rbb20221121_8k.htm
false 0001499422 0001499422 2023-01-19 2023-01-19
 
 


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 

 
FORM 8-K
 

 
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): January 23, 2023 (January 19, 2023) 
 

 
RBB BANCORP
(Exact name of Registrant as Specified in Its Charter)
 

 
California
001-38149
27-2776416
(State or Other Jurisdiction
of Incorporation)
(Commission
File Number)
(IRS Employer
Identification No.)
     
1055 Wilshire Blvd., 12th floor,
Los Angeles, California
 
90017
(Address of Principal Executive Offices)
 
(Zip Code)
 
Registrant’s Telephone Number, Including Area Code: (213) 627-9888
 
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
 

 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Securities registered pursuant to Section 12 (b) of the Act:
 
Title of each class
 
Trading
Symbol(s)
 
Name of exchange on which registered
Common Stock, No Par Value
 
RBB
 
NASDAQ Global Select Market
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
 
Emerging growth company 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 


 
 

 
Item 2.02 Results of Operations and Financial Condition.
 
On January 23, 2023, RBB Bancorp issued a press release setting forth the financial results for the quarter ended December 31, 2022, and information relating to our quarterly conference call and webcast. A copy of this press release is attached hereto as Exhibit 99.1 and is hereby incorporated by reference.
 
The information furnished under Item 2.02 and Item 9.01 of this Current Report on Form 8-K (including Exhibits 99.1 and 99.2) shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liability of that section, and shall not be incorporated by reference into any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set for the by specific reference in such filing.
 
Item 8.01 Other Events.
 
On January 19, 2023, RBB Bancorp announced that its Board of Directors declared a cash dividend of $0.16 per share of its common stock. The dividend is payable on February 10, 2023, to common shareholders of record as of January 30, 2023.
 
Item 9.01 Financial Statements and Exhibits.
 
(d)
 
Exhibits.
     
99.1
 
     
99.2
 
     
104   Cover Page Interactive Data File (embedded within the Inline XBRL document)
 
 

 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
RBB BANCORP
(Registrant)
       
Date: January 23, 2023
By:
 
/s/ David Morris
     
David Morris
     
President and Chief Executive Officer,
and Chief Financial Officer
 
 
ex_449728.htm
 

Exhibit 99.1

 

https://cdn.kscope.io/911b2c9e0b04465c025a162c03b3a56a-logo.jpg

 

Press Release

For Immediate Release

 

Contact:

David Morris

 

President, CEO and CFO

 

(714) 670-2488

   

 

RBB Bancorp Reports Fourth Quarter and Full Year Earnings for 2022

Conference Call and Webcast Scheduled for Tuesday, January 24, 2023 at

11:00 a.m. Pacific Time/2:00 p.m. Eastern Time

 

 

Fourth Quarter 2022 Highlights 

 

Record net income of $17.6 million, or $0.92 diluted earnings per share, increased $929,000, or 5.6%, from the prior quarter and increased $1.9 million, or 11.9%, from the fourth quarter of 2021

 

Loans grew by $114.4 million, or 14.1% annualized, from the end of the prior quarter

 

●     Declared $0.16 per share quarterly dividend

 

Los Angeles, CA, January 23, 2023 – 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 and year ended December 31, 2022.

 

The Company reported net income of $17.6 million, or $0.92 diluted earnings per share, for the quarter ended December 31, 2022, compared to net income of $16.7 million, or $0.87 diluted earnings per share, and $15.7 million, or $0.79 diluted earnings per share, for the quarter ended September 30, 2022 and December 31, 2021, respectively.

 

“Loan growth, increasing loan yields and declining expenses drove record fourth quarter and 2022 results,” said David Morris, President, CEO and CFO of RBB Bancorp. “The organizational re-alignment we began in the first quarter of last year is well underway with new hires and clearly defined responsibilities contributing to results. I'm also pleased to announce that we have concluded all internal investigations and have taken previously disclosed steps to address shortcomings and prevent future lapses.

 

While we made tremendous progress in 2022, we’re not immune from market forces and the impact of the rate environment. We saw significant pressure on deposit costs in the fourth quarter which we anticipate will continue over the next few quarters.”

 

“Despite the challenges Royal Business Bank faced in 2022, the strength of the franchise and focus of the management team delivered a record year of results and loan growth,” said Dr. James Kao, Chairman of RBB Bancorp. “As shareholders, the RBB Board of Directors appreciates management’s efforts over the past twelve months and looks forward to continuing to build on the momentum they have achieved.”

 


 

 

1

 

Key Performance Ratios

 

Net income of $17.6 million for the fourth quarter of 2022 produced an annualized return on average assets ("ROA") of 1.80% and an annualized return on average shareholders' equity ("ROE") of 14.59% compared to an annualized ROA of 1.72% and an annualized ROE of 13.93% for the third quarter of 2022. The efficiency ratio, which is defined in the Selected Financial Highlights section, for the fourth quarter of 2022 was 31.67%, compared to 40.22% for the third quarter of 2022. 

 

Net Interest Income and Net Interest Margin

 

Net interest income, before provision for credit losses, was $39.0 million for the fourth quarter of 2022, compared to $39.0 million for the third quarter of 2022. Net interest income remained flat as revenues from a $162.7 million increase in higher-yielding average commercial real estate and mortgage loans was offset by costs of a $250.0 million increase in average time deposits.

 

Compared to the fourth quarter of 2021, net interest income, before provision for credit losses, increased $5.8 million from $33.2 million. The $5.8 million increase was primarily attributable to a $414.1 million increase in average commercial real estate and mortgage loans partially offset by a $161.0 million increase in average time deposits and due to increasing rates.

 

Net interest margin was 4.26% for the fourth quarter of 2022, a decrease of 5 basis points from 4.31% in the third quarter of 2022 primarily due to a 111 basis point increase in the average cost on interest-bearing deposits from 0.82% in the third quarter of 2022 to 1.93% in the fourth quarter of 2022. Cost of interest-bearing deposits increased due to increasing market rates and peer bank deposit competition.

 

Noninterest Income

 

Noninterest income was $2.4 million for the fourth quarter of 2022, a decrease of $183,000 from $2.5 million in the third quarter of 2022. The decrease was primarily driven by a $153,000 decrease in gain on sale of loans and a $143,000 decrease in loan servicing fees due to loan payoffs in the third quarter of 2022, offset by an $85,000 increase in recoveries on purchased loans during the quarter.

 

During the fourth quarter loan sale volume and margins on loan sales decreased. The Company sold $2.8 million in FNMA qualified mortgage loans for a net gain of $69,000 during the fourth quarter of 2022 compared to $3.8 million in FNMA qualified mortgage loans sold for a net gain of $135,000 during the third quarter of 2022. The Company sold $834,000 in SBA loans during the fourth quarter of 2022 for a net gain of $43,000, compared to $2.5 million SBA loans sold for a net gain of $130,000 during the third quarter of 2022.

 

Compared to the fourth quarter of 2021, noninterest income decreased by $804,000 from $3.2 million. The decrease was primarily attributable to a $1.7 million decrease in gain on sale of loans due to rate hikes that caused both sellable loan volume and premium decreases, offset by a $323,000 increase in loan servicing fees due to loan payoffs slowing down in 2022, a $300,000 decrease in unrealized loss on equity investments, and a $265,000 increase in gain on derivatives.

 

2

 

Noninterest Expense

 

Noninterest expense for the fourth quarter of 2022 was $13.1 million, compared to $16.7 million for the third quarter of 2022. The $3.6 million decrease was primarily attributable to a $2.6 million decrease in salaries and employee benefits expenses due to bonus reversals related to executive compensation and lower commission expenses for decreased loan originations in the fourth quarter of 2022, a $902,000 decrease in the provision for off balance sheet commitments due to the conversion to CECL, and a $103,000 decrease in data processing expenses.

 

Noninterest expense decreased from $13.3 million in the fourth quarter of 2021. The $207,000 decrease was primarily due to a $641,000 decrease in legal and professional expenses due to the completion of the previously disclosed Board special investigation, offset by a $365,000 increase in data processing expenses.

 

Income Taxes

 

The effective tax rate was 30.5% for the fourth quarter of 2022, 27.8% for the third quarter of 2022, and 30.0% for the fourth quarter of 2021. The Company recognized a tax benefit from stock option exercises of $9,000, $276,000 and $215,000 for the fourth quarter of 2022, the third quarter of 2022, and the fourth quarter of 2021, respectively. The Company amended its 2020 tax returns and 2018 California state tax return and recorded a total of $300,000 tax expense reduction in the third quarter of 2022.

 

Loan and Securities Portfolio

 

Loans held for investment, net of deferred fees and discounts, totaled $3.3 billion as of December 31, 2022, an increase of $115.5 million from September 30, 2022, and an increase of $405.1 million from December 31, 2021. The increase from September 30, 2022 was primarily due to a $107.8 million increase in single-family residential mortgage loans and a $91.3 million increase in commercial real estate loans, offset by a $76.6 million decrease in construction and land development loans and a $3.6 million decrease in commercial and industrial loans. The increase from December 31, 2021 was primarily due to a $459.5 million increase in single-family residential mortgages and a $64.1 million increase in commercial real estate loans, offset by a $67.5 million decrease in commercial and industrial loans and a $26.3 million decrease in construction and land development loans.

 

During the fourth quarter of 2022, single-family residential mortgage production was $130.8 million while net payoffs and paydowns were $21.4 million. During the third quarter of 2022, single-family residential mortgage production was $191.8 million while payoffs and paydowns were $36.2 million.

 

There were no mortgage loans held for sale as of December 31, 2022 compared to $1.2 million as of September 30, 2022 and $6.0 million as of December 31, 2021. The Company originated approximately $889,000 in FNMA mortgage loans for sale for the fourth quarter of 2022, compared with $1.8 million during the third quarter of 2022. 

 

In the fourth quarter of 2022, SBA loan production was $10.2 million and total SBA loan sales were $834,000 compared to SBA loan production of $7.7 million and total SBA loan sales of $2.5 million in the third quarter of 2022. 

 

As of December 31, 2022, the Bank’s total available-for-sale securities maturing in over 12 months were $234.8 million. As of December 31, 2022 the Bank recorded gross unrealized losses of $31.2 million compared to gross unrealized losses of $2.3 million as of December 31, 2021.

 

Deposits

 

Deposits were $3.0 billion at December 31, 2022, which was an increase of $18.0 million compared to September 30, 2022. During the fourth quarter of 2022, noninterest-bearing deposits decreased by $117.6 million due to the continued reduction of a single deposit relationship, interest-bearing non-maturity deposits decreased by $266.8 million, and time deposits increased by $402.4 million. As of December 31, 2022, there were $255.0 million in brokered CDs, as compared to $105.5 million brokered CDs as of September 30, 2022 and $2.4 million brokered CDs as of December 31, 2021. Compared to December 31, 2021, total deposits decreased by $407.8 million primarily due to a $492.7 million decrease in noninterest-bearing demand deposits, and a $312.3 million decrease in interest-bearing non-maturity deposits, offset by a $397.2 million increase in time deposits.

 

Asset Quality

 

Nonperforming assets totaled $12.1 million, or 0.31% of total assets at December 31, 2022, compared to $11.8 million, or 0.30% of total assets at September 30, 2022. The increase in nonperforming assets was due to the foreclosure of a property in the amount of $284,000 that was transferred to Other Real Estate Owned (OREO) in the fourth quarter of 2022. Nonperforming assets consist of other real estate owned, loans modified under troubled debt restructurings (“TDR”), non-accrual loans, and loans past due 90 days or more and still accruing interest.

 

Our 30-89 day delinquent loans, excluding non-accrual loans decreased $24.7 million to $15.2 million as of December 31, 2022 compared to $39.9 million as of September 30, 2022. 30-89 days past due loans at December 31, 2022 decreased primarily due to the completion of extensions on a construction loan of $11.3 million on a project that is substantially complete and a commercial real estate loan of $8.8 million. Both loans were delinquent for 52 days at September 30, 2022, and extended and back to current in October 2022.

 

3

 

In the fourth quarter of 2022, there were $85,000 in net charge-offs, compared to net recoveries of $127,000 in the third quarter of 2022 and net recoveries of $46,000 in the fourth quarter of 2021.

 

The Company's emerging growth company (“EGC”) status expired on December 31, 2022. The Company adopted ASU 2016-13 “Accounting for Credit Losses” (“CECL”) retrospectively to January 1, 2022. Due to the adoption of CECL, the Company recorded a $2.1 million transition adjustment for the credit for loan losses and a provision for unfunded commitments of $1.0 million through retained earnings on January 1, 2022. Subsequent to CECL adoption, the Company recorded a provision for credit losses of $3.0 million in the fourth quarter of 2022 compared to $1.8 million in third quarter of 2022. The Company also recorded a reversal of provision for off-balance sheet commitments of $930,000 in the fourth quarter of 2022 compared to a reversal of $28,000 in the third quarter of 2022.

 

The allowance for credit losses totaled $41.0 million, or 1.23% of loans held for investment at December 31, 2022, compared with $36.0 million, or 1.12%, of total loans at September 30, 2022.

 

Stock Repurchase

 

During the fourth quarter of 2022, the Company repurchased 48,896 common shares at a weighted average price of $20.77.

 

4

 

Corporate Overview

 

RBB Bancorp is a community-based financial holding company headquartered in Los Angeles, California. As of December 31, 2022, the company had total assets of $3.9 billion. Its wholly-owned subsidiary, the 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, in Edison, New Jersey, in the Chicago neighborhoods of Chinatown and Bridgeport, Illinois, and on Oahu, Hawaii. 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 Orange County, California, one branch in Las Vegas, Nevada, three branches and one loan operation center in Brooklyn, three branches in Queens, one branch in Manhattan in New York, one branch in Edison, New Jersey, two branches in Chicago, Illinois, and one branch in Honolulu, Hawaii. 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 Ave., 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 on Tuesday, January 24, 2023, to discuss the Company’s fourth quarter and year-end 2022 financial results.

 

To listen to the conference call, please dial 1-888-506-0062 or 1-973-528-0011, the Participant ID code is 200944, conference ID RBBQ422. A replay of the call will be made available at 1-877-481-4010 or 1-919-882-2331, the passcode is 47492, approximately one hour after the conclusion of the call and will remain available through February 7, 2023.

 

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.

 

5

 

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 credit losses and charge-offs; expectations regarding the impact of the COVID-19 pandemic; the costs or effects of acquisitions or dispositions we may make, 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/A and Form 10-K for the year ended December 31, 2021, 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.

 

 

6

 

RBB BANCORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, except for December 31, 2021)

(Dollars in thousands)

 

   

December 31,

   

September 30,

   

June 30,

   

March 31,

   

December 31,

 
   

2022

   

2022

   

2022

   

2022

   

2021

 

Assets

                                       

Cash and due from banks

  $ 83,548     $ 134,179     $ 224,736     $ 149,767     $ 501,372  

Federal funds sold and other cash equivalents

          40,000       100,000       200,000       193,000  

Total cash and cash equivalents

    83,548       174,179       324,736       349,767       694,372  

Interest-bearing deposits in other financial institutions

    600       600       600       600       600  

Investment securities available for sale

    256,830       266,270       358,135       420,448       368,260  

Investment securities held to maturity

    5,729       5,735       5,741       6,246       6,252  

Mortgage loans held for sale

          1,185       -       3,572       5,957  

Loans held for investment

    3,336,449       3,220,913       3,045,946       3,006,484       2,931,350  

Allowance for credit losses

    (41,047 )     (36,047 )     (34,154 )     (33,292 )     (32,912 )

Net loans held for investment

    3,295,402       3,184,866       3,011,792       2,973,192       2,898,438  

Premises and equipment, net

    27,009       26,850       27,104       27,455       27,199  

Federal Home Loan Bank (FHLB) stock

    15,000       15,000       15,000       15,000       15,000  

Cash surrender value of life insurance

    57,310       56,975       56,642       56,313       55,988  

Goodwill

    71,498       71,498       71,498       71,498       69,243  

Servicing assets

    9,521       10,054       10,456       11,048       11,517  

Core deposit intangibles

    3,718       3,971       4,248       4,525       4,075  

Right-of-use assets- operating leases

    25,447       24,768       25,931       22,451       22,454  

Accrued interest and other assets

    66,074       63,278       57,154       51,454       48,839  

Total assets

  $ 3,917,686     $ 3,905,229     $ 3,969,037     $ 4,013,569     $ 4,228,194  

Liabilities and shareholders' equity

                                       

Deposits:

                                       

Noninterest-bearing demand

  $ 798,741     $ 916,301     $ 1,045,009     $ 1,159,703     $ 1,291,484  

Savings, NOW and money market accounts

    615,339       882,126       868,307       885,050       927,609  

Time deposits, less than $250,000

    837,369       608,489       574,050       570,274       587,940  

Time deposits, greater than or equal to $250,000

    726,234       552,754       540,199       553,226       578,499  

Total deposits

    2,977,683       2,959,670       3,027,565       3,168,253       3,385,532  

FHLB advances

    220,000       240,000       250,000       150,000       150,000  

Long-term debt, net of debt issuance costs

    173,585       173,441       173,296       173,152       173,007  

Subordinated debentures

    14,720       14,665       14,611       14,556       14,502  

Lease liabilities - operating leases

    26,523       25,701       26,823       23,314       23,282  

Accrued interest and other liabilities

    20,612       19,953       13,035       19,469       15,188  

Total liabilities

    3,433,123       3,433,430       3,505,330       3,548,744       3,761,511  

Shareholders' equity:

                                       

Shareholder's equity

    506,156       494,248       479,382       475,077       468,267  

Non-controlling interest

    72       72       72       72       72  

Accumulated other comprehensive loss - Net of tax

    (21,665 )     (22,521 )     (15,747 )     (10,324 )     (1,656 )

Total shareholders' equity

    484,563       471,799       463,707       464,825       466,683  

Total liabilities and shareholders’ equity

  $ 3,917,686     $ 3,905,229     $ 3,969,037     $ 4,013,569     $ 4,228,194  

 

7

 

RBB BANCORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Dollars in thousands, except share and per share data) 

 

   

For the Three Months Ended

 
   

December 31, 2022

   

September 30, 2022

   

December 31, 2021

 

Interest and dividend income:

                       

Interest and fees on loans

  $ 49,468     $ 43,588     $ 36,783  

Interest on interest-bearing deposits

    697       373       160  

Interest on investment securities

    1,874       1,784       1,069  

Dividend income on FHLB stock

    265       224       227  

Interest on federal funds sold and other

    347       445       205  

Total interest income

    52,651       46,414       38,444  

Interest expense:

                       

Interest on savings deposits, NOW and money market accounts

    2,471       1,529       683  

Interest on time deposits

    7,798       2,460       1,748  

Interest on subordinated debentures and long term debt

    2,491       2,427       2,343  

Interest on other borrowed funds

    898       1,020       445  

Total interest expense

    13,658       7,436       5,219  

Net interest income before provision for credit losses

    38,993       38,978       33,225  

Provision for credit losses

    2,950       1,766       635  

Net interest income after provision for credit losses

    36,043       37,212       32,590  

Noninterest income:

                       

Service charges, fees and other

    1,196       1,277       1,323  

Gain on sale of loans

    112       265       1,788  

Gain on transfer of OREO

    22             -  

Loan servicing fees, net of amortization

    581       724       258  

Recoveries on loans acquired in business combinations

    90       5       4  

Unrealized loss on equity investments

                (300 )

Unrealized gain/(loss)on derivatives

    16       (68 )     (249 )

Increase in cash surrender value of life insurance

    335       332       332  

Total noninterest income

    2,352       2,535       3,156  

Noninterest expense:

                       

Salaries and employee benefits

    6,958       9,561       6,812  

Occupancy and equipment expenses

    2,364       2,349       2,125  

Data processing

    1,203       1,306       838  

Legal and professional

    1,045       1,077       1,686  

Office expenses

    405       382       359  

Marketing and business promotion

    406       364       418  

Insurance and regulatory assessments

    489       441       475  

Core deposit premium

    253       277       252  

OREO expenses

    6       4       4  

Merger expenses

    1             38  

Other expenses

    (37 )     936       293  

Total noninterest expense

    13,093       16,697       13,300  

Income before income taxes

    25,302       23,050       22,446  

Income tax expense

    7,721       6,398       6,740  

Net income

  $ 17,581     $ 16,652     $ 15,706  
                         

Net income per share

                       

Basic

  $ 0.93     $ 0.88     $ 0.81  

Diluted

  $ 0.92     $ 0.87     $ 0.79  

Cash Dividends declared per common share

  $ 0.14     $ 0.14     $ 0.13  

Weighted-average common shares outstanding

                       

Basic

    18,971,250       18,988,443       19,444,148  

Diluted

    19,086,586       19,130,447       19,851,202  
8

RBB BANCORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited, except for December 31, 2021)

(Dollars in thousands, except share and per share data) 

 

   

For the Year Ended

 
   

December 31, 2022

   

December 31, 2021

 

Interest and dividend income:

               

Interest and fees on loans

  $ 171,099     $ 141,569  

Interest on interest-earning deposits

    1,353       552  

Interest on investment securities

    6,084       3,379  

Dividend income on FHLB stock

    938       869  

Interest on federal funds sold and other

    1,496       694  

Total interest income

    180,970       147,063  

Interest expense:

               

Interest on savings deposits, NOW and money market accounts

    5,561       2,786  

Interest on time deposits

    13,338       9,170  

Interest on subordinated debentures and long term debt

    9,645       8,999  

Interest on other borrowed funds

    2,872       1,765  

Total interest expense

    31,416       22,720  

Net interest income

    149,554       124,343  

Provision for credit losses

    5,998       3,959  

Net interest income after provision for credit losses

    143,556       120,384  

Noninterest income:

               

Service charges, fees and other

    5,096       7,276  

Gain on sale of loans

    1,895       9,991  

Gain on transfer of OREO

    22        

Loan servicing fees, net of amortization

    2,209       684  

Recoveries on loans acquired in business combinations

    198       82  

Unrealized loss on equity investments

          (360 )

Unrealized (loss) gain on derivatives

    (247 )     5  

Increase in cash surrender value of life insurance

    1,322       1,067  

Gain on sale of fixed assets

    757        

Total noninterest income

    11,252       18,745  

Noninterest expense:

               

Salaries and employee benefits

    35,517       33,568  

Occupancy and equipment expenses

    9,092       8,691  

Data processing

    5,060       4,474  

Legal and professional

    5,383       3,773  

Office expenses

    1,438       1,197  

Marketing and business promotion

    1,578       1,157  

Insurance and regulatory assessments

    1,850       1,561  

Core deposit premium

    1,086       1,121  

OREO expenses

    23       17  

Merger expenses

    61       137  

Other expenses

    2,375       2,496  

Total noninterest expense

    63,463       58,192  

Income before income taxes

    91,345       80,937  

Income tax expense

    27,018       24,031  

Net income

  $ 64,327     $ 56,906  
                 

Net income per share

               

Basic

  $ 3.37     $ 2.92  

Diluted

  $ 3.33     $ 2.86  

Cash Dividends declared per common share

  $ 0.56     $ 0.51  

Weighted-average common shares outstanding

               

Basic

    19,099,509       19,423,549  

Diluted

    19,332,639       19,834,306  

 

 
9

 

RBB BANCORP AND SUBSIDIARIES

AVERAGE BALANCE SHEET AND NET INTEREST INCOME

(Unaudited)

 

 

   

For the Three Months Ended

 
   

December 31, 2022

   

September 30, 2022

   

December 31, 2021

 
   

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)

  $ 94,932     $ 1,310       5.47 %   $ 141,737     $ 1,042       2.92 %   $ 587,980     $ 592       0.40 %

Securities

                                                                       

Available for sale (2)

    245,348       1,847       2.99 %     318,066       1,758       2.19 %     376,601       1,037       1.09 %

Held to maturity (2)

    5,733       50       3.46 %     5,738       50       3.46 %     6,256       56       3.55 %

Mortgage loans held for sale

    192       3       6.20 %     420       6       5.48 %     3,721       40       4.26 %

Loans held for investment: (3)

                                                                       

Real estate

    3,006,293       43,864       5.79 %     2,820,022       38,999       5.49 %     2,492,396       31,978       5.09 %

Commercial

    280,326       5,601       7.93 %     303,899       4,583       5.98 %     380,098       4,765       4.97 %

Total loans

    3,286,619       49,465       5.97 %     3,123,921       43,582       5.53 %     2,872,494       36,743       5.07 %

Total earning assets

    3,632,824     $ 52,675       5.75 %     3,589,882     $ 46,438       5.13 %     3,847,052     $ 38,468       3.97 %

Noninterest-earning assets

    247,574                       250,737                       240,059                  

Total assets

  $ 3,880,398                     $ 3,840,619                     $ 4,087,111                  
                                                                         

Interest-bearing liabilities

                                                                       

NOW

  $ 67,854     $ 77       0.45 %   $ 74,518     $ 91       0.48 %   $ 73,896     $ 48       0.26 %

Money Market

    561,575       2,337       1.65 %     612,743       1,376       0.89 %     668,742       602       0.36 %

Saving deposits

    136,623       57       0.17 %     147,349       62       0.17 %     138,906       33       0.09 %

Time deposits, less than $250,000

    716,476       3,884       2.15 %     566,730       1,221       0.85 %     599,119       827       0.55 %

Time deposits, $250,000 and over

    631,897       3,914       2.46 %     531,655       1,239       0.92 %     588,265       921       0.62 %

Total interest-bearing deposits

    2,114,425       10,269       1.93 %     1,932,995       3,989       0.82 %     2,068,928       2,431       0.47 %

FHLB advances

    196,304       898       1.81 %     239,674       1,020       1.69 %     150,000       445       1.18 %

Long-term debt

    173,491       2,194       5.02 %     173,345       2,194       5.02 %     172,912       2,195       5.04 %

Subordinated debentures

    14,684       297       8.02 %     14,629       233       6.32 %     14,466       148       4.06 %

Total interest-bearing liabilities

    2,498,904       13,658       2.17 %     2,360,643       7,436       1.25 %     2,406,306       5,219       0.86 %

Noninterest-bearing liabilities

                                                                       

Noninterest-bearing deposits

    856,917                       964,867                       1,177,948                  

Other noninterest-bearing liabilities

    46,613                       41,003                       39,483                  

Total noninterest-bearing liabilities

    903,530                       1,005,870                       1,217,431                  

Shareholders' equity

    477,964                       474,106                       463,374                  

Total liabilities and shareholders' equity

  $ 3,880,398                     $ 3,840,619                     $ 4,087,111                  

Net interest income / interest rate spreads

          $ 39,017       3.58 %           $ 39,002       3.88 %           $ 33,249       3.11 %

Net interest margin

                    4.26 %                     4.31 %                     3.43 %

 


(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.

 

 

10

RBB BANCORP AND SUBSIDIARIES

AVERAGE BALANCE SHEET AND NET INTEREST INCOME

(Unaudited, except for December 31, 2021)

 

 

   

For the Year Ended

 
   

December 31, 2022

   

December 31, 2021

 
   

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)

  $ 276,923     $ 3,788       1.37 %   $ 504,809     $ 2,115       0.42 %

Securities

                                               

Available for sale (2)

    338,437       5,973       1.76 %     320,544       3,217       1.00 %

Held to maturity (2)

    5,865       208       3.55 %     6,543       238       3.64 %

Mortgage loans held for sale

    1,263       66       5.23 %     20,817       670       3.22 %

Loans held for investment: (3)

                                               

Real estate

    2,774,348       151,164       5.45 %     2,363,846       122,204       5.17 %

Commercial

    322,438       19,869       6.16 %     381,646       18,695       4.90 %

Total loans

    3,096,786       171,033       5.52 %     2,745,492       140,899       5.13 %

Total earning assets

    3,719,274     $ 181,068       4.87 %     3,598,205     $ 147,139       4.09 %

Noninterest-earning assets

    244,891                       235,267                  

Total assets

  $ 3,964,165                     $ 3,833,472                  
                                                 

Interest-bearing liabilities

                                               

NOW

  $ 73,335     $ 262       0.36 %   $ 69,211     $ 184       0.27 %

Money Market

    631,094       5,114       0.81 %     637,539       2,468       0.39 %

Saving deposits

    144,409       185       0.13 %     137,534       134       0.10 %

Time deposits, less than $250,000

    609,464       6,583       1.08 %     640,747       4,462       0.70 %

Time deposits, $250,000 and over

    565,059       6,755       1.20 %     597,770       4,708       0.79 %

Total interest-bearing deposits

    2,023,361       18,899       0.93 %     2,082,801       11,956       0.57 %

FHLB advances

    192,438       2,872       1.49 %     150,000       1,765       1.18 %

Long-term debt

    173,275       8,777       5.07 %     157,719       8,404       5.33 %

Subordinated debentures

    14,603       868       5.94 %     14,385       595       4.14 %

Total interest-bearing liabilities

    2,403,677     $ 31,416       1.31 %     2,404,905     $ 22,720       0.94 %

Noninterest-bearing liabilities

                                               

Noninterest-bearing deposits

    1,050,063                       938,710                  

Other noninterest-bearing liabilities

    39,644                       42,143                  

Total noninterest-bearing liabilities

    1,089,707                       980,853                  

Shareholders' equity

    470,781                       447,714                  

Total liabilities and shareholders' equity

  $ 3,964,165                     $ 3,833,472                  

Net interest income / interest rate spreads

          $ 149,652       3.56 %           $ 124,419       3.15 %

Net interest margin

                    4.02 %                     3.46 %

 


(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.

 

 

11

 

RBB BANCORP AND SUBSIDIARIES

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited)

 

 

   

For the Three Months Ended

 
   

December 31,

   

September 30,

   

December 31,

 
   

2022

   

2022

   

2021

 

Per share data (common stock)

                       

Earnings

                       

Basic

  $ 0.93     $ 0.88     $ 0.81  

Diluted

  $ 0.92     $ 0.87     $ 0.79  

Dividends declared

  $ 0.14     $ 0.14     $ 0.13  

Book value

  $ 25.55     $ 24.82     $ 23.99  

Tangible book value (1)

  $ 21.58     $ 20.85     $ 20.22  

Weighted average shares outstanding

                       

Basic

    18,971,250       18,988,443       19,444,148  

Diluted

    19,086,586       19,130,447       19,851,202  

Shares outstanding at period end

    18,965,776       19,011,672       19,455,544  

Performance ratios

                       

Return on average assets, annualized

    1.80 %     1.72 %     1.52 %

Return on average shareholders' equity, annualized

    14.59 %     13.93 %     13.45 %

Return on average tangible common equity, annualized (1)

    17.33 %     16.58 %     15.98 %

Noninterest income to average assets, annualized

    0.24 %     0.26 %     0.31 %

Noninterest expense to average assets, annualized

    1.34 %     1.72 %     1.29 %

Yield on average earning assets

    5.75 %     5.13 %     3.97 %

Cost of average total deposits

    1.37 %     0.55 %     0.30 %

Cost of average interest-bearing deposits

    1.93 %     0.82 %     0.47 %

Cost of average interest-bearing liabilities

    2.17 %     1.25 %     0.86 %

Accretion on loans to average earning assets

    0.00 %     0.01 %     0.02 %

Net interest spread

    3.58 %     3.88 %     3.11 %

Net interest margin

    4.26 %     4.31 %     3.43 %

Efficiency ratio (2)

    31.67 %     40.22 %     36.56 %

Common stock dividend payout ratio

    15.05 %     15.91 %     16.05 %

 


(1)

Reconciliations of the non–U.S. generally accepted accounting principles (“GAAP”) measures are set forth at the end of this press release.

(2)

Ratio calculated by dividing noninterest expense by the sum of net interest income before provision for credit losses and noninterest income.

 

12

RBB BANCORP AND SUBSIDIARIES

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited, except for December 31, 2021)

 

 

 

   

For the Year Ended December 31,

 
   

2022

   

2021

 

Per share data (common stock)

               

Earnings

               

Basic

  $ 3.37     $ 2.92  

Diluted

  $ 3.33     $ 2.86  

Dividends declared

  $ 0.56     $ 0.51  

Book value

  $ 25.55     $ 23.99  

Tangible book value (1)

  $ 21.58     $ 20.22  

Weighted average shares outstanding

               

Basic

    19,099,509       19,423,549  

Diluted

    19,332,639       19,834,306  

Shares outstanding at period end

    18,965,776       19,455,544  

Performance ratios

               

Return on average assets, annualized

    1.62 %     1.48 %

Return on average shareholders' equity, annualized

    13.66 %     12.71 %

Return on average tangible common equity, annualized (1)

    16.26 %     15.22 %

Noninterest income to average assets, annualized

    0.28 %     0.49 %

Noninterest expense to average assets, annualized

    1.60 %     1.52 %

Yield on average earning assets

    4.87 %     4.09 %

Cost of average deposits

    0.61 %     0.40 %

Cost of average interest-bearing deposits

    0.93 %     0.57 %

Cost of average interest-bearing liabilities

    1.31 %     0.94 %

Accretion on loans to average earning assets

    0.01 %     0.03 %

Net interest spread

    3.56 %     3.15 %

Net interest margin

    4.02 %     3.46 %

Efficiency ratio (2)

    39.47 %     40.67 %

Common stock dividend payout ratio

    16.62 %     17.47 %

 


(1)

Reconciliations of the non–U.S. generally accepted accounting principles (“GAAP”) measures are set forth at the end of this press release.

(2)

Ratio calculated by dividing noninterest expense by the sum of net interest income before provision for credit losses and noninterest income.

 

13

 

 

 

RBB BANCORP AND SUBSIDIARIES

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited)

(Dollars in thousands)

 

   

As of

 
   

December 31,

   

September 30,

   

December 31,

 
   

2022

   

2022

   

2021

 

Loan to deposit ratio

    112.05 %     108.83 %     86.58 %

Core deposits (1) / total deposits

    75.61 %     81.32 %     82.91 %

Net non-core funding dependence ratio (2)

    17.96 %     11.09 %     -6.50 %
                         

Credit Quality Data:

                       

Loans 30-89 days past due

  $ 15,249     $ 39,938     $ 17,640  

Loans 30-89 days past due to total loans

    0.46 %     1.24 %     0.60 %

Nonperforming loans

  $ 11,525     $ 11,503     $ 20,725  

Nonperforming loans to total loans

    0.35 %     0.36 %     0.71 %

Nonperforming assets

  $ 12,102     $ 11,796     $ 21,018  

Nonperforming assets to total assets

    0.31 %     0.30 %     0.50 %

Allowance for credit losses to total loans

    1.23 %     1.12 %     1.12 %

Allowance for credit losses to nonperforming loans

    356.16 %     313.37 %     158.80 %

Net (recoveries) charge-offs to average loans (for the quarter-to-date period)

    0.01 %     (0.02 %)     (0.01 %)
                         

Regulatory and other capital ratios—Company

                       

Tangible common equity to tangible assets (2)

    10.65 %     10.35 %     9.47 %

Tier 1 leverage ratio

    11.67 %     11.47 %     10.21 %

Tier 1 common capital to risk-weighted assets

    16.04 %     15.52 %     14.86 %

Tier 1 capital to risk-weighted assets

    16.58 %     16.06 %     15.40 %

Total capital to risk-weighted assets

    24.28 %     23.72 %     23.15 %
                         

Regulatory capital ratios—Bank only

                       

Tier 1 leverage ratio

    14.89 %     14.57 %     12.45 %

Tier 1 common capital to risk-weighted assets

    21.16 %     20.41 %     18.80 %

Tier 1 capital to risk-weighted assets

    21.16 %     20.41 %     18.80 %

Total capital to risk-weighted assets

    22.41 %     21.67 %     20.05 %

 


(1)

Comprised of demand and savings deposits of any amount plus time deposits less than $250,000.

(2)

Reconciliations of the non–U.S. generally accepted accounting principles (“GAAP”) measures are set forth at the end of this press release.

14

 

RBB BANCORP AND SUBSIDIARIES

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited)

(Dollars in thousands, except per share data)

 

   

4th Quarter

   

3rd Quarter

   

2nd Quarter

   

1st Quarter

   

4th Quarter

 

Quarterly Consolidated Statements of Earnings

 

2022

   

2022

   

2022

   

2022

   

2021

 

Interest income

                                       

Loans, including fees

  $ 49,468     $ 43,588     $ 40,157     $ 37,886     $ 36,783  

Investment securities and other

    3,183       2,826       2,181       1,680       1,661  

Total interest income

    52,651       46,414       42,338       39,566       38,444  

Interest expense

                                       

Deposits

    10,269       3,989       2,350       2,292       2,431  

Interest on subordinated debentures and other

    2,491       2,427       2,379       2,348       2,343  

Other borrowings

    898       1,020       519       435       445  

Total interest expense

    13,658       7,436       5,248       5,075       5,219  

Net interest income before provision for credit losses

    38,993       38,978       37,090       34,491       33,225  

Provision for credit losses

    2,950       1,766       915       366       635  

Net interest income after provision for credit losses

    36,043       37,212       36,175       34,125       32,590  

Noninterest income

    2,352       2,535       3,422       2,944       3,156  

Noninterest expense

    13,093       16,697       17,612       16,061       13,300  

Earnings before income taxes

    25,302       23,050       21,985       21,008       22,446  

Income taxes

    7,721       6,398       6,508       6,391       6,740  

Net income

  $ 17,581     $ 16,652     $ 15,477     $ 14,617     $ 15,706  

Net income per common share - basic

  $ 0.93     $ 0.88     $ 0.81     $ 0.75     $ 0.81  

Net income per common share - diluted

  $ 0.92     $ 0.87     $ 0.80     $ 0.74     $ 0.79  

Cash dividends declared per common share

  $ 0.14     $ 0.14     $ 0.14     $ 0.14     $ 0.13  

Cash dividends declared on common shares

  $ 2,655     $ 2,663     $ 2,687     $ 2,724     $ 2,537  

Yield on average assets, annualized

    1.80 %     1.72 %     1.60 %     1.39 %     1.52 %

Yield on average earning assets

    5.75 %     5.13 %     4.66 %     4.00 %     3.97 %

Cost of average deposits

    1.37 %     0.55 %     0.31 %     0.27 %     0.30 %

Cost of average interest-bearing deposits

    1.93 %     0.82 %     0.49 %     0.44 %     0.47 %

Cost of average interest-bearing liabilities

    2.17 %     1.25 %     0.91 %     0.84 %     0.86 %

Accretion on loans to average earning assets

    0.00 %     0.01 %     0.01 %     0.02 %     0.02 %

Net interest margin

    4.26 %     4.31 %     4.08 %     3.49 %     3.43 %

 

15

 

RBB BANCORP AND SUBSIDIARIES

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited, except for December 31, 2021)

 

 

 

Loan Portfolio Detail

 

As of December 31, 2022

   

As of September 30, 2022

   

As of June 30, 2022

   

As of March 31, 2022

   

As of December 31, 2021

 

(dollars in thousands)

 

$

   

%

   

$

   

%

   

$

   

%

   

$

   

%

   

$

   

%

 

Loans:

                                                                               

Commercial and industrial

  $ 201,223       6.0 %   $ 204,817       6.4 %   $ 238,045       7.8 %   $ 280,825       9.3 %   $ 268,709       9.2 %

SBA

    61,411       1.9 %     61,934       1.9 %     59,303       1.9 %     67,688       2.3 %     76,136       2.6 %

Construction and land development

    276,876       8.3 %     353,473       11.0 %     356,772       11.7 %     346,766       11.5 %     303,144       10.3 %

Commercial real estate (1)

    1,312,132       39.3 %     1,220,791       37.9 %     1,160,350       38.1 %     1,217,985       40.5 %     1,247,999       42.6 %

Single-family residential mortgages

    1,464,108       43.9 %     1,356,342       42.1 %     1,205,732       39.6 %     1,064,581       35.4 %     1,004,576       34.3 %

Other loans

    20,699       0.6 %     23,556       0.7 %     25,744       0.9 %     28,639       1.0 %     30,786       1.0 %

Total loans (2)

  $ 3,336,449       100.0 %   $ 3,220,913       100.0 %   $ 3,045,946       100.0 %   $ 3,006,484       100.0 %   $ 2,931,350       100.0 %

Allowance for credit losses

    (41,047 )             (36,047 )             (34,154 )             (33,292 )             (32,912 )        

Total loans, net

  $ 3,295,402             $ 3,184,866             $ 3,011,792             $ 2,973,192             $ 2,898,438          

 


(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

   

Year Ended

 

Change in Allowance for Credit Losses

 

December 31,

   

December 31,

 

(dollars in thousands)

 

2022

   

2021

   

2022

   

2021

 

Beginning balance

  $ 36,047     $ 32,231     $ 32,912     $ 29,337  

ASU 2016-13 transition adjustment

    2,135             2,135        

Adjusted Beginning balance

    38,182       32,231       35,047       29,337  

Additions to the allowance charged to expense

    2,950       635       5,998       3,959  

Net (charge-offs)/recoveries on loans

    (85 )     46       2       (384 )

Ending balance

  $ 41,047     $ 32,912     $ 41,047     $ 32,912  

 

16

 

Non-GAAP Financial Measures

 

Tangible Book Value Reconciliations

 

The tangible book value per share is a non-GAAP disclosure. Management measures the tangible book value per share to assess the Company’s capital strength and business performance and believes these are helpful to investors as additional tool for further understanding our 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 December 31, 2022, September 30, 2022, and December 31, 2021. 

 

                         

(dollars in thousands, except share and per share data)

 

December 31, 2022

   

September 30, 2022

   

December 31, 2021

 

Tangible common equity:

                       

Total shareholders' equity

  $ 484,563     $ 471,799     $ 466,683  

Adjustments

                       

Goodwill

    (71,498 )     (71,498 )     (69,243 )

Core deposit intangible

    (3,718 )     (3,971 )     (4,075 )

Tangible common equity

  $ 409,347     $ 396,330     $ 393,365  

Tangible assets:

                       

Total assets-GAAP

  $ 3,917,686     $ 3,905,229     $ 4,228,194  

Adjustments

                       

Goodwill

    (71,498 )     (71,498 )     (69,243 )

Core deposit intangible

    (3,718 )     (3,971 )     (4,075 )

Tangible assets

  $ 3,842,470     $ 3,829,760     $ 4,154,876  

Common shares outstanding

    18,965,776       19,011,672       19,455,544  

Tangible common equity to tangible assets ratio

    10.65 %     10.35 %     9.47 %

Book value per share

  $ 25.55     $ 24.82     $ 23.99  

Tangible book value per share

  $ 21.58     $ 20.85     $ 20.22  

 

Return on Average Tangible Common Equity

 

Management measures return on average tangible common equity (“ROATCE”) to assess the Company’s capital strength and business performance and believes these are helpful to investors as an additional tool for further understanding our performance. Tangible equity excludes goodwill and other intangible assets (excluding mortgage servicing rights), and is reviewed by banking and financial institution regulators when assessing a financial institution’s capital adequacy. 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 return on average tangible common equity to its most comparable GAAP measure:

 

   

Three Months Ended