Company Announcements

Four consecutive quarters of Net interest margin expansion

Second Quarter 2025 Highlights

• Net income for the quarter totaled $13.2 million, or $1.42 per diluted share
• Net interest margin expanded to 3.58% from 3.47% in the prior quarter
• Cost of average deposits declined to 1.16%compared to 1.19% in the prior quarter
• Core Deposits increased $173 million or 5% over the prior quarter
• Total loans increased $63 million or 2% over the prior quarter
• Net yield on interest earning assets increased 11 basis points over the prior quarter
• Non-interest bearing demand deposits represent 46% of total deposits
• Minimal past due loans
• No borrowings at the end of the second quarter
• Return on Average Assets of 1.26% for the current quarter
• Return on Average Equity of 14.34% for the current quarter
• Quarterly cash dividend paid on common stock of $0.25 per share
• Tangible book value per share increased $0.93 to $41.55
• Continued status as well-capitalized, the highest regulatory category

LOS ANGELES--(BUSINESS WIRE)--Jul. 24, 2025-- AMERICAN BUSINESS BANK (OTCQX: AMBZ) today reported net income of $13.2 million or $1.42 per fully diluted share for the quarter ended June 30, 2025 compared to $11.9 million or $1.27 per fully diluted share for the quarter ended March 31, 2025, and $9.5 million or $1.02 per fully diluted share for the quarter ended June 30, 2024, representing an increase of 11% and 39%, respectively.

“Loan growth over the last year and quarter combined with higher loan yields continues to drive net interest margin expansion and earnings growth over the prior quarter and year periods. Profitability metrics for the quarter were a Return on Average Equity of 14% and a Return on Average Assets of 1.26%. In addition, business momentum and the loan pipeline remains solid as prospects and existing customers are strong and continue to grow.”

“We are pleased with the core deposit growth for the quarter mainly from existing customers. Some of this growth was event-driven and will not remain on the balance sheet over the long term. The deposit pipeline of new customer relationships remains solid and should drive further core deposit growth in the year. The key to our success continues to be attracting new business clients by differentiating ourselves with professional bankers who deliver business acumen coupled with high touch service,” commented Leon Blankstein, Chief Executive Officer (CEO) and Director.

For the quarter ended June 30, 2025, net interest income was $36.8 million, a 27% increase compared to the prior year quarter. The higher average balance of loans along with an increase in loan yields contributed to the increase in interest income compared to the prior year quarter.

The allowance for credit losses as a percentage of loans was 1.10% at June 30, 2025 and 1.11% at March 31, 2025, respectively. A provision of $0.4 million was recorded for the quarter to increase the allowance for credit losses due to growth in the loan portfolio which was offset by the reduction in the reserve for unfunded loan commitments.

For the six months ended June 30, 2025, net income was higher compared to the six months ended June 30, 2024 due to higher average balance of loans along with a decrease in the cost of borrowings.

Net Interest Margin

The net interest margin for the second quarter of 2025 increased to 3.58% from 3.47% for the prior quarter and 3.00% for the prior year quarter. The increase compared to the prior quarter is primarily due to an increase in average loans with higher interest rates along with a reduction of interest expense on deposits from lower rates and no borrowings. The loan yield for the month of June was 5.62%. As of June 30, 2025, 59% of the loan portfolio was fixed rate with a weighted average remaining life of 64 months. Approximately 46% of variable rate loans are indexed to prime of which $508 million are adjustable within 90 days of a change in prime. The Bank has experienced net interest margin expansion for the past four consecutive quarters.

Net Interest Income

For the quarter ended June 30, 2025, net interest income increased by $2 million, or 6%, compared to the quarter ended March 31, 2025 primarily due to growth in loans. For the quarter ended June 30, 2025, net interest income increased by $7.7 million, or 27%, compared to the quarter ended June 30, 2024. This increase in net interest income was attributable to an increase in the average balance of loans coupled with no borrowings in the second quarter of 2025. Interest income was further enhanced in the second quarter by higher rates on the loan portfolio. For the quarter ended June 30, 2025, the cost of deposits was 1.16% representing a decrease of 3 bps compared to the quarter ended March 31, 2025. The loan-to-deposit ratio was 75% as of June 30, 2025, March 31, 2025 and June 30, 2024, respectively.

Provision for Credit Losses

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

Non-Interest Income

The decrease in non-interest income compared to the prior quarter and to the prior year quarter is primarily due to losses on the sale of select lower yielding investment securities that were sold as rates declined near the end of the quarter.

Non-Interest Expense

For the quarter ended June 30, 2025, total non-interest expense increased $0.7 million and $2.2 million compared to the prior quarter and the prior year quarter, respectively. The increase over the prior year quarter was primarily due to an increase of new employees with higher salary and employee benefit expenses. The increase over the prior quarter reflected higher bonuses commensurate with increased profitability. The efficiency ratio decreased to 50% for the second quarter compared to 52% for the first quarter of 2025 and 55% for the second quarter of 2024.

There were 251 full time equivalent employees at June 30, 2025 compared to 243 a year ago and 252 at March 31, 2025. The Bank has 48 relationship managers in nine offices compared to 50 at March 31, 2025 and 44 at June 30, 2024.

For the six months ended June 30, 2025, non-interest expense increased $4.5 million or 13% compared to the same period a year ago, mainly due to increases in salaries and employee benefits.

Income Taxes

The effective income tax rate was 27.3% for the quarter ended June 30, 2025, 27.6% for the quarter ended March 31, 2025, and 28.0% for the quarter ended June 30, 2024. On June 27, California enacted S.B. 132, which changed apportionment for financial institutions to single-sales apportionment for tax years beginning January 1, 2025. This resulted in a California state tax rate increase and a net benefit increase to deferred tax assets of $108 thousand.

Balance Sheet

For the quarter ended June 30, 2025, total loans increased $63 million, or 2% compared to the prior quarter. The majority of this increase was in owner-occupied commercial real estate loans secured by industrial collateral. The increase in Commercial and Industrial (C&I) loans is mainly due to an increase in line utilization. At June 30, 2025, the utilization rate for the Bank’s commercial lines of credit increased to 30.1%, a 1.0% increase compared to March 31, 2025.

The following table is the composition of Commercial Real Estate (CRE) loans as of:

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

Total investment securities at June 30, 2025 were $1.1 billion including $538 million (51%) in held-to-maturity (HTM) securities based on book value. The Bank has no non-agency mortgage-backed securities in its portfolio. The duration of the available-for-sale (AFS) securities portfolio was 6.1 years as of June 30, 2025, 5.9 years as of March 31, 2025, and 5.8 years as of June 30, 2024. Accumulated other comprehensive loss (AOCI) increased to $70.7 million as of June 30, 2025 from $68.7 million as of March 31, 2025 as market rates relevant to securities pricing increased. The duration of the held-to-maturity portfolio, which consists primarily of municipal securities, is 8.2 years. As of June 30, 2025, the unrealized after tax loss on HTM securities was $75.6 million.

Deposits increased by $114 million or 3% to $3.9 billion in the quarter ended June 30, 2025. Of this increase, approximately $16 million came from 42 new client relationships. The Bank has no brokered or internet-solicited deposits. The ratio of non-interest bearing deposits to total deposits is 46% and 45% at June 30, 2025 and March 31, 2025, respectively.

During the second quarter of 2025, total assets increased $124 million, or 3%, total loans increased by $63 million, or 2%, and total deposits increased by $114 million, or 3%. As of June 30, 2025, the Bank has $1.6 billion in total borrowing capacity from the discount window of the Federal Reserve Board and loans pledged at the Federal Home Loan Bank of San Francisco. There were no borrowings outstanding at the end of the second and first quarters of 2025.

Capital Management

As of June 30, 2025, total shareholders’ equity increased to $373 million. During the quarter, the Bank declared and paid a cash dividend of $0.25 per share and repurchased 120,000 shares of common stock.

The following table presents a summary of quarterly cash dividends for 2025:

The Bank announced a Stock Repurchase Program in January 2025 for 227,541 shares that expires in January 2026. For the first six months of year, the Bank repurchased 191,797 shares for a total of $8.4 million.

The following table presents a summary of quarterly stock repurchases for 2025:

Asset Quality

The following table presents an overview of quarterly asset quality for 2025:

During the second quarter of 2025, non-performing assets decreased by $0.2 million. The Bank believes that it is well positioned with collateral and SBA enhancements, therefore no loss is expected on the credits. As of June 30, 2025, NPAs have a $461 thousand allowance on individually evaluated loans related to six non-performing C&I loans. The decline in Criticized loans was due to a payoff upon consummation of a property sale by the borrower.

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 located in suburban markets.

Our commercial real estate lending is primarily owner-occupied which is not dependent on rent rolls, but reliant on the cash flows of the operating business that occupies the property. C&I and owner-occupied commercial real estate portfolios comprise 63% of total loans while non-owner occupied represent 26% of total loans.

As of June 30, 2025, the loan portfolio has one piece of collateral on a commercial property that had been destroyed by the January fires in Los Angeles county; the property has adequate insurance coverage.

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

The allowance for credit losses for loans increased to $31.9 million during the second quarter of 2025 primarily as a result of growth in the loan portfolio. There were no charge-offs or recoveries in the second quarter of 2025. The Bank has ten restructured loans totaling $6.4 million involving borrowers 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 eight 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, LA Coastal in Long Beach and North County in San Diego.

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.

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Karen Schoenbaum
EVP/CFO
(213) 430-4000
www.americanbb.bank

Source: American Business Bank