RBB Bancorp’s Earnings Call: Growth Amid Challenges

Rbb Bancorp ((RBB)) has held its Q1 earnings call. Read on for the main highlights of the call.

RBB Bancorp’s recent earnings call presented a mixed sentiment, highlighting both positive strides and ongoing challenges. The company reported strong loan growth and a reduction in non-performing assets, which were seen as positive developments. However, these were tempered by a decline in net income and increased non-interest expenses. The balanced outlook reflects optimism for future improvements, albeit with acknowledgment of the hurdles that remain.

Loan Growth and Margin Expansion

RBB Bancorp experienced significant loan growth, with investments increasing by $90 million or 12% on an annualized basis. This growth was primarily driven by commercial, SBA, and SFR balances. Additionally, the net interest margin saw an increase of 12 basis points to 2.88%, attributed to a decline in the cost of interest-bearing deposits.

Successful Mortgage Origination

The company’s in-house mortgage origination business proved successful, originating $112 million in mortgages during the first quarter. This contributed to a total of $201 million in loan originations for the quarter, achieving a blended yield of 6.77%.

Reduction in Non-Performing Assets

RBB Bancorp made notable progress in reducing non-performing assets by 20%. The net exposure to non-performing loans decreased by 32% to $51 million, with a $20.7 million or 25% reduction in NPLs, representing 1.92% of loans held for investment at the quarter’s end.

Strong Deposit Growth

The company reported an 8% annualized increase in total deposits, reaching $3.14 billion. Growth in money market accounts and CDs effectively offset the decline in non-interest-bearing accounts.

Decline in Net Income

RBB Bancorp faced a decline in net income for the first quarter, dropping to $2.3 million or $0.13 per share. This was largely impacted by a $6.7 million pre-tax provision for credit losses.

Increase in Non-Interest Expenses

Non-interest expenses rose by $873,000 to $18.5 million, driven by a seasonal increase in compensation and benefits, higher data processing fees, and increased legal and professional expenses.

Continued Challenges with Non-Performing Loans

The company continues to face challenges with non-performing loans, including the downgrade of a $5.3 million New York CRE loan to non-performing status. Specific reserves increased by $2.8 million, with net charge-offs amounting to $2.6 million.

Decrease in Non-Interest Income

RBB Bancorp saw a 4.34% decline in non-interest income, totaling $2.3 million in the first quarter. This decrease was due to lower gains on the sale of loans and other income.

Forward-Looking Guidance

Looking ahead, RBB Bancorp remains focused on resolving non-performing loans and anticipates further progress in upcoming quarters. The company aims to continue its strategic efforts to reduce non-performing assets and improve financial metrics. Despite a fall in net income to $2.3 million, the bank achieved a 12% annualized growth in loans and a 12 basis point increase in net interest margin. The cost of interest-bearing deposits decreased, contributing to a decline in the overall cost of funds.

In summary, RBB Bancorp’s earnings call reflected a balanced sentiment with both achievements and challenges. The company demonstrated strong loan and deposit growth, alongside a reduction in non-performing assets. However, the decline in net income and increased expenses highlight areas needing attention. The forward-looking guidance suggests a focus on resolving non-performing loans and achieving further financial improvements.