RBB Bancorp Reports Third Quarter Earnings for 2021

Rhea-AI Summary

RBB Bancorp (NASDAQ:RBB) reported a record net income of $15.4 million for Q3 2021, translating to $0.77 diluted EPS, an increase of 14.8% from Q2 2021 and 80.3% year-over-year. Loan growth stood at $137.1 million, or 20.0% annualized. The bank declared a quarterly cash dividend of $0.13 per share and received a $1.8 million CDFI grant to support community development in response to the COVID-19 pandemic. The conference call is scheduled for October 26, 2021.

Positive

• Record net income of $15.4 million, up 80.3% YOY.
• Diluted EPS increased to $0.77, up 14.8% from the prior quarter.
• Loan growth of $137.1 million, or 20.0% annualized.
• Quarterly dividend declared at $0.13 per share.
• Received $1.8 million CDFI grant for community support.

Negative

• Noninterest expenses increased from $14.0 million in Q3 2020 to $14.4 million in Q3 2021.

Conference Call and Webcast Scheduled for Tuesday, October 26, 2021 at 11:00 a.m. Pacific Time/2:00 p.m. Eastern Time Third Quarter 2021 Highlights

• Reported record net income of $15.4 million, or $0.77 diluted earnings per share, increased $2.0 million, or 14.8%, from the prior quarter and increased $6.8 million, or 80.3%, from the third quarter of 2020
• Loan growth of $137.1 million, or 20.0% annualized, from the end of the prior quarter
• Declared quarterly cash dividend of $0.13 per common share
• Entered into an agreement in July, received regulatory approval in September to buy the Honolulu, Hawaii branch office of Bank of the Orient, which is expected to close by mid-January 2022

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 ended September 30, 2021.

The Company reported record net income of $15.4 million, or $0.77 diluted earnings per share, for the three months ended September 30, 2021, compared to net income of $13.4 million, or $0.67 diluted earnings per share, and $8.5 million, or $0.43 diluted earnings per share, for the three months ended June 30, 2021 and September 30, 2020, respectively. Third quarter results included the impact of a $1.8 million CDFI grant that increased diluted earnings per share by approximately $0.07.

"Our differentiated business model continued to outperform in the third quarter as we reported record diluted earnings per share of $0.77 and 20% annualized loan growth,” said Alan Thian, President and CEO of RBB Bancorp. “In addition to our financial performance and growth, continued pricing discipline and focus on our cost of deposits has kept our net interest margin stable in the first 9 months of 2021 versus the same period in 2020. We are also pleased that our efforts to support the communities in which we operate were recognized by the US Treasury which awarded Royal Business Bank with a $1.8 million CDFI grant to facilitate a rapid response to the economic impacts of the COVID-19 pandemic in distressed and underserved communities.”

"I am very pleased with Royal Business Bank’s record financial performance in the third quarter," said Dr. James Kao, Chairman of RBB Bancorp. “And I am very proud that RBB’s success in community development has been recognized with a CDFI grant and with the appointment of Alan to the Community Development Advisory Board.”

Key Performance Ratios

Net income of $15.4 million for the third quarter of 2021 produced an annualized return on average assets ("ROA") of 1.54%, an annualized return on average tangible common shareholders' equity ("ROTCE") of 16.17%, and an annualized return on average shareholders' equity ("ROE") of 13.52%. This compares to an annualized return on average assets of 1.39%, an annualized return on average tangible common shareholders' equity of 14.57%, and an annualized return on average shareholders' equity of 12.13% for the second quarter of 2021. Third quarter results included the impact of a $1.8 million CDFI grant that increased ROA by 0.03%, ROTCE by 0.35%, and ROE by 0.29%. The efficiency ratio for the third quarter of 2021 was 38.87%, compared to 42.89% for the prior quarter.

Net Interest Income and Net Interest Margin

Net interest income, before provision for loan losses, was $31.6 million for the third quarter of 2021, compared to $30.1 million for the second quarter of 2021. The $1.5 million increase was primarily attributable to higher interest income due to a $92.7 million increase in average earning assets, partially offset by an $11.3 million increase in average interest-bearing liabilities. Accretion of purchase discounts from prior acquisitions contributed $289,000 to net interest income in the third quarter of 2021, compared to $183,000 in the second quarter of 2021.

Compared to the third quarter of 2020, net interest income, before provision for loan losses, increased $4.3 million from $27.3 million. The increase was primarily attributable to a $691.5 million increase in average earning assets, partially offset by a $262.0 million increase in average interest-bearing liabilities. The increases in average earning assets and total deposits were primarily due to increased loan and deposit originations.

Net interest margin was 3.38% for the third quarter of 2021, an increase of 5 basis points from 3.33% in the second quarter of 2021. The increase was primarily attributable to a $89.9 million increase in average non-interest bearing deposits, combined with an 8 basis point decrease in the cost of average interest-bearing liabilities, which was partially offset by a 2 basis point decrease in the yield on average earning assets. Loan discount accretion contributed 3 basis points to the net interest margin in the third quarter of 2021, compared to 2 basis points in the second quarter of 2021.

Noninterest Income

Noninterest income was $5.5 million for the third quarter of 2021, an increase of $1.4 million from $4.2 million in the second quarter of 2021. The increase was primarily driven by a $1.8 million grant under the US Treasury’s Rapid Response Program, partially offset by a $782,000 decrease in gain on sale of loans during the quarter. The Company sold $35.7 million fewer loans in the third quarter than in the prior quarter primarily due to selling fewer FNMA loans.

The Company sold $36.6 million in FNMA qualified mortgage loans for a net gain of $1.3 million and sold no non-qualified mortgage loans during the third quarter of 2021. This compared to $58.9 million in FNMA qualified mortgage loans sold for a net gain of $1.4 million and $13.4 million in non-qualified mortgage loans to private investors for a gain of $389,000 during the second quarter of 2021. The Company sold $5.9 million in SBA loans during the third quarter of 2021 for a net gain of $553,000, compared to $5.9 million SBA loans sold for a net gain of $747,000 during the second quarter of 2021.

Compared to the third quarter of 2020, noninterest income increased by $2.8 million from $2.7 million. The increase was primarily attributable to an increase of $1.8 million grant under the US Treasury’s Rapid Response Program and an increase of $1.0 million in gain on loan sales.

Noninterest Expense

Noninterest expense for the third quarter of 2021 was $14.4 million, compared to $14.7 million for the second quarter of 2021. The $260,000 decrease was primarily attributable to a reversal of impairment write-down on mortgage servicing assets of $416,000 and a $266,000 decrease in data processing expense, partially offset by a $210,000 increase in legal and professional expenses and a $93,000 increase in marketing and business promotion expense.

Noninterest expense increased from $14.0 million in the third quarter of 2020. The $444,000 increase was primarily due to a $1.2 million increase in salaries and employee benefits and a $193,000 increase in marketing and business promotion expenses. These were partially offset by a $475,000 decrease in mortgage servicing assets impairment write-down, a $235,000 decrease in data processing expenses and a $171,000 decrease in occupancy and equipment expenses.

Income Taxes

The effective tax rate was 28.5% for the third quarter of 2021, 29.3% for the second quarter of 2021, and 29.8% for the third quarter of 2020. The Company recognized a tax benefit from stock option exercises of $534,000, $68,000 and zero for the third quarter of 2021, the second quarter of 2021, and the third quarter of 2020, respectively.

CDFI Rapid Response Program

In mid-June, 2021 the Bank was awarded a $1.8 million grant under the US Treasury’s Rapid Response Program to facilitate a rapid response to the economic impacts of the COVID-19 pandemic in distressed and underserved communities. The award was received in August 2021 after finalization of the contract between the Bank and the US Treasury which included various performance goals and measures that specify the use of the funds to provide affordable housing. The funds were disbursed for two loans that help provide affordable housing to underserved communities.

Loan Portfolio

Loans held for investment, net of deferred fees and discounts, totaled $2.84 billion as of September 30, 2021, an increase of $131.1 million from June 30, 2021, and an increase of $85.2 million from September 30, 2020. The increase from the prior quarter was primarily due to an increase in commercial real estate and construction & land development loans. Single-family residential mortgages decreased by $9.5 million net of payoffs, paydowns and loan sales. Commercial real estate loans increased by $103.2 million, construction and land development loans increased by $34.8 million, SBA loans decreased by $9.8 million (which included a $6.2 million decrease in PPP loans), commercial and industrial loans decreased by $693,000 and other loans increased by $13.2 million.

During the third quarter of 2021, single-family residential mortgage production was $112.0 million, payoffs and paydowns were $79.0 million, and single-family residential mortgage loan sales were $36.6 million. During the second quarter of 2021, single-family residential mortgage production was $107.9 million, payoffs and paydowns were $121.0 million, and loan sales were $72.3 million.

Mortgage loans held for sale were $15.2 million as of September 30, 2021, an increase of $5.9 million from $9.2 million at June 30, 2021 and a decrease of $8.7 million from $23.9 million as of September 30, 2020. The Company originated approximately $12.2 million in FNMA mortgage loans for sale for the third quarter of 2021, compared with $29.2 million during the prior quarter.

In the third quarter of 2021, SBA loan production was $22.7 million and total SBA loan sales were $5.9 million.

Deposits and Borrowings

Deposits were $3.0 billion at September 30, 2021, a decrease of $102.1 million from June 30, 2021, and an increase of $356.1 million from September 30, 2020, including brokered deposits. The decrease in total deposits from the prior quarter was primarily attributable to a decrease in noninterest-bearing demand deposits and time deposits. During the third quarter of 2021, noninterest-bearing deposits decreased by $115.3 million, interest-bearing non-maturity deposits increased by $72.9 million, and time deposits decreased by $59.8 million. As of September 30, 2021, time deposits included $2.4 million in brokered CDs, as compared to $17.4 million as of June 30, 2021 and $17.4 million as of September 30, 2020.

Asset Quality

Nonperforming assets totaled $14.5 million, or 0.38% of total assets at September 30, 2021, compared to $19.5 million, or 0.50%, of total assets at June 30, 2021. 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.

In the third quarter of 2021, there were $317,000 in net charge-offs, compared to net charge-offs of $71,000 in the second quarter.

The Company recorded a provision for credit losses of $1.2 million for the third quarter of 2021, an increase from $628,000 in the prior quarter, primarily attributable to loan growth.

The allowance for loan losses totaled $32.2 million, or 1.13% of loans held for investment at September 30, 2021, compared with $31.4 million, or 1.16%, of total loans at June 30, 2021.

As of September 30, 2021, borrowers representing 167 loans totaling $23.0 million, or 0.80% of the Company’s total loan portfolio, have funded under the SBA’s Paycheck Protection Program due to the COVID-19 pandemic. Presently none of our SBA customers are on a payment deferral plan due to the COVID-19 pandemic. The Company does not have any shared national credits or loans, backed by airlines or cruise lines, on deferral as of September 30, 2021.

As of October 15, 2021, the Company had one COVID-19 loan deferral in the amount of $241,000.

Corporate Overview

RBB Bancorp is a community-based financial holding company headquartered in Los Angeles, California. As of September 30, 2021, the company had total assets of $3.8 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, and in the Chicago neighborhoods of Chinatown and Bridgeport, Illinois. 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, two 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 and two branches in Chicago, Illinois. 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 tomorrow, October 26, 2021, to discuss the Company’s third quarter 2021 financial results.

To listen to the conference call, please dial 1-877-876-9174 or 1-785-424-1669, passcode RBBQ321. A replay of the call will be made available at 1-888-269-5324 or 1-402-220-7325 (no passcode required) approximately one hour after the conclusion of the call and will remain available through November 2, 2021.

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 loan losses and charge-offs; expectations regarding the impact of the COVID-19 pandemic; the costs or effects of acquisitions or dispositions we may make, including our recent acquisition of PGB Holdings, Inc. and its wholly-owned subsidiary, Pacific Global Bank, and our recently completed acquisition of First American International Corp., 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 for the year ended December 31, 2020, 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, 2020)
(Dollars in thousands)
		September 30,				June 30,				March 31,				December 31,				September 30,
		2021				2021				2021				2020				2020
Assets
Cash and due from banks		$	206,927			$	493,653			$	362,930			$	137,654			$	121,630
Federal funds sold and other cash equivalents			170,000				110,000				57,000				57,000				57,000
Total cash and cash equivalents			376,927				603,653				419,930				194,654				178,630
Interest-bearing deposits in other financial institutions			600				600				600				600				600
Investment securities available for sale			345,000				339,568				281,582				210,867				214,662
Investment securities held to maturity			6,258				6,664				6,668				7,174				7,569
Mortgage loans held for sale			15,188				9,246				37,675				49,963				23,886
Loans held for investment			2,840,354				2,709,206				2,715,205				2,706,766				2,755,153
Allowance for loan losses			(32,231	)			(31,352	)			(30,795	)			(29,337	)			(26,634	)
Net loans held for investment			2,808,123				2,677,854				2,684,410				2,677,429				2,728,519
Premises and equipment, net			27,157				27,039				27,093				27,103				24,237
Federal Home Loan Bank (FHLB) stock			15,000				15,000				15,641				15,641				15,641
Cash surrender value of life insurance			55,656				55,325				35,308				35,121				34,930
Goodwill			69,243				69,243				69,243				69,243				69,243
Servicing assets			12,141				12,558				13,264				13,965				14,724
Core deposit intangibles			4,327				4,608				4,895				5,196				5,519
Right-of-use assets- operating leases			23,735				25,050				25,500				—				—
Accrued interest and other assets			42,452				44,230				42,490				43,116				41,416
Total assets		$	3,801,807			$	3,890,638			$	3,664,299			$	3,350,072			$	3,359,576
Liabilities and shareholders' equity
Deposits:
Noninterest-bearing demand		$	824,771			$	940,041			$	787,439			$	617,206			$	642,332
Savings, NOW and money market accounts			931,517				858,597				791,486				731,084				654,378
Time deposits			1,211,525				1,271,287				1,242,368				1,286,838				1,315,038
Total deposits			2,967,813				3,069,925				2,821,293				2,635,128				2,611,748
Reserve for unfunded commitments			1,304				1,216				1,320				1,383				1,129
FHLB advances			150,000				150,000				150,000				150,000				190,000
Long-term debt, net of debt issuance costs			172,862				172,718				172,581				104,391				104,305
Subordinated debentures			14,447				14,393				14,338				14,283				14,229
Lease liabilities - operating leases			24,524				25,798				26,199				—				—
Accrued interest and other liabilities			14,833				14,263				42,900				16,399				16,749
Total liabilities			3,345,783				3,448,313				3,228,631				2,921,584				2,938,160
Shareholders' equity:
Shareholder's equity			456,490				442,086				435,746				427,287				420,329
Non-controlling interest			72				72				72				72				72
Accumulated other comprehensive (loss) income - Net of tax			(538	)			167				(150	)			1,129				1,015
Total shareholders' equity			456,024				442,325				435,668				428,488				421,416
Total liabilities and shareholders’ equity		$	3,801,807			$	3,890,638			$	3,664,299			$	3,350,072			$	3,359,576

		RBB BANCORP AND SUBSIDIARIES
		CONDENSED CONSOLIDATED STATEMENTS OF INCOME
		(Unaudited)
		(Dollars in thousands, except per share amounts)
				For the Three Months Ended
				September 30, 2021				June 30, 2021				September 30, 2020
		Interest and dividend income:
		Interest and fees on loans		$	35,601			$	34,669			$	34,153
		Interest on interest-bearing deposits			219				125				61
		Interest on investment securities			889				794				621
		Dividend income on FHLB stock			225				225				190
		Interest on federal funds sold and other			174				158				100
		Total interest income			37,108				35,971				35,125
		Interest expense:
		Interest on savings deposits, NOW and money market accounts			697				708				779
		Interest on time deposits			2,048				2,410				4,746
		Interest on subordinated debentures and long term debt			2,342				2,356				1,905
		Interest on other borrowed funds			445				440				444
		Total interest expense			5,532				5,914				7,874
		Net interest income before provision for loan losses			31,576				30,057				27,251
		Provision for loan losses			1,196				628				3,861
		Net interest income after provision for loan losses			30,380				29,429				23,390
		Noninterest income:
		Service charges, fees and other(1)			3,100				1,374				1,143
		Gain on sale of loans			1,790				2,572				760
		Loan servicing fees, net of amortization			62				118				546
		Recoveries on loans acquired in business combinations			68				5				32
		Unrealized (loss) on equity investments			(5	)			(35	)			—
		Gain (loss) on derivatives			178				(80	)			—
		Increase in cash surrender value of life insurance			331				217				194
		Gain on sale of securities			—				—				52
		Total noninterest income			5,524				4,171				2,727
		Noninterest expense:
		Salaries and employee benefits			8,772				8,742				7,599
		Occupancy and equipment expenses			2,189				2,135				2,360
		Data processing			965				1,231				1,200
		Legal and professional			746				536				675
		Office expenses			311				272				271
		Marketing and business promotion			324				231				131
		Insurance and regulatory assessments			384				354				363
		Core deposit premium			281				287				357
		OREO expenses			4				4				3
		Merger expenses			40				17				62
		Other expenses			404				871				957
		Total noninterest expense			14,420				14,680				13,978
		Income before income taxes			21,484				18,920				12,139
		Income tax expense			6,120				5,540				3,619
		Net income		$	15,364			$	13,380			$	8,520
		Net income per share
		Basic		$	0.79			$	0.69			$	0.43
		Diluted		$	0.77			$	0.67			$	0.43
		Cash Dividends declared per common share		$	0.13			$	0.13			$	0.06
		Weighted-average common shares outstanding
		Basic			19,343,262				19,432,204				19,717,568
		Diluted			19,798,187				19,874,969				19,804,892
(1)		Includes $1.8 million of the U.S. Treasury's CDFI rapid response program grant income.

		RBB BANCORP AND SUBSIDIARIES
		CONDENSED CONSOLIDATED STATEMENTS OF INCOME
		(Unaudited)
		(Dollars in thousands, except per share amounts)
				For the Nine Months Ended
				September 30, 2021				September 30, 2020
		Interest and dividend income:
		Interest and fees on loans		$	104,786			$	99,062
		Interest on interest-earning deposits			392				586
		Interest on investment securities			2,310				2,329
		Dividend income on FHLB stock			642				379
		Interest on federal funds sold and other			489				900
		Total interest income			108,619				103,256
		Interest expense:
		Interest on savings deposits, NOW and money market accounts			2,103				2,804
		Interest on time deposits			7,422				17,765
		Interest on subordinated debentures and long term debt			6,656				5,776
		Interest on other borrowed funds			1,320				1,033
		Total interest expense			17,501				27,378
		Net interest income			91,118				75,878
		Provision for loan losses			3,324				8,815
		Net interest income after provision for loans losses			87,794				67,063
		Noninterest income:
		Service charges, fees and other (1)			5,884				3,287
		Gain on sale of loans			8,203				3,552
		Loan servicing fees, net of amortization			426				1,846
		Recoveries on loans acquired in business combinations			78				79
		Unrealized (loss) on equity investments			(60	)			—
		Gain on derivatives			323				—
		Increase in cash surrender value of life insurance			735				576
		Gain on sale of securities			—				210
		Total noninterest income			15,589				9,550
		Noninterest expense:
		Salaries and employee benefits			26,756				25,207
		Occupancy and equipment expenses			6,566				7,291
		Data processing			3,636				3,224
		Legal and professional			2,087				1,949
		Office expenses			838				931
		Marketing and business promotion			739				456
		Insurance and regulatory assessments			1,086				774
		Core deposit premium			869				1,071
		OREO expenses			13				31
		Merger expenses			99				741
		Other expenses			2,203				3,385
		Total noninterest expense			44,892				45,060
		Income before income taxes			58,491				31,553
		Income tax expense			17,291				9,772
		Net income		$	41,200			$	21,781
		Net income per share
		Basic		$	2.11			$	1.10
		Diluted		$	2.07			$	1.09
		Cash Dividends declared per common share		$	0.38			$	0.24
		Weighted-average common shares outstanding
		Basic			19,416,608				19,799,617
		Diluted			19,828,612				19,958,612
(1)		Includes $1.8 million of the U.S. Treasury's CDFI rapid response program grant income.

RBB BANCORP AND SUBSIDIARIES
AVERAGE BALANCE SHEET AND NET INTEREST INCOME
(Unaudited)
(Dollars in thousands, except per share amounts)
		For the three months ended
		September 30, 2021												June 30, 2021												September 30, 2020
		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)		$	628,020			$	618				0.39	%		$	582,554			$	508				0.35	%		$	179,521			$	351				0.78	%
Securities
Available for sale			336,130				856				1.01	%			328,004				751				0.92	%			168,151				558				1.32	%
Held to maturity (2)			6,262				56				3.55	%			6,667				60				3.61	%			7,604				71				3.71	%
Mortgage loans held for sale			5,218				46				3.50	%			21,033				173				3.30	%			19,848				171				3.43	%
Loans held for investment: (3)
Real estate			2,361,405				30,911				5.19	%			2,292,145				29,794				5.21	%			2,266,752				29,616				5.20	%
Commercial			374,125				4,644				4.92	%			388,049				4,702				4.86	%			377,789				4,366				4.60	%
Total loans			2,735,530				35,555				5.16	%			2,680,194				34,496				5.16	%			2,644,541				33,982				5.11	%
Total earning assets			3,711,160			$	37,131				3.97	%			3,618,452			$	35,988				3.99	%			3,019,665			$	35,133				4.63	%
Noninterest-earning assets			242,742												230,049												204,638
Total assets		$	3,953,902											$	3,848,501											$	3,224,303
Interest-bearing liabilities
NOW		$	71,454			$	48				0.27	%		$	66,777			$	45				0.27	%		$	59,451			$	50				0.33	%
Money Market			660,806				615				0.37	%			640,026				628				0.39	%			454,820				698				0.61	%
Saving deposits			139,555				34				0.10	%			140,418				35				0.10	%			126,635				31				0.10	%
Time deposits, less than $250,000			644,013				977				0.60	%			657,494				1,163				0.71	%			699,765				2,539				1.44	%
Time deposits, $250,000 and over			604,394				1,071				0.70	%			604,429				1,247				0.83	%			584,586				2,207				1.50	%
Total interest-bearing deposits			2,120,222				2,745				0.51	%			2,109,144				3,118				0.59	%			1,925,257				5,525				1.14	%
FHLB advances			150,000				445				1.18	%			150,000				440				1.18	%			151,739				444				1.16	%
Long-term debt			172,767				2,194				5.04	%			172,622				2,206				5.13	%			104,252				1,748				6.67	%
Subordinated debentures			14,411				148				4.07	%			14,357				150				4.19	%			14,195				157				4.40	%
Total interest-bearing liabilities			2,457,400				5,532				0.89	%			2,446,123				5,914				0.97	%			2,195,443				7,874				1.43	%
Noninterest-bearing liabilities
Noninterest-bearing deposits			1,003,304												913,442												595,264
Other noninterest-bearing liabilities			42,419												46,549												13,270
Total noninterest-bearing liabilities			1,045,723												959,991												608,534
Shareholders' equity			450,779												442,387												420,326
Total liabilities and shareholders' equity		$	3,953,902											$	3,848,501											$	3,224,303
Net interest income / interest rate spreads						$	31,599				3.08	%						$	30,074				3.02	%						$	27,259				3.20	%
Net interest margin											3.38	%											3.33	%											3.59	%

---

(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)
(Dollars in thousands, except per share amounts)
		For the nine months ended
		September 30, 2021												September 30, 2020
		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)		$	476,781			$	1,523				0.43	%		$	220,195			$	1,865				1.13	%
Securities
Available for sale			301,653				2,180				0.97	%			159,373				2,136				1.79	%
Held to maturity (2)			6,640				182				3.66	%			7,760				218				3.75	%
Mortgage loans held for sale			26,579				630				3.17	%			40,936				1,454				4.74	%
Loans held for investment: (3)
Real estate			2,320,524				90,226				5.20	%			2,141,022				84,261				5.26	%
Commercial			382,168				13,930				4.87	%			359,907				13,347				4.95	%
Total loans			2,702,692				104,156				5.15	%			2,500,929				97,608				5.21	%
Total earning assets			3,514,345			$	108,671				4.13	%			2,929,193			$	103,281				4.71	%
Noninterest-earning assets			233,652												208,000
Total assets		$	3,747,997											$	3,137,193
Interest-bearing liabilities
NOW		$	67,633			$	136				0.27	%		$	53,633			$	153				0.38	%
Money Market			627,024				1,866				0.40	%			430,524				2,534				0.79	%
Saving deposits			137,072				101				0.10	%			121,836				117				0.13	%
Time deposits, less than $250,000			654,776				3,635				0.74	%			720,810				9,408				1.74	%
Time deposits, $250,000 and over			600,973				3,787				0.84	%			598,137				8,357				1.87	%
Total interest-bearing deposits			2,087,478				9,525				0.61	%			1,924,940				20,569				1.43	%
FHLB advances			150,000				1,320				1.18	%			118,029				1,033				1.17	%
Long-term debt			152,600				6,209				5.44	%			104,168				5,243				6.72	%
Subordinated debentures			14,357				447				4.16	%			14,221				533				5.01	%
Total interest-bearing liabilities			2,404,435			$	17,501				0.97	%			2,161,358			$	27,378				1.69	%
Noninterest-bearing liabilities
Noninterest-bearing deposits			858,087												546,419
Other noninterest-bearing liabilities			43,038												14,606
Total noninterest-bearing liabilities			901,125												561,025
Shareholders' equity			442,437												414,810
Total liabilities and shareholders' equity		$	3,747,997											$	3,137,193
Net interest income / interest rate spreads						$	91,170				3.16	%						$	75,903				3.02	%
Net interest margin											3.47	%											3.46	%

RBB BANCORP AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)
		For the three months Ended
		September 30,				June 30,				September 30,
		2021				2021				2020
Per share data (common stock)
Earnings
Basic		$	0.79			$	0.69			$	0.43
Diluted		$	0.77			$	0.67			$	0.43
Dividends declared		$	0.13			$	0.13			$	0.06
Book value		$	23.37			$	22.86			$	21.35
Tangible book value		$	19.60			$	19.04			$	17.56
Weighted average shares outstanding
Basic			19,343,262				19,432,204				19,717,568
Diluted			19,798,187				19,874,969				19,804,892
Shares outstanding at period end			19,516,393				19,349,802				19,739,280
Performance ratios
Return on average assets, annualized			1.54	%			1.39	%			1.05	%
Return on average shareholders' equity, annualized			13.52	%			12.13	%			8.06	%
Return on average tangible common equity, annualized			16.17	%			14.57	%			9.81	%
Noninterest income to average assets, annualized			0.55	%			0.43	%			0.34	%
Noninterest expense to average assets, annualized			1.45	%			1.53	%			1.72	%
Yield on average earning assets			3.97	%			3.99	%			4.63	%
Cost of average total deposits			0.35	%			0.41	%			0.87	%
Cost of average interest-bearing deposits			0.51	%			0.59	%			1.14	%
Cost of average interest-bearing liabilities			0.89	%			0.97	%			1.43	%
Accretion on loans to average earning assets			0.03	%			0.02	%			0.08	%
Net interest spread			3.08	%			3.02	%			3.20	%
Net interest margin			3.38	%			3.33	%			3.59	%
Efficiency ratio			38.87	%			42.89	%			46.63	%
Common stock dividend payout ratio			16.46	%			18.84	%			13.95	%

RBB BANCORP AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)
		For the nine months ended September 30,
		2021				2020
Per share data (common stock)
Earnings
Basic		$	2.11			$	1.10
Diluted		$	2.07			$	1.09
Dividends declared		$	0.38			$	0.24
Book value		$	23.37			$	21.35
Tangible book value		$	19.60			$	17.56
Weighted average shares outstanding
Basic			19,416,608				19,799,617
Diluted			19,828,612				19,958,612
Shares outstanding at period end			19,516,393				19,739,280
Performance ratios
Return on average assets, annualized			1.47	%			0.93	%
Return on average shareholders' equity, annualized			12.45	%			7.01	%
Return on average tangible common equity, annualized			14.95	%			8.59	%
Noninterest income to average assets, annualized			0.56	%			0.41	%
Noninterest expense to average assets, annualized			1.60	%			1.92	%
Yield on average earning assets			4.13	%			4.71	%
Cost of average deposits			0.43	%			1.11	%
Cost of average interest-bearing deposits			0.61	%			1.43	%
Cost of average interest-bearing liabilities			0.97	%			1.69	%
Accretion on loans to average earning assets			0.04	%			0.10	%
Net interest spread			3.16	%			3.02	%
Net interest margin			3.47	%			3.46	%
Efficiency ratio			42.07	%			52.75	%
Common stock dividend payout ratio			18.01	%			21.82	%

RBB BANCORP AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)
		As of
		September 30,				June 30,				September 30,
		2021				2021				2020
Loan to deposit ratio			95.71	%			88.25	%			105.49	%
Core deposits / total deposits			79.87	%			80.04	%			99.34	%
Net non-core funding dependence ratio			9.27	%			0.87	%			9.69	%
Credit Quality Data:
Loans 30-89 days past due		$	7,258			$	5,449			$	21,735
Loans 30-89 days past due to total loans			0.26	%			0.20	%			0.79	%
Nonperforming loans		$	14,248			$	19,243			$	17,975
Nonperforming loans to total loans			0.50	%			0.71	%			0.65	%
Nonperforming assets		$	14,541			$	19,536			$	18,268
Nonperforming assets to total assets			0.38	%			0.50	%			0.54	%
Allowance for loan losses to total loans			1.13	%			1.16	%			0.97	%
Allowance for loan losses to nonperforming loans			226.21	%			162.93	%			148.17	%
Net charge-offs to average loans (for the quarter-to-date period)			0.05	%			0.01	%			0.01	%
Regulatory and other capital ratios—Company
Tangible common equity to tangible assets			10.26	%			9.65	%			10.55	%
Tier 1 leverage ratio			10.31	%			10.20	%			11.47	%
Tier 1 common capital to risk-weighted assets			14.82	%			14.76	%			14.11	%
Tier 1 capital to risk-weighted assets			15.38	%			15.33	%			14.69	%
Total capital to risk-weighted assets			23.30	%			23.48	%			20.05	%
Regulatory capital ratios—Bank only
Tier 1 leverage ratio			12.48	%			12.34	%			14.16	%
Tier 1 common capital to risk-weighted assets			18.64	%			18.58	%			18.13	%
Tier 1 capital to risk-weighted assets			18.64	%			18.58	%			18.13	%
Total capital to risk-weighted assets			19.89	%			19.83	%			19.26	%

RBB BANCORP AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited)
(Dollars in thousands, except per share amounts)
		3rd Quarter				2nd Quarter				1st Quarter				4th Quarter				3rd Quarter
Quarterly Consolidated Statements of Earnings		2021				2021				2021				2020				2020
Interest income
Loans, including fees		$	35,601			$	34,669			$	34,516			$	34,832			$	34,153
Investment securities and other			1,507				1,302				1,024				1,032				972
Total interest income			37,108				35,971				35,540				35,864				35,125
Interest expense
Deposits			2,745				3,118				3,662				4,636				5,525
Interest on subordinated debentures and other			2,342				2,356				1,958				1,901				1,905
Other borrowings			445				440				435				450				444
Total interest expense			5,532				5,914				6,055				6,987				7,874
Net interest income before provision for loan losses			31,576				30,057				29,485				28,877				27,251
Provision for loan losses			1,196				628				1,500				3,008				3,861
Net interest income after provision for loan losses			30,380				29,429				27,985				25,869				23,390
Noninterest income			5,524				4,171				5,894				4,490				2,727
Noninterest expense			14,420				14,680				15,792				14,453				13,978
Earnings before income taxes			21,484				18,920				18,087				15,906				12,139
Income taxes			6,120				5,540				5,631				4,759				3,619
Net income		$	15,364			$	13,380			$	12,456			$	11,147			$	8,520
Net income per common share - basic		$	0.79			$	0.69			$	0.64			$	0.57			$	0.43
Net income per common share - diluted		$	0.77			$	0.67			$	0.63			$	0.56			$	0.43
Cash dividends declared per common share		$	0.13			$	0.13			$	0.12			$	0.09			$	0.06
Cash dividends declared on common shares		$	2,516			$	2,540			$	2,347			$	1,777			$	1,184
Yield on average assets, annualized			1.54	%			1.39	%			1.47	%			1.33	%			1.05	%
Yield on average earning assets			3.97	%			3.99	%			4.49	%			4.55	%			4.63	%
Cost of average deposits			0.35	%			0.41	%			0.55	%			0.71	%			0.87	%
Cost of average interest-bearing deposits			0.51	%			0.59	%			0.73	%			0.93	%			1.14	%
Cost of average interest-bearing liabilities			0.89	%			0.97	%			1.06	%			1.23	%			1.43	%
Accretion on loans to average earning assets			0.03	%			0.02	%			0.06	%			0.03	%			0.08	%
Net interest margin			3.38	%			3.33	%			3.73	%			3.67	%			3.59	%

RBB BANCORP AND SUBSIDIARIES
SELECTED FINANCIAL HIGHLIGHTS
(Unaudited, except for December 31, 2020)
(Dollars in thousands, except per share amounts)
Loan Portfolio Detail		As of September 30, 2021								As of June 30, 2021								As of March 31, 2021								As of December 30, 2020								As of September 30, 2020
(dollars in thousands)			$			%					$			%					$			%					$			%					$			%
Loans:
Commercial and industrial		$	276,387				9.7	%		$	277,080				10.2	%		$	286,016				10.5	%		$	290,139				10.7	%		$	317,891				11.5	%
SBA			88,784				3.1	%			98,572				3.6	%			111,330				4.1	%			97,821				3.6	%			111,193				4.0	%
Construction and land development			271,764				9.6	%			236,965				8.7	%			209,727				7.7	%			186,723				6.9	%			183,569				6.7	%
Commercial real estate (1)			1,205,630				42.4	%			1,102,467				40.7	%			1,063,104				39.2	%			1,003,637				37.1	%			975,187				35.4	%
Single-family residential mortgages			974,780				34.3	%			984,311				36.3	%			1,041,260				38.3	%			1,124,357				41.5	%			1,163,982				42.2	%
Other loans			23,009				0.9	%			9,811				0.5	%			3,768				0.2	%			4,089				0.2	%			3,331				0.2	%
Total loans (2)		$	2,840,354				100.0	%		$	2,709,206				100.0	%		$	2,715,205				100.0	%		$	2,706,766				100.0	%		$	2,755,153				100.0	%
Allowance for loan losses			(32,231	)							(31,352	)							(30,795	)							(29,337	)							(26,634	)
Total loans, net		$	2,808,123							$	2,677,854							$	2,684,410							$	2,677,429							$	2,728,519

---

(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								Nine Months Ended
Change in Allowance for Loan Losses		September 30,								September 30,
(dollars in thousands)		2021				2020				2021				2020
Beginning balance		$	31,352			$	22,820			$	29,337			$	18,816
Additions to the allowance charged to expense			1,196				3,861				3,324				8,815
Net charge-offs on loans			(317	)			(47	)			(430	)			(997	)
Ending balance		$	32,231			$	26,634			$	32,231			$	26,634

Tangible Book Value Reconciliations (non-GAAP)

The tangible book value per share is a non-GAAP disclosure. The Company uses certain non-GAAP financial measures to provide supplemental information regarding the Company’s performance. The following is a reconciliation of tangible book value to the Company shareholders’ equity computed in accordance with GAAP, as well as a calculation of tangible book value per share as of September 30, 2021 and 2020 and June 30, 2021.

(dollars in thousands, except per share data)		September 30, 2021				June 30, 2021				September 30, 2020
Tangible common equity:
Total shareholders' equity		$	456,024			$	442,325			$	421,416
Adjustments
Goodwill			(69,243	)			(69,243	)			(69,243	)
Core deposit intangible			(4,327	)			(4,608	)			(5,519	)
Tangible common equity		$	382,454			$	368,474			$	346,654
Tangible assets:
Total assets-GAAP		$	3,801,807			$	3,890,638			$	3,359,576
Adjustments
Goodwill			(69,243	)			(69,243	)			(69,243	)
Core deposit intangible			(4,327	)			(4,608	)			(5,519	)
Tangible assets		$	3,728,237			$	3,816,787			$	3,284,814
Common shares outstanding		$	19,516,393				19,349,802				19,739,280
Tangible common equity to tangible assets ratio			10.26	%			9.65	%			10.55	%
Book value per share		$	23.37			$	22.86			$	21.35
Tangible book value per share		$	19.60			$	19.04			$	17.56

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20211025005738/en/

Yee Phong (Alan) Thian

President and CEO

(626) 307-7559

David Morris

Executive Vice President and CFO

(714) 670-2488

Source: RBB Bancorp

FAQ

What were RBB's earnings results for Q3 2021?

RBB Bancorp reported a net income of $15.4 million for Q3 2021, with a diluted EPS of $0.77.

How much did RBB grow its loans in Q3 2021?

RBB experienced loan growth of $137.1 million, translating to a 20.0% annualized growth rate.

What is the dividend announced by RBB for Q3 2021?

RBB declared a quarterly cash dividend of $0.13 per common share.

What impact did the CDFI grant have on RBB's performance?

The $1.8 million CDFI grant contributed to the increase in net income and supported community development initiatives.

When is RBB's next conference call scheduled?

The next conference call is scheduled for October 26, 2021, at 11:00 a.m. PT.