RBB Bancorp (NASDAQ:RBB) Q4 2022 Earnings Call Transcript

David Morris: I think our NIM will contingent as — I think the history of rates going up and up and up has ceased. So most of our competitors are in the 4.25% range on CDs. For us to attract CDs we have to be around 4%, okay, about 4%. So you are going to see everything re-price to about 4% if we want to retain those depositors, okay, for the remainder of the year. So I think you are going to see over the next quarters our NIM going down even though rates may go up still 75 basis points, I don’t think the deposit rates are going to continue to go up as much. I may be wrong with that, because they are supposed to be — they haven’t really with the last rate increase at an increase, okay. The community priced everything starting September and early October at 4%, 4.25%, 4.5%, 4.75%. That’s where they have been people have been pricing stuff. So we have has taken a conscious effort to keep everything between 4% and 4.25%, okay.

Nick Cucharale: So can you give me a sense for — at this point, obviously, a lot can change and it’s a wildcard, but what are your thoughts kind of in the middle of the year? Do you think the magnitude starts to slow down in terms of the cost increases on the liability side or just any sort of quantification would help there?

David Morris: Well, I think, like I said, I said about 4% first quarter, we are optimistic on that. The second quarter, I think, will be around 3.75%. I think it will be about 25 bps for the next couple of quarters, okay.

Nick Cucharale: That’s helpful. Okay. Thank you. And then in light of your capital position and valuation, are you expecting a more forceful repurchase activity over the course of the year relative to 2022?

David Morris: We are hoping to be — that will be the case, okay.

Nick Cucharale: Okay. Thank you for taking my questions.

Operator: Thank you. Our next question is coming from Tim Coffey with Janney. Please go ahead.

Tim Coffey: Hey. Good morning, David.

David Morris: Hi, Tim.

Tim Coffey: Hey.

David Morris: Hi.

Tim Coffey: Just a follow-up on the deposit cost questions there. What were or what was your spot rate on deposits at the end of December?

David Morris: What do you mean by spot rate? What’s our offering rate?

Tim Coffey: Yeah. What was the rate of interest-bearing deposits at December 31st?

David Morris: What we were offering was around 4.18%, okay.

Tim Coffey: Okay. Yeah. Okay.

David Morris: Yeah. Yeah. Yeah.

Tim Coffey: Okay. So we are talking about a sizable step-up in the cost of your interest-bearing deposits from where you

David Morris: Yeah.

Tim Coffey: ended what the average rate was, okay.

David Morris: Yeah.

Tim Coffey: If we kind of flip to the loan side and the borrower side of the equation, what kind of commentary are you hearing from them? Is it more related to rates or is it just more economic outlook that’s given the many kind of hesitation?

David Morris: Well, everybody that has a floating rate loan wants to try to fix it at 7.5%, which we are not doing and if they pay off the loan, we get the prepayment fee. So loans in general commercial lending has slowed down greatly, okay, in the last two months, greatly in the last two months and I think it’s all rate driven.

Tim Coffey: Okay. Okay. And then what’s the — I mean how should we think about the efficiency ratio going forward? It seems like it’s got the possibility to break above 40, but does it hit 45?

David Morris: I haven’t done any modeling of that, Tim. I think we will be — I haven’t done any modeling so I can’t answer that question on that.