RBB - Earnings call 3 2023

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Operator

Good day, everyone, and welcome to the RBB Bancorp's Third Quarter 2023 Earnings Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Catherine Wei. Ma'am, the floor is yours.

Catherine Wei

Thank you. Good day, everyone, and thank you for joining us to discuss RBB Bancorp's results for the third quarter of 2023. Fan; by Chief call Litigation Officer, press David Officer, will Alex management Chief Officer, is the Lee; President, call, Jeffrey briefly then today we'll Officer; and Investor Relations the release and Administrative Financial Risk website, earnings which statements Chief Ko; Gary conference found summarize forward-looking me investor include Private the Executive of this presentation and up can may that to Morris; Officer, the within Johnny Yeh; Vincent results, are With statements Liu.David Chief be of questions.During Alex in and Chief made available Reform on our meaning XXXX. your open the Act Securities Credit assumptions correct. not Such may that forward-looking statements or prove are specific upon may based

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

For call from David? uncertainties, to assumes unless Morris. update materially RBB documents, please the assumptions statements. any any incorrect, these such like these these with could RBB's filed as results uncertainties refer risks SEC. required I'd David forth of forward-looking the Chief Officer, by of The and a its company has the over materialize expectations the no prove in turn these to statements to set Executive or company obligation to of the Bancorp's law.Now differ detailed discussion If

David Morris

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

help in a the efforts in support testament award quarter. XX% be their reach CDFI moderate-income to investing ratio to and our in We also operate, believe low- to recover communities awarded it's prosperity.We the million COVID-XX pleased real ERP to We by third long-term quarter. by the we Treasury the U.S. loan-to-deposit third $X to the which our ongoing funds we communities target in pandemic from to are and were use the intend pleased a

high-quality has that joined we have of of mentioned, who commercial loan to strategic loan done an pipeline which could margins. and the deposit be the fourth in our second a at Johnny, interest as quarter.As to we deleveraging expect the in one profitability taken beginning higher supported we also that loans priorities President categories this growth, our our reducing job our As us have we been expect certain will achieved part risk we believe excellent environment. resume developing by enhance we quarter in to of process, steps exposure it, has and for to now longer that loan originate a de-risk portfolio rate

pressure off to quarter, margin, million quarter.We remained the decline additional quarter take the credit margin third of While the cost that tended X.XX% us loan higher to to help potential the in on redemption but yield a our we believe interest decline proactive to will against in sheet it managing and income, NIM against impacted carry stable protect we net interest on broadly NIM expect to the declined of we interest sub which fourth debt quarter. our the as and also balance these our the income charge approaches loans third expect our due $XX losses, with $X.X as held in exited loans hope rates.The direct of fourth reduction but and These was a to impacted the have de-risk result continued loans costs, the to investment net high-yielding yields, in deposit in negatively sheet. specific deposit we future.Credit in when pressure books the actions, the a of we interest balance will in benefit for loan did million quarter during sought combined

We improving will quarter third Alex, coming us over charge-offs optimistic provisions and results. financial quarters.With proactive the loan have discuss for that the positioned to the it are credit who over Alex? with combined that, de-risking, our I'll hand

Alex Ko

Slide The that due decrease sharply to interest was benefited The and to cover results. income, in a on in Thank while fees, has legal insurance of $X loan expenses. have portion summary expense. million on we resulted in led expenses of legal interest a X by X.X%, discussed income from a higher third David. David continued in costs which the offset CDFI non-interest you, professional as deposit a quarter past yield interest in decline income, decline significant by pressure the award.Noninterest decreased investigation-related began in reduction referenced the in net increase primarily

increase impact We and continue to the decreasing of approximately X anticipate XX.X%.Slide construction held investment. deposit can margin a net loan about our the the at which X.XX%. total summary of you mentioned, have next of X exposure. portfolio, X yield, closely totaled decreased quarter, temporarily of the net our the provides yield $XX in loans, annualized third be details some end land year.As the noninterest and in loans.And Commercial million loans bank X to billion that the comprised sheet points total for and estate expenses at interest quarter the our The level the at include and which net loan in to real about loans increase and additional ratio first balances decline loan-to-deposit of quarter to includes the with end lower of loan X.XX% David XX manage information, in fourth see before balance cost.Slide expenses basis quarter due third seasonal $X.X development Slide was detail quarter XX% third

deposit decrease loan of mainly consists quarter. our York a from our some with franchise. time and in about decreased slightly $XXX,XXX.Non-interest decrease of XX%.Slide XX%.Slide mortgage deposits bearing mortgages Total at $XX decreased total portfolio, from the deposits prior million million LTV represents which $X.X loans details average $XX has about deposits weighted residential office an was The non-QM average from X.X% under stands mostly by and an exposure prior billion has X the CRE and quarter. in XX Our details of of has California LTV New

pace non-interest to QX the of of compared However, slowed significantly in QX. bearing reduction deposits

Our basis of slowed last the XX from up points in the points from deposits was for and in that average quarter. quarter cost significantly has the worth XX pace the quarter increase X.XX%, basis noting quarter.It's XX first interest-bearing points the of basis second

due of quarters.Slide of from details slow on $XX.X large pace charge-off $XX.X $X.X X partial million continue to million in to deposit loans provides quarter from the Non-performing loan. the We in some XX decreased million expect costs increases to future credit. to last

by million cautiously the We due in from mainly quarter this of prior one quarter, resolved are losses.Delinquent delinquent remaining the $XX the optimistic fourth additional that large loan. balance be loan no to loan increased with will

million -- balance stable. However, after by non-credit delinquent credit payment $X.X million quality the $XX delay the after the the a loan related loan decreased of from remained charge-off, end in the large temporary of quarter, was corrected.Apart

credit Our loans. total allowance losses of at remained X.XX% stable for

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

Operator

question Certainly. Piper Nathan coming from is [Operator Your from first Sandler. Instructions] Race

Nathan Race

was to it are you pressure the magnitude pressure of least fourth the sounds the the if compression quarter at guys frame additional next quarter. well. kind up rate expecting that margin just like around quarter in commentary the in I into the and you Appreciate the -- the from And year, kind can wondering fourth expecting hikes here? of you're of stop early as assuming

Alex Ko

do be Nathan. happy to Sure. that, I'll

strategy, And actually the payoff of interest the larger compressed expected net As you to quarter, third as the the than this margin of payoff was the for came level our reason mentioned, the amount large we but David what in and actually a second more paydowns, the de-risking quarter. is compression quarter. due mentioned. especially second There quarter, down for our in payoffs

maybe negatively impact have deposits or also level in costs, time didn't an I paid payoff stabilize maybe as only negative That deposit QX, think down deposits bearing compress mentioned, example, paid that off and in that's increase will and It much And net increase. impact I more on the slow the But further will slowdown fourth is QX off higher the on the margin.Related that $XX of I even interest the non-interest and a there $XXX million decrease to year. will X on As that in loan third yields I quarter. loan yield margin. deposit rate. will be to the will But so and next the would the large think expect the a XXX,XXX cost one quarter. in interest loan have million

on million are we a Also, December that's redeem as our sub true impact. net So total income and debt, $XX mentioned, interest expecting to X. margin David

impact in QX expect but well in a So that more, -- because with QX. extent would to little minimum, seen $XXX,XXX not also, actually have more debt, but point next the saved as or it we a XX-basis quarterly any compress in about deposits will in those and the as reduction the combination and the will sub But we redemption impact, -- rate could QX of the of all it we bit loan QX, year, forward. annually be to have going was X.XX% positively

David Morris

less not not November, I Fed believe the or us We do they Fed of increases depends have increase does. which the if probably rates the If then side, -- rates. compression also loan we'll on in it on what do now would anymore? think most see

Okay.

Nathan Race

you it. terms of kind that runoff quite couldn't and And had Alex, of amount the I non-core XQ in Got of subsequent. Understood. in catch

in had runoff million guys you kind are going think that about I looking forward. of loans guys $XXX to non-core you

I'm balances just those going stand forward? So guess I where curious

Alex Ko

sure Are QX just to hear expected you want correctly. make payoff? I to loan it referring the I

Nathan Race

you Yes, understand of remaining today? how more kind loans non-core in to as have guys much I'm just of trying

Alex Ko

we our the other believe loan the $XX talking if by And are we go that I think competitors. million let that to asking you're are amount. I or a that's dollar about strategically Yes, decided -- refinance aware only we me

Nathan Race

the it. around like in curious from X it charge-off color any loan you additional can came Okay. It And sounds just Got the particular. then on provide in quarter.

So that color any other helpful? be on would

David Morris

due the Okay. other it -- reason $X.X a -- million it still Hills, first decreases loan at the for Beverly it was that to not people off block according it's city of we've talk where millionaire's have L.A. the Yes. and a least $XX away is The tax. in a is in. appraisal and million. chime about the -- it I'll can this which value books does millionaire's charged on to collateral tax a from it's It's

the of an at can right the out whole with place moment. that would closed they appraisal, we'll by the a be new offer end if us on the have charged-off, And year. we that So do the see get

Nathan Race

one resuming share If ask it. of terms repurchases the we Any thoughts should occur? could continuing. any that I monitoring on Got share expectation in could of that just perhaps for on more be governors And forward? when going repurchases kind perhaps

David Morris

We're time very hoping, our we'll resume repurchase that be able to frame, mid-November. in we're the November optimistic

Okay.

Nathan Race

Great.

David Morris

XXX,XXX shares left.

Operator

from from Terrell Your Stephens. next coming Andrew is question

Andrew Terrell

follow-up I the the I fourth make have total on the quarter, Do quarter. wanted should you margin, spot end how to of maybe the magnitude we just the to understand of questions the of the in some think deposits sure at about interest-bearing? the or cost either of around move

Alex Ko

Andrew. Yes,

spot is a now And me the X, $XXX,XXX. The the have have we breakdown it $XXX,XXX X.X% savings between for account, over deposits MMA under you combined. spot $XXX those that accounts, CD, of about rate let about and down break give And me rate million. X.XX%. the we for Let and

is the rate On $XXX,XXX spot the X.X%. $XXX,XXX rate the CD and X.XX% is CD, spot over

Andrew Terrell

loans you exit the the of And far on Okay. I'm then similar it. have understand question loan That's quarter? how timing -- be the really loan just when paydown incredibly on trying in occurred, as the helpful. quarter the spot the it's yields. the loan might to on I yield throughout appreciate It the if so fourth trending easy portfolio or well. like weighed just

David Morris

quarter. Well, fourth quarter, right at in runoff the all had the fourth haven't now, we significant for

sale a we this then have coupon. And is that's X.XX% a mortgage we $XX expect, And about they're X.X%. at million $XX million, We closing loan today. which one have

Alex Ko

X.X%.

David Morris

off. roll And our X.X%. to today. books currently know we going on don't exactly that's when It's

supposed end this expect a by away, would week We go but it only It's month, by rolling that XX. so. November the off of it's be to

Alex Ko

continue average deleveraging the loans. bad about we your the me Yes, a one rate pay the to margin. color that originated helpful obviously, X.XX% little but will model payoff more we're been million QX. will on and about bit had Like and and originate for our the of rate you was point. Andrew, And That's give loan the $XX let talking high-risk down, if the of of be not We've loans. we

And point, margin should mention $XXX Second million other QX. did the in $XX about, QX due the quarter was And that that for paydown. $XX to the in I payoff compression that talked be and million million it. we than

you So, give yields of I think loan an will and the side the equation. the idea that of margin

Johnny Lee

Yes.

$XX to we million, million. are expecting and the it than less that -- In most addition at $XX

Alex Ko

Yes, normal.

Johnny Lee

Right, paydown. payoff, normal paydown, interest

Andrew Terrell

Okay. Understood.

Okay. lift I maybe year. next a XQ. sounds million like the then I right, question the heard more quarter appreciate seasonal it. $XX around And bit if of X It then a And just of in you or first little about so into expenses.

that environment, how of expense you as Is of thinking $XX number, get in can kind kind to we should expectations you franchise? Or wanted XXXX? off manage that managing think base, around you maybe growth. throughout this on the of some million operating continue Just other -- something of balance expect expense you're reinvest about to -- in growth kind updated

Alex Ko

-- can fee expense Yes. covered even was and QX in $X smaller previous of based for that. on be legal by much those investigation-related SEC the to $XX professional basis for -- about quarters or Maybe it the that the XX% higher fact million given expenses will attempt Yes, the our smaller than million be investigation will and be answer the to the insurance. than used QX, I even

me we CECL-related to sure $XX the lot if validation, legal down.So reviews biggest professional the But employees. contributor salary and that think mature have run million all But it QX. we think you're expenses. consulting But or reduction in high a QX really advisory, a outside neighborhood know, those overall, expect some I the is the for -- million. I one services, even if kind mention rate also, and is We I But some you can caveat careful in credit the will and as of be the third-party higher, for for even managing the asking but need want and the did run grow, the million terms $XX very fees, to in make are salary we to obviously, would that in of going that not the go benefit we we would of lower by weaknesses It I feel 'XX expect forward, hire So qualified than But benefit expenses. expenses, like comfortable of $XX about expenses. be of rate seasonal lower XXXX. QX, is million $XX related. can on the

Operator

coming Motta from Your Instructions] is next Kelly KBW. [Operator question from

Kelly Motta

line was dropping terms resolution? It towards could I to provide I in, the us with time but update nice you insurance wondering if the see potential was you idea was an investigation. it's SEC kick so not maybe in on of any to hoping had expenses, down

David Morris

works, Well, us tell if anything. you don't know they how the SEC

just that's has are. where upon And where they of based really for really we slowed they stopped. information. much on, So, bunch know us pretty asking We if comment are they're down has that a significantly and cannot

Kelly Motta

And Got gateway was know it. terminated. I

branches all de or expansion into in Just we getting is as at you've in? look that San market that in And as past? order potentially things shift that M&A this novo still wondering to for does versus you're appetite markets done in interested your drive the like Francisco ahead, new one

David Morris

more that would there's have we markets at save. multiple branches cost that we after get XX where -- because in here savings a we XX% XX% in the cost acquisition of a would a also where or make And and to of here duplication, would Okay. we XX XX% doesn't San something that lot Boulevard, we or have Valley local entertain of would we Francisco. branches L.A., sense, be and have XX%, on market your depends look would on acquisition. Boulevard, especially or sense market. like to banks, significant -- can same we more banks branches we It local type it a already yes, Valley there's much the are -- But on all And while, American an than lot maybe serving typical closer Chinese make

the now, is right but So, it not screen. radar on

Okay?

Kelly Motta

where terms -- there's then segment your industry or And it. any category, Got opportunities wondering seeing more you're in of growth the down seeing that now by just to you're loan-to-deposit if attractive ratio, particular risk-adjusted returns. where targeted you're best for

David Morris

Go Yes. ahead, Johnny.

Johnny Lee

It's for too -- all now obviously, of construction, no -- not are lot want demand loans on we -- of an type lenders to opportunistic that. that at a experience, still Well, track certainly because do at and CRE-related more us, Johnny. there's we good look right area obviously, keen still development, basis.If very for there's many construction that look loans. there's on to But continue case-by-case good there's quality that's we record, still

example, guarantee sort ratio CRE only launch obviously, the certainly, very these this of a even types have there. positioned there the we're though demand to obviously, SBA where On But there's for but and now demand we lenders of see to on of side, reached our C&I for we types credits. selective we government here, you are But non-construction SBA businesses, are XX% certain now lending. loan-to-deposit better -- C&I, just --

bit will the this we on pursuing basis, more a an So on at still selective certainly, but point. little elevated be C&I side, very

Operator

further queue. no questions are There the in

David Morris

today. everybody like would thank us to for joining Okay. I

all have Bye-bye. Thank You you. a good day.

Operator

This event. Thank concludes today's you, everyone.

have at disconnect Thank participation. and your for a time, wonderful may day. you this You

RBB Bancorp (RBB) 24 Oct 232023 Q3 Earnings call transcript