RBB Bancorp
NASDAQ:RBB
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RBB Bancorp
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Good day, everyone, and welcome to the RBB Bancorp results for the Second Quarter of 2023. At this time, all participants have been placed on a listen-only mode and we will open the floor for your questions and comments after the presentation.
It is now my pleasure to turn the floor over to your host, Catherine Wei. Ma'am the floor is yours.
Thank you. Good day, everyone, and thank you for joining us to discuss RBB Bancorp's results for the second quarter of 2023. With me today is Chief Executive Officer, David Morris; President and Chief Banking Officer, Johnny Lee; Chief Financial Officer, Alex Ko; Chief Credit Officer, Jeffrey Yeh; Chief Administrative Officer, Gary Fan; and Chief Risk Officer, Vincent Liu. David, Johnny and Alex will briefly summarize the results, which can be found in the earnings press release and investor presentation that are 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 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. First thing first, I would like to welcome Johnny Lee to the Royal Business Bank family as President and Chief Banking Officer and say how pleased we are to have someone with his experience and reputation join us in a leadership role. Johnny's hiring is one of the more visible steps we've taken over the past 15 months to strengthen our management team, enhance our Board of Directors and adopt industry-leading corporate governance policies. These actions are summarized on page 3 of our earnings presentation.
Since I was named CEO in February of last year, we have added a new President, Chief Financial Officer, Chief Administrative Officer, SBA Manager, Commercial Lending Manager and an East Coast Head of Branch Banking. These additions to the RBB team have deepened our management bench and improved our ability to run a nationwide banking franchise.
In addition to the new employees, we enhanced our Board of Directors with six new directors with extensive regulatory, executive leadership, wealth management, risk management and community banking experience. Of our 10 directors, nine including our Chairman are classified as independent directors.
We also adopted new corporate governance policies and standards, which include enhanced director independent standards and independent Board Chair, update Board committee charters and a new code of ethics. I want to mention these actions because I think they show how serious we are about serving our community, increasing shareholder value and preventing a repeat of the events that led to the departure of former employees and directors. And we are hopeful that folks will look at us not as the bank we were a year ago, but as the bank we are today.
With all that said, I think it's important to address a couple of items in the quarter before I hand it over to Alex. First, we are aware of the increase in nonperforming loans. While nonperforming loans increased in the second quarter, classified, special mention and loans delinquent between 30 and 90 days decreased from the last quarter. Specifically special mention for the loans decreased significantly to $24 million from $89 million in the past quarter.
Second, we strengthened our liquidity and are well on our way to bring the bank's loan-to-deposit ratio down to our sub-95% target. These efforts have resulted in a decrease in loans, as we have slowed our lending, tightening credit and increased our liquidity over the past few quarters. We continue to lend to our core customers and expect Chinese experience and C&I lending will create new opportunities to originate loans that come with significant deposits.
Now, I'll hand the call over to Johnny, who will make a few comments before handing it over to Alex to discuss the financial results. Johnny?
Thank you, David. I'd just like to say how excited I am to join Royal Business Bank as President and Chief Banking Officer. I've been here for a little more than a month and have been impressed by the energy and dedication of the whole team. We have a real opportunity to continue to build on a successful track record of the bank, and to build shareholder value.
As David mentioned, I believe my 33 years of experience in C&I lending will expand opportunities to diversify our loan portfolio, while adding our cost deposits. I look forward to meeting many of you in person to reporting on our progress in the quarters to come.
With that, I'll hand it over to Alex who will discuss the financial results. Alex?
Thank you, Johnny. Slide 4 has a summary of second quarter results. Increasing loan yield drove another quarter of record interest income but were offset by increase in interest expenses. As a result, net income for the quarter was stable at $10.9 million or $0.58 per share.
Non-interest income of $2.5 million increased slightly from the first quarter as $271,000 increase in service charges offset a $125,000 decline in loan servicing fees. Non-interest expenses decreased $394,000 due to decreases in salaries and legal expenses offset by increases in occupancy, data processing and regulatory assessments. Second quarter net interest margin of 3.37% decreased 43 basis points from the last quarter, as deposit cost increases continue to outpace loan yield increases.
Slide 5 includes summary balance sheet information. And you can see that, the biggest change was net loans held for investment which decreased by $146 million. As we began to see the impact from the slowdown in originations, we discussed last quarter.
All loan category balances declined with the exception of residential mortgages, which increased slightly. The net loan-to-deposit ratio at the end of the second quarter was 99%. So we were pleased with our progress on this important goal.
Our yield on average earning assets increased to 6.01% in the second quarter, which was a 17 basis point increase from the last quarter and a 135 basis point increase from the second quarter of 2022. The increase in yield from last quarter was due to increasing yield on virtually all of our interest-earning assets.
Starting on slide 6 of the earnings presentation, we provide additional detail about our loan portfolio which totaled $3.2 billion at the end of the second quarter, with an annualized yield of 6.23%.
Commercial real estate loans comprised 45% of our loans and slides 7 and 8 have some details about our exposure. Our CRE office portfolio is relatively small at $45 million and has average weighted LTD of 57%. Our CRE loans consist of 44% of multifamily loans.
Slide 9 has a snapshot of our $1.55 billion residential mortgage portfolio, which mostly consists of non-QM mortgages in Rio and California.
Moving on to Slide 11. Our total deposit balance increased steadily for the last two quarters. Average interest-bearing deposits increased by $217 million due to increases in time deposits. Average non-interest-bearing deposits declined at a slower pace than last quarter. We have had a steady decline in uninsured deposits, which now stands at 29% of total deposits, partially due to converting to SEDAR's deposits.
Our average cost of interest-bearing deposits for the quarter was 3.47%, up 72 basis points from the prior quarter and a slight decline from the 82 basis point increase we saw in the first quarter. We continue to expect the pace of increases and deposit costs to slow in future quarters.
Moving on to credit. As detailed on Slide 12 non-performing loans increased to $42.5 million from $26.4 million from the last quarter due to – primarily to three loans, totaling $17.8 million. One of these loans is a CRE office loan and two of them are residential mortgage loans. Also during the second quarter, 13 loans totaling $3.5 million were removed from the nonperforming category, with seven of them totaling $3.1 million paying off and five of them totaling $100,000 being charged off.
As David mentioned, and you can see on Slide 14, we saw a $68.5 million decline in special mention and classified loans in the second quarter. The largest part of this improvement was an upgrade of $55 million multifamily construction loan. The company recorded a $380,000 provision for credit losses, which when combined with a decline in loans outstanding took our allowance for credit losses to 1.35% of total loans.
As noted on Slide 15, non-interest income increased slightly from the last quarter mainly due to an increase in deposit service fees. Slide 16 shows detail of operating expenses. Our efficiency ratio slightly increased mainly due to reduced net interest income offset by a decrease in salary and employee benefit expenses. Non-interest expenses to average asset ratio improved slightly to 0.46%, mainly reflecting the reduction of non-interest expense quarter-over-quarter. Our capital levels remain strong, with all capital ratios well above regulatory well capitalized ratio, which we believe is prudent given the market risk.
With that we are happy to take your questions. Operator, please open up the call.
[Operator Instructions] Your first question is coming from Kelly Motta from KBW. Your line is live.
Hi, good morning. Thanks for the questions. I think maybe I'll kick it off with your broader comments on building the bench. I know you guys have done a tremendous job, adding independent members to the Board, as well as adding to the bench on the management team. Just wondering, as you look at what you've done and brought on, do you feel like you have the team in place now to kind of execute in terms of the next stages, or are you still looking to add executives in some areas?
Kelly, this is Dave. Good morning. I believe that, as far as our executive management team, we have everybody on board. We do have some holes. And for example, we need to have a C&I lender that we would need to put on in a couple of other physicians like that within the organization.
Great. And then on the loan growth front, I believe your release and commentary suggested that you're pulling back in some non-core areas, maybe non-core regions. Can you expand on kind of where you are more specifically where you're pulling back, as well as where you continue to see good risk-adjusted returns? And also, as we look towards the second half of the year, loan balances are down. I know you've laid out where you want to get to on your loan-to-deposit ratio. How much of that comes from just pulling back on the loan growth as we look towards the back half of the year?
Okay. I will attempt to answer the first and second part. When we say non-core growth, we're talking about customers who do not have a core relationship with us, meaning they do not have a deposit relationship with us also or their main deposit relationship. And most -- many of these are out of our market, okay maybe in the state of Washington or Oregon, Texas and so forth. We're also paring back in some of our other areas of non-core business like our auto lending, we have ceased auto lending. And we're bringing down mortgage a little bit also. We are not growing mortgage like we used to.
As far as the second part of your question, most of our decreases is coming in both areas, but most of the decrease in our loan-to-deposit ratio and it's going to be probably from the loans rolling off in those areas that I talked about earlier. Okay. While at the same time, we're going to probably bring on $40 million a quarter or so in deposits. So that's what's going on.
Got it. And then maybe last question for me and then I'll let others into the queue. But on the noninterest-bearing deposits, I know you had some larger sort of accounts and there's been declines over the past several quarters now, some of that letting go some of those customers that aren't core to your business. But just as we look ahead like -- where do you see noninterest-bearing settling out as a percentage of deposits? They're at 18% now. And is that pace of noninterest-bearing runoff showing any signs of slowing? Any sort of color around the details of those would be helpful as we look ahead.
Kelly, I'm going to have Gary answer that question for you.
Kelly, yes, we definitely see the trend of that slowing. I think ultimately with Johnny coming on board and with some of the new management team that's the primary focus of our deposit growth for the remainder of this year, where like every other bank trying to deal with the market shifts and the way that we're looking at our current customer base, but the investments we're making in people, in systems, products and services, that's all in line to help us grow the noninterest-bearing deposit segment of our broad deposit book. So that's something I don't think you'll see immediate results in the next let's say 30, 45 days, but I would expect us to see some positive momentum before the end of this calendar year.
Great. Appreciate it. I’ll step back.
Thank you. Your next question is coming from Nathan Race from Piper Sandler. Your line is live.
Yes. Hi everyone. Good morning. Thanks for taking the questions. A question on some of the term two dynamics in the quarter. Cash balances remain fairly high, but you're also able to bring down your FHLB advances in the quarter. So just curious to hear how we should kind of think about those two areas going forward?
Sure, Nathan. Good to talk to you. Yes, you're correct. As you know, we have a strategy to lower our loan-to-deposit ratio at the bank level. So I think we are on track. So with kind of monitoring or control the growth on the loan side, and also continue to increase the deposit side we park those money in the investment security as well as to just boosting our liquidity report on the cash and due from banks.
Compared to last year, same quarter, Q2, we have about $22 million increase. And I think it is prudent to keep the cash and the liquidity being at this level. It might go a little bit down, as we kind of funding mechanism, as we grow in loan side in Q4 maybe, we might decrease a little bit, but I feel comfortable with, let's say, $240 million $250 million of cash level, I think, it is adequate.
And also investment security wise, it did increase from last quarter, quite a big increase around like close to $100 million. So that is actually -- we are doing a barbell strategy to short-term make sure we have liquidity matters, but also it helps us boosting our some interest income as well.
Right. Got it. And then maybe changing gears and thinking about the expense run rate. I think, last quarter we were talking to being closer to $17 million in the back half of this year. Just curious with the decrease in comp that we saw this quarter relative to the still relatively all legal costs. How should we think about those two areas in particular relative to the guidance toward the last quarter?
Sure. Yes. We did say that. We are expecting to professional fees, especially legal fees is expected to go down. Yes, it did go down, but not to the level of the decrease that we expected actually happened this quarter. But I think going forward the run rate we expect that will continue to go down. And in fact just to give you a magnitude of the legal fees and other professional fee last six months is we incurred about $3 million of legal fees, which I do not think continue going forward.
It will be reduced, and also one thing to note is, obviously, there is some insurance coverage. They will reimburse certain expenses, which include certain legal fees as well. So -- but I would expect to continue to report the growth basis of total our expenses related to legal matters. So, you will see some elevated level, but not to the level of Q2 or Q1, but some expenses going forward. But we -- I would expect to see some sort of reimbursement from the insurance company for that legal expenses.
So I hope that will continue -- that will help us to lower our efficiency ratio, and also non-interest expense over average asset ratio. And you mentioned, the salary and benefit like compensation expenses, I think, it did decrease a little bit for this quarter. But I think given we have a new key persons joined the bank and also we are strengthening certain bench. So I think the salary and compensation expense might go up a little bit.
So that will kind of offset a little bit to the increase of legal expenses and all other kind of operating expenses, such as like assessment fee, I would expect a small amount like $100,000 or something will decrease going forward, because I did see some one-off increase in the second quarter.
So having said that, I would expect like $18 million plus/minus might be the run rate that I can foresee for now. But there is a certain aspect that obviously some legal fees all those kinds of things might be some out of management's control. But I would feel comfortable in the neighborhood of $18 million run rate for non-interest expense we'll be comfortable.
Okay. Great. That's very helpful. And then just any additional details you can provide on the office commercial real estate loan that moved to non-accrual in the quarter. I appreciate all the details in the deck but just any additional color in terms of occupancy rates and kind of how you guys are working through that credit in particular?
Yes, maybe I can attempt. Jeffrey is here with me, so Jeff you can definitely chime in. We try to have kind of a little bit more details about the CRE office portfolio. Nathan actually we provide a slight more details on the earnings presentation page seven, which have LTD distribution and also by regional breakdown.
But actually office exposure, itself, we have a very minimum $45 million total which is 1.5% of our total loans. So, that's I believe to start with it, we have small amount of exposure.
However, one loan that kind of migrate into non-accrual loans this quarter happen to be those office portfolio. And we did perform impairment analysis, which is about 90% of net loan-to-value ratio.
And there is another real reserve or loss content for now based on the appraisal that we have. And we believe that is a kind of isolated one-off office portfolio because I don't see any other office type of portfolio in our -- even small portfolio have a similar nature of risk content. So, I think that is kind of isolated, but we are watching very closely because office space itself is industry-wide it's a high-risk carrier. So, we are watching carefully.
I'd just give you a little bit more color more on the overall office portfolio we have average-weighted LTD is very low like 57%. So one-off 90% that NPL is a kind of one-off item. And we have low LTD, again, like 57%. And also 80% or more is all in the areas that we serve in the young New Jersey area.
Okay. Got it, very helpful. And if I could just ask one more on capital management priorities. I imagine you guys want to continue to build excess capital in this type of environment would -- but also just curious give me updated thoughts on just when maybe share repurchases can resume and the ongoing SEC investigation that was indicating has any impact on your timing or ability to resume share repurchases?
We don't know the timing on the share repurchases at this time, but we want to start repurchasing as soon as we can.
Okay, great. That’s all I have. Appreciate you guys taking questions Alex and David.
Thank you. Your next question is coming from Andrew Terrell from Stephens. Your line is live.
Hey, good morning.
Hey Andrew.
Hey. If I could just follow up on the office loan. I understand that the portfolio overall is very small. It looks like very well underwritten here. For the one office loan that went non-performing it sounded like the LTV is right around 90% but you maybe had gotten a recent appraisal on that. I was just curious before the updated appraisal what was the LTV beforehand. So, I guess in other words, what was the kind of value degradation the property saw?
Yes. Hi, this is Jeffrey. Before it was reappraised, that the LTV is about 65% we did do appraisal -- new appraisal because of the drop of operating income also that you know that the building is 100% occupied.
And it's just -- the reason of the drop is mainly because of the tenant negotiate for the lower rent then it actually impact the value because if you're using the income approach to evaluate a property and on top of it there is a short-term rental disagreement. So, then that's the reason why we will put it into NPL just for your information.
Understood. That's very helpful color. I appreciate it. And then maybe on the other side of the credit front, I mean it was good to see the special mention improvement this quarter. I just want to make sure I heard correctly. Was it one specific multifamily construction loan for $55 million or a handful of multifamily construction deals for that aggregate amount that drove the decrease in special mentions?
Yes, that is true. That is a big decrease of special mention because of this property. Just to give you a little bit color on this property. This property is 100% completed and then they are breaking into project. The project one is more than 90% of lease. And then the project two is just completed and they are doing the pre-leasing. And also then just for your information that because we are -- because of the market they're in the good market area, so actually they already received a commitment later from the other financial institutions to take them out. And then also because -- and because of things are very clear right now so that is the reason why we upgraded this long from special mention.
Yeah. Understood. Okay. I appreciate the color. And it's great to see that improvement. David on the -- I want to go back to your comments kind of around loan growth and maybe letting some of the -- what you would deem non-core maybe roll off and I know you made some comments on some kind of out-of-market lending. I was hoping you could maybe ring fence just what was in your portfolio, I guess how much in aggregate would you deem out of market? And similar question, how much would you view as non-core? What I'm trying to get at here is you gave us an idea of targeting kind of $40 million per quarter in deposit growth. Just trying to get a sense on the loan growth moving forward, would you expect a similar amount of loan decreases over the next couple of quarters, or is that pool that you would deem non-core kind of mostly work through at this point?
First of all, I don't think we'll have as much come off the books next quarter as we have today, this last past quarter. I'm going to pass this over to Jeffrey who has the concentration report who could tell you what we have in different states. But I don't -- and how much we project to roll off. Unfortunately, Andrew that $55 million loan we just talked about is actually a core customer of ours, but we could not compete on rate. So we -- the rate was significantly lower so we do not play the rate game. So unfortunately that customer is taking one of this loan. We have other loans with them to another bank.
Yeah. This is Jeffrey again. So basically out of market or out of area alone that we define as David mentioned earlier loan that do not have a complete relationship such as lending and deposits. So those are the loans that we -- that is part of our risk strategy to gradually non-core those loans. Just to give you a little bit of color on the out-of-state lending okay? We used to have about $400 million of out-of-state lending in beginning of the year. Right now then we -- that is already reduced to about 300 -- close to $320 million. That happened in six months and that tells you that when we decided to go this route and then we actually are very serious about executing it.
And so is that $320 million remaining kind of the last of what you would deem non-core?
We will -- most of them we'll consider non-core as long as they do not have total relationship with us especially the deposit relationship.
Yeah. Understood. Okay. Thank you for taking the question. I'll step back in the queue.
Thank you. Your next question is coming from Tim Coffey from Janney. Your line is live.
Good morning, everybody. David, Alex, do you have any kind of visibility into when margin might trough say is that something later this year event or early next year?
Well, Tim, we know that there's about $1 billion of CDs that come up for renewal in the third and fourth quarter. We also know that they're presently priced at around 4%. So we don't see a huge repricing issue there. And I think we're holding the rates steady from – since about January or February of this year on our offering rates on CDs. So I really think it's more of the end of the year first on next year. Before – and then if we see any decreases in rates, we'll begin seeing hopefully a little bit takes about a year for our margin to improve, if we begin to see decreases in rates and so forth. Alex, any more color than that?
Sure. That's a great point. Just one point to add, there's obviously a deposit lagging impact. We have seen quite a big increase on the market rate in the beginning of the year and the last year Q4, Q3 but those were kind of repriced already or it will continue to reprice this quarter and the next two quarters. So once that kind of repricing kind of set I think in the world have a much more normalized the deposit cost.
And we will also have an increase on the asset side. Now as you know, we have decreased our earning assets with good reasons, strategic reasons. With the help from Johnny and the team going back to the market of the variable rate loans and other good earning assets, it will definitely help our net interest margin going forward to increase.
But I would say next quarter Q3, we'll have a compression. But again, as David kind of alluded, it's not to the level of what we have seen in this quarter. We have a 33 basis point compression. I don't think it will be that level. It will be less level but it will continue. And I'm hoping by end of the year, starting next year something, we would like to see the kind of bouncing back our net interest margin.
Okay. And Alex, do you have a spot rate for interest-bearing deposits for June?
Yes, I do have. I have spot rate for money market is 2.73%. And I have only a breakdown of the CD for less than 20,000 is 3.83% and deposit over 250,000 is 4.5%.
Okay, great. Okay, thank you very much for that. David, switching gears, do you have any visibility on when the SEC inquiry might conclude because it's not uncommon that the SEC will launch an investigation and then never close it?
I don't know if I can really answer that question Tim, because I really don't know either. I could just tell you that it's progressing enough to where we felt very comfortable in announcing publicly and I think 8-K of what's going on or at least what we can say what's going on.
Okay. That's fair. And then just a final question for me. On the three loans added to non-performers in this quarter, were any of them out of your primary service area?
There – the three of them, two of them are residential mortgage there in our area. And then there – I mean just also for your information there loan – LTV actually is – one is like 59, one like is 67 – 66, which we think is covered. The other one is the one that I mentioned about our office. That is out of state but that is in...
It's in Springfield, Illinois, which is technically out of our market area but we do have branches in that state.
Right.
Okay. All right. Well, thank you very much. Those are my questions. Thank you.
Thank you. Your next question is coming from Kelly Motta from KBW. Your line is live.
Hi, thanks for the follow-up. Kind of on that note of the investigation. Just wondering if there's any implication at all for the pending gateway deal? And if you could remind us, when that deal needs to be renegotiated, when the contract is up, Dave?
The contract to expire September 30. And that's all I can say about gateway right now.
Thank you.
Thank you. Your next question is coming from Nathan Race from Piper Sandler. Your line is live.
Yes. I appreciate you guys taking the follow-up as well. I just want to clarify on the margin expectations. I know, there's a handful of moving parts to it. But Alex, it sounds like you expect the pace of compression to slow the next couple of quarters. Can you just kind of circle back on how you're kind of thinking about the trajectory during 3Q and 4Q of this year?
Yeah. Sure. I would like to say one more time. Yes, it will compress but not to the level that we have experienced in Q2 and Q1. Q2 we have a 33 basis point margin compression maybe half of that. I don't have a real crystal quantifying it, but I would say it will be substantially lower than 33% -- at 33 basis point compression that we have experienced in Q2. So going forward Q3 probably it will be compressed and Q4 maybe. But I'm hoping that Q1 of next year we might see the expansion.
Okay. Great. And then just lastly on kind of the reserve outlook. It sounds like you're all secure in that office commercial real estate loan that moved to non-accrual in the quarter. And you guys obviously had a nice increase in your ACL here in 2Q. Should we expect the reserve to continue to grow at this point, or just how you guys kind of think about future provisioning in light of maybe some continued loan shrinkage near term and then maybe a return to growth in 4Q?
Yeah. I will turn to answer first, but Jeffrey might chime in. I would say our allowance coverage ratio as of Q2 is quite -- I feel comfortable with it. Let me give you a little bit more color of $380,000 a provision for this quarter, because we have $146 million of reduction of our portfolio.
That if you kind of estimate how much of impact it will have just multiplying 1.35% of our ACL coverage that's a $2.1 million of the provision for credit losses, but obviously we do have a positive $380,000 provision for credit losses this quarter. Reason for that is considering some sort of economic macro uncertainties and also we did see some pop-up on the non-performing loans, right? That did increase even though other classification has improved. So we want to be prudent our ACL coverage.
So to answer your question, I think 1.35% allowance coverage ratio relative to our peers, I think, we feel it's adequate. And going forward, I don't think we are trying to build the reserve going forward unless it is necessary. So we will monitor the credit very carefully. Given we have some -- maybe it might be a one-off item that we have an increase in the nonaccrual, but we are taking serious and our underwriting criteria all those kind of things we actually quite strengthened. So we will monitor the allowance coverage ratio. But I don't anticipate, we need to continue to build the reserve unless there is a macroeconomic or the great quality further deteriorates.
Yes, I think that is definitely.
Yes, I would agree with what Alex said.
Okay. Great. Thanks, again.
Thank you. [Operator Instructions] Your next question is coming from Ben Gerlinger from Hovde Group. Your line is live.
Good morning, everyone.
Hi, Ben.
During the course of this call there's been a rumor on that two Los Angeles competitors are likely to announce a merger any time sometime soon. I was curious just on overall deposit pricing in the Los Angeles area, have you seen anything material that any sort of outsized pricing where people are flat, kind of, scrambling to retain their clients, or is it really not that impactful to overall deposit costs?
I don't see any -- we don't see anything like what you're talking about, okay.
Got you. Fair enough. And then, I mean, a lot of the -- we've added a few different questions about the margin and potentially speaking let's call it around the end of the year, or excuse me the margin troughing around the end of the year before rebounding higher. I was curious if you'd be open to sharing potentially where you think that NIM is? I get that it's a bit cloudy out there over the next six months especially with pricing and mix shift. But just curious if you'd be open to sharing where your margin potentially troughed at least in your model today?
Yeah. Actually to be honest, there's a lot of moving components, the deposit pricing. Again we will continue to grow. Even though we will focus on the noninterest-bearing deposits but we will grow the deposit side and will cost us. And we have a target of 95% bank level net loan-to-deposit ratio. We have some sort of deposit matters.
But I would -- kind of difficult to give a accurate NIM projection by end of the year or Q1 because there is so many moving parts. Also not only the deposit side, but also loan side our -- as David mentioned we will compete with the deposit -- I'm sorry loan pricing, but we are not going to just retain for the sake of the growth by paying the -- by allowing the high loan rate, or if they are asking for. So again, sorry, it's too hard for me to give you a real accurate NIM margin guidance at this time other than what…
Okay. Fair enough. I fully understand. I appreciate color. That’s it for me.
Any others?
Thank you. That concludes our Q&A session. I will now hand the conference back to our host for closing remarks. Please go ahead.
Once again thank you all for joining us today. We look forward to speaking to many of you in the coming days and weeks. Have a great afternoon.
Thank you everyone. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.