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1998estd
TECHNOLOGY changesFUNDAMENTALS don’t
Robert F. Schack chairman
Wes E. Schaefer vice chairman
Robin C. Patersonexecutive vice president
Leon I. Blanksteinpresident & ceo
Entrepreneurs are the backbone of the American economy. They provide over half of all new job creation, they provide the vast majority of all innovation and are central to the American way of life.
Entrepreneurs are also survivors. They have shown that despite the booms, busts, over-regulation and technological changes that they do, indeed, adapt and survive.
As entrepreneurs, ourselves, American Business Bank has not only survived, but prospered in the past decade. We have done so for one simple reason - having true relationships with each and every one of our clients.
The year 2014 was yet another successful one for our bank. A few of our accomplishments are worthy of note:
• The addition of nearly 90 new relationships
• Deposit growth of more than 10%
• Loan growth of nearly 14%
• Core earnings growth of more than 17%
• Return on equity of 10%
• Being named one of the 50 most profitable banks in the U.S. by American Banker Magazine
• Once again being named a Super Premier Performing Bank by the Findley Companies
While we are rightfully proud of these results, they merely reflect the quality and determination of our clients to succeed. It’s our responsibility to listen to them, to contribute our thoughts and to support them in their success. That’s what relationship banking is all about.
from the
MANAGEMENT
1420
“the process of industrial mutation
that incessantly revolutionizes the
economic structure from within,
incessantly destroying the old one,
incessantly creating a new one.”
creative destruction
Creative destruction has been a major component of capitalism for all time. What’s changing, however, is the pace of this creative destruction brought about by technology. Whole industries are being overturned with technological advancements. UBER is a perfect example. The whole regulated taxi industry, with its virtual monopoly on the urban transportation business, is being replaced with non-regulated, easy-entry transportation alternative. It’s happened very quickly. People love it. And it’s here to stay.
The creative destruction, exemplified by UBER, is beginning to be seen in the banking business as well.
Will the banking industry be UBER’ed?
74%
Most consumers can imagine they’ll bank 100% digitally in the future
Consumers who agree with the statement, “I can envision a day when I’ll do all my banking virtually.”
most major payment innovations have occurred in the last 15 years
credit cards
NFC
online banking
debit cards
paypal launched
mobile banking mobile e-wallets
ATMs
NFC
p2p mobile payments
mobile check deposits
coin cards
4,000
6,000
8,000
10,000
12,000
14,000
16,000
1975 1980 1985 1990 1995 2000 2005 2010 2015
branch
1-2 timesper month
20-30 timesper month
mobile
7-10 timesper month
desktop
5-10 timesper month
call center
3-5 timesper month
atm
Changes in Number ofFDIC-Insured Commercial Banks
projected in 2016
monthly banking channel
interactions
Historically, banks have existed to meet three broad financial needs: To facilitate payments, to provide loans and to give advice. Today, there seems to be an app for everything. We have the ability to use our smart phones to perform all the depository banking functions that we used to have to stand in line to do. Parallel payment systems, like PayPal, facilitate funds transfers without the use of any bank. Even digital currencies are beginning to appear — Bitcoin and Boston Bean come to mind. The lending side has also been breached by crowd sourcing and peer to peer lending, with the likes of Lending Club and Prosper appearing in the market.
Banks, today, are scrambling to get ahead of this trend by embracing the technology in order to remain relevant. Banking in the future will certainly be faster, more convenient and more democratized than it has been in the past. It will also continue to become more and more of a commodity.
WHAT ARE WE GIVING UP?
So,
The answer is the third leg of the traditional banking stool — the advisory, relationship roles of the bank and the customer.
All of the technological advancements in the new era, just described, are transactional in nature. Big banks, in particular, have surrendered the advisory relationship role they traditionally played in favor of speed, accuracy and price.
We believe that the business banking client of the future will demand all of the new technology, as a given. We also believe, however, that as we become more connected electronically, we will need to connect more strongly on a personal level. American Business Bank’s relationships are designed to do just that — to help solve problems and take advantage of opportunities.
no app there’s
At American Business bank, we
realize relationships can not be
created with a touch of a button.
Rather, it is something tangible
that produces tangible results.
no app for this
deposit growth ($millions)
1400
1050
700
350
0201420132010 2011 2012
Our ability to listen strengthens relationships which in turn, grows deposits. Deposits increased more than 10% during the year, reflecting the bank’s continuing growth in our client base.
some people hear, we listenOne of the keys to our success over time is that we actually listen to our clients with the intent to understand. We ask questions. We provide feedback. We act. One size does not fit all.
we don’t leave relationships to chanceReal relationships take work. To us, it means that, as a bank, we must invest time with individuals, to develop understanding and to foster mutual trust. If we’re doing our jobs right, our clients will know how we think, every bit as much as our knowing how they think.
1
2
3we put the pieces together - togetherAt inception, we built American Business Bank the way that you would have designed it to meet your banking needs. This means, talented, interested bankers, who are not afraid to consult with their clients, are empowered to act on their behalf and are involved enough to respond to our ever-changing environment. That was our promise at the beginning, and it remains our promise today.
ASSET GROWTH($ millions)Asset growth of 14% reflects an increase in our loan portfolio and a continued shift toward more liquidity in our investment portfolio, as we anticipate higher interest rates.
NET LOANS OUTSTANDING($ millions)Loans increased nearly 14% during 2014. This is a result of continued market share growth, along with a marginal improvement in our economy.
1600
1200
800
400
0201420132010 2011 2012
700
525
350
175
0201420132010 2011 2012
NET PROFIT($ thousands)American Business Bank increased our core earnings, this year by over 17%. Total profits were down from the prior year, due to management’s decision to harvest unrealized bond gains into income in 2013.
core earnings total earnings
Financials
14000
10500
7000
3500
0201420132010 2011 2012
ADJUSTED BOOK VALUE PER SHARE
($ dollars)American Business Bank has nearly doubled its book value over the past five years through retention of earnings, negligible credit losses
and prudent investment management.
$140
$105
$70
$35
$0201420132010 2011 2012
15
11.25
7.5
3.75
0201420132010 2011 2012
CAPITAL AND RESERVES
($ millions)We continue to grow our capital through retention of earnings and by adding to our reserves, at a time when other banks are
reducing them.
ASSETS PER EMPLOYEE
($ millions)American Business Bank’s business model is efficient. Our assets per employee remain among the best in the industry, approximately double the industry average.
170
128
85
43
0201420132010 2011 2012
MARKET CAPITALIZATION
($ millions)While we don’t try to drive stock price, American Business Bank’s market value has
steadily grown since inception.
20.0
15.0
10.0
5.0
0201420132010 2011 2012
We are a legacy bank. We believe in
continuity. All five of our founding
executives are still involved with the bank,
six of our original seven board members
still serve and sixteen of our seventeen
starting employees are still with us. Our
relationship managers have an average of 27
years experience in banking, which is one
of our most valuable assets.
Why does all this matter? It means that we
get it. We’ve seen a lot and we’re not afraid
to share our experience with our clients. It’s
all part of the relationships that we offer at
American Business Bank.
since
INCEPTION
9819
25 years experience
154years of bank experience
Wes E. Schaefer vice chairman
Leon I. Blanksteinpresident & ceo
Robert F. Schack chairman
Robin C. Patersonexecutive vice president
10%
14%
17%
10%
deposit growth of more than
loan growth of nearly
core earnings of more than
return on equity of
BALANCE SHEET AND INCOME STATEMENT
DEC 2014 DEC 2013ASSETSOvernight Interest Bearing Funds $ 19,278 $ 46,028Investment Securities 790,643 644,898Loans and Leases (net) 645,861 568,433Cash, Checks in Process of Collection, Due from Banks 25,145 42,300Premises, Equipment and other Assets 54,611 50,793 Total Assets $ 1,535,538 $ 1,352,452
LIABILITY AND SHAREHOLDERS’ EQUITYDemand Deposits $ 695,461 $ 576,792Money Market and NOW Deposits 589,796 586,497Savings and Time Deposits 79,187 75,922
Total Deposits $ 1,364,444 $ 1,239,211
FHLB Advances $ 41,000 $ 5,000Other Liabilities 11,203 12,753Shareholders’ Equity 118,891 95,489
Total Liabilities and Shareholders’ Equity $ 1,535,538 $ 1,352,453
TWELVE MONTHS ENDED DEC 2014 DEC 2013 Interest Income
Loans and Leases $ 27,682 $ 25,141Investment Securities 14,742 16,224
Total Interest Income $ 42,424 $ 41,365
Interest ExpenseMoney Market and NOW Accounts $ 1,183 $ 1,340Savings and Time Deposits 282 359FHLB Advances 67 132
Total Interest Expense $ 1,532 $ 1,831Net Interest Income $ 40,892 $ 39,534
Provisions for Loan Losses 898 1,675Net Interest Income After Provision for Loan Losses $ 39,994 $ 37,859
Non Interest Income $ 3,354 $ 7,580
Non Interest Expense $ 26,790 $ 25,291
Operating Income Before Taxes $ 16,558 $ 20,148Income Tax Expense 5,098 6,655Net Income $ 11,460 $ 13,493Net Income Per Share – Basic $ 1.93 $ 2.30Net Income Per Share – Diluted $ 1.86 $ 2.22
Weighted Average Shares – Basic 5,941,876 5,869,399Weighted Average Shares – Diluted 6,145,947 6,068,401
Board of Directors
From top left: Don Johnson, Vice Chairman and Co-Founder of American Business Bank
Robert I. Usdan, Principal of The Endicott GroupJon Schlobohm, Former Chairman National Corset Supply
Edith Matthai, Managing Partner Robie & MatthaiTrent Merrill, CEO, Triple R, LLC
D. Van Skilling, Chairman of the Board, Onvia, Inc.
FoundersAcorn Group
Ed Actkinson
Arthur J. Alper
Paul H. Apel
Anthony P. Arons
James A. Asher
John A. Asher
Robert L. Asher
Peter Barsocchini
Ben Bernie
Peter H. Betti
Leon & Mary Blankstein
Jay W. Bligh
Mr. & Mrs. Michael J. Bonesteel
William Brodersen
John Cirelle
Barry Cohn
Joseph Conzonire
Ben F. Smith, Inc.
Gerald P. Cotter, President
Frank Cutrone, Jr.
Debbie L. Dair
Frank DelRe
David Dennis
Aurella DeZonia
Roger & Diane Duhl
Jack Edelstein
Leonard A. Faas, Jr.
Herb Fields
Ed Fountain
Arnold L. Gilberg, M.D., Ph.D.
Harold Greene & Charlene Greene
Uri Halabe
John Hancock
Edward Handler
Mark S. Hierbaum
Dan Holtzman
Thomas H. Hurlburt
Donald P. & Lana R. Johnson
Karl Johnson & Barbara Smith
Morley Justman
Russell Justman
Charles King
R. DeWitt Kirwan
Richard Koral
Beverly & Andy Liggett
Martin & Sandy Luboviski
Larry D. Lyon
Joel Matta, M.D., Ph.D.
Donald V. McCann
George B. McGregor, III
Trent D. Merrill
Ken Miller
Thomas E. Miller
Gene Montesano
Stan & Aileen Morse
Robert Murphy
Marc Myers
Raymond V. O’Brien, III
John & Laura O’Connor
Norma Owen
Robin C. Paterson
Barry L. Perlman
Darrel Reifschneider
Rob Reifschneider
Richard A. Riddle
Brian Roberts
Marty & René Romell
Al & Elaine Ruhl Trust
William A. Saunders
Robert & Gail Schack
Kathy Schaefer
Wes Schaefer
Jon Schlobohm
Roy Schlobohm
Richard C. Seff
Sandy M. Singer
D. Van Skilling
Richard St. John
Donald P. Tobin
Robert G. Twist
Ervin (Erv) Unvert
Jim Valestrino
Ralph Van De Moere
Chuck Von Der Ahe
T/C Von Der Ahe
Revocable Trust
Carl Von Wolffradt
Marshall Wax
Max Weissberg
Fred & Sue Westberg
Myra & Louis Wiener
A. Charles Wilson
Timothy Wilson
Kenneth Wolt
Terrence L. Young
William L. Young, Jr.
headquarterslos angeles
523 W. 6th Street, Suite 900Los Angeles, California 90014
213.430.4000
regional officesorange county
18101 Von Karman Ave., Suite 450 Irvine, California 92612
949.261.1122
south bay970 West 190th Street, Suite 301
Torrance, California 90502
310.808.1200
san fernando valley 21800 Oxnard Street, Suite 350Woodland Hills, California 91367
818.884.0000
inland empire3633 Inland Empire Blvd., Suite 720
Ontario, California 91764
909.919.2040
www.americanbusinessbank.com