American Business Bank Reports First Quarter Earnings

AMERICAN BUSINESS BANK (OTCQX: AMBZ) today reported net income of $10.5 million or $1.13 per fully diluted share for the quarter ended March 31, 2024 compared to $11.4 million or $1.23 per fully diluted share for the quarter ended December 31, 2023, and $13.1 million or $1.42 per fully diluted share for the quarter ending March 31, 2023, representing declines of 8% and 20%, respectively. The reduction in net income is primarily due to reduced net interest income.

“We remain focused on providing high touch community banking services to our business clients with a conservative risk approach. At its core, our business is solely reliant on spread income and the rapid rise in interest rates combined with an inverted yield curve has compressed the net interest margin. As is typical, in the 1^st quarter our customers distributed funds for bonuses. Additionally, several of our larger clients took advantage of outside investment opportunities. As a result, despite adding new clients, total deposits declined compared to the prior quarter. Our goals for 2024 continue to be centered on building our outstanding core deposit franchise to eliminate borrowings and enhance margins. There is a strong deposit pipeline of new customers and the cost of deposits seems to be accelerating at a slower pace. The key to our success in 2024 is the continued generation of new clients and we are well positioned to do so.

“The one area the Bank can control is expenses, operating expenses increased 0.9% quarter over quarter and 3.7% year over year. Despite experiencing margin pressure, the Bank still achieved a return on average assets of 1.08% and a return on average equity of 13.4% for the quarter.

“We continue to deliver superior service with the goal of being the premier relationship-banking franchise for small to mid-size businesses in Southern California.” commented Leon Blankstein, ABB’s CEO and Director.

For the quarter ending March 31, 2024, net interest income was $29 million, representing a 5% decrease over the fourth quarter of 2023. Net interest income was negatively impacted by the increase in the cost of deposits and borrowings exceeding the increase in interest earned on loans and securities. The cost of deposits was the largest contributor to the decrease in net interest income as compared to the prior year quarter. For the quarter ending March 31, 2024, the cost of deposits was 1.24% representing an increase of 7 bps compared to the quarter ending December 31, 2023.

The provision for credit losses was $0.2 million in the quarter, a decrease from the prior quarter. The decrease in provision was a result of a reduction in the loan portfolio along with net recoveries of $0.1 million offset by an increase in the reserve for unfunded loan commitments mainly due to a decrease in line utilization. The allowance for credit losses as a percentage of loans was 1.10% at March 31, 2024 and December 31, 2023.

Net Interest Margin

Net interest margin for the first quarter of 2024 decreased to 3.07% from 3.16% for the fourth quarter of 2023 primarily due to an increase in average borrowings. Net interest margin for the first quarter of 2024 decreased to 3.07% from 3.38% for the first quarter of 2023 primarily due to an increase in the cost of deposits and a decline in the ratio of average non-interest bearing deposits to total deposits. As of March 31, 2024, 63% of the loan portfolio was fixed rate with a weighted average remaining life of 74 months. Of the variable rate loans, approximately 46% are indexed to prime of which $381 million are adjustable within 90 days of a change in prime.

Net Interest Income

For the quarter ended March 31, 2024, net interest income decreased by $1.5 million, or 5%, compared to the fourth quarter of 2023 primarily due to an increase in borrowings. For the quarter ended March 31, 2024, net interest income decreased by $2.5 million, or 8%, compared to the first quarter of 2023. The decrease compared to prior year quarter is primarily due to a change in the mix of deposits from non-interest bearing deposits to interest bearing deposits. The Loan to Deposit ratio was 78% and 81% as of March 31, 2024 and 2023, respectively.

Provision for Credit Losses

The following table presents details of the provision for credit losses for the periods indicated:

	Three Months Ended
	March 31, 2024				December 31, 2023				March 31, 2023
(Figures in $000s)
Addition (recapture) to allowance for loan losses	$	(226	)		$	1,049			$	313
Addition (recapture) to reserve for unfunded loan commitments		438				(490	)			150
Total loan-related provision	$	212			$	559			$	463
Addition to allowance for held-to-maturity securities		-				-				-
Total provision for credit losses	$	212			$	559			$	463

Non-Interest Income

The decrease in non-interest income compared to the prior quarter and compared to the prior year quarter is primarily due a reduction in the gain on sales of SBA loans. In 2023, seasoned SBA loans were sold unlike in 2024 where only current production was sold.

Non-Interest Expense

For the quarter ending March 31, 2024, total non-interest expense increased $0.2 million compared to the prior quarter and increased $0.6 million compared to the prior year quarter. The increase compared to the prior quarter and prior year quarter is primarily due to an increase in salaries and employee benefits as bonuses and commissions fluctuated with actual results between the periods. The efficiency ratio of 54% for the first quarter of 2024 increased compared to 48% for the fourth quarter of 2023 and 47% for the first quarter of 2023. The first quarter of 2024 is more typical of the Bank’s quarterly non-interest expense.

There were 233 full time equivalent employees at March 31, 2024 compared to 224 a year ago and 233 at December 31, 2023. The Bank has 40 relationship managers in eight offices representing a decrease of one from a year ago and from the prior quarter.

Income Taxes

The effective income tax rate was 27.9% for the quarter ended March 31, 2024, 27.6% for the quarter ended December 31, 2023, and 27.1% for the quarter ended March 31, 2023.

Balance Sheet

For the quarter ended March 31, 2024, total loans decreased $7 million, or 0.3% compared to the prior quarter. The majority of this decline was in Commercial and industrial (C&I) loans mainly as a result of a decrease in line utilization. At March 31, 2024, the utilization rate for the Bank’s commercial lines of credit decreased to 26% from 27% at December 31, 2023. The decline in C&I was offset by loan growth in Commercial real estate (CRE) loans.

		March 31, 2024			December 31, 2023
(Figures in $000s)
RE - Owner occupied		$	1,120,822		$	1,111,476
RE - Non owner occupied			718,439			722,531
Construction & Land			62,359			50,078
Total CRE Loans		$	1,901,621		$	1,884,085

The following table is the composition of the Owner occupied and Non owner occupied CRE loans by collateral type:

		as of March 31, 2024
		Owner occupied			Non owner occupied
(Figures in $000s)
Industrial		$	693,253		$	298,339
Office			166,758			99,516
Retail			22,349			183,539
Automobile Service Facilities			66,709			17,759
Contractor's Yard			60,427			8,302
Other			27,379			36,292
Miscellaneous			83,946			74,692
Total		$	1,120,822		$	718,439

Total investment securities declined to $1.2 billion at March 31, 2024, which include $561 million or 45% in held-to-maturity (HTM) securities based on book value. As of March 31, 2024, the duration of the available-for-sale (AFS) securities portfolio was 5.8 years, an increase from 5.7 years as of December 31, 2023 and 5.5 years as of March 31, 2023. Accumulated other comprehensive loss (AOCI) increased to $79.6 million as of March 31, 2024 from $70.7 million as of December 31, 2023 as market rates relevant to securities pricing increased. The duration on the held-to-maturity portfolio, which consists primarily of municipal securities, is 7.8 years. As of March 31, 2024, the unrealized after tax loss on HTM securities was $72 million.

During the first quarter of 2024, deposits declined by $188 million or 5% to $3.3 billion. The Bank has lost minimal relationships due to the turbulence in the banking industry this last year. Since January 1, 2024, new deposit relationships have totaled approximately $5.6 million in deposits from 26 new clients. The Bank’s off-balance sheet products of treasury securities held for clients increased by $25 million during the first quarter of 2024 to $247 million and declined by $31 million from prior year quarter. The Bank has no brokered deposits nor internet solicited deposits.

During the first quarter of 2024, total assets decreased $26.5 million, or 0.7%, total loans declined $7 million, or 0.3%, total deposits decreased by $188 million, or 5%, and borrowings increased by $155 million.

The Federal Reserve Bank (FRB) Term Funding Program ended March 11, 2024; however, $180 million is outstanding with a maturity date of March 11, 2025 at a rate of 5.4%. Including the outstanding FRTB borrowing, and also under the FRB discount window and loans pledged at the Federal Home Loan Bank of San Francisco, the Bank has $1.7 billion in borrowing capacity as of March 31, 2024.

Asset Quality

The following table presents asset quality overview as of the dates indicated:

	March 31, 2024				December 31, 2023
(Figures in $000s)
Non-performing assets (NPA)	$	7,440			$	7,859
Loans 90+ Days Past Due and Still Accruing		-				-
Total NPA	$	7,440			$	7,859
NPA as a % of total assets		0.19	%			0.20	%
Past Due as a % of total Loans		0.00	%			0.00	%
Criticized as a % of total Loans		5.67	%			5.95	%
Classified as a % of total Loans		0.88	%			0.29	%

During the first quarter, non-performing assets (NPAs) decreased by $0.4 million to $7.4 million mainly due to a paydown of one loan and a $99,000 charge off of one loan relationship. As of March 31, 2024, NPAs have a $333 thousand allowance on individually evaluated loans related to one residential real estate loan relationship and seven C&I non-performing loan relationships of which the majority have a partial guarantee by the state of California or the SBA. Criticized loans reflect an overall deterioration in contractors impacted by an increase in labor and material costs. The construction industry related loans represent 15% of the loan portfolio. The increase in classified loans is due to one loan that is fully secured by industrial real estate.

The loan portfolio has approximately 10% in office collateral of which the majority is owner-occupied, and substantially all are three stories or under and are all located in suburban markets.

The following table represents the allowance for credit losses for loans as of and for the dates and periods indicated:

	Three Months Ended
	March 31, 2024				December 31, 2023				March 31, 2023
(Figures in $000s)
Balance, beginning of period	$	28,460			$	27,601			$	29,635
Cumulative effect of change in accounting principle - CECL		-				-				(3,885	)
Charge-offs		(99	)			(200	)			-
Recoveries		200				10				10
Net (charge-offs) / recoveries	$	101			$	(190	)		$	10
Provision		(226	)			1,049				313
Balance, end of period	$	28,335			$	28,460			$	26,073
Allowance as a % of loans		1.10	%			1.10	%			1.05	%

The allowance for credit losses for loans declined to $28.3 million during the first quarter of 2024 primarily as a result of a decline in the loan portfolio. There was a $99,000 charge off on the unguaranteed portion related to a state guaranteed loan in the first quarter of 2024 compared to no charge offs in the prior year quarter. The Bank recovered in the first quarter of 2024 the loan that had been charged off in the prior quarter. The Bank has one $229 thousand restructured SBA guaranteed loan involving a borrower experiencing financial difficulty.

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 seven 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, Inland Empire in Ontario and LA Coastal in Long Beach.

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 SHEETS (unaudited)
	March			December			March
		2024			2023			2023
Assets:
Cash and Due from Banks	$	52,198		$	32,354		$	43,642
Interest Earning Deposits in Other Financial Institutions		10,368			10,804			9,732
Investment Securities:
US Agencies		85,678			91,226			114,081
Mortgage Backed Securities		394,124			413,870			442,375
State and Municipals		86,535			91,949			100,791
Corporate Bonds		13,870			14,157			14,347
Securities Available-for-Sale, at Fair Value		580,207			611,202			671,594
Mortgage Backed Securities		176,317			178,985			187,850
State and Municipals		384,612			390,184			393,459
Allowance for Credit Losses, Held-To-Maturity		(55	)		(55	)		(55	)
Securities Held-to-Maturity, at Amortized Cost,		560,874			569,114			581,254
Net of Allowance for Credit Losses
Federal Home Loan Bank Stock, at Cost		15,000			15,000			15,000
Total Investment Securities		1,156,081			1,195,316			1,267,848
Loans Receivable:
Commercial Real Estate		1,901,621			1,884,085			1,801,897
Commercial and Industrial		470,294			491,698			491,065
Residential Real Estate		194,059			197,281			175,099
Installment and Other		6,685			6,577			9,665
Total Loans Receivable		2,572,659			2,579,641			2,477,726
Allowance for Credit Losses		(28,335	)		(28,460	)		(26,073	)
Loans Receivable, Net		2,544,324			2,551,181			2,451,653
Furniture, Equipment and Leasehold Improvements, Net		4,380			4,589			5,334
Bank/Corporate Owned Life Insurance		29,185			28,898			27,863
Other Assets		79,639			79,582			73,047
Total Assets	$	3,876,175		$	3,902,724		$	3,879,119
Liabilities:
Non-Interest Bearing Demand Deposits	$	1,601,795		$	1,699,560		$	1,708,750
Interest Bearing Transaction Accounts		367,903			388,152			276,059
Money Market and Savings Deposits		1,083,008			1,145,389			997,720
Certificates of Deposit		256,309			264,312			93,624
Total Deposits		3,309,015			3,497,413			3,076,153
Federal Home Loan Bank Advances / Other Borrowings		210,000			55,000			486,000
Other Liabilities		41,186			36,257			37,285
Total Liabilities	$	3,560,201		$	3,588,670		$	3,599,438
Shareholders' Equity:
Common Stock	$	208,336		$	208,048		$	205,791
Retained Earnings		187,243			176,747			145,865
Accumulated Other Comprehensive Income / (Loss)		(79,605	)		(70,741	)		(71,975	)
Total Shareholders' Equity	$	315,974		$	314,054		$	279,681
Total Liabilities and Shareholders' Equity	$	3,876,175		$	3,902,724		$	3,879,119
Standby Letters of Credit	$	43,810		$	43,178		$	40,641
Per Share Information:
Common Shares Outstanding		9,078,782			9,041,911			8,998,695
Book Value Per Share	$	34.80		$	34.73		$	31.08
Tangible Book Value Per Share	$	34.80		$	34.73		$	31.08

American Business Bank
Figures in $000, except share and per share amounts
INCOME STATEMENTS (unaudited)
	For the three months ended:
	March			December			March
		2024			2023			2023
Interest Income:
Interest and Fees on Loans	$	33,664		$	33,185		$	29,743
Interest on Investment Securities		7,658			7,794			7,861
Interest on Interest Earning Deposits
in Other Financial Institutions		250			623			208
Total Interest Income		41,572			41,602			37,812
Interest Expense:
Interest on Interest Bearing Transaction Accounts		1,002			1,011			231
Interest on Money Market and Savings Deposits		7,265			7,027			2,230
Interest on Certificates of Deposits		2,288			2,443			267
Interest on Federal Home Loan Bank Advances
and Other Borrowings		1,598			171			3,086
Total Interest Expense		12,153			10,652			5,814
Net Interest Income		29,419			30,950			31,998
Provision for Credit Losses		212			559			463
Net Interest Income after Provision for Credit Losses		29,207			30,391			31,535
Non-Interest Income:
Deposit Fees		988			941			1,023
International Fees		406			419			269
Gain (Loss) on Sale of Investment Securities, Net		(110	)		(418	)		(211	)
Gain on Sale of SBA Loans, Net		57			-			611
Bank/Corporate Owned Life Insurance Income (Expense)		287			498			195
Other		487			494			706
Total Non-Interest Income		2,115			1,934			2,593
Non-Interest Expense:
Salaries and Employee Benefits		11,649			11,182			11,338
Occupancy and Equipment		1,209			1,207			1,192
Professional Services		1,963			2,084			1,919
Promotion Expenses		528			708			441
Other		1,424			1,444			1,281
Total Non-Interest Expense		16,773			16,625			16,171
Earnings before income taxes		14,549			15,700			17,957
Income Tax Expense		4,052			4,326			4,872
NET INCOME	$	10,497		$	11,374		$	13,085
Per Share Information:
Earnings Per Share - Basic	$	1.14		$	1.23		$	1.43
Earnings Per Share - Diluted	$	1.13		$	1.23		$	1.42
Weighted Average Shares - Basic		9,237,317			9,221,219			9,153,915
Weighted Average Shares - Diluted		9,293,818			9,264,224			9,228,602

American Business Bank
Figures in $000
QUARTERLY AVERAGE BALANCE SHEETS AND YIELD ANALYSIS (unaudited)
	For the three months ended:
	March 2024							December 2023
	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	$	19,252	$	250	5.23	%		$	46,030	$	623	5.37	%
Investment Securities:
US Agencies		89,024		1,285	5.77	%			94,837		1,327	5.60	%
Mortgage Backed Securities		674,033		3,199	1.90	%			684,903		3,246	1.90	%
State and Municipals		485,036		2,656	2.19	%			493,806		2,720	2.20	%
Corporate Bonds		16,250		188	4.64	%			16,250		189	4.64	%
Securities Available-for-Sale and Held-to-Maturity		1,264,343		7,328	2.32	%			1,289,796		7,482	2.32	%
Federal Home Loan Bank Stock		15,000		330	8.79	%			15,000		312	8.32	%
Total Investment Securities		1,279,343		7,658	2.39	%			1,304,796		7,794	2.39	%
Loans Receivable:
Commercial Real Estate		1,878,384		22,817	4.89	%			1,853,087		22,354	4.79	%
Commercial and Industrial		471,147		7,740	6.61	%			479,580		7,853	6.50	%
Residential Real Estate		196,176		3,044	6.24	%			187,505		2,916	6.17	%
Installment and Other		9,235		63	2.74	%			9,250		62	2.64	%
Total Loans Receivable		2,554,942		33,664	5.30	%			2,529,422		33,185	5.21	%
Total Interest Earning Assets	$	3,853,537	$	41,572	4.27	%		$	3,880,248	$	41,602	4.20	%
Liabilities:
Non-Interest Bearing Demand Deposits		1,647,928		-	0.00	%			1,799,457		-	0.00	%
Interest Bearing Transaction Accounts		382,086		1,002	1.05	%			372,990		1,011	1.08	%
Money Market and Savings Deposits		1,125,101		7,265	2.60	%			1,120,271		7,027	2.49	%
Certificates of Deposit		255,490		2,288	3.60	%			266,120		2,443	3.64	%
Total Deposits		3,410,605		10,555	1.24	%			3,558,838		10,481	1.17	%
Federal Home Loan Bank Advances / Other Borrowings		123,022		1,598	5.22	%			11,848		171	5.72	%
Total Interest Bearing Deposits and Borrowings		1,885,699		12,153	2.59	%			1,771,229		10,652	2.39	%
Total Deposits and Borrowings	$	3,533,627	$	12,153	1.38	%		$	3,570,686	$	10,652	1.18	%
Net Interest Income			$	29,419						$	30,950
Net Interest Rate Spread					2.89	%						3.02	%
Net Interest Margin					3.07	%						3.16	%

American Business Bank
Figures in $000
QUARTERLY AVERAGE BALANCE SHEETS AND YIELD ANALYSIS (unaudited)
	For the three months ended:
	March 2024							March 2023
	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	$	19,252	$	250	5.23	%		$	18,945	$	208	4.45	%
Investment Securities:
US Agencies		89,024		1,285	5.77	%			118,463		1,203	4.06	%
Mortgage Backed Securities		674,033		3,199	1.90	%			719,422		3,417	1.90	%
State and Municipals		485,036		2,656	2.19	%			505,910		2,792	2.21	%
Corporate Bonds		16,250		188	4.64	%			16,250		184	4.52	%
Securities Available-for-Sale and Held-to-Maturity		1,264,343		7,328	2.32	%			1,360,045		7,596	2.23	%
Federal Home Loan Bank Stock		15,000		330	8.79	%			15,000		265	7.07	%
Total Investment Securities		1,279,343		7,658	2.39	%			1,375,045		7,861	2.29	%
Loans Receivable:
Commercial Real Estate		1,878,384		22,817	4.89	%			1,757,142		19,630	4.53	%
Commercial and Industrial		471,147		7,740	6.61	%			509,396		7,587	6.04	%
Residential Real Estate		196,176		3,044	6.24	%			175,030		2,440	5.65	%
Installment and Other		9,235		63	2.74	%			7,475		86	4.65	%
Total Loans Receivable		2,554,942		33,664	5.30	%			2,449,043		29,743	4.93	%
Total Interest Earning Assets	$	3,853,537	$	41,572	4.27	%		$	3,843,033	$	37,812	3.94	%
Liabilities:
Non-Interest Bearing Demand Deposits		1,647,928		-	0.00	%			1,832,495		-	0.00	%
Interest Bearing Transaction Accounts		382,086		1,002	1.05	%			285,939		231	0.33	%
Money Market and Savings Deposits		1,125,101		7,265	2.60	%			1,133,697		2,230	0.80	%
Certificates of Deposit		255,490		2,288	3.60	%			64,162		267	1.69	%
Total Deposits		3,410,605		10,555	1.24	%			3,316,293		2,728	0.33	%
Federal Home Loan Bank Advances / Other Borrowings		123,022		1,598	5.22	%			257,711		3,086	4.86	%
Total Interest Bearing Deposits and Borrowings		1,885,699		12,153	2.59	%			1,741,509		5,814	1.35	%
Total Deposits and Borrowings	$	3,533,627	$	12,153	1.38	%		$	3,574,003	$	5,814	0.66	%
Net Interest Income			$	29,419						$	31,998
Net Interest Rate Spread					2.89	%						3.28	%
Net Interest Margin					3.07	%						3.38	%

American Business Bank
Figures in $000
SUPPLEMENTAL DATA (unaudited)
	March			December			March
		2024			2023			2023
Performance Ratios:
Quarterly:
Return on Average Assets (ROAA)		1.08	%		1.17	%		1.35	%
Return on Average Equity (ROAE)		13.42	%		16.05	%		19.54	%
Efficiency Ratio		54.39	%		48.45	%		46.90	%
Year-to-Date
Return on Average Assets (ROAA)		1.08	%		1.13	%		1.35	%
Return on Average Equity (ROAE)		13.42	%		15.70	%		19.54	%
Efficiency Ratio		54.39	%		50.82	%		46.90	%
Capital Adequacy:
Total Risk Based Capital Ratio		12.62	%		12.37	%		12.56	%
Common Equity Tier 1 Capital Ratio		11.72	%		11.47	%		11.65	%
Tier 1 Risk Based Capital Ratio		11.72	%		11.47	%		11.65	%
Tier 1 Leverage Ratio		9.99	%		9.64	%		8.90	%
Tangible Common Equity / Tangible Assets		8.15	%		8.05	%		7.21	%
Asset Quality Overview
Non-Performing Loans	$	7,440		$	7,859		$	6,000
Loans 90+ Days Past Due and Still Accruing		-			-			-
Total Non-Performing Loans		7,440			7,859			6,000
Loans Modified with Financial Difficulty	$	229		$	231		$	-
Other Real Estate Owned		-			-			-
ACL / Loans Receivable		1.10	%		1.10	%		1.05	%
Non-Performing Loans / Total Loans Receivable		0.29	%		0.30	%		0.24	%
Non-Performing Assets / Total Assets		0.19	%		0.20	%		0.15	%
Net Charge-Offs (Recoveries) quarterly	$	(101	)	$	190		$	(10	)
Net Charge-Offs (Recoveries) year-to-date	$	(101	)	$	344		$	(10	)
Net Charge-Offs (Recoveries) year-to-date / Average Loans Receivable		(0.00	%)		0.01	%		(0.00	%)

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240430001225/en/

The American Business Bank Stock at the time of publication of the news with a raise of 0,00 % to 33,50USD on Nasdaq OTC stock exchange (27. April 2024, 02:10 Uhr).