RBB Bancorp Q2 FY2025 earnings call

• Net income included $2.9 million from an employee retention tax credit refund. Adjusted for this, net income was $6.5 million.
• Net interest income rose $1.2 million, and NIM expanded for the fourth quarter, driven by 8 basis point reduction in deposit costs.
• Loan growth continued with $183 million in total originations at 6.76% yield. Pipelines remain full but growth expected to moderate.
• Noninterest expenses increased $2 million to $20.5 million, but expected to return to $18 million run rate.
• Asset quality: NPLs decreased $3.6 million, criticized/classified assets increased but majority on accrual, with 1.58% allowance for loan losses to total loans.

Net income totaled $9.3 million or $0.52 per share. Net interest income increased to $27.3 million for the fourth consecutive quarter, driven by loan growth and stable asset yields. Net interest margin was 2.92%, up 25 basis points over the last 4 quarters. Loans held for investment grew by $92 million or 12% annualized. Total deposits increased at a 6% annualized rate to $3.2 billion. Tangible book value per share was $25.11. The loan portfolio yield was relatively stable at just over 6%, and the residential mortgage portfolio was $1.6 billion with an average LTV of 55%.

• Loan growth expected to continue but at a more moderate pace.
• NIM likely to see incremental increases if rates don't cut.
• Noninterest expenses expected to stabilize at $18 million run rate.
• Buyback program viewed as attractive with ability to manage both buyback and credit work due to strong capital and coverage ratios.

• Potential impact of rate cuts on funding costs.
• Continued management of nonperforming loans and ensuring credit quality.
• Uncertainty around deposit cost decreases even with rate cuts, given competitive liquidity environment.

Q: Brendan Nosal asked about capital buyback activity and asset quality.

A: Lynn Hopkins said the buyback is viewed as attractive relative to tangible book value, and Johnny Lee discussed credit downgrades as a credit enhancement.

Q: Matthew Clark inquired about loan-to-deposit ratio, deposit growth, and expense run rate.

A: Johnny Lee mentioned selective loan growth and deposit promotion, Lynn Hopkins talked about deposit cost expectations and expense normalization.

Q: Andrew Terrell asked about credit control process.

A: Lynn Hopkins and Johnny Lee explained that special mention loans are a temporary holding place for certain bridge loans, with a conservative approach.

Q: Kelly Motta asked about deposits and tax rate.

A: Johnny Lee and Lynn Hopkins discussed deposit drivers and the impact of California tax law on the tax rate.