RBB Bancorp Q1 Earnings Call Highlights

Key Points

• RBB reported a “strong start” to 2026 with net income of $11.3 million (EPS $0.66), its highest quarterly earnings in two years, and net interest margin widened 60 basis points to 3.15% (partly aided by a one‑time FHLB special dividend).
• Loan growth was modest (about $11 million) as $131 million of originations at a 6.4% average yield were offset by payoffs; management emphasized disciplined pricing (generally keeping loan rates above 6%) while deposits shifted from wholesale into retail (+$50 million), improving funding mix and lowering costs.
• Credit metrics improved—non‑performing assets fell 9% q/q with effectively no net charge‑offs and a small reserve reversal—and capital remained stable (book value $31.10, tangible book $26.84) as the bank prioritizes addressing repriced subordinated debt and may consider a share buyback subject to regulatory approval.

RBB Bancorp NASDAQ: RBB reported what management called a “strong start” to 2026, with higher earnings, a fifth consecutive quarter of net interest margin expansion, and further improvements in credit metrics.

Quarterly earnings rise to highest level in two years

President and CEO Johnny Lee said the company generated net income of $11.3 million, or $0.66 per share, in the first quarter, an 11% increase from the fourth quarter and “our highest quarterly earnings level in two years.” Lee added that return on assets increased to 1.09% and that the company continued to grow tangible book value per share.

Chief Financial Officer Lynn Hopkins said the results compared to $10.2 million, or $0.59 per diluted share, in the fourth quarter. Despite two fewer days in the quarter, Hopkins said net interest income increased $1 million to $30.5 million, reflecting a $1.4 million decrease in interest expense that was “partially offset by a $390,000 decrease in interest income.”

Net interest margin expands again as funding costs decline

Lee said net interest margin increased 60 basis points to 3.15%, marking “our fifth consecutive quarter of margin expansion.” He attributed the improvement to both lower funding costs and higher asset yields, noting that the cost of deposits declined 10 basis points and the “flat rate on deposits ended the quarter at 2.79%.” Lee said that left “some additional opportunity for improvement in the second quarter.”

Hopkins provided additional detail, saying the margin increased to 3.15% from 2.99% in the fourth quarter, including an eight basis point increase in earning asset yields and an eight basis point decline in the overall cost of funds. Hopkins also said the company received a $430,000 Federal Home Loan Bank special dividend, which added four basis points to net interest margin in the first quarter.

Asked about the sustainability of the benefit, Hopkins said the FHLB special dividend was “one time in nature,” adding, “We would welcome a special dividend every quarter, but don’t view that as recurring.” Hopkins also noted several moving pieces that could affect near-term margin trends, including the impact of a shorter quarter on the mortgage portfolio and the upcoming repricing of subordinated debt. Even so, Hopkins said the company still sees room to expand margin from “a more normalized basis, which is probably closer to or just above 3%,” aided by balance sheet growth and “some modest repricing of our deposits.”

Loan growth modest as pricing discipline and payoffs offset originations

RBB’s loan growth was limited in the quarter. Lee said loans increased by about $11 million, roughly 1% annualized. The company originated $131 million of new loans at an average yield of 6.4%, but Lee said growth was offset by “elevated payoffs and pay downs” as some borrowers refinanced or sold assets.

On the call, Lee emphasized that the bank remained “disciplined on pricing and structure” and focused on profitable growth. In response to questions about muted growth, he said the company was not willing to match certain competitive market rates, citing examples such as “5.5%-5% for multifamily” and “5.75% or even lower for some CRE loans.” Lee said RBB “stayed pretty disciplined during the first quarter in keeping our rates above 6%,” unless there were relationship benefits such as deposits or fee income that could enhance overall returns.

Hopkins said the company entered the quarter with roughly $130 million of loan production at approximately the same yields as the fourth quarter, and added that second and third quarters have historically been the strongest for production. Hopkins framed the outlook as “mid to high single digits” for loan growth, depending in part on whether borrowers move off the sidelines in a higher-rate environment and how growth interacts with net interest margin objectives. Lee echoed that view, pointing to a “healthy” pipeline while reiterating that the company would remain focused on loan quality and returns.

Deposit mix shifts toward retail relationships; cost outlook discussed

Lee said deposits declined slightly due to a reduction in wholesale deposits, but the change was “more than offset from a quality standpoint” by growth in retail relationships.

Hopkins said retail deposits increased by $50 million during the quarter and included a shift from time deposits into a high-yield savings product. On the broader balance sheet, Hopkins said total assets were $4.2 billion at quarter-end, loans held for investment increased $11 million since year-end, and deposits declined $10.5 million, with the mix improving as the company reduced wholesale funding and grew lower-costing retail deposits.

When asked about the outlook for deposit costs, Hopkins said there may be “less opportunity” as market dynamics evolve, but added that the company’s end-of-quarter spot rate was lower than the quarterly average, suggesting “still a little bit of opportunity.” Hopkins discussed the bank’s CD ladder and noted that 98% of CDs mature over a 12-month period. He also said that rate-sensitive deposit pricing in the market was being offered at roughly 3.85% to 4%, while the bank has been “successful a little bit lower than that.”

Credit metrics improve; non-interest items lift results

On credit, Lee said non-performing assets declined 9% from the prior quarter and were down 24% from a year earlier. Hopkins said non-performing loans were “basically unchanged,” while substandard loans decreased to $2.7 million and special mention loans increased $5.5 million; Hopkins said all special mention loans were “on approval status.”

Chief Credit Officer Jeffrey Yeh said the quarter was “pretty quiet,” with “2 exit, 1 in” among non-performing loans. Yeh said the two exits were successful workouts that paid off, while the one new non-accrual was tied to “only a little bit of technical issue.” Hopkins added that roughly 90% of non-performing loans were tied to the same three relationships and said the largest one remained in a bankruptcy process. “We do see an opportunity for NPLs to be resolved during 2026,” Hopkins said.

Hopkins said the company had “effectively no net charge-offs” and recorded a small reversal of provisions for credit losses, citing paydowns on non-performing loans, stable credit quality, and positive economic indicators in the forecast. “We believe that we are adequately reserved,” Hopkins said, adding that future provisions should reflect generally improving credit quality.

Non-interest income increased $1.4 million to $4.3 million. Hopkins said the increase was driven by an $890,000 higher net gain on real estate owned, a $484,000 recovery on a fully charged-off acquired loan, and $360,000 of interest income on tax refunds related to purchased federal tax credits.

Non-interest expense increased $293,000 to $19.3 million, primarily from higher payroll taxes and employee benefit costs early in the year. Even with the increase, Hopkins said the efficiency ratio improved to 55% from 59% in the fourth quarter. He said the company expects non-interest expense in the next few quarters to be in the $18 million to $19 million range.

Hopkins also highlighted capital and book value trends, saying book value per share increased to $31.10 and tangible book value per share increased 2% to $26.84.

On capital deployment, Hopkins said the company remained focused on subordinated debt that repriced April 1 and noted that its regulatory capital treatment would begin to sunset. He said addressing the sub-debt was the company’s “first priority,” though he also pointed to “opportunity for us to look at a stock buyback,” adding that retiring a portion of the sub-debt could make sense depending on rate conditions and balance sheet considerations, subject to regulatory approval.

About RBB Bancorp NASDAQ: RBB

RBB Bancorp is a bank holding company headquartered in Los Angeles, California, and the parent of Royal Business Bank. Established in 2008, the company focuses on providing a full range of commercial banking services tailored to small- and medium-sized businesses, professionals and real estate investors. Through its subsidiary, RBB Bancorp delivers deposit products, loan facilities and cash management solutions designed to support operations and growth strategies.

The company's core offerings include commercial real estate lending, construction and land development loans, Small Business Administration (SBA) lending and trade finance.

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