Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the BofI Holding, Inc. First Quarter 2016 Earnings Conference Call. For today's presentation, all parties will be in listen-only mode. As a reminder, following the presentation, there will be a question-and-answer session. [Operator Instructions] This conference is being recorded today, Thursday October 29, 2015. Now, I’d like to turn the conference over to Johnny Lai, Vice President of Corporate Development and Investor Relations for BofI Holding. Please go ahead, sir.

Thank you, and good afternoon, everyone. Joining us today for BofI Holding Inc.'s first quarter 2016 financial results conference call are the Company's President and Chief Executive Officer, Greg Garrabrants; and Executive Vice President and Chief Financial Officer, Andy Micheletti. Greg and Andy will review and comment on financial and operational results for the first quarter of 2016 and they will be available to answer questions after the prepared presentation. Before we begin, I’d like to remind listeners that prepared remarks made on this call may contain forward-looking statements that are subject to risks and uncertainties, and that management may make additional forward-looking statements in response to your questions. Therefore, the company claims the Safe Harbor protection for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements related to the business of BofI Holding, Inc. and its subsidiaries can be identified by common use forward-looking terminology and those statements involve unknown risks and uncertainties, including all business-related risks that are more detailed in the company's filings on Form 10-K, 10-Q and 8-K with the SEC. This call is being webcast and there will be an audio replay available in the Investor Relations section of the company's Web site located at www.bofiholdinginc.com. Details for this call were provided on the conference call announcement and in today's press release. At this time, I’d like to turn the call over to Mr. Greg Garrabrants, who will provide opening remarks. Greg, the floor is yours.

Thanks, Johnny. Good afternoon, everyone and thank you for joining us. I’d like to welcome everyone to BofI Holding's conference call for the first quarter of fiscal year 2016, ended September 30, 2015. I thank you for your interest in BofI Holding and BofI Federal Bank. BofI announced record net income for its first quarter ended 2016 of $25,501,000, up 42.9% when compared to the $7,841,000 earned in the first quarter ended September 30, 2014 and up 4.5% when compared to the $24,395,000 earned last quarter. Excluding the $1.7 million special dividend that the bank received from the Federal Home Loan Bank last quarter, this quarter’s earnings grew 8.9% over the prior quarters earning. Earnings attributable to BofI's common stockholders were $25,425,000 or $1.60 per diluted share for the quarter ended September 30, 2015 compared to $1.20 per diluted share for the quarter ended September 30, 2014 and $1.54 per diluted share for the quarter ended June 30, 2014. Excluding the after-tax impact of net gains related to investment securities, adjusted earnings for the first quarter ended September 30, 2015 increased $7 million or 38.1% when compared to the quarter ended September 30, 2014. Other highlights for the first quarter include, total assets reached $6.3 billion at September 30, 2015, up $436 million compared to June 30, 2014 and up $1.4 billion from the first quarter in 2015. Return on equity reached 18.34% for the first quarter. The efficiency ratio was 33.25% for the first quarter of fiscal 2016 compared to 32.47% in the fourth quarter of fiscal 2015, excluding the effects of a one-time dividend and 34.81% for the first quarter of fiscal 2015. Net interest margin was 4.02%, an expansion of 5 basis points over the four fiscal quarter and an expansion of 4 basis points in comparison…

Thanks, Greg. First, I wanted to note that in addition to our press release, our 10-Q was filed with the SEC today and is available online through EDGAR or through our Web site at bofiholding.com. Second, I’ll discuss our quarterly results on a year-over-year basis, meaning fiscal 2016 versus fiscal 2015, as well as this quarter ended September 30, 2015, versus the last quarter, the fourth quarter ended June 30, 2015. For the quarter ended September 30, 2015, net income totaled $25,501,000, up 42.9% from the first quarter of fiscal 2015. Diluted earnings were $1.60 per share, up $0.40 or 33.3% compared to the first quarter of fiscal 2015. Net income increased 4.5% compared to the fourth quarter ended June 30, 2015. Excluding the $1.7 million special dividend that the bank received from the Federal Home Loan Bank last quarter, this quarter’s earnings grew 8.8% over the prior quarter’s earnings. Excluding the after-tax gains and losses associated with our securities, our portfolio adjusted earnings previously known as core earnings were $25.5 million for the quarter ended 2016, up 38.1% year-over-year from the $18,485,000 adjusted earnings for the first quarter of fiscal 2015. Net interest income increased $14,253,000 during the first quarter ended September 30, 2015, compared to the first quarter of fiscal 2015 and increased $3,834,000 compared to the fourth quarter ended June 30, 2015. This was a result of increase in average interest earning assets combined with a decrease in the cost of funds resulting in a net interest margin of 4.02% this quarter compared to 3.98% in the first quarter of fiscal 2015 and compared to 3.97% in the quarter ended June 30, 2015. The cost of funds decreased to 96 basis points, down 5 basis points over the first quarter of fiscal 2015 and down 7 basis…

Thanks, Andy. As most of you know, I commented on our September 2, and October 14 conference call regarding the matter of our disgruntled former junior employee who filed the frivolous complaint on October 12, 2015. In our October 14, 2015 call, I stated that this completely merit less complaint is writable with evidence of basic misunderstandings, inaccuracies, out of context statements and illogical conclusions. We filed the lawsuits against this disgruntle former junior employee in federal court on October 16, 2015. I have made it abundantly clear in my prior statements that the allegations in this complaint whether they are made against a company or any individuals in the company including any allegations of wrong doing with regard to my accounts or allegations of reported restrictions placed on me regarding activities in my accounts or personal investments are completely false, misleading and wholly without merit. Specifically with regard to Mr. Erhart’s allegation in his complaint in a section entitled John Ball abruptly resigns after refusing to break the law. In paragraph 51, Mr. Erhart states that “On or about March 5, 2015 Mr. Ball resigned abruptly after refusing an order from CEO, Garrabrants to engage in what Mr. Ball reasonably viewed to be unlawful conduct to cover up the bank’s wrong doing”. In direct contravention to this allegation by Mr. Erhart in a statement that Mr. Ball provided to the bank’s legal council regarding the reasons for his departure Mr. Ball stated. On March 5, 2015, I sent an email for the audit committee and senior management to advise them that I was resigning from BofI effective that same day. The main reason for my resignation was due to a burnout caused by continuous long hours. My immediate resignation was due to a discussion that I had on March…

Operator, we’re ready to take questions please.

Thank you. [Operator Instructions] The first question comes from [indiscernible] with KBW.

Hi. Thank you for taking my question.

Sure.

You mentioned the CRE group and I’ve seen that they continued to ramp. Could you provide any color on kind of your expectations for the group and what you’re seeing there?

Sure. Well, so it’s early, but that group really expands the product line of the multi-family group which they’ve been entirely focused on multi-family loans previously. The small balance, commercial real estate group really compliments that group. We find a lot of our borrowers that we work to find through out data driven initiatives and through our marketing or not only multi-family properties, but other small commercial properties. So there’s a natural synergy there. That being said the underwriting is split because of the more complex and somewhat unique nature of some other properties. I expect that we’ll continue to ramp that business up as we find good quality loans and I think it will increase over time. I’m not really prepared to give specific numbers there, but one other benefits of that group has been that we’ve been able to maintain a relatively steady yield in the combined multi-family and commercial real-estate portfolio despite some compression in some of the multi-family markets because the commercial side provides a little bit higher yield there. So, yes we’re excited about that. I think it’s indicative of our ability to grow businesses, but I won't be providing a specific forecast on that.

Okay. Thank you. And then, turning to fee income, I saw that mortgage banking income was a bit lower than it’s been in the past. I wanted to see if that was normal variation or indicative of something else going on there?

Sure. When you look at our mortgage banking income its really comprised of two different number, we have $1.3 million in gain on sale of agency loans and then when you look at our other sales of loans it came in at approximately 0.6 million. So both of those numbers are down from the prior quarter and there is no single reason for the decline other than in the case of the individual portfolio transactions. It depends on the pool of buyers and their interest in expanding for that quarter. So there is no general trend we’re seeing other than we had fewer buyers this period.

Okay. Thank you.

And next will be Bob Ramsey with FBR.

Hi. Good evening guys.

Hi, Bob.

Hi. Thanks for taking the questions. Sorry, I missed it in your comments, but the Ball statement that was made after the suite was filed. What was the date that he made that statement?

The statement was made, the written statement was made after the suite was filed and with regard to any other details to that I will -- I have already said to you that I’m not commenting further on it except that statement was made in clear response to the false statement that was made in the complaint regarding why he left which is why the statement is so pointedly addressed to that particular falsehood.

Okay. No, that’s helpful. I’m just trying to establish the timeline, because I know after the New York Times article on the 15th, people expect him to be a second whistle blower and I was curious if the comment -- his comment that comes from him was after that.

Yes, that I think is great. That was a very misleading way to write that.

Okay. In terms of the net interest margin this quarter, obviously you all had nice expansion, just kind of curious sort of what the outlook looks like here. Are you still thinking 3.80% or 4%, do you come back down because you’re obviously a little bit above the high-end of that range today.

Right. Well this quarter as we’re going into as it will start to ramp up some of the Emerald Advance loans and in a prior guidance on one of our calls we gave some rough numbers around potential expansion of that margin and then after those loans start to repay what's going to end up happening is we’re going to end up having a lot of cash on the books. All that is going to do is, we’ll be able to earn whatever yield in Fed Funds we get out of that cash. But what that is going to do is it’s going to compress margins on a temporary basis until that cash comes off. But if we separate out that noise and look at the underlying business, we see very strong stability in our loan yields. We’ve been able to reduce deposit cost very well with all the operational things we’re doing and we’ve also been pretty aggressive about giving people a very clear message both verbally and through pricing that if they’re here at the bank and they think that the only thing we’re providing them is a great rate and they don’t value service, they don’t value the technology in that, we may not be the bank for them. So I think the combination of those things leads me to be confident about margin. That being said, we’ve -- we’re not changing our guidance and we are at the higher end of that range and if you look at the core business I think you could continue to look at that guidance or something that we would think makes sense going forward.

Okay. And in terms of modeling the Block fee-based income, I was just wondering, I know you guys said it was I think $1.2 million or $1.4 million this quarter. What is the expectation for Block income in this coming quarter and just sort of how should we model the seasonality of the fee income piece?

Yes, we gave early guidance on that and that guidance is pretty much the same which means that about 70% to 80% of it is going to be in the March quarter and then the differences -- that difference will be in the December quarter. And when we’re talking about an entire estimate, again the estimate was around after tax $16 million. So think about 70% or so that in March quarter and then the rest in December and a small amount in the June quarter.

And then by the way Bob, one thing you did say is you used the word whistle blower and there are no whistle blowers at all at the Company.

Okay. Great. I got it. I guess last thing and I’ll hop out, but could you just confirm again that as of today you’re not aware of any ongoing investigations by federal regulators in the BofI?

I already said I’m not commenting on that, but I will say that you can review the very clear statements that I made on my prior two conference calls and those statements remain as true today as when I made them.

Okay. Thank you.

And your next question comes from Andrew Liesch with Sandler O'Neill & Partners.

Hi, guys.

Hi.

Just a couple of questions for me that I had left, does the prepaid fees that you have this quarter, just kind of curious how much seasonals were they this quarter, are they lumpy from one quarter to the next, what can we expect for that going forward?

Andrew I wish I can predict it. It’s so hard to predict. Obviously we had a lot of them in the prior quarter, it came down this quarter. I would probably average between them if you want a number to go forward, but it’s just really hard to predict. It’s not necessarily a seasonal thing.

Okay. And then, Greg I’m sorry if I missed it, did you say what the percentage of your deposits are in business accounts, I know you’ve said that in prior quarters.

Yes, it’s about 52%.

52%, okay. And then …

No, no -- 52%.

52%, okay. And then, are they all 1031 exchange, what percentage of the 52% is 1031 exchange companies?

No, they’re not even close to the size and close to that. I don’t have an exact number, but it’s -- I mean it’s a very small percentage. I mean it’s a very, very diverse set of businesses which with thousands of small business accounts from a diverse set of industries. We have a significant number of deep treasury management commercial relationships, and then within the specialty deposit group there is 1031 exchanges, there’s fiduciaries, there is a variety of deposits. So it’s not -- that wouldn’t even be close to being a correct statement.

Okay. Thank you. I appreciate it.

Sure.

Next will be Gary Tenner with D.A. Davidson.

Good afternoon, guys.

Hi, Garry.

Just two quick questions, the gain on sale line, I guess this is the one income line that maybe was already asked, 3.7% this quarter versus 1.4% last quarter. Any correlation there between that line and the mortgage line or it’s just kind of timing of sales.

Yes, so gain on sale other is what you’re talking?

Yes.

Gain on sale, yes. We originate structured settlements for sale depending on a variety of factors in terms of looking at the business, the primary increase in that is related to structured settlement sales.

Okay. And then Greg, you had made the comment regarding capital that you didn’t see any need for capital. Does that mean that the ATM is on the shelf for the time being or were you talking about something overly on that?

No.

You said $16 million of …

Yes, we finished our last ATM. We generally believe that an ATM should always be outstanding, but what I was specifically referring to, well certainly the question of capital and when we need it, I believe that we’re in good shape based on asset growth and earnings projections for a nice long period of time and the fact that we have excess capital. But then also our shelf offering allows us to raise subordinated debt and a variety of other instruments. Our capital requirements at our bank are higher than our holding company and because we don’t do anything on a double -- anything significantly. We have $5 million on a double leverage basis that just gives us opportunity and room. So my only point is, as what I would always say is, I’m not -- I’m certainly not in a hurry to raise equity nor do I need to be and we have lots of options if we needed capital and we don’t need it right now.

Okay. Thank you.

Yes.

And moving on to Don Worthington with Raymond James.

Good afternoon.

Hi, Don.

In terms of deposits, deposits were up in the lower $300 million but you also got in 400 plus million from Block, so did you run off other types of deposits during the quarter once you got those less expense of deposits in?

Yes, we’ve been really, really pushing down and basically non-renewing a variety of CDs that we just don’t feel when we do our segmentation have long-term customer value from a standpoint of being able to cross sell them a product or get them into higher value added services. So if you look, I think one of the interesting things about what we’ve done just from a retail perspective is continued to, over the year we’ve run off a lot of CDs, we’ve built up others. I think this quarter as well, there was -- we had one so -- this quarter the CD side was relatively stagnant. If we had one brand that had some higher rates and in one of the savings groups and we had been very aggressive about cutting that back and that’s a way of us establishing what elasticity is there. So we always continue to look for that because like I said if we have a lot lower cost of funds that a lot of the internet, just internet only type banks. So we continue to look for ways to squeeze that down and run off customers that are only focused on rate. But that being said we feel very confident in our deposit pipelines and our ability to grow our deposits to fund our loan growth.

Okay. And then in terms of loan growth for this fiscal year, still look like the opportunity to grow at 20 plus percent on a year-over-year basis?

Yes, I think that’s right. I’ve been -- I had previously said in that 25’ish percent range, I don’t maybe 25% to 30%, maybe a little bit lower around there. I don’t think you should expect nor are we targeting the type of growth that we had in the prior year, and so that’s -- I think that’s the right way to think about that.

Okay. Thank you.

Yes.

And that does conclude the question-and-answer session. I’ll now turn the conference back over to you.

All right. Thank you everyone very much for your time. I appreciate your interest in BofI Holding and BofI Federal Bank, and we’ll talk to you next quarter. Thank you. Bye-bye.

Thank you. That does conclude today's conference call. We do thank you for your participation today.