RBB Bancorp

Good day everyone and welcome to the RBB Bancorp earnings conference call for the fourth quarter 2022. At this time all participants are placed on a listen only mode and the floor will be open for questions and comments after the presentation. Please note that today's event is being recorded. It is now my pleasure to turn the call over to your host, Ms Catherine Way. Ma'am, the floor is yours.

Thank you. Good day, everyone, and thank you for joining us to discuss RVB Bancorp's financial results for the fourth quarter of 2022. With me today are President, CEO, and CFO David Morris, SVP and Chief Accounting Officer Shalom Chang, EVP and Chief Administrative Officer Gary Phan, EVP and Chief Risk Officer Vincent Miu, and EVP and Chief Credit Officer Jeffrey Yip. David will provide a brief summary of the results, which can be found in the earnings press release that is available on our Investor Relations website, and then we'll open up the call to your questions. During this conference call, statements made by management may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based upon specific assumptions that may or may not prove correct. Forward-looking statements are also subject to known and unknown risks and uncertainties and other factors relating to RBB Bancorp's operations and business environment, all of which are difficult to predict and many of which are beyond the control of the company. For a detailed discussion of these risks and uncertainties, please refer to the documents the company has filed with the SEC. If any of these uncertainties materialize or any of these assumptions prove incorrect, RBB Bancorp's results could differ materially from its expectations as set forth in these statements. The company assumes no obligation to update such forward-looking statements unless required by law. Now, I'd like to turn the call over to David Morris. David?

Thank you, Catherine. Good day, everyone, and thank you for joining us today. Loan growth, increasing loan yields, and declining expenses drove record fourth quarter and 2022 results with quarterly net income of $17.6 million and earnings per share of 92 cents and an annual net income of $64.3 million and earnings per share of 3.33. Net interest income for the quarter was stable at $39 million. as the positive impact of loan growth and increasing yields was offset by sharply higher deposit costs. Fourth quarter non-interest income of $2.4 million was down slightly from the third quarter due to lower loan sales and servicing fees. A $3.6 million decrease in net interest expenses from last quarter was primarily attributable to bonus reversal of $2 million and lower loan origination commissions of about $500,000 as new compensation guidelines took effect. Basically, the team, myself included, missed board-established goals on deposit gathering and loan originations, and our compensation was affected as a result. Fourth quarter net interest margin of 4.26% was down slightly from last quarter, but up from 3.43% a year ago. We remain cautiously optimistic that we'll be able to maintain our NIM around four in the first quarter, but expect that it likely peaked in the third quarter of last year. Annualized return on average assets and return of total common equity were 1.8% and 14.59%, respectively, in the fourth quarter. Net loans held for investments increased by about $111 million to $3.3 billion in the fourth quarter, and CRE and residential mortgages showing good growth in construction and other decreasing for the last quarter. Our yield on average earning assets increased to 5.75 percent in the fourth quarter, which was a 62 basis point increase from last quarter and a 178 basis point increase from the prior year. Continued commercial customer activity and rising rates drove $108 million decrease in average non-interest-bearing deposits over the quarter. Our average cost of interest-bearing deposits for the quarter was 1.93 percent, which was up 111 basis points from the prior quarter as the expected catch-up in deposit costs materialized. We continue to be below our competitors on deposit pricing, but have been forced to increase rates to retain deposits. Non-performing loans were stable at $11.5 million from last quarter, and loans 30 to 89 days past due returned to a normalized level after a temporary increase in the third quarter. Subsequent to our adoption of CECL, we recorded a provision for credit loss of $3 million in the fourth quarter of 2022 compared to $1.8 million in the third quarter of 2022. We also recorded a reversal of provision for off-balance sheet commitments of $930,000 in the fourth quarter of 2022 compared to a reversal of $28,000 in the third quarter of 2022. Our capital levels remain strong with all of our capital ratios well above regulatory minimums. We purchased 49,000 shares in the fourth quarter at an average price of $20.77. We have 433,000 shares left on the buyback. Finally, we are saddened by the tragic loss of life in the three recent shootings in California, including the one last Saturday in Monterey Park. All of our employees are safe, but are understandably upset by such a horrific event that occurred so close to one of our branches. In response to this tragedy, we made a $20,000 donation to Asian Pacific Community Fund, of which 100% of the donation will be going to victims' families in an effort to help the community recover. With that, we are happy to take your questions. Operator, please open up the call.