Good morning, ladies and gentlemen. Thank you for standing by. Welcome to EverBank Financial Corp's Second Quarter 2015 Earnings Conference Call. My name is Allison 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.

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

Thank you, operator. Good morning, everyone, and welcome to EverBank Financial Corp's second quarter 2015 earnings call. I'm joined today by Rob Clements, our Chairman and CEO; Blake Wilson, our President and COO; and Steve Fischer, our Senior 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 the Company’s financial results 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 reported in our earnings release earlier today, our core performance was strong in the quarter. During the quarter, we achieved robust loan growth and a significant increase in net interest income while maintaining our outstanding credit quality and continuing improve our operating efficiency.

We also increased our quarterly dividend 50% to $0.06 per share beginning in the third quarter. Second quarter adjusted net income available to common shareholders was $44 million or $0.35 per diluted share compared to $39 million or $0.31 per diluted share in the prior quarter and $34 million or $0.27 per diluted share a year ago.

Adjusted return on average equity was 10.7% for the quarter compared to 9.1% a year ago and we grew tangible common equity per common share 8% year-over-year to $13 at June 30, 2015.

The strength and diversification of our commercial and residential origination capabilities were evident in the quarter with total originations of $3.5 billion, an increase of 13% quarter-over-quarter and 19% year-over-year. Total loans and leases held for investment increased 7% sequentially and 30% year-over-year to $19.9 billion.

Total assets grew 22% year-over-year to $24.1 billion and deposits increased 19% year-over-year to $16.5 billion driven by continued inflows of new commercial and consumer deposit relationships in the quarter.

Commercial deposits now represent 21% of our total deposits, compared to 13% a year ago and we continue to expect this mix to increase over time. Our capital position was solid in the first quarter with the consolidated common equity tier-1 ratio of 10.5% and a bank tier-1 leverage ratio of 8.6%.

During the quarter, we augmented our capital base with $175 million subordinated debt issuance which provides sufficient capital to execute our organic growth plans. In addition, we closed our $5.5 billion Ginnie Mae servicing sale to Green Tree during the quarter which also included terminating our sub-servicing agreement.

And finally, we were able to hire a proven and experienced asset-based lending team during the quarter. We believe the added ABL capabilities will complement our existing commercial banking activities and further support our commercial diversification and growth strategies.

I’ll now turn the call over to Blake to discuss our business performance in more detail..

Thanks, Rob and good morning everyone. As Rob mentioned, asset growth remained strong in the quarter and we continue to be pleased with our ability to source high-quality residential and commercial loans. Retained originations remained strong at $1.8 billion in the quarter, which represents a 9% increase compared to the first quarter.

Year-to-date, retained originations were $3.5 billion, an increase of 31% year-over-year. In the second quarter, we originated $759 million of total commercial loans and leases to small and mid-size businesses, which represents an 8% increase compared to the first quarter and an 11% increase year-over-year.

Total commercial and commercial real estate originations were $466 million in the second quarter, which represents a 63% increase from the prior year. The year-over-year increase was driven primarily by continued success with our commercial real estate origination activity with $258 million originated in the quarter.

Total commercial and commercial real estate originations were down slightly compared to the first quarter driven by lower warehouse finance originations quarter-over-quarter. Equipment finance and leasing also performed with originations of $293 million, an increase of 31% compared to the prior quarter.

We believe we are well positioned to build on our momentum in the first half of the year based on the strength of our commercial lending pipeline, which totaled more than $1.5 billion at June 30, an increase of 16% compared to March 31st, 69% compared to December 31, 2014.

The credit profile of our commercial real estate originations remains strong with average LTVs on second quarter originations of 59%, in addition to nice diversification by both property type and geography.

We grew commercial deposits by $188 million or 6% compared to the prior quarter to $3.4 billion, which represents an increase of $1.6 billion or 86% from the prior year.

Commercial deposit growth remains a key strategic initiative for us over the intermediate term and we are optimistic that additional business development activities should result in continued growth throughout the year.

We also enjoyed continued strength in our consumer lending business which strategically focuses on serving the needs of our core consumer clients with prime purchase-oriented lending in top metro markets nationwide. During the quarter, prime jumbo originations were $1.5 billion, an increase of 12% compared to the prior quarter and 32% year-over-year.

The client profile of our jumbo loan originations has remained consistent, over time with an average balance of approximately $820,000, and average loan-to-value of approximately 69% and an average FICO score of 765 in the second quarter.

Total residential originations were $2.7 billion in the second quarter, an increase of 15% quarter-over-quarter and a 22% increase year-over-year driven by strong seasonal purchase activity. Applications increased to $1.8 billion in the second quarter, an increase of 7% compared to the strong first quarter and rate locks were flat at $1.6 billion.

Consumer deposits increased $219 million or 2% compared to the prior quarter and $1 billion or 9% year-over-year to $13.1 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 $169 million in the quarter, an increase of $14 million or 9% compared to the first quarter, driven by a $1.5 billion or 7% sequential increase in average interest earning assets.

Year-over-year, net interest income increased $29 million or 21%, driven by a $4.3 billion or 25% increase in average interest earning assets. Adjusting for the MSR valuation allowance recoveries, net interest income represented over 71% of total revenue in the quarter, compared to 61% a year ago.

Net interest margin increased 2 basis points sequentially to 3.11%. The average yield on interest earning assets remained flat in the quarter at 3.99%, with higher residential yields offsetting lower commercial yields.

Our asset rotation strategy of selling longer duration jumbo warrants and investing in short duration higher yielding government insured Ginnie Mae pool buyout loans, continues to improve our asset sensitivity while maintaining a strong NIM.

Yields on residential mortgages increased 17 basis points compared to the prior quarter, driven by higher yields on new jumbo portfolio loans, as well as increase in average yields on our Ginnie Mae pool buyout loans.

Average commercial yields declined in the quarter driven by the run-off of higher yielding loans and the addition of loans and leases at current market rates in addition to growth in lower yielding warehouse finance average balances.

The average cost of total interest-bearing liabilities declined 4 basis points in the quarter to 99 basis points driven by lower average cost on time deposits and lower rates on FHLB advances. Credit performance continues to be strong with non-performing assets of 44 basis points and net charge-offs of $5 million or 10 basis points in the quarter.

Non-interest income was $84 million for the second quarter or $68 million when adjusting for the $16 million MSR valuation allowance recovery in the quarter. Gain on sale of loans declined $2 million or 5% quarter-over-quarter to $41 million, driven by a lower margin resulting from a greater mix of jumbo loans sold.

As we mentioned on last quarter’s call, we sold $652 million of longer duration jumbo hybrid arms in the quarter at a small gain. Non-interest expense increased $22 million or 14% to $178 million in the second quarter.

Salaries, commissions and benefits expense increased by $4 million or 4% driven primarily by higher commissions resulting from a strong residential origination levels as well as severance cost resulting from the servicing sales.

G&A increased $18 million, or 42% compared to the prior quarter driven by $15 million in restructuring and transaction cost associated with the servicing sales. Partially offsetting the increases was a $2 million reduction in sub-servicing expense due to closing the Ginnie Mae servicing sale in May.

Excluding the servicing sale transaction and other non-recurring expenses this quarter, adjusted NIU was $155 million. Our adjusted efficiency ratio was 65%, for the second quarter, a 150 basis improvement from 72% in the second quarter a year ago.

We remained focused on driving greater efficiency across the organization and continue to expect our efficiency ratio to improve over the intermediate term. Now, I’d like to turn it back over to Rob for some closing remarks..

Thanks, Steve. In closing, we are pleased with the positive momentum we experienced in the quarter as we executed on key strategies to drive continued loan and deposit growth, improve efficiency and deliver strong risk-adjusted returns.

We are optimistic about our prospects for the second half of the year and continue to believe that our disciplined long-term view toward both risk and growth positions us for a sustainable and attractive shareholder returns over time. With that, I’d now like to turn the call over to the operator for questions..

[Operator Instructions]. Our first question comes from Erika Najarian from Bank of America. Please go ahead..

Hi, good morning..

Good morning, Erika..

I just wanted to ask about your outlook in terms of commercial banking for the second half of the year. Clearly, on both loan originations and deposit gathering, the momentum was strong.

But could you give us a little bit of sense in terms of the pipeline for the rest of the year in the lending side? And also, could you give us a little bit more insight on what you are doing on deposit side to continue to accelerate your commercial banking deposit growth from here?.

Sure, Erika. As we mentioned in our prepared remarks, we are really pleased with the momentum we are experiencing in our commercial lending activities and we highlighted the fact that, we’ll continue to see very strong pipeline growth. Overall activity has been robust, multi-family has been particularly strong.

We are having great success in our lender finance business lines. But really across the board, we are certainly benefiting from strength in the economy. Arguably, we are seeing some positive impact from the disposition of GCC which is creating some opportunities for us. We are really pleased with the addition of our ABL team.

They are up and running and they’ve already closed a couple of transactions and have already built up an attractive pipeline. So it’s – we are really just seeing the continued progress of these – we have still relatively new business lines, but we’ve given the raw material to be successful.

The team we acquired from – the platform from Tigress and the BPL lending business we acquired from GE and as they continue to penetrate the market and re-establish themselves. The success has been – again very strong and very gratifying for us.

On the commercial deposit side, as we mentioned before it’s been a renewed focus to go after these opportunities and with some of the regulatory issues in the marketplace, it’s really – really played out nicely up for us in terms of the – our value proposition and our ability to leverage the strong commercial relationships that we have established and to offer additional products and services.

So we are really pleased with the success today and more excited about our prospects going forward..

Got it. And just as a – my follow-up question, just looking at the balance sheet and looking at the yields on the residential portfolio, I hear you guys will have clear terms of the asset remix strategy.

I was just wondering if you could get a little bit more color on the dynamics in terms of both the residential yield and the yield on Ginnie Mae pool buyouts went up separately quarter-over-quarter in terms of yield. Sort of, maybe a little bit more color in terms of what drove that.

I know you mentioned in your prepared remarks about some of the loans that you sold versus what you retain on the resi side and how we should think about the yield trending from here assuming nothing happens with the curve?.

Yes, hey, Erika. It’s Blake, thanks. Great question. A couple of things playing out there. One, the asset rotation strategy just generally is playing out, just as we had hoped.

We are effectively selling longer-duration hybrid arms into the market and on the residential side, we really kind of bottomed out, we think relative to the existing yields versus ongoing yields. And so we’ve seen some stabilization and improvement in that area compared to prior quarters.

On the Ginnie Mae side, the yields there continue to really outperform based on the strong cash flow characteristics versus expectation primarily based on where we are in the rate cycle overall. So, generally, the rotation strategy playing out really well.

We continue to see good opportunities on the Ginnie Mae side and we’ll continue to optimize reducing risk by lower asset sensitive or greater asset sensitivity and then optimizing the mix between those two categories at this part of the rate curve..

Got it. Thank you..

Thanks, Erika..

Our next question comes from Michael Rose from Raymond James. Please go ahead..

Hey good morning guys.

How are you?.

Good morning Mike..

Good morning..

Just maybe want to follow-up on Erika’s question and to the ABL team, you guys are tracking above the $5 million or $6 million in retained asset origination through the first two quarters of the year. Can you give us a sense for what the ABL team maybe able to ask to the commercial pipeline.

I don’t know if you gave a number, but I think you are at $1.3 billion at the end of the first quarter. I am just trying to size the opportunity there, there are chances to that I think..

Yes, Mike, this is Blake. We are from the ABL the new ABL team specifically, we are in the early innings of that. We are clearly pleased with the progress and the momentum that they have in the marketplace. It’s an incredibly experienced team with a great capacity. But I don’t think we’ve given any specific numbers relative to their capacity.

But we think that it rounds out the overall commercial offering, particularly serving the clients segment that we weren’t really serving before.

And so, strategically, as we’ve been talking about more unified offering focused on serving a broader client set, it really fills in on a nice product segment for us to serve clients and will additive to the overall commercial volumes as we look forward..

Out of that, this is a team which is very consistent with our other business lines in terms of its scaleable and national platform and the team have had great success in the past running a platform of this nature. So you I guess, it really complements our existing commercial business and its abilities..

The other comment we really make on the commercial side playing to Rob’s remarks, clearly, the commercial lending pipeline of $1.5 billion at June 30 was really the strongest, certainly compared to the prior quarter and the end of the year.

We are entering the seasonally strong third and fourth quarter for the equipment leasing business as well as commercial real estate business. And then starting to reflect some of the ABL activity in that pipeline. So, generally speaking, the outlook on the commercial origination side is diverse and high quality and very attractive..

Okay, that’s very helpful and then maybe it’s my follow-up for Steve. Steve, I appreciate all the color around the margin this quarter. Last quarter you’ve given us kind of a 3 to 3.09 range for the next couple quarters. You are obviously over that this quarter. Just any updates there based on all the commentary in the preamble? Thanks..

I think, as you heard from Blake, really nice strength in some of our core asset classes and the residential yields in the Ginnie Mae pool buyouts and good news there and the trend lines are continuing to be very strong. So, I think we are still in a similar type of frame of mind as we’ve had before.

I think we’ve bracketed the NIM guidance and where we’ve been recently and I think that with the trends where they are still kind of 3 now, maybe 3, sort of 3 to 3.09, 3 to 3.11 seems to be a reasonable viewpoint moving forward..

Great. Thanks for taking my questions guys..

Thank you..

Our next question comes from Jared Shaw, Wells Fargo. Please go ahead..

Hi, good morning..

Good morning, Jared. Good morning..

I guess, first just following-up on the ABL discussion.

With the $92 million portfolio that you purchased this quarter, did that come over without – it was not associated with the team that you hired that they were running before or is that separate from the hiring?.

That was originated by that team and it came as part of the bringing that team over, we are able to acquire that portfolio..

Okay.

And then, when you look at the deposit pricing associated with CD pricing improving over the last two quarters, is that resulting in any specific campaign? I guess, being running, how much more assuming rates flattering out, how much more run rate is there to the seasonal improvement on the deposit funding side?.

Yes, that’s really been a bit of a delivered strategy of ours to – there has been some modest in the time deposits as we are filling in, kind of the belly of the curve in the two to five year period. And we’ve seen some attractive growth and then we’ve seen some run-off of just overall higher yielding CDC.

So we’ve benefited from a remix there as well as a little bit more duration as we leverage that particular part of the deposit mix here..

Great, thank you..

Thanks, Jared..

Our next question comes from Peyton Green, Piper Jaffray. Please go ahead..

Yes, good morning. Steve, I was just wondering if the margin guidance takes into account the sub-debt offering and then also I know at least new customer rates are higher in July versus June, maybe….

That’s our overall forecast, Peyton. So – but, some of the – I knew that Blake touched on the underpinning of the cash flows and the Ginnies have been better than we’ve expected. So we had something that have benefiting both the overall yields and the NIMs and so, we continue to see strength there as well..

Okay, so bottom-line, I mean, you would expect the improved cash flow from the Ginnie Maes would put offset the margin deterioration now that we would see from higher deposit rates to fund the balance sheet size right?.

That’s right..

Okay, great. And then, maybe if you could touch on the commercial deposit piece. Certainly, commercial deposit growth has been stronger than consumer growth for the last three or four quarters. Maybe talk about the outlook and kind of the projection or the trajection of the growth rate there going forward? Thank you..

Well, I think we’ve highlighted commercial deposits – the percentage of overall deposits has increased now to 21%, a year ago, that would have been around 13% and we would expect to see that percentage continue to increase going forward.

There is a lot of activity right now in the pipeline and we are very bullish about the strength of the relationships we are developing and again, our value proposition is very attractive and so, we would expect to see commercial deposit growth continue to remain robust and increase as an overall percentage of our deposit mix going forward..

Okay, great. Thank you..

Thanks, Peyton..

Our next question comes from the Steve Moss from Evercore. Please go ahead..

Good morning..

Hey good morning, Steve..

I was wondering if you guys give a little color around the linked-quarter increase in credit-related expenses and G&A here?.

Yes, I think a significant portion of that is related to the sale and the servicing that we announced in the prior quarter, so some of the trade backs in restructuring cost that we had really related to some of the indemnification and contractual provisions inside that servicing sales I remember, Steve, we gave guidance to that in the prior quarter.

And that was what we expected to be. So it’s largely related to that..

Okay.

In terms of – on the uptick in NPL this quarter, was any of that Shared National Credit-related or it’s any color you could give there be helpful?.

Yes, none of it was, really that’s a seasonal increase in a sense on the increase in the NPL but we actually reflect back to the prior year, you saw a similar trend happen in the second quarter. So we received significant amount of updated financial information as part of our normal asset management process.

And so, you’ll see – generally in the second quarter an uptick in those downgrade. But they are all paying, they are not delinquent and so, that’s just a normal part of the routine. There is really no change overall in our viewpoint around credits..

All right. Got you. Thank you very much..

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

Good morning..

Hi, Kevin..

Good morning, Kevin..

I was hoping you could speak about some of the gain on sale margins that you see on the jumbo products versus the conventional products. Given, how long you are holding some of these in inventory, versus selling them or whether you are holding them on the very, very – over just a very short amount of time and then turning around and selling them.

Is there some difference in the margin that you are realizing due to the length of timing you are holding the assets or whether you are seeing tighter margins on jumbo versus conventional?.

Yes, hey Kevin, this is Blake. No there is really – when you look at the mix of business, that’s really what’s driving probably that the change in gain on sale of margin percentage. During the period we did about $1.2 billion – well, almost $1.3 billion of conventional loans.

Those are really originated, sold forward and moved through the balance sheet on a regular and routine basis. On the prime jumbo side, we did see a little bit more of 30 year fix as part of the overall mix and as we talked about in the repositioning overall, we sold about $650 million of hybrids.

So, clearly, given the balance size, the jumbos have a smaller gain on sale of percentage overall. But directionally, outside of the $650 million that came out of the repositioning initiative, it’s really gain on sale mix and then hope not holding time dependent origination and sell activity-driven..

And I think going forward, just to add to that, I think, as we indicated that $650 million clear this quarter, I think for the third quarter and fourth quarter you should expect to see less loans sold in a smaller number there. And some improved marginal improvement in the gain on sale margin asset and mix goes in fact to more agencies as well..

And so, like as we see refis drop-off from the back-half of the second quarter and third quarter, we’ll see lower volumes and then we obviously see that summarization coming through the servicing fee line. You recorded $19 million this quarter some $20 million.

I think across the industry, we are seeing higher amortization expense in the second quarter versus the first quarter.

Could you just give us some color on like what your expectations maybe for really like a run rate, if the prepay speed, given where prepay speeds are running right now?.

Sure, I mean, I think, well two things play into that. You’ve got prepays fees and then obviously we have the impact of clearing the Green Tree portion of the MSR sales. So we are going to see benefits of both of those. So we are seeing prepay fees slowdown to your point as we get to the back half of the year.

So we’ll benefit on the amortization for both of those. So that – our forward look would be, we’ll see a step-down in amortization in the third quarter as a result of lower basis as well as lower prepays fees and potentially pertaining on when we clear the other component of the MSR sale, we’ll see another step-down as well..

Sure, the clearing in the MSR sale is probably – it’s going to be in the fourth quarter rate and then, is that right?.

Yes, I mean, I think you’ll see, there is a mix of Fannie, Freddie and privates in there. So, like we will clear some in the third and some in the fourth..

Thank you..

Thanks, Kevin..

There are no further questions at this time. I would like to pass the call back to Rob Clements for 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 is now concluded. Thank you for attending today’s presentation. You may now disconnect..