RBB Bancorp
Annual Report 2013

Plain-text annual report

CONTENTS LETTER TO SHAREHOLDERS-ENGLISH LETTER TO SHAREHOLDERS-CHINESE BOARD OF DIRECTORS INDEPENDENT AUDITOR’S REPORT ON THE CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statements of Financial Condition Consolidated Statements of Income Consolidated Statements of Comprehensive Income Consolidated Statements of Changes in Shareholders' Equity Consolidated Statements of Cash Flows Notes to Consolidated Financial Statements Notes 1-2 3 4-5 6 7 9 10 11 12 13-41 42-43 RBB BANCORP AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS WITH INDEPENDENT AUDITOR'S REPORT DECEMBER 31, 2013 AND 2012 This statement has not been reviewed or confirmed for accuracy or relevance by the Federal Deposit Insurance Corporation. Vavrinek, Trine, Day & Co., LLP Certified Public Accountants INDEPENDENT AUDITOR'S REPORT V A L U E T H E D I F F E R E N C E Board of Directors and Shareholders of RBB Bancorp and Subsidiaries We have audited the accompanying consolidated financial statements of RBB Bancorp and Subsidiaries, which are comprised of the consolidated statements of financial condition as of December 31, 2013 and 2012, and the related consolidated statements of income, comprehensive income, changes in shareholders' equity and cash flows for the years then ended, and the related notes to the consolidated financial statements. Management's Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of RBB Bancorp and Subsidiaries as of December 31, 2013 and 2012, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Laguna Hills, California February 19, 2014 25231 Paseo De Alicia, Suite 100 Laguna Hills, CA 92653 Tel: 949.768.0833 Fax: 949.768.8408 www.vtdcpa.com F R E S N O • L A G U N A H I L L S • P A L O A L T O • P L E A S A N T O N • R A N C H O C U C A M O N G A • S A C R A M E N T O • R I V E R S I D E RBB BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION DECEMBER 31, 2013 AND 2012 ASSETS Cash and Due from Banks Federal Funds Sold and Other Cash Equivalents TOTAL CASH AND CASH EQUIVALENTS 2013 2012 $ 23,773,709 12,000,000 35,773,709 $ 32,507,552 29,500,000 62,007,552 Interest-Bearing Deposits in Other Financial Institutions 100,000 - Securities: Available for Sale Held to Maturity (Fair Value 2013 - $7,047,221; 2012 - $7,854,687) 61,547,620 6,742,037 169,839,256 7,125,086 Loans: Real Estate Commercial Unaccreted Discount on Acquired Loans Deferred Loan Fees, Net of Costs Allowance for Loan Losses Cash Surrender Value of Life Insurance Premises and Equipment FHLB Stock Net Deferred Tax Assets Income Tax Receivable Other Real Estate Owned Goodwill Core Deposit Intangible Accrued Interest and Other Assets TOTAL LOANS NET LOANS 443,538,614 139,133,779 582,672,393 (5,283,190) (760,295) 576,628,908 (7,549,320) 569,079,588 20,210,933 7,145,674 3,696,000 8,660,000 795,434 1,510,852 4,000,767 713,738 3,433,203 230,757,185 100,158,284 330,915,469 (2,901,649) (697,458) 327,316,362 (7,121,878) 320,194,484 - 2,792,126 2,096,500 6,004,000 1,354,070 1,424,765 788,890 - 2,857,652 $ 723,409,555 $ 576,484,381 The accompanying notes are an integral part of these consolidated financial statements. RBB BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION DECEMBER 31, 2013 AND 2012 LIABILITIES AND SHAREHOLDERS' EQUITY Deposits: Noninterest-Bearing Demand Savings, NOW and Money Market Accounts Time Deposits Under $100,000 Time Deposits $100,000 and Over TOTAL DEPOSITS FHLB Advances Reserve for Unfunded Commitments Capital Subscriptions Accrued Interest and Other Liabilities TOTAL LIABILITIES Commitments and Contingencies - Notes E and I Shareholders' Equity: Preferred Stock - 100,000,000 Shares Authorized, No Par Value; None Outstanding Common Stock - 100,000,000 Shares Authorized, No Par Value; 11,658,259 and 9,714,411 Shares Issued and Outstanding for 2013 and 2012, Respectively Additional Paid-in Capital Retained Earnings Accumulated Other Comprehensive Income (Loss) - Net Unrealized Gain (Loss) on Securities Available for Sale, Net of Tax of $201,716 in 2013 and $1,084,768 in 2012 TOTAL SHAREHOLDERS' EQUITY 2013 2012 $ 89,129,152 190,786,116 29,085,370 265,077,985 574,078,623 $ 56,502,217 145,996,014 19,540,398 220,639,754 442,678,383 7,000,000 721,561 - 3,617,272 585,417,456 - 1,156,019 22,010,550 2,526,253 468,371,205 - - - - 125,707,421 5,200,636 7,374,317 102,365,035 3,816,537 370,597 (290,275) 137,992,099 1,561,007 108,113,176 $ 723,409,555 $ 576,484,381 The accompanying notes are an integral part of these consolidated financial statements. RBB BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 INTEREST INCOME Interest and Fees on Loans Interest on Interest-Bearing Deposits Interest on Investment Securities Interest on Federal Funds Sold and Other TOTAL INTEREST INCOME INTEREST EXPENSE Interest on Savings Deposits, NOW and Money Market Accounts Interest on Time Deposits Interest on Other Borrowed Funds Provision for Loan Losses TOTAL INTEREST EXPENSE NET INTEREST INCOME NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES NONINTEREST INCOME Service Charges, Fees and Other Gain on Sale of Loans Recoveries on Loans Acquired in Business Combinations Increase in Cash Surrender of Life Insurance Gain on Sale of Securities Gain on Sale of OREO Bank Enterprise Award ("BEA") Grant NONINTEREST EXPENSE Salaries and Employee Benefits Occupancy and Equipment Expenses Data Processing Legal and Professional Office Expenses Marketing and Business Promotion Insurance and Regulatory Assessments OREO Expenses Other Expenses Income Tax Expense INCOME BEFORE INCOME TAXES NET INCOME NET INCOME PER SHARE - BASIC NET INCOME PER SHARE - DILUTED 2013 2012 $ 29,653,433 49,078 2,166,929 201,943 32,071,383 $ 20,966,694 128,189 3,111,930 238,409 24,445,222 1,011,063 2,350,485 5,687 3,367,235 28,704,148 1,612,540 1,218,512 3,191,784 6 4,410,302 20,034,920 2,057,920 27,091,608 17,977,000 1,258,548 139,782 713,741 210,933 179,249 459,782 415,000 3,377,035 9,344,683 2,343,703 1,812,494 1,800,762 302,988 261,666 745,085 138,897 1,404,151 18,154,429 12,314,214 5,310,494 7,003,720 0.65 0.63 $ $ $ 804,346 403,015 193,000 - 161,513 761,472 - 2,323,346 6,979,627 2,112,818 768,844 836,630 223,547 232,167 657,073 411,431 1,037,007 13,259,144 7,041,202 2,994,992 4,046,210 0.49 0.48 $ $ $ The accompanying notes are an integral part of these consolidated financial statements. RBB BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 Net Income OTHER COMPREHENSIVE INCOME (LOSS): Unrealized Gains (Losses) on Securities Available for Sale: Change in Unrealized Gains (Losses) Reclassification of Gains Recognized in Net Income Related Income Tax Effect: Change in Unrealized Gains (Losses) Reclassification of Gains Recognized in Net Income 2013 2012 $ 7,003,720 $ 4,046,210 (2,958,517) (179,249) (3,137,766) 1,212,992 73,492 1,286,484 2,161,749 (161,513) 2,000,236 (886,317) 66,220 (820,097) TOTAL OTHER COMPREHENSIVE INCOME (LOSS) (1,851,282) 1,180,139 TOTAL COMPREHENSIVE INCOME $ 5,152,438 $ 5,226,349 The accompanying notes are an integral part of these consolidated financial statements. RBB BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 Common Stock Shares 7,123,259 Amount 71,273,557 $ Additional Paid-in Capital 3,574,037 $ Retained Earnings (Deficit) (3,675,613) $ Accumulated Other Comprehensive Income (Loss) $ 380,868 4,046,210 Balance at December 31, 2011 Net Income Exercise of Stock Options 17,000 221,000 (51,000) 293,500 Total $ 71,552,849 4,046,210 170,000 293,500 Stock-Based Compensation Issuance of Common Stock Through Private Placement, Net of Expenses of $19,346 Change in Other Comprehensive Income, Net of Taxes 2,574,152 30,870,478 30,870,478 1,180,139 1,180,139 Balance at December 31, 2012 9,714,411 102,365,035 3,816,537 370,597 1,561,007 108,113,176 Net Income 7,003,720 Exercise of Stock Options 18,000 232,210 (52,210) Stock-Based Compensation Issuance of Common Stock Through Private Placement 1,925,848 23,110,176 1,436,309 7,003,720 180,000 1,436,309 23,110,176 Change in Other Comprehensive Income, Net of Taxes (1,851,282) (1,851,282) Balance at December 31, 2013 11,658,259 $ 125,707,421 $ 5,200,636 $ 7,374,317 $ (290,275) $ 137,992,099 The accompanying notes are an integral part of these consolidated financial statements. RBB BANCORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2013 AND 2012 OPERATING ACTIVITIES Net Income Adjustments to Reconcile Net Income to Net Cash From Operating Activities: Depreciation, Accretion and Amortization Provision for Loan Losses Stock-Based Compensation Deferred Tax Expense Gain on Sale of Securities Gain on Sale of Loans Gain on Sale of Other Real Estate Owned Increase in Cash Surrender Value of Life Insurance Loss on Sale of Fixed Assets Other Items NET CASH FROM OPERATING ACTIVITIES INVESTING ACTIVITIES Decrease in Interest-Bearing Deposits Securities Available for Sale: Purchases Maturities, Prepayments and Calls Sales Securities Held to Maturity: Purchases Maturities, Prepayments and Calls Purchase of FHLB Stock and Other Equity Securities Purchase of Life Insurance Net Increase in Loans Proceeds from Sales of Other Real Estate Owned Net Cash Acquired in Connection with Acquisitions Purchases of Premises and Equipment NET CASH FROM INVESTING ACTIVITIES FINANCING ACTIVITIES Net Increase in Demand Deposits and Savings Accounts Net Decrease in Time Deposits Proceeds from FHLB Advances (Decrease) Increase in Capital Subscriptions Issuance of Common Stock NET CASH FROM FINANCING ACTIVITIES DECREASE IN CASH AND CASH EQUIVALENTS Cash and Cash Equivalents at Beginning of Period CASH AND CASH EQUIVALENTS AT END OF YEAR Supplemental Disclosures of Cash Flow Information: Interest Paid Taxes Paid Transfer from Loans to Other Real Estate Owned 2013 7,003,720 $ 2012 4,046,210 $ (1,056,187) 1,612,540 1,436,309 1,281,000 (179,249) (139,782) (459,782) (210,933) - 3,306,997 12,594,633 1,133,054 2,057,920 293,500 1,417,000 (161,513) (403,015) (761,472) - 77,098 (1,876,122) 5,822,660 1,619,000 733,000 (3,098,933) 34,272,904 72,730,731 (143,864,442) 39,315,691 23,531,598 - 350,000 (1,601,015) (20,000,000) (132,616,504) 1,016,195 30,900,534 (203,521) (16,630,609) 10,772,935 (41,250,428) 7,000,000 (22,010,550) 23,290,176 (22,197,867) (26,233,843) 62,007,552 35,773,709 $ (1,020,433) - (415,100) - (20,882,743) 2,394,461 - (201,619) (100,409,587) 39,062,811 (23,921,914) - 22,010,550 31,040,478 68,191,925 (26,395,002) 88,402,554 62,007,552 $ $ $ $ 3,496,405 2,332,000 292,500 $ $ $ 4,621,870 2,995,000 791,004 The accompanying notes are an integral part of these consolidated financial statements. RBB BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2013 AND 2012 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation and Nature of Operations The accompanying consolidated financial statements include the accounts of RBB Bancorp and its wholly-owned subsidiaries Royal Business Bank (“Bank") and RBB Asset Management Company (“RAM”), collectively referred to herein as "the Company". All significant intercompany transactions have been eliminated. RBB Bancorp was formed in January 2011 as a bank holding company. RAM was formed in 2012 to hold and manage problem assets acquired in business combinations. RBB Bancorp has no significant business activity other than its investments in Royal Business Bank and RAM. Accordingly, no separate financial information on RBB Bancorp is provided. The Company operates full-service banking offices in Los Angeles, San Gabriel, Torrance, Rowland Heights, Westlake Village, Oxnard, Buena Park, Monterey Park, and Silverlake, California and Las Vegas, Nevada and loan production offices in Industry and Rowland Heights, California. The Company's primary source of revenue is providing loans to customers, who are predominately small and middle-market businesses and individuals. Subsequent Events The Company has evaluated subsequent events for recognition and disclosure through February 19, 2014, which is the date the financial statements were available to be issued. Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents Cash and cash equivalents include cash and due from banks and term federal funds sold and interest-bearing deposits in other financial institutions with original maturities of less than 90 days. Net cash flows are reported for customer loan and deposit transactions and interest-bearing deposits in other financial institutions. Cash and Due from Banks Banking regulations require that banks maintain a percentage of their deposits as reserves in cash or on deposit with the Federal Reserve Bank. The reserves required to be held as of December 31, 2013 and 2012 were $5,415,000 and $4,948,000, respectively. The Company maintains amounts in due from bank accounts, which may exceed federally insured limits. The Company has not experienced any losses in such accounts. RBB BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2013 AND 2012 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Interest-Bearing Deposits in Other Financial Institutions Interest-bearing deposits in other financial institutions not included in cash and cash equivalents are carried at cost. Investment Securities Debt securities are classified as held to maturity and carried at amortized cost when management has the positive intent and ability to hold them to maturity. Debt securities not classified as held to maturity are classified as available for sale. Equity securities with readily determinable fair values are classified as available for sale. Securities available for sale are carried at fair value, with unrealized holding gains and losses reported in other comprehensive income, net of tax. Interest income includes amortization of purchase premiums or discounts. Premiums and discounts on securities are amortized on the level-yield method without anticipating prepayments. Gains and losses on sales are recorded on the trade date and determined using the specific identification method. Management evaluates securities for other-than-temporary impairment ("OTTI") on at least a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. For securities in an unrealized loss position, management considers the extent and duration of the unrealized loss, and the financial condition and near-term prospects of the issuer. Management also assesses whether it intends to sell, or it is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. For debt securities that do not meet the aforementioned criteria, the amount of impairment is split into two components as follows; OTTI related to credit loss, which must be recognized in the income statement and; OTTI related to other factors, which is recognized in other comprehensive income. The credit loss is defined as the difference between the present value of the cash flows expected to be collected and the amortized cost basis. For equity securities, the entire amount of impairment is recognized through earnings. Loans Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their outstanding unpaid principal balances reduced by any charge-offs or specific valuation accounts and net of any deferred fees or costs on originated loans, or unamortized premiums or discounts on purchased loans. Loan origination fees and certain direct origination costs are deferred and recognized in interest income using the level-yield method without anticipating prepayments. RBB BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2013 AND 2012 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Loans - Continued Premiums and discounts on loans purchased are grouped by type and certain common risk characteristics and amortized or accreted as an adjustment of yield over the weighted-average remaining contractual lives of each group of loans, adjusted for prepayments when applicable, using methodologies which approximate the interest method. Loans on which the accrual of interest has been discontinued are designated as nonaccrual loans. The accrual of interest on loans is discontinued when principal or interest is past due 90 days or when, in the opinion of management, there is reasonable doubt as to collectibility based on contractual terms of the loan. When loans are placed on nonaccrual status, all interest previously accrued but not collected is reversed against current period interest income. Income on nonaccrual loans is subsequently recognized only to the extent that cash is received and the loan's principal balance is deemed collectible. Interest accruals are resumed on such loans only when they are brought current with respect to interest and principal and when, in the judgment of management, the loans are estimated to be fully collectible as to all principal and interest. Allowance for Loan Losses The allowance for loan losses is a valuation allowance for probable incurred credit losses. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. Management estimates the allowance balance required using past loan loss experience, the nature and volume of the portfolio, information about specific borrower situations and estimated collateral values, economic conditions, and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management's judgment, should be charged-off. Amounts are charged-off when available information confirms that specific loans or portions thereof, are uncollectible. This methodology for determining charge-offs is consistently applied to each segment. The Company determines a separate allowance for each portfolio segment. The allowance consists of specific and general reserves. Specific reserves relate to loans that are individually classified as impaired. A loan is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Factors considered in determining impairment include payment status, collateral value and the probability of collecting all amounts when due. Measurement of impairment is based on the expected future cash flows of an impaired loan, which are to be discounted at the loan's effective interest rate, or measured by reference to an observable market value, if one exists, or the fair value of the collateral for a collateral-dependent loan. The Company selects the measurement method on a loan-by-loan basis except that collateral-dependent loans for which foreclosure is probable are measured at the fair value of the collateral. RBB BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2013 AND 2012 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Allowance for Loan Losses - Continued The Company recognizes interest income on impaired loans based on its existing methods of recognizing interest income on nonaccrual loans. Loans, for which the terms have been modified resulting in a concession, and for which the borrower is experiencing financial difficulties, are considered troubled debt restructurings and classified as impaired with measurement of impairment as described above. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan's existing rate or at the fair value of collateral if repayment is expected solely from the collateral. General reserves cover non-impaired loans and are based on historical loss rates of peer institutions for each portfolio segment, adjusted for the effects of qualitative or environmental factors that are likely to cause estimated credit losses as of the evaluation date to differ from the portfolio segment's historical loss experience. Qualitative factors include consideration of the following: changes in lending policies and procedures; changes in economic conditions, changes in the nature and volume of the portfolio; changes in the experience, ability and depth of lending management and other relevant staff; changes in the volume and severity of past due, nonaccrual and other adversely graded loans; changes in the loan review system; changes in the value of the underlying collateral for collateral-dependent loans; concentrations of credit and the effect of other external factors such as competition and legal and regulatory requirements. Portfolio segments identified by the Company include real estate and commercial loans. Relevant risk characteristics for these portfolio segments generally include debt service coverage, loan-to-value ratios, and financial performance. Certain Acquired Loans As part of business acquisitions, the Company acquires certain loans that have shown evidence of credit deterioration since origination. These acquired loans are recorded at the allocated fair value, such that there is no carryover of the seller's allowance for loan losses. Such acquired loans are accounted for individually. The Company estimates the amount and timing of expected cash flows for each purchased loan, and the expected cash flows in excess of the allocated fair value is recorded as interest income over the remaining life of the loan (accretable yield). The excess of the loan's contractual principal and interest over expected cash flows is not recorded (non-accretable difference). Over the life of the loan, expected cash flows continue to be estimated. If the present value of expected cash flows is less than the carrying amount, a loss is recorded through the allowance for loan losses. If the present value of expected cash flows is greater than the carrying amount, it is recognized as part of future interest income. RBB BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2013 AND 2012 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Premises and Equipment Land is carried at cost. Premises, leasehold improvements and equipment are carried at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives, which is twenty-five years for premises and ranges from three to ten years for leasehold improvements and equipment. Leasehold improvements are amortized using the straight-line method over the estimated useful lives of the improvements or the remaining lease term, whichever is shorter. Expenditures for betterments or major repairs are capitalized and those for ordinary repairs and maintenance are charged to operations as incurred. Other Real Estate Owned Real estate acquired by foreclosure or deed in lieu of foreclosure is recorded at fair value at the date of foreclosure, establishing a new cost basis by a charge to the allowance for loan losses, if necessary. Other real estate owned is carried at the lower of the Company's carrying value of the property or its fair value, less estimated carrying costs and costs of disposition. Fair value is based on current appraisals less estimated selling costs. Any subsequent write-downs are charged against operating expenses and recognized as a valuation allowance. Operating expenses and related income of such properties and gains and losses on their disposition are included in other operating income and expenses. Goodwill and Other Intangible Assets Goodwill is generally determined as the excess of the fair value of the consideration transferred, plus the fair value of any noncontrolling interests in the acquiree, over the fair value of the net assets acquired and liabilities assumed as of the acquisition date. Goodwill resulting from whole bank acquisitions is not amortized, but tested for impairment at least annually. The Company has selected November 30 as the date to perform the annual impairment test. Goodwill amounted to $4,000,767 and $788,890 as of December 31, 2013 and 2012, respectively, and is the only intangible asset with an indefinite life on the balance sheet. No impairment was recognized on goodwill during 2013 and 2012. Other intangible assets consist of core deposit intangible (“CDI”) assets arising from whole bank acquisitions. CDI assets are amortized on an accelerated method over their estimated useful life of 8 years. CDI was recognized in the 2013 acquisition of Los Angeles National Bank. The unamortized balance as of December 31, 2013 was $713,738. CDI amortization expense was $88,000 in 2013. Estimated CDI amortization expense for the next 5 years is as follows: 2014 2015 2016 2017 2018 $ 131,000 117,000 106,000 88,000 87,000 RBB BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2013 AND 2012 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Company Owned Life Insurance The Company has purchased life insurance policies on certain key executives. Company owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement. Federal Home Loan Bank ("FHLB") Stock The Company is a member of the FHLB system. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. FHLB stock is carried at cost, classified as a restricted security, and periodically evaluated for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income. Stock-Based Compensation Compensation cost is recognized for stock options issued to employees, based on the fair value of these awards at the date of grant. A Black-Scholes model is utilized to estimate the fair value of stock options. This cost is recognized over the period which an employee is required to provide services in exchange for the award, generally defined as the vesting period. Income Taxes Income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between carrying amounts and tax bases of assets and liabilities, computed using enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to be realized. Tax effects from an uncertain tax position are recognized in the financial statements only if, based on its merits, the position is more likely than not to be sustained on audit by the taxing authorities. Interest and penalties related to uncertain tax positions are recorded as part of income tax expense. Retirement Plans The Company established a 401(k) plan in 2010. The Company contributed $46,000 and $41,000 in 2013 and 2012, respectively. Comprehensive Income The change in unrealized gains and losses on securities available for sale is the only component of accumulated other comprehensive income for the Company. The amount reclassified out of other accumulated comprehensive income relating to realized gains on securities available for sale was $179,249 and $161,513 for 2013 and 2012, with the related tax effect of $73,492 and $66,220, respectively. RBB BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2013 AND 2012 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Financial Instruments In the ordinary course of business, the Company has entered into off-balance sheet financial instruments consisting of commitments to extend credit, commercial letters of credit, and standby letters of credit as described in Note I. Such financial instruments are recorded in the financial statements when they are funded. Earnings Per Share ("EPS") Basic EPS excludes dilution and is computed by dividing income available to common shareholders by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Fair Value Measurement Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Current accounting guidance establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair values: Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3: Significant unobservable inputs that reflect the Company's own assumptions about the assumptions that market participants would use in pricing an asset or liability. See Note M for more information and disclosures relating to the Company's fair value measurements. Reclassifications Certain reclassifications have been made in the 2012 financial statements to conform to the presentation used in 2013. These reclassifications had no impact of the Company's previously reported financial statements. RBB BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2013 AND 2012 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Adoption of New Accounting Standards In February 2013, the Financial Accounting Standards Board issued Accounting Standards Update 2013-02, Comprehensive Income ("Topic 220") - Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income ("ASU 2013-02"). This ASU requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under Generally Accepted Accounting Principles (“GAAP”) to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under GAAP that provide additional detail about those amounts. ASU 2013-02 is effective prospectively for annual and interim periods beginning after December 15, 2012 for public entities and annual periods beginning after December 15, 2013 for nonpublic entities. The adoption of this ASU did not have a material impact on the Company's financial position, results of operations, or cash flows. RBB BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2013 AND 2012 NOTE B - ACQUISITIONS Los Angeles National Bank Acquisition: On May 17, 2013, the Company acquired all the assets and assumed all the liabilities of Los Angeles National Bank ("LANB") in exchange for cash of $31.3 million. LANB operated four branches in the Los Angeles metropolitan area. The Company acquired LANB to strategically increase its existing presence in the Los Angeles area. Goodwill in the amount of $3.2 million was recognized in this acquisition. Goodwill represents the future economic benefits arising from net assets acquired that are not individually identified and separately recognized and is attributable to synergies expected to be derived from the combination of the two entities. Goodwill is not deductible for income tax purposes. The following table represents the assets acquired and liabilities assumed of LANB as of May 17, 2013 and the fair value adjustments and amounts recorded by the Company in 2013 under the acquisition method of accounting: LANB Book Value Fair Value Adjustments Fair Value ASSETS ACQUIRED Cash and Cash Equivalents Interest-Bearing Deposits in Other Financial Institutions Loans, gross Allowance for Loan Losses Other Real Estate Owned Bank Premises and Equipment Deferred Tax Assets Other Assets Total Assets Acquired LIABILITIES ASSUMED Deposits Other Liabilities Total Liabilities Assumed Excess of Assets Acquired Over Liabilities Assumed Cash Paid Goodwill Recognized $ 62,176,338 1,719,000 119,946,508 (3,621,870) 350,000 1,285,527 2,269,327 3,485,268 187,610,098 $ $ 161,860,440 549,180 162,409,620 25,200,478 187,610,098 $ - $ - (5,240,599) 3,621,870 - 3,498,169 385,651 802,000 3,067,091 $ $ 150,642 53,000 203,642 2,863,449 3,067,091 $ $ 62,176,338 1,719,000 114,705,909 - 350,000 4,783,696 2,654,978 4,287,268 190,677,189 $ $ 162,011,082 602,180 162,613,262 28,063,927 31,275,804 3,211,877 $ The Company accounted for the transaction under the acquisition method of accounting which requires purchased assets and liabilities assumed to be recorded at their respective fair values at the date of acquisition. The Company determined the fair value of loans, leases, core deposit intangible and deposits with the assistance of a third party valuation. The fair value of bank premises and other real estate owned was based on recent appraisals of the properties. RBB BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2013 AND 2012 NOTE B - ACQUISITIONS - Continued The estimated fair values are subject to refinement as additional information relative to the closing date fair values become available through the measurement period. While additional significant changes to the closing date fair values are not expected, any information relative to the changes in these fair values will be evaluated to determine if such changes are due to events and circumstances that existed as of the acquisition date. During the measurement period, any such changes will be recorded as part of the closing date fair value. In many cases, the fair values of assets acquired and liabilities assumed were determined by estimating the cash flows expected to result from those assets and liabilities and discounting them at appropriate market rates. The most significant category of assets for which this procedure was used was that of acquired loans. The excess of expected cash flows above the fair value of the majority of loans will be accreted to interest income over the remaining lives of the loans in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 310-20 (formerly SFAS 91). Certain loans, for which specific credit-related deterioration, since origination, was identified, are recorded at fair value, reflecting the present value of the amounts expected to be collected. Income recognition on these “purchased credit-impaired” loans is based on a reasonable expectation about the timing and amount of cash flows to be collected. Acquired loans deemed impaired and considered collateral dependent, with the timing of the sale of loan collateral indeterminate, remain on non-accrual status and have no accretable yield. For loans acquired, the contractual amounts due, expected cash flows to be collected, interest component and fair value as of the respective acquisition dates were as follows: Contractual Amounts Due Cash Flows not Expected to be Collected Expected Cash Flows Interest Component of Expected Cash Flows Fair Value of Acquired Loans $ Acquired Loans 133,655,634 - 133,655,634 18,949,725 114,705,909 $ None of the loans acquired had evidence of deterioration of credit quality since origination for which it was probable, at acquisition, that the Company would be unable to collect all contractually required payments receivable. In accordance with generally accepted accounting principles there was no carryover of the allowance for loan losses that had been previously recorded by LANB. RBB BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2013 AND 2012 NOTE C - INVESTMENT SECURITIES The following table summarizes the amortized cost and fair value of securities available for sale and held to maturity at December 31, 2013 and 2012, and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income: December 31, 2013 Available for Sale Mortgage-Backed Securities- Government Sponsored Agencies Corporate Debt Securities Held to Maturity Municipal Taxable Securities Municipal Securities December 31, 2012 Available for Sale U.S. Government Agency Mortgage-Backed Securities- Government Sponsored Agencies Corporate Debt Securities Held to Maturity Municipal Taxable Securities Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value $ $ 46,955,691 15,083,919 62,039,610 $ $ 5,759,907 982,130 6,742,037 $ 98,314 282,011 380,325 $ $ $ 331,972 - 331,972 $ $ (872,315) - (872,315) $ $ 46,181,690 15,365,930 61,547,620 $ - (26,788) (26,788) $ $ $ 6,091,879 955,342 7,047,221 $ 5,251,764 $ 113,424 $ - $ 5,365,188 129,822,453 32,119,263 167,193,480 $ 1,805,199 802,342 2,720,965 $ (74,534) (655) (75,189) $ 131,553,118 32,920,950 169,839,256 $ $ 7,125,086 $ 729,601 $ - $ 7,854,687 During 2013 and 2012 the Company sold $72.7 million and $23.5 million of securities available for sale, recognizing gross gains of $179,249 and $161,513, respectively. There were no securities pledged as of December 31, 2013. RBB BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2013 AND 2012 NOTE C - INVESTMENT SECURITIES - Continued The amortized cost and fair value of the investment securities portfolio as of December 31, 2013 are shown by expected maturity below. Expected maturities may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Within One Year Due From One through Five Years Due from Five to Ten Years Due after Ten Years Available for Sale Held to Maturity Amortized Cost $ 6,035,599 36,359,433 16,374,221 3,270,357 $ Fair Value 6,083,050 36,199,368 15,994,845 3,270,357 Amortized Cost $ - 1,448,726 3,303,184 1,990,127 Fair Value $ - 1,552,820 3,450,999 2,043,402 $ 62,039,610 $ 61,547,620 $ 6,742,037 $ 7,047,221 Substantially all unrealized losses had been in a continuous loss position for less than 12 months as of December 31, 2013 and 2012. Unrealized losses on mortgage-backed and municipal bonds have not been recognized into income because the issuer bonds are of high credit quality, management does not intend to sell, it is not more likely than not that management would be required to sell the securities prior to their anticipated recovery and the decline in fair value is largely due to changes in interest rates. The fair value is expected to recover as the bonds approach maturity. NOTE D - LOANS The Company's loan portfolio consists primarily of loans to borrowers within Los Angeles and Orange County, California. Although the Company seeks to avoid concentrations of loans to a single industry or based upon a single class of collateral, real estate and real estate associated businesses are among the principal industries in the Company's market area and, as a result, the Company's loan and collateral portfolios are, to some degree, concentrated in those industries. A summary of the changes in the allowance for loan losses as of December 31 follows: Beginning Balance Additions to the Allowance Charged to Expense Recoveries on Loans Charged-Off Less Loans Charged-Off Ending Balance 2013 7,121,878 1,612,540 9,763 8,744,181 1,194,861) $ ( $ 2012 5,059,929 2,057,920 4,029 7,121,878 - $ 7,549,320 $ 7,121,878 RBB BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2013 AND 2012 NOTE D - LOANS - Continued The following table presents the recorded investment in loans and impairment method as of December 31, 2013 and 2012 and the activity in the allowance for loan losses for the years then ended, by portfolio segment: December 31, 2013 Allowance for Loan Losses: Beginning of Year Provisions Charge-offs Recoveries Reserves: Specific General Loans Acquired with Deteriorated Credit Quality Loans Evaluated for Impairment: Individually Collectively Loans Acquired with Deteriorated Credit Quality December 31, 2012 Allowance for Loan Losses: Beginning of Year Provisions Charge-offs Recoveries Reserves: Specific General Loans Acquired with Deteriorated Credit Quality Loans Evaluated for Impairment: Individually Collectively Loans Acquired with Deteriorated Credit Quality Real Estate Commercial Total $ $ $ 4,688,187 1,603,025 (1,183,678) - 5,107,534 2,433,691 9,515 (11,183) 9,763 2,441,786 7,121,878 1,612,540 (1,194,861) 9,763 7,549,320 $ $ $ $ - 5,107,534 - 5,107,534 $ $ - 2,441,786 - 2,441,786 $ $ - 7,549,320 - 7,549,320 $ $ 4,718,487 430,651,335 1,875,428 437,245,250 $ $ 415,296 138,847,473 120,889 139,383,658 $ $ 5,133,783 569,498,808 1,996,317 576,628,908 $ $ $ $ 3,304,182 1,384,005 - - 4,688,187 1,755,747 673,915 - 4,029 2,433,691 5,059,929 2,057,920 - 4,029 7,121,878 $ $ $ $ - 4,688,187 - 4,688,187 $ $ - 2,433,691 - 2,433,691 $ $ - 7,121,878 - 7,121,878 $ $ 7,201,393 216,074,836 3,718,651 226,994,880 $ $ 1,166,548 98,966,576 188,358 100,321,482 $ $ 8,367,941 315,041,412 3,907,009 327,316,362 $ RBB BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2013 AND 2012 NOTE D - LOANS - Continued The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, collateral adequacy, credit documentation, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis typically includes larger, non-homogeneous loans such as commercial real estate and commercial and industrial loans. This analysis is performed on an ongoing basis as new information is obtained. The Company uses the following definitions for risk ratings: Pass - Loans classified as pass include loans not meeting the risk ratings defined below. Special Mention - Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date. Substandard - Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Impaired - A loan is considered impaired, when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the loan agreement. Additionally, all loans classified as troubled debt restructurings are considered impaired. Purchased credit- impaired loans are not subject to the impairment rules under ASC 310-10 and are therefore excluded from the impaired risk category and are instead included in the substandard risk category. The risk category of loans by class of loans was as follows as of December 31, 2013 and 2012: December 31, 2013 Pass Special Mention Substandard Impaired Total Real Estate: Construction and Land Development Residential Real Estate Commercial Real Estate Commercial December 31, 2012 Real Estate: Construction and Land Development Residential Real Estate Commercial Real Estate Commercial $ 61,097,852 162,715,639 192,242,911 131,652,901 547,709,303 $ $ - - 5,767,231 4,314,931 10,082,162 $ $ - 1,094,241 9,608,889 3,000,530 13,703,660 $ $ $ 2,066,237 - 2,652,250 415,296 5,133,783 $ 50,281,636 55,123,749 100,005,618 88,829,004 294,240,007 $ $ 2,881,418 - 5,093,597 8,167,964 16,142,979 $ $ $ 1,693,477 2,241,803 2,472,189 2,157,966 8,565,435 1,744,391 - 5,457,002 1,166,548 8,367,941 $ $ $ 63,164,089 163,809,880 210,271,281 139,383,658 576,628,908 $ $ 56,600,922 57,365,552 113,028,406 100,321,482 327,316,362 $ RBB BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2013 AND 2012 NOTE D - LOANS - Continued Past due and nonaccrual loans presented by loan class were as follows as of December 31, 2013 and 2012: December 31, 2013 Commercial Real Estate Commercial December 31, 2012 Construction and Land Development Commercial Real Estate Commercial Still Accruing 30-89 Days Past Due $ - 662,338 662,338 $ Over 90 Days Past Due - $ 91,089 91,089 $ - $ - 122,393 122,393 $ - $ - - $ - $ Nonaccrual 156,595 311,212 467,807 $ $ $ 1,460,887 3,400,348 1,123,281 5,984,516 Information relating to individually impaired loans presented by class of loans was as follows as of December 31, 2013 and 2012: December 31, 2013 Construction and Land Development Commercial Real Estate Commercial December 31, 2012 Construction and Land Development Commercial Real Estate Commercial With no Allowance Recorded Unpaid Principal Balance Recorded Investment Average Balance Interest Income $ $ $ $ 2,475,401 2,652,249 415,296 5,542,946 2,066,237 2,652,250 415,296 5,133,783 2,082,901 3,877,039 790,922 6,750,862 $ $ $ $ $ $ $ $ 2,134,973 6,941,292 1,208,548 10,284,813 $ 1,744,391 5,457,002 1,166,548 8,367,941 1,687,487 5,490,162 1,211,474 8,389,123 $ $ $ 362,524 209,473 6,109 578,106 223,720 3,290 - 227,010 There were no allowances recorded on individually impaired loans as of December 31, 2013 and 2012 and no interest income was recognized on a cash basis in the years then ended. RBB BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2013 AND 2012 NOTE D - LOANS - Continued The Company had eight and nine loans identified as troubled debt restructurings ("TDR's") at December 31, 2013 and 2012, respectively, and no specific reserves have been allocated thereon. There are no commitments to lend additional amounts as of December 31, 2013 and 2012, respectively, to customers with outstanding loans that are classified as TDR's. During the year ended December 31, 2012, the terms of certain loans were modified as TDR's. The modification of the terms generally included loans where an extension of the maturity date was granted at a stated rate of interest lower than the current market rate for new debt with similar risk. Such extensions ranged from two to five years on the loans restructured in 2012. There was also a restructuring of a participation purchase loan by the lead bank into an A note and a B note with differing repayments terms for both. No charge-off was recorded in conjunction with this A/B note restructure in 2012. The following table presents loans by class modified as TDR's that occurred during the year ended December 31, 2012: December 31, 2012 Construction and Land Development Commercial Real Estate Commercial Pre- Modification Recorded Investment Post- Modification Recorded Investment Number of Loans 1 4 4 9 $ 1,630,523 2,986,819 1,331,222 $ 1,630,523 3,013,648 1,331,222 $ 5,948,564 $ 5,975,393 There were no loans modified as TDR’s during the year ended December 31, 2013. The determination of the allowance for loan losses related to TDR's depends on the collectability of principal and interest, according to the repayment terms. The TDR's that occurred in 2012 did not materially change the estimated collectability and therefore did not materially change the related allowance for loan loss amounts. There were no defaults of TDR's in 2013 or 2012 where the loan was modified within the prior twelve months. Default for this purpose is defined as the loan being 90 days or more past due under the modified terms. RBB BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2013 AND 2012 NOTE D - LOANS - Continued The Company has purchased loans as part of its whole bank acquisitions, for which there was at acquisition, evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected. The outstanding balance and carrying amount of purchased credit-impaired loans as of December 31 were as follows: Outstanding Balance Carrying Amount 2013 3,086,000 1,996,000 $ $ 2012 5,060,000 3,907,000 $ $ For these purchased credit-impaired loans, the Company did not increase the allowance for loan losses during 2013 or 2012 as there were no significant reductions in the expected cash flows. Below is a summary of activity in the accretable yield on purchased credit-impaired loans for 2013 and 2012: Balance, Beginning of Year New Loans Purchased Disposals Restructuring as TDR Reclassification to Nonaccretable Accretion of Income $ 2013 1,681,966 - (301,618) - (437,253) (172,027) $ 2012 3,382,348 - (385,147) (906,730) - (408,505) Balance, End of Year $ 771,068 $ 1,681,966 Income is not recognized on certain purchased loans if the Company cannot reasonably estimate cash flows expected to be collected. The carrying amount of such loans was $0 and $1,544,056 at December 31, 2013 and 2012, respectively. RBB BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2013 AND 2012 NOTE E - PREMISES AND EQUIPMENT A summary of premises and equipment as of December 31 follows: Land and Buildings Leasehold Improvements Furniture, Fixtures, and Equipment Less Accumulated Depreciation and Amortization $ 2013 5,186,514 2,712,708 2,017,772 9,916,994 (2,771,320) 2012 $ 450,928 2,638,292 1,844,846 4,934,066 (2,141,940) $ 7,145,674 $ 2,792,126 Depreciation expense was $653,899 and $669,353 for 2013 and 2012, respectively. The Company leases several of its operating facilities under various noncancellable operating leases expiring at various dates through 2021. The Company is also responsible for common area maintenance, taxes and insurance at the various branch locations. Future minimum rent payments on the Company's leases were as follows as of December 31, 2013: 2014 2015 2016 2017 2018 Thereafter $ 1,370,137 1,265,521 1,259,292 1,087,973 775,710 598,041 6,356,674 $ The minimum rent payments shown above are given for the existing lease obligation and are not a forecast of future rental expense. Total rental expense, recognized on a straight-line basis, was approximately $1,234,490 and $1,106,000 for 2013 and 2012, respectively. NOTE F - DEPOSITS At December 31, 2013 the scheduled maturities of time deposits are as follows: One year Two to three years $ $ 291,296,490 2,866,865 294,163,355 RBB BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2013 AND 2012 NOTE G - BORROWING ARRANGEMENTS The Company has established secured lines of credit. The Company may borrow funds from time to time on a term or overnight basis from the Federal Home Loan Bank of San Francisco ("FHLB"), the Federal Reserve Bank of San Francisco ("FRB") and other financial institutions as indicated below. Federal Funds Arrangements with Commercial Banks. As of December 31, 2013 the Company may borrow on an unsecured basis, up to $15 million, $10 million, $12 million and $5 million overnight from Union Bank, Wells Fargo Bank, First Tennessee National Bank, and Pacific Coast Bankers' Bank, respectively. Letter of Credit Arrangements. As of December 31, 2013 the Company had an unsecured commercial letter of credit line with Wells Fargo Bank for $2 million. FRB Secured Line of Credit. The secured borrowing capacity of $101.1 million at December 31, 2013 is collateralized by loans pledged with a carrying value of $152.0 million. FHLB Secured Line of Credit. The secured borrowing capacity of $87.5 million at December 31, 2013 is collateralized by loans pledged with a carrying value of $112.4 million. There was $7 million outstanding with the FHLB as of December 31, 2013, which matures on January 6, 2014 and carries an interest rate of 0.16%. There were no amounts outstanding under any of the arrangements above as of December 31, 2012. NOTE H - INCOME TAXES The asset and liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Income tax expense consists of the following: Current: Federal State Deferred 2013 2012 $ 3,081,182 948,312 4,029,494 1,281,000 $ 1,351,268 226,724 1,577,992 1,417,000 $ 5,310,494 $ 2,994,992 RBB BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2013 AND 2012 NOTE H - INCOME TAXES - Continued A comparison of the federal statutory income tax rates to the Company's effective income tax rates at December 31 follows: Statutory Federal Tax State Franchise Tax, Net of Federal Benefit Other Items, Net 2013 2012 $ Amount 4,187,000 907,000 216,494 Rate 34.0% 7.4% 1.8% $ Amount 2,394,000 521,000 79,992 Rate 34.0% 7.4% 1.1% Actual Tax Expense $ 5,310,494 43.1% $ 2,994,992 42.5% Deferred taxes are a result of differences between income tax accounting and generally accepted accounting principles with respect to income and expense recognition. The following is a summary of the components of the net deferred tax asset accounts recognized in the accompanying statements of financial condition at December 31: Deferred Tax Assets: Pre-Opening Expenses Allowance For Loan Losses Stock-Based Compensation Off Balance Sheet Reserve Operating Loss Carryforwards Other Real Estate Owned Acquisition Accounting Fair Value Adjustments Unrealized Loss on AFS Securities Other Deferred Tax Liabilities: Depreciation Unrealized Gain on AFS Securities Other Net Deferred Tax Assets 2013 2012 $ 349,000 2,173,000 1,482,000 297,000 1,493,000 1,320,000 1,804,000 202,000 1,324,000 10,444,000 $ 603,000 1,751,000 1,096,000 476,000 18,000 1,759,000 1,190,000 - 624,000 7,517,000 (1,124,000) - (660,000) (1,784,000) 8,660,000 $ - (1,085,000) (428,000) (1,513,000) 6,004,000 $ RBB BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2013 AND 2012 NOTE H - INCOME TAXES - Continued The Company has net operating loss carryforwards of approximately $3.2 million for federal income and approximately $5.5 million for California franchise tax purposes. Net operating loss carry forwards, to the extent not used will begin to expire in 2027. Net operating loss carryforwards available from acquisitions are substantially limited by Section 382 of the Internal Revenue Code and benefits not expected to be realized due to the limitation have been excluded from the deferred tax asset and net operating loss carryforward amounts noted above. The Company is subject to federal income tax and franchise tax of the state of California. Income tax returns for the years ending after December 31, 2009 are open to audit by the federal authorities and for the years ending after December 31, 2008 are open to audit by California state authorities. NOTE I - COMMITMENTS In the ordinary course of business, the Company enters into financial commitments to meet the financing needs of its customers. These financial commitments include commitments to extend credit, unused lines of credit, commercial and similar letters of credit and standby letters of credit. Those instruments involve to varying degrees, elements of credit and interest rate risk not recognized in the Company's financial statements. The Company's exposure to loan loss in the event of nonperformance on these financial commitments is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments as it does for loans reflected in the financial statements. As of December 31, 2013 and 2012, the Company had the following financial commitments whose contractual amount represents credit risk: Commitments to Make Loans Unused Lines of Credit Commercial and Similar Letters of Credit Standby Letters of Credit 2013 2012 $ 49,186,312 75,736,453 28,260,791 3,340,000 $ 46,408,020 56,925,753 43,420,144 2,139,481 $ 156,523,556 $ 148,893,398 Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Since many of the commitments are expected to expire without being drawn upon, the total amounts do not necessarily represent future cash requirements. The Company evaluates each client's credit worthiness on a case-by-case basis. The amount of collateral obtained if deemed necessary by the Company is based on management's credit evaluation of the customer. RBB BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2013 AND 2012 NOTE J - RELATED PARTY TRANSACTIONS Loans granted to executive officers, directors and their related interests with which they are associated totaled approximately $7,600,000 and $5,700,000 as of December 31, 2013 and 2012, respectively. Loan commitments outstanding to executive officers, directors and their related interests with which they are associated totaled approximately $3,400,000 and $9,500,000 as of December 31, 2013 and 2012, respectively. Deposits from executive officers, directors and their related interests with which they are associated held by the Company at December 31, 2013 and 2012 amounted to approximately $39,672,000 and $43,748,000, respectively. NOTE K - STOCK OPTION PLAN Under the terms of the Company's 2010 Stock Option Plan, officers and key employees may be granted both nonqualified and incentive stock options and directors and organizers, who are not also an officer or employee, may only be granted nonqualified stock options. The Plan provides for options to purchase up to 30 percent of the outstanding common stock at a price not less than 100 percent of the fair market value of the stock on the date of the grant. Stock options expire no later than ten years from the date of the grant and generally vest over three years. The Company recognized stock-based compensation expense of $1,436,309 and $293,500 in 2013 and 2012 and recognized income tax benefits on that expense of $446,595 and $45,551, respectively. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions presented below: Expected Volatility Expected Term Expected Dividends Risk Free Rate Grant Date Fair Value 2013 35.0% 5.6 Years None 1.06% 4.23 $ 2012 35.0% 6.2 Years None 1.16% 3.79 $ Since the Company has a limited amount of historical stock activity the expected volatility is based on the historical volatility of similar banks that have a longer trading history. The expected term represents the estimated average period of time that the options remain outstanding. Since the Company does not have sufficient historical data on the exercise of stock options, the expected term is based on the "simplified" method that measures the expected term as the average of the vesting period and the contractual term. The risk free rate of return reflects the grant date interest rate offered for zero coupon U.S. Treasury bonds over the expected term of the options. RBB BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2013 AND 2012 NOTE K - STOCK OPTION PLAN - Continued A summary of the status of the Company's stock option plan as of December 31, 2013 and changes during the year then ended is presented below: Weighted- Average Remaining Contractual Term Aggregate Intrinsic Value Weighted- Average Exercise Price $ $ $ $ 10.10 12.00 10.00 10.89 Shares 1,537,242 769,500 (16,000) (40,500) Outstanding at Beginning of Year Granted Exercised Forfeited or Expired Outstanding at End of Year 2,250,242 $ 10.84 6.7 Years $ 7,610,253 Options Exercisable 1,314,076 $ 10.11 5.2 Years $ 5,398,900 As of December 31, 2013 there was approximately $2,630,000 of total unrecognized compensation cost related to outstanding stock options that will be recognized over a weighted-average period of 1.5 years. The intrinsic value of options exercised was $36,000 and $34,000 in 2013 and 2012, respectively. NOTE L - REGULATORY MATTERS Holding companies (with assets over $500 million at the beginning of the year) and banks are subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory - and possibly additional discretionary - actions by regulators that, if undertaken, could have a direct material effect on the Company's financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, RBB Bancorp and the Bank must meet specific capital guidelines that involve quantitative measures of RBB Bancorp's and the Bank's assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. Capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors. Quantitative measures established by regulation to ensure capital adequacy require RBB Bancorp and the Bank to maintain minimum amounts and ratios (set forth in the table below) of total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of December 31, 2013 and 2012, that RBB Bancorp and the Bank meet all capital adequacy requirements to which it is subject. As of December 31, 2013, the most recent notification from the FDIC categorized the Bank as well-capitalized under the regulatory framework for prompt corrective action (there are no conditions or events since that notification that management believes have changed the Bank's category). To be categorized as well-capitalized, the Bank must maintain minimum ratios as set forth in the table below. RBB BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2013 AND 2012 NOTE L - REGULATORY MATTERS - Continued The following table sets forth the RBB Bancorp's and Bank's actual capital amounts and ratios and related regulatory requirements as of December 31, 2013 and 2012 (dollar amounts in thousands): Amount of Capital Required Actual For Capital Adequacy Purposes To Be Well- Capitalized Under Prompt Corrective Provisions Amount Ratio Amount Ratio Amount Ratio $ $ 141,079 116,717 23.5% 19.6% $ $ 48,094 47,620 8.0% 8.0% NA 59,525 $ NA 10.0% $ $ 133,555 109,266 22.2% 18.4% $ $ 24,047 23,810 4.0% 4.0% NA 35,715 $ $ $ 133,555 109,266 18.5% 15.3% $ $ 28,841 28,600 4.0% 4.0% NA 35,750 $ NA 6.0% NA 5.0% $ $ 108,667 97,652 26.8% 24.1% $ $ 32,444 32,442 8.0% 8.0% NA 40,552 $ NA 10.0% $ $ 103,558 92,543 25.5% 22.8% $ $ 16,222 16,221 4.0% 4.0% NA 24,331 $ $ $ 103,558 92,543 17.5% 15.6% $ $ 23,670 23,691 4.0% 4.0% NA 29,614 $ NA 6.0% NA 5.0% As of December 31, 2013: Total Capital (to Risk-Weighted Assets) Consolidated Bank Tier 1 Capital (to Risk-Weighted Assets) Consolidated Bank Tier 1 Capital (to Average Assets) Consolidated Bank As of December 31, 2012: Total Capital (to Risk-Weighted Assets) Consolidated Bank Tier 1 Capital (to Risk-Weighted Assets) Consolidated Bank Tier 1 Capital (to Average Assets) Consolidated Bank The California Financial Code generally acts to prohibit banks from making a cash distribution to its shareholders in excess of the lesser of the bank's undivided profits or the bank's net income for its last three fiscal years less the amount of any distribution made by the bank's shareholders during the same period. RBB BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2013 AND 2012 NOTE L - REGULATORY MATTERS - Continued The California general corporation law generally acts to prohibit companies from paying dividends on common stock unless its retained earnings, immediately prior to the dividend payment, equals or exceeds the amount of the dividend. If a company fails this test, then it may still pay dividends if after giving effect to the dividend the company's assets are at least 125% of its liabilities. Additionally, the Federal Reserve Bank has issued guidance which requires that they be consulted before payment of a dividend if a bank holding company does not have earnings over the prior four quarters of at least equal to the dividend to be paid, plus other holding company obligations. NOTE M - FAIR VALUE MEASUREMENTS The following is a description of valuation methodologies used for assets and liabilities recorded at fair value: Securities: The fair values of securities available for sale are determined by obtaining quoted prices on nationally recognized securities exchanges (Level 1) or matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for specific securities but rather by relying on the securities' relationship to other benchmark quoted securities (Level 2). Other Real Estate Owned: Nonrecurring adjustments to certain commercial and residential real estate properties classified as other real estate owned are measured at the lower of carrying amount or fair value, less costs to sell. In cases where the carrying amount exceeds the fair value, less costs to sell, an impairment loss is recognized. Fair values are generally based on third party appraisals of the property which are commonly adjusted by management to reflect an expectation of the amount to be ultimately collected and selling costs (Level 3). Appraisals for other real estate owned are performed by state licensed appraisers (for commercial properties) or state certified appraisers (for residential properties) whose qualifications and licenses have been reviewed and verified by the Company. When a Notice of Default is recorded, an appraisal report is ordered. Once received, a member of the credit administration department reviews the assumptions and approaches utilized in the appraisal as well as the overall resulting fair value in comparison to independent data sources such as recent market data or industry wide-statistics for residential appraisals. Commercial appraisals are sent to an independent third party to review. The Company also compares the actual selling price of collateral that has been sold to the most recent appraised value to determine what additional adjustments, if any, should be made to the appraisal values on any remaining other real estate owned to arrive at fair value. If the existing appraisal is older than twelve months a new appraisal report is ordered. No significant adjustments to appraised values have been made as a result of this comparison process as of December 31, 2013. RBB BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2013 AND 2012 NOTE M - FAIR VALUE MEASUREMENTS - Continued The following table provides the hierarchy and fair value for each major category of assets and liabilities measured at fair value at December 31, 2013 and 2012: December 31, 2013 Assets Measured at Fair Value: On a Recurring Basis: Securities Available for Sale On a Non-Recurring Basis: Other Real Estate Owned December 31, 2012 Assets Measured at Fair Value: On a Recurring Basis: Securities Available for Sale On a Non-Recurring Basis: Other Real Estate Owned Fair Value Measurements Using: Level 2 Level 1 Level 3 Total $ - $ 61,547,620 $ - $ 61,547,620 $ - $ - $ 1,510,852 $ 1,510,852 $ - $ 169,839,256 $ - $ 169,839,256 $ - $ - $ 1,424,765 $ 1,424,765 No write-downs from the original value of OREO have been recorded in 2013 or 2012. Quantitative information about the Company's non-recurring Level 3 fair value measurements as of December 31, 2013 and 2012 is as follows: December 31, 2013 Other Real Estate Owned Fair Value Amount 1,510,852 $ December 31, 2012 Other Real Estate Owned $ 1,424,765 Unobservable Input Valuation Technique Third Party Management Adjustments Appraisals to Reflect Current Conditions and Selling Costs Adjustment Range 0 - 69% Weighted- Average Adjustment 30% Third Party Management Adjustments Appraisals to Reflect Current Conditions and Selling Costs 0 - 58% 31% RBB BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2013 AND 2012 NOTE N - FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value of a financial instrument is the amount at which the asset or obligation could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Fair value estimates are made at a specific point in time based on relevant market information and information about the financial instrument. These estimates do not reflect any premium or discount that could result from offering for sale at one time the entire holdings of a particular financial instrument. Because no market value exists for a significant portion of the financial instruments, fair value estimates are based on judgments regarding future expected loss experience, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature, involve uncertainties and matters of judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates. Fair value estimates are based on financial instruments both on and off the balance sheet without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Additionally, tax consequences related to the realization of the unrealized gains and losses can have a potential effect on fair value estimates and have not been considered in many of the estimates. The following methods and assumptions were used to estimate the fair value of significant financial instruments not previously presented: Cash and Cash Equivalents The carrying amounts of cash and short-term instruments approximate fair values. Time Deposits in Other Banks Fair values for time deposits with other banks are estimated using discounted cash flow analyses, using interest rates currently being offered with similar terms. Loans For variable rate loans that reprice frequently and with no significant change in credit risk, fair values are based on carrying amounts. The fair values for all other loans are estimated using discounted cash flow analyses, using interest rates currently being offered for loans with similar terms to borrowers with similar credit quality. The methods utilized to estimate the fair value of loans do not necessarily represent an exit price. Federal Home Loan Bank Stock and Other Bank Stock The fair value of Federal Home Loan Bank Stock and other Bank stock is not readily determinable due to the lack of its transferability. RBB BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2013 AND 2012 NOTE N - FAIR VALUE OF FINANCIAL INSTRUMENTS - Continued Deposits The fair values disclosed for demand deposits, including interest and non-interest demand accounts, savings, and certain types of money market accounts are, by definition based on carrying value. Fair value for fixed-rate certificates of deposit is estimated using a discounted cash flow calculation that applies interest rates currently being offered on certificates to a schedule of aggregate expected monthly maturities on time deposits. Early withdrawal of fixed-rate certificates of deposit is not expected to be significant FHLB Advances The carrying amounts of short-term debt with maturities of less than ninety days, such as FHLB Advances, approximate their fair values. Off-Balance Sheet Financial Instruments The fair value of commitments to extend credit and standby letters of credit is estimated using the fees currently charged to enter into similar agreements. The fair value of these financial instruments is not material. The fair value hierarchy level and estimated fair value of significant financial instruments at December 31, 2013 and 2012 are summarized as follows (dollar amounts in thousands): Financial Assets: Cash and Due From Banks Federal Funds Sold and Other Cash Equivalents Interest-Bearing Deposits in Other Financial Institutions Investment Securities - AFS Investment Securities - HTM Loans, Net Financial Liabilities: Deposits FHLB Advances 2013 2012 Fair Value Hierarchy Carrying Value Fair Value Carrying Value Fair Value Level 1 $ 23,774 $ 23,774 $ 32,508 $ 32,508 Level 1 12,000 12,000 29,500 29,500 Level 1 Level 2 Level 2 Level 3 100 61,547 6,742 569,080 100 61,547 7,047 570,498 - 169,839 7,125 320,194 - 169,839 7,855 322,633 Level 2 Level 2 574,079 7,000 574,071 7,000 442,678 - 444,128 - RBB BANCORP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2013 AND 2012 NOTE O - EARNINGS PER SHARE ("EPS") The following is a reconciliation of net income and shares outstanding to the income and number of shares used to compute EPS: 2013 2012 Income Shares Income Shares $ 7,003,720 $ 4,046,210 Net Income as Reported Shares Outstanding at Year End Impact of Weighting Shares Purchased During the Year Used in Basic EPS 7,003,720 Dilutive Effect of Outstanding Stock Options 11,658,259 871,577) ( 10,786,682 246,822 4,046,210 9,714,411 ( 1,420,494) 8,293,917 60,690 Used in Dilutive EPS $ 7,003,720 11,033,504 $ 4,046,210 8,354,607 Stock options for 417,750 and 71,250 shares of common stock were not considered in computing diluted earnings per common share for 2013 and 2012 because they were anti-dilutive. Administrative Office Alan Thian President and Chief Executive Officer (626) 307-7588; (213) 533-7928 Branch Administration Tsu-Te Huang Senior Vice President and Branch Administrator (626) 307-7508 Vincent Liu Executive Vice President and Chief Operations Officer (626) 307-7505 Simon Pang Executive Vice President and Chief Strategic Officer / Regional Offices Coordinator (626) 307-7555 Finance Department David Morris Executive Vice President / Chief Financial Officer (213) 533-7918 Karen Comer, CPA Senior Vice President / Controller (213) 533-7910 Credit Administration Jeffrey Yeh Senior Vice President / Acting Chief Credit Officer (626) 307-7556 Keith Thomas Senior Vice President / Special Assets Manager (702) 405-2525 Eddie Chow First Vice President / Credit Administrator (626) 307-7525 Risk Management Department Sophy Chu Vice President / Compliance Officer (213) 533-7906 Jun No Vice President / BSA Officer (213) 533-7911 Operations Administration Esther Chu First Vice President and Operations Administrator (213) 533-7926 Legal Counsel Alberto G. Alvarado Senior Advisor and Counsel (626) 307-7562 Information Technology Department William Sanchez First Vice President / Chief Information Officer (714) 228-5860 Commercial Lending Division (38) Derek (Wai-Hung) Lee First Vice President / Sr. Lending Officer (626) 307-7545 Commercial Lending Division (39) Cary Niu Senior Vice President / Head-Commercial Lending (626) 322-1218 Commercial Real Estate Lending / Construction Lending Department Nonie Cheung Senior Vice President and Manager (626) 307-7566 Residential Mortgage Loan Division Larsen Lee Senior Vice President / Director of Mortgage Lending (213) 533-7919 SBA Lending Division John Liu First Vice President / Relationship Manager (714) 670-2400 x 212 Franchise Finance Department Richard Combs First Vice President / Director of Franchise Finance (714) 670-2400 x 223 International Trade Operations Jay (Justo) Gonzalez Vice President and Central Operations Manager (213) 533-7902 Catherine Wang First Vice President / International Banking Manager (626) 307-7551 Branches San Gabriel Branch Ashley Chang Vice President and Branch Manager 123 East Valley Boulevard, Suite 101 San Gabriel, CA 91776 (626) 307-7503 Torrance Branch Grace Lin Assistant Vice President and Service Manager 23740 Hawthorne Boulevard, Suite 103 Torrance, CA 90505 (310) 602-4519 Rowland Heights Branch Fanny Fan Assistant Vice President and Branch Manager 1015 South Nogales Street, Unit 121 & 122A Rowland Heights, CA 91748 (626) 322-1208 Monterey Park Branch Janet Tsai Senior Vice President and Branch Manager 700 West Garvey Avenue Monterey Park, CA 91754 (626) 570-4807 L.A. Silver Lake Branch Juan Sandoval Assistant Vice President and Branch Manager 1912 Sunset Boulevard Los Angeles, CA 90026 (213) 989-1004 Office Addresses Corporate Headquarters 660 South Figueroa Street, Suite 1888 Los Angeles, CA 90017 (213) 627-9888 Loan Production Office 18605 East Gale Avenue, Suite 238 City of Industry, CA 91748 (626) 322-1220 Spring Mountain Branch Nikki Guo Vice President and Branch Manager 3919 Spring Mountain Road Las Vegas, NV 89102 (702) 405-2519 Buena Park Branch Annie Chuang Operations Officer 7025 Orangethorpe Avenue Buena Park, CA 90621 (714) 670-2495 Westlake Village Branch Thushara Liyanage Vice President and Business Development Officer 600 Hampshire Road, Suite 100 Westlake Village, CA 91361 (805) 288-4140 Oxnard Branch Thushara Liyanage Vice President and Business Development Officer 366 West Esplanade Drive Oxnard, CA 93036 (805) 288-4140 San Gabriel Offices 123 East Valley Boulevard, Suite 201 San Gabriel, CA 91776 (626) 307-7500 

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