Scanning The Universe

It can be most interesting to look at young companies. Not just startups, but companies that have achieved a level of success. A good hunting ground can be the list of smaller IPO’s. When a company is going public to raise less than $100 million, it raises a whole bunch of interesting questions.

The first is: why bother, what is the motive. Public ownership involves a new layer of administration, reporting and compliance. And then you have to deal with Wall Street analysts and their expectations. This can take up loads of time and money.

The motive for many smaller offerings is to establish a market price and use it to sell out to a bigger competitor. Sometimes this works and a lot of times you can get stuck with owning a small fish in a big lake.

RBB: Targeting With An Asian Persuasion

Lately, we have made note of several small state and regional banks going public with such a plan fairly evident.

This does not appear the case with Los Angeles based RBB Bancorp. They are carving out a special niche in traditional banking services. Their plan appears to based on growing the business rather than selling out.

RBB stands for Royal Business Bank. Back in 2008, CEO Alan Thian and a group of his business partners started as a California state-chartered commercial bank. Here is what makes RBB different.

Most members are Asian born and began their banking careers in Asia. They each worked together at various banks in California for more than 20 years.

Thian and his group identified a high level of dissatisfaction with the banking service to Asian-American and Chinese-American communities.

Thian focused on providing commercial banking services to first generation immigrants, initially concentrating on Chinese immigrants, and now includes Koreans and other Asian ethnicities.

Team Thian utilized their strong local community ties and relationships with both federal and California bank regulatory agencies to create a bank emphasizing strong credit quality and a solid balance sheet without the burden of the troubled legacy assets of other banks.

RBB picked one of the worst times to open a bank during the 2008 financial crisis. Overcoming those difficulties demonstrated management strength. Over the past few years RBB has amassed more than $1 billion in deposits. That is up from about $650 million just two years earlier.

The bank welcomes deposits from all customers but seems to have found the right formula for its target audience. The average RBB depositor is not a billionaire Chinese politician seeking a safe haven in the United States. Rather RBB appears to be a reliable lending source to small business from its downtown Los Angeles headquarters, just a few blocks from Chinatown.

The Offering

RBB is out to raise about $80 million after fees and expenses. Wall Street banking specialists Keefe, Bruyette & Woods, Sandler O’Neill and Stephens Inc are managing to offering. The S-1 was filed at the end of June so it will be a while before there is much of a read on the marketing of the deal.

The entire proceeds will go entirely the company either to strengthen its balance sheet or to use for growth, which includes acquisition. Obviously with the Asian community extending well beyond Los Angeles, there are several options for the proceeds of the offering to be put to use.
Postscript

We all appreciate the role that timing plays in public financings. Like most things in life, it makes a big difference.

We never make an investment recommendation that is not our role. Nevertheless, RBB attracted our interest for two reasons. First: bank stocks have been dogs this year so for underwriters to offer any company in this group makes a statement. Secondly, the offering was filed in late June, historically one of the worst times of the year.

With two strikes against the offering it, the RBB deal will be fun to watch.
But then, RBB started their business at one of the worst times for banking. So perhaps they just have the right feng shui.