Good afternoon. And welcome to the BofI Holding’s Incorporated Earnings Conference Call for the Third Quarter ended March 31, 2012. With us today are BofI’s President and CEO, Gregory Garrabrants; and Executive Vice President and CFO, Andrew Micheletti. Today’s call will have the following format. Mr. Garrabrants will provide an overview of the highlights for the quarter. He will then turn the call over to Mr. Micheletti, who will provide a more detailed discussion of BofI’s financial results. Finally, Mr. Garrabrants will make some closing remarks and open up the call to any questions you may have. Before I turn the call over to them, please remember that in this call management’s remarks contain forward-looking statements which 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 protection of the Safe Harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today, including risks and uncertainties related to, among other things, the economic environment, particularly in the market areas in which the BofI operates, competitive products and pricing, fiscal and monetary policies of the U.S. government, changes in laws and government, regulations affecting financial institutions, including regulatory fees and capital requirements, and the recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act changes in prevailing interest rates, risks associated with the conduct of the company’s business over the internet, credit risk management, asset liability management, the financial and securities markets, and the availability of and costs associated with sources of liquidity. Examples of forward-looking statements include statements related to BofI’s anticipated or projected asset size, net interest income, net interest margin, projections of future delinquencies and impairment charges, loan originations, deposits and performance ratios, such as efficiency ratio, regulatory capital ratios and return on equity. We would like to encourage all our listeners to review a more detailed discussion on the risks and uncertainties related to these forward-looking statements that is contained in the company’s filings with the U.S. Securities and Exchange Commission. Any forward-looking statement as to the company’s future financial performance represents management’s estimates as of May 3, 2012. BofI assumes no obligation to update these forward-looking statements in the future due to changing market conditions or otherwise. With those cautionary statements, it is my pleasure to turn the call over to BofI’s President and CEO, Gregory Garrabrants. Please go ahead, sir.

Thank you. I’d like to welcome everyone to BofI Holding’s third quarter conference call for the quarter ended March 31, 2012. I thank you for your interest in BofI Holding and BofI Federal Bank. BofI announced record net income for its third quarter ended March 31, 2012 of $7,718,000, up 46.3% when compared to the $5,275,000 earned for the third quarter of fiscal 2011 and up 15.9% when compared to the $6,660,000 earned in the last quarter ended December 31, 2011. Earnings attributable to BofI common stockholders were at $7,331,000 or $0.58 per diluted share for the quarter ended March 31, 2012, compared to $0.48 per diluted share for the quarter ended March 31, 2011 and $0.54 per diluted share for the quarter ended December 31, 2011. Excluding the after-tax impact of net gains related to investment securities, core earnings for the third quarter ended March 31, 2012 increased $3,803,000 or 85.4% when compared to the quarter ended March 31, 2011. For the 9 months ended March 31, 2012 net income was $20,911,000, up 39.1% over the $15,036,000 earned for the 9 months ended March 31, 2011. Other highlights of the third quarter include return on equity reaching 16.8% for the third quarter ended March 31, 2012. Our net interest margin of -- about 3.72% for the quarter ended March 31, 2012, a 12 basis point improvement over the prior quarter. Our loan origination unit had another great quarter with $324.7 million in loans originated in the third quarter, the $324.7 million of production consisted of the following. $128.4 million of single family agency eligible gain on sale production, $14.9 million of single family non-agency eligible gain on sale production, $103.3 million of single family jumbo portfolio production, $36.1 million of multifamily non-agency gain on sale production, $21.2 million of…

Thanks, Greg. First I want 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 website www.bofiholding.com. Second, I will discuss our quarterly results on a year-over-year basis meaning fiscal 2012 versus fiscal 2011, as well as this quarter ended March 31, 2012 versus the second quarter ended December 31, 2012 -- 2011. For the quarter ended March 31, 2012, net income totaled $7,718,000, up 46.3% from the third quarter of fiscal 2011. Diluted earnings per share were $0.58 this quarter, up $0.10 or 20.8% compared to third quarter of fiscal 2011. Net income increased 15.9%, compared to the second quarter ended December 31, 2011. Excluding the after-tax impact of gains and losses associated with our securities portfolio, core earnings would have been $8,256,000 for the quarter ended March 31, 2012, up 85.4% year-over-year from the $4,453,000 in core earnings for the third quarter of fiscal 2011 and up from $6,828,000 in core earnings for the last quarter ended December 31, 2011. Net income was $20,911,000 for the 9 months ended March 31, 2012, up 39.1% over the $15,036,000 earned for the 9 months ended March 31, 2011. Earnings attributable to BofI’s common stockholders were $20,018,000 or $1.68 per diluted share for the 9 months ended March 31, 2012, up 37% from the $14,804,000 or $1.37 per diluted for the 9 months ended March 31, 2011. The reasons for the increased earnings for the 9 months ended March 31, 2011 and 2012 are similar to those identified this quarter. Specifically, increased net interest income from loan growth and increased non-interest income from growth in the volume of loans sold through the mortgage banking business. Net interest income increased $5 million during the third quarter…

Thank you all for joining us this afternoon. That concludes our prepared remarks. And we will now move to the question-and-answer session. Operator, if you could open up the line for questions?

[Operator Instructions] And we’ll take our first question from Andrew Liesch from Sandler O’Neill & Partners.

So just looking at loan yield, I mean, it looks likes it was up 2 basis points to 514. I’m just kind of curious like what yields do you have on your -- this single family jumbos that would make, first of all, the yield is high and also just what you are putting on now?

The single family jumbo yield on new originations hovers in the low 5% range on average. There are certainly lower loan yields available, but by the time it averages out that’s around where it comes out. The multifamily side is a little bit lower than that. But it’s not that far off from that and then we blend in from other specialty assets, which can have significantly higher yield. So, we may see a little compression of that but I wouldn’t expect much.

Got you. And then, and also just putting through the Q here and I know you guys are obviously purchased loans throughout your history and it looks you didn’t do that last quarter. But I’m curious if you purchased those at a discount would they come with higher yields as well?

Well, historically to the extent we did purchase loans that we purchased at a discount. We really haven’t done that for quite a number of years now in any significant bulk. They did generally come with higher yields and the discounted -- the accretion of that discount obviously impacts the yield and helps those yields become, when they were just higher as a result of that. But that’s not really driving any of our business now in any significant way. Our discount on loans outside our specialty finance area is only a few million dollars really and it’s the last and it’s quite low as far as the accretive element on the loan side, so what’s really driving it is we had a $1 billion of loan production, obviously some of that was sold over the last 9 months, but that is overwhelmingly what sets the yields in our portfolio.

Got it. Thank you. And then just one other question from me and that was I think that you’ve said that your first regulatory exam with OCC is going to be towards the end of March, I’m just curious if you can us an update on if that’s still going on if they’ve left or where does that stand right now?

They left, as you know you’re not allowed to disclose specific ratings and those sorts of things, but we feel very good about the outcome of that. I think it’s fair to say that they were impressed with the teams that we have in place here and with what we’ve done and with the organizational structure that we’ve created to ensure that we run an institution in a safe and sound manner. So, I don’t expect any changes to our business model at all or any of the growth that we’ve been able to achieve as a result of the regulatory exam, and I don’t expect any additional costs of any significant nature whatsoever that will arise out of any requests that they had. They always have helpful suggestions and in some measures in different areas and those are suggestions are things that we’ll implement in a appropriate and speedy manner and move forward. So I thought it was an outcome that people felt good about. And also, we also had our first step Federal Reserve examination at the holding company as well, and I would say that the remarks that I had for the OCC would also apply to the Federal Reserve examination as well.

And we’ll now go onto our next question from Joe Gladue from B. Riley.

Yes. Actually I’d like to follow-up on that last question a little bit. Just wondering if you had any change in method of treating reserves and net charge-offs due to this, whatever to the OCC?

No is the simple answer. They spent a large amount of time going through our methodology and a substantial amount of which is detailed in the 10-Q in terms of how we separate analyze and report our general loan loss allowance and our experience. So there were no recommended changes to the methodology on how we’re doing our allowance.

And as they in regulatory speak, it is found to be satisfactory, which is the word for everything even if it’s great.

Okay. All right. So, I’d like to I guess just a little follow-up on your progress with some of the -- I guess newer business initiatives both affinity group white label stuff and the business banking platform.

Sure. So, on the warehouse lending side that is going well. We have our existing single family sales teams, selling that product and the first loans should be boarding that platform in the next month or so. There is a long lead time to get those lines set up, because they are business lines, the credit they require, site visits, due diligence and there is a relatively complex agreement that has to get in place and sometimes folks want to negotiate it, but we’ve been making good progress there. The team is doing well and the demand for the product is definitely there. So that will add to asset growth in the next fiscal year, in a substantive way and so I’m very pleased about that and I think that’s going well. On the business banking side, we have, we’ve made obviously some progress there. It’s still relatively small, it’s about $10 million of deposits there. The demand is very large and at this stage it’s a pilot program for us. We are making sure that we have our economics right. We have all the systems in place and the team in place. And so, we’ve been doing a little bit of hiring there to make sure that we can scale that to the next level. But the demand that we’re seeing is quite large and we have not yet even started to do any of these things that we would do to scale that business, so we are probably going to have it run in a pilot capacity for another 3 months to ensure that we’ve got everything, done appropriately before we would push it out to an affinity or even to our own customers to allow it to scale. So, I think that that will be successful and…

Okay. And question with the article, I guess in American Banker about Costco, about expanding out to auto and student loans, I just wondered if you had any comment on that?

We have a great partnership with Costco. We are very much in contact with them about their future plans, and obviously that distribution platform is incredibly powerful. So if they’re interested in doing up certain products, that obviously is an important thing for us to consider and think about, and certainly we’re watching that closely because they are an absolutely incredible partner and we’re very pleased to be able to work with them.

We’ll now go onto our next question. That comes from Edward Hemmelgarn from Shaker Investments.

Yes. Gregg, Andy, couple of questions. One, could you, as a little bit of a follow up on that, could you talk a little bit more about where you might expect some of these programs to be in 6 months. I mean it’s, I know they take a while to ramp, -- in terms of the deposit period, what do you think those programs might be sourcing for you, say by the end of the September?

I don’t think if that’s kind of micro level projection for new business is really appropriate to give, and it would be inherently wrong and subject to a lot of variables. So, I think the thing to do is whenever you, obviously from a regulatory perspective and from a Board perspective, making sure that you are engaging appropriately and making sure that you have got the resources to get the business in the place you need it to be is important. So it’s very difficult to say right obviously, let’s just take a simple example. So we have a certain amount of warehouse lines that go out, they have minimum usage fees. We make a lot of money from minimum usage fees and mortgage banking operations may be willing to spend those, because they want to make sure they have the flexibility in the business. It’s very difficult for me to say what that line utilization would be given that it’s highly dependent upon what happens in the mortgage market. So it’s just, I think that until we get some history there, I think its best that we don’t provide specific projections on individual new businesses.

Okay. I mean, could you, I guess you talked about as you’ve mentioned the warehouse line or the warehouse lending function, could you talk about a little bit about how just might see that ramping in terms of number of relationship overtime? I mean what, give us a little bit of a feel for and you’ve been talking about this for a while and I’m just curious, where you think it may be heading?

Yes. The answer to that is that, is it really depends on how want to price it. So we have a, what we call note grade financing. So, in other words what that does, is it doesn’t leave carry for the mortgage bank in the timeframe in which they hold the loan. So depending upon, it’s again, it’s a very rate driven business. We are very sensitive to our return on equity. So the ability to grow that business to $500 million outstanding with our existing deposit base in 6 months is readily available and we could do it almost instantly. The question is as what yield we would get. And so what we are doing is, we are approaching the business like we approach all our businesses. We approach them very economically and thoughtfully. And so that means if they inherently grow at, I mean obviously it’s difficult to say that we grow with a measured pace when we increased our assets 40% in a year, but the point is that, we have one of the largest networks of bankers and brokers in the country and it’s getting larger every day. They have tens of billions dollars -- tens of billions of dollars of outstanding warehouse capacity, depending on how we price that and what we’re trying to achieve the ability to grow the assets as available, but we don’t -- that’s not the approach. So what I think that you’ll see, I gave some numbers about $55 million in approved line of credit and another $90 million of applications. You can look at that and say that typically banks have about 50% utilization on those lines. And obviously, we intend to continue to build that pipeline. So but -- it’s -- it is a business that has obviously the mortgage banker highly focused on what the rate is in the loan now, where it doesn’t -- where that rate competitiveness is not directly. We know that directly impacts the agency business, but this line also is utilized for our own individual jumbo production, which helps drive peoples’ desire to have it and then because they have that line, they end up using it for the agency side to avoid the non-usage fee. So that’s really the way the economics work on that. And so as we go and we’re seeing that we’re able to hold our pricing. We don’t have to become more aggressive on price because we’re getting enough volume for what we want to do. Well there’s really...

I have, just the other question I had was, there was a pickup in non-performing loans on the secured by real estate. Can you talk about that a little bit?

Yes. Let me go ahead and give you some color, there was primarily one loan, which is actually footnoted in your 10-Q. That was $2.2 million. It’s actually a multifamily loan, which was a TDR and came off of the TDR non-accrual about 18 months ago. Based on a technicality of the file review, we did not have current financials at the time we took it off of non-accrual. So we are working to get current financials into that file, as a result for the period ended March 31, we showed that as non-performing, even though frankly, it had been -- it had been performing under its modified terms for 18 months. So we’re doing that until the financials are and we expect the financials to be in and we expect this item to be cleared next quarter. That’s the most significant item in the growth other than that the growth would have been relatively small in dollar terms and in percent.

And now we will take a question from Greg Cole from Sidoti & Company.

My first question is just looking at your deposits, the rate on the time deposits under $100,000, it jumped up a little bit this quarter. Is that mainly due to just trying to match your cash flows or is that I guess due to competition and just growing your own balances?

Yes. I mean in general it relates to the mix of CDs that we have in the time now. We actually have been when you look at our CDs, they have actually been coming down in terms of that. So depending on which maturities are paying off, so for example there is some shorter, which have lower rates that have come off, the higher rates were still on, which as they mature going to change the mix. So what you’ve really seen is the mix, a small mix change.

Yes. I think the short answer is you are right. This is the result of us extending in different areas to match the cash flow timing with the increased loan production.

Okay. All right. Thank you. And then with -- I’m just looking at the LTVs of the segments, and it looks like that 80% LTVs on the single family popped up this quarter, is that -- I mean it’s still at pretty low level, but is that -- I mean are you seeing opportunities in that area just a higher LTV loans?

No, I would not say that, that’s necessarily an area of focus at all. We haven’t changed our guidelines at all. What’s, what is you looking at Andrew.

Just looking at the breakdown in the loan loss allowance,

How much of the cost did that incur?

In dollar terms, I think it’s relatively small.

Yes.

Okay. But it still -- I mean you’re still just staying with the, the very low -- or the very high quality credits?

Exactly. Yes. We haven’t changed our single family underwriting standards to increase LTVs at all.

[Operator Instructions] And next we’ll go to Mitchell Sacks from Grand Slam.

Can you just remind me a little bit of the rollout schedule on the repos and some of the higher priced CDs over the next few quarters?

Sure. Let me just flip to that. So, when you look at our mix, we will have in April $51.2 million will come off, at a 2.55 rate, that’s CDs. Then 54 in May, and then 59 in June. So these are pretty good-sized hunks. All are at one set a 1.9 rate, the other is at a 2 rate. And also when you look at the next 12 months going forward, we have $571 million coming off at 1.73, so, on a weighted average basis. So, clearly almost no matter what duration we pick to replace that we will be re-pricing down in those -- in those products. As far as the repos are concerned, we’ve got $10 million of $120 million coming off at 3.65% during the next 12 months and that’s a big piece.

Okay. And then in terms of -- I was trying to follow a little bit early when you are talking about some of the different deposit relationships. How do I think about the new deposit relationships? Do think about them as replacing some of the deposits running at lower cost or do I think of them as just helping you grow the balance sheet?

I think that over time, they will be helpful on lowering deposit costs as we were able to focus on checking and savings accounts and other more relationship-based accounts. Initially, though in general, they really are a replacement for the marketing expense and the cost associated with going out and reaching customers. So pretty expensive, obviously. We work with different types of affinity groups. Most of them -- some of them for example American Senior Association, like AARP market is a benefits organization. And so, I think very few people say that well gee, I want to help the AARP make more money. I don’t think that’s really the value proposition. Now if it’s the Audubon Society or something like that you might have folks who say that the affinity nature of that will allow you to price that relationship definitely. But it’s very dependent upon the relationship and the nature of the marketing technique. So this is really a way just like MBNA did right to reach out and to get customers who are willing to look at an offer based on the fact that brand means something to them. So I think that’s the right way to look at that side. And then obviously, on the BIN sponsorship side that’s different. That is a relationship where because of the other services you are providing the cost of funds is really not something that those programs are very focused on. And so that is just a much lower cost of funds. That is associated with those programs.

And our next question will come from Gregg Hillman from First Wilshire Securities Management.

So first of all, could you talk about, some of your new initiatives are losing money in the third quarter. What was the amount of money that they lost or basically what kind of overhead you had for people for the businesses they haven’t gotten break even yet?

The businesses that haven’t gotten break even yet. I guess the -- it’s -- sorry -- because for example on the -- if we take, if we go through and you say the retail factoring side is not losing money. So that wouldn’t be -- that is, there is nothing there. They are on the BIN sponsorship side. There is -- we have 4 people working in that group. And we have term sheets that well exceed their costs just on a fee-based perspective right now. So I think obviously we have got expenses associated with doing all of these things and they are -- we estimated maybe it’s up to 3% to 5% of our efficiency ratio associated with that. These things are doing -- they are doing very well. And so it’s very difficult to really break them out and try to say that certain ones are losing money. In some respects, it’s not really a very fruitful discussion to have.

Okay. We are moving now to another area. So the non-interest income, could you sort of give me -- break that down more the components of it versus a year ago?

Yes. The biggest element of change was about $1.9 million in non-agency sales gains. So this year, we have started to originate and sell portfolio jumbo single family and multifamily loans. That $1.9 million was not around last year where we were not selling non-agency loans. So that’s the single biggest increase in that component year-over-year.

And that does conclude our question-and-answer session at this time. I would like to turn the call back over to Mr. Garrabrants for any additional or closing remarks.

Thank you all for the questions and the time, and we will see you next quarter.

That does conclude our conference for today. Thank you for your participation. You may now disconnect.