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 and fiscal year ended December
31, 2023.
Fourth Quarter 2023 Highlights
- Net income increased to $12.1 million, or $0.64 diluted
earnings per share, up from $8.5 million, or $0.45 diluted earnings
per share for the third quarter.
- Return on average assets increased to 1.20%, up from 0.83% for
the third quarter.
- Return on average common equity of 9.48% and return on average
tangible common equity (1) of 11.12%, up from 6.66% and 7.82% for
the third quarter.
- Recognized a $5.0 million Community Development Financial
Institution Equitable Recovery Program award.
- Redeemed $55.0 million of 6.18% subordinated notes at par on
December 1, 2023.
- Repurchased 396,374 shares for $6.7 million during the fourth
quarter.
- Nonperforming loans decreased to $31.6 million from $40.1
million at the end of the third quarter.
- Allowance for loan losses to loans held for investment
increased to 1.38%, up from 1.36% at the end of the third
quarter.
- Book value and tangible book value (1) per share increased to
$27.47 and $23.48, up from $26.45 and $22.53 per share at end of
the third quarter.
The Company reported net income of $12.1 million, or $0.64
diluted earnings per share, for the quarter ended December 31,
2023, compared to net income of $8.5 million, or $0.45 diluted
earnings per share, for the quarter ended September 30, 2023. Net
income for the year ended December 31, 2023 totaled $42.5 million,
or $2.24 diluted earnings per share, compared to net income of
$64.3 million, or $3.33 diluted earnings per share, for the year
ended December 31, 2022. The results for the fourth quarter and
year ended December 31, 2023 included a Community Development
Financial Institution (“CDFI”) Equitable Recovery Program (“ERP”)
award of $5.0 million on a pre-tax basis; there was no similar
income included in the other periods presented.
“We undertook several initiatives in 2023 to position the
Company for the future,” said David Morris, CEO of RBB Bancorp. “We
strengthened our management team by adding respected senior
executives and restructured our operations in order to improve the
management of our national banking franchise. We addressed
regulatory concerns by adopting enhanced corporate governance
policies and reconstituting our Board of Directors. Additionally,
we increased liquidity and mitigated balance sheet risk by
strategically exiting certain higher risk lending relationships and
reducing our loan to deposit ratio.”
Mr. Morris continued, “While some of these actions had a
negative impact on our short-term results, we are confident that
they will drive long-term shareholder value and have positioned the
Company for improved profitability in a variety of economic
environments.”
“The changes implemented by management and the Board of
Directors are intended to enhance shareholder value,” said Dr.
James Kao, Chairman of the Company. “The Board of Directors
appreciates the efforts of all RBB employees and their commitment
to providing exceptional financial services to the Asian-American
community.”
(1)
Reconciliations of the non–U.S. generally
accepted accounting principles (“GAAP”) measures included at the
end of this press release.
Net Interest Income and Net Interest Margin
Net interest income was $25.7 million for the fourth quarter of
2023, compared to $27.6 million for the third quarter of 2023. The
$1.9 million decrease in net interest income was primarily due to
higher interest expense of $1.2 million and lower interest income
of $731,000. The increase in interest expense was due to an
increase in the average rate paid on interest-bearing liabilities,
offset by lower average balances of interest-bearing liabilities.
The decrease in interest income was due to lower average balances
of loans and securities, offset by higher average balances for
Federal funds sold, cash equivalents & other and a higher yield
on this earning asset category.
Net interest margin was 2.73% for the fourth quarter of 2023, a
decrease of 14 basis points from 2.87% in the third quarter of 2023
primarily due to a 20 basis point increase in the average rate paid
on interest-bearing liabilities, partially offset by a 4 basis
point increase in the average yield earned on interest-earning
assets. The higher overall funding costs were due mostly to a 25
basis point increase in the average cost of interest-bearing
deposits to 4.08% in the fourth quarter of 2023 from 3.83% in the
third quarter of 2023. The cost of interest-bearing deposits
increased due to increasing market rates and peer bank deposit
competition.
The Company redeemed all $55.0 million of its outstanding 6.18%
fixed-to-floating rate subordinated notes on December 1, 2023 at
par. The subordinated notes had an original maturity date of
December 1, 2028 and an effective interest rate of 6.18% as of
their redemption date.
Provision for Credit Losses
The Company recorded a reversal of its provision for credit
losses of $431,000 for the fourth quarter of 2023 compared to a
$1.4 million provision in the third quarter. The $1.8 million
decrease in the provision for credit losses was primarily due to
lower net charge-offs in the fourth quarter compared to the third
quarter and the impact of improved credit quality coupled with
lower total loans at the end of the fourth quarter. Total net
charge-offs were $109,000 for the fourth quarter of 2023 compared
to net charge-offs of $2.2 million in the prior quarter.
Noninterest Income
Noninterest income was $7.4 million for the fourth quarter of
2023, an increase of $4.6 million from $2.8 million in the third
quarter of 2023. The increase was primarily driven by $5.0 million
of income recognized from the CDFI ERP award, partially offset by
lower net gains on the sale of other real estate owned of $247,000
and loans of $96,000.
Noninterest Expense
Noninterest expense for the fourth quarter of 2023 was $16.4
million, compared to $16.9 million for the third quarter of 2023.
The $483,000 decrease was primarily due to lower salaries and
employee benefits expenses of $884,000 related to lower taxes and
incentives expense, partially offset by higher insurance and
regulatory assessments of $392,000 due to the timing of such
assessment notifications, and higher legal and other professional
fees of $269,000. The annualized operating expense ratio for the
fourth quarter of 2023 was 1.63%, down from 1.65% for the third
quarter of 2023.
Income Taxes
The effective tax rate was 29.4% for the fourth quarter of 2023,
and 29.9% for the third quarter of 2023.
Balance Sheet
At December 31, 2023, total assets were $4.03 billion, a $43.3
million decrease compared to September 30, 2023, and a $107.0
million increase compared to December 31, 2022.
Loan and Securities Portfolio
Loans held for investment, net of deferred fees and discounts,
totaled $3.0 billion as of December 31, 2023, a decrease of $89.1
million from September 30, 2023. The decrease from September 30,
2023 was primarily due to a $78.3 million decrease in construction
and land development loans, a $17.5 million decrease in
single-family residential mortgages, and a $1.0 million decrease in
other loans, partially offset by a $3.6 million increase in
commercial real estate loans, a $2.4 million increase in commercial
and industrial loans, and a $1.7 million increase in Small Business
Administration (“SBA”) loans. During 2023, management strategically
decreased loans and strengthened the Company's liquidity position
which also resulted in a lower loan to deposit ratio. The loan to
deposit ratio ended 2023 at 94.2% compared to 97.6% at September
30, 2023 and 110.7% at December 31, 2022.
As of December 31, 2023, available-for-sale securities totaled
$319.0 million, including $271.0 million of available-for-sale
securities maturing in over 12 months. As of December 31, 2023,
gross unrealized losses totaled $28.1 million on available-for-sale
securities, a $9.0 million decrease due to changes in market
interest rates, compared to gross unrealized losses of $37.1
million as of September 30, 2023.
Liquidity and Deposits
Total deposits were $3.2 billion as of December 31, 2023, a
$20.7 million, or 0.7%, increase compared to September 30, 2023.
This increase was due to a $53.5 million increase in
interest-bearing deposits and a $32.8 million decrease in
noninterest-bearing demand deposits. The increase in
interest-bearing deposits included higher non-maturity deposits of
$24.7 million and higher time deposits of $28.8 million. The
increase in time deposits, included a $20.4 million decrease in
wholesale deposits (brokered deposits and collateralized State of
California CD's), which totaled $338.1 million at December 31,
2023, and $358.5 million at September 30, 2023.
As of December 31, 2023, the Company had $431.4 million in cash
and due from banks, an increase of $100.6 million, or 30.4%,
compared to September 30, 2023. In addition to this cash liquidity,
the Company had secondary sources of liquidity that totaled $1.2
billion at December 31, 2023. As of December 31, 2023, the
Company's cash balances and secondary sources of liquidity
represented 123% of total uninsured deposits.
Credit Quality
Nonperforming assets totaled $31.6 million, or 0.79% of total
assets, at December 31, 2023, compared to $40.4 million, or 0.99%
of total assets, at September 30, 2023. The $8.8 million decrease
in nonperforming assets was due to the payoff of a $9.8 million
non-accrual loan, the sale of one other real estate owned property
that had a carrying value of $284,000, and non-accrual loan
charge-offs of $150,000. These decreases were partially offset by
loans placed on non-accrual status of $1.8 million, consisting
primarily of single-family residential mortgages.
Special mention loans totaled $32.8 million, or 1.08% of total
loans, at December 31, 2023, compared to $31.2 million, or 1.00% of
total loans, at September 30, 2023. The increase was due to
additional special mention loans of $4.4 million, consisting
primarily of commercial and industrial loans, partially offset by
loan paydowns of $2.7 million.
Substandard loans totaled $61.1 million, or 2.01% of total
loans, at December 31, 2023, compared to $71.4 million, or 2.29% of
total loans, at September 30, 2023. The $10.3 million decrease was
due to loan paydowns of $11.0 million and upgrades to pass loans of
$1.5 million, partially offset by additional substandard loans of
$2.2 million, consisting primarily of single-family residential
mortgages.
30-89 day delinquent loans, excluding non-accrual loans,
decreased $2.9 million to $16.8 million as of December 31, 2023
compared to $19.7 million as of September 30, 2023. The decrease in
past due loans was due to $17.1 million in loans that migrated back
to past due for less than 30 days, consisting primarily of
commercial real estate loans, $918,000 in loans that converted to
non-accrual status, and $218,000 in loan payoffs or paydowns,
partially offset by $15.5 million in new delinquent loans.
As of December 31, 2023, the allowance for credit losses totaled
$42.5 million and was comprised of an allowance for loan losses of
$41.9 million and a reserve for unfunded commitments of $640,000.
This compares to the allowance for credit losses of $43.1 million
comprised of an allowance for loan losses of $42.4 million and a
reserve for unfunded commitments of $654,000 at September 30, 2023.
The $540,000 decrease in the allowance for credit losses during the
fourth quarter of 2023 was due to net charge-offs of $109,000 and a
negative provision for credit losses of $431,000. The allowance for
loan losses as a percentage of loans held for investment was 1.38%
at December 31, 2023, compared to 1.36% at September 30, 2023. The
allowance for loan losses as a percentage of nonperforming loans
was 133% at December 31, 2023, an increase from 106% at September
30, 2023.
Shareholders' Equity and Capital Actions
At December 31, 2023, total shareholders' equity was $511.3
million, an $8.7 million increase compared to September 30, 2023,
and a $26.7 million increase compared to December 31, 2022. The
increase in shareholders' equity for the fourth quarter was due to
net earnings of $12.1 million, lower net unrealized losses of $6.2
million, offset by dividends paid of $3.0 million and share
repurchases totaling $6.7 million. As a result, book value per
share increased to $27.47 from $26.45 and tangible book value per
share increased to $23.48 from $22.53.
On January 18, 2024, the Company announced the Board of
Directors had declared a common stock cash dividend of $0.16 per
share, payable on February 9, 2024 to shareholders of record on
January 31, 2024.
On June 14, 2022, the Board of Directors authorized the
repurchase of up to 500,000 shares of common stock, of which 36,750
shares were available as of December 31, 2023. The repurchase
program permits shares to be repurchased in open market or private
transactions, through block trades, and pursuant to any trading
plan that may be adopted in accordance with Securities and Exchange
Commission (“SEC”) Rules 10b5-1 and 10b-8. The Company repurchased
396,374 shares at a weighted average share price of $17.02 during
the fourth quarter of 2023.
Corporate Governance and Regulatory Updates
The Company is providing the following update on various
corporate governance and regulatory matters previously
reported:
- Since May 2022, the Boards of Directors of the Company and the
Bank have taken several actions to enhance the Company’s corporate
governance and oversight:
- In late 2022 and early 2023, the Company’s Board of Directors
adopted new corporate governance policies and standards which
include enhanced director independence standards, an independent
Board chair, updated board committee charters and an amended and
restated code of ethics.
- Since May 2022, 6 new directors have been added to the Boards
of Directors of the Company and the Bank. These new directors have
extensive regulatory, executive leadership, wealth management, risk
management, and community banking experience. Nine out of the ten
(10) current directors of the Company are classified as
‘independent directors’.
- During 2023, the Boards of Directors of the Company and the
Bank took certain actions to strengthen the Company’s management
team, including hiring a President / Chief Banking Officer, Chief
Financial Officer, Chief Administrative Officer, SBA Manager,
Deputy Chief Risk Officer/BSA Officer, and an East Coast head of
branch banking.
- The Bank entered into a Consent Order (the “Consent Order”)
with the Federal Deposit Insurance Corporation (the “FDIC”) and the
California Department of Financial Protection and Innovation (the
“DFPI”) on October 25, 2023. The Consent Order requires the Bank to
take certain actions with respect to its Anti-Money
Laundering/Countering the Financing of Terrorism (“AML/CFT”)
compliance program and to correct certain alleged violations of the
Bank Secrecy Act (“BSA”) program. The Bank was proactive in
addressing the items identified in the Consent Order prior to
entering into the Consent Order, taking the actions described in
its Current Report on Form 8-K filed with the SEC on October 31,
2023. As of December 31, 2023, the Bank believes it has addressed
all of the deficiencies identified in the Consent Order, although
there can be no guarantee that additional measures will not be
required until the FDIC and the DFPI have reexamined and retested
the Bank’s AML/CFT policies and procedures to the FDIC’s and the
DFPI’s satisfaction, the timing of which is uncertain.
- As reported in connection with the Company’s second quarter
2023 earnings release, the Company was voluntarily responding to
informal requests from the SEC's Division of Enforcement for
information regarding, among other things, certain Company policies
and procedures, certain Company expenditures, certain former
officers and directors, their roles and relationships, and the
circumstances relating to and surrounding their departures,
including potential violations of laws and/or regulations. The SEC
subsequently notified the Company that the SEC has concluded its
inquiry with respect to the Company without any enforcement action
against the Company.
The Company’s Board of Directors remains committed to continuing
to evaluate and, where necessary or appropriate, further enhancing
the Company’s corporate governance and oversight to ensure the
Company’s governance structure aligns with its business operations
and corporate strategy, as well as regulatory and investor
expectations.
Corporate Overview
RBB Bancorp is a community-based financial holding company
headquartered in Los Angeles, California. As of December 31, 2023,
the Company had total assets of $4.0 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, January 23, 2024, to
discuss the Company’s fourth 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 885254, conference ID
RBBQ423. A replay of the call will be made available at
1-877-481-4010 or 1-919-882-2331, the passcode is 49681,
approximately one hour after the conclusion of the call and will
remain available through February 6, 2024.
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, the Bank’s ability to comply with the requirements of
the Consent Order we have entered into with the FDIC and the DFPI
and the possibility that we may be required to incur additional
expenses or be subject to additional regulatory action, if we are
unable to timely and satisfactorily comply with the consent order;
the effectiveness of the Company’s internal control over financial
reporting and disclosure controls and procedures; the potential for
additional material weaknesses in the Company’s internal controls
over financial reporting or other potential control deficiencies of
which the Company is not currently aware or which have not been
detected; 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; our
ability to attract and retain deposits and access other sources of
liquidity; 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; 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 conflicts
between Russia and Ukraine and in the Middle East, which could
impact business and economic conditions in the United States and
abroad; public health crises and pandemics, 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 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 SEC, the Public
Company Accounting Oversight Board, the Financial Accounting
Standards Board or other accounting standards setters, including
Accounting Standards Update 2016-13 (Topic 326, “Measurement of
Current Losses on Financial Instruments, commonly referenced as the
Current Expected Credit Losses 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 Company’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
DFPI; 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 and
Form 10-K/A 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) (Dollars in
thousands)
December 31,
September 30,
December 31,
2023
2023
2022
Assets
Cash and due from banks
$
431,373
$
330,791
$
83,548
Interest-bearing deposits in other
financial institutions
600
600
600
Investment securities available for
sale
318,961
354,378
256,830
Investment securities held to maturity
5,209
5,214
5,729
Mortgage loans held for sale
1,911
62
—
Loans held for investment
3,031,861
3,120,952
3,336,449
Allowance for loan losses
(41,903
)
(42,430
)
(41,076
)
Net loans held for investment
2,989,958
3,078,522
3,295,373
Premises and equipment, net
25,684
26,134
27,009
Federal Home Loan Bank (FHLB) stock
15,000
15,000
15,000
Cash surrender value of bank owned life
insurance
58,719
58,346
57,310
Goodwill
71,498
71,498
71,498
Servicing assets
8,110
8,439
9,521
Core deposit intangibles
2,795
3,010
3,718
Right-of-use assets
29,803
29,949
25,447
Accrued interest and other assets
66,404
87,411
67,475
Total assets
$
4,026,025
$
4,069,354
$
3,919,058
Liabilities and shareholders'
equity
Deposits:
Noninterest-bearing demand
$
539,621
$
572,393
$
798,741
Savings, NOW and money market accounts
632,729
608,020
615,339
Time deposits, $250,000 and under
1,190,821
1,237,831
837,369
Time deposits, greater than $250,000
811,589
735,828
726,234
Total deposits
3,174,760
3,154,072
2,977,683
FHLB advances
150,000
150,000
220,000
Long-term debt, net of issuance costs
119,147
174,019
173,585
Subordinated debentures
14,938
14,884
14,720
Lease liabilities - operating leases
31,191
31,265
26,523
Accrued interest and other liabilities
24,729
42,603
21,984
Total liabilities
3,514,765
3,566,843
3,434,495
Shareholders' equity:
Shareholders' equity
530,700
528,200
506,156
Non-controlling interest
72
72
72
Accumulated other comprehensive loss, net
of tax
(19,512
)
(25,761
)
(21,665
)
Total shareholders' equity
511,260
502,511
484,563
Total liabilities and shareholders’
equity
$
4,026,025
$
4,069,354
$
3,919,058
RBB BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In
thousands, except share and per share data)
For the Three Months
Ended
December 31, 2023
September 30, 2023
December 31, 2022
Interest and dividend income:
Interest and fees on loans
$
45,895
$
47,617
$
49,468
Interest on interest-bearing deposits
4,650
3,193
697
Interest on investment securities
3,706
4,211
1,874
Dividend income on FHLB stock
312
290
265
Interest on federal funds sold and
other
269
252
347
Total interest income
54,832
55,563
52,651
Interest expense:
Interest on savings deposits, NOW and
money market accounts
4,026
3,106
2,471
Interest on time deposits
22,413
21,849
7,798
Interest on subordinated debentures and
long-term debt
2,284
2,579
2,491
Interest on other borrowed funds
440
440
898
Total interest expense
29,163
27,974
13,658
Net interest income before
(reversal)/provision for credit losses
25,669
27,589
38,993
(Reversal)/provision for credit losses
(431
)
1,399
1,887
Net interest income after
(reversal)/provision for credit losses
26,100
26,190
37,106
Noninterest income:
Service charges and fees
972
1,057
940
Gain on sale of loans
116
212
112
Loan servicing fees, net of
amortization
616
623
581
Increase in cash surrender value of life
insurance
374
356
335
(Loss)/gain on sale of other real estate
owned
(57
)
190
—
Other income
5,373
332
384
Total noninterest income
7,394
2,770
2,352
Noninterest expense:
Salaries and employee benefits
8,860
9,744
6,930
Occupancy and equipment expenses
2,387
2,414
2,364
Data processing
1,357
1,315
1,203
Legal and professional
1,291
1,022
1,045
Office expenses
349
437
405
Marketing and business promotion
241
340
406
Insurance and regulatory assessments
1,122
730
489
Core deposit premium
215
236
253
Other expenses
571
638
1,061
Total noninterest expense
16,393
16,876
14,156
Income before income taxes
17,101
12,084
25,302
Income tax expense
5,028
3,611
7,721
Net income
$
12,073
$
8,473
$
17,581
Net income per share
Basic
$
0.64
$
0.45
$
0.93
Diluted
$
0.64
$
0.45
$
0.92
Cash dividends declared per common
share
$
0.16
$
0.16
$
0.14
Weighted-average common shares
outstanding
Basic
18,938,005
18,995,303
18,971,250
Diluted
18,948,087
18,997,304
19,086,586
RBB BANCORP AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (In
thousands, except share and per share data)
For the Year Ended
December 31, 2023
December 31, 2022
Interest and dividend income:
Interest and fees on loans
$
194,264
$
171,099
Interest on interest-earning deposits
10,746
1,353
Interest on investment securities
14,028
6,084
Dividend income on FHLB stock
1,125
938
Interest on federal funds sold and
other
985
1,496
Total interest income
221,148
180,970
Interest expense:
Interest on savings deposits, NOW and
money market accounts
12,205
5,561
Interest on time deposits
76,837
13,338
Interest on subordinated debentures and
long-term debt
9,951
9,645
Interest on other borrowed funds
2,869
2,872
Total interest expense
101,862
31,416
Net interest income before provision for
credit losses
119,286
149,554
Provision for credit losses
3,362
4,935
Net interest income after provision for
credit losses
115,924
144,619
Noninterest income:
Service charges and fees
4,172
4,145
Gain on sale of loans
374
1,895
Loan servicing fees, net of
amortization
2,576
2,209
Increase in cash surrender value of life
insurance
1,410
1,322
Gain on sale of fixed assets
32
757
Gain on sale of other real estate
owned
134
—
Other income
6,320
924
Total noninterest income
15,018
11,252
Noninterest expense:
Salaries and employee benefits
37,795
35,488
Occupancy and equipment expenses
9,629
9,092
Data processing
5,326
5,060
Legal and professional
8,198
5,383
Office expenses
1,512
1,438
Marketing and business promotion
1,132
1,578
Insurance and regulatory assessments
3,165
1,850
Core deposit premium
923
1,086
Other expenses
3,016
3,551
Total noninterest expense
70,696
64,526
Income before income taxes
60,246
91,345
Income tax expense
17,781
27,018
Net income
$
42,465
$
64,327
Net income per share
Basic
$
2.24
$
3.37
Diluted
$
2.24
$
3.33
Cash Dividends declared per common
share
$
0.64
$
0.56
Weighted-average common shares
outstanding
Basic
18,978,075
19,099,509
Diluted
18,997,265
19,332,639
RBB BANCORP AND SUBSIDIARIES
AVERAGE BALANCE SHEET AND NET INTEREST INCOME (Unaudited)
For the Three Months
Ended
December 31, 2023
September 30, 2023
December 31, 2022
Average
Interest
Yield /
Average
Interest
Yield /
Average
Interest
Yield /
(tax-equivalent basis, dollars in
thousands)
Balance
& Fees
Rate
Balance
& Fees
Rate
Balance
& Fees
Rate
Interest-earning assets
Federal funds sold, cash equivalents &
other (1)
$
348,940
$
5,231
5.95
%
$
285,484
$
3,735
5.19
%
$
94,932
$
1,310
5.47
%
Securities
Available for sale (2)
329,426
3,684
4.44
%
369,459
4,187
4.50
%
245,348
1,847
2.99
%
Held to maturity (2)
5,212
46
3.50
%
5,385
48
3.54
%
5,733
50
3.46
%
Mortgage loans held for sale
1,609
29
7.15
%
739
13
6.98
%
192
3
6.20
%
Loans held for investment: (3)
Real estate
2,870,227
41,950
5.80
%
2,968,246
43,583
5.83
%
3,006,293
43,864
5.79
%
Commercial
183,396
3,916
8.47
%
187,140
4,021
8.52
%
280,326
5,601
7.93
%
Total loans held for investment
3,053,623
45,866
5.96
%
3,155,386
47,604
5.99
%
3,286,619
49,465
5.97
%
Total interest-earning assets
3,738,810
$
54,856
5.82
%
3,816,453
$
55,587
5.78
%
3,632,824
$
52,675
5.75
%
Total noninterest-earning assets
253,386
250,083
247,589
Total average assets
$
3,992,196
$
4,066,536
$
3,880,413
Interest-bearing liabilities
NOW
$
54,378
$
214
1.56
%
$
55,325
$
201
1.44
%
$
67,854
$
77
0.45
%
Money Market
422,582
3,252
3.05
%
403,300
2,656
2.61
%
561,575
2,337
1.65
%
Saving deposits
148,354
560
1.50
%
123,709
249
0.80
%
136,623
57
0.17
%
Time deposits, $250,000 and under
1,162,014
13,244
4.52
%
1,285,320
14,090
4.35
%
716,476
3,884
2.15
%
Time deposits, greater than $250,000
781,833
9,169
4.65
%
717,026
7,759
4.29
%
631,897
3,914
2.46
%
Total interest-bearing deposits
2,569,161
26,439
4.08
%
2,584,680
24,955
3.83
%
2,114,425
10,269
1.93
%
FHLB advances
150,000
440
1.16
%
150,000
440
1.16
%
196,304
898
1.81
%
Long-term debt
155,536
1,895
4.83
%
173,923
2,194
5.00
%
173,491
2,194
5.02
%
Subordinated debentures
14,902
389
10.36
%
14,848
385
10.29
%
14,684
297
8.02
%
Total interest-bearing liabilities
2,889,599
29,163
4.00
%
2,923,451
27,974
3.80
%
2,498,904
13,658
2.17
%
Noninterest-bearing liabilities
Noninterest-bearing deposits
535,554
571,371
856,917
Other noninterest-bearing liabilities
61,858
67,282
46,628
Total noninterest-bearing liabilities
597,412
638,653
903,545
Shareholders' equity
505,184
504,432
477,964
Total liabilities and shareholders'
equity
$
3,992,195
$
4,066,536
$
3,880,413
Net interest income / interest rate
spreads
$
25,693
1.82
%
$
27,613
1.98
%
$
39,017
3.58
%
Net interest margin
2.73
%
2.87
%
4.26
%
Total cost of deposits
$
3,104,715
$
26,439
3.38
%
$
3,156,051
$
24,955
3.14
%
$
2,971,342
$
10,269
1.37
%
Total cost of funds
$
3,425,153
$
29,163
3.38
%
$
3,494,822
$
27,974
3.18
%
$
3,355,821
$
13,658
1.61
%
(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 non-accrual loans and loans
held for sale. Interest income on loans includes - amortization of
deferred loan fees, net of deferred loan costs.
RBB BANCORP AND SUBSIDIARIES
AVERAGE BALANCE SHEET AND NET INTEREST INCOME (Unaudited)
For the Year Ended
December 31, 2023
December 31, 2022
Average
Interest
Yield /
Average
Interest
Yield /
(tax-equivalent basis, dollars in
thousands)
Balance
& Fees
Rate
Balance
& Fees
Rate
Interest-earning assets
Federal funds sold, cash equivalents &
other (1)
$
231,851
$
12,857
5.55
%
$
276,923
$
3,787
1.37
%
Securities
Available for sale (2)
331,357
13,928
4.20
%
338,437
5,973
1.76
%
Held to maturity (2)
5,509
198
3.59
%
5,865
208
3.55
%
Mortgage loans held for sale
627
46
7.34
%
1,263
66
5.23
%
Loans held for investment: (3)
Real estate
2,998,250
176,740
5.89
%
2,774,348
151,164
5.45
%
Commercial
206,748
17,478
8.45
%
322,438
19,869
6.16
%
Total loans held for investment
3,204,998
194,218
6.06
%
3,096,786
171,033
5.52
%
Total interest-earning assets
3,774,342
$
221,247
5.86
%
3,719,274
$
181,067
4.87
%
Total noninterest-earning assets
246,981
244,894
Total average assets
$
4,021,323
$
3,964,168
Interest-bearing liabilities
NOW
$
58,191
$
725
1.25
%
$
73,335
$
262
0.36
%
Money Market
429,102
10,566
2.46
%
631,094
5,114
0.81
%
Saving deposits
126,062
915
0.73
%
144,409
185
0.13
%
Time deposits, $250,000 and under
1,146,513
47,150
4.11
%
609,464
6,583
1.08
%
Time deposits, greater than $250,000
742,839
29,687
4.00
%
565,059
6,755
1.20
%
Total interest-bearing deposits
2,502,707
89,043
3.56
%
2,023,361
18,899
0.93
%
FHLB advances
172,219
2,869
1.67
%
192,438
2,872
1.49
%
Long-term debt
169,182
8,478
5.01
%
173,275
8,777
5.07
%
Subordinated debentures
14,821
1,474
9.95
%
14,603
868
5.94
%
Total interest-bearing liabilities
2,858,929
101,864
3.56
%
2,403,677
31,416
1.31
%
Noninterest-bearing liabilities
Noninterest-bearing deposits
602,291
1,050,063
Other noninterest-bearing liabilities
59,561
39,647
Total noninterest-bearing liabilities
661,852
1,089,710
Shareholders' equity
500,540
470,781
Total liabilities and shareholders'
equity
$
4,021,321
$
3,964,168
Net interest income / interest rate
spreads
$
119,383
2.30
%
$
149,651
3.56
%
Net interest margin
3.16
%
4.02
%
Total cost of deposits
$
3,104,998
$
89,043
2.87
%
$
3,073,424
$
18,899
0.61
%
Total cost of funds
$
3,461,220
$
101,864
2.94
%
$
3,453,740
$
31,416
0.91
%
(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 non-accrual 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
For the Year Ended December
31,
December 31,
September 30,
December 31,
2023
2023
2022
2023
2022
Per share data (common stock)
Book value
$
27.47
$
26.45
$
25.55
$
27.47
$
25.55
Tangible book value (1)
$
23.48
$
22.53
$
21.58
$
23.48
$
21.58
Performance ratios
Return on average assets, annualized
1.20
%
0.83
%
1.80
%
1.06
%
1.62
%
Return on average shareholders' equity,
annualized
9.48
%
6.66
%
14.59
%
8.48
%
13.66
%
Return on average tangible common equity,
annualized (1)
11.12
%
7.82
%
17.33
%
9.97
%
16.26
%
Noninterest income to average assets,
annualized
0.73
%
0.27
%
0.24
%
0.37
%
0.28
%
Noninterest expense to average assets,
annualized
1.63
%
1.65
%
1.45
%
1.76
%
1.63
%
Yield on average earning assets
5.82
%
5.78
%
5.75
%
5.86
%
4.87
%
Yield on average loans
5.96
%
5.99
%
5.97
%
6.06
%
5.52
%
Cost of average total deposits (2)
3.38
%
3.14
%
1.37
%
2.87
%
0.61
%
Cost of average interest-bearing
deposits
4.08
%
3.83
%
1.93
%
3.56
%
0.93
%
Cost of average interest-bearing
liabilities
4.00
%
3.80
%
2.17
%
3.56
%
1.31
%
Net interest spread
1.82
%
1.98
%
3.58
%
2.30
%
3.56
%
Net interest margin
2.73
%
2.87
%
4.26
%
3.16
%
4.02
%
Efficiency ratio (3)
49.58
%
55.59
%
34.24
%
52.64
%
40.13
%
Operating expense ratio, annualized
1.63
%
1.65
%
1.45
%
1.76
%
1.63
%
Common stock dividend payout ratio
25.00
%
35.56
%
15.05
%
28.57
%
16.62
%
(1)
Non-GAAP measure. See Non–GAAP
reconciliations set forth at the end of this press release.
(2)
Total deposits include non-interest
bearing deposits and interest-bearing deposits.
(3)
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)
At or for the quarter
ended
December 31,
September 30,
December 31,
2023
2023
2022
Credit Quality Data:
Loans 30-89 days past due
$
16,803
$
19,662
$
15,249
Loans 30-89 days past due to total
loans
0.55
%
0.63
%
0.46
%
Nonperforming loans
$
31,619
$
40,146
$
23,523
Nonperforming loans to total loans
1.04
%
1.29
%
0.71
%
Nonperforming assets
$
31,619
$
40,430
$
24,100
Nonperforming assets to total assets
0.79
%
0.99
%
0.61
%
Special mention loans
$
32,842
$
31,212
$
42,212
Special mention loans to total loans
1.08
%
1.00
%
1.27
%
Substandard loans
$
61,091
$
71,401
$
61,966
Substandard loans to total loans
2.01
%
2.29
%
1.86
%
Allowance for loan losses to total
loans
1.38
%
1.36
%
1.23
%
Allowance for loan losses to nonperforming
loans
132.52
%
105.69
%
174.62
%
Net charge-offs
$
109
$
2,206
$
85
Net charge-offs to average loans
0.01
%
0.28
%
0.01
%
Capital ratios (1)
Tangible common equity to tangible assets
(2)
11.06
%
10.71
%
10.65
%
Tier 1 leverage ratio
11.99
%
11.68
%
11.67
%
Tier 1 common capital to risk-weighted
assets
19.07
%
17.65
%
16.03
%
Tier 1 capital to risk-weighted assets
19.69
%
18.22
%
16.58
%
Total capital to risk-weighted assets
25.92
%
26.24
%
24.27
%
(1)
December 31, 2023 capital ratios are
preliminary.
(2)
Non-GAAP measure. See Non-GAAP
reconciliations set forth at the end of this press release.
RBB BANCORP AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS (Unaudited)
Loan Portfolio Detail
As of December 31,
2023
As of September 30,
2023
As of December 31,
2022
(dollars in thousands)
$
%
$
%
$
%
Loans:
Commercial and industrial
$
130,096
4.3
%
$
127,655
4.1
%
$
201,223
6.0
%
SBA
52,074
1.7
%
50,420
1.6
%
61,411
1.9
%
Construction and land development
181,469
6.0
%
259,778
8.3
%
276,876
8.3
%
Commercial real estate (1)
1,167,857
38.5
%
1,164,210
37.3
%
1,312,132
39.3
%
Single-family residential mortgages
1,487,796
49.1
%
1,505,307
48.2
%
1,464,108
43.9
%
Other loans
12,569
0.4
%
13,582
0.5
%
20,699
0.6
%
Total loans (2)
$
3,031,861
100.0
%
$
3,120,952
100.0
%
$
3,336,449
100.0
%
Allowance for credit losses
(41,903
)
(42,430
)
(41,076
)
Total loans, net
$
2,989,958
$
3,078,522
$
3,295,373
(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 of $542, $384,
and ($521) as of December 31, 2023, September 30, 2023, and
December 31, 2022, respectively.
Non-GAAP Reconciliations
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 December 31, 2023, September 30, 2023, and
December 31, 2022.
(dollars in thousands, except share and
per share data)
December 31, 2023
September 30, 2023
December 31, 2022
Tangible common equity:
Total shareholders' equity
$
511,260
$
502,511
$
484,563
Adjustments
Goodwill
(71,498
)
(71,498
)
(71,498
)
Core deposit intangible
(2,795
)
(3,010
)
(3,718
)
Tangible common equity
$
436,967
$
428,003
$
409,347
Tangible assets:
Total assets-GAAP
$
4,026,025
$
4,069,354
$
3,919,058
Adjustments
Goodwill
(71,498
)
(71,498
)
(71,498
)
Core deposit intangible
(2,795
)
(3,010
)
(3,718
)
Tangible assets
$
3,951,732
$
3,994,846
$
3,843,842
Common shares outstanding
18,609,179
18,995,303
18,965,776
Common equity to assets ratio
12.70
%
12.35
%
12.36
%
Tangible common equity to tangible assets
ratio
11.06
%
10.71
%
10.65
%
Book value per share
$
27.47
$
26.45
$
25.55
Tangible book value per share
$
23.48
$
22.53
$
21.58
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 ROATCE to its most comparable GAAP
measure:
Three Months Ended
Year Ended
December 31,
December 31,
(dollars in thousands)
2023
2022
2023
2022
Net income available to common
shareholders
$
12,073
$
17,581
$
42,465
$
64,327
Average shareholders' equity
505,184
477,964
500,540
470,781
Adjustments:
Goodwill
(71,498
)
(71,498
)
(71,498
)
(70,948
)
Core deposit intangible
(2,935
)
(3,882
)
(3,282
)
(4,131
)
Adjusted average tangible common
equity
$
430,751
$
402,584
$
425,760
$
395,702
Return on average common equity
9.48
%
14.59
%
8.48
%
13.66
%
Return on average tangible common
equity
11.12
%
17.33
%
9.97
%
16.26
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240122238325/en/
Lynn Hopkins, Interim Chief Financial Officer (213) 716-8066
lhopkins@rbbusa.com
RBB Bancorp (NASDAQ:RBB)
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From Nov 2024 to Dec 2024
RBB Bancorp (NASDAQ:RBB)
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