Independent Banker - August 2018 - 64

opportunities for growth. " There is a general view that the
economy is growing along with banks' balance sheets, " says
Tom Killian, a principal in Sandler O'Neill + Partners, L.P.'s
investment banking group. " Bank stock valuations have
held up pretty well despite volatility in the market. "
It's good news for the industry. " There's an awareness
on the part of investors that banks are once again worthy
of being invested in, " notes Gary Teagno, president and
CEO of ICBA Consolidated Holdings and the ICBA Services
Network. " They are looking at banks as a long-term
investment. It's a very positive sign. "
Capital plans
Going public was always part of Royal Business Bank's
strategic plan. Founded in 2008 to serve Asian-American
immigrants, the bank has grown both organically and
through acquisition. But it needs capital to achieve its
goal of being a $5 billion bank serving Asian-American
communities across the country.
" We've always said we wanted to acquire banks, " says
Morris. " We were getting to the point where we couldn't do
cash deals anymore. We had to have a stock currency. "
It was years in the making. Royal Business Bank set aside
money in 2013 to make its financials compliant with Public
Company Accounting Oversight Board (PCAOB) standards.
A year before going public, it implemented a full SarbanesOxley
Act (SOX) program, since the bank was approaching
$1 billion in assets and would need to be compliant with
the Financial Deposit Insurance Corporation Improvement
Act of 1991 (FDICIA). It got to know investment banks,
learning what niche they served, so it would know who
would be best for each market segment.
" When the time was right, everything was ready on the
accounting side, " says Morris.
Planning ahead for an IPO is critical, says Teagno,
and isn't something that can be thrown together in six
months. Investors don't like uncertainty, and expect legal,
accounting, credit and operating issues to be resolved.
Beyond SOX disclosure compliance, banks need to make
sure their financials, internal policies and procedures,
and independent board committees are all in order. A
bank needs to have the internal staff and capability to put
together all the documentation
and analysis.
Size also matters when
looking ahead to a potential
IPO. Of the 31 IPOs since
2015, just six have been at
banks with less than $1 billion
in assets, says Killian. The
median asset size is about
$1.5 billion, and the average
is $3 billion as of June 5. Just
one was a bank with less than
$500 million in assets.
Part of the reason is the
relatively high cost of an IPO,
Killian says. The other key
factor is investor desire for
liquidity. Smaller banks will
have fewer shares to trade.
That doesn't mean they can't
go public, but it just might not
be as cost-effective.
Employees from RBB Bancorp, the holding company that owns Royal Business Bank, visited the Nasdaq
MarketSite in Times Square in celebration of their initial public offering (IPO) on the Nasdaq Stock
Market on July 26, 2017.
64 Q ICBA Independent Banker Q August 2018
Often, banks looking to go
public compare themselves
with the Russell 3000 Index,
a key benchmark of the U.S.
stock market, Killian says.
" Once you get to the billiondollar
threshold, are valued

Independent Banker - August 2018

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