Rbb Bancorp ((RBB)) has held its Q2 earnings call. Read on for the main highlights of the call.
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RBB Bancorp’s recent earnings call painted a picture of both optimism and caution. The company reported strong loan growth, improved net interest margins, and increased deposits, which were met with enthusiasm. However, concerns were raised regarding increased substandard loans, higher noninterest expenses, and net charge-offs. Despite these challenges, RBB Bancorp remains optimistic about future loan growth and addressing criticized assets.
Increased Net Income and Loan Growth
RBB Bancorp reported a net income of $9.3 million, or $0.52 per share, for the second quarter. This was bolstered by robust loan growth, with loans held for investment growing by $92 million, or 12% on an annualized basis. This growth underscores the company’s strong performance in expanding its loan portfolio.
Strong Mortgage Origination Business
The company’s in-house mortgage origination business was a significant contributor, originating $120 million in mortgages during the second quarter. This contributed to total loan originations of $183 million, achieved at a blended yield of 6.76%, highlighting the strength of RBB Bancorp’s mortgage operations.
Net Interest Margin Expansion
RBB Bancorp’s net interest margin expanded to 2.92%, marking a 25 basis point increase over the past four quarters. This expansion reflects the company’s effective management of interest-earning assets and liabilities, contributing positively to its financial performance.
Employee Retention Credit Refund
The second quarter results were positively impacted by a $5.2 million employee retention credit refund, which was included in other income. This refund provided a notable boost to the company’s financial results for the quarter.
Deposit Growth
Total deposits grew at a 6% annualized rate, reaching $3.2 billion. This growth was driven by an increase in noninterest-bearing deposits and certificates of deposit (CDs), indicating a strong deposit base to support the company’s funding needs.
Increased Criticized and Classified Assets
There was an increase in criticized and classified assets, although most of these additions remain on accrual status. This indicates some underlying asset quality concerns that the company will need to address moving forward.
Higher Noninterest Expenses
Noninterest expenses rose by $2 million to $20.5 million in the second quarter, primarily due to executive management transitions and incentive payments. This increase in expenses is an area of concern that the company will need to manage carefully.
Increased Substandard Loans
Substandard loans increased by $14.6 million to $91 million by the end of the quarter, primarily due to downgrades. This rise in substandard loans highlights a potential risk area that requires attention.
Net Charge-Offs
Net charge-offs amounted to $3.3 million, related almost entirely to one lending relationship. This indicates a specific issue within the loan portfolio that the company is likely addressing.
Past Due Loans Increase
Past due loans increased by $12.1 million to $18 million, although some have since been brought current. This increase in past due loans is another area that the company will need to monitor closely.
Forward-Looking Guidance
RBB Bancorp provided guidance indicating continued focus on loan growth and managing deposit growth to support funding needs. The company expects its net interest margin to continue expanding, with funding costs likely stabilizing in the absence of rate cuts. While nonperforming loans did not increase, the growth in criticized and classified assets remains a concern. Overall, the company is committed to maintaining a strong loan origination pipeline.
In summary, RBB Bancorp’s earnings call reflected a mix of positive growth indicators and areas of concern. Strong loan growth and net interest margin expansion were key highlights, while increased substandard loans and higher noninterest expenses posed challenges. The company remains optimistic about its future prospects, focusing on loan growth and asset management to drive continued success.