Welcome to the First Quarter Earnings Conference Call. [Operator Instructions]. As a reminder, the conference is being recorded. And I will now turn the conference over to our host, Mr. Craig Blunden, Chairman and CEO. Please go ahead, sir.

Thank you. Good morning, everyone. This is Craig Blunden, Chairman and CEO of Provident Financial Holdings. And on the call with me is Donavon Ternes, our President, Chief Operating and Chief Financial Officer. Before we begin, I have a brief administrative item to address. Our presentation today discusses the company's business outlook and will include forward-looking statements. Those statements include descriptions of Management's plans, objective or goals for future operations, products or services, forecast 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. 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, 2015 and from the Form 10-Q to the -- subsequent to the Form 10K. Forward-looking statements are effective only as of the date they are made and the company assumes no obligation to update this information. To begin with, thank you for participating in our call. We hope that each of you has had an opportunity to review our earnings release which describes our first quarter results. You will note that our community banking and mortgage banking businesses are both profitable, subsequent to the less favorable mortgage banking environment which developed approximately two years ago. We're pleased that, in comparison to the same quarter last year, net interest income and fee income have both increased and our efficiency ratio has improved, but the current environment is not without its challenges. For instance, we've been…

[Operator Instructions]. We have a question from the line of Brian Zabora with KBW. Please go ahead.

Thank you for the detail on the locked pipeline coming into the quarter or the beginning of the quarter. I wanted to see if the pipeline has got a similar structure where it is more purchase heavy, maybe more retail origination, so could we expect a gain on sale to be closer to the high end of the range that you have seen recently?

This is Donavan. I believe the pipeline is more heavily swayed toward retail activity as well as purchase activity. As a result, we would expect our loan sale margin to be at the higher end of that range. If you look at our investor presentation, I think the range that we have over the last six quarters is 125 basis points to 165 basis points, the 165 being the September 2015 quarter. So whether or not we can replicate the high of the past six quarters in the December quarter is difficult to say, but we feel comfortable that will be at the higher end of that 125 to165 range.

Also last quarter you talked about potentially adding your origination staff on the commercial side. I just wanted to see if you were able to add anyone in the most recent quarter?

Yes. In fact, we hired two original origination staff since June 30. We have one applicant being background right now that we anticipate we will be extending an offer to.

Is that on any product that they're focused on? Maybe multifamily or CRE?

Yes, these are CRE multifamily personnel.

We have a question from the line of Tim O'Brien with Sandler O'Neill. Please go ahead.

Could you guys characterize -- talk a little bit about -- that's great color on the FTE hires and such. Can you talk a little bit about the held-for- investment pipeline and how that looked at quarter end relative to the beginning of the quarter?

We don't generally disclose our pipeline with respect to multi and CRE, but --

Hope springs eternal, Donavan.

But it is as strong or stronger than we began the quarter. In fact, I would characterize it as a little bit stronger, particularly with respect to the new hires. The other thing that we have seen, frankly over about the last month, we have seen more loan packages being offered in commercial real estate and multifamily. I think that's partly because there is some concentration issues in the industry with respect to those product lines, but I think it's also because we're getting close to December 31 when many companies have their period end. And as a result they're tidying up their balance sheet. We expect that we will be participating with respect to purchasing mortgages from others, primarily multifamily and CRE.

Can you give a little color on why the payoffs were elevated this quarter? And if that's the new norm that you are going to experience more higher payoffs like everybody else in the industry or if there was anything exceptional this quarter that spiked payoffs?

I didn't see anything exceptional, per se with respect to the payoff numbers. I think one of the things that may have occurred with respect to the September payoffs and with respect to what actually happened in our portfolio and others, perhaps, is that there is this thinking that the Fed was going to begin to raise interest rates. And as a result, I think some multifamily CRE borrowers and even some single-family borrowers were starting to think, hey, maybe now is the time to do that refinance activity. As a result, I think we saw just about a doubling of payoffs this year -- or the September quarter this year versus the September quarter last year.

Our next question from the line of Tim Coffey with FIG Partners. Please go ahead.

As you prepared for the new trade regulations for mortgages, how do you anticipate that's going to impact your operations?

[Indiscernible] was a huge project for all companies and many, many months of building the programs and testing. I'd say we're pretty much largely complete. There's still a few little wrinkles to iron out, especially on the non-single-family area, but we made it. I think everybody needed that extra time, though.

You don't just say it's going to slow down your closing loans this next quarter?

I think there might have been a little bit of a hiccup, but that was kind of related to everybody getting applications in before the Trib disclosure was required at October 3, such that the following couple weeks after October 3, it seemed like new applications were down a bit. But, frankly, they had spiked a bit prior to that October 3 deadline.

On the preferred loans this quarter, how much of the multi-family was purchased?

None of the multi-family was purchased. In fact, I think we may have purchased one single-family loan of a couple hundred thousand in the September quarter is it. Everything else was originated

And then going back to your earlier comments to a question about potentially purchasing some of these loan packages that you're seeing, what makes these packages more attractive than the ones you've been shown before?

I'm sorry, could you repeat that?

Sure. As you go to look at some of these loan packages that you're seeing, what makes them more attractive now than the ones you have seen in the past?

Frankly, we have been able to come closer with respect to pricing. So the sellers have come in and the bid ask spread has come down such that we're finally, probably in the ballpark with respect to pricing. And then additionally, with respect to the packages that we're seeing, many of the credit quality characteristics are similar to our own requirements and I think that's partly, you know, everybody coming through the cycle. The examiners being out at many institutions, really ratcheting up the requirements with respect to global cash flow underwriting and the like and so I think the packages we're seeing are generated subsequent to those new underwriting restrictions such that we can actually look at them from a credit quality standpoint.

[Operator Instructions]. We have no additional questions. I will turn it back to our speakers.

I appreciate everyone dialing into our conference call and we look forward to talking to everybody next quarter. Thank you.

Thank you. Ladies and gentlemen, this conference call will be made available for replay that begins today at 11 AM Pacific, running through November 4 at Midnight Pacific. You can access the AT&T teleconference replay system by dialing 1-800-475-6701 and entering the access code 371989. Again that number 1-800-475-6701, the replay access code 371989. That will conclude our teleconference for today. Thank you for your participation and for using AT&T Executive Teleconference service. You may now disconnect.