The State of RBAZ
03/22/24
By Brian Ruisinger, President and Chief Executive Officer
Recently, the State of the Union speech was delivered to Congress and the United States citizenry, so I thought it might be well-timed to provide some insight into RBAZ for our friends and affiliates.
Earnings: we recently reported our best earning year on record with the Bank level posting net income of $2.88 million ($2.46 million for the Holding Company). Comparatively, 2022 was $2.26 million, $2.11 million for 2021 and $854,000 for 2020.
Stock price: Currently $11.11. The stock had reached a high point of $10.75 when three prominent bank failures took place in March of 2023 which resulted in our stock dropping over 25% to $7.54 through no action on RBAZ’ part. This is the third time in the past 5 years that our stock price has been negatively impacted by events unrelated to RBAZ. Each time we have been able to perform our way back to where our stock previously traded or higher.
Book value: Currently $11.77. Our stock is trading at 94% of our book value. This is typical of the industry at present for banks in our size range as the sector fell out of favor with investors when the Bank failures occurred in 1Q23. It has steadily come back into favor primarily due to the lack of a recession and the perception that the Fed does not intend to invoke additional rate increases.
Geographic expansion: RBAZ has opened branches in Gilbert, AZ and Scottsdale, AZ in the past year. The Gilbert location was delayed due to the Pandemic from the original plan in 2021, while the Scottsdale branch, located on Scottsdale Road, was an unsolicited opportunity that presented itself that the Board and Management believed was a special one to increase brand visibility in the market.
Capital: The Company is well-capitalized today but will seek capital to achieve its growth goals over the next 3 years. RBAZ was exploring a capital raise when the bank failures of March 2023 occurred, effectively freezing capital raising opportunities for all banks for the rest of 2023. The opportunity to raise capital is improving as the industry sector comes back into favor with the investment community. Our strong performance in 2023 has positioned us well to revisit capital at the appropriate time.
Dividends: We are often asked about paying dividends. The Bank has paid one dividend in its history in 2019. Currently, there are no plans to pay dividends as reducing our capital today would impact on our ability to continue growing and lower our legal lending limit, two important strategic metrics.
Staffing: The talent level at RBAZ has never been higher. After the labor shortage during the Pandemic, where recruiting efforts were at historically challenging levels, balance has returned. We are seeing more qualified candidates in the market. Our current employee base is 36.
Challenges: Liquidity (fancy name for deposits) remains the biggest challenge for most banks around the country and RBAZ is no exception. Banks were flushed with deposits during the Pandemic then saw significant outflows post-pandemic as pent-up spending demand unleashed in combination with increasing interest rates.
Navigating Growth and Challenges
There is concern around the Office Real Estate Market as 5-year loans come due in 2024-26 and the tenants no longer require all the space or, in some cases, none of the space previously leased due to downsizing or remote work arrangements. RBAZ is not an active lender in larger, Class A office space but does have some loans on Class B, smaller offices that we believe is less prone to the potential stress.
In the past 4 years, RBAZ has seen its number of branches grow from one to three and its total assets grow from $108 million to $275 million, the result of a supportive Board of Directors, a focused management team and a talented, dedicated staff.
Below is a link to our 4Q23 Earnings Release for additional detail.
https://finance.yahoo.com/news/rbaz-bancorp-inc-announces-unaudited-213400107.html