RBB Bancorp Stock Analysis
Microcap bank trading at 0.67x book value
RBB Bancorp is another bank mentioned on the Value After Hours podcast a while back that featured a discussion on community banks. This bank is based in LA and has a market cap of $357M. Interestingly RBB is one of the largest Chinese-American banks in the country. They were founded in 2008 and have grown through a series of acquisitions so they have branches in about half a dozen states. What caught my eye is the stock is trading at quite the discount to book value. While earnings have been mediocre lately, in the recent past RBB has had high returns on equity. The combination of cheap valuation and strong returns on equity are what I like to see in a bank stock. But first analysis of the bank needs to be performed to see if there are any red flags.
Asset Quality
The first step in evaluating a bank’s asset quality is looking at non-performing loans (NPLs). Over the past four quarters, RBB Bancorp reported NPL balances of $60.4M, $56.8M, $45.5M, and $44.6M. NPL-to-asset ratio has seen an improvement over the last year, falling from 1.51% to 1.06%. While this trend is encouraging, these levels are still somewhat elevated compared to the strongest community banks, where this ratio is often below 1%. That said, they remain comfortably below the ~3% level that would typically start raising serious credit concerns. RBB’s allowance for credit losses (ACL) currently sits at $44.4M, representing 1.32% of total loans. This figure is essentially modestly higher than the current level of non-performing loans, and is above 1% which is a nice threshold.
Looking deeper into the loan portfolio, RBB’s loan mix is 50% single-family residential (SFR), 39.3% commercial real estate (CRE), 6.8% commercial & industrial (C&I), and 3.8% other loans. The heavy weighting toward residential mortgages is generally positive since these tend to have lower loss rates than most commercial categories. Breaking down the CRE portfolio further, 32% is retail or mixed-use properties, 24% multifamily, 20% hotel/hospitality, 13% office, and 8% industrial. The exposure to office and hotels stands out as the potentially riskier segments. Office properties continue to face structural challenges from remote work trends, while hotel performance tends to be highly cyclical and sensitive to economic slowdowns.
From an interest rate perspective, the loan book is relatively balanced with 52% fixed-rate loans and 48% floating-rate loans. This structure helps mitigate interest rate risk since the bank benefits when rates rise through floating-rate repricing, while still maintaining stability through the fixed-rate portion. The average interest rate across the loan portfolio is 6.07%, with CRE and C&I both averaging 6.4%, and single-family residential loans at 5.7%.
Finally, looking at RBB’s overall asset composition, loans make up 78.6% of total assets, followed by securities at 9.8%, cash at 5.6%, and other assets at 5.6%, for total assets of about $4.21B. This is a fairly typical balance sheet structure for a community bank, where loans are the dominant asset class and securities provide liquidity and interest rate flexibility. The securities portfolio is relatively modest as a percentage of assets, which reduces the risk of large unrealized losses that some banks experienced when interest rates rose sharply in recent years.
Deposit Mix
Deposits are the primary funding source for most community banks, so evaluating their composition and cost is critical to understanding long-term profitability. RBB Bancorp currently holds $3.35B in total deposits, which fund the majority of its balance sheet. The deposit mix consists of 16% non-interest-bearing demand deposits, 50% interest-bearing non-maturity deposits, and 34% time deposits. This structure is fairly typical for a mid-sized community bank, though the proportion of non-interest-bearing deposits is somewhat modest. These accounts are the most valuable funding source since they provide essentially zero-cost capital, so banks with larger demand deposit bases tend to have structurally higher margins.
The largest component of the deposit base is interest-bearing non-maturity deposits at 50%, which typically include savings accounts, money market accounts, and interest-bearing checking. These deposits are generally more stable than time deposits but still sensitive to changes in market rates. Meanwhile, time deposits account for 34% of total deposits, which is somewhat elevated compared to banks with stronger franchise deposits. Certificates of deposit typically reprice quickly and are often the most expensive source of funding, particularly in higher interest rate environments.
From the latest quarter, RBB’s cost of deposits came in at 2.96%. That figure is on the higher side compared with a community bank with a bunch of cheap checking account deposits. In a higher-rate environment, banks with lower levels of non-interest-bearing deposits tend to see funding costs rise more quickly as they compete to retain deposits. Looking at the broader profitability picture, RBB reported a net interest margin (NIM) of 2.99%, with a 5.78% yield on interest-earning assets and a 3.04% cost of funds. For community banks, a strong NIM would be around 3.5-4%. RBB’s more mediocre margin also helps explain why net income has declined lately.
From a balance sheet strength perspective, the bank maintains a capital ratio of 12.4%, which provides a solid buffer against potential credit losses or economic stress. For a bank with meaningful commercial real estate exposure, maintaining a strong capital base is particularly important, and this level appears comfortably above typical regulatory minimums.
Profitability and Valuation
RBB Bancorp generated $31.95M in net income in 2025, which is a sizable decline from prior years. For comparison, the bank earned $42.47M, $64.1M, and $56.5M in the preceding years. The decline in earnings is also visible in the bank’s return on equity. In 2025, ROE came in at 6.2%, down from 8.3% the year before and significantly below the 13–14% range the bank achieved during its strongest years. An ROE above 10–12% is generally considered strong for a community bank, so the current level shows that profitability has come under meaningful pressure. Much of this compression is likely tied to higher funding costs and margin pressure that have affected many banks during the interest rate hikes the past couple of years.
One area where RBB still performs relatively well is operating efficiency. RBB reported a 2025 efficiency ratio of 59.3%, compared to 52.6% in the prior year and extremely strong levels of 40.7% and 40.2% during its peak profitability years. The efficiency ratio measures how much a bank spends to generate one dollar of revenue, so lower numbers indicate better cost control. Even though the ratio has worsened recently, a figure around 60% is still respectable for a community bank, where many institutions operate in the 60–70% range. The earlier sub-45% efficiency levels were exceptionally strong so it would be nice if RBB could get back to those levels.
Turning to valuation, RBB is trading at a price to earnings of 11.4x and a price to book value of 0.67x. This is quite the discount to book value for a bank that has in the recent past showed high returns on equity and efficiency ratio. If RBB could get their ROE back towards 10%, then buying at this P/B could provide nearly a 15% return over the long term. The question is why the stock is trading at such as discount to book value. Part of it could be the decline in earnings lately due to the interest rate cycle, and the fact they have some office exposure might have scared investors. The office loans are worth looking into, but on the surface it seems like once deposit costs decrease, RBB will be able to generate better returns. Overall I think RBB could be a quality bank that the market has left behind, so I will be doing some more research on the stock.