RBB(US:RBB)2024-07-23 20:57Financial Data and Key Metrics Changes - RBB Bancorp reported a net income of $7.2 million or $0.39 per share, a decline of $0.04 from the previous quarter's $0.43 per share [5][7] - Net interest margin decreased by 2 basis points, primarily due to the impact of $22.5 million in loans that migrated to non-accrual, which reduced interest income by $710,000 and net interest margin by 8 basis points [7][8] - Net interest income decreased by $912,000 to $24 million, with $520,000 of that decrease attributed to non-accrual loans [7][8] - Non-interest income increased slightly to $3.5 million, benefiting from distributions on an equity investment and higher gains on loan sales [8] Business Line Data and Key Metrics Changes - Loans increased by $20 million in the second quarter, supported by approximately $115 million of loan production at a weighted average rate of 7.4% [5][6] - Commercial real estate loans and construction loans remained stable at 39% and 7% of total loans, respectively [8] - The residential mortgage portfolio, valued at $1.5 billion, consists of well-secured non-QM mortgages primarily in New York and California with an average loan-to-value (LTV) of 61% [8] Market Data and Key Metrics Changes - Total deposits remained stable at $3 billion, with a successful replacement of wholesale funding with retail deposits [8] - Non-interest bearing deposits remained relatively flat for the second quarter in a row [8] - The average all-in-cost deposit for the second quarter was unchanged at 3.59% from the first quarter [8] Company Strategy and Development Direction - The company is focused on reducing non-performing loans (NPLs) and expects to settle two non-accrual loans totaling $8.1 million in the third quarter [6][8] - Management is cautiously optimistic about loan growth and net interest margin stabilization in the second half of the year, despite a challenging environment [10][31] - The company plans to continue share repurchases as the stock price remains below tangible book value, with 0.5 million shares still authorized for buyback [37] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding loan growth and net interest margin recovery, expecting increased growth in the second half of the year compared to the first half [10][31] - The increase in non-performing loans was not attributed to any specific review or audit but was part of normal banking operations [44] - Management believes they are appropriately reserved based on updated appraisals and expect to resolve troubled loans without material loss [6][44] Other Important Information - The allowance for loan losses remained stable at 1.37% of total loans held for investment, but the allowance to non-performing loans ratio decreased to 76% [8] - The company repurchased approximately 448,000 shares at an average price of $18.01 in the second quarter [8] Q&A Session Summary Question: Opportunities for loan growth and margin in the next two quarters - Management is cautiously optimistic about loan growth, expecting increased growth compared to the first half of the year, with net interest margin stabilizing [10][12] Question: Migration of non-accrual loans and common drivers - Management indicated there is no common driver for the migration of the loans that moved to non-accrual [14][15] Question: Loan sales composition and pipeline for the back half of the year - The majority of loan sales were from SBA loans, with some traction in the mortgage portfolio [17][18] Question: Expense run rate and SEC investigation - Current expenses related to remediation processes are included in the expense run rate [21][48] Question: Confidence in recouping non-performing loans without losses - Management expressed confidence based on new appraisals and proactive measures taken to resolve troubled loans [44][45]