RBB(US:RBB)2023-10-24 20:35Financial Data and Key Metrics Changes - The net interest margin (NIM) decreased by 50 basis points to 2.87% in Q3 2023 due to declining loan yields and increasing deposit costs [9][13] - Net interest income declined as a result of lower loan yields, while non-interest income increased significantly due to a $5 million CDFI award [11][12] - Non-interest expenses decreased by 8.9% primarily due to reduced legal and professional fees, with expectations of total non-interest expenses around $17 million in Q4 2023 [12][13] Business Line Data and Key Metrics Changes - The loan portfolio totaled $3.1 billion at the end of Q3 2023, with an annualized yield of 5.99% [14] - Commercial real estate loans comprised 46% of total loans, with specific exposure to construction and land development loans [14] - The residential mortgage portfolio amounted to $1.5 billion, primarily consisting of non-QM mortgages in New York and California [15] Market Data and Key Metrics Changes - Total deposits decreased by $21 million from the prior quarter, mainly due to a reduction in time deposits under $250,000 [16] - The average cost of interest-bearing deposits rose to 3.83%, up 36 basis points from the previous quarter, but the pace of increase has slowed significantly [16] Company Strategy and Development Direction - The company achieved a target loan-to-deposit ratio of 95% and plans to resume deposit-supported loan growth to enhance profitability [6][7] - A strategic focus on de-risking the loan portfolio has led to reduced exposure to certain loan categories deemed at risk in a higher interest rate environment [8] - The company is open to acquisitions in the San Francisco market and is looking for opportunities that provide significant cost savings [60] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about improving credit quality due to proactive loan de-risking and a specific charge-off taken in Q3 [10] - The company anticipates continued pressure on NIM in Q4 due to deposit costs and loan yields but expects future benefits from the redemption of $55 million in subordinated debt [9][30] - Management is cautiously optimistic about the resolution of a large delinquent loan and expects no additional losses from it [17] Other Important Information - The allowance for credit losses remained stable at 1.36% of total loans, with capital levels well above regulatory requirements [19] - The company is optimistic about resuming share repurchases in mid-November, with 433,000 shares remaining [37][39] Q&A Session Summary Question: Expectations for margin pressure in Q4 - Management indicated that NIM compression is expected to continue but not to the extent seen in Q3, with one large loan payoff anticipated to impact yields [24][25] Question: Non-core loans remaining - Management confirmed that approximately $57 million in non-core loans are expected to be let go or refinanced [34] Question: Charge-off details - A $12 million loan resulted in a $2.2 million charge-off due to a decrease in collateral value related to a local tax issue [36] Question: Share repurchase timeline - Management is optimistic about resuming share repurchases in mid-November [37] Question: SEC investigation update - Management stated that they cannot comment on the timeline for the SEC investigation but noted that the process has slowed down [58] Question: Growth opportunities by category - Management highlighted ongoing demand for construction and CRE-related loans, with a selective approach to lending in these areas [63]