rbb-10q_20180930.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 September 30, 2018 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, if any, every Interactive Data File required to be submitted 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 such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

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: 18,874,891 outstanding as of November 9, 2018.

 

 

 


 

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

34

 

 

 

 

CRITICAL ACCOUNTING POLICIES

36

 

 

 

 

OVERVIEW

37

 

 

 

 

ANALYSIS OF THE RESULTS OF OPERATIONS

38

 

 

 

 

ANALYSIS OF FINANCIAL CONDITION

49

 

 

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

66

 

 

 

ITEM 4.

CONTROLS AND PROCEDURES

67

 

 

PART II - OTHER INFORMATION

68

 

 

 

ITEM 1.

LEGAL PROCEEDINGS

68

 

 

 

ITEM 1A.

RISK FACTORS

68

 

 

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

68

 

 

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

68

 

 

 

ITEM 4.

MINE SAFETY DISCLOSURES

68

 

 

 

ITEM 5.

OTHER INFORMATION

68

 

 

 

ITEM 6.

EXHIBITS

69

 

 

 

SIGNATURES

 

70

 

 

 

 

2


 

PART I - FINANCIAL INFORMATION (UNAUDITED)

ITEM 1.

CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

RBB BANCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2018 (UNAUDITED) AND DECEMBER 31, 2017 (AUDITED)

(In thousands, except share amounts)

 

 

 

September 30,

 

 

December 31,

 

 

 

2018

 

 

2017

 

Assets

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

171,553

 

 

$

70,048

 

Federal funds sold and other cash equivalents

 

 

 

 

 

80,000

 

Cash and cash equivalents

 

 

171,553

 

 

 

150,048

 

 

 

 

 

 

 

 

 

 

Interest-earning deposits in other financial institutions

 

 

600

 

 

 

600

 

 

 

 

 

 

 

 

 

 

Securities:

 

 

 

 

 

 

 

 

Available for sale (amortized cost of $89,218 and $65,587 at September 30, 2018 and

   December 31, 2017, respectively)

 

 

87,066

 

 

 

64,957

 

Held to maturity (fair value of $9,866 and $10,250 at September 30, 2018 and

   December 31, 2017, respectively)

 

 

9,974

 

 

 

10,009

 

Mortgage loans held for sale

 

 

378,943

 

 

 

125,847

 

 

 

 

 

 

 

 

 

 

Loans held for investment:

 

 

 

 

 

 

 

 

Real estate

 

$

994,208

 

 

$

839,230

 

Commercial

 

 

386,106

 

 

 

410,812

 

Total loans

 

 

1,380,314

 

 

 

1,250,042

 

Unaccreted discount on acquired loans

 

 

(1,280

)

 

 

(2,762

)

Deferred loan costs (fees), net

 

 

2,184

 

 

 

1,794

 

Total loans, net of deferred loan fees

 

 

1,381,218

 

 

 

1,249,074

 

Allowance for loan losses

 

 

(16,178

)

 

 

(13,773

)

Net loans

 

 

1,365,040

 

 

 

1,235,301

 

 

 

 

 

 

 

 

 

 

Premises and equipment

 

 

8,119

 

 

 

6,583

 

Federal Home Loan Bank stock

 

 

7,738

 

 

 

6,770

 

Net deferred tax assets

 

 

7,320

 

 

 

6,086

 

Income tax receivable

 

 

1,845

 

 

 

272

 

Other real estate owned

 

 

293

 

 

 

293

 

Cash surrender value of life insurance

 

 

33,380

 

 

 

32,782

 

Goodwill

 

 

29,940

 

 

 

29,940

 

Servicing assets

 

 

6,248

 

 

 

5,957

 

Core deposit intangibles

 

 

1,203

 

 

 

1,438

 

Accrued interest and other assets

 

 

27,577

 

 

 

14,176

 

Total assets

 

$

2,136,839

 

 

$

1,691,059

 

 

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

 

 

3


 

RBB BANCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

SEPTEMBER 30, 2018 (UNAUDITED) AND DECEMBER 31, 2017 (AUDITED) (CONTINUED)

(In thousands, except share amounts)

 

 

 

September 30,

 

 

December 31,

 

Liabilities and Shareholders’ Equity

 

2018

 

 

2017

 

Deposits:

 

 

 

 

 

 

 

 

Noninterest-bearing demand

 

$

287,274

 

 

$

285,690

 

Savings, NOW and money market accounts

 

 

462,737

 

 

 

411,663

 

Time deposits under $250,000

 

 

266,327

 

 

 

293,471

 

Time deposits $250,000 and over

 

 

548,626

 

 

 

346,457

 

Total deposits

 

 

1,564,964

 

 

 

1,337,281

 

 

 

 

 

 

 

 

 

 

Reserve for unfunded commitments

 

 

550

 

 

 

282

 

FHLB advances

 

 

210,000

 

 

 

25,000

 

Long-term debt

 

 

49,637

 

 

 

49,528

 

Subordinated debentures

 

 

3,492

 

 

 

3,424

 

Accrued interest and other liabilities

 

 

13,198

 

 

 

10,368

 

Total liabilities

 

 

1,841,841

 

 

 

1,425,883

 

 

 

 

 

 

 

 

 

 

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; 16,795,903 shares

   issued and outstanding at September 30, 2018 and 15,908,893 shares at

   December 31,2017

 

 

216,675

 

 

 

205,927

 

Additional paid-in capital

 

 

6,193

 

 

 

8,426

 

Retained earnings

 

 

73,646

 

 

 

51,266

 

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

   securities available for sale, net of tax benefit of $637 at September 30, 2018 and

   $186 at December 31, 2017

 

 

(1,516

)

 

 

(443

)

Total shareholders’ equity

 

 

294,998

 

 

 

265,176

 

Total liabilities and shareholders’ equity

 

$

2,136,839

 

 

$

1,691,059

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(In thousands, except per share amounts)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Interest and dividend income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

23,445

 

 

$

17,200

 

 

$

63,651

 

 

$

49,992

 

Interest on interest-earning deposits

 

 

250

 

 

 

371

 

 

 

645

 

 

 

731

 

Interest on investment securities

 

 

560

 

 

 

331

 

 

 

1,722

 

 

 

922

 

Dividend income on FHLB stock

 

 

132

 

 

 

118

 

 

 

385

 

 

 

353

 

Interest on federal funds sold and other

 

 

86

 

 

 

326

 

 

 

530

 

 

 

628

 

Total interest income

 

 

24,473

 

 

 

18,346

 

 

 

66,933

 

 

 

52,626

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on savings deposits, now and money market accounts

 

 

1,145

 

 

 

649

 

 

 

2,845

 

 

 

1,698

 

Interest on time deposits

 

 

2,994

 

 

 

2,061

 

 

 

7,450

 

 

 

5,903

 

Interest on subordinated debentures and other

 

 

925

 

 

 

908

 

 

 

2,758

 

 

 

2,720

 

Interest on other borrowed funds

 

 

793

 

 

 

 

 

 

992

 

 

 

29

 

Total interest expense

 

 

5,857

 

 

 

3,618

 

 

 

14,045

 

 

 

10,350

 

Net interest income

 

 

18,616

 

 

 

14,728

 

 

 

52,888

 

 

 

42,276

 

Provision for credit losses

 

 

1,695

 

 

 

700

 

 

 

2,579

 

 

 

(3,488

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income after provision for credit losses

 

 

16,921

 

 

 

14,028

 

 

 

50,309

 

 

 

45,764

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges, fees and other

 

 

640

 

 

 

518

 

 

 

1,551

 

 

 

1,624

 

Gain on sale of loans

 

 

1,125

 

 

 

2,584

 

 

 

5,025

 

 

 

6,370

 

Loan servicing fees, net of amortization

 

 

137

 

 

 

314

 

 

 

164

 

 

 

571

 

Recoveries on loans acquired in business combinations

 

 

3

 

 

 

19

 

 

 

14

 

 

 

76

 

Increase in cash surrender value of life insurance

 

 

200

 

 

 

219

 

 

 

598

 

 

 

620

 

Gain on sale of OREO

 

 

 

 

 

142

 

 

 

 

 

 

142

 

 

 

 

2,105

 

 

 

3,796

 

 

 

7,352

 

 

 

9,403

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

4,916

 

 

 

4,178

 

 

 

14,575

 

 

 

12,604

 

Occupancy and equipment expenses

 

 

1,014

 

 

 

705

 

 

 

2,640

 

 

 

2,176

 

Data processing

 

 

511

 

 

 

458

 

 

 

1,471

 

 

 

1,264

 

Legal and professional

 

 

378

 

 

 

318

 

 

 

1,058

 

 

 

227

 

Office expenses

 

 

198

 

 

 

153

 

 

 

561

 

 

 

484

 

Marketing and business promotion

 

 

320

 

 

 

250

 

 

 

785

 

 

 

575

 

Insurance and regulatory assessments

 

 

223

 

 

 

201

 

 

 

645

 

 

 

611

 

Amortization of intangibles

 

 

76

 

 

 

87

 

 

 

235

 

 

 

268

 

Other expenses

 

 

1,018

 

 

 

850

 

 

 

3,165

 

 

 

2,529

 

 

 

 

8,654

 

 

 

7,200

 

 

 

25,134

 

 

 

20,738

 

Income before income taxes

 

 

10,372

 

 

 

10,624

 

 

 

32,527

 

 

 

34,429

 

Income tax expense

 

 

2,041

 

 

 

4,013

 

 

 

5,913

 

 

 

13,789

 

Net income

 

$

8,331

 

 

$

6,611

 

 

$

26,614

 

 

$

20,640

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.50

 

 

$

0.45

 

 

$

1.62

 

 

$

1.53

 

Diluted

 

 

0.48

 

 

 

0.42

 

 

 

1.54

 

 

 

1.42

 

Cash dividends declared per common share

 

 

0.09

 

 

 

 

 

 

0.26

 

 

 

0.30

 

 

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 NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(In thousands)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2018

 

 

2017

 

 

2018

 

 

2017

 

Net income

 

$

8,331

 

 

$

6,611

 

 

$

26,614

 

 

$

20,640

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains (losses) on securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized gains (losses)

 

 

(297

)

 

 

(80

)

 

 

(1,523

)

 

 

222

 

Related income tax effect:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized gains (losses)

 

 

88

 

 

 

33

 

 

 

450

 

 

 

(92

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other comprehensive income (loss)

 

 

(209

)

 

 

(47

)

 

 

(1,073

)

 

 

130

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

$

8,122

 

 

$

6,564

 

 

$

25,541

 

 

$

20,770

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(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, 2018

 

 

15,908,893

 

 

$

205,927

 

 

$

8,426

 

 

$

51,266

 

 

$

(443

)

 

$

265,176

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

26,614

 

 

 

 

 

 

 

26,614

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

446

 

 

 

 

 

 

 

 

 

 

 

446

 

Restricted stock awarded

 

 

43,425

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividend

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,234

)

 

 

 

 

 

 

(4,234

)

Stock options exercised

 

 

843,585

 

 

 

10,748

 

 

 

(2,679

)

 

 

 

 

 

 

 

 

 

 

8,069

 

Other comprehensive income, net of taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,073

)

 

 

(1,073

)

Balance at September 30, 2018

 

 

16,795,903

 

 

$

216,675

 

 

$

6,193

 

 

$

73,646

 

 

$

(1,516

)

 

$

294,998

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2017

 

 

12,827,803

 

 

$

142,651

 

 

$

8,417

 

 

$

30,784

 

 

$

(267

)

 

$

181,585

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20,640

 

 

 

 

 

 

 

20,640

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

592

 

 

 

 

 

 

 

 

 

 

 

592

 

Cash dividend

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,848

)

 

 

 

 

 

 

(3,848

)

Stock options exercised

 

 

105,052

 

 

 

1,338

 

 

 

(323

)

 

 

 

 

 

 

 

 

 

 

1,015

 

Issuance of common stock, net of issuance

   costs

 

 

2,857,756

 

 

 

60,217

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

60,217

 

Other comprehensive income, net of taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

130

 

 

 

130

 

Balance at September 30, 2017

 

 

15,790,611

 

 

$

204,206

 

 

$

8,686

 

 

$

47,576

 

 

$

(137

)

 

$

260,331

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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 NINE MONTHS ENDED SEPTEMBER 30, 2018 AND 2017

(In thousands)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2018

 

 

2017

 

Operating activities

 

 

 

 

 

 

 

 

Net income

 

$

26,614

 

 

$

20,640

 

Adjustments to reconcile net income to net cash from

 

 

 

 

 

 

 

 

Operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization of premises, equipment and intangibles

 

 

922

 

 

 

971

 

Net accretion of securities, loans, deposits, and other

 

 

(670

)

 

 

(1,257

)

Provision for (Recapture of) loan losses

 

 

2,579

 

 

 

(3,488

)

Stock-based compensation

 

 

446

 

 

 

592

 

Deferred tax benefit

 

 

(1,573

)

 

 

 

Gain on sale of loans

 

 

(5,025

)

 

 

(6,370

)

Gain on sale of OREO

 

 

 

 

 

(142

)

Increase in cash surrender value of life insurance

 

 

(598

)

 

 

(620

)

Loans originated and purchased for sale

 

 

(338,129

)

 

 

(184,468

)

Proceeds from loans sold

 

 

170,179

 

 

 

155,372

 

Other items

 

 

1,290

 

 

 

(360

)

Net cash used in operating activities

 

 

(143,965

)

 

 

(19,130

)

Investing activities

 

 

 

 

 

 

 

 

Decrease in interest-earning deposits

 

 

 

 

 

245

 

Securities available for sale:

 

 

 

 

 

 

 

 

Purchases

 

 

(59,288

)

 

 

(18,795

)

Maturities, prepayments and calls

 

 

35,541

 

 

 

3,336

 

Purchase of FHLB stock and other equity securities, net

 

 

(8,008

)

 

 

(27

)

Purchase of investment in qualified affordable housing projects

 

 

(4,500

)

 

 

 

Net increase in loans

 

 

(212,688

)

 

 

(131,321

)

Proceeds from sales of OREO

 

 

 

 

 

257

 

Purchase of life insurance

 

 

 

 

 

(10,000

)

Purchases of premises and equipment

 

 

(2,105

)

 

 

(229

)

Net cash used in investing activities

 

 

(251,048

)

 

 

(156,534

)

Financing activities

 

 

 

 

 

 

 

 

Net increase in demand deposits and savings accounts

 

 

52,658

 

 

 

178,620

 

Net increase (decrease) in time deposits

 

 

175,025

 

 

 

(13,001

)

Net increase in FHLB advances

 

 

185,000

 

 

 

 

Cash dividends paid

 

 

(4,234

)

 

 

(3,848

)

Issuance of common stock, net of issuance costs

 

 

 

 

 

60,217

 

Exercise of stock options

 

 

8,069

 

 

 

1,015

 

Net cash from financing activities

 

 

416,518

 

 

 

223,003

 

Net increase in cash and cash equivalents

 

 

21,505

 

 

 

47,339

 

Cash and cash equivalents at beginning of period

 

 

150,048

 

 

 

118,713

 

Cash and cash equivalents at end of period

 

$

171,553

 

 

$

166,052

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

 

Cash paid during the period:

 

 

 

 

 

 

 

 

Interest paid

 

$

2,778

 

 

$

9,528

 

Taxes paid

 

 

7,785

 

 

 

12,875

 

Non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Transfer of loan to available for sale securities

 

 

 

 

 

1,000

 

Transfer of loans to held for sale

 

 

138,045

 

 

 

114,047