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

The following is management's discussion and analysis of the major factors that
influenced the Company's results of operations and financial condition as of and
for the three and six months ended June 30, 2022. This analysis should be read
in conjunction with the Company's Annual Report on Form 10-K for the year ended
December 31, 2021 and with the unaudited consolidated financial statements and
notes (unaudited) thereto set forth in this Quarterly Report on Form 10-Q.

Critical accounting estimates

The Company's consolidated financial statements are prepared in accordance with
GAAP and general practices within the banking industry. Within these financial
statements, certain financial information contains approximate measurements of
financial effects of transactions and impacts at the consolidated statements of
financial condition dates and the Company's results of operations for the
reporting periods. As certain accounting policies require significant estimates
and assumptions that have a material impact on the carrying value of assets and
liabilities, the Company has established critical accounting policies to
facilitate making the judgment necessary to prepare financial statements. The
Company's critical accounting policies are described in Note 1 to Consolidated
Financial Statements and in the "Critical Accounting Estimates" section of
Management's Discussion and Analysis of Financial Condition and Results of
Operations in its Annual Report on Form 10-K for the year ended December 31,
2021 and in Note 1 to Consolidated Financial Statements (unaudited) included in
Part I of this Quarterly Report on Form 10-Q.

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 tables present reconciliation of return on average tangible common
equity, tangible common equity per common share and tangible common equity to
tangible assets ratios to their most comparable GAAP measures as of the dates or
for the periods indicated. These non-GAAP measures are used by management in its
analysis of the Company's performance.

                                                     Three Months Ended June 30,                   Six Months Ended June 30,
($ in thousands)                                       2022                  2021                 2022                     2021
Average total shareholders' equity               $     292,135           $ 239,448          $    275,841               $ 238,127
Less: average preferred stock                           28,872                   -                14,516                       -
Average tangible common equity                   $     263,263           $ 239,448          $    261,325               $ 238,127
Net income                                       $       9,092           $   9,844          $     19,332               $  18,404
Annualized return on average shareholder's
equity                                                   12.48   %           16.49  %              14.13   %               15.59  %
Annualized return on average tangible
common equity                                            13.85   %           16.49  %              14.92   %               15.59  %


($ in thousands, except per share data)                    June 30, 2022         December 31, 2021          June 30, 2021
Total shareholders' equity                                $    334,375          $         256,286          $    238,941
Less: preferred stock                                           69,141                          -                     -
Tangible common equity                                    $    265,234          $         256,286          $    238,941
Outstanding common shares                                   14,956,760                 14,865,825            14,854,315
Book value per common share                               $      22.36          $           17.24          $      16.09
Tangible common equity per common share                   $      17.73          $           17.24          $      16.09
Total assets                                              $  2,344,560          $       2,149,735          $  2,060,003
Total shareholders' equity to total assets                       14.26  %                   11.92  %              11.60  %
Tangible common equity to total assets                           11.31  %                   11.92  %              11.60  %



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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 as of the dates indicated. 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.
($ in thousands)                                                June 30, 

2022 December 31, 2021 June 30, 2021
Loans held for investment purposes

                                      $  1,833,010          $       1,732,205          $  1,719,656
Less: SBA PPP loans                                                   1,583                     65,329               181,019
Loans held-for-investment, excluding SBA PPP loans             $  1,831,427          $       1,666,876          $  1,538,637
Allowance for loan losses                                      $     21,071          $          22,381          $     24,889
Allowance for loan losses to loans held-for-investment                 1.15  %                    1.29  %               1.45  %
Allowance for loan losses to loans held-for-investment,
excluding SBA PPP loans                                                1.15  %                    1.34  %               1.62  %


Selected Financial Data

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

                                                     As of or For the Three 

Month ended on or for the half-year ended

                                                                  June 30,                                  June 30,
($ in thousands, except per share data)                   2022                 2021                 2022                 2021
Selected balance sheet data:
Cash and cash equivalents                            $   299,910          $ 

174,621 $299,910 $174,621
Titles available for sale

                            139,067              135,479              139,067              135,479
Loans held-for-sale                                        9,627               11,255                9,627               11,255
Loans held-for-investment, net of deferred
loan costs (fees)                                      1,833,010            1,719,656            1,833,010            1,719,656
Allowance for loan losses                                (21,071)             (24,889)             (21,071)             (24,889)
Total assets                                           2,344,560            2,060,003            2,344,560            2,060,003
Total deposits                                         1,997,607            1,797,648            1,997,607            1,797,648
Shareholders' equity                                     334,375              238,941              334,375              238,941
Selected income statement data:
Interest income                                      $    22,446          $    20,051          $    43,340          $    39,309
Interest expense                                           1,095                1,055                1,996                2,494
Net interest income                                       21,351               18,996               41,344               36,815
Reversal for loan losses                                    (109)                (934)              (1,300)              (2,081)
Noninterest income                                         3,648                5,151                8,934                8,008
Noninterest expense                                       12,245               11,139               24,316               20,808
Income before income taxes                                12,863               13,942               27,262               26,096
Income tax expense                                         3,771                4,098                7,930                7,692
Net income                                                 9,092                9,844               19,332               18,404
Per share data:
Earnings per common share, basic                     $      0.61          $ 

0.65 $1.29 $1.20
Earnings per common share, diluted

                          0.60                 0.64                 1.27                 1.19
Book value per common share (1)                            22.36                16.09                22.36                16.09
Tangible common equity per common share (9)                17.73                16.09                17.73                16.09
Cash dividends declared per common share                    0.15                 0.10                 0.30                 0.20
Outstanding share data:
Number of common shares outstanding                   14,956,760           14,854,315           14,956,760           14,854,315
Weighted-average common shares outstanding,
basic                                                 14,883,768           15,115,561           14,865,990           15,249,210
Weighted-average common shares outstanding,
diluted                                               15,122,452           15,309,873           15,138,493           15,425,308


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                                                      As of or For the Three Months Ended           As of or For the Six Months Ended
                                                                    June 30,                                    June 30,
($ in thousands, except per share data)                            2022                                 2021                   2022                 

2021

Selected performance ratios:
Return on average assets (2)                                          1.65         %                     1.96     %              1.78  %              1.85  %
Return on average shareholders' equity (2)                           12.48         %                    16.49     %             14.13  %             15.59  %
Return on average tangible common equity
(2),(9)                                                              13.85         %                    16.49     %             14.92  %             15.59  %
Dividend payout ratio (3)                                            24.59         %                    15.38     %             23.26  %             16.67  %
Efficiency ratio (4)                                                 48.98         %                    46.13     %             48.36  %             46.42  %
Yield on average interest-earning assets (2)                          4.22         %                     4.04     %              4.13  %              4.02  %
Cost of average interest-bearing liabilities
(2)                                                                   0.43         %                     0.40     %              0.39  %              0.46  %
Net interest spread (2)                                               3.79         %                     3.64     %              3.74  %              3.56  %
Net interest margin (2), (5)                                          4.01         %                     3.83     %              3.94  %              3.77  %
Total loans to total deposits ratio (6)                              92.24         %                    96.29     %             92.24  %             96.29  %
Asset quality:
Loans 30 to 89 days past due and still accruing       $                682                       $        227             $       682          $       227

Nonperforming loans (7)                                              1,223                              1,446                   1,223                1,446
Nonperforming assets (8)                                             2,031                              1,446                   2,031                1,446
Net charge-offs (recoveries)                                            18                               (309)                     10                 

(460)

Loans 30 to 89 days past due and still accruing
to loans held-for-investment                                          0.04         %                     0.01     %              0.04  %             

0.01%

Nonperforming loans to loans
held-for-investment                                                   0.07         %                     0.08     %              0.07  %              0.08  %
Nonperforming loans to allowance for loan
losses                                                                5.80         %                     5.81     %              5.80  %              5.81  %
Nonperforming assets to total assets                                  0.09         %                     0.07     %              0.09  %              0.07  %
Allowance for loan losses to loans
held-for-investment                                                   1.15         %                     1.45     %              1.15  %              1.45  %
Allowance for loan losses to loans
held-for-investment, excluding SBA PPP loans
(9)                                                                   1.15         %                     1.62     %              1.15  %             

1.62%

Allowance for loan losses to nonperforming
loans                                                             1,722.89         %                 1,721.23     %          1,722.89  %          1,721.23  %
Net charge-offs (recoveries) to average loans
held-for-investment (2)                                               0.01         %                    (0.07)    %              0.01  %             (0.06) %
Capital ratios:
Shareholders' equity to total assets                                 14.26         %                    11.60     %             14.26  %             11.60  %
Tangible common equity to total assets (9)                           11.31         %                    11.60     %             11.31  %             11.60  %
Average shareholders' equity to average total
assets                                                               13.23         %                    11.86     %             12.63  %             11.89  %
PCB Bancorp
Common tier 1 capital (to risk-weighted assets)                      14.44         %                    15.17     %             14.44  %             15.17  %
Total capital (to risk-weighted assets)                              19.25         %                    16.43     %             19.25  %             16.43  %
Tier 1 capital (to risk-weighted assets)                             18.11         %                    15.17     %             18.11  %             15.17  %
Tier 1 capital (to average assets)                                   15.37         %                    11.76     %             15.37  %             11.76  %
Pacific City Bank
Common tier 1 capital (to risk-weighted assets)                      17.79         %                    14.88     %             17.79  %             14.88  %
Total capital (to risk-weighted assets)                              18.92         %                    16.13     %             18.92  %             16.13  %
Tier 1 capital (to risk-weighted assets)                             17.79         %                    14.88     %             17.79  %             14.88  %
Tier 1 capital (to average assets)                                   15.09         %                    11.53     %             15.09  %            

11.53%


(1)  Shareholders' equity divided by common shares outstanding.
(2)  Annualized.
(3)  Dividends declared per common share divided by basic earnings per common
share.
(4)  Noninterest expenses divided by the sum of net interest income and
noninterest income.
(5)  Net interest income divided by average total interest-earning assets.
(6)  Total loans include both loans held-for-sale and loans held-for-investment,
net of unearned loan costs (fees).
(7)  Nonperforming loans include nonaccrual loans and loans past due 90 days or
more and still accruing.
(8)  Nonperforming assets include nonperforming loans and other real estate
owned.
(9)  Non-GAAP measure. See "Non-GAAP Measures" for a reconciliation to its most
comparable GAAP measure.
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Summary

Q2 2022 Financial Highlights

• Net income was $9.1 million for the three months ended June 30, 2022a decrease of $752,000i.e. 7.6%, of $9.8 million for the three months ended
June 30, 2021;

•The Company recorded a reversal for loan losses of $109,000 for the three months ended June 30, 2022 compared to $934,000 for the three months ended June 30, 2021.

•Net interest income was $21.4 million for the three months ended June 30, 2022
compared with $19.0 million for the three months ended June 30, 2021. Net
interest margin was 4.01% for the three months ended June 30, 2022 compared with
3.83% for the three months ended June 30, 2021.

• The gain on the sale of loans was $2.0 million for the three months ended June 30, 2022
compared to $4.0 million for the three months ended June 30, 2021.

• Total assets were $2.34 billion at June 30, 2022an augmentation of $194.8 millioni.e. 9.1%, of $2.15 billion at December 31, 2021;

•Loans held-for-investment, net of deferred costs (fees), were $1.83 billion at
June 30, 2022, an increase of $100.8 million, or 5.8%, from $1.73 billion at
December 31, 2021; and

• SBA PPP loans totaled $1.6 million and $65.3 million at June 30, 2022 and
December 31, 2021respectively.

• There were no modified terms loans related to the COVID-19 pandemic at
June 30, 2022 and December 31, 2021respectively.

• The ratio of loan loss allowance to total loans held for investment was 1.15% at
June 30, 2022 compared to 1.29% at December 31, 2021.

• Total deposits were $2.00 billion at June 30, 2022an augmentation of $130.5 millioni.e. 7.0%, of $1.87 billion at December 31, 2021.

•The Company issued 69,141 preferred shares in exchange for a capital investment of $69.1 million from WE Treasury within the framework of the ECIP.

Change of name from Pacific City Bank at PCB bank

On August 25, 2022, the Pacific City Bank will change its name to PCB Bank. In
addition, the Company introduced a new logo, which will also be utilized by the
Bank after its name change. In accordance with the name change, the Bank will
update its website, branch signage and marketing collateral.

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.

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.

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.


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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
II Item 1 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 totaled $100 thousand, which
represents the retention amount on its insurance claims. There were no
additional expenses associated with the data incident during the three and six
months ended June 30, 2022. 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.

Results 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 tables present interest income, average interest-earning assets,
interest expense, average interest-bearing liabilities, and their corresponding
yields and costs expressed both in dollars and rates, on a consolidated
operations basis, for the periods indicated:

                                                                                         Three Months Ended June 30,
                                                                     2022                                                           2021
                                                                                       Yield/ Cost                                                    Yield/ Cost
($ in thousands)                             Average Balance          Interest             (6)              Average Balance          Interest             (6)
Interest-earning assets:
Total loans (1)                            $      1,804,368          $ 21,243               4.72  %       $      1,691,704          $ 19,511               4.63  %
Mortgage backed securities                           88,032               416               1.90  %                 92,732               233               1.01  %
Collateralized mortgage obligation                   25,929               125               1.93  %                 22,929                54               0.94  %
SBA loan pool securities                             11,164                43               1.54  %                 10,828                51               1.89  %
Municipal bonds - tax exempt (2)                      5,347                37               2.78  %                  5,760                37               2.58  %
Corporate bonds                                       4,852                47               3.89  %                      -                 -                  -  %
Interest-bearing deposits in other
financial institutions                              185,786               410               0.89  %                156,155                42               0.11  %
FHLB and other bank stock                             9,847               125               5.09  %                  8,555               123               5.77  %
Total interest-earning assets                     2,135,325            22,446               4.22  %              1,988,663            20,051               4.04  %
Noninterest-earning assets:
Cash and due from banks                              20,801                                                         19,080
Allowance for loan losses                           (21,204)                                                       (25,559)
Other assets                                         73,137                                                         36,605
Total noninterest earning assets                     72,734                                                         30,126
Total assets                               $      2,208,059                                               $      2,018,789
Interest-bearing liabilities:
Deposits:
NOW and money market accounts              $        464,829               430               0.37  %       $        400,314               317               0.32  %
Savings                                              14,989                 2               0.05  %                 11,588                 1               0.03  %
Time deposits                                       521,606               609               0.47  %                615,035               682               0.44  %
Borrowings                                           11,132                54               1.95  %                 19,012                55               1.16  %
Total interest-bearing liabilities                1,012,556             1,095               0.43  %              1,045,949             1,055               0.40  %
Noninterest-bearing liabilities:
Demand deposits                                     889,691                                                        720,105
Other liabilities                                    13,677                                                         13,287
Total noninterest-bearing
liabilities                                         903,368                                                        733,392
Total liabilities                                 1,915,924                                                      1,779,341
Shareholders' equity                                292,135                                                        239,448
Total liabilities and shareholders'
equity                                     $      2,208,059                                               $      2,018,789
Net interest income                                                  $ 21,351                                                       $ 18,996
Net interest spread (3)                                                                     3.79  %                                                        3.64  %
Net interest margin (4)                                                                     4.01  %                                                        3.83  %
Cost of funds (5)                                                                           0.23  %                                                        0.24  %


(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 $606 thousand and $1.5 million, respectively, and net
accretion of discount on loans of $907 thousand and $1.0 million, respectively,
are included in the interest income for the three months ended June 30, 2022 and
2021.
(2)  The yield on municipal bonds has not been computed on a tax-equivalent
basis.
(3)  Net interest spread is calculated by subtracting average rate on
interest-bearing liabilities from average yield on interest-earning assets.
(4)  Net interest margin is calculated by dividing net interest income by
average interest-earning assets.
(5)  Cost of funds is calculated by dividing annualized interest expense on
total interest-bearing liabilities by the sum of average total interest-bearing
liabilities and noninterest-bearing demand deposits.
(6)  Annualized.
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                                                                                          Six Months Ended June 30,
                                                                     2022                                                           2021
                                                                                       Yield/ Cost                                                    Yield/ Cost
($ in thousands)                             Average Balance          Interest             (6)              Average Balance          Interest             (6)
Interest-earning assets:
Total loans (1)                            $      1,788,958          $ 41,433               4.67  %       $      1,666,808          $ 38,255               4.63  %
Mortgage backed securities                           86,138               723               1.69  %                 87,140               448               1.04  %
Collateralized mortgage obligation                   22,106               173               1.58  %                 23,903               111               0.94  %
SBA loan pool securities                             10,633                81               1.54  %                 11,248               103               1.85  %
Municipal bonds - tax exempt (2)                      5,489                73               2.68  %                  5,782                73               2.55  %
Corporate bonds                                       4,944                94               3.83  %                      -                 -                  -  %
Interest-bearing deposits in other
financial institutions                              188,051               506               0.54  %                168,363                87               0.10  %
FHLB and other bank stock                             9,216               257               5.62  %                  8,501               232               5.50  %
Total interest-earning assets                     2,115,535            43,340               4.13  %              1,971,745            39,309               4.02  %
Noninterest-earning assets:
Cash and due from banks                              20,594                                                         19,076
Allowance for loan losses                           (21,787)                                                       (26,211)
Other assets                                         70,384                                                         38,481
Total noninterest earning assets                     69,191                                                         31,346
Total assets                               $      2,184,726                                               $      2,003,091
Interest-bearing liabilities:
Deposits:
NOW and money market accounts              $        448,496               743               0.33  %       $        403,948               650               0.32  %
Savings                                              15,315                 4               0.05  %                 11,101                 2               0.04  %
Time deposits                                       553,818             1,144               0.42  %                625,267             1,659               0.54  %
Borrowings                                           10,768               105               1.97  %                 47,128               183               0.78  %
Total interest-bearing liabilities                1,028,397             1,996               0.39  %              1,087,444             2,494               0.46  %
Noninterest-bearing liabilities:
Demand deposits                                     865,294                                                        663,902
Other liabilities                                    15,194                                                         13,618
Total noninterest-bearing
liabilities                                         880,488                                                        677,520
Total liabilities                                 1,908,885                                                      1,764,964
Shareholders' equity                                275,841                                                        238,127
Total liabilities and shareholders'
equity                                     $      2,184,726                                               $      2,003,091
Net interest income                                                  $ 41,344                                                       $ 36,815
Net interest spread (3)                                                                     3.74  %                                                        3.56  %
Net interest margin (4)                                                                     3.94  %                                                        3.77  %
Cost of funds (5)                                                                           0.21  %                                                        0.29  %


(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 $1.8 million and $2.7 million, respectively, and net
accretion of discount on loans of $1.8 million and $1.8 million, respectively,
are included in the interest income for the six months ended June 30, 2022 and
2021.
(2)  The yield on municipal bonds has not been computed on a tax-equivalent
basis.
(3)  Net interest spread is calculated by subtracting average rate on
interest-bearing liabilities from average yield on interest-earning assets.
(4)  Net interest margin is calculated by dividing net interest income by
average interest-earning assets.
(5)  Cost of funds is calculated by dividing annualized interest expense on
total interest-bearing liabilities by the sum of average total interest-bearing
liabilities and noninterest-bearing demand deposits.
(6)  Annualized.
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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.

                                                      Three Months Ended June 30,                                         Six Months Ended June 30,
                                                             2022 vs. 2021                                                      2022 vs. 2021
                                           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                            $       1,299          $    433          $       1,732          $       2,803                  $   375          $       3,178
Investment securities                              9               284                    293                      7                      402                    409
Other interest-earning assets                     31               339                    370                     37                      407                    444
Total interest income                          1,339             1,056                  2,395                  2,847                    1,184                  4,031
Interest incurred on:
Savings, NOW, and money market
deposits                                          52                62                    114                     77                       18                     95
Time deposits                                   (104)               31                    (73)                  (190)                    (325)                  (515)
Borrowings                                       (23)               22                     (1)                  (141)                      63                    (78)
Total interest expense                           (75)              115                     40                   (254)                    (244)                  (498)

Change in net interest income $1,414 $941

     $       2,355          $       3,101                  $ 1,428          

$4,529

Three months completed June 30, 2022 Compared to the three months ended June 30, 2021

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

                                                          Three Months Ended June 30,
($ in thousands)                                            2022                  2021             Amount Change          Percentage Change
Interest and dividend income:
Loans, including fees                                 $       21,243          $  19,511          $        1,732                        8.9  %
Investment securities                                            668                375                     293                       78.1  %
Other interest-earning assets                                    535                165                     370                      224.2  %
Total interest income                                         22,446             20,051                   2,395                       11.9  %
Interest expense:
Deposits                                                       1,041              1,000                      41                        4.1  %
Borrowings                                                        54                 55                      (1)                      (1.8) %
Total interest expense                                         1,095              1,055                      40                        3.8  %
Net interest income                                   $       21,351          $  18,996          $        2,355                       12.4  %

Net interest income increased primarily due to a 7.4% increase in average balance of interest-bearing assets, an 18 basis point increase in average yield and a 3.2% decrease in the average balance of interest-bearing liabilities, partially offset by a lower 3 basis point increase in average cost.

Interest and fees on loans increased primarily due to a 6.7% increase in average
balance and a 9 basis point increase in average yield. The increase in average
yield was primarily due to an increase in overall interest rates on loans from
the rising interest rate environment, partially offset by a decrease in net
amortization of deferred loan fees. The decrease in net amortization of deferred
loan fees was primarily due to the decreased amount of SBA PPP loan payoffs.

Interest on investment securities increased primarily due to an 84 basis point
increase in average yield and a 2.3% increase in average balance. The increase
in average yield was primarily due to a decrease in net amortization of premiums
on mortgage-backed securities and collateralized mortgage obligations. For the
three months ended June 30, 2022 and 2021, yield on total investment securities
was 1.98% and 1.14%, respectively.


                                       44
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Interest income on other interest-earning assets increased primarily due to a 70
basis point increase in average yield and a 18.8% increase in average balance.
The increase in average yield was primarily due to an increase in interest rate
on cash held at the Federal Reserve Bank ("FRB") account. The increase in
average balance was primarily due to an increase in deposits and the ECIP
capital investment, partially offset by an increase in loans. The Company
maintains most of its cash at the FRB account. For the three months ended
June 30, 2022 and 2021, yield on total other interest-earning assets was 1.10%
and 0.40%, respectively.

Interest expense on deposits increased primarily due to a 3 basis point increase
in average cost of interest-bearing deposits and a 16.5% increase in savings,
NOW and money market accounts, partially offset by a 15.2% decrease in average
balance of time deposits. The increase in average cost was primarily due to an
increase in market rates. The decrease in average balance of time deposits was
primarily due to a lower level of new time deposits. For the three months ended
June 30, 2022 and 2021, average cost on total interest-bearing deposits was
0.42% and 0.39%, respectively, and average cost on total deposits were 0.22% and
0.23%, respectively.

Interest expense on borrowings decreased primarily due to a decrease in average
balance, partially offset by an increase in average cost. The Company had no
outstanding borrowings as of June 30, 2022.

Semester completed June 30, 2022 Compared to the half-year ended June 30, 2021

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

                                                           Six Months Ended June 30,
($ in thousands)                                            2022                 2021             Amount Change          Percentage Change
Interest and dividend income:
Loans, including fees                                 $      41,433          $  38,255          $        3,178                        8.3  %
Investment securities                                         1,144                735                     409                       55.6  %
Other interest-earning assets                                   763                319                     444                      139.2  %
Total interest income                                        43,340             39,309                   4,031                       10.3  %
Interest expense:
Deposits                                                      1,891              2,311                    (420)                     (18.2) %
Borrowings                                                      105                183                     (78)                     (42.6) %
Total interest expense                                        1,996              2,494                    (498)                     (20.0) %
Net interest income                                   $      41,344          $  36,815          $        4,529                       12.3  %


Net interest income increased primarily due to a 7.3% increase in average
balance of interest-earning assets, an 11 basis point increase in average yield,
a 5.4% decrease in average balance of interest-bearing liabilities and a 7 basis
point decrease in average cost.

Interest and fees on loans increased primarily due to a 7.3% increase in average
balance and a 4 basis point increase in average yield. The increase in average
yield was primarily due to the rising interest rate environment, partially
offset by a decrease in net amortization of deferred loan fees. The decrease in
net amortization of deferred loan fees was primarily due to the decreased amount
of SBA PPP loan payoffs.

Interest on investment securities increased primarily due to a 62 basis point
increase in average yield and a 1.0% increase in average balance. The increase
in average yield was primarily due to a decrease in net amortization of premiums
on mortgage-backed securities and collateralized mortgage obligations. For the
six months ended June 30, 2022 and 2021, yield on total investment securities
was 1.78% and 1.16%, respectively.

Interest income on other interest-earning assets increased primarily due to a 42
basis point increase in average yield and a 11.5% increase in average balance.
The increase in average yield was primarily due to an increase in interest rate
on cash held at the FRB account. The increase in average balance was primarily
due to an increase in deposits and the ECIP capital investment, partially offset
by an increase in loans. For the six months ended June 30, 2022 and 2021, yield
on total other interest-earning assets was 0.78% and 0.36%, respectively.


                                       45
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Interest expense on deposits decreased primarily due to an 8 basis point
decrease in average cost of interest-bearing deposits and an 11.4% decrease in
average balance of time deposits, partially offset by a 11.7% increase in
savings, NOW and money market accounts. The decrease in average cost was
primarily due to the lower interest rates on time deposits opened throughout
2021. The decrease in average balance of time deposits was primarily due to a
lower level of new time deposits. For the six months ended June 30, 2022 and
2021, average cost on total interest-bearing deposits was 0.37% and 0.45%,
respectively, and average cost on total deposits were 0.20% and 0.27%,
respectively.

Interest expense on borrowings decreased primarily due to a decrease in average
balance, partially offset by an increase in average cost of FHLB advances. The
Company had no outstanding borrowings as of June 30, 2022.

Write-off for loan losses

Reversal for loan losses was $109 thousand and $934 thousand for the three
months ended June 30, 2022 and 2021, respectively. For the six months ended
June 30, 2022 and 2021, reversal for loan losses was $1.3 million and $2.1
million, respectively. The reversal for loan losses for the three and six months
ended June 30, 2022 was primarily due to a decrease in historical loss and
qualitative adjustment factor allocations as a result of improving economic
conditions, partially offset by increases in commercial and residential property
loans.

See more details in the “Loan Loss Allowance” section.

                                       46
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Non-interest income

Three months completed June 30, 2022 Compared to the three months ended June 30, 2021

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

                                                      Three Months Ended June 30,
($ in thousands)                                        2022                   2021             Amount Change          Percentage Change
Service charges and fees on deposits            $          330             $     302          $           28                        9.3  %
Loan servicing income                                      755                   545                     210                       38.5  %
Bank-owned life insurance income                           175                     -                     175                            NM
Gain on sale of loans                                    2,039                 3,967                  (1,928)                     (48.6) %

Other income                                               349                   337                      12                        3.6  %
Total noninterest income                        $        3,648             $   5,151          $       (1,503)                     (29.2) %


Loan servicing income increased primarily due to an increase in servicing income
received and a decrease in servicing asset amortization. Servicing asset
amortization was $532 thousand and $579 thousand, respectively, for the three
months ended June 30, 2022 and 2021.

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

Gain on sale of loans decreased primarily due to a lower level of premium on SBA
loans in the secondary market. The Company sold SBA loans of $38.4 million with
a gain of $2.0 million during the three months ended June 30, 2022. During the
three months ended June 30, 2021, the Company sold SBA loans of $34.1 million
with a gain of $4.0 million and residential property loans of $1.6 million with
a gain of $13 thousand.

Other income primarily included wire transfer fees of $166 thousand and $141
thousand, respectively, and debit card interchange fees of $85 thousand and $77
thousand, respectively, for the three months ended June 30, 2022 and 2021.

Semester completed June 30, 2022 Compared to the half-year ended June 30, 2021

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

                                                     Six Months Ended June 30,
($ in thousands)                                      2022                 2021             Amount Change          Percentage Change
Service charges and fees on deposits            $         633          $     595          $           38                        6.4  %
Loan servicing income                                   1,455              1,427                      28                        2.0  %
Bank-owned life insurance income                          347                  -                     347                            NM
Gain on sale of loans                                   5,816              5,289                     527                       10.0  %

Other income                                              683                697                     (14)                      (2.0) %
Total noninterest income                        $       8,934          $   8,008          $          926                       11.6  %


Loan servicing income increased primarily due to an increase in servicing income
received, partially offset by an increase in servicing asset amortization.
Servicing asset amortization was $1.1 million and $970 thousand, respectively,
for the six months ended June 30, 2022 and 2021.

The Company purchased bank-owned life insurance 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 an increase in sale volume of
SBA loans. The Company sold SBA loans of $78.1 million with a gain of $5.9
million during the six months ended June 30, 2022. During the six months ended
June 30, 2021, the Company sold SBA loans of $45.0 million with a gain of $5.1
million and residential property loans of $9.5 million with a gain of $140
thousand.

Other income primarily included wire transfer fees of $325 thousand and $276
thousand, respectively, debit card interchange fees of $169 thousand and $136
thousand, respectively, and gain on sale of OREO of none and $74 thousand,
respectively, for the six months ended June 30, 2022 and 2021.


                                       47
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Non-interest expenses

Three months completed June 30, 2022 Compared to the three months ended June 30, 2021

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

                                                    Three Months Ended June 30,
($ in thousands)                                      2022                  2021             Amount Change          Percentage Change
Salaries and employee benefits                  $        8,125          $   7,125          $        1,000                       14.0  %
Occupancy and equipment                                  1,537              1,388                     149                       10.7  %
Professional fees                                          642                658                     (16)                      (2.4) %
Marketing and business promotion                           310                516                    (206)                     (39.9) %
Data processing                                            441                396                      45                       11.4  %
Director fees and expenses                                 182                151                      31                       20.5  %

Regulatory assessments                                     147                179                     (32)                     (17.9) %

Other expenses                                             861                726                     135                       18.6  %
Total noninterest expense                       $       12,245          $  11,139          $        1,106                        9.9  %


Salaries and benefits increased primarily due to an increase in salaries from the annual merit increase and an increase in the number of employees, partially offset by a decrease in incentives related to the sale of SBA loans issued by loan origination offices (“LPOs”) and an increase in the cost of loan origination, which offsets the recognition of salaries. The number of full-time equivalent employees was 271 to June 30, 2022 against 248 to
June 30, 2021.

Marketing and trade promotion expenses decreased primarily due to a decrease in advertising, partially offset by an increase in marketing activities.

Directors’ fees and expenses increased primarily due to the appointment of a new director during the fourth quarter of 2021.

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

Other expenses primarily included $55 thousand and $64 thousand in loan related
expenses, $369 thousand and $338 thousand in office expense, and $150 thousand
and $130 thousand in armed guard expense for the three months ended June 30,
2022 and 2021, respectively.
                                       48
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Semester completed June 30, 2022 Compared to the half-year ended June 30, 2021

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

                                                     Six Months Ended June 30,
($ in thousands)                                      2022                 2021             Amount Change          Percentage Change
Salaries and employee benefits                  $      16,720          $  13,307          $        3,413                       25.6  %
Occupancy and equipment                                 2,934              2,759                     175                        6.3  %
Professional fees                                       1,045              1,152                    (107)                      (9.3) %
Marketing and business promotion                          517                654                    (137)                     (20.9) %
Data processing                                           845                773                      72                        9.3  %
Director fees and expenses                                351                289                      62                       21.5  %
Regulatory assessments                                    288                387                     (99)                     (25.6) %
Other expenses                                          1,616              1,487                     129                        8.7  %
Total noninterest expense                       $      24,316          $  20,808          $        3,508                       16.9  %


Salaries and employee benefits increased primarily due to increases in salaries,
the incentives tied to sales of LPO originated SBA loans, and other employee
benefit expenses, and a decrease in loan origination cost. For the six months
ended June 30, 2021, loan origination cost were higher primarily due to the SBA
PPP loan production. The number of full-time equivalent employees was 271 at
June 30, 2022 compared to 248 at June 30, 2021.

Marketing and trade promotion expenses decreased primarily due to a decrease in advertising, partially offset by an increase in marketing activities.

Directors’ fees and expenses increased primarily due to the appointment of a new director during the fourth quarter of 2021.

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

Other expenses mainly included $101,000 and $221,000 in expenses related to borrowings, $695,000 and $645,000 in office expenses, and $290,000 and $244,000 in armed guard expenses for the six months ended
June 30, 2022 and 2021, respectively.

income tax expense

Income tax expense was $3.8 million and $4.1 million, respectively, and the
effective tax rate was 29.3% and 29.4%, respectively, for the three months ended
June 30, 2022 and 2021. For the six months ended June 30, 2022 and 2021, income
tax expense was $7.9 million and $7.7 million, respectively, and the effective
tax rate was 29.1% and 29.5%, respectively.
                                       49
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Financial condition

Investment security

The Company's investment strategy aims to maximize earnings while maintaining
liquidity in securities with minimal credit risk. The types and maturities of
securities purchased are primarily based on current and projected liquidity and
interest rate sensitivity positions.

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

                                                             June 30, 2022                                                     December 31, 2021
                                                                                   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:
Residential mortgage-backed
securities                            $       101,619          $   93,510   

$(8,109) $85,346 $84,713 $

(633)

Residential collateralized
mortgage obligations                           25,705              24,680                (1,025)                  18,990              19,056                     66
SBA loan pool securities                       11,007              10,792                  (215)                   8,520               8,672                    152
Municipal bonds                                 5,307               5,272                   (35)                   5,329               5,686                    357
Corporate bonds                                 5,000               4,813                  (187)                   5,000               5,071                     71
Total securities
available-for-sale                    $       148,638          $  139,067          $     (9,571)         $       123,185          $  123,198          $          13


Total investment securities were $139.1 million at June 30, 2022, an increase of
$15.9 million, or 12.9%, from $123.2 million at December 31, 2021. The increase
was primarily due to purchases of $38.0 million, partially offset by principal
paydowns of $12.3 million, a decrease in fair value of securities
available-for-sale of $9.6 million, and net premium amortization of $232
thousand.

The Company performs an OTTI assessment at least on a quarterly basis. OTTI is
recognized when fair value is below the amortized cost where: (i) an entity has
the intent to sell the security; (ii) it is more likely than not that an entity
will be required to sell the security before recovery of its amortized cost
basis; or (iii) an entity does not expect to recover the entire amortized cost
basis of the security. All individual securities in a continuous unrealized loss
position for 12 months or more as of June 30, 2022 and December 31, 2021 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 June 30,
2022 and December 31, 2021. 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 during the three and six months ended June 30, 2022
and 2021.

                                       50
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The following table presents the contractual maturity schedule for securities,
at amortized cost, and their weighted-average yields as of the date indicated:

                                                                                                                                                                                   June 30, 2022
                                                                       Within One Year                            More than One Year through Five Years                More than Five Years through Ten Years                        More than Ten Years                                          Total
                                                                                                                                                                                                                           Amortized
($ in thousands)                                        Amortized Cost     

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

            Cost             Weighted-Average Yield          Amortized Cost          Weighted-Average Yield
Securities available-for-sale:
U.S. government agency and U.S. government
sponsored enterprise securities:
Residential mortgage-backed securities                 $           -                              -  %       $         840                           1.57  %       $       8,747                           1.81  %       $   92,032                           2.04  %       $       101,619                           2.01  %
Residential collateralized mortgage obligations                    -                              -  %                 218                           2.09  %               8,579                           1.99  %           16,908                           2.32  %                25,705                           2.21  %
SBA loan pool securities                                           -                              -  %                 401                           2.58  %               3,098                           0.73  %            7,508                           1.72  %                11,007                           1.48  %
Municipal bonds                                                  300                           5.00  %               1,839                           2.07  %                 822                           2.27  %            2,346                           3.53  %                 5,307                           2.91  %
Corporate bonds                                                    -                              -  %                   -                              -  %               5,000                           3.75  %                -                              -  %                 5,000                           3.75  %
Total securities available-for-sale                    $         300                           5.00  %       $       3,298                           2.01  %       $      26,246                           2.13  %       $  118,794                           2.09  %       $       148,638                           2.10  %


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.

                                       51
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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 a composition of
loans held-for-sale as of the dates indicated:

($ in thousands)                        June 30, 2022       December 31, 2021
Real estate loans:

SBA property                           $        8,040      $           33,603

Commercial and industrial loans:

SBA commercial term                             1,587                   3,423

Total                                  $        9,627      $           37,026

Loans held for sale were $9.6 million at June 30, 2022a decrease of $27.4 millioni.e. 74.0%, of $37.0 million at December 31, 2021. The decrease is mainly explained by the sales of $78.1 millionpartially offset by new financing from
$51.1 million.

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:

                                                                    June 30, 2022                                   December 31, 2021
($ in thousands)                                          Amount           Percentage to Total              Amount              Percentage to Total
Real estate loans:
Commercial property                                   $ 1,204,142                       65.7  %       $      1,105,843                       63.9  %
Residential property                                      258,259                       14.1  %                209,485                       12.1  %
SBA property                                              131,420                        7.2  %                129,661                        7.5  %
Construction                                               12,595                        0.7  %                  8,252                        0.5  %
Total real estate loans                                 1,606,416                       87.7  %              1,453,241                       84.0  %
Commercial and industrial loans:
Commercial term                                            73,885                        4.0  %                 73,438                        4.2  %
Commercial lines of credit                                111,916                        6.1  %                100,936                        5.8  %
SBA commercial term                                        16,985                        0.9  %                 17,640                        1.0  %
SBA PPP                                                     1,583                        0.1  %                 65,329                        3.8  %
Total commercial and industrial loans                     204,369                       11.1  %                257,343                       14.8  %
Other consumer loans                                       22,225                        1.2  %                 21,621                        1.2  %
Loans held-for-investment                               1,833,010                      100.0  %              1,732,205                      100.0  %
Allowance for loan losses                                 (21,071)                                             (22,381)
Net loans held-for-investment                         $ 1,811,939                                     $      1,709,824

Allowance for loan losses to loans
held-for-investment                                          1.15  %                                              1.29  %
Allowance for loan losses to loans
held-for-investment, excluding SBA PPP loans
(1)                                                          1.15  %                                              1.34  %


(1) Non-GAAP measure. See “Non-GAAP Measures” for a reconciliation to its most comparable GAAP measure.

Loans held-for-investment, net of deferred loan costs (fees) were $1.83 billion
at June 30, 2022, an increase of $100.8 million, or 5.8%, from $1.73 billion at
December 31, 2021. The increase was primarily due to new funding of $278.9
million and advances of $69.3 million, partially offset by paydowns and payoffs
of $247.3 million. During the six months ended June 30, 2022, SBA PPP loans of
$63.7 million were paid off and related unamortized net deferred fees were
recognized through interest income. Commercial and residential property loan
production contributed significantly to the Company's loan growth for the six
months ended June 30, 2022.


                                       52
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SBA Paycheck Protection Program

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

                                                       June 30, 2022                                                December 31, 2021
                                                          Carrying           Contractual           Number of           Carrying           Contractual
($ in thousands)                 Number of Loans            Value              Balance               Loans              Value               Balance
Loan amount:
$50,000 or less                           3              $    102          $         108               145           $   2,915          $       3,074
Over $50,000 and less
than $350,000                             8                 1,041                  1,098               156              25,417                 26,146
Over $350,000 and less
than $2,000,000                           1                   440                    451                52              33,812                 34,432
$2,000,000 or more                        -                     -                      -                 1               3,185                  3,187
Total                                    12              $  1,583          $       1,657               354           $  65,329          $      66,839

Loan modifications related to the COVID-19 pandemic

The Company had made changes related to the COVID-19 pandemic during the years ended December 31, 2021 and 2020. The Company had no pending amendments since September 30, 2021.

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 the dates
indicated:

                                                             Carrying Value Per Risk Category
                                                     Special                                                                      Accrued Interest
($ in thousands)                    Pass             Mention            Substandard           Doubtful            Total              Receivable
June 30, 2022
Real estate loans:
Commercial property             $ 270,481          $   2,800          $        370          $       -          $ 273,651          $         687
Residential property               20,223                  -                     -                  -             20,223                    477
SBA property                        3,648                249                     -                  -              3,897                     11
Commercial and industrial
loans:
Commercial term                    23,478                960                 1,046                  -             25,484                     69
SBA commercial term                 1,513                  -                    47                  -              1,560                      5
Other consumer loans                  512                  -                     -                  -                512                      1
Total                           $ 319,855          $   4,009          $      1,463          $       -          $ 325,327          $       1,250
December 31, 2021
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


The decrease in special mention loans for the six months ended June 30, 2022 was
primarily due to improvements of 2 loans with an aggregated carrying value of
$11.3 million at December 31, 2021.

                                       53
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Allowance for loan losses

The Company's methodology for assessing the appropriateness of the allowance for
loan losses includes a general allowance for performing loans, which are grouped
based on similar characteristics, and a specific allowance for individual
impaired loans or loans considered by management to be in a high-risk category.
General allowances are established based on a number of factors, including
historical loss rates, an assessment of portfolio trends and conditions, accrual
status and economic conditions.

For any loan held-for-investment, a specific allowance may be assigned based on
an impairment analysis. Loans are considered impaired when it is probable that
the Company will be unable to collect all amounts due according to the
contractual terms of the loan agreement. The amount of impairment is based on an
analysis of the most probable source of repayment, including the present value
of the loan's expected future cash flows, the estimated market value or the fair
value of the underlying collateral. Interest income on impaired loans is accrued
as earned, unless the loan is placed on nonaccrual status.

Individual loans considered to be uncollectible are charged off against the
allowance for loan losses. Factors used in determining the amount and timing of
charge-offs on loans include consideration of the loan type, length of
delinquency, sufficiency of collateral value, lien priority and the overall
financial condition of the borrower. Collateral value is determined using
updated appraisals and/or other market comparable information. Charge-offs are
generally taken on loans once the impairment is confirmed. Recoveries on loans
previously charged off are added to the allowance for loan losses.

The decrease in allowance for loan losses to loans held-for-investment was
primarily due to a decrease in historical loss and qualitative adjustment factor
allocations as a result of improving economic conditions, partially offset by an
increase in commercial property loans.

The Company analyzes the loan portfolio, including delinquencies,
concentrations, and risk characteristics, at least quarterly in order to assess
the overall level of the allowance for loan losses. The Company also relies on
internal and external loan review procedures to further assess individual loans
and loan pools, and economic data for overall industry and geographic trends.

In determining the allowance and the related provision for loan losses, the
Company considers three principal elements: (i) valuation allowances based upon
probable incurred losses identified during the review of impaired commercial and
industrial, commercial property and construction loans, (ii) allocations, by
loan classes, on loan portfolios based on historical loan loss experience and
(iii) qualitative factors. Provisions for loan losses are charged to operations
to record changes to the allowance for loan losses to a level deemed
appropriate.

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 June 30, 2022 and December 31, 2021.


                                       54
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The following tables present net charge-offs (recoveries) as a percentage to the
average loan held for investment balances in each of the loan categories for the
periods indicated:

                                                                                                    Three Months Ended June 30,
                                                                          2022                                                                        2021
                                                                     Net Charge-Offs                                                             Net Charge-Offs
($ in thousands)                           Average Balance            (Recoveries)               Percentage             Average Balance            (Recoveries)              Percentage
Real estate loans:
Commercial property                      $      1,176,726          $              -                        -  %       $        939,972          $             -                        -  %
Residential property                              237,978                         -                        -  %                189,800                        -                        -  %
SBA property                                      113,253                         -                        -  %                124,530                      (17)                   (0.05) %
Construction                                       10,345                         -                        -  %                 13,322                        -                        -  %
Total real estate loans                         1,538,302                         -                        -  %              1,267,624                      (17)                   (0.01) %
Commercial and industrial loans:
Commercial term                                    71,552                        (2)                   (0.01) %                 78,930                     (123)                   (0.62) %
Commercial lines of credit                        110,090                         -                        -  %                 86,905                        -                        -  %
SBA commercial term                                16,047                         1                     0.02  %                 20,226                     (176)                   (3.48) %
SBA PPP                                            10,549                         -                        -  %                202,917                        -                        -  %
Total commercial and industrial
loans                                             208,238                        (1)                       -  %                388,978                     (299)                   (0.31) %
Other consumer loans                               21,615                        19                     0.35  %                 20,907                        7                     0.13  %
Total                                    $      1,768,155          $             18                    (0.01) %       $      1,677,509          $          (309)                   (0.07) %


                                                                                                     Six Months Ended June 30,
                                                                          2022                                                                        2021
                                                                     Net Charge-Offs                                                             Net Charge-Offs
($ in thousands)                           Average Balance            (Recoveries)               Percentage             Average Balance            (Recoveries)              Percentage
Real estate loans:
Commercial property                      $      1,153,936          $              -                        -  %       $        920,546          $             -                        -  %
Residential property                              223,554                         -                        -  %                192,395                        -                        -  %
SBA property                                      115,220                         -                        -  %                124,494                      (29)                   (0.05) %
Construction                                        9,701                         -                        -  %                 13,914                        -                        -  %
Total real estate loans                         1,502,411                         -                        -  %              1,251,349                      (29)                   (0.01) %
Commercial and industrial loans:
Commercial term                                    71,963                        (4)                   (0.01) %                 81,661                     (126)                   (0.31) %
Commercial lines of credit                        104,952                         -                        -  %                 91,883                     (136)                   (0.30) %
SBA commercial term                                16,455                        (2)                   (0.02) %                 21,152                     (181)                   (1.71) %
SBA PPP                                            26,307                         -                        -  %                190,902                        -                        -  %
Total commercial and industrial
loans                                             219,677                        (6)                   (0.02) %                385,598                     (443)                   (0.23) %
Other consumer loans                               21,459                        16                     0.15  %                 21,001                       12                     0.11  %
Total                                    $      1,743,547          $             10                    (0.01) %       $      1,657,948          $          (460)                   (0.06) %



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Non-performing loans and non-performing assets

The following table presents a summary of total non-performing assets as of the
dates indicated:

($ in thousands)                                       June 30, 2022         December 31, 2021           Amount Change          Percentage Change
Nonaccrual loans
Real estate loans:

Residential property                                  $        450          $             -            $          450                          -  %
SBA property                                                   564                      746                      (182)                     (24.4) %

Total real estate loans                                      1,014                      746                       268                       35.9  %

Commercial and industrial loans:

SBA commercial term                                            185                      213                       (28)                     (13.1) %
Total commercial and industrial loans                          185                      213                       (28)                     (13.1) %
Other consumer loans                                            24                       35                       (11)                     (31.4) %
Total nonaccrual loans                                       1,223                      994                       229                       23.0  %
Loans past due 90 days or more still on accrual                  -                        -                         -                          -  %
Total nonperforming loans                                    1,223                      994                       229                       23.0  %
Other real estate owned                                        808                        -                       808                          -  %
Total nonperforming assets                            $      2,031          $           994            $        1,037                      104.3  %

Nonaccrual loans to loans held-for-investment                 0.07  %                  0.06    %
Allowance for loan losses to nonaccrual loans             1,722.89  %              2,251.61    %
Nonperforming assets to total assets                          0.09  %                  0.05    %


The increase in total nonaccrual loans was primarily due to loans placed on
nonaccrual status of $481 thousand during the six months ended June 30, 2022,
partially offset by paydowns and payoffs of $246 thousand and charge-offs of $6
thousand. 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. In all cases, loans are placed on nonaccrual if
collection of principal or interest is considered doubtful. 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 believes the borrower will eventually
overcome those circumstances and repay the loan in full. Additional income of
approximately $17 thousand and $35 thousand would have been recorded during the
three and six months ended June 30, 2022, respectively, had these loans been
paid in accordance with their original terms throughout the periods indicated.

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:

                                                       June 30, 2022                                           December 31, 2021
($ in thousands)                       Accruing           Nonaccrual           Total             Accruing            Nonaccrual           Total
Real estate loans:
Commercial property                  $     321          $         -          $   321          $     326            $         -          $   326

SBA property                               229                   10              239                242                     17              259

Commercial and industrial
loans:
Commercial term                              -                    -                -                  2                      -                2

SBA commercial term                          5                    -                5                  6                      -                6

Total                                $     555          $        10          $   565          $     576            $        17          $   593


                                       56
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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 a summary of the Company's deposits as of the dates indicated:

                                                                               December 31,
($ in thousands)                                        June 30, 2022              2021               Amount Change          Percentage Change
Noninterest-bearing demand deposits                   $      988,454          $    830,383          $      158,071                       19.0  %
Interest-bearing deposits:
Savings                                                       14,686                16,299                  (1,613)                      (9.9) %
NOW                                                           18,881                20,185                  (1,304)                      (6.5) %
Retail money market accounts                                 458,605               386,041                  72,564                       18.8  %
Brokered money market accounts                                     1                     1                       -                          -  %
Retail time deposits of:
$250,000 or less                                             235,956               256,956                 (21,000)                      (8.2) %
More than $250,000                                           186,024               172,269                  13,755                        8.0  %

Brokered time deposits                                        35,000                85,000                 (50,000)                     (58.8) %
Time deposits from California State Treasurer                 60,000               100,000                 (40,000)                     (40.0) %
Total interest-bearing deposits                            1,009,153             1,036,751                 (27,598)                      (2.7) %
Total deposits                                        $    1,997,607          $  1,867,134          $      130,473                        7.0  %

Total deposits not covered by deposit insurance $1,199,502

   $    919,584                 279,918                       30.4  %

Term deposits not covered by deposit insurance $192,296

   $    216,269                 (23,973)                     (11.1) %


The increases in non-interest bearing demand deposits and retail money market accounts are primarily attributable to the overall cash deposit market.

The decrease in retail time deposits was primarily due to matured and closed
accounts of $413.7 million, partially offset by new accounts of $297.6 million
and renewals of the matured accounts of $99.4 million.

As of June 30, 2022 and December 31, 2021, total deposits were comprised of
49.5% and 44.5%, respectively, of noninterest-bearing demand accounts, 24.6% and
22.6%, respectively, of savings, NOW and money market accounts, and 25.9% and
32.9%, respectively, of time deposits.

The deposits of certain officers, directors and their related interests with which they are associated held by the Company have been $3.1 million and $3.9 millionrespectively, to June 30, 2022 and December 31, 2021.

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

                                          Three Months         Three to Six        Six Months to
($ in thousands)                            or Less               Months              One Year            Over One Year                  Total
June 30, 2022

Term deposits of $250,000 or less $100,393 $90,778

       $    74,701          $        5,084                $ 270,956
Time deposits of more than
$250,000                                     134,962               38,200               71,662                   1,200                  246,024
Total                                    $   235,355          $   128,978          $   146,363          $        6,284                $ 516,980

Not covered by deposit insurance $112,489 $25,578

        $    52,935          $        1,294                $ 192,296

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


                                       57
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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 $334.4 million at June 30, 2022, an increase of $78.1
million, or 30.5%, from $256.3 million at December 31, 2021. The increase was
primarily due to an issuance of preferred stock of $69.1 million, net income of
$19.3 million and cash proceeds from exercise of stock options of $567 thousand,
partially offset by dividends declared on common stock of $4.5 million and a
decrease in accumulated other comprehensive income of $6.8 million.

Regulatory capital requirements

The Bank is subject to various regulatory capital requirements administered by
the federal and state banking regulators. The Company is not currently subject
to separate minimum capital measurements under the definition of a "Small Bank
Holding Company." At such time as the Company reaches the $3 billion asset
level, it will again be subject to capital measurements independent of the Bank.

Federal banking agencies also require a capital conservation buffer of 2.50% in
addition to the ratios required to generally be considered "adequately
capitalized" under the prompt corrective action ("PCA") regulations. Failure to
meet regulatory capital requirements may result in certain mandatory and
possible additional discretionary actions by regulators that, if undertaken,
could have a direct material effect on the Company's financial statements. Under
capital adequacy guidelines and the regulatory framework for the PCA, the Bank
must meet specific capital guidelines that involve quantitative measures of
assets, liabilities and certain off-balance sheet items as calculated under
regulatory accounting policies. In addition to these uniform risk-based capital
guidelines and leverage ratios that apply across the industry, the regulators
have the discretion to set individual minimum capital requirements for specific
institutions at rates significantly above the minimum guidelines and ratios.

The following table presents a summary of the capital requirements applicable to
the Bank in order to be considered "well-capitalized" from a regulatory
perspective, as well as the Bank's capital ratios as of the dates indicated. For
comparison purpose, the Company's ratios are included as well, 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)
June 30, 2022
Common tier 1 capital (to risk-weighted
assets)                                                      14.44  %                17.79  %                       4.5  %                       6.5  %
Total capital (to risk-weighted assets)                      19.25  %                18.92  %                       8.0  %                      10.0  %
Tier 1 capital (to risk-weighted assets)                     18.11  %                17.79  %                       6.0  %                       8.0  %
Tier 1 capital (to average assets)                           15.37  %                15.09  %                       4.0  %                       5.0  %
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  %


The capital conservation buffer of the Company and the Bank was 11.25% and 10.92%, respectively, as at June 30, 2022and 8.04% and 7.73%, respectively, at
December 31, 2021.

Emergency Capital Investment Program

On May 24, 2022, the Company issued 69,141 shares of Series C Preferred Stock
for the capital investment of $69.1 million from the U.S. Treasury under the
ECIP. ECIP investment is treated as tier 1 capital for the regulatory capital
treatment.

The Series C Preferred Stock bears no dividend for the first 24 months following
the investment date. Thereafter, the dividend rate will be adjusted based on the
lending growth criteria listed in the terms of the ECIP investment with the
annual dividend rate up to 2%. After the tenth anniversary of the investment
date, the dividend rate will be fixed based on average annual amount of lending
in years 2 through 10. Dividends will be payable quarterly in arrears on March
15, June 15, September 15, and December 15.
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The Series C Preferred Stock may be redeemed at the option of the Company on or
after the fifth anniversary of issuance (or earlier in the event of loss of
regulatory capital treatment), subject to the approval of the appropriate
federal banking regulator and in accordance with the federal banking agencies'
regulatory capital regulations.

Established by the Consolidated Appropriations Act, 2021, the ECIP was created
to encourage low- and moderate-income community financial institutions and
minority depository institutions to provide loans, grants, and forbearance for
small businesses, minority-owned businesses, and consumers, especially
low-income and underserved communities, including persistent poverty counties,
that may be disproportionately impacted by the economic effect of the COVID-19
pandemic by providing direct and indirect capital investments in low- and
moderate-income community financial institutions.

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 cash flow and
capital and strategic cash flow needs, all at a reasonable cost. The Company
continuously monitors its 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 non-core 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 following table presents a summary of the Company's liquidity position as of
the dates indicated:

                                                                       December 31,
($ in thousands)                                 June 30, 2022             2021              Amount Change          Percentage Change
Cash and cash equivalents                       $     299,910          $  203,285          $       96,625                       47.5  %
Cash and cash equivalents to total assets                12.8  %            

9.5%

Available borrowing capacity:
FHLB advances                                   $     549,920          $  516,158                  33,762                        6.5  %
Federal Reserve Discount Window                        21,955              29,198                  (7,243)                     (24.8) %
Overnight federal funds lines                          65,000              65,000                       -                          -  %
Total                                           $     636,875          $  610,356          $       26,519                        4.3  %
Total available borrowing capacity to
total assets                                             27.2  %            

28.4%

The Company also maintains capital markets relationships with brokers and dealers to issue term deposits and money market accounts.

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.
                                       59
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Off-balance sheet activities and contractual obligations

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 consolidated 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:

                                            June 30, 2022                      December 31, 2021
($ in thousands)                   Fixed Rate       Variable Rate       Fixed Rate       Variable Rate
Unused lines of credit            $    16,940      $      201,910      $     8,261      $      160,739
Unfunded loan commitments               1,086              39,500              595              29,688
Standby letters of credit               2,921               1,701            3,078               1,431
Commercial letters of credit                -                 362               91                 524
Total                             $    20,947      $      243,473      $    12,025      $      192,382


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
June 30, 2022
Time deposits                                $  510,696          $    6,071          $      213          $             -          $ 516,980

Operating leases                                  2,968               2,565               1,396                      559              7,488
Total                                        $  513,664          $    8,636          $    1,609          $           559          $ 524,468
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                                        $  615,036          $   13,873          $    1,596          $           710          $ 631,899


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.


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