Press Release Details

• Net income was $6.6 million or $0.42 diluted earnings per share
  
  
• Total loans increased by $50.5 million, or 17.5% annualized growth, from the end of the prior quarter
  
  
• Total deposits increased by $39.8 million, or 12.4% annualized growth, from the end of the prior quarter

LOS ANGELES, Oct. 23, 2017 (GLOBE NEWSWIRE) -- 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, 2017.

The Company reported net income of $6.6 million, or $0.42 diluted earnings per share, for the three months ended September 30, 2017, compared to net income of $8.5 million, or $0.62 diluted earnings per share, and $5.7 million, or $0.43 diluted earnings per share, for the three months ended June 30, 2017 and September 30, 2016, respectively. The decline in earnings per share relative to the second quarter of 2017 was attributable to the recapture of $4.2 million of provision for loan losses in the second quarter of 2017 that positively impacted the prior quarter's results.

Mr. Alan Thian, Chairman, President and CEO of RBB Bancorp, commented on the results, “We executed well on our strategic plan in the third quarter and delivered strong financial results driven by quality balance sheet growth, higher gain on loan sale income, stable expenses and improvement in our asset quality.  Our loan pipeline remains strong and we expect to see a continuation of these positive trends going forward.  We are also on track to launch our Wealth Management business by the beginning of 2018.  We anticipate that Wealth Management will provide a stable source of non-interest income, further diversify our revenue mix, and serve as another catalyst for the continued growth of our franchise in the coming years.”

Key Performance Ratios

Net income of $6.6 million for the third quarter of 2017 produced an annualized return on average equity of 11.04% and an annualized return on average assets of 1.65%. The efficiency ratio for the third quarter of 2017 was 38.87%, compared to 40.44% for the prior quarter. Adjusted annualized return on average assets and average tangible common equity for the third quarter of 2017 was 1.55% and 11.97%, respectively, compared to 1.10% and 11.06% for the third quarter of 2016.  A reconciliation of adjusted earnings to earnings according to generally accepted accounting principles (“GAAP”) is provided in the financial tables at the end of this press release.

Net Interest Income and Net Interest Margin

Net interest income, before provision for loan losses, was $14.7 million for the third quarter of 2017, compared to $14.0 million for the second quarter of 2017.  The increase was primarily attributable to a $94.5 million increase in average earning assets (mainly the result of proceeds from the Company’s July IPO), largely offset by an 11 basis point decrease in the net interest margin (which includes the impact of reduced loan discount accretion).

Compared to the third quarter of 2016, net interest income, before provision for loan losses, declined from $15.5 million. The decrease was primarily due to loan discount accretion income being lower by $2.3 million in the third quarter of 2017 as compared to the third quarter of 2016.

Net interest margin was 3.91% for the third quarter of 2017, a decrease from 4.02% in the second quarter of 2017.  The decrease was primarily attributable to a 15 basis point decrease in the yield on earning assets, primarily due to lower loan discount accretion income and a higher proportion of lower yielding assets due to excess liquidity from the IPO.  

Compared to the third quarter of 2016, net interest margin declined from 4.52%.  The decrease was primarily due to lower accretion of purchased discounts between the third quarter of 2017 and the third quarter of 2016 (see adjusted earnings metrics table on page 16).

Noninterest Income

Noninterest income was $3.8 million for the third quarter of 2017, compared to $3.2 million in the second quarter of 2017.  The increase was primarily attributable to an additional $295,000 gain on loan sales, an additional $319,000 in loan servicing fees, a $142,000 gain on sale of one OREO property, partially offset by a $123,000 decrease in service charges.

The Company sold $43.4 million in mortgage loans for a net gain of $969,000 during the quarter ended September 30, 2017, compared to $37.7 million in mortgage loans for a net gain of $802,000 during the quarter ended June 30, 2017. The Company originated $118.6 million in mortgage loans for the quarter ended September 30, 2017, compared with $97.1 million during the quarter ended June 30, 2017.

The Company sold $22.4 million in SBA loans for a net gain of $1.6 million during the quarter ended September 30, 2017, compared to $23.1 million in SBA loans for a net gain of $1.5 million during the quarter ended June 30, 2017.  SBA loan originations for the quarter ending September 30, 2017 were $19.3 million, compared to $34.4 million during the quarter ended June 30, 2017.

Compared to the third quarter of 2016, noninterest income increased from $2.6 million. The increase was primarily attributable to an additional $714,000 from gains on loan sales, an increase of $219,000 in additional loan servicing fees, plus the above mentioned OREO sale.

Noninterest Expense

Noninterest expense for the third quarter of 2017 was $7.2 million, compared to $7.0 million for the second quarter of 2017.  The increase was primarily attributable to a $107,000 increase in marketing and business promotion expenses and other expense, partially offset by reductions in salaries and employee benefits, occupancy and equipment expenses and office expenses.

Compared to the third quarter of 2016, noninterest expense increased from $7.0 million. The $164,000 increase when compared to the third quarter of 2016 was primarily the result of an increase in salaries and employee benefits of $697,000, partially offset by decreases in data processing, legal & professional, and other expenses.

Income Taxes

The effective tax rate for the three and nine months ended September 30, 2017 was 37.8% and 40.1%, respectively, compared with 41.7% and 41.2% for the three and nine months ended September 30, 2016, respectively. Our estimated annual effective tax rate varies depending upon tax-advantaged income as well as available tax credits. The decrease in the effective tax rate is mainly due to stock option exercises and a resulting tax deduction of $773,000. 

Loan Portfolio

Loans held for investment, net of deferred fees and discounts, totaled $1.20 billion as of September 30, 2017, an increase of $50.5 million, or 17.5% annualized growth, from $1.15 billion at June 30, 2017, and an increase of $74.6 million, or 6.7%, from September 30, 2016.  The increase in loans held for investment from the end of the prior quarter was primarily attributable to growth in the commercial real estate and residential real estate portfolios.

Mortgage loans held for sale increased to $125.7 million as of September 30, 2017, compared to $83.3 million at June 30, 2017.  The increase was due to higher originations of single-family residential mortgage loans held for sale.

Deposits

Deposits were at $1.32 billion at September 30, 2017, an increase of $39.8 million, or 12.4% annualized growth, from $1.28 billion at June 30, 2017, and an increase of $119.2 million, or 9.9%, from September 30, 2016. The increase in total deposits from the end of the prior quarter was attributable to growth in non-maturity deposit types.

Noninterest-bearing deposits increased to $287.6 million as of September 30, 2017, compared to $215.7 million at June 30, 2017 and $168.6 million at September 30, 2016.  The growth in noninterest-bearing deposits is mainly due to marketing efforts by our branches and by branch management.

Asset Quality

Nonperforming assets totaled $4.2 million, or 0.26% of total assets at September 30, 2017, compared to $9.3 million, or 0.61% of total assets, at June 30, 2017.  The decline in non-performing assets was primarily attributable to a $3.6 million SBA loan guaranty payment in July 2017.  Nonperforming assets consist of Other Real Estate Owned (foreclosed properties), loans modified under troubled debt restructurings (TDRs), non-accrual loans, and loans past due 90 days or more and still accruing interest. Nonperforming assets exclude PCI loans acquired in prior acquisitions.

Loans 30 to 89 days past due declined to $2.2 million at September 30, 2017, down from $20.7 million at June 30, 2017.  The decrease was primarily attributable to one delinquent loan totaling $12.7 million that was brought current during the third quarter of 2017, while the collateral securing the loan remains in escrow.

Net charge-offs were (0.07)% of average loans during the third quarter of 2017, consisting of no gross charge-offs, and loan recoveries of $747,000.

The Company recorded provision for loan losses of $700,000 for the third quarter of 2017, which was primarily attributable to the growth in total loans during the quarter.

The allowance for loan losses totaled $11.4 million, or 0.95% of total loans, at September 30, 2017, compared with $10.6 million, or 0.93% of total loans, at June 30, 2017. 

Corporate Overview

RBB Bancorp is a $1.6 billion in assets bank holding company headquartered in Los Angeles, California. Its wholly-owned subsidiary, Royal Business Bank (the “Bank”), is a full service commercial bank which provides business banking services to the Chinese-American communities in Los Angeles County, Orange County, Ventura County and in Las Vegas, Nevada, including 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, trade finance and a full range of depository accounts. The Bank has ten branches in Los Angeles County, located in downtown Los Angeles, San Gabriel, Torrance, Rowland Heights, Monterey Park, Silver Lake, Arcadia, Cerritos, Diamond Bar, and west Los Angeles, two branches in Ventura County, located in Oxnard and Westlake Village, and one branch in Las Vegas, Nevada. The Company’s administrative and lending center is located at 123 E. Valley Blvd., San Gabriel, California 91176, and its finance and operations center is located at 7025 Orangethorpe Avenue, Buena Park, California 90621. RBB’s website address is www.royalbusinessbankusa.com.

Conference Call

Management will hold a conference call at 10:00 a.m. PDT/1:00 p.m. EDT on Tuesday, October 24, 2017, to discuss the Company’s third quarter 2017 financial results.

To listen to the conference call, please dial 1-833-659-7620, passcode 99941708. A replay of the call will be made available at 1-855-859-2056, passcode 99941708, approximately one hour after the conclusion of the call and will remain available through October 31, 2017 at 5:00 p.m. PDT/8:00 p.m. EDT.

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. Please access the website 15 minutes prior to the call to download any necessary audio software. This webcast will be recorded and available for replay on the Company’s website approximately two hours after the conclusion of the conference call, and will be available on the website for approximately 12 months.

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 within the meaning of the Private Securities Litigation Reform Act of 1995, including 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; the costs or effects of acquisitions or dispositions we may make, whether we are able to obtain any required governmental 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; 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 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 S-1 for the year ended December 31, 2016, 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.

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, 2017 and 2016.

Adjusted Earnings Metrics (non-GAAP)

Management uses the measure adjusted earnings to assess the performance of our core business and the strength of our capital position. We believe that this non-GAAP financial measure provides meaningful additional information about us to assist investors in evaluating our operating results. 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 adjusted earnings, adjusted diluted earnings per share, adjusted return on average assets and adjusted return on average tangible common equity to their most comparable GAAP measures.

Source: RBB Bancorp