RBB Bancorp (RBB) Earnings Call Transcript & Summary

Good morning. Good morning, I'm James Chairman of the RBB Bancorp. On behalf of the Board of Directors, I welcome all of you and thank you for your attendance today. Now I call the meeting to order. Before we move -- moving to the formal agenda, I would like to introduce those of the Board members who are present here on the forum today. Please stand up [Technical Difficulty] During the Q&A session at the end of the meeting, they will be available to answer any questions regarding the company's financial statements. Ms. Geraldine Pannu, Secretary of the company, will present proof of the due calling of the meeting.

So I present the following a copy of the printed notice of the Annual Meeting of Shareholders stating the time, place and purpose of this meeting and a copy of the proxy statement furnished in connection, with the solicitation of proxies for use at this meeting. A complete list of shareholders of the company of record as of April 10, 2023, each of whom is entitled to notice of and to vote at this meeting. This list, which will be available for inspection throughout the course of this meeting, shows that as of April 10, 2023, there were 18,992,943 common shares of the company issued and outstanding. My affidavit is showing that I caused to be mailed on or about May 12, 2023, to each shareholder of record a copy of the notice of the annual meeting of shareholders, the proxy statements and the proxy.

Thanks, Geraldine. Please find a copy of the notice of Annual Meeting together with the affidavit of mailing in the minutes book as part of the minutes of this meeting. The minutes book is here and will be kept open for the inspection of shareholders throughout the course of the meeting. The Board of Directors of the company has appointed [indiscernible] the Inspector of the Election for this meeting. The Board has also appointed myself, Dr. Kao, as management's proxy holders for this meeting. The Inspector of Election has duly taken her or his office. I direct that the oath be filed with the minutes of this meeting. At this time, to be certain, a quorum is present. I ask the Inspector of Election to now make a poll of the shareholders shares represented at this meeting in person or by proxy and to report results.

They are present in person or by proxy at the meeting of the shareholders that I have subscribed for an aggregate of [ 12,956,947 ] common shares or 65% of the issued and outstanding common shares of the company.

By reason of facts that shareholders owning majorities of issued and outstanding shares of the company entitled to vote at this meeting are present in person or by proxy. A quorum is present for all purposes. This meeting is now declared legally convened and ready to transact business. After the meeting has been adjourned, we will present our report as to the condition and operation of the company. We ask that you hold all of your questions, until we have completed the report, then you will then be provided with ample opportunity to ask the questions. Proposal 1, election of directors The first matter of business will be the election of 10 directors to the Board of Directors of the company to serve until the next annual meeting of shareholders, and until their successors are elected and qualified. On behalf of the Board of Directors, I hereby nominate the following individuals: William Bill Bennet; Robert Bob Franko; Christina Kao; Dr. James Kao; Joyce Wong Lee; Christopher Lin; myself; Geraldine Pannu; Scott Polakoff; and Frank Wong. Is there a second for the proposal? Geraldine?

[indiscernible]

Is there any shareholder represented wishes to revoke his or her proxy? Are there any shareholders present who did not submit proxies and wish to vote by written ballot? I don't see any. The 10 nominees receiving the highest number of the votes will be elected. I hereby declare the polls closed. It appears that the Inspector of Election has finished counting the votes in connection with the election of directors. Will the Inspector of Election, please report the results of the election?

Mr. Morris, all the director nominees have been elected.

Thank you, Geraldine. The report of the Inspector of Election shows that the shareholders of the company have voted for the election of: William Bill Bennet; Robert Bob Franko; Christina Kao; Dr. James Kao; Joyce Wong Lee; Chuang-I (Christopher) Lin; Geraldine Pannu; Scott Polakoff; Frank Wong; and myself, David Morris. They are hereby declared elected to serve as directors of the company until the next annual meeting of shareholders or until their successors are elected and have qualified. The report of the Inspector of Election is approved. Proposal 2. Advisory vote on named Executive Officer compensation. The second matter of business will be to approve an advisory and nonbinding basis the compensation paid to the company's named executive officers, as described in proposal 2 of the proxy statement dated May 12, 2023. On behalf of the Board of Directors, I hereby move the proposal 2 contained in the proxy statement dated May 12, 2023, be approved. Is there a second to the motion? Geraldine?

I second.

The proposal must receive at least a majority of the shares presented in person or represented by proxy and voting at the meeting is required to approve or on a nonbinding advisory basis. The 2022 compensation on our named executive officers, as described in our May 12, 2023, proxy statement. Is there any shareholder present who wishes to revoke his or her proxy? Are there any shareholders present who did not submit proxies or wish to vote by written ballot? Seeing none, I hereby declare the voting closed. Will the Inspector of Election, please report results of the vote?

Mr. Morris, proposal 2 has been approved by a majority of the shares present in person or represented by proxy and voting at this meeting.

The report of the Inspector of Election shows that the stockholders of the company approved, on a nonbinding advisory basis, that the company's 2022 compensation of our named executive officers. The report of the Inspector of Election is approved. Proposal 3, ratification of appointment of independent auditors. The business will be to ratify the appointment of Crowe LLP as the company's independent auditors for the fiscal year ending December 31, 2023, as described in proposal 3 on the proxy statement dated May 12, 2023. On behalf of the Board of Directors, I hereby move that proposal 3 contained in the proxy statement dated May 12, 2023, be approved. Is there a second to that motion? The proposal must receive at least a majority of the shares present in person or represented by proxy and voting at this meeting, to ratify the appointment of Crowe LLP as our independent auditors for the fiscal year ending December 31, 2023, as described in our proxy statement dated May 12, 2023. Is there any shareholder present who wishes to revoke their proxy? Are there any shareholders present who did not submit proxies and wishes to vote by written ballot? Seeing none, I hereby declare the voting closed. Will the Inspector of Election, please report the results of the vote?

Mr. Morris, Proposal 3 has been approved by the majority of the shares present in person or represented by proxy and voting at this meeting.

The report by the Inspector of Election shows that the stockholders of the company have ratified the appointment of Crowe LLP as our independent auditors for the fiscal year ending December 31, 2023, as described in our May 12, 2023, proxy statement. The report of the Inspector of Election is approved. Thank you for attending today's meeting. The meeting is adjourned. At this time, I would like to present a report as to the condition and operation of the company. After I've finished the report, there will be questions and answers -- a question-and-answer session. [Operator Instructions] I think that on the call in..

[indiscernible]

Okay. We'll get started.

[indiscernible] Thank you.

Okay. Just before we get started, last year was a very good year for us. Our asset, liabilities is such that there's an interest rate rising environment, we do [indiscernible]. When rate did slowdown thereby and [indiscernible] we don't make a much money [indiscernible]. For the last year, we know that early on that our earnings was going to be very, very good last year, and they were very good. This year, it's going to be harmful for us this year because rates have stabilized and so forth. And we didn't even project March -- still come back issue and the issues with Signature Bank and so forth was not anywhere in our forecast. But, if you look at us today, we're at $4.1 billion, $3.3 billion in loans, $3.2 billion in total deposits. Our tangible common equity is 10.4%. Return on average assets for the first quarter was a little lower than [indiscernible] revenues 1.12%. Net interest margin last year was [ 4 50 3 70 ], we expect that to go down [indiscernible] go down [indiscernible] historic stuff. This happened in '22. We acquired branch of [indiscernible] only about $75 million in size, but it gives us to why you see all of the tax history, but the acquisition [indiscernible] we have done that and so forth with some of the other things that they have done such as [ 50 55 ] recording debt. We also issued $120 million in 2021 this time. Okay. We already talked about this a little bit loan growth. I don't expects much loan growth in this year. I think, it will be unwise [indiscernible] this year, if we grow at I see nothing more than 5%. We might see it all happening on deposits. As you could see, we ended up full deposits almost $3 billion, and we're at $3.2 billion today and so forth. You can see that our income was $11 million, that's a little bit lower than what our run rate was for 2022. There's a number of reasons. I already talked about the margins one to that. The other reason is our label expenses and our [indiscernible] all of the investigations and so on. I still believe that we got a better company is doing better than $11 million per quarter. But even with economic times change, we may not -- they may not be at the low markets for 2022. You could see the yield on earning assets. You could see total loans all earning assets were [indiscernible] are pretty high some of our competitors. Cost of interest-bearing liabilities [ $2.91 ]. Total cost of [indiscernible] $2.11. You could see this was a prior issue. As deposits [indiscernible] reprice but this has only gone up from 5.12, as I explained [indiscernible] So this has gone up almost 2. This has been gone up 1, okay? But you could see, you don't have [indiscernible] in the market just by [indiscernible] and that shows a breakdown here in this graph here. And we were at 4.02 for the whole year of 2022. We're actually [indiscernible] we were over 4.25 [indiscernible] Efficiency ratio has gone up. This was affected by the legal cost. So, we expect the following quarters are our efficiency ratio will back in [indiscernible] 46% of our loans are at the [indiscernible] real estate. I always get the question, as how much do we have on our books in commercial. We have about $45 million -- $48 million sold commercial office, right now. This is by a file size. We don't break out that on this, but this is all report to have, pleased to see that family here is that 51% still higher than what we set business by product, what we can call product line. There's difference between what the call report stays and how we report things and manage things. This is all managed. The 46% is all managed by residential mortgage department, whereas the rest is all managed by the commercial real estate. Lets talk about single-family portfolio. It's increased last -- fiscal last quarter and so forth. Our average rates now are around [ 7 and 58 ] on SMR as of today, most of our products, we do everything not the other -- not fall by product 5 years or 7 years, just so that everybody announced. We also did a 30 years [indiscernible]. We also have Fannie Mae and Freddie Mae originator and servicer. Almost 20% of our [indiscernible] portfolio is investment properties. We have about 3.5% of our family market just nonresident system. Then we start -- in addition to the $1.5 billion, we started another $1.1 billion from other banks [indiscernible]. [indiscernible] office up there, it's only 3.5%. So we did put this to our rather our last year. We had 6.3% [indiscernible] goes down right now, nobody's going back toward. That's why all this is very much concerning lot of investor side is that question all the time [indiscernible]. So I get the question [indiscernible] Second question is, do we have booked almost [indiscernible] So that's why we [indiscernible] $221 million. You'll see how that's broken [indiscernible] We have very little SBA. So I'm not going to talk about that, and we only have $156 million in C&I [indiscernible] It's not a secret anymore. We announced that we are hiring a gentleman named Johnny Lee to come in to take our commercial lending department. And, I expect next year while I'm standing on this stage that these numbers will be okay. Because one of the things that we've always said is we want to be a balance in that and that balance is, we don't want to third of it to be residential mortgage. We want third of it to be in CRE, and we want to third of it to be in C&I [indiscernible] We're not near in that enough. So that is something that's will take me 2 or 3 years, maybe 5 years. Not performing on total bucking up just a little bit, but [indiscernible] white space above peer group 3, we were above peer group 3, which is about 1.21%. So I think we're okay with our flow at this time and our post next year. And this is something I really wanted to tell everybody, show everybody our capital ratios. We have a very strong capitalized spending. Tier 1 leverage, these numbers here are showing fully phased and well capital leverage. By considering well-capitalized Tier 1 at 11.6%. That's a holding company If you look at the bank, we're at 14.5% after than that. We are almost 3x more than the minimal level to be considered well capital fully phased. We have the same numbers all the way across. So, the regulators look at those 4 numbers, they speak to us and look how much capital we get. That's [indiscernible] capital in case we [indiscernible] The bad news is I never ever, ever seen before as well as a bank that only have 6%, okay? I will never be able to work on that as well. Ultimately, we want to reduce this ratio. And the money back to shareholders, which we sometimes do buy back or so. When I think give the money back to the shareholders, we do have dividend $0.15 a share per quarter, so that's about 6% yield, on it right now. That's all I have. Any questions? I do not have appendices for the investors that -- I do not have appendices, has been published before either in press releases or through a statement. Thank you all for coming.