall liquid deposit market. A total of $93.9 million of SBA PPP loans were
funded through the Bank's noninterest-bearing demand deposits and deposit
customers also received $201.1 million of SBA Economic Injury Disaster Loans and
SBA Revitalization Funds during the year ended December 31, 2021.

The decrease in retail time deposits was primarily due to matured and closed
accounts of $583.2 million, partially offset by new accounts of $101.6 million,
renewals of the matured accounts of $428.8 million, and balance increases of
$13.9 million.

As of December 31, 2021 and 2020, total deposits were comprised of 44.5% and
33.7%, respectively, of noninterest-bearing demand accounts, 22.6% and 25.7%,
respectively, of savings, NOW and money market accounts and 32.9% and 40.6%,
respectively, of time deposits.

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

                                          Three Months         Three to Six        Six Months to        One to Three
($ in thousands)                            or Less               Months              One Year              Years                    Total
December 31, 2021

Term deposits of $250,000 or less $143,594 $60,686

       $   129,627          $    8,049                $ 341,956
Time deposits of more than
$250,000                                     156,502               57,301               55,304               3,162                  272,269
Total                                    $   300,096          $   117,987          $   184,931          $   11,211                $ 614,225

Not covered by deposit insurance $136,219 $38,229

        $    38,780          $    3,041                $ 216,269

December 31, 2020

Term deposits of $250,000 or less $175,478 $76,197

       $   113,734          $   13,924                $ 379,333
Time deposits of more than
$250,000                                     156,507               35,000               72,553               4,623                  268,683
Total                                    $   331,985          $   111,197          $   186,287          $   18,547                $ 648,016

Not covered by deposit insurance $145,247 $23,338

        $    51,820          $    4,313                $ 224,718


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Equity and regulatory capital

Capital resources

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

Shareholders' equity was $256.3 million at December 31, 2021, an increase of
$22.5 million, or 9.6%, from $233.8 million at December 31, 2020. The increase
was primarily due to the net income of $40.1 million and stock option exercised
of $1.3 million, partially offset by repurchase of common stock of $10.9
million, cash dividends declared on common stock of $6.7 million and other
comprehensive loss from the fair value change in securities available-for-sale
of $1.8 million.

Stock Repurchase

On April 8, 2021, the Company's Board of Directors approved a repurchase program
authorizing the repurchase of up to 5% of the Company's outstanding common stock
as of the date of the board meeting, which represented 775,000 shares, through
September 7, 2021. The Company repurchased and retired 680,269 shares of common
stock at a weighted-average price of $15.99 per share, totaling $10.9 million
under this repurchase program.

Regulatory capital requirements

The following table presents a summary of the capital requirements applicable to the Bank in order to be considered “well capitalized” from a regulatory point of view as of December 31, 2021 and 2020. For comparison purposes, the Company’s ratios are also included, all of which would have exceeded the “well capitalized” level had the Company been subject to separate capital minimums.

                                                                                                      Minimum Regulatory            Well Capitalized
                                                     PCB Bancorp            Pacific City Bank            Requirements             Requirements (Bank)
December 31, 2021
Common tier 1 capital (to risk-weighted
assets)                                                      14.79  %                14.48  %                       4.5  %                       6.5  %
Total capital (to risk-weighted assets)                      16.04  %                15.73  %                       8.0  %                      10.0  %
Tier 1 capital (to risk-weighted assets)                     14.79  %                14.48  %                       6.0  %                       8.0  %
Tier 1 capital (to average assets)                           12.11  %                11.85  %                       4.0  %                       5.0  %
December 31, 2020
Common tier 1 capital (to risk-weighted
assets)                                                      15.97  %                15.70  %                       4.5  %                       6.5  %
Total capital (to risk-weighted assets)                      17.22  %                16.95  %                       8.0  %                      10.0  %
Tier 1 capital (to risk-weighted assets)                     15.97  %                15.70  %                       6.0  %                       8.0  %
Tier 1 capital (to average assets)                           11.94  %                11.74  %                       4.0  %                       5.0  %


The capital conservation buffer of the Company and the Bank was 8.04% and 7.73%, respectively, as at December 31, 2021and 9.22% and 8.95%, respectively, at
December 31, 2020.

Emergency Capital Investment Program

On December 14, 2021, the U.S. Treasury informed the Company that the U.S
Treasury has reviewed the Company's application to receive a capital investment
from the U.S Treasury under the Emergency Capital Investment Program ("ECIP"),
and that the Company would be eligible to receive an ECIP investment in an
amount up to $69,141,000 in the form of non-dilutive Tier 1 senior perpetual
preferred capital. The Company determined to accept the offer to receive the
ECIP investment for the full amount.

In order to receive the ECIP investment from the U.S Treasury, the Company will
be required to fulfill certain conditions established by the U.S Treasury and
will be subject to certain restrictions following its acceptance of the
investment. In addition, the final amount of the ECIP will be determined by the
U.S. Treasury and it may differ from the eligible amount. The Company expects to
close the investment in the second quarter of 2022, but the ultimate timing will
be controlled by the U.S. Treasury.

Established by the Consolidated Appropriations Act, 2021, the ECIP was created
to encourage low- and moderate-income community financial institutions and
minority depository institutions such as the Bank to augment their efforts to
support small businesses and consumers in their communities.


                                       70
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Liquidity

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

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

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

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

The Company had $10.0 million and $80.0 million of outstanding FHLB advances at
December 31, 2021 and 2020, respectively. Based on the values of loans pledged
as collateral, the Company had $516.2 million and $425.3 million of additional
borrowing capacity with FHLB as of December 31, 2021 and 2020, respectively. As
of December 31, 2021 and 2020, the Company had $65.0 million and $65.0 million
of available unused unsecured federal funds lines, respectively.

In addition, available unused secured borrowing capacity from Federal Reserve
Discount Window at December 31, 2021 and 2020 was $29.2 million and $35.8
million, respectively. Federal Reserve Discount Window was collateralized by
loans totaling $36.6 million and $44.1 million as of December 31, 2021 and 2020,
respectively. The Company's borrowing capacity from the Federal Reserve Discount
Window is limited by eligible collateral. The Company also maintains
relationships in the capital markets with brokers and dealers to issue
certificates of deposit. As of December 31, 2021 and 2020, total cash and cash
equivalents represented 9.5% and 10.1% of total assets, respectively.

On June 30, 2020, the Company also transferred securities held-to-maturity of
$18.8 million to securities available-for-sale in order to secure additional
liquidity on balance sheet. Since the beginning of the crisis, management has
been able to maintain strong on-and off-balance sheet liquidity as a result of
proactive liquidity management in response to the COVID-19 pandemic evidenced by
the fact that as of December 31, 2021, the Company maintained $203.3 million, or
9.5% of total assets, of cash and cash equivalents and $610.4 million, or 28.4%
of total assets, of available borrowing capacity.

PCB Bancorp, on a stand-alone holding company basis, must provide for its own
liquidity and its main source of funding is dividends from the Bank. There are
statutory, regulatory and debt covenant limitations that affect the ability of
the Bank to pay dividends to the holding company. Management believes that these
limitations will not impact the Company's ability to meet its ongoing short- and
long-term cash obligations.
                                       71
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Off-balance sheet arrangements

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

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

The Company’s exposure to loan losses in the event of non-performance of these financial covenants is represented by the contractual amount of these instruments. The Company uses the same credit policies for making commitments as for the loans reflected in the financial statements.

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

                                                               December 31,
                                                2021                                 2020
($ in thousands)                   Fixed Rate       Variable Rate       Fixed Rate       Variable Rate
Unused lines of credit            $     8,261      $      160,739      $     6,623      $      150,247
Unfunded loan commitments                 595              29,688            1,752              34,874
Standby letters of credit               3,078               1,431            2,971               1,814
Commercial letters of credit               91                 524                -                   -
Total                             $    12,025      $      192,382      $    11,346      $      186,935


The Company's exposure to loan loss in the event of nonperformance on
commitments to extend credit and standby letters of credit is represented by the
contractual amount of those instruments. The Company uses the same credit
policies in making commitments as it does for the loans reflected in the
consolidated financial statements. The Company maintained reserve for
off-balance sheet items of $214 thousand and $238 thousand, respectively, at
December 31, 2021 and 2020.

Contractual Obligations

The following table provides additional information regarding the total contractual obligations as of the dates indicated:

                                              Within One         One to Three        Three to Five
($ in thousands)                                 Year                Years               Years            Over Five Years            Total
December 31, 2021
Time deposits                                $  603,014          $   10,850          $      361          $             -          $ 614,225
FHLB advances                                    10,000                   -                   -                        -             10,000
Operating leases                                  2,706               3,023               1,235                      710              7,674
Total                                        $  615,720          $   13,873          $    1,596          $           710          $ 631,899
December 31, 2020
Time deposits                                $  629,469          $   17,019          $    1,528          $             -          $ 648,016
FHLB advances                                    70,000              10,000                   -                        -             80,000
Operating leases                                  2,494               4,342               1,413                      818              9,067
Total                                        $  701,963          $   31,361          $    2,941          $           818          $ 737,083


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


                                       72

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