RBB Bancorp's first-quarter 2024 earnings call transcript painted a picture of cautious optimism. Margins appeared to be stabilizing, loan balances held steady, and the bank expressed confidence in its ability to navigate the uncertain interest rate environment. However, lurking beneath the surface of this seemingly positive narrative lies a subtle, yet potentially significant, shift in the competitive landscape.

A close examination of the transcript reveals a recurring theme: intense price competition. While acknowledging a healthy loan pipeline, both CEO David Morris and Interim CFO Lynn Hopkins emphasized the "extremely price-competitive" nature of the market. This wasn't merely a passing observation; it was a key factor influencing the bank's decision to hold back on loan originations in the first quarter.

This aggressive pricing strategy, as Morris subtly hinted, originates from competitors willing to extend loans without securing corresponding deposits. Such a strategy, while potentially boosting short-term loan growth, carries inherent risks. It relies on accessing alternative funding sources, which can become expensive and volatile, especially in a fluctuating interest rate environment.

This raises a critical question: Are we witnessing the early stages of a price war in RBB Bancorp's key markets? While not explicitly stated, the bank's deliberate restraint in loan originations suggests a reluctance to engage in a race to the bottom on pricing.

Delving into the Numbers

Let's delve into the numbers to assess this hypothesis. RBB Bancorp originated approximately $69 million of commercial loans in the first quarter at an average yield of 8.3%. This yield, while robust, doesn't appear drastically out of line with prevailing market rates. However, consider this: the bank expected loan growth in the first quarter. Their decision to pull back suggests that the competitive pricing was significantly below their internal expectations, potentially jeopardizing their target profitability levels.

Furthermore, RBB Bancorp's non-interest bearing deposit levels remained relatively stable. This stability, while positive in itself, contrasts with the potential for DDA growth that often accompanies robust C&I loan expansion. The absence of this expected DDA growth further reinforces the notion that competitors are prioritizing loan volume over relationship-based deposit gathering.

A Conservative Approach for Long-Term Success

Here's the crux of the matter: RBB Bancorp's conservative approach, prioritizing profitability and deposit-funded growth, may temporarily hinder loan growth. However, it positions them for long-term success by avoiding the pitfalls of unsustainable pricing strategies.

The bank's strategy stands in stark contrast to some competitors seemingly prioritizing rapid loan expansion, even at the expense of profitability and deposit growth. This approach, while potentially rewarding in the short term, could prove vulnerable if funding costs surge or loan quality deteriorates.

A Potential Shift in the Banking Landscape

RBB Bancorp's first-quarter 2024 earnings call, therefore, offers a glimpse into a potential shift in the banking landscape. While not a full-blown price war, the aggressive pricing tactics employed by some competitors signal a willingness to prioritize growth over sustainable profitability. RBB Bancorp's cautious approach, in contrast, demonstrates a long-term vision focused on building a solid foundation for sustained success.

Visualizing Competitive Dynamics

The following chart illustrates a hypothetical scenario of how RBB Bancorp's loan growth strategy might compare to its more aggressive competitors over the next few quarters. Note that this is a simplified representation for illustrative purposes and doesn't reflect actual projections.

"Fun Fact: RBB Bancorp, despite its name, has a surprisingly significant presence in the Eastern United States. They operate branches in New York City, Chicago, and Edison, New Jersey, catering to the Chinese-American and Korean-American communities. This East Coast expansion reflects the bank's strategic vision to transcend its regional roots and establish a nationwide presence."