American Business Bank Announces First Quarter Net Income Increases 123% over Prior Year - American Business Bank (OTC:AMBZ)

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 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	%

View source version on businesswire.com: https://www.businesswire.com/news/home/20190429005178/en/

Market News and Data brought to you by Benzinga APIs