Downtown-based American Business Bank reported record annual net income of $48.6 million in its fourth quarter and full-year results following a year of steady growth.
“Our team is pleased to report record annual net income for 2022 as well as achieving a 1.46% return on average assets for the fourth quarter,” Leon Blankstein, the bank’s president and chief executive, said in a statement. “These are wonderful milestones for our bank, but many factors are changing quickly, especially interest rates, over the past several months.”
ABB benefitted from rising interest rates in the last year, but according to Blankstein, the rates are starting to have an adverse effect as the federal government draws liquidity from the financial system at competitive rates. Interest income on the bank’s loans increased by $2.9 million.
The bank’s loan pipeline has remained “solid” according to Blankstein but has been impacted by the higher rate environment and slowing economy.
“At year-end 2022, our deposits decreased $207 million, or 6%, from a year ago, and we are borrowing overnight to fill that gap,” Blankstein said. “We continue to be a strong core deposit franchise and will be leaning into that strength, focusing on gathering core deposits to replace those borrowings.”
For the fourth quarter, net interest income was $34.6 million, an increase of $2.3 million compared to the previous quarter. The increase was the result of the bank’s loan growth and increases in market rates on loans and investment securities that were offset by the reduction in PPP loan income.
PPP, or Paycheck Protection Program, netted American Business Bank $2.9 million worth of income last year, a significant decrease from the $12.4 million it received in 2021, when the program ended. As of January 19, approximately 99% of PPP loans have been forgiven. Of the 13 remaining PPP loans under American Business Bank, four are in the forgiveness review or submission process.
Real estate contributed to the bank’s loan growth as well. During the fourth quarter, commercial real estate loans increased by $78 million, primarily due to an increase of $52 million in owner-occupied commercial real estate and $44 million in non-owner-occupied commercial real estate.
Both figures were offset by a decrease of $18 million in construction and land loans, primarily due to three loan payoffs. As of the fourth quarter, the bank’s total commercial real estate loans totaled $1.72 billion.
“We look forward to 2023 and continuing to deliver superior service and solutions throughout the entire economic cycle for small to mid-size businesses in Southern California,” Blankstein said in a statement.