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RBB Bancorp (RBB)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 EPS was $0.25, down from $0.39 in Q3, driven primarily by a higher provision for credit losses ($6.0M vs. $3.3M), while net interest margin expanded 8 bps to 2.76% on lower deposit costs .
  • Noninterest-bearing deposits rose $19.4M QoQ to $563.0M (18.3% of total), improving funding mix; wholesale deposits held flat QoQ at ~4.8% of deposits .
  • Credit quality deteriorated: nonperforming assets increased to $81.0M (2.03% of assets), largely from a single $26.4M construction loan migrating to nonaccrual; ACL coverage rose to 1.56% of loans HFI .
  • Management guided to low-to-mid single-digit loan growth in 2025, ongoing NIM support from CD repricing, and pushed legacy NPA resolution target from mid-2025 to end-2025; quarterly OpEx expected modestly above ~$$17.5M run rate .
  • Dividend maintained at $0.16 per share (declared Jan 16, 2025); potential buyback consideration later in 2025 after credit focuses ease .

What Went Well and What Went Wrong

What Went Well

  • NIM expanded to 2.76% (+8 bps QoQ) as total cost of funds fell 25 bps; deposit spot rate ended Q4 at 3.15% .
  • Funding mix improved: noninterest-bearing deposits increased $19.4M QoQ to 18.3% of deposits, while interest-bearing deposits declined $27.8M QoQ .
  • Management emphasized healthy loan production ($126M in Q4; pipeline ~$200–$225M) and expects loan growth to resume in coming quarters: “we do expect to resume loan growth in the coming quarters” .

What Went Wrong

  • EPS fell to $0.25 from $0.39 QoQ as provision rose to $6.0M (specific reserve +$4.5M for a mixed-use C&D loan and $2.0M net charge-offs) and noninterest income normalized after a Q3 recovery .
  • Nonperforming assets climbed to $81.0M (2.03% of assets) from $60.7M, primarily due to one $26.4M C&D loan; substandard loans increased to $100.3M .
  • Efficiency ratio worsened to 61.5% (from 57.5%) as noninterest income declined; legal/professional expenses increased QoQ .

Financial Results

Core P&L and Margins vs prior periods and estimates

MetricQ4 2023Q3 2024Q4 2024
EPS (Diluted, $)$0.64 $0.39 $0.25
Net Income ($USD Millions)$12.073 $6.999 $4.385
Net Interest Income before Provision ($USD Millions)$25.669 $24.545 $25.977
Noninterest Income ($USD Millions)$7.394 $5.746 $2.729
Net Interest Margin (%)2.73% 2.68% 2.76%
Efficiency Ratio (%)49.58% 57.51% 61.48%
ROAA (annualized, %)1.20% 0.72% 0.44%

Estimates: S&P Global consensus data was unavailable; therefore, estimate comparisons are not provided. Values would be retrieved from S&P Global if available.

Credit quality snapshot

MetricQ4 2023Q3 2024Q4 2024
Nonperforming Assets ($USD Millions)$31.619 $60.662 $81.038
NPA / Total Assets (%)0.79% 1.52% 2.03%
ALLL / Loans HFI (%)1.38% 1.41% 1.56%
Net Charge-offs ($USD Thousands)$109 $1,201 $2,006

Balance sheet mix

MetricQ4 2023Q3 2024Q4 2024
Total Assets ($USD Billions)$4.026 $3.990 $3.992
Total Deposits ($USD Billions)$3.175 $3.092 $3.084
Noninterest-bearing Deposits ($USD Millions; % of Deposits)$539.621; 17.0% $543.623; 17.6% $563.012; 18.3%
Loan-to-Deposit Ratio (%)94.2% 98.6% 97.5%

Segment breakdown (Loans)

Segment ($USD Millions; %)Dec 31, 2023Sep 30, 2024Dec 31, 2024
C&I$130.096; 4.3% $128.861; 4.2% $129.585; 4.2%
SBA$52.074; 1.7% $48.089; 1.6% $47.263; 1.5%
Construction & Land Dev.$181.469; 6.0% $180.196; 5.8% $173.290; 5.7%
Commercial Real Estate$1,167.857; 38.5% $1,252.682; 40.5% $1,201.420; 39.3%
Single-Family Residential$1,487.796; 49.1% $1,473.396; 47.7% $1,494.022; 48.9%
Other$12.569; 0.4% $8.672; 0.2% $7.650; 0.4%
Total Loans HFI$3,031.861; 100.0% $3,091.896; 100.0% $3,053.230; 100.0%

KPIs

KPIQ4 2023Q3 2024Q4 2024
ROATCE (annualized, %)11.12% 6.40% 3.98%
Tangible Book Value/Share ($)$23.48 $24.64 $24.51
Efficiency Ratio (%)49.58% 57.51% 61.48%
NIM (%)2.73% 2.68% 2.76%
NPA / Assets (%)0.79% 1.52% 2.03%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
NIM trajectory1H 2025Q2 2024: “cautiously optimistic” NIM begins to expand in Q3/Q4 ; Q3 2024: optimism to continue CFO: NIM expanding in Q1 as CDs reprice; may flatten in Q2 with FHLB maturity; potential re-expansion 2H if Fed cuts Updated/clarified
CD repricingQ1 2025n/a~$650M CDs maturing; expected renewal rates ~4.00%–4.10% New detail
FHLB advancesMar 2025n/a$150M matures in March at 1.18%; likely replaced by retail/wholesale/FHLB at higher rates New detail
Loan growthFY 2025“Modest loan growth” (Q2) Low-to-mid single-digit growth; heavier 2H likely; pipeline $200–$225M Updated
Legacy NPA resolutionFY 2025Resolve majority by mid-2025 (Q3) Pushed to end-2025 due to large C&D NPL addition Lowered timeline
Expense run-rateFY 20252024 run-rate ~$17.0–$17.5M/qtr Slightly above $17.5M; Q1 seasonally higher (payroll taxes) Raised
BuybackFY 20251M-share program completed in Q3 2024 Interest in considering a new program in 2025 after credit focus Potential
DividendQ1 2025$0.16/share throughout 2024 $0.16/share declared for Feb 12, 2025 Maintained
Tax rateFY 202426–28% guide (Q3) Actual FY 2024 ETR 25.3% In-line actual

Earnings Call Themes & Trends

TopicQ2 2024 (Q-2)Q3 2024 (Q-1)Q4 2024 (Current)Trend
NIM/MarginExpected to begin expansion in Q3/Q4 Slight increase; optimism to continue +8 bps QoQ to 2.76%; CDs repricing; possible flatten Q2; re-expansion 2H Improving near term; mixed mid-year
Loan growthModest net growth; production >$115M Loans up at 6% annualized; production ~$175M Production $126M; pipeline $200–$225M; growth to resume Gradual recovery
Deposit mix/costsWholesale reduced; NIB up QoQ Deposits +$68.6M; spot rate 3.53% Cost of funds down; NIB +$19.4M; spot rate 3.15% Improving
Credit qualityNPLs rose due to 3 loans Special mention up (hotel C&D); NPA 1.52% NPA 2.03% on one $26.4M C&D NPL; ACL/Loans 1.56% Deteriorated
Capital actionsBuyback program ongoing Completed 1M-share buyback Considering new buyback in 2025; dividend maintained Neutral to positive
M&A strategyn/an/aContinue to evaluate Asian-American bank targets incl. SF Bay Area Ongoing
Wildfire impactn/an/aNo material portfolio/ops impact; $30K community support Monitored

Management Commentary

  • “Declining funding costs and stable interest income drove net interest income and net interest margin higher in the fourth quarter… We continue to make good progress on our growth initiatives and expect we will resume loan growth in the first quarter and for the remainder of the year” — Johnny Lee, President and CEO of the Bank .
  • “Nonperforming assets totaled $81 million… The $20 million increase… was mainly due to $26 million C&D loans that migrated to nonaccrual status” — Johnny Lee .
  • “The provision for credit losses was $6 million… due to partial charge-offs on 3 loans moved to held for sale… and an increase of $4.5 million in specific reserves for the C&D loan” — Lynn Hopkins, CFO .
  • “Our average all-in cost of deposits decreased by 30 bps to 3.35%… Tangible book value per share decreased slightly to $24.51” — Lynn Hopkins .
  • “We are continuing to look at other Asian American banks… to strengthen our branch network and go into San Francisco Bay Area” — David Morris, CEO .

Q&A Highlights

  • Credit/NPLs: CFO detailed the $26.5M C&D nonaccrual with a $4.5M specific reserve and ongoing fair value work; management expects two NPL sales to close imminently and extended full remediation timeline to end-2025 .
  • Margin/Deposits: ~$650M CDs maturing in Q1 expected to reprice to ~4.00–4.10%; $150M FHLB advances maturing in March at 1.18% to be replaced at higher rates; NIM likely up in Q1, flatten in Q2, then expand in 2H subject to Fed path .
  • Growth outlook: Pipeline ~$200–$225M; push for low-to-mid single-digit loan growth in 2025, likely weighted to 2H; new talent additions to support C&I and relationship depth .
  • Expenses: Quarterly OpEx expected modestly above the 2024 $17.0–$17.5M run-rate; Q1 seasonality from payroll taxes; legal/professional likely to remain elevated during credit workouts .
  • Capital actions: Completed 1M-share buyback in Q3; open to considering a new repurchase program in 2025 as credit normalization progresses .

Estimates Context

  • S&P Global consensus estimates (EPS, revenue, EBITDA, target price, recommendation) for Q4 2024 were unavailable at the time of this report; therefore, comparisons to Street estimates cannot be provided. Values would be retrieved from S&P Global if available.

Key Takeaways for Investors

  • Near-term margin tailwind from deposit repricing should support NIM in Q1, with an expected pause/flatten in Q2 as low-cost FHLB funding rolls, then potential improvement in 2H if rates decline .
  • Credit remains the swing factor: a single large C&D NPL drove NPA higher; management is actively resolving select NPLs and now targets full remediation by end-2025, implying lingering headline risk but improving coverage and workout momentum .
  • Funding mix improvement (higher NIBs, steady wholesale at ~4.8%) provides cost leverage and reduces reliance on higher-cost time deposits .
  • Earnings pressure vs. Q3 reflects provision normalization and one-time noninterest income in Q3; monitoring the cadence of NPL sales and specific reserve changes is key for EPS stabilization .
  • Loan growth strategy is intact with healthy production and pipeline; execution amid competitive refi/paydowns and disciplined pricing/underwriting will determine trajectory .
  • Capital returns remain balanced: dividend maintained at $0.16; buyback optionality exists for 2025 subject to credit progress .
  • Tactical setup: catalysts include NPL sales closings, deposit cost declines, and visible loan growth resumption; risks center on additional credit downgrades and higher replacement funding costs post-FHLB maturity .