Q4 2024 Provident Financial Holdings Inc Earnings Call
Thank you for standing by. My name is Mandeep and I'll be your operator today. At this time, I'd like to welcome everyone to the Provident Financial Holdings Fourth Quarter and Fiscal 2024 Earnings Call.
Speaker Change: All lines being placed on mute to prevent any background noise.
Speaker Change: After the speaker's remarks, there will be a question and answer session.
Speaker Change: If you'd like to ask a question during this time, simply press star followed by the number one on your telephone keypad.
Speaker Change: If you'd like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Donovan Ternes, President and CEO . He may begin.
Operator: I would now like to turn the call over to Donovan Ternes, President and CEO. He can begin.
Donavon P. Ternes: This is Donovan Ternes, President and CEO of Provident Financial Holdings, and on the call with me is Tam Nguyen, our Senior Vice President and Chief Financial Officer. Before we begin, I have a brief administrative item to address.
Donavon P. Ternes: Good morning.
Donavon P. Ternes: This is Donovan Ternes, President and CEO of Provident Financial Holdings. And on the call with me is Tam Nguyen, our Senior Vice President and Chief Financial Officer.
Donavon P. Ternes: Before we begin, I have a brief administrative item to address.
Donavon P. Ternes: Our presentation today discusses the company's business outlook and will include forward-looking statements. Those statements include descriptions of management's plans, objectives, or goals for future operations, products, or services, forecasts of financial or other performance measures, and statements about the company's general outlook for economic and business conditions. We also may make forward-looking statements during the question and answer period following management's presentation. These forward-looking statements are subject to a number of risks and uncertainties, and actual results may differ materially from those discussed today.
Speaker Change: Our presentation today discusses the company's business outlook and will include forward-looking statements.
Donavon P. Ternes: Information on the risk factors that could cause actual results to differ from any forward-looking statement is available from the earnings release that was distributed yesterday, from the Annual Report on Form 10-K for the year ended June 30, 2023, and from the Form 10-Qs and other SEC filings that are filed subsequent to the Form 10-K. Forward-looking statements are effective only as of the date that they are made, and the company assumes no obligation to update this information. To begin with, thank you for participating in our call.
Donavon P. Ternes: Those statements include descriptions of management's plans, objectives or goals for future operations, products or services,
Donavon P. Ternes: Forecasts of financial or other performance measures and statements about the company's general outlook for economic and business conditions.
Donavon P. Ternes: We also may make forward-looking statements during the question and answer period following management's presentation. These forward-looking statements are subject to a number of risks and uncertainties, and actual results may differ materially from those discussed today.
Donavon P. Ternes: Information on the risk factors that could cause actual results to differ from any forward-looking statement.
Donavon P. Ternes: is available from the earnings release that was distributed yesterday, from the annual report on Form 10-K for the year ended June 30, 2023, and from the Form 10-Q s and other SEC filings that are filed subsequent to the Form 10-K .
Donavon P. Ternes: Forward-looking statements are effective only as of the date that they are made, and the company assumes no obligation to update this information.
Speaker Change: To begin with, thank you for participating in our call. I hope that each of you has had an opportunity to review our earnings release which describes our fourth quarter and fiscal year results.
Donavon P. Ternes: I hope that each of you has had an opportunity to review our earnings release, which describes our fourth quarter and fiscal year results. In the most recent quarter, we originated $18.6 million of loans held for investment, an increase from $18.2 million in the prior sequential quarter. During the most recent quarter, we also had $30.6 million in loan principal payments and payoffs, which is up from $28.5 million in the March 2024 quarter and still at the lower end of the quarterly range.
Speaker Change: In the most recent quarter, we originated $18.6 million of loans held for investment, an increase from $18.2 million in the prior sequential quarter.
Speaker Change: During the most recent quarter, we also had $30.6 million of loan principal payments and payoffs, which is up from $28.5 million in the March 2024 quarter, and still at the lower end of the quarterly range.
Donavon P. Ternes: Currently, it seems that many real estate investors have reduced their activity as a result of higher mortgage and other interest rates, although we have been seeing some additional activity recently. Additionally, we are seeing more consumer demand for single-family adjustable-rate mortgage products as a result of higher fixed-rate mortgage interest rates. We have generally tightened our underwriting requirements and increased our pricing across all of our product lines as a result of higher funding costs and tighter liquidity conditions. But we'll be quick to return to more routine criteria when conditions improve for growth.
Speaker Change: Currently, it seems that many real estate investors have reduced their activity as a result of higher mortgage and other interest rates, although we have been seeing some additional activity recently.
Speaker Change: Additionally, we are seeing more consumer demand for single-family adjustable-rate mortgage products as a result of higher fixed-rate mortgage interest rates.
Speaker Change: We have generally tightened our underwriting requirements and increased our pricing across all of our product lines as a result of higher funding costs.
Speaker Change: the current economic environment.
Speaker Change: and tighter liquidity conditions, but will be quick to return to more routine criteria when conditions improve for growth.
Donavon P. Ternes: Additionally, our single-family and multifamily loan pipelines are similar in comparison to last quarter, suggesting our loan originations in the September 2024 quarter will be similar to this quarter and at the lower end of the range of recent quarters, which have been between $18 and $54 million. For the three months ended June 30, 2024, loans held for investment decreased by approximately $12.8 million when compared to March 31, 2024, with decreases in the multifamily, commercial business, and construction loan categories, partly offset by increases in the single family and commercial real estate loan categories.
Speaker Change: Additionally, our single-family and multifamily loan pipelines are similar in comparison to last quarter.
Speaker Change: Suggesting our loan originations in the September 2024 quarter will be similar to this quarter and at the lower end of the range of recent quarters, which has been between 18 and 54 million dollars.
Speaker Change: For the three months ended June 30, 2024.
Speaker Change: Loans held for investment decreased by approximately $12.8 million when compared to March 31, 2024.
Speaker Change: with decreases in the multifamily, commercial business, and construction loan categories, partly offset by increases in the single-family and commercial real estate loan categories.
Donavon P. Ternes: Current credit quality is holding up well, and you will note that non-performing assets increased to $2.6 million on June 30, 2024, which is up slightly from $2.2 million on March 31, 2024. Additionally, there were no early stage delinquencies at June 30, 2024.
Speaker Change: Current credit quality is holding up well, and you will note that non-performing assets increased to $2.6 million on June 30, 2024.
Speaker Change: which is up slightly from $2.2 million on March 31st, 2024.
Speaker Change: Additionally, there were no early stage delinquencies at June 30, 2024.
Donavon P. Ternes: We continue to monitor commercial real estate loans, particularly loans secured by office buildings, but are confident that our underwriting characteristics of our borrowers and collateral will continue to perform well. We have outlined these characteristics on slide 13 of our quarterly investor presentation, which shows that our exposure to loans secured by various types of offices is $41.5 million, or 3.9% of the loans held for investment. You should also note that we have just five CRE loans for $2.5 million maturing during the remainder of calendar 2024 and seven CRE loans for $3.1 million maturing in calendar 2025. We recorded a $12,000 recovery for credit losses in the June 2024 quarter.
Speaker Change: We continue to monitor commercial real estate loans, particularly loans secured by office buildings.
Speaker Change: but are confident that our underwriting characteristics of our borrowers and collateral will continue to perform well.
Speaker Change: We have outlined these characteristics on slide 13 of our quarterly investor presentation.
Speaker Change: which shows that our exposure to loans secured by various types of offices is 41.5 million dollars or 3.9 percent of the loans held for investment
Speaker Change: You should also note that we have just five CRE loans for $2.5 million maturing during the remainder of calendar 2024.
Speaker Change: and seven CRE loans for 3.1 million dollars maturing in calendar 2025.
Speaker Change: We recorded a $12,000 recovery for credit losses in the June 2024 quarter.
Donavon P. Ternes: The recovery for credit losses recorded in the fourth quarter of fiscal 2024 was primarily attributable to a slight decline in the outstanding balance of loans held for investment at a shorter estimated life of the single-family loan portfolio resulting from decreased market interest rates and higher loan prepayment estimates. The outstanding balance of loans held for investment at June 30, 2024. [inaudible] Our net interest margin was unchanged at 2.74% for the quarter ended June 30, 2024, compared to the March 31, 2024 sequential quarter as the net result of a 10 basis point increase in the average yield on total interest earning assets and an 11 basis point increase in the cost of total interest bearing liabilities.
Speaker Change: The recovery for credit losses recorded in the fourth quarter of fiscal 2024 was primarily attributable to a slight decline in the outstanding balance of loans held for investment.
Speaker Change: and a shorter estimated life of the single family loan portfolio resulting from decreased market interest rates and higher loan prepayment estimates.
Speaker Change: The Outstanding Balance of Loans Held for Investment at June 30, 2024.
Speaker Change: declined 2% to $1.05 billion from $1.07 billion at March 31, 2024.
Speaker Change: The allowance for credit losses to gross loans held for investment was unchanged at 67 basis points at both June 30, 2024 and March 31, 2024.
Speaker Change: Our net interest margin was unchanged.
Speaker Change: at 2.74% for the quarter ended June 30, 2024.
Speaker Change: compared to the March 31st, 2024 sequential quarter.
Speaker Change: as the net result of a 10 basis point increase in the average yield on total interest earning assets and an 11 basis point increase in the cost of total interest bearing liabilities.
Donavon P. Ternes: Notably, our average cost of deposits increased by nine basis points to 127 basis points for the quarter ended June 30, 2024, compared to 19 basis points in the prior sequential quarter. In addition, our cost of borrowing increased by 21 basis points in the June 2024 quarter compared to the March 2024 quarter. The net interest margin this quarter was negatively impacted by approximately two basis points as a result of higher net deferred loan costs associated with loan payoffs in the June 2024 quarter compared to the average net deferred loan cost amortization of the previous five quarters.
Speaker Change: Notably, our average cost of deposits increased by 9 basis points to 127 basis points for the quarter ended June 30, 2024, compared to 19 basis points in the prior sequential quarter.
Speaker Change: In addition, our cost of borrowing increased by 21 basis points in the June 2024 quarter compared to the March 2024 quarter.
Speaker Change: The net interest margin this quarter was negatively impacted by approximately two basis points.
Speaker Change: As a result of higher net deferred loan costs associated with loan payoffs in the June 2024 quarter compared to the average net deferred loan cost amortization of the previous five quarters.
Donavon P. Ternes: New loan production is being originated at higher mortgage interest rates than recent prior quarters, and adjustable rate loans in our portfolio are now adjusting to higher interest rates in comparison to their existing interest rates. We have approximately $116.9 million of loans repricing upward in the September 2024 quarter at a currently estimated 90 basis points to a weighted average of 8.17% from 7.27%, and approximately $79.7 million of loans repricing upward in the December 2024 quarter at a currently estimated 51 basis points to a weighted average of 8.23% from 7.72%. However, many adjustable-rate loans in all categories are currently limited in their upward adjustment by their periodic interest rate cap.
Speaker Change: New loan production is being originated at higher mortgage interest rates than recent prior quarters and adjustable rate loans in our portfolio are now adjusting to higher interest rates in comparison to their existing interest rates.
Speaker Change: We have approximately $116.9 million of loans repricing upward in the September 2024 quarter at a currently estimated 90 basis points.
Speaker Change: to a weighted average of 8.17 percent from 7.27 percent.
Speaker Change: and approximately $79.7 million of loans repricing upward in the December 2024 quarter at a currently estimated 51 basis points.
Speaker Change: to a weighted average of 8.23% from 7.72%.
Speaker Change: However, many adjustable rate loans in all categories are currently limited in their upward adjustment by their periodic interest rate caps.
Donavon P. Ternes: I would also point out that there is an opportunity to reprice the touring wholesale funding downward as a result of current market conditions, where interest rates have moved lower in 12-month and longer terms, excluding overnight borrowing. We have approximately $60.5 million of federal home loan bank advances and brokered certificates of deposits maturing in the September 2024 quarter at a weighted average interest rate of 5.32%. Given current market conditions, we would expect to reprice these maturities to a lower weighted average cost of funds.
Speaker Change: I would also point out that there is an opportunity to reprice the touring wholesale funding downward as a result of current market conditions, where interest rates have moved lower in 12-month and longer terms, excluding overnight borrowing.
Speaker Change: We have approximately $60.5 million of Federal Home Loan Bank advances and Brokered Certificates of Deposits.
Speaker Change: Maturing in the September 2024 quarter at a weighted average interest rate of 5.32 percent.
Speaker Change: Given current market conditions, we would expect to reprice these maturities to a lower weighted average cost of funds. All of this suggests that the current pressure on the net interest margin may soon subside.
Donavon P. Ternes: All of this suggests that the current pressure on the net interest margin may soon subside. We continue to look for operating efficiencies throughout the company to lower operating expenses. For example, our FTE count on June 30, 2024, decreased to 160 compared to 161 FTE on the same date last year.
Speaker Change: We continue to look for operating efficiencies throughout the company to lower operating expenses.
Speaker Change: Our FTE count on June 30, 2024.
Speaker Change: decreased to 160 compared to 161 FTE on the same date last year.
Donavon P. Ternes: You will note that operating expenses were $7.2 million in the June 2020 quarter, which is consistent with the stable run rate of $7.2 million per quarter. For fiscal 2025, we expect a run rate of approximately $7.4 million per quarter as a result of increased wages and inflationary pressures on other operating expenses. Our short-term strategy for balance sheet management is somewhat more conservative than last fiscal year. We believe that slowing loan portfolio growth is the best course of action at this time as a result of tighter liquidity conditions and the inverted yield curve.
Speaker Change: You will note that operating expenses were $7.2 million in the June 2020 quarter, which is consistent with the stable run rate of $7.2 million per quarter.
Speaker Change: For fiscal 2025, we expect a run rate of approximately $7.4 million per quarter as a result of increased wages and inflationary pressures on other operating expenses.
Speaker Change: Our short-term strategy for balance sheet management is somewhat more conservative than last fiscal year. We believe that slowing the loan portfolio growth is the best course of action at this time as a result of tighter liquidity conditions and the inverted yield curve.
Donavon P. Ternes: We were successful in the execution of this strategy this quarter, with loan origination volumes at the low end of the quarterly range and low payoffs also at the low end of the quarterly range. The composition of interest-earning assets reflected a decrease in the average balance of loans receivable and in the lower-yielding average balance of investment securities. Also, the total interest-bearing liabilities composition deteriorated somewhat with a larger decrease in the average balance of deposits in contrast to a smaller decrease in the average balance of borrowings.
Speaker Change: We were successful in the execution of this strategy this quarter with loan origination volumes at the low end of the quarterly range and low payoffs also at the low end of the quarterly range.
Speaker Change: The composition of interest earning assets reflected a decrease in the average balance of loans receivable and then the lower yielding average balance of investment securities.
Speaker Change: Also, the total interest-bearing liabilities composition deteriorated somewhat with a larger decrease in the average balance of deposits in contrast to a smaller decrease in the average balance of borrowings.
Donavon P. Ternes: We exceed well-capitalized capital ratios by a significant margin, allowing us to execute on our business plan and capital management goals without complication. We believe that maintaining our cash dividend is very important. We also recognize that prudent capital returns to shareholders through stock buyback programs is a responsible capital management tool, and we repurchased approximately 48,000 shares of common stock in the June 2024 quarter. For fiscal 2024, we distributed approximately $3.9 million of cash dividends to shareholders and repurchased approximately $2.6 billion worth of common stock.
Speaker Change: We exceed well-capitalized capital ratios by a significant margin, allowing us to execute on our business plan and capital management goals without complications.
Speaker Change: We believe that maintaining our cash dividend is very important.
Speaker Change: We also recognize that prudent capital returns to shareholders through stock buyback programs is a responsible capital management tool, and we repurchased approximately 48,000 shares of common stock in the June 2024 quarter.
Speaker Change: For fiscal 2024, we distributed approximately $3.9 million of cash dividends to shareholders and repurchased approximately $2.6 billion worth of common stock.
Donavon P. Ternes: As a result, our capital management activities resulted in an 88% distribution of fiscal 2024 net income. We encourage everyone to review our June 30th investor presentation posted on our website. You will find that we included slides regarding financial metrics, asset quality, and capital management, which we believe will give you additional insight into our solid financial foundation supporting the future growth of the company. We will now entertain any questions that you may have regarding our financial results. Thank you.
Speaker Change: As a result, our capital management activities resulted in an 88% distribution of fiscal 2024 net income.
Speaker Change: We encourage everyone to review our June 30th investor presentation posted on our website.
Speaker Change: You will find that we included slides regarding financial metrics, asset quality, and capital management, which we believe will give you additional insight on our solid financial foundation supporting the future growth of the company.
Speaker Change: We will now entertain any questions that you may have regarding our financial results.
Operator: Thank you. We will now begin the question and answer session. If you've dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you'd like to withdraw your question, simply press star 1 again. If you're called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, press star 1 to join the queue. Our first question comes from the line of Andrew Liesch with Piper Sandler. Please go ahead.
Speaker Change: Thank you.
Speaker Change: Thank you. We will now begin the question and answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again.
Speaker Change: If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question.
Speaker Change: Again, press star 1 to join the queue.
Speaker Change: Our first question comes from the line of Andrew Liesch with Piper Sandler. Please go ahead.
Andrew Brian Liesch: So Donovan, it sounds like you're becoming increasingly willing to look at adding loans to the portfolio and opening up growth. I guess, what sort of specific things do we need to see for that to happen?
Andrew Brian Liesch: Hey, good morning.
Speaker Change: Thank you. Bye.
Speaker Change: So, Donovan, it sounds like you're becoming increasingly willing to look at adding loans to the portfolio and opening up growth. I guess, what sort of specific things do we need to see for that to happen?
Donavon P. Ternes: Well, Andrew, I think your assessment is accurate. We are interested in a growing loan portfolio again. The difficulty is the inverted yield curve and the extent that the inversion is inverted, which complicates populating, call it a five-year, hybrid arm at the five-year part of the curve and funding it at the, you know, call it six month, one year, 18 month part of the curve. Unknown Attendee, Provident Financial Holdings, as they've suggested or as Plundens have suggested.
Donavon P. Ternes: Well, Andrew, I think your assessment is accurate. We are interested in a growing loan portfolio again.
Speaker Change: is inverted, which complicates.
Speaker Change: You know, populating, call it a five-year.
Speaker Change: hybrid arm at the five-year part of the curve.
Speaker Change: and funding at
Speaker Change: at the, you know, call it 6-month, 1-year, 18-month part of the curve.
Speaker Change: where the inversion essentially brings a lower spread at the margin when we populate those loans. If we see the Fed actually begin to lower interest rates,
Blundens: as they've suggested or as pundits have suggested.
Donavon P. Ternes: We can see the short end of the curve, in fact, reduce in cost, and that would allow us to populate loans at a better spread than we are currently. So the first thing is, we want to see...
Blundens: We can see the short end part of the curve, in fact, reduce in cost.
Donavon P. Ternes: Unknown Attendee, Provident Financial Holdings, Unknown Attendee, Provident Financial Holdings, is, you know, the fact that we're still in an inverted yield curve environment. There's still a risk of recession, although I would argue that the risk is lower today than it was six months ago or a year ago. But we are sensitive to that, and obviously, we're not interested in growing a loan portfolio in the event that we're about to enter a recession.
Blundens: lower inversion in the yield curve, that would be beneficial to us. But the second part of it,
Blundens: is the
Blundens: You know, the fact that we're still in an averted yield curve environment.
Blundens: There's still a risk of recession, although I would argue that the risk is lower today than it was six months ago or a year ago, but we are sensitive to that, and obviously we're not interested in growing loan portfolio in the event we're about to enter a recession.
Andrew Brian Liesch: Very helpful. Turning to capital, book value and equity continue to rise, even with the buyback and the dividend. And I know you want to retain some capital for growth returns, but have you thought about, or has the board thought about, a special dividend just to return some of this to shareholders, just given where things stand right now?
Speaker Change: Got it.
Speaker Change: Very helpful.
Speaker Change: Turning to capital, the
Speaker Change: book value and equity continue to rise even with the buyback and the dividend and I know you want to retain some capital for growth rent growth returns but have you thought about or the board thought about a special dividend just to return some of this to shareholders just given where things stand right now
Donavon P. Ternes: Sure, I think a special dividend has been thought of. I think our preferred course of action is cash, well, growth, cash dividends to shareholders, and then ultimately re-purchasing shares when we are trading at approximately 70% of tangible book value. So I think those three courses of action are preferred to a special cash dividend.
Speaker Change: Sure, I think a special dividend has been thought of. I think our preferred course of action
Speaker Change: is cash, well, broke, cash dividends to shareholders, and then ultimately repurchasing shares when we are trading at, you know, approximately 70% of tangible book value.
Speaker Change: So I think those three courses of action are preferred to a special cash dividend.
Andrew Brian Liesch: You've answered all my other questions. I'll step back. Thank you. Thank you.
Andrew Brian Liesch: Got it. Very good.
Speaker Change: Got it. Very good. You've answered all my other questions. I'll step back. Thank you.
Timothy Norton Coffey: Our next question comes from the line of Timothy Coffey with Jannie. Please go ahead.
Speaker Change: Our next question comes from the line of Timothy Coffey with Jannie. Please go ahead.
Timothy Norton Coffey: Hi, Donovan.
Timothy Norton Coffey: So what is your best estimate for, if we get into a downrate environment? What is your best estimate for the payoff and pay down activity on your loan portfolio?
Timothy Norton Coffey: Hey, good morning.
Timothy Norton Coffey: Hey, so what is your best estimate for, so we get into a downrate environment, what is your best estimate for the payoff and pay down activity on your loan portfolio?
Donavon P. Ternes: Well, we would expect payoffs to potentially increase if we see interest rates decline. However, the thing to think about there.
Speaker Change: Well, we would expect payoffs to potentially increase if we see
Speaker Change: Interest rates decline, although the thing to think about there
Donavon P. Ternes: Our in the money coupons at that point would probably be the origination volume that was originated over the past, you know, couple of years at higher interest rates, and that volume is or has been lower than what we routinely originate in a better environment, and then secondarily. Those loans that have adjusted or fully indexed and are now fully adjustable, perhaps those loans, as well, would consider. However, if we see the short end of the curve come down, the indices will come down, and those loans would actually begin to adjust downward.
Speaker Change: Our in-the-money coupons at that point would probably be the origination volume that was originated over the past, you know, couple of years at higher interest rates.
Speaker Change: And that volume is or has been lower than what we routinely originate in a better environment.
Speaker Change: And then secondarily, those loans that have adjusted or fully indexed and are now fully adjustable, you know, perhaps those loans as well would consider
Speaker Change: Refind
Speaker Change: Although, if we see the short end of the curve come down, the indices will come down and those loans would actually begin to adjust downward. So some of the enticement to refinance those loans would be taken off.
Donavon P. Ternes: So some of the enticement to refinance those loans would be taken off the table if we were to start seeing those loans adjusting downward because they're already in the fully indexed and fully adjustable period. So generally speaking, we would think that prepayment estimates should go up as a result of a decline in interest rates. Unknown Attendee, Provident Financial Holdings Inc., or how much it would really go up because of the two conditions I've suggested, which are a lower volume of in-the-money loans and adjustable rate loans, perhaps reversing course and adjusting downward.
Speaker Change: at the table if we would just start seeing those loans adjusting downward because they're already in the fully indexed and fully adjustable period. So, generally speaking, we would think that prepayment estimates should go up.
Speaker Change: As a result of a decline in interest rates.
Speaker Change: but it's uncertain how much would really...
Speaker Change: or how much it would really go up because of the two conditions I've suggested, which is lower volume of in-the-money loans and adjustable rate loans, perhaps reversing course and adjusting downward.
Timothy Norton Coffey: Okay, regardless of the rate environment, do you typically see 100% of the loans that are scheduled to reprice in a quarter stick around versus being prepaid, or is it always less than 100%?
Speaker Change: Regardless of the rate environment, do you typically see 100% of the loans that are scheduled to reprice in a quarter stick around versus being prepaid?
Donavon P. Ternes: Well, there is some activity with respect to payoff volume, and some of that payoff volume could be those loans that are set to reprice. Unknown Attendee, Provident Financial Holdings, than sticking around with respect to repricing. Although the one thing we've seen, and we've heard anecdotally from some of our originators.
Speaker Change: Or is it always less than 100%?
Speaker Change: Well, there is some activity with respect to payoff volume, and some of that payoff volume could be those loans that are set to reprice.
Speaker Change: obviously, and they might choose to pay off into a lower costing loan.
Speaker Change: than sticking around with respect to repricing. Although the one thing we've seen and we've heard anecdotally from some of our originators.
Donavon P. Ternes: Because multifamily and commercial real estate rates are still a little bit higher, most firms are not originating. Donovan Ternes, Craig Blunden, Unknown Attendee, Provident Financial Holdings Inc., You know, not many of them are necessarily interested in a five-year or seven-year hybrid arm. Unknown Attendee, Provident Financial Holdings Inc., And so there might be some lag for some of these borrowers to look for lower interest rates before they refinance. And in fact, while we've had some payoff before, they began their first repricing or their next repricing. It's been a routine or a relatively small number.
Speaker Change: Because multifamily and commercial real estate rates are still a little bit higher, and most firms are not originating 30 interest rates that are lower in nature,
Speaker Change: You know, not many of them are necessarily interested in a five-year or seven-year
Speaker Change: hybrid arm at these higher rates because they get locked in to a new prepayment penalty.
Speaker Change: And so there might be some lag for some of these borrowers to look for lower interest rates before they refinance.
Speaker Change: And in fact, while we've had some payoff before, they began their first repricing or their next repricing. It's been a routine or a relatively small number.
Timothy Norton Coffey: Okay, that's helpful. Thank you. Um, well, in your mind, to get investors back in the market, do they need a material decline in interest rates or visibility to lower?
Speaker Change: Okay, that's helpful. Thank you. In your mind, to get investors back in the market, do they need a material decline in interest rates or visibility to lower interest rates?
Donavon P. Ternes: I think visibility, we're already seeing it. I think it's visibility to lower interest rates, but ultimately, with respect to the Donovan Ternes, Timothy Coffey, Donovan Ternes, Craig Blunden, Donovan Ternes, Donovan Ternes,
Speaker Change: Well, I think visibility, we're already seeing it. I think it's visibility.
Speaker Change: to lower interest rates. But ultimately, with respect to the...
Speaker Change: borrowers, they want to see lower interest rates. If you're talking about investors in bank stocks, I think there's already been a return to the market.
Timothy Norton Coffey: Yeah, I was talking more about commercial real estate. Okay, got it. Yeah. Yeah, no, no.
Speaker Change: I was talking more about commercial real estate investors.
Timothy Norton Coffey: Yeah, I've seen the movement in bank stocks, and I think that's positive. And then I appreciate the color on your advances and broker deposits that are scheduled to mature. I'm wondering, within your deposit portfolio from your retail customers or your general bank customers, how much of those, or what segments of those deposits, would reprice on day one of a rate cut?
Speaker Change: Okay, got it. Yeah, yeah, I've seen the movement in bank stocks, and I think that's positive.
Speaker Change: And then I appreciate the color on your advances and broker deposits that are scheduled to mature. I'm wondering, within your deposit portfolio,
Speaker Change: from your retail customers or your general bank customers.
Speaker Change: How much of those, or what segments of those deposits reprice on day one of a rate cut?
Donavon P. Ternes: Very little of them will reprice on day one, Tim. As you know, our deposit beta has been very low during this cycle. And that's because we haven't done much with respect to increasing interest rates on our transaction accounts. It would only be the retail CDs that would perhaps reprice downward. But they're in a locked term, so it wouldn't be a day one phenomenon. It would be over the course of time as that CD were to mature, very similarly to brokered CDs. Okay.
Speaker Change: Very little of them will reprice on day one, Tim.
Timothy Norton Coffey: Okay. All right. I appreciate that. Those are my questions. Thank you.
Speaker Change: As you know, our deposit beta has been very low.
Tim: during this cycle.
Tim: And that's because we've not done much with respect to increasing interest rates on our transaction accounts.
Tim: It would only be the retail CDs.
Tim: That would perhaps reprice downward, but they're in a locked term, so it wouldn't be a day one phenomenon. It would be over the course of time as that CD were to mature, very similarly to brokered CDs.
Speaker Change: Okay. All right. I appreciate that. Those are my questions. Thank you.
Operator: That concludes our Q&A session. I will now turn the call back over to Donovan Ternes for closing remarks.
Speaker Change: That concludes our Q&A session. I will now turn the call back over to Donovan Ternes for closing remarks.
Donavon P. Ternes: Thank you, everyone, for attending our fourth quarter and fiscal year-end call. In the event you have any follow-up questions, we are open to follow-up questions in a follow-up call. Just give us a ring, and have a good day.
Donavon P. Ternes: Thank you everyone for attending our fourth quarter and fiscal year-end call.
Speaker Change: In the event you have any follow-up questions, we are open to follow-up questions in a follow-up call. Just be...
Speaker Change: Just give us a ring and have a good day.
Operator: This concludes today's call. You may now disconnect.
Speaker Change: This concludes today's call. You may now disconnect.