RBB Bancorp Earnings 2019-06-30

RBB 10Q Quarterly Report

Balance Sheet	Income Statement	Cash Flow

10-Q 1 rbb-10q_20190630.htm 10-Q rbb-10q_20190630.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2019 or

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______ to ______

Commission File Number: 001-38149

RBB BANCORP

(Exact name of registrant as specified in its charter)

California	27-2776416
(State or other jurisdiction of Incorporation or organization)	(I.R.S. Employer Identification No.)

1055 Wilshire Blvd., Suite 1200,
Los Angeles, California	90017
(Address of principal executive offices)	(Zip Code)

(213) 627-9888

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12 (b) of the Act:

Title of each class		Trading Symbol(s)		Name of exchange on which registered
Common Stock, No Par Value		RBB		NASDAQ Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of shares of common stock of the registrant: 20,110,203 outstanding as of August 7, 2019.

TABLE OF CONTENTS


PART I – FINANCIAL INFORMATION (UNAUDITED)		3

ITEM 1.	CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)	3

	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)	9

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	33

	CRITICAL ACCOUNTING POLICIES	35

	OVERVIEW	36

	ANALYSIS OF THE RESULTS OF OPERATIONS	37

	ANALYSIS OF FINANCIAL CONDITION	48

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	63

ITEM 4.	CONTROLS AND PROCEDURES	64

PART II - OTHER INFORMATION		65

ITEM 1.	LEGAL PROCEEDINGS	65

ITEM 1A.	RISK FACTORS	65

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	65

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	65

ITEM 4.	MINE SAFETY DISCLOSURES	65

ITEM 5.	OTHER INFORMATION	65

ITEM 6.	EXHIBITS	66

SIGNATURES		67

PART I - FINANCIAL INFORMATION (UNAUDITED)

ITEM 1.

CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

RBB BANCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018 (AUDITED)

(In thousands, except share amounts)

	June 30,			December 31,
	2019			2018
Assets
Cash and due from banks	$	185,643		$	147,685
Federal funds sold and other cash equivalents		20,000			—
Cash and cash equivalents		205,643			147,685
Interest-earning deposits in other financial institutions		1,196			600
Securities:
Available for sale		71,629			73,762
Held to maturity (fair value of $8,999 and $9,940 at June 30, 2019 and December 31, 2018, respectively)		8,733			9,961
Mortgage loans held for sale		249,596			434,522
Loans held for investment:
Real estate		1,736,322			1,762,864
Commercial		362,589			387,474
Total loans		2,098,911			2,150,338
Unaccreted discount on acquired loans		(6,753	)		(9,229	)
Deferred loan costs (fees), net		280			906
Total loans, net of deferred loan fees		2,092,438			2,142,015
Allowance for loan losses		(18,561	)		(17,577	)
Net loans		2,073,877			2,124,438

Premises and equipment		17,214			17,307
Federal Home Loan Bank (FHLB) stock		15,000			9,707
Net deferred tax assets		4,318			4,642
Income tax receivable		3,001			656
Other real estate owned (OREO)		2,075			1,101
Cash surrender value of life insurance (BOLI)		33,963			33,578
Goodwill		58,383			58,383
Servicing assets		17,587			17,370
Core deposit intangibles		6,828			7,601
Accrued interest and other assets		32,913			32,689
Total assets	$	2,801,956		$	2,974,002

The accompanying notes are an integral part of these unaudited consolidated financial statements.

RBB BANCORP AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

JUNE 30, 2019 (UNAUDITED) AND DECEMBER 31, 2018 (AUDITED) (CONTINUED)

(In thousands, except share amounts)

	June 30,			December 31,
	2019			2018
Liabilities and Shareholders’ Equity
Deposits:
Noninterest-bearing demand	$	435,629		$	438,764
Savings, NOW and money market accounts		462,448			579,247
Time deposits under $250,000		739,551			532,395
Time deposits $250,000 and over		597,706			593,635
Total deposits		2,235,334			2,144,041

Reserve for unfunded commitments		621			688
Income tax payable		1,610			—
FHLB advances		40,000			319,500
Long-term debt, net of debt issuance costs		103,878			103,708
Subordinated debentures		9,590			9,506
Accrued interest and other liabilities		17,103			21,938
Total liabilities		2,408,136			2,599,381

Commitments and contingencies - Note 13		—			—

Shareholders' equity:
Preferred Stock - 100,000,000 shares authorized, no par value; none outstanding		—			—
Common Stock - 100,000,000 shares authorized, no par value; 20,077,524 shares issued and outstanding at June 30, 2019 and 20,000,022 shares at December 31, 2018		289,577			288,610
Additional paid-in capital		6,055			5,659
Retained earnings		98,126			81,618
Non-controlling interest		72			72
Accumulated other comprehensive loss, net		(10	)		(1,338	)
Total shareholders’ equity		393,820			374,621
Total liabilities and shareholders’ equity	$	2,801,956		$	2,974,002

The accompanying notes are an integral part of these unaudited consolidated financial statements.

RBB BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME – (UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018

(In thousands, except per share amounts)

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2019		2018		2019		2018
Interest and dividend income:
Interest and fees on loans	$	34,240	$	21,132	$	70,079	$	40,206
Interest on interest-earning deposits		515		209		983		395
Interest on investment securities		685		603		1,273		1,163
Dividend income on FHLB stock		379		134		577		253
Interest on federal funds sold and other		124		206		237		443
Total interest income		35,943		22,284		73,149		42,460
Interest expense:
Interest on savings deposits, now and money market accounts		1,238		998		2,532		1,700
Interest on time deposits		7,797		2,410		13,750		4,456
Interest on subordinated debentures and long-term debt		1,929		920		3,862		1,833
Interest on other borrowed funds		662		129		2,776		200
Total interest expense		11,626		4,457		22,920		8,189
Net interest income		24,317		17,827		50,229		34,271
Provision for credit losses		357		700		907		884

Net interest income after provision for credit losses		23,960		17,127		49,322		33,387
Noninterest income:
Service charges, fees and other		1,222		446		2,042		912
Gain on sale of loans		3,120		2,085		5,318		3,900
Loan servicing fees, net of amortization		899		58		1,739		27
Recoveries on loans acquired in business combinations		55		5		61		11
Unrealized gain on equity investments		—		—		147		—
Increase in cash surrender value of life insurance		194		199		385		398
Gain on Sale of Fixed Assets		6		—		6		—
		5,496		2,793		9,698		5,248
Noninterest expense:
Salaries and employee benefits		8,169		4,709		17,287		9,660
Occupancy and equipment expenses		2,674		834		4,926		1,626
Data processing		1,219		487		2,228		960
Legal and professional		656		423		1,081		680
Office expenses		294		192		630		363
Marketing and business promotion		316		262		678		465
Insurance and regulatory assessments		284		213		582		422
Amortization of intangibles		385		77		773		158
OREO expenses		81		—		162		7
Merger expenses		15		183		86		223
Other expenses		806		811		1,791		1,916
		14,899		8,191		30,224		16,480
Income before income taxes		14,557		11,729		28,796		22,155
Income tax expense		4,415		2,292		8,274		3,872
Net income	$	10,142	$	9,437	$	20,522	$	18,283

Net income per share
Basic	$	0.51	$	0.58	$	1.02	$	1.13
Diluted		0.50		0.54		1.00		1.06
Cash dividends declared per common share		0.10		0.09		0.20		0.17

The accompanying notes are an integral part of these unaudited consolidated financial statements.

RBB BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME – (UNAUDITED)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2019 AND 2018

(In thousands)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2019			2018			2019			2018
Net income	$	10,142		$	9,437		$	20,522		$	18,283

Other comprehensive income (loss):
Unrealized gains (losses) on securities available for sale:
Change in unrealized gains (losses)		928			(379	)		1,886			(1,227	)
Related income tax effect:
Change in unrealized gains (losses)		(274	)		112			(558	)		363

Total other comprehensive income (loss)		654			(267	)		1,328			(864	)

Total comprehensive income	$	10,796		$	9,170		$	21,850		$	17,419

The accompanying notes are an integral part of these unaudited consolidated financial statements.

RBB BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY – (UNAUDITED)

FOR JUNE 30, 2019 AND 2018

(In thousands, except share amounts)

	Common Stock												Accumulated
	Shares		Amount		Additional Paid-in Capital			Retained Earnings			Non- Controlling Interest		Other Comprehensive Income (Loss)			Total
Balance at April 1, 2019		20,073,991	$	289,514	$	5,890		$	89,991		$	72	$	(664	)	$	384,803
Net income		—		—		—			10,142			—		—			10,142
Stock-based compensation		—		—		165			—			—		—			165
Cash dividend		—		—		—			(2,007	)		—		—			(2,007	)
Stock options exercised, net of expense recognized		3,533		63		—			—			—		—			63
Other comprehensive income, net of taxes		—		—		—			—			—		654			654
Balance at June 30, 2019		20,077,524	$	289,577	$	6,055		$	98,126		$	72	$	(10	)	$	393,820

Balance at April 1, 2018		16,288,928	$	210,595	$	7,429		$	58,838		$	—	$	(1,040	)	$	275,822
Net income		—		—		—			9,437			—		—			9,437
Stock-based compensation		—		—		131			—			—		—			131
Cash dividend		—		—		—			(1,471	)		—		—			(1,471	)
Stock options exercised		255,699		3,430		(880	)		—			—		—			2,550
Other comprehensive income, net of taxes		—		—		—			—			—		(267	)		(267	)
Balance at June 30, 2018		16,544,627	$	214,025	$	6,680		$	66,804		$	—	$	(1,307	)	$	286,202

	Common Stock											Accumulated
	Shares		Amount		Additional Paid-in Capital		Retained Earnings			Non- Controlling Interest		Other Comprehensive Income (Loss)			Total
Balance at January 1, 2019		20,000,022	$	288,610	$	5,659	$	81,618		$	72	$	(1,338	)	$	374,621
Net income		—		—		—		20,522			—		—			20,522
Stock-based compensation		—		—		396		—			—		—			396
Cash dividend		—		—		—		(4,014	)		—		—			(4,014	)
Stock options exercised, net of expense recognized		77,502		967		—		—			—		—			967
Other comprehensive income, net of taxes		—		—		—		—			—		1,328			1,328
Balance at June 30, 2019		20,077,524	$	289,577	$	6,055	$	98,126		$	72	$	(10	)	$	393,820
												<

Closing Price ($)	Shares Out (MM)	Market Cap ($MM)
$32.23	20	$647

10-Q	2019-06-30	Quarter: 2019-06-30
10-Q	2019-03-31	Quarter: 2019-03-31
10-K	2018-12-31	Annual: 2018-12-31
10-Q	2018-09-30	Quarter: 2018-09-30
10-Q	2018-06-30	Quarter: 2018-06-30
10-Q	2018-03-31	Quarter: 2018-03-31
10-K	2017-12-31	Annual: 2017-12-31
10-Q	2017-09-30	Quarter: 2017-09-30
10-Q	2017-06-30	Quarter: 2017-06-30

8-K	2019-09-24	Regulation FD, Exhibits
8-K	2019-09-06	Enter Agreement, Regulation FD, Exhibits
8-K	2019-07-29	Regulation FD, Exhibits
8-K	2019-07-22	Accountant, Exhibits
8-K	2019-07-18	Earnings, Other Events, Exhibits
8-K	2019-06-24	Other Events, Exhibits
8-K	2019-06-07	Other Events
8-K	2019-05-08	Other Events
8-K	2019-05-08	Shareholder Vote
8-K	2019-04-22	Earnings, Other Events, Exhibits
8-K	2019-03-26	Regulation FD, Exhibits
8-K	2019-03-22	Other Events, Exhibits
8-K	2019-03-05	Regulation FD, Exhibits
8-K	2019-01-30	Regulation FD, Exhibits
8-K	2019-01-24	Earnings, Other Events, Exhibits
8-K	2018-12-20	Other Events
8-K	2018-11-29	Enter Agreement, Off-BS Arrangement, Regulation FD, Other Events, Exhibits
8-K	2018-11-27	Regulation FD, Exhibits
8-K	2018-10-22	Earnings, Exhibits
8-K	2018-10-15	M&A, Officers, Regulation FD, Exhibits
8-K	2018-10-12	Earnings, Exhibits
8-K	2018-09-20	Regulation FD, Exhibits
8-K	2018-09-20	Officers, Other Events, Exhibits
8-K	2018-09-17	Other Events, Exhibits
8-K	2018-07-25	Regulation FD, Other Events, Exhibits
8-K	2018-07-20	Earnings, Other Events, Exhibits
8-K	2018-07-11	Earnings, Exhibits
8-K	2018-06-07	Regulation FD, Exhibits
8-K	2018-04-23	Enter Agreement, Regulation FD, Exhibits
8-K	2018-01-31	Regulation FD, Exhibits

BK	Bank of New York Mellon	39,948
FCNCA	First Citizens Bancshares	5,058
FHN	First Horizon National	4,844
FULT	Fulton Financial	2,633
VBTX	Veritex Holdings	1,248
HMST	Homestreet	717
EQBK	Equity Bancshares	404
CBNK	Chicopee Bancorp	167
RIVE	Riverview Financial	91
UBOH	United Bancshares	74

EX-31.1	rbb-ex311_8.htm
EX-31.2	rbb-ex312_7.htm
EX-32.1	rbb-ex321_9.htm
EX-32.2	rbb-ex322_6.htm