RBB Bancorp Reports Third Quarter Earnings for 2022

Rhea-AI Summary

RBB Bancorp (NASDAQ:RBB) reported strong Q3 2022 results, with record net income of $16.7 million or $0.87 diluted EPS, up from $15.5 million in Q2 2022. Loans increased by $176.2 million (22.9% annualized), driving net interest income to a record $39.0 million. The efficiency ratio improved to 40.22%, and the ROA and ROE rose to 1.72% and 13.93%, respectively. A quarterly dividend of $0.14 per share was declared. However, noninterest income decreased due to lower gains from loan sales.

Positive

• Record net income of $16.7 million, or $0.87 diluted EPS.
• Loans grew by $176.2 million, or 22.9% annualized.
• Net interest income increased to a record $39.0 million.
• Efficiency ratio improved to 40.22%.
• Declared quarterly dividend of $0.14 per share.

Negative

• Noninterest income decreased by $887,000 from Q2 2022.
• Nonperforming assets rose to $11.8 million, or 0.30% of total assets.

 Conference Call and Webcast Scheduled for Tuesday, October 25, 2022 at 11:00 a.m. Pacific Time/2:00 p.m. Eastern Time

Third Quarter 2022 Highlights

• Record net income of $16.7 million, or $0.87 diluted earnings per share, increased $1.2 million, or 7.6%, from the prior quarter and increased $1.3 million, or 8.4%, from the third quarter of 2021
• Loans grew by $176.2 million, or 22.9% annualized, from the end of the prior quarter
• Declared $0.14 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 ended September 30, 2022.

The Company reported record net income of $16.7 million, or $0.87 diluted earnings per share, for the three months ended September 30, 2022, compared to net income of $15.5 million, or $0.80 diluted earnings per share, and $15.4 million, or $0.77 diluted earnings per share, for the three months ended June 30, 2022 and September 30, 2021, respectively.

“Increasing rates continued to drive performance to record levels in the third quarter,” said David Morris, President and CEO of RBB Bancorp. “Expenses declined as expected due to the near conclusion of the Board of Directors investigation, and net interest income increased to a record $39.0 million as loans grew and margins improved. We are starting to see pressure on deposit costs which we anticipate will continue over the next few quarters.”

“Royal Business Bank had another quarter of excellent results and loan growth in the third quarter,” said Dr. James Kao, Chairman of RBB Bancorp. “We believe it demonstrates the value of the franchise and the strength of David’s leadership and management's efforts over the past few quarters. We are also pleased to welcome David to the Board of Directors and to his new role as President and CEO of RBB Bancorp.”

Key Performance Ratios

Net income of $16.7 million for the third quarter of 2022 produced an annualized return on average assets ("ROA") of 1.72% and an annualized return on average shareholders' equity ("ROE") of 13.93% compared to an annualized ROA of 1.60% and an annualized ROE of 13.30% for the second quarter of 2022. The efficiency ratio, see definition in Selected Financial Highlights section, for the third quarter of 2022 was 40.22%, compared to 43.47% for the prior quarter.

Net Interest Income and Net Interest Margin

Net interest income, before provision for loan losses, was $39.0 million for the third quarter of 2022, compared to $37.1 million for the second quarter of 2022. The $1.9 million increase was primarily attributable to a $150.6 million decrease in lower-yielding cash and a $211.1 million increase in higher yielding commercial real estate and mortgage loans. Accretion of purchase discounts from prior acquisitions contributed $112,000 to net interest income in the third quarter of 2022, compared to $75,000 in the second quarter of 2022.

Compared to the third quarter of 2021, net interest income, before provision for loan losses, increased $7.4 million from $31.6 million. The $7.4 million increase was primarily attributable to a $202.8 million decrease in lower-yielding cash and a $396.7 million increase in higher yielding commercial real estate and mortgage loans.

Net interest margin was 4.31% for the third quarter of 2022, an increase of 23 basis points from 4.08% in the second quarter of 2022. Loan discount accretion contributed 1 basis point to the net interest margin in the third quarter of 2022 and in the second quarter of 2022.

Noninterest Income

Noninterest income was $2.5 million for the third quarter of 2022, a decrease of $887,000 from $3.4 million in the second quarter of 2022. The decrease was primarily driven by a $757,000 decrease in gain on sale of corporate real estate, a $107,000 decrease in gain on derivatives and a $93,000 decrease in recoveries on purchased loans, partially offset by a $252,000 increase in loan servicing fees during the quarter.

The Company sold $3.8 million in FNMA qualified mortgage loans for a net gain of $135,000 during the third quarter of 2022 compared to $12.6 million in FNMA qualified mortgage loans sold for a net gain of $284,000 during the second quarter of 2022. The Company sold $2.5 million in SBA loans during the third quarter of 2022 for a net gain of $130,000, compared to $1.1 million SBA loans sold for a net gain of $60,000 during the second quarter of 2022.

Compared to the third quarter of 2021, noninterest income decreased by $3.0 million from $5.5 million. The decrease was primarily attributable to a $1.8 million CDFI RRP award received in the third quarter of 2021, a $1.5 million decrease in gain on sale of loans due to rate hikes that caused both sellable loan volume and premium decreases and a $193,000 decrease in gain on derivatives, partially offset by a $662,000 increase in loan servicing fees.

Noninterest Expense

Noninterest expense for the third quarter of 2022 was $16.7 million, compared to $17.6 million for the second quarter of 2022. The $915,000 decrease was primarily attributable to a $1.2 million decrease in legal and professional expenses as the Company is getting close to completing the Board special investigation and a $137,000 decrease in marketing and business promotion expenses, partially offset by a $246,000 increase in directors RSU compensation expense and director fees and a $175,000 increase in occupancy and equipment expenses.

Noninterest expense increased from $14.4 million in the third quarter of 2021. The $2.3 million increase was primarily due to a $789,000 increase in salaries and employee benefits expenses due to new hires and salary adjustments to reflect economic inflation, a reversal of $416,000 valuation allowance on mortgage servicing rights in third quarter of 2021, a $275,000 increase in director RSU compensation expense and travel expense, a $341,000 increase in data processing expenses, a $331,000 increase in legal and professional expenses and a $160,000 increase in occupancy and equipment expenses.

Income Taxes

The effective tax rate was 27.8% for the third quarter of 2022, 29.6% for the second quarter of 2022, and 28.5% for the third quarter of 2021. The Company recognized a tax benefit from stock option exercises of $276,000, $279,000 and $534,000 for the third quarter of 2022, the second quarter of 2022, and the third 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 $3.22 billion as of September 30, 2022, an increase of $175.0 million from June 30, 2022, and an increase of $380.6 million from September 30, 2021. The increase from the prior quarter was primarily due to a $150.6 million increase in single-family residential mortgage loans and a $60.4 million increase in commercial real estate loans, partially offset by a $33.2 million decrease in commercial and industrial loans and a $3.3 million decrease in construction & land development loans. The increase from September 30, 2021 was primarily due to a $381.6 million increase in single-family residential mortgages and an $81.7 million increase in construction & land development loans offset by a $71.6 million decrease in commercial and industrial loans and a $26.9 million decrease in SBA loans.

During the third quarter of 2022, single-family residential mortgage production was $191.8 million while net payoffs and paydowns were $36.2 million. During the second quarter of 2022, single-family residential mortgage production was $216.9 million while payoffs and paydowns were $66.8 million.

There were $1.2 million mortgage loans held for sale as of September 30, 2022 compared to none as of June 30, 2022 and $15.2 million as of September 30, 2021. The Company originated approximately $1.8 million in FNMA mortgage loans for sale for the third quarter of 2022, compared with $1.2 million during the prior quarter.

In the third quarter of 2022, SBA loan production was $7.7 million and total SBA loan sales were $2.5 million compared to SBA loan production of $1.4 million and total SBA loan sales of $1.1 million in the second quarter of 2022.

As of September 30, 2022, the Bank’s total available-for-sale securities maturing in over 12 months were $237.9 million. As of September 30, 2022 the Bank recorded gross unrealized losses of $32.5 million compared to gross unrealized losses of $2.3 million as of December 31, 2022.

Deposits

Deposits were $3.0 billion at September 30, 2022, which was a decrease of $67.9 million compared to June 30, 2022. During the third quarter of 2022, noninterest-bearing deposits decreased by $128.7 million due to the continued reduction of a single deposit relationship, interest-bearing non-maturity deposits increased by $13.8 million, and time deposits increased by $47.0 million. As of September 30, 2022, there were $105.5 million in brokered CDs, as compared to $50.0 million brokered CDs as of June 30, 2022 and $2.4 million brokered CDs as of September 30, 2021. Compared to September 30, 2021, total deposits decreased by $8.1 million primarily due to a $50.3 million decrease in time deposits and a $49.4 million decrease in interest-bearing non-maturity deposits, partially offset by a $91.5 million increase in noninterest-bearing demand deposits.

Asset Quality

Nonperforming assets totaled $11.8 million, or 0.30% of total assets at September 30, 2022, compared to $14.2 million, or 0.36% of total assets at June 30, 2022. The decrease in nonperforming assets was due to the pay-off of certain nonperforming loans in the third 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 increased to $39.9 million as of June 30, 2022 compared to $8.3 million as of June 30, 2022. The $31.6 million increase in past due loans was due in part to: one construction loan of $11.3 million on a project that is substantially complete that was delinquent for 52 days due to administrative delays in processing an extension, which was processed as of October 6, 2022, and one commercial real estate loan of $8.8 million that was delinquent for 52 days due to administrative delays in the processing of an extension, which was processed as of October 3, 2022. As of October 21, $14.5 million of loans were 30-89 days delinquent.

In the third quarter of 2022, there were $127,000 in net recoveries, compared to net charge-offs of $53,000 in the second quarter of 2022 and net charge-offs of $317,000 in the third quarter of 2021.

The Company recorded a provision for loan losses of $1.8 million for the third quarter of 2022 which was primarily attributable to loan growth. Provision for loan losses were $915,000 in the second quarter of 2022. Allowance for loan losses continue to include $625,000 of reserves taken as a precaution against COVID-19 losses in 2020 and 2021.

The allowance for loan losses totaled $36.0 million, or 1.12% of loans held for investment at September 30, 2022, compared with $34.2 million, or 1.12%, of total loans at June 30, 2022.

During the third quarter of 2022, the Company repurchased 94,539 common shares at a weighted average price of $20.93.

Corporate Overview

RBB Bancorp is a community-based financial holding company headquartered in Los Angeles, California. As of September 30, 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 tomorrow, October 25, 2022, to discuss the Company’s third quarter 2022 financial results.

To listen to the conference call, please dial 1-800-343-4136 or 1-203-518-9708, conference ID RBBQ322. A replay of the call will be made available at 1-877-925-9639 or 1-402-220-5391 (no passcode required) approximately one hour after the conclusion of the call and will remain available through November 1, 2022.

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, 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)
		September 30,				June 30,				March 31,				December 31,				September 30,
		2022				2022				2022				2021				2021
Assets
Cash and due from banks		$	134,179			$	224,736			$	149,767			$	501,372			$	206,927
Federal funds sold and other cash equivalents			40,000				100,000				200,000				193,000				170,000
Total cash and cash equivalents			174,179				324,736				349,767				694,372				376,927
Interest-bearing deposits in other financial institutions			600				600				600				600				600
Investment securities available for sale			266,270				358,135				420,448				368,260				345,000
Investment securities held to maturity			5,735				5,741				6,246				6,252				6,258
Mortgage loans held for sale			1,185				—				3,572				5,957				15,188
Loans held for investment			3,220,913				3,045,946				3,006,484				2,931,350				2,840,354
Allowance for loan losses			(36,047	)			(34,154	)			(33,292	)			(32,912	)			(32,231	)
Net loans held for investment			3,184,866				3,011,792				2,973,192				2,898,438				2,808,123
Premises and equipment, net			26,850				27,104				27,455				27,199				27,157
Federal Home Loan Bank (FHLB) stock			15,000				15,000				15,000				15,000				15,000
Cash surrender value of life insurance			56,975				56,642				56,313				55,988				55,656
Goodwill			71,498				71,498				71,498				69,243				69,243
Servicing assets			10,054				10,456				11,048				11,517				12,141
Core deposit intangibles			3,971				4,248				4,525				4,075				4,327
Right-of-use assets- operating leases			24,768				25,931				22,451				22,454				23,735
Accrued interest and other assets			63,278				57,154				51,454				48,839				42,452
Total assets		$	3,905,229			$	3,969,037			$	4,013,569			$	4,228,194			$	3,801,807
Liabilities and shareholders' equity
Deposits:
Noninterest-bearing demand		$	916,301			$	1,045,009			$	1,159,703			$	1,291,484			$	824,771
Savings, NOW and money market accounts			882,126				868,307				885,050				927,609				931,517
Time deposits, less than $250,000			608,489				574,050				570,274				587,940				614,146
Time deposits, greater than or equal to $250,000			552,754				540,199				553,226				578,499				597,379
Total deposits			2,959,670				3,027,565				3,168,253				3,385,532				2,967,813
FHLB advances			240,000				250,000				150,000				150,000				150,000
Long-term debt, net of debt issuance costs			173,441				173,296				173,152				173,007				172,862
Subordinated debentures			14,665				14,611				14,556				14,502				14,447
Lease liabilities - operating leases			25,701				26,823				23,314				23,282				24,524
Accrued interest and other liabilities			19,953				13,035				19,469				15,188				16,137
Total liabilities			3,433,430				3,505,330				3,548,744				3,761,511				3,345,783
Shareholders' equity:
Shareholder's equity			494,248				479,382				475,077				468,267				456,490
Non-controlling interest			72				72				72				72				72
Accumulated other comprehensive (loss) income - Net of tax			(22,521	)			(15,747	)			(10,324	)			(1,656	)			(538	)
Total shareholders' equity			471,799				463,707				464,825				466,683				456,024
Total liabilities and shareholders’ equity		$	3,905,229			$	3,969,037			$	4,013,569			$	4,228,194			$	3,801,807

RBB BANCORP AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Dollars in thousands, except per share amounts)
		For the Three Months Ended
		September 30, 2022				June 30, 2022				September 30, 2021
Interest and dividend income:
Interest and fees on loans		$	43,588			$	40,157			$	35,601
Interest on interest-bearing deposits			373				111				219
Interest on investment securities			1,784				1,419				889
Dividend income on FHLB stock			224				222				225
Interest on federal funds sold and other			445				429				174
Total interest income			46,414				42,338				37,108
Interest expense:
Interest on savings deposits, NOW and money market accounts			1,529				844				697
Interest on time deposits			2,460				1,506				2,048
Interest on subordinated debentures and long term debt			2,427				2,379				2,342
Interest on other borrowed funds			1,020				519				445
Total interest expense			7,436				5,248				5,532
Net interest income before provision for loan losses			38,978				37,090				31,576
Provision for loan losses			1,766				915				1,196
Net interest income after provision for loan losses			37,212				36,175				30,380
Noninterest income:
Service charges, fees and other			1,277				1,382				3,153
Gain on sale of loans			265				344				1,790
Loan servicing fees, net of amortization			724				472				62
Recoveries on loans acquired in business combinations			5				98				68
Unrealized (loss) on equity investments			—				—				(5	)
Unrealized (loss) gain on derivatives			(68	)			39				125
Increase in cash surrender value of life insurance			332				330				331
Gain on sale of fixed assets			—				757				—
Total noninterest income			2,535				3,422				5,524
Noninterest expense:
Salaries and employee benefits			9,561				9,628				8,772
Occupancy and equipment expenses			2,349				2,174				2,189
Data processing			1,306				1,293				965
Legal and professional			1,077				2,254				746
Office expenses			382				358				311
Marketing and business promotion			364				501				324
Insurance and regulatory assessments			441				478				384
Core deposit premium			277				277				281
OREO expenses			4				5				4
Merger expenses			—				23				40
Other expenses			936				621				404
Total noninterest expense			16,697				17,612				14,420
Income before income taxes			23,050				21,985				21,484
Income tax expense			6,398				6,508				6,120
Net income		$	16,652			$	15,477			$	15,364
Net income per share
Basic		$	0.88			$	0.81			$	0.79
Diluted		$	0.87			$	0.80			$	0.77
Cash Dividends declared per common share		$	0.14			$	0.14			$	0.13
Weighted-average common shares outstanding
Basic			18,988,443				19,066,621				19,343,262
Diluted			19,130,447				19,324,253				19,798,187

RBB BANCORP AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Dollars in thousands, except per share amounts)
		For the Nine Months Ended
		September 30, 2022				September 30, 2021
Interest and dividend income:
Interest and fees on loans		$	121,631			$	104,786
Interest on interest-earning deposits			655				392
Interest on investment securities			4,210				2,310
Dividend income on FHLB stock			673				642
Interest on federal funds sold and other			1,149				489
Total interest income			128,318				108,619
Interest expense:
Interest on savings deposits, NOW and money market accounts			3,091				2,103
Interest on time deposits			5,540				7,422
Interest on subordinated debentures and long term debt			7,154				6,656
Interest on other borrowed funds			1,974				1,320
Total interest expense			17,759				17,501
Net interest income			110,559				91,118
Provision for loan losses			3,048				3,324
Net interest income after provision for loans losses			107,511				87,794
Noninterest income:
Service charges, fees and other			3,899				5,953
Gain on sale of loans			1,783				8,203
Loan servicing fees, net of amortization			1,628				426
Recoveries on loans acquired in business combinations			108				78
Unrealized (loss) gain on equity investments			—				(60	)
Unrealized (loss) gain on derivatives			(262	)			254
Increase in cash surrender value of life insurance			986				735
Gain on sale of fixed assets			757				—
Total noninterest income			8,899				15,589
Noninterest expense:
Salaries and employee benefits			28,558				26,756
Occupancy and equipment expenses			6,728				6,566
Data processing			3,857				3,636
Legal and professional			4,337				2,087
Office expenses			1,033				838
Marketing and business promotion			1,172				739
Insurance and regulatory assessments			1,360				1,086
Core deposit premium			833				869
OREO expenses			17				13
Merger expenses			60				99
Other expenses			2,412				2,203
Total noninterest expense			50,367				44,892
Income before income taxes			66,043				58,491
Income tax expense			19,297				17,291
Net income		$	46,746			$	41,200
Net income per share
Basic		$	2.44			$	2.11
Diluted		$	2.41			$	2.07
Cash Dividends declared per common share		$	0.42			$	0.39
Weighted-average common shares outstanding
Basic			19,142,732				19,416,608
Diluted			19,415,558				19,828,612

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, 2022												June 30, 2022												September 30, 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)		$	141,737			$	1,042				2.92	%		$	249,738			$	762				1.22	%		$	628,020			$	618				0.39	%
Securities
Available for sale (2)			318,066				1,758				2.19	%			399,321				1,393				1.40	%			336,130				856				1.01	%
Held to maturity (2)			5,738				50				3.46	%			5,744				50				3.49	%			6,262				56				3.55	%
Mortgage loans held for sale			420				6				5.48	%			892				13				5.85	%			5,218				46				3.50	%
Loans held for investment: (3)
Real estate			2,820,022				38,999				5.49	%			2,663,753				35,207				5.30	%			2,361,405				30,911				5.19	%
Commercial			303,899				4,583				5.98	%			325,861				4,937				6.08	%			374,125				4,644				4.92	%
Total loans			3,123,921				43,582				5.53	%			2,989,614				40,144				5.39	%			2,735,530				35,555				5.16	%
Total earning assets			3,589,882			$	46,438				5.13	%			3,645,309			$	42,362				4.66	%			3,711,160			$	37,131				3.97	%
Noninterest-earning assets			250,737												243,279												242,742
Total assets		$	3,840,619											$	3,888,588											$	3,953,902
Interest-bearing liabilities
NOW		$	74,518			$	91				0.48	%		$	75,637			$	50				0.27	%		$	71,454			$	48				0.27	%
Money Market			612,743				1,376				0.89	%			631,807				759				0.48	%			660,806				615				0.37	%
Saving deposits			147,349				62				0.17	%			148,400				35				0.09	%			139,555				34				0.10	%
Time deposits, less than $250,000			566,730				1,221				0.85	%			553,282				724				0.52	%			644,013				977				0.60	%
Time deposits, $250,000 and over			531,655				1,239				0.92	%			526,164				782				0.60	%			604,394				1,071				0.70	%
Total interest-bearing deposits			1,932,995				3,989				0.82	%			1,935,290				2,350				0.49	%			2,120,222				2,745				0.51	%
FHLB advances			239,674				1,020				1.69	%			182,749				519				1.14	%			150,000				445				1.18	%
Long-term debt			173,345				2,194				5.02	%			173,201				2,195				5.08	%			172,767				2,194				5.04	%
Subordinated debentures			14,629				233				6.32	%			14,575				184				5.06	%			14,411				148				4.07	%
Total interest-bearing liabilities			2,360,643				7,436				1.25	%			2,305,815				5,248				0.91	%			2,457,400				5,532				0.89	%
Noninterest-bearing liabilities
Noninterest-bearing deposits			964,867												1,082,793												1,003,304
Other noninterest-bearing liabilities			41,003												33,377												42,419
Total noninterest-bearing liabilities			1,005,870												1,116,170												1,045,723
Shareholders' equity			474,106												466,603												450,779
Total liabilities and shareholders' equity		$	3,840,619											$	3,888,588											$	3,953,902
Net interest income / interest rate spreads						$	39,002				3.88	%						$	37,114				3.75	%						$	31,599				3.08	%
Net interest margin											4.31	%											4.08	%											3.38	%

__________
(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, 2022												September 30, 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)		$	338,253			$	2,477				0.98	%		$	476,780			$	1,523				0.43	%
Securities
Available for sale (2)			369,808				4,126				1.49	%			301,653				2,180				0.97	%
Held to maturity (2)			5,909				158				3.57	%			6,640				182				3.66	%
Mortgage loans held for sale			1,624				62				5.10	%			26,579				630				3.17	%
Loans held for investment: (3)
Real estate			2,696,183				107,301				5.32	%			2,320,525				90,226				5.20	%
Commercial			336,630				14,268				5.67	%			382,168				13,930				4.87	%
Total loans			3,032,813				121,569				5.36	%			2,702,693				104,156				5.15	%
Total earning assets			3,748,407			$	128,392				4.58	%			3,514,345			$	108,671				4.13	%
Noninterest-earning assets			245,137												233,652
Total assets		$	3,993,544											$	3,747,997
Interest-bearing liabilities
NOW		$	75,182			$	185				0.33	%		$	67,633			$	136				0.27	%
Money Market			654,522				2,777				0.57	%			627,024				1,866				0.40	%
Saving deposits			147,033				129				0.12	%			137,072				101				0.10	%
Time deposits, less than $250,000			573,401				2,698				0.63	%			654,776				3,635				0.74	%
Time deposits, $250,000 and over			542,535				2,842				0.70	%			600,973				3,787				0.84	%
Total interest-bearing deposits			1,992,673				8,631				0.58	%			2,087,478				9,525				0.61	%
FHLB advances			191,136				1,974				1.38	%			150,000				1,320				1.18	%
Long-term debt			173,202				6,583				5.08	%			152,600				6,209				5.44	%
Subordinated debentures			14,575				571				5.24	%			14,357				447				4.16	%
Total interest-bearing liabilities			2,371,586			$	17,759				1.00	%			2,404,435			$	17,501				0.97	%
Noninterest-bearing liabilities
Noninterest-bearing deposits			1,115,153												858,087
Other noninterest-bearing liabilities			36,257												43,038
Total noninterest-bearing liabilities			1,151,410												901,125
Shareholders' equity			470,548												442,437
Total liabilities and shareholders' equity		$	3,993,544											$	3,747,997
Net interest income / interest rate spreads						$	110,633				3.58	%						$	91,170				3.16	%
Net interest margin											3.95	%											3.47	%

__________
(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) (Dollars in thousands, except per share amounts)
		For the Three Months Ended
		September 30,				June 30,				September 30,
		2022				2022				2021
Per share data (common stock)
Earnings
Basic		$	0.88			$	0.81			$	0.79
Diluted		$	0.87			$	0.80			$	0.77
Dividends declared		$	0.14			$	0.14			$	0.13
Book value		$	24.82			$	24.56			$	23.37
Tangible book value (1)		$	20.85			$	20.55			$	19.60
Weighted average shares outstanding
Basic			18,988,443				19,066,621				19,343,262
Diluted			19,130,447				19,324,253				19,798,187
Shares outstanding at period end			19,011,672				18,881,829				19,516,393
Performance ratios
Return on average assets, annualized			1.72	%			1.60	%			1.54	%
Return on average shareholders' equity, annualized			13.93	%			13.30	%			13.52	%
Return on average tangible common equity, annualized (1)			16.58	%			15.89	%			16.17	%
Noninterest income to average assets, annualized			0.26	%			0.35	%			0.55	%
Noninterest expense to average assets, annualized			1.72	%			1.82	%			1.45	%
Yield on average earning assets			5.13	%			4.66	%			3.97	%
Cost of average total deposits			0.55	%			0.31	%			0.35	%
Cost of average interest-bearing deposits			0.82	%			0.49	%			0.51	%
Cost of average interest-bearing liabilities			1.25	%			0.91	%			0.89	%
Accretion on loans to average earning assets			0.01	%			0.01	%			0.03	%
Net interest spread			3.88	%			3.75	%			3.08	%
Net interest margin			4.31	%			4.08	%			3.38	%
Efficiency ratio (2)			40.22	%			43.47	%			38.87	%
Common stock dividend payout ratio			15.91	%			17.28	%			16.46	%

__________
(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 loan losses and noninterest income.

RBB BANCORP AND SUBSIDIARIES SELECTED FINANCIAL HIGHLIGHTS (Unaudited) (Dollars in thousands, except per share amounts)
		For the Nine Months Ended September 30,
		2022				2021
Per share data (common stock)
Earnings
Basic		$	2.44			$	2.11
Diluted		$	2.41			$	2.07
Dividends declared		$	0.42			$	0.39
Book value		$	24.82			$	23.37
Tangible book value (1)		$	20.85			$	19.60
Weighted average shares outstanding
Basic			19,142,732				19,416,608
Diluted			19,415,558				19,828,612
Shares outstanding at period end			19,011,672				19,516,393
Performance ratios
Return on average assets, annualized			1.57	%			1.47	%
Return on average shareholders' equity, annualized			13.28	%			12.45	%
Return on average tangible common equity, annualized (1)			15.80	%			14.95	%
Noninterest income to average assets, annualized			0.30	%			0.56	%
Noninterest expense to average assets, annualized			1.69	%			1.60	%
Yield on average earning assets			4.58	%			4.13	%
Cost of average deposits			0.37	%			0.43	%
Cost of average interest-bearing deposits			0.58	%			0.61	%
Cost of average interest-bearing liabilities			1.00	%			0.97	%
Accretion on loans to average earning assets			0.02	%			0.04	%
Net interest spread			3.58	%			3.16	%
Net interest margin			3.95	%			3.47	%
Efficiency ratio (2)			42.16	%			42.07	%
Common stock dividend payout ratio			17.21	%			18.01	%

__________
(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 loan losses and noninterest income.

RBB BANCORP AND SUBSIDIARIES SELECTED FINANCIAL HIGHLIGHTS (Unaudited) (Dollars in thousands, except per share amounts)
		As of
		September 30,				June 30,				September 30,
		2022				2022				2021
Loan to deposit ratio			108.83	%			100.61	%			95.71	%
Core deposits (1) / total deposits			81.32	%			82.16	%			79.87	%
Net non-core funding dependence ratio (2)			11.09	%			-0.44	%			9.27	%
Credit Quality Data:
Loans 30-89 days past due		$	39,938			$	8,346			$	7,258
Loans 30-89 days past due to total loans			1.24	%			0.27	%			0.26	%
Nonperforming loans		$	11,503			$	13,937			$	14,248
Nonperforming loans to total loans			0.36	%			0.46	%			0.50	%
Nonperforming assets		$	11,796			$	14,230			$	14,541
Nonperforming assets to total assets			0.30	%			0.36	%			0.38	%
Allowance for loan losses to total loans			1.12	%			1.12	%			1.13	%
Allowance for loan losses to nonperforming loans			313.37	%			245.06	%			226.21	%
Net (recoveries) charge-offs to average loans (for the quarter-to-date period)			-0.02	%			0.00	%			0.05	%
Regulatory and other capital ratios—Company
Tangible common equity to tangible assets (2)			10.35	%			9.96	%			10.26	%
Tier 1 leverage ratio			11.47	%			10.95	%			10.26	%
Tier 1 common capital to risk-weighted assets			15.52	%			14.82	%			14.82	%
Tier 1 capital to risk-weighted assets			16.06	%			15.35	%			15.38	%
Total capital to risk-weighted assets			23.72	%			22.94	%			23.30	%
Regulatory capital ratios—Bank only
Tier 1 leverage ratio			14.57	%			13.90	%			12.42	%
Tier 1 common capital to risk-weighted assets			20.41	%			19.51	%			18.64	%
Tier 1 capital to risk-weighted assets			20.41	%			19.51	%			18.64	%
Total capital to risk-weighted assets			21.67	%			20.76	%			19.89	%

__________
(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 amounts)
		3rd Quarter				2nd Quarter				1st Quarter				4th Quarter				3rd Quarter
Quarterly Consolidated Statements of Earnings		2022				2022				2022				2021				2021
Interest income
Loans, including fees		$	43,588			$	40,157			$	37,886			$	36,783			$	35,601
Investment securities and other			2,826				2,181				1,680				1,661				1,507
Total interest income			46,414				42,338				39,566				38,444				37,108
Interest expense
Deposits			3,989				2,350				2,292				2,431				2,745
Interest on subordinated debentures and other			2,427				2,379				2,348				2,343				2,342
Other borrowings			1,020				519				435				445				445
Total interest expense			7,436				5,248				5,075				5,219				5,532
Net interest income before provision for loan losses			38,978				37,090				34,491				33,225				31,576
Provision for loan losses			1,766				915				366				635				1,196
Net interest income after provision for loan losses			37,212				36,175				34,125				32,590				30,380
Noninterest income			2,535				3,422				2,944				3,156				5,524
Noninterest expense			16,697				17,612				16,061				13,300				14,420
Earnings before income taxes			23,050				21,985				21,008				22,446				21,484
Income taxes			6,398				6,508				6,391				6,740				6,120
Net income		$	16,652			$	15,477			$	14,617			$	15,706			$	15,364
Net income per common share - basic		$	0.88			$	0.81			$	0.75			$	0.81			$	0.79
Net income per common share - diluted		$	0.87			$	0.80			$	0.74			$	0.79			$	0.77
Cash dividends declared per common share		$	0.14			$	0.14			$	0.14			$	0.13			$	0.13
Cash dividends declared on common shares		$	2,663			$	2,687			$	2,724			$	2,537			$	2,516
Yield on average assets, annualized			1.72	%			1.60	%			1.39	%			1.52	%			1.54	%
Yield on average earning assets			5.13	%			4.66	%			4.00	%			3.97	%			3.97	%
Cost of average deposits			0.55	%			0.31	%			0.27	%			0.30	%			0.35	%
Cost of average interest-bearing deposits			0.82	%			0.49	%			0.44	%			0.47	%			0.51	%
Cost of average interest-bearing liabilities			1.25	%			0.91	%			0.84	%			0.86	%			0.89	%
Accretion on loans to average earning assets			0.01	%			0.01	%			0.02	%			0.02	%			0.03	%
Net interest margin			4.31	%			4.08	%			3.49	%			3.43	%			3.38	%

RBB BANCORP AND SUBSIDIARIES SELECTED FINANCIAL HIGHLIGHTS (Unaudited, except for December 31, 2021) (Dollars in thousands, except per share amounts)
Loan Portfolio Detail		As of September 30, 2022								As of June 30, 2022								As of March 31, 2022								As of December 31, 2021								As of September 30, 2021
(dollars in thousands)		$				%				$				%				$				%				$				%				$				%
Loans:
Commercial and industrial		$	204,817				6.4	%		$	238,045				7.8	%		$	280,825				9.3	%		$	268,709				9.2	%		$	276,387				9.7	%
SBA			61,934				1.9	%			59,303				1.9	%			67,688				2.3	%			76,136				2.6	%			88,784				3.1	%
Construction and land development			353,473				11.0	%			356,772				11.7	%			346,766				11.5	%			303,144				10.3	%			271,764				9.6	%
Commercial real estate (1)			1,220,791				37.9	%			1,160,350				38.1	%			1,217,985				40.5	%			1,247,999				42.6	%			1,205,630				42.4	%
Single-family residential mortgages			1,356,342				42.1	%			1,205,732				39.6	%			1,064,581				35.4	%			1,004,576				34.3	%			974,780				34.3	%
Other loans			23,556				0.7	%			25,744				0.9	%			28,639				1.0	%			30,786				1.0	%			23,009				0.9	%
Total loans (2)		$	3,220,913				100.0	%		$	3,045,946				100.0	%		$	3,006,484				100.0	%		$	2,931,350				100.0	%		$	2,840,354				100.0	%
Allowance for loan losses			(36,047	)							(34,154	)							(33,292	)							(32,912	)							(32,231	)
Total loans, net		$	3,184,866							$	3,011,792							$	2,973,192							$	2,898,438							$	2,808,123

__________
(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)		2022				2021				2022				2021
Beginning balance		$	34,154			$	31,352			$	32,912			$	29,337
Additions to the allowance charged to expense			1,766				1,196				3,048				3,324
Net recoveries (charge-offs) on loans			127				(317	)			87				(430	)
Ending balance		$	36,047			$	32,231			$	36,047			$	32,231

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 September 30, 2022 and 2021, and June 30, 2022.

(dollars in thousands, except per share data)		September 30, 2022				June 30, 2022				September 30, 2021
Tangible common equity:
Total shareholders' equity		$	471,799			$	463,707			$	456,024
Adjustments
Goodwill			(71,498	)			(71,498	)			(69,243	)
Core deposit intangible			(3,971	)			(4,248	)			(4,327	)
Tangible common equity		$	396,330			$	387,961			$	382,454
Tangible assets:
Total assets-GAAP		$	3,905,229			$	3,969,037			$	3,801,807
Adjustments
Goodwill			(71,498	)			(71,498	)			(69,243	)
Core deposit intangible			(3,971	)			(4,248	)			(4,327	)
Tangible assets		$	3,829,760			$	3,893,291			$	3,728,237
Common shares outstanding		$	19,011,672				18,881,829				19,516,393
Tangible common equity to tangible assets ratio			10.35	%			9.96	%			10.26	%
Book value per share		$	24.82			$	24.56			$	23.37
Tangible book value per share		$	20.85			$	20.55			$	19.60

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								Nine Months Ended
		September 30,								September 30,
(dollars in thousands)		2022				2021				2022				2021
Net income available to common shareholders		$	16,652			$	15,364			$	46,746			$	41,200
Average shareholders' equity			474,106				450,779				470,548				442,437
Adjustments:
Goodwill			(71,498	)			(69,243	)			(70,763	)			(69,243	)
Core deposit intangible			(4,154	)			(4,513	)			(4,215	)			(4,797	)
Adjusted average tangible common equity		$	398,454			$	377,023			$	395,570			$	368,397
Return on average tangible common equity			16.58	%			16.17	%			15.80	%			14.95	%

Non-core Funding Dependency Ratio

The Bank measures core deposits by reviewing all relationships over $250,000 on a quarterly basis. We track 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 us (as a director or shareholder); (ii) deposits within our market area; (iii) additional non-deposit services with us; (iv) electronic banking services with us; (v) active demand deposit account with us; (vi) deposits at market interest rates; and (vii) longevity of the relationship with us. We consider 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. We believe 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)		September 30, 2022				December 31, 2021
Non-core deposits: Time deposits greater than $250,000		$	552,754			$	578,499
Short term borrowing outstanding			90,000				—
Adjusted non-core liabilities			642,754				578,499
Short term assets (1)			235,633				837,941
Adjustment to short term assets:
Purchased receivables with maturities less than 90-days			—				—
Adjusted short term assets			235,633				837,941
Net non-core funding		$	407,121			$	(259,442	)
Total earning assets			3,671,529				3,988,715
Net non-core funding dependency ratio			11.09	%			-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/20221024005911/en/

Contact:

David Morris

President, CEO and CFO

(714) 670-2488

Source: RBB Bancorp

FAQ

What were RBB Bancorp's earnings for Q3 2022?

RBB Bancorp reported a record net income of $16.7 million for Q3 2022, translating to $0.87 diluted earnings per share.

How much did loans grow for RBB Bancorp in Q3 2022?

Loans grew by $176.2 million, or 22.9% annualized, in Q3 2022 compared to the previous quarter.

What is the quarterly dividend declared by RBB Bancorp?

RBB Bancorp declared a quarterly dividend of $0.14 per share.

What was RBB Bancorp's net interest income in Q3 2022?

The net interest income for RBB Bancorp in Q3 2022 was $39.0 million, a record high.

What was the efficiency ratio for RBB Bancorp in Q3 2022?

The efficiency ratio for RBB Bancorp improved to 40.22% in Q3 2022.