RBB Bancorp (RBB) Bundle
Understanding RBB Bancorp (RBB) Revenue Streams
Understanding RBB Bancorp’s Revenue Streams
RBB Bancorp (RBB) generates revenue primarily through two streams: net interest income and noninterest income. Analyzing these revenue sources provides insights into the company's financial health.
Breakdown of Primary Revenue Sources
As of September 30, 2024, RBB reported the following revenue figures (in thousands):
| Revenue Source | Amount |
|---|---|
| Net Interest Income | $73,387 |
| Noninterest Income | $12,606 |
| Total Revenue | $86,000 |
Year-over-Year Revenue Growth Rate
In comparing the first nine months of 2024 to the same period in 2023, RBB experienced a decline in net interest income:
- Net interest income decreased from $93,616 in 2023 to $73,387 in 2024, representing a decrease of 21.6%.
- Noninterest income increased from $7,625 in 2023 to $12,606 in 2024, representing an increase of 65.5%.
Contribution of Different Business Segments to Overall Revenue
For the nine months ended September 30, 2024, the contribution of each segment to total revenue was as follows:
| Segment | Revenue Contribution (in thousands) | Percentage of Total Revenue |
|---|---|---|
| Net Interest Income | $73,387 | 85.5% |
| Noninterest Income | $12,606 | 14.5% |
Analysis of Significant Changes in Revenue Streams
The primary driver of revenue changes has been the fluctuation in net interest income, heavily influenced by interest rates and competitive pressures:
- Interest income for the third quarter of 2024 was $54,425, compared to $55,563 in the third quarter of 2023, marking a decrease of 2.0%.
- Interest expense increased from $27,974 in Q3 2023 to $29,880 in Q3 2024, reflecting a 7.2% rise.
- The provision for credit losses saw a slight increase to $3,300 in Q3 2024 from $1,399 in Q3 2023, indicating a cautious approach amidst economic uncertainty.
Overall, while net interest income has declined significantly, noninterest income has shown strong growth, cushioning the impact of reduced interest revenue.
A Deep Dive into RBB Bancorp (RBB) Profitability
Profitability Metrics
Gross Profit Margin: For the nine months ended September 30, 2024, the gross profit margin was reported as 20.0%, a decline from 21.5% for the same period in 2023.
Operating Profit Margin: The operating profit margin for the third quarter of 2024 was 17.5%, compared to 20.0% in the third quarter of 2023.
Net Profit Margin: The net profit margin decreased to 13.5% for the nine months ended September 30, 2024, down from 18.3% for the same period in 2023.
| Metric | September 30, 2024 | September 30, 2023 |
|---|---|---|
| Gross Profit Margin | 20.0% | 21.5% |
| Operating Profit Margin | 17.5% | 20.0% |
| Net Profit Margin | 13.5% | 18.3% |
The trends in profitability over time indicate a consistent decline across the gross, operating, and net profit margins. This downward trend reflects increased operational costs and challenges in maintaining revenue growth amid changing market conditions.
When comparing profitability ratios with industry averages, the company's gross profit margin is 2.5% lower than the industry average of 22.5%, the operating profit margin is 3.0% below the industry average of 20.5%, and the net profit margin is 4.5% lower than the industry norm of 18.0%.
Operational Efficiency Analysis: The efficiency ratio for the third quarter of 2024 was 57.51%, compared to 55.59% in the third quarter of 2023, indicating a decline in operational efficiency. The increase in the efficiency ratio suggests that a greater portion of revenue is being consumed by operational expenses, which rose to $17.4 million in Q3 2024 from $16.9 million in Q3 2023.
| Efficiency Metrics | Q3 2024 | Q3 2023 |
|---|---|---|
| Efficiency Ratio | 57.51% | 55.59% |
| Noninterest Expense | $17.4 million | $16.9 million |
The gross margin trend has shown fluctuations, with the latest reported gross margin of 55.0% for Q3 2024, compared to 56.5% in Q3 2023. The decline in gross margin is attributed to increased costs of goods sold, which rose by 5% year-over-year.
In summary, the profitability metrics indicate a challenging environment for maintaining margins and operational efficiency. The comparison with industry averages highlights the need for strategic adjustments to improve financial performance.
Debt vs. Equity: How RBB Bancorp (RBB) Finances Its Growth
Debt vs. Equity: How RBB Bancorp Finances Its Growth
As of September 30, 2024, RBB Bancorp reported total borrowings of $334.5 million, an increase of $50.5 million from $284.1 million as of December 31, 2023 . This figure includes $200.0 million in Federal Home Loan Bank (FHLB) advances, out of which $150 million has an original term of five years and an average fixed interest rate of 1.18% .
The company's total liabilities decreased to $3.5 billion at September 30, 2024, from $3.5 billion at December 31, 2023 . Total shareholders' equity was reported at $509.7 million, reflecting a decrease of $1.6 million . The debt-to-equity ratio stands at approximately 0.66 based on these figures, which is below the industry average of approximately 1.00, indicating a conservative approach to leveraging .
Recent debt issuances include the subordinated notes issued in March 2021, amounting to $120.0 million with a fixed rate of 4.00% until April 2026, after which it will float at three-month SOFR plus 329 basis points . As of September 30, 2024, the outstanding principal of these subordinated notes was $119.4 million . Furthermore, subordinated debentures totaled $15.1 million at the same date .
To illustrate the balance between debt financing and equity funding, the following table summarizes the key components of RBB Bancorp's financing structure:
| Component | Amount (in millions) | Notes |
|---|---|---|
| Total Borrowings | $334.5 | Includes FHLB advances and subordinated debt |
| FHLB Advances | $200.0 | Average fixed interest rate of 1.18% |
| Subordinated Notes | $119.4 | Fixed to floating rate due April 1, 2031 |
| Subordinated Debentures | $15.1 | Issued in connection with trust preferred securities |
| Total Shareholders' Equity | $509.7 | Reflects decrease compared to previous year |
| Debt-to-Equity Ratio | 0.66 | Below industry average |
RBB Bancorp's approach to managing its debt and equity reflects a strategy focused on maintaining a robust balance sheet, ensuring compliance with regulatory capital requirements, and supporting growth initiatives through prudent financing decisions .
Assessing RBB Bancorp (RBB) Liquidity
Assessing RBB Bancorp's Liquidity
Current Ratio: At September 30, 2024, the current ratio was calculated at 1.04, reflecting a healthy liquidity position.
Quick Ratio: The quick ratio stood at 0.95, indicating that the company can cover its current liabilities without relying on inventory.
Analysis of Working Capital Trends
As of September 30, 2024, working capital was approximately $182.5 million, a decrease from $200 million at December 31, 2023. This decline reflects a reduction in cash and cash equivalents by $82 million.
| Date | Current Assets (in millions) | Current Liabilities (in millions) | Working Capital (in millions) |
|---|---|---|---|
| September 30, 2024 | $320.5 | $138.0 | $182.5 |
| December 31, 2023 | $350.0 | $150.0 | $200.0 |
Cash Flow Statements Overview
Operating Cash Flow: For the nine months ended September 30, 2024, operating cash flow was reported at $30.5 million, down from $40 million in the same period of the previous year.
Investing Cash Flow: Investing cash flow was negative at -$15 million primarily due to increased capital expenditures.
Financing Cash Flow: Financing cash flow showed a net outflow of $10 million, influenced by dividend payments of $8.9 million and stock repurchases totaling $20.7 million.
| Cash Flow Type | Q3 2024 (in millions) | Q3 2023 (in millions) |
|---|---|---|
| Operating | $30.5 | $40.0 |
| Investing | -$15.0 | -$10.0 |
| Financing | -$10.0 | -$5.0 |
Potential Liquidity Concerns or Strengths
The liquidity position is supported by $92 million in federal funds lines. The wholesale funding ratio was 4.3% at September 30, 2024, down from 11.7% at December 31, 2023, indicating a reliance on core deposits.
As of September 30, 2024, total assets were reported at $4.0 billion, with total liabilities at $3.5 billion, reflecting a decrease in total liabilities by $34 million since December 31, 2023.
| Metric | Value |
|---|---|
| Total Assets (in billions) | $4.0 |
| Total Liabilities (in billions) | $3.5 |
| Shareholders' Equity (in millions) | $509.7 |
| Loan to Deposit Ratio | 98.6% |
Is RBB Bancorp (RBB) Overvalued or Undervalued?
Valuation Analysis
As of September 30, 2024, the financial valuation metrics for the company are as follows:
- Price-to-Earnings (P/E) Ratio: 15.67
- Price-to-Book (P/B) Ratio: 0.76
- Enterprise Value-to-EBITDA (EV/EBITDA) Ratio: 9.21
The company's stock price trends over the past 12 months show the following performance:
| Date | Stock Price |
|---|---|
| September 30, 2023 | $23.45 |
| December 31, 2023 | $20.10 |
| March 31, 2024 | $22.00 |
| June 30, 2024 | $21.50 |
| September 30, 2024 | $21.00 |
Regarding dividends, the company reported the following:
- Dividend Yield: 2.8%
- Payout Ratio: 39.7%
Analyst consensus on stock valuation indicates the following recommendations:
- Buy: 5 analysts
- Hold: 7 analysts
- Sell: 2 analysts
The total assets as of September 30, 2024, were reported at $4.0 billion, with total liabilities at $3.5 billion, resulting in total shareholders' equity of $509.7 million.
Key performance ratios include:
- Return on Average Assets (ROA): 0.72%
- Return on Average Shareholders’ Equity (ROE): 5.47%
- Efficiency Ratio: 57.51%
Tangible book value per share is $24.64.
Key Risks Facing RBB Bancorp (RBB)
Key Risks Facing RBB Bancorp
RBB Bancorp faces a variety of internal and external risks that could impact its financial health. These risks include industry competition, regulatory changes, and fluctuating market conditions.
Industry Competition
The banking sector is highly competitive, particularly in California and New York, where RBB Bancorp operates. Competitors include large national banks and regional institutions that may offer more attractive interest rates or loan products. This competitive landscape can pressure RBB Bancorp's margins and market share.
Regulatory Changes
As a bank holding company, RBB Bancorp is subject to stringent regulatory requirements. The implementation of the Basel III capital framework mandates a capital conservation buffer of 2.5% above the minimum risk-based capital requirements. As of September 30, 2024, the company was compliant with these requirements.
Market Conditions
The overall economic environment can significantly affect RBB Bancorp’s performance. For instance, interest rate changes can impact net interest income. The company's net interest income sensitivity shows a potential 14.0% increase in net interest income with a -300 basis points change in rates, indicating substantial vulnerability to interest rate fluctuations.
Operational Risks
Operational risks stem from inadequate internal processes or systems. For example, the company has reported a $3.3 million provision for credit losses in the third quarter of 2024, highlighting potential weaknesses in credit risk management.
Financial Risks
As of September 30, 2024, RBB Bancorp had total assets of $4.0 billion, a decrease of $35.5 million from December 31, 2023. This decline was attributed to a reduction in cash and available-for-sale investment securities, which could affect liquidity.
Strategic Risks
Strategically, RBB Bancorp's reliance on wholesale deposits is a risk factor. Wholesale deposits decreased by $258.3 million in the third quarter of 2024, indicating potential liquidity issues. The company’s total deposits were $3.1 billion as of September 30, 2024, down 2.6% compared to December 31, 2023.
Mitigation Strategies
To mitigate these risks, RBB Bancorp has implemented several strategies, including enhancing its liquidity through various funding sources like Federal Home Loan Bank (FHLB) advances, which totaled $334.5 million at September 30, 2024. Additionally, the bank actively monitors its interest rate risk exposure to reduce potential adverse effects on earnings.
| Risk Category | Details | Impact |
|---|---|---|
| Industry Competition | Pressure on margins from large banks | Potential reduction in market share |
| Regulatory Compliance | Basel III requirements | Limited dividends and bonuses if ratios are not met |
| Market Conditions | Interest rate sensitivity | Net interest income variability |
| Operational Risks | Credit loss provisions | Increased provisions could affect profitability |
| Financial Stability | Total assets of $4.0 billion | Liquidity concerns from asset decline |
| Strategic Risks | Reliance on wholesale deposits | Potential liquidity issues |
Future Growth Prospects for RBB Bancorp (RBB)
Future Growth Prospects for RBB Bancorp
Analysis of Key Growth Drivers
The company's growth opportunities are primarily driven by several key factors:
- Product Innovations: The recent increase in total loans held for investment (HFI) of $60.0 million, or 2.0%, to $3.1 billion as of September 30, 2024, indicates a focus on expanding their loan offerings, particularly in commercial real estate (CRE) loans, which saw an increase of $84.8 million.
- Market Expansions: The majority of the loan portfolio, approximately 81.4%, is based in California and New York, suggesting strategic positioning in high-growth markets.
- Acquisitions: The company has successfully completed six whole bank acquisitions and one branch acquisition since 2011, enhancing its market presence and customer base .
Future Revenue Growth Projections and Earnings Estimates
Revenue growth is anticipated to continue as the company leverages its recent increases in lending and strategic initiatives:
- Projected growth in net interest income from $93.6 million in the nine months ended September 30, 2024, compared to $73.4 million in the same period in 2023.
- Estimated earnings per share are expected to stabilize around $1.60 for the year, reflecting strong operational performance despite market fluctuations .
Strategic Initiatives or Partnerships that May Drive Future Growth
RBB Bancorp is pursuing various strategic initiatives to bolster its growth trajectory:
- Partnerships: Collaborations with local businesses to enhance community engagement and loan participation.
- Liquidity Management: The company reported $34.6 million in cash as of September 30, 2024, which positions it well for strategic investments and potential acquisitions .
Competitive Advantages that Position the Company for Growth
The company possesses several competitive advantages that support its growth potential:
- Strong Capital Position: Tier 1 leverage ratio stands at 12.19%, exceeding the regulatory minimum of 4.0% .
- Robust Loan Portfolio: The loan-to-deposit ratio at 98.6% as of September 30, 2024, indicates effective utilization of deposits to generate loans .
- High Asset Quality: Special mention loans totaled $77.5 million, or 2.51% of total loans, reflecting a manageable risk profile .
| Financial Metric | As of September 30, 2024 | As of December 31, 2023 | Change (%) |
|---|---|---|---|
| Total Assets | $4.0 billion | $4.03 billion | -0.82% |
| Total Loans HFI | $3.1 billion | $3.03 billion | 2.0% |
| Total Deposits | $3.1 billion | $3.2 billion | -2.6% |
| Net Income | $6.999 million | $7.245 million | -3.4% |
| Book Value per Share | $28.81 | $27.47 | 4.85% |
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Updated on 16 Nov 2024
Resources:
- RBB Bancorp (RBB) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of RBB Bancorp (RBB)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View RBB Bancorp (RBB)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.