Exhibit 99.1

 

 

Press Release

For Immediate Release

 

	Contacts: Yee Phong (Alan) Thian
	Chairman, President and CEO
	(626) 307-7559
	David Morris
	Executive Vice President and CFO
	(714) 670-2488

 

 

RBB Bancorp Reports Third Quarter Earnings for 2020

Conference Call and Webcast Scheduled for Tuesday, October 27, 2020 at

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

 

 

Third Quarter 2020 Highlights

 

●	Net income of $8.5 million, or $0.43 diluted earnings per share
●	Loans held for investment increased by $160.5 million, or 24.6% annualized growth, from the end of the prior quarter
●	Total deposits (excluding brokered deposits) increased by $160.2 million, or 26.2% annualized growth, from the end of the prior quarter
●	Nonperforming assets to total assets of 0.54%, improving 2 basis points from the prior quarter
●	Loans modified under the CARES Act decreased by 76% from the end of the prior quarter and now represent 4% of loans outstanding
●	Net interest margin of 3.59% increased by 17 basis points from the prior quarter and was flat from the third quarter of 2019
●	Announced resumption of our stock repurchase program

 

Los Angeles, CA, October 26, 2020 – 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 ended September 30, 2020.

 

The Company reported net income of $8.5 million, or $0.43 diluted earnings per share, for the three months ended September 30, 2020, compared to net income of $6.5 million, or $0.33 diluted earnings per share, and $8.0 million, or $0.39 diluted earnings per share, for the three months ended June 30, 2020 and September 30, 2019, respectively.

 

“Our performance in the third quarter demonstrated the strength of our growing franchise as we generated strong earnings, increasing net interest margin, and asset and deposit growth,” said Mr. Alan Thian, Chairman, President and CEO of RBB Bancorp. “Effective management of our loan exposure in prior quarters – which resulted in lower concentrations of CRE and C&I loans relative to our peers – created an opportunity to selectively originate attractive loans in markets in which our competitors were forced to pull back.  Strong deposit growth was accompanied by declines in corresponding costs as we benefited from ongoing efforts to improve our deposit franchise and a declining rate environment.  Our asset quality remains solid and we remain well capitalized with ample access to liquidity.  Loans modified under the CARES Act outstanding decreased 76% over the quarter to just 4% of loans outstanding.”

 

“Our board of directors approved the reinstatement of the stock repurchase program to the maximum of what the plan allows, which will further enhance shareholder value,” Mr. Thian concluded.

 

 

Key Performance Ratios

 

Net income of  $8.5 million for the third quarter of 2020 produced an annualized return on average assets of  1.05%, an annualized return on average tangible common equity of 9.81%, and an annualized return on average equity of 8.06%. This compares to an annualized return on average assets of 0.83%, an annualized return on average tangible common equity of 7.77%, and an annualized return on average equity of 6.34% for the second quarter of 2020. The efficiency ratio for the third quarter of 2020 was 46.63%, compared to 54.40% for the prior quarter.  The improvement in the efficiency ratio was primarily due to improved net interest income.

 

Net Interest Income and Net Interest Margin

 

Net interest income, before provision for loan losses, was $27.3 million for the third quarter of 2020, compared to $25.0 million for the second quarter of 2020. The $2.2 million increase was primarily attributable to a $71.8 million increase in average earning assets and a $37.4 million increase in average noninterest-bearing deposits, partially offset by a $27.0 million increase in average interest-bearing liabilities. Net interest income was also favorably impacted by a 17 basis point increase in the net interest margin. Accretion of purchase discounts from prior acquisitions contributed $634,000 to net interest income in the third quarter of 2020, compared to $818,000 in the second quarter of 2020.

 

Compared to the third quarter of 2019, net interest income, before provision for loan losses, increased $3.7 million from $23.5 million. The increase was primarily attributable to a $418.9 million increase in average earning assets and a $170.3 million increase in average noninterest-bearing deposits, partially offset by a $268.1 million increase in average interest-bearing liabilities. The net interest margin was unchanged at 3.59% between the third quarters of 2020 and 2019.  The increases in average earning assets and total deposits were primarily due to the Pacific Global Bank (“PGB”) acquisition and increased loan and deposit originations.

 

Net interest margin was 3.59% for the third quarter of 2020, an increase from 3.42% in the second quarter of 2020. The increase was primarily attributable to a 51 basis point decrease in the cost of total deposits and a 48 basis point decrease in the cost of borrowings (FHLB advances, long-term debt and subordinated debentures), partially offset by a 2 basis point decrease in the yield on average earning assets. Loan discount accretion contributed 8 basis points to the net interest margin in the third quarter of 2020, compared to 14 basis points in the second quarter of 2020.

 

Noninterest Income

 

Noninterest income was $2.7 million for the third quarter of 2020, an increase of $519,000 from $2.2 million in the second quarter of 2020. The increase was driven by an increase in gain on loan sales of $679,000 as the Company sold $28.2 million more loans in the third quarter than in the prior quarter generally due to increased market activity following the initial impact of the COVID-19 pandemic. The Company expects gain on sale of loan income to return to prior levels in the fourth quarter.

 

The Company sold $17.7 million in FNMA qualified mortgage loans for a net gain of $537,000 and sold $11.8 million in non-qualified mortgage loans to private investors for a gain of $227,000 during the third quarter of 2020.  This compared to $5.2 million in FNMA qualified mortgage loans for a net gain of $105,000 during the second quarter of 2020.  The Company sold no SBA loans during the third quarter of 2020, compared to $1.4 million in SBA loans sold for a net gain of $70,000 during the second quarter of 2020.

 

Compared to the third quarter of 2019, noninterest income decreased by $73,000 from $2.8 million. The decrease was primarily attributable to a decrease of $281,000 in loan servicing fees.

 

 

Noninterest Expense

 

Noninterest expense for the third quarter of 2020 was $14.0 million, compared to $14.8 million for the second quarter of 2020. The $855,000 decrease was primarily attributable to a $424,000 decrease in salaries and employee benefits expenses, $214,000 decrease in merger expenses, $167,000 decrease in occupancy and equipment expenses, partially offset by a $318,000 increase in data processing expenses and a $128,000 increase in insurance and regulatory assessments. The decrease in salary and employee benefits was primarily attributable to severance paid in the second quarter for employees affected by restructuring related to the completion of the PGB acquisition.

 

 

Noninterest expense increased from $13.8 million in the third quarter of 2019. The $192,000 increase was primarily due to a $226,000 increase in data processing expense, a $240,000 increase in legal and professional expense, and a $190,000 increase in insurance and regulatory assessments. These were partially offset by a $122,000 decrease salaries and employee benefit expense, a $117,000 decrease in marketing and business promotion expense.

 

Income Taxes

 

The effective tax rate was 29.8% for the third quarter of 2020, 30.8% for the second quarter of 2020, and 31.5% for the third quarter of 2019. The slightly lower effective tax rate in the third quarter of 2020 was a result of affordable housing tax credits.

 

Loan Portfolio

 

Loans held for investment, net of deferred fees and discounts, totaled $2.8 billion as of September 30, 2020, an increase of $160.5 million from June 30, 2020, and an increase of $629.0 million from September 30, 2019. The increase from the prior quarter was primarily due to organic loan growth. Single-family residential mortgages decreased by $10.9 million, net of payoffs, paydowns and loan sales, and was driven by loan sales. Commercial real estate loans increased by $74.9 million, construction and land development loans increased by $37.8 million, SBA loans increased by $7.1 million, and commercial and industrial loans increased by $50.4 million.

 

During the third quarter of 2020, single-family residential mortgage production was $82.6 million (mortgage loans held for investment and held for sale), payoffs and paydowns were $45.7 million, and single-family residential mortgage loan sales were $29.5 million. During the second quarter of 2020, single-family residential mortgage production was $117.6 million, payoffs and paydowns were $36.0 million, and loan sales were $1.4 million.

 

Mortgage loans held for sale were $23.9 million as of September 30, 2020, an increase of $8.4 million from $15.5 million at June 30, 2020 and a decrease of $235.4 million from $259.3 million as of September 30, 2019. The Company originated approximately $28.7 million in mortgage loans for sale for the third quarter of 2020, compared with $19.0 million during the prior quarter. In the third quarter, SBA loan production was $7.2 million. In the prior quarter, SBA loan production was $33.1 million, which consisted exclusively of PPP loans and total loan sales were $1.4 million.

 

Deposits

 

Deposits were $2.6 billion at September 30, 2020, an increase of $160.2 million from June 30, 2020, and an increase of $445.0 million from September 30, 2019, excluding brokered deposits. The increase in total deposits from the prior quarter was primarily attributable to organic deposit growth. Noninterest-bearing deposits increased by $66.5 million and interest-bearing non-maturity deposits increased by $53.7 million. Time deposits increased by $55.0 million, including a $15.0 million increase in brokered CDs. As of September 30, 2020, time deposits included $17.4 million in brokered CDs, as compared to $2.4 million as of June 30, 2020 and $102.6 million as of September 30, 2019.

 

Asset Quality

 

Nonperforming assets totaled $18.3 million, or 0.54% of total assets at September 30, 2020, compared to $17.5 million, or 0.56%, of total assets at June 30, 2020. The decrease in nonperforming assets was primarily due to an increase in total assets. Nonperforming assets consist of OREO, loans modified under troubled debt restructurings (“TDR”), non-accrual loans, and loans past due 90 days or more and still accruing interest.

 

Loans held-for-investment 30 to 89 days past due decreased by $2.2 million to $21.7 million at September 30, 2020 from $23.9 million at June 30, 2020.

 

 

In the third quarter of 2020, there were $47,000 in net charge-offs, down from $320,000 in the prior quarter.

 

The Company recorded a provision for credit losses of $3.9 million for the third quarter of 2020, an increase from $3.0 million in the prior quarter, primarily attributable to the higher loan balances and the impact of the COVID-19 pandemic.

 

The allowance for loan losses totaled $26.6 million, or 0.97% of loans held for investment at September 30, 2020, compared with $22.8 million, or 0.88%, of total loans at June 30, 2020.

 

The following table, as of September 30, 2020, is intended to summarize the Company’s overall loan exposure to major industries that are considered “at-risk” for business interruption due to the COVID-19 pandemic:

 

Industry / Property Type		Total Exposure ($000)				% of Total HFI Loans
General retail (excluding SBA)		$	235,153				8.5	%
Mixed use commercial			106,166				3.9	%
Commercial			62,678				2.3	%
Hospitality (excluding SBA)			27,666				1.0	%
Service stations (excluding SBA)			13,825				0.5	%
SBA loans			111,193				4.0	%
Shared National Credits (excluding airlines, cruise lines and hotels)			35,998				1.3	%
Airlines, cruise lines and hotels (SNC)			11,825				0.4	%
Restaurants (excluding SBA)			5,520				0.2	%
Total loans		$	610,024				22.1	%

 

In the above table, the general retail exposure now includes warehouse loans and the mixed use commercial exposure now includes residential mixed use loans.

 

As of September 30, 2020, borrowers representing 260 loans totaling $32.9 million, or 1.2% of the Company’s total loan portfolio, have funded under the SBA’s Paycheck Protection Program due to the COVID-19 pandemic.

 

Under the CARES Act SBA loan payments were made through September 30, 2020 by the SBA.  We have contacted nearly all of our SBA borrowers and the following table details new deferments of SBA loans:

 

		Requested SBA Loan Deferments
		Number				Principal Amount ($000)				Principal Amount Average LTV%				Guaranteed Amount ($000)				Unguaranteed Amount ($000)				Unguaranteed Amount to Total SBA Loans
Hospitality			9			$	38,965				75	%		$	29,224			$	9,741				8.8	%
General retail			5				5,051				51	%			3,794				1,257				1.1	%
Restaurant			2				2,681				155	%			2,016				665				0.6	%
Transportation			3				1,042				30	%			782				261				0.2	%
Fitness			1				101				0	%			86				15				0.0	%
Mixed use commercial			1				45				0	%			33				11				0.0	%
			21			$	47,885							$	35,935			$	11,950				10.7	%

 

We have not been able to contact four borrowers listed in the above table to determine if they need a deferment under SBA guidelines. The unguaranteed balance of those four loans is $27,665.  All four have not made their payments as of October 15, 2020.  There are two loans with an unguaranteed balance of $54,766 that will not qualify for a SBA deferment due to delinquency or deferment issues prior to COVID-19. Those two loans are not listed above and the borrowers have not made their payments as of October 15, 2020.

 

The following table provides details regarding the Company's COVID-19 loan deferral activity through October 21, 2020.

 

		As of June 30, 2020												As of October 23, 2020
		Deferred Loans												Loans Resuming Payments								Loans Deferred
		Number				Principal Amount ($000)				% of Total HFI Loans				Number				Principal Amount ($000)				Number				Principal Amount ($000)
General retail (excluding SBA)			34			$	94,251				3.4	%			31			$	67,411				3			$	26,840
Mixed use commercial			38				58,841				2.1	%			34				48,294				4				10,547
Hospitality (excluding SBA)			5				25,343				0.9	%			3				12,414				2				12,929
Restaurants (excluding SBA)			11				4,186				0.2	%			10				4,186				1				12
Multifamily			6				9,086				0.3	%			6				9,086				—				—
Commercial, office and other (1)			6				22,983				0.8	%			1				3,102				5				19,881
SFR mortgage loans - Western region			183				118,484				4.3	%			145				88,880				38				29,604
SFR mortgage loans - Eastern region			203				85,935				3.1	%			194				82,699				10				4,106
SFR mortgage loans - Chicago metropolitan			84				14,824				0.5	%			83				14,575				4				719
Total			570			$	433,933				15.7	%			507			$	330,647				67			$	104,638

 

(1)  Loan with a principal amount of $17 million is on a principal deferment only.

 

 

The Company does not have any shared national credits or loans backed by service stations, airlines or cruise lines on deferral as of October 20, 2020.

 

Properties

 

On March 31, 2020, we closed the Grand Street branch in New York City as the lease for this branch expired in April 2020. Branch operations and staff were transferred to the Bowery branch.

 

The Bank plans to open a new full service banking branch in Edison, New Jersey in November of 2020. The branch will be located at 561 US-1, in the Wicks Shopping Plaza in Edison. The Bank purchased a property located at 2057 86^th Street, Brooklyn, New York, in the Bensonhurst neighborhood, to house a full-service branch. We expect this branch to open in 2021.  The Bank has leased a location on Canal Street in Manhattan to move our Bowery Street branch.

 

Corporate Overview

 

RBB Bancorp is a community-based financial holding company headquartered in Los Angeles, California. The Company has total assets of $3.4 billion. Its wholly-owned subsidiary, Royal Business 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, and three branches in the Chicago neighborhoods of Chinatown and Bridgeport. 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 Irvine, California, one branch in Las Vegas, Nevada, six branches and one loan operation center in Brooklyn, Queens and Manhattan in New York, and three branches in Chicago, Illinois. 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 Avenue, 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 tomorrow, October 27, 2020, to discuss the Company’s third quarter 2020 financial results.

 

To listen to the conference call, please dial 1-833-519-1355 or 1-918-922-6505, passcode 8574857. A replay of the call will be made available at 1-800-585-8367 or 1-404-537-3406, passcode 8574857, approximately one hour after the conclusion of the call and will remain available through November 3, 2020.

 

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.

 

 

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 loan losses and charge-offs; expectations regarding the impact of the COVID-19 pandemic; the costs or effects of acquisitions or dispositions we may make, including our recent acquisition of PGB Holdings, Inc. and its wholly-owned subsidiary, Pacific Global Bank, and our recently completed acquisition of First American International Corp., 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 for the year ended December 31, 2019, 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.

 

 

RBB BANCORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, except for December 31, 2019)

(Dollars in thousands)

 

		September 30				June 30				March 31				December 31				September 30
		2020				2020				2020				2019				2019
Assets
Cash and due from banks		$	121,630			$	94,844			$	285,667			$	114,763			$	136,076
Federal funds sold and other cash equivalents			57,000				57,000				75,300				67,000				47,000
Total cash and cash equivalents			178,630				151,844				360,967				181,763				183,076
Interest-bearing deposits in other financial institutions			600				600				600				600				949
Investment securities available for sale			214,662				185,756				126,294				126,069				72,923
Investment securities held to maturity			7,569				7,615				7,825				8,332				8,724
Mortgage loans held for sale			23,886				15,479				52,096				108,194				259,339
Loans held for investment			2,755,153				2,594,620				2,399,982				2,196,934				2,126,145
Allowance for loan losses			(26,634	)			(22,820	)			(20,130	)			(18,816	)			(19,386	)
Net loans held for investment			2,728,519				2,571,800				2,379,852				2,178,118				2,106,759
Premises and equipment, net			24,237				23,965				24,472				16,813				16,871
Federal Home Loan Bank (FHLB) stock			15,641				15,641				15,630				15,000				15,000
Net deferred tax assets			1,080				—				—				2,326				4,378
Cash surrender value of life insurance			34,930				34,736				34,544				34,353				34,158
Goodwill			69,243				69,209				69,790				58,563				58,383
Servicing assets			14,724				15,595				16,826				17,083				17,180
Core deposit intangibles			5,519				5,876				6,234				6,100				6,444
Accrued interest and other assets			40,336				38,065				33,523				35,221				36,118
Total assets		$	3,359,576			$	3,136,181			$	3,128,653			$	2,788,535			$	2,820,302
Liabilities and shareholders' equity
Deposits:
Noninterest-bearing demand		$	642,332			$	574,553			$	504,324			$	458,763			$	446,141
Savings, NOW and money market accounts			654,378				601,941				571,870				537,490				493,965
Time deposits			1,315,038				1,260,026				1,359,787				1,252,685				1,311,817
Total deposits			2,611,748				2,436,520				2,435,981				2,248,938				2,251,923
Net deferred tax liabilities			—				656				312				—				—
FHLB advances			190,000				150,000				150,000				—				35,000
Long-term debt, net of debt issuance costs			104,305				104,220				104,135				104,049				103,964
Subordinated debentures			14,229				14,174				14,120				9,673				9,632
Accrued interest and other liabilities			17,878				16,586				16,112				18,185				20,942
Total liabilities			2,938,160				2,722,156				2,720,660				2,380,845				2,421,461
Shareholders' equity:
Shareholder's equity			420,329				412,827				407,332				407,379				398,438
Non-controlling interest			72				72				72				72				72
Accumulated other comprehensive income (loss) - Net of tax			1,015				1,126				589				239				331
Total shareholders' equity			421,416				414,025				407,993				407,690				398,841
Total liabilities and stockholders’ equity		$	3,359,576			$	3,136,181			$	3,128,653			$	2,788,535			$	2,820,302

 

 

RBB BANCORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Dollars in thousands, except per share amounts) 

 

		For the three months ended
		September 30, 2020				June 30, 2020				September 30, 2019
Interest and dividend income:
Interest and fees on loans		$	34,153			$	32,633			$	32,902
Interest on interest-bearing deposits			61				74				429
Interest on investment securities			621				887				703
Dividend income on FHLB stock			190				187				238
Interest on federal funds sold and other			100				322				397
Total interest income			35,125				34,103				34,669
Interest expense:
Interest on savings deposits, NOW and money market accounts			779				782				1,117
Interest on time deposits			4,746				5,933				8,038
Interest on subordinated debentures and long term debt			1,905				1,915				1,921
Interest on other borrowed funds			444				439				81
Total interest expense			7,874				9,069				11,157
Net interest income before provision for loan losses			27,251				25,034				23,512
Provision for loan losses			3,861				3,009				824
Net interest income after provision for loan losses			23,390				22,025				22,688
Noninterest income:
Service charges, fees and other			1,143				1,065				934
Gain on sale of loans			760				81				813
Loan servicing fees, net of amortization			546				708				827
Recoveries on loans acquired in business combinations			32				5				12
Increase in cash surrender value of life insurance			194				191				195
Gain on sale of securities			52				158				7
Gain on sale of other real estate owned			—				—				11
Total noninterest income			2,727				2,208				2,799
Noninterest expense:
Salaries and employee benefits			7,599				8,103				7,801
Occupancy and equipment expenses			2,360				2,527				2,434
Data processing			1,200				882				974
Legal and professional			675				670				435
Office expenses			271				337				335
Marketing and business promotion			131				111				248
Insurance and regulatory assessments			363				234				172
Core deposit premium			357				357				384
OREO expenses/(income)			3				14				(1	)
Merger and conversion expenses			62				276				154
Other expenses			957				1,308				850
Total noninterest expense			13,978				14,819				13,786
Income before income taxes			12,139				9,414				11,701
Income tax expense			3,619				2,901				3,689
Net income		$	8,520			$	6,513			$	8,012
Net income per share
Basic		$	0.43			$	0.33			$	0.40
Diluted		$	0.43			$	0.33			$	0.39
Cash Dividends declared per common share		$	0.06			$	0.06			$	0.10
Weighted-average common shares outstanding
Basic			19,717,568				19,710,330				20,067,847
Diluted			19,804,892				19,806,304				20,425,966

 

 

RBB BANCORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Dollars in thousands, except per share amounts)

 

		For the nine months ended
		September 30, 2020				September 30, 2019
Interest and dividend income:
Interest and fees on loans		$	99,062			$	102,981
Interest on interest-earning deposits			586				1,412
Interest on investment securities			2,329				1,976
Dividend income on FHLB stock			379				815
Interest on federal funds sold and other			900				634
Total interest income			103,256				107,818
Interest expense:
Interest on savings deposits, NOW and money market accounts			2,804				3,649
Interest on time deposits			17,765				21,788
Interest on subordinated debentures and long term debt			5,776				5,783
Interest on other borrowed funds			1,033				2,857
Total interest expense			27,378				34,077
Net interest income			75,878				73,741
Provision for loan losses			8,815				1,731
Net interest income after provision for loans losses			67,063				72,010
Noninterest income:
Service charges, fees and other			3,287				2,976
Gain on sale of loans			3,552				6,131
Loan servicing fees, net of amortization			1,846				2,566
Recoveries on loans acquired in business combinations			79				73
Unrealized gain on equity investments			—				147
Increase in cash surrender value of life insurance			576				580
Gain on sale of securities			210				7
Gain on sale of fixed assets			—				6
Loss on sale of other real estate owned			—				11
Total noninterest income			9,550				12,497
Noninterest expense:
Salaries and employee benefits			25,207				25,088
Occupancy and equipment expenses			7,291				7,360
Data processing			3,224				3,202
Legal and professional			1,949				1,516
Office expenses			931				965
Marketing and business promotion			456				926
Insurance and regulatory assessments			774				754
Amortization of intangibles			1,071				1,157
OREO expenses			31				161
Merger expenses			741				240
Other expenses			3,385				2,641
Total noninterest expense			45,060				44,010
Income before income taxes			31,553				40,497
Income tax expense			9,772				11,963
Net income		$	21,781			$	28,534
Net income per share
Basic		$	1.10			$	1.42
Diluted		$	1.09			$	1.40
Cash Dividends declared per common share		$	0.24			$	0.30
Weighted-average common shares outstanding
Basic			19,799,617				20,063,479
Diluted			19,958,612				20,435,867

 

 

RBB BANCORP AND SUBSIDIARIES

AVERAGE BALANCE SHEET AND NET INTEREST INCOME

(Unaudited)

(Dollars in thousands, except per share amounts)

 

		For the three months ended
		September 30, 2020												June 30, 2020												September 30, 2019
		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)		$	179,521			$	351				0.78	%		$	231,943			$	583				1.01	%		$	144,131			$	1,064				2.93	%
Securities
Available for sale			168,151				558				1.32	%			171,298				823				1.93	%			92,292				631				2.71	%
Held to maturity (2)			7,604				71				3.71	%			7,661				72				3.78	%			8,730				81				3.68	%
Mortgage loans held for sale			19,848				171				3.43	%			25,130				303				4.85	%			253,492				3,050				4.77	%
Loans held for investment: (3)
Real estate			2,266,752				29,616				5.20	%			2,147,646				28,216				5.28	%			1,749,371				23,963				5.43	%
Commercial			377,789				4,366				4.60	%			364,189				4,114				4.54	%			352,795				5,889				6.62	%
Total loans			2,644,541				33,982				5.11	%			2,511,835				32,330				5.18	%			2,102,166				29,852				5.63	%
Total earning assets			3,019,665			$	35,133				4.63	%			2,947,867			$	34,111				4.65	%			2,600,811			$	34,678				5.29	%
Noninterest-earning assets			204,638												206,833												169,691
Total assets		$	3,224,303											$	3,154,700											$	2,770,502
Interest-bearing liabilities
NOW and money market deposits		$	514,271			$	748				0.58	%		$	462,027			$	751				0.65	%		$	364,127			$	1,070				1.17	%
Savings deposits			126,635				31				0.10	%			123,868				31				0.10	%			95,725				47				0.19	%
Time deposits			1,284,351				4,746				1.47	%			1,314,232				5,933				1.82	%			1,340,751				8,038				2.38	%
Total interest-bearing deposits			1,925,257				5,525				1.14	%			1,900,127				6,715				1.42	%			1,800,603				9,155				2.02	%
FHLB advances			151,739				444				1.16	%			150,000				439				1.18	%			13,261				81				2.42	%
Long-term debt			104,252				1,748				6.67	%			104,168				1,747				6.75	%			103,912				1,748				6.67	%
Subordinated debentures			14,195				157				4.40	%			14,141				168				4.78	%			9,606				173				7.15	%
Total interest-bearing liabilities			2,195,443				7,874				1.43	%			2,168,436				9,069				1.68	%			1,927,382				11,157				2.30	%
Noninterest-bearing liabilities
Noninterest-bearing deposits			595,264												557,903												424,908
Other noninterest-bearing liabilities			13,270												15,509												20,490
Total noninterest-bearing liabilities			608,534												573,412												445,398
Shareholders' equity			420,326												412,852												397,722
Total liabilities and shareholders' equity		$	3,224,303											$	3,154,700											$	2,770,502
Net interest income / interest rate spreads						$	27,259				3.20	%						$	25,042				2.97	%						$	23,521				2.99	%
Net interest margin											3.59	%											3.42	%											3.59	%

 

---

(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.

 

 

RBB BANCORP AND SUBSIDIARIES

AVERAGE BALANCE SHEET AND NET INTEREST INCOME

(Unaudited)

(Dollars in thousands, except per share amounts)

 

		For the nine months ended
		September 30, 2020												September 30, 2019
		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)		$	220,195			$	1,865				1.13	%		$	122,563			$	2,861				3.12	%
Securities
Available for sale			159,373				2,136				1.79	%			82,868				1,749				2.82	%
Held to maturity (2)			7,760				218				3.75	%			9,159				255				3.72	%
Mortgage loans held for sale			40,936				1,454				4.74	%			352,110				12,785				4.85	%
Loans held for investment: (3)
Real estate			2,141,022				84,261				5.26	%			1,759,253				72,842				5.54	%
Commercial			359,907				13,347				4.95	%			350,823				17,354				6.61	%
Total loans			2,500,929				97,608				5.21	%			2,110,076				90,196				5.72	%
Total earning assets			2,929,193			$	103,281				4.71	%			2,676,776			$	107,846				5.39	%
Noninterest-earning assets			208,000												167,887
Total assets		$	3,137,193											$	2,844,663
Interest-bearing liabilities
NOW and money market deposits		$	484,157			$	2,687				0.74	%		$	388,298			$	3,500				1.21	%
Savings deposits			121,836				117				0.13	%			97,959				149				0.20	%
Time deposits			1,318,947				17,765				1.80	%			1,273,604				21,788				2.29	%
Total interest-bearing deposits			1,924,940				20,569				1.43	%			1,759,861				25,437				1.93	%
FHLB advances			118,029				1,033				1.17	%			148,101				2,857				2.58	%
Long-term debt			104,168				5,243				6.72	%			103,827				5,243				6.75	%
Subordinated debentures			14,221				533				5.01	%			9,565				540				7.55	%
Total interest-bearing liabilities			2,161,358			$	27,378				1.69	%			2,021,354			$	34,077				2.25	%
Noninterest-bearing liabilities
Noninterest-bearing deposits			546,419												412,845
Other noninterest-bearing liabilities			14,606												19,888
Total noninterest-bearing liabilities			561,025												432,733
Shareholders' equity			414,810												390,576
Total liabilities and shareholders' equity		$	3,137,193											$	2,844,663
Net interest income / interest rate spreads						$	75,903				3.02	%						$	73,769				3.13	%
Net interest margin											3.46	%											3.68	%

 

 

RBB BANCORP AND SUBSIDIARIES

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited)

(Dollars in thousands, except per share amounts)

 

		For the three months ended
		September 30				June 30,				September 30
		2020				2020				2019
Per share data (common stock)
Earnings
Basic		$	0.43			$	0.33			$	0.40
Diluted		$	0.43			$	0.33			$	0.39
Dividends declared		$	0.06			$	0.06			$	0.10
Basic, excluding merger and conversion expense		$	0.43			$	0.34			$	0.40
Diluted, excluding merger and conversion expense		$	0.43			$	0.34			$	0.40
Book value		$	21.35			$	20.97			$	19.91
Tangible book value		$	17.56			$	17.17			$	16.67
Weighted average shares outstanding
Basic			19,717,568				19,710,330				20,067,847
Diluted			19,804,892				19,806,304				20,425,966
Shares outstanding at period end			19,739,280				19,739,280				20,030,866
Performance ratios
Return on average assets, annualized			1.05	%			0.83	%			1.15	%
Return on average shareholders' equity, annualized			8.06	%			6.34	%			7.99	%
Return on average tangible common equity, annualized			9.81	%			7.77	%			9.56	%
Noninterest income to average assets, annualized			0.34	%			0.28	%			0.40	%
Noninterest expense to average assets, annualized			1.72	%			1.89	%			1.97	%
Yield on average earning assets			4.63	%			4.65	%			5.29	%
Cost of average total deposits			0.87	%			1.10	%			1.63	%
Cost of average interest-bearing deposits			1.14	%			1.42	%			2.02	%
Cost of average interest-bearing liabilities			1.43	%			1.68	%			2.30	%
Accretion on loans to average earning assets			0.08	%			0.14	%			0.10	%
Net interest spread			3.20	%			2.97	%			2.99	%
Net interest margin			3.59	%			3.42	%			3.59	%
Efficiency ratio			46.63	%			54.40	%			52.40	%
Common stock dividend payout ratio			13.95	%			18.18	%			25.00	%

 

 

RBB BANCORP AND SUBSIDIARIES

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited)

(Dollars in thousands, except per share amounts)

 

		For the nine months ended September 30,
		2020				2019
Per share data (common stock)
Earnings
Basic		$	1.10			$	1.42
Diluted		$	1.09			$	1.40
Basic, excluding merger expense		$	1.13			$	1.44
Diluted, excluding merger expense		$	1.12			$	1.41
Dividends declared		$	0.24			$	0.30
Book value		$	21.35			$	19.91
Tangible book value		$	17.56			$	16.67
Weighted average shares outstanding
Basic			19,799,617				20,063,479
Diluted			19,958,612				20,435,867
Shares outstanding at period end			19,739,280				20,030,866
Performance ratios
Return on average assets, annualized			0.93	%			1.34	%
Return on average shareholders' equity, annualized			7.01	%			9.77	%
Return on average tangible common equity, annualized			8.59	%			11.73	%
Noninterest income to average assets, annualized			0.41	%			0.59	%
Noninterest expense to average assets, annualized			1.92	%			2.07	%
Yield on average earning assets			4.71	%			5.39	%
Cost of average deposits			1.11	%			1.57	%
Cost of average interest-bearing deposits			1.43	%			1.93	%
Cost of average interest-bearing liabilities			1.69	%			2.25	%
Accretion on loans to average earning assets			0.10	%			0.12	%
Net interest spread			3.02	%			3.13	%
Net interest margin			3.46	%			3.68	%
Efficiency ratio			52.75	%			51.03	%
Common stock dividend payout ratio			21.82	%			21.13	%

 

 

RBB BANCORP AND SUBSIDIARIES

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited)

(Dollars in thousands, except per share amounts)

 

		As of
		September 30,				June 30,				September 30,
		2020				2020				2019
Loan to deposit ratio			105.49	%			106.49	%			94.41	%
Core deposits / total deposits			99.34	%			76.84	%			68.32	%
Net non-core funding dependence ratio			14.47	%			13.39	%			25.41	%
Credit Quality Data:
Loans 30-89 days past due		$	21,735			$	23,872			$	4,578
Loans 30-89 days past due to total loans			0.79	%			0.92	%			0.22	%
Nonperforming loans		$	17,975			$	17,217			$	9,628
Nonperforming loans to total loans			0.65	%			0.66	%			0.39	%
Nonperforming assets		$	18,268			$	17,510			$	10,895
Nonperforming assets to total assets			0.54	%			0.56	%			0.39	%
Allowance for loan losses to total loans			0.97	%			0.88	%			0.91	%
Allowance for loan losses to nonperforming loans			148.17	%			132.54	%			201.35	%
Net charge-offs to average loans (for the quarter-to-date period)			0.01	%			0.05	%			0.00	%
Regulatory and other capital ratios—Company
Tangible common equity to tangible assets			10.55	%			11.07	%			12.12	%
Tier 1 leverage ratio			11.47	%			11.48	%			12.74	%
Tier 1 common capital to risk-weighted assets			14.11	%			14.87	%			16.95	%
Tier 1 capital to risk-weighted assets			14.69	%			15.49	%			17.44	%
Total capital to risk-weighted assets			20.05	%			21.10	%			23.71	%
Regulatory capital ratios—Bank only
Tier 1 leverage ratio			14.16	%			14.14	%			14.98	%
Tier 1 common capital to risk-weighted assets			18.16	%			19.09	%			20.53	%
Tier 1 capital to risk-weighted assets			18.16	%			19.09	%			20.53	%
Total capital to risk-weighted assets			19.29	%			20.13	%			21.54	%

 

 

RBB BANCORP AND SUBSIDIARIES

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited)

(Dollars in thousands, except per share amounts)

 

		3rd Quarter				2nd Quarter				1st Quarter				4th Quarter				3rd Quarter
Quarterly Consolidated Statements of Earnings		2020				2020				2020				2019				2019
Interest income
Loans, including fees		$	34,153			$	32,633			$	32,276			$	32,178			$	32,902
Investment securities and other			972				1,470				1,752				1,729				1,767
Total interest income			35,125				34,103				34,028				33,907				34,669
Interest expense
Deposits			5,525				6,715				8,329				8,796				9,155
Interest on subordinated debentures and other			1,905				1,915				1,956				1,915				1,921
Other borrowings			444				439				150				73				81
Total interest expense			7,874				9,069				10,435				10,784				11,157
Net interest income before provision for loan losses			27,251				25,034				23,593				23,123				23,512
Provision for loan losses			3,861				3,009				1,945				659				824
Net interest income after provision for loan losses			23,390				22,025				21,648				22,464				22,688
Noninterest income			2,727				2,208				4,615				5,823				2,799
Noninterest expense			13,978				14,819				16,263				13,463				13,786
Earnings before income taxes			12,139				9,414				10,000				14,824				11,701
Income taxes			3,619				2,901				3,252				4,149				3,689
Net income		$	8,520			$	6,513			$	6,748			$	10,675			$	8,012
Net income per common share - basic		$	0.43			$	0.33			$	0.34			$	0.53			$	0.40
Net income per common share - diluted		$	0.43			$	0.33			$	0.33			$	0.52			$	0.39
Cash dividends declared per common share		$	0.06			$	0.06			$	0.12			$	0.10			$	0.10
Cash dividends declared on common shares		$	3,592			$	1,184			$	2,407			$	2,003			$	2,016
Yield on average assets, annualized			1.05	%			0.83	%			0.90	%			1.51	%			1.15	%
Yield on average earning assets			4.63	%			4.60	%			4.86	%			5.09	%			5.29	%
Cost of average deposits			0.87	%			1.09	%			1.38	%			1.55	%			1.63	%
Cost of average interest-bearing deposits			1.14	%			1.41	%			1.72	%			1.93	%			2.02	%
Cost of average interest-bearing liabilities			1.43	%			1.66	%			1.98	%			2.21	%			2.30	%
Accretion on loans to average earning assets			0.08	%			0.13	%			0.10	%			0.10	%			0.10	%
Net interest margin			3.59	%			3.38	%			3.37	%			3.47	%			3.59	%

 

 

RBB BANCORP AND SUBSIDIARIES

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited, except for December 31, 2019)

(Dollars in thousands, except per share amounts)

 

Loan Portfolio Detail		As of September 30, 2020								As of June 30, 2020								As of March 31, 2020								As of December 31, 2019								As of September 30, 2019
(dollars in thousands)		$				%				$				%				$				%				$				%				$				%
Loans:
Commercial and industrial		$	317,891				11.5			$	267,481				10.3			$	275,602				11.5			$	274,586				12.5			$	276,478				13.0
SBA			111,193				4.0				104,069				4.0				77,566				3.2				74,985				3.4				70,978				3.3
Construction and land development			183,569				6.7				145,754				5.6				120,115				5.0				96,020				4.4				101,649				4.8
Commercial real estate (1)			975,187				35.4				900,302				34.7				854,580				35.6				793,268				36.1				787,927				37.1
Single-family residential mortgages			1,163,982				42.2				1,174,927				45.3				1,070,649				44.6				957,254				43.6				888,577				41.8
Other loans			3,331				0.1				2,087				0.1				1,470				0.1				821				0.0				536				0.0
Total loans (2)		$	2,755,153				99.9			$	2,594,620				100.0			$	2,399,982				100.0			$	2,196,934				100.0			$	2,126,145				100.0
Allowance for loan losses			(26,634	)							(22,820	)							(20,130	)							(18,816	)							(19,386	)
Total loans, net		$	2,728,519							$	2,571,800							$	2,379,852							$	2,178,118							$	2,106,759

 

---

(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								Nine Months Ended
Change in Allowance for Loan Losses		September 30,								September 30,
(dollars in thousands)		2020				2019				2020				2019
Beginning balance		$	22,820			$	18,561			$	18,816			$	17,577
Additions to the allowance charged to expense			3,861				824				8,815				1,731
Net (charge-offs) recoveries on loans			(47	)			1				(997	)			78
Ending balance		$	26,634			$	19,386			$	26,634			$	19,386

 

 

Tangible Book Value Reconciliations (non-GAAP)

 

The tangible book value per share is a non-GAAP disclosure. The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company’s 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 September 30, 2020 and 2019.

 

		September 30,
(dollars in thousands, except per share data)		2020				2019
Tangible common equity:
Total shareholders' equity		$	421,416			$	398,841
Adjustments
Goodwill			(69,243	)			(58,383	)
Core deposit intangible			(5,519	)			(6,444	)
Tangible common equity		$	346,654			$	334,014
Tangible assets:
Total assets-GAAP		$	3,359,576			$	2,820,302
Adjustments
Goodwill			(69,243	)			(58,383	)
Core deposit intangible			(5,519	)			(6,444	)
Tangible assets		$	3,284,814			$	2,755,475
Common shares outstanding			19,739,280				20,030,866
Tangible common equity to tangible assets ratio			10.55	%			12.12	%
Book value per share		$	21.35			$	19.91
Tangible book value per share		$	17.56			$	16.67

 

Earnings Per Share Excluding Merger and Conversion Expense (non-GAAP)

 

Earnings per share excluding merger and conversion expense is a non-GAAP disclosure. The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company’s performance. The following is a calculation of earnings per share with after-tax net income excluding tax-affected merger and conversion expense. This EPS calculation is presented for the quarters ended September 30, 2020, June 30, 2020 and September 30, 2019, plus for the nine-month periods ending September 30, 2020 and 2019.

 

		For the three months ended												For the nine months ended
		September 30, 2020				June 30, 2020				September 30, 2019				September 30, 2020				September 30, 2019
Earnings Per Share Excluding Merger and Conversion Expense (non-GAAP)
Net income after tax		$	8,520			$	6,513			$	8,012			$	21,781			$	28,534
Merger and conversion expense			62				276				100				741				282
Tax on merger and conversion expense			(18	)			(85	)			(32	)			(229	)			(83	)
Net adjustment			44				191				68				512				199
Adjusted net income after tax		$	8,564			$	6,704			$	8,080			$	22,293			$	28,733
Weighted average shares outstanding
Basic			19,717,568				19,710,330				20,067,847				19,799,617				20,063,479
Diluted			19,804,892				19,806,304				20,425,966				19,958,612				20,435,867
Adjusted Earnings Per Share
Basic, excluding merger and conversion expense		$	0.43			$	0.34			$	0.40			$	1.13			$	1.44
Diluted, excluding merger and conversion expense		$	0.43			$	0.34			$	0.40			$	1.12			$	1.41

 

 

Efficiency Ratio (non-GAAP)

 

The efficiency ratio is a non-GAAP disclosure. The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company’s performance. The efficiency ratio is non-interest expense divided by net interest income plus non-interest income. The efficiency ratio is presented for the quarters ended September 30, 2020, June 30, 2020 and September 30, 2019, plus the nine-month periods ending September 30, 2020 and 2019.

 

		For the three months ended												For the nine months ended
		September 30, 2020				June 30, 2020				September 30, 2019				September 30, 2020				September 30, 2019
Efficiency Ratio (non-GAAP)
Noninterest expense		$	13,978			$	14,819			$	13,786			$	45,060			$	44,010
Net interest income			27,251				25,034				23,512				75,878				73,741
Noninterest income			2,727				2,208				2,799				9,550				12,497
Net interest income and non-interest income		$	29,978			$	27,242			$	26,311			$	85,428			$	86,238
Efficiency ratio			46.63	%			54.40	%			52.40	%			52.75	%			51.03	%