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Press Release

RBB Bancorp Reports Third Quarter Earnings for 2017

October 23, 2017 at 4:15 PM EDT
  • Net income was $6.6 million or $0.42 diluted earnings per share

  • Total loans increased by $50.5 million, or 17.5% annualized growth, from the end of the prior quarter

  • Total deposits increased by $39.8 million, or 12.4% annualized growth, from the end of the prior quarter

LOS ANGELES, Oct. 23, 2017 (GLOBE NEWSWIRE) -- RBB Bancorp (NASDAQ:RBB) and its subsidiaries, Royal Business Bank (“the Bank”) and RBB Asset Management Company (“RAM”), collectively referred to herein as “the Company”, announced financial results for the quarter ended September 30, 2017.

The Company reported net income of $6.6 million, or $0.42 diluted earnings per share, for the three months ended September 30, 2017, compared to net income of $8.5 million, or $0.62 diluted earnings per share, and $5.7 million, or $0.43 diluted earnings per share, for the three months ended June 30, 2017 and September 30, 2016, respectively. The decline in earnings per share relative to the second quarter of 2017 was attributable to the recapture of $4.2 million of provision for loan losses in the second quarter of 2017 that positively impacted the prior quarter's results.

Mr. Alan Thian, Chairman, President and CEO of RBB Bancorp, commented on the results, “We executed well on our strategic plan in the third quarter and delivered strong financial results driven by quality balance sheet growth, higher gain on loan sale income, stable expenses and improvement in our asset quality.  Our loan pipeline remains strong and we expect to see a continuation of these positive trends going forward.  We are also on track to launch our Wealth Management business by the beginning of 2018.  We anticipate that Wealth Management will provide a stable source of non-interest income, further diversify our revenue mix, and serve as another catalyst for the continued growth of our franchise in the coming years.”

Key Performance Ratios

Net income of $6.6 million for the third quarter of 2017 produced an annualized return on average equity of 11.04% and an annualized return on average assets of 1.65%. The efficiency ratio for the third quarter of 2017 was 38.87%, compared to 40.44% for the prior quarter. Adjusted annualized return on average assets and average tangible common equity for the third quarter of 2017 was 1.55% and 11.97%, respectively, compared to 1.10% and 11.06% for the third quarter of 2016.  A reconciliation of adjusted earnings to earnings according to generally accepted accounting principles (“GAAP”) is provided in the financial tables at the end of this press release.

Net Interest Income and Net Interest Margin

Net interest income, before provision for loan losses, was $14.7 million for the third quarter of 2017, compared to $14.0 million for the second quarter of 2017.  The increase was primarily attributable to a $94.5 million increase in average earning assets (mainly the result of proceeds from the Company’s July IPO), largely offset by an 11 basis point decrease in the net interest margin (which includes the impact of reduced loan discount accretion).

Compared to the third quarter of 2016, net interest income, before provision for loan losses, declined from $15.5 million. The decrease was primarily due to loan discount accretion income being lower by $2.3 million in the third quarter of 2017 as compared to the third quarter of 2016.

Net interest margin was 3.91% for the third quarter of 2017, a decrease from 4.02% in the second quarter of 2017.  The decrease was primarily attributable to a 15 basis point decrease in the yield on earning assets, primarily due to lower loan discount accretion income and a higher proportion of lower yielding assets due to excess liquidity from the IPO.  

Compared to the third quarter of 2016, net interest margin declined from 4.52%.  The decrease was primarily due to lower accretion of purchased discounts between the third quarter of 2017 and the third quarter of 2016 (see adjusted earnings metrics table on page 16).

Noninterest Income

Noninterest income was $3.8 million for the third quarter of 2017, compared to $3.2 million in the second quarter of 2017.  The increase was primarily attributable to an additional $295,000 gain on loan sales, an additional $319,000 in loan servicing fees, a $142,000 gain on sale of one OREO property, partially offset by a $123,000 decrease in service charges.

The Company sold $43.4 million in mortgage loans for a net gain of $969,000 during the quarter ended September 30, 2017, compared to $37.7 million in mortgage loans for a net gain of $802,000 during the quarter ended June 30, 2017. The Company originated $118.6 million in mortgage loans for the quarter ended September 30, 2017, compared with $97.1 million during the quarter ended June 30, 2017.

The Company sold $22.4 million in SBA loans for a net gain of $1.6 million during the quarter ended September 30, 2017, compared to $23.1 million in SBA loans for a net gain of $1.5 million during the quarter ended June 30, 2017.  SBA loan originations for the quarter ending September 30, 2017 were $19.3 million, compared to $34.4 million during the quarter ended June 30, 2017.

Compared to the third quarter of 2016, noninterest income increased from $2.6 million. The increase was primarily attributable to an additional $714,000 from gains on loan sales, an increase of $219,000 in additional loan servicing fees, plus the above mentioned OREO sale.

Noninterest Expense

Noninterest expense for the third quarter of 2017 was $7.2 million, compared to $7.0 million for the second quarter of 2017.  The increase was primarily attributable to a $107,000 increase in marketing and business promotion expenses and other expense, partially offset by reductions in salaries and employee benefits, occupancy and equipment expenses and office expenses.

Compared to the third quarter of 2016, noninterest expense increased from $7.0 million. The $164,000 increase when compared to the third quarter of 2016 was primarily the result of an increase in salaries and employee benefits of $697,000, partially offset by decreases in data processing, legal & professional, and other expenses.

Income Taxes

The effective tax rate for the three and nine months ended September 30, 2017 was 37.8% and 40.1%, respectively, compared with 41.7% and 41.2% for the three and nine months ended September 30, 2016, respectively. Our estimated annual effective tax rate varies depending upon tax-advantaged income as well as available tax credits. The decrease in the effective tax rate is mainly due to stock option exercises and a resulting tax deduction of $773,000

Loan Portfolio

Loans held for investment, net of deferred fees and discounts, totaled $1.20 billion as of September 30, 2017, an increase of $50.5 million, or 17.5% annualized growth, from $1.15 billion at June 30, 2017, and an increase of $74.6 million, or 6.7%, from September 30, 2016.  The increase in loans held for investment from the end of the prior quarter was primarily attributable to growth in the commercial real estate and residential real estate portfolios.

Mortgage loans held for sale increased to $125.7 million as of September 30, 2017, compared to $83.3 million at June 30, 2017.  The increase was due to higher originations of single-family residential mortgage loans held for sale.

Deposits

Deposits were at $1.32 billion at September 30, 2017, an increase of $39.8 million, or 12.4% annualized growth, from $1.28 billion at June 30, 2017, and an increase of $119.2 million, or 9.9%, from September 30, 2016. The increase in total deposits from the end of the prior quarter was attributable to growth in non-maturity deposit types.

Noninterest-bearing deposits increased to $287.6 million as of September 30, 2017, compared to $215.7 million at June 30, 2017 and $168.6 million at September 30, 2016.  The growth in noninterest-bearing deposits is mainly due to marketing efforts by our branches and by branch management.

Asset Quality

Nonperforming assets totaled $4.2 million, or 0.26% of total assets at September 30, 2017, compared to $9.3 million, or 0.61% of total assets, at June 30, 2017.  The decline in non-performing assets was primarily attributable to a $3.6 million SBA loan guaranty payment in July 2017.  Nonperforming assets consist of Other Real Estate Owned (foreclosed properties), loans modified under troubled debt restructurings (TDRs), non-accrual loans, and loans past due 90 days or more and still accruing interest. Nonperforming assets exclude PCI loans acquired in prior acquisitions.

Loans 30 to 89 days past due declined to $2.2 million at September 30, 2017, down from $20.7 million at June 30, 2017.  The decrease was primarily attributable to one delinquent loan totaling $12.7 million that was brought current during the third quarter of 2017, while the collateral securing the loan remains in escrow.

Net charge-offs were (0.07)% of average loans during the third quarter of 2017, consisting of no gross charge-offs, and loan recoveries of $747,000.

The Company recorded provision for loan losses of $700,000 for the third quarter of 2017, which was primarily attributable to the growth in total loans during the quarter.

The allowance for loan losses totaled $11.4 million, or 0.95% of total loans, at September 30, 2017, compared with $10.6 million, or 0.93% of total loans, at June 30, 2017. 

Corporate Overview

RBB Bancorp is a $1.6 billion in assets bank holding company headquartered in Los Angeles, California. Its wholly-owned subsidiary, Royal Business Bank (the “Bank”), is a full service commercial bank which provides business banking services to the Chinese-American communities in Los Angeles County, Orange County, Ventura County and in Las Vegas, Nevada, including remote deposit, E-banking, mobile banking, commercial and investor real estate loans, business loans and lines of credit, commercial and industrial loans, SBA 7A and 504 loans, 1-4 single family residential loans, trade finance and a full range of depository accounts. The Bank has ten branches in Los Angeles County, located in downtown Los Angeles, San Gabriel, Torrance, Rowland Heights, Monterey Park, Silver Lake, Arcadia, Cerritos, Diamond Bar, and west Los Angeles, two branches in Ventura County, located in Oxnard and Westlake Village, and one branch in Las Vegas, Nevada. The Company’s administrative and lending center is located at 123 E. Valley Blvd., San Gabriel, California 91176, and its finance and operations center is located at 7025 Orangethorpe Avenue, Buena Park, California 90621. RBB’s website address is www.royalbusinessbankusa.com.

Conference Call

Management will hold a conference call at 10:00 a.m. PDT/1:00 p.m. EDT on Tuesday, October 24, 2017, to discuss the Company’s third quarter 2017 financial results.

To listen to the conference call, please dial 1-833-659-7620, passcode 99941708. A replay of the call will be made available at 1-855-859-2056, passcode 99941708, approximately one hour after the conclusion of the call and will remain available through October 31, 2017 at 5:00 p.m. PDT/8:00 p.m. EDT.

The conference call will also be simultaneously webcast over the Internet; please visit our Royal Business Bank website at www.royalbusinessbankusa.com and click on the “Investors” tab to access the call from the site. Please access the website 15 minutes prior to the call to download any necessary audio software. This webcast will be recorded and available for replay on the Company’s website approximately two hours after the conclusion of the conference call, and will be available on the website for approximately 12 months.

Disclosure

This press release contains certain non-GAAP financial disclosures for tangible common equity and tangible assets and adjusted earnings. 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. Please refer to the tables at the end of this release for a presentation of performance ratios in accordance with GAAP and a reconciliation of the non-GAAP financial measures to the GAAP financial measures.

Safe Harbor

Certain matters set forth herein (including the exhibits hereto) constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including forward-looking statements relating to the Company’s current business plans and expectations and our future financial position and operating results. These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance and/or achievements to differ materially from those projected. These risks and uncertainties include, but are not limited to, local, regional, national and international economic and market conditions and events and the impact they may have on us, our customers and our assets and liabilities; our ability to attract deposits and other sources of funding or liquidity; supply and demand for real estate and periodic deterioration in real estate prices and/or values in California or other states where we lend, including both residential and commercial real estate; a prolonged slowdown or decline in real estate construction, sales or leasing activities; changes in the financial performance and/or condition of our borrowers, depositors or key vendors or counterparties; changes in our levels of delinquent loans, nonperforming assets, allowance for loan losses and charge-offs; the costs or effects of acquisitions or dispositions we may make, whether we are able to obtain any required governmental approvals in connection with any such acquisitions or dispositions, and/or our ability to realize the contemplated financial or business benefits associated with any such acquisitions or dispositions; the effect of changes in laws, regulations and applicable judicial decisions (including laws, regulations and judicial decisions concerning financial reforms, taxes, banking capital levels, consumer, commercial or secured lending, securities and securities trading and hedging, compliance, employment, executive compensation, insurance, vendor management and information security) with which we and our subsidiaries must comply or believe we should comply; changes in estimates of future reserve requirements and minimum capital requirements based upon the periodic review thereof under relevant regulatory and accounting requirements, including changes in the Basel Committee framework establishing capital standards for credit, operations and market risk; inflation, interest rate, securities market and monetary fluctuations; changes in government interest rates or monetary policies; changes in the amount and availability of deposit insurance; cyber-security threats, including loss of system functionality or theft or loss of Company or customer data or money; political instability; acts of war or terrorism, or natural disasters, such as earthquakes, drought, or the effects of pandemic diseases; the timely development and acceptance of new banking products and services and the perceived overall value of these products and services by our customers and potential customers; the Company’s relationships with and reliance upon vendors with respect to the operation of certain of the Company’s key internal and external systems and applications; changes in commercial or consumer spending, borrowing and savings preferences or behaviors; technological changes and the expanding use of technology in banking (including the adoption of mobile banking and funds transfer applications); the ability to retain and increase market share, retain and grow customers and control expenses; changes in the competitive and regulatory environment among financial and bank holding companies, banks and other financial service providers; volatility in the credit and equity markets and its effect on the general economy or local or regional business conditions; fluctuations in the price of the Company’s common stock or other securities; and the resulting impact on the Company’s ability to raise capital or make acquisitions, the effect of changes in accounting policies and practices, as may be adopted from time-to-time by our regulatory agencies, as well as by the Public Company Accounting Oversight Board, the Financial Accounting Standards Board and other accounting standard-setters; changes in our organization, management, compensation and benefit plans, and our ability to retain or expand our workforce, management team and/or our board of directors; the costs and effects of legal, compliance and regulatory actions, changes and developments, including the initiation and resolution of legal proceedings (such as securities, consumer or employee class action litigation), regulatory or other governmental inquiries or investigations, and/or the results of regulatory examinations or reviews; our ongoing relations with our various federal and state regulators, including the SEC, FDIC, FRB and California DBO; our success at managing the risks involved in the foregoing items and all other factors set forth in the Company’s public reports, including its Annual Report as filed under Form S-1 for the year ended December 31, 2016, and particularly the discussion of risk factors within that document. The Company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements except as required by law. Any statements about future operating results, such as those concerning accretion and dilution to the Company’s earnings or shareholders, are for illustrative purposes only, are not forecasts, and actual results may differ.

RBB BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS 
(Unaudited) 
(Dollars in thousands)
                     
    September 30,   June 30,   March 31,   December 31,   September 30,
    2017   2017   2017   2016   2016
Assets                    
Cash and due from banks   $ 69,552     $ 104,366     $ 147,547     $ 74,213     $ 104,270  
Federal funds sold and other cash equivalents     96,500       58,500       20,000       44,500       51,500  
Total cash and cash equivalents     166,052       162,866       167,547       118,713       155,770  
Interest-bearing deposits in other financial institutions     100       100       100       345       345  
Investment securities available for sale     55,697       40,241       39,155       39,277       30,800  
Investment securities held to maturity     5,191       6,199       6,206       6,214       6,222  
Mortgage loans held for sale     125,704       83,263       66,555       44,345       57,983  
Loans held for investment:     1,196,522       1,146,005       1,139,563       1,110,446       1,121,873  
Allowance for loan losses     (11,420 )     (10,627 )     (14,186 )     (14,162 )     (13,399 )
Net loans held for investment     1,185,102       1,135,378       1,125,377       1,096,284       1,108,474  
Premises and equipment, net     6,300       6,441       6,538       6,585       6,740  
Federal Home Loan Bank (FHLB) stock     6,770       6,770       6,770       6,770       6,770  
Net deferred tax assets     9,517       10,214       11,068       11,097       12,135  
Other real estate owned (OREO)     293       833       833       833       293  
Cash surrender value of life insurance     32,578       32,358       32,142       21,958       21,820  
Goodwill     29,940       29,940       29,940       29,940       29,940  
Servicing assets     5,370       4,661       4,223       3,704       3,257  
Core deposit intangibles     1,525       1,612       1,699       1,793       1,897  
Accrued interest and other assets     12,575       12,723       7,595       7,693       7,009  
Total assets   $ 1,642,714     $ 1,533,599     $ 1,505,748     $ 1,395,551     $ 1,449,455  
Liabilities and shareholders' equity                    
Deposits:                    
Noninterest-bearing demand   $ 287,574     $ 215,716     $ 215,652     $ 174,272     $ 168,627  
Savings, NOW and money market accounts     362,018       348,627       325,589       296,699       317,222  
Time deposits     668,700       714,105       707,016       681,792       713,284  
Total deposits     1,318,292       1,278,448       1,248,257       1,152,763       1,199,133  
Reserve for unfunded commitments     489       517       985       604       715  
Income tax payable                 4,664       793       2,342  
FHLB advances                 10,000             10,000  
Long-term debt     49,492       49,456       49,419       49,383       49,347  
Subordinated debentures     3,402       3,379       3,357       3,334       3,310  
Accrued interest and other liabilities     10,708       9,462       5,570       7,089       8,174  
Total liabilities     1,382,383       1,341,262       1,322,252       1,213,966       1,273,021  
Shareholders' equity:                    
Shareholder's equity     260,468       192,427       183,695       181,852       176,219  
Accumulated other comprehensive income (loss) - Net of tax     (137 )     (90 )     (199 )     (267 )     215  
Total shareholders' equity     260,331       192,337       183,496       181,585       176,434  
Total liabilities and stockholders’ equity   $ 1,642,714     $ 1,533,599     $ 1,505,748     $ 1,395,551     $ 1,449,455  
                     


RBB BANCORP AND SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME 
(Unaudited) 
(Dollars in thousands, except per share amounts)
     
    Three Months Ended
    September 30, 2017   June 30, 2017   September 30, 2016
Interest and dividend income:            
Interest and fees on loans   $ 17,200   $ 16,759     $ 18,169
Interest on interest-bearing deposits     371     209       80
Interest on investment securities     331     313       203
Dividend income on FHLB stock     118     82       155
Interest on federal funds sold and other     326     158       92
Total interest income     18,346     17,521       18,699
Interest expense:            
Interest on savings deposits, NOW and money market accounts     649     575       521
Interest on time deposits     2,061     1,993       1,801
Interest on subordinated debentures and other     908     907       903
Interest on other borrowed funds         12       16
Total interest expense     3,618     3,487       3,241
Net interest income     14,728     14,034       15,458
Provision (recapture) for loan losses     700     (4,188 )     1,250
             
Net interest income after provision (recapture) or credit losses     14,028     18,222       14,208
Noninterest income:            
Service charges, fees and other     518     646       443
Gain on sale of loans     2,584     2,289       1,870
Loan servicing fees, net of amortization     314     (5 )     95
Recoveries on loans acquired in business combinations     19     29       47
Increase in cash surrender value of life insurance     219     216       141
Gain on Sale of Securities              
Gain on Sale of OREO     142          
      3,796     3,175       2,596
Noninterest expense:            
Salaries and employee benefits     4,178     4,243       3,481
Occupancy and equipment expenses     705     727       766
Data processing     458     454       563
Legal and professional     318     296       511
Amortization of intangibles     87     87       103
Other expenses     1,454     1,153       1,613
      7,200     6,960       7,037
Income before income taxes     10,624     14,437       9,767
Income tax expense     4,013     5,901       4,070
Net income   $ 6,611   $ 8,536     $ 5,697
             
Net income per share            
Basic   $ 0.45   $ 0.67     $ 0.44
Diluted   $ 0.42   $ 0.62     $ 0.42
                     


RBB BANCORP AND SUBSIDIARIES 
CONDENSED CONSOLIDATED STATEMENTS OF INCOME 
(Unaudited) 
(Dollars in thousands, except per share amounts)
     
    Nine Months Ended
    September 30,
    2017   2016
     
Interest and dividend income:        
Interest and fees on loans   $ 49,992     $ 50,042
Interest on interest-bearing deposits     731       236
Interest on investment securities     922       620
Dividend income on FHLB stock     353       416
Interest on federal funds sold and other     628       159
Total interest income     52,626       51,473
Interest expense:        
Interest on savings deposits, NOW and money market accounts     1,698       1,489
Interest on time deposits     5,903       5,144
Interest on subordinated debentures and other     2,720       1,824
Interest on other borrowed funds     29       24
Total interest expense     10,350       8,481
Net interest income     42,276       42,992
Provision (recapture) for loan losses     (3,488 )     3,599
         
Net interest income after provision (recapture) or credit losses     45,764       39,393
Noninterest income:        
Service charges, fees and other     1,624       1,182
Gain on sale of loans     6,370       4,136
Loan servicing fees, net of amortization     571       384
Recoveries on loans acquired in business combinations     76       139
Increase in cash surrender value of life insurance     620       423
Gain on Sale of Securities           19
Gain on Sale of OREO     142      
      9,403       6,283
Noninterest expense:        
Salaries and employee benefits     12,604       10,547
Occupancy and equipment expenses     2,176       2,388
Data processing     1,264       1,488
Legal and professional     227       1,478
Amortization of intangibles     268       268
Other expenses     4,199       6,205
      20,738       22,374
Income before income taxes     34,429       23,302
Income tax expense     13,789       9,609
Net income   $ 20,640     $ 13,693
         
Net income per share        
Basic   $ 1.53     $ 1.07
Diluted   $ 1.42     $ 1.00
Cash Dividends declared per common share   $ 0.30     $ 0.20
         


RBB BANCORP AND SUBSIDIARIES
AVERAGE BALANCE SHEET AND NET INTEREST INCOME
(Unaudited)
(Dollars in thousands, except per share amounts)
                       
  For the three months ended 
  September 30, 2017   June 30, 2017   September 30, 2016
(tax-equivalent basis, dollars in thousands) Average Interest Yield /   Average Interest Yield /   Average Interest Yield /
  Balance  & Fees  Rate    Balance  & Fees  Rate    Balance  & Fees  Rate 
Earning assets:                      
Federal funds sold, cash equivalents & other (1) $ 202,005 $ 815 1.60 %   $ 134,089 $ 449 1.34 %   $ 103,624 $ 326 1.26 %
Securities (2)                      
Available for sale   43,075   277 2.55 %     40,618   253 2.50 %     30,269   149 1.97 %
Held to maturity   5,533   55 3.92 %     6,204   60 3.88 %     6,226   54 3.48 %
Mortgage loans held for sale   98,807   1,149 4.61 %     71,356   848 4.77 %     63,304   764 4.84 %
Loans held for investment: (3)                      
Real estate   766,911   10,673 5.52 %     768,585   10,645 5.56 %     807,197   12,711 6.32 %
Commercial (4)   377,501   5,379 5.65 %     378,436   5,266 5.58 %     361,200   4,696 5.21 %
Total loans   1,144,411   16,051 5.56 %     1,147,021   15,911 5.56 %     1,168,397   17,407 5.98 %
Total earning assets   1,493,833 $ 18,346 4.87 %     1,399,288 $ 17,521 5.02 %     1,371,820 $ 18,699 5.47 %
Noninterest-earning assets   96,555         95,434         80,212    
Total assets $ 1,590,388       $ 1,494,722       $ 1,452,032    
                       
Interest-bearing liabilities                      
NOW and money market deposits $ 333,471 $ 605 0.72 %   $ 302,483 $ 536 0.71 %   $ 290,963 $ 479 0.66 %
Savings deposits   36,746   43 0.46 %     34,203   39 0.46 %     35,533   41 0.46 %
Time deposits   690,378   2,061 1.18 %     701,314   1,993 1.14 %     713,087   1,802 1.01 %
Total interest-bearing deposits   1,060,596   2,710 1.01 %     1,038,000   2,568 0.99 %     1,039,583   2,321 0.90 %
FHLB short-term advances     0.00 %     5,220   12 0.92 %     11,902   16 0.55 %
Long-term debt   49,470   849 6.81 %     49,432   850 6.90 %     49,333   850 6.91 %
Subordinated debentures   3,388   60 6.99 %     3,366   57 6.79 %     3,255   54 6.61 %
Total interest-bearing liabilities   1,113,455 $ 3,618 1.29 %     1,096,018 $ 3,487 1.28 %     1,104,072 $ 3,241 1.18 %
Noninterest-bearing liabilities                      
Noninterest-bearing deposits   227,854         198,126         162,005    
Other noninterest-bearing liabilities   11,599         13,176         9,934    
Total noninterest-bearing liabilities   239,453         211,302         171,939    
Shareholders' equity   237,480         187,402         176,021    
Total liabilities and shareholders' equity $ 1,590,388       $ 1,494,722       $ 1,452,032    
Net interest income / interest rate spreads   $ 14,728 3.58 %     $ 14,034 3.75 %     $ 15,458 4.29 %
Net interest margin      3.91 %       4.02 %       4.52 %
                       
                                         
(1) Includes income and average balances for FHLB stock, term federal funds, interest-bearing time deposits and other miscellaneous interest-bearing assets.
 
(2) We have an insignificant amount of tax-exempt loans and securities, less than $1 million. Interest income and average rates for tax-exempt loans and securities are presented on a tax-equivalent basis as of September 30, 2017 and 2016.
 
(3) Average loan balances include nonaccrual loans and loans held for sale. Interest income on loans includes - amortization of deferred loan fees, net of deferred loan costs.
 
(4) Includes purchased receivables, which are short term loans made to investment grade companies and are used for cash - management purposes by the Company.


RBB BANCORP AND SUBSIDIARIES
AVERAGE BALANCE SHEET AND NET INTEREST INCOME
(Unaudited)
(Dollars in thousands, except per share amounts)
   
  For the nine months ended September 30,
  2017   2016
(tax-equivalent basis, dollars in thousands) Average Interest Yield /   Average Interest Yield /
  Balance & Fees Rate   Balance & Fees Rate
Earning assets:              
Federal funds sold, cash equivalents & other (1) $ 151,755 $ 1,711 1.51 %   $ 80,475 $ 810 1.35 %
Securities (2)              
Available for sale   40,862   746 2.44 %     28,703   433 2.01 %
Held to maturity   5,980   176 3.94 %     6,378   187 3.92 %
Mortgage loans held for sale   74,230   2,617 4.71 %     66,848   2,421 4.84 %
Loans held for investment: (3)              
Real estate   766,974   31,990 5.58 %     771,131   34,386 5.96 %
Commercial (4)   374,979   15,384 5.49 %     351,731   13,236 5.03 %
Total loans   1,141,953   47,375 5.55 %     1,122,862   47,621 5.67 %
Total earning assets   1,414,780 $ 52,626 4.97 %     1,305,266 $ 51,473 5.27 %
Noninterest-earning assets   93,160         84,539    
Total assets $ 1,507,940       $ 1,389,806    
               
Interest-bearing liabilities              
NOW and money market deposits $ 301,254 $ 1,576 0.70 %   $ 282,790 $ 1,370 0.65 %
Savings deposits   34,879   121 0.46 %     34,718   118 0.45 %
Time deposits   695,020   5,903 1.14 %     682,484   5,144 1.01 %
Total interest-bearing deposits   1,031,153   7,601 0.99 %     999,992   6,633 0.89 %
FHLB short-term advances   5,128   29 0.77 %     5,949   24 0.54 %
Long-term debt   49,433   2,546 6.89 %     33,001   1,698 6.87 %
Subordinated debentures   3,366   173 6.88 %     2,673   127 6.34 %
Total interest-bearing liabilities   1,089,080 $ 10,350 1.27 %     1,041,615 $ 8,481 1.09 %
Noninterest-bearing liabilities              
Noninterest-bearing deposits   205,532         163,518    
Other noninterest-bearing liabilities   10,274         15,052    
Total noninterest-bearing liabilities   215,805         178,569    
Shareholders' equity   203,054         169,622    
Total liabilities and shareholders' equity $ 1,507,940       $ 1,389,806    
Net interest income / interest rate spreads   $ 42,276 3.70 %     $ 42,992 4.18 %
Net interest margin     4.00 %       4.40 %
               
                           
(1) Includes income and average balances for FHLB stock, term federal funds, interest-bearing time deposits and other miscellaneous interest-bearing assets.
 
(2) We have an insignificant amount of tax-exempt loans and securities, less than $1 million. Interest income and average rates for tax-exempt loans and securities are presented on a tax-equivalent basis as of September 30, 2017 and 2016.
 
(3) Average loan balances include nonaccrual loans and loans held for sale. Interest income on loans includes - amortization of deferred loan fees, net of deferred loan costs.
 
(4) Includes purchased receivables, which are short term loans made to investment grade companies and are used for cash - management purposes by the Company.
               


RBB BANCORP AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS 
(Unaudited) 
(Dollars in thousands, except per share amounts)
             
    For the three months ended
     September 30,    June 30,    September 30,
     2017     2017     2016 
Per share data (common stock)            
Earnings            
Basic   $   0.45     $   0.67     $   0.44  
Diluted   $   0.42     $   0.62     $   0.42  
Book value   $   20.29     $   14.99     $   14.30  
Tangible book value   $   17.84     $   12.53     $   11.84  
             
Performance ratios            
Return on average assets, annualized     1.65 %     2.29 %     1.56 %
Return on average shareholders' equity, annualized      11.04 %     18.27 %     12.88 %
Return on average tangible common equity, annualized     12.73 %     21.98 %     15.73 %
Noninterest income to average assets, annualized     0.95 %     0.85 %     0.71 %
Noninterest expense to average assets, annualized     1.80 %     1.87 %     1.93 %
Return on average earning assets     4.87 %     5.02 %     5.47 %
Cost of average deposits     0.83 %     0.83 %     0.77 %
Cost of average interest-bearing deposits     1.01 %     0.99 %     0.90 %
Cost of average interest-bearing liabilities      1.29 %     1.28 %     1.18 %
Accretion on loans to average earning assets     0.17 %     0.25 %     0.81 %
Net interest spread     3.58 %     3.75 %     4.29 %
Net interest margin     3.91 %     4.02 %     4.52 %
Efficiency ratio     38.87 %     40.44 %     40.13 %
             


RBB BANCORP AND SUBSIDIARIES 
SELECTED FINANCIAL HIGHLIGHTS 
(Unaudited)
(Dollars in thousands, except per share amounts)
         
    For the nine months ended September 30,
    2017   2016
Per share data (common stock)        
Earnings        
Basic   $ 1.53     $ 1.07  
Diluted   $ 1.42     $ 1.00  
Dividends declared   $ 0.30     $ 0.20  
Book value   $ 16.49     $ 13.75  
Tangible book value   $ 14.49     $ 11.42  
         
Performance ratios        
Return on average assets, annualized     1.83 %     1.32 %
Return on average shareholders' equity, annualized     13.59 %     10.78 %
Return on average tangible common equity, annualized     16.10 %     12.70 %
Noninterest income to average assets, annualized     0.83 %     0.60 %
Noninterest expense to average assets, annualized     1.84 %     2.15 %
Return on average earning assets     4.97 %     5.27 %
Cost of average deposits     0.82 %     0.76 %
Cost of average interest-bearing deposits     0.99 %     0.89 %
Cost of average interest-bearing liabilities     1.27 %     1.09 %
Accretion on loans to average earning assets     0.23 %     0.63 %
Net interest spread     3.70 %     4.18 %
Net interest margin     4.00 %     4.40 %
Efficiency ratio     40.13 %     45.41 %
Common stock dividend payout ratio     19.60 %     18.68 %
         


RBB BANCORP AND SUBSIDIARIES 
SELECTED FINANCIAL HIGHLIGHTS 
(Unaudited) 
(Dollars in thousands, except per share amounts)
             
    For the periods ending
    September 30,   June 30,   September 30,
    2017   2017   2016
Weighted average shares outstanding            
Basic     13,481,459       12,827,803       12,791,876  
Diluted     14,559,043       13,798,475       13,687,998  
Shares outstanding at period end     15,790,611       12,827,803       12,827,803  
Loan to deposit ratio     90.76 %     89.64 %     93.56 %
Core deposits / total deposits     73.37 %     70.51 %     69.03 %
Net non-core funding dependence ratio     22.81 %     23.84 %     18.47 %
             
Credit Quality Data:            
Loans 30-89 days past due   $ 2,178     $ 20,688     $ 3,708  
Loans 30-89 days past due to total loans     0.18 %     1.81 %     0.33 %
Nonperforming loans   $ 3,950     $ 8,481     $ 7,468  
Nonperforming loans to total loans     0.33 %     0.74 %     0.67 %
Nonperforming assets   $ 4,243     $ 9,315     $ 7,761  
Nonperforming assets to total assets     0.26 %     0.61 %     0.54 %
Allowance for loan losses to total loans     0.95 %     0.93 %     1.19 %
Allowance for loan losses to nonperforming loans     289.12 %     125.30 %     179.42 %
Net charge-offs to average loans     -0.07 %     -0.06 %     0.02 %
             
Regulatory and other capital ratios—Company            
Tangible common equity to tangible assets     14.20 %     10.70 %     10.20 %
Tier 1 leverage ratio     14.91 %     11.24 %     10.52 %
Tier 1 common capital to risk-weighted assets     18.23 %     13.68 %     12.48 %
Tier 1 capital to risk-weighted assets     18.49 %     13.96 %     12.72 %
Total capital to risk-weighted assets     23.37 %     19.10 %     18.12 %
             
Regulatory capital ratios—Bank only            
Tier 1 leverage ratio     14.57 %     13.32 %     12.27 %
Tier 1 common capital to risk-weighted assets     18.13 %     16.58 %     14.85 %
Tier 1 capital to risk-weighted assets     18.13 %     16.58 %     14.85 %
Total capital to risk-weighted assets     19.08 %     17.53 %     16.05 %
             


RBB BANCORP AND SUBSIDIARIES 
SELECTED FINANCIAL HIGHLIGHTS 
(Unaudited) 
(Dollars in thousands, except per share amounts)
                         
Quarterly Consolidated Statements of Earnings                        
    3Q    2Q    1Q    4Q    3Q 
    2017   2017   2017   2016   2016
Interest income                                
Loans, including fees   $ 17,200     $ 16,759     $ 16,033     $ 15,846     $ 18,169  
Investment securities and other     1,146       762       726       870       530  
Total interest income     18,346       17,521       16,759       16,716       18,699  
Interest expense                            
Deposits     2,710       2,568       2,323       2,310       2,322  
Interest on subordinated debentures and other     908       907       905       723       903  
Other borrowings           12       17       193       16  
Total interest expense     3,618       3,487       3,245       3,226       3,241  
Net interest income before provision for loan losses     14,728       14,034       13,514       13,490       15,458  
Provision (recapture) for loan losses     700       (4,188 )           1,375       1,250  
Net interest income after provision for loan losses     14,028       18,222       13,514       12,115       14,208  
Noninterest income     3,796       3,175       2,432       2,683       2,596  
Noninterest expense     7,200       6,960       6,578       5,532       7,037  
Earnings before income taxes     10,624       14,437       9,368       9,266       9,767  
Income taxes     4,013       5,901       3,875       3,880       4,070  
Net income   $ 6,611     $ 8,536     $ 5,493     $ 5,386     $ 5,697  
Net income per common share - basic   $ 0.45     $ 0.67     $ 0.43     $ 0.42     $ 0.44  
Net income per common share - diluted   $ 0.42     $ 0.62     $ 0.40     $ 0.39     $ 0.42  
Cash dividends declared per common share               $ 0.30              
Cash dividends declared               $ 3,848              
Return on average assets, annualized     1.65 %     2.29 %     1.55 %     1.49 %     1.56 %
Return on average earning assets     4.87 %     5.02 %     5.04 %     4.92 %     5.47 %
Cost of average deposits     0.83 %     0.83 %     0.80 %     0.78 %     0.77 %
Cost of average interest-bearing deposits     1.01 %     0.99 %     0.95 %     0.91 %     0.90 %
Cost of average interest-bearing liabilities     1.29 %     1.28 %     1.24 %     1.20 %     1.16 %
Accretion on loans to average earning assets     0.17 %     0.25 %     0.25 %     0.54 %     0.75 %
Net interest margin     3.91 %     4.02 %     4.06 %     3.97 %     4.52 %
                   


RBB BANCORP AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS 
(Unaudited) 
(Dollars in thousands, except per share amounts)
                               
Loan Portfolio Detail                              
    As of September 30,    As of June 30,    As of March 31,    As of December 31,   As of September 30, 
(dollars in thousands)   2017 %    2017 %    2017 %    2016 %    2016 % 
Loans:                              
Commercial and industrial   $ 225,968   18.89   $ 229,985   20.07   $ 214,480   18.82   $ 203,843   18.36   $ 189,484   16.89
SBA     148,005   12.37     158,372   13.82     149,926   13.16     158,968   14.32     162,924   14.52
Construction and land development     94,297   7.88     100,239   8.75     89,869   7.89     89,409   8.05     106,769   9.52
Commercial real estate (1)     491,085   41.04     439,204   38.32     493,416   43.30     501,798   45.19     519,103   46.27
Single-family residential mortgages     237,167   19.82     218,205   19.04     191,872   16.84     156,428   14.09     143,593   12.80
Total loans,(2)   $ 1,196,522   100.00   $ 1,146,005   100.00   $ 1,139,563   100.00   $ 1,110,446   100.00   $ 1,121,873   100.00
Allowance for loan losses     (11,420 )       (10,627 )       (14,186 )       (14,162 )       (13,399 )  
Total loans, net   $ 1,185,102       $ 1,135,378       $ 1,125,377       $ 1,096,284       $ 1,108,474    
                               
(1) Includes non-farm and non-residential loans, multi-family residential loans and non-owner occupied single family residential loans.
(2) Net of discounts and deferred fees and costs.
                               

  

Change in Allowance for Loan Losses   Nine months ended
    September 30,
(dollars in thousands)   2017   2016
Beginning balance   $ 14,162     $ 10,023  
(Recapture) additions to the allowance charged to expense     (3,488 )     3,599  
Recoveries on loans charged-off     747        
      11,420       13,622  
Less loans charged-off           (223 )
         
Ending balance   $ 11,420     $ 13,399  
         

Tangible Book Value Reconciliations (non-GAAP)

The tangible book value per share is a non-GAAP disclosure. The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company’s performance. The following is a reconciliation of tangible book value to the Company shareholders’ equity computed in accordance with GAAP, as well as a calculation of tangible book value per share as of September 30, 2017 and 2016.

    September 30,
    2017   2016
(dollars in thousands, except per share data)        
Tangible common equity:        
Total shareholders' equity   $ 260,331     $ 176,434  
Adjustments        
Goodwill     (29,940 )     (29,940 )
Core deposit intangible     (1,525 )     (1,897 )
Tangible common equity   $ 228,866     $ 144,597  
Tangible assets:        
Total assets-GAAP   $ 1,642,714     $ 1,449,455  
Adjustments        
Goodwill     (29,940 )     (29,940 )
Core deposit intangible     (1,525 )     (1,897 )
Tangible assets   $ 1,611,249     $ 1,417,618  
Common shares outstanding     15,790,611       12,827,803  
Tangible common equity to tangible assets ratio     14.20 %     10.20 %
Tangible book value per share   $ 14.49     $ 11.27  
         

Adjusted Earnings Metrics (non-GAAP)

Management uses the measure adjusted earnings to assess the performance of our core business and the strength of our capital position. We believe that this non-GAAP financial measure provides meaningful additional information about us to assist investors in evaluating our operating results. This non-GAAP financial measure should not be considered a substitute for operating results determined in accordance with GAAP and may not be comparable to other similarly titled measures used by other companies. The following table reconciles adjusted earnings, adjusted diluted earnings per share, adjusted return on average assets and adjusted return on average tangible common equity to their most comparable GAAP measures.

      Three Months Ended
      September 30,   June 30,   September 30,
      2017   2017   2016
(dollars in thousands, except per share data)                        
Income before taxes - GAAP   $ 10,624     $ 14,437     $ 9,767  
Adjustments to interest income            
Accretion of purchase discounts     (638 )     (868 )     (2,895 )
Provision for loan loss           (4,188 )      
Adjustments to noninterest income            
Gain on sale of investment securities, net                  
Adjustments to other expenses            
Integration and acquisition expenses                  
Total adjustments to income     (638 )     (5,056 )     (2,895 )
Adjusted earnings pre-tax     9,986       9,381       6,872  
Adjusted taxes     3,772       3,834       2,864  
Adjusted earnings non-GAAP   $ 6,214     $ 5,547     $ 4,008  
Adjusted diluted EPS   $ 0.39     $ 0.40     $ 0.29  
Weighted average diluted common shares outstanding     15,851,929       13,863,273       13,717,232  
Average assets   $ 1,590,388     $ 1,494,722     $ 1,452,032  
Adjusted return on average assets     1.55 %     1.49 %     1.10 %
Average tangible common equity   $ 205,964     $ 155,798     $ 144,122  
Adjusted return on average tangible common equity     11.97 %     14.28 %     11.06 %


Contacts: Yee Phong (Alan) Thian
   Chairman, President and CEO
   (213) 627-9888
   David Morris
   Executive Vice President and CFO
   (714) 670-2488

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Source: RBB Bancorp