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American Business Bank Announces First Quarter Net Income Increases 123% over Prior Year

LOS ANGELES--(BUSINESS WIRE)--

Loan Interest Income increases 27% annualized over prior quarter

First Quarter 2019 Highlights

  • Total loans increased $258 million or 26% from a year ago
  • Total deposits increased $253 million or 15% from a year ago
  • Non-interest bearing demand deposits were 50% of total deposits
  • Nonperforming assets to total assets negligible at 0.07%
  • Net interest income increased by $3.8 million or 26% over the prior year
  • Continued status as well-capitalized, the highest regulatory category

AMERICAN BUSINESS BANK (OTC Pink: AMBZ) today reported net income of $5.4 million or $0.67 per fully diluted share for the first quarter of 2019 as compared to $2.4 million or $0.31 per fully diluted share for the first quarter of 2018, an increase of 123%. The increase was primarily due to significant loan and core deposit growth during 2018 resulting in increased net interest income.

“The investment we made in hiring seasoned banking personnel in the fourth quarter of 2017 has paid off with the substantial increase in earnings year-over-year due to the transformative growth in loans and core deposits in 2018. The significant increase in loan interest income for the quarter is the direct result of record loan growth in the fourth quarter of 2018. Although loan and deposit growth was minimal in the first quarter of 2019, we are pleased with the pipeline for new business. The increase in the loan to deposit ratio to 64% has helped to expand the net interest margin and drive return on equity to 13%,” said Leon Blankstein, ABB’s President, CEO and Director.

For the quarter ending March 31, 2019, net income was $5.4 million or $0.67 per fully diluted share, compared with net income of $6.1 million or $0.77 per fully diluted share for the fourth quarter of 2018. The decrease in net income was due to an increase in deferred compensation plan (DCP) liability that resulted in a $925,000 charge to compensation and benefits expense in the first quarter of 2019, compared to a decrease in DCP liability that resulted in a $2 million reduction to compensation and benefits expense in the fourth quarter of 2018. Comparing the first quarter of 2019 core net income of $5.8 million to the fourth quarter of 2018 core net income of $5.0 million, which excludes the impact of DCP ABB stock funds, results in an increase of 17%.

The Bank’s net interest margin for the first quarter of 2019 was 3.62%. This compares to 3.28% in the first quarter of 2018 and 3.53% for the fourth quarter of 2018 representing increases of 0.34% and 0.09%, respectively. The increases were primarily due to average loans being a higher percentage of average earnings assets in the first quarter of 2019 than in the first and fourth quarters of 2018, as well as expansion in average loan yields for the periods compared. The loan to deposit ratio increased to 64% for the first quarter of 2019 from 58% for the first quarter of 2018 and 63% for the fourth quarter of 2018.

Net interest income increased for the first quarter of 2019 compared to the first quarter of 2018 by $3.8 million or 26% due to an increase in average outstanding loans, a higher yield on loans and a low deposit beta for the periods compared. The yield on average loans increased to 4.89% for the first quarter of 2019 compared to 4.46% for the first quarter of 2018. The Bank’s core funding continues to be a strength with the cost of deposits of 0.21% for the first quarter of 2019, an increase of 10 basis points over the quarter a year ago.

Net interest income remained steady for the first quarter of 2019 compared to the fourth quarter of 2018 even with two less days in the quarter. For the first quarter of 2019, loan interest income increased $954,000 or 27% annualized due to an increase in average outstanding loans and a higher yield on loans. The yield on average loans increased to 4.89% for the first quarter of 2019 compared to 4.80% for the fourth quarter of 2018. The new loan production weighted average coupon was 5.22% in the quarter. The Bank’s cost of deposits was at 0.21% for the most recent quarter, an increase of only 3 basis points over the prior quarter.

Non-interest income in the first quarter of 2019 was $1.5 million, an increase of $661,000, or 81% from $812,000 in the quarter a year ago. The is mainly attributable to a positive $220,000 increase in the value of corporate owned life insurance (COLI) in the first quarter of 2019 and $195,000 of losses realized on the sale of investment securities in the first quarter of 2018. Additionally, Deposit and International fees increased $144,000 from the quarter a year ago due to growth in commercial business customers.

Non-interest income was $1.5 million for the first quarter of 2019, an increase of $827,000, or 128% compared to the fourth quarter of 2018. This favorable change was due to a $770,000 increase in the positive change in COLI value which is invested in mutual funds, from a $323,000 negative change in the fourth quarter of 2018 to a $447,000 positive change in the first quarter of 2019. The change in COLI value is offset by a corresponding non-cash charge (credit) to compensation and benefits expense, which is included in non-interest expense.

Non-interest expense increased $1.0 million for the quarter ending March 31, 2019 compared to the quarter a year ago. The increase was predominantly due to the change in DCP liability that is correlated to the value of COLI investments and the Bank’s stock price, with the resulting charge included in compensation and benefits expense. Additionally, occupancy and equipment expense increased $287,000 in the first quarter of 2019 versus the first quarter of 2018 due to the planned relocation of the Bank’s Los Angeles headquarters in June 2019. The current headquarters lease expires as well in the same month.

Non-interest expense increased $3.5 million for the quarter ending March 31, 2019 compared to the prior quarter. This is mainly due to an increase in DCP liability that resulted in a $925,000 non-cash charge to compensation and benefits expense in the first quarter of 2019, compared to a decrease in DCP liability that resulted in a $2 million reduction to compensation and benefits expense in the prior quarter. The increase in the Bank’s stock price resulted in a charge to DCP expense of $536,000 during the most recent quarter. An additional charge to DCP expense of $389,000 is correlated to the positive change in COLI value of $447,000. Further, occupancy and equipment expense increased $229,000 from the prior quarter due to the new lease agreement for its new Los Angeles headquarters.

Full time equivalent employees at March 31, 2019 were 189, an increase of 12 employees or 7% higher than a year ago, but only two less than at December 31, 2018. The Bank now has 29 relationship managers in seven offices.

Total assets increased $258 million, or 13% from March 31, 2018 to $2.19 billion which was driven by an increase in deposits. Other assets increased $13 million, or 21% from December 31, 2018 mainly due to the adoption of the new lease accounting standard.

Asset quality at March 31, 2019 remains excellent with non-performing assets to total assets of 0.07%, $1.2 million in non-performing loans, and no Other Real Estate Owned (OREO). The largest nonaccrual loan is fully secured by real estate. At the end of the quarter, the allowance for loan losses stood at $17.6 million, or 1.4% of total loans. For the first quarter of 2019, the Bank had no charge-offs.

ABOUT AMERICAN BUSINESS BANK

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

FORWARD LOOKING STATEMENTS

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

         
American Business Bank
Figures in $000, except share and per share amounts
   
BALANCE SHEET (unaudited)
 
 
             
March December March
2019     2018     2018

Assets:

Cash and Due from Banks $ 54,418 $ 26,673 $ 44,171
Interest Earning Deposits in Other Financial Institutions 28,428 76,599 2,705
 

Investment Securities:

US Agencies 415,682 440,212 551,783
Mortgage Backed Securities 181,978 128,851 88,362
State and Municipals 80,914 77,460 177,305
US Treasuries 9,878 9,859 9,822
    Corporate Bonds         1,972         1,971         1,994  
Securities Available-for-Sale, at Fair Value 690,424 658,353 829,266
Securities Held-to-Maturity, at Amortized Cost 87,325 87,526 -
    Federal Home Loan Bank Stock, at Cost     10,356         10,356         9,938  
Total Investment Securities 788,105 756,235 839,204

Loans Receivable:

Commercial Real Estate 836,069 827,388 671,478
Commercial and Industrial 359,548 356,583 256,068
Residential Real Estate 58,340 62,835 68,956
    Installment and Other         3,715         3,455         3,042  
Total Loans Receivable 1,257,672 1,250,261 999,544
        Allowance for Loan Losses       (17,608 )       (17,503 )       (14,487 )
Loans Receivable, Net 1,240,064 1,232,758 985,057
Furniture, Equipment and Leasehold Improvements, Net 3,044 1,834 1,551
  Other Assets           76,503         63,344         60,250  
    Total Assets         $ 2,190,562       $ 2,157,443       $ 1,932,938  
 

Liabilities:

Non-Interest Bearing Demand Deposits $ 988,196 $ 983,284 $ 876,164
Interest Bearing Transaction Accounts 187,838 211,794 179,876
Money Market and Savings Deposits 722,043 728,237 613,881
  Certificates of Deposit         81,934         50,443         57,544  
Total Deposits 1,980,011 1,973,758 1,727,465
Federal Home Loan Bank Advances / Other Borrowings - - 32,000
  Other Liabilities           36,678         18,618         20,336  
    Total Liabilities       $ 2,016,689       $ 1,992,376       $ 1,779,801  
 

Shareholders' Equity:

Common Stock and Retained Earnings $ 185,556 $ 182,164 $ 165,750
  Accumulated Other Comprehensive Income / (Loss)     (11,683 )       (17,097 )       (12,613 )
    Total Shareholders' Equity     $ 173,873       $ 165,067       $ 153,137  
    Total Liabilities and Shareholders' Equity   $ 2,190,562       $ 2,157,443       $ 1,932,938  
 
Standby Letters of Credit $ 38,106 $ 36,411 $ 29,220
 

Per Share Information:

Common Shares Outstanding 7,745,979 7,705,590 7,588,400
Book Value Per Share $ 22.45 $ 21.42 $ 20.18
Tangible Book Value Per Share $ 22.45 $ 21.42 $ 20.18
 
           
American Business Bank
Figures in $000, except share and per share amounts
         
INCOME STATEMENT (unaudited)
 
 
For the three months ended:
March December March
2019     2018     2018

Interest Income:

Interest and Fees on Loans

$ 15,078 $ 14,124 $ 10,612
Interest on Investment Securities 4,273 4,747 4,983

Interest on Interest Earning Deposits in Other Financial Institutions

    503       868         45  
Total Interest Income 19,854 19,739 15,640
 

Interest Expense:

Interest on Interest Bearing Transaction Accounts 104 110 74
Interest on Money Market and Savings Deposits 807 725 333
Interest on Certificates of Deposits 105 97 62

Interest on Federal Home Loan Bank Advances and Other Borrowings

    -       1         175  
Total Interest Expense 1,016 933 644
 
Net Interest Income 18,838 18,806 14,996
Provision for Loan Losses     90       1,543         832  
Net Interest Income after Provision for Loan Losses 18,748 17,263 14,164
 

Non-Interest Income:

Deposit Fees 503 505 424
International Fees 259 281 194
Gain (Loss) on Sale of Investment Securities, Net - (74 ) (195 )
Gain on Sale of SBA Loans, Net 79 141 105
Other     632       (207 )       284  
Total Non-Interest Income 1,473 646 812
 

Non-Interest Expense:

Salaries and Employee Benefits 9,444 5,959 8,793
Occupancy and Equipment 1,021 792 734
Professional Services 1,197 1,269 1,139
Promotion Expenses 264 402 271
Other     1,094       1,130         1,054  
Total Non-Interest Expense 13,020 9,552 11,991
 
Earnings before income taxes 7,201 8,357 2,985
Income Tax Expense     1,800       2,262         559  
 
NET INCOME   $ 5,401     $ 6,095       $ 2,426  
Add back:
After-Tax Gain (Loss) on Sale of Investment Securities, Net $ - $ 54 $ 159
After-Tax DCP ABB Stock Expense (Benefit) $ 402 $ (1,199 ) $ 81
Core Net Income   $ 5,803     $ 4,950       $ 2,666  
 

Per Share Information:

Earnings Per Share - Basic $ 0.70 $ 0.79 $ 0.32
 
Earnings Per Share - Diluted $ 0.67 $ 0.77 $ 0.31
Core Earnings Per Share - Diluted $ 0.72 $ 0.63 $ 0.34
 
Weighted Average Shares - Basic 7,722,461 7,700,091 7,569,277
 
Weighted Average Shares - Diluted 8,033,433 7,881,465 7,830,162
 
             
American Business Bank
Figures in $000
         
SUPPLEMENTAL DATA (unaudited)
 
 
             
March December March
2019     2018     2018

Performance Ratios:

Quarterly:

Return on Average Assets (ROAA) 0.99 % 1.12 % 0.50 %
Core Return on Average Assets (ROAA) 1.06 % 0.91 % 0.55 %
 
Return on Average Equity (ROAE) 12.88 % 15.52 % 6.37 %
Core Return on Average Equity (ROAE) 13.84 % 12.61 % 7.01 %
 
Efficiency Ratio 64.10 % 48.92 % 74.93 %
Core Efficiency Ratio 61.46 % 57.34 % 74.30 %
 

Year-to-Date

Return on Average Assets (ROAA) 0.99 % 0.80 % 0.50 %
Core Return on Average Assets (ROAA) 1.06 % 0.78 % 0.55 %
 
Return on Average Equity (ROAE) 12.88 % 10.65 % 6.37 %
Core Return on Average Equity (ROAE) 13.84 % 10.38 % 7.01 %
 
Efficiency Ratio 64.10 % 63.57 % 74.93 %
Core Efficiency Ratio 61.46 % 65.21 % 74.30 %
 

Capital Adequacy:

Total Capital Ratio 14.15 % 14.09 % 14.84 %
Common Equity Tier 1 Capital Ratio 12.90 % 12.84 % 14.84 %
Tier 1 Capital Ratio 12.90 % 12.84 % 16.09 %
Tier 1 Leverage Ratio 8.46 % 8.33 % 8.55 %
Tangible Common Equity / Tangible Assets 7.94 % 7.65 % 7.92 %
 

Asset Quality Overview

Non-Performing Loans $ 1,222 $ 1,222 $ 915

Loans 90+ Days Past Due and Still Accruing

- - -
Total Non-Performing Loans 1,222 1,222 915
 
Restructured Loans 233 235 241
 
Other Real Estate Owned - - -
 
ALLL / Loans Receivable 1.40 % 1.40 % 1.45 %
Non-Performing Loans / Total Loans Receivable * 0.12 % 0.12 % 0.12 %
Non-Performing Assets / Total Assets * 0.07 % 0.07 % 0.06 %
Net Charge-Offs (Recoveries) quarterly $ (15 ) $ (10 ) $ (16 )
Net Charge-Offs (Recoveries) year-to-date $ (15 ) $ (53 ) $ (16 )

Net Charge-Offs (Recoveries) year-to-date / Average Loans Receivable

(0.00 %) (0.00 %) (0.00 %)

 

  * Includes non-accrual loans, accruing loans past due 90+ days and Troubled Debt Restructurings (TDRs).
                         
American Business Bank
Figures in $000
         
QUARTERLY AVERAGE BALANCE SHEETS AND YIELD ANALYSIS (unaudited)
 
 
For the three months ended:
March 2019 December 2018
Average Interest Average Average Interest Average
Balance     Inc/Exp     Yield/Rate Balance     Inc/Exp     Yield/Rate

Interest Earning Assets:

Interest Earning Deposits in Other Financial Institutions $ 82,027 $ 503 2.49 % $ 150,483 $ 868 2.34 %
 

Investment Securities:

US Agencies 433,799 1,757 1.62 % 459,879 1,886 1.64 %
Mortgage Backed Securities 148,059 1,118 3.02 % 137,272 957 2.79 %
State and Municipals 172,411 1,161 2.69 % 174,603 1,492 3.42 %
US Treasuries 10,052 37 1.48 % 10,059 37 1.46 %
Corporate Bonds     2,000       18     3.63 %   2,000       17     3.41 %
Securities Available-for-Sale and Held-to-Maturity 766,321 4,091 2.14 % 783,813 4,389 2.19 %
Federal Home Loan Bank Stock     10,356       182     7.03 %   10,356       358     13.83 %
Total Investment Securities 776,677 4,273 2.20 % 794,169 4,747 2.34 %

Loans Receivable:

Commercial Real Estate 831,259 9,656 4.71 % 782,799 9,164 4.64 %
Commercial and Industrial 353,660 4,599 5.27 % 317,882 4,031 5.03 %
Residential Real Estate 59,928 788 5.33 % 62,307 819 5.21 %
Installment and Other     4,685       35     3.01 %   4,245       110     10.32 %
Total Loans Receivable     1,249,532       15,078     4.89 %   1,167,233       14,124     4.80 %
Total Interest Earning Assets   $ 2,108,236     $ 19,854     3.77 % $ 2,111,885     $ 19,739     3.66 %
 

Liabilities:

Non-Interest Bearing Demand Deposits 996,040 - 0.00 % 1,029,346 - 0.00 %
Interest Bearing Transaction Accounts 198,809 104 0.21 % 197,465 110 0.22 %
Money Market and Savings Deposits 736,155 807 0.44 % 712,486 725 0.40 %
Certificates of Deposit     64,601       105     0.66 %   64,269       97     0.60 %
Total Deposits 1,995,605 1,016 0.21 % 2,003,566 932 0.18 %
Federal Home Loan Bank Advances / Other Borrowings     -       -     0.00 %   402       1     1.48 %
Total Interest Deposits and Borrowings     999,565       1,016     0.41 %   974,622       933     0.38 %
Total Deposits and Borrowings   $ 1,995,606     $ 1,016     0.21 % $ 2,003,969     $ 933     0.18 %
 
Net Interest Income $ 18,838 $ 18,806
Net Interest Rate Spread 3.56 % 3.48 %
Net Interest Margin 3.62 % 3.53 %
 
                         
American Business Bank
Figures in $000
         
QUARTERLY AVERAGE BALANCE SHEETS AND YIELD ANALYSIS (unaudited)
 
 
For the three months ended:
March 2019 March 2018
Average Interest Average Average Interest Average
Balance     Inc/Exp     Yield/Rate Balance     Inc/Exp     Yield/Rate

Interest Earning Assets:

Interest Earning Deposits in Other Financial Institutions $ 82,027 $ 503 2.49 % $ 11,658 $ 45 1.55 %
 

Investment Securities:

US Agencies 433,799 1,757 1.62 % 580,066 2,580 1.78 %
Mortgage Backed Securities 148,059 1,118 3.02 % 91,726 587 2.56 %
State and Municipals 172,411 1,161 2.69 % 181,741 1,580 3.48 %
US Treasuries 10,052 37 1.48 % 10,079 37 1.48 %
Corporate Bonds     2,000       18     3.63 %

 

  2,353       16     2.76 %
Securities Available-for-Sale and Held-to-Maturity 766,321 4,091 2.14 % 865,965 4,800 2.22 %
Federal Home Loan Bank Stock     10,356       182     7.03 %   9,938       183     7.35 %
Total Investment Securities 776,677 4,273 2.20 % 875,903 4,983 2.28 %

Loans Receivable:

Commercial Real Estate 831,259 9,656 4.71 % 659,296 7,193 4.42 %
Commercial and Industrial 353,660 4,599 5.27 % 238,393 2,592 4.41 %
Residential Real Estate 59,928 788 5.33 % 64,624 757 4.75 %
Installment and Other     4,685       35     3.01 %   3,389       70     8.39 %
Total Loans Receivable     1,249,532       15,078     4.89 %   965,702       10,612     4.46 %
Total Interest Earning Assets   $ 2,108,236     $ 19,854     3.77 % $ 1,853,263     $ 15,640     3.38 %
 

Liabilities:

Non-Interest Bearing Demand Deposits 996,040 - 0.00 % 881,512 - 0.00 %
Interest Bearing Transaction Accounts 198,809 104 0.21 % 173,091 74 0.17 %
Money Market and Savings Deposits 736,155 807 0.44 % 593,198 333 0.23 %
Certificates of Deposit     64,601       105     0.66 %   56,548       62     0.44 %
Total Deposits 1,995,605 1,016 0.21 % 1,704,349 469 0.11 %
Federal Home Loan Bank Advances / Other Borrowings     -       -     0.00 %   46,850       175     1.51 %
Total Interest Deposits and Borrowings     999,565       1,016     0.41 %   869,687       644     0.30 %
Total Deposits and Borrowings   $ 1,995,606     $ 1,016     0.21 % $ 1,751,200     $ 644     0.15 %
 
Net Interest Income $ 18,838 $ 14,996
Net Interest Rate Spread 3.56 % 3.23 %
Net Interest Margin 3.62 % 3.28 %
 

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