PCB Bancorp (PCB) risk factors, FY2024 10-K

Risks Related to our Business

1. 01Our business depends on our ability to successfully manage credit risk
2. 02Fluctuations in interest rates may reduce net interest income and otherwise negatively impact our financial condition and results of operations
3. 03Liquidity risks could affect operations and jeopardize our business, financial condition and results of operations
4. 04We face a risk of noncompliance and enforcement action with the Bank Secrecy Act and other anti-money laundering statutes and regulations
5. 05Adverse developments affecting the banking industry could have a material effect on our operations and/or stock price
6. 06A decline in general business and economic conditions and any regulatory responses to such conditions could have a material adverse effect on our business, financial position, results of operations and growth prospects
7. 07System failure or breaches of our network security could subject us to increased operating costs as well as litigation and other liabilities
8. 08We have a continuing need for technological change, and we may not have the resources to effectively implement new technology or we may experience operational challenges when implementing new technology
9. 09The use of artificial intelligence in our marketplace may result in reputational harm or liability, or could otherwise adversely affect our business
10. 10Our business depends on our ability to attract and retain Korean-American immigrants as clients
11. 11Adverse conditions in Asia and elsewhere could adversely affect our business
12. 12Severe Weather, Natural Disasters or Other Climate Change Related Matters Could Significantly Impact Our Business
13. 13As we expand our business outside of California markets, we will encounter risks that could adversely affect us
14. 14We have a limited service area. This lack of geographic and ethnic diversification increases our risk profile

Risks Related to Our Loans

1. 15Because a significant portion of our loan portfolio is comprised of real estate loans, negative changes in the economy affecting real estate values and liquidity could impair the value of collateral securing our real estate loans and result in loan and other losses
2. 16The recognition of gains on the sale of loans and servicing asset valuations reflect certain assumptions
3. 17If we breach any of the representations or warranties we make to a purchaser of our mortgage loans, we may be liable to the purchaser for certain costs and damages
4. 18The non-guaranteed portion of SBA loans that we retain on our balance sheet as well as the guaranteed portion of SBA loans that we sell could expose us to various credit and default risks
5. 19Many of our loans are to commercial borrowers, which have a higher degree of risk than other types of loans
6. 20Our high concentration in commercial real estate could cause our regulators to restrict our ability to grow and could adversely affect our results of operations and financial condition
7. 21Our residential mortgage loan product consists primarily of non-qualified residential mortgage loans which may be considered riskier and less liquid than qualified residential mortgage loans
8. 22Curtailment of government guaranteed loan programs could affect a segment of our business
9. 23The small- and medium-sized businesses that we lend to may have fewer resources to weather adverse business developments, which may impair a borrower’s ability to repay a loan, and such impairment could adversely affect our results of operations and financial condition
10. 24Real estate construction loans are based upon estimates of costs and values associated with the complete project. These estimates may be inaccurate, and we may be exposed to significant losses on loans for these projects
11. 25Nonperforming assets take significant time to resolve and adversely affect our results of operations and financial condition, and could result in further losses in the future
12. 26Real estate market volatility and future changes in our disposition strategies could result in net proceeds that differ significantly from our other real estate owned fair value appraisals
13. 27We could be exposed to risk of environmental liabilities with respect to properties to which we take title

Risks Related to Our Deposits

1. 28Competition among U.S. banks for customer deposits is intense and may increase the cost of retaining current deposits or procuring new deposits
2. 29A large percentage of our deposits is attributable to a relatively small number of customers, which could adversely affect our liquidity, financial condition and results of operations

Risks Related to Our Management

1. 30We are highly dependent on key personnel and the loss of one or more of those key personnel may materially and adversely affect our ability to execute on our strategic plan, existing and prospective customer relationships, growth prospects, and results of operations

Risks Related to Our Allowance for Credit Losses and Other Accounting Estimates

1. 31Accounting estimates and risk management processes rely on analytical models that may prove inaccurate resulting in a material adverse effect on our business, financial condition and results of operations
2. 32Our allowance for credit losses may not be adequate to cover actual losses in our loan portfolio

Risks Related to Our Growth Strategy

1. 33We may not be able to continue growing our business, particularly if we cannot increase loans and deposits through organic growth because of constrained capital resources or other reasons
2. 34Operations in our LPOs have positively affected our results of operations, and sustaining these operations and growing loans may be more difficult than we expect, which could adversely affect our results of operations

Risks Related to Our Capital

1. 35We are subject to stringent capital requirements
2. 36We are subject to capital adequacy and liquidity rules and other regulatory requirements specifying minimum amounts and types of capital that must be maintained. From time to time, banking regulators implement changes to these regulatory capital adequacy and liquidity guidelines
3. 37The Company relies on dividends from the Bank to pay cash dividends, repurchase shares and fund its operating expenses
4. 38We are subject to extensive government regulation that could limit or restrict our activities, which in turn may adversely impact our ability to increase our assets and earnings
5. 39We are subject to numerous laws designed to protect consumers, including the Community Reinvestment Act and fair lending laws, and failure to comply with these laws could lead to a wide variety of sanctions
6. 40Monetary policies and regulations of the Federal Reserve could adversely affect our business, financial condition and results of operations
7. 41Changes in U.S. trade policies, such as the implementation of tariffs, control may adversely impact our business, financial condition and results of operations