RBB Bancorp RBB

RBB Bancorp made significant strides in improving its credit quality, with nonperforming assets declining 11% to 1.02% of total assets. Nonperforming loans decreased by $20.8 million, or 47%, to $23.8 million, primarily due to the transfer of a $19.4 million credit to REO, which is the largest nonperforming asset and is expected to be resolved in the second half of the year. The allowance for credit losses remained stable at $43.7 million, resulting in a substantial improvement in allowance coverage of nonperforming loans to 184%.

The company saw an acceleration in loan originations, totaling $150 million in the second quarter at an average yield of 6.3%. Management expects continued progress on loan growth in the second half of the year, targeting mid-single-digit annualized growth. A key development is the expansion into Northern California with the opening of a loan production office and the hiring of a commercial banking team, led by John Curtis, to tap into the region's large Asian-American community and drive commercial loan growth.

Deposits grew by $50.8 million in the quarter, reaching $3.4 billion, with retail deposits increasing $94 million and wholesale deposits declining $44 million. The deposit mix improved, as noninterest-bearing deposits rose to 17.5% of total deposits from 15.8% in the prior quarter. While the cost of average interest-bearing deposits declined 5 basis points to 3.40%, the competitive landscape for core funding remains intense, with rates for wholesale funding moving higher towards the end of the quarter.

The net interest margin (NIM) was 3.06% for the second quarter, a 9 basis point decrease from 3.15% in the first quarter. This decline was primarily attributed to the repricing of $120 million in subordinated debt from 4% to a floating rate of 6.98% and the absence of a special FHLB dividend received in Q1. However, the NIM improved 14 basis points year-over-year, reflecting the cumulative benefits of deposit repricing efforts and improved earning asset yields. Management anticipates NIM to improve in Q3, returning to Q1 levels or higher, driven by loan growth and the partial redemption of subordinated debt.

RBB Bancorp maintains strong capital ratios, with a CET1 ratio of approximately 18% and a TCE to tangible assets ratio of approximately 11%. The company redeemed $40 million of subordinated debt on July 1, reducing future interest expense. The Board also authorized a new share repurchase program of up to 1 million shares, representing 6% of shares outstanding, reflecting confidence in the bank's capital position and commitment to optimizing its capital structure. Approximately 181,000 shares were repurchased in Q2 at an average price of $24.65-$24.75.