AMERICAN BUSINESS BANK Announces Record Growth in Core Deposits

Total Assets reach $2.1 Billion

LOS ANGELES--()--AMERICAN BUSINESS BANK (OTCBB: AMBZ) today reported net income of $4.1 million for the quarter ended September 30, 2018, or $.53 per diluted share compared to net income of $3.7 million or $.48 per diluted share for the second quarter of 2018. The increase in net income was primarily due to an increase in net interest income with a reduction to loan loss provision commensurate with quarterly loan growth.

Net interest income increased by $1.5 million or 10% to $17.4 million for the third quarter of 2018 compared to $15.8 million for the second quarter of 2018. This quarterly increase reflects the continuing shift from investment securities to loans.

Total assets increased $223 million, or 16% annualized from year end December 31, 2017 to $2.1 billion. This was driven by an increase in deposits of $276 million, or 23% annualized growth from year end. Total loans increased $218 million to $1.1 billion, or 32% annualized growth from year end. This resulted in an increase in the loan to deposit ratio to 59% from 56% during the year. In the third quarter of 2018, the Bank grew loans by $45 million and deposits by $107 million. At September 30, 2018, non-interest bearing deposits represented 51% of total deposits.

“The investment we made in hiring seasoned banking personnel in the fourth quarter of last year negatively affected earnings in the first half of the year. The increase in loan balances funded by core deposit growth since then has resulted in a return on average equity approaching 11% for the quarter,” said Leon Blankstein, ABB’s President, CEO and Director.

Asset quality at September 30, 2018 remains excellent with non-performing assets to total assets of 0.06%, $1.4 million in non-performing loans, and no Other Real Estate Owned (OREO). The largest nonaccrual is fully secured by real estate. At the end of the quarter, the allowance for loan losses stood at $15.9 million, or 1.4% of total loans. For 2018 year to date, the Bank has had no charge offs.

Net Interest Income increased due to an increase in average outstanding loans, a higher yield on loans and a low deposit beta for the current quarter over the prior quarter. The yield on average loans increased to 4.71% for the third quarter of 2018 compared to 4.55% for the second quarter of 2018. The Bank recovered $86,000 in interest on a paid off nonaccrual loan; this benefitted the quarterly loan yield by .04%. The new loan production weighted average coupon was 5.11% in the quarter. The Bank’s core deposits continue to be a strength with the cost of deposits at 0.17% for the most recent quarter, an increase of only 3 basis points over the prior quarter. Thus, the net interest margin in the third quarter increased to 3.46% compared to 3.35% in the second quarter of 2018.

Non-Interest Income decreased $324,000 quarter over quarter primarily as the Bank recorded a lower gain on sale of SBA loans of $342,000. This decline in SBA gain on sale is due to timing of fully funding before eligible for sale and a reduction in premiums.

Non-Interest Expense increased $1.0 million for the quarter ending September 30, 2018 compared to the prior quarter. The increase in the third quarter was due to the increase in compensation and benefits. Employee total salaries have increased with a growth in the average number of employees between the two quarters, an increase in bonus expense commensurate with surpassing goals, and higher expense on deferred compensation tied to increases in the Bank’s stock price.

From a year ago, total assets increased $344 million or 20%. This was driven by an increase in deposits of $333 million, or 21% over the twelve months. Total loans increased $260 million, or 30% from a year ago.

Year to date net income is below last year due to the significant investment in a growth strategy as well as the one time charge in the first quarter of $979,000 in compensation and benefits. Full time equivalent employees at September 30, 2018 were 188, an increase of 45 employees or 31% higher than a year ago, but only 4 more than at June 30, 2018.

“We believe we have turned the corner in reaching break even with the investment in staffing as the Bank realized a significant growth in net interest income in the quarter as well as the net interest income margin grew by 11 basis points,” said Karen Schoenbaum, Executive Vice President and Chief Financial Officer.

As announced in September, the Bank expanded into Riverside County with a new loan production office in Corona. “As a relationship bank, we are very pleased to have hired an experienced team of local bankers. Riverside County has been a growing market for American Business Bank, and we look forward to penetrating further in this dynamic region,” said Phil Feghali, Executive Vice President.

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. The Bank has opened six Loan Production Offices in strategic areas including our North Orange County Office in Anaheim, our Orange County Office in Irvine, our South Bay Office in Torrance, our San Fernando Valley Office in the Warner Center, our Riverside County office in Corona and our Inland Empire Office in Ontario.

 

       
 
American Business Bank
Figures in $000, except per share amounts
 
BALANCE SHEET (unaudited)
 
 
             
September June December September
  2018     2018     2017       2017  

Assets:

Cash and Due from Banks $ 59,007 $ 54,916 $ 32,205 $ 52,818
Interest Earning Deposits with Other Financial Institutions 62,497 41,709 9,701 19,698
 

Investment Securities:

US Agencies 464,604 504,722 584,950 522,636
Mortgage Backed Securities 129,813 86,795 86,909 68,880
State and Municipals 79,396 166,504 169,803 147,104
US Treasuries 9,758 9,791 9,931 10,028
    Corporate Bonds       1,976       1,995       3,394       3,376  
Securities Available-for-Sale, at Fair Value 685,547 769,807 854,987 752,024
Securities Held-to-Maturity, at Amortized Cost 87,546 - - -
    Federal Home Loan Bank Stock, at Cost   10,611       10,611       10,190       10,190  
Total Investment Securities 783,704 780,418 865,177 762,214

Gross Loans:

Commercial Real Estate 765,374 733,183 641,459 610,362
Commercial and Industrial 304,682 295,127 216,007 208,898
Residential Real Estate 64,853 61,807 59,665 55,773
    Installment and Other     3,528       3,418       3,262       3,229  
Total Gross Loans 1,138,437 1,093,535 920,393 878,262
        Allowance for Loan and Lease Losses   (15,950 )     (15,431 )     (13,639 )     (13,638 )
Net Loans 1,122,487 1,078,104 906,754 864,624
Premises and Equipment 1,831 1,816 1,273 1,355
  Other Assets         66,772       64,289       58,439       51,947  
    Total Assets     $ 2,096,298     $ 2,021,252     $ 1,873,549     $ 1,752,656  
 

Liabilities:

Non-Interest Bearing Demand Deposits $ 972,560 $ 905,552 $ 863,410 $ 795,930
Interest Bearing Transaction Accounts 197,460 203,068 170,326 165,813
Money Market and Savings Deposits 672,047 632,257 563,611 575,235
  Certificates of Deposit       73,239       67,032       42,390       45,775  
Total Deposits 1,915,306 1,807,909 1,639,737 1,582,753
Federal Home Loan Bank Advances / Other Borrowings 1,000 37,000 62,000 2,000
  Other Liabilities       25,048       21,686       19,009       12,821  
    Total Liabilities     $ 1,941,354     $ 1,866,595     $ 1,720,746     $ 1,597,574  
 

Shareholders' Equity:

Common Stock and Retained Earnings $ 175,616 $ 170,673 $ 160,880 $ 162,238
  Accumulated Other Comprehensive Income / (Loss)   (20,672 )     (16,016 )     (8,077 )     (7,156 )
    Total Shareholders' Equity   $ 154,944     $ 154,657     $ 152,803     $ 155,082  
    Total Liabilities and Shareholders' Equity $ 2,096,298     $ 2,021,252     $ 1,873,549     $ 1,752,656  
 
Standby Letters of Credit $ 31,561 $ 30,449 $ 28,863 $ 29,712
 

Per Share Information:

Common Shares Outstanding 7,691,918 7,663,057 7,539,922 7,530,819
Book Value Per Share $ 20.14 $ 20.18 $ 20.27 $ 20.53
Tangible Book Value Per Share $ 20.14 $ 20.18 $ 20.27 $ 20.53
 
 
 
 
American Business Bank
Figures in $000, except per share amounts
 
INCOME STATEMENT (unaudited)
 
 
For the three months ended:
September June September
  2018     2018     2017  

Interest Income:

Loans $ 13,156 $ 11,846 $ 9,614
Investment Securities 4,625 4,652 4,501
  Interest Earning Deposits in Other Financial Institutions   414       93       259  
Total Interest Income 18,195 16,591 14,374
 

Interest Expense:

Money Market and Savings Deposits 700 531 329
Certificates of Deposits 96 77 41
  Federal Home Loan Bank Advances / Other Borrowings   12       141       10  
Total Interest Expense 808 749 380
 
Net Interest Income 17,387 15,842 13,994
  Provision for Loan Losses     505       931       300  
Net Interest Income after Provision for Loan Losses 16,882 14,911 13,694
 

Non-Interest Income:

Deposit Fees 496 474 421
International Fees 237 220 194
Realized Securities Gains (Losses) (208 ) (149 ) (18 )
Gains (Losses) on Sale of SBA Loans 149 491 -
  Other           504       466       402  
Total Non-Interest Income 1,178 1,502 999
 

Non-Interest Expense:

Compensation and Benefits 8,960 7,962 5,909
Occupancy and Equipment 874 853 706
Professional Services 1,042 1,207 946
Promotion Expenses 341 321 252
  Other           1,383       1,234       1,510  
Total Non-Interest Expense 12,600 11,577 9,323
 
Earnings before income taxes 5,460 4,836 5,370
  Provision for Income Tax     1,318       1,106       1,587  
 
NET INCOME       $ 4,142     $ 3,730     $ 3,783  
After-Tax Realized Securities (Gains) / Losses $ 158 $ 115 $ 13
After-Tax Cash Value - DCP ABB stocks (Gains) / Losses $ 356 $ 50 $ 986
Core Net Income       $ 4,656     $ 3,895     $ 4,782  
 

Per Share Information:

Earnings Per Share - Basic $ 0.54 $ 0.49 $ 0.50
 
Earnings Per Share - Diluted $ 0.53 $ 0.48 $ 0.48
Core Earnings Per Share - Diluted $ 0.59 $ 0.50 $ 0.61
 
Weighted Average Shares - Basic 7,683,427 7,616,766 7,528,125
 
Weighted Average Shares - Diluted 7,885,205 7,847,871 7,812,483
 
 
 
 
 
American Business Bank
Figures in $000, except per share amounts
 
INCOME STATEMENT (unaudited)
 
 
For the nine months ended:
September September
  2018       2017  

Interest Income:

Loans $ 35,614 $ 27,242
Investment Securities 14,260 14,603
  Interest Earning Deposits in Other Financial Institutions   552       420  
Total Interest Income 50,426 42,265
 

Interest Expense:

Money Market and Savings Deposits 1,639 869
Certificates of Deposits 235 111
  Federal Home Loan Bank Advances / Other Borrowings   328       314  
Total Interest Expense 2,202 1,294
 
Net Interest Income 48,224 40,970
  Provision for Loan Losses     2,268       628  
Net Interest Income after Provision for Loan Losses 45,956 40,342
 

Non-Interest Income:

Deposit Fees 1,394 1,240
International Fees 651 567
Realized Securities Gains (Losses) (553 ) (65 )
Gains (Losses) on Sale of SBA Loans 744 -
  Other           1,378       1,216  
Total Non-Interest Income 3,614 2,958
 

Non-Interest Expense:

Compensation and Benefits 25,715 18,772
Occupancy and Equipment 2,461 2,019
Professional Services 3,389 2,682
Promotion Expenses 934 900
  Other           3,790       4,203  
Total Non-Interest Expense 36,289 28,576
 
Earnings before income taxes 13,281 14,724
  Provision for Income Tax     2,983       3,870  
 
NET INCOME       $ 10,298     $ 10,854  
After-Tax Realized Securities (Gains) / Losses $ 429 $ 48
After-Tax Cash Value - DCP ABB stocks (Gains) / Losses $ 364 $ 1,031
Core Net Income       $ 11,091     $ 11,933  
 

Per Share Information:

Earnings Per Share - Basic $ 1.35 $ 1.45
 
Earnings Per Share - Diluted $ 1.31 $ 1.39

Core Earnings Per Share - Diluted

$

1.41

$

1.53

 
Weighted Average Shares - Basic 7,623,157 7,498,052
 
Weighted Average Shares - Diluted 7,854,031 7,782,229
 
 
 
 
American Business Bank
Figures in $000
 
SUPPLEMENTAL DATA (unaudited)
 
 
             
September June December September
  2018     2018     2017       2017  

Performance Ratios:

Quarterly:

Return on Average Assets (ROAA) 0.80 % 0.76 % -0.54 % 0.84 %
Core Return on Average Assets (ROAA) 0.89 % 0.77 % -0.35 % 0.84 %
 
Return on Average Equity (ROAE) 10.74 % 9.81 % -6.47 % 9.85 %
Core Return on Average Equity (ROAE) 11.95 % 10.05 % -4.12 % 9.89 %
 

Year-to-Date

Return on Average Assets (ROAA) 0.69 % 0.63 % 0.45 % 0.79 %
Core Return on Average Assets (ROAA) 0.74 % 0.67 % 0.78 % 0.87 %
 
Return on Average Equity (ROAE) 8.98 % 8.09 % 5.60 % 9.93 %
Core Return on Average Equity (ROAE) 9.68 % 8.52 % 9.66 % 10.91 %
 

Capital Adequacy:

Total Capital Ratio 14.70 % 14.92 % 16.51 % 15.58 %
Common Equity Tier 1 Ratio 13.45 % 13.67 % 15.26 % 15.58 %
Tier 1 Capital Ratio 13.45 % 13.67 % 15.26 % 16.84 %
Tier 1 Leverage Ratio 8.48 % 8.66 % 8.55 % 8.33 %
Tangible Common Equity / Tangible Assets 7.39 % 7.65 % 8.16 % 8.85 %
 

Asset Quality Overview

Non-Performing Loans $ 1,361 $ 2,115 $ 915 $ 431
  Loans 90+Days Past Due and Still Accruing   -       -       -       -  
Total Non-Performing Loans 1,361 2,115 915 431
 
Restructured Loans 237 239 243 245
 
Other Real Estate Owned - - - -
 
ALLL / Gross Loans 1.40 % 1.41 % 1.48 % 1.55 %
Non-Performing Loans / Total Loans * 0.12 % 0.19 % 0.10 % 0.05 %
Non-Performing Assets / Total Assets * 0.06 % 0.10 % 0.05 % 0.02 %
Net Charge-Offs (Recoveries) quarterly $ (13 ) $ (14 ) $ (1 ) $ (14 )
Net Charge-Offs (Recoveries) year-to-date $ (43 ) $ (30 ) $ (46 ) $ (45 )
Net Charge-Offs (Recoveries) year-to-date / Average Gross Loans (0.00 %) (0.00 %) (0.01 %) (0.01 %)
 
* Excludes Restructured Loans
                 
American Business Bank
Figures in $000
 
QUARTERLY AVERAGE BALANCE SHEETS AND YIELD ANALYSIS (unaudited)
 
 
For the three months ended:          
September 2018 June 2018
Average Interest Average Average Interest Average
Balance   Inc/Exp   Yield/Rate Balance   Inc/Exp   Yield/Rate

Interest Earning Assets:

Interest Earning Deposits with Other Financial Institutions $ 80,898 $ 414 2.08 % $ 21,686 $ 93 1.74 %
 

Investment Securities:

US Agencies 493,172 2,093 1.70 % 528,777 2,180 1.65 %
Mortgage Backed Securities 112,564 804 2.86 % 92,146 627 2.72 %
State & Municipals 175,161 1,496 3.41 % 187,246 1,621 3.46 %
US Treasuries 10,066 37 1.46 % 10,073 37 1.49 %
    Corporate Bonds       2,000     16   3.30 %   2,000     16   3.12 %

Securities Available-for-Sale and Held-to-Maturity

792,963 4,446 2.19 % 820,242 4,481 2.16 %
    Federal Home Loan Bank Stock   10,611     179   6.76 %   10,524     171   6.50 %
Total Investment Securities 803,574 4,625 2.25 % 830,766 4,652 2.22 %

Gross Loans:

Commercial Real Estate 748,331 8,693 4.61 % 698,804 7,801 4.48 %
Commercial & Industrial 295,338 3,600 4.84 % 275,934 3,156 4.59 %
Residential Real Estate 61,767 784 5.04 % 66,101 811 4.92 %
    Installment and Other     3,755     79   8.32 %   3,719     78   8.36 %
      Total Gross Loans     1,109,191     13,156   4.71 %   1,044,558     11,846   4.55 %
  Total Interest Earning Assets   $ 1,993,663   $ 18,195   3.57 % $ 1,897,010   $ 16,591   3.46 %
 

Liabilities:

Non-Interest Bearing Demand Deposits 956,243 - 0.00 % 895,336 - 0.00 %
Interest Bearing Transaction Accounts 201,146 113 0.22 % 180,292 76 0.17 %
Money Market and Savings Deposits 663,767 587 0.35 % 629,622 455 0.29 %
  Certificates of Deposit       68,957     96   0.55 %   62,415     77   0.49 %
Total Deposits 1,890,113 796 0.17 % 1,767,665 608 0.14 %
  Federal Home Loan Bank Advances / Other Borrowings   2,946     12   1.66 %   30,648     141   1.84 %
  Total Interest Deposits & Borrowings   936,816     808   0.34 %   902,977     749   0.33 %
  Total Deposits & Borrowings   $ 1,893,059   $ 808   0.17 % $ 1,798,312   $ 749   0.17 %
 
Net Interest Income $ 17,387 $ 15,842
Net Interest Rate Spread 3.40 % 3.29 %
Net Interest Margin 3.46 % 3.35 %
 
 
 
 
American Business Bank
Figures in $000
 
QUARTERLY AVERAGE BALANCE SHEETS AND YIELD ANALYSIS (unaudited)
 
 
For the three months ended:          
September 2018 September 2017
Average Interest Average Average Interest Average
Balance   Inc/Exp   Yield/Rate Balance   Inc/Exp   Yield/Rate

Interest Earning Assets:

Interest Earning Deposits with Other Financial Institutions $ 80,898 $ 414 2.08 % $ 80,854 $ 259 1.30 %
 

Investment Securities:

US Agencies 493,172 2,093 1.70 % 529,934 2,524 1.90 %
Mortgage Backed Securities 112,564 804 2.86 % 74,828 312 1.67 %
State & Municipals 175,161 1,496 3.41 % 159,469 1,443 3.62 %
US Treasuries 10,066 37 1.46 % 3,400 12 1.47 %
    Corporate Bonds       2,000     16   3.30 %   5,290     39   2.98 %

Securities Available-for-Sale and Held-to-Maturity

792,963 4,446 2.19 % 772,921 4,330 2.22 %
    Federal Home Loan Bank Stock   10,611     179   6.76 %   10,190     171   6.71 %
Total Investment Securities 803,574 4,625 2.25 % 783,111 4,501 2.27 %

Gross Loans:

Commercial Real Estate 748,331 8,693 4.61 % 599,865 6,601 4.41 %
Commercial & Industrial 295,338 3,600 4.84 % 213,675 2,323 4.36 %
Residential Real Estate 61,767 784 5.04 % 56,625 661 4.68 %
    Installment and Other     3,755     79   8.32 %   4,299     29   2.79 %
      Total Gross Loans     1,109,191   13,156 4.71 %   874,464   9,614 4.41 %
  Total Interest Earning Assets   $ 1,993,663   $ 18,195   3.57 % $ 1,738,429   $ 14,374   3.27 %
 

Liabilities:

Non-Interest Bearing Demand Deposits 956,243 - 0.00 % 833,169 - 0.00 %
Interest Bearing Transaction Accounts 201,146 113 0.22 % 176,997 72 0.17 %
Money Market and Savings Deposits 663,767 587 0.35 % 580,105 257 0.18 %
  Certificates of Deposit       68,957     96   0.55 %   44,500     41   0.37 %
Total Deposits 1,890,113 796 0.17 % 1,634,771 370 0.09 %
  Federal Home Loan Bank Advances / Other Borrowings   2,946     12   1.66 %   3,239     10   1.23 %
  Total Interest Deposits & Borrowings   936,816     808   0.34 %   804,841     380   0.19 %
  Total Deposits & Borrowings   $ 1,893,059   $ 808   0.17 % $ 1,638,010   $ 380   0.09 %
 
Net Interest Income $ 17,387 $ 13,994
Net Interest Rate Spread 3.40 % 3.18 %
Net Interest Margin 3.46 % 3.23 %
 
 
 
 
American Business Bank
Figures in $000
 
YEAR-TO-DATE AVERAGE BALANCE SHEETS AND YIELD ANALYSIS (unaudited)
 
 
For the nine months ended:          
September 2018 September 2017
Average Interest Average Average Interest Average
Balance   Inc/Exp   Yield/Rate Balance   Inc/Exp   Yield/Rate

Interest Earning Assets:

Interest Earning Deposits with Other Financial Institutions $ 38,334 $ 552 1.95 % $ 37,200 $ 420 1.52 %
 

Investment Securities:

US Agencies 533,686 6,854 1.71 % 553,577 6,777 1.63 %
Mortgage Backed Securities 98,888 2,018 2.72 % 76,791 1,063 1.85 %
State & Municipals 181,359 4,696 3.45 % 218,720 6,124 3.73 %
US Treasuries 10,073 111 1.47 % 1,146 12 1.46 %
    Corporate Bonds       2,116     48   3.04 %   6,093     129   2.82 %

Securities Available-for-Sale and Held-to-Maturity

826,122 13,727 2.19 % 856,327 14,105 2.17 %
    Federal Home Loan Bank Stock   10,444     533   6.80 %   9,882     498   6.71 %
Total Investment Securities 836,566 14,260 2.25 % 866,209 14,603 2.22 %

Gross Loans:

Commercial Real Estate 702,470 23,687 4.51 % 581,280 18,837 4.33 %
Commercial & Industrial 270,097 9,348 4.63 % 209,698 6,577 4.19 %
Residential Real Estate 64,153 2,352 4.90 % 50,977 1,723 4.52 %
    Installment and Other     3,622     227   8.35 %   4,053     105   3.47 %
      Total Gross Loans     1,040,342     35,614   4.58 %   846,008     27,242   4.31 %
  Total Interest Earning Assets   $ 1,915,242   $ 50,426   3.47 % $ 1,749,417   $ 42,265   3.19 %
 
 

Liabilities:

Non-Interest Bearing Demand Deposits 911,304 - 0.00 % 840,946 - 0.00 %
Interest Bearing Transaction Accounts 184,946 264 0.19 % 172,709 197 0.15 %
Money Market and Savings Deposits 629,121 1,375 0.29 % 558,799 673 0.16 %
  Certificates of Deposit       62,686     235   0.50 %   41,549     111   0.36 %
Total Deposits 1,788,057 1,874 0.14 % 1,614,003 981 0.08 %
  Federal Home Loan Bank Advances / Other Borrowings   26,654     328   1.64 %   54,359     314   0.77 %
  Total Interest Deposits & Borrowings   903,407     2,202   0.33 %   827,416     1,295   0.21 %
  Total Deposits & Borrowings   $ 1,814,710   $ 2,202   0.16 % $ 1,668,361   $ 1,295   0.10 %
 
Net Interest Income $ 48,224 $ 40,970
Net Interest Rate Spread 3.31 % 3.09 %
Net Interest Margin 3.37 % 3.13 %

Contacts

AMERICAN BUSINESS BANK
Karen Schoenbaum
EVP/CFO
(213) 430-4000
www.americanbusinessbank.com

Release Summary

American Business Bank Announces 2018 Third Quarter Income

Contacts

AMERICAN BUSINESS BANK
Karen Schoenbaum
EVP/CFO
(213) 430-4000
www.americanbusinessbank.com