Earnings call transcript Q4 2022

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Operator

Good day, everyone. And welcome to the RBB Bancorp Earnings Conference Call for the Fourth Quarter 2022. At this time, all participants are placed on a listen-only mode and the floor will be open for questions and comments after the presentation. Please note that today’s event is being recorded.

It is now my pleasure to turn the call over to your host, Ms. Wei. Catherine is floor yours. the Ma’am,

Catherine Wei

me Yeh. you. everyone. and Risk Credit SVP joining Jeffrey fourth and and thank CEO Chief With for Liu; Chief Chief Accounting Chang; Officer, day, to Thank quarter CFO, discuss EVP Officer, Morris; XXXX. the Administrative And and us for RBB you results Gary Officer, Chief President, EVP Shalom Good Vincent Bancorp’s David are and today Officer, EVP of and financial Fan;

David brief the which press and on a open will be release can questions. Relations your will Investor available results, provide up the of summary to the is found website earnings in we our call then that

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

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

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

like David? David the Now Morris. to over to turn I’d call

David Morris

annual income $XX.X earnings record income per quarter Loan of $X.XX. growth million quarterly earnings share with you thank declining and an of Thank today. XXXX $XX.X per net $X.XX, increasing us expenses everyone, results, you, and Catherine. and day, of and and of joining Good loan and million share fourth yields drove for net

$X.X in and of positive loan due the for quarter $XX Net slightly yields quarter sharply higher million at sales million the of growth interest the income by loan as servicing was deposit from Fourth increase was lower and quarter impact fees. offset income down to costs. stable was third noninterest

A of to and and new origination Basically, net included, $X $X as million in the million, from effect. lower primarily reversal a our commissions compensation established on was bonus affected goals result. gathering decrease $X.X million last originations interest -- attributable myself $X of was took and loan quarter compensation million about expenses loan as team, miss Board sorry, deposit guidelines $XXX,XXX

X.XX% interest but slightly quarter from peaked able likely was margin our will We year. third be maintain but we it last quarter it of down likely that up expect Fourth -- ago. quarter, net remain that last will in X the optimistic quarter the to first around X.XX% from of a in cautiously NIM year that

good $X.X return increased Annualized CRE quarter. and were million X.X% other for the and fourth $XXX XX.XX%, decreasing residential last common to respectively, about investments average for by showing the fourth construction asset on and and the growth loans equity held return Net billion and total mortgages quarter in in quarter. of and

basis Our basis prior on XX last point a increase to earning which quarter, the X.XX% and was quarter yield in year. the assets fourth average XXX from increase increased point from

deposits rates rising Continued over decrease quarter. $XXX and drove non-interest-bearing activity customer commercial million the in average

materialized. up the from which in expected of the was basis quarter Our as was prior costs XXX the X.XX%, catch deposit for deposits average interest-bearing cost up points quarter

below our deposit We pricing, to to forced been but be retain competitors deposits. on have increase to continue rates

past days temporary due XX after a increase the quarter. last and days quarter stable to XX Non-performing a third at in normalized loans from were to $XX.X returned million loans level

million $X recorded we CECL, loss XXXX. $X.X of quarter of the million in in Subsequent to of of third compared adoption the our provision quarter fourth a to XXXX, credit for

We a quarter fourth for of quarter in off-balance XXXX. provision a of of third the sheet XXXX, $XX,XXX $XXX,XXX commitments reversal reversal of of the also in recorded compared to

capital minimums. We regulatory fourth average in levels of ratios strong with the our all well of at remain $XX.XX. capital Our price shares purchased above XX,XXX quarter an

We the have XXX,XXX on shares left buyback.

Finally, are in including recent the loss saddened we last in the tragic Saturday in by of Park. California, one shootings Monterrey three life the

so of families close branches. safe, Pacific Community response the community the tragedy, in XXX% understandably donation made be which effort upset an we of a our Fund, that event by but are are employees In going to to $XX,XXX to All of our this such horrific of will to recover. Asian one a victims donation occurred to help

happy are open your up we the please Operator, call. take to that, With questions.

Operator

Instructions] you. you. Thank [Operator Thank

Our first question KBW. from coming go Motta Kelly with is ahead. Please

Kelly Motta

Hi, David.

David Morris

Kelly. Hi,

Kelly Motta

you. prepared Thank your that reversals in Thanks Can off expenses, start remarks the in was for with noted you there. question. there some

fell a outlook as of what’s run movement out as Just the rate, this kind occurred starting sense given a actually what quarter? of good trying the well point to that get go-forward and of

David Morris

been pre-tax to accrue earnings. pre-tax at and bank -- has X% pre to of Our accrue policies -- and

to that accruals right pre-tax that that of to We Bancorp amount to the now. we have our earnings is conformed changed bonus our changing But are really structure peers.

my up was our salary pre-tax of and to get I am a received before eligible XXX% CEO eligible versus X.X% get the President example, for of earnings. So to to

that million there have X.X% I really pre-tax -- that’s would our biggest So earnings okay. me. don’t $X.X is and like of number the been for biggest change, the

So but just -- salary, would not not X.X that’s times my that okay.

Kelly Motta

Got it. Thanks help. for the

seems perhaps go-forward XQ reversal what… run ties this for that in Just like trying to understand rate. It the how is there into

David Morris

Yeah.

Kelly Motta

like back things and that. build three again, basis, way a the different were after out number go-forward how million the the that’s maybe if we a the crude to wrap-up low, reversal, on asking a you was off also feels kind of $XX we what the because quarters … of prior but of, had of can investigations

what in am accruing So do to out forward? more anticipate been you have how just would when you you take normal had understand to I under of going trying be kind so XQ, reversals

David Morris

way in I are I of next be to they level pre-tax you not the and think, and will going additional amount the certainly, up have at getting, the I to going full the to that -- dollars look level couple of be $X that So, income. open us there again, be year, bonuses significant a positions company executive taking of again, it have if are level million, bank the but holding possibly of still instead

numbers for will because on okay, actually will all. we you will a what -- we think in very we closer our spend, bonuses number Bancorp much I get base

legal legal As have concerned, -- our up significantly went year, is was accrual, more but less going this go down, think, I the is than expensive -- will than up, to well, who our our because have we as expense to EV the is. significant auditing expense -- to is of far expense go tune you we will going

So basis, I do sure, should checking by all think an down, dollars legal million some am on down we okay? that actually be going quite of going numbers. I will here. a just not okay, of Yes, annualized couple be put those fees

Kelly Motta

gateway, which… Okay. Got excluding I it. assume

David Morris

Right.

Kelly Motta

are things and close is XQ, progressing with still the you acquisition? that that …can how of

David Morris

hope, We Xst okay. would I will know come March

Kelly Motta

color the on for helpful. ask pressure deposit but with I queue, was past Got and just of Maybe am side. looks the on funded There’s will last I to and… kind it. into and the as deposit anticipate like back wanted step increases been wondering you brokered after non-interest-bearing the gap of then any it cadence down let to and during more starting some year cadence the me COVID. That’s any when that was mix over to time some of flows of to Just the slow funding? shift deposits,

David Morris

Okay.

Kelly Motta

funding was? your what …

David Morris

Okay.

last $XXX has which asked they Our in us we with year between past, and trust of million, biggest couple talked them been, of $XXX did. down we move issue which have have I to December had about $XXX to and it accounts, we million these million the asked which have about moved

$XXX quarter fourth went -- we to -- down crypto customers a them -- crypto at then exchange our moved $XX didn’t approximately, the million We from the of one customer out third that have that and end million of our like mean, million, X quarter, discussion went that to customer $XXX to really we one of had I that and the a of the decided later, But we and okay? with they winner sub customers. book, I $XXX sub one is the again in of from weeks down million two company

that’s still million was that’s demand had one million the to big the the deposits. asked to away, that and FDX and asked crypto off, customer, with asked like in we planned is And we okay? we issue that not So winner that just $XXX $XXX know. that $XXX customer, are we with to them this then banking big we then news, -- anybody went really the from the headlined didn’t move million we go else you them one so or

Kelly Motta

in That’s quite accounts. to that I sneak could Got Those If a large just quickly. follow-up it. are David. real helpful,

Just just largest the those levels are wondering color now XX what what to account however want down, but as that you to sizes if it at have or you you is taken frame any… as bank? kind top sure am at it, the not look accounts I of as to -- any curious

David Morris

have. We

Kelly Motta

customers that… large of …sort

David Morris

Okay.

Kelly Motta

to … pressure? could the add

David Morris

Yeah.

customer no $XXX million, okay? some… I We No the relationship have million say anymore, policy bank -- we is customer. with okay. when over single Well, $XXX over do now have our single single, And

Kelly Motta

it. Got

David Morris

most $XX also have directors banks either companies okay. Presidents high are of over … we have of our million that people directors banks -- have we most left of that or that are our deposits former former purchased, of our who or

banks that, the at have the a region, number President number, the So LA we deposits of okay. in you either have a retained we good of the that from when have the the good chairperson purchased look we or

Kelly Motta

today, all back. for will step color Awesome. David. I Thanks the

David Morris

Okay.

Operator

Thank you.

Nick Our with next Cucharale is from coming Piper go Sandler. ahead. question Please

David Morris

Hey. Nick. Hey,

Nick Cucharale

Good How you? day, everyone. are

David Morris

We great. are

Nick Cucharale

I wanted just Good. I sure NIM heard commentary your correctly. make to

that a expecting trajectory sense year color or throughout do quarter just first are in the X% on point? You the magnitude have and of at any the you on this --

David Morris

up I of and up will as I contingent history -- think NIM our has think going rates and ceased. the up

the our in CDs. are range of X.XX% most on competitors So

For we us about to have to okay, be X%. attract X%, around CDs

about we X% re-price depositors, to of those So okay, retain if see going to to the want the you year. for remainder everything are

the NIM going much. So I going continue go the may still rates up to deposit I to going our as up don’t you quarters though even are points, go XX basis see to are think rates over down next think

That’s X.XX%. be okay. increase, early The increase an they I really been community that, the been with at stuff. are at X%, everything X.XX%, October may they X.X%, rate pricing September they -- haven’t to priced with where and because be supposed wrong starting have have people last

So keep effort okay. has taken and X.XX%, conscious X% we have a to everything between

Nick Cucharale

lot you middle think help slow can starts -- give point, Do of a the it’s there? what me but any So in side this sort wildcard, in of for a to can a increases and change on are the at cost or just the your sense year? terms the thoughts of kind would magnitude down the of you obviously, liability quantification

David Morris

Well, I I we about optimistic I quarter, said are think, like on X% said, that. first

The think, will X.XX%. be I around second quarter,

will okay. couple be the quarters, for it think about bps of I XX next

Nick Cucharale

helpful. That’s

Thank you. and over XXXX? light you the of more the capital course expecting in are of a relative activity forceful position year repurchase your to Okay. then And valuation,

David Morris

okay. that -- be will be to hoping case, the are We

Nick Cucharale

you Thank my questions. taking Okay. for

Operator

Thank you.

Tim Our Please Janney. question from with coming ahead. go next is Coffey

Tim Coffey

Good morning, David. Hey.

David Morris

Tim. Hi,

Tim Coffey

Hey.

David Morris

Hi.

Tim Coffey

on follow-up December? of was deposit there. your or deposits rate What were cost the at what questions a on the end Just spot

David Morris

by mean spot What’s offering our you rate? do rate? What

Tim Coffey

interest-bearing at of XXst? Yeah. What rate deposits was December the

David Morris

offering around were we okay. What was X.XX%,

Tim Coffey

Okay. Yeah.

Okay.

David Morris

Yeah. Yeah. Yeah.

Tim Coffey

Okay.

deposits we are in a of sizable interest-bearing you… your step-up about from talking where So cost the

David Morris

Yeah.

Tim Coffey

what was, average ended the rate … okay.

David Morris

Yeah.

Tim Coffey

borrower of the to or to hesitation? commentary what outlook it Is many side side kind loan rates flip equation, of that’s the it we kind from you are the more just given kind related is hearing of the them? and If economic of more

David Morris

they not are has at loan rate wants prepayment a and it that if try everybody get pay fee. X.X%, we fix the which off Well, to loan, the doing we floating to

I So the has two last months, and loans rate lending it’s in months okay, general slowed down all greatly driven. commercial in greatly, the in two think last

Tim Coffey

Okay.

about forward? seems what’s possibility ratio break I to we efficiency it’s Okay. it the think like And but should does hit mean XX, then above the going -- It got XX? how the

David Morris

any done that, haven’t I modeling Tim. of

done on haven’t I I question -- be that. will we think I modeling can’t so any that answer

Tim Coffey

Okay.

might as already non-interest-bearing exit Okay. this total if deposits And any missed this, then, a do might where your sorry you but I sense I of been of have year percentage deposits have asked, at?

David Morris

I non-interest-bearing deposits our regard. think

but go, run-off DDAs customers who are happened to to mean still everybody once I think some you has have become want the interest, us. I wants for their to still we business a hard the cash D follows that’s -- you kind a on and have Reg because interest-bearing that of the bank need all flow to do require stuff. we are when

count transactions. still we six So

I it’s So same. be think the going relatively to

Tim Coffey

Okay.

Yeah. All Those Great. my much. Okay. Thank questions. very right. you are

Operator

Thank you.

Our Group. go from Please next ahead. Gerlinger question coming with is Hovde Ben

Ben Gerlinger

Okay.

You will have to…

David Morris

Ben. Hi,

Ben Gerlinger

Oh! excluding if it’s but once so hires apologize am Good I total XX good per quarter thinking of the it the to expenses, around the rest run or takes gives kind I rate into belaboring the is just year point [inaudible]. year, morning. fair fold, a gateway something of about throughout as incorrectly? XX.XX on here, guess and I that the say it the puts you have on

David Morris

okay. the expenses should in be like range something Total that, XX.X

Ben Gerlinger

Okay. Yeah. fair. That’s

pretty and takes, just just of more you a forgive on curiosity, sort I or kind clients either I of crypto And had It’s sorry. puts me any lending then Okay. deposits? lot other related diligence am do so that. close. just of perspective, have

David Morris

Well, have we the is active. The one only two.

CDs. is one in other The

worry about it, So we don’t okay.

Ben Gerlinger

Yeah. No.

David Morris

okay. their we B have Series If funds,

much. we about that don’t So so worry

Ben Gerlinger

And a then question last my is of view. philosophical more a kind you. Got of XX,XXX-foot

You of -- be loan demand that going and continued rate? to to come initiatives not broker if deposit source up. to said there outside have to that kind go you customer deposits. funding rather match there’s so different I CD overall has demand are going much deposit just down again, rates just a of as at curious high have Is used market avenues of of just CD any I lending than new am or could know .

David Morris

Well, we Gary. hired

we of regions lot over do is a One things try. and York we on the thoughts the that have different interesting he’s could New going take of to things

we much So we implement may things quarter that of won’t this that’s a in York to see but really California. or what different probably than fourth of until slightly the lot year, here New that of third quarter going are be in do

think At a your contact and you we as are relationships least completely relationships grow you relationship here I bank all only once in a your California, grow.

be side such, headcount reallocate bought -- have faster additional to adding so could we that the in relationship would grow we to So bring forth and in officers expense here California help also. and/or But do okay. to would to

Ben Gerlinger

Got you.

sit of so more If six year… there’s latter tight. of it’s kind the a result, months So

David Morris

Yeah.

Ben Gerlinger

… if there’s anything this year.

David Morris

Yeah.

Ben Gerlinger

probably there But if is expenses ramp?

David Morris

Yeah.

but We have time. things are of any to in at our strategic this things plan that we not are those looking we at, announce ready

So there some could on them… one really to we of that side. that the deposit And are help things planning do are

Ben Gerlinger

Got you.

David Morris

able that customer and you depositors variable them be don’t one okay. we a tell is of hopefully will we I do putting are the Well, could bank, C&I C&I platform really C&I the to in and attract to

Ben Gerlinger

really I No. Yeah. the Sure. there. over appreciate Thank color you.

Operator

ahead. Stephens. from next coming with Instructions] Andrew go Please Our question Terrell [Operator is

Andrew Terrell

morning. Good Hey.

David Morris

Good morning.

Andrew Terrell

current of just into the deposit with into that talk a lending I bit sheet. Can you of as step David, in more relationships balance of just getting or little different you about of lending on Can make as parameters than just market? heavily that more talk kind pivot kind a type maybe, could maybe first, maybe obviously, bring that place risk you composition maybe well. the C&I type it mean, last about point

David Morris

two already step loan two have On weeks, do parameter have to to be the Well, takes have okay. C&I to second, loan is day. within this takes okay. and C&I do and a They haven’t for alone. it done weeks let issue within me it It able be us The set, Andrew. day a risk already needs done back a to changed. We we a you us

what we So that’s doing. are really

Andrew Terrell

Okay. Got it.

David Morris

or the Okay. our And every book, decreased just have on product so we rest almost okay. twice, loan-to-value of you know, have on either

on basis So each by our type. we X by wise basis product DCF points points and increased X also DFCR time -- have every

over that at the fall -- of are isn’t even not we seeing those did that moment. But right too. boxes we that So the loans even year out

Andrew Terrell

aggregate to and service CRE across And what loan values aggregate at? debt coverage rate are portfolio

David Morris

is around and I would loan-to-value actual say probably would would be north probably, aggregate would policy, will actuals XX say is the XXX, XXX be now the in and be the probably XXs. aggregate I of

Andrew Terrell

Okay.

David Morris

still Now -- mortgage haven’t is XX% slightly we is to different. Mortgage we mortgage are -- of is our XX%,okay. on max, is still max around average but most loan loan-to-value, value

Andrew Terrell

just move we over can could for some I fee shift side, And expectations you as income fee provide income gain then into Okay. sale if the on and XXXX? maybe overall to

David Morris

their that the we in investors from York down now. they come Well, seeing New the are range X.X%, X.X% are

still around at X.X% loans the are X% are producing not we and We mortgage rate.

if selling could can that get could get further, little they if So be it a we bit some. we -- down

million We local to local a that Coast the possibly on do would a a out have East bank, want $XX to bank pools two purchase. -- not to another bank, they that’s Chinese-American but

So also. at we looking are that

major loans our per on a Our okay. get of million up the number, $X to quarter is one about goals sale of gain to back

Andrew Terrell

Okay. last margin one clarification for interest-bearing And the me costs. of kind and on a is then just point the deposit of

end interest-bearing right, spot the I hearing mentioned want costs you am costs I low sure quarter of to think but make was you at full the X%. just year X.XX%... average for I the interest-bearing

David Morris

Right.

Andrew Terrell

… what December? cost at that of was the end

David Morris

that what is. That’s Right.

Andrew Terrell

That was Okay. it low.

David Morris

-- talking rate what that the spot offer is the about offering customers. am our our I the we Now cost to --

Andrew Terrell

Okay.

as incremental funds make… the opposed to So

David Morris

Yeah.

Andrew Terrell

balance the on sheet? already was …

David Morris

Yeah.

Andrew Terrell

Okay. Understood. Thanks for taking questions. the

David Morris

Okay.

Operator

you. Thank

ahead. Motta from is Please KBW. with question Kelly go next Our coming

Kelly Motta

Thanks the Hey. queue. back in me having step for

what to for know over are was outlook thoughts about as in for really your your growth the what’s as Just this side generally just lot have on look strong we loans your funding. But in on this C&I of a year? going something wondering XXXX. well of up broader spent as but I driven, markets, time on you know pressure know it be deposit mostly your on CRE kind balance throughout time, what economy, I quarter. upcoming as to spoke loan wondering is ramp you and resi and we to Is potentially going just the

David Morris

you is are XX%, of loan-to-value see a at put have about now do, think hoping take a you our will especially what can about if because which back it we XX%. portfolio, already I we mortgage our loan portfolios really, mortgage total of seat, okay, XX% the safest is

So to really want we don’t grow that.

we not rest, is grow the CRE number and a With C&I. want huge growth C&I year to forth. and to going this be so

can’t We will of see for well really loan loans type end by because probably and to But maybe. out it’s to and of the long. C&I it time too takes roll out meant smaller loans we the really then forth just how take at it it really year it does the do, roll that larger of so $XXX,XXX

be of right, the our real will growth So, most commercial side. in estate

looking are at rates well, We not most, all.

We up products. now X% X% and anywhere those that X%, have X% right to like on -- on from -- rates XX%

maybe may of see construction the a see there you summer time, in build. I So because little out bit can they more

rain. a We of have month had

So on construction is nobody their loans. drawing down

and category, not any but So, okay. stressing are going we one particularly out

Kelly Motta

Thanks, David.

David Morris

Hi.

your okay, answer on be this year, production you Just below I really to do significantly answer see loan I growth. to single would below digits mid XX%. say -- -- question.

Kelly Motta

you. Thank

Operator

you. Thank

Morris at any further for will comments no we questions I time, closing this have have. back you to queue As it in Mr. hand

David Morris

Year. days Happy and again far you the Go thank to [ph]. coming of We you sleep weeks. south in speaking today. joining forward all Once New many to us for and look

Operator

conclude call. this And today’s you. conference Thank does

thank this and you wonderful And You may your at time have day. disconnect a your for participation. we lines

Catherine Wei	Investor Relations
David Morris	President, Chief Executive Officer and CFO
Shalom Chang	Senior Vice President and CAO
Gary Fan	Executive Vice President and CAO
Vincent Liu	Executive Vice President and CRO
Jeffrey Yeh	Executive Vice President and CCO
Kelly Motta	KBW
Nick Cucharale	Piper Sandler
Tim Coffey	Janney
Ben Gerlinger	Hovde Group
Andrew Terrell	Stephens

RBB Bancorp (RBB) 24 Jan 232022 Q4 Earnings call transcript