RBB Bancorp
For the period ended Mar 31, 2025. Filed May 12, 2025.
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A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 12, 2025
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ANALYSIS OF THE RESULTS OF OPERATIONS
ANALYSIS OF RESULTS OF OPERATIONS
Financial Performance
| Three Months Ended | |||
|---|---|---|---|
| March 31, 2025 | December 31, 2024 | March 31, 2024 | |
| (dollars in thousands, except per share data) | |||
| Interest income | $52,336 | $54,555 | $54,795 |
| Interest expense | 26,173 | 28,578 | 29,918 |
| Net interest income | 26,163 | 25,977 | 24,877 |
| Provision for credit losses | 6,746 | 6,000 | — |
| Net interest income after provision for credit losses | 19,417 | 19,977 | 24,877 |
| Noninterest income | 2,295 | 2,729 | 3,372 |
| Noninterest expense | 18,522 | 17,649 | 16,969 |
| Income before income taxes | 3,190 | 5,057 | 11,280 |
| Income tax expense | 900 | 672 | 3,244 |
| Net income | $2,290 | $4,385 | $8,036 |
| Share Data | |||
| Earnings per common share (1): | |||
| Basic | $0.13 | $0.25 | $0.43 |
| Diluted | 0.13 | 0.25 | 0.43 |
| Performance Ratios | |||
| Return on average assets, annualized | 0.24% | 0.44% | 0.81% |
| Return on average shareholders’ equity, annualized | 1.81% | 3.41% | 6.30% |
| Return on average tangible common equity, annualized (2) | 2.12% | 3.98% | 7.37% |
| Efficiency ratio (3) | 65.09% | 61.48% | 60.07% |
| Tangible common equity to tangible assets (2) | 11.10% | 11.08% | 11.56% |
| Tangible book value per share (2) | $24.63 | $24.51 | $23.68 |
| (1) | Basic earnings per share is calculated by dividing net income to common shareholders by the weighted average number of common shares outstanding. Diluted earnings per share is calculated by dividing net income by the weighted average number of shares adjusted for the dilutive effect of outstanding stock options and restricted stock units using the treasury stock method. |
| (2) | Return on average tangible common equity, tangible common equity to tangible assets and tangible book value per share are non-GAAP financial measures. See "Non-GAAP Financial Measures" for a reconciliation of these measures to their most comparable GAAP measures. |
| (3) | Ratio calculated by dividing noninterest expense by the sum of net interest income before provision for credit losses and noninterest income. |
Average Balance Sheet, Interest and Yield/Rate Analysis
The principal component of our earnings is net interest income, which is the difference between the interest and fees earned on loans, cash and investments (interest-earning assets) and the interest paid on deposits and borrowed funds (interest-bearing liabilities). Net interest margin is net interest income as a percentage of average interest-earning assets for the period. The level of interest rates and the volume and mix of interest-earning assets and interest-bearing liabilities impact net interest income and net interest margin. The net interest spread is the yield on average interest-earning assets minus the cost of average interest-bearing liabilities. Net interest margin and net interest spread are included on a tax equivalent (“TE”) basis by adjusting interest income utilizing the federal statutory tax rate of 21% for 2025 and 2024. Our net interest income, interest spread, and net interest margin are sensitive to general business and economic conditions. These conditions include short-term and long-term interest rates, inflation, monetary supply, and the strength of the international, national and state economies, in general, and more specifically, the local economies in which we conduct business. Our ability to manage net interest income during changing interest rate environments will have a significant impact on our overall performance. We manage net interest income through affecting changes in the mix of interest-earning assets as well as the mix of interest-bearing liabilities, changes in the level of interest-bearing liabilities in proportion to interest-earning assets, and in the growth and maturity of earning assets. For additional information see “Capital Resources and Liquidity Management” and Part I,Item 3. "Quantitative and Qualitative Disclosures about Market Risk" included in this Report.
The following tables present average balance sheet information, interest income, interest expense and the corresponding average yields earned and rates paid for the periods presented. The average balances are daily averages and, for loans, include both performing and nonperforming balances.
| Three Months Ended | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| March 31, 2025 | December 31, 2024 | March 31, 2024 | |||||||
| Average | Interest | Yield / | Average | Interest | Yield / | Average | Interest | Yield / | |
| Balance | & Fees | Rate | Balance | & Fees | Rate | Balance | & Fees | Rate | |
| (dollars in thousands) | |||||||||
| Interest-earning assets: | |||||||||
| Cash and cash equivalents (1) | $194,236 | $2,249 | 4.70% | $308,455 | $3,890 | 5.02% | $364,979 | 5,306 | 5.85% |
| FHLB Stock | 15,000 | 330 | 8.92% | 15,000 | 330 | 8.75% | 15,000 | 331 | 8.88% |
| Securities (2) | |||||||||
| Available for sale | 390,178 | 4,113 | 4.28% | 361,253 | 3,939 | 4.34% | 320,015 | 3,589 | 4.51% |
| Held to maturity | 5,189 | 49 | 3.83% | 5,194 | 48 | 3.68% | 5,207 | 46 | 3.55% |
| Total loans (3) | 3,079,224 | 45,621 | 6.01% | 3,059,786 | 46,374 | 6.03% | 3,018,423 | 45,547 | 6.07% |
| Total interest-earning assets | 3,683,827 | $52,362 | 5.76% | 3,749,688 | $54,581 | 5.79% | 3,723,624 | $54,819 | 5.92% |
| Noninterest-earning assets | 260,508 | 244,609 | 246,341 | ||||||
| Total assets | $3,944,335 | $3,994,297 | $3,969,965 | ||||||
| Interest-bearing liabilities: | |||||||||
| NOW | $61,222 | $321 | 2.13% | $53,879 | $254 | 1.88% | $58,946 | $298 | 2.03% |
| Money market | 463,443 | 3,625 | 3.17% | 463,850 | 3,735 | 3.20% | 411,751 | 3,526 | 3.44% |
| Saving deposits | 155,116 | 522 | 1.36% | 162,351 | 682 | 1.67% | 157,227 | 654 | 1.67% |
| Time deposits, less than $250,000 | 989,622 | 10,046 | 4.12% | 1,034,946 | 11,583 | 4.45% | 1,175,804 | 13,805 | 4.72% |
| Time deposits, $250,000 and over | 864,804 | 9,038 | 4.24% | 835,583 | 9,778 | 4.66% | 785,172 | 9,517 | 4.88% |
| Total interest-bearing deposits | 2,534,207 | 23,552 | 3.77% | 2,550,609 | 26,032 | 4.06% | 2,588,900 | 27,800 | 4.32% |
| FHLB advances | 176,833 | 989 | 2.27% | 200,000 | 886 | 1.76% | 150,000 | 439 | 1.18% |
| Long-term debt | 119,562 | 1,295 | 4.39% | 119,466 | 1,295 | 4.31% | 119,180 | 1,295 | 4.37% |
| Subordinated debentures | 15,175 | 337 | 9.01% | 15,121 | 365 | 9.60% | 14,957 | 384 | 10.33% |
| Total interest-bearing liabilities | 2,845,777 | 26,173 | 3.73% | 2,885,196 | 28,578 | 3.94% | 2,873,037 | 29,918 | 4.19% |
| Noninterest-bearing liabilities | |||||||||
| Noninterest-bearing deposits | 520,145 | 539,900 | 528,346 | ||||||
| Other noninterest-bearing liabilities | 66,151 | 56,993 | 55,795 | ||||||
| Total noninterest-bearing liabilities | 586,296 | 596,893 | 584,141 | ||||||
| Shareholders' equity | 512,262 | 512,208 | 512,787 | ||||||
| Total liabilities and shareholders' equity | $3,944,335 | $3,994,297 | $3,969,965 | ||||||
| Net interest income / interest rate spreads | $26,189 | 2.03% | $26,003 | 1.85% | $24,901 | 1.73% | |||
| Net interest margin | 2.88% | 2.76% | 2.69% | ||||||
| Total cost of deposits | $3,054,352 | $23,552 | 3.13% | $3,090,509 | $26,032 | 3.35% | $3,117,246 | $27,800 | 3.59% |
| Total cost of funds | $3,365,922 | $26,173 | 3.15% | $3,425,096 | $28,578 | 3.32% | $3,401,383 | $29,918 | 3.54% |
| (1) | Includes income and average balances for interest-earning time deposits and other miscellaneous interest-earning assets. |
| (2) | Interest income and average rates for tax-exempt securities are presented on a tax-equivalent basis. |
| (3) | Average loan balances include nonaccrual loans. Interest income on loans includes the effects of discount accretion and net deferred loan origination fees and costs accounted for as yield adjustments. |
The following table summarizes the extent to which changes in (1) interest rates and (2) volume of average interest-earning assets and average interest-bearing liabilities affected our net interest income for the periods presented. The total change for each category of interest-earning assets and interest-bearing liabilities is segmented into changes attributable to variations in volume and yield/rate. Changes that are not solely due to either volume or yield/rate are allocated proportionally based on the absolute value of the change related to average volume and average yield/rate.
| Three Months Ended March 31, 2025 compared with Three Months Ended December 31, 2024 · Three Months Ended March 31, 2025 compared with Three Months Ended March 31, 2024 | ||||||
|---|---|---|---|---|---|---|
| Change due to: | Change due to: | |||||
| Volume | Yield/Rate | Interest Variance | Volume | Yield/Rate | Interest Variance | |
| Interest-earning assets: · (dollars in thousands) | ||||||
| Cash and cash equivalents (1) | $(1,400) | $(241) | $(1,641) | $(2,153) | $(904) | $(3,057) |
| FHLB Stock | — | — | — | — | (1) | (1) |
| Securities: (2) | ||||||
| Available for sale | 518 | (344) | 174 | 1,653 | (1,129) | 524 |
| Held to maturity | — | 1 | 1 | (2) | 5 | 3 |
| Total loans (3) | 845 | (1,598) | (753) | 1,833 | (1,759) | 74 |
| Total interest-earning assets | $(37) | $(2,182) | $(2,219) | $1,331 | $(3,788) | $(2,457) |
| Interest-bearing liabilities | ||||||
| NOW | $34 | $33 | $67 | $10 | $13 | $23 |
| Money market | (9) | (101) | (110) | 1,429 | (1,330) | 99 |
| Saving deposits | (31) | (129) | (160) | (9) | (123) | (132) |
| Time deposits, less than $250,000 | (571) | (966) | (1,537) | (2,085) | (1,674) | (3,759) |
| Time deposits, $250,000 and over | 1,755 | (2,495) | (740) | 4,174 | (4,653) | (479) |
| Total interest-bearing deposits | 1,178 | (3,658) | (2,480) | 3,519 | (7,767) | (4,248) |
| FHLB advances | (553) | 656 | 103 | 77 | 473 | 550 |
| Long-term debt | - | — | - | - | - | - |
| Subordinated debentures | 8 | (36) | (28) | 36 | (83) | (47) |
| Total interest-bearing liabilities | 633 | (3,038) | (2,405) | 3,632 | (7,377) | (3,745) |
| Changes in net interest income | $(670) | $856 | $186 | $(2,301) | $3,589 | $1,288 |
| (1) | Includes income and average balances for interest-earning time deposits and other miscellaneous interest-earning assets. |
| (2) | Interest income and average rates for tax-exempt securities are presented on a tax-equivalent basis. |
| (3) | Average loan balances include nonaccrual loans. Interest income on loans includes the effects of discount accretion and net deferred loan origination fees and costs accounted for as yield adjustments. |
Net Interest Income/Average Balance Sheet
Net interest income was $26.2 million for the first quarter of 2025, compared to $26.0 million for the fourth quarter of 2024. The $186,000 increase was due to a $2.4 million decrease in interest expense, offset by a $2.2 million decrease in interest income. The decrease in interest income was mostly due to the impact of fewer days in the quarter of $1.2 million and the impact of lower average excess liquidity (cash and cash equivalents and investment securities) of $1.5 million. The decrease in interest expense was mostly due to the impact of lower average funding rates of $1.5 million, fewer days in the quarter of $621,000 and lower average interest-bearing liabilities of $336,000. The $1.5 million attributed to lower average funding rates included $1.8 million due to a 29 basis point decrease in the average cost of interest-bearing deposits.
Net interest margin ("NIM") was 2.88% for the first quarter of 2025, an increase of 12 basis points from 2.76% for the fourth quarter of 2024. The NIM expansion was due to a 17 basis point decrease in the overall cost of funds, partially offset by a 3 basis point decrease in the yield on average interest-earning assets. The yield on average interest-earning assets decreased to 5.76% for the first quarter of 2025 from 5.79% for the fourth quarter of 2024 due mainly to a decrease in the yield on average cash and cash equivalents of 32 basis points and average loans of 2 basis points, partially offset by the benefit of a change in the mix in average-earning assets. Average loans represented 84% of average interest-earning assets in the first quarter of 2025, as compared to 82% in the fourth quarter of 2024.
The average cost of funds decreased to 3.15% for the first quarter of 2025 from 3.32% for the fourth quarter of 2024, driven by a 29 basis point decrease in the average cost of interest-bearing deposits, partially offset by a 38 basis point increase in the average cost of borrowings. The average cost of interest-bearing deposits decreased to 3.77% for the first quarter of 2025 from 4.06% for the fourth quarter of 2024. During the first quarter of 2025, $150.0 million in FHLB advances with an average cost of 1.18% matured and were replaced with $110.0 million in FHLB advances with various terms at an average rate of 3.88%. The overall funding mix for the first quarter of 2025 remained relatively unchanged from the fourth quarter of 2024 with total deposits representing 90% of the funding mix and average noninterest-bearing deposits representing 17% of average total deposits. The all-in average spot rate for total deposits was 3.06% at March 31, 2025.
Net interest income was $26.2 million for the first quarter of 2025, compared to $24.9 million for the first quarter of 2024. The $1.3 million increase in net interest income was primarily due to lower interest expense of $3.7 million, offset by lower interest income of $2.5 million. The decrease in net interest income was driven largely by lower market interest rates, offset by the mix and volume of interest-earning assets and interest-bearing liabilities. The Federal Funds Rate averaged 4.33% during the first quarter of 2025 compared to 5.33% during the first quarter of 2024.
The $2.5 million increase in interest income was due mostly to a $3.1 million decrease in interest income on cash and cash equivalents, of which $2.2 million was attributed to lower average cash balances and $904,000 was attributed to lower rates paid on such cash balances. Average cash and cash equivalents decreased $170.7 million and the yield on such balances decreased 115 basis points. Investment securities interest income increased $525,000 due to the impact of the average investments increasing $70.1 million, partially offset by a 23 basis point decrease in the average yield. Interest and fees on total loans increased $74,000 for the first quarter of 2025 to $45.6 million when compared to the same quarter in 2024. This increase included the benefit of higher average loan balances, offset by a 6 basis point reduction in the overall loan yield. Average loans increased $60.8 million to $3.08 billion for the first quarter of 2025 compared to $3.02 billion for the first quarter of 2024 due to strong loan growth in 2025. Average loans represented 84% of average interest-earning assets in the first quarter of 2025 compared to 81% in the first quarter of 2024. For the three months ended March 31, 2025 and 2024, the yield on total loans was 6.01% and 6.07%.
The $3.7 million decrease in interest expense was due mostly to a $4.2 million decrease in deposit interest expense. The decrease in interest expense on deposits was primarily due to a 55 basis point decrease in the average rates paid on such funds, offset by the impact of a $54.7 million decrease in average interest-bearing deposits. Interest expense on FHLB advances increased $550,000 due mostly to a higher rate paid on such borrowings. The cost of FHLB advances increased 109 basis points as certain term advances matured and were replaced in the current rate environment.
NIM was 2.88% for the first quarter of 2025, an increase of 19 basis points from 2.69% for the first quarter of 2024. The increase was primarily due to a 39 basis point decrease in the overall cost of funds, partially offset by a 16 basis point decrease in the yield on interest-earnings assets to 5.76% for the first quarter of 2025 from 5.92% for the first quarter of 2024. The decrease in the yield on interest-earning assets was due mainly to lower market rates. The decrease in funding costs was due to the lower cost of interest-bearing deposits in response to lower market rates, offset by the impact of competition and a higher average cost for FHLB advances. Average noninterest-bearing deposits totaled $520.1 million, or 17.0% of total average deposits, for the first quarter of 2025 compared to $528.3 million, or 16.9% of total average deposits, for the first quarter of 2024.
Provision for Credit Losses
We recorded a $6.7 million provision for credit losses for the first quarter of 2025 compared to a $6.0 million provision for credit losses for the fourth quarter of 2024. The first quarter of 2025 provision for credit losses was due to an increase in specific reserves of $2.8 million, net charge-offs of $2.6 million and an increase in general reserves of $1.3 million due mainly to net loan growth. The first quarter increase in specific reserves related mostly to two lending relationships. Net charge-offs included $1.4 million related to a bulk sale of $10.8 million in underperforming SFR mortgage loans, of which $6.5 million were on nonaccrual at the end of the year, and $1.2 million related to an $8.8 million loan transferred to OREO and subsequently sold. Net charge-offs on an annualized basis represented 0.35% of average loans for the first quarter of 2025 compared to 0.26% for the fourth quarter of 2024. The first quarter provision also took into consideration factors such as changes in loan balances, the loan portfolio mix, the outlook for economic conditions and market interest rates, and changes in credit quality metrics, including changes in nonperforming loans, special mention and substandard loans during the period.
We recorded a provision for credit losses of $6.7 million for the first quarter of 2025 compared to no provision for the first quarter of 2024. The first quarter provision increased primarily due to higher specific reserves of $2.8 million, net charge-offs of $2.6 million and an increase in general reserves of $1.3 million due mainly to net loan growth. The specific reserves for the first quarter of 2025 related to loans that migrated to nonaccrual status after the first quarter of 2024. There were $2.6 million in net loan charge-offs in the first quarter of 2025, as compared to $184,000 in net loan charge-offs in the first quarter of 2024.
Noninterest Income
The following table presents the major components of our noninterest income for the periods presented:
| Three Months Ended | |||
|---|---|---|---|
| March 31, 2025 | December 31, 2024 | March 31, 2024 | |
| Noninterest income: · (dollars in thousands) | |||
| Service charges and fees | $1,017 | $988 | $992 |
| Gain on sale of loans | 81 | 376 | 312 |
| Loan servicing income, net of amortization | 588 | 492 | 589 |
| Increase in cash surrender value of life insurance | 403 | 407 | 382 |
| Gain on OREO | — | — | 724 |
| Other income | 206 | 466 | 373 |
| Total noninterest income | $2,295 | $2,729 | $3,372 |
Noninterest income for the first quarter of 2025 was $2.3 million, a decrease of $434,000 from $2.7 million in the fourth quarter of 2024. This decrease was mostly due to the fourth quarter of 2024 including $258,000 of income from a Bank Enterprise Award grant (included in other income) and lower net gain on sale of loans as compared to the fourth quarter of 2024.
Noninterest income decreased $1.1 million to $2.3 million for the first quarter of 2025 from $3.4 million for the same quarter in the prior year. This decrease was mostly due to lower gain on OREO of $724,000 and lower gain on sale of loans of $231,000.
The following table presents information on loan servicing income for the periods indicated:
| Three Months Ended | |||
|---|---|---|---|
| March 31, 2025 | December 31, 2024 | March 31, 2024 | |
| Loan servicing income, net of amortization: · (dollars in thousands) | |||
| Single-family residential loans | $415 | $403 | $443 |
| SBA loans | 173 | 89 | 146 |
| Total | $588 | $492 | $589 |
As of March 31, 2025, we were servicing SFR mortgage loans for other financial institutions, FHLMC, FNMA and SBA loans.
The following table presents loans serviced for others as of the dates indicated:
| As of | |||
|---|---|---|---|
| March 31, 2025 | December 31, 2024 | March 31, 2024 | |
| Loans serviced: · (dollars in thousands) | |||
| Single-family residential loans | $894,310 | $922,183 | $990,930 |
| SBA loans | 94,725 | 92,678 | 100,713 |
| Commercial real estate loans | 3,746 | 3,761 | 3,798 |
| Construction loans | 7,881 | 7,315 | 5,096 |
| Total | $1,000,662 | $1,025,937 | $1,100,537 |
The following table presents information on loans sold and gain (loss) on sale of loans for the periods indicated:
| Three Months Ended | |||
|---|---|---|---|
| March 31, 2025 | December 31, 2024 | March 31, 2024 | |
| Loans sold: · (dollars in thousands) | |||
| SBA | $3,742 | $4,056 | $3,407 |
| Single-family residential mortgage (1) | 11,182 | 8,791 | 5,288 |
| Other (2) | 4,579 | — | — |
| $19,503 | $12,847 | $8,695 | |
| Gain (loss) on sale of loans: | |||
| SBA | $156 | $191 | $220 |
| Single-family residential mortgage | 8 | 185 | 92 |
| Other | (83) | — | — |
| $81 | $376 | $312 | |
| (1) | SFR mortgage loans sold with servicing rights retained were $400,000, $8.8 million, and $3.6 million for the three months ended March 31, 2025, December 31, 2024 and March 31, 2024. The first quarter of 2025 also included a bulk sale of $10.8 million underperforming SFR mortgage loans resulting in charge-offs of $1.4 million, and no gain or loss on sale. |
| (2) | Other loans sold in the first quarter of 2025 represent nonperforming loans held for sale at December 31, 2024. |
Noninterest Expense
The following table presents major components of our noninterest expense for the periods presented:
| Three Months Ended | |||
|---|---|---|---|
| March 31, 2025 | December 31, 2024 | March 31, 2024 | |
| Noninterest expense: · (dollars in thousands) | |||
| Salaries and employee benefits | $10,643 | $9,927 | $9,927 |
| Occupancy and equipment expenses | 2,407 | 2,403 | 2,443 |
| Data processing | 1,602 | 1,499 | 1,420 |
| Legal and professional | 1,515 | 1,355 | 880 |
| Office expenses | 408 | 399 | 356 |
| Marketing and business promotion | 197 | 251 | 172 |
| Insurance and regulatory assessments | 730 | 677 | 982 |
| Core deposit premium | 172 | 182 | 201 |
| Other expenses | 848 | 956 | 588 |
| Total noninterest expense | $18,522 | $17,649 | $16,969 |
Noninterest expense for the first quarter of 2025 was $18.5 million, an increase of $873,000 compared to $17.6 million for the fourth quarter of 2024. This increase was mostly due to higher salaries and employee benefits expense of $716,000, attributed to higher payroll taxes and annual pay increases, which are typically reflected in the first quarter of the year. The annualized noninterest expenses to average assets ratio was 1.90% for the first quarter of 2025, up from 1.76% for the fourth quarter of 2024. The efficiency ratio was 65.1% for the first quarter of 2025, up from 61.5% for the fourth quarter of 2024 due mostly to higher noninterest expense and lower noninterest income in the first quarter of 2025.
Noninterest expense for the first quarter of 2025 was $18.5 million, an increase of $1.6 million compared to $17.0 million for the first quarter of 2024. This increase was due to higher salaries and employee benefits expense of $716,000 due in part to annual pay increases, and higher legal and professional expenses of $635,000 in the first quarter of 2025. The annualized noninterest expenses to average assets ratio was 1.72% and the efficiency ratio was 60.1% for the first quarter of 2024.
Income Tax Expense
We recorded an income tax provision of $900,000 and $672,000, reflecting an effective tax rate of 28.2% and 13.3%, for the three months ended March 31, 2025 and December 31, 2024. The increase in the effective tax rate for the first quarter of 2025 was due in part to lower tax credits combined with higher estimated pre-tax net income for the full year of 2025 as compared to the prior quarter.
We recorded an income tax provision of $900,000 and $3.2 million, reflecting an effective tax rate of 28.2% and 28.8%, for the three months ended March 31, 2025 and 2024.
The text of this filing, as the company filed it with the SEC, without its images or exhibits. This is not investment advice.