American Business Bank Reports First Quarter Earnings of $9.9 Million

Rhea-AI Summary

American Business Bank (OTCQX: AMBZ) reported a net income of $9.9 million or $1.08 per diluted share for Q1 2022, up from $9.7 million or $1.06 in Q4 2021, marking a 3% increase. Core loans rose by $163 million (8%) quarter-over-quarter. Net interest income increased by 24% year-over-year to $28.2 million. The bank maintained a zero nonperforming assets ratio, with 54% of deposits in non-interest bearing demand accounts. The cost of deposits decreased to 0.04%. Despite challenges from rising interest rates and inflation, ABB continues to serve its business clients effectively.

Positive

• Core loans increased by $163 million (8%) quarter-over-quarter.
• Net interest income rose by $3.7 million (15%) year-over-year.
• Nonperforming assets ratio remains at 0%, indicating strong asset quality.
• Cost of deposits decreased to 0.04%, enhancing profitability.

Negative

• Total assets decreased by $85 million (2%) from the previous quarter.
• Total deposits decreased by $63 million, indicating potential liquidity concerns.

Core loans increased by $163 million or 34% annualized in the quarter

First Quarter 2022 Highlights

• Total core loans, excluding PPP loans, increased $163 million or 8% over prior quarter
• Net interest income increased 24%, excluding accelerated PPP fees, over prior year quarter
• Net income increased $1.0 million or 11% over prior year quarter
• Total PPP loans outstanding of $89 million with $2.2 million of net deferred processing fees
• Nonperforming assets to total assets of 0%
• Non-interest bearing demand deposits were 54% of total deposits
• Net interest income includes accelerated PPP fees of $1.4 million on loan forgiveness
• Cost of average deposits of 0.04%, a decline of 0.02% over prior year quarter
• Continued status as well capitalized, the highest regulatory standard

LOS ANGELES--(BUSINESS WIRE)-- AMERICAN BUSINESS BANK (OTCQX: AMBZ) today reported net income of $9.9 million or $1.08 per fully diluted share for the first quarter of 2022 compared to $9.7 million or $1.06 per fully diluted share for the fourth quarter of 2021, an increase of 3%. For the quarter ended March 31, 2022, net income associated with the PPP program was $1.3 million or $0.14 per fully diluted share the same as the fourth quarter of 2021.

“The highlight for the quarter was generating $163 million in core loan growth (non-PPP) matching our record increase from the fourth quarter of 2021. As a result of this growth, loan interest income has increased meaningfully in the first quarter of 2022 over 2021. Our overall loan growth from the second half of 2021 through the first quarter of 2022 has enabled the Bank to replace and surpass the significant income generated from PPP that was essential to bridge the pandemic rate shock. Despite a challenging environment that includes now rapidly rising interest rates, a labor shortage and high inflation, we continue to execute on serving small to middle-market business customers with superior service while maintaining outstanding credit quality,” commented Leon Blankstein, ABB’s President, CEO, and Director.

For the quarter ending March 31, 2022, net interest income was $28.2 million, a 2% increase over the fourth quarter of 2021 as loan interest income increased by $1.0 million as the average loan portfolio, excluding PPP, increased by $160 million. This increase was offset by the $0.5 million decrease in interest income on securities due to a non-recurring prepayment penalty of $470 thousand received during the fourth quarter of 2021. For the quarter ending March 31, 2022, the cost of deposits decreased to 0.04% compared to 0.05% in the previous quarter.

For the quarter ending March 31, 2022, the provision for loan losses was $1.5 million commensurate with the growth in core loans. The allowance for loan losses as a percentage of loans, excluding PPP loans, was 1.27% at March 31, 2022.

Net Interest Margin

Net interest margin for the first quarter of 2022 was 3.00% compared to 2.82% in the fourth quarter of 2021 and 2.92% in the first quarter of 2021. Excluding the impact of PPP loans, the net interest margin was 2.89% for the first quarter of 2022 compared to 2.75% for the fourth quarter of 2021 reflecting the higher percentage of core loans to assets. Without the acceleration of fees on forgiveness, the yield on PPP loans was 1.65% for the first quarter of 2022. As of March 31, 2022, 37% of the loan portfolio had variable rates, with approximately half of the Bank’s variable-rate loans indexed to prime and 81% of these loans are at or above interest rate floors by 48 bps.

Net Interest Income

For the quarter ending March 31, 2022, net interest income increased by $586,000, or 2%, compared to the fourth quarter of 2021 and increased by $3.7 million, or 15%, compared to the quarter ending March 31, 2021. The increase is a result of the Bank’s strong core loan growth offset by the decrease in the accelerated realization of net deferred PPP processing fees and decrease in interest income on securities.

		As of or For the Three Months Ended:
(Figures in $000s, except per share amounts)		March 2022			December 2021			March 2021
PPP loans - first round, net		$	6,391		$	10,361		$	424,327
PPP loans - second round, net			79,997			133,224			217,780
PPP Total Loans, net		$	86,388		$	143,585		$	642,107
1% Coupon Interest		$	277		$	418		$	1,527
Amortized fees			171			254			668
Accelerated fees			1,427			1,118			2,845
Total PPP loan income		$	1,875		$	1,789		$	5,040
Total PPP loan income after tax		$	1,322		$	1,262		$	3,555
Total PPP loan income after tax per share - diluted		$	0.14		$	0.14		$	0.39

As of April 25, 2022, approximately 98% of PPP loans originated in 2020 and 72% of PPP loans originated in 2021 have been forgiven. Of the remaining PPP loans originated in 2020 and 2021, approximately 23% are in the forgiveness review or submission process.

Non-Interest Income

The decrease in non-interest income from the prior quarter and the same quarter a year ago are primarily due to the decline in the value of the Bank/Corporate owned life insurance (BOLI) that are invested in mutual funds.

Non-Interest Expense

For the quarter ending March 31, 2022, total non-interest expense decreased $349 thousand compared to the fourth quarter of 2021 primarily due to donations paid in the fourth quarter of 2021 fulfilling the Bank’s PPP Grant Program benefiting minority and women-owned businesses. The efficiency ratio decreased to 50% compared to 52% for the fourth quarter of 2021.

Non-interest expense increased $771 thousand for the quarter ended March 31, 2022 compared to the first quarter of 2021. This was driven by an increase in salaries and employee benefits. The efficiency ratio declined to 50% for the first quarter of 2022 compared to 54% for the first quarter of 2021.

There were 198 full time equivalent employees at March 31, 2022 compared to 192 a year ago and 203 at December 31, 2021. In March of 2022, Suzanne Dondanville, EVP/Chief Operations Officer, departed from the Bank. “We thank Suzanne for her contributions to our success,” commented ABB’s Executive Vice President and Chief Financial Officer. The Bank has 38 relationship managers in eight offices representing an increase of four from a year ago and an increase of one from the prior quarter.

Balance Sheet

From December 31, 2021 to March 31, 2022, total core loans, excluding PPP loans, increased $163 million, or 8%. During the first quarter of 2022, CRE loans, primarily owner-occupied, increased by $125 million, and C&I loans increased by $49 million. At March 31, 2022, the utilization rate for the Bank’s commercial lines of credit remained unchanged at 30% compared to December 31, 2021. Investment securities decreased from the fourth quarter of 2021 to $1.46 billion. On January 3, 2022, $307 million of Available-for-Sale securities, net of $3.7 million of unrealized losses, were transferred to Held-to-Maturity securities. As of March 31, 2022, the duration of the securities portfolio increased to 5.7 years from 4.5 years as of December 31, 2021 as market interest rates increased.

During the first quarter of 2022, total assets decreased $85 million, or 2%, and total deposits decreased by $63 million.

At March 31, 2022, the tangible common equity ratio was 6.7%, as the benefit of first quarter net income was more than offset by a larger Accumulated Other Comprehensive Loss, reflecting the impact of higher rates on net unrealized securities losses. The loan growth over the last year has increased risk-weighted assets resulting in a decrease in those capital ratios, which remain well above regulatory requirements.

Asset Quality

The following table presents asset quality overview as of the dates indicated:

		March 31, 2022			December 31, 2021
(Figures in $000s)
Non-performing assets (NPA)		$	-		$	338
Loans 90+ Days Past Due and Still Accruing			-			-
Total NPA		$	-		$	338
NPA as a % of total assets, excluding PPP			0.00%			0.01%
Past Due as a % of total Loans, excluding PPP			0.00%			0.00%
Criticized as a % of total Loans, excluding PPP			2.49%			3.50%
Classified as a % of total Loans, excluding PPP			0.14%			0.12%

As of March 31, 2021, the Bank had no specific reserve related to two impaired loan relationships.

The following table represents the allowance for loan losses as of and for the dates and periods indicated:

		Three Months Ended
		March 31, 2022			December 31, 2021
(Figures in $000s)
Beginning Balance		$	25,062		$	23,550
Charge-offs			-			-
Recoveries			13			27
Net (charge-offs) / recoveries		$	13		$	27
Provision			1,486			1,485
Ending Balance		$	26,561		$	25,062
Allowance as a % of total assets, excluding PPP			1.27%			1.30%

All PPP loans are 100% guaranteed by the SBA and as such, no allowance for loan losses is allocated to these loans. The Bank is required to adopt CECL, or Current Expected Credit Loss, on January 1, 2023. There are no loans on a loan payment deferment program.

ABOUT AMERICAN BUSINESS BANK

American Business Bank, headquartered in downtown Los Angeles, offers a wide range of financial services to the business marketplace. Clients include wholesalers, manufacturers, service businesses, professionals and non-profits. American Business Bank has seven Loan Production Offices in strategic locations including: North Orange County in Anaheim, Orange County in Irvine, South Bay in Torrance, San Fernando Valley in Woodland Hills, Riverside County in Corona, Inland Empire in Ontario and LA Coastal in Long Beach.

FORWARD LOOKING STATEMENTS

This communication contains certain forward-looking information about American Business Bank that is intended to be covered by the safe harbor for “forward-looking statements” provided by the Private Securities Litigation Reform Act of 1995. Such statements include future financial and operating results, expectations, intentions and other statements that are not historical facts. Such statements are based on information available at the time of this communication and are based on current beliefs and expectations of the Bank’s management and are subject to significant risks, uncertainties and contingencies, many of which are beyond our control. Actual results may differ materially from those set forth in the forward-looking statements due to a variety of factors, including various risk factors. We are under no obligation (and expressly disclaim any such obligation) to update or alter our forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

American Business Bank
Figures in $000, except share and per share amounts
BALANCE SHEETS (unaudited)
		March			December			March
		2022			2021			2021
Assets:
Cash and Due from Banks		$	48,531		$	33,246		$	38,637
Interest Earning Deposits in Other Financial Institutions			63,022			195,624			350,354
Investment Securities:
US Agencies			169,832			185,170			218,794
Mortgage Backed Securities			545,447			808,496			407,651
State and Municipals			122,868			231,917			270,161
US Treasuries			-			-			-
Corporate Bonds			14,044			12,903			8,848
Securities Available-for-Sale, at Fair Value			852,191			1,238,486			905,454
Mortgage Backed Securities			204,025			-			-
State and Municipals			396,748			298,651			151,041
Securities Held-to-Maturity, at Amortized Cost			600,773			298,651			151,041
Federal Home Loan Bank Stock, at Cost			11,779			11,779			10,864
Total Investment Securities			1,464,743			1,548,916			1,067,359
Loans Receivable:
Commercial Real Estate			1,496,684			1,371,475			1,137,493
Commercial and Industrial			492,822			444,009			327,519
SBA Payroll Protection Program			86,387			143,584			642,107
Residential Real Estate			102,305			112,817			80,686
Installment and Other			5,756			5,897			4,212
Total Loans Receivable			2,183,954			2,077,782			2,192,017
Allowance for Loan Losses			(26,561)			(25,062)			(22,946)
Loans Receivable, Net			2,157,393			2,052,720			2,169,071
Furniture, Equipment and Leasehold Improvements, Net			6,327			6,580			7,472
Bank/Corporate Owned Life Insurance			28,622			28,851			28,070
Other Assets			58,242			46,339			44,247
Total Assets		$	3,826,880		$	3,912,276		$	3,705,210
Liabilities:
Non-Interest Bearing Demand Deposits		$	1,920,015		$	1,934,444		$	1,855,756
Interest Bearing Transaction Accounts			277,016			287,224			260,610
Money Market and Savings Deposits			1,297,039			1,337,035			1,270,228
Certificates of Deposit			40,998			39,445			34,267
Total Deposits			3,535,068			3,598,148			3,420,861
Federal Home Loan Bank Advances / Other Borrowings			-			-			-
Other Liabilities			36,588			35,574			36,265
Total Liabilities		$	3,571,656		$	3,633,722		$	3,457,126
Shareholders' Equity:
Common Stock		$	203,400		$	202,199		$	166,956
Retained Earnings			91,443			81,521			84,473
Accumulated Other Comprehensive Income / (Loss)			(39,619)			(5,166)			(3,345)
Total Shareholders' Equity		$	255,224		$	278,554		$	248,084
Total Liabilities and Shareholders' Equity		$	3,826,880		$	3,912,276		$	3,705,210
Standby Letters of Credit		$	36,698		$	35,891		$	32,115
Per Share Information:
Common Shares Outstanding			8,913,974			8,832,797			8,775,324
Book Value Per Share		$	28.63		$	31.54		$	28.27
Tangible Book Value Per Share		$	28.63		$	31.54		$	28.27
* All per share amounts and number of shares outstanding have been retroactively applied for the 10% stock dividend paid in July 2021

American Business Bank
Figures in $000, except share and per share amounts
INCOME STATEMENTS (unaudited)
		For the three months ended:
		March			December			March
		2022			2021			2021
Interest Income:
Interest and Fees on Loans		$	21,809		$	20,729		$	20,774
Interest on Investment Securities			6,658			7,158			4,122
Interest on Interest Earning Deposits in Other Financial Institutions			80			135			66
Total Interest Income			28,547			28,022			24,962
Interest Expense:
Interest on Interest Bearing Transaction Accounts			26			33			41
Interest on Money Market and Savings Deposits			323			377			414
Interest on Certificates of Deposits			10			10			14
Interest on Federal Home Loan Bank Advances and Other Borrowings			-			-			-
Total Interest Expense			359			420			469
Net Interest Income			28,188			27,602			24,493
Provision for Loan Losses			1,486			1,485			-
Net Interest Income after Provision for Loan Losses			26,702			26,117			24,493
Non-Interest Income:
Deposit Fees			960			912			745
International Fees			337			357			263
Gain (Loss) on Sale of Investment Securities, Net			30			(18)			(15)
Gain on Sale of SBA Loans, Net			-			-			-
Bank/Corporate Owned Life Insurance Income (Expense)			(229)			308			332
Other			293			280			202
Total Non-Interest Income			1,391			1,839			1,527
Non-Interest Expense:
Salaries and Employee Benefits			10,475			10,459			9,663
Occupancy and Equipment			1,165			1,157			1,146
Professional Services			1,681			1,462			1,703
Promotion Expenses			320			800			222
Other			1,064			1,176			1,200
Total Non-Interest Expense			14,705			15,054			13,934
Earnings before income taxes			13,388			12,902			12,086
Income Tax Expense			3,465			3,240			3,170
NET INCOME		$	9,923		$	9,662		$	8,916
Per Share Information:
Earnings Per Share - Basic		$	1.10		$	1.07		$	1.00
Earnings Per Share - Diluted		$	1.08		$	1.06		$	0.99
Weighted Average Shares - Basic			9,040,825			9,002,011			8,921,941
Weighted Average Shares - Diluted			9,167,184			9,143,933			9,033,128
* All per share amounts and number of shares outstanding have been retroactively applied for the 10% stock dividend paid in July 2021

American Business Bank
Figures in $000
QUARTERLY AVERAGE BALANCE SHEETS AND YIELD ANALYSIS (unaudited)
		For the three months ended:
		March 2022								December 2021
		Average			Interest			Average		Average			Interest			Average
		Balance			Inc/Exp			Yield/Rate		Balance			Inc/Exp			Yield/Rate
Interest Earning Assets:
Interest Earning Deposits in Other Financial Institutions		$	162,969		$	80		0.20%		$	326,356		$	135		0.17%
Investment Securities:
US Agencies			177,077			91		0.21%			191,544			278		0.58%
Mortgage Backed Securities			805,321			3,361		1.67%			818,689			3,728		1.82%
State and Municipals			523,835			2,913		2.22%			520,354			2,863		2.20%
US Treasuries			-			-		0.00%			-			-		0.00%
Corporate Bonds			13,000			113		3.47%			12,750			109		3.42%
Securities Available-for-Sale and Held-to-Maturity			1,519,233			6,478		1.71%			1,543,337			6,978		1.81%
Federal Home Loan Bank Stock			11,779			180		6.10%			11,779			180		6.10%
Total Investment Securities			1,531,012			6,658		1.74%			1,555,116			7,158		1.84%
Loans Receivable:
Commercial Real Estate			1,418,952			14,180		4.05%			1,318,877			13,610		4.09%
Commercial and Industrial			465,403			4,691		4.09%			401,559			4,211		4.16%
SBA Payroll Protection Program			110,355			1,875		6.89%			161,986			1,789		4.38%
Residential Real Estate			109,759			1,011		3.74%			113,660			1,059		3.70%
Installment and Other			6,746			52		3.10%			6,658			60		3.58%
Total Loans Receivable			2,111,215			21,809		4.19%			2,002,740			20,729		4.11%
Total Interest Earning Assets		$	3,805,196		$	28,547		3.00%		$	3,884,212		$	28,022		2.82%
Liabilities:
Non-Interest Bearing Demand Deposits			1,984,694			-		0.00%			2,019,342			-		0.00%
Interest Bearing Transaction Accounts			274,988			26		0.04%			267,881			33		0.05%
Money Market and Savings Deposits			1,303,545			323		0.10%			1,363,415			377		0.11%
Certificates of Deposit			40,270			10		0.10%			39,414			10		0.10%
Total Deposits			3,603,497			359		0.04%			3,690,052			420		0.05%
Federal Home Loan Bank Advances / Other Borrowings			-			-		0.00%			-			-		0.00%
Total Interest Bearing Deposits and Borrowings			1,618,803			359		0.09%			1,670,710			420		0.10%
Total Deposits and Borrowings		$	3,603,497		$	359		0.04%		$	3,690,052		$	420		0.05%
Net Interest Income					$	28,188							$	27,602
Net Interest Rate Spread								2.96%								2.77%
Net Interest Margin								3.00%								2.82%
Net Interest Margin, excluding SBA PPP								2.89%								2.75%

American Business Bank
Figures in $000
QUARTERLY AVERAGE BALANCE SHEETS AND YIELD ANALYSIS (unaudited)
		For the three months ended:
		March 2022								March 2021
		Average			Interest			Average		Average			Interest			Average
		Balance			Inc/Exp			Yield/Rate		Balance			Inc/Exp			Yield/Rate
Interest Earning Assets:
Interest Earning Deposits in Other Financial Institutions		$	162,969		$	80		0.20%		$	216,373		$	66		0.12%
Investment Securities:
US Agencies			177,077			91		0.21%			225,144			408		0.72%
Mortgage Backed Securities			805,321			3,361		1.67%			398,884			1,229		1.23%
State and Municipals			523,835			2,913		2.22%			414,773			2,267		2.19%
US Treasuries			-			-		0.00%			-			-		0.00%
Corporate Bonds			13,000			113		3.47%			10,273			82		3.20%
Securities Available-for-Sale and Held-to-Maturity			1,519,233			6,478		1.71%			1,049,074			3,986		1.52%
Federal Home Loan Bank Stock			11,779			180		6.10%			10,864			136		5.01%
Total Investment Securities			1,531,012			6,658		1.74%			1,059,938			4,122		1.56%
Loans Receivable:
Commercial Real Estate			1,418,952			14,180		4.05%			1,105,890			11,463		4.20%
Commercial and Industrial			465,403			4,691		4.09%			330,778			3,462		4.24%
SBA Payroll Protection Program			110,355			1,875		6.89%			609,638			5,040		3.35%
Residential Real Estate			109,759			1,011		3.74%			78,034			758		3.94%
Installment and Other			6,746			52		3.10%			4,957			51		4.15%
Total Loans Receivable			2,111,215			21,809		4.19%			2,129,297			20,774		3.96%
Total Interest Earning Assets		$	3,805,196		$	28,547		3.00%		$	3,405,608		$	24,962		2.93%
Liabilities:
Non-Interest Bearing Demand Deposits			1,984,694			-		0.00%			1,730,626			-		0.00%
Interest Bearing Transaction Accounts			274,988			26		0.04%			255,416			41		0.07%
Money Market and Savings Deposits			1,303,545			323		0.10%			1,223,414			414		0.14%
Certificates of Deposit			40,270			10		0.10%			34,865			14		0.16%
Total Deposits			3,603,497			359		0.04%			3,244,321			469		0.06%
Federal Home Loan Bank Advances / Other Borrowings			-			-		0.00%			-			-		0.00%
Total Interest Bearing Deposits and Borrowings			1,618,803			359		0.09%			1,513,695			469		0.13%
Total Deposits and Borrowings		$	3,603,497		$	359		0.04%		$	3,244,321		$	469		0.06%
Net Interest Income					$	28,188							$	24,493
Net Interest Rate Spread								2.96%								2.87%
Net Interest Margin								3.00%								2.92%
Net Interest Margin, excluding SBA PPP								2.89%								2.82%

American Business Bank
Figures in $000
SUPPLEMENTAL DATA (unaudited)
		March			December			March
		2022			2021			2021
Performance Ratios:
Quarterly:
Return on Average Assets (ROAA)			1.01%			0.97%			1.01%
Return on Average Equity (ROAE)			14.48%			14.17%			14.32%
Efficiency Ratio			49.77%			51.10%			53.52%
Year-to-Date
Return on Average Assets (ROAA)			1.01%			1.03%			1.01%
Return on Average Equity (ROAE)			14.48%			14.95%			14.32%
Efficiency Ratio			49.77%			51.77%			53.52%
Capital Adequacy:
Total Risk Based Capital Ratio			12.82%			13.21%			14.85%
Common Equity Tier 1 Capital Ratio			11.72%			12.09%			13.60%
Tier 1 Risk Based Capital Ratio			11.72%			12.09%			13.60%
Tier 1 Leverage Ratio			7.53%			7.09%			7.13%
Tangible Common Equity / Tangible Assets			6.67%			7.12%			6.70%
Asset Quality Overview
Non-Performing Loans		$	-		$	338		$	2,172
Loans 90+ Days Past Due and Still Accruing			-			-			-
Total Non-Performing Loans			-			338			2,172
Restructured Loans			-			-			216
Other Real Estate Owned			-			-			-
ALLL / Loans Receivable			1.22%			1.21%			1.05%
Non-Performing Loans / Total Loans Receivable *			0.00%			0.02%			0.11%
Non-Performing Loans / Total Loans Receivable *, excluding PPP **			0.00%			0.02%			0.15%
Non-Performing Assets / Total Assets *			0.00%			0.01%			0.06%
Non-Performing Assets / Total Assets *, excluding PPP **			0.00%			0.01%			0.08%
Net Charge-Offs (Recoveries) quarterly		$	(13)		$	(27)		$	(16)
Net Charge-Offs (Recoveries) year-to-date		$	(13)		$	(178)		$	(16)
Net Charge-Offs (Recoveries) year-to-date / Average			(0.00%)			(0.01%)			(0.00%)
Loans Receivable
* Includes non-accrual loans, accruing loans past due 90+ days and Troubled Debt Restructurings (TDRs).
** SBA Paycheck Protection Program (PPP)

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20220429005092/en/

Karen Schoenbaum

EVP/CFO

(213) 430-4000

www.americanbb.bank

Source: AMERICAN BUSINESS BANK

FAQ

What were the earnings results for American Business Bank in Q1 2022?

American Business Bank reported net income of $9.9 million, or $1.08 per diluted share for Q1 2022.

How did core loan growth impact American Business Bank's performance?

Core loans increased by $163 million (8%) in Q1 2022, significantly contributing to net interest income growth.

What is the current nonperforming assets ratio for AMBZ?

The nonperforming assets ratio remains at 0%, reflecting strong asset quality.

What was the net interest income for AMBZ in the first quarter of 2022?

Net interest income for Q1 2022 was $28.2 million, a 2% increase from the previous quarter.

How did the cost of deposits change in the first quarter of 2022 for AMBZ?

The cost of deposits decreased to 0.04% in Q1 2022, down from 0.05% in the previous quarter.