Ted Haberfield - President, MZ North America Jay Sidhu - Chairman and CEO Bob Wahlman - Chief Financial Officer Dick Ehst - President.

Frank Schiraldi - Sandler O’Neill Bob Ramsey - FBR Chris McGratty - KBW Chris Stulpin - Merion Capital Bill Dezellem - Tieton Capital Management Richard Reach - RLR Capital Management.

Good day everyone and welcome to the Customers Bancorp First Quarter 2015 Earnings Conference Call. As a remainder, today’s conference is being recorded. And this time, I would like to turn the call over to Mr. Ted Haberfield, President MZ North America. Please go ahead, sir..

Thank you and good morning everyone. Customers Bancorp’s first quarter 2015 earnings release was issued yesterday afternoon just after the close and is posted on the company’s website at www.customersbank.com. There will be no slides accompanying today’s call but the press release will be at website.

You can also email me at thaberfield@mzgroup.us, if you have any additional questions. Representing the company today are Jay Sidhu, Chairman and Chief Executive Officer and Bob Wahlman, Chief Financial Officer. Before we begin, we would like to remind you that some of the statements that we make today may be considered forward-looking.

The discussion today may contain forward looking statements which are made in good faith by Customers Bancorp pursuant to the Safe Harbors provision of the Private Securities Litigation Reform Act of 1995, the Securities Act of 1933 as amended and the Securities Exchange of 1934 as amended.

These forward-looking statements include statements with respect to Customer Bancorp’s strategies, goals, beliefs, expectations, estimates, intentions, capital raising efforts, financial condition and results of operations due to the performance of business.

Statements preceded by, followed by or that include the words may, could, should, pro forma, looking forward, would, believe, expect, anticipate, estimate intend, plan or similar expression generally indicate a forward-looking statement. At this time, it is my pleasure to introduce Customers Bancorp’s CEO, Jay Sidhu. Jay the floor is yours..

Thank you very much, Ted and good morning ladies and gentlemen. Thank you for taking the time to be on our call today. Also joining me today besides Bob Wahlman, our CFO, is Dick Ehst, our President of our bank.

As you know, we are very pleased to report the strong beginning to 2015 and so our first quarter earnings per share as you know were up by 69% over Q1 2014 and we improved our financial metrics in every area. Return on equity, return on assets, asset quality, interest rate risk profile, all of them showed improvement.

So, we are very pleased over the first quarter performance.

Today’s call what we will do is, I’ll provide some initial comments; Bob will go over in detail our financial results and then before we open it out for Q&A, I’ll go over some of our critical success factors and some strategic issues that we are involved in and we really look forward to having a dialogue with you.

As I mentioned to you earlier, earnings per share were very good and in terms of the deposit performance, we are very focused on that. And we are very pleased to share with you that our non-interest bearing deposits were up by about $75 million; net interest bearing deposits were -- if you combine the two, were exceeded our loan growth.

And this is a very important accomplishment in this sort of an environment for us. And as we had expected and we had planned that we managed our capital very well and we focused on growth in variable rate loans in the first quarter. And the margin also expanded in the first quarter.

So with that sort of general introduction, I’d like to hand it over to Bob Wahlman who will go over some details of the financial performance of the company..

Thank you very much Jay and good morning everyone. And thank you for calling into Customers earnings call this morning. Customers Bank is reporting a record net income for the first quarter of $14 million compared to net income of $8.1 for the first quarter of 2014, an increase of 71.5%.

And as Jay noted a moment ago, Customers’ fully diluted earnings per share for Q1 2015 is $0.49 compared to earnings per share for Q1 of 2014 of $0.29 or an increase of 69% year-over-year.

Linked quarter, the first quarter of 2015 earnings of $14 million were up $8 million or 6% over Q4 2014 and our Q1 2015 earnings per share of $0.49 increased to $0.02 compared to the $0.47 reported for Q4 2014. The other key financial and balance sheet metrics for Q1 2014 -- Q1 of 2015 of special note were as follows.

Customers reached 12.5% return on equity in Q1 2014, up from 8.4% in Q1 2014 and 11.9% in Q4 2014. This was the first time we reached our previously stated goal of 12% target return on common equity.

Asset quality continues to be outstanding with non-performing loans declining to $11.8 million to only 0.19% of total loans outstanding at March 31, 2015 that’s down $6.3 million or about a third from a year ago and other real estate also declined by $2.5 million from a year ago to $13.1 million.

Customers’ efficiency ratio also continued its downward trend, reaching 52.8% in Q1 2015 compared to 61.8% at Q1 2014 and 54.9% for Q4 2014. Our return on assets also continued to improve, reaching 83 basis points for Q1 2015 compared to 76 basis points for a year ago quarter and 80 basis points for Q4 2014.

Customers’ total assets climbed to $7.1 billion as of March 31, 2015, another milestone that’s an increase of $2.1 billion or 42% since March 31, 2014 and an increase of $308 million or roughly 4.5% as of December 31, 2014. The balance sheet growth was driven by loans on the asset side funded by the deposits and borrowing on the liability side.

And the $308 million of growth during the Q4 2014, reflects the moderation of our growth that we had talked about previously. Loan growth reflects the growth in total assets with loans as of March 31, 2015 up to $6.1 billion or up to $2 billion over loans as of March 31, 2014 and up $348 million over loans as of December 31, 2014.

Year-over-year, the C&I portfolio grew $267 million; the commercial real estate portfolio grew $332 million; mortgage warehouse loans were up $1 billion; and multi-family loans were up $576 million, all over a year ago.

Quarter-over-quarter, C&I loans were up $69 million; CRE loans increased $47 million; mortgage warehouse loans increased $342 million; and multi-family loans declined during the quarter by $92 million. Deposits grew $1.3 billion to $4.9 billion as of March 31, 2015 compared to $3.6 billion since of March 31, 2014.

Money market deposits were up $647 million. DDA accounts year-over-year were up $103 million and CDs were up $538 million. Deposits grew $361 million in Q1 2015 with money market deposits up $60 million and DDA deposits up $180 million; the difference was made up by CDs over that period of time.

Borrowings increased $773 million to $1.7 million and we used this largely to fund our warehouse portfolio, so it reflects the growth in warehouse portfolio.

The borrowing increase also on a year-over-year basis included the $110 million of sub debt used for Tier 2 capital and the bulk of the borrowing was due to the short-term growth in the FHLB borrowings to fund mortgage warehouse loan portfolio growth.

Turning our interest into the income statement, Customers reported net interest income of $46.3 million for Q1 2015 compared to net interest income of $29.8 million for Q1 2014, an increase of 55%. The increase in net interest income is largely attributable to the $2.3 billion higher average loan balance for Q1 2015 compared to Q1 2014.

Net interest income is up approximately $1.3 million Q1 2015 compared to Q4 2014 with average loans up $224 million. Customers’ net interest margin for Q1 2015 is reported at 2.9% for Q1 2015 compared with 2.91% a year ago. The net interest margin reported for Q4 2014 was 2.84%.

While bond yields are down somewhat year-over-year and quarter-over-quarter, and year-over-year borrowing costs have increased as a result of the issuance of the sub debt and the senior debt in June 2014.

NIM in 2014 has been reported by decrease in our interest rates paid on money market deposits and other deposit accounts and increased dividend received on FHLB stock. The Q1 2015 NIM was also held back by a decline in prepayment penalties in Q1 versus Q4 on multi-family loans, down about $400,000.

Margins were also assisted by the fewer number of calendar days in Q1 2015 compared to Q4 2014. The allowance for loan lease losses is reported at $3 million for Q1 2015 compared to $4.4 million for Q1 2014 and $2.5 million for Q4 2014.

The Q1 2015 provision reflects provisions of approximately $900,000 for asset growth during the period, otherwise asset quality remained outstanding with slight improvement with MPL declining to only 0.19% of total loans.

However, we’re still providing an additional $2 million for loan losses -- for potential loan losses as we continue to evaluate our loan exposures. Q1 2015 non-interest income was $5.7 million, down $1.6 million compared to Q1 2014 and flat relative to Q4 2014.

The decrease in non-interest income year-over-year results from a Q1 2014 non-recurring gain on sale of securities of $2.8 million that was offset by the recurring gains on sale of multifamily loans in Q1 of 2015 by $1.2 million.

Customers sold approximately $140 million of multi-family loans in Q1 2014; we sold a $134 million in Q4 2014 and a $101 million in Q3 2014. So, we have demonstrated our sustained ability to sell more multi-family loan.

Q1 2015 non-interest expense of $27.5 million is up $6.3 million from Q1 2014 and was down $400,000 compared to Q4 2014 operating expenses.

Customers’ $2 billion growth in the loan portfolio year-over-year has required increased staffing for loan originations and administratively support on the loan teams that we listed from other institutions and it’s increased our operating expenses by about $4.6 million year-over-year.

With the increased assets and the employee headcount, employees at Customers incur higher occupancy expenses, higher FDIC assessment, higher franchise taxes and higher regulatory fee. In aggregate, those were up $1.6 million in Q1 2015 compared to Q1 2014. The Q1 2015 costs that I’ve already noted include approximately $1 million for Bank Mobile cost.

The decrease in Q1 2015 expenses compared to Q4 2014 expenses results from $1 million lower write-downs, the repossessed properties and the cost of settling certain litigation offset by the increased staffing, occupancy and the Bank Mobile cost as we continue to grow and invest in our business.

The Q1 2015 tax number reflects an estimated 35.5% effective tax rate. Customers was using a 35% estimated tax rate at Q1 2014 and for all of 2014. For the Q1 2014 tax expense was reduced due to a onetime benefit for that period to approximately 30% of pretax income. That’s my detailed review of the income statement and other financial metrics.

And I will turn the presentation back to Jay..

Thank you very much Bob. I stand corrected on one thing; I mentioned to you in my opening comments that our deposits, DDAs were up by about 75, the number is more accurate, what Bob said; it’s about 180 million, not 75 million. So, we’re very, very pleased with that. Now talking about a few other highlights as you can -- as you heard from Bob.

We had strong profitability; efficiency ratio went down; we’re getting much more closer to the 50% and we would love to get down in the 40%, 45% to 50% range. And we think within the next 24 months or so that’s going to happen. And the credit quality remained very, very strong.

As you know our NPLs are today at 19 basis points and our charge-offs have been for the last five quarters between 0.02% and 0.03%.

So what’s been our strategy? As you know, our shareholder value creation model is really focusing on building and attracting very high credit quality loan portfolio, loan customers by marketing to very high credit quality borrowers.

And even if we have to sacrifice a little bit on the interest rate, we will do that but we don’t sacrifice on the structure. We deliver through a single point of contact and by recruiting and retaining and continuing to attract very experienced team.

So, in the first quarter, we are pleased to share with you that we’ve added two full fledged teams and one in New York area and that team came to us from Chase and supplemented that with Capital One and that team will be housed in Melville, Long Island and they will be focusing on gathering core deposits as well as small and medium sized middle market lending.

And then we announced recently that we’ve attracted a very experienced team which will be housed, coverage is housed currently in Boston and they’ll be moving over to New Hampshire closer to where they live. And that team is going to be focused on commercial finance. And we believe that we should be able to really show some good growth in that area.

The team currently manages about $1 billion portfolio. And it’s our objective that within the next three to five years that team will be able to bring substantially most of that business over to us as well as look at new business.

So, our shareholder creation model has consistently been and it remains the same quality, credit quality, from high quality borrowers and being focused on the remaining as a business bank. To supplement that we’re also very focused on stable core deposit growth, as I mentioned to you and that’s DDAs.

So we are recruiting teams which are very focused on DDA growth. And just to share with you some numbers in terms of our performance in gathering deposits from the different segments. From the business segment, we today have about $1.7 billion in deposits and from the banking, the privately held businesses; we have about $1.3 billion in loans.

So that clearly shows our penetration in this market and it creates very, very strong opportunities for us. Number three, is we’ve continue to focus on our very, very efficient way and what we call a Branch Lite High Touch single point of contact banking supported with high technology. And that we are not going to change.

And so you shouldn’t expect us to add any more branches in any significant way at all. And we believe this is the model which gives us strategic advantage while other banks are looking at what do they do with the branches. We have no intentions of growing our branches.

The next item for shareholder value creation is continue to use new technologies and products that disrupt the market and improve our operating efficiencies while making the customers say wow. So, we think there are tremendous opportunities in that and that’s something which we’ll continue to.

A very important part of our strategy is to control our risks and that gets into the credit risk, interest rate risk, compliance risk, cyber security risk as well as talent attraction and retention.

And in that, areas like I shared with you already, we’d be happy to answer any kind of questions, but we think that is a very significant strategic advantage that we possess. So we made some changes this quarter based upon aligning our alignment of responsibilities with this risk structure.

We added several people to our overall interest rate risk management, compliance risk management, credit risk management and we pointed the executive with greatest amount of experience and credit risk to be our Chief Risk Officer and that’s Bob White.

And a person in our company who has the greatest amount of experience and who was the chief auditor for Sovereign, Mary Lou Scalese and we promoted here and she becomes the Chief Auditor for us to supplement and work closely with Bob and the rest of the team and improving not just the credit risk but also the overall enterprise-wide risk management area.

So, our objective remains the same, sustainable above average ROE and growth rate in earnings. And we’re pleased to share with you that our interest rate risk position is much better today than what it was even a quarter ago. And we are very well positioned for higher interest rates as well as for a flatter curve.

And we believe those are the two most possible structures or things that will happen in the marketplace. So looking at, I know some of you may have questions about Bank Mobile. Bank Mobile is an experiment by us in the consumer banking business.

And we launched it this quarter and our goals remain the same, about 25,000 customers by the end of the year and about 250,000 customers within five years. And we are very pleased with the results that we’ve seen so far. And we believe that those goals ought to be achieved by us and we will continue to monitor progress of that.

In the first quarter, we spent about $1 million on Bank Mobile that’s reflected in our income statement. And we had very, very, as you would expect insignificant revenues over there. Our goal is to spend somewhere between $5 million to $6 million this year and by the end of the year have those 25,000 accounts.

So, it’s going to have immaterial impact on our income statement but we believe it will have a very material impact on our franchise value. So that’s basically the Bank Mobile area. In terms of our loan mix, what we are focusing on, multi-family loans are about now today -- about 35% of our business.

And we are focused on continuing to make -- to grow our C&I business. That’s why the commercial finance team as well as other teams that we’ve gathered. And we intend to keep longer term somewhere our multifamily business, about a third of our business and not make it the significant part of the business like some of our competitors have.

We love the business; we like the business but we develop the strategy to keep what we like on our portfolio and to sale whatever additional business that we have. And we have our demand that exceeds are our ability to sale. So what we’ve been doing in the multi-family area is remaining very disciplined on pricing.

We have not put any loans in our portfolio, which are below 3.25 with half a point or 3.375 with no points. That discipline we will maintain. We haven’t put a single loan on our books, less than that over the last year and we will not put any loans at less than that going forward.

We are not taking advantage of any prepayment penalties because we are not seeing large payoffs. We’ve entered this business only in the last three to four years. And so we think margin is very core and not dependent upon fluctuations and coming through the prepayment penalties as such.

So, we believe this quarter, we will probably show some increases in that portfolio. But by design, we sold more than what we have originated in the first quarter this year.

Our focus remains New York pretty; our loan sizes remain $4 million to $7 million and we are not focused on packages and we are not focused on doing very large deal or financing buildings with elevators in them as such. So, it’s smaller type of businesses that we have. Asset quality, like I mentioned earlier remains very, very strong.

And we have 19 basis points and compared to approximately, in terms of our non-performing loan and that compared to 1.30 for our peer group and 2.30 for the industry as such. And so we do not expect any significant movements in that area at all, our delinquencies remain very low.

There have been no change in our delinquencies; no change in our non-performing loans; no change at all of any significance in our classified loans at all. So, asset quality remains very, very strong. Interest rate risk issue becomes better actually than where it was in the fourth quarter.

So with that we would like to open it up for questions and answers.

So, Aaron, if you can please open the line for question?.

Thank you. [Operator Instructions]. And we’ll go to our first caller Frank Schiraldi with Sandler O’Neill..

First, I just wanted to ask on capital plan. In the past year, you guys have talked about 2015 and said you weren’t interested in raising common equity. Obviously the stock price has moved pretty significantly, valuation has improved. So, wondering if that has changed at all.

And then if we -- other than that, if we should expect a preferred at some point, perhaps this year?.

Frank, we remain focused on constantly managing our capital along with other things. But I want to make very clear, we are not going to issue common equity that is consistent.

So we don’t need to, we’re going to taper our growth to our self generated common equity, as such generated through retained earnings and we’ll remain opportunistic and we will look at every single option available to us on a regular basis. We don’t need to increase any capital at any time and we go look at options to us on a constant basis..

And then I just guess on Tier 1 risk adjusted, is it sort of at the end of the quarter, is that sort of again or somewhere to what we saw at the end of the year, I think around 8.4% maybe 8.5% if I recall that correctly?.

It’s in that range, yes..

Okay. And then just on Bank Mobile, given really a reiteration of what you said in the past Jay. It sounds like it’s pretty much going according to plan. And just want to get maybe a little more commentary there. And then on the expense front, is it still safe to assume about $5 million in expenses for the year? I believe that was the number..

Like I just said a moment ago, Frank, it is somewhere between $5 million to $6 million of expenses. And yes everything is on plan. And it’s been very well receive by the marketplace and we continue to make improvements. So our strategy, we haven’t done any marketing at all yet, and that will be in the second half of the year. And we are on target.

It’s going to take us somewhere between 3 to 5 years to reach the breakeven point. So, it will be an expense burden on our company for the next at least two to three years..

And then finally, I think in the past you’ve talked about a -- I think it was on 4Q call, but a margin in sort of the range of plus or minus 2.80.

I just wanted to if there was still reasonable assumption going forward and if you could just share with us what the contribution the margin was this quarter? It sounds like there was very little in prepayment penalty but from the FHLB special dividend?.

I think that what we’ve said before is we expect the net interest margin to range between 2.75 and 2.80 is certainly within that range. And I think it is reasonable expectation going forward, maybe a little higher.

But there is a lot that goes into the net interest margin on every side, everything all that interest trading assets and liabilities come in to play there. We’ve had something develop over the period.

As we know that there was lower prepayment fees that were received during the first quarter which actually was against it, it was a shorter month of February when we have 28 days and that helps us. We had some -- the FHLB had a little bit more to dividend this period and versus a lot of different pieces that come into play.

And I think overall we’ve talked about a range, 2.75 to 3 and we’re comfortable with that..

I just want to make sure, it was in the ballpark on the FHLB dividend. I thought it would be about 1.7 million, 1.8 million, the special dividend, they paid, I guess in the first quarter; is that in the ballpark or….

That would be much too high for the special dividend; that would be the total dividend, the special dividend would have been only 40% of that..

Okay.

And the special dividend was 2.5% on your FHLB stock?.

Correct..

I thought -- maybe just to the stock -- I thought the stock was about 70 million as of the end of the period -- fourth quarter at least, has that changed?.

Frank, our FHLB as Bob mentioned special was only a couple of hundred thousand bucks, not into millions, no..

And then I guess just finally on the deposit front, obviously some pretty strong deposit growth.

Was that supplemented by brokered or wholesale deposits and could you just share where those levels were as a percentage of total deposits at the end of the period?.

We’ve been deemphasizing broker deposits. Our broker deposits reduced significantly. This is core deposit growth and not broker deposit growth. And I think broker deposits are about 20% or so approximately. And we will keep them at that level or lower..

And we’ll go next to Michael Perino..

Hey Mike..

It looks like his line disconnected. [Operator Instructions]..

Okay Aaron, why don’t we move to someone else?.

Okay, we’ll go next to Bob Ramsey with FBR..

Let me follow up real quick on Frank’s question about the FHLB special. I mean it looks to me, looking at the average balance sheet, like there was increase in the income from other interest earning assets of about 1.3 million quarter over quarter. And I thought most of that was the FHLB special.

But if it’s not, if FHLB special is only couple of hundred thousand, I’m just curious, what else is benefiting the yield on other interest earning assets this quarter versus last..

Bob there is in that income number, there was -- the total amount of dividend that was received from the FHLB was approximately $2 million for the quarter and that’s why you see the increase period over period. Some of that increase is related to core dividend which was 4% and some of that relates to the special dividend which was 2.5%.

So roughly that $2 million is divided 60-40 between regular dividend on our borrowings from the FHLB and the special dividend. So the special dividend was approximately $750,000 to $800,000..

And what was the dividend in the fourth quarter, just by point of reference?.

The dividend in the fourth quarter was approximately $700,000, little bit, plus or minus something. But as our balances increase, our short-term balances increase our borrowing..

And I might have missed it earlier but did you quantify what prepayments were this quarter versus last? I know you said they were down; I just didn’t catch the dollar amount..

They were down approximately 400,000..

So next quarter, if prepayments are similar and the special goes down, I guess that adds a little bit of margin pressure, sort of above whatever would be core is the right way to think about margin here?.

Yes, Bob. But like we said, there’s a lot that goes into it. And sometimes there is some things that come up that are good and sometimes some things work against you. So I think that when we talk in a range, it’s the best way to think about it..

And there’re a couple of numbers I couldn’t find in the release.

Do you have the dollar amount of net charge-offs this quarter and the end of period shares outstanding?.

Yes, I think the end of period shares outstanding were 28.3; it’s in the press release..

Okay, I only found diluted; I couldn’t find the end of period..

We’ll get you those..

Between 500,000 share difference between the outstanding and the fully diluted, Bob; it’s an approximation but we can get back to you. And then in regard to the charge-offs, the charge-offs for the period were $1 million..

And then I was hoping you give maybe a little bit more color, I know you broke out sort of what drove the provision expense this quarter. And there was about $2 million for decreased collateral valuation on some credit impaired loans.

Could you just elaborate on what types of loans these are; what are these loans that you guys acquired or originated; whether they were updated appraisals or kind of what drove the shift in collateral valuation?.

Bob, we try to take a very conservative view on credit quality and on reserving. And we felt that even though our loan portfolio will help our investment, didn’t really -- we didn’t want to increase it as much this quarter but still there ought to be some consistency in the provisioning.

And so keeping that in mind, we went through a pretty thorough analysis and we came up with a number that of our provisions. And you can see it’s an allocated based upon the appropriate accounting guidelines that are there. And we will -- but the bottom line is we don’t envision and we don’t see any deterioration at all in our credit quality.

And so, this is the way we intend really justify and quantify our provision..

And so on a go forward basis, I guess if quarter trends seem reasonably stable, what’s fair to expect provision expense will stay in that $2 million to $3 million to $4 million ballpark, is that a fair way to think about it?.

Once again, we’re going to have to follow accounting guidelines and SEC guidelines and the end result is that whenever that comes but we will be as conservative as we possibly can be. .

I was wonder Jay, if you could provide may be a little bit of update on the outlook for multi-family loan sales. You guys obviously had your third quarter where you all have sold a fair amount of multi-family loans. That gain on sales has bound surround a little bit.

Just curious sort of how you see the outlook for that piece of the business?.

I think we -- there has been many of our competitors of really in our opinion taken the -- put on some loans on their books in the 2.75 to 3 range. And they are most welcome to have that kind of business. And we think with the interest rate risk profile that we want to maintain and there’s better quality that we want to maintain.

And our earning asset needs that exist right now that we don’t have to stretch it all and we will not violate our pricing discipline as well as our structure discipline. So in the last two or three quarters, we sold approximate on an average of $100 to $225 million that you should expect us to sell a little bit this quarter also.

And it’s based upon our needs for balance sheet as such. And what’s happening is that the business still is coming to us but it’s at a lower level and because some of the people are just given it away in our assessment. So, we will continue with our strategy. There is nothing new.

And the bottom line is, you will probably see a growth in our multi-family outstanding this quarter and because we see a need to do that; and may be a little bit less sales this quarter compared to what we did in the first quarter..

I am curious to sort of outlook for mortgage warehouse, obviously a very strong quarter for balances in that business and I guess mortgage banking in a broader sounds.

But how are you all thinking about the mortgage warehouse outlook from here today?.

Mortgage warehouse is about 25% to 30% of our business and we want to keep it in that range. We think the second quarter average outstandings might be pretty darn similar to the first quarter and we expect it to slow down a little bit in the third and the fourth quarters as such.

About 60%; between 55% to 60% of our businesses is refi business and so that you can see why we believe that that volume will be coming down a little bit in the second half of the year. So, we are picking up some new customers at the present time. We’ve been consistent in this market.

Our quality of service is very, very high and that’s why you should expect us to see that volumes, our outstandings to be somewhere between 1 billion to 1.7 billion for the rest of the year..

And we go next to Chris McGratty with KBW..

Jay, I know you mentioned in the prepared remarks, you talked about some of the hiring initiatives you’ve done and kind of the build-out of Bank Mobile. And so I apologize if you’ve already covered it.

Can you help us with the outlook on the expenses? You guys have talked about leveraging the expense base and driving the efficiencies lower but if we think about core expenses, there are marginally, sequentially but any kind of expectations for the next few quarters?.

Chris, we spent about $1 million a little over $1 million in the first quarter on Bank Mobile and we expect for the year that number to be somewhere between $5 million to $6 million that is consistent with guidance that we’ve given to you last year. And we’re on target with our expectation on the new business what we are getting.

This is the business which like I said earlier that doesn’t have any significant impact on our income statement on the revenue side. It does have a significant impact on the expense side but the greatest impact is going to be in the franchise value creation.

We think it will take us about three to four years, minimum two years to reach a breakeven point. And that’s why -- but so far it’s been very well received by the customers, very well received by the marketplace. And that’s why we’re going to continue doing what we have done in the first quarter. And we are in phase one.

We’re actually also recruiting a technology team. So, we will be making some phase two improvements in that area.

And like we said earlier that we have intentions, also sometime over the next few quarters to also launch Bank Mobile like offering for small and medium size businesses to gather deposits and to extend our small business administration lending through the mobile technology also..

Bank competition, you talked about some of your competitors doing 2.75 pricing.

I am interested in is that coming from kind of the smaller players in your market or is that coming from bigger banks market share, they have may lost?.

I think the bigger players are generally much more disciplined than the new entrants and the smaller players..

Last question is on overall balance sheet growth.

I think you talked about managing the originated sale model to kind of keep the capital steady but I can’t remember that you told us exact range of the kind of total balance sheet growth for the year?.

I think we have given the guidance of 10% to 15% total balance sheet growth for the year. So you can see we had 4 point some percent balance sheet growth in the first quarter. And so that’s consistent in that range. And so you should expect us in the high end 15% and the low end at 10% for the year.

So, we ended the first quarter with little over 7 billion. You should expect us to be by the end of the year to be about 8 billion or under..

And we’ll go next to Chris Stulpin with Merion Capital..

Two of my questions remain from my list and they are the equipment finance team is new line of business, the team that you hired up in New England.

What are your growth plans for this line of business and how should we look at this as it pretends to contributing to future earnings?.

I think Chris, it’s in addition to our small business administration - excuse me, small business lending. So, we’re very focused on privately held companies.

And this business will help us in that area, plus there are certain industry segments like one is an expertise that our team has in the plastics industry and very unique situations and needs that they have for financing. Another expertise this team has is in certain high quality franchise businesses for some term financing in that area.

So, we believe that this team within a year will reach very people point and then will be contributing to our profitability beyond that. And so, we remain in that area.

We have stated in the past that’s we would like to see our C&I loans and our owner occupied commercial real estate loans over a three to five year period to be about a third of our business. And we think this is consistent with that, so this is simply helping us to get to that level.

And as you know, that business, C&I and owner occupied CRE is approximately 12% to 13% of our business right now. So, we see tremendous growth opportunities in that area over the next three to five years..

Last question, what’s your comfort range for your loan to deposit ratio? I know it came down substantially linked quarter in the first quarter of this year..

Like I said earlier, our balance bank is a strong bank and we think shareholder value creation comes through franchise enhancement and franchise enhancement comes through deposit -- core deposit generation as well as high quality loans which cannot easily be duplicated. So, we continue to recruit teams to build our deposits.

We think we should be building deposits faster than loans this year. It depends on some seasonality. And so we’re focused on that sort of a thing and you should expect our core loan to deposit ratio to remain between 95% to 100%.

We look at funding our mortgage warehouse business or banking to the mortgage companies with some deposits but mainly with the borrowings, so that there is match funding for that..

And we’ll go next to Bill Dezellem Tieton Capital Management..

Couple of questions, the first one would be relative to Bank Mobile. You said you’re going to begin advertising in the second half of the year.

How are you planning on doing that and as we look out in the marketplace, how will we see the Bank Mobile advertising?.

I think I’m sorry if I used the word advertising but I said the marketing. And the marketing, it’s probably going to be much more digital marketing than newspaper advertising or radio or television advertising. So, you probably will not see that much. We think data analytics is the way to go.

And we can look at so many different market segments, analyze what their preferences are and use digital marketing to propose to them this option for banking.

And so our model remains the same, which is you go after [indiscernible] some of our interest to infinity groups and then you also use some direct marketing techniques, such as multilevel marketing and guerilla marketing at the street level, that sort of the thing marketing we’re in, so we have no intensions of using mass media advertising..

And then the second question, you have reached your ROE goal here this quarter? And how about the ROA goal, what do you need to do to accomplish that ROA goal?.

I think for ROA, the way we look at it is to grow our revenues faster than the growth in expenses. And if you take about $5 million to $6 million in expenses that we’re investing in our consumer banking franchise through Bank Mobile that has an impact on the ROA and ROE and EPS.

But we believe by recruiting teams, by getting earning asset growth, by maintaining our margins, by looking at non-interest income sources; that is the way we will achieve our ROA goal. And so we think that within that two to three year period of ROA somewhere between 90 to 100 basis points is very doable by us..

And we’ll go next to Richard Reach with RLR Capital Management. .

Thank you for taking my question.

When you sell loans, is there a put back feature in any of those loan sale agreements?.

No..

And we’ll go next to Bob Ramsey with FBR..

I just had couple of lingering questions.

With the equipment financing that you guys are bringing on board, how will that impact expenses in the second quarter? I imagine you see some lifts in expenses before the revenue starts to coming through?.

Bob, we see revenues pick up in another areas for the second quarter, so you shouldn’t expect any material change to our efficiency ratios in the second quarter, even though we’ll be picking up compensation of each people because this is the largest team that we’ve recruited at one time but we do see offsetting revenues coming from the areas.

It wouldn’t make any effect in terms on our second quarter earnings..

Just from a modeling perspective; how much should we increase the expenses for the team or how should we think about that?.

You can figure out eight people and they’re all very experienced people and those kind of things for modeling purpose..

Okay..

It’s very difficult and we’re not going to be giving any guidance at team level. But what I’m saying to you is it should not have any material impact at all on our second quarter earnings and our modeling for second quarter that we’re doing..

And then just curious as well if there is any updated thoughts you guys can share or want to share on I guess one the Religare investment and two Philly Fed ongoing situation?.

I think on the Religare, we stay and remain the same, which we’ve said to you in the first -- in the last couple of quarters, including our Analyst Day at New York Stock Exchange on January the 7th that we’re going to wait till the third or fourth quarter and at the most that’s it.

And if our investment doesn’t get increased in value significantly as a result of Religare getting a banking license, we’re going to pull it back. And as far as the regulatory issues are concerned, we don’t comment on that other than to say that we’re very, very strong in risk management.

We believe we are very strong in CRA compliance and we have no issues on pure lending at all. So, we feel very optimistic about the strength of our company and the risk management practices that we’ve been taught..

And we have no questions holding in the queue at this time..

Okay. Thank you very much, ladies and gentlemen. Please give us a call or email us, if you have any questions at all. And we’re excited about 2015 and look forward to the next call..

And this does conclude today’s conference. We thank you all for your participation..