Axos Financial Inc (AX) 2014 Q3 法說會逐字稿

Good day, ladies and gentlemen; thank you for standing by. Welcome to BofI Holding Inc.'s, Third Quarter Fiscal 2014 Earnings Conference Call. (Operator Instructions) This conference is being recorded today, Tuesday, May 6, 2014.

Now I'd like to turn the conference over to Johnny Lai from MZ Group. Please go ahead, Sir.

Thank you, and good afternoon, everyone. Joining us today from BofI Holding Inc.'s, Third Quarter 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 operational results for the third quarter and they will be available to answer questions after the prepared presentation.

Now before we begin, I would like to remind our listeners on this call that prepared remarks may contain forward-looking statements that are subject to risks and uncertainties and that management may make additional statements in response to your questions. Therefore, the Company claims the protection from the Safe Harbor for Forward-looking Statements that is 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 the Form 10-K, 10-Q, and 8-K with the SEC.

This call is being webcast and there will be an audio replay available on the Company's investor relations website, located at www.BofIholding.com. All the details of this call were provided on the conference call announcement and in the press release today.

At this time I would like to turn the call over to Mr. Greg Garrabrants, who will provide 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 2014 ended March 31, 2014. 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, 2014, of $14,610,000, up 40.5% when compared to the $10,402,000 earned in the third quarter ended March 31, 2013, and up 11.1% when compared to the $13,154,000 earned last quarter.

Earnings attributable to BofI's common stockholders were $14,533,000, or $1.00 per diluted share for the quarter ended March 31, 2014, compared to $0.74 per diluted share for the quarter ended March 31, 2013, and $0.91 per diluted share for the quarter ended December 31, 2013.

Excluding the after-tax impact of net gains related to investment securities, core earnings for the third quarter ended March 31, 2014, increased $4,801,000, or 47.1%, when compared to the second quarter ended March 31, 2013.

Other highlights for the third quarter include total assets reached $3.850 billion at March 31, 2014, up $760 million compared to the June 30, 2013, asset and up $889 million from the third quarter of fiscal 2013.

Return on equity reached 17.94% for the third quarter.

Our net interest margin was 3.89% for the quarter ended March 31, 2013, a 12 basis point decrease over the quarter ended March 31, 2013, and a 15 basis point improvement over the quarter ended March 31, 2013. (sic)

Total deposits reached $2.833 billion, up $430 million when compared to December 31, 2013.

Our loan units had another great quarter, with $696 million in gross loans originated in the quarter. As a result, the Bank achieved good quarterly loan growth, growing loan balances by 11.4% over the linked quarter and at a 46.1% annualized rate. The excellent performance of our lending groups resulted in $301 million of net loan growth.

The $696 million of production consisted of $47 million of single-family agency eligible gain on sale production; $6 million of single-family non-agency eligible gain on sale production; $305 million of single-family jumbo portfolio production; $15 million of single-family jumbo gain on sale production; $34 million of multi-family nonagency gain on sale production; $67 million of multi-family portfolio production; and $222 million of C&I and specialty asset production.

As of April 31, 2014, the lending pipeline was robust, with a single-family jumbo pipeline of $363 million; $157 million of multifamily loans; and $167 million of C&I loans.

For this quarter, our noninterest income continues to show the diversity of our platform. This quarter our non-interest income, excluding securities and mortgage prepayment penalties, was $5,400,000, consisting of $800,000 of mortgage banking income from single-family agency eligible mortgage loans; $400,000 of mortgage banking income from single-family jumbo mortgage loans; $1.2 million of mortgage banking income from multifamily mortgage loans; $1.9 million from the sale of structured settlements and other loans; $600,000 of prepaid card fees; and $500,000 of other fees.

Because the Bank felt that agency mortgage loans and both sales and retains its single-family jumbo and multi-family and specialty financed production, the Bank's continued strong continued overall loan production allows us to continue to generate fee income from loan sales, reducing dependency on agency mortgage banking income.

Although agency mortgage banking income was lower in the third quarter, we are pleased to see significant positive trends in our agency mortgage banking business in the current quarter as the selling season picks up and we move away from the holiday-type (inaudible). I believe we will see an increased contribution from agency mortgage banking in the fourth quarter.

We are also bullish about volumes in our single-family jumbo, multi-family, and C&I lending businesses. We are particularly bullish about the jumbo mortgage business given the securitization market is not an effective threat or competitor to balance sheet lending at this time, although we are well positioned if the securitization market does come back.

The enhanced capital requirements at larger banks that are driving them to either exit businesses or reprice their loan rates and the many potential competitors discouraged by the fixed costs of managing the wave of complex regulations, including those related to QM and QRM that came into effect in January of this year.

We are pleased with the increase in the credit quality at the Bank. Our nonperforming assets as a percentage of total assets are down from 0.71 at the end of the March 2013 quarter to 50 basis points at the end of the quarter March 2014. Into the third quarter of our fiscal year, that trend appears to be continuing.

We remain highly focused on credit quality at the Bank and have not sacrificed credit quality to increase originations nor loosen our underwriting standards to (inaudible).

For the third fiscal quarter's originations, the average FICO for single-family agency eligible production was 765, with an average loan-to-value ratio of 65%. The average FICO for the single-family jumbo production was 717, with an average loan-to-value ratio of 59%. The average loan-to-value ratio of the originated multi-family loans was 61%, and the average debt service cover was 1.45.

At March 31, 2014, the weighted average loan-to-value ratio of our entire portfolio of real estate loans was 55%.

When reviewing our loan loss provision, we spend time to ensure that our loss provisions are well matched to the level of risk in our portfolio. For example, our position that would be booked for an 80% loan-to-value jumbo mortgage is 210 basis points, but for a 65% loan-to-value jumbo loan the position is 55 basis points. Our reserve for C&I loans is 274 basis points.

Our current level of loan loss reserve reflects the low-risk and low loan-to-value ratio in the current portfolio. When reviewing our loan loss provision adequacy, it is worth remembering that our historic loss rate on single-family loans, including both loan purchases and loans in the 2005 to 2007 (inaudible), are under 1 basis point. We are in the process of selling our last piece of real estate owned this week.

We continue to make progress in growing and enhancing our deposit franchise. Our goal is to increase our share of transaction accounts and develop deeper customer relationships. We have made strong progress on changing the mix of our deposits to become more transaction-focused.

From December 2011 to March 2014, we grew our checking account balances by 1303%; our money market balances by 200%; while our certificate of deposit balances decreased by 61%. Transaction accounts now make up 79% of our deposit base, up from only 35% from a year ago.

The bank's deposit base, as of the end of the March 31 quarter, was approximately 69% checking and savings prior to the acquisition of the H&R Block Bank. On a pro-forma basis, assuming the H&R Block deposits were added to our deposit mix as of the end of the 2014 quarter, our transaction accounts would equal 85% of our deposit base and reduce our average cost of deposits by 13 basis points.

Of the 31% of our deposits that are CDs, only 21% have durations of five years or more.

Our business banking group had over $1.1 billion of total deposits at the end of the quarter, up from $688 million in the prior quarter ended December 31, 2013. The business bank has over 2,200 accounts, with 81% of those balances comprised of checking accounts. We continue to foresee robust growth in our business deposit balances.

Including the growth of both consumer and business checking, we have grown our checking account balances by approximately 225% this fiscal year. We believe that we create value in our consumer deposit franchise by providing a strong value proposition to our customers. We do not rest on any single attribute of that value proposition.

First, for our deposit customers, the majority of whom are coming from larger banks, there is a deep dissatisfaction with the fee and product structure of those large bank accounts, particularly monthly fees, overdraft fees, overdraft fine and credit usage fees, and not sufficient fund fees. No product from a large bank offers the free-fee usage of any ATM in the country. If the account does not have a monthly fee, it usually has a set of gotcha criteria associated with the avoidance of the fee, and an overdraft component tied to it.

We can offer this enhanced consumer value because we have around half the cost on a percentage of asset base of such branch-based banks. Additionally, we have a significant advantage over larger banks, costing roughly 95 basis points of additional interchange revenue with 115 basis points of average interchange versus 21 basis points of average interchange from non-(inaudible) exempt banks such that a checking account with an average spend of $3,000 per month would generate approximately an extra $250 per year of fee revenue. This interchange advantage allows us to offer more competitive accounts and/or debit rewards products.

Second, as bank transaction volumes continue to collapse and technology such as mobile remote deposit capture fully transform banking from a place you go to something you do, branches represent a much smaller part of the consumer experience for the ever-shrinking number of people.

[Any competent] banker is able to handle customer requests if the Bank is run efficiently and create a customer-centered experience where consumers engage with us through their cell phones, tablets, desktops, (inaudible), and customer service center. The addressable consumer deposit market for a branchless bank continues to grow far beyond what will be required to support our asset growth.

There will continue to be a segment of the consumer deposit base that values branch proximity, such as renting a safe deposit box or other services. These customers will have to pay for those services eventually because most banks providing these services [are monitoring] their cost of capital.

However, we don't need to be all things to all people. We simply don't need to penetrate that customer segment because ours is growing more than sufficiently to support our funding needs and it is a more profitable segment.

I sometimes hear the concern that we have many more direct banking competitors than we did previously. We've always had competitors, with now consolidated ING Direct the most conspicuous one.

Our deposit strategy is different than these competitors in a significant way. We've demonstrated that we can offer full service consumer and business accounts in a profit-(inaudible) manner, not just focused on high yields savings with CDs. We can do this with a lower cost structure by focusing on differentiated acquisition channels and operating efficiency without bearing the cost of branches.

The primary impediment to growth of branchless banking is from [a mix] of customers who haven't stepped out to try it. I believe that a robust group of direct banks and branch-based banks doing things like charging customers to use a branch will only increase the addressable market.

Beside our success in both our consumer and business deposit franchise, I'm excited about what we have left to do to expand our product offering, enhance our customer service, simultaneously becoming more efficient in acquiring and servicing customers.

We clearly have shifted our deposit base toward consumer and business checking and savings accounts and away from certificates of deposits as well as extending our borrowing. Interest rates have significantly improved both since year end and since last quarter. The sensitivity of our net (inaudible) value of equity to an instantaneous 200 basis point (inaudible) upward shock with a 103 basis points decline in present value on March 31, 2014, compared to 166 basis point decline at December 31, 2013, and 199 basis point decline at June 30, 2013.

A review of the simplistic interest rate [gap] table will show, not surprisingly, that checking and savings accounts don't have contractual maturities, although the average time frame our checking and savings accounts are outstanding are seven years and five years, respectively.

The interest rate gap tables simply do not reflect the economic benefit of the longevity of higher-quality checking and savings deposits and does not reflect the prepayment of mortgage principal.

Our multi-family and single-family portfolio loans are primarily 5-1 ARMs, and the portfolio's weighted average life is about three years, shorter than the contractual period of (inaudible) interest rate gap table. When looking at the cumulative interest rate gap table, the Bank is essentially neutral over a five-year time horizon.

From a net interest income and risk perspective, the Bank benefits by approximately 1.8% in the first year, from a 200 basis point (inaudible) to rates, and the cumulative impact in Year 1 and 2 with a decrease of 1.815% on a static asset base, an insignificant amount given the rate of growth of the Bank's net interest income.

I also do not foresee margin compression. I believe that we have a real opportunity, although one we have not guaranteed given our strong asset growth, to continue to take advantage of our ability to offer a better value proposition to our customers to continue to lower our cost of funds.

We will continue to reprice at lower rates our remaining (inaudible) agreement, our certificates of deposits, and gain the benefit of a lower cost of funds associated with the H&R Block deposits.

I believe that we will be able to utilize our (inaudible) relationships as well as our increasingly sophisticated Internet marketing engine to drive consumers to our deposit products, including the approximately 200,000 IRA deposit accounts (inaudible) from H&R Block.

On the (inaudible) side, I believe we can sustain the pricing on our multi-family and single-family products and pick up some incremental yield on our C&I portfolio. If (inaudible) we grow our loan portfolio at around 25% per year on a net basis, and keep the duration of our loan book relatively short, our loan book would reprice upward and any interest rate and in an upward environment at a relatively rapid pace.

Additionally, although our securities book is higher-yielding than other banks, partially due to opportunistic purchases, the securities book is a lower yield than the yield generated from the [early] originated loans. As a result, we believe that our average asset yield will increase as the result of our securities book being replaced by a greater percentage of loans.

Approximately 15% of our net interest income is from bonds and we have grown our loan interest income by the entire amount of our bond portfolio in (inaudible) less than five months this year. Another way to look at this would be, on a 15% rate of securities payoff, it would take three to four weeks of loan production to replace the entire annual income from the loan office securities portfolio, assuming that we do not purchase additional securities.

At different times over the last number of years, there has been a concern expressed over how the Bank can replace income from its securities portfolio. The math shows that this is a small concern but it is interesting, because those concerns are often voiced are those who say that they are simultaneously concerned with higher rates. The easy answer is that if rates are so much higher, you can buy marketable securities to replace the yield.

I am proud of our 35% efficiency ratio we have earned this quarter. A 35% efficiency ratio, despite our investment in technology and compliance infrastructure, the expansion of our more-established and newer businesses, is a testament to our business model as well as the ongoing operational improvements in cost management initiatives we have undertaken at the Bank.

What is so fantastic about where we are on our cost management initiative we began about eight months ago is that we still haven't fully implemented all our vendor cost-containment processes but have significant reparative processes that are too labor-intensive and can be automated to increase the efficiency of our personnel.

However, as we prepare for the Block transaction, some of the incremental personnel expense associated with preparation for that business will be incurred prior to the realization of revenue that is (inaudible) around tax season. And as we enhance our executive team for the next phase of our growth, I believe that we will revert to an efficiency ratio that is closer to 40% than 35%, at least until we realize the revenue benefits from the H&R Block transaction.

This quarter, we added a Chief Digital Officer, who will enhance our digital marketing infrastructure and refresh our marketing strategy for the mobile and social line of consumer.

We also added a Chief Deposit Officer, a former McKenzie partner who ran analytics through with Citibank, to focus on enhancing the integration between our (inaudible) marketing initiatives and continue to drive greater engagement with our customers with a particular focus on our consumer deposit customers.

We significantly upgraded talent in our analytics area as well with a recent senior hire.

We also recently added several risk-focused personnel in our C&I lending business in order to ensure that our infrastructure is sufficient to handle the increased volume of business we expect.

As we grow the Bank, the expertise required in managing operations continues to increase and we are pleased to be able to supplement our management team to allow us to pursue the significant opportunities that are available to us.

Now I'll turn the call over to Andy, who will provide additional detail on our financial results.

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 on line through EDGAR or through our website, BofIholding.com.

Second, I will discuss our quarterly results on a year-over-year basis, meaning fiscal 2014 versus fiscal 2013 as well as this quarter, ended March 31, 2014, versus the second quarter ended December 31, 2013.

For the quarter ended March 31, 2014, net income totaled $14,610,000, up 40.5% from the third quarter of fiscal 2013.

Diluted earnings were $1.00 per share this quarter, up $0.26, or 35.1%, compared to the third quarter of fiscal 2013.

Net income increased 11.1% compared to the second quarter ended December 31, 2013.

For the nine months ended March 31, 2014, net income totaled $39,946,000, up 37% compared to the nine months ended March 31, 2013.

Diluted earnings were $2.76 per share for the nine months ended March 31, 2014, up $0.64, or 30.2%, compared to the nine months ended March 31, 2013.

Excluding the after-tax impact of gains and losses associated with our securities portfolio, core earnings were $15 million for the quarter ended 2014, up 47.1% year over year from the $10,199,000 in core earnings for the third quarter of fiscal 2013 and up 8.8% from the $13,786,000 in core earnings for the last quarter ended December 31, 2013.

Net interest income increased $9,461,000 during the third quarter ended March 31, 2014, compared to the third quarter of fiscal 2013 and increased $2,836,000 compared to the second quarter ended December 31, 2013. This was a result of increases in average interest earning assets combined with a decrease in the cost of funds resulting in net interest margin of 3.89%. This is compared to 3.74% in the third quarter of fiscal 2013.

The cost of funds decreased to 1.18%, down 14 basis points compared to the third quarter of fiscal 2013 and was up 2 basis points compared to the quarter ended December 31, 2013.

Provisions for loan losses were $1,600,000 this quarter, $1,550,000 for the third quarter of last fiscal year, and $1 million for the second quarter ended December 31, 2013. The increase this quarter compared to last quarter was the result of higher charge-offs and growth in the loan portfolio.

Noninterest income for the third quarter of fiscal 2014 was $5,212,000, compared to $6,834,000 in the third quarter of fiscal 2013 and compared to $5,543,000 for the second quarter ended December 31, 2013. The decline was primarily the result of industry-wide declines in agency mortgage banking. We have mitigated the decline by selling other loans and increasing fees.

Noninterest expense for operating costs for the third quarter ended March 31, 2014, was $14,347,000, compared to $13,921,000 in operating costs in the third quarter of fiscal 2013 and compared to $15,304,000 in operating costs for the second quarter of fiscal 2014.

For the third quarter, year over year, salaries and related costs were up $211,000 related to additional staffing added since March 31, 2013. Professional services increased $544,000; data processing and Internet expenses were up $847,000; and depreciation and amortization expense was up $251,000. These increases are primarily due to growth of the Bank's lending and deposit operations.

Other general and administrative costs increased $884,000 as a result of the decline in mortgage-banking related costs and our cost management initiatives implemented to improve efficiencies and the effectiveness of people, vendor, and other costs.

For the third quarter ended March 31, 2014, compared to the second quarter ended December 31, 2013, salaries and related costs were down $239,000; professional services increased $162,000; advertising and promotional was down $544,000, primarily due to declines in online, email, and direct leads expense primarily related to agency mortgage banking.

And other general and administrative expenses decreased $775,000, primarily as a result of the continued decline in mortgage banking-related activities and our increased focus on cost management initiatives implemented to improve the efficiency and the effectiveness of people and vendors and other costs.

Our efficiency ratio was 35.1% for the third quarter of 2014 compared to 42.14% recorded in the third quarter of fiscal 2013 and compared to 39.89% for the second quarter of fiscal 2014. The efficiency ratio is calculated by dividing our operating expenses by the sum of our net interest income and our noninterest income.

Shifting to the balance sheet, our total assets increased $760.1 million, or 24.6%, to $3.851 billion as of March 31, 2014, up from $3.091 billion at June 30, 2013. The increase in total assets was primarily due to an increase of $844.5 million in loans held for investments.

Total liabilities increased $689.5 million, primarily due to increases in deposits of $741 million, partially offset by the maturity of $50 million of repurchase agreements.

Stockholders' equity increased by $70.6 million, or 26.3%, to $338.8 million at March 31, 2014, up from $268.3 million at June 30, 2013. The increase was primarily the result of our net income for the nine months ended December 31, 2014 (sic) of $39.9 million; the sale of common stock of $27.6 million; and vesting an issuance of RSUs and stock options of $3.9 million less $600,000 in unrealized loss in other comprehensive income; and less $200,000 for dividends declared on our preferred stock.

At March 31, 2014, our Tier 1 core capital ratio for the Bank was 9.07%, with $157.2 million of capital in excess of the regulatory definition of well-capitalized.

With that, I'll turn the call back over to Greg.

Thanks, Andy. Operator, if you could open the call for questions at this time? Thank you.

Absolutely. Before we go to questions, I'd like to turn it back to Johnny Lai for a quick announcement.

Great. Thank you all for joining us this afternoon. That concludes the prepared remarks. We will now move to the question-and-answer session. Before we start taking your questions, I'd like to request participants to limit themselves to one question and one follow-up. We're asking those of you with more than one question to get back into the queue after you ask your question and follow-up. Thanks, and we're ready to begin. Operator?

Thank you. Michael Millman, Millman Research and Associates.

Thank you. I may have missed this -- I apologize in advance. But regarding the deal for buying Block Bank, will you need to borrow money to support, particularly the credit as a cost of the advanced credit, or will -- and if you need to borrow, is Block the likely lender? Thank you.

Sure. First of all, it's worth remembering that the H&R Block transaction, although signed, is subject to regulatory approval. And we would need that regulatory approval to close the transaction.

With regard to the structure of the deal, we are assuming approximately $500 million of deposits in that transaction. There's no premium for those deposits, nor are there any significant assets of any kind being purchased or assumed as a result of the transaction.

So the primary nature of the transaction is an assumption of deposits, which will reduce our cost of funds and increase our liquidity as well as enhance our fee revenue through a series of products that we're going to be issuing through H&R Block, including prepaid cards, an Emerald advanced loan product, and a refund transfer product.

The only product within those three products that has any minor impact on the asset side or from a borrowing perspective would be that we're retaining a relatively small component of the Emerald advanced loans, which is around $40 million over the whole season, and they pay off and come and go. So the actual level of those at any period is even significantly lower than $40 million.

So no, there's no need for borrowing or anything associated with that transaction.

Great; thank you.

Julianna Balicka, Keefe, Bruyette, & Woods.

Good afternoon.

Hello, Julianna, how are you?

Hi.

Hello; how are you? I just have a couple of questions. One, on the deposit growth that you saw this quarter -- and I'm sorry if I missed this in your prepared remarks -- could you talk about some of the qualitative drivers behind some of the extraordinary growth? And maybe some thoughts about how that will continue through the rest of the calendar year and any seasonality we should be looking for in that.

And related to that question, it looks like on your add accounts you have a higher level of IB deposits and excess liquidity. So should we think about that as getting redeployed in the near future, or are you going to have to hold more liquidity for whatever various reasons going forward?

Well, we have a -- just from an on-balance sheet liquidity perspective, around 5% is typically where I think you'd expect to see that. That may be above that at different periods of time.

We did have a good deposit growth quarter, and we continue to add personnel in that area, increase our marketing and focus on continued deposit growth across both business and consumer. So we hope to be able to continue to achieve that good deposit growth, and you obviously -- if the H&R Block acquisition is consummated, that will assist in that growth as well.

So we're putting continued effort into that side of our balance sheet and improving the mix and growing the deposit base. We feel confident that we can continue to fund [pertinent] asset growth with the deposits (inaudible).

Very good. And then, my other question -- the 40% efficiencies that you think you'll get to before the revenues from H&R Block will kick in. How quickly do you think you'll go from 35% to 40% over the next quarter, or is this more like two or three quarters?

And then, related to that, you've added a number of senior management this quarter, but are you adding more senior management throughout the year, especially in advance of H&R Block Bank, maybe in the areas of compliance, etc., that we should be thinking about? Thank you.

Sure. The 35% efficiency ratio is partly due to the cost efficiency initiatives, which have really been driving out bunches of little things that get leaky as we grow. But also it has been a result of agency mortgage bank income declining, and so that did reduce the expenses in that area.

We see a pick-up that's significant in agency mortgage banking over the last month, and the pipeline is looking a lot better. That, therefore, is going to drive marketing expense up and some other things.

So what I said in the prepared remarks is that we'd be closer to 40% that we would be to 35%. Obviously, I'm hopeful that we don't get to 40%, but we continue to add risk personnel.

We have another senior BSA officer, three new BSA analysts, which is a substantial increase. We do believe that those are hires in advance of the things that we hope to accomplish with H&R Bank. So it's a little bit tough to say because the efficiency ratio is somewhat driven by what happens on the loan production side.

So I think that the good side will be, if it's closer to 40%, then you'll have good agency mortgage banking income. But I would think that somewhere in the area between 35% and 40% is probably a reasonable estimate for next quarter, although I really don't want to get more specific than that just because I might be wrong. We're continuing to focus on risk personnel and making sure infrastructure's in good shape for our growth.

(Operator Instructions) Don Worthington, Raymond James.

Well, good afternoon.

Hi, Don.

Hi, Don.

I missed two numbers, Greg, from the presentation. One was in terms of the pipeline -- I got the last two numbers on the multi-family and the C&I, but I missed the single-family.

Okay, the jumbo pipeline was 363. (Inaudible)

Okay. And then, on the business deposits, what was the balance at the end of the quarter?

I've got it -- it would be $1.113 billion.

Okay, great; thanks. And then, in terms of I guess the loan pricing on the jumbo product -- I know you don't say specifically necessarily where your pricing is, but just on a relative basis to the market, where would you say you are?

I'd say that we're within the market, various products. There's a lot of different market niches associated with the jumbo product, and we have a pretty broad range of products to offer folks.

We focus on portfolioing the 5-1 ARM, but we have some 30-year products that are securitization-eligible products. And those have kind of fallen a little bit out of favor lately. But I'm wondering, with some of the long rates decreases we've seen over the past couple of weeks, you won't see that pick up a little bit.

I think we're in a good position there. We don't feel compression from a rate perspective there, at least at this time. We continue to look for that, but our volume's sufficient for our appetite. And we try to focus on speed of service, on purchase business -- the vast majority of that business is purchase.

We get deals done in a quick period of time with good service, and so that assists us in gaining market share.

Okay, thanks.

Thank you. And we have no further questions. I'd like to turn the cal back over to Mr. Johnny Lai for any additional or closing comments.

Great. Thanks for your interest in BofI and your participation on today's call. If you have any follow-up questions, please contact me. Have a great afternoon. Thank you.

Thank you, everybody.

Thank you.

That does conclude today's call. Thank you for your participation.