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RBB Bancorp Reports Third Quarter Earnings for 2017

  • 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.

RBB BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
September 30, June 30, March 31, December 31, September 30,
2017 2017 2017 2016 2016
Assets
Cash and due from banks $69,552 $104,366 $147,547 $74,213 $104,270
Federal funds sold and other cash equivalents 96,500 58,500 20,000 44,500 51,500
Total cash and cash equivalents 166,052 162,866 167,547 118,713 155,770
Interest-bearing deposits in other financial institutions 100 100 100 345 345
Investment securities available for sale 55,697 40,241 39,155 39,277 30,800
Investment securities held to maturity 5,191 6,199 6,206 6,214 6,222
Mortgage loans held for sale 125,704 83,263 66,555 44,345 57,983
Loans held for investment: 1,196,522 1,146,005 1,139,563 1,110,446 1,121,873
Allowance for loan losses (11,420) (10,627) (14,186) (14,162) (13,399)
Net loans held for investment 1,185,102 1,135,378 1,125,377 1,096,284 1,108,474
Premises and equipment, net 6,300 6,441 6,538 6,585 6,740
Federal Home Loan Bank (FHLB) stock 6,770 6,770 6,770 6,770 6,770
Net deferred tax assets 9,517 10,214 11,068 11,097 12,135
Other real estate owned (OREO) 293 833 833 833 293
Cash surrender value of life insurance 32,578 32,358 32,142 21,958 21,820
Goodwill 29,940 29,940 29,940 29,940 29,940
Servicing assets 5,370 4,661 4,223 3,704 3,257
Core deposit intangibles 1,525 1,612 1,699 1,793 1,897
Accrued interest and other assets 12,575 12,723 7,595 7,693 7,009
Total assets $1,642,714 $1,533,599 $1,505,748 $1,395,551 $1,449,455
Liabilities and shareholders' equity
Deposits:
Noninterest-bearing demand $287,574 $215,716 $215,652 $174,272 $168,627
Savings, NOW and money market accounts 362,018 348,627 325,589 296,699 317,222
Time deposits 668,700 714,105 707,016 681,792 713,284
Total deposits 1,318,292 1,278,448 1,248,257 1,152,763 1,199,133
Reserve for unfunded commitments 489 517 985 604 715
Income tax payable 4,664 793 2,342
FHLB advances 10,000 10,000
Long-term debt 49,492 49,456 49,419 49,383 49,347
Subordinated debentures 3,402 3,379 3,357 3,334 3,310
Accrued interest and other liabilities 10,708 9,462 5,570 7,089 8,174
Total liabilities 1,382,383 1,341,262 1,322,252 1,213,966 1,273,021
Shareholders' equity:
Shareholder's equity 260,468 192,427 183,695 181,852 176,219
Accumulated other comprehensive income (loss) - Net of tax (137) (90) (199) (267) 215
Total shareholders' equity 260,331 192,337 183,496 181,585 176,434
Total liabilities and stockholders’ equity $1,642,714 $1,533,599 $1,505,748 $1,395,551 $1,449,455


RBB BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share amounts)
Three Months Ended
September 30, 2017 June 30, 2017 September 30, 2016
Interest and dividend income:
Interest and fees on loans $17,200 $16,759 $18,169
Interest on interest-bearing deposits 371 209 80
Interest on investment securities 331 313 203
Dividend income on FHLB stock 118 82 155
Interest on federal funds sold and other 326 158 92
Total interest income 18,346 17,521 18,699
Interest expense:
Interest on savings deposits, NOW and money market accounts 649 575 521
Interest on time deposits 2,061 1,993 1,801
Interest on subordinated debentures and other 908 907 903
Interest on other borrowed funds 12 16
Total interest expense 3,618 3,487 3,241
Net interest income 14,728 14,034 15,458
Provision (recapture) for loan losses 700 (4,188) 1,250
Net interest income after provision (recapture) or credit losses 14,028 18,222 14,208
Noninterest income:
Service charges, fees and other 518 646 443
Gain on sale of loans 2,584 2,289 1,870
Loan servicing fees, net of amortization 314 (5) 95
Recoveries on loans acquired in business combinations 19 29 47
Increase in cash surrender value of life insurance 219 216 141
Gain on Sale of Securities
Gain on Sale of OREO 142
3,796 3,175 2,596
Noninterest expense:
Salaries and employee benefits 4,178 4,243 3,481
Occupancy and equipment expenses 705 727 766
Data processing 458 454 563
Legal and professional 318 296 511
Amortization of intangibles 87 87 103
Other expenses 1,454 1,153 1,613
7,200 6,960 7,037
Income before income taxes 10,624 14,437 9,767
Income tax expense 4,013 5,901 4,070
Net income $6,611 $8,536 $5,697
Net income per share
Basic $0.45 $0.67 $0.44
Diluted $0.42 $0.62 $0.42


RBB BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in thousands, except per share amounts)
Nine Months Ended
September 30,
2017 2016
Interest and dividend income:
Interest and fees on loans $49,992 $50,042
Interest on interest-bearing deposits 731 236
Interest on investment securities 922 620
Dividend income on FHLB stock 353 416
Interest on federal funds sold and other 628 159
Total interest income 52,626 51,473
Interest expense:
Interest on savings deposits, NOW and money market accounts 1,698 1,489
Interest on time deposits 5,903 5,144
Interest on subordinated debentures and other 2,720 1,824
Interest on other borrowed funds 29 24
Total interest expense 10,350 8,481
Net interest income 42,276 42,992
Provision (recapture) for loan losses (3,488) 3,599
Net interest income after provision (recapture) or credit losses 45,764 39,393
Noninterest income:
Service charges, fees and other 1,624 1,182
Gain on sale of loans 6,370 4,136
Loan servicing fees, net of amortization 571 384
Recoveries on loans acquired in business combinations 76 139
Increase in cash surrender value of life insurance 620 423
Gain on Sale of Securities 19
Gain on Sale of OREO 142
9,403 6,283
Noninterest expense:
Salaries and employee benefits 12,604 10,547
Occupancy and equipment expenses 2,176 2,388
Data processing 1,264 1,488
Legal and professional 227 1,478
Amortization of intangibles 268 268
Other expenses 4,199 6,205
20,738 22,374
Income before income taxes 34,429 23,302
Income tax expense 13,789 9,609
Net income $20,640 $13,693
Net income per share
Basic $1.53 $1.07
Diluted $1.42 $1.00
Cash Dividends declared per common share $0.30 $0.20


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, 2017 June 30, 2017 September 30, 2016
(tax-equivalent basis, dollars in thousands)AverageInterestYield / AverageInterestYield / AverageInterestYield /
Balance & Fees Rate Balance & Fees Rate Balance & Fees Rate
Earning assets:
Federal funds sold, cash equivalents & other (1)$202,005$8151.60% $134,089$4491.34% $103,624$3261.26%
Securities (2)
Available for sale 43,075 2772.55% 40,618 2532.50% 30,269 1491.97%
Held to maturity 5,533 553.92% 6,204 603.88% 6,226 543.48%
Mortgage loans held for sale 98,807 1,1494.61% 71,356 8484.77% 63,304 7644.84%
Loans held for investment: (3)
Real estate 766,911 10,6735.52% 768,585 10,6455.56% 807,197 12,7116.32%
Commercial (4) 377,501 5,3795.65% 378,436 5,2665.58% 361,200 4,6965.21%
Total loans 1,144,411 16,0515.56% 1,147,021 15,9115.56% 1,168,397 17,4075.98%
Total earning assets 1,493,833$18,3464.87% 1,399,288$17,5215.02% 1,371,820$18,6995.47%
Noninterest-earning assets 96,555 95,434 80,212
Total assets$1,590,388 $1,494,722 $1,452,032
Interest-bearing liabilities
NOW and money market deposits$333,471$6050.72% $302,483$5360.71% $290,963$4790.66%
Savings deposits 36,746 430.46% 34,203 390.46% 35,533 410.46%
Time deposits 690,378 2,0611.18% 701,314 1,9931.14% 713,087 1,8021.01%
Total interest-bearing deposits 1,060,596 2,7101.01% 1,038,000 2,5680.99% 1,039,583 2,3210.90%
FHLB short-term advances 0.00% 5,220 120.92% 11,902 160.55%
Long-term debt 49,470 8496.81% 49,432 8506.90% 49,333 8506.91%
Subordinated debentures 3,388 606.99% 3,366 576.79% 3,255 546.61%
Total interest-bearing liabilities 1,113,455$3,6181.29% 1,096,018$3,4871.28% 1,104,072$3,2411.18%
Noninterest-bearing liabilities
Noninterest-bearing deposits 227,854 198,126 162,005
Other noninterest-bearing liabilities 11,599 13,176 9,934
Total noninterest-bearing liabilities 239,453 211,302 171,939
Shareholders' equity 237,480 187,402 176,021
Total liabilities and shareholders' equity$1,590,388 $1,494,722 $1,452,032
Net interest income / interest rate spreads $14,7283.58% $14,0343.75% $15,4584.29%
Net interest margin 3.91% 4.02% 4.52%
(1) Includes income and average balances for FHLB stock, term federal funds, interest-bearing time deposits and other miscellaneous interest-bearing assets.
(2) We have an insignificant amount of tax-exempt loans and securities, less than $1 million. Interest income and average rates for tax-exempt loans and securities are presented on a tax-equivalent basis as of September 30, 2017 and 2016.
(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.
(4) Includes purchased receivables, which are short term loans made to investment grade companies and are used for cash - management purposes by the Company.


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,
2017 2016
(tax-equivalent basis, dollars in thousands)AverageInterestYield / AverageInterestYield /
Balance & Fees Rate Balance & Fees Rate
Earning assets:
Federal funds sold, cash equivalents & other (1)$151,755$1,7111.51% $80,475$8101.35%
Securities (2)
Available for sale 40,862 7462.44% 28,703 4332.01%
Held to maturity 5,980 1763.94% 6,378 1873.92%
Mortgage loans held for sale 74,230 2,6174.71% 66,848 2,4214.84%
Loans held for investment: (3)
Real estate 766,974 31,9905.58% 771,131 34,3865.96%
Commercial (4) 374,979 15,3845.49% 351,731 13,2365.03%
Total loans 1,141,953 47,3755.55% 1,122,862 47,6215.67%
Total earning assets 1,414,780$52,6264.97% 1,305,266$51,4735.27%
Noninterest-earning assets 93,160 84,539
Total assets$1,507,940 $1,389,806
Interest-bearing liabilities
NOW and money market deposits$301,254$1,5760.70% $282,790$1,3700.65%
Savings deposits 34,879 1210.46% 34,718 1180.45%
Time deposits 695,020 5,9031.14% 682,484 5,1441.01%
Total interest-bearing deposits 1,031,153 7,6010.99% 999,992 6,6330.89%
FHLB short-term advances 5,128 290.77% 5,949 240.54%
Long-term debt 49,433 2,5466.89% 33,001 1,6986.87%
Subordinated debentures 3,366 1736.88% 2,673 1276.34%
Total interest-bearing liabilities 1,089,080$10,3501.27% 1,041,615$8,4811.09%
Noninterest-bearing liabilities
Noninterest-bearing deposits 205,532 163,518
Other noninterest-bearing liabilities 10,274 15,052
Total noninterest-bearing liabilities 215,805 178,569
Shareholders' equity 203,054 169,622
Total liabilities and shareholders' equity$1,507,940 $1,389,806
Net interest income / interest rate spreads $42,2763.70% $42,9924.18%
Net interest margin 4.00% 4.40%
(1) Includes income and average balances for FHLB stock, term federal funds, interest-bearing time deposits and other miscellaneous interest-bearing assets.
(2) We have an insignificant amount of tax-exempt loans and securities, less than $1 million. Interest income and average rates for tax-exempt loans and securities are presented on a tax-equivalent basis as of September 30, 2017 and 2016.
(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.
(4) Includes purchased receivables, which are short term loans made to investment grade companies and are used for cash - management purposes by the Company.


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,
2017 2017 2016
Per share data (common stock)
Earnings
Basic $ 0.45 $ 0.67 $ 0.44
Diluted $ 0.42 $ 0.62 $ 0.42
Book value $ 20.29 $ 14.99 $ 14.30
Tangible book value $ 17.84 $ 12.53 $ 11.84
Performance ratios
Return on average assets, annualized 1.65% 2.29% 1.56%
Return on average shareholders' equity, annualized 11.04% 18.27% 12.88%
Return on average tangible common equity, annualized 12.73% 21.98% 15.73%
Noninterest income to average assets, annualized 0.95% 0.85% 0.71%
Noninterest expense to average assets, annualized 1.80% 1.87% 1.93%
Return on average earning assets 4.87% 5.02% 5.47%
Cost of average deposits 0.83% 0.83% 0.77%
Cost of average interest-bearing deposits 1.01% 0.99% 0.90%
Cost of average interest-bearing liabilities 1.29% 1.28% 1.18%
Accretion on loans to average earning assets 0.17% 0.25% 0.81%
Net interest spread 3.58% 3.75% 4.29%
Net interest margin 3.91% 4.02% 4.52%
Efficiency ratio 38.87% 40.44% 40.13%


RBB BANCORP AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)
For the nine months ended September 30,
2017 2016
Per share data (common stock)
Earnings
Basic $1.53 $1.07
Diluted $1.42 $1.00
Dividends declared $0.30 $0.20
Book value $16.49 $13.75
Tangible book value $14.49 $11.42
Performance ratios
Return on average assets, annualized 1.83% 1.32%
Return on average shareholders' equity, annualized 13.59% 10.78%
Return on average tangible common equity, annualized 16.10% 12.70%
Noninterest income to average assets, annualized 0.83% 0.60%
Noninterest expense to average assets, annualized 1.84% 2.15%
Return on average earning assets 4.97% 5.27%
Cost of average deposits 0.82% 0.76%
Cost of average interest-bearing deposits 0.99% 0.89%
Cost of average interest-bearing liabilities 1.27% 1.09%
Accretion on loans to average earning assets 0.23% 0.63%
Net interest spread 3.70% 4.18%
Net interest margin 4.00% 4.40%
Efficiency ratio 40.13% 45.41%
Common stock dividend payout ratio 19.60% 18.68%


RBB BANCORP AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)
For the periods ending
September 30, June 30, September 30,
2017 2017 2016
Weighted average shares outstanding
Basic 13,481,459 12,827,803 12,791,876
Diluted 14,559,043 13,798,475 13,687,998
Shares outstanding at period end 15,790,611 12,827,803 12,827,803
Loan to deposit ratio 90.76% 89.64% 93.56%
Core deposits / total deposits 73.37% 70.51% 69.03%
Net non-core funding dependence ratio 22.81% 23.84% 18.47%
Credit Quality Data:
Loans 30-89 days past due $2,178 $20,688 $3,708
Loans 30-89 days past due to total loans 0.18% 1.81% 0.33%
Nonperforming loans $3,950 $8,481 $7,468
Nonperforming loans to total loans 0.33% 0.74% 0.67%
Nonperforming assets $4,243 $9,315 $7,761
Nonperforming assets to total assets 0.26% 0.61% 0.54%
Allowance for loan losses to total loans 0.95% 0.93% 1.19%
Allowance for loan losses to nonperforming loans 289.12% 125.30% 179.42%
Net charge-offs to average loans -0.07% -0.06% 0.02%
Regulatory and other capital ratios—Company
Tangible common equity to tangible assets 14.20% 10.70% 10.20%
Tier 1 leverage ratio 14.91% 11.24% 10.52%
Tier 1 common capital to risk-weighted assets 18.23% 13.68% 12.48%
Tier 1 capital to risk-weighted assets 18.49% 13.96% 12.72%
Total capital to risk-weighted assets 23.37% 19.10% 18.12%
Regulatory capital ratios—Bank only
Tier 1 leverage ratio 14.57% 13.32% 12.27%
Tier 1 common capital to risk-weighted assets 18.13% 16.58% 14.85%
Tier 1 capital to risk-weighted assets 18.13% 16.58% 14.85%
Total capital to risk-weighted assets 19.08% 17.53% 16.05%


RBB BANCORP AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)
Quarterly Consolidated Statements of Earnings
3Q 2Q 1Q 4Q 3Q
2017 2017 2017 2016 2016
Interest income
Loans, including fees $17,200 $16,759 $16,033 $15,846 $18,169
Investment securities and other 1,146 762 726 870 530
Total interest income 18,346 17,521 16,759 16,716 18,699
Interest expense
Deposits 2,710 2,568 2,323 2,310 2,322
Interest on subordinated debentures and other 908 907 905 723 903
Other borrowings 12 17 193 16
Total interest expense 3,618 3,487 3,245 3,226 3,241
Net interest income before provision for loan losses 14,728 14,034 13,514 13,490 15,458
Provision (recapture) for loan losses 700 (4,188) 1,375 1,250
Net interest income after provision for loan losses 14,028 18,222 13,514 12,115 14,208
Noninterest income 3,796 3,175 2,432 2,683 2,596
Noninterest expense 7,200 6,960 6,578 5,532 7,037
Earnings before income taxes 10,624 14,437 9,368 9,266 9,767
Income taxes 4,013 5,901 3,875 3,880 4,070
Net income $6,611 $8,536 $5,493 $5,386 $5,697
Net income per common share - basic $0.45 $0.67 $0.43 $0.42 $0.44
Net income per common share - diluted $0.42 $0.62 $0.40 $0.39 $0.42
Cash dividends declared per common share $0.30
Cash dividends declared $3,848
Return on average assets, annualized 1.65% 2.29% 1.55% 1.49% 1.56%
Return on average earning assets 4.87% 5.02% 5.04% 4.92% 5.47%
Cost of average deposits 0.83% 0.83% 0.80% 0.78% 0.77%
Cost of average interest-bearing deposits 1.01% 0.99% 0.95% 0.91% 0.90%
Cost of average interest-bearing liabilities 1.29% 1.28% 1.24% 1.20% 1.16%
Accretion on loans to average earning assets 0.17% 0.25% 0.25% 0.54% 0.75%
Net interest margin 3.91% 4.02% 4.06% 3.97% 4.52%


RBB BANCORP AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)
Loan Portfolio Detail
As of September 30, As of June 30, As of March 31, As of December 31, As of September 30,
(dollars in thousands) 2017% 2017% 2017% 2016% 2016%
Loans:
Commercial and industrial $225,968 18.89 $229,985 20.07 $214,480 18.82 $203,843 18.36 $189,484 16.89
SBA 148,005 12.37 158,372 13.82 149,926 13.16 158,968 14.32 162,924 14.52
Construction and land development 94,297 7.88 100,239 8.75 89,869 7.89 89,409 8.05 106,769 9.52
Commercial real estate (1) 491,085 41.04 439,204 38.32 493,416 43.30 501,798 45.19 519,103 46.27
Single-family residential mortgages 237,167 19.82 218,205 19.04 191,872 16.84 156,428 14.09 143,593 12.80
Total loans,(2) $1,196,522 100.00 $1,146,005 100.00 $1,139,563 100.00 $1,110,446 100.00 $1,121,873 100.00
Allowance for loan losses (11,420) (10,627) (14,186) (14,162) (13,399)
Total loans, net $1,185,102 $1,135,378 $1,125,377 $1,096,284 $1,108,474
(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.

Change in Allowance for Loan Losses Nine months ended
September 30,
(dollars in thousands) 2017 2016
Beginning balance $14,162 $10,023
(Recapture) additions to the allowance charged to expense (3,488) 3,599
Recoveries on loans charged-off 747
11,420 13,622
Less loans charged-off (223)
Ending balance $11,420 $13,399

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.

September 30,
2017 2016
(dollars in thousands, except per share data)
Tangible common equity:
Total shareholders' equity $260,331 $176,434
Adjustments
Goodwill (29,940) (29,940)
Core deposit intangible (1,525) (1,897)
Tangible common equity $228,866 $144,597
Tangible assets:
Total assets-GAAP $1,642,714 $1,449,455
Adjustments
Goodwill (29,940) (29,940)
Core deposit intangible (1,525) (1,897)
Tangible assets $1,611,249 $1,417,618
Common shares outstanding 15,790,611 12,827,803
Tangible common equity to tangible assets ratio 14.20% 10.20%
Tangible book value per share $14.49 $11.27

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.

Three Months Ended
September 30, June 30, September 30,
2017 2017 2016
(dollars in thousands, except per share data)
Income before taxes - GAAP $10,624 $14,437 $9,767
Adjustments to interest income
Accretion of purchase discounts (638) (868) (2,895)
Provision for loan loss (4,188)
Adjustments to noninterest income
Gain on sale of investment securities, net
Adjustments to other expenses
Integration and acquisition expenses
Total adjustments to income (638) (5,056) (2,895)
Adjusted earnings pre-tax 9,986 9,381 6,872
Adjusted taxes 3,772 3,834 2,864
Adjusted earnings non-GAAP $6,214 $5,547 $4,008
Adjusted diluted EPS $0.39 $0.40 $0.29
Weighted average diluted common shares outstanding 15,851,929 13,863,273 13,717,232
Average assets $1,590,388 $1,494,722 $1,452,032
Adjusted return on average assets 1.55% 1.49% 1.10%
Average tangible common equity $205,964 $155,798 $144,122
Adjusted return on average tangible common equity 11.97% 14.28% 11.06%


Contacts:Yee Phong (Alan) Thian
Chairman, President and CEO
(213) 627-9888
David Morris
Executive Vice President and CFO
(714) 670-2488

Source:RBB Bancorp