LOS ANGELES–(BUSINESS WIRE)–AMERICAN BUSINESS BANK (OTCQX: AMBZ) today reported net income of $15.9 million or $1.73 per fully diluted share for the quarter ended March 31, 2026 compared to $14.8 million or $1.61 per fully diluted share for the quarter ended December 31, 2025, and $11.9 million or $1.27 per fully diluted share for the quarter ended March 31, 2025, representing an increase of 7% and 33%, respectively.

“We are pleased with our record earnings, earnings per share growth; and return on equity of more than 15% this quarter. This performance enabled the Bank to increase its dividend payout in only the second year of paying cash dividends. None of this would have been possible without our exceptional clients and dedicated team, for which I am grateful,” said Leon Blankstein, Chief Executive Officer, President, and Director.

“First quarter results benefited from both loan growth and repricing, all at higher rates than the existing portfolio. Even on a core basis, the loan yield increased from the prior quarter despite the prime rate decline in December. Loans grew at a healthy pace in the first quarter as compared to peers. In today’s uncertain environment, clients appear cautious; by contrast, last year, existing customers helped drive double-digit loan growth. Looking ahead, we expect overall net loan growth to be lower this year than last year. While we expect new, high-quality customer relationships to contribute to growth, we anticipate limited loan growth in the second quarter due to loan payoffs but overall resulting in moderate growth for the year.”

“Non-interest bearing deposits continue to represent 46% of total deposits and grew 4.28% year over year. Total deposits declined in the first quarter as seasonal needs were higher than normal, primarily due to distributions for tax payments. Our pipeline of new customer relationships remains strong.”

For the quarter ended March 31, 2026, net interest income was $41.7 million, a 20% increase compared to the prior year quarter. The higher balance of average loans, an increase in loan yields, and a decrease in the cost of deposits, all contributed to the increase in net interest income compared to the prior year quarter. Included in net interest income during the quarter was a non-recurring, special FHLB dividend of $430 thousand.

The allowance for credit losses as a percentage of loans was 1.11% and 1.10% at March 31, 2026 and December 31, 2025, respectively. A provision of $1 million was recorded for the quarter to increase the allowance for credit losses primarily due to growth in the loan portfolio.

Recently, certain investments with longer duration and below market yields were sold opportunistically. The following table presents net income excluding the after-tax losses on sales of investment securities to arrive at core net income:

Core net income declined from the prior quarter, primarily due to lower net interest income attributable to fewer days in the quarter.

Net Interest Margin

The net interest margin for the first quarter of 2026 increased to 3.93% from 3.78% for the prior quarter and 3.47% for the prior year quarter. The increase compared to the prior quarter is primarily due to an increase in the balance of average loans, a higher loan to deposit ratio, lower interest rates on deposits and the non-recurring, special FHLB dividend. Without the non-recurring events in the quarter, the core net interest margin would have been 3.89%. The loan yield for the month of March was 5.69%. As of March 31, 2026, 55% of the loan portfolio was fixed rate with a weighted average remaining life of 60 months. In the next 12 months, $140 million of fixed rate loans currently yielding 4.6% will mature, and $75 million of hybrid loans currently yielding 4.3% will reprice. Approximately 45% of variable rate loans are indexed to prime of which $572 million are adjustable within 90 days of a change in the prime rate. The Bank has experienced net interest margin expansion for the past seven consecutive quarters.

Net Interest Income

For the quarter ended March 31, 2026, net interest income decreased by $108 thousand, or 0.3%, compared to the quarter ended December 31, 2025 primarily due to fewer days in the quarter offset by growth in loans and a decrease in the cost of deposits. Compared to the quarter ended March 31, 2025, net interest income increased by $6.9 million, or 20%, in the quarter ended March 31, 2026. The increase in net interest income is primarily due to an increase in the average balance of loans with higher interest rates and a decrease in the cost of deposits. Interest income was further enhanced in the first quarter of 2026 by a non-recurring, special FHLB dividend of $430 thousand. For the quarter ended March 31, 2026, the cost of deposits was 0.97% representing a decrease of 5 bps compared to the quarter ended December 31, 2025. This decrease is primarily due to lower interest rates paid on money market, savings and certificate of deposit accounts. The loan-to-deposit ratio was 79% as of March 31, 2026, 77% as of December 31, 2025, and 75% as of March 31, 2025, respectively.

Provision for Credit Losses

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

Non-Interest Income

The increase in non-interest income compared to the prior quarter and the decrease in non-interest income compared to the prior year quarter are primarily due to the amount of realized losses on the sale of investment securities with longer durations and below market yields.

Non-Interest Expense

For the quarter ended March 31, 2026, total non-interest expense increased $1.0 million and $1.6 million compared to the prior quarter and the prior year quarter, respectively. This increase over the prior quarter is mainly due to an increase in bonuses as the prior quarter benefitted from an over accrual of estimated bonus payments offset by a decrease in deferred compensation expense as the stock market performance was weaker than in the prior quarter. The increase over the prior year quarter was primarily due to an increase in salaries and bonuses commensurate with increased profitability. The efficiency ratio increased to 47% for the first quarter compared to 44% for the fourth quarter and decreased from 52% for the first quarter of 2025.

There were 252 full time equivalent employees at March 31, 2026 compared to 255 at December 31, 2025 and 252 at March 31, 2025. The Bank had 43 relationship managers in ten offices compared to 42 relationship managers at December 31, 2025 and 48 at March 31, 2025.

Income Taxes

The effective income tax rate was 25.6% for the quarter ended March 31, 2026, 27.9% for the quarter ended December 31, 2025, and 27.6% for the quarter ended March 31, 2025. This reduction is a result of an increase in excess tax benefit on current year restricted stock vesting. Without this excess tax benefit, the effective income tax rate would be 28.0%.

Balance Sheet

For the quarter ended March 31, 2026, total loans increased $51 million, or 2% compared to the prior quarter. The majority of this quarter’s increase in loan balances was in Commercial and Industrial (C&I) loans, primarily due to an increase in the Bank’s commercial lines of credit. At March 31, 2026, the utilization rate for the Bank’s commercial lines of credit was 30%, a 1% decrease compared to December 31, 2025 and a 1% 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 March 31, 2026 were $1 billion including $515 million (52%) 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 5.6 years as of March 31, 2026 and December 31, 2025, and 5.9 years as of March 31, 2025. Accumulated other comprehensive loss (AOCI) increased to $54.1 million as of March 31, 2026 from $52.9 million as of December 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 8.0 years. As of March 31, 2026, the unrealized after tax loss on HTM securities was $64 million.

Deposits declined by $50 million or 1% to $3.9 billion in the quarter ended March 31, 2026. The decline in the quarter was a result of a decrease of $68 million in money market and savings deposits due to seasonal distributions to owners and the loss of one customer’s deposits to an investment fund. This was offset by an increase of $31 million in customer certificates of deposit which had previously been held off balance sheet. For the first quarter, new deposit relationships have totaled approximately $5 million from 28 new clients. The Bank has never had brokered or internet-solicited deposits. The ratio of non-interest bearing deposits to total deposits was 46%, 45% and 45% at March 31, 2026, December 31, 2025 and March 31, 2025, respectively.

During the first quarter of 2026, total assets decreased $35 million, total investment securities decreased by $31 million, total loans increased by $51 million, and total deposits decreased by $50 million. As of March 31, 2026, 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 first quarter of 2026.

Capital Management

For the quarter ended March 31, 2026, total shareholders’ equity increased by $10 million to $422 million. During the quarter, the Bank declared and paid a cash dividend of $0.30 per share, totaling $2.7 million, and repurchased 15,000 shares of common stock at a weighted average price of $69.60, totaling $1.04 million.

The Bank’s Board of Directors has an authorized stock repurchase program for 205,453 shares, or approximately 2.3% of the Bank’s outstanding shares of common stock, which expires in August 2026. The Bank has already repurchased 37% of this authorization leaving 128,889 shares to be repurchased in the current authorization.

Asset Quality

The following table presents an overview of asset quality:

During the first quarter of 2026, non-performing assets increased by $1.7 million due to three relationships consisting of a C&I SBA loan, an owner occupied CRE loan and a non-owner occupied CRE loan. As of March 31, 2026, NPAs have a $711 thousand allowance on individually evaluated loans related to six non-performing C&I loans.

“Although no single industry is predominate in the NPA portfolio, the majority of the Bank’s NPAs are now managed through exit-oriented workouts (e.g. payoffs) rather than customer-focused restructurings intended to return loans to performing status in the past,” commented Jeffrey Munson, Executive Vice President and Chief Credit Officer (CCO).

The loan portfolio has approximately 9% 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 66% of total loans while non-owner occupied represent 25% of total loans.

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 $34.5 million during the first quarter of 2026 as a result of growth in the loan portfolio and a higher allowance on individually evaluated loans. There were no charge-offs and recoveries of $1 thousand in the first quarter of 2026. Three relationships totaling $5 million were restructured in the past twelve months 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 nine 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, Southern Inland Empire in Corona, Inland Empire in Ontario, Riverside County in Downtown Riverside, 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.