RBB(RBB) - 2024 Q4 - Annual Report

Financial Performance - For the year ended December 31, 2024, net earnings were $26.7 million, a decrease of$ 15.8 million, or 37.2%, from $42.5 million in 2023 due to a$ 19.9 million decrease in net interest income [271]. - Net interest income for 2024 was $99.4 million, down from$ 119.3 million in 2023, attributed to a $15.4 million increase in interest expense [282]. - Noninterest income increased slightly to$ 15.3 million in 2024 from $15.0 million in 2023 [282]. - The efficiency ratio for 2024 was 60.30%, compared to 52.64% in 2023, indicating a decline in operational efficiency [282]. - The provision for loan losses was$ 9.8 million in 2024, significantly higher than the $3.9 million in 2023, indicating a proactive approach to managing credit risk [366]. - Income tax expense dropped to$ 9.0 million in 2024, a 49.3% decrease from $17.8 million in 2023, with the effective tax rate falling to 25.3% [316]. Assets and Liabilities - Total assets as of December 31, 2024, were$ 4.0 billion, a decrease of $33.5 million, or 0.8%, from the previous year, primarily due to a$ 178.7 million decrease in interest-earning cash [272]. - Total liabilities decreased by $30.2 million, or 0.9%, to$ 3.5 billion at December 31, 2024, primarily due to a $91.0 million decrease in deposits [384]. - Total deposits decreased to$ 3.1 billion, down $91.0 million, or 2.9%, compared to the previous year, with a significant decrease in wholesale deposits [275]. - Cash and cash equivalents decreased by$ 173.6 million, or 40.3%, to $257.7 million as of December 31, 2024, from$ 431.4 million at December 31, 2023 [381]. Loans and Credit Quality - Loans held for investment (HFI) increased to $3.1 billion, up$ 21.4 million, or 0.7%, from $3.0 billion at December 31, 2023, driven by increases in commercial real estate and single-family residential mortgage loans [274]. - The allowance for loan losses (ALL) was$ 47.7 million, reflecting an increase of $5.8 million from$ 41.9 million in 2023, with a provision for loan losses of $9.8 million in 2024 compared to$ 3.9 million in 2023 [278]. - Nonperforming assets totaled $81.0 million, or 2.03% of total assets, at December 31, 2024, compared to$ 31.6 million, or 0.79% of total assets, at December 31, 2023, indicating a significant increase in nonperforming assets [373]. - The ratio of net charge-offs to average LHFI was 0.13% for 2024, compared to 0.10% in 2023, showing a slight deterioration in credit quality [366]. Capital and Equity - Shareholders' equity decreased by $3.4 million, or 0.7%, to$ 507.9 million as of December 31, 2024, primarily due to common stock repurchases and dividends paid [279]. - The Tier 1 leverage capital ratio was 11.92% as of December 31, 2024, compared to 11.99% in 2023, indicating the company remains well capitalized under Basel III standards [280]. - The Common Equity Tier 1 Risk-Based Capital Ratio for the consolidated entity was 17.94% in 2024, down from 19.07% in 2023, with a minimum requirement of 4.50% [416]. Interest Income and Expense - The net interest margin (NIM) decreased to 2.70% in 2024, down 46 basis points from 3.16% in 2023 [286]. - Interest expense on total interest-bearing liabilities increased by $15.4 million, or 15.2%, to$ 117.3 million in 2024 [292]. - The average cost of total deposits rose to 3.54% in 2024 from 2.87% in 2023, driven by a 72 basis point increase in the average rate paid on interest-bearing deposits [293]. Securities and Investments - As of December 31, 2024, total securities amounted to $425.4 million, with available-for-sale securities at$ 420.2 million, representing 98.8% of total securities [322]. - The fair value of mortgage-backed securities (residential) was $55,677,000, with unrealized losses of$ 6,674,000 as of December 31, 2024 [329]. - The weighted-average yield for total available-for-sale securities was 4.06% as of December 31, 2024 [327]. Operational Efficiency - Total noninterest expense decreased by $1.5 million, or 2.2%, to$ 69.2 million in 2024, primarily due to a $3.7 million reduction in legal and professional expenses [314]. - Salaries and employee benefits increased by$ 1.6 million, or 4.2%, to $39.4 million in 2024, attributed to merit increases and rising health benefit costs [314]. - The noninterest expenses to average assets ratio remained stable at 1.76% for both 2024 and 2023 [314]. Risk Management - The company employs a comprehensive methodology to monitor credit quality, including a risk classification system for potential problem loans [357]. - The company utilizes a discounted cash flow approach for estimating expected credit losses, incorporating economic forecasts and internal factors [361]. - The NII at risk results are within board policy limits, indicating effective risk management practices [437].