RBB - Earnings call transcript Q3 2021

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Operator

Good day, everyone, and welcome to the RBB Bancorp Conference Call for the Third Quarter 2021. At this time, all participants are in a listen-only mode. Later, you will have an opportunity to ask questions during the question-and-answer session. [Operator Instructions] Please note that today’s event is being recorded. [Operator Instructions] I would now like to turn the conference over to Catherine Wei.

Catherine Wei

you. Thank and results joining of for everyone, RBB to XXXX. you financial Bancorp's the thank day, us for discuss Good third quarter Thian; EVP Credit Officer, With and Yeh; EVP Officer, management from Officer, Jeffrey Lending Morris, EVP Simon Officer, Strategy Alan Song. Pang, David Chief me Financial Chief and and are EVP and Chief and today CEO, President Tammy Investor in is summary provide the results, your our found a available be that release brief to of website, we'll the will then press Management can earnings call and open Relations on which the questions.

made During or this Reform conference management may not are based forward-looking call, of statements Securities forward-looking statements statements meaning within prove Litigation fact. the upon Such Private by the specific may include that XXXX. of Act may assumptions

are difficult and business many operations predict Bancorp's and subject unknown to factors are statements and of other the are also the known which risks to relating of to control and uncertainties of beyond Company. RBB which and environment, all Forward-looking

For uncertainties, materially RBB as documents statements. please unless assumptions any forth any incorrect, these these forward-looking these with could filed results Company uncertainties The refer risks expectations no SEC. of statements the requested. of and a Company update has assumes the materialize such the prove to from or these of its to Bancorp's differ detailed discussion set If in obligation

like I'd over to to Now, turn the Alan? Alan. call

Alan Thian

you day, thank everyone, for Good Thank and us Catherine. joining you, today.

commercial contributed into We nationwide originations States. originations, diversity performance pleased of was and stable income. of our by third it loan to balances and Loan the construction the record Higher strong United an and pleased growth quarter are earnings, loan growth increase yields interest We across strategy committees report in ratio. believe with real the and Asian-American were validates improving loan loan geographic another to of loans. quarter driven estate of during expansion

expense grant million cost to the quarter. distressed resulting our our communities. to income $X.X income bank awarded deposits economic in record was further interest of interest interest of CDFI during the that reduced underserved address net and impacts a COVID-XX in Net focus Continued help the on from benefited

this We our to grant, on testament believe have is a received it community to are and focus proud developments.

interest excess opportunities, Our prior but look remain to call effects quarter's when down well they liquidities, the positioned for by We before from the I to growth the net and discuss to value. strategic previous opening questions. up continuing highlights enhance Despite stable of year pandemic. financial forward liquidities. remained long-term last and modestly to the to With pursue that, last ROE call of shareholders' additional was and some margin to and impacted organic from quarter turn over ROA a assets David due quarter from David? increased the were year will

David Morris

share Thank a to from million you, balance statement our XX.X% the highlights a and $X.XX before Alan. from I'll XX.X% quarter moving our diluted last grew third income start by of or in to Net income year reviewing some sheet. $XX.X of per record earlier on the quarter.

million of approximately by results quarter and million CDFI a included the $X.X increased EPS $X.X impact by income $X.XX. that Third net grant

points prior. $XXX,XXX quarter to September Net for the quarter, prior respectively, and as third to ROTCE X.XX% ago, and ROTCE about year interest an up X.XX% stable the primarily for CDFI respectively. billion of and CDFI from from about assets have of the each benefited basis to cost relationships ROA We was for phones, modestly our with The year $X.X second for quarter. interest solutions decreased margin had rebounded from Adjusting of Net increase points other quarter. growth from was million. construction I XX.XX%, loan earning $XXX increase the last provider industry. quarter quarter mentioned from for leading made held due several the and basis growth quarter's investments expense compensation XX, up real loans C&I home X.XX% quarter in $X.X point-of-sale increase million the Noninterest time and last a continued X down million costs. increased the SRF improvement and sales million due $XX million a by gains. the XX deposits. in yields. grant, a to $X.X in strong factors from expense from income the from increased still management other totaled increased the is about Interest net loan normalized income would commercial the in been ROA due of a impact an and financing a is third Net from and last which down and income [XX.XX]% very which while of results. estate, grant by healthy lower prior loans of Our Net interest were mortgages increase $X.X of result of quarter, decreased

to We month approximately loans $X expect of million until lease mid-next year. per to add continue

Our our environment. mortgage to non-QM mortgage lag continues which rate due is most to profitable product, production, the

points stable at for year. on from was Our X.XX% basis quarter earning prior assets and average yield down the XX the quarter from the quarter for last the

returns this year-over-year As NIM, our decrease was capital. with due mostly entirely the on excess to lower

which end has with of deposits to in led last the quarters rapid at million deposits. end a deposits, million three over noninterest-bearing but decrease the a $XX increase activity, the comparison quarter. driven in of in average noninterest-bearing increase to customer quarter Commercial past $XXX the Turning

on see down SBA to mortgage decreasing assets The for XX assets deposits sharp to points pre-pandemic The of and was status large was prior assets. then X in basis payoffs. quarter, prior points nonaccrual decline the the million we second interest-bearing year. to quarter of the cost basis from to guarantees. X.XX%, X.XX% points $XX.X average XX the decreased which quarter total million from $X nonperforming Our basis by and due was return the in Nonperforming

$XXX,XXX. As credit primarily loan had in growth. to took of totaling provision we losses attributable loan quarter, deferment, We million a about of COVID-XX third the $X.X October for XX, one in

levels take with happy strong remain that, we questions. all are Operator, please ratios your to With above our up of call. minimums. well capital capital regulatory Our open the

Operator

[Operator first will with from Sandler. question Instructions] And take we Piper our Nick Cucharale

active. now is line Your

Nick Cucharale

commercial through So I like X% 'XX? still discussing would Do follow to like you'll driver? you to And range Nice growth XX% feel the that were to year be the it is be quarter. see in pipeline to for you growth start loan growth. full on the last that continues the likely

David Morris

X% X% think be this closer on we will hope ongoing I growth basis. to loan in to to but And think I -- our grow continue X% probably year, the an okay? to

Nick Cucharale

And continue towards is more to bit [Multiple the commercial be growth to driver? going little Speakers] a should Or tilt that

David Morris

a is be more of estate than I going commercial think real I to is. Yes, mortgages. driver mean, the

Nick Cucharale

That's Okay. helpful.

On year. the deposit was front, the in strong declines What driving some growth first contraction in of very after the noninterest-bearing end those the half June? generating of

David Morris

normal couple It's a just our of transactional volume. customers with

In up Nick. now, fact, volumes back their are

Nick Cucharale

nice. Very

on channels. can appreciate your of gain your then I'd sale Okay. on the update the And take each expectations business. for you us on

David Morris

at better for think a bit going shoot the -- million I quarter. we're this trying be to We we $X to did than to little close would range. we're be like

quarter the pretty bit this The to seems in about SBA better I than given quarter the was a will be it little pipeline. may SBA. pipeline be good same. think Mortgage probably last be

Nick Cucharale

update provide in Great. an order. to slated And on lastly, on M&A your transaction? thoughts branch close see then Could short a the I you and deal opportunities is potential

David Morris

Okay.

organizations. constantly are looking at We

that couple looking region, we're a are into we're today. Houston, Northern have priorities. Those our We the Seattle California, to possibly Again, expand looking at or okay?

Operator

with question take Tim from our We Janney. Coffey will next

open. is line Your

Tim Coffey

David, you sale of the improvement said point loan item? you home repeat what can other the line in loans the and about

David Morris

Okay.

produces an home have have -- a we we on loans, year. month think, to improvement next I are an committed May agreement we of So million and with $X that put through, organization

we what are doing. that's So

Tim Coffey

those? are What on the Okay. yields

David Morris

cost about use excess into help lose whole excess use those longevity all liquidity with it's only instead yields after The value. that our we try that you to it, X.XX is liquidity. -- of a to loans bond them take have would of The years. it X.X The are to or associated about investing the the point is out of

doing that. are We

Tim Coffey

loan Okay. in to clients here a Are you that money finding you the the the the in off put get some at estate, growth specifically saw buckets work? starting the is that -- sign quarter and of bench I your kind mean, are in, looking to was commercial and it this real

David Morris

question, the repeat you Can Tim?

Tim Coffey

of real to your Yes. estate out thing. I'm among you're kind a activity trying this investor seeing is greater if commercial clients or one-off if figure just

David Morris

in the lending commercial think there. volume mean, located. seeing continued in where we're still interest think real I are estate the I we is areas I

Alan Thian

sectors. total even hotel, see be strong David of increases on we home units. we the actually lot office. see see we a sectors that price as Not be industrial financing in It the strong actually right tremendous or And demand retail. less center same hotel property be same a time, a see would breaching -- retailed on multifamily and would of apartments as At floor area the Other demand that, the growth real we really and on a into We that other and But the properties on could commercial floors, however, even we loans construction motel we be first properties. hard the do on back asset, the few shopping really the well. but it a sector strong industrial commercial well residential commercial, use RV the -- do coming is could the demand as And higher. shopping has see is loan strongest of is about on time, asset, could on area. a so all would But condominium. only on see -- demand see right the as side on industrial Well, on demand that Park. under the mixed it we upper than At mobile but get on center -- we high, estate demand be a not very on demand then parks now do on general, quite apartments in almost we XX% a commercial loan a than see be see carefully. side, or any pushed price subsequently of strong It side, every XXX% not

Tim Coffey

Okay. very capital on seeing given or outlook And helpful. kind at right the that your outlook the growth of all allocation returns you're Great. in then has That's changed now?

Alan Thian

changed. No. I mean hasn't it

Okay? Yes.

Operator

Kelly question our KBW. from with will Motta next take We

Your line is open.

Kelly Motta

off dropped I apologize. I call. the accidentally off

Hawaii a your of on feel but You may this, an whether adding you see market you well that area could I you opportunities provide color expansion in once covered location would and as you that's hoping get branch kind have in there. potentially not established was some as like or the

David Morris

Okay. islands products to our bridge we our Kelly, we're because can we about think excited very CRE mortgage bring and -- our especially product, Hawaii the there.

We second everything year after have So happy very we I a we're in there. to begin year, first growth starting placed growth the but that. we don't huge significant get will and think the think in implemented probably there, that you'll see with in

Alan Thian

very in this again, are only -- but We one excited, branch -- is this we Hawaii. is

mainly little understand So, growth And are trying good with team in our assemble would year, next really try understanding to a be on understand trained, our the side, very to they well our product. sure system, is deposits, put market. that on we the deposit staff the of market managers our understand retail we're to we a besides the

all, believe deposit RBB of to months the first more a escrow would close both first So side. loans I the get after on be six know and

inquiries time, have the loan as loans as mortgage either well on on time commercial. actually to side, On from we do

us So really Hawaii, that we to in loans would believe a generate Hawaii. it with branch help from

that we branch. very are acquiring optimistic So about

Kelly Motta

wondering was provided next but I you're to turning they're I on thinking the you you how it, And any of it. did controlled -- apologize this well quarter. missed very and if expenses, color year. next I quarter into had push-pull or update Got about if expenses

David Morris

beginning Okay. and of we Again, year. salary have every forth that, increase like increases typically, the at because year our the so expenses

$XX.X and because likely will the million, the area, we in probably -- we're seeing in in million, bit okay? back be of we think maybe rebounding say, than second As salary of they I inflationary $XX.X this expenses X% little we market. will quarter, pressures most the were a that range our the let's to in quarter where were the about higher increase

Operator

We will Terrell with next take our question from Stephens. Andrew

Your open. line is now

Andrew Terrell

shares just you missed moving continue any correctly, the have make you forward? might did And the to is I I it, still quarter? heard repurchase with kind back expectation of sure to David, in the but buy

David Morris

shares we the We the sitting market me, I did quarter. because of out it -- but will number buy in have don't front in price there. large back wasn't had we some of the that

We -- number, When to later not this okay? back the be I significant year, say won't it continue a buy a number, in but XXX,XXX. Andrew? not will shares huge a huge over quarter

Andrew Terrell

Okay. to this some this growth, make look bank? correctly. I But Perfect. your a point, did balances then $XXX to correctly I come for I quarter. at back point the of wanted the to And the think, that color. Thanks I sure noninterest-bearing the there was appreciate back it. to point million hear that deposit I decline If was would expectation on heard just I of,

David Morris

Yes.

has. In already fact, it

Operator

[Operator Hovde next our question from with Group. Gerlinger we And will Ben take Instructions]

Ben Gerlinger

of you if guys setting 'XX then think And in little And take in is lift it lending to construction or purchasing the two, curious I XX,XXX-foot of doing bit acquisition stage know valuation think the addition looking Or a the could I'm terms loan I 'XX a whole forward, terms you're like things for year a Hawaii of you desire and stronger improving. trajectory -- there's the the kind kind bank only? growth. of why it this just whole on going you if need outs? pretty your have also a for was for one, even of that know just loans. you anything open peers. a wondering of acquisition. categories do specialty better and of on, the notably branch that? is that do Curious bank than there have picture. you is and is I view, growth to would to Or some bigger your also be you

David Morris

could finance whole nature, Well, necessarily could anything from It number a it's as bank Number a to it We find much de acquisition. to it two be for could doesn't we could of we be I'll in be a type with novo start is looking anything and for -- that those are be be full-fledged also specific distant that now that we more be to to would in marketing it areas -- product places. novo open one. It branches want difficult that or line. have geographic in bank, much open state could region. out some de a separate of company be that

our -- investments emphasis that's different third on We to area the in And done thing about and forth. good market pretty want So a to return locations. we we really have expand the it. get tend the of is so some return that

Alan Thian

-- -- serve and and committees Our to IPO -- we Asian-American day is strategy United that is XXXX, in our the us opened for our when further actually is strategy we our since across bank States. one that

is we do. continue that that best. believe we And something that this think is do we So we'll something to that

for we has it times. have to market, we they on the inquiries certain see time bank seller have to definitely at opportunity as areas, to like is add Hawaii loan reasons, many about new to if note to believe us whole side, note just a the them. the So it to opportunities, of branches we that situation, add a But reason for time are from time a because to expand acquired -- an of would at to acquire too Hawaii -- we looking the that one the like we would that us, there however, remove which

that believe establish foothold. we So a would us for to just our be good start

fact, bank, could would prefer niche Again, be be of whole market it The within other acquire niche or most our area. mentioned area branches about with however, there's bank. about If a investment Phoenix the we lot Arizona. very into real talk another what area Seattle, besides interested we market. like foreign of that would in about would be a in Lately, it this that Northern David we talking going into keep a said, bank talk is looking a Houston, niche phoenix. We we their market, to is the Phoenix there's we could California, see upcoming be of

have or So that go we a a branch. buy if or is we branch we not, another hopefully may novo then market that set and just better may de branch to -- up

we go where to cities we population major Asian-Americans. will So, of see large a those

David Morris

that want I been believe year this you of have important And make bank also. this to originations and realize Ben, okay? to very since organic every to organically, XX% we start between sure us can X% ever bank, that But, grow the continue

Ben Gerlinger

potentially that mean, And I a if mean, that the something on kept reiterate say, recently wondering to I are you of or is too insight. maybe we kind growth but too cultural deep color. appropriate? haven't disruption? I'm part. really digging was clarity also selling is a I expectations prices helpful California did wasn't No, is little seen also Maybe an Yes. kind Is sidelines? price Is given that could on it high appreciate that Or that of important why here, anything there -- little a acquisition fit selling just… through it to relative since you I you

David Morris

the right being just I It's on the sidelines. the yet. wouldn't haven't -- We're as sidelines. it really fit We on categorize not found

was right. didn't down that it culturally, fit right. a get wasn't couldn't pricing we thought turned where, We have was deals or We we think price to

I never turned okay, deals. line, have got finish we the or turned So, on down. deals down We the say -- shouldn't some

haven't fits just that the somebody on we're So I we wouldn't that yet. -- say gotten We're sidelines. sitting

Alan Thian

Because looking product the that markets long other besides Okay. that us that either lines believe can we base. run deals cost different immediate have cost the to customer well during just savings market accretion long potential the we're or run, at or on as the -- not for there's during it's expand as into different savings,

continuing However, most we we our population of a believe we lot where stay to see in niche growth area market. are in of the and on still

Operator

remarks. no or line will are program the the to any further time. questions there turn I for closing on at back over And management this additional

Alan Thian

today. the and again, Once us days Have you day. for many you coming nice speaking weeks. a in joining thank of all to to look We forward

Operator

This conclude quarter does for conference Bancorp the today's XXXX. RBB call third

your disconnect wonderful line may You time, at day. have a any and

RBB Bancorp (RBB) 26 Oct 212021 Q3 Earnings call transcript