RBB Bancorp Reports Fourth Quarter and Full Year Earnings for 2022

Rhea-AI Summary

RBB Bancorp (NASDAQ:RBB) reported a record net income of $17.6 million, or $0.92 diluted earnings per share for Q4 2022, marking an 11.9% increase year-over-year. Loans rose by $114.4 million, or 14.1% annualized. Noninterest income decreased to $2.4 million, while noninterest expenses fell to $13.1 million. The company declared a $0.16 per share dividend. Despite these achievements, management noted ongoing pressures from rising deposit costs due to market forces. The company has concluded internal investigations and made organizational changes aimed at improvement.

Positive

• Record net income of $17.6 million for Q4 2022, a 5.6% increase from Q3 2022.
• Loans increased by $114.4 million, annualized growth of 14.1%.
• Declared a quarterly dividend of $0.16 per share.
• Efficiency ratio improved to 31.67% from 40.22% in Q3 2022.

Negative

• Noninterest income decreased by $183,000 from Q3 2022.
• Noninterest expenses were higher year-over-year despite a decrease from Q3 2022.
• Increased competition raised the cost of interest-bearing deposits.

Conference Call and Webcast Scheduled for Tuesday, January 24, 2023 at 11:00 a.m. Pacific Time/2:00 p.m. Eastern Time  

Fourth Quarter 2022 Highlights 

• Record net income of $17.6 million, or $0.92 diluted earnings per share, increased $929,000, or 5.6%, from the prior quarter and increased $1.9 million, or 11.9%, from the fourth quarter of 2021
  
  
  
  
• Loans grew by $114.4 million, or 14.1% annualized, from the end of the prior quarter
  
  
  
  
• Declared $0.16 per share quarterly dividend

LOS ANGELES--(BUSINESS WIRE)-- 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 year ended December 31, 2022.

The Company reported net income of $17.6 million, or $0.92 diluted earnings per share, for the quarter ended December 31, 2022, compared to net income of $16.7 million, or $0.87 diluted earnings per share, and $15.7 million, or $0.79 diluted earnings per share, for the quarter ended September 30, 2022 and December 31, 2021, respectively.

“Loan growth, increasing loan yields and declining expenses drove record fourth quarter and 2022 results,” said David Morris, President, CEO and CFO of RBB Bancorp. “The organizational re-alignment we began in the first quarter of last year is well underway with new hires and clearly defined responsibilities contributing to results. I’m also pleased to announce that we have concluded all internal investigations and have taken previously disclosed steps to address shortcomings and prevent future lapses.

While we made tremendous progress in 2022, we’re not immune from market forces and the impact of the rate environment. We saw significant pressure on deposit costs in the fourth quarters which we anticipate will continue over the next few quarters.”

“Despite the challenges Royal Business Bank faced in 2022, the strength of the franchise and focus of the management team delivered a record year of results and loan growth,” said Dr. James Kao, Chairman of RBB Bancorp. “As shareholders, the RBB Board of Directors appreciates management’s efforts over the past twelve months and looks forward to continuing to build on the momentum they have achieved.”

Key Performance Ratios

Net income of $17.6 million for the fourth quarter of 2022 produced an annualized return on average assets ("ROA") of 1.80% and an annualized return on average shareholders' equity ("ROE") of 14.59% compared to an annualized ROA of 1.72% and an annualized ROE of 13.93% for the third quarter of 2022. The efficiency ratio, which is defined in Selected Financial Highlights section, for the fourth quarter of 2022 was 31.67%, compared to 40.22% for the third quarter of 2022.

Net Interest Income and Net Interest Margin

Net interest income, before provision for credit losses, was $39.0 million for the fourth quarter of 2022, compared to $39.0 million for the third quarter of 2022. Net interest income remained flat as revenues from a $162.7 million increase in higher-yielding average commercial real estate and mortgage loans was offset by costs of a $250.0 million increase in average time deposits.

Compared to the fourth quarter of 2021, net interest income, before provision for credit losses, increased $5.8 million from $33.2 million. The $5.8 million increase was primarily attributable to a $414.1 million increase in average commercial real estate and mortgage loans partially offset by a $161.0 million increase in average time deposits and due to increasing rates.

Net interest margin was 4.26% for the fourth quarter of 2022, a decrease of 5 basis points from 4.31% in the third quarter of 2022 primarily due to a 111 basis point increase in the average cost on interest-bearing deposits from 0.82% in the third quarter of 2022 to 1.93% in the fourth quarter of 2022. Cost of interest-bearing deposits increased due increasing market rates and peer bank deposit competition.

Noninterest Income

Noninterest income was $2.4 million for the fourth quarter of 2022, a decrease of $183,000 from $2.5 million in the third quarter of 2022. The decrease was primarily driven by a $153,000 decrease in gain on sale of loans and a $143,000 decrease in loan servicing fees due to loan payoffs in the third quarter of 2022, offset by an $85,000 increase in recoveries on purchased loans during the quarter.

During the fourth quarter loan sale volume and margins on loan sales decreased. The Company sold $2.8 million in FNMA qualified mortgage loans for a net gain of $69,000 during the fourth quarter of 2022 compared to $3.8 million in FNMA qualified mortgage loans sold for a net gain of $135,000 during the third quarter of 2022. The Company sold $834,000 in SBA loans during the fourth quarter of 2022 for a net gain of $43,000, compared to $2.5 million SBA loans sold for a net gain of $130,000 during the third quarter of 2022.

Compared to the fourth quarter of 2021, noninterest income decreased by $804,000 from $3.2 million. The decrease was primarily attributable to a $1.7 million decrease in gain on sale of loans due to rate hikes that caused both sellable loan volume and premium decreases, offset by a $323,000 increase in loan servicing fees due to loan payoffs slowing down in 2022, a $300,000 decrease in unrealized loss on equity investments, and a $265,000 increase in gain on derivatives.

Noninterest Expense

Noninterest expense for the fourth quarter of 2022 was $13.1 million, compared to $16.7 million for the third quarter of 2022. The $3.6 million decrease was primarily attributable to a $2.6 million decrease in salaries and employee benefits expenses due to bonus reversals related to executive compensation and lower commission expenses for decreased loan originations in the fourth quarter of 2022, a $902,000 decrease in the provision for off balance sheet commitments due to the conversion to CECL, and a $103,000 decrease in data processing expenses.

Noninterest expense decreased from $13.3 million in the fourth quarter of 2021. The $207,000 decrease was primarily due to a $641,000 decrease in legal and professional expenses due to the completion of the previously disclosed Board special investigation, offset by a $365,000 increase in data processing expenses.

Income Taxes

The effective tax rate was 30.5% for the fourth quarter of 2022, 27.8% for the third quarter of 2022, and 30.0% for the fourth quarter of 2021. The Company recognized a tax benefit from stock option exercises of $9,000, $276,000 and $215,000 for the fourth quarter of 2022, the third quarter of 2022, and the fourth quarter of 2021, respectively. The Company amended its 2020 tax returns and 2018 California state tax return and recorded a total of $300,000 tax expense reduction in the third quarter of 2022.

Loan and Securities Portfolio

Loans held for investment, net of deferred fees and discounts, totaled $3.3 billion as of December 31, 2022, an increase of $115.5 million from September 30, 2022, and an increase of $405.1 million from December 31, 2021. The increase from September 30, 2022 was primarily due to a $107.8 million increase in single-family residential mortgage loans and a $91.3 million increase in commercial real estate loans, offset by a $76.6 million decrease in construction and land development loans and a $3.6 million decrease in commercial and industrial loans. The increase from December 31, 2021 was primarily due to a $459.5 million increase in single-family residential mortgages and a $64.1 million increase in commercial real estate loans, offset by a $67.5 million decrease in commercial and industrial loans and a $26.3 million decrease in construction and land development loans.

During the fourth quarter of 2022, single-family residential mortgage production was $130.8 million while net payoffs and paydowns were $21.4 million. During the third quarter of 2022, single-family residential mortgage production was $191.8 million while payoffs and paydowns were $36.2 million.

There were no mortgage loans held for sale as of December 31, 2022 compared to $1.2 million as of September 30, 2022 and $6.0 million as of December 31, 2021. The Company originated approximately $889,000 in FNMA mortgage loans for sale for the fourth quarter of 2022, compared with $1.8 million during the third quarter of 2022.

In the fourth quarter of 2022, SBA loan production was $10.2 million and total SBA loan sales were $834,000 compared to SBA loan production of $7.7 million and total SBA loan sales of $2.5 million in the third quarter of 2022.

As of December 31, 2022, the Bank’s total available-for-sale securities maturing in over 12 months were $234.8 million. As of December 31, 2022 the Bank recorded gross unrealized losses of $31.2 million compared to gross unrealized losses of $2.3 million as of December 31, 2021.

Deposits

Deposits were $3.0 billion at December 31, 2022, which was an increase of $18.0 million compared to September 30, 2022. During the fourth quarter of 2022, noninterest-bearing deposits decreased by $117.6 million due to the continued reduction of a single deposit relationship, interest-bearing non-maturity deposits decreased by $266.8 million, and time deposits increased by $402.4 million. As of December 31, 2022, there were $255.0 million in brokered CDs, as compared to $105.5 million brokered CDs as of September 30, 2022 and $2.4 million brokered CDs as of December 31, 2021. Compared to December 31, 2021, total deposits decreased by $407.8 million primarily due to a $492.7 million decrease in noninterest-bearing demand deposits, and a $312.3 million decrease in interest-bearing non-maturity deposits, offset by a $397.2 million increase in time deposits.

Asset Quality

Nonperforming assets totaled $12.1 million, or 0.31% of total assets at December 31, 2022, compared to $11.8 million, or 0.30% of total assets at September 30, 2022. The increase in nonperforming assets was due to the foreclosure of a property in the amount of $284,000 that was transferred to Other Real Estate Owned (OREO) in the fourth quarter of 2022. Nonperforming assets consist of other real estate owned, loans modified under troubled debt restructurings (“TDR”), non-accrual loans, and loans past due 90 days or more and still accruing interest.

Our 30-89 day delinquent loans, excluding non-accrual loans decreased $24.7 million to $15.2 million as of December 31, 2022 compared to $39.9 million as of September 30, 2022. 30-89 days past due loans at December 31, 2022 decreased primarily due to the completion of extensions on a construction loan of $11.3 million on a project that is substantially complete and a commercial real estate loan of $8.8 million. Both loans were delinquent for 52 days at September 30, 2022, and extended and back to current in October 2022.

In the fourth quarter of 2022, there were $85,000 in net charge-offs, compared to net recoveries of $127,000 in the third quarter of 2022 and net recoveries of $46,000 in the fourth quarter of 2021.

The Company's emerging growth company (“EGC”) status expired on December 31, 2022. The Company adopted ASU 2016-13 “Accounting for Credit Losses” (“CECL”) retrospectively to January 1, 2022. Due to the adoption of CECL, the Company recorded a $2.1 million transition adjustment for the credit for loan losses and a provision for unfunded commitments of $1.0 million through retained earnings on January 1, 2022. Subsequent to CECL adoption, the Company recorded a provision for credit losses of $3.0 million in the fourth quarter of 2022 compared to $1.8 million in third quarter of 2022. The Company also recorded a reversal of provision for off-balance sheet commitments of $930,000 in the fourth quarter of 2022 compared to a reversal of $28,000 in the third quarter of 2022.

The allowance for credit losses totaled $41.0 million, or 1.23% of loans held for investment at December 31, 2022, compared with $36.0 million, or 1.12%, of total loans at September 30, 2022.

Stock Repurchase

During the fourth quarter of 2022, the Company repurchased 48,896 common shares at a weighted average price of $20.77.

Corporate Overview

RBB Bancorp is a community-based financial holding company headquartered in Los Angeles, California. As of December 31, 2022, the company had total assets of $3.9 billion. Its wholly-owned subsidiary, the Bank is a full service commercial bank, which provides business banking services to the Chinese-American 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 24, 2023, to discuss the Company’s fourth quarter and year-end 2022 financial results.

To listen to the conference call, please dial 1-888-506-0062 or 1-973-528-0011, the Participant ID code is 200944, conference ID RBBQ422. A replay of the call will be made available at 1-877-481-4010 or 1-919-882-2331, the passcode is 47492, approximately one hour after the conclusion of the call and will remain available through February 7, 2023.

The conference call will also be simultaneously webcast over the Internet; please visit our Royal Business Bank website at www.royalbusinessbankusa.com and click on the “Investors” tab to access the call from the site. This webcast will be recorded and available for replay on our website approximately two hours after the conclusion of the conference call.

Disclosure

This press release contains certain non-GAAP financial disclosures for tangible common equity and tangible assets and adjusted earnings. The Company uses certain non-GAAP financial measures to provide meaningful supplemental information regarding the Company’s operational performance and to enhance investors’ overall understanding of such financial performance. Please refer to the tables at the end of this release for a presentation of performance ratios in accordance with GAAP and a reconciliation of the non-GAAP financial measures to the GAAP financial measures.

Safe Harbor

Certain matters set forth herein (including the exhibits hereto) constitute forward-looking statements relating to the Company’s current business plans and expectations and our future financial position and operating results. These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance and/or achievements to differ materially from those projected. These risks and uncertainties include, but are not limited to, 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 credit losses and charge-offs; expectations regarding the impact of the COVID-19 pandemic; the costs or effects of acquisitions or dispositions we may make, whether we are able to obtain any required governmental or shareholder 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, including ASU 2016-13 (Topic 326), “Measurement of Credit Losses on Financial Instruments”, commonly referenced as the Current Expected Credit Loss (“CECL”) model, which will change how we estimate credit losses and may increase the required level of our allowance for credit losses after adoption; 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 DFPI (formerly DBO); our success at managing the risks involved in the foregoing items and all other factors set forth in the Company’s public reports, including its Annual Report as filed under Form 10-K/A and Form 10-K for the year ended December 31, 2021, and particularly the discussion of risk factors within that document. The Company does not undertake, and specifically disclaims any obligation, to update any forward-looking statements to reflect occurrences or unanticipated events or circumstances after the date of such statements except as required by law. Any statements about future operating results, such as those concerning accretion and dilution to the Company’s earnings or shareholders, are for illustrative purposes only, are not forecasts, and actual results may differ.

RBB BANCORP AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, except for December 31, 2021) (Dollars in thousands)
		December 31,				September 30,				June 30,				March 31,				December 31,
		2022				2022				2022				2022				2021
Assets
Cash and due from banks		$	83,548			$	134,179			$	224,736			$	149,767			$	501,372
Federal funds sold and other cash equivalents			—				40,000				100,000				200,000				193,000
Total cash and cash equivalents			83,548				174,179				324,736				349,767				694,372
Interest-bearing deposits in other financial institutions			600				600				600				600				600
Investment securities available for sale			256,830				266,270				358,135				420,448				368,260
Investment securities held to maturity			5,729				5,735				5,741				6,246				6,252
Mortgage loans held for sale			—				1,185				-				3,572				5,957
Loans held for investment			3,336,449				3,220,913				3,045,946				3,006,484				2,931,350
Allowance for credit losses			(41,047	)			(36,047	)			(34,154	)			(33,292	)			(32,912	)
Net loans held for investment			3,295,402				3,184,866				3,011,792				2,973,192				2,898,438
Premises and equipment, net			27,009				26,850				27,104				27,455				27,199
Federal Home Loan Bank (FHLB) stock			15,000				15,000				15,000				15,000				15,000
Cash surrender value of life insurance			57,310				56,975				56,642				56,313				55,988
Goodwill			71,498				71,498				71,498				71,498				69,243
Servicing assets			9,521				10,054				10,456				11,048				11,517
Core deposit intangibles			3,718				3,971				4,248				4,525				4,075
Right-of-use assets- operating leases			25,447				24,768				25,931				22,451				22,454
Accrued interest and other assets			66,074				63,278				57,154				51,454				48,839
Total assets		$	3,917,686			$	3,905,229			$	3,969,037			$	4,013,569			$	4,228,194
Liabilities and shareholders' equity
Deposits:
Noninterest-bearing demand		$	798,741			$	916,301			$	1,045,009			$	1,159,703			$	1,291,484
Savings, NOW and money market accounts			615,339				882,126				868,307				885,050				927,609
Time deposits, less than $250,000			837,369				608,489				574,050				570,274				587,940
Time deposits, greater than or equal to $250,000			726,234				552,754				540,199				553,226				578,499
Total deposits			2,977,683				2,959,670				3,027,565				3,168,253				3,385,532
FHLB advances			220,000				240,000				250,000				150,000				150,000
Long-term debt, net of debt issuance costs			173,585				173,441				173,296				173,152				173,007
Subordinated debentures			14,720				14,665				14,611				14,556				14,502
Lease liabilities - operating leases			26,523				25,701				26,823				23,314				23,282
Accrued interest and other liabilities			20,612				19,953				13,035				19,469				15,188
Total liabilities			3,433,123				3,433,430				3,505,330				3,548,744				3,761,511
Shareholders' equity:
Shareholder's equity			506,156				494,248				479,382				475,077				468,267
Non-controlling interest			72				72				72				72				72
Accumulated other comprehensive loss - Net of tax			(21,665	)			(22,521	)			(15,747	)			(10,324	)			(1,656	)
Total shareholders' equity			484,563				471,799				463,707				464,825				466,683
Total liabilities and shareholders’ equity		$	3,917,686			$	3,905,229			$	3,969,037			$	4,013,569			$	4,228,194

RBB BANCORP AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Dollars in thousands, except share and per share data)
		For the Three Months Ended
		December 31, 2022				September 30, 2022				December 31, 2021
Interest and dividend income:
Interest and fees on loans		$	49,468			$	43,588			$	36,783
Interest on interest-bearing deposits			697				373				160
Interest on investment securities			1,874				1,784				1,069
Dividend income on FHLB stock			265				224				227
Interest on federal funds sold and other			347				445				205
Total interest income			52,651				46,414				38,444
Interest expense:
Interest on savings deposits, NOW and money market accounts			2,471				1,529				683
Interest on time deposits			7,798				2,460				1,748
Interest on subordinated debentures and long term debt			2,491				2,427				2,343
Interest on other borrowed funds			898				1,020				445
Total interest expense			13,658				7,436				5,219
Net interest income before provision for credit losses			38,993				38,978				33,225
Provision for credit losses			2,950				1,766				635
Net interest income after provision for credit losses			36,043				37,212				32,590
Noninterest income:
Service charges, fees and other			1,196				1,277				1,323
Gain on sale of loans			112				265				1,788
Gain on transfer of OREO			22				—				-
Loan servicing fees, net of amortization			581				724				258
Recoveries on loans acquired in business combinations			90				5				4
Unrealized loss on equity investments			—				—				(300	)
Unrealized gain/(loss)on derivatives			16				(68	)			(249	)
Increase in cash surrender value of life insurance			335				332				332
Total noninterest income			2,352				2,535				3,156
Noninterest expense:
Salaries and employee benefits			6,958				9,561				6,812
Occupancy and equipment expenses			2,364				2,349				2,125
Data processing			1,203				1,306				838
Legal and professional			1,045				1,077				1,686
Office expenses			405				382				359
Marketing and business promotion			406				364				418
Insurance and regulatory assessments			489				441				475
Core deposit premium			253				277				252
OREO expenses			6				4				4
Merger expenses			1				—				38
Other expenses			(37	)			936				293
Total noninterest expense			13,093				16,697				13,300
Income before income taxes			25,302				23,050				22,446
Income tax expense			7,721				6,398				6,740
Net income		$	17,581			$	16,652			$	15,706
Net income per share
Basic		$	0.93			$	0.88			$	0.81
Diluted		$	0.92			$	0.87			$	0.79
Cash Dividends declared per common share		$	0.14			$	0.14			$	0.13
Weighted-average common shares outstanding
Basic			18,971,250				18,988,443				19,444,148
Diluted			19,086,586				19,130,447				19,851,202

RBB BANCORP AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited, except for December 31, 2021) (Dollars in thousands, except share and per share data)
		For the Year Ended
		December 31, 2022				December 31, 2021
Interest and dividend income:
Interest and fees on loans		$	171,099			$	141,569
Interest on interest-earning deposits			1,353				552
Interest on investment securities			6,084				3,379
Dividend income on FHLB stock			938				869
Interest on federal funds sold and other			1,496				694
Total interest income			180,970				147,063
Interest expense:
Interest on savings deposits, NOW and money market accounts			5,561				2,786
Interest on time deposits			13,338				9,170
Interest on subordinated debentures and long term debt			9,645				8,999
Interest on other borrowed funds			2,872				1,765
Total interest expense			31,416				22,720
Net interest income			149,554				124,343
Provision for credit losses			5,998				3,959
Net interest income after provision for credit losses			143,556				120,384
Noninterest income:
Service charges, fees and other			5,096				7,276
Gain on sale of loans			1,895				9,991
Gain on transfer of OREO			22				—
Loan servicing fees, net of amortization			2,209				684
Recoveries on loans acquired in business combinations			198				82
Unrealized loss on equity investments			—				(360	)
Unrealized (loss) gain on derivatives			(247	)			5
Increase in cash surrender value of life insurance			1,322				1,067
Gain on sale of fixed assets			757				—
Total noninterest income			11,252				18,745
Noninterest expense:
Salaries and employee benefits			35,517				33,568
Occupancy and equipment expenses			9,092				8,691
Data processing			5,060				4,474
Legal and professional			5,383				3,773
Office expenses			1,438				1,197
Marketing and business promotion			1,578				1,157
Insurance and regulatory assessments			1,850				1,561
Core deposit premium			1,086				1,121
OREO expenses			23				17
Merger expenses			61				137
Other expenses			2,375				2,496
Total noninterest expense			63,463				58,192
Income before income taxes			91,345				80,937
Income tax expense			27,018				24,031
Net income		$	64,327			$	56,906
Net income per share
Basic		$	3.37			$	2.92
Diluted		$	3.33			$	2.86
Cash Dividends declared per common share		$	0.56			$	0.51
Weighted-average common shares outstanding
Basic			19,099,509				19,423,549
Diluted			19,332,639				19,834,306

RBB BANCORP AND SUBSIDIARIES AVERAGE BALANCE SHEET AND NET INTEREST INCOME (Unaudited)
		For the Three Months Ended
		December 31, 2022												September 30, 2022												December 31, 2021
		Average				Interest				Yield /				Average				Interest				Yield /				Average				Interest				Yield /
(tax-equivalent basis, dollars in thousands)		Balance				& Fees				Rate				Balance				& Fees				Rate				Balance				& Fees				Rate
Earning assets:
Federal funds sold, cash equivalents & other (1)		$	94,932			$	1,310				5.47	%		$	141,737			$	1,042				2.92	%		$	587,980			$	592				0.40	%
Securities
Available for sale (2)			245,348				1,847				2.99	%			318,066				1,758				2.19	%			376,601				1,037				1.09	%
Held to maturity (2)			5,733				50				3.46	%			5,738				50				3.46	%			6,256				56				3.55	%
Mortgage loans held for sale			192				3				6.20	%			420				6				5.48	%			3,721				40				4.26	%
Loans held for investment: (3)
Real estate			3,006,293				43,864				5.79	%			2,820,022				38,999				5.49	%			2,492,396				31,978				5.09	%
Commercial			280,326				5,601				7.93	%			303,899				4,583				5.98	%			380,098				4,765				4.97	%
Total loans			3,286,619				49,465				5.97	%			3,123,921				43,582				5.53	%			2,872,494				36,743				5.07	%
Total earning assets			3,632,824			$	52,675				5.75	%			3,589,882			$	46,438				5.13	%			3,847,052			$	38,468				3.97	%
Noninterest-earning assets			247,574												250,737												240,059
Total assets		$	3,880,398											$	3,840,619											$	4,087,111
Interest-bearing liabilities
NOW		$	67,854			$	77				0.45	%		$	74,518			$	91				0.48	%		$	73,896			$	48				0.26	%
Money Market			561,575				2,337				1.65	%			612,743				1,376				0.89	%			668,742				602				0.36	%
Saving deposits			136,623				57				0.17	%			147,349				62				0.17	%			138,906				33				0.09	%
Time deposits, less than $250,000			716,476				3,884				2.15	%			566,730				1,221				0.85	%			599,119				827				0.55	%
Time deposits, $250,000 and over			631,897				3,914				2.46	%			531,655				1,239				0.92	%			588,265				921				0.62	%
Total interest-bearing deposits			2,114,425				10,269				1.93	%			1,932,995				3,989				0.82	%			2,068,928				2,431				0.47	%
FHLB advances			196,304				898				1.81	%			239,674				1,020				1.69	%			150,000				445				1.18	%
Long-term debt			173,491				2,194				5.02	%			173,345				2,194				5.02	%			172,912				2,195				5.04	%
Subordinated debentures			14,684				297				8.02	%			14,629				233				6.32	%			14,466				148				4.06	%
Total interest-bearing liabilities			2,498,904				13,658				2.17	%			2,360,643				7,436				1.25	%			2,406,306				5,219				0.86	%
Noninterest-bearing liabilities
Noninterest-bearing deposits			856,917												964,867												1,177,948
Other noninterest-bearing liabilities			46,613												41,003												39,483
Total noninterest-bearing liabilities			903,530												1,005,870												1,217,431
Shareholders' equity			477,964												474,106												463,374
Total liabilities and shareholders' equity		$	3,880,398											$	3,840,619											$	4,087,111
Net interest income / interest rate spreads						$	39,017				3.58	%						$	39,002				3.88	%						$	33,249				3.11	%
Net interest margin											4.26	%											4.31	%											3.43	%

_____________________
(1)	Includes income and average balances for FHLB stock, term federal funds, interest-bearing time deposits and other miscellaneous interest-bearing assets.
(2)	Interest income and average rates for tax-exempt loans and securities are presented on a tax-equivalent basis.
(3)	Average loan balances include nonaccrual loans and loans held for sale. Interest income on loans includes - amortization of deferred loan fees, net of deferred loan costs.

RBB BANCORP AND SUBSIDIARIES AVERAGE BALANCE SHEET AND NET INTEREST INCOME (Unaudited, except for December 31, 2021)
		For the Year Ended
		December 31, 2022												December 31, 2021
		Average				Interest				Yield /				Average				Interest				Yield /
(tax-equivalent basis, dollars in thousands)		Balance				& Fees				Rate				Balance				& Fees				Rate
Earning assets:
Federal funds sold, cash equivalents & other (1)		$	276,923			$	3,788				1.37	%		$	504,809			$	2,115				0.42	%
Securities
Available for sale (2)			338,437				5,973				1.76	%			320,544				3,217				1.00	%
Held to maturity (2)			5,865				208				3.55	%			6,543				238				3.64	%
Mortgage loans held for sale			1,263				66				5.23	%			20,817				670				3.22	%
Loans held for investment: (3)
Real estate			2,774,348				151,164				5.45	%			2,363,846				122,204				5.17	%
Commercial			322,438				19,869				6.16	%			381,646				18,695				4.90	%
Total loans			3,096,786				171,033				5.52	%			2,745,492				140,899				5.13	%
Total earning assets			3,719,274			$	181,068				4.87	%			3,598,205			$	147,139				4.09	%
Noninterest-earning assets			244,891												235,267
Total assets		$	3,964,165											$	3,833,472
Interest-bearing liabilities
NOW		$	73,335			$	262				0.36	%		$	69,211			$	184				0.27	%
Money Market			631,094				5,114				0.81	%			637,539				2,468				0.39	%
Saving deposits			144,409				185				0.13	%			137,534				134				0.10	%
Time deposits, less than $250,000			609,464				6,583				1.08	%			640,747				4,462				0.70	%
Time deposits, $250,000 and over			565,059				6,755				1.20	%			597,770				4,708				0.79	%
Total interest-bearing deposits			2,023,361				18,899				0.93	%			2,082,801				11,956				0.57	%
FHLB advances			192,438				2,872				1.49	%			150,000				1,765				1.18	%
Long-term debt			173,275				8,777				5.07	%			157,719				8,404				5.33	%
Subordinated debentures			14,603				868				5.94	%			14,385				595				4.14	%
Total interest-bearing liabilities			2,403,677			$	31,416				1.31	%			2,404,905			$	22,720				0.94	%
Noninterest-bearing liabilities
Noninterest-bearing deposits			1,050,063												938,710
Other noninterest-bearing liabilities			39,644												42,143
Total noninterest-bearing liabilities			1,089,707												980,853
Shareholders' equity			470,781												447,714
Total liabilities and shareholders' equity		$	3,964,165											$	3,833,472
Net interest income / interest rate spreads						$	149,652				3.56	%						$	124,419				3.15	%
Net interest margin											4.02	%											3.46	%

________________
(1)	Includes income and average balances for FHLB stock, term federal funds, interest-bearing time deposits and other miscellaneous interest-bearing assets.
(2)	Interest income and average rates for tax-exempt loans and securities are presented on a tax-equivalent basis.
(3)	Average loan balances include nonaccrual loans and loans held for sale. Interest income on loans includes - amortization of deferred loan fees, net of deferred loan costs.

RBB BANCORP AND SUBSIDIARIES SELECTED FINANCIAL HIGHLIGHTS (Unaudited)
		For the Three Months Ended
		December 31,				September 30,				December 31,
		2022				2022				2021
Per share data (common stock)
Earnings
Basic		$	0.93			$	0.88			$	0.81
Diluted		$	0.92			$	0.87			$	0.79
Dividends declared		$	0.14			$	0.14			$	0.13
Book value		$	25.55			$	24.82			$	23.99
Tangible book value (1)		$	21.58			$	20.85			$	20.22
Weighted average shares outstanding
Basic			18,971,250				18,988,443				19,444,148
Diluted			19,086,586				19,130,447				19,851,202
Shares outstanding at period end			18,965,776				19,011,672				19,455,544
Performance ratios
Return on average assets, annualized			1.80	%			1.72	%			1.52	%
Return on average shareholders' equity, annualized			14.59	%			13.93	%			13.45	%
Return on average tangible common equity, annualized (1)			17.33	%			16.58	%			15.98	%
Noninterest income to average assets, annualized			0.24	%			0.26	%			0.31	%
Noninterest expense to average assets, annualized			1.34	%			1.72	%			1.29	%
Yield on average earning assets			5.75	%			5.13	%			3.97	%
Cost of average total deposits			1.37	%			0.55	%			0.30	%
Cost of average interest-bearing deposits			1.93	%			0.82	%			0.47	%
Cost of average interest-bearing liabilities			2.17	%			1.25	%			0.86	%
Accretion on loans to average earning assets			0.00	%			0.01	%			0.02	%
Net interest spread			3.58	%			3.88	%			3.11	%
Net interest margin			4.26	%			4.31	%			3.43	%
Efficiency ratio (2)			31.67	%			40.22	%			36.56	%
Common stock dividend payout ratio			15.05	%			15.91	%			16.05	%

____________________
(1)	Reconciliations of the non–U.S. generally accepted accounting principles (“GAAP”) measures are set forth at the end of this press release.
(2)	Ratio calculated by dividing noninterest expense by the sum of net interest income before provision for credit losses and noninterest income.

RBB BANCORP AND SUBSIDIARIES SELECTED FINANCIAL HIGHLIGHTS (Unaudited, except for December 31, 2021)
		For the Year Ended December 31,
		2022				2021
Per share data (common stock)
Earnings
Basic		$	3.37			$	2.92
Diluted		$	3.33			$	2.86
Dividends declared		$	0.56			$	0.51
Book value		$	25.55			$	23.99
Tangible book value (1)		$	21.58			$	20.22
Weighted average shares outstanding
Basic			19,099,509				19,423,549
Diluted			19,332,639				19,834,306
Shares outstanding at period end			18,965,776				19,455,544
Performance ratios
Return on average assets, annualized			1.62	%			1.48	%
Return on average shareholders' equity, annualized			13.66	%			12.71	%
Return on average tangible common equity, annualized (1)			16.26	%			15.22	%
Noninterest income to average assets, annualized			0.28	%			0.49	%
Noninterest expense to average assets, annualized			1.60	%			1.52	%
Yield on average earning assets			4.87	%			4.09	%
Cost of average deposits			0.61	%			0.40	%
Cost of average interest-bearing deposits			0.93	%			0.57	%
Cost of average interest-bearing liabilities			1.31	%			0.94	%
Accretion on loans to average earning assets			0.01	%			0.03	%
Net interest spread			3.56	%			3.15	%
Net interest margin			4.02	%			3.46	%
Efficiency ratio (2)			39.47	%			40.67	%
Common stock dividend payout ratio			16.62	%			17.47	%

______________________
(1)	Reconciliations of the non–U.S. generally accepted accounting principles (“GAAP”) measures are set forth at the end of this press release.
(2)	Ratio calculated by dividing noninterest expense by the sum of net interest income before provision for credit losses and noninterest income.

RBB BANCORP AND SUBSIDIARIES SELECTED FINANCIAL HIGHLIGHTS (Unaudited) (Dollars in thousands)
		As of
		December 31,				September 30,				December 31,
		2022				2022				2021
Loan to deposit ratio			112.05	%			108.83	%			86.58	%
Core deposits (1) / total deposits			75.61	%			81.32	%			82.91	%
Net non-core funding dependence ratio (2)			17.96	%			11.09	%			-6.50	%
Credit Quality Data:
Loans 30-89 days past due		$	15,249			$	39,938			$	17,640
Loans 30-89 days past due to total loans			0.46	%			1.24	%			0.60	%
Nonperforming loans		$	11,525			$	11,503			$	20,725
Nonperforming loans to total loans			0.35	%			0.36	%			0.71	%
Nonperforming assets		$	12,102			$	11,796			$	21,018
Nonperforming assets to total assets			0.31	%			0.30	%			0.50	%
Allowance for credit losses to total loans			1.23	%			1.12	%			1.12	%
Allowance for credit losses to nonperforming loans			356.16	%			313.37	%			158.80	%
Net (recoveries) charge-offs to average loans (for the quarter-to-date period)			0.01	%			(0.02	%)			(0.01	%)
Regulatory and other capital ratios—Company
Tangible common equity to tangible assets (2)			10.65	%			10.35	%			9.47	%
Tier 1 leverage ratio			11.67	%			11.47	%			10.21	%
Tier 1 common capital to risk-weighted assets			16.04	%			15.52	%			14.86	%
Tier 1 capital to risk-weighted assets			16.58	%			16.06	%			15.40	%
Total capital to risk-weighted assets			24.28	%			23.72	%			23.15	%
Regulatory capital ratios—Bank only
Tier 1 leverage ratio			14.89	%			14.57	%			12.45	%
Tier 1 common capital to risk-weighted assets			21.16	%			20.41	%			18.80	%
Tier 1 capital to risk-weighted assets			21.16	%			20.41	%			18.80	%
Total capital to risk-weighted assets			22.41	%			21.67	%			20.05	%

__________________
(1)	Comprised of demand and savings deposits of any amount plus time deposits less than $250,000.
(2)	Reconciliations of the non–U.S. generally accepted accounting principles (“GAAP”) measures are set forth at the end of this press release.

RBB BANCORP AND SUBSIDIARIES SELECTED FINANCIAL HIGHLIGHTS (Unaudited) (Dollars in thousands, except per share data)
		4th Quarter				3rd Quarter				2nd Quarter				1st Quarter				4th Quarter
Quarterly Consolidated Statements of Earnings		2022				2022				2022				2022				2021
Interest income
Loans, including fees		$	49,468			$	43,588			$	40,157			$	37,886			$	36,783
Investment securities and other			3,183				2,826				2,181				1,680				1,661
Total interest income			52,651				46,414				42,338				39,566				38,444
Interest expense
Deposits			10,269				3,989				2,350				2,292				2,431
Interest on subordinated debentures and other			2,491				2,427				2,379				2,348				2,343
Other borrowings			898				1,020				519				435				445
Total interest expense			13,658				7,436				5,248				5,075				5,219
Net interest income before provision for credit losses			38,993				38,978				37,090				34,491				33,225
Provision for credit losses			2,950				1,766				915				366				635
Net interest income after provision for credit losses			36,043				37,212				36,175				34,125				32,590
Noninterest income			2,352				2,535				3,422				2,944				3,156
Noninterest expense			13,093				16,697				17,612				16,061				13,300
Earnings before income taxes			25,302				23,050				21,985				21,008				22,446
Income taxes			7,721				6,398				6,508				6,391				6,740
Net income		$	17,581			$	16,652			$	15,477			$	14,617			$	15,706
Net income per common share - basic		$	0.93			$	0.88			$	0.81			$	0.75			$	0.81
Net income per common share - diluted		$	0.92			$	0.87			$	0.80			$	0.74			$	0.79
Cash dividends declared per common share		$	0.14			$	0.14			$	0.14			$	0.14			$	0.13
Cash dividends declared on common shares		$	2,655			$	2,663			$	2,687			$	2,724			$	2,537
Yield on average assets, annualized			1.80	%			1.72	%			1.60	%			1.39	%			1.52	%
Yield on average earning assets			5.75	%			5.13	%			4.66	%			4.00	%			3.97	%
Cost of average deposits			1.37	%			0.55	%			0.31	%			0.27	%			0.30	%
Cost of average interest-bearing deposits			1.93	%			0.82	%			0.49	%			0.44	%			0.47	%
Cost of average interest-bearing liabilities			2.17	%			1.25	%			0.91	%			0.84	%			0.86	%
Accretion on loans to average earning assets			0.00	%			0.01	%			0.01	%			0.02	%			0.02	%
Net interest margin			4.26	%			4.31	%			4.08	%			3.49	%			3.43	%

RBB BANCORP AND SUBSIDIARIES SELECTED FINANCIAL HIGHLIGHTS (Unaudited, except for December 31, 2021)
Loan Portfolio Detail		As of December 31, 2022								As of September 30, 2022								As of June 30, 2022								As of March 31, 2022								As of December 31, 2021
(dollars in thousands)		$				%				$				%				$				%				$				%				$				%
Loans:
Commercial and industrial		$	201,223				6.0	%		$	204,817				6.4	%		$	238,045				7.8	%		$	280,825				9.3	%		$	268,709				9.2	%
SBA			61,411				1.9	%			61,934				1.9	%			59,303				1.9	%			67,688				2.3	%			76,136				2.6	%
Construction and land development			276,876				8.3	%			353,473				11.0	%			356,772				11.7	%			346,766				11.5	%			303,144				10.3	%
Commercial real estate (1)			1,312,132				39.3	%			1,220,791				37.9	%			1,160,350				38.1	%			1,217,985				40.5	%			1,247,999				42.6	%
Single-family residential mortgages			1,464,108				43.9	%			1,356,342				42.1	%			1,205,732				39.6	%			1,064,581				35.4	%			1,004,576				34.3	%
Other loans			20,699				0.6	%			23,556				0.7	%			25,744				0.9	%			28,639				1.0	%			30,786				1.0	%
Total loans (2)		$	3,336,449				100.0	%		$	3,220,913				100.0	%		$	3,045,946				100.0	%		$	3,006,484				100.0	%		$	2,931,350				100.0	%
Allowance for credit losses			(41,047	)							(36,047	)							(34,154	)							(33,292	)							(32,912	)
Total loans, net		$	3,295,402							$	3,184,866							$	3,011,792							$	2,973,192							$	2,898,438

__________________
(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.

		Three Months Ended								Year Ended
Change in Allowance for Credit Losses		December 31,								December 31,
(dollars in thousands)		2022				2021				2022				2021
Beginning balance		$	36,047			$	32,231			$	32,912			$	29,337
ASU 2016-13 transition adjustment			2,135				—				2,135				—
Adjusted Beginning balance			38,182				32,231				35,047				29,337
Additions to the allowance charged to expense			2,950				635				5,998				3,959
Net (charge-offs)/recoveries on loans			(85	)			46				2				(384	)
Ending balance		$	41,047			$	32,912			$	41,047			$	32,912

Non-GAAP Financial Measures

Tangible Book Value Reconciliations

The tangible book value per share is a non-GAAP disclosure. Management measures the tangible book value per share to assess the Company’s capital strength and business performance and believes these are helpful to investors as additional tool for further understanding our performance. The following is a reconciliation of tangible book value to the Company shareholders’ equity computed in accordance with GAAP, as well as a calculation of tangible book value per share as of December 31, 2022, September 30, 2022, and December 31, 2021.

(dollars in thousands, except share and per share data)		December 31, 2022				September 30, 2022				December 31, 2021
Tangible common equity:
Total shareholders' equity		$	484,563			$	471,799			$	466,683
Adjustments
Goodwill			(71,498	)			(71,498	)			(69,243	)
Core deposit intangible			(3,718	)			(3,971	)			(4,075	)
Tangible common equity		$	409,347			$	396,330			$	393,365
Tangible assets:
Total assets-GAAP		$	3,917,686			$	3,905,229			$	4,228,194
Adjustments
Goodwill			(71,498	)			(71,498	)			(69,243	)
Core deposit intangible			(3,718	)			(3,971	)			(4,075	)
Tangible assets		$	3,842,470			$	3,829,760			$	4,154,876
Common shares outstanding			18,965,776				19,011,672				19,455,544
Tangible common equity to tangible assets ratio			10.65	%			10.35	%			9.47	%
Book value per share		$	25.55			$	24.82			$	23.99
Tangible book value per share		$	21.58			$	20.85			$	20.22

Return on Average Tangible Common Equity

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

		Three Months Ended								Year Ended
		December 31,								December 31,
(dollars in thousands)		2022				2021				2022				2021
Net income available to common shareholders		$	17,581			$	15,706			$	64,327			$	56,906
Average shareholders' equity			477,964				463,374				470,781				447,714
Adjustments:
Goodwill			(71,498	)			(69,243	)			(70,948	)			(69,243	)
Core deposit intangible			(3,882	)			(4,239	)			(4,131	)			(4,657	)
Adjusted average tangible common equity		$	402,584			$	389,892			$	395,702			$	373,814
Return on average tangible common equity			17.33	%			15.98	%			16.26	%			15.22	%

Non-core Funding Dependency Ratio

The Bank measures core deposits by reviewing all relationships over $250,000 on a quarterly basis. The Company tracks all deposit relationships over $250,000 on a quarterly basis and consider a relationship to be core if there are any three or more of the following: (i) relationships with the Company (as a director or shareholder); (ii) deposits within the Company’s market area; (iii) additional non-deposit services with the Company; (iv) electronic banking services with the Company; (v) active demand deposit account with the Company; (vi) deposits at market interest rates; and (vii) longevity of the relationship with the Company. The Company considers all deposit relationships under $250,000 as a core relationship except for time deposits originated through an internet service. This differs from the traditional definition of core deposits which is demand and savings deposits plus time deposits less than $250,000. The Company believes it is the proper way to measure our core and non-core deposits under regulatory guidelines. The following table reconciles the non-core dependency ratio.

		As of
(dollars in thousands)		December 31, 2022				December 31, 2021
Non-core deposits: Time deposits greater than $250,000		$	726,234			$	578,499
Short term borrowing outstanding			70,000				—
Adjusted non-core liabilities			796,234				578,499
Short term assets (1)			137,302				837,941
Adjustment to short term assets:
Purchased receivables with maturities less than 90-days			—				—
Adjusted short term assets			137,302				837,941
Net non-core funding		$	658,932			$	(259,442	)
Total earning assets			3,668,447				3,988,715
Net non-core funding dependency ratio			17.96	%			-6.50	%

______________
(1)	Short term assets include cash equivalents and investment with maturities less than one year

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230123005727/en/

David Morris

President, CEO and CFO

(714) 670-2488

Source: RBB Bancorp

FAQ

What were RBB's net income results for Q4 2022?

RBB Bancorp reported a net income of $17.6 million, or $0.92 diluted earnings per share for Q4 2022.

How much did loans grow in Q4 2022 for RBB?

Loans at RBB Bancorp increased by $114.4 million, representing a 14.1% annualized growth.

What is the dividend declared by RBB for Q4 2022?

RBB Bancorp declared a quarterly dividend of $0.16 per share.

What challenges did RBB face in Q4 2022?

RBB noted significant pressure on deposit costs due to increasing market rates and peer competition.

What was RBB's efficiency ratio in Q4 2022?

The efficiency ratio improved to 31.67% in Q4 2022, compared to 40.22% in Q3 2022.