Axos Financial (AX)

Johnny Lai CFA VP, Corporate Development & IR
Greg Garrabrants President & CEO
Andrew Micheletti EVP & CFO
Nick Dufala B. Riley FBR
Andrew Liesch Piper Sandler
Michael Perito KBW
David Chiaverini Wedbush Securities
Call transcript
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Greetings, and welcome to the Axos Financial Second Quarter 2020 Earnings Results Conference Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instruction] As a reminder, this conference is being recorded.

It's now my pleasure to introduce our host, Johnny Lai. ahead. go Please

Johnny Lai

good and Thank afternoon you everyone.

prepare be and today quarter the quarter, second us Executive Andy Greg Vice will will Financial Greg comment and Andy President and Inc's results conference Officer, operational President presentation. answer Executive questions and our Axos review financial Garrabrants; Financial call and second to after available Chief Officer, Micheletti. Joining the and for Chief on are financial and Company's the with results they

questions. Before forward-looking begin, Litigation to risks listeners are additional XXXX. we is management would statements I remind claims the this that to Company from that Reform in for that statements your the Private like on made the Act forward-looking may in call prepared make contained and subject statements remarks, response of Securities uncertainties, and Therefore, may the to contain protection Safe that Harbor

to can risks. unknown filings the Inc uncertainties, XX-K, the more statements form Financial involve all business risks Axos by Forward-looking the in detailed with terminology are those XX-Q, on forward-looking related business identified SEC. statements use including be X-K related and of subsidiary There and its Company's and common

this press available and webcast were be announcement and of call Relations This being provided is days call an with audio on conference today's in of Company's call there'll All website details axosfinancial.com. the replay the XX the section Investor the release. located at

over will our opening begin. provide the please like At the Greg CEO, remarks. time, I'd who Garrabrants, turn to to Greg, call

Greg Garrabrants

Financial for second thank XX, Axos of to Bank. welcome XXXX, year for you and quarter Axos Financials like of Johnny. and interest you December everyone conference I'd Good fiscal Axos you, Thank everyone, your in I us. thank afternoon to for XXXX. the the call end joining

million fiscal second second million the announced December million the second December XX, XXXX, quarter. the earned quarter quarter X.X% X.X% from $XX.X income compared in quarterly fiscal quarter of up Axos for the the in and record up earned XXXX, prior $XX.X ended net $XX.X ended XX, to

Earnings the for million, diluted XX, XX, quarter $XX.X were ended quarter attributable $X.XX share $X.XX XXXX, December XXXX. diluted ended $X. September quarter XX, share December for diluted and XXXX, December share for to Axos' XX compared per common the per to stockholders ended or the -- per

$X.X highlights annualized per Excluding and leases $XX.X earnings include $X.XX XXXX, and non-recurring from ended non-GAAP XX.X% for second loan approximately XX.X% quarter quarter and share first the Other up expenses, million quarter up the earnings of adjusted ending respectively billion, December XX, were of the by increased XXXX. year-over-year. and

portfolios. in mortgage loan Strong warehouse commercial specialty production C&I estate leasing payoffs in or jumbo in bowels by IR multi-family lending, lending, estate uncertain originations real offset small lower and equipment in commercial single-family real

December in points first fiscal XXXX Total and the assets the and for unchanged second billion December reached XXXX, second XXst September margin quarter XXXX, $XX.X the from -- from interest basis by up X.XX% billion $X.X up X.XX% $X in of to XX, quarter the up billion compared of XX at XXXX. Net was from quarter XX, XX, XXXX. XXXX, of fiscal quarter X.X% the September ended

in interest non-interest from excess subordinated average liquidity impact cost excluding costs X average average on deposits, H&R balances products X.XX a higher basis while Average bearing bearing function was and near The loan debt. and Block, declined X.XX%. and costs loan %, basis seasonal funding sequential the improvement by of linked-quarter to yields our points fell funding points to XX lower deposit a

year-over-year up was X.XX% XXXX. Net have X year comparable and XX, in for for segment interest the basis banking basis September been basis points up approximately interest ended at from the XX ago. the XX, margin points quarter December quarter business would Net quarter the margin in points X.XX%, XXXX X.X%, a up

ratio efficiency December compared XXXX. to and were XX, in The XXXX year-over-year XX.XX ended of XX.XX% periods and December period the increase primary XX.XX% and three the driver the Our XX, which comparable of six-month ended intensive. our ratio for addition banking efficacy XX.XX higher Axos the in Clearing business, is the but and was a Axos business, also at operates the than mature which more more Invest, to compared relatively efficiency capital securities respectably

for six year the Our ended all bank at for compared to period X.XX% of regulatory to XX.XX% remained the strong periods. XXXX ended bank, level of solid leverage ratio XX, Tier with XX, XXXX. remained both our December for requirements the in ago months X.XX% Capital compared six the only efficiency months X ratio December XX.XX% of

to Return have been XX.XX% second in last compared XX.XX% the period equity non-cash in one-time depreciation merger-related amortization quarter non-GAAP on on expense, year, for equity the adjusted second our would corresponding was excluding of and XXXX return XXXX. of quarter expenses XX.XX% the

charge-off the to was basis receivable a charge-off identified of this of XX, asset multi-family loans and net Our and are points factoring loan loan-to-value Non-performing points was than excluding basis credit million XX.X and single-family assets ratio XXXX. quarter average good non-performing The ratios. previously by comprised December total X assets majority remains quarter. ended for quality leases XX of with less a our low

prior increased in December coverage allowance small prepayments jumbo C&I loan single-family with due billion at remain balanced commercial estate to loan non-performing XX, We originations finance lending Ending year-over-year XX.X% and our lower and reserved leases loss of in for to in XXX.X% real balances by to and corresponding XXXX. compared representing year. XX.X lender strong the loans period well the

consisted for on of XXXX in multi-family loan growth, single-family of XXX of gain XXX production, real commercial and originations. Emerald production production. auto loan consumer and jumbo C&I originations XXX million Advance XX estate XXX million portfolio net portfolio production, of C&I million XXX XXX eligible second million resulting unsecured of sale agency production December single-family million XX, million ended of of Our another of loan the quarter million

follows. fiscal For quarter XXXX the are of second originations as

was ratio with loan-to-value agency The $XXX XX.X. multi-family The was average with of XX.X. single-family the single-family The loan average originated production ratio, jumbo average XXX of ratio was FICO loan-to-value average FICO loan-to-value coverage production average for the of score the an was the for the ratio eligible XX.X commercial estate coverage XX.X, XXX. and was balance service production real debt the debt X.XX. The originated small X.XX, the and and was FICO was average service loans auto loan-to-value average of

use real was current historic with appraisals At portfolio December of loan-to-value XX, amortized date loan-to-value increasing conservative estate ratios, over real loan-to-value markets values. balances, origination entire making XXXX, the in The more our weighted average estate XX%. ratios bank's of these

loan-to-value our XX%. ratios between loan-to-value and XX% X% XX%, December have or ratios between less and at approximately As XX% X% have than ratio X% and between of ratios single-family XX% loan-to-value XX, XXXX below and XX%, than and XX% of XX%, XX% mortgages have greater loan-to-value ratio have a XX%, quarter, have loan-to-value

in track originated. We points record X credit credit performance jumbo our loan strong in portfolio losses of single-family a with of of well lending have established lifetime loans basis mortgage originated single-family

X.X book. have XX, representing December of approximately billion our total at loans of outstanding loan multi-family We XXXX, XX% approximately

of of are in book between our the loan-to-value XX%. multi-family value and X% ratio weighted the on of and our XX% loans origination. average between XX% loan-to-value, XX% our solid. time XX% above XX% loan-to-value are Approximately XX% loan is and The multi-family multi-family Growth has are XX% been appraised loan based multi-family ratio than and XX% at loans of our have X% less production

losses lifetime loans. have credit points multi-family are basis loans the portfolio originated than XX our For we in originated multi-family less X originated over of years

million. with record outstanding quarter Our business balance C&I ending and million quarterly by an X.X posted increasing lending of XXX originations of

see continue demand finance. and good estate, categories commercial lender specialty including islanding and equipment lending, our We to real diversity across finance

C&I and and new members We commercial to further team our have geographic experience also loan lending expanded expanded in our relationships cover types. added businesses course

to low Loan demand and near wages, across and solid and rising markets highs. rising profitability values by corporate supported lending stock our home market most prices categories record unemployment, remains stable of

Our C&I loans single-family of loans. XXX X.X loans, consisting XXXX at agency XXX property loan jumbo of XX, single-family pipeline income XXX million and was XXX of million billion mortgages, million of million of December

our but transition in anticipate originations lending fiscal our XXXX. commercial adjusted of across from continue second risk the categories We into lending most away lending estate real single-family the we to relative half returns strong portfolio business, these lending given and C&I across

fluctuate Our quarter-to-quarter based loan the from average on balances will pace lending of prepayments.

Switching XXX including small in linked million and to to year-over-year billion. XX.X Services. million or primarily deposits We had deposits XX.X% X.X funding, management, total increased quarters Axos Fiduciary specialty in deposits business growth treasury

bearing non-interest deposits bearing to average XXX non-interest balances over growing with December quarter. We million increasing have in by deposit our continue success

at XX% to compared XXXX, accounts. XXXX, checking, into costs, and our improvement lower XX, XX, XX% money accounts, X% December balances at XX, deposits December Checking accounts, deposits consumer business our checking total replacing accounts, are of success deposit of The IRA accounts, XX% prepaid X% X% and higher savings market and savings and represent deposits XXXX. savings XX% At money deposits. time December costs, reflects approximately

off kicked our million December prep resulting Emerald balances Block the loan from customers the of approximately retained consumer by Advance XX% Emerald of quarter. tax Advance XXXX. XX, originating December tax XXXX-XXXX We in of incremental at $XXX season loans, million H&R unsecured loans, approximately We $XX

successful February. started as customers interest end H&R season with tax customers. prep tax forward we program prep H&R H&R available On fees borrower to This all Refund to January look to to We originating the no another loans tax the block Advance X, of charges or block. block qualified to

calendar ended the We $XX crossing threshold interchange $XX.X billion assets related billion the Durbin to with debit here the of the exemption.

a Durbin stated year in on de in As our expect as a call, our interchange impact minimis of we last earnings result calendar relatively our direct XXXX. bank's we

tax interchange continue products. not does on block the Because interchange rates to our XXXX, substantially card the or impact H&R will complete. H&R impact Block's do Block or the we the this own H&R from our with card Durbin the insights July July to when XXXX, MO expect work be X of X any economics of Block season economics loss MO We not from resolution ongoing H&R revenue until on before

have we to share resolution active to in reached whether relationship, with Block with and H&R timeframe. a to future respect discussions updates with Although, will to to have be the our both satisfactory of respect continue parties we no what

Our for and RIAs steady direct-to-consumer progress. and independent security dealers clearing business make introducing securities segment to continues Invest in-custody Axos Axos digital management wealth broker which includes our are Clearing,

over with operational Invest in processes XXXX. management assets systems streamlined closed of under new accounts up over of we was and $XXX approximately million Axos assets several the acquisition meaningfully of XX,XXX enhanced funded We XXX in XX,XXX calendar clients and past XXXX functionalities, under added the management the March have million from quarter. and accounts

customers. accounts checking in for other traction rollout to updated resulted Axos mid-December, We're account cross-sell in conversion our in single We and trading, from improvement wealth numbers we starting minimus with banking referrals perspective, which opening measurable some are gradual Invest dollar mortgage but sign-on workflow account respect de Axos personalization self-directed we to gamification through and a and complete expect The the as it early rate. for see Invest improvements later features in this year. to cross-sell online digital

insured bank quarter volatility. as tolerance revenue clients Securities dealer $XX.X flat and linked the result earned In was risk Axos stock reduced this while activity IBD quarter, margin $X.X Clearing fees Clearing, FDIC XXXX broker XX, as months fees December both respectively. lending revenue down. deposits fee was lower lending and million market decreased were six for trading of on roughly and and declined a three their custody ended and income million were our

was Ending customer points points cash the to negatively XX XXXX. XX, Federal a margin in by December XXXX were by by banks basis lowering Axos Reserve reduction the $XXX million paid with impacted the rates and third-party compared XX approximately Clearing on Non-interest basis balance income sheet calendar on in balances million in December September $XXX quarter by off on fees sweeps. for XX XXXX,

signed and two custody the $XXX two IBD December firms in AUM quarter. new firms million RIA with Clearing Axos approximately in

pipeline We their of of takes Axos. book and custody to quarters have a clearing to several transition business robust client typically

our independent infrastructure services to sales serve building our are RIAs. to We accelerate and capacity

with custody of result do and custodial existing of the services and pending and firms significant XX% With small to banking compete TD of the Ameritrade variety a potential merger, controlling opportunity provide sized over market not to We RIAs. RIAs, we Schwab, and a as clearing wealth management. disruption two of medium RIAs see independent assets

product suite broad independent practices. to and We have RIAs technology to their a grow help

digital that wealth white and We partners. independent we of also over have label clients RIAs private number initiatives months, a to the other X product of introducing XX and management for and IBDs, and technology including labeled RIA services high strategic enhanced be custody for will banking worth net next capabilities, RIAs

Conference XXth existing inaugural Axos in to Client We San look April forward to our the at XXth. Clearing Diego, clients hosting prospective and

diversify and specialty and grow to continue We deposit commercial our businesses.

bankers deposit months, the Angeles XX downtown opened Midtown have XX and Over office commercial to past commercial Los in Manhattan. a senior we added and loan and

The allow new and us new the on expanding to deposit clients in into teams those and are officer's serve metros. and focused two large verticals existing lending better

that April lending the few balances We Fiduciary hundreds well. commercial have a new added in next we of commercial non-X trustees of existing Axos to new fiduciaries XXXX, their fiduciaries we and Since voluntarily perform trustees our and solid successfully in we opportunities Chapter close to to quarters. X Bank. trustees Chapter have the and close non-X acquisition moved deposit have and deposit serving pipeline Services, business, deposit in expect Axos continues X

a client at our of a and the in management capabilities sales And a competitive amount of expand we for have quarter. bearing significant Services. service services bring fiduciary of bank the and to meaningful end Axos our testament the want opportunities, to deposits Fiduciary relationship the non-interest mandate to We December new teams

discussed a more data a of integrated the November, and to use The ourselves we and diversified detailed create profitable strategies position more future for institution. and technology convenient At Day our in component and is our personalized Investor become core strategy last experience. customer to our to

Axos and of building a digital the and and the multiple banking just not to data integration platform to opening co-branded new universal Invest the we deployed assessment Our account integration improvements near the to ability inside now digital universal of platform. have rapid enables for few into partners capabilities, streamlined future, tools client more businesses digital with our risk nationwide bank, The the from accounts more prior in create banking did bank. instances are of the universal across consumer addition examples deployment ongoing like

bank see self-directed a With to ability of cycle the across inside and trading banking, single we commercial our further digital serve our on and innovation consumer universal enhance development banking addition of three services the that securities. our our customers sign-on Axos clearing for within platform businesses, banking Invest, custody roadmap, perpetual will effectively integration of and

across the teens consolidate of with to we team the by members our objectives. Against competition and pleased interest growing rates, of long at financial on or margins. targets, while continued I'm growth our backdrop equity volatile to growth our on return increased ambitious net deliver execution annual and low above loan each term XX%, interest an stable including maintaining

opportunities. significant We've receive

We strategic have core paramount our be have of and significant to opportunities initiatives number ahead we and in the given plan. of the people goal. Execution have our assets will us achieve

our prudential intense positions on management Our focus shareholders. to continuous capital us on of behalf in well execute clients and improvement

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

Andrew Micheletti

Thanks Greg.

or online press First, release, filed to I through and our available in today EDGAR is axosfinancial.com. note wanted addition our SEC our through the with was to that XX-Q website,

individual press additional will line refer few than to XX-Q for areas release Please or a every item. Second, go rather through our financial I highlight details.

earlier, XXXX, margin. net compared the up Greg loan due XX.X the of second to interest Axos' As and our quarter our ended goes up last XX, quarter September income X.X% million, and primarily for net growth ended X.XX% maintenance XX, year-over-year XXXX, to both indicated December

of a securities X.X segment the corporate of million, X.X net income ended second had benefit the quarter and had ended million, a quarter or down XXXX, grew the interest first growth for interest XX, compared net linked X% Breaking million. net decline million by banking growth of Net the business September income of had XX, to business net our segment, X.X X.X the quarter XXXX. December

That of bearing. more business The compared balances average improvement to compared the for to is year. interest banking X.XX% the to last net points points basis deposit basis grew net margin interest and non-interest first shifting XX X linked of X.XX% quarter the primarily banking in to up quarter margin result prior the

Second, in earning Block deposit finally loans; interest seasonal third, fourth, H&R the our growth reducing Emerald our and Advance adding average interest assets. bearing overall rates;

while grew basis. cost million, income result, of on linked declined the funding X.X interest X.X million quarter a in a As dividend

Average providing fiduciary XXX into the municipal while deposits, grew lower or primarily non-interest increased million cost average savings savings to bearing assistance XXX accounts. million, accounts, quarter, primarily loan opportunity redeploy existing higher balances deposit cost no cost this

quarter As business basis XX a segments the segment demand offset result, at million. linked business linked interest income X.X the the average securities bearing rate Partially accounts banking banking XX on decline cost points quarter on and in the for the the in income net basis was a of growth decreased points savings funds interest total of interest decreased basis. net of a of the business

on primarily earned lending lending interest the earned activity declining income X.X decreased customers lending primarily to volumes, the declined due by reserve million due to due customer income a margin second also X.X on lower to rates income decreased Interest margin balances million dealer million X.X in customer Interest during quarter. stock quarter. market declining broker to levels

X.X Interest requiring less expense lower borrowing. lending of near million, activities decreased levels

As year funding fiscal X%. continue variety net the with sources, we last maintain this expect of our year be to due and interest X.X% our line our Greg margin for of to in range historical mentioned, to fiscal to consolidated

delinquencies basis basis as to Total compared loan XXXX at XX, points XXXX. December of loans the to five basis metrics quarter asset of the assets ratio strong and loans X.XX% quality, compared to quarter non-performing remains XX-day XX to points total at total to our ratio to a total non-performing loans basic XX, points declining X September percentage assets to with X.XX%. Turning plus this unchanged of also last declining remain

XXXX off receivables classified for of end last helpful for During This factoring previously as XX, the bank the fully one customer. reserved quarter. quarter, was disclosed at this at September million and X.X a bank charged

this charge the very amount less Given average circumstances in small size were than normal remaining of loans quarter. receivables million charge factoring factoring offs book, points excluding of loss off the the on basis X.X the for receivables the one

to accounting the to implement the Bank new standard, With required adoption CECL new X, regards until Axos of is not the July standard XXXX.

We on get allowance loss of the adoption will we closer date. loan the estimated guidance impact to once the give

segment slightly X.X quarter to last XXXX. XX.XX% from from quarter non-interest linked down Moving to efficiency the consolidated compared quarter to of down a ratio basis last improved XX.XX% September basis, banking a improved and net operating on to overall ended XX, quarter last increased linked expenses million business this quarter. quarter XX.XX% expenses on efficiency a The XX.XX%

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

Johnny Lai

Thanks. Operator, we're ready to take questions.


Thank you.

We session. [Operator Instructions] Steve from coming Riley is will conducting today now Moss B. be first a from Our question-and-answer question FBR.

is line now live. Your

Nick Dufala

the afternoon Dufala, of could question Steve us and guys Good I XQ, expenses through if remaining part walk Nick you expenses for Moss. How of escalate 'XX. in stepping to guys. year? regarding This they kind is the have a operating for

Greg Garrabrants

Let and can with me level overview specifics in then particular give might a you have. you Andy jump high any

segment So, personnel personnel. divide into sort production sales first. then and oriented of infrastructure that let's banking about I'll talk and the

that respect we going that technological we the I in our our that to relatively without to with expense a have place to are small with able think We're changes. have to substantially I those good technology adding respect goals objectives base. be to we feel investments relatively complete barring where

has incredible pipeline moving we And off of of a staff ones. think a last amount activities, them and and now they're to list good So, of an that good items number the been and There's the accomplishing on over checking new have is investment years. news. that I large

that's one think is it. sales continue it of commercial bankers. to we team, The that piece piece expand of next So I

those well. of perform bankers Some

less well. Some of those perform bankers

but that a that asset bank base increase a grow talent. management the then be banking we would and there the as in commensurate increase So issue deposit there, is we

business. before With banking think say to traditional with to more respect said you costs up commercial of online to you the with important how is that, much let's retail business a operating as that and blend, levels obviously to different a with it's respect end costs? I business, what I more reiterate continue

have but other we a that personnel. increase And in words, have of with personnel. And bearing level automated have in funds. cost higher of in you'll of higher deposits, businesses, cost you'll comes commensurate a So a more non-interest lower of levels

the to that the So think cost the any team. from the if understand only we're not very the but the for year isn't also have I But isn't that we based and big We to perspective we've personnel that. have, associated think now office those a And remainder it's their there, new I commission are going on of conceptually structures opened are real on growth based the do exist the for don't offices with estate right management plans there, important much that let expenses growth. that season.

security significant on side, the segment, to operations, given to automation the size sophisticated a of said, book segment respect that would this there's improvements With have expect less have segment the say savings maturity of to and cost the the lot That we that segment with -- to that automated business. don't the current security segment given being less bring I of associated we opportunities the segment. relative and of that and that

for given personnel. having But without commensurately scalable prepare it's more rather, small growth to the relatively in add those to segments size

in way -- able to a personnel in be without do in in personnel. the to able grow put other have reduction we'll in any Andy, commensurate increase a putting us anything else? the in significant have that not words, we cost enhancements will that New the we'll by of Year. But be you business So in, the

Andrew Micheletti

three Yes, or grade I'll probably just one just comment items. on

all banks, Looking one benefit a at expense about insurance, forward, have where from the getting banks FDIC. a going operating quarter's operating area generally smaller been and been had thinking the have this credit where we FDIC has frankly a expense

million would as to run diminish, numbers. at approach starting rate, the year, a credit program a our is start This in on which year that at $X.X were net FDIC Last a we end. X.X, insurance. us look to I it's expect where million $X So, you six the month on result year-to-date to when basis,

FDIC and our about is there. in an of And That in have growth entry. a uptick software the fiduciary incremental items deployed business. deployed increased you'll small expect, That's So, the we accounting, purchase million. linked looking don't that's amortization at being in that I quarter unity amortization $X software insurance. largest the depreciation best exclusively our for

have will in deployed the capitalize quarter. to million, increase But We continue continue and get to as million expect amortized. costs, some of don't capitalized we of depreciation a software than they of for the this the and get I software some we they tap growth larger have

and they were down capitalization at is salaries Part that quarter on have basis. quarter reason little a happen of Looking this of wages, a we to labor. linked more

I was on $X quarter. and what frankly, the happens that with completely can on every It million think So count on team a that benefit, linked development depends how benefit having that don't looks. quarter. we

I overall, happy we do with think increase we're So expenses the to increase. this expect small quarter, but

next quarter, seasonal have block. the March seasonal increases for quarter will the meaning normal increases, We

overall, should So, we think expenses not but increase large.

Nick Dufala

It all you the least I business? also rate for given kind the that on thinking side a you're term pretty guys in what you resi mortgage how seeing about there. on sounds balances equipped environment thanks are thinking well like of And was Okay. are guys on that at lower information. near of front that technology

Greg Garrabrants

in shooting as And work we some lot for a have in stabilization think competition stabilizing areas participate we're some there, for in hopeful can that that indications, a be on But think not we significant in of really stabilization paying pipeline. increased businesses bit quarters. really, be seeing to to really have continue think think several simply business we little focus We we I continue it, it's continue go, next in do portfolio. to see business to that I to lower want mechanisms that the Unfortunately, just prepayment grower that that and where we're the some ongoing we're little upticks and a a did in. to but -- don't we that slight letting we we're don't certain that expect cases some a I given attention bit but business. growth, of interesting We some

to to So, we basis. watch have ongoing something be an that's going on


Andrew is Liesch Our from Piper coming next from question Sandler.

Andrew Liesch

The at What accounts here. through non-interest bearing you the I move it, non-interest that driver was deposit quarter of walk bearing. bearing suddenly end. you $X.X billion -- know but some and some growth big interest

in this going Or You come Is outflows non-interest commercial you here? accounting? where going good level this a balance. from maybe another is larger had some you What over had moving bearing to there epic of forward? do departments some be see

Greg Garrabrants


think look at differences. a always I we've had seasonal

quarter, in bearing, don't this settlements we that settlements we have block fiduciary it So basically when bottom-line balances to where upon, get of next stay at And paid. that to have the that increases necessarily due course, non-interest that was two same seasonal but majority in. growth expect came and we because level, depend does

you you X than that come advertise faster it's off. tell there's down how going But our to a fast balances. can't Chapter would we be So chance normal

Andrew Liesch

wide, lower the towards be of up side? end think middle that. reclassifying is, the margin funding in success others. but you mean, quarter. what And especially had pretty X% is closer part the of does And this bringing like of have mean, then, having forecasting? the success are to to the the pretty -- with I said X% we mean, it's some some range non-interest good I a account it place to you're success range you'd I sound bearing I is before like on better there you've the creeping

Greg Garrabrants

we a might do that. premature, bit that tried obviously, think but to I Yes, be always

now. And loan respect target, have different I to elements make things but of you that. the pressure bear side. not to like and to able broadly, think these and to of respect enough can our are of ability, is outflows also, the on a more it's right asset the some just given growth the to always we're I these they there in respect just times inflows sustain given non-interest at the think to different may balances, predictable bearing that various there maintain the mind premature just nature with to that, conclusion occur that steadiness if with little be do with


from Our next is coming question Michael from KBW. Perito

now line Your is live.

Michael Perito

call looking my on start broker last think on you If for want I'm tight like I couple were Analyst core. specifically business. the the did a Thanks they've jump questions. added there. -- apologize the and it been taking couple clients guys at of But to for range quarters. guys I about seamlessly, I I new but Day, just I in talking at improvements sounds And a opportunity that efficiency recall you dealer if pretty fees,

kind guess So clients driven of my going wasn't into mean, know And there is the forward? this question, the guess expense question, is mostly done. sounded on like an I line There point? stream on revenue of what's update you've already I material if for case, it kind earlier the it adding answering you're anything side. I time and that what more I growing that's more revenue growing at

Greg Garrabrants

that I resilient create it I in lot to other stated think tools and efficiency a to of businesses think certainly utilized and and opportunities ours a much operation. manual you better the improve reasonably lots we've processing is of There utilize of to accurately.

its think relative the I is the business of size. that reality though

significant bit to forecast I growth. little going think rough you're it's cut that any to your to way just a

So, the to way is going this severalfold. is work

board reasonable revenues. come pipeline a clients clients, multiple on take of new and those quarters generate have to We and right now

immediate component there. that there's that So, business of

get that, to player. some they're strategic done of we have they're do clients that the a viable we're to other substantive, before we're actually with there that talking but items that large, Then are are, need

have we that others in get sort class that's them. can And deposits, a million deployed. XX in is off be compete dealer. reality elements a get So good for the table it there's that some months one at for cost be clients. truly that technological, in broker probably all of put it will once that one $XXX example, But stakes. more and of to deployed, technology will about Not guaranteeing us put best of low will some before year us does industry that single will very place has just we to player The reasonably of those

in using consolidated we're a of in core great companies have of that their interested a great future that product of have dealer providers are out joining clients some good other that are our for long-term there folks in We're I for the to a we the us. when lot really businesses don't not broker ones size business, of the the proposition investing including have capabilities, think then create some good certain are have and the I a And strategy. we there of here. weeding who group And a we largest within think a the platforms product. for So

Michael Perito

some of So, you lift should is about we that, when see base should it trying this year, revenue year there but to pickup for next think of your say kind we're if a just of case bigger to be business abilities kind kind those full that lot this a in items of are is much what fair that the to... of expectation discussed force terms

Greg Garrabrants

right. that's I Yes, think

items, businesses a much businesses these term basically and sort way than They're much both more wouldn't long-term of they term reality needs the year. of I next holistic to couple of to the a is rest as in serve respect forecast of throughout think lift lift I flattish to longer that expect with in the long strategic clients quarters the they them. this are in I way are

Michael Perito

if seen And kind could just been was I you've That's specialty nice that real flavor you. businesses Got I been was then some really of commercial made that's growth you able last give months? drive a if us what helpful. to of you Thank XX over value of estate think segment of kind there, the growth. And some on, -- the you it. opportunities And in a XX could has wondering, like the that proposition what growth typical actual some capitalizing difference within? wondering, of is that the to

Greg Garrabrants

have very over we have of lot time. I think to relationships institutional grown partners with who a trust strong us

partners comfortable feel and ability have allow take essentially. to we've that with with our so, be that And positions the longstanding we call, first to risk us relationships

many And are and of of funds And benefits periods of the private think time. shops those the relationships we've so, reaping world. those we're now, over of equity those those the I cultivated largest relationships. extended partnerships And in

Michael Perito

growth capital And XXXX? just for And then levels? of look it. kind Greg of on organic like Got the what fiscal any updated on, might of lastly thoughts some outside priorities

Greg Garrabrants

with be of capital about ratio business X And something average Tier leverage given are grow or mean, double sort low think look we XXX% to Well, continue continue the at. relatively lower ratio as I to our obviously, respect capital ratios. industry risk the in XX%, than double we side, the to that will max leverage leverage next moves the much thinking are I weighted, do

to with day outlined more items anything we to on but that that there, track. don't And then I definitive you something. will global think investor outlook, stay an have on only I be update respect just

we're the substantive and plan execute continuing strategic really against so, don't update to have that we share. And have any to there

Michael Perito


perspective, XXXX, build that couple it of you communicate? the that end think capital timing fair is probably a be as next and more from to the reach fiscal quarters, to So, will might the there

Greg Garrabrants

equity, We that might and of options clearly, we think need have leverage common fair to statement. and so don't be I are now sort a obviously than in the Yes, pretty ratio think -- continue capital obviously, certainly equity I are position don't grow. obviously fee we And good that. other accumulate our a


question you [Operator from Thank coming today's Securities. Wedbush Our from David next Chiaverini Instructions]

Your line is now live.

David Chiaverini

of Hi questions for a you. thanks, couple

between in the Schwab the of investment TD merger on clearing this? actually a mentioned opportunity accelerating take advantage and Have significant follow-up first, considered the given So you Ameritrade. clearing, you business

Greg Garrabrants

that it think there that. for case is I a probably justification the that is doing

a do. a elements we kind to the because number trying on of that that running we're simultaneously items have there's what of are to However, do through

we're retail the of features banks on dealers, of the seen very broker when robustness or lot a the And by of platform all the aren't independent example, have opening or it's move platform. for account banking are elements valuable. to So they're together. kind whether those And RIAs that working they unique truly

have that able of be hard working set to can then come think or a And and we're really reincarnate invest case is a fintech I there it. on investor So, investors for in you in base that, softbank we'll as me, my if and that, clearing from do lot custody more build you of think more then, they client discussions unhappy much how a there's they of a frustrated And a are business market opportunity I are. players, robust But quickly. sense existing with how here. and get

and often kind A up, right. before that opportunities sort always before, the those can around of kinds had lot of of things here you show that's years and thing feel we've of

people started would lending to remember, I I C&I to about and So X years the ago, when first I X comments. talking get then

some it. hired And and tick, don't tremendous tick, it tick, later, tick, years people what's You results I I on. right? two the going from you see obviously, see later, like know quarters don't then

sort So, think short I it's I term. to these that's long I And job days be to be mean, term. my job think an of industry

And sort and so, place yin ends do balance, I opportunity. that there up that kind a in you've got yang of of that lot a of yes, so, a think is

where a you the I from, understand you're your, because I question any given insightful think that's really think, opportunities. maybe

David Chiaverini

Is to it won't it competitors on, not terms in holding in jumbo Or generate you a is gears they're getting shifting is pricing your tight? how much then And in too too What growth niche to be supply of underwriting loan that's offering Or near contributor simply mentioned term. back? it the it enough you lending, loose? growth?

Greg Garrabrants

our of and alternative opportunities, in why it's necessarily some we of conduit been goes. inclined work are to and perspective so not that we which going sheet. had in is engage respect has toe products it And that very what of We've with we're always a such a they're how that see business, variety conduit emergence for I to a over an our performance doing outlook strong balance, an period outlet extended style time. for of credit some balance we're that dip think conservative the to creating

not securities, that's bank, be and going special the securities subsidiary subsidiary to But going that's the the to through through through of subsidiary. a be actually

to don't on historically fundamentally participate be may sign. income. would different there doing have -- some That just then would some in we but it I been business So, -- fee that the it's than what would but portfolio be result ability generated, a that, in


We've over back reached end our for of the turn comments. any I'd session. question-and-answer floor or closing to further like

Greg Garrabrants

Thank and and quarter. your you next to you everyone support we'll talk for attention


you. This conclude does teleconference. Thank today's

disconnect wonderful thank your have you time may day. We and for lines You a your this at today. participation