雅虎香港財經 RBB Bancorp (NASDAQ:RBB) Q1 2024 Earnings Call Transcript
RBB Bancorp (NASDAQ:RBB) Q1 2024 Earnings Call Transcript April 23, 2024
RBB Bancorp isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Good day, ladies and gentlemen. And welcome to the RBB Bancorp First Quarter 2024 Earnings Conference Call. At this time, all participants are placed on a listen-only mode and the floor will be open for questions-and-comments following the presentation. It is now my pleasure to turn the floor over to your host, Catherine Wei, Investor Relations Officer. Ma’am, you may begin.
Catherine Wei: Thank you. Good day, everyone, and thank you for joining us to discuss RBB Bancorp’s results for the first quarter of 2024. With me today are Chief Executive Officer, David Morris; President, Johnny Lee; Chief Financial Officer, Lynn Hopkins; Chief Credit Officer, Jeffrey Yeh; Chief Administrative Officer, Gary Fan; and Chief Risk Officer, Vincent Liu. David and Lynn will briefly summarize the results, which can be found in the earnings press release and investor presentation that are available on our Investor Relations website and then we’ll open up the call to your questions. I would ask that everyone please refer to the disclaimer regarding forward-looking statements in the investor presentation and the company’s SEC filings. Now, I’d like to turn the call over to RBB’s Chief Executive Officer, David Morris. David?
David Morris: Thank you, Catherine. Good day, everyone, and thank you for joining us today. First, I’m happy to share that Lynn Hopkins has been formally appointed as our Chief Financial Officer. We appreciated her expertise since joining RBB in late 2023 as Interim CFO and look forward to her ongoing contributions as an official member of our leadership team. Turning to our first quarter performance, earnings and margins showed signs of stabilizing and loan balances remaining flat. Net interest margin declining 4 basis points and earnings declining $0.02 per share from last quarter’s results when we exclude the income from the CDFI award. While changing expectations about the timing and size of our rate cuts makes forecasting challenging.
We are cautiously optimistic that margins should start to creep back up as deposit costs stabilize and loan yields continue to increase. Loans held for investment remain stable this quarter at $3 billion after a few quarters of intentional declines. We had expected some loan growth in the first quarter, but were surprised by the pricing in the market and held back originations rather than adding loans at levels that would put further pressure on our profitability. That said, we did originate approximately $69 million of commercial loans in the first quarter at a yield of 8.3%, which coupled with renewal and other repricing activities contributed to an 11-basis-point increase in our overall loan portfolio yield of 6.07%. With that, I hand it over to Lynn, who can go into some more detail about the quarter.
Lynn?
Lynn Hopkins: Thank you, David. Please feel free to refer to the investor presentation we have provided as I share my comments on the company’s first quarter of 2024 financial performance. Slide 3 of our investor presentation has a summary of first quarter results. Net income was $8 million or $0.43 per diluted share, so relatively stable compared to last quarter’s $0.45 per share after adjusting for last quarter’s $5 million CDFI income. There was no similar income in the first quarter of 2024. As David mentioned, our net interest margin decreased 4 basis points, as our cost of funds increased 16 basis points, while our yield on interest earning assets increased by 10 basis points from last quarter. The earning asset yield expansion is mostly due to our total loan yield increasing 11 basis points.
Interest income remained stable at $54.8 million. The increase in total cost of funds to 3.54% was due to the continued pressure on the cost of interest-bearing deposits, which increased by 24 basis points, but was offset by the benefit of our $55 million redemption of subordinated notes during the fourth quarter and a small decline in average non-interest-bearing liabilities. As a result, net interest income decreased $792,000. Non-interest income of $3.4 million decreased primarily due to the positive impact of last quarter’s $5 million CDFI ERP award. The first quarter also benefited from the $724,000 in gains on OREO due to current appraisals on two properties and the sale of one property in the quarter. As expected, non-interest expenses increased by $576,000 to $17 million due to seasonally high salaries and benefits offset by lower legal fees, which included a legal expense recovery of $165,000 and lower regulatory assessment fees.
Non-interest expenses in the second quarter are expected to remain around the $17 million level. Non-performing loans increased to $36 million due to $7.7 million being placed on non-accrual, consisting primarily of low LTV single-family mortgages offset by $3 million of payoffs and paydowns. Non-performing assets at March 31st totaled $37 million and included $1.1 million in two new OREOs. Our allowance for loan losses remained stable at 1.38% of total loans held for investment and represented 116% of non-performing loans. Commercial real estate loans and construction and land development loans were stable at 39% and 7% of our total loans, and Slides 6 and 7 have additional details about our exposure in these portfolios. Slide 8 has details about our $1.5 billion residential mortgage portfolio, which consists of well-secured non-QM mortgages, primarily in New York and California, with an average LTV of 61%.
Slide 10 has details about our deposit franchise. Total deposits were $3 billion at the end of the first quarter, $146 million decrease compared to the fourth quarter, as we let more expensive-time deposits roll off and maintained non-interest-bearing deposits relatively stable. Our average all-in cost of deposits for the first quarter was 3.59%, an increase of 21 basis points from the fourth quarter. While we continue to see upward pressure on our funding costs, the actions we took in the last two quarters, namely redeeming $55 million of subordinated notes and reducing wholesale deposits has reduced the pace of increase. We continue to implement longer term strategies to attract lower cost deposits, which we expect will contribute to improved funding costs over time.
Our tangible book value per share increased 1% during the first quarter to $23.68 due to earnings and accretive share repurchases offset by a $1.5 million increase in unrealized losses on our securities portfolio and dividends of $3 million. We authorized a share repurchase plan of up to 1 million shares at the end of February and repurchased about 80,000 shares during the first quarter. Our capital levels remain strong, with all capital ratios above regulatory well-capitalized levels. With that, we are happy to take your questions. Operator, would you please open up the call?
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