AMERICAN BUSINESS BANK Announces Record Growth in Core Deposits

Total Assets reach $2.1 Billion

AMERICAN BUSINESS BANK 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	%

View source version on businesswire.com: https://www.businesswire.com/news/home/20181026005069/en/