PCB BANCORPPCB
PCB BANCORP Fair Value Disclosure
Fair Value Measurements
ASC 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value including a three-level valuation hierarchy, and expands disclosures about fair value measurements. Fair value is the exchange price that would be received for an asset or paid to transfer a liability (i.e. an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The three-level fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are defined as follows:
•Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.
•Level 2: Significant observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
•Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.
Fair value is measured on a recurring basis for certain assets and liabilities in which fair value is the primary basis of accounting. Additionally, fair value is used on a non-recurring basis to evaluate certain assets or liabilities for impairment or for disclosure purposes. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The Company records securities available-for-sale at fair value on a recurring basis. Certain other assets, such as loans held-for-sale, individually evaluated loans, servicing assets and OREO are recorded at fair value on a non-recurring basis. Non-recurring fair value measurements typically involve assets that are periodically evaluated for impairment and for which any impairment is recorded in the period in which the re-measurement is performed.
The following is a description of valuation methodologies used for assets and liabilities recorded at fair value:
Investment securities: The fair values of securities available-for-sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1) or matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for specific securities but rather by relying on the securities’ relationship to other benchmark quoted securities (Level 2). Management reviews the valuation techniques and assumptions used by the provider and determines that the provider uses widely accepted valuation techniques based on observable market inputs appropriate for the type of security being measured.
Loans held-for-sale: The Company records SBA loans held-for-sale, residential mortgage loans held-for-sale and certain non-residential real estate loans held-for-sale at the lower of cost or fair value, on an aggregate basis. The Company obtains fair values from a third-party independent valuation service provider. Loans held-for-sale accounted for at the lower of cost or fair value are considered to be recognized at fair value when they are recorded at below cost, on an aggregate basis, and are classified as Level 2.
Individually evaluated loans: The Company records fair value adjustments on certain loans that reflect (i) partial write-downs, through charge-offs or individual reserve allowances, that are based on the current appraised or market-quoted value of the underlying collateral or (ii) the full charge-off of the loan carrying value. In some cases, the properties for which market quotes or appraised values have been obtained are located in areas where comparable sales data is limited, outdated, or unavailable. Fair value estimates for collateral-dependent individually evaluated loans are obtained from real estate brokers or other third-party consultants, and are classified as Level 3.
Other real estate owned: The Company initially records OREO at fair value at the time of foreclosure. Thereafter, OREO is recorded at the lower of cost or fair value based on their subsequent changes in fair value. The fair value of OREO is generally based on recent real estate appraisals adjusted for estimated selling costs. These appraisals may utilize a single valuation approach or a combination of approaches including comparable sales and the income approach. Adjustments are routinely made in the appraisal process by the appraisers to adjust for differences between the comparable sales and income data available. Such adjustments may be significant and result in a Level 3 classification due to the unobservable inputs used for determining fair value. Only OREO with a valuation allowance are considered to be carried at fair value.
Servicing Assets: Servicing assets represent the value of servicing rights associated with servicing loans that have been sold. The fair value for servicing assets is determined through discounted cash flow analysis and utilizes discount rates and prepayment speed assumptions as inputs. All of these assumptions require a significant degree of management estimation and judgment. The fair market valuation is performed on a quarterly basis for servicing assets. Servicing assets are accounted for at the lower of cost or market value and considered to be recognized at fair value when they are recorded at below cost and are classified as Level 3.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis as of the dates indicated:
| Fair Value Measurement Level | ||||||||||||||||||||||||||
| ($ in thousands) | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||
Securities available-for-sale: | ||||||||||||||||||||||||||
| U.S. government agency and U.S. government sponsored enterprise securities: | ||||||||||||||||||||||||||
| Mortgage-backed securities | $ | — | $ | 129,822 | $ | — | $ | 129,822 | ||||||||||||||||||
| Collateralized mortgage obligations | — | 18,762 | — | 18,762 | ||||||||||||||||||||||
| SBA loan pool securities | — | 4,193 | — | 4,193 | ||||||||||||||||||||||
| Municipal bonds | — | 2,484 | — | 2,484 | ||||||||||||||||||||||
| Corporate bonds | — | 4,748 | — | 4,748 | ||||||||||||||||||||||
| Total securities available-for-sale | — | 160,009 | — | 160,009 | ||||||||||||||||||||||
Total assets measured at fair value on a recurring basis | $ | — | $ | 160,009 | $ | — | $ | 160,009 | ||||||||||||||||||
Total liabilities measured at fair value on a recurring basis | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||
Securities available-for-sale: | ||||||||||||||||||||||||||
| U.S. government agency and U.S. government sponsored enterprise securities: | ||||||||||||||||||||||||||
| Mortgage-backed securities | $ | — | $ | 112,439 | $ | — | $ | 112,439 | ||||||||||||||||||
| Collateralized mortgage obligations | — | 21,237 | — | 21,237 | ||||||||||||||||||||||
| SBA loan pool securities | — | 6,008 | — | 6,008 | ||||||||||||||||||||||
| Municipal bonds | — | 2,420 | — | 2,420 | ||||||||||||||||||||||
| Corporate bonds | — | 4,245 | — | 4,245 | ||||||||||||||||||||||
| Total securities available-for-sale | — | 146,349 | — | 146,349 | ||||||||||||||||||||||
Total assets measured at fair value on a recurring basis | $ | — | $ | 146,349 | $ | — | $ | 146,349 | ||||||||||||||||||
Total liabilities measured at fair value on a recurring basis | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis
The following table presents the Company’s assets and liabilities measured at fair value on a non-recurring basis as of the dates indicated:
| Fair Value Measurement Level | ||||||||||||||||||||||||||
| ($ in thousands) | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||
Loans individually evaluated: | ||||||||||||||||||||||||||
Business property | — | — | 507 | 507 | ||||||||||||||||||||||
Total loans individually evaluated | — | — | 507 | 507 | ||||||||||||||||||||||
Total assets measured at fair value on a non-recurring basis | $ | — | $ | — | $ | 507 | $ | 507 | ||||||||||||||||||
Total liabilities measured at fair value on a non-recurring basis | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||
Loans individually evaluated: | ||||||||||||||||||||||||||
| Business property | $ | — | $ | — | $ | 994 | $ | 994 | ||||||||||||||||||
Total loans individually evaluated | — | — | 994 | 994 | ||||||||||||||||||||||
Total assets measured at fair value on a non-recurring basis | $ | — | $ | — | $ | 994 | $ | 994 | ||||||||||||||||||
Total liabilities measured at fair value on a non-recurring basis | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||||
The following table presents quantitative information about level 3 fair value measurements for assets measured at fair value on a non-recurring basis as of the dates indicated:
| ($ in thousands) | Fair Value | Valuation Technique(s) | Unobservable Input(s) | Range (Weighted-Average) | ||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||
Loans individually evaluated: | ||||||||||||||||||||||||||
Business property | $ | 507 | Fair value of collateral | Selling cost | 6% | |||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||
Loans individually evaluated: | ||||||||||||||||||||||||||
Business property | $ | 994 | Fair value of collateral | Selling cost | 6% | |||||||||||||||||||||
For assets measured at fair value, the following table presents the total net gains (losses), which include charge-offs, recoveries, individual reserves, impairment on servicing assets, gain (loss) on sale of OREO, and OREO valuation write-downs recorded for the periods indicated:
| Year Ended December 31, | ||||||||||||||||||||
| ($ in thousands) | 2025 | 2024 | 2023 | |||||||||||||||||
Loans individually evaluated: | ||||||||||||||||||||
Business property | $ | (135) | $ | 200 | $ | (264) | ||||||||||||||
| Multifamily | — | (20) | — | |||||||||||||||||
| Commercial and industrial | (37) | (47) | 1,074 | |||||||||||||||||
| Net gains (losses) recognized | $ | (172) | $ | 133 | $ | 810 | ||||||||||||||
Fair Value of Financial Instruments
The fair value of a financial instrument is the amount at which the asset or obligation could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the entire holdings of a particular financial instrument. Because no market value exists for a significant portion of the financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature, involve uncertainties and matters of judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.
Fair value estimates are based on financial instruments both on and off the consolidated balance sheet without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Additionally, tax consequences related to the realization of the unrealized gains and losses can have a potential effect on fair value estimates and have not been considered in many of the estimates. The following methods and assumptions were used to estimate the fair value of significant financial instruments.
Financial assets: The carrying amounts of interest-bearing deposits with other financial institutions and accrued interest receivable are considered to approximate fair value. The fair values of investment securities are generally based on matrix pricing (Level 2). The fair value of loans is estimated based on a discounted cash flow approach under an exit price notion. The fair value reflects the estimated yield that would be negotiated with a willing market participant. Because sale transactions of such loans are not readily observable, as many of the loans have unique risk characteristics, the valuation is based on significant unobservable inputs (Level 3). It is not practical to determine the fair value of FHLB and other restricted stock due to restrictions placed on its transferability.
Financial liabilities: The carrying amounts of accrued interest payable are considered to approximate fair value. The fair value of deposits is estimated based on discounted cash flows. The discount rate is derived from the interest rates currently being offered for similar remaining maturities. Non-maturity deposits are estimated based on their historical decaying experiences (Level 3). The fair value of FHLB advances is estimated based on discounted cash flows. The discount rate is derived from the current market rates for borrowings with similar remaining maturities (Level 2).
Off-balance-sheet financial instruments: The fair value of commitments to extend credit and standby letters of credit is estimated using the fees currently charged to enter into similar agreements. The fair value of these financial instruments is not material and is excluded from the table below.
The following table presents the carrying value and estimated fair values of financial assets and liabilities as of the dates indicated:
| Carrying Value | Fair Value | Fair Value Measurements | ||||||||||||||||||||||||||||||
| ($ in thousands) | Level 1 | Level 2 | Level 3 | |||||||||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||||||||
Financial assets: | ||||||||||||||||||||||||||||||||
| Interest-bearing deposits in other financial institutions | $ | 181,823 | $ | 181,823 | $ | 181,823 | $ | — | $ | — | ||||||||||||||||||||||
| Securities available-for-sale | 160,009 | 160,009 | — | 160,009 | — | |||||||||||||||||||||||||||
| Loans held-for-sale | 12,077 | 12,815 | — | 12,815 | — | |||||||||||||||||||||||||||
| Net loans held-for-investment | 2,787,019 | 2,783,879 | — | — | 2,783,879 | |||||||||||||||||||||||||||
| FHLB and other restricted stock | 14,978 | N/A | N/A | N/A | N/A | |||||||||||||||||||||||||||
| Accrued interest receivable | 10,669 | 10,669 | 126 | 599 | 9,944 | |||||||||||||||||||||||||||
Financial liabilities: | ||||||||||||||||||||||||||||||||
| Deposits | $ | 2,795,412 | $ | 2,805,598 | $ | — | $ | — | $ | 2,805,598 | ||||||||||||||||||||||
| FHLB advances | 34,000 | 34,000 | — | 34,000 | — | |||||||||||||||||||||||||||
| Accrued interest payable | 25,228 | 25,228 | — | 4 | 25,224 | |||||||||||||||||||||||||||
| December 31, 2024 | ||||||||||||||||||||||||||||||||
Financial assets: | ||||||||||||||||||||||||||||||||
| Interest-bearing deposits in other financial institutions | $ | 171,692 | $ | 171,692 | $ | 171,692 | $ | — | $ | — | ||||||||||||||||||||||
| Securities available-for-sale | 146,349 | 146,349 | — | 146,349 | — | |||||||||||||||||||||||||||
| Loans held-for-sale | 6,292 | 6,783 | — | 6,783 | — | |||||||||||||||||||||||||||
| Net loans held-for-investment | 2,598,759 | 2,593,839 | — | — | 2,593,839 | |||||||||||||||||||||||||||
| FHLB and other restricted stock | 14,042 | N/A | N/A | N/A | N/A | |||||||||||||||||||||||||||
| Accrued interest receivable | 10,466 | 10,466 | 139 | 548 | 9,779 | |||||||||||||||||||||||||||
Financial liabilities: | ||||||||||||||||||||||||||||||||
| Deposits | $ | 2,615,791 | $ | 2,620,750 | $ | — | $ | — | $ | 2,620,750 | ||||||||||||||||||||||
| Other short-term borrowings | 15,000 | 15,000 | — | 15,000 | — | |||||||||||||||||||||||||||
| Accrued interest payable | 24,407 | 24,407 | — | 2 | 24,405 | |||||||||||||||||||||||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 16, 2026 | Showing above |
| 2024 | Mar 13, 2025 | |
| 2023 | Mar 12, 2024 | |
| 2022 | Mar 9, 2023 | |
| 2021 | Mar 4, 2022 | |
| 2020 | Mar 11, 2021 | |
| 2019 | Mar 9, 2020 | |
| 2018 | Mar 18, 2019 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.