Q4 2024 RBB Bancorp Earnings Call
Speaker Change: At this time, all participants are on a listen-only mode, and a question and answer session will follow the formal presentation.
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Please note, this conference is being recorded.
Speaker Change: I will now turn the conference over to your host, Ms. Rebecca Riekel. Ma'am, the floor is yours.
Rebecca Riekel: Thank you, Ali. Good day, everyone. And thank you for joining us to discuss RBB Bank Corp's results for the fourth quarter of 2024. With me today are Johnny Lee, David Morris, Lynn Hopkins, and Jeffrey Yeh.
Rebecca Riekel: David, Johnny, and Lynn 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.
Rebecca Riekel: I would ask that everyone please refer to the disclaimer regarding forward-looking statements in the investor presentation and company SEC filings.
Rebecca Riekel: Now I'd like to turn the call over to RBB Bank Group's Chief Executive Officer, David Morris. David?
David Morris: Thank you, Rebecca. Good day, everyone, and thank you for joining us today. First, as a bank headquartered in Los Angeles, it's important to acknowledge the tremendous devastation and impact to many Southern California communities due to the wildfires.
David Morris: We are proud of our team's efforts to support the affected communities and are committed to assisting with the long recovery process.
We've partnered with non-profit organizations.
David Morris: serving low-to-moderate income communities, collecting donated supplies in our branches, and donated $30,000 to provide essential services to affected families.
David Morris: while many in Southern California have been impacted by the fires.
David Morris: We are grateful our Royal Business Bank team is safe, and we are not aware of any significant exposure to the bank's loan portfolio or the bank's operations.
David Morris: We reported fourth quarter net income of $4.4 million, or $0.25 per share. The decrease in earnings compared to the prior quarter relates mostly to credit, which we are actively addressing and will discuss in detail on today's call.
On a more positive note,
David Morris: The net interest margin increased by 8 basis points due primarily to a 33 basis points decline in the cost of interest bearing deposits, which was a welcome reversal to an extended period of increases.
David Morris: Loan balances declined in the fourth quarter, but as Johnny will explain, we are confident that growth will resume in the coming quarters.
David Morris: Deposits declined slightly from the last quarter, but we did see a $20 million increase in non-interest bearing deposits.
Speaker Change: Finally, before I hand it over to Johnny, I'd like to congratulate him on his new role as President and Chief Executive Officer of RBB, Royal Business Bank.
Speaker Change: I am confident that the bank is well positioned to succeed.
Speaker Change: under his leadership. And while I look forward to retirement, I will remain on the Board of Directors of both RBB Bancorp and Royal Business Bank, where I will continue to offer my support to Johnny and the rest of the team.
Johnny
Johnny Lee: Thank you, David. I appreciate the confidence the board has in me and look forward to continue to build shareholder value as we serve the financial needs of the Asian American community.
Speaker Change: I would also like to personally thank David for his leadership and contributions as the Chief Executive Officer of Royal Business Bank and for his willingness to remain on the Board of Directors where his input and guidance will ensure a smooth transition.
Speaker Change: RVB is a relationship driven business bank which combines the lending expertise of a large bank with the speed and personalized service of a community bank to provide a full suite of financial services to individuals in small to medium-sized enterprises.
Speaker Change: We achieved $126 million of loan production in the fourth quarter, and after consideration of loan sold, total loans declined about $28 million.
Speaker Change: We continue to see surprisingly high levels of paydowns due to aggressive refi offers from competitors and borrowers who repay loans using their own funds.
Speaker Change: Due to last year's successful efforts to hire experienced commercial lenders and broaden our lending capabilities, we have maintained and grown a healthy pipeline, so we do expect to resume loan growth in the coming quarters.
Speaker Change: While we are confident in our ability to prudently and profitably grow loans over time, we are also focused on resolving a number of non-performing loans, the majority of which were originated prior to 2022.
Speaker Change: Starting on slide nine of the investor presentation, we provide some additional details on credit.
Speaker Change: Non-performing assets totaled $81 million, or 2% of total assets, at the end of the fourth quarter.
Speaker Change: The $20 million increase from the third quarter was mainly due to the $26 million in deed loans that migrated to non-accrual status.
Speaker Change: At year-end, we had 8 NPLs that were greater than $1 million including a C&D loan that was moved to non-performing after going past due in early January.
Speaker Change: It is secured by a mixed-use construction project near a major sports and entertainment venue in Los Angeles.
Speaker Change: Lynn will provide some additional details about our substandard and non-performing loans, but I want to emphasize that we are focused on resolving them as quickly as possible while minimizing the impact to earnings and capital.
Speaker Change: Thank you, Johnny. Please feel free to refer to the investor presentation we have provided as I share my comments on the company's fourth quarter of 2024 financial performance.
Speaker Change: Slide 3 of our investor presentation has a summary of our fourth quarter results. As David mentioned, net income was $4.4 million, or $0.25 per diluted share.
Speaker Change: We did see the net interest margin we've been expecting with NIM increasing 8 basis points to 276 due to the decrease in the cost of deposits offset by the impact of an increase of on-balance sheet liquidity.
Speaker Change: The higher liquidity was due to the timing of loan production and in anticipation of $150 million in FHLB advances that will mature in the first quarter.
Speaker Change: Non-interest income was $2.7 million in the fourth quarter following a $2.8 million recovery of a fully charged off acquired loan that temporarily elevated the third quarter results.
Thank you.
Speaker Change: Fourth quarter non-interest expenses were relatively stable, increasing by $297,000 to $17.6 million due to an increase in legal and professional expenses, mostly due to year-end accruals.
Speaker Change: The provision for credit losses was $6 million compared to $3.3 million in the prior quarter.
Speaker Change: The fourth quarter provision was primarily due to partial charge-offs on three loans moved to help for sale in the fourth quarter and an increase of $4.5 million in specific reserves for the C&D loan, which migrated to non-performing as of year end.
Speaker Change: The fourth quarter provision also took into consideration the size of our loan portfolio, an improved economic forecast, and our general credit quality trends.
Speaker Change: Slide 5 and 6 have additional color on our Loan Portfolio and Yields.
Speaker Change: The overall loan portfolio yield decreased 10 basis points to 6.03% with a decrease attributed to an 18 basis point decrease in the CRE loan yield due to higher prepayment fees in the third quarter.
and David Morris. Thank you.
Speaker Change: As Johnny mentioned, fourth quarter loan production totaled $126 million and had an average yield of 7.5%.
7-Eleven.
Speaker Change: Slide 7 has details about our $1.5 billion residential mortgage portfolio, which remains stable and consists of well-secured non-QM mortgages primarily in New York and California with an average LTV of 56%.
Speaker Change: The $20.4 million increase in non-performing loans from the third quarter was mainly due to the $26.4 million C&D loan that migrated to non-accrual status, offset by paydowns and payoffs of $6.7 million and partial charge-offs of $2 million.
Speaker Change: The charge-offs related almost entirely to the three loans moved to held for sale in the fourth quarter. They are all under contract and are expected to be sold in the first quarter.
Speaker Change: and totaled $65.3 million at the end of the fourth quarter. The decrease was primarily due to upgrades on two performing CRE loans totaling $11.8 million after the borrowers paid their delinquent property taxes.
Speaker Change: Otherwise, there were three other CRE loans totaling $13.4 million that are current but remain classified as special mention due to unpaid property taxes.
Speaker Change: The $44 million C&D loan on a completed hotel that was downgraded in the third quarter is current and its property taxes have been paid, but it remained on special mention as it is still awaiting a certificate of occupancy.
Speaker Change: Substandard loans totaled $100 million and included $81 million of non-performing loans and $19 million of loans on accrual status.
Speaker Change: This included $11.7 million related to a C&D loan on a completed multifamily project that was in the process of transitioning to permanent financing at the end of the year.
Speaker Change: Since that time, we've received a pay down of $1.5 million and it has been refinanced with a new CRE loan.
Speaker Change: The ratio of our allowance for loan losses to total loans held for investment increased by 15 basis points to 1.56 percent, inclusive of specific reserves.
Speaker Change: While the coverage ratio of our allowance for loan losses to non-performing loans held for investment decreased to 68% from 72%.
Speaker Change: When we exclude specific reserves and individually reviewed loans, the ratio of our allowance for loan losses,
Speaker Change: to Loans Held for Investment and Those Not Individually Evaluated was up two basis points to 1.35% at the end of the year.
Slide 13 has details about our deposit franchise.
Speaker Change: Total deposits remain stable from the third quarter at $3.1 billion, with some minor movement between categories.
Speaker Change: Our average all-in cost of deposits decreased by 30 basis points to 335 in the fourth quarter, including an estimated quarter-end spot rate of 315.
Speaker Change: Tangible book value per share decreased slightly to $24.51, as earnings were offset by a $4.2 million increase in accumulated other comprehensive losses and $2.9 million in dividends paid to our shareholders.
Speaker Change: With that, we are happy to take your questions. Operator, please open up the call.
Speaker Change: Thank you. Ladies and gentlemen at this time we will be conducting our question and answer session.
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One moment please while we poll for questions.
Speaker Change: Thank you. Our first question is coming from Brendan Nossel with Hovde Group. Your line is live.
Thank you.
Brendan Nossel: Hey folks, hope you're doing well and congratulations to David and Johnny on the announcement not too long ago. Thank you, thank you.
Yeah, you bet. Maybe starting off here on the...
Brendan Nossel: the 26 million C&D loan. Can you just give us kind of a little more color on a few things, like just kind of curious what drove the migration, how close to completion the project is.
Brendan Nossel: how much undrawn commitment is left on that project and any evaluation on whether there needs to be an additional advance of funds to get the project over the finish line. Thanks.
Brendan Nossel: Sure, I'll start and then I'll turn it over to Credit. That was a huge question. I think some analysts guessed it. Because this moved to non-accrual so close to the end of the quarter, we took a little bit extra time to make sure that we could get the right estimate of fair value.
Brendan Nossel: It did involve working with an appraiser and also our fund control since the project is in completion. It is over 50%.
Speaker Change: But I don't know if getting into all of those specifics is kind of necessary in the sense that it is $26.5 million outstanding. We're working with those parties. I think we've taken a $4.5 million specific reserve.
Brendan Nossel: to get to what we estimate the fair value is as of year end.
Okay. Okay. That's helpful.
Thank you.
Anything else, Raymond?
And then maybe turning to.
Speaker Change: to Capital for a moment. I think you folks completed the million share buyback earlier in 2024 during the third quarter. Just kind of curious for any thoughts around appetite for another repurchase program or just capital allocation decisions in general as you move through this year. Thanks.
Speaker Change: Yeah, thanks for recognizing what we were able to complete in 2024. You know, I think we would be interested in looking at a stock buyback again in 2020.
Speaker Change: And then we can maybe look back at starting at the stock buyback again.
All right, great. Thanks for taking the questions.
Thank you.
Speaker Change: Our next question is coming from Matthew Clark with Piper Sandler. Your line is live.
Good morning, everyone. Thanks for the questions.
Speaker Change: Just a few questions around the margin, Lynn, the average margin in December, maybe on an adjusted basis for any noise on credit, and then just remind us
Speaker Change: How much you have in CDEs coming due in the first and second quarter? You know the rates on those and where do you expect them to renew at?
Speaker Change: Sure. So, there's a few things at play that you pointed out.
Speaker Change: I'll try to walk through a few of them. I would say relative to the fourth quarter, the NIM itself is moving up over the course of the quarter as our CDs continue to price down into the current rate environment.
Speaker Change: So it's a little bit higher, you know, call it about five basis points.
Speaker Change: In the first quarter, we have about $650 million of CDs that have a weighted average maturity of about 460.
Speaker Change: We estimate that those that have an opportunity to come into the market now, closer to a 4, 4.10.
Speaker Change: where are we? Ahhh, okay. Why is everyone looking at me? Why is everyone looking at my phone? Oh, my gosh! They're so sweet.
Speaker Change: At the same time, we do have the FHLB advances, which are only $150 million are maturing in the March timeframe. They are priced at $118.
Speaker Change: We look to replace those with retail deposits, wholesale deposits, and potentially some FHLB advances, but they'll obviously be priced.
higher Than what they're maturing at
Speaker Change: I think we'll see the impact of all of this more in the second quarter. So the first quarter has an opportunity to continue and expand because we are liability sensitive.
Speaker Change: And then once those funds reprice, you know, the NIM may flatten out a little bit from there.
Also with the Fed, maybe on pause until June.
Speaker Change: Then as rates, if they move down further, the NIM would have an opportunity to...
Speaker Change: start expanding again maybe in the second half of the year.
Loan Production, which we, you know.
Speaker Change: have some visibility to the pipeline and that also has a positive impact on our net interest margin.
Thank you.
Great, thank you.
Speaker Change: On the growth outlook, can you give us a sense for where the pipeline is, you know, year over year, or, you know, relative to the prior quarter, maybe on a percentage basis and kind of what are you assuming for
loan and kind of core deposit growth this year.
Speaker Change: Hi Matt, this is Johnny. So I can maybe just provide a little bit of a highlight. So ever since last year, at any given time, we have about, I would say, $200-$225 million dollars on average, at any given time that we're looking at in our pipeline.
obviously our efforts are trying to
Speaker Change: identified the ones that fit our sort of credit standards and ensuring that they're generating proper returns to us. You know obviously we'll get through that but PowerPoint's always been staying healthy in that respect. I ran average around that you know that that range.
So we are, you know, for better quality credits.
Speaker Change: We are being more flexible as far as, you know, aggressively, you know, allowing our R&Ms to aggressively pursue, you know, those relationships a little bit on the pricing side.
Speaker Change: but yet but obviously you know we measure determining pricing based on risk profile right so the better quality credits that we feel that it's going to
build great relationships for us on the long term.
Speaker Change: We will go more aggressively on those rates. But the overall pipeline has always been healthy. It's just a matter of our selection, if you will, and making sure that we are bringing in a good relationship that's going to help us continue to expand on and grow the bank.
Speaker Change: I think in the investor deck, page 9 at the bottom, we put in the production that we were able to achieve in the third and fourth quarter. You know, we were up at about 175 in the third quarter.
Speaker Change: A little bit lower, 126 in the fourth quarter, and then the pipeline's been building a little bit here for the first quarter. So I think we're looking at kind of leveraging off of those levels from a production standpoint, and then obviously net growth is then a little bit contingent on what prepayments we see.
Thank you.
Okay, you know, low single-digit though seems like a reasonable...
Speaker Change: Assumption for the year with maybe a single family being flat to down.
Speaker Change: I don't know if I'm going to be able to comment on all of those numbers. Go ahead. Probably still early right now, but I guess overall, yeah, we're trying to maintain
Speaker Change: Yeah, I would say mid-low to mid-low single digits, I think, are certainly reasonable. But again, we do have a lot of deals that we're looking at at any given time in the pipeline.
Speaker Change: I guess it's just a matter of how aggressively you want to compete on those deals to secure these relationships.
Speaker Change: I mean, we can give up on our credit standard, underwriting standards, or be more, you know, price aggressive, but certainly we...
Speaker Change: You know do our best to avoid that You know we don't want to compromise on credit That's for sure, but we are willing to be a little bit more aggressive on the pricing side in order to secure relationships
Speaker Change: Okay, great. And then last one for me, just on the expense run rate going forward into the new year here, what kind of range should we assume?
Speaker Change: I think the expenses might be, you know, a little bit above that $17.5 million dollar rent rate. Obviously, first quarter, kind of get that timing of payroll taxes, so it's probably a little bit higher than that in the first quarter.
and David Morris. Thank you.
Speaker Change: Should we expect more meaningful relief in that going forward, or do you think that's going to remain?
Speaker Change: kind of stubbornly high with kind of the work out on the credit side.
Speaker Change: Yeah, I think that's probably a fair statement. We've, you know, we've got a little bit of a road.
to walk down related to that in 2025.
Okay, thank you.
Thank you.
Speaker Change: Our next question is coming from Andrew Terrell with Stevens. Your line is live.
Good morning, this is Jackson Lauren on for Andrew Terrell.
Hi, Jackson. Hi, Jackson.
Speaker Change: If I could just start off on deposits, I was wondering if you'd give us a little bit more color on what drove the strength in NIBs this quarter, and then just what your expectations are for non-interest bearing deposits moving forward.
Speaker Change: So you're focused on the increase in non-interest-bearing deposits? Yes, correct.
Thank you.
Speaker Change: I'm not interested in deposits, specifically, what we did in the fourth quarter, there was one or two
Speaker Change: and a larger sort of commercial client that brought in deposits. So these are our efforts and we continue to try to develop and expand on our CNI clientele.
So I would say, you know, as we bring in...
Speaker Change: Last year we brought in some new commercial lenders and also continue to build out the talents there. So as we bring in these new lenders, certainly the expectation would be that they would be able to continue to contribute to our non-interest bearing deposit generations as well.
Thank you.
Speaker Change: I'm sorry, Jackson, the second half of your question, can you repeat it?
Speaker Change: Well, I think Johnny just answered it. I was just kind of looking for expectations moving forward on non-interest bearing deposits. So thank you for that. And then I guess last one for me, can you just remind us your interest on M&A in this environment and if the strategy overall has changed?
The strategy has not changed.
Speaker Change: and other Asian-American banks in our market areas to strengthen our branch networks and go into the San Francisco Bay Area, so it has not changed at all.
Great, thank you for taking my questions.
Great, thanks Jackson.
Speaker Change: Thank you. Once again, if you have any questions or comments, please press star 1 on your telephone keypad.
Speaker Change: Our next question is coming from Kelly Mota with KBW. Your line is live.
Kelly Mota: Hi. Good morning. Thanks for the question. I did want to circle back on credit. I appreciate all the detail on the slides. It looks like...
Kelly Mota: construction it's your your three biggest NPLs and it looks like almost a quarter of the construction book is
Kelly Mota: in MPL right now. Have you made any changes? Is it idiosyncratic? Any changes you've made in order to
Kelly Mota: you know, potentially mitigate problems ahead? Have you have you done a deep dive into the the construction book as well and relative comfort level in the rest of it? And then kind of third part of that question is I
Speaker Change: You provided some loan-to-values on your NPLs. I'm assuming those are updated.
Speaker Change: evaluations given, you know, C&D 92% weighted average LTV in NPL, but also also just just wanted to confirm that.
Speaker Change: I'll start with the last one. We are looking at as current valuations as possible since they did make it to NPL. We do get current valuations.
Speaker Change: I think as far as your question on kind of the deep dive, I think we have done some additional work to make sure that we understand those. You're right that it represents about a third of our, a quarter to a third of our construction portfolio.
Speaker Change: I'll give you a little more color. The characteristics of these loans were they were done during COVID. They were
Speaker Change: initiated or originated in during COVID and they had problems with getting materials, problems with getting people to complete the projects and so forth.
Speaker Change: That's where they stem from and so forth, and we are looking to make sure if we have any more, we have identified them and try to shore them up now before they go any further.
Speaker Change: Okay, that's helpful. And I think maybe on the last quarter call or the call before, we were talking about kind of working through some of these legacy credit issues and hopefully kind of cleaning the slate by mid-2025. Is that still a reasonable timeline?
here, just wondering how you're thinking about this.
Speaker Change: you know, resolution process playing out. I think the release mentions you're looking to kind of minimize losses as you work through. So just from a high level, it seems like that's kind of this last leg of this nice remediation work you've done over the past couple of years.
And this is Angela Boucher. Okay. OK. Good afternoon.
on non-performing.
I do believe where we are, we're, we're.
Speaker Change: working hard on these. We have two of them that are on this list on, you know, sold deals that we hope to close, you know, within the next couple of weeks actually. So we're hoping that we'll begin to see this number go down.
Speaker Change: Got it. Maybe last question from me to round it out. You kind of alluded to...
Speaker Change: You've gotten through the buyback authorization this quarter and did a good job with that and have talked a little bit about M&A. Is it fair to say like the near-term focus is on
Speaker Change: the resolution of these NPAs, and then you can kind of return to your strategy, or you do have a ton of capital, are you able to juggle kind of both that one?
Well, we're trapped.
Speaker Change: We're working on both items right now, but clearly, cleaning up the MPAs is
is a very high issue.
Speaker Change: We have a special team now working on that, that's reporting directly to the DLC. The team meets twice a week. I mean, get into the weeds here. But it's very important for us to do that.
Speaker Change: But clearly, we're working on both. I'm still meeting with people, other bankers and so forth, to see if they're interested in joining us and so forth, while I'm still here.
Speaker Change: Got it. Thank you for all the all the color. I just wanted to walk through those pieces. I'll step back.
Now we have 10.
Speaker Change: Thank you. We have a question from Tim Coffey with Johnny. Your line is live.
Okay, thanks. Morning, everybody.
Tim Coffey: Lynn, if I can start with you and talk a little bit about deposit costs. I guess the rate of change in the quarter was a bit more than I had anticipated.
Speaker Change: Was it, you know, programs that were initiated during the quarter to bring those deposit costs down? Was it just, you know, kind of, you know, the final efforts of hard work? Can you kind of give me some color on what brought those costs down?
Speaker Change: Sure. So, I am going to give a lot of credit out to our branch network. It is a lot of hard work to bring in our deposits in the communities and branches where we're located. We brought down our wholesale funding percent to just barely 4% at the end of the year.
Speaker Change: So a lot of local deposits, but, you know, the interest rate environment was walking down and we saw, you know, 50 basis points in September and then another 50 during the fourth quarter.
Speaker Change: So what we saw in the fourth quarter was really the benefit of the September cuts.
Speaker Change: And a lot of our deposits, which we've talked about in the past, are basically 12-month CD products. So we have a very nice ladder, and as it matures, it reprices into the current environment.
Speaker Change: So, 92% of our CD's now mature within the next 12 months.
Speaker Change: And, you know, with a weighted average interest rate on those is 430, kind of top-end non-brokered is around 4%. So, you know, it has the opportunity to just naturally reprice.
And I mentioned earlier
Speaker Change: and that has an opportunity to reprice in the first quarter of 2025. So I think we're seeing, this is why we say we're liability sensitive.
Speaker Change: We're seeing them just repriced into the environment, even if they are fully priced at a 12-month CD at about 4%.
So,
Speaker Change: Great. That's helpful. Thank you. But as I mentioned, yeah, the FHLB advances, we'll see that in...
The second quarter, which we'll.
Speaker Change: They'll kind of offset each other, if you will, which will be nice to not have a big impact there. And then with loan production, you know, we still have an opportunity to maintain our NIM or continue to grow it this year.
Johnny Lee: Okay, great, thank you. And Johnny, if I can talk a little bit about kind of the...
Johnny Lee: The pace of loan growth expected through 2025 and for the low to mid-single digits for the year, got it. Is it expected that, or is it reasonable to think that growth might be heavier in the second half of the year than the first half?
Speaker Change: and David Morris and Catherine Wei. Good. Brady works here for the Savior's and the Academy. Good evening to everyone from Cal 亮 County Commission for Jesus and Cal's members. And you can also get our participants in your chat area like we are doing
Speaker Change: Well, obviously, from the get-go, starting January 1st, I've been, you know, pushing the loan production. But I think, typically, Q1 is maybe a little bit...
Speaker Change: slower, but then do expect, you know, getting Q2, Q3 to really ramp up.
Speaker Change: I think also Tim, and I don't know what everyone else is seeing out there, but you know.
Tim Coffey: The Fed's on pause right now. You know, Fed Fund futures indicate maybe
Tim Coffey: Maybe March or June. And then again, in the second part of the year, the curve ended up being a little bit steeper in the longer term. So I think we're still navigating through a little bit of change. So I think earlier was mentioned, you know,
Tim Coffey: Low to mid single digits, you know, I think it is probably still a little bit of a challenging environment given the interest rate environment
Tim Coffey: and some transition out there and talks to things like tariffs and other things that might impact the marketplace. So I think your comment is a good one, and I think that's what we're seeing right now as well.
Tim Coffey: And I'll just add that obviously, you know, we were able to successfully bring in some more additional talent on the commercial laning side.
Tim Coffey: at the beginning of this year, so hopefully, you know, they will be able to contribute to our overall, you know, sort of strategic initiatives that we're driving.
Speaker Change: When it comes to mitigating payoffs, do you plan to employ any new strategies to slow that as much as you can?
Tim Coffey: I understand some things, you know, are just out of your control, but, you know, if there are things that are in your control, what are you doing to get out in front of them?
Tim Coffey: Sure. I appreciate the question. That's a good question. And actually, since last year, we've, you know, actively...
Tim Coffey: look through our portfolio with all the RNs, with all our teams.
Tim Coffey: and actually we do try to look ahead looking at the maturities and so on and trying to get ahead in a quarter or two to start having that dialogue conversation just kind of get a feel of what the borrowers may be you know planning to do or what their thought is.
Tim Coffey: But unfortunately, maybe because of the elevated high interest costs, some of our borrowers who have excess funds on hand, sometimes they just decide to just go and pay these loans off.
Tim Coffey: And then obviously there's some, by our own business decision, we decided not to go, we felt potentially.
Tim Coffey: may be problematic. And then, yeah, we always try and stay ahead by looking ahead at these files and see if we can get in front of them to, you know, and establish some retention sort of strategies.
Tim Coffey: And then, you know, half of our portfolio, Tim, is our mortgage products. And so I think we...
Tim Coffey: You know, some of it is commoditized, some of it is specialized, and I think there's opportunities there to try to be preemptive and encourage renewals in the current environment. I think, as we know, a portion of it is they're hybrids.
Tim Coffey: So they reprice after five or seven years. So these aren't 30 year mortgages.
Tim Coffey: So some of our borrowers have sensitivity to the interest rate environment, so trying to work to retain that business as it moves from its fixed to floating period. So I'd say we have some programs there as well.
Tim Coffey: okay great well thank you very much those are my questions
Speaker Change: Thanks, Tim. And then, I'm sorry, go ahead, Johnny. We do have one closing remark. Oh, okay. Is that all the questions? Yeah. Okay. Well, once again, thank you for joining us today. We look forward to speaking to many of you in the coming days and weeks. Have a great day.
Speaker Change: Thank you ladies and gentlemen, this does conclude today's call and you may disconnect your lines at this time and we thank you for your participation.