Executive Summary

Q1 2025 EPS of $0.13 missed S&P Global consensus of $0.38 due to a $6.7M provision for credit losses taken to accelerate the resolution of nonperforming loans; net income was $2.3M versus $4.4M in Q4 2024 . Revenue (S&P Global definition) was $21.7M vs consensus $28.9M, a significant miss as well (see Estimates Context) *.
Asset quality actions were tangible: nonperforming assets fell 20% QoQ to $64.6M (1.61% of assets), and the allowance coverage of NPLs rose to 86% from 68% in Q4 .
Core profitability drivers improved: net interest margin expanded 12 bps QoQ to 2.88% on a 29 bps decline in interest‑bearing deposit costs; loan originations were $201M at a 6.77% yield and loans HFI grew 12% annualized .
Capital return catalyst: management indicated it was working to implement a buyback on the call, and on May 29 authorized up to $18M in repurchases through June 30, 2026, a potential stock support near term .

What Went Well and What Went Wrong

What Went Well
- Accelerated de-risking: “We reduced our net exposure to nonperforming loans to $51 million…or 32% since year end” (CEO) .
- Margin traction: NIM rose to 2.88% (+12 bps QoQ) on lower deposit costs; spot deposit rate exited at 3.06%, below the 3.13% quarterly average (CFO) .
- Loan growth resumed: $201M of Q1 production at 6.77% blended yield; pipelines remain healthy though growth likely moderates (President) .
What Went Wrong
- Earnings under pressure from credit costs: $6.7M provision (vs $6.0M in Q4) tied to specific reserves and charge-offs; EPS fell to $0.13 from $0.25 in Q4 .
- Higher operating expenses: noninterest expense increased $0.9M QoQ to $18.5M on seasonally higher comp/benefits and data processing; efficiency ratio rose to 65.1% .
- Deposit mix drift: noninterest-bearing deposits declined to 16.8% of total (from 18.3% in Q4) amid migration into higher-yielding products .

Financial Results

P&L snapshot (USD millions, except per-share)

Metric	Q1 2024	Q4 2024	Q1 2025
Net Interest Income (pre-provision)	$24.877	$25.977	$26.163
Provision for Credit Losses	$0.000	$6.000	$6.746
Noninterest Income	$3.372	$2.729	$2.295
Noninterest Expense	$16.969	$17.649	$18.522
Income Before Taxes	$11.280	$5.057	$3.190
Net Income	$8.036	$4.385	$2.290
Diluted EPS ($)	$0.43	$0.25	$0.13

Margins and efficiency

Metric	Q1 2024	Q4 2024	Q1 2025
Net Interest Margin (%)	2.69	2.76	2.88
Efficiency Ratio (%)	60.07	61.48	65.09
ROAA (%)	0.81	0.44	0.24
Cost of Avg Total Deposits (%)	3.59	3.35	3.13
Net Charge-offs / Avg Loans (%)	0.02	0.26	0.35

Balance sheet and credit KPIs

Metric	Q1 2024	Q4 2024	Q1 2025
Loans HFI ($M)	$3,027.4	$3,053.2	$3,143.1
Total Deposits ($M)	$3,028.3	$3,083.8	$3,142.6
Loan / Deposit Ratio (%)	98.6	97.5	98.4
NPLs HFI ($M)	$35.9	$69.8	$60.4
NPAs ($M)	$37.0	$81.0	$64.6
ALLL / Loans HFI (%)	1.38	1.56	1.65
ALLL / NPLs HFI (%)	116.01	68.34	86.01

Loan portfolio mix (dollars in millions)

Category	12/31/2024	3/31/2025
Commercial & Industrial	$129.6	$135.5
SBA	$47.3	$50.7
Construction & Land Dev.	$173.3	$158.9
Commercial Real Estate	$1,201.4	$1,245.4
Single-family Residential	$1,494.0	$1,545.8
Other	$7.7	$6.8
Total Loans HFI	$3,053.2	$3,143.1

Notes: Noninterest-bearing deposits were 16.8% of total at 3/31/2025 vs 18.3% at 12/31/2024 .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Loan growth	2025 near-term	“Expect…resume loan growth in the first quarter and for the remainder of the year” (Q4 PR)	Pipelines healthy; expect continued growth in Q2, “albeit likely at a more moderate pace” (President)	Maintained, moderated cadence
NIM / funding costs	Q2 2025+	—	Expect “some incremental decreases in funding costs…at a slower pace” than recent quarters (CFO); NIM improved on deposit cost declines	New qualitative
Operating expenses	Q2 2025+	—	OpEx run-rate ~$17.5–$18.0M; OpEx ratio ~1.80% of avg assets (CFO)	New quantitative
Credit workout timing	2025	Majority resolved by mid‑2025 (Q3 PR)	Targeting 2H 2025; NPLs remain “lumpy” (CEO)	Pushed out
Capital return (buyback)	2025–2026	—	“Working hard to put a buyback in place” (CFO, call) ; subsequently authorized up to $18M through 6/30/2026	New/raised
Dividend	Q2 2025	$0.16/share (prior cadence)	Declared $0.16/share payable May 12, 2025	Maintained

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2024, Q4 2024)	Current Period (Q1 2025)	Trend
Asset quality resolution	Q3: special mention/substandard increased; plans to resolve majority by mid‑2025 . Q4: higher specific reserves; NPLs rose .	NPA down 20% QoQ; coverage to 86%; targeting 2H 2025 for substantial resolution .	Improving coverage; timeline extended
NIM / funding costs	Q3: slight NIM uptick; cost of funds 3.57% . Q4: NIM +8 bps; deposit costs down .	NIM 2.88% (+12 bps); spot deposit rate 3.06% vs 3.13% avg; further modest cost declines expected .	Improving, pace moderating
Loan growth & pipeline	Q3: loans +6% annualized . Q4: expect growth in Q1 and 2025 .	$201M originations at 6.77% yield; pipelines healthy; expect moderation .	Accelerating, then normalizing
Deposit mix	Q3: NIB ~17.6% . Q4: NIB 18.3% .	NIB 16.8% as clients migrate to higher‑yielding products .	Mixed; slight NIB pressure
Capital return	Q3: completed prior repurchase program . Q4: no update.	Working on buyback on call; $18M plan authorized 5/29 .	Resuming repurchases
Macro/tariffs exposure	—	Limited direct exposure; trade finance ~4% of loans; outreach shows no current impact (Mgmt) .	Monitoring; currently limited impact
Expenses	Q3: stable OpEx . Q4: modest increase .	Seasonal increase; guided to ~$17.5–$18.0M run-rate .	Stabilizing after seasonal spike

Management Commentary

“We took decisive action to address our nonperforming loans…We reduced our net exposure to nonperforming loans to $51 million…or 32% since year end” — David Morris, CEO .
“Loan production was relatively strong…$201 million…at blended yield of 6.77%…we anticipate loan growth to continue in the second quarter, albeit likely at a more moderate pace” — Johnny Lee, President & Bank CEO .
“Our spot rate on deposits on March 31 was 3.06%…below the average of 3.13%…so costs are likely to continue to decrease but at a more measured pace” — Lynn Hopkins, CFO .
“We are working hard to put a buyback in place and hope to have more to report…soon” — Lynn Hopkins, CFO .

Q&A Highlights

Capital return: Management confirmed a strong preference to deploy excess capital via buybacks; subsequently authorized a new $18M repurchase plan (post‑quarter) .
NIM dynamics: FHLB advance repricing fully reflected in March NIM; management still expects incremental funding cost relief; nonaccruals remain a drag until resolutions return balances to accrual status (CFO) .
Credit tactics: Open to opportunistic problem loan sales; believe reserves are adequate for remaining actions (Mgmt) .
Macro trade/tariffs: Outreach to top 10 customers found no current financial impact; trade finance exposure ~4% of loans .
Expenses: Expect OpEx to look more like 2H24 vs 1H24; targeted run‑rate ~$17.5–$18.0M with puts/takes (CFO) .

Estimates Context

Consensus vs actual (S&P Global; Q1 2025)

Metric	Consensus	Actual	Surprise
EPS (Primary, $)	0.38*	0.13	(0.25)
Revenue ($M, S&P definition)	28.93*	21.71*	(7.22)

Additional context: 5 EPS estimates; 4 revenue estimates. Target price consensus $21.4 (5 est.)* [GetEstimates]. Note: S&P Global’s “Revenue” for banks may differ from company NII/noninterest income presentation; we use S&P’s figures for estimate comparisons.*

Values retrieved from S&P Global.*

Key Takeaways for Investors

Core spread improvement is intact (NIM +12 bps QoQ) with further modest funding cost relief expected; near‑term EPS trajectory hinges on the cadence of credit cost normalization .
Asset quality risk is being actively addressed: NPAs down 20% QoQ and coverage up to 86%; management targets substantial progress by 2H 2025, though quarterly lumpiness remains likely — a key medium‑term de‑risking catalyst .
Loan growth is back, but management signaled moderation; originations at attractive ~6.8% yields support NII if credit costs abate .
Deposit mix drifted away from NIB; continued focus on C&I franchise building could help over time, but near‑term funding remains rate‑sensitive .
Capital deployment is turning more shareholder‑friendly (buyback authorized), supporting the stock while the credit clean‑up completes .
Near‑term: trading may focus on credit headlines (NPL resolutions/sales) and NIM trajectory; medium‑term: improved asset quality plus buybacks can re‑rate earnings power if provisions recede and expenses normalize .

Appendices

Deposit and funding details (Q1 2025)

Average cost of interest‑bearing deposits fell 29 bps QoQ to 3.77%; total cost of funds 3.15% (–17 bps QoQ). Spot total deposit rate was 3.06% at March 31 .
FHLB: $150M of 1.18% advances matured; replaced largely by $110M at ~3.88%; most new advances are putable with 3–7 year final maturities and near‑term FHLB call options (CFO) .

Credit resolution actions (Q1 2025)

Bulk sale of $10.8M underperforming SFR mortgages ($1.4M charge‑off); $8.8M loan moved to OREO and sold ($1.2M charge‑off) .
One $5.3M NY CRE loan moved to nonaccrual after a tenant exit; management expects resolution without principal loss given an 85% LTV appraisal and sale process underway (CEO) .

Dividend

Declared $0.16 per common share, payable May 12, 2025 to holders of record April 30, 2025 .

RBB Bancorp (RBB)·Q1 2025 Earnings Summary