rbb-10q_20190930.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, 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: 20,030,867 outstanding as of November 8, 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

32

 

 

 

 

CRITICAL ACCOUNTING POLICIES

34

 

 

 

 

OVERVIEW

35

 

 

 

 

ANALYSIS OF THE RESULTS OF OPERATIONS

36

 

 

 

 

ANALYSIS OF FINANCIAL CONDITION

47

 

 

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

62

 

 

 

ITEM 4.

CONTROLS AND PROCEDURES

63

 

 

PART II - OTHER INFORMATION

64

 

 

 

ITEM 1.

LEGAL PROCEEDINGS

64

 

 

 

ITEM 1A.

RISK FACTORS

64

 

 

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

64

 

 

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

64

 

 

 

ITEM 4.

MINE SAFETY DISCLOSURES

64

 

 

 

ITEM 5.

OTHER INFORMATION

64

 

 

 

ITEM 6.

EXHIBITS

65

 

 

 

SIGNATURES

 

66

 

 

 

2


 

PART I - FINANCIAL INFORMATION (UNAUDITED)

ITEM 1.

CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

RBB BANCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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

(In thousands, except share amounts)

 

 

 

September 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

Assets

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

136,076

 

 

$

147,685

 

Federal funds sold and other cash equivalents

 

 

47,000

 

 

 

 

Cash and cash equivalents

 

 

183,076

 

 

 

147,685

 

Interest-earning deposits in other financial institutions

 

 

949

 

 

 

600

 

Securities:

 

 

 

 

 

 

 

 

Available for sale

 

 

72,923

 

 

 

73,762

 

Held to maturity (fair value of $9,053 and $9,940 at September 30, 2019 and

   December 31, 2018, respectively)

 

 

8,724

 

 

 

9,961

 

Mortgage loans held for sale

 

 

259,339

 

 

 

434,522

 

Loans held for investment:

 

 

 

 

 

 

 

 

Real estate

 

 

1,785,295

 

 

 

1,762,864

 

Commercial and other

 

 

346,892

 

 

 

387,474

 

Total loans

 

 

2,132,187

 

 

 

2,150,338

 

Unaccreted discount on acquired loans

 

 

(6,005

)

 

 

(9,229

)

Deferred loan costs (fees), net

 

 

(37

)

 

 

906

 

Total loans, net of deferred loan fees

 

 

2,126,145

 

 

 

2,142,015

 

Allowance for loan losses

 

 

(19,386

)

 

 

(17,577

)

Net loans

 

 

2,106,759

 

 

 

2,124,438

 

 

 

 

 

 

 

 

 

 

Premises and equipment

 

 

16,871

 

 

 

17,307

 

Federal Home Loan Bank (FHLB) stock

 

 

15,000

 

 

 

9,707

 

Net deferred tax assets

 

 

4,378

 

 

 

4,642

 

Income tax receivable

 

 

898

 

 

 

656

 

Other real estate owned (OREO)

 

 

1,267

 

 

 

1,101

 

Cash surrender value of life insurance (BOLI)

 

 

34,158

 

 

 

33,578

 

Goodwill

 

 

58,383

 

 

 

58,383

 

Servicing assets

 

 

17,180

 

 

 

17,370

 

Core deposit intangibles

 

 

6,444

 

 

 

7,601

 

Accrued interest and other assets

 

 

33,953

 

 

 

32,689

 

Total assets

 

$

2,820,302

 

 

$

2,974,002

 

 

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

3


 

RBB BANCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

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

(In thousands, except share amounts)

 

 

 

September 30,

 

 

December 31,

 

 

 

2019

 

 

2018

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

Noninterest-bearing demand

 

$

446,141

 

 

$

438,764

 

Savings, NOW and money market accounts

 

 

493,965

 

 

 

579,247

 

Time deposits under $250,000

 

 

701,021

 

 

 

532,395

 

Time deposits $250,000 and over

 

 

610,796

 

 

 

593,635

 

Total deposits

 

 

2,251,923

 

 

 

2,144,041

 

 

 

 

 

 

 

 

 

 

Reserve for unfunded commitments

 

 

618

 

 

 

688

 

Income tax payable

 

 

 

 

 

 

FHLB advances

 

 

35,000

 

 

 

319,500

 

Long-term debt, net of debt issuance costs

 

 

103,964

 

 

 

103,708

 

Subordinated debentures

 

 

9,632

 

 

 

9,506

 

Accrued interest and other liabilities

 

 

20,324

 

 

 

21,938

 

Total liabilities

 

 

2,421,461

 

 

 

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; 20,030,866 shares

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

   December 31, 2018

 

 

288,862

 

 

 

288,610

 

Additional paid-in capital

 

 

6,202

 

 

 

5,659

 

Retained earnings

 

 

103,374

 

 

 

81,618

 

Non-controlling interest

 

 

72

 

 

 

72

 

Accumulated other comprehensive income (loss), net

 

 

331

 

 

 

(1,338

)

Total shareholders’ equity

 

 

398,841

 

 

 

374,621

 

Total liabilities and shareholders’ equity

 

$

2,820,302

 

 

$

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 NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(In thousands, except per share amounts)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Interest and dividend income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

32,902

 

 

$

23,445

 

 

$

102,981

 

 

$

63,651

 

Interest on interest-earning deposits

 

 

429

 

 

 

250

 

 

 

1,412

 

 

 

645

 

Interest on investment securities

 

 

703

 

 

 

560

 

 

 

1,976

 

 

 

1,722

 

Dividend income on FHLB stock

 

 

238

 

 

 

132

 

 

 

815

 

 

 

385

 

Interest on federal funds sold and other

 

 

397

 

 

 

86

 

 

 

634

 

 

 

530

 

Total interest income

 

 

34,669

 

 

 

24,473

 

 

 

107,818

 

 

 

66,933

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest on savings deposits, now and money market accounts

 

 

1,117

 

 

 

1,145

 

 

 

3,649

 

 

 

2,845

 

Interest on time deposits

 

 

8,038

 

 

 

2,994

 

 

 

21,788

 

 

 

7,450

 

Interest on subordinated debentures and long-term debt

 

 

1,921

 

 

 

925

 

 

 

5,783

 

 

 

2,758

 

Interest on other borrowed funds

 

 

81

 

 

 

793

 

 

 

2,857

 

 

 

992

 

Total interest expense

 

 

11,157

 

 

 

5,857

 

 

 

34,077

 

 

 

14,045

 

Net interest income

 

 

23,512

 

 

 

18,616

 

 

 

73,741

 

 

 

52,888

 

Provision for credit losses

 

 

824

 

 

 

1,695

 

 

 

1,731

 

 

 

2,579

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net interest income after provision for credit losses

 

 

22,688

 

 

 

16,921

 

 

 

72,010

 

 

 

50,309

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges, fees and other

 

 

934

 

 

 

640

 

 

 

2,976

 

 

 

1,551

 

Gain on sale of loans

 

 

813

 

 

 

1,125

 

 

 

6,131

 

 

 

5,025

 

Loan servicing fees, net of amortization

 

 

827

 

 

 

137

 

 

 

2,566

 

 

 

164

 

Recoveries on loans acquired in business combinations

 

 

12

 

 

 

3

 

 

 

73

 

 

 

14

 

Unrealized gain on equity investments

 

 

 

 

 

 

 

 

147

 

 

 

 

Increase in cash surrender value of life insurance

 

 

195

 

 

 

200

 

 

 

580

 

 

 

598

 

Gain on sale of securities

 

 

7

 

 

 

 

 

 

7

 

 

 

 

Gain on sale of OREO

 

 

11

 

 

 

 

 

 

11

 

 

 

 

Gain on Sale of fixed assets

 

 

 

 

 

 

 

 

6

 

 

 

 

 

 

 

2,799

 

 

 

2,105

 

 

 

12,497

 

 

 

7,352

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

7,801

 

 

 

4,916

 

 

 

25,088

 

 

 

14,576

 

Occupancy and equipment expenses

 

 

2,434

 

 

 

1,014

 

 

 

7,360

 

 

 

2,640

 

Data processing

 

 

974

 

 

 

511

 

 

 

3,202

 

 

 

1,471

 

Legal and professional

 

 

435

 

 

 

378

 

 

 

1,516

 

 

 

1,058

 

Office expenses

 

 

335

 

 

 

198

 

 

 

965

 

 

 

561

 

Marketing and business promotion

 

 

248

 

 

 

320

 

 

 

926

 

 

 

785

 

Insurance and regulatory assessments

 

 

172

 

 

 

223

 

 

 

754

 

 

 

645

 

Core deposit premium

 

 

384

 

 

 

76

 

 

 

1,157

 

 

 

235

 

OREO expenses/ (income)

 

 

(1

)

 

 

5

 

 

 

161

 

 

 

12

 

Merger expenses

 

 

154

 

 

 

348

 

 

 

240

 

 

 

571

 

Other expenses

 

 

850

 

 

 

665

 

 

 

2,641

 

 

 

2,580

 

 

 

 

13,786

 

 

 

8,654

 

 

 

44,010

 

 

 

25,134

 

Income before income taxes

 

 

11,701

 

 

 

10,372

 

 

 

40,497

 

 

 

32,527

 

Income tax expense

 

 

3,689

 

 

 

2,041

 

 

 

11,963

 

 

 

5,913

 

Net income

 

$

8,012

 

 

$

8,331

 

 

$

28,534

 

 

$

26,614

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.40

 

 

$

0.50

 

 

$

1.42

 

 

$

1.62

 

Diluted

 

 

0.39

 

 

 

0.48

 

 

 

1.40

 

 

 

1.54

 

Cash dividends declared per common share

 

 

0.10

 

 

 

0.09

 

 

 

0.30

 

 

 

0.26

 

 

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, 2019 AND 2018

(In thousands)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income

 

$

8,012

 

 

$

8,331

 

 

$

28,534

 

 

$

26,614

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains (losses) on securities available for sale:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized gains (losses)

 

 

494

 

 

 

(297

)

 

 

2,380

 

 

 

(1,523

)

Reclassification of gains recognized in net income

 

 

(7

)

 

 

 

 

 

(7

)

 

 

 

 

 

 

487

 

 

 

(297

)

 

 

2,373

 

 

 

(1,523

)

Related income tax effect:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized gains (losses)

 

 

(148

)

 

 

88

 

 

 

(706

)

 

 

450

 

Reclassification of gains recognized in net income

 

 

2

 

 

 

 

 

 

2

 

 

 

 

 

 

 

(146

)

 

 

88

 

 

 

(704

)

 

 

450

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other comprehensive income (loss)

 

 

341

 

 

 

(209

)

 

 

1,669

 

 

 

(1,073

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive income

 

$

8,353

 

 

$

8,122

 

 

$

30,203

 

 

$

25,541

 

 

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 THREE AND NINE MONTHS ENDED SEPTEMBER 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 July 1, 2019

 

 

20,077,524

 

 

$

289,577

 

 

$

6,055

 

 

$

98,126

 

 

$

72

 

 

$

(10

)

 

$

393,820

 

Net income

 

 

 

 

 

 

 

 

 

 

 

8,012

 

 

 

 

 

 

 

 

 

8,012

 

Stock-based compensation

 

 

 

 

 

 

 

 

147

 

 

 

 

 

 

 

 

 

 

 

 

147

 

Cash dividend

 

 

 

 

 

 

 

 

 

 

 

(2,016

)

 

 

 

 

 

 

 

 

(2,016

)

Stock options exercised, net of expense

   recognized

 

 

123,127

 

 

 

1,727

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,727

 

Repurchase of common stock

 

 

(169,785

)

 

 

(2,442

)

 

 

 

 

 

(748

)

 

 

 

 

 

 

 

 

(3,190

)

Other comprehensive income, net of taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

341

 

 

 

341

 

Balance at September 30, 2019

 

 

20,030,866

 

 

$

288,862

 

 

$

6,202

 

 

$

103,374

 

 

$

72

 

 

$

331

 

 

$

398,841

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at July 1, 2018

 

 

16,544,627

 

 

$

214,025

 

 

$

6,680

 

 

$

66,804

 

 

$

 

 

$

(1,307

)

 

$

286,202

 

Net income

 

 

 

 

 

 

 

 

 

 

 

8,331

 

 

 

 

 

 

 

 

 

8,331

 

Stock-based compensation

 

 

 

 

 

 

 

 

184

 

 

 

 

 

 

 

 

 

 

 

 

184

 

Restricted stock awarded

 

 

43,425

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividend

 

 

 

 

 

 

 

 

 

 

 

(1,489

)

 

 

 

 

 

 

 

 

(1,489

)

Stock options exercised

 

 

207,851

 

 

 

2,650

 

 

 

(671

)

 

 

 

 

 

 

 

 

 

 

 

1,979

 

Other comprehensive income, net of taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(209

)

 

 

(209

)

Balance at September 30, 2018

 

 

16,795,903

 

 

$

216,675

 

 

$

6,193

 

 

$

73,646

 

 

$

 

 

$

(1,516

)

 

$

294,998

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

28,534

 

 

 

 

 

 

 

 

 

28,534

 

Stock-based compensation

 

 

 

 

 

 

 

 

543

 

 

 

 

 

 

 

 

 

 

 

 

543

 

Cash dividend

 

 

 

 

 

 

 

 

 

 

 

(6,030

)

 

 

 

 

 

 

 

 

(6,030

)

Stock options exercised, net of expense

   recognized

 

 

200,629

 

 

 

2,694

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,694

 

Repurchase of common stock

 

 

(169,785

)

 

 

(2,442

)

 

 

 

 

 

(748

)

 

 

 

 

 

 

 

 

(3,190

)

Other comprehensive income, net of taxes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,669