Greetings and welcome to BofI Holding Inc. Third Quarter 2017 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Johnny Lai, VP of Investor Relations. Thank you. Sir you may begin.

Thanks, Erin. Good afternoon, everyone. Thanks for your interest in BofI. Joining us today for BofI Holding, Inc’s third quarter 2017 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 the financial and operating results for the three and nine months ended March 31, 2017, and they will be available to answer questions after the prepared remarks. Before I begin, I'd like to remind listeners that prepared remarks made on this call may contain forward-looking statements that are subject to risk and uncertainties and that management may make additional forward-looking statements in response to your questions. These forward-looking statements are made on the basis of current views and assumptions of management regarding future events and performance. Actual results could differ materially from those expressed or implied in such forward-looking statements as a result of risks and uncertainties. Therefore, the Company claims the Safe Harbor protection pertaining to forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. 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 bofiholding.com for 30 days. Details for this call were provided on the conference call announcement and in today's earnings press release. At this time, I’d like to turn the call over to Greg for his opening remarks. Greg, the floor is yours.

Thank you, Johnny. Good afternoon, everyone, and thank you for joining us. I'd like to welcome everyone to BofI Holding's conference call for the third quarter of fiscal 2017 ended March 31, 2017. I thank you for your interest in BofI Holding and BofI Federal Bank. BofI announced net income for its third quarter ended March 31, 2017 of $40,994,000 million, up 14.1% when compared to the $35,914,000 earned in the third quarter ended March 31, 2016 and up 26.9% when compared to the $32,300,000 earned last quarter. Earnings attributable to BofI's common stockholders were $40,917,000 or $0.63 per diluted share for the quarter ended March 31, 2017, compared to $0.56 per diluted share for the quarter ended March 31, 2016 and $0.50 per diluted share for the quarter ended December 31, 2016. Other highlights for the third quarter include: total assets reached $8.7 billion at March 31, 2017, up $0.5 billion compared to December 31, 2016 and up $1 billion for the third quarter of 2016. Net interest margin increased 24 basis points from the prior quarter and 39 basis points from the third quarter of 2016 to 4.24%. Excluding the impact from H&R Block seasonal loan products, excess liquidity and our subordinated debt, net interest margin in the quarter ended March 31, 2017 would have been approximately 3.97% at the high end of our 3.8% to 4.0% annual net interest margin target. Return on equity was 21.10% for the third quarter, well above our long-term target of 15% or better. The efficiency ratio was 31.73% for the third quarter of fiscal 2017, compared to 35.78% in the second quarter of fiscal 2017 and 31.66% for the third quarter of fiscal 2016. Capital levels remains strong, with Tier 1 leverage ratio of 9.11% at the bank and 9.47% at…

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 website at bofiholding.com. Second, I will highlight a few areas rather than go through every individual financial line item. Please refer to our press release or 10-Q for additional details. As Greg indicated earlier BOI’s net income for the third quarter ended March 31, 2017 was a record $40,994,000, up 14.1% when compared to the $35,914,000 earned in the third quarter ended March 31, 2016 and 26.9% when compared to the $32.3 million earned last quarter. Earnings attributable to BofI's common stockholders were $40,917,000 or $0.63 per diluted share for the quarter ended March 31, 2017, compared to $0.56 per diluted share for the quarter ended March 31, 2016 and compared to $0.50 per diluted share for the quarter ended December 31, 2016. This quarter ended March 31, 2017, was the second income tax preparation season since the bank entered into its August 2015 long-term agreement with H&R Block, Inc. to offer co-branded financial products to H&R customers. The increase in earnings this quarter compared to our last quarter ended December 31, 2016 was due in part to H&R Block financial product revenue in the March quarter. And the increase in assets this quarter was due in part to the income tax refund from H&R Block customers causing a seasonal increase in the bank's short-term liquid assets and in its deposits. As Greg mentioned, new this year is the refund advance loan product. The bank purchased the refund advances at a discount during the quarter ended March 31, 2017 and accreted the discount into interest income as the loans were repaid. Of the $277 million in refund advances purchased…

Thanks Andy. Dern [ph] we’re ready to take questions.

At this time we'll be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Bob Ramsey of FBR. Please proceed with your question.

Hey good afternoon guys. Thanks for taking the question. I wanted to talk a little more about block of anticipation loan. I guess, last year blocks sort of narrowed your margin because of all the excess liquidity. This year, without additional products, you guys have gotten a nice boost of margin. Is it your expectation that basically all goes away next quarter it sounds like the balances are almost are gone, and then sort of as we think about the seasonality of the block business, would you expect another 30 basis point benefit next year in the March quarter as well?

With respect to next quarter, yes that benefit will be essentially non-existence. Our balances are low enough now that they are de minimis from the standpoint of the impact they provide. And there's other seasonal products as well, such as the franchise loans that are also add to minimus levels as well. So with respect to that. With respect to next year, that's something that we are obviously talking with H&R Block about and are not ready really to discuss anything there you’ve got but we have a good partnership with them. They obviously have to make decisions about what products they are going to decide to offer, and I'm not going to preempt that decision, which they obviously have that they obviously to make. We think we have a good relationship with them, and we certainly would hope to be a part of that. And I think that we were pleased with how it worked, I think, they were pleased with how it worked. And I think it was very successful.

Okay. And I guess, when you all made the comment that losses on those loans have run below expectations. Is that comment applicable to sort of what's happened over the last three weeks since quarter end on the Taylor portfolio or is that way you experienced through the first quarter? Does that indicate that the reserve being fully reserved at this point is probably more than enough, or I’m just trying to get better sense on what that comment meant?

Yes. So the reserve is more than enough, the $3.4 million number that was cited is roughly the current balance today. And so, we have that plus more allowance. So we can lose every dollar at the 3.4 and not have an increase in our loan loss provisions next quarter.

Okay, great. Got it. And then maybe you can give us a little bit more of update on the online consumer loan product. I know you gave a little information about originations, I think you guys are going to kind of take it slow. I noticed you are offering it now sort of direct to your customers through your website. Just kind of curious how you see that business growing, evolving over time, knowing that you have to take it slow, what is kind of trajectory?

Yes. Slow, slow for us on new products means slow. So we had about $1 million of originations today. It's working very well. There's good yields, we’re seeing good borrowers come through. We like what we're seeing. There is certainly lots of opportunity to grow that. But we also need to make sure that our model gets tested over some period of time, has enough loans run through it before we really open that up. So it's really a longer-term initiative. I think it reflects what we've been able to do on the development side. That's obviously completely in-house development, which is one of the, I think, many impressive things that the development team has built over time, which is going to help us in general as we move on this increasingly digital path that we have. And obviously over time, it will benefit our net interest margin. But we are going to really take it in a very controlled and measured way. You’ll see the credit quality in everything we do. We've done a great job on the auto side from a credit quality perspective, being thoughtful and efficient, but also controlled and how our rollout goes, and that's what we're going to do here too. So I'm not going to give you exact numbers, but it's not going to be material in this calendar year, but I would expect in the next calendar year would start to really ramp up as long as our performance continues to be good.

And any thoughts around mix of existing customers versus people that don't have any other products or relationships with you?

Well I think that the mix will change as we have our universal digital banking platform coming up as the algorithm to determine whether that product is beneficial to a particular customer gets refined. And so if that refinement occurs, we should have much more, for example, credit consolidation loans with customers as we’re able to utilize our own internal data and the external data around the personalization engine better. Right now, this is more front facing and there's marketing that's being done on a very targeted basis to small sets of internal customers. But the sophistication level as with the universal digital banking platform is all about, right, you've got have the product and then you've also got to have the personalizing engine, you've got to have the delivery mechanism on the front end to be able to bring all that together, and that ultimately is what's going to come together.

Okay great thank you.

Sure, thank you.

Our next question comes from Scott Valentin from Compass Point. Please proceed with your questions.

Hi good afternoon thanks for taking my questions. With regard to loans mix, C&I growth has been strong, RV growth is strong. Just wondering how you envision overtime the portfolio mix changing and then, I guess, as a derivative of that, provision and allowance loan losses, how you see that evolving over time?

Well I’ll let Andy talk a bit more about the allowance, but from that perspective we do think C&I will become a greater proportion of the loan balance over time. The opportunities there are very strong. We're turning away transactions that we simply just don't have the capacity for. So, there's definitely a lot of business there, we like overseeing there and so I think that, that will grow as a percentage of the balance. Consumer obviously because we’re such a small part of our business right now, will continue to grow, but it will grow on a more measured fashion over time as we nurture those platforms. With respect to…

Sure I mean you are absolutely right. Over time, depending on mix, you should expect the loan loss allowance to increase as a percentage of total loans as the C&I portfolio gross. We've always had very good strong loan loss allowances for loans depending upon the loan-to-value ratio. For single-family loans that are typical bank that originated 80% loan-to-value, they have very high loan loss allowances. And obviously when you have much lower loan-to-value ratios you have lower loss allowances which have been historically reflective of frankly significantly greater than but certainly historically reflective of what we've had, which has been very low levels of loan loss.

Thanks. And then just on deposits you mentioned that you're seeing some competitive pressure I guess some competitors raised pricing. Just wondering in terms of the deposit beta how are you guys thinking about your deposit rates relative to online competitors and maybe even brick and motor.

Sure, so with respect to – there really are several segments that we have we've tried hard I think have done a reasonable job of having many segments of our deposit portfolio not be competitive with direct or online competitors. And then some of our products and deposits are more competitive. With respect to the first couple of rate increases, we've seen out of this call selective movement targeting by certain banks of certain customers and aggressively going after those customers because they believe those customers are profitable. We haven't seen post sale repricing of deposits, but we have seen that sort of targeted repricing. Certainly online competitors most recently Union Bank with pure bank or pure point is the most aggressive provider out there, which is interesting given obviously that is Union Bank. But right now it's still fairly one off and I think that you’ll probably start to see more pressure on repricing as rates continue to go up. I think we've done a pretty reasonable job right now minimizing that impact. And certainly that impact has been lower than what we've been able to do with our loan rates. And we haven't even begun to see the influence of raising our loan rates on multi and single family given that there's a lot pipeline that takes some time for that lot pipeline to the fund out. And then the newer loans are coming into higher rate, but we definitely expect to see deposit pressure over time as you get higher levels of rate increases. We’ve modeled in the 60 and higher range on betas even though we are not seeing.

Which is very conservative. We're not seeing the less than that, we’re seeing more of between 20 to 40 on a blended basis. But we’ve always modeled to make sure that we're prepared in terms of looking at how we move loan rates in case we do have such a moment.

Thanks for the color, I appreciate it.

Sure.

Our next question comes from Brad Berning of Craig-Hallum. Please proceed with your question.

Good afternoon. Just a couple of follow-ups on H&R Block. You made a comment about through the end of the March quarter that the results had been better than last year. And I just wanted to get you to clarify whether that was March quarter to March quarter or whether this year's March quarter versus a total last year? Is the first question. The follow-up is can you talk a little bit about the prepaid card part of it and if there's any been any timing issues and pushing some of it from 1Q. Or should see the March quarter for you into the June quarter? How do you feel about the overall you know aggregate guidance for flat on a year-over-year basis? And just wondered if you can touch a little more in detail on that first and then I’ll come back for a follow-up?

Yes so the way we're measuring that is the March quarter over the March quarter is what we're looking at. So we were slightly better in the March quarter. As far as guidance going forward we still stick with the guidance that we're going to continue to operate in that forecasted range for that bottom line as we've seen a little bit of shrinkage in our team, but we also saw some growth in Emerald card, that was positive. And then we added the RA on top of that. But the RA is done as Greg has mentioned, so that pretty much just leaves Emerald card which we don't expect to be a large mover next quarter.

Yes so basically the benefit we received is in this quarter and we don't think there's going to be a benefit incremental over the prior years comparable quarter in this quarter as a result of H&R Block.

And then on the jumbo mortgage book you guys had a couple quarters so some refinance activity being higher than what you would like to seen. It looks like you got back to sequential growth this quarter. Can you talk about where you're at on prepayment levels and some of the activities that you've been trying to curb? And talk about how you're feeling about prepayment activity going into this quarter versus your production and do continue to expect to see growth kind of reaccelerate here now that you it seems like you’re moving through some of that issue?

Yes I think that's a fair assessment. I do think we'll have single family jumbo mortgage growth this quarter. We do have strong prepayment rates in our portfolio, they have declined some. But we have very strong borrowers with very low loan to value loans. And so they do have lots of opportunities for refinance. But I think that jumbo business is doing very well, the pipelines are very good, the pipeline has not been impacted by the rating increases we have, the housing market on the purchase side there's incredible demand, the supply of homes is a little bit tight, but we're still seeing good volumes to that channel. So we feel pretty good about being able to have a jumbo loan growth this next quarter from a portfolio perspective. I don't want to speculate on how much but I do think that it’s there. With respect to specific initiatives there's a number of them doing a better job in portfolio retention which I think we are doing using better data analytics has been a big part of that. Extending some penalties associated with refinancing for some of our third-party partners and some other things and just looking at some of that behavior has been helpful too. So in general though I think it was a good quarter for jumbo. And I think it's shaping up to be a decent one next quarter as well.

So in the repay penalties you talked about was that part of the contributor to the pick up and repay penalties this quarter, was specifically to partners rather than to specific loans or…

No, no that was on a C&I side.

It’s going to be the C&I and the multifamily.

Yes that was – no that’s more of a deterrent and I don't want to overemphasize that's not a huge part of it. I think the biggest part of it is doing better job on corporate tension and also it's a race issue as well. In a couple of those quarters rates are really scrapping the bottom and competitor rates have gone up, so it's narrowed the refinance benefit in a lot of our book.

Understood. And then one follow-up on the NIM a little bit. You talked about some of the competitive issues on the deposit side a little bit but you talked about some of the yield side. Can you just kind of talk through any impact in your view as far as which side of the range or the high side of the range a little bit of your NIM kind of guidance over time. How are you feeling about the prospects on that in the near and intermediate term?

I don't want to start getting yields. I think the guidance is probably as much as I'd like to give. It's a little bit difficult to start parsing that around but I think we have lots of tools and opportunities. I think the C&I pipelines and volumes are very, very good. And there's lots of opportunity there it's an increasing part of the loan mix and it has higher rates. Our ability to raise rates so far on our single and multifamily has been – they've been either followed by competitors on time to even higher extent chase raised their multifamily loan rates by a lot more than we did so there may be some room there. So I think – and then we have some of the higher rate products obviously the consumer side is still pretty nascent, but could be a contributor over time. It's just going to depend. I don't want to be overly prescriptive. But I think we have a lot of tools and so far it's worked out pretty well. And I think that we really believe that we can get into that 380 to 400 range obviously we're going to work hard to do that. We can't promise it, but work hard to do that, keep it the rest of the year.

That's helpful thank you.

Our next question comes from Edward Hemmelgarn of Shaker Investments. Please proceed with your question.

Yes hi Greg. It's a good quarter what I was kind of wondering about was the talk about again about the loan growth because the page has in terms of balances has certainly slowed down. And you know as your originations have kind of stayed about the same in your prepayments the good news is your loans get repaid, have increased. It's been kind of stuck in this the range of originations for about the last year now good levels. But it's –how did we – do you really think that the commercial and industrial is that's going to? What are you doing there to take advantage of that use of there's more opportunities there than what you can take advantage of now? I mean what have you done to allow yourself to take more advantage of to really increase that business?

We've got a number of personnel additions that we're looking to make there. And we've got quite a few I would say newest sponsor relationships that we’re establishing that we're doing first deals for. And there's a lot of good dialogue related to the pipelines of what those deals look like going forward. So I'm very comfortable with that. I think our loan growth has been really where we wanted to be. And if you look through the quarter 16-ish percent for the year I guided to mid teens mid to high teens area so maybe a couple of 200 basis points below what that would look like. But I think it's been really good. I think clearly we want to make sure that we maintain our yields and margins which I think there are right. And we've obviously got to –we're thinking about holistically how our growth works and making sure it's profitable. So I think that having that continuing to keep high credit standards and having that sort of loan growth is really pretty good. And so we're not really – I'm not feeling like we need to accelerate that loan growth anymore. And I think it's in a pretty good place.

No I'm just thinking in terms of I mean to keep on growing 15% to 20% a year something you do right growing the by that amount just to keep growing that way.

Yes.

What about the consumer part I mean is it – what's your I know that it's become more of a focus and you're starting to generate some loans and things like that. I mean what type of a mix do you think that percentage of your loan portfolio, do you think your [indiscernible] be?

It's a little bit early to tell. I do believe that it's not something I think if you're looking six quarters out, look for that C&I side to get a lot bigger and look for continued growth in multi and single-family. If you start to look out beyond that, you'll start to see that like all the things that we do all the new initiatives those loans creep up and start to make up a portion of the loan book. It's a very early for me to tell because as you know we've been very good at when we enter a new loan category making sure that we do a very good job of having control losses and good credit quality. We want to really put that first. So look there's a ton of opportunity there but I want to make sure that we're ready for it. I don't want to go out and speculate what multiple years out what that's going to look like it's just too early for that.

Do you think you have I mean is that as you kind of unveil your universal bank offering that should make a major difference in just in how you go out and start targeting consumers…

Sure the overall all the initiatives that we have related to what's going to happen with the Universal Digital Bank. All of the product offerings and the ability to have control of the platform to have a permanent product team there and then to be able to enhance the marketing that we have to why to push those products through we think is ultimately going to be a very, very powerful driver and significant growth. And what’s interesting, I think when I sit back and look I feel so comfortable about where we are from a future perspective because we have been so conservative in growing these platforms and really making sure that we do have incredible credit performance. And if we were looking for average credit performance, our loan growth would be double or triple what it is, but we’re not looking for that we’re looking for something much better and we hold ourselves to much higher standards. So, yeah, I think we’re in really good shape. We’re investing a lot for the future and I feel good about long-term growth prospects.

Okay. And Andy just one more question about the – actually there is two more questions. In terms of the – how did the IRA program go?

Yes, from a technological perspective, it went really well. It’s one our first API integrations into a industrial sort of scale processing platform, works very well from that perspective. The take rates were below expectations. We’re not going to give exact numbers on the accounts. We did open thousands of accounts and they were – and it was fine. But it wasn’t – it didn’t have the consumer traction that we were expecting. But from a technological perspective, it works very well.

Do you think that that something is that you can probably increase with just more timely marketing perhaps to the H&R Block providers?

Yes. I mean that will be something that we have to talk with them. And we’ve not done a lot of work on sort of post tax season and post mortem, but there’s a lot of interesting things we’re talking about and there’s a lot of ideas that we’re working through. And I think we’ve got a lot of great opportunities there. So we just have to work through what those are and it’s been a real push to get to tax season and everything turned out really well for the tax season. So we’re going to obviously take a look at that stuff and talk with them about where we want to go with respect to different products and services and see where that takes us.

Okay. And then lastly, there’s a question for Andy. I appreciate your conservatism on the Emerald Advance or Refund Advance loans fully reserving that now. But as the payments I mean or the repayments of those loans pretty much stopped or are you still getting payments on the three million…

Yeah, no, we are getting payments on the amounts. And so, we do expect some more payments between now and June, but as you can see the lion’s share has already happened.

Yes. And so you would certainly expect some losses.

Probably, no. There will absolutely be losses and that was – it is within expectations and we just – we know that they will of course be below 100% of the balance to be reserve for but where that sits. I wouldn’t expect – I wouldn’t count on some big a recovery in the next quarter or something a big reversal of loan loss. There’ll be some reversal, but I wouldn’t be putting a huge amount of reversal in your model for next quarter.

No, no I mean I was just – it sounded like I mean you really have been factored in much for that product and it sounds like that was a very profitable product for you.

Yes, we’ve worked out well.

Worked out very well. Okay, thanks.

Our next question comes from Andrew Liesch with Sandler O’Neill. Please proceed with your question.

Hey, guys.

Hey, Andrew.

Andy, I think you provided with the average yield on the portfolio was, excluding Block, but do you what the average deposit costs were excluding Block from this quarter compared to last?

I don’t have that number.

I’ll follow-up with you offline. And then the lower structured settlements like they just didn't sell much that all this quarter was that planned or and then what are your thoughts on selling more of them going forward?

Yes, I would say that the market and for originating that product is different today than it's been over the past. We’re not seeing as many opportunities to originate and sell as we saw in the past. So I would expect that lower structured settlements sales are more of the future.

Got you. And then on the similar lines of mortgage banking presumably that's going to be lower than it’s been in the last few years as well.

I think we are looking for an improvement in mortgage banking next quarter, given kind of where the numbers came out. It’s clearly was a much smaller number than the quarter before. So we are looking forward to a better mortgage banking quarter coming up.

All right, thanks for taking my questions.

Our next question comes from Austin Nicholas with Stephens. Please proceed with your question.

Hey guys. Good afternoon.

Good afternoon.

Maybe just on the loan pipeline, I think it was the $909 million that was mentioned. Is that exclusive of the mortgage warehouse lines and is there really any growth off the decline that we saw this quarter that could happen in that business and maybe just try to think about the mortgage warehouse business going forward?

Sure. That does not include – yes, so it is exclusive of that the mortgage warehouse opportunities. That pipeline number has not included those opportunities. There are opportunities for increased and the number of customers in that business, we have very good levels of active negotiation going on. I think there was a pretty difficult quarter for a lot of independent mortgage bankers. There's an industry layoffs happening and things like that. So there are declines and balances. Now that being said, I think we do have the ability to take share there, because of the fact that we have a portfolio of products that we can bundle with the agency product and I think we have a good reputation in the market. I think we'll be able to continue to look for opportunities there. In any quarter though, I don't expect that we'd have a reduction in balances like we did this quarter though in subsequent quarters. That was – this is a relatively significant balance kind of as a result of that decline in mortgage banking activity.

Got you. Okay, that’s very helpful. Thank you. And then, maybe just on the Las Vegas office and maybe you could provide some outlook for the growth in that office and then maybe how that might impact your tax rate over the next couple of years?

Yes, so the office is being staffed, individuals are being hired in that office. That allows us to accommodate the goal of having a diverse employment base, and also providing a lower cost location for individuals that would like to live in the location like that. With respect to the tax rate side, I think over time, you gradually get to have some benefit as a result of that. I don't want to overstate what that benefit is. And I think that clearly any reduction in corporate tax rates that would be legislatively enacted would swamp, what those are. But over time, obviously, when you have a diverse set of employees in a number of different states. Those allocations start to have the impact, but it's going to be a pretty extended timeframe before that impact occurs. And so we'll – you'll start – you might see that, but I wouldn't be modeling that right now, it's just – it's going to be too gradual and too small and occur over many, many years as we would shift employees there over time.

Got you. That makes sense. And then maybe just my last question, what's the outlook for acquisitions any fee-based businesses or lending opportunity similar to what we saw with the Pac West Equipment Financing acquisition. Anything on the radar or anything – are there are opportunities to be had over the next year or so.

Well, there certainly are opportunities we regularly look at a variety of lending and deposit M&A opportunities that we always have active pipelines. We're thoughtful on discriminate buyers. As you can see from the acquisitions we've made, we've done a very good job of getting very good prices for good value. And that's obviously an important goal of ours. So we don't want to overpay for anything and that's something we want to continued to focus on. But yes, we do see opportunities I can't say that any one of them ends up working out and many of them are competitive, some aren't as competitive and but we have an active M&A pipeline and we're always focused on looking for opportunities that enhanced our overall strategic plan.

Understand, Thanks for take my question guys.

The final question comes from Gary Tenner of D.A. Davidson. Please proceed with your question.

Thanks for taking again.

Hi, Gary.

Andy, I wanted to ask just a follow up – just on the sort of sequential flows on the H&R Block side, that memory serves last year. The deposit had a little longer tell kind of stick around little more into the fiscal fourth quarter. So it is a result assume that occurs the same way this year and in fact the margin could be the lower end of that range in the fiscal fourth quarter as a result of the access liquidity nothing offset by those higher yielding loans.

You're absolutely correct. We will still have some average excess liquidity, obviously less than the impact this quarter. But it still will have some negative impact on next quarter. And so, I think it's, as Greg articulated we've got a lot of good things going on, in terms of loan pricing up, which has a very optimistic that we will be in that range and could be in the higher end of the range. But when you had the extra liquidity that will become that would then post down a little bit. And potentially be at the lower end of that range. So that's kind of why we've guided 3.80 to 4 and you know you're right on it.

Okay, great, thanks. And then on securities portfolio, obviously the average balance in that portfolio this quarter $100 million to $400 million it's by far the lowest it's been as a percentage of earning assets or our total assets. Can you talk about and how you think about that that asset [indiscernible]

Sure. I mean I think we’ve done a lot of work on it, where as you’ll see on a linked quarter basis, the average rate is actually come up on that portfolio. We divested ourselves of lower yielding product and [indiscernible] things like [indiscernible] securities that needed to be sold except. Can you look for opportunities, I would say it's not going to grow as fast as well [indiscernible] all but we do think that it will be a positive contributor and we will look to grow it.

Okay, and then final question for me, with regards to the accounting change in the impact that a lot of banks have had. On the stock based compensation. Is that something that wasn't going to you all until fiscal 2018?

Correct.

And would that be in the fiscal first quarter or calendar first quarter of meeting. It’s cooled quarter, we think the impact will be very, very, very small.

Okay. Thanks guys.

Ladies and gentlemen, we’ve reached the end of the question-and-answer session. I would like to turn the call back over Mr. Johnny Lai for closing remarks.

Great, thanks everyone for your interest and if you have any follow ups please to contact me. Take care. We will talk in 90 days.

This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.