RBB Bancorp Reports Third Quarter Earnings for 2020

October 26, 2020

Conference Call and Webcast Scheduled for Tuesday, October 27, 2020 at 11:00 a.m. Pacific Time/2:00 p.m. Eastern Time

Third Quarter 2020 Highlights

Net income of $8.5 million, or $0.43 diluted earnings per share
Loans held for investment increased by $160.5 million, or 24.6% annualized growth, from the end of the prior quarter
Total deposits (excluding brokered deposits) increased by $160.2 million, or 26.2% annualized growth, from the end of the prior quarter
Nonperforming assets to total assets of 0.54%, improving 2 basis points from the prior quarter
Loans modified under the CARES Act decreased by 76% from the end of the prior quarter and now represent 4% of loans outstanding
Net interest margin of 3.59% increased by 17 basis points from the prior quarter and was flat from the third quarter of 2019
Announced resumption of our stock repurchase program

LOS ANGELES--(BUSINESS WIRE)--Oct. 26, 2020-- 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, 2020.

The Company reported net income of $8.5 million, or $0.43 diluted earnings per share, for the three months ended September 30, 2020, compared to net income of $6.5 million, or $0.33 diluted earnings per share, and $8.0 million, or $0.39 diluted earnings per share, for the three months ended June 30, 2020 and September 30, 2019, respectively.

“Our performance in the third quarter demonstrated the strength of our growing franchise as we generated strong earnings, increasing net interest margin, and asset and deposit growth,” said Mr. Alan Thian, Chairman, President and CEO of RBB Bancorp. “Effective management of our loan exposure in prior quarters – which resulted in lower concentrations of CRE and C&I loans relative to our peers – created an opportunity to selectively originate attractive loans in markets in which our competitors were forced to pull back. Strong deposit growth was accompanied by declines in corresponding costs as we benefited from ongoing efforts to improve our deposit franchise and a declining rate environment. Our asset quality remains solid and we remain well capitalized with ample access to liquidity. Loans modified under the CARES Act outstanding decreased 76% over the quarter to just 4% of loans outstanding.”

“Our board of directors approved the reinstatement of the stock repurchase program to the maximum of what the plan allows, which will further enhance shareholder value,” Mr. Thian concluded.

Key Performance Ratios

Net income of $8.5 million for the third quarter of 2020 produced an annualized return on average assets of 1.05%, an annualized return on average tangible common equity of 9.81%, and an annualized return on average equity of 8.06%. This compares to an annualized return on average assets of 0.83%, an annualized return on average tangible common equity of 7.77%, and an annualized return on average equity of 6.34% for the second quarter of 2020. The efficiency ratio for the third quarter of 2020 was 46.63%, compared to 54.40% for the prior quarter. The improvement in the efficiency ratio was primarily due to improved net interest income.

Net Interest Income and Net Interest Margin

Net interest income, before provision for loan losses, was $27.3 million for the third quarter of 2020, compared to $25.0 million for the second quarter of 2020. The $2.2 million increase was primarily attributable to a $71.8 million increase in average earning assets and a $37.4 million increase in average noninterest-bearing deposits, partially offset by a $27.0 million increase in average interest-bearing liabilities. Net interest income was also favorably impacted by a 17 basis point increase in the net interest margin. Accretion of purchase discounts from prior acquisitions contributed $634,000 to net interest income in the third quarter of 2020, compared to $818,000 in the second quarter of 2020.

Compared to the third quarter of 2019, net interest income, before provision for loan losses, increased $3.7 million from $23.5 million. The increase was primarily attributable to a $418.9 million increase in average earning assets and a $170.3 million increase in average noninterest-bearing deposits, partially offset by a $268.1 million increase in average interest-bearing liabilities. The net interest margin was unchanged at 3.59% between the third quarters of 2020 and 2019. The increases in average earning assets and total deposits were primarily due to the Pacific Global Bank (“PGB”) acquisition and increased loan and deposit originations.

Net interest margin was 3.59% for the third quarter of 2020, an increase from 3.42% in the second quarter of 2020. The increase was primarily attributable to a 51 basis point decrease in the cost of total deposits and a 48 basis point decrease in the cost of borrowings (FHLB advances, long-term debt and subordinated debentures), partially offset by a 2 basis point decrease in the yield on average earning assets. Loan discount accretion contributed 8 basis points to the net interest margin in the third quarter of 2020, compared to 14 basis points in the second quarter of 2020.

Noninterest Income

Noninterest income was $2.7 million for the third quarter of 2020, an increase of $519,000 from $2.2 million in the second quarter of 2020. The increase was driven by an increase in gain on loan sales of $679,000 as the Company sold $28.2 million more loans in the third quarter than in the prior quarter generally due to increased market activity following the initial impact of the COVID-19 pandemic. The Company expects gain on sale of loan income to return to prior levels in the fourth quarter.

The Company sold $17.7 million in FNMA qualified mortgage loans for a net gain of $537,000 and sold $11.8 million in non-qualified mortgage loans to private investors for a gain of $227,000 during the third quarter of 2020. This compared to $5.2 million in FNMA qualified mortgage loans for a net gain of $105,000 during the second quarter of 2020. The Company sold no SBA loans during the third quarter of 2020, compared to $1.4 million in SBA loans sold for a net gain of $70,000 during the second quarter of 2020.

Compared to the third quarter of 2019, noninterest income decreased by $73,000 from $2.8 million. The decrease was primarily attributable to a decrease of $281,000 in loan servicing fees.

Noninterest Expense

Noninterest expense for the third quarter of 2020 was $14.0 million, compared to $14.8 million for the second quarter of 2020. The $855,000 decrease was primarily attributable to a $424,000 decrease in salaries and employee benefits expenses, $214,000 decrease in merger expenses, $167,000 decrease in occupancy and equipment expenses, partially offset by a $318,000 increase in data processing expenses and a $128,000 increase in insurance and regulatory assessments. The decrease in salary and employee benefits was primarily attributable to severance paid in the second quarter for employees affected by restructuring related to the completion of the PGB acquisition.

RBB incurred $62,000 in merger and conversion expenses in the third quarter of 2020, of which $20,000 is a reversal of expenses related to the First American International Corp. acquisition and $82,000 to the PGB acquisition, a decrease of $214,000 from the prior quarter.

Noninterest expense increased from $13.8 million in the third quarter of 2019. The $192,000 increase was primarily due to a $226,000 increase in data processing expense, a $240,000 increase in legal and professional expense, and a $190,000 increase in insurance and regulatory assessments. These were partially offset by a $122,000 decrease salaries and employee benefit expense, a $117,000 decrease in marketing and business promotion expense.

Income Taxes

The effective tax rate was 29.8% for the third quarter of 2020, 30.8% for the second quarter of 2020, and 31.5% for the third quarter of 2019. The slightly lower effective tax rate in the third quarter of 2020 was a result of affordable housing tax credits.

Loan Portfolio

Loans held for investment, net of deferred fees and discounts, totaled $2.8 billion as of September 30, 2020, an increase of $160.5 million from June 30, 2020, and an increase of $629.0 million from September 30, 2019. The increase from the prior quarter was primarily due to organic loan growth. Single-family residential mortgages decreased by $10.9 million, net of payoffs, paydowns and loan sales, and was driven by loan sales. Commercial real estate loans increased by $74.9 million, construction and land development loans increased by $37.8 million, SBA loans increased by $7.1 million, and commercial and industrial loans increased by $50.4 million.

During the third quarter of 2020, single-family residential mortgage production was $82.6 million (mortgage loans held for investment and held for sale), payoffs and paydowns were $45.7 million, and single-family residential mortgage loan sales were $29.5 million. During the second quarter of 2020, single-family residential mortgage production was $117.6 million, payoffs and paydowns were $36.0 million, and loan sales were $1.4 million.

Mortgage loans held for sale were $23.9 million as of September 30, 2020, an increase of $8.4 million from $15.5 million at June 30, 2020 and a decrease of $235.4 million from $259.3 million as of September 30, 2019. The Company originated approximately $28.7 million in mortgage loans for sale for the third quarter of 2020, compared with $19.0 million during the prior quarter. In the third quarter, SBA loan production was $7.2 million. In the prior quarter, SBA loan production was $33.1 million, which consisted exclusively of PPP loans and total loan sales were $1.4 million.

Deposits

Deposits were $2.6 billion at September 30, 2020, an increase of $160.2 million from June 30, 2020, and an increase of $445.0 million from September 30, 2019, excluding brokered deposits. The increase in total deposits from the prior quarter was primarily attributable to organic deposit growth. Noninterest-bearing deposits increased by $66.5 million and interest-bearing non-maturity deposits increased by $53.7 million. Time deposits increased by $55.0 million, including a $15.0 million increase in brokered CDs. As of September 30, 2020, time deposits included $17.4 million in brokered CDs, as compared to $2.4 million as of June 30, 2020 and $102.6 million as of September 30, 2019.

Asset Quality

Nonperforming assets totaled $18.3 million, or 0.54% of total assets at September 30, 2020, compared to $17.5 million, or 0.56%, of total assets at June 30, 2020. The decrease in nonperforming assets was primarily due to an increase in total assets. Nonperforming assets consist of OREO, loans modified under troubled debt restructurings (“TDR”), non-accrual loans, and loans past due 90 days or more and still accruing interest.

Loans held-for-investment 30 to 89 days past due decreased by $2.2 million to $21.7 million at September 30, 2020 from $23.9 million at June 30, 2020.

In the third quarter of 2020, there were $47,000 in net charge-offs, down from $320,000 in the prior quarter.

The Company recorded a provision for credit losses of $3.9 million for the third quarter of 2020, an increase from $3.0 million in the prior quarter, primarily attributable to the higher loan balances and the impact of the COVID-19 pandemic.

The allowance for loan losses totaled $26.6 million, or 0.97% of loans held for investment at September 30, 2020, compared with $22.8 million, or 0.88%, of total loans at June 30, 2020.

The following table, as of September 30, 2020, is intended to summarize the Company’s overall loan exposure to major industries that are considered “at-risk” for business interruption due to the COVID-19 pandemic:

Industry / Property Type	Total Exposure ($000)		% of Total HFI Loans
General retail (excluding SBA)	$	235,153		8.5	%
Mixed use commercial		106,166		3.9	%
Commercial		62,678		2.3	%
Hospitality (excluding SBA)		27,666		1.0	%
Service stations (excluding SBA)		13,825		0.5	%
SBA loans		111,193		4.0	%
Shared National Credits (excluding airlines, cruise lines and hotels)		35,998		1.3	%
Airlines, cruise lines and hotels (SNC)		11,825		0.4	%
Restaurants (excluding SBA)		5,520		0.2	%
Total loans	$	610,024		22.1	%

In the above table, the general retail exposure now includes warehouse loans and the mixed use commercial exposure now includes residential mixed use loans.

As of September 30, 2020, borrowers representing 260 loans totaling $32.9 million, or 1.2% of the Company’s total loan portfolio, have funded under the SBA’s Paycheck Protection Program due to the COVID-19 pandemic.

Under the CARES Act SBA loan payments were made through September 30, 2020 by the SBA. We have contacted nearly all of our SBA borrowers and the following table details new deferments of SBA loans:

	Requested SBA Loan Deferments
	Number		Principal Amount ($000)		Principal Amount Average LTV%			Guaranteed Amount ($000)		Unguaranteed Amount ($000)		Unguaranteed Amount to Total SBA Loans
Hospitality		9	$	38,965		75	%	$	29,224	$	9,741		8.8	%
General retail		5		5,051		51	%		3,794		1,257		1.1	%
Restaurant		2		2,681		81	%		2,016		665		0.6	%
Transportation		3		1,042		30	%		782		261		0.2	%
Fitness		1		101		N/A			86		15		0.0	%
Mixed use commercial		1		45		N/A			33		11		0.0	%
		21	$	47,885				$	35,935	$	11,950		10.7	%

We have not been able to contact four borrowers listed in the above table to determine if they need a deferment under SBA guidelines. The unguaranteed balance of those four loans is $27,665. All four have not made their payments as of October 15, 2020. There are two loans with an unguaranteed balance of $54,766 that will not qualify for a SBA deferment due to delinquency or deferment issues prior to COVID-19. Those two loans are not listed above and the borrowers have not made their payments as of October 15, 2020.

The following table provides details regarding the Company's COVID-19 loan deferral activity through October 21, 2020.

	As of June 30, 2020							As of October 23, 2020
	Deferred Loans							Loans Resuming Payments				Loans Deferred
	Number		Principal Amount ($000)		% of Total HFI Loans			Number		Principal Amount ($000)		Number		Principal Amount ($000)
General retail (excluding SBA)		34	$	94,251		3.4	%		31	$	67,411		3	$	26,840
Mixed use commercial		38		58,841		2.1	%		34		48,294		4		10,547
Hospitality (excluding SBA)		5		25,343		0.9	%		3		12,414		2		12,929
Restaurants (excluding SBA)		11		4,186		0.2	%		10		4,186		1		12
Multifamily		6		9,086		0.3	%		6		9,086		—		—
Commercial, office and other (1)		6		22,983		0.8	%		1		3,102		5		19,881
SFR mortgage loans - Western region		183		118,484		4.3	%		145		88,880		38		29,604
SFR mortgage loans - Eastern region		203		85,935		3.1	%		194		82,699		10		4,106
SFR mortgage loans - Chicago metropolitan		84		14,824		0.5	%		83		14,575		4		719
Total		570	$	433,933		15.7	%		507	$	330,647		67	$	104,638

(1) Loan with a principal amount of $17 million is on a principal deferment only.

The Company does not have any shared national credits or loans backed by service stations, airlines or cruise lines on deferral as of October 20, 2020.

Properties

On March 31, 2020, we closed the Grand Street branch in New York City as the lease for this branch expired in April 2020. Branch operations and staff were transferred to the Bowery Street branch.

The Bank plans to open a new full service banking branch in Edison, New Jersey in November of 2020. The branch will be located at 561 US-1, in the Wicks Shopping Plaza in Edison. The Bank purchased a property located at 2057 86th Street, Brooklyn, New York, in the Bensonhurst neighborhood, to house a full-service branch. We expect this branch to open in 2021. The Bank has leased a location on Canal Street in Manhattan to move our Bowery Street branch.

Corporate Overview

RBB Bancorp is a community-based financial holding company headquartered in Los Angeles, California. The Company has total assets of $3.4 billion. Its wholly-owned subsidiary, Royal Business Bank is a full service commercial bank, which provides business banking services to the Chinese-American communities in Los Angeles County, Orange County and Ventura County in California, in Las Vegas, Nevada, in Brooklyn, Queens, and Manhattan in New York, and three branches in the Chicago neighborhoods of Chinatown and Bridgeport. Bank services include 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, automobile lending, trade finance, a full range of depository account products and wealth management services. The Bank has nine branches in Los Angeles County, two branches in Ventura County, one branch in Irvine, California, one branch in Las Vegas, Nevada, six branches and one loan operation center in Brooklyn, Queens and Manhattan in New York, and three branches in Chicago, Illinois. The Company's administrative and lending center is located at 1055 Wilshire Blvd., Los Angeles, California 90017, and its finance and operations center is located at 7025 Orangethorpe Avenue, Buena Park, California 90621. The Company's website address is www.royalbusinessbankusa.com.

Conference Call

Management will hold a conference call at 11:00 a.m. Pacific time/2:00 p.m. Eastern time tomorrow, October 27, 2020, to discuss the Company’s third quarter 2020 financial results.

To listen to the conference call, please dial 1-833-519-1355 or 1-918-922-6505, passcode 8574857. A replay of the call will be made available at 1-800-585-8367 or 1-404-537-3406, passcode 8574857, approximately one hour after the conclusion of the call and will remain available through November 3, 2020.

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. This webcast will be recorded and available for replay on our website approximately two hours after the conclusion of the conference call.

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 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; expectations regarding the impact of the COVID-19 pandemic; the costs or effects of acquisitions or dispositions we may make, including our recent acquisition of PGB Holdings, Inc. and its wholly-owned subsidiary, Pacific Global Bank, and our recently completed acquisition of First American International Corp., whether we are able to obtain any required governmental or shareholder 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, including ASU 2016-13 (Topic 326), “Measurement of Credit Losses on Financial Instruments”, commonly referenced as the Current Expected Credit Loss (“CECL”) model, which will change how we estimate credit losses and may increase the required level of our allowance for credit losses after adoption; 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 DFPI (formerly 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 10-K for the year ended December 31, 2019, 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, except for December 31, 2019) (Dollars in thousands)

	September 30			June 30			March 31			December 31			September 30
	2020			2020			2020			2019			2019
Assets
Cash and due from banks	$	121,630		$	94,844		$	285,667		$	114,763		$	136,076
Federal funds sold and other cash equivalents		57,000			57,000			75,300			67,000			47,000
Total cash and cash equivalents		178,630			151,844			360,967			181,763			183,076
Interest-bearing deposits in other financial institutions		600			600			600			600			949
Investment securities available for sale		214,662			185,756			126,294			126,069			72,923
Investment securities held to maturity		7,569			7,615			7,825			8,332			8,724
Mortgage loans held for sale		23,886			15,479			52,096			108,194			259,339
Loans held for investment		2,755,153			2,594,620			2,399,982			2,196,934			2,126,145
Allowance for loan losses		(26,634	)		(22,820	)		(20,130	)		(18,816	)		(19,386	)
Net loans held for investment		2,728,519			2,571,800			2,379,852			2,178,118			2,106,759
Premises and equipment, net		24,237			23,965			24,472			16,813			16,871
Federal Home Loan Bank (FHLB) stock		15,641			15,641			15,630			15,000			15,000
Net deferred tax assets		1,080			—			—			2,326			4,378
Cash surrender value of life insurance		34,930			34,736			34,544			34,353			34,158
Goodwill		69,243			69,209			69,790			58,563			58,383
Servicing assets		14,724			15,595			16,826			17,083			17,180
Core deposit intangibles		5,519			5,876			6,234			6,100			6,444
Accrued interest and other assets		40,336			38,065			33,523			35,221			36,118
Total assets	$	3,359,576		$	3,136,181		$	3,128,653		$	2,788,535		$	2,820,302
Liabilities and shareholders' equity
Deposits:
Noninterest-bearing demand	$	642,332		$	574,553		$	504,324		$	458,763		$	446,141
Savings, NOW and money market accounts		654,378			601,941			571,870			537,490			493,965
Time deposits		1,315,038			1,260,026			1,359,787			1,252,685			1,311,817
Total deposits		2,611,748			2,436,520			2,435,981			2,248,938			2,251,923
Net deferred tax liabilities		—			656			312			—			—
FHLB advances		190,000			150,000			150,000			—			35,000
Long-term debt, net of debt issuance costs		104,305			104,220			104,135			104,049			103,964
Subordinated debentures		14,229			14,174			14,120			9,673			9,632
Accrued interest and other liabilities		17,878			16,586			16,112			18,185			20,942
Total liabilities		2,938,160			2,722,156			2,720,660			2,380,845			2,421,461
Shareholders' equity:
Shareholder's equity		420,329			412,827			407,332			407,379			398,438
Non-controlling interest		72			72			72			72			72
Accumulated other comprehensive income (loss) - Net of tax		1,015			1,126			589			239			331
Total shareholders' equity		421,416			414,025			407,993			407,690			398,841
Total liabilities and stockholders’ equity	$	3,359,576		$	3,136,181		$	3,128,653		$	2,788,535		$	2,820,302

RBB BANCORP AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) *(Dollars in thousands, except per share amounts)*

	For the three months ended
	September 30, 2020		June 30, 2020		September 30, 2019
Interest and dividend income:
Interest and fees on loans	$	34,153	$	32,633	$	32,902
Interest on interest-bearing deposits		61		74		429
Interest on investment securities		621		887		703
Dividend income on FHLB stock		190		187		238
Interest on federal funds sold and other		100		322		397
Total interest income		35,125		34,103		34,669
Interest expense:
Interest on savings deposits, NOW and money market accounts		779		782		1,117
Interest on time deposits		4,746		5,933		8,038
Interest on subordinated debentures and long term debt		1,905		1,915		1,921
Interest on other borrowed funds		444		439		81
Total interest expense		7,874		9,069		11,157
Net interest income before provision for loan losses		27,251		25,034		23,512
Provision for loan losses		3,861		3,009		824
Net interest income after provision for loan losses		23,390		22,025		22,688
Noninterest income:
Service charges, fees and other		1,143		1,065		934
Gain on sale of loans		760		81		813
Loan servicing fees, net of amortization		546		708		827
Recoveries on loans acquired in business combinations		32		5		12
Increase in cash surrender value of life insurance		194		191		195
Gain on sale of securities		52		158		7
Gain on sale of other real estate owned		—		—		11
Total noninterest income		2,727		2,208		2,799
Noninterest expense:
Salaries and employee benefits		7,599		8,103		7,801
Occupancy and equipment expenses		2,360		2,527		2,434
Data processing		1,200		882		974
Legal and professional		675		670		435
Office expenses		271		337		335
Marketing and business promotion		131		111		248
Insurance and regulatory assessments		363		234		172
Core deposit premium		357		357		384
OREO expenses/(income)		3		14		(1	)
Merger and conversion expenses		62		276		154
Other expenses		957		1,308		850
Total noninterest expense		13,978		14,819		13,786
Income before income taxes		12,139		9,414		11,701
Income tax expense		3,619		2,901		3,689
Net income	$	8,520	$	6,513	$	8,012

Net income per share
Basic	$	0.43	$	0.33	$	0.40
Diluted	$	0.43	$	0.33	$	0.39
Cash Dividends declared per common share	$	0.06	$	0.06	$	0.10
Weighted-average common shares outstanding
Basic		19,717,568		19,710,330		20,067,847
Diluted		19,804,892		19,806,304		20,425,966

RBB BANCORP AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) *(Dollars in thousands, except per share amounts)*

	For the nine months ended
	September 30, 2020		September 30, 2019
Interest and dividend income:
Interest and fees on loans	$	99,062	$	102,981
Interest on interest-earning deposits		586		1,412
Interest on investment securities		2,329		1,976
Dividend income on FHLB stock		379		815
Interest on federal funds sold and other		900		634
Total interest income		103,256		107,818
Interest expense:
Interest on savings deposits, NOW and money market accounts		2,804		3,649
Interest on time deposits		17,765		21,788
Interest on subordinated debentures and long term debt		5,776		5,783
Interest on other borrowed funds		1,033		2,857
Total interest expense		27,378		34,077
Net interest income		75,878		73,741
Provision for loan losses		8,815		1,731
Net interest income after provision for loans losses		67,063		72,010
Noninterest income:
Service charges, fees and other		3,287		2,976
Gain on sale of loans		3,552		6,131
Loan servicing fees, net of amortization		1,846		2,566
Recoveries on loans acquired in business combinations		79		73
Unrealized gain on equity investments		—		147
Increase in cash surrender value of life insurance		576		580
Gain on sale of securities		210		7
Gain on sale of fixed assets		—		6
Loss on sale of other real estate owned		—		11
Total noninterest income		9,550		12,497
Noninterest expense:
Salaries and employee benefits		25,207		25,088
Occupancy and equipment expenses		7,291		7,360
Data processing		3,224		3,202
Legal and professional		1,949		1,516
Office expenses		931		965
Marketing and business promotion		456		926
Insurance and regulatory assessments		774		754
Amortization of intangibles		1,071		1,157
OREO expenses		31		161
Merger expenses		741		240
Other expenses		3,385		2,641
Total noninterest expense		45,060		44,010
Income before income taxes		31,553		40,497
Income tax expense		9,772		11,963
Net income	$	21,781	$	28,534

Net income per share
Basic	$	1.10	$	1.42
Diluted	$	1.09	$	1.40
Cash Dividends declared per common share	$	0.24	$	0.30
Weighted-average common shares outstanding
Basic		19,799,617		20,063,479
Diluted		19,958,612		20,435,867

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, 2020							June 30, 2020							September 30, 2019
	Average		Interest		Yield/			Average		Interest		Yield/			Average		Interest		Yield/
(tax-equivalent basis, dollars in thousands)	Balance		& Fees		Rate			Balance		& Fees		Rate			Balance		& Fees		Rate
Earning assets:
Federal funds sold, cash equivalents & other (1)	$	179,521	$	351		0.78	%	$	231,943	$	583		1.01	%	$	144,131	$	1,064		2.93	%
Securities
Available for sale		168,151		558		1.32	%		171,298		823		1.93	%		92,292		631		2.71	%
Held to maturity (2)		7,604		71		3.71	%		7,661		72		3.78	%		8,730		81		3.68	%
Mortgage loans held for sale		19,848		171		3.43	%		25,130		303		4.85	%		253,492		3,050		4.77	%
Loans held for investment: (3)
Real estate		2,266,752		29,616		5.20	%		2,147,646		28,216		5.28	%		1,749,371		23,963		5.43	%
Commercial		377,789		4,366		4.60	%		364,189		4,114		4.54	%		352,795		5,889		6.62	%
Total loans		2,644,541		33,982		5.11	%		2,511,835		32,330		5.18	%		2,102,166		29,852		5.63	%
Total earning assets		3,019,665	$	35,133		4.63	%		2,947,867	$	34,111		4.65	%		2,600,811	$	34,678		5.29	%
Noninterest-earning assets		204,638							206,833							169,691
Total assets	$	3,224,303						$	3,154,700						$	2,770,502

Interest-bearing liabilities
NOW and money market deposits	$	514,271	$	748		0.58	%	$	462,027	$	751		0.65	%	$	364,127	$	1,070		1.17	%
Savings deposits		126,635		31		0.10	%		123,868		31		0.10	%		95,725		47		0.19	%
Time deposits		1,284,351		4,746		1.47	%		1,314,232		5,933		1.82	%		1,340,751		8,038		2.38	%
Total interest-bearing deposits		1,925,257		5,525		1.14	%		1,900,127		6,715		1.42	%		1,800,603		9,155		2.02	%
FHLB advances		151,739		444		1.16	%		150,000		439		1.18	%		13,261		81		2.42	%
Long-term debt		104,252		1,748		6.67	%		104,168		1,747		6.75	%		103,912		1,748		6.67	%
Subordinated debentures		14,195		157		4.40	%		14,141		168		4.78	%		9,606		173		7.15	%
Total interest-bearing liabilities		2,195,443		7,874		1.43	%		2,168,436		9,069		1.68	%		1,927,382		11,157		2.30	%
Noninterest-bearing liabilities
Noninterest-bearing deposits		595,264							557,903							424,908
Other noninterest-bearing liabilities		13,270							15,509							20,490
Total noninterest-bearing liabilities		608,534							573,412							445,398
Shareholders' equity		420,326							412,852							397,722
Total liabilities and shareholders' equity	$	3,224,303						$	3,154,700						$	2,770,502
Net interest income / interest rate spreads			$	27,259		3.20	%			$	25,042		2.97	%			$	23,521		2.99	%
Net interest margin						3.59	%						3.42	%						3.59	%

(1) Includes income and average balances for FHLB stock, term federal funds, interest-bearing time deposits and other miscellaneous interest-bearing assets.

(2) Interest income and average rates for tax-exempt loans and securities are presented on a tax-equivalent basis.

(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.

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, 2020							September 30, 2019
	Average		Interest		Yield /			Average		Interest		Yield /
(tax-equivalent basis, dollars in thousands)	Balance		& Fees		Rate			Balance		& Fees		Rate
Earning assets:
Federal funds sold, cash equivalents & other (1)	$	220,195	$	1,865		1.13	%	$	122,563	$	2,861		3.12	%
Securities
Available for sale		159,373		2,136		1.79	%		82,868		1,749		2.82	%
Held to maturity (2)		7,760		218		3.75	%		9,159		255		3.72	%
Mortgage loans held for sale		40,936		1,454		4.74	%		352,110		12,785		4.85	%
Loans held for investment: (3)
Real estate		2,141,022		84,261		5.26	%		1,759,253		72,842		5.54	%
Commercial		359,907		13,347		4.95	%		350,823		17,354		6.61	%
Total loans		2,500,929		97,608		5.21	%		2,110,076		90,196		5.72	%
Total earning assets		2,929,193	$	103,281		4.71	%		2,676,776	$	107,846		5.39	%
Noninterest-earning assets		208,000							167,887
Total assets	$	3,137,193						$	2,844,663

Interest-bearing liabilities
NOW and money market deposits	$	484,157	$	2,687		0.74	%	$	388,298	$	3,500		1.21	%
Savings deposits		121,836		117		0.13	%		97,959		149		0.20	%
Time deposits		1,318,947		17,765		1.80	%		1,273,604		21,788		2.29	%
Total interest-bearing deposits		1,924,940		20,569		1.43	%		1,759,861		25,437		1.93	%
FHLB advances		118,029		1,033		1.17	%		148,101		2,857		2.58	%
Long-term debt		104,168		5,243		6.72	%		103,827		5,243		6.75	%
Subordinated debentures		14,221		533		5.01	%		9,565		540		7.55	%
Total interest-bearing liabilities		2,161,358	$	27,378		1.69	%		2,021,354	$	34,077		2.25	%
Noninterest-bearing liabilities
Noninterest-bearing deposits		546,419							412,845
Other noninterest-bearing liabilities		14,606							19,888
Total noninterest-bearing liabilities		561,025							432,733
Shareholders' equity		414,810							390,576
Total liabilities and shareholders' equity	$	3,137,193						$	2,844,663
Net interest income / interest rate spreads			$	75,903		3.02	%			$	73,769		3.13	%
Net interest margin						3.46	%						3.68	%

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
	2020			2020			2019
Per share data (common stock)
Earnings
Basic	$	0.43		$	0.33		$	0.40
Diluted	$	0.43		$	0.33		$	0.39
Dividends declared	$	0.06		$	0.06		$	0.10
Basic, excluding merger and conversion expense	$	0.43		$	0.34		$	0.40
Diluted, excluding merger and conversion expense	$	0.43		$	0.34		$	0.40
Book value	$	21.35		$	20.97		$	19.91
Tangible book value	$	17.56		$	17.17		$	16.67
Weighted average shares outstanding
Basic		19,717,568			19,710,330			20,067,847
Diluted		19,804,892			19,806,304			20,425,966
Shares outstanding at period end		19,739,280			19,739,280			20,030,866
Performance ratios
Return on average assets, annualized		1.05	%		0.83	%		1.15	%
Return on average shareholders' equity, annualized		8.06	%		6.34	%		7.99	%
Return on average tangible common equity, annualized		9.81	%		7.77	%		9.56	%
Noninterest income to average assets, annualized		0.34	%		0.28	%		0.40	%
Noninterest expense to average assets, annualized		1.72	%		1.89	%		1.97	%
Yield on average earning assets		4.63	%		4.65	%		5.29	%
Cost of average total deposits		0.87	%		1.10	%		1.63	%
Cost of average interest-bearing deposits		1.14	%		1.42	%		2.02	%
Cost of average interest-bearing liabilities		1.43	%		1.68	%		2.30	%
Accretion on loans to average earning assets		0.08	%		0.14	%		0.10	%
Net interest spread		3.20	%		2.97	%		2.99	%
Net interest margin		3.59	%		3.42	%		3.59	%
Efficiency ratio		46.63	%		54.40	%		52.40	%
Common stock dividend payout ratio		13.95	%		18.18	%		25.00	%

RBB BANCORP AND SUBSIDIARIES SELECTED FINANCIAL HIGHLIGHTS (Unaudited) *(Dollars in thousands, except per share amounts)*

	For the nine months ended September 30,
	2020			2019
Per share data (common stock)
Earnings
Basic	$	1.10		$	1.42
Diluted	$	1.09		$	1.40
Basic, excluding merger expense	$	1.13		$	1.44
Diluted, excluding merger expense	$	1.12		$	1.41
Dividends declared	$	0.24		$	0.30
Book value	$	21.35		$	19.91
Tangible book value	$	17.56		$	16.67
Weighted average shares outstanding
Basic		19,799,617			20,063,479
Diluted		19,958,612			20,435,867
Shares outstanding at period end		19,739,280			20,030,866
Performance ratios
Return on average assets, annualized		0.93	%		1.34	%
Return on average shareholders' equity, annualized		7.01	%		9.77	%
Return on average tangible common equity, annualized		8.59	%		11.73	%
Noninterest income to average assets, annualized		0.41	%		0.59	%
Noninterest expense to average assets, annualized		1.92	%		2.07	%
Yield on average earning assets		4.71	%		5.39	%
Cost of average deposits		1.11	%		1.57	%
Cost of average interest-bearing deposits		1.43	%		1.93	%
Cost of average interest-bearing liabilities		1.69	%		2.25	%
Accretion on loans to average earning assets		0.10	%		0.12	%
Net interest spread		3.02	%		3.13	%
Net interest margin		3.46	%		3.68	%
Efficiency ratio		52.75	%		51.03	%
Common stock dividend payout ratio		21.82	%		21.13	%

RBB BANCORP AND SUBSIDIARIES SELECTED FINANCIAL HIGHLIGHTS (Unaudited) *(Dollars in thousands, except per share amounts)*

	As of
	September 30,			June 30,			September 30,
	2020			2020			2019
Loan to deposit ratio		105.49	%		106.49	%		94.41	%
Core deposits / total deposits		99.34	%		76.84	%		68.32	%
Net non-core funding dependence ratio		14.47	%		13.39	%		25.41	%

Credit Quality Data:
Loans 30-89 days past due	$	21,735		$	23,872		$	4,578
Loans 30-89 days past due to total loans		0.79	%		0.92	%		0.22	%
Nonperforming loans	$	17,975		$	17,217		$	9,628
Nonperforming loans to total loans		0.65	%		0.66	%		0.39	%
Nonperforming assets	$	18,268		$	17,510		$	10,895
Nonperforming assets to total assets		0.54	%		0.56	%		0.39	%
Allowance for loan losses to total loans		0.97	%		0.88	%		0.91	%
Allowance for loan losses to nonperforming loans		148.17	%		132.54	%		201.35	%
Net charge-offs to average loans (for the quarter-to-date period)		0.01	%		0.05	%		0.00	%

Regulatory and other capital ratios—Company
Tangible common equity to tangible assets		10.55	%		11.07	%		12.12	%
Tier 1 leverage ratio		11.47	%		11.48	%		12.74	%
Tier 1 common capital to risk-weighted assets		14.11	%		14.87	%		16.95	%
Tier 1 capital to risk-weighted assets		14.69	%		15.49	%		17.44	%
Total capital to risk-weighted assets		20.05	%		21.10	%		23.71	%

Regulatory capital ratios—Bank only
Tier 1 leverage ratio		14.16	%		14.14	%		14.98	%
Tier 1 common capital to risk-weighted assets		18.16	%		19.09	%		20.53	%
Tier 1 capital to risk-weighted assets		18.16	%		19.09	%		20.53	%
Total capital to risk-weighted assets		19.29	%		20.13	%		21.54	%

RBB BANCORP AND SUBSIDIARIES SELECTED FINANCIAL HIGHLIGHTS (Unaudited) *(Dollars in thousands, except per share amounts)*

	3rd Quarter			2nd Quarter			1st Quarter			4th Quarter			3rd Quarter
Quarterly Consolidated Statements of Earnings	2020			2020			2020			2019			2019
Interest income
Loans, including fees	$	34,153		$	32,633		$	32,276		$	32,178		$	32,902
Investment securities and other		972			1,470			1,752			1,729			1,767
Total interest income		35,125			34,103			34,028			33,907			34,669
Interest expense
Deposits		5,525			6,715			8,329			8,796			9,155
Interest on subordinated debentures and other		1,905			1,915			1,956			1,915			1,921
Other borrowings		444			439			150			73			81
Total interest expense		7,874			9,069			10,435			10,784			11,157
Net interest income before provision for loan losses		27,251			25,034			23,593			23,123			23,512
Provision for loan losses		3,861			3,009			1,945			659			824
Net interest income after provision for loan losses		23,390			22,025			21,648			22,464			22,688
Noninterest income		2,727			2,208			4,615			5,823			2,799
Noninterest expense		13,978			14,819			16,263			13,463			13,786
Earnings before income taxes		12,139			9,414			10,000			14,824			11,701
Income taxes		3,619			2,901			3,252			4,149			3,689
Net income	$	8,520		$	6,513		$	6,748		$	10,675		$	8,012
Net income per common share - basic	$	0.43		$	0.33		$	0.34		$	0.53		$	0.40
Net income per common share - diluted	$	0.43		$	0.33		$	0.33		$	0.52		$	0.39
Cash dividends declared per common share	$	0.06		$	0.06		$	0.12		$	0.10		$	0.10
Cash dividends declared on common shares	$	3,592		$	1,184		$	2,407		$	2,003		$	2,016
Yield on average assets, annualized		1.05	%		0.83	%		0.90	%		1.51	%		1.15	%
Yield on average earning assets		4.63	%		4.60	%		4.86	%		5.09	%		5.29	%
Cost of average deposits		0.87	%		1.09	%		1.38	%		1.55	%		1.63	%
Cost of average interest-bearing deposits		1.14	%		1.41	%		1.72	%		1.93	%		2.02	%
Cost of average interest-bearing liabilities		1.43	%		1.66	%		1.98	%		2.21	%		2.30	%
Accretion on loans to average earning assets		0.08	%		0.13	%		0.10	%		0.10	%		0.10	%
Net interest margin		3.59	%		3.38	%		3.37	%		3.47	%		3.59	%

RBB BANCORP AND SUBSIDIARIES SELECTED FINANCIAL HIGHLIGHTS (Unaudited, except for December 31, 2019) *(Dollars in thousands, except per share amounts)*

Loan Portfolio Detail	As of September 30, 2020					As of June 30, 2020					As of March 31, 2020					As of December 31, 2019					As of September 30, 2019
(dollars in thousands)	$			%		$			%		$			%		$			%		$			%
Loans:
Commercial and industrial	$	317,891			11.5	$	267,481			10.3	$	275,602			11.5	$	274,586			12.5	$	276,478			13.0
SBA		111,193			4.0		104,069			4.0		77,566			3.2		74,985			3.4		70,978			3.3
Construction and land development		183,569			6.7		145,754			5.6		120,115			5.0		96,020			4.4		101,649			4.8
Commercial real estate (1)		975,187			35.4		900,302			34.7		854,580			35.6		793,268			36.1		787,927			37.1
Single-family residential mortgages		1,163,982			42.2		1,174,927			45.3		1,070,649			44.6		957,254			43.6		888,577			41.8
Other loans		3,331			0.1		2,087			0.1		1,470			0.1		821			0.0		536			0.0
Total loans (2)	$	2,755,153			99.9	$	2,594,620			100.0	$	2,399,982			100.0	$	2,196,934			100.0	$	2,126,145			100.0
Allowance for loan losses		(26,634	)				(22,820	)				(20,130	)				(18,816	)				(19,386	)
Total loans, net	$	2,728,519				$	2,571,800				$	2,379,852				$	2,178,118				$	2,106,759

(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.

	Three Months Ended					Nine Months Ended
Change in Allowance for Loan Losses	September 30,					September 30,
(dollars in thousands)	2020			2019		2020			2019
Beginning balance	$	22,820		$	18,561	$	18,816		$	17,577
Additions to the allowance charged to expense		3,861			824		8,815			1,731
Net (charge-offs) recoveries on loans		(47	)		1		(997	)		78
Ending balance	$	26,634		$	19,386	$	26,634		$	19,386

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, 2020 and 2019.

	September 30,
(dollars in thousands, except per share data)	2020			2019
Tangible common equity:
Total shareholders' equity	$	421,416		$	398,841
Adjustments
Goodwill		(69,243	)		(58,383	)
Core deposit intangible		(5,519	)		(6,444	)
Tangible common equity	$	346,654		$	334,014
Tangible assets:
Total assets-GAAP	$	3,359,576		$	2,820,302
Adjustments
Goodwill		(69,243	)		(58,383	)
Core deposit intangible		(5,519	)		(6,444	)
Tangible assets	$	3,284,814		$	2,755,475
Common shares outstanding		19,739,280			20,030,866
Tangible common equity to tangible assets ratio		10.55	%		12.12	%
Book value per share	$	21.35		$	19.91
Tangible book value per share	$	17.56		$	16.67

Earnings Per Share Excluding Merger and Conversion Expense (non-GAAP)

Earnings per share excluding merger and conversion expense 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 calculation of earnings per share with after-tax net income excluding tax-affected merger and conversion expense. This EPS calculation is presented for the quarters ended September 30, 2020, June 30, 2020 and September 30, 2019, plus for the nine-month periods ending September 30, 2020 and 2019.

	For the three months ended									For the nine months ended
	September 30, 2020			June 30, 2020			September 30, 2019			September 30, 2020			September 30, 2019
Earnings Per Share Excluding Merger and Conversion Expense (non-GAAP)
Net income after tax	$	8,520		$	6,513		$	8,012		$	21,781		$	28,534
Merger and conversion expense		62			276			100			741			282
Tax on merger and conversion expense		(18	)		(85	)		(32	)		(229	)		(83	)
Net adjustment		44			191			68			512			199
Adjusted net income after tax	$	8,564		$	6,704		$	8,080		$	22,293		$	28,733
Weighted average shares outstanding
Basic		19,717,568			19,710,330			20,067,847			19,799,617			20,063,479
Diluted		19,804,892			19,806,304			20,425,966			19,958,612			20,435,867
Adjusted Earnings Per Share
Basic, excluding merger and conversion expense	$	0.43		$	0.34		$	0.40		$	1.13		$	1.44
Diluted, excluding merger and conversion expense	$	0.43		$	0.34		$	0.40		$	1.12		$	1.41

Efficiency Ratio (non-GAAP)

The efficiency ratio is a non-GAAP disclosure. The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company’s performance. The efficiency ratio is non-interest expense divided by net interest income plus non-interest income. The efficiency ratio is presented for the quarters ended September 30, 2020, June 30, 2020 and September 30, 2019, plus the nine-month periods ending September 30, 2020 and 2019.

	For the three months ended									For the nine months ended
	September 30, 2020			June 30, 2020			September 30, 2019			September 30, 2020			September 30, 2019
Efficiency Ratio (non-GAAP)
Noninterest expense	$	13,978		$	14,819		$	13,786		$	45,060		$	44,010
Net interest income		27,251			25,034			23,512			75,878			73,741
Noninterest income		2,727			2,208			2,799			9,550			12,497
Net interest income and non-interest income	$	29,978		$	27,242		$	26,311		$	85,428		$	86,238
Efficiency ratio		46.63	%		54.40	%		52.40	%		52.75	%		51.03	%

View source version on businesswire.com: https://www.businesswire.com/news/home/20201026005848/en/

Yee Phong (Alan) Thian
Chairman, President and CEO
(626) 307-7559

David Morris
Executive Vice President and CFO
(714) 670-2488

Source: RBB Bancorp

Press Release Details

RBB Bancorp Reports Third Quarter Earnings for 2020