Nick Pi: Andrew, this is Nick speaking. And for our TDR, we only have two small loans on our TDR lease, combined with only $1.5 million is belonging to one of the relationship and they’re paying. Everything seems okay. And definitely for Fed’s rapid rate increases and our borrower, I believe they do have some pressures on that service coverage ratio side. However, most of our loans, we have a very strong — financially strong sponsorship behind it. And that you can see from our past year report, and we don’t have that many past due under 30 to 90 days. And also nonperforming loan, we only have one mortgage loan as Mr. Yu mentioned previously, it’s only a $280,000 around. That’s it. So basically, our credit quality is still quite stable comparing to our previous quarters, and we expect that to be the situation and definitely there are still many, many economy uncertainties ahead of us in 2023, such as honorable energy or food supplies, inflation costs, weakening the purchase power and the rapid rate increase and fast QT side.
All those kind of things are really give us uncertainties for this market and the management continues to maintain a kind of a moderate risk posture for factoring the reserve requirements at this time.
Li Yu: Again, it’s just pretty much that I’ve said at this time, if based on metric makers today, we are over reserved. Okay. That’s my personal opinion. But however, in general, we have been trying to consider the recessionary economy, what the effect would be.
Operator: Our next question comes from Gary Tenner with D.A. Davidson. Please go ahead with your question.
Gary Tenner: Two questions. First, on the commercial construction segment, relatively small but had a couple of quarters of decline before increasing this quarter on an end-of-period basis. Just wondering if you could talk about kind of the committed pipeline that might fund over the course of the next year? And if there’s — does that number– does the period end number continue to trend down? Was the fourth quarter a bit of an aberration there or anything else to think about?
Li Yu: Nick will give you more color on that, but some of the fluctuations here then is because in the past, we have pandemic slowed down many of the projects, okay? Many of us has restarted and obviously, the summertime has been the greatest time to increase the construction, okay. So Nick.
Nick Pi: Yes, our construction portfolio, we try to manage this portfolio under 10%. During the past quarter, I believe this is around 8%, and this quarter dropped to — a little bit dropped to below 8%. And just to give a little bit more color on our construction loans because we don’t do many construction loans, which is not a desirable products. Most of our construction loans actually is from the existing loans, and we try to slow down a little bit, especially for those condo projects and those kind of things because there’s a lot of uncertainties in the economy. So we try to slow down. However, all of our construction loans at the origination, we try to base on our increased projections to have interest reserve. So we are doing construction very conservatively compared to our peer groups.
Gary Tenner: Okay, thanks. And then a question for Ed. There’s obviously a lot of conjecture out there in terms of what happens to rates, how long they stay at elevated levels when the Fed does stop tightening. Just wondering, given the amount of progress you’ve made in terms of asset yields year-to-date or in 2022, any updated thoughts on how you might kind of manage the balance sheet to lock in some of those benefits looking forward to a timeframe where the Fed does start to cut right?
Edward Czajka: Well, I don’t — I’m not going to speak for the production side, but I know we have had a lot of discussions around, as you know, Gary, about 80% of the book is floating rate. So there have been a lot of discussions around. And making headway into doing some more fixed rate lending at this time, given the overall level of interest rates, this would kind of be the opportune time to start doing more fixed rate lending. However, that still presents a challenge, obviously, as we’ve talked about already, the activity has slowed down €“ economic activity has slowed down. But I can let — Mr. Yu, do you want to speak to more on that?
Li Yu: Well, I think in overall fund management situation, we have a — most of the floating rate loans, in fact, substantially all our floating rate loan has a floor. The floor sort of protects us from the fluctuation okay, the cognitive cost by the rate situation. And obviously, that during this high interest return, it will be sometimes a bit advantages to do selectively a few fixed rate loans. But the floor really puts us in the situation that — I mean, that we can have time to adjust a bit along with the rate — interest cost rate decreases. So going forward, we just have paved every step of the way, just like way is going up, we’ve built up the sensitive balance sheet.
Gary Tenner: Just as a follow-up to that, to the degree that you’ve got new loans working through the pipeline, which, as you pointed out, I mean, that’s slowed down dramatically. Are your customers more interested in variable rate loans because the customer has a sense that rates are going to fall quickly. Is that kind of the general view of your customer base that I think that, that will pivot quickly to the downside?
Li Yu: Customers are probably more interested in this day as a floating rate loans because presumably talking about real estate, I’m not talking about C&I, okay? Because they forecast, they listen to forecast by all the economists who is indicating that rate will come down at latter part of this year or early next year, okay? And to them, it’s the short-term situation.
Operator: Our next question comes from David Feaster with Raymond James. Please go ahead with your question.
David Feaster: I wanted to touch on some of the expansionary plans that you touched on early in the call. Maybe specifically starting with the SBA department, just curious the plans for that, whether your plans are to retain production or sell it, maybe the time line for the build-out and maybe where you’re going to be focused from a regional perspective?
Li Yu: Okay. SBA department was started latter part of 2022 with the skeleton crew, okay? And then we are going through to be getting our PLP position. We’ve never been a preferred lender before, okay? So we expect the PLP position will be granted early part of this year, okay? So as far as the plan of the way you return, retain something like that, Wellington, you want to answer that?
Wellington Chen: Thank you, Mr. Yu. David, our plan is to — as we fund the SBA loan, we will just sell it to the secondary target.
David Feaster: Okay. Do you have any early expectations in terms of production? Or is it kind of a wait-and-see?
Wellington Chen: It’s a wait-and-see, especially with current economy and current situation. The SBA with a recessionary economy, SBA tends to slow down. A lot of people, actually, the market has slowed down. But we’re just looking at to go about methodically and just very careful since it’s a new product that we have, although we have experienced team and the team leader.
David Feaster: So you got a tailwinds on the fee income side, but wouldn’t expect a huge contribution this year.
Wellington Chen: Yes, sir.
David Feaster: Okay. And then maybe just touching on the branch expansion side. Just curious, is — are the branches a part of the Texas expansion in those LPOs? And maybe if you could just give us an update on where we are in Texas, how growth and demand and pipelines are trending there?
