Regulatory Matters

3 Months Ended

Mar. 31, 2024

Under the final rules implementing Basel Committee on Banking Supervision’s capital guidelines for U.S. banks (“Basel III rules”), the Bank must hold a capital conservation buffer of 2.50% above the adequately capitalized risk-based capital ratios to avoid restrictions on dividends, stock repurchase, discretionary bonuses and other payments. Management believes as of March 31, 2024 and December 31, 2023, the Bank met all capital adequacy requirements to which it is subject. Under the Federal Reserve’s “Small Bank Holding Company” policy, the Company is not currently subject to separate minimum capital requirements under the Basel III rules. At such time as the Company reaches the $3 billion asset level, it will be subject to capital measurements under the Basel III rules independent of the Bank. For comparison purposes, the Company’s ratios are included in the following discussion as well, all of which would have exceeded the “well-capitalized” level had the Company been subject to separate capital minimums. The Company and the Bank’s capital conservation buffer was 7.38% and 7.58%, respectively, as of March 31, 2024, and 7.73% and 8.07%, respectively, as of December 31, 2023. Unrealized gain or loss on securities available-for-sale is not included in computing regulatory capital. The following table presents the regulatory capital amounts and ratios for the Company and the Bank as of dates indicated:


	Actual				Minimum Capital Requirement				To Be Well Capitalized Under Prompt Corrective Provisions
($ in thousands)	Amount		Ratio		Amount		Ratio		Amount		Ratio
March 31, 2024
PCB Bancorp
Common tier 1 capital (to risk-weighted assets)	$	290,431	11.88	%	$	109,998	4.5	%	N/A		N/A
Total capital (to risk-weighted assets)	389,349		15.93	%	195,552		8.0	%	N/A		N/A
Tier 1 capital (to risk-weighted assets)	359,572		14.71	%	146,664		6.0	%	N/A		N/A
Tier 1 capital (to average assets)	359,572		12.73	%	112,954		4.0	%	N/A		N/A
PCB Bank
Common tier 1 capital (to risk-weighted assets)	$	351,242	14.37	%	$	109,997	4.5	%	$	158,885	6.5	%
Total capital (to risk-weighted assets)	381,020		15.59	%	195,550		8.0	%	244,438		10.0	%
Tier 1 capital (to risk-weighted assets)	351,242		14.37	%	146,663		6.0	%	195,550		8.0	%
Tier 1 capital (to average assets)	351,242		12.44	%	112,953		4.0	%	141,191		5.0	%
December 31, 2023
PCB Bancorp
Common tier 1 capital (to risk-weighted assets)	$	288,174	12.23	%	$	106,043	4.5	%	N/A		N/A
Total capital (to risk-weighted assets)	386,125		16.39	%	188,521		8.0	%	N/A		N/A
Tier 1 capital (to risk-weighted assets)	357,315		15.16	%	141,391		6.0	%	N/A		N/A
Tier 1 capital (to average assets)	357,315		13.43	%	106,423		4.0	%	N/A		N/A
PCB Bank
Common tier 1 capital (to risk-weighted assets)	$	350,038	14.85	%	$	106,081	4.5	%	$	153,228	6.5	%
Total capital (to risk-weighted assets)	378,849		16.07	%	188,588		8.0	%	235,735		10.0	%
Tier 1 capital (to risk-weighted assets)	350,038		14.85	%	141,441		6.0	%	188,588		8.0	%
Tier 1 capital (to average assets)	350,038		13.16	%	106,421		4.0	%	133,026		5.0	%

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

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