rbb-10q_20170630.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2017 or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission File Number: 001-38149

RBB BANCORP

(Exact name of registrant as specified in its charter)

 

California

27-2776416

(State or other jurisdiction of

Incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

660 S. Figueroa Street, Suite 1888

 

Los Angeles, California

90017

(Address of principal executive offices)

(Zip Code)

 

(213) 627-9888

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, accelerated filer, non-accelerated filer or smaller reporting company. See definition of “large accelerated filer, accelerated filer and smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer 

Accelerated filer 

Non-accelerated filer 

Smaller reporting company 

 

 

 

 

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.    

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

Number of shares of common stock of the registrant: 15,787,611 outstanding as of August 31, 2017.

 

 

 


 

TABLE OF CONTENTS

 

PART I – FINANCIAL INFORMATION (UNAUDITED)

3

 

 

 

ITEM 1.

CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

3

 

 

 

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

9

 

 

 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

33

 

 

 

 

CRITICAL ACCOUNTING POLICIES

35

 

 

 

 

OVERVIEW

35

 

 

 

 

ANALYSIS OF THE RESULTS OF OPERATIONS

37

 

 

 

 

ANALYSIS OF FINANCIAL CONDITION

50

 

 

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

68

 

 

 

ITEM 4.

CONTROLS AND PROCEDURES

69

 

 

PART II - OTHER INFORMATION

70

 

 

 

ITEM 1.

LEGAL PROCEEDINGS

70

 

 

 

ITEM 1A.

RISK FACTORS

70

 

 

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

70

 

 

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

70

 

 

 

ITEM 4.

MINE SAFETY DISCLOSURES

70

 

 

 

ITEM 5.

OTHER INFORMATION

70

 

 

 

ITEM 6.

EXHIBITS

70

 

 

 

SIGNATURES

 

71

 

 

 

 

2


 

PART I - FINANCIAL INFORMATION (UNAUDITED)

ITEM 1.

CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

RBB BANCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

JUNE 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016 (AUDITED)

(In thousands, except share amounts)

 

 

 

June 30,

 

 

December 31,

 

 

 

2017

 

 

2016

 

Assets

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

104,366

 

 

$

74,213

 

Federal funds sold and other cash equivalents

 

 

58,500

 

 

 

44,500

 

Cash and cash equivalents

 

 

162,866

 

 

 

118,713

 

 

 

 

 

 

 

 

 

 

Interest-bearing deposits in other financial institutions

 

 

100

 

 

 

345

 

 

 

 

 

 

 

 

 

 

Securities:

 

 

 

 

 

 

 

 

Available for sale

 

 

40,241

 

 

 

39,277

 

Held to maturity (fair value of $6,514 and $6,553 at June 30, 2017 and

   December 31, 2016, respectively)

 

 

6,199

 

 

 

6,214

 

Mortgage loans held for sale

 

 

83,263

 

 

 

44,345

 

 

 

 

 

 

 

 

 

 

Loans held for investment:

 

 

 

 

 

 

 

 

Real estate

 

 

763,187

 

 

 

755,301

 

Commercial

 

 

386,942

 

 

 

361,227

 

Total loans

 

 

1,150,129

 

 

 

1,116,528

 

Unaccreted discount on acquired loans

 

 

(6,140

)

 

 

(8,085

)

Deferred loan costs (fees), net

 

 

2,016

 

 

 

2,003

 

 

 

 

1,146,005

 

 

 

1,110,446

 

Allowance for loan losses

 

 

(10,627

)

 

 

(14,162

)

Net loans

 

 

1,135,378

 

 

 

1,096,284

 

 

 

 

 

 

 

 

 

 

Premises and equipment

 

 

6,441

 

 

 

6,585

 

Federal Home Loan Bank ("FHLB") stock

 

 

6,770

 

 

 

6,770

 

Net deferred tax assets

 

 

10,214

 

 

 

11,097

 

Other real estate owned ("OREO")

 

 

833

 

 

 

833

 

Cash surrender value of life insurance

 

 

32,358

 

 

 

21,958

 

Goodwill

 

 

29,940

 

 

 

29,940

 

Servicing assets

 

 

4,661

 

 

 

3,704

 

Core deposit intangibles

 

 

1,612

 

 

 

1,793

 

Accrued interest and other assets

 

 

12,723

 

 

 

7,693

 

 

 

$

1,533,599

 

 

$

1,395,551

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 

3


 

RBB BANCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

JUNE 30, 2017 (UNAUDITED) AND DECEMBER 31, 2016 (AUDITED) (CONTINUED)

(In thousands, except share amounts)

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

 

 

June 30,

 

 

December 31,

 

 

 

2017

 

 

2016

 

Deposits:

 

 

 

 

 

 

 

 

Noninterest-bearing demand

 

$

215,716

 

 

$

174,272

 

Savings, NOW and money market accounts

 

 

348,627

 

 

 

296,699

 

Time deposits under $250,000

 

 

337,053

 

 

 

310,969

 

Time deposits $250,000 and over

 

 

377,052

 

 

 

370,823

 

Total deposits

 

 

1,278,448

 

 

 

1,152,763

 

 

 

 

 

 

 

 

 

 

Reserve for unfunded commitments

 

 

517

 

 

 

604

 

Income tax payable

 

 

 

 

 

793

 

Long-term debt

 

 

49,456

 

 

 

49,383

 

Subordinated debentures

 

 

3,379

 

 

 

3,334

 

Accrued interest and other liabilities

 

 

9,462

 

 

 

7,089

 

Total liabilities

 

 

1,341,262

 

 

 

1,213,966

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies - Note 13

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Preferred Stock - 100,000,000 shares authorized, no par value; none outstanding

 

 

 

 

 

 

Common Stock - 100,000,000 shares authorized, no par value; 12,827,803 shares

   issued and outstanding at June 30, 2017 and December 31, 2016

 

 

142,651

 

 

 

142,651

 

Additional paid-in capital

 

 

8,812

 

 

 

8,417

 

Retained earnings

 

 

40,964

 

 

 

30,784

 

Accumulated other comprehensive income (loss) - net unrealized loss on

   securities available for sale, net of tax of $63 at June 30, 2017 and

   $186 at December 31, 2016

 

 

(90

)

 

 

(267

)

Total shareholders’ equity

 

 

192,337

 

 

 

181,585

 

 

 

$

1,533,599

 

 

$

1,395,551

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 

 

 

4


 

RBB BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME – (UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016

(In thousands, except per share amounts)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Interest and dividend income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

16,759

 

 

$

18,218

 

 

$

32,792

 

 

$

31,873

 

Interest on interest-bearing deposits

 

 

209

 

 

 

68

 

 

 

360

 

 

 

156

 

Interest on investment securities

 

 

313

 

 

 

206

 

 

 

591

 

 

 

417

 

Dividend income on FHLB stock

 

 

82

 

 

 

164

 

 

 

235

 

 

 

261

 

Interest on federal funds sold and other

 

 

158

 

 

 

19

 

 

 

302

 

 

 

67

 

Total interest income

 

 

17,521

 

 

 

18,675

 

 

 

34,280

 

 

 

32,774

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on savings deposits, now and money market accounts

 

 

575

 

 

 

533

 

 

 

1,049

 

 

 

968

 

Interest on time deposits

 

 

1,993

 

 

 

1,736

 

 

 

3,842

 

 

 

3,343

 

Interest on subordinated debentures and other

 

 

907

 

 

 

901

 

 

 

1,812

 

 

 

921

 

Interest on other borrowed funds

 

 

12

 

 

 

6

 

 

 

29

 

 

 

8

 

Total interest expense

 

 

3,487

 

 

 

3,176

 

 

 

6,732

 

 

 

5,240

 

Net interest income

 

 

14,034

 

 

 

15,499

 

 

 

27,548

 

 

 

27,534

 

Provision (recapture) for credit losses

 

 

(4,188

)

 

 

1,351

 

 

 

(4,188

)

 

 

2,349

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income after provision for credit losses

 

 

18,222

 

 

 

14,148

 

 

 

31,736

 

 

 

25,185

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges, fees and other

 

 

646

 

 

 

385

 

 

 

1,106

 

 

 

739

 

Gain on sale of loans

 

 

2,289

 

 

 

1,580

 

 

 

3,786

 

 

 

2,266

 

Loan servicing fees, net of amortization

 

 

(5

)

 

 

167

 

 

 

257

 

 

 

289

 

Recoveries on loans acquired in business combinations

 

 

29

 

 

 

43

 

 

 

57

 

 

 

92

 

Increase in cash surrender value of life insurance

 

 

216

 

 

 

142

 

 

 

401

 

 

 

282

 

Gain on Sale of Securities

 

 

 

 

 

19

 

 

 

 

 

 

19

 

 

 

 

3,175

 

 

 

2,336

 

 

 

5,607

 

 

 

3,687

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

4,243

 

 

 

3,542

 

 

 

8,426

 

 

 

7,066

 

Occupancy and equipment expenses

 

 

727

 

 

 

879

 

 

 

1,471

 

 

 

1,622

 

Data processing

 

 

454

 

 

 

528

 

 

 

806

 

 

 

925

 

Legal and professional

 

 

296

 

 

 

951

 

 

 

(91

)

 

 

967

 

Office expenses

 

 

177

 

 

 

156

 

 

 

331

 

 

 

302

 

Marketing and business promotion

 

 

143

 

 

 

190

 

 

 

325

 

 

 

306

 

Insurance and regulatory assessments

 

 

205

 

 

 

274

 

 

 

410

 

 

 

526

 

Amortization of intangibles

 

 

87

 

 

 

104

 

 

 

181

 

 

 

165

 

OREO expenses

 

 

14

 

 

 

8

 

 

 

28

 

 

 

10

 

Other expenses

 

 

614

 

 

 

1,023

 

 

 

1,651

 

 

 

3,448

 

 

 

 

6,960

 

 

 

7,655

 

 

 

13,538

 

 

 

15,337

 

Income before income taxes

 

 

14,437

 

 

 

8,829

 

 

 

23,805

 

 

 

13,535

 

Income tax expense

 

 

5,901

 

 

 

3,673

 

 

 

9,776

 

 

 

5,539

 

Net income

 

$

8,536

 

 

$

5,156

 

 

$

14,029

 

 

$

7,996

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.67

 

 

$

0.40

 

 

$

1.09

 

 

$

0.63

 

Diluted

 

$

0.62

 

 

$

0.38

 

 

$

1.02

 

 

$

0.58

 

Cash dividends declared per common share

 

$

 

 

$

 

 

$

0.30

 

 

$

0.20

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 

 

5


 

RBB BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME – (UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2017 AND 2016

(In thousands)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2017

 

 

2016

 

 

2017

 

 

2016

 

Net income

 

$

8,536

 

 

$

5,156

 

 

$

14,029

 

 

$

7,996

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains (losses) on securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized gains (losses)

 

 

185

 

 

 

202

 

 

 

300

 

 

 

665

 

Reclassification of Gains Recognized in Net Income

 

 

 

 

 

(19

)

 

 

 

 

 

(19

)

 

 

 

185

 

 

 

183

 

 

 

300

 

 

 

646

 

Related income tax effect:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized gains (losses)

 

 

(76

)

 

 

(83

)

 

 

(123

)

 

 

(273

)

Reclassification of Gains Recognized in Net Income

 

 

 

 

 

8

 

 

 

 

 

 

8

 

 

 

 

(76

)

 

 

(75

)

 

 

(123

)

 

 

(265

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other comprehensive income

 

 

109

 

 

 

108

 

 

 

177

 

 

 

381

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

 

8,645

 

 

 

5,264

 

 

 

14,206

 

 

 

8,377

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 

 

6


 

RBB BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY – (UNAUDITED)

FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016

(In thousands, except share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Retained

 

 

Comprehensive

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Income (Loss)

 

 

Total

 

Balance at January 1, 2017

 

 

12,827,803

 

 

$

142,651

 

 

$

8,417

 

 

$

30,784

 

 

$

(267

)

 

$

181,585

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,029

 

 

 

 

 

 

 

14,029

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

395

 

 

 

 

 

 

 

 

 

 

 

395

 

Cash dividend

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,849

)

 

 

 

 

 

 

(3,849

)

Other comprehensive Income, net of taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

177

 

 

 

177

 

Balance at June 30, 2017

 

 

12,827,803

 

 

$

142,651

 

 

$

8,812

 

 

$

40,964

 

 

$

(90

)

 

$

192,337

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2016

 

 

12,770,571

 

 

$

141,873

 

 

$

7,706

 

 

$

14,259

 

 

$

(193

)

 

$

163,645

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

7,996

 

 

 

 

 

 

 

7,996

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

431

 

 

 

 

 

 

 

 

 

 

 

431

 

Cash dividend

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,554

)

 

 

 

 

 

 

(2,554

)

Stock options exercised

 

 

57,232

 

 

 

778

 

 

 

(183

)

 

 

 

 

 

 

 

 

 

 

595

 

Other comprehensive Income, net of taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

381

 

 

 

381

 

Balance at June 30, 2016

 

 

12,827,803

 

 

$

142,651

 

 

$

7,954

 

 

$

19,701

 

 

$

189

 

 

$

170,494

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

 

 

7


 

RBB BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS – (UNAUDITED)

FOR THE SIX MONTHS ENDED JUNE 30, 2017 AND 2016

(In thousands)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2017

 

 

2016

 

Operating activities

 

 

 

 

 

 

 

 

Net income

 

$

14,029

 

 

$

7,996

 

Adjustments to reconcile net income to net cash from

 

 

 

 

 

 

 

 

Operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization of premises, equipment and intangibles

 

 

664

 

 

 

719

 

Net amortization (accretion) of securities, loans, deposits, and other

 

 

(881

)

 

 

(3,730

)

Provision (recapture) for loan losses

 

 

(4,188

)

 

 

2,349

 

Stock-based compensation

 

 

395

 

 

 

248

 

Gain on Sale of Securities

 

 

 

 

 

(19

)

Gain on sale of loans

 

 

(3,786

)

 

 

(2,266

)

Increase in cash surrender value of life insurance

 

 

(401

)

 

 

(282

)

Loans originated and purchased for sale

 

 

(101,210

)

 

 

(104,229

)

Proceeds from loans sold

 

 

87,387

 

 

 

110,703

 

Other items

 

 

(2,392

)

 

 

5,151

 

Net cash from operating activities

 

 

(10,383

)

 

 

16,640

 

Investing activities

 

 

 

 

 

 

 

 

Decrease in interest-bearing deposits

 

 

245

 

 

 

6,252

 

Securities available for sale:

 

 

 

 

 

 

 

 

Purchases

 

 

(2,000

)

 

 

 

Maturities, prepayments and calls

 

 

2,167

 

 

 

2,085

 

Sales

 

 

 

 

 

5,083

 

Purchase of FHLB stock and other equity securities, net

 

 

(27

)

 

 

(2,998

)

Net increase  in loans

 

 

(57,571

)

 

 

(15,749

)

Purchase of life insurance

 

 

(10,000

)

 

 

 

Net cash paid in connection with acquisition

 

 

 

 

 

(35,051

)

Purchases of premises and equipment

 

 

(200

)

 

 

(188

)

Net cash from investing activities

 

 

(67,386

)

 

 

(40,566

)

Financing activities

 

 

 

 

 

 

 

 

Net increase (decrease) in demand deposits and savings accounts

 

 

93,373

 

 

 

(39,823

)

Net increase (decrease) in time deposits

 

 

32,398

 

 

 

(20,018

)

Net change in FHLB advances

 

 

 

 

 

10,000

 

Cash dividends paid

 

 

(3,849

)

 

 

(2,554

)

Issuance of subordinated debentures, net of issuance costs

 

 

 

 

 

49,304

 

Issuance of Common Stock

 

 

 

 

 

778

 

Net cash from financing activities

 

 

121,922

 

 

 

(2,313

)

Net increase (decrease) in cash and cash equivalents

 

 

44,153

 

 

 

(26,239

)

Cash and cash equivalents at beginning of period

 

 

118,713

 

 

 

113,891

 

Cash and cash equivalents at end of period

 

$

162,866

 

 

$

87,652

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

 

Cash paid during the period:

 

 

 

 

 

 

 

 

Interest paid

 

$

6,793

 

 

$

5,479

 

Taxes paid

 

$

9,690

 

 

$

4,825

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Transfer of loan to available for sale securities

 

$

1,000

 

 

$

 

Transfer of loans to held for sale

 

$

67,188

 

 

$

20,690