rbb-10q_20190630.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, 2019 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.)

 

 

1055 Wilshire Blvd., Suite 1200,

 

Los Angeles, California

90017

(Address of principal executive offices)

(Zip Code)

 

(213) 627-9888

(Registrant’s telephone number, including area code)

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 (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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) 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: 20,110,203 outstanding as of August 7, 2019.

 

 


 

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

36

 

 

 

 

ANALYSIS OF THE RESULTS OF OPERATIONS

37

 

 

 

 

ANALYSIS OF FINANCIAL CONDITION

48

 

 

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

63

 

 

 

ITEM 4.

CONTROLS AND PROCEDURES

64

 

 

PART II - OTHER INFORMATION

65

 

 

 

ITEM 1.

LEGAL PROCEEDINGS

65

 

 

 

ITEM 1A.

RISK FACTORS

65

 

 

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

65

 

 

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

65

 

 

 

ITEM 4.

MINE SAFETY DISCLOSURES

65

 

 

 

ITEM 5.

OTHER INFORMATION

65

 

 

 

ITEM 6.

EXHIBITS

66

 

 

 

SIGNATURES

 

67

 

 

 

2


 

PART I - FINANCIAL INFORMATION (UNAUDITED)

ITEM 1.

CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

RBB BANCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018 (AUDITED)

(In thousands, except share amounts)

 

 

 

June 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

Assets

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

185,643

 

 

$

147,685

 

Federal funds sold and other cash equivalents

 

 

20,000

 

 

 

 

Cash and cash equivalents

 

 

205,643

 

 

 

147,685

 

Interest-earning deposits in other financial institutions

 

 

1,196

 

 

 

600

 

Securities:

 

 

 

 

 

 

 

 

Available for sale

 

 

71,629

 

 

 

73,762

 

Held to maturity (fair value of $8,999 and $9,940 at June 30, 2019 and

   December 31, 2018, respectively)

 

 

8,733

 

 

 

9,961

 

Mortgage loans held for sale

 

 

249,596

 

 

 

434,522

 

Loans held for investment:

 

 

 

 

 

 

 

 

Real estate

 

 

1,736,322

 

 

 

1,762,864

 

Commercial

 

 

362,589

 

 

 

387,474

 

Total loans

 

 

2,098,911

 

 

 

2,150,338

 

Unaccreted discount on acquired loans

 

 

(6,753

)

 

 

(9,229

)

Deferred loan costs (fees), net

 

 

280

 

 

 

906

 

Total loans, net of deferred loan fees

 

 

2,092,438

 

 

 

2,142,015

 

Allowance for loan losses

 

 

(18,561

)

 

 

(17,577

)

Net loans

 

 

2,073,877

 

 

 

2,124,438

 

 

 

 

 

 

 

 

 

 

Premises and equipment

 

 

17,214

 

 

 

17,307

 

Federal Home Loan Bank (FHLB) stock

 

 

15,000

 

 

 

9,707

 

Net deferred tax assets

 

 

4,318

 

 

 

4,642

 

Income tax receivable

 

 

3,001

 

 

 

656

 

Other real estate owned (OREO)

 

 

2,075

 

 

 

1,101

 

Cash surrender value of life insurance (BOLI)

 

 

33,963

 

 

 

33,578

 

Goodwill

 

 

58,383

 

 

 

58,383

 

Servicing assets

 

 

17,587

 

 

 

17,370

 

Core deposit intangibles

 

 

6,828

 

 

 

7,601

 

Accrued interest and other assets

 

 

32,913

 

 

 

32,689

 

Total assets

 

$

2,801,956

 

 

$

2,974,002

 

 

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

3


 

RBB BANCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018 (AUDITED) (CONTINUED)

(In thousands, except share amounts)

 

 

 

June 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Noninterest-bearing demand

 

$

435,629

 

 

$

438,764

 

Savings, NOW and money market accounts

 

 

462,448

 

 

 

579,247

 

Time deposits under $250,000

 

 

739,551

 

 

 

532,395

 

Time deposits $250,000 and over

 

 

597,706

 

 

 

593,635

 

Total deposits

 

 

2,235,334

 

 

 

2,144,041

 

 

 

 

 

 

 

 

 

 

Reserve for unfunded commitments

 

 

621

 

 

 

688

 

Income tax payable

 

 

1,610

 

 

 

 

FHLB advances

 

 

40,000

 

 

 

319,500

 

Long-term debt, net of debt issuance costs

 

 

103,878

 

 

 

103,708

 

Subordinated debentures

 

 

9,590

 

 

 

9,506

 

Accrued interest and other liabilities

 

 

17,103

 

 

 

21,938

 

Total liabilities

 

 

2,408,136

 

 

 

2,599,381

 

 

 

 

 

 

 

 

 

 

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; 20,077,524 shares

   issued and outstanding at June 30, 2019 and 20,000,022 shares at

   December 31, 2018

 

 

289,577

 

 

 

288,610

 

Additional paid-in capital

 

 

6,055

 

 

 

5,659

 

Retained earnings

 

 

98,126

 

 

 

81,618

 

Non-controlling interest

 

 

72

 

 

 

72

 

Accumulated other comprehensive loss, net

 

 

(10

)

 

 

(1,338

)

Total shareholders’ equity

 

 

393,820

 

 

 

374,621

 

Total liabilities and shareholders’ equity

 

$

2,801,956

 

 

$

2,974,002

 

 

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, 2019 AND 2018

(In thousands, except per share amounts)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Interest and dividend income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

34,240

 

 

$

21,132

 

 

$

70,079

 

 

$

40,206

 

Interest on interest-earning deposits

 

 

515

 

 

 

209

 

 

 

983

 

 

 

395

 

Interest on investment securities

 

 

685

 

 

 

603

 

 

 

1,273

 

 

 

1,163

 

Dividend income on FHLB stock

 

 

379

 

 

 

134

 

 

 

577

 

 

 

253

 

Interest on federal funds sold and other

 

 

124

 

 

 

206

 

 

 

237

 

 

 

443

 

Total interest income

 

 

35,943

 

 

 

22,284

 

 

 

73,149

 

 

 

42,460

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on savings deposits, now and money market accounts

 

 

1,238

 

 

 

998

 

 

 

2,532

 

 

 

1,700

 

Interest on time deposits

 

 

7,797

 

 

 

2,410

 

 

 

13,750

 

 

 

4,456

 

Interest on subordinated debentures and long-term debt

 

 

1,929

 

 

 

920

 

 

 

3,862

 

 

 

1,833

 

Interest on other borrowed funds

 

 

662

 

 

 

129

 

 

 

2,776

 

 

 

200

 

Total interest expense

 

 

11,626

 

 

 

4,457

 

 

 

22,920

 

 

 

8,189

 

Net interest income

 

 

24,317

 

 

 

17,827

 

 

 

50,229

 

 

 

34,271

 

Provision for credit losses

 

 

357

 

 

 

700

 

 

 

907

 

 

 

884

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income after provision for credit losses

 

 

23,960

 

 

 

17,127

 

 

 

49,322

 

 

 

33,387

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges, fees and other

 

 

1,222

 

 

 

446

 

 

 

2,042

 

 

 

912

 

Gain on sale of loans

 

 

3,120

 

 

 

2,085

 

 

 

5,318

 

 

 

3,900

 

Loan servicing fees, net of amortization

 

 

899

 

 

 

58

 

 

 

1,739

 

 

 

27

 

Recoveries on loans acquired in business combinations

 

 

55

 

 

 

5

 

 

 

61

 

 

 

11

 

Unrealized gain on equity investments

 

 

 

 

 

 

 

 

147

 

 

 

 

Increase in cash surrender value of life insurance

 

 

194

 

 

 

199

 

 

 

385

 

 

 

398

 

Gain on Sale of Fixed Assets

 

 

6

 

 

 

 

 

 

6

 

 

 

 

 

 

 

5,496

 

 

 

2,793

 

 

 

9,698

 

 

 

5,248

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

8,169

 

 

 

4,709

 

 

 

17,287

 

 

 

9,660

 

Occupancy and equipment expenses

 

 

2,674

 

 

 

834

 

 

 

4,926

 

 

 

1,626

 

Data processing

 

 

1,219

 

 

 

487

 

 

 

2,228

 

 

 

960

 

Legal and professional

 

 

656

 

 

 

423

 

 

 

1,081

 

 

 

680

 

Office expenses

 

 

294

 

 

 

192

 

 

 

630

 

 

 

363

 

Marketing and business promotion

 

 

316

 

 

 

262

 

 

 

678

 

 

 

465

 

Insurance and regulatory assessments

 

 

284

 

 

 

213

 

 

 

582

 

 

 

422

 

Amortization of intangibles

 

 

385

 

 

 

77

 

 

 

773

 

 

 

158

 

OREO expenses

 

 

81

 

 

 

 

 

 

162

 

 

 

7

 

Merger expenses

 

 

15

 

 

 

183

 

 

 

86

 

 

 

223

 

Other expenses

 

 

806

 

 

 

811

 

 

 

1,791

 

 

 

1,916

 

 

 

 

14,899

 

 

 

8,191

 

 

 

30,224

 

 

 

16,480

 

Income before income taxes

 

 

14,557

 

 

 

11,729

 

 

 

28,796

 

 

 

22,155

 

Income tax expense

 

 

4,415

 

 

 

2,292

 

 

 

8,274

 

 

 

3,872

 

Net income

 

$

10,142

 

 

$

9,437

 

 

$

20,522

 

 

$

18,283

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.51

 

 

$

0.58

 

 

$

1.02

 

 

$

1.13

 

Diluted

 

 

0.50

 

 

 

0.54

 

 

 

1.00

 

 

 

1.06

 

Cash dividends declared per common share

 

 

0.10

 

 

 

0.09

 

 

 

0.20

 

 

 

0.17

 

 

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, 2019 AND 2018

(In thousands)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income

 

$

10,142

 

 

$

9,437

 

 

$

20,522

 

 

$

18,283

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains (losses) on securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized gains (losses)

 

 

928

 

 

 

(379

)

 

 

1,886

 

 

 

(1,227

)

Related income tax effect:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized gains (losses)

 

 

(274

)

 

 

112

 

 

 

(558

)

 

 

363

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other comprehensive income (loss)

 

 

654

 

 

 

(267

)

 

 

1,328

 

 

 

(864

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

$

10,796

 

 

$

9,170

 

 

$

21,850

 

 

$

17,419

 

 

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 JUNE 30, 2019 AND 2018

(In thousands, except share amounts)

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional

Paid-in

Capital

 

 

Retained

Earnings

 

 

Non-

Controlling

Interest

 

 

Other

Comprehensive

Income (Loss)

 

 

Total

 

Balance at April 1, 2019

 

 

20,073,991

 

 

$

289,514

 

 

$

5,890

 

 

$

89,991

 

 

$

72

 

 

$

(664

)

 

$

384,803

 

Net income

 

 

 

 

 

 

 

 

 

 

 

10,142

 

 

 

 

 

 

 

 

 

10,142

 

Stock-based compensation

 

 

 

 

 

 

 

 

165

 

 

 

 

 

 

 

 

 

 

 

 

165

 

Cash dividend

 

 

 

 

 

 

 

 

 

 

 

(2,007

)

 

 

 

 

 

 

 

 

(2,007

)

Stock options exercised, net of expense recognized

 

 

3,533

 

 

 

63

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

63

 

Other comprehensive income, net of taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

654

 

 

 

654

 

Balance at June 30, 2019

 

 

20,077,524

 

 

$

289,577

 

 

$

6,055

 

 

$

98,126

 

 

$

72

 

 

$

(10

)

 

$

393,820

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at April 1, 2018

 

 

16,288,928

 

 

$

210,595

 

 

$

7,429

 

 

$

58,838

 

 

$

 

 

$

(1,040

)

 

$

275,822

 

Net income

 

 

 

 

 

 

 

 

 

 

 

9,437

 

 

 

 

 

 

 

 

 

9,437

 

Stock-based compensation

 

 

 

 

 

 

 

 

131

 

 

 

 

 

 

 

 

 

 

 

 

131

 

Cash dividend

 

 

 

 

 

 

 

 

 

 

 

(1,471

)

 

 

 

 

 

 

 

 

(1,471

)

Stock options exercised

 

 

255,699

 

 

 

3,430

 

 

 

(880

)

 

 

 

 

 

 

 

 

 

 

 

2,550

 

Other comprehensive income, net of taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(267

)

 

 

(267

)

Balance at June 30, 2018

 

 

16,544,627

 

 

$

214,025

 

 

$

6,680

 

 

$

66,804

 

 

$

 

 

$

(1,307

)

 

$

286,202

 

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Additional

Paid-in

Capital

 

 

Retained

Earnings

 

 

Non-

Controlling

Interest

 

 

Other

Comprehensive

Income (Loss)

 

 

Total

 

Balance at January 1, 2019

 

 

20,000,022

 

 

$

288,610

 

 

$

5,659

 

 

$

81,618

 

 

$

72

 

 

$

(1,338

)

 

$

374,621

 

Net income

 

 

 

 

 

 

 

 

 

 

 

20,522

 

 

 

 

 

 

 

 

 

20,522

 

Stock-based compensation

 

 

 

 

 

 

 

 

396

 

 

 

 

 

 

 

 

 

 

 

 

396

 

Cash dividend

 

 

 

 

 

 

 

 

 

 

 

(4,014

)

 

 

 

 

 

 

 

 

(4,014

)

Stock options exercised, net of expense recognized

 

 

77,502

 

 

 

967

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

967

 

Other comprehensive income, net of taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,328

 

 

 

1,328

 

Balance at June 30, 2019

 

 

20,077,524

 

 

$

289,577

 

 

$

6,055

 

 

$

98,126

 

 

$

72

 

 

$

(10

)

 

$

393,820

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at January 1, 2018

 

 

15,908,893

 

 

$

205,927

 

 

$

8,426

 

 

$

51,266

 

 

$

 

 

$

(443

)

 

$

265,176

 

Net income

 

 

 

 

 

 

 

 

 

 

 

18,283

 

 

 

 

 

 

 

 

 

18,283

 

Stock-based compensation

 

 

 

 

 

 

 

 

262

 

 

 

 

 

 

 

 

 

 

 

 

262

 

Cash dividend

 

 

 

 

 

 

 

 

 

 

 

(2,745

)

 

 

 

 

 

 

 

 

(2,745

)

Stock options exercised