Good morning, ladies and gentlemen. Thank you for standing by. Welcome to EverBank Financial Corp's Fourth Quarter and Full Year 2014 Earnings Conference Call. My name is Emily and I will be your conference operator today. At this time, all participants are in a listen-only mode.

After the prepared remarks, EverBank Financial Corp management will conduct a question-and-answer session and conference participants will be given instructions at that time. As a reminder, this conference call is being recorded. [Operator Instructions].

I would now like to turn the conference over to Scott Verlander, Vice President, Corporate Development and Investor Relations for the company. Please go ahead sir..

Thank you, Emily. Good morning, everyone, and welcome to EverBank Financial Corp's fourth quarter and full year 2014 earnings call. I'm joined today by Rob Clements, our Chairman and CEO; Blake Wilson, our President and COO; and Steve Fisher, our Executive Vice President and CFO.

Before we begin, I would like to remind you that our earnings release and financial tables are available on the Investor Relations section of our website. I would also like to remind you that certain comments made on today's call are forward-looking statements related to the Company and are subject to risks and uncertainties.

Factors that may cause our actual results to differ from expectations are detailed in the Company's filings with the SEC. In addition, some of the Company's remarks this morning may contain non-GAAP financial measures. You can find reconciliations to the most comparable GAAP measures in the Company's earnings release and financial tables.

Now I would like to turn the call over to Rob..

Thank you, Scott, and good morning everyone. As we shared with you a year ago, 2014 was going to be a "tale of two halves". As we execute on the strategic initiatives designed to simplify our business, reduced risk and position the company for strong growth and financial performance.

Our business and balance sheet repositioning initiatives in the first half of the year, combined with strong operating performance from our core consumer and commercial banking businesses, resulted in strong second half performance indicative of the returns and growth profile we expect to deliver.

We are pleased with our results for the fourth quarter and for the full year 2014. Net income available to common shareholders was $35 million in the fourth quarter and $138 million for the year. Earnings per fully diluted share were $0.28 in the quarter and $1.10 for the full year.

Excluding the impact of non-recurring regulatory and other expenses, adjusted earnings per diluted share were $0.30 for the fourth quarter, a 25% increase year-over-year. Return on average equity was 9% for the quarter or 9.5% on an adjusted basis and we grew tangible common equity per share 8% year-over-year to $12.51 at December 31, 2014.

The strategic investments we've made in our diversified origination capabilities are paying off, as we continue to demonstrate our ability to originate high quality commercial and residential loans which is unique for a bank our size.

Total portfolio loans and leases include 10% or $1.2 billion quarter-over-quarter and 34% or $4.5 billion year-over-year to $17.8 billion. Total assets grew 5% sequentially and 23% year-over-year to $21.6 billion.

Deposits increased 7% sequentially and 17% year-over-year to $15.5 billion driven by continued inflow of new commercial deposit relationships in the quarter. Commercial deposits now represent 19% of our total deposits and we expect this mix to continue to increase over time.

Our capital position was solid in the fourth quarter with a tier 1 common ratio of 11.6%, a bank tier 1 leverage ratio of 8.2%, and a bank total risk-based capital ratio of 13.4%. I'll now turn the call over to Blake to discuss our operating performance in more detail..

Thanks, Rob, and good morning everyone. Retained originations were $1.7 billion in the quarter an increase of 2% compared to the prior quarter, and 18% year-over-year. For the full year retained originations were $6 billion, which represents a 58% increase over 2013 and also surpassed the upper end of our original guidance for the year by $1 billion.

In the fourth quarter we originated $842 million of total commercial loans and leases to small and mid-size businesses which represents a 12% increase compared to the prior quarter and a 20% increase year-over-year. The strong sequential growth was driven by an 80% increase in our commercial real estate originations to $393 million.

For the full year commercial real estate originations increased 41% to $857 million. The credit profile of our commercial real estate originations is strong with average LTVs on fourth quarter originations of 63%, in addition to solid diversification by both property type and geography.

Commercial finance and leasing originations continue to be strong at $449 million, which represents a 4% decrease compared to the third quarter. For the full year, commercial finance and leasing originations increased 38% to $1.6 billion.

We expect these trends to continue into 2015, driven by the continued strength of our commercial pipeline, which totaled more than $900 million as of December 31. Commercial deposits were a highlight again in the fourth quarter with growth of 24% in the quarter and 62% for the year to $3 billion.

We are very pleased with these results which clearly demonstrates the strength of our value proposition. Looking forward into 2015, we expect this momentum to continue due to both industry trends and our ability to deepen new and existing commercial banking client relationships.

We believe the second half of 2014 demonstrates the maturation of our commercial banking franchise and is evidence of our high quality clients and attractive value proposition. We expect commercial loans and deposits to continue to grow as a percentage of the overall balance sheet this year and in the years to come.

We also enjoyed continued strength in our consumer lending business, which strategically focuses on servicing the needs of our core consumer clients, with prime purchase-oriented lending in top metro markets nationwide.

During the quarter, prime jumbo originations were $1.2 billion, flat compared to the third quarter, and a 47% increase year-over-year.

The client profile of our jumbo loan originations has remained consistent, with an average balance of approximately $802,000, and average loan-to-value of less than 70%, and an average FICO score of 767 in the fourth quarter.

Total residential originations were $2.2 billion in the fourth quarter, a decrease of 5% in the quarter driven by normal fourth quarter seasonal influences. Applications were $1.3 billion in the fourth quarter, an increase of 4% compared to the third quarter, while rate locks were up 1% to $1.25 billion.

Now, I will turn the call over to Steve to cover the financial results for the quarter in more detail..

Thanks, Blake, and good morning. Net interest income was $147 million in the quarter, an increase of $1 million or 1% compared to the third quarter, driven by a $292 million or 2% sequential increase in average interest earning assets.

Year-over-year net interest income increased $12 million or 9% driven by $3.6 billion or 23% increase in average interest earning assets. Net interest income represented over 66% of total revenue in the quarter compared to less than 60% a year ago driven by our balance sheet repositioning and asset retention strategies.

Net interest margin was fairly stable at 3.00%, a 2 basis point sequential decline. The average yield on interest earning assets increased 2 basis points in the quarter to 3.97% primarily driven by a 6 basis point increase in portfolio residential loan yields.

Commercial loan yields declined 4 basis points in the quarter and equipment financials declined 23 basis points driven by the run-up of higher yielding loans and the addition of loans and leases at current market rates.

Total deposit cost increased 4 basis points during the quarter driven primarily by the impact of short-term introductory bonus rates on new accounts. Credit performance continues to be strong as our non-performing assets declined to 46 basis points and net charge-offs were 12 basis points for the quarter.

At quarter-end approximately 91% or $4.9 billion of our originated and retained non government residential held for investment portfolio was originated in 2010 or later with an average LTV of approximately 66% and a weighted average FICO score of 7.64.

In addition, approximately 95% or $3.8 billion of our originated commercial and commercial real estate loans were originated in 2010 or later. The profile of these loans is strong with a weighted average LTV of 64% on a commercial real estate loan originations.

In addition, we have reviewed our commercial loan and lease portfolio and believe our total direct exposure to energy companies is approximately 10 basis points of total loans or less than $20 million.

This highlights one of the benefits of our nationwide business model and demonstrates our geographic and industry diversification which we view as a key credit risk mitigant. Non-interest income was $75 million for the fourth quarter, a decrease of $13 million or 15% quarter-over-quarter.

Gain on sale of loans declined $14 million or 29% quarter-over-quarter to $34 million driven by a 24% sequential decline in loans sold to $1.6 billion. Excluding the $3 million valuation allowance recovery benefit in the third quarter, net loans servicing income declined $1 million or 5% quarter-over-quarter.

Non-interest expense decreased $5 million or 3% to $153 million in the fourth quarter driven by lower salaries expense and lower G&A expenses. Salaries, benefits and commissions declined $4 million or 4% compared to the third quarter to $87 million driven primarily by lower variable compensation.

G&A expense declined $1 million or 3% compared to the third quarter to $42 million driven by lower credit related expenses, FDIC and other agency fees, consent order expense, and other G&A, partially offset by higher legal and professional expense.

Our efficiency ratio was 69% in the fourth quarter a 1,600 basis point improvement compared to 85% in the same quarter a year ago. For the full year 2014, total non-interest expense decreased $209 million or 25% to $639 million below our 2014 guidance of $650 million.

Our efficiency ratio improved 800 basis points year-over-year to 71% for the full year. Now, I would like to turn it back over to Rob for some closing remarks..

Thanks, Steve. Before we open the call up to questions, I would like to give you some perspective on our outlook for 2015. I believe that the actions we have taken over the past 18 months to exit non-core businesses and reposition the balance sheet has us well-positioned for sustainable strategic growth.

Based on the current environment a prolonged low and compressed interest rates, we expect our 2015 full year return on average equity to be consistent with the last few quarters of 2014 and be closer to the low-end of our intermediate term target range of 10% to 13%.

Over time we expect to gravitate toward the upper half of the range in a more normalized rate environment. We remain confident in our ability to directly source robust commercial and consumer asset and deposit volumes and we will remain focused on leveraging our fixed costs.

Given the current interest rate environment, we expect to benefit from the diversity and flexibility of our business model which will allow us to remain opportunistic either retain or sell assets to optimize risk adjusted return on equity.

In closing, we are pleased with our results for the quarter and we continue to believe our diversified business model will enable us to produce consistent results and attractive risk-adjusted returns over varied interest rate and economic cycles, which we believe is the best formula for building shareholder value over the long-term.

Now, I would like to turn the call over to the operator for questions..

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. Our first question is from Michael Rose of Raymond James. Please go ahead..

I appreciate the commentary on the ROE outlook for the newer term. Wanted to get a sense for organic asset origination and what you expect obviously you're about $1 billion above. You targeted $4 billion to $5 billion last year and it looks like in the back half of the year about $1.7 each quarter.

How should we think about the origination trends as we move through 2015?.

Hey, Michael, it's Rob. In terms of expectations for the year, our focus is on really optimizing our balance sheet in terms of what we retain and what we sell as you know. We do expect overall origination to show a healthy growth in 2015.

But in terms of what we retain and how much we grow loans held-for-investment again really be a function of the market environment, the interest rate environment, and how our appetite to retain certain products based on market conditions. But we are feeling very good.

We are thrilled with the progress we've made in our core business line, especially our newer commercial business lines and the significant growth we experienced in 2014. We go into 2015 with very healthy pipeline.

And particular in commercial, we've got real estate going into the year with probably the strongest pipeline on a seasonal basis that we've ever had before. So I expect strong total originations in the year but retention again will be more a function of market conditions..

Okay. Fair enough. And then as my follow-up, obviously you guys exceeded your non-interest expense outlook for 2014. Is the current run rate I guess do you exclude kind of a one-time transaction and regulatory charges by $149 million; is that kind of a good base to build off of as we think about expenses for next year? Thanks..

Hey, Michael, it's Steve. I probably would -- the way I would look at it as, Rob in his introductory remarks had said the tail of two halves. I think if you look at the NIE expense for the back half of the year, which is, I think about $310 million if you add those two quarters together annualized that get to the more of a $620 number.

And the originations in the mortgage business are about $9 billion annualized in that same period of time that probably gives you a pretty good baseline. That $620 million to your point did include I think for both quarters of about $7 million to $8 million of nonrecurring expenses in them.

But will also likely give everybody a raise as well, so you have some counterbalancing. So I think staring with kind of the back half NIE annualized probably gives a pretty good baseline and then influenced based on variable comp based on organic or asset generation..

Michael, we do expect to continue leveraging the fixed cost and in our corporate services infrastructure which we build out for a more -- much larger organization. We're very pleased with the improvements we've made in our efficiency ratio.

As Steve mentioned in his remarks 16,100 basis point improvement over the course of the year and we do see potential to see continued declines going forward as we generate achieve more operating leverage..

That’s very helpful. Thanks for taking my questions..

Our next question is from Jared Shaw of Wells Fargo Securities. Please go ahead..

Could you give us a little, share your thoughts as you go in the loans where we should be seeing the allowance for loan loss building out, this quarter you had strong commercial loan growth but the allowance level only grew $3.6 million?.

Yes, I think, hey Jared, its Steve. I think the -- we've been talking about kind of $5 million to $7 million of provision in prior and prior quarters I think with the strength that we're seeing in the commercial platform.

I think the last two quarters really do probably bracket what we're, our expectations are around provisioning kind of in that $6 million to $9 million range, probably gives you a sense with the mix shift that we see in the balance sheet that's probably pretty good those two quarters gave a pretty good idea I think as to where we're, what we're thinking.

We don't see any delinquency trends or anything that's created any stress inside the portfolio. But our net charge-offs I think we're only $5 million in the quarter. So providing $9 million we are actually growing reserves quarter-over-quarter really just reflecting the mix shift in the portfolio..

I just want to emphasize, how strong our credit quality remains we mentioned NPAs coming down to 46 basis points from 50 basis points, charge-offs remain very modest, we have over three years of coverage so and we also mentioned the quality of the book that, the high percentage of more assets that have been originated since 2010 and the high quality in terms of high FICO scores and low LPVs so feeling very good about our overall credit quality..

Okay.

So then as we see -- or if in the future we see higher commercial growth as a percentage of overall growth in that quarterly provision line could continue to stay towards the higher end of that?.

I think that's fair. I think it was a very, very strong commercial quarter. So I think the tier point I think that the general theme of your question is, yes, it's going to be impacted based on, assuming similar credit trends we're in right now is going to be impacted by the mix shift..

Okay, great. Thanks very much..

Thank you..

Our next question is from John Pancari of Evercore ISI. Please go ahead..

One of you can give us a little more detail on the drivers of the commercial loan growth this quarter, what components really saw a particular increase? And then after that anyone of you if you can just shed some light on your expectations for loan growth going forward, particularly the mortgage warehouse business but also the other commercial portfolios and resi mortgage?.

Yes, this is Blake.

We really saw the maturation of a lot of the commercial businesses during the quarter and with $842 million of total commercial activity, we really saw strength across the platforms, most particularly though the commercial real estate business, which was the most recently re-launch business after the GE acquisition in 2012, really gained a lot of momentum as we continue to build relationships with clients back in the market and close to $400 million overall.

So as we indicated earlier there was about $900 million pipeline at the end of the year which remains strong that's something if you look a year ago, was not necessarily the case. So we continue to see good solid strength and deepening customer relationships both on the commercial real estate and the commercial finance side.

During the quarter on the warehouse finance side we did see a kick up in activity primarily related to utilization at the end of the period that obviously can fluctuate depending on what's happening with overall residential origination activity.

We would continue to expect that to remain relatively strong given the current low rate environment and overall residential origination activity..

Okay.

And then in terms of the -- in terms of that CRE portfolio, can you just remind us what's the average size of the loans that you are underwriting in that business? And also what's the average duration of the CRE paper that you're retaining, because as I recall with the GE capital business it was larger credits and longer dated?.

Yes, generally the average size tends to be in the $5 million to $10 million range and overall it tends to be as we talked about in the mid to low 60% LTV range overall.

What we really like about the property they tend to be stabilized, mature tenants, either credit tenant for owner occupied kind of relationships and really with the weighted average duration in the four to five year range.

The good news about this particular profile depending on your view of the outlook on interest rates, is that they have a very, very strong prepayment protection which gives us a lot of certainty in terms of matching up and locking in the returns over a long period of time.

It also eliminates some of the payment shock risks that can bring credit risk into play with a more floating rate structure on credit and commercial credit in particular in a raising rate environment. So overall that gives you a feel for both the credit and kind of the yields profile..

Okay.

If I could just ask one more on the margin want to get your thoughts on where you expect the margin to trend in the first quarter in 2015?.

Hey, John, it's Steve.

I think right now with we're seeing really good stability on the liability side certainly some of the repricing dynamics on the acquired CRE book for example and some of the just what where interest rates are, I think our expectations of the next few quarters to come it at 3 basis points to 5 basis points of NIM compression would probably be our base line expectation..

Is that per quarter or?.

Yes. Per -- per quarter..

Yes. Okay, thanks..

[Operator Instructions]. Our next question is from Kevin Barker of Compass Point. Please go ahead..

Good morning. I believe you mentioned something about selling assets at the end of our prepared commentary.

Could you expand upon what assets you're talking about selling or with that regards to your normal course of business in regards to the mortgage banking?.

Yes, this is Blake. It's really related to the normal activity that we're seeing across the platform primarily related to what type and what amount of residential assets we're selling. As you know we sell a 100% of our agency eligible product to Fannie, Freddie, Ginnie. And then we also sell the 30-year fixed rate product.

We also have great liquidity in the broader based high quality jumbo hybrid arm product and as we managed ratio and managed capital and looking to maximize overall risk adjusted return on equity that's also from time-to-time a portfolio that we can sell..

Kevin, this is Steve. Just to add, I mean you saw that in the third quarter where we -- I think we talked in the last call about an arm sale that we cleared at the end of the third quarter as well of about $500 million.

And so in my remarks the reference to the reduction in loans sold is really a reflection that we sold as Blake said some of the arms in the third quarter and we did not do that in the fourth..

Okay.

And then given you're at a 8.2% tier 1 leverage ratio right now, could you outline how low you think you can on the tier 1 leverage ratio and before you will look to reposition the balance sheet or potentially increase regulatory capital?.

Yes, our target range has always been 7.5% to 8.5% on tier 1 leverage ratio. Kind of following up on the comments we just made about the -- which really reflect the flexibility we have on our balance sheet in terms of what we retain and we sell, we feel like we have sufficient capital right now to execute our business plan.

That being said we are evaluating alternate forms of supplemental non-dilutive capital which we may pursue may or may not pursue this year, but feel very good about how we're capitalized today and our ability to again execute our plan..

I mean the only thing I would add to that if you look at the growth in the balance sheet overall particularly with there's going to be whole buyouts government insured now around $3.5 billion and a significant element of the growth in the back half of the year.

And then the flexibility, as Rob indicated, with great liquidity on most of the high quality residential products on the jumbo side as well as the preferred arm we've got great flexibility to manage..

Okay.

So when you talk about supplemental capital you're talking tier 2 or tier 1?.

I mean we're -- we've been doing some review of our overall capital optimization strategies and clearly think that tier 2 capital is an element that looks like there is a possibility for optimization in that area. But we're looking at those non-dilutive sources in particular..

Thank you for taking my questions..

There are no further questions at this time. I'd like to pass the call back to Rob Clements for any closing remarks..

Well thank you for joining us today and we look forward to updating everyone on future calls. Have a great day..

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect..