RBB Bancorp (RBB) 23 Jul 242024 Q2 Earnings call transcript

Good day, and welcome to the RBB Bancorp's Second Quarter 2024 Earnings Conference Call. [Operator Instructions] I would now like to turn the call over to your host, Catherine Wei. Please go ahead.

Thank you. Good day, everyone, and thank you for joining us to discuss RBB Bancorp's results for the second quarter of 2024. With me today are Chief Executive Officer, David Morris; President, Johnny Lee; Chief Financial Officer, Lynn Hopkins; Chief Credit Officer, Jeffrey Yeh; Chief Administrative Officer, Gary Fan; and Chief Risk Officer, Vincent Liu. David and Lynn will briefly summarize the results, which can be found in the earnings press release and investor presentation that are available on our Investor Relations website. presentation up please to regarding refer statements the open ask questions. I the we'll SEC in everyone company's that to investor then the your call would forward-looking filings. And the and the disclaimer

Now RBB's Executive I'd Officer, to Chief David? like the Morris. over turn to call David

modest and of is explain, average approximately Good as $XX $XXX X growth will second at fourth million joining deposit or interest loan per you begin growth. by share, we us stabilization income Loans today. RBB in third you, million Catherine. Net it as thank a net production quarter, $X.X weighted Thank going and reported saw supported X.X%. optimistic basis quarters. What the Lynn are of of signs further that we with to really day, in expand everyone, results change to costs. the no funded million for second increased cautiously quarter loan but by loan in and is rate of points, $X.XX will funding declined margin our drive

a These million C&D residence. of million of loans personal appropriately loans and expanding, However, we deposits $X.X will X we the to continued are in obtained importantly, $XX updated expenses forward. Interest further year and an activity as C&I quarter, increased quarter the of down at -- million we see in ago $X.X migrating declined and believe reserved primarily the nonaccrual. appraisals to support during on loan million consist CRE total secured going wholesale loan a X which net growth $XX increase expect we about loan, and did funding from quarter. X% by pipeline end second loan a to loan, quarter. We based during reliance But second of a the from more XX% on last to and reduce our a we our is deposits. X% loan are loans due first we nonperforming is totaled seeing This

focused million And example, reducing through $X.X X very loans less we third nonaccrual than loan totaling settle in values are SFR to on the trustee levels We way with by sales of expect of XX% the to quarter. NPLs.

go we in of that environment for able them Lynn, are environment, troubled assets could increase material our a a nonperforming that to loans the be expect underlying While more it recognize details collateral about cause this quarter. or loss. With for the any over will who we in matter, comfortable into can concern, without to resolve I'll some be hand and XX% that, we with Lynn?

quarter we feel our presentation comments Thank of second results. XXXX second refer quarter you, share presentation to investor David. free of have the to Please X company's investor provided as my on a performance. Slide financial has I the of summary

the $X.X the $X.X and million million, loans. balances on interest $XX.X reduced mentioned, $XXX,XXX $XX that David to income $XXX,XXX basis last interest reduce allowed decreased funding to expenses $XXX the million margin with to diluted million that us expenses our million gain $X.XX -- nonaccruals, in net our in quarter. on reduce income decline income $X.XX helped reduction, higher of As balances interest $XXX,XXX million average loans. quarter's X was interest of interest on points, and by or wholesale per Net CRA decreased and purposes decreased increased nonaccrual sale in benefited funding basis of by maintain million coming the cash $XXX,XXX decrease impact the to income slightly $X.XX to decreased by made aforementioned funds last loan reliance $XXX,XXX from share, per points. Net cash our and from for equity X Interest decrease the second interest Trimming margin primarily distributions income $X.X also cash migrated share. quarter. Noninterest income net million on and a net about stable of our due $XXX,XXX. Average loans to us from compared a Decreasing of or of a which increase income to offset in of of by due cost an interest by wholesale impact quarter-over-quarter. investment a $X.X $X the balances

New relatively and in level $XXX,XXX to LTV gain X% average real million, residential at development and for OREO, additional on with this $XXX,XXX loans. York our loans loans we estate loan third them about of than primarily quarter. Noninterest remain less and well-secured has stable on gain total in construction XX% X close at stable Slide in were non-QM and was portfolio, consists an $X.X billion recognized we the California, we mortgage fourth of those were the our $XX.X expect exposure about has While details to at and this mortgages, of our last X expenses quarters. Commercial OREO XX%. recognized which portfolios. Slide details to

of loan reported at X, that investment. the XX, held to of you hope stable on increase the losses our presentation understand allowance quarter. On loans quality Turning Slide X.XX% remained of see for we loans we added this light asset a for will will total we our help in nonperforming couple slides investors Slide

to to the of due to However, nonperforming decreased loans, XX%. nonperforming loans increase allowance ratio our

wholesale resolve billion, nonperforming successfully deposit ratio this future quarters first to at in Total as retail funding stable replaced our about deposits. details deposits franchise. recover XX was the the expect has were from with we $X loans. Slide as We quarter

a deposits relatively in the second flat for quarter addition, row. noninterest-bearing remained In

in repurchases, quarter dividends repurchased $XX.XX of cost an quarter. Tangible second at the per at book $XX.XX the all-in the deposits per share increased by from average accretive and to million. offset quarter. first our was about to $X XXX,XXX price X.XX% of unchanged Our shareholder second of for value We earnings average share share shares due

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

[Operator question is Nosal first with Your Hovde from Instructions] Brendan coming Group.

loan a for the the both certainly the size help I tone these areas to could growth us on struck X over quarters. start up year. of both margin you on Maybe off bullish opportunities the was half back next hoping the you here, and just

Okay. Lynn will start.

Let and details. over me start, then turn can to with people it we

So I growth net second $XX I in think year, half quarter. and relative to of no growth reported quarter net optimistic. the We the million the we're the had first first cautiously in think

digit definitely those So is the kind low current I to that still environment leaning towards growth. X quarters, think think relative growth. Can increased percent we're appreciate expecting I of

if to think know the bullish the interest X I our tone, margin net basis or on the -- of that -- into helps a on points. loans, of we don't interest had which impacted details go then with we migration and of margin, impact report net I pipelines. And nonaccrual the can So other couple

I floor that of So the of growth, interest that's I loan our where think we to would ongoing margin think see off at we with In to any the like have wouldn't possibly absence and optimistic we're nonaccruals additional come now. those, report. large stabilize net

how one Maybe do you X maybe migration me, That's talk Yes. mean in more the the I credits? these nonaccruals. saw helpful. for the just about Or migration drivers. you on folks characterize for

was Given to migration. kind I'm tough of common there kind it's say one-offs. of these feels But curious are X driver that in it's if in different just it any like portfolios, that

I driver migration you the that with the here, don't at of a there is the think common loans in increase saw all.

to X based concerned would we're time any the look about I exposure. this on anything could I those have you loans, think point, we're nonaccrual, determine your take that there's trends that at we've at or and seeing looks if similar don't to something to And else anything So portfolio we nonaccrual. of moved Obviously, did a relationship. rest every have that of identified are anything have think agree. moving to indicate, report. Two I don't hard the you we within have

only a to would be think that happen I But denominator. I guess, that they So different in item, be the portfolios. common has

is coming next Your with Motta KBW. from Kelly question

this pipeline Wondering back SBA, loan as up loan year? we picked color if of your half the residential could towards your look sales was well that if for you It or looks this sales to any provide again like as as as quarter.

this traction in of seen our in so have pickup we bit we SBA, also. mortgage But of SBA. still little portfolio a is most our Kelly, also a gaining are

Okay? So the exact you if any has details more Lynn -- in it. you can fill need

my have I Actually, fingertips. those don't right at

I SBA, we're spreads. seeing wide that think on

rate then But successful. And think SBA. I interest bit the little we've majority with the So mortgage. more seen has on is a environment, that the been part

up the slightly. for maybe Got helpful. Lynn. question it. yields And you, then securities That's ticked It looks like a

or book, any Just of wondering of flows that that about cash the we of margin. into securities reinvesting think as are side the driver if the the you

Sure.

what percentage that we're itself short-term curve. in for higher on the was the seeing yield inversion a securities given in yield the commercial the is paper think I probably portfolio

most I when the got that look our earning So at had I think loans of a assets higher average percent earning impact in probably of whole the assets.

the was driver of the that yield think increase. main I So securities

remediation And through items. I working progress of Got it. you know and several been making solid guys towards have

is investigation the AML. and think working I done still you're SEC towards

expense through expect guys you wondering, are run all any processes, that if to expenses work additional those you those if the continue in Just or as there's currently rate.

rate run currently they're in believe now. I expense Yes. the

Piper Sandler. is question next Your from with Clark Matthew coming

on of income on X basis, first margin that spot do then in on Lynn, the month rate excluding the June? points adjusted the average of you reversals? basis end And margin, June the Maybe the maybe have at an deposits of interest

Matthew. question, Good

stabilize in my then investor I for of seeing is think June. got of not interest comments shared. And net kind your and we I spot is in including on rates, deck, on -- it information I I I've So May, intentions getting it there. the we're Yes, the based of that all think I question, trending, the the meant how apologize think, April, margin

pull me question, up. meantime? bear I that Matthew, with another Just moment you in the while Do one have

CDs to going and was rates to I Yes, Sure. roll there. the get

you what's us renew and at? quarter, and third remind in maturing them Just to what fourth rate, the at what expect

Okay.

I CDs months. XX So our of over mature XX% think

I there is a evenly portion distributed. think of kind good it's

have I cost week interest rates or think started just over of that eased last the actually kind or the deposits of to X. have

I funding think of question you'd seeing were higher-for-longer if we answer So think asked rolling come what they were different, my to the similar is how been because month in off rates would a mantra. pretty ago, have the because I

be exact like the basis I we're of see. could a you I softening. probably would there's of I points. Anything think seeing little lot a opportunity know However, don't bit give you reprice little I add, general my comment. would else them David? a to lower, for or would if we as it's But to think points, bit as much don't think I basis

said No. you mean -- I I think everything.

Our portfolio over is so. months, evenly dispersed the pretty

it. Got

then that, updated that's just borrowings? of think I the are X.XX%, first plans quarter, million the on those And for Okay. $XXX FHLB maturing your in what

Sure.

market the So have wholesale our end, we'll loan would, And obviously, the other likelihood tapping I with of the in loan-to-deposit or keep and whether desire determine rate source. interest that at growth, of there's the with FHLB of amount look at to higher a liquidity, advances think quarter on-balance absence options year. as in we that sheet ratio the good at a a and the organic to a it just point, is first work best environment different next wholesale

to are I decrease. the rates those that necessarily given prefunded So getting interest know we -- don't expect

at quarter the rates, I'm the some So that say with looking for unfortunately, first quarter. to to pretty it's spot respect higher similar to I was average we're think rate year. And going repricing in source next the probably the

Terrell Stephens. [Operator Instructions] question with Andrew Your next coming from is

quick for Just of me; already. ones of a asked were couple mine most

said of growth, On for the just the year. think low you Lynn, loan still single I expectations for to clarify, digits kind

digits. about mid-single talking message? I to overall change guess any I last loan were we the think quarter, growth low to

we're low you of to of don't year, I more. if the rest mean this want think first kind at the If years the yes, for add think comments I to on you're a I as or so. know don't relative pipeline half, moved again, of I mid. if looking to looking it's, something the couple I mean single-family on, mortgage.

very, calculated best the to as environment also But right and loans, the to to as very very first competing this. We're also environment. to try are trying now Our of are get and year we very payoffs right the expect, relative can. second of be half we we be trying will the It's half a -- type better. Andrew, now, a of things are we have do year, those But into also need that strong. in pipelines

Yes. Understood.

maybe And months as any specific the just optimism pipeline mix-wise ago? any, about today, versus as pickup Any X think change CRE, there? more it composition Is sits the Okay. C&I, in X, the the single-family? you by like of driven slightly color

I Okay. so. don't think

it's resi. think I basically commercial, XX-XX

Okay?

spreads at of think you mix Have you all lot compression production of It's it's we new yields I actively just guys you then new -- quite about have X.X% Okay. function think talked a spreads? quarter yield, Maybe brought But this for mix. on I -- quarter. mentioned sequentially. loans a X.X% a last lowered origination

the that production C&I turn with ended a -- portfolio some of average reported single-family examples quarter the you current X.X% blend lower to it has about a And which Before our the as rate. our to up But think we think commoditized I'm maybe yield. X.X% rate. to relates we I of that of I going our how last maybe came that's over the -- part from versus production

So you turn on spreads, I I are I'll that. the comment then to kind over X think to I just talk that trend product, we're a were -- on where think ends David. you, And seeing if we're there probably think of by of

Yes.

For for X.XX% rates -- start, from the are are about? X.XX%. anywhere That's our the mortgage, XX%. they about in go right, to So commercial,

on the product. Depending Okay.

from with Hovde You coming have follow-up Nosal Brendan a question Group.

to wanted hit before the the buyback wrapped up. Just on call

quite throughout the up this a quarter. shares, You is price bit active second repurchasing guys were quarter that but average from price the quite

that over the few of next is Just making to use curious continue what quarters. your authorization kind appetite of

Sure.

X.X I our your think looking we under a strong all I But still at appetite below it price to think shares but of our price stock aspects is tangible we'll stock have we pretty our have moved has the could authorization still moderate, book. consider it. nicely, still since there. point, and Maybe million up

with question Motta from follow-up additional Kelly KBW. an have We

I jump about, borrower. color reserves specific them you of more commentary you on Thanks I guys the know this X for letting appreciate me same been back was the hoping Lynn, I down have quarter. believe, a took I said NPAs. in. bit to get the may had But

provide on -- without as gives bit your with -- Just those confidence on more to wondering if you we was could this just commentary well, quarter you ability the what losses. And there like that horizon saw level? a of uptick part a recoup there review kind specific migrate is this NPAs on you inwards that? anything could think of anything keep the to as And this at the or you could higher was

from for We say. to you when forth. do. came the you most that we of No, back calm, Kelly, and or we a in going appraisals. there's X in X discount property. pass got result what very Okay, property you calculate you're out appraisals. those going X way expedite normal and to be there's let you foreclosure off for these so on of can we're not supposed we believe of did both we're of we selling there. to could all. Really way, loan doing And we of and it, I appraisals distinct go normal the those review do the the This been the separate was if lieu in I guess, loans, will -- that X proactive any things about circumstances out deed we've -- and that say, borrowers, I'll Lynn, the any start, audit. get guess, very examination how or and them very accept We that's really threw value to They could to on details. expect that this was this and have type went banking loans. We brought Those it or just then there's a impairment the loan, operations, I'll to look so Lynn of a

Sure.

So of your are Kelly, reserves. nonperforming, loans about for of to the all kind that specific talking comment

a run to is once we obviously detailed CECL process, has comprehensive So a going it individual go through of through models. But can impaired, lot something review.

looked you the that some then the is quarter. this limited specific there's measured. To that and you has do might level loans. charge-off, been that saw which our some nonperforming on take And group in reserves of loans specifically charge-off dependent, at So respects, collateral in we it's extent comfort

nonaccrual so many we at all as how work of answers Unfortunately, question the our comments, know deck don't looked David's we with through put loans. I that the agree conversation the I So in of and as reserves. And if -- know, your time on to takes looked XX that Page uptick it them. as facilitate some we given to -- we specific the specifically I at

I think third this a the things with. fourth obviously lot it, We'll we're going comply have in have of it to we quarter about we through urgent to of year. be but work and

a You have follow-up with question Piper do Clark Sandler. Instructions] from [Operator Matthew

any the going rate, if I commentary apologize I missed but in run comp? run forward seasonal a it, expense decline after noninterest on expense rate, the

was a one. It quick Sure.

at rate we be that have believe quarter. the or same our second similar we think expense run the approximately I will level in

to appears in closing for Morris time. floor at would I David like to queue questions turn now remarks. back be There additional over any to no this the

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

today's conference Thank call. you, everyone. conclude This does

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