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RBB Bancorp Reports First Quarter 2023 Earnings

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 March 31, 2023.

The Company reported net income of $11.0 million, or $0.58 diluted earnings per share, for the quarter ended March 31, 2023, compared to net income of $17.6 million, or $0.92 diluted earnings per share, and $14.6 million, or $0.74 diluted earnings per share, for the quarter ended December 31, 2022 and March 31, 2022, respectively.

“Fundamentally our first quarter results reflected a solid start to 2023, despite the challenges the industry faced in March,” said David Morris, President and CEO of RBB Bancorp. “Net income was impacted by increased legal expenses and other professional expenses, but we expect these expenses to normalize in future quarters. Thanks to the loyalty of our customers, we achieved a 5.8% increase in deposits in the first quarter and we are cautiously optimistic that the rapid increase in our cost of deposits and cost of funds that we have experienced over the past year will moderate in coming quarters. Our liquidity remains strong, and we are well positioned to service our existing customers. We expect our loan to deposit ratio to decrease in 2023 as we restructure our balance sheet in response to the ongoing market volatility.”

“Management and the Board continue to focus on rigorously improving internal processes and taking actions necessary to maximize long-term shareholder value,” said Dr. James Kao, Chairman of the Company, “We are pleased to welcome Mr. Scott Polakoff and Mr. Robert Franko to the Board of Directors of RBB Bancorp and believe they possess the skills and experience to enhance our governance and assist us in positioning the Company to take advantage of future opportunities to expand our business and grow our franchise." Mr. Polakoff is a former Regional Director of the Federal Deposit Insurance Corporation for the Chicago Region and Mr. Franko is a long-time commercial banker, most recently the President and CEO of First Choice Bank.

First Quarter 2023 Highlights

  • Net income of $11.0 million, or $0.58 diluted earnings per share.
  • Net interest income of $34.1 million.
  • Deposits, excluding brokered certificates of deposits, increased by $58.5 million, or 8.7% annualized, from the end of the fourth quarter.
  • Return on average assets of 1.12%.
  • Return on average tangible common equity of 10.66%. (1)
  • Net interest margin of 3.70%.
  • Total loans increased by $6.0 million and total deposits increase by $173.4 million, respectively, resulting in a decrease in the loan to deposit ratio to 106 % from 112 % at the end of the prior quarter.
  • The ratio of allowance for credit losses to total loans increased to 1.29% from 1.23% at the end of prior quarter.
  • The Company's capital position remained strong with a ratio of 16.3% tier 1 common equity to risk-weighted assets.

(1)

Reconciliations of the non–U.S. generally accepted accounting principles (“GAAP”) measures are set forth at the end of this press release.

Net Interest Income and Net Interest Margin

Net interest income, before provision for credit losses, was $34.1 million for the first quarter of 2023, compared to $39.0 million for the fourth quarter of 2022. The $4.9 million decrease was primarily attributable to an increase in interest expense on time deposits. For the first quarter of 2023, average time deposits increased $327.1 million and the interest rate paid on time deposits increased 96 basis points, from 2.29% to 3.25%, from the fourth quarter of 2022.

Compared to the first quarter of 2022, net interest income, before provision for credit losses, decreased $390,000 from $34.5 million. The decrease was primarily attributable to an increase in average interest-bearing deposits of $206.7 million and a 231 basis points increase in the interest rate paid on interest-bearing deposits, partially offset by an increase in average loans of $359.2 million and a 92 basis points increase in the yield earned on loans.

Net interest margin was 3.70% for the first quarter of 2023, a decrease of 56 basis points from 4.26% in the fourth quarter of 2022 due primarily to an 82 basis point increase in the average cost on interest-bearing deposits from 1.93% in the fourth quarter of 2022 to 2.75% in the first quarter of 2023. Cost of interest-bearing deposits increased due to increasing market rates and peer bank deposit competition.

Noninterest Income

Noninterest income was $2.4 million for the first quarter of 2023, an increase of $10,000 from $2.4 million in the fourth quarter of 2022. The increase was primarily driven by a $150,000 increase in loan servicing fees due to loan prepayments slowing down in 2023 and a $34,000 increase in service charges, partially offset by an $85,000 decrease in recoveries on purchased loans and a $83,000 decrease in gain on sale of loans during the quarter.

During the first quarter of 2023, loan sale volume and gain on loan sales decreased compared to prior quarter. The Company sold $836,000 in Federal National Mortgage Association ("Fannie Mae") qualified mortgage loans for a net gain of $19,000 during the first quarter of 2023 compared to $2.8 million in Fannie Mae qualified mortgage loans sold for a net gain of $69,000 during the fourth quarter of 2022. The Company sold $127,000 in Small Business Association ("SBA") loans during the first quarter of 2023 for a net gain of $10,000, compared to $834,000 SBA loans sold for a net gain of $43,000 during the fourth quarter of 2022.

Noninterest income decreased by $405,000 from $2.9 million in the first quarter of 2022. The decrease was primarily attributable to a $1.1 million decrease in gain on sale of loans due to interest rate hikes that caused decreases in both loans held for sale and gains on loans sold.

Noninterest Expense

Noninterest expense for the first quarter of 2023 was $18.9 million, compared to $14.2 million for the fourth quarter of 2022. The $4.8 million increase was primarily attributable to a $2.9 million increase in salaries and employee benefits expenses and a $2.0 million increase in legal and other professional fees. The increase in salaries and employee benefits expenses was due to the normalization of those benefits following fourth quarter reversals which reduced those expenses.

Income Taxes

The effective tax rate was 29.4% for the first quarter of 2023, 30.5% for the fourth quarter of 2022, and 30.4% for the first quarter of 2022.

Balance sheet Management

Management expects to reduce the size of the loan portfolio in the next few quarters by slowing the pace of loan originations and focusing on supporting core relationships. Management is targeting a reduction in the loan to deposit ratio to below 100% by June 30, 2023 and to below 95% by the end of 2023 and is proactively offering various alternatives, including IntraFi Cash Service (“ICS”) and CDARS, to clients with deposit balances that exceed $250,000 to reduce the level of uninsured deposits.

Loan and Securities Portfolio

Loans held for investment, net of deferred fees and discounts, totaled $3.34 billion as of March 31, 2023, an increase of $6.0 million from December 31, 2022, and an increase of $335.9 million from March 31, 2022. The increase from December 31, 2022 was primarily due to a $75.9 million increase in single-family residential mortgage loans, partially offset by a $45.2 million decrease in commercial and industrial loans and a $23.9 million decrease in commercial real estate loans. The increase from March 31, 2022 was primarily due to a $475.4 million increase in single-family residential mortgages and a $70.2 million increase in commercial real estate loans, offset by a $124.8 million decrease in commercial and industrial loans and a $65.6 million decrease in construction and land development loans.

During the first quarter of 2023, single-family residential mortgage production was $108.7 million while net payoffs and paydowns were $32.0 million. During the fourth quarter of 2022, single-family residential mortgage production was $130.8 million while payoffs and paydowns were $21.4 million.

There were no mortgage loans held for sale as of March 31, 2023 and December 31, 2022 and $3.6 million as of March 31, 2022. The Company originated $836,000 in Fannie Mae mortgage loans for sale during the first quarter of 2023, compared with $889,000 during the fourth quarter of 2022.

In the first quarter of 2023, SBA loan production was $3.0 million and total SBA loan sales were $127,000 compared to SBA loan production of $10.2 million and total SBA loan sales of $834,000 in the fourth quarter of 2022.

As of March 31, 2023, the Bank’s total available-for-sale securities amounted to $293.4 million, including available-for-sale securities maturing in over 12 months of $235.9 million. As of March 31, 2023 the Bank recorded gross unrealized losses of $28.7 million on its available-for-sale securities compared to gross unrealized losses of $31.2 million as of December 31, 2022 with respect to its available-for-sale securities.

Liquidity and Deposits

Total deposits were $3.2 billion as of March 31, 2023, which reflected an increase of $173.4 million or 5.8% compared to December 31, 2022. As of March 31, 2023, the Company had $230.7 million in cash on the balance sheet, which is an increase of $147.2 million or 176% from December 31, 2022. In addition, the Company had $818.4 million in Federal Home Loan Bank borrowing availability, Fed fund lines of $92.0 million, $11.2 million in available funds from the FRB Discount window and $293.3 million in available for sale securities that were unpledged. The Company has $149.1 million loans qualified to be pledged to the FRB. The total of these available sources represents $1.6 billion or 146% of total uninsured deposit or 169% of adjusted uninsured deposit, which excludes ICS and CDARS program deposits and uninsured deposits affiliated with directors and officers of the Company.

Total adjusted uninsured deposits of $945.4 million represented approximately 30% of total deposits as of March 31, 2023. Uninsured deposits affiliated with directors and officers of the Company amounted to $29.1 million. Since mid-March, we have been diligently working with our larger deposit clients to enroll them in the ICS and CDARS program to ensure that all of their deposits are FDIC insured. ICS and CDARS program deposits amounted $116.2 million at March 31, 2023.

Credit Quality

Nonperforming assets totaled $27.0 million, or 0.66% of total assets at March 31, 2023, compared to $24.1 million, or 0.61% of total assets at December 31, 2022. The $2.9 million increase in nonperforming assets was due to the increase in single-family residential loans in the amount of $4.7 million, partially offset by single-family residential loan payoffs or paydowns of $1.8 million.

Our 30-89 day delinquent loans, excluding non-accrual loans, decreased $961,000 to $14.3 million as of March 31, 2023 compared to $15.2 million as of December 31, 2022.

Total net charge-offs were $157,000 for the first quarter of 2023, as compared to net charge-offs of $85,000 in the prior quarter and net recoveries of $14,000 in the same quarter last year.

The allowance for credit losses totaled $43.1 million, or 1.29% of loans held for investment at March 31, 2023, compared with $41.1 million, or 1.23%, of loans held for investment at December 31, 2022.

Dividend Payout and Stock Repurchase

During the first quarter of 2023, the Board of Directors declared a common stock cash dividend of $0.16 per share, payable on May 12, 2023 to stockholders of record on May 1, 2023.

On June 14, 2022, the Board of Directors authorized the repurchase of up to 500,000 shares of common stock, of which 433,124 shares remain available. The Company did not repurchase any shares during the first quarter of 2023, and has not repurchased any shares since October 24, 2022 pursuant to this authorization.

Corporate Overview

RBB Bancorp is a community-based financial holding company headquartered in Los Angeles, California. As of March 31, 2023, the Company had total assets of $4.1 billion. Its wholly-owned subsidiary, the Bank, is a full service commercial bank, which provides business banking services to the Asian communities in Los Angeles County, Orange County, and Ventura County in California, in Las Vegas, Nevada, in Brooklyn, Queens, and Manhattan in New York, in Edison, New Jersey, in the Chicago neighborhoods of Chinatown and Bridgeport, Illinois, and on Oahu, Hawaii. 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 Orange County, California, one branch in Las Vegas, Nevada, three branches and one loan operation center in Brooklyn, three branches in Queens, one branch in Manhattan in New York, one branch in Edison, New Jersey, two branches in Chicago, Illinois, and one branch in Honolulu, Hawaii. 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 Ave., 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 on Tuesday, April 25, 2023, to discuss the Company’s first quarter 2023 financial results.

To listen to the conference call, please dial 1-888-506-0062 or 1-973-528-0011, the Participant ID code is 874821, conference ID RBBQ123. A replay of the call will be made available at 1-877-481-4010 or 1-919-882-2331, the passcode is 48133, approximately one hour after the conclusion of the call and will remain available through May 9, 2023.

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, business and economic conditions generally and in the financial services industry, nationally and within our current and future geographic markets, including the tight labor market, ineffective management of the U.S. federal budget or debt or turbulence or uncertainly in domestic of foreign financial markets; the strength of the United States economy in general and the strength of the local economies in which we conduct operations; possible additional provisions for loan losses and charge-offs; credit risks of lending activities and deterioration in asset or credit quality; extensive laws and regulations and supervision that we are subject to, including potential supervisory action by bank supervisory authorities; increased costs of compliance and other risks associated with changes in regulation, including any amendments to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”); compliance with the Bank Secrecy Act and other money laundering statutes and regulations; potential goodwill impairment; liquidity risk; fluctuations in interest rates; the transition away from the London Interbank Offering Rate ("LIBOR") and related uncertainty as well as the risks and costs related to our adopted alternative reference rate, including the Secured Overnight Financing Rate ("SOFR"); risks associated with acquisitions and the expansion of our business into new markets; inflation and deflation; real estate market conditions and the value of real estate collateral; environmental liabilities; our ability to compete with larger competitors; our ability to retain key personnel; successful management of reputational risk; severe weather, natural disasters, earthquakes, fires; or other adverse external events could harm our business; geopolitical conditions, including acts or threats of terrorism, actions taken by the United States or other governments in response to acts or threats of terrorism and/or military conflicts, including the war between Russia and Ukraine, which could impact business and economic conditions in the United States and abroad; public health crises and pandemics, including the COVID-19 pandemic, and their effects on the economic and business environments in which we operate, including our credit quality and business operations, as well as the impact on general economic and financial market conditions; general economic or business conditions in Asia, and other regions where the Bank has operations; failures, interruptions, or security breaches of our information systems; climate change, including any enhanced regulatory, compliance, credit and reputational risks and costs; cybersecurity threats and the cost of defending against them; our ability to adapt our systems to the expanding use of technology in banking; risk management processes and strategies; adverse results in legal proceedings; the impact of regulatory enforcement actions, if any; certain provisions in our charter and bylaws that may affect acquisition of the Company; changes in tax laws and regulations; the impact of governmental efforts to restructure the U.S. financial regulatory system; the impact of future or recent changes in the Federal Deposit Insurance Corporation ("FDIC") insurance assessment rate of the rules and regulations related to the calculation of the FDIC insurance assessment amount; the effect of changes in accounting policies and practices or accounting standards, as may be adopted from time-to-time by bank regulatory agencies, the U.S. Securities and Exchange Commission (“SEC”), the Public Company Accounting Oversight Board, the Financial Accounting Standards Board (“FASB”) or other accounting standards setters, including Accounting Standards Update (“ASU” or “Update”) 2016-13 (Topic 326, “Measurement of Current Losses on Financial Instruments, commonly referenced as the Current Expected Credit Losses Model (“CECL”) model, which changed how we estimate credit losses and may further increase the required level of our allowance for credit losses in future periods; market disruption and volatility; fluctuations in the Bancorp’s stock price; restrictions on dividends and other distributions by laws and regulations and by our regulators and our capital structure; issuances of preferred stock; our ability to raise additional capital, if needed, and the potential resulting dilution of interests of holders of our common stock; the soundness of other financial institutions; 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, 2022, 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, 2022)

(Dollars in thousands)

 

 

 

March 31,

 

 

December 31,

 

 

March 31,

 

 

 

2023

 

 

2022

 

 

2022

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

230,703

 

 

$

83,548

 

 

$

149,767

 

Federal funds sold and other cash equivalents

 

 

 

 

 

 

 

 

200,000

 

Total cash and cash equivalents

 

 

230,703

 

 

 

83,548

 

 

 

349,767

 

Interest-bearing deposits in other financial institutions

 

 

600

 

 

 

600

 

 

 

600

 

Investment securities available for sale

 

 

293,371

 

 

 

256,830

 

 

 

420,448

 

Investment securities held to maturity

 

 

5,722

 

 

 

5,729

 

 

 

6,246

 

Mortgage loans held for sale

 

 

 

 

 

 

 

 

3,572

 

Loans held for investment

 

 

3,342,416

 

 

 

3,336,449

 

 

 

3,006,484

 

Allowance for credit losses

 

 

(43,071

)

 

 

(41,076

)

 

 

(33,292

)

Net loans held for investment

 

 

3,299,345

 

 

 

3,295,373

 

 

 

2,973,192

 

Premises and equipment, net

 

 

27,040

 

 

 

27,009

 

 

 

27,455

 

Federal Home Loan Bank (FHLB) stock

 

 

15,000

 

 

 

15,000

 

 

 

15,000

 

Cash surrender value of life insurance

 

 

57,645

 

 

 

57,310

 

 

 

56,313

 

Goodwill

 

 

71,498

 

 

 

71,498

 

 

 

71,498

 

Servicing assets

 

 

9,159

 

 

 

9,521

 

 

 

11,048

 

Core deposit intangibles

 

 

3,481

 

 

 

3,718

 

 

 

4,525

 

Right-of-use assets- operating leases

 

 

29,931

 

 

 

25,447

 

 

 

22,451

 

Accrued interest and other assets

 

 

65,996

 

 

 

67,475

 

 

 

51,454

 

Total assets

 

$

4,109,491

 

 

$

3,919,058

 

 

$

4,013,569

 

Liabilities and shareholders' equity

 

 

 

 

 

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing demand

 

$

672,177

 

 

$

798,741

 

 

$

1,159,703

 

Savings, NOW and money market accounts

 

 

617,101

 

 

 

615,339

 

 

 

885,050

 

Time deposits, less than $250,000

 

 

1,122,687

 

 

 

837,369

 

 

 

570,274

 

Time deposits, greater than or equal to $250,000

 

 

739,098

 

 

 

726,234

 

 

 

553,226

 

Total deposits

 

 

3,151,063

 

 

 

2,977,683

 

 

 

3,168,253

 

FHLB advances

 

 

220,000

 

 

 

220,000

 

 

 

150,000

 

Long-term debt, net of debt issuance costs

 

 

173,730

 

 

 

173,585

 

 

 

173,152

 

Subordinated debentures

 

 

14,774

 

 

 

14,720

 

 

 

14,556

 

Lease liabilities - operating leases

 

 

31,078

 

 

 

26,523

 

 

 

23,314

 

Accrued interest and other liabilities

 

 

24,099

 

 

 

21,984

 

 

 

19,469

 

Total liabilities

 

 

3,614,744

 

 

 

3,434,495

 

 

 

3,548,744

 

Shareholders' equity:

 

 

 

 

 

 

 

 

 

 

 

 

Shareholder's equity

 

 

514,553

 

 

 

506,156

 

 

 

475,077

 

Non-controlling interest

 

 

72

 

 

 

72

 

 

 

72

 

Accumulated other comprehensive loss, net of tax

 

 

(19,878

)

 

 

(21,665

)

 

 

(10,324

)

Total shareholders' equity

 

 

494,747

 

 

 

484,563

 

 

 

464,825

 

Total liabilities and shareholders equity

 

$

4,109,491

 

 

$

3,919,058

 

 

$

4,013,569

 

RBB BANCORP AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Dollars in thousands, except share and per share data)

 

 

 

For the Three Months Ended

 

 

 

March 31, 2023

 

 

December 31, 2022

 

 

March 31, 2022

 

Interest and dividend income:

 

 

 

 

 

 

 

 

 

 

 

 

Interest and fees on loans

 

$

49,942

 

 

$

49,468

 

 

$

37,886

 

Interest on interest-bearing deposits

 

 

791

 

 

 

697

 

 

 

171

 

Interest on investment securities

 

 

2,536

 

 

 

1,874

 

 

 

1,007

 

Dividend income on FHLB stock

 

 

265

 

 

 

265

 

 

 

227

 

Interest on federal funds sold and other

 

 

217

 

 

 

347

 

 

 

275

 

Total interest income

 

 

53,751

 

 

 

52,651

 

 

 

39,566

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

Interest on savings deposits, NOW and money market accounts

 

 

2,296

 

 

 

2,471

 

 

 

718

 

Interest on time deposits

 

 

13,406

 

 

 

7,798

 

 

 

1,574

 

Interest on subordinated debentures and long term debt

 

 

2,539

 

 

 

2,491

 

 

 

2,348

 

Interest on other borrowed funds

 

 

1,409

 

 

 

898

 

 

 

435

 

Total interest expense

 

 

19,650

 

 

 

13,658

 

 

 

5,075

 

Net interest income before provision for credit losses

 

 

34,101

 

 

 

38,993

 

 

 

34,491

 

Provision for credit losses

 

 

2,014

 

 

 

1,887

 

 

 

366

 

Net interest income after provision for credit losses

 

 

32,087

 

 

 

37,106

 

 

 

34,125

 

Noninterest income:

 

 

 

 

 

 

 

 

 

 

 

 

Service charges, fees and other

 

 

1,252

 

 

 

1,218

 

 

 

1,121

 

Gain on sale of loans

 

 

29

 

 

 

112

 

 

 

1,174

 

Loan servicing fees, net of amortization

 

 

731

 

 

 

581

 

 

 

432

 

Recoveries on loans acquired in business combinations

 

 

5

 

 

 

90

 

 

 

 

Unrealized gain/(loss)on derivatives

 

 

10

 

 

 

16

 

 

 

(108

)

Increase in cash surrender value of life insurance

 

 

335

 

 

 

335

 

 

 

325

 

Total noninterest income

 

 

2,362

 

 

 

2,352

 

 

 

2,944

 

Noninterest expense:

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

9,874

 

 

 

6,930

 

 

 

9,369

 

Occupancy and equipment expenses

 

 

2,398

 

 

 

2,364

 

 

 

2,206

 

Data processing

 

 

1,299

 

 

 

1,203

 

 

 

1,258

 

Legal and professional

 

 

3,013

 

 

 

1,045

 

 

 

1,006

 

Office expenses

 

 

375

 

 

 

405

 

 

 

293

 

Marketing and business promotion

 

 

300

 

 

 

406

 

 

 

307

 

Insurance and regulatory assessments

 

 

504

 

 

 

489

 

 

 

441

 

Core deposit premium

 

 

237

 

 

 

253

 

 

 

279

 

Other expenses

 

 

921

 

 

 

1,061

 

 

 

902

 

Total noninterest expense

 

 

18,921

 

 

 

14,156

 

 

 

16,061

 

Income before income taxes

 

 

15,528

 

 

 

25,302

 

 

 

21,008

 

Income tax expense

 

 

4,567

 

 

 

7,721

 

 

 

6,391

 

Net income

 

$

10,961

 

 

$

17,581

 

 

$

14,617

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.58

 

 

$

0.93

 

 

$

0.75

 

Diluted

 

$

0.58

 

 

$

0.92

 

 

$

0.74

 

Cash Dividends declared per common share

 

$

0.16

 

 

$

0.14

 

 

$

0.14

 

Weighted-average common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

18,985,846

 

 

 

18,971,250

 

 

 

19,377,407

 

Diluted

 

 

19,049,685

 

 

 

19,086,586

 

 

 

19,799,323

 

RBB BANCORP AND SUBSIDIARIES

AVERAGE BALANCE SHEET AND NET INTEREST INCOME

(Unaudited)

 

 

 

For the Three Months Ended

 

 

 

March 31, 2023

 

 

December 31, 2022

 

 

March 31, 2022

 

(tax-equivalent basis, dollars in thousands)

 

Average

Balance

 

 

Interest

& Fees

 

 

Yield /

Rate

 

 

Average

Balance

 

 

Interest

& Fees

 

 

Yield /

Rate

 

 

Average

Balance

 

 

Interest

& Fees

 

 

Yield /

Rate

 

Earning assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal funds sold, cash equivalents & other (1)

 

$

110,750

 

 

$

1,272

 

 

 

4.66

%

 

$

94,932

 

 

$

1,310

 

 

 

5.47

%

 

$

628,634

 

 

$

673

 

 

 

0.43

%

Securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available for sale (2)

 

 

277,206

 

 

 

2,510

 

 

 

3.67

%

 

 

245,348

 

 

 

1,847

 

 

 

2.99

%

 

 

392,858

 

 

 

974

 

 

 

1.01

%

Held to maturity (2)

 

 

5,727

 

 

 

51

 

 

 

3.61

%

 

 

5,733

 

 

 

50

 

 

 

3.46

%

 

 

6,250

 

 

 

57

 

 

 

3.70

%

Mortgage loans held for sale

 

 

88

 

 

 

1

 

 

 

6.45

%

 

 

192

 

 

 

3

 

 

 

6.20

%

 

 

3,652

 

 

 

43

 

 

 

4.78

%

Loans held for investment: (3)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Real estate

 

 

3,092,667

 

 

 

44,903

 

 

 

5.89

%

 

 

3,006,293

 

 

 

43,864

 

 

 

5.79

%

 

 

2,602,382

 

 

 

33,095

 

 

 

5.16

%

Commercial

 

 

249,911

 

 

 

5,038

 

 

 

8.18

%

 

 

280,326

 

 

 

5,601

 

 

 

7.93

%

 

 

380,978

 

 

 

4,748

 

 

 

5.05

%

Total loans

 

 

3,342,578

 

 

 

49,941

 

 

 

6.06

%

 

 

3,286,619

 

 

 

49,465

 

 

 

5.97

%

 

 

2,983,360

 

 

 

37,843

 

 

 

5.14

%

Total earning assets

 

 

3,736,349

 

 

$

53,775

 

 

 

5.84

%

 

 

3,632,824

 

 

$

52,675

 

 

 

5.75

%

 

 

4,014,754

 

 

$

39,590

 

 

 

4.00

%

Noninterest-earning assets

 

 

239,952

 

 

 

 

 

 

 

 

 

 

 

247,589

 

 

 

 

 

 

 

 

 

 

 

241,235

 

 

 

 

 

 

 

 

 

Total assets

 

$

3,976,301

 

 

 

 

 

 

 

 

 

 

$

3,880,413

 

 

 

 

 

 

 

 

 

 

$

4,255,989

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOW

 

$

63,401

 

 

$

108

 

 

 

0.69

%

 

$

67,854

 

 

$

77

 

 

 

0.45

%

 

$

75,399

 

 

$

43

 

 

 

0.23

%

Money Market

 

 

458,824

 

 

 

2,140

 

 

 

1.89

%

 

 

561,575

 

 

 

2,337

 

 

 

1.65

%

 

 

720,197

 

 

 

643

 

 

 

0.36

%

Saving deposits

 

 

120,695

 

 

 

49

 

 

 

0.16

%

 

 

136,623

 

 

 

57

 

 

 

0.17

%

 

 

145,327

 

 

 

32

 

 

 

0.09

%

Time deposits, less than $250,000

 

 

912,694

 

 

 

7,425

 

 

 

3.30

%

 

 

716,476

 

 

 

3,884

 

 

 

2.15

%

 

 

600,563

 

 

 

754

 

 

 

0.51

%

Time deposits, $250,000 and over

 

 

762,770

 

 

 

5,981

 

 

 

3.18

%

 

 

631,897

 

 

 

3,914

 

 

 

2.46

%

 

 

570,210

 

 

 

820

 

 

 

0.58

%

Total interest-bearing deposits

 

 

2,318,384

 

 

 

15,703

 

 

 

2.75

%

 

 

2,114,425

 

 

 

10,269

 

 

 

1.93

%

 

 

2,111,696

 

 

 

2,292

 

 

 

0.44

%

FHLB advances

 

 

229,778

 

 

 

1,409

 

 

 

2.49

%

 

 

196,304

 

 

 

898

 

 

 

1.81

%

 

 

150,000

 

 

 

435

 

 

 

1.18

%

Long-term debt

 

 

173,635

 

 

 

2,194

 

 

 

5.12

%

 

 

173,491

 

 

 

2,194

 

 

 

5.02

%

 

 

173,058

 

 

 

2,194

 

 

 

5.14

%

Subordinated debentures

 

 

14,739

 

 

 

344

 

 

 

9.47

%

 

 

14,684

 

 

 

297

 

 

 

8.02

%

 

 

14,521

 

 

 

154

 

 

 

4.30

%

Total interest-bearing liabilities

 

 

2,736,536

 

 

 

19,650

 

 

 

2.91

%

 

 

2,498,904

 

 

 

13,658

 

 

 

2.17

%

 

 

2,449,275

 

 

 

5,075

 

 

 

0.84

%

Noninterest-bearing liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noninterest-bearing deposits

 

 

698,351

 

 

 

 

 

 

 

 

 

 

 

856,917

 

 

 

 

 

 

 

 

 

 

 

1,301,497

 

 

 

 

 

 

 

 

 

Other noninterest-bearing liabilities

 

 

49,113

 

 

 

 

 

 

 

 

 

 

 

46,628

 

 

 

 

 

 

 

 

 

 

 

34,319

 

 

 

 

 

 

 

 

 

Total noninterest-bearing liabilities

 

 

747,464

 

 

 

 

 

 

 

 

 

 

 

903,545

 

 

 

 

 

 

 

 

 

 

 

1,335,816

 

 

 

 

 

 

 

 

 

Shareholders' equity

 

 

492,301

 

 

 

 

 

 

 

 

 

 

 

477,964

 

 

 

 

 

 

 

 

 

 

 

470,898

 

 

 

 

 

 

 

 

 

Total liabilities and shareholders' equity

 

$

3,976,301

 

 

 

 

 

 

 

 

 

 

$

3,880,413

 

 

 

 

 

 

 

 

 

 

$

4,255,989

 

 

 

 

 

 

 

 

 

Net interest income / interest rate spreads

 

 

 

 

 

$

34,125

 

 

 

2.93

%

 

 

 

 

 

$

39,017

 

 

 

3.58

%

 

 

 

 

 

$

34,515

 

 

 

3.16

%

Net interest margin

 

 

 

 

 

 

 

 

 

 

3.70

%

 

 

 

 

 

 

 

 

 

 

4.26

%

 

 

 

 

 

 

 

 

 

 

3.49

%

_____________

(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

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited)

 

 

 

For the Three Months Ended

 

 

 

March 31,

 

 

December 31,

 

 

March 31,

 

 

 

2023

 

 

2022

 

 

2022

 

Per share data (common stock)

 

 

 

 

 

 

 

 

 

 

 

 

Book value

 

$

26.05

 

 

$

25.55

 

 

$

24.15

 

Tangible book value (1)

 

$

22.10

 

 

$

21.58

 

 

$

20.20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Performance ratios

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets, annualized

 

 

1.12

%

 

 

1.80

%

 

 

1.39

%

Return on average shareholders' equity, annualized

 

 

9.03

%

 

 

14.59

%

 

 

12.59

%

Return on average tangible common equity, annualized (1)

 

 

10.66

%

 

 

17.33

%

 

 

14.91

%

Noninterest income to average assets, annualized

 

 

0.24

%

 

 

0.24

%

 

 

0.28

%

Noninterest expense to average assets, annualized

 

 

1.93

%

 

 

1.45

%

 

 

1.53

%

Yield on average earning assets

 

 

5.84

%

 

 

5.75

%

 

 

4.00

%

Cost of average total deposits

 

 

2.11

%

 

 

1.37

%

 

 

0.27

%

Cost of average interest-bearing deposits

 

 

2.75

%

 

 

1.93

%

 

 

0.44

%

Cost of average interest-bearing liabilities

 

 

2.91

%

 

 

2.17

%

 

 

0.84

%

Accretion on loans to average earning assets

 

 

0.02

%

 

 

0.00

%

 

 

0.02

%

Net interest spread

 

 

2.93

%

 

 

3.58

%

 

 

3.16

%

Net interest margin

 

 

3.70

%

 

 

4.26

%

 

 

3.49

%

Efficiency ratio (2)

 

 

51.89

%

 

 

34.24

%

 

 

42.90

%

Common stock dividend payout ratio

 

 

27.59

%

 

 

15.05

%

 

 

18.67

%

_____________

(1)

Reconciliations of the non–U.S. generally accepted accounting principles (“GAAP”) measures are set forth at the end of this press release.

(2)

Ratio calculated by dividing noninterest expense by the sum of net interest income before provision for credit losses and noninterest income.

RBB BANCORP AND SUBSIDIARIES

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited)

(Dollars in thousands)

 

 

 

 

 

 

As of

 

 

 

March 31,

 

 

December 31,

 

 

March 31,

 

 

 

2023

 

 

2022

 

 

2022

 

Credit Quality Data:

 

 

 

 

 

 

 

 

 

 

 

 

Loans 30-89 days past due

 

$

14,288

 

 

$

15,249

 

 

$

17,635

 

Loans 30-89 days past due to total loans

 

 

0.43

%

 

 

0.46

%

 

 

0.59

%

Nonperforming loans (2)

 

$

26,436

 

 

$

23,523

 

 

$

20,691

 

Nonperforming loans to total loans

 

 

0.79

%

 

 

0.71

%

 

 

0.69

%

Nonperforming assets (2)

 

$

27,013

 

 

$

24,100

 

 

$

20,984

 

Nonperforming assets to total assets

 

 

0.66

%

 

 

0.61

%

 

 

0.52

%

Allowance for credit losses to total loans

 

 

1.29

%

 

 

1.23

%

 

 

1.11

%

Allowance for credit losses to nonperforming loans

 

 

162.93

%

 

 

174.62

%

 

 

160.90

%

Net Charge-offs (recoveries)

 

$

157

 

 

$

85

 

 

$

(14

)

Net charge-offs (recoveries) to average loans (for the quarter-to-date period)

 

 

0.02

%

 

 

0.01

%

 

 

(0.00

%)

 

 

 

 

 

 

 

 

 

 

 

 

 

Regulatory and other capital ratios

 

 

 

 

 

 

 

 

 

 

 

 

Tangible common equity to tangible assets (1)

 

 

10.40

%

 

 

10.65

%

 

 

9.87

%

Tier 1 leverage ratio

 

 

11.61

%

 

 

11.67

%

 

 

9.90

%

Tier 1 common capital to risk-weighted assets

 

 

16.34

%

 

 

16.03

%

 

 

14.12

%

Tier 1 capital to risk-weighted assets

 

 

16.89

%

 

 

16.58

%

 

 

14.63

%

Total capital to risk-weighted assets

 

 

24.58

%

 

 

24.27

%

 

 

21.96

%

_____________

(1)

Reconciliations of the non-U.S. generally accepted accounting principles ("GAAP") measures are set forth at the end of this press release.

(2)

Nonperforming loans and nonperforming assets were revised from $11,525 and $12,102, respectively, as shown in the earnings release for the quarter and year ended December 31, 2022, to $23,523 and $24,100, respectively, as correctly shown in the Company's Annual Report on 10-K for the year ended December 31, 2022, due to a $12 million construction loan that was not included in nonperforming loans and nonperforming assets in the Company's earnings release as of the year ended December 31, 2022.

RBB BANCORP AND SUBSIDIARIES

SELECTED FINANCIAL HIGHLIGHTS

(Unaudited, except for December 31, 2022)

 

 

 

 

 

 

 

 

 

 

Loan Portfolio Detail

 

As of March 31, 2023

 

 

As of December 31, 2022

 

 

As of March 31, 2022

 

(dollars in thousands)

 

 

$

 

 

%

 

 

 

$

 

 

%

 

 

 

$

 

 

%

 

Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and industrial

 

$

156,023

 

 

 

4.7

%

 

$

201,223

 

 

 

6.0

%

 

$

280,825

 

 

 

9.3

%

SBA

 

 

58,531

 

 

 

1.7

%

 

 

61,411

 

 

 

1.9

%

 

 

67,688

 

 

 

2.3

%

Construction and land development

 

 

281,203

 

 

 

8.4

%

 

 

276,876

 

 

 

8.3

%

 

 

346,766

 

 

 

11.5

%

Commercial real estate (1)

 

 

1,288,188

 

 

 

38.5

%

 

 

1,312,132

 

 

 

39.3

%

 

 

1,217,985

 

 

 

40.5

%

Single-family residential mortgages

 

 

1,539,982

 

 

 

46.1

%

 

 

1,464,108

 

 

 

43.9

%

 

 

1,064,581

 

 

 

35.4

%

Other loans

 

 

18,489

 

 

 

0.6

%

 

 

20,699

 

 

 

0.6

%

 

 

28,639

 

 

 

1.0

%

Total loans (2)

 

$

3,342,416

 

 

 

100.0

%

 

$

3,336,449

 

 

 

100.0

%

 

$

3,006,484

 

 

 

100.0

%

Allowance for credit losses

 

 

(43,071

)

 

 

 

 

 

 

(41,076

)

 

 

 

 

 

 

(33,292

)

 

 

 

 

Total loans, net

 

$

3,299,345

 

 

 

 

 

 

$

3,295,373

 

 

 

 

 

 

$

2,973,192

 

 

 

 

 

(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.

Non-GAAP Financial Measures

Tangible Book Value Reconciliations

The tangible book value per share is a non-GAAP disclosure. Management measures the tangible book value per share to assess the Company��s capital strength and business performance and believes these are helpful to investors as additional tool for further understanding our 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 March 31, 2023, December 31, 2022, and March 31, 2022.

 

 

 

 

 

 

 

 

 

 

 

 

 

(dollars in thousands, except share and per share data)

 

March 31, 2023

 

 

December 31, 2022

 

 

March 31, 2022

 

Tangible common equity:

 

 

 

 

 

 

 

 

 

 

 

 

Total shareholders' equity

 

$

494,747

 

 

$

484,563

 

 

$

464,825

 

Adjustments

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

 

(71,498

)

 

 

(71,498

)

 

 

(71,498

)

Core deposit intangible

 

 

(3,481

)

 

 

(3,718

)

 

 

(4,525

)

Tangible common equity

 

$

419,768

 

 

$

409,347

 

 

$

388,802

 

Tangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

Total assets-GAAP

 

$

4,109,491

 

 

$

3,919,058

 

 

$

4,013,569

 

Adjustments

 

 

 

 

 

 

 

 

 

 

 

 

Goodwill

 

 

(71,498

)

 

 

(71,498

)

 

 

(71,498

)

Core deposit intangible

 

 

(3,481

)

 

 

(3,718

)

 

 

(4,525

)

Tangible assets

 

$

4,034,512

 

 

$

3,843,842

 

 

$

3,937,546

 

Common shares outstanding

 

 

18,992,903

 

 

 

18,965,776

 

 

 

19,247,970

 

Tangible common equity to tangible assets ratio

 

 

10.40

%

 

 

10.65

%

 

 

9.87

%

Book value per share

 

$

26.05

 

 

$

25.55

 

 

$

24.15

 

Tangible book value per share

 

$

22.10

 

 

$

21.58

 

 

$

20.20

 

Return on Average Tangible Common Equity

Management measures return on average tangible common equity (“ROATCE”) to assess the Company’s capital strength and business performance and believes these are helpful to investors as an additional tool for further understanding our performance. Tangible equity excludes goodwill and other intangible assets (excluding mortgage servicing rights), and is reviewed by banking and financial institution regulators when assessing a financial institution’s capital adequacy. This non-GAAP financial measure should not be considered a substitute for operating results determined in accordance with GAAP and may not be comparable to other similarly titled measures used by other companies. The following table reconciles return on average tangible common equity to its most comparable GAAP measure:

 

 

Three Months Ended

 

 

March 31,

(dollars in thousands)

 

 

2023

 

 

2022

 

Net income available to common shareholders

 

$

10,961

 

 

$

14,617

 

Average shareholders' equity

 

 

492,301

 

 

 

470,898

 

Adjustments:

 

 

 

 

 

Goodwill

 

 

(71,498

)

 

 

(69,268

)

Core deposit intangible

 

 

(3,636

)

 

 

(4,061

)

Adjusted average tangible common equity

 

$

417,167

 

 

$

397,569

 

Return on average tangible common equity

 

 

10.66

%

 

 

14.91

%

 

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