Release Date: October 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- RBB Bancorp (RBB, Financial) reported a net income of $7 million, or $0.39 per share, for the third quarter of 2024.
- The company experienced a $44 million increase in loans during the third quarter, supported by $175 million in loan production at a weighted average rate of 7.26%.
- Deposits increased by $69 million from the last quarter, with non-interest bearing deposits remaining stable.
- RBB Bancorp (RBB) successfully resolved and terminated its Consent Order in August, allowing the company to focus on growth and value-creating opportunities.
- The tangible book value per share increased to $24.64 due to earnings, accretive share repurchases, and a recovery of AOCI.
Negative Points
- Net interest margin increased by only 1 basis point, which was less than expected.
- Non-performing loans increased to $60.7 million, or 1.52% of total assets, with two loans migrating to non-accrual status.
- The allowance for credit losses increased by $2.1 million in the third quarter, driven by a $3.3 million provision for credit losses.
- RBB Bancorp (RBB) experienced higher non-interest expenses, which increased by $297,000 to $17.4 million due to higher salaries and other expenses.
- The company's reliance on wholesale deposits, although reduced, still accounted for 4.8% of total deposits.
Q & A Highlights
Q: Can you provide more details on the expected net interest margin (NIM) expansion as we move into 2025?
A: Lynn Hopkins, CFO, explained that RBB Bancorp is positioned as a liability-sensitive bank, with deposit rates expected to trend downward. The repricing of the CD portfolio, with $800 million set to reprice over the next quarter, is a key driver. Loan production is also coming in higher than the average loan rate, which should support NIM expansion. While exact magnitude is uncertain, the deposit spot cost is a good indication of the minimum amount of expansion expected.
Q: Have there been any signs of improvement in the secondary market for loan sales, particularly for SBA loans?
A: Lynn Hopkins noted that SBA premiums have been consistent, with gross premiums averaging 8% to 9%. Johnny Lee added that the SBA pipeline remains healthy, indicating potential for increased production and fee income.
Q: What are the current offer rates for CDs, and how do they compare to the rates of maturing CDs?
A: Lynn Hopkins stated that the offer rates for 12-month CDs in both wholesale and retail markets are 50 to 70 basis points lower than the average rate of maturing CDs, which is just under 5%.
Q: Can you provide an update on the resolution of non-performing loans (NPLs) and expectations for charge-offs?
A: Johnny Lee mentioned that RBB Bancorp is working on resolving nine NPLs exceeding $1 million, with an expectation to resolve approximately 70% by mid-next year. Currently, there are no expectations for additional charge-offs related to these loans.
Q: What are the plans for refinancing the $150 million of FHLB advances due in March next year?
A: Lynn Hopkins indicated that RBB Bancorp plans to take advantage of the declining rate environment to refinance the $150 million FHLB advances. They have already put on a $50 million puttable advance at a favorable rate and will continue to explore cost-effective funding options.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
