RBB Bancorp: A Discounted Financial Gem with a Strategic Capital Play

In a world where many financial stocks trade at premiums, RBB Bancorp (NASDAQ: RBB) stands out as an undervalued opportunity. With its recent $18 million stock repurchase plan—equivalent to 6% of its $291 million market capitalization—the regional bank is taking bold steps to capitalize on its deeply discounted valuation. For value investors, this is a signal: RBB is a rare chance to buy a well-capitalized financial institution at a fraction of its book value, with catalysts in place to drive shareholder returns.

The Undervalued Financial Gem
RBB's price-to-book (P/B) ratio of 0.57 places it far below its peers and historical norms. To put this in perspective:

The stock trades at $16.42, while its book value per share sits at $28.77, meaning investors are paying 57 cents for every dollar of the bank's assets. This stark discount isn't arbitrary. RBB has been aggressively resolving non-performing assets (NPAs), a process that temporarily pressured earnings but strengthened its balance sheet. Over the past year, NPAs fell by 20%, and net exposure to non-performing loans dropped by 32%—a clear sign of progress.

Meanwhile, competitors like East West Bancorp (EWBC) and Zions Bancorporation (ZION) trade at P/B ratios of 11.04 and 9.10, respectively. RBB's discount reflects market skepticism about its near-term earnings volatility, but it also creates a compelling entry point for investors willing to look past short-term noise.

Strategic Capital Allocation at Its Best
The $18 million repurchase plan isn't just a PR move—it's a mathematically sound decision. With shares trading at $16.42, RBB can buy back nearly 1.1 million shares at current prices. This reduces dilution, boosts earnings per share (EPS), and aligns with management's confidence in the stock's undervaluation.

Consider this: RBB's tangible book value per share has climbed to $24.63, and its capital ratios remain comfortably above regulatory “well-capitalized” thresholds. The repurchase plan uses excess capital to close the gap between its book value and market price—a textbook value-creation strategy.

Catalysts for Growth: Why Now Is the Time
1. Loan Pipeline Momentum: RBB's Q1 2025 loan originations hit $201 million, with strong demand in commercial, SBA, and residential lending. Management has flagged full pipelines for the rest of 2025, suggesting sustainable growth.
2. Margin Expansion: The net interest margin (NIM) expanded by 12 basis points to 2.88%, driven by lower deposit costs. As non-accrual loans are resolved—$20 million are expected to return to accrual status by year-end—the NIM could rise further, adding $1.2 million annually to interest income.
3. NPA Resolution Payoff: By reducing NPAs to $64.6 million from $76.4 million in late 2024, RBB has cleared a major overhang. With specific reserves now covering 86% of non-performing loans, the path to normalized earnings is clearer.

Risks and Considerations
No investment is risk-free. RBB faces challenges like a declining non-interest-bearing deposit mix (now 16.8% of total deposits) and a $5.3 million CRE loan downgrade in New York. However, management has shown discipline in risk management, and the CRE exposure is manageable given the property's 85% loan-to-value ratio.

The Bottom Line: A Value Investor's Dream
RBB Bancorp is a textbook value play: a bank with a fortress balance sheet, strategic capital allocation, and a stock price lagging its intrinsic worth. The $18 million buyback isn't just a vote of confidence—it's a lever to narrow the gap between market price and book value.

For investors seeking asymmetric upside, RBB offers a compelling risk-reward profile. With shares trading at less than half their book value and catalysts like margin expansion and loan growth in sight, this is a rare opportunity to buy a quality financial institution at a deep discount.

The dividend—currently yielding 1.0%—may seem modest, but it's a testament to RBB's consistent capital returns. As valuation multiples normalize, this stock could deliver double-digit returns. The question isn't whether RBB will rebound—it's when. Act now, before the market catches up.