Tim Sedabres - IR Steven Sugarman - President & CEO Ron Nicolas - CFO Hugh Boyle - Chief Credit Officer & Chief Risk Officer.

Andrew Liesch - Sandler O'Neill & Partners Don Worthington - Raymond James Jackie Chimera - KBW Gary Tenner - D.A. Davidson & Co..

Welcome to the Banc of California, Inc. First Quarter 2015 Earnings Conference. [Operator Instructions]. I would now like to turn the conference over to Tim Sedabres, Director of Investor Relations. Please go ahead..

Thank you and good morning everyone. Thank you for joining us for today's first quarter 2015 earnings conference call. Joining me today in the call is Banc of California's, President and Chief Executive Officer, Steven Sugarman; Chief Financial Officer, Ronald Nicolas; and Chief Risk Officer Hugh Boyle.

I'd like to remind everyone that today's conference call is being recorded and a copy of the recording will be available later on the company's Investor Relations website. We have furnished a presentation that management will reference on today's call and that presentation is also available on our website under the Investor Relations section.

Before I turn it over to Steve, I'd like to remind everyone that as always elements of this presentation are forward-looking and are based on our best view of the world and our businesses as we see them today. Those elements can change as the world changes. Please interpret them in that light.

The forward-looking statements are outlined on slide one of today's presentation which apply to our comments today. And we'll provide an opportunity for Q&A at the end of the presentation. With that, I'll turn it over to President and CEO, Steven Sugarman..

Thank you, Tim. And welcome everyone to this morning's first quarter earnings call for Banc of California. The first quarter of 2015 was marked -- mark a significant period for the company as Banc of California has emerged as California's banks.

We're now a $6 billion financial institution with 38 branches across Southern California serving California's diverse private businesses, entrepreneurs and homeowners. Management continues to be pleased by the accelerating earnings power of the franchise.

Looking to the remainder of the year and including the interest costs of our newly issued debt and preferred securities, management continues to believe the company is positioned to deliver earnings that will meet or exceed the $1.14 per share consensus estimate for the full year 2015 which we referenced in our prior call.

Turning to slide two of the presentation, we highlight a few key accomplishments in the quarter. The company earned $0.29 per share on a fully diluted basis for the first quarter with $11.7 million of net income to common shareholders. This represents a new high watermark for the company's quarterly net income.

Importantly, these earnings can be considered core as the company has had no material or significant special items during the quarter. These core earnings before the return on average assets of approximately 0.9% and a return on average tangible common equity of 13.5% and a consolidated efficiency ratio of approximately 77%.

We remain confident in our ability to achieve our stated run-rate operating target of over 1% ROA, 15% ROTCE and 70% to 75% efficiency ratio by the end of the year. Our capital ratios remained strong at the end of the quarter with our tangible equity to tangible assets ratio finishing the quarter at 7.6%.

Following the end of the first quarter, the company raised approximately $290 million of senior debt and perpetual preferred stock.

This capital increased our tangible equities to tangible asset ratio to 9% on a pro forma basis and has fully funded the company's strategic plan inclusive of expected debt and preferred stock potential payoffs through 2016.

While we expect the interest expense associated with these issuances to be a short-term drag on earnings during the immediate second quarter, we believe our organic growth will enable the company to prudently deploy the capital such that the additional capital will be accretive to earnings prior to end of year.

One year ago, we announced our acquisition of Popular Community Bank's California Franchise.

At that time we indicated the transaction would have a tangible book value payback period of less than one year inclusive of the impact of the capital raise that we would manage our key capital ratios to be at the same levels or higher levels following the closing of the transaction than the then existing ratios and then we expected the acquisition to generate over $25 million per year pre-tax operating income.

We reiterated this guidance following the completion of our capital raise in May of last year. And we're pleased to reiterate the same guidance today approximately six months after the closing. Today, our tangible book value per share exceeds its level at the time of the announcement of the Popular acquisition.

Our key pro forma capital ratios exceeds the level they were at, at the time of the initial announcement. And our first quarter earnings related to the Popular acquisition exceeded our annualized guidance from the initial announcement.

The ability to successfully execute this acquisition including the technological conversion, business integration and capital markets requirements was due to the great work of literally hundreds of employees of Banc of California.

I want to recognize them and thank them all for their expertise and professionalism in this process and applaud the results they were able to deliver for the company and all of our stakeholders. I'm very proud to work with such dedicated capable banking professionals.

Now, I'll turn it over to Ron Nicolas, our CFO to discuss the first quarter financials in more detail..

Thanks, Steve and good morning everyone. I will be directing my comments to the supplemental presentation that accompanied our release starting with the highlights for the first quarter on slide three. Today, we reported net income of $12.6 million compared to $10.1 million in the prior quarter and $749,000 a year ago.

Net income available to common shareholders totaled $11.7 million after accounting for our preferred dividends or $0.29 per diluted share with the return on average tangible common equity of 13.5%. The first quarter included a tax expense of $9.5 million which represented a 43% effective tax rate.

We expect the tax-rate of 42% to 43% going forward on a combined state and federal basis. First quarter revenues totaled $98 million and increased $10.8 million or 12% from the fourth quarter. As highlighted strong growth in both net interest income and non-interest income contributed to the approximately $11 million increase.

Higher net interest income was driven primarily by a full quarter of benefit from the Popular acquisition which closed in November of last year. In aggregate, the Popular acquisition contributed $12 million to the net interest income for the quarter.

Non-interest income increased by 12% from the fourth quarter due to a higher mortgage banking revenues driven by the increased originations as well as higher gain on sale margins. Non-interest expense decreased to $75.9 million as fourth quarter expenses included one-time costs of $5.9 million.

Excluding the fourth quarter one-time costs, expenses increased by $3.6 million largely attributable to the higher volume related expense in mortgage banking. This yielded a marginal efficiency ratio of just 33% for the incremental revenue growth during the quarter.

Revenue growth at this marginal efficiency ratio is a key driver of the lower consolidated efficiency ratio which moved to 77%, down from 90% in the fourth quarter.

We incurred no provision expense during the first quarter as we saw positive risk rating movements within our loan portfolios and our held for investment loan balances were largely unchanged from the fourth quarter. Hugh will have more to discuss on this in a few minutes.

The share count or diluted EPS purposes for the quarter was 38.3 million and includes the minimum out issuable under the purchase contracts related to the tangible equity units. This included 34.9 million average shares outstanding for the first quarter, plus an additional 3 million potential common shares related to the TEUs.

As a reminder, from an EPS perspective, both are included within the share count utilized for both basic and diluted EPS calculations. Our March 31st period ending shares outstanding totaled just over 38 million when including potential shares to be issued under the TEUs as noted on page 10 of the earnings press release financial tables.

On slide four, we outlined the pre-tax contributions by business segment for the first quarter compared to the fourth quarter.

The Banking segment which includes commercial and retail banking activities produced pre-tax income of $15.9 million for the first quarter and revenues of $59.5 million which represented just over 60% of total consolidated revenues. This compared to $3 million of Banking segment pre-tax income for the fourth quarter.

A large increase in the pre-tax income was driven by higher net interest income as a result of the full quarter benefit from Popular as well as lower expenses by $3.7 million and zero provision for loan losses.

The lower expenses were primarily a result of the non-recurring one-time expense items incurred in the fourth quarter associated with Popular closing. As a reminder, the Banking segment also includes the gain on sale business related to the sale of jumbo mortgage loans and SBA loans.

The Mortgage Banking segment which includes our traditional agency and conforming mortgage banking activities produced a pre-tax income of $9.6 million for the first quarter and revenues of $39.4 million and represented 40% of consolidated revenues. This compares to $3.2 million of mortgage banking pre-tax income for the fourth quarter.

The increase in pre-tax income was driven by higher mortgage originations during the quarter along with increased gain on sale margins. Financial advisory and Asset Management segment represents the Palisades Group.

The pre-tax income for the first quarter of 600,000 was down from the $3.9 million from the prior quarter as there were no transactional or performance based fees received in the first quarter.

Finally, the corporate and other segment primarily represents the operating expense of the holding company which includes the interest expense for the debt and preferred securities of the holding company. Our net interest income and net interest margin and key components are highlighted on slide five.

Net interest income grew to $52 million during the first quarter from $46.3 million for the fourth quarter. As mentioned, the increase in net interest income was largely a result of the full quarter impact of the Popular acquisition.

Our consolidated net interest margin finished the quarter at 3.69% up four basis points from the fourth quarter largely as a result of lower average deposit costs.

Loan yields remained relatively flat for the quarter while the cost of deposits declined by six basis points to 54 basis points on a consolidated basis and are down 23 basis points from a year ago. Our stated goal was to bring the company's cost of the deposits down to 50 basis points by year-end 2015.

And as we stand today we're very comfortable in achieving that target. We continue to maintain a disciplined deposit pricing in order to bring down our overall funding cost. Additionally, we would anticipate holding the line on deposit pricing on some of our higher rate deposit products for the first 25 basis points moved by the Fed.

Higher or additional rate increases by the Fed would likely drive us to slowly follow the increase of short-term rates on the deposit side. Slide six highlights our non-interest income for the quarter of $46 million, an increase of $5 million compared to the prior quarter.

The primary driver of the increase was a $13 million increase in mortgage banking income for the fourth quarter. The higher mortgage banking income for the quarter was driven by record origination volumes and higher net gain on sale margins which expanded to 3.41% from 2.76% in the fourth quarter.

Both higher volumes and wider margins were influenced by lower interest rates in the first quarter. We would expect gain on sale margins to return to more normalized levels in the second quarter.

Total agency and conforming originations for the quarter were $1 billion up from $800 million in the prior quarter with sales during the quarter of $913 million.

Roughly 43% of the first quarter mortgage banking originations were purchase related down from 57% during the fourth quarter as refinance volumes drove the overall increase in originations as a result of the drop in interest rates during the first quarter.

Partially offsetting the stronger mortgage banking revenues was a drop in TPG related advisory fees. You will recall in the fourth quarter, we recorded a higher advisory fees from TPG as a result of the monetization of a client portfolio which added $5 million of fee income.

For the first quarter, advisory fees were $1.2 million and included no transactional or performance-based fees. Gain on the sale of loans, excluding mortgage banking for the first quarter increased by $600,000 to $4.5 million as the net gain on sale margins for jumbo loans also expanded by 40 basis points to 1.84%.

Similar to the agency business, the wider gain on sale margin was influenced by the quarter's lower rates. First quarter production of the non-conforming jumbo originations totaled $240 million compared to $298 million in the prior quarter, with sales of $187 million compared to the fourth quarter sale number of $194 million of jumbo loans.

Of the $240 million originated during the quarter, approximately $216 million was originated for sale and $24 million held for investment. We intend to continue to originate and sell jumbo mortgages to manage both portfolio risk and economic returns.

We continue to be focused on managing non-interest expense, while expanding and growing our business as highlighted on slide seven. First quarter non-interest expense totaled $76 million, down $2.3 million from the fourth quarter.

As you may recall, the fourth quarter included $5.9 million of one-time non-recurring charges in part related to the conversion and integration of the Popular transaction. Adjusting for the fourth quarter's one-time expenses, our operating expense increased by approximately $4 million.

This increase was entirely attributable to the loan volume related expenses which increased by $4.1 million related to higher mortgage banking originations. Basic expenses, as highlighted in the slide declined by $500,000 compared to the fourth quarter.

This was largely driven by a full quarter of ongoing operating expense attributable to the acquired Popular branches offset by lower incentive compensation as the fourth quarter including an additional two million in incentive compensation tied to the hired advisory revenue last quarter.

We believe that base expense number has begun to stabilize and the volume related expenses will move in line with mortgage banking originations. As previously mentioned, our marginal efficiency ratio for the quarter was 33%.

We continue to be focused on driving the consolidated efficiency ratio toward our run-rate target of 70% to 75% and are confident in our ability to achieve this target by year-end. Overall, the company increased by 58 to 1,533 FTEs compared to the prior quarter.

The majority of the additions to the head count were related to hiring within our mortgage banking division as hiring picked up due to staffing required to support the higher volumes and continued expansion of our mortgage business.

Turning to the balance sheet on slide eight, the company finished the quarter at $6.1 billion in total assets up slightly to the end of the fourth quarter. Loans held for investment decreased by $15 million from the fourth quarter as a result of pay-downs and payoffs as well as the sale of $29 million of multi-family loans during the quarter.

Loans held for sale increased primarily as a result of higher fundings for our agency and conforming loans as previously noted which ended the first quarter at $355 million versus $280 million in December. Most if not all of these loans will be sold in April.

In total, our lending teams originated over $1.5 billion of loans during the quarter, up from $1.3 billion in the prior quarter and we continue to target originations of over $7 billion for the full year.

The securities portfolio increased by $48 million and cash increased by $34 million during the quarter as we increased liquidity to support the overall growth of the balance sheet.

We purchased 57 million of securities during the first quarter which were short duration agency CMOs with the weighted average life of 3.7 years and an average yield of 2.3%. Deposits increased by $190 million and we were able to lower our outstanding FHLB advances by approximately $90 million as a result of that deposit growth.

Highlighted on slide nine is our current portfolio mix. The $5.2 billion current portfolio continues to be comprised of 50% of commercial loans. Commercial loan originations totaled $191 million for the first quarter up slightly from the prior quarter.

During the quarter, as previously noted, we sold a handful of multi-family real-estate loans with notional principal balances of $29 million.

These loans were generally lower yielding assets compared to our overall multi-family portfolio and overall lower yield targets and the loan sale allowed us to test the liquidity of these assets while managing our overall CRE concentration. The associated net gain for these assets totaled less than $300,000 given the absolute low coupons of the pool.

However, the transaction validated the liquidity for these assets. We expect to continue to examine opportunities to optimize our returns on capital and manage our overall CRE concentration and may look opportunistically to sell additional CRE assets with lower risk-adjusted returns.

Of the total loans held for sale $355 million were agency and conforming mortgage loans and the remaining $880 million were jumbo mortgages down from -- just over $900 million at the end of December. Moving to deposits on slide 10, as mentioned deposits increased by $190 million during the quarter to $4.9 billion.

We saw a nice uptick in the non-interest bearing deposits during the quarter which grew by $87 million as the money market balances which increased by $62 million. Savings in interest bearing checking balances declined by a combined $110 million.

Time deposits grew by $150 million as a result of increased wholesale funding to support both the increased loans held for sale portfolio as well as the swapping out of $90 million of FHLB advances into brokered CDs during the quarter as the company continues to prudently manage its interest rate risk.

The average loan to deposit ratio was 82% for the first quarter excluding our loans held for sale. Lastly, during the first quarter, we closed two branches, one in Hollywood and one in Irvine.

Both of these locations were acquired through the acquisition of the Private Bank of California and were primarily loan production offices with very low transaction accounts. Deposit balances collectively were approximately $16 million and were easily transferred to other branch locations with virtually no impact to our customers.

Slide 11, highlights our capital position as total equity increased during the quarter to $514 million. Tangible book value increased to $10.81 per share from $10.53 as of December 31st and when adjusting for the TEU conversion, the tangible book value per share increased $0.32 to $9.96 per share.

Our tangible equity to tangible asset ratio was up slightly from the prior quarter to 7.6% as retained earnings grew faster than the balance sheet expanded. As we guided previously earlier this month, we completed the concurrent debt and preferred offerings raising approximately $290 million of new capital.

With the proceeds from these offerings, our tangible equity to tangible asset ratio on a pro forma basis moves up to 9% as Steve mentioned earlier. The banking company both remain well-capitalized at the end of the quarter for each of the key risk base and leverage ratios.

We believe these capital offerings support our current strategic plan for growth and although the associated carrying cost of the debt may be a short-term drag on earnings for the second quarter, we're confident in our deployment opportunities to leverage this capital and continue to grow the earnings power of the franchise.

With that, I will now turn it over to Hugh Boyle to highlight credit quality..

Thank you, Ron and good morning everyone. As of March 31st, 2015 Bank of California stands with approximately $5.1 billion in loans. Comprised of roughly $3.9 billion and held for investment loans at approximately $1.2 billion in held for sale of loans.

Of the $4 billion in HFI loans, we have approximately $1 billion in loan balances in each of the three following business lines. Commercial real estate mortgages, one-to-four family residential first mortgages and multi-family loans.

In addition, with the integration of the Popular loans, our commercial and industrial loan balances are now approximately $500 million. The remaining loan balances are comprised of equipment finance leases, SBA, construction and other consumer or HELOC loans.

Consistent with one of the central themes of our strategic plan to diversify and strengthen our loan portfolio and business platform, as of March 31st, 2015 single-family residential mortgages remained flat quarter-over-quarter at 29% of total HFI loans down from over 48% one year ago.

Correspondingly total commercial loans registered at 66% as of quarter end up from 46% one year ago. With regard to the Popular Community Bank loan acquisition which closed in November 2014, our initial experience with the new book of business continues to be positive.

Banc of California has proactively reached out to our acquired relationships, many of which represent desirable C&I businesses and established a strong dialog oftentimes with our executive team personally involved.

We have reiterated our support for our newly acquired customers and have already begun to expand and move many of these relationships forward with additional loan extensions, competitive deposit products and other banking services.

Recall that Banc of California only acquired performing loans, all the loans with delinquencies greater than 90 days were excluded from the purchase and we excluded loans that were high risk from a BSA/AML standpoint.

As a result, nearly all of our bank-wide credit metrics and ratios further improved the year-end and results from the denominator representing a larger portfolio of clean acquired loans. Also remember that Banc of California negotiated credit protection rights with Popular for a term of two years.

Any losses above 50 basis points will be covered by Banco Popular up to 2% of portfolio balances. To ensure that we properly preserve this credit protection, the Bank has created tiding consistent process that requires a review from accounting credited legal for all modifications, extensions and changes to the loans that we initially acquired.

We believe that this process will ensure high collectability under our loss-sharing agreement with Banco Popular should losses occur. Our legacy businesses continued to show robust internal loan origination growth for the quarter.

However, with several internal management initiatives and continuing low interest rates leading to refinancings and repayments, the total loan book only increased by $37 million or less than 1% for the quarter. Held for investment loans declined slightly during the quarter.

With the November 2014 closing of the $1.1 billion in Popular loans, management consciously focused our attention on reviewing and properly integrating the new loan book.

Time was spent by both our origination units and credit risk administration to ensure proper risk ratings and to perform a deeper dive into the financial and operating positions of our newly acquired customers. Much of this loan portfolio integration has now been completed with the March 31st quarter-end closing process.

In addition, management in the normal course of business considered our internal concentration limits and prudently tested the market with a successful execution and sale of $29 million in recently originated multi-family and commercial real estate loans.

With the recent decline in oil prices and the losses announced by a number of our peer banks, we anticipate that our investors will be interested in knowing Banc of California's exposure to the oil and gas sector. We confirm that the Bank has no internal loan exposure to the oil and gas sector.

On slide 12 of our investor presentation, we outlined our asset quality metrics. Overall, our asset quality metrics remained flat and consistent with dollar levels and ratios that the bank has experienced over the last couple of quarters.

The slight tick up in both delinquencies and non-performing loans during the quarter is largely attributable to our seasoned loan portfolio which is carried on a fair value basis and continues to have a strong valuation cushion.

Non-performing loans in our originated and ALLL attributable HFI portfolio actually improved and sell by $2.7 million or 9.5% during the quarter. ALLL attributable delinquent loans increased only slightly by $2 million for the quarter.

With the relatively lower net loan growth for the quarter, the credit quality of our ALLL attributable loan portfolio continuing to be stable -- continued benign macroeconomic conditions and very low net charge-off levels our allowance or loan loss reserve requirement remained flat for the quarter.

This resulted in a provision of zero for the quarter. The ALLL to ALLL attributable loans coverage ratio finished the quarter at 1.26% down only slightly from 1.29% in Q4. With that, I'll turn it back over to our CEO, Steven Sugarman..

Thank you, Ron, thank you, Hugh. I'll now turn to slide 13 of the presentation where we recap our progress towards our stated financial targets. The first quarter was a significant step forward towards meeting all of our financial targets.

With the Popular acquisition under our belt and positively contributing to consolidated performance, we continue to be focused on growing our core businesses to drive increasing returns for our shareholders.

As we've demonstrated this quarter incremental revenue growth and marginal efficiency ratios sub 50% will continue to be the key factor for our company on our path towards delivering our stated financial targets.

Looking towards the remainder of 2015, we continue to believe there are attractive growth opportunities for Banc of California across our various existing business units. With the additional capital we raised in April, we're able to fully fund these attractive opportunities being generated by our existing businesses.

Management expects that amongst other things, this will enable the company to increase our focus on held for investment lending. This would result in additional asset growth, higher quality earnings and improved cost efficiencies.

Finally, before opening this call up to questions given that we have a growing list for shareholders, I want to highlight that the company continues to have an active dividend reinvestment plan.

As part of this plan all investors have the option to have the dividends reinvested back into shares of common stock at a 3% discount to prevailing market prices for our common stock. This enables interested investors to grow their holdings in Banc of California at a discount to prevailing market prices.

Any investor seeking additional information can contact Tim Sedabres our Head of Investor Relations. His contact information is at the bottom of this quarter's earnings press release. This completes our prepared remarks this morning. Operator, we're now ready for questions..

[Operator Instructions]. The first question is from Andrew Liesch of Sandler O'Neill. Please go ahead..

Question on, you mentioned a couple of times capital deployment opportunities with what you just recently raised and I am just curious like what that sort like if you could just dive into that deeper and how you think that will generate loan growth especially with the high level of pay-ups and pay-down this quarter?.

This quarter we originated approximately $1.5 billion of loans which was up $200 million over the fourth quarter. One of the key questions is, whether those loans are originated for sale or for investment. And that is primarily a management decision.

So the pace and rate of our asset growth is largely a function of management's decision around capital deployment and capital efficiency and profitability at any point in time. That being said, it's important to note that we have provided guidance that we expect over $7 billion of originations this year.

And our target of $1.5 billion of those originations coming from commercial lending. Considering that level of commercial lending with average durations of four years to five years you're looking at a run-rate volume of commercial lending which is well above the existing size of our commercial loan portfolio.

So when we think about the deployment of this capital, management believes we're able to do it with the existing businesses we have, with the existing pace of originations that we expect for this year. And then, with time our loan portfolio will continue to grow to levels, they grow the bank up towards $10 billion..

Okay. So then if I heard you correctly, commercial originations were $191 million this quarter..

That's correct, Andrew. Yes..

Did you get that $1.5 billion Hugh.

I would assume that they would then accelerate pretty substantially as we move through the next few quarters?.

Yes, and just as you look towards our originations, you'll expect similar trends, one thing I'd refer you back to is, I believe, you asked a similar question in the fourth quarter of 2013, after we completed an integration of two of our subsidiary banks.

And during the fourth quarter of 2013 our total assets actually remained flat for the quarter, because as is our practice and what we believe is prudent, as we finish an integration and consolidation it's often best to focus on your operations and consolidating the platform and driving some efficiencies.

And at that time, a question came up about our ability to generate loan growth. And I think that my response was, it was the first time that anyone had questioned Banc of California's ability to grow quickly.

And so, I think that you're seeing here a pretty predictable pattern that when we do meaningful transactions, we don't look to grow without restraint. We look to consolidate the growth, we look to make sure our relationships are stronger, our processes are strong.

This quarter's slower growth rate is very reflective of the same thing that happened at the end of 2013. And that ushered in the period of pretty responsible, but attractive growth throughout 2014..

Got you. I think, I do remember that too. And then just one other question. The other non-interest income line, they were down to about 327,000, just curious what the difference was between this quarter and fourth quarter of last year..

That one in particular, Andrew, I don't have off the top of my head, I'll have to get back to you on that one..

The next question is from Don Worthington of Raymond James. Please go ahead..

In terms of, I think you mentioned in the press release, deposit reprise, just wondering if you could give a little more color, are you kind of intentionally managing higher rate accounts out or I guess, I was just looking for more of what that meant?.

Sure. There are two elements I would highlight, one is, real focus on non-interest bearing deposits. As you'll see in the presentation we've seen our non-interest bearing deposits almost double over the last year and it's been a primary focus of our businesses to deliver those high quality relationship accounts.

Secondly, given the growth our banks experienced over the last four years, a number of our relationships are newer.

And we view that with newer relationships there is a seasoning process where we want to add services and products and ways that we can interact with and serve those relationships which make them longer-term, stickier and more -- and higher quality core deposits. That's been the primary focus of our deposit strategy.

And with that becomes pricing improvements because as you have a more robust relationship with your clients and deeper relationship, the products, the deposit products they use and the pricing on those products should reflect a lowering cost to deposit..

And then in terms of the mortgage banking business, what do you expect the volumes to be in the second quarter? Are they still looking strong, obviously first quarter was seasonally strong, but just curious on the outlook?.

Yes, first quarter for mortgage banking is seasonally, typically a pretty slow quarter. So the strong performance in the first quarter was partially a reflection of macro market conditions which were positive I think across the sector. But our origination volumes also reflected a lot of the positive strides our mortgage banking team has made.

And adjusted general tailwind in terms of production that we'd expect over time. As we look forward into the second quarter in the summer, at least for this early part of the second quarter, we continue to see volumes on pace consistent with the first quarter.

And just as a follow-up to Andrew's earlier question, on the other income, some of those fluctuations relate to our mortgage servicing rights and fluctuations that come with fluctuating interest rates and duration assumptions..

[Operator Instructions]. The next question is from Jackie Chimera of KBW. Please go ahead..

Looking at the movements, if I write it down correctly, I think you said that purchase volume was 43% in the first quarter.

How did that move between January, February and then into March and where we're at in April?.

Sure, Jackie, this is Ron, January was fairly balanced at roughly the 50%-50% and then we saw an acceleration of the refi in February and March and pretty much a continuation, although we saw a slight slowdown of the refinance business in April.

But, pretty much it's been running, the purchase refi business has been running in that 45% - 55% respectively range for each of them..

Jackie, I would also add with what we're seeing in April. While our loss volumes consistent with March, our purchase activity has increased as you'd expect with kind of the second and third quarter, where it's approximating about 50%. And just to put out a point, a finer point on that, that's our agency and conforming business.

Our jumbo originations continue to be very high purchase related at 70%..

And then you had mentioned that with the movement up to 341 for the gain on sale margin you expected that to come down to a more normalized level in 2Q.

At this point in the cycle what do you view a more normalized level as maybe just a range?.

Yes, so I think that that number is somewhere on a net basis right around 3% and fluctuates really between 3% and 3.25% what I would consider, I think what we would consider a more normalized level. It obviously expanded with the drop in interest rates.

We saw consistency with our pull through and up on delivery of course, we got the benefit of the lower rates notwithstanding the hedge impact that we had as well. So, but again the more normalized levels probably in that 3%, 3.25% kind of range..

Okay.

And if refinances continue, let's say, they go back to more of the February-March pickup that you saw, could we see that be a little higher than 3%, 3.5% next quarter?.

Jackie, I think we previously have provided guidance that we target about 75 basis points of pre-tax profit within our mortgage business for agency and conforming. And against originations. So that continues to be our targets. So this could bounce around a little bit.

But with our overall origination targets that we laid out earlier, we're budgeting for north of $5 billion of mortgage banking originations..

And Jackie, the gain on sale between purchase and refi really is, there is really no real meaningful difference between the gain on sale from those two products..

[Operator Instructions]. Next question is from Gary Tenner of D.A. Davidson. Please go ahead..

Just a question on the capital comments you made where that you mentioned the capital issuance and the debt issuance in early April takes you through '16 on your planning process including redemptions. Obviously, it gets, you got SBLF that re-prices next year.

How about timing on the callable senior notes that are at the higher rate than what this most recent slog was issued at.

Any sense of timing on when you may consider calling some of that?.

Yes. We're actively considering that question right now. I don't have anything to share with you forward-looking on that. They have become callable securities. That said accompanying the higher existing interest rate is also some capitalized expenses in the order of about $3 million.

So to the extent that there was a decision to repay those, you'd get a one-time hit. But we've made the decision at this point, but are very comfortable with our overall capital position financing our business plan..

This concludes our question-and-answer session. I would now like to turn the conference back over to Tim Sedabres for any closing remarks..

Thank you everyone for joining today's call. As always, we're happy to talk to you. If you have any follow-up questions don't hesitate to reach out and we'll make ourselves available. Thanks for joining us..

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