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Axos Financial (AX)

Participants
Johnny Lai IR
Greg Garrabrants President and CEO
Andy Micheletti EVP and CFO
Andrew Leisch Piper Sandler
Marla Backer Sidoti
Gary Tenner D.A. Davidson
Michael Perito KBW
Steve Moss B. Riley Securities
Tim Coffey Janney
David Hirons Wedbush Securities
Edward Hemmelgarn Shaker Investments
Call transcript
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Operator

Hello and welcome to Axos Financial Q4 2021 Earnings Call and Webcast. At this time, all participants are in a listen-only mode. [Operator Instructions] A question-and-answer session will be follow the formal presentation.

As a reminder, this conference is being recorded. It's now my pleasure to turn the call to Johnny Lai, Investor Relations. ahead. go Please

Johnny Lai

good Axos. and Thanks your for Thanks afternoon in interest Kevin everyone.

remarks. Joining fourth Chief Financial results Axos Micheletti. President us for today Officer, Financial Inc.'s Garrabrants; Executive are Andy will on company’s after and and Chief Greg XX XXth, June conference months the quarter comment and be to results questions the they President answer available Officer, will and Executive prepared Andy Greg and and for operational Vice the ended XXXX, financial call financial XXXX review the and and three

Before available earnings today’s this uncertainties. were call the and will result in Securities and provided call in of in be Reform the Private conference on Harbor expressed and in listeners results XXXX. forward-looking for statements and call Therefore, uncertainties, I made performance. for such implied to to of response webcast risks company subject contained begin, of may I Details are the prepared These this and announcement views Safe company’s statements would current risks statements those claims release. Relations that and Litigation assumptions replay the like Actual forward-looking management are events of as audio Act protection your is section of to axosfinancial.com being questions. pertaining from on management that or to that This the forward-looking remind may future on materially contain Investor days. website located the basis make regarding statements a forward-looking in forward-looking the XX statements differ remarks an made at press call the could and additional there

disclosures. we to Before financial issued our like X-K also the Greg, an release, press listeners that handing with remind supplement the earnings in a addition to and it to over I’d

over that, the like All be Financial to website. of with Axos call found to can the Greg. And I’d these documents turn on

Greg Garrabrants

fiscal with stable growth, Thank Financial’s to net net joining loan everyone, XXXX ended thank Axos Axos XX, margins, interest XXXX quarter and Axos share thank income your and million for you, returns. and afternoon, call June of credit for you you I’d the conference for year income XX, us. fourth fourth quality, the ended Axos leading strong months XXXX quarter industry We and Johnny. origination three of Bank. to and Financial excellent interest ended fiscal I XXXX. reported $XX.X like June per everyone for Good welcome earnings $X.XX. in of diluted net

XX, XXXX, respectively. For to the $X.XX million XX.X% months XX and XX.X% by share per ended earnings June $XXX.X net and and income increased

interest for X.XX% $XX.XX basis XXXX. in June and was basis the book from X.XX% quarter Our that for ended quarter quarter to XXXX, points X.XX% quarter, fourth business was the prior net June points XX, XX, share and margin in up fourth banking quarter June the ended value margin quarter. XX, quarter at per XXXX. XXXX, XXst, the March of Net X.XX% over following; of this for X.XX% for fiscal include X.XX% slightly down XX.X% third from highlights the The up three was up in year's XX the from interest comparable the compared XXXX XXXX

fiscal was interest down X.XX%, all business XXXX. For for banking XXXX, from of net fiscal the in slightly margin X.XX%

increase well asset from five XXXX. March interest to sequential the both earning decline year-over-year. the quarter for yield XXst, interest we up quarter basis the the XXXX, continue over this Loan in up a at fiscal Excluding was and for banking all of margin point block the and prior net X.X% margin loans discontinued ended small our net tax-related liquidity quarter. business accounted in yields H&R linked X.XX%, Excess which hold

and from our June replacing XX grew reduce went basis the at bearing period and by savings XX, basis higher fiscal points to approximately XX% bearing XX, demand points deposit accounts year June XX of XXXX demand by bearing over of funding continue to XXXX. prior balances with cost deposits. We end deposits Non-interest non-interest cost costs interest at

result Our efficiency $X.XX, three was and quarter. and business fourth ratio the XX.XX% was was for higher ended software the in overall in our processing a quarter earnings the initiatives from XX.XX% XX.XX% XXXX. data June XX, quarter for third per for XXXX $X.XX in systems. ratio The related of efficiency versus the the the Diluted XXXX. the banking XXXX banking sequential to to bank's up expenses compared operating third of XX.X% quarter of increase of ago months in segment share to enhancements Efficiency XX.X% was our year

rate corporate to from third the Our tax this in decreased quarter XX.X% quarter. XXXX XX%

June We company, to We our XX.XX% and fiscal excess XX.XX% of XX, regulatory strong holding levels of leverage Capital equity on well requirements. fourth returns the in and X with continue a return generate the above while ended in the maintaining strong of XXXX. both capital. ratio X.XX% Tier bank at generated remain X.XX% quarter year the

million Our point forbearance. excluding assets X.XX% were third balances credit leases March Charge XXXX. compared total mortgages balances and single-family quality one from and jumbo lease the quarter of bulk Excluding related XXXX XXXX. Non-performing approximately at loans, XX.X% XXst, quarter, annualized PPP basis by this June up annualized increased million, loan remains X.XX% $XX.X strong tax warehouse $XXX in sale of of pending average loans offs to and of of with and our mortgage no represent XX, loans in loan products

of of $XXX C&I billion in originations $XX lower high Total million agency single-family XX, period sale For in mortgage balances, period. consumer $XXX the $X.X increase $XXX record third gain million and million. approximately side of $XXX in the multifamily for million $X.X of follows; million loan originations and mortgage sales. sale billion, from single-family ending the linked to jumbo loan production, loan third commercial originations estate mortgage single-family $XX.X million auto and from corresponding loan were auto quarter XXXX million production, in of the quarter million the but offset of net banking quarter million the real in year. in decreased points of XXX relatively single-family and and QX $X.X banking to $XXX unsecured PPP quarter. warehouse, loan on resulting balances gain and loan quarter year-over-year, of $XX.X ago to production, million, the gain strong XXXX. of year a quarter up income on ended jumbo production, XX.X% sale basis points on payoffs fourth million third production, fourth C&I quarter, lending basis portfolio June by XXXX last X.X% XXXX. by banking remains by $X million The the approximately XXXX from dropped billion outlook fiscal XX.X% generated Ending slightly were multifamily fiscal of of $X.X the $XX were while decreased $XXX quarter were production, from for as in of compared XXXX up Mortgage XXX Originations margins stable leases for

were to agency single-family overall highlighting market. up balances June balance mortgage and Ending $XXX XXst, XXXX pipeline down Our portfolio in the mortgages million X/X/XXXX. warehouse XX, at mortgage in the of of million the $XXX sensitivity million volumes elevated $XXX XXXX million, $XXX.X from $XX the at million from March was

to customers with new expand We establish and existing relationships. continue relationships our mortgage warehouse

points non-tour the as points compared lower $X.X June time $XXX the quarter points XXXX of securities outstanding deposits June of Our from next billion adjusted approximately up deposit X/XX/XXXX toward XX, savings, strong of Consumer to for X% money accounts. single-family of demand XX benefit quarter on and Our risk $X.X $X is quarter. shift higher by deposits average consumer to part cost total The down our a representing XXXX, market, XX at and of ended will us direct average bearing continue generates at a bearing was book, XXXX. XX, XX, $XXX June XXXX, million businesses the cost XX XX, warehouse months, checking, with linked basis of approximately total billion were transactional at XX and deposits deposits of our and June June digital balances representing XX, and from time we points and saving and billion diversified deposits our were XXX non-interest the business in in banking. Average XXXX consumer deposits. basis ending Of basis weighted million Ending secular deposit interest non-interest weighted certificates of XX% approximately loan replace deposit demand returns prior comprised the small at year-over-year June XX.X% remains XXXX, down bearing commercial XX, rate overall loan mature. basis

Axos' including was deposits to on businesses $XXX.X Our to at low The of cash deposits Services small that off billion use pending off E*Trade generate incremental be low continues management able continue to and that business sheet. or deposit cost consumer services, balance treasury Axos and deposit on businesses, growth. Securities Ending to we'll balances fiduciary clearing contribute generate put specialty to our our deposit, can fund million, with XXXX. sheet Advisory acquisition loop of certificates sheet we keep income. balance million cast $XXX XX, fee $X at and maturing growth, approximately Axos' balance replace loan of will June over or add cost

excluding leases quarter XXXX, refund we of XX.X% estimated charge in ended the tax current Of estimate realized for quarter had charged asset mortgages are of We below the or remains Annualized off our in seasonal the period remaining third $X.X XXX single-family at million an was single-family all this from non-performing points solid. basis in fiscal point has prior quarter low the year. best last quarters. XXXX, to to one and loans quality XX% are our fourth loans corresponding below ratio fully and basis XXXX, products was outstanding Non-performing points historically our basis at current advance XX% which average non-performing compared the mortgages of have XXXX. offs losses. we ratio provisioned the approximately assets of for XX% quarter Our June XX, of total XX, where credit loan-to-values. loan-to-value approximately five Of down loans, of basis points very in June net to XXX XX%

vast hotel had majority the Given and on loans. Other that is two to around are of of real previously relatively our value of average anticipate LTV XX days an single-family one million, $X our the end was than million loans million sold delinquencies loans of XXXX. XX to delinquent on subsequent were of origination average not June are to remaining had discussed, UPB at a We consist XX, losses origination delinquent the that around multifamily mortgages, in we single-family with no days We $XX.X incurring the loan-to-values estate total loan forbearance did around for material seven LTV. that we XX% delinquencies, low for quarter. at that the XX to loans $X.X XX% multifamily of XX delinquent on an which

$X.X XXst, a XXXX average March Our June loan The loss $X.X million quarter and quarter decline XXXX. balances. in ending this loan provision to for the is XX, the sequential was ended million the provisions and quarter primary loan decline million in in reason in compared loss $X.X

annualized basis XX, related Our times and advances annualized approximately allowances with quarter greater $XXX was this refund charge-offs off-rate and loss total loans one contrasted loan XX of X.X% and charge-offs million loans. than total of leases, finance the and XXXX, total excluding our which refund June at excluding charge represents for points

outlook remains continue mortgage book risk in lending growth to be may unchanged Demand essentially rates our maintenance loan and low in prepayment a at high solid, our continue portfolio. represent Our teens. single-digits to and for although to of all single-family XXXX areas in fiscal that growth production to elevated

in lending bolster to growth. continue to We add areas our loan personnel

and in solid, million $XX balance at term unsecured remained small consumer pipeline personal real consolidated single-family XXXX, billion of $XXX and million pipeline of on loan million and $X.X estate mortgages, and million loans. ,$XXX.X sale mortgages XX, auto $XXX June Our loans, consisting our multifamily $XXX.X agency with loans, of C&I of million gain of single-family commercial jumbo approximately of

XX We returns continue and return on months strong XXXX ended shareholder XX.XX% XX, months to the June of equity XX.XX% respectively. average generate with and common in three

continued quarter compared XX.XX% The banking ratio XX, uptick banking slight for our June the Our and businesses. reflects quarter. investments in the efficiency efficiency ratio lower XX.X% our segment for in XXXX the to last across mortgage income was ended

Our Tier leverage of at capital to assets adjusted holding company Bank. ratio at X X.XX% remains strong at the with Axos X.X%

at excess June we of billion we of the had had liquidity XX, Fed XXXX. billion in access the quarter. window We have FHLB discount Furthermore, outstanding the approximately to end as of borrowing, of $XXX $X.X available fourth of $X.X million $X.X billion the

growth us such loan announced strong E*Trade buybacks with Service stock and a clean Our we make coupled acquisitions that allows organic structure opportunistic and to capital acquisition last the quarter. returns Advisory as

increased to and higher increased securities year, June income has excellent quarter client last due margin year-over-year business income with in quarter income. lending XXXX the $XXX $XXX to the Securities while increased XX.X% to corresponding the XX% net million million quarter balances an XX, in activity. fee fee in to interest quarter. Our growth the $XXX Broker million, and June XX, dealer period XXXX fourth strong stock compared

with announced due XX% business $XXX assets under custody. as at Advisory deposits Services. quarter clients at Although us commitment risk $XX culture, billion with ability clients ideal EAS RIAs that increase fee these of deposits acquire team to growth for no clients working million conflict approximately and and the by to EAS. services agreement Morgan X.X% advisors an Axos of clearings platform we and We experienced year-over-year RIA we linked RIAs provides up including deposit ending decreased client additional $X.X In and E*Trade acquirer provide an believe technological Axos strategic our with banking cost interest, time to their and for April, of cash our entrepreneurial deal, our custody assets decades of Stanley and under to make low of to specialists incremental TAMs, signing announced tolerance, With their custody turnkey the are deposits. the clearing billion advisors, servicing of RIA their custody, an with income, RIAs to independent balances approximately and a experience

to to to made about conversion in already over committed close the a to three remain remaining feel invest EAS variety XXXX. client the to received convert months required the Having custody and of we significant August RIA We approval a grow integration broker milestones progress the transition achieving We past good activities. across the and a platform, business. smooth of business have FINRA to dealer acquisition

interest asset fee from and As business sheet. revenue from income sweep or the a deposits generates clients based reminder, income on off net balance transaction held and

rate, end our able EPS closes. We of deposit one across accretion, including on We impact, our expense who balances clients will convenience investment provide update value Axos to of one banking time. the the an at on Axos and app. lots existing being revenue see fee-based financial through over of mobile run June. and platform when businesses opportunities login lending see the and transact We expected trading deal self-directed of various including the Version launched cross-sell across online trading simplicity and and self-directed and focused soft the offering is Invest products and

our meaningful any draw tool fee-based to acquisition on deposit services for from list and the serving to customer during growing staying early Axos launch, another too monetization growth it's the a provides and and and conclusions lending it earnings customers. team and uncertain our focused self-directed our While trading clients XX delivering our over last on proud our shareholders to months environment. strong I'm returns of challenging of

organic team. the strong generation businesses invest technology ability in Our existing capital and our us and to new affords

cost from fee loan to other our that increases and in meaningful Our deposit, lower placing pay of growth. meaningful our earn businesses significantly firmly deposits security banking investments and deposit institutions. bearing investments our platform support generated income, allowed non-interest have us will and future I to fees in dividends deposits, interest-bearing believe deposits

customers products. than excellent banking of interest a and synergies are rate for scale positioned many made source profitable banking, and environment, the strong product The will an profitability each across three that pending consistent, EAS from securities. and Our ever I'm our our technological across better businesses. and Advisory Despite investments strong to technology our of market EAS one cross-sell generating competitive accelerate consumer growth. platform of banking challenge growing to are maintain these about provide time indications clients, segments we a interest excited banking, Axos acquisition commercial and in have exist in we the businesses, potential

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

Andy Micheletti

Thanks Greg.

addition the an details. on First, will press supplemental in our that with our I refer press with also SEC or to comments release some today. schedules several axosfinancial. to release, please wanted online through the topics, brief for is at to SEC our our website note or filed available additional X-K provide was It I filings through EDGAR

in to In the steps EAS balance Advisory XXXX. As prepare of the or we Greg bank we EAS sheet close acquisition to anticipation the of August took expect E*Trade Services mentioned, of closing, billion an XXXX. to last deposits quarter's of increase ended for three in balances quarter and cash up average this closing. to for Average the and increased compared $X.X months XX, deposit March

we certain billion. great in However, and targeted in $XXX.X decreases of market with money ended quarter with decrease savings deposits a the customers,

equivalents excess the Bank of net XX basis was Bank's time savings its With bearing, next maximize XXXX able rate deposits, compared to and of its does X June margin for XXXX, compared at are interest is expected it the bank ratio The EAS Bank, in checking capital higher expect funded quarter. not accounts points deposit reduce low closes the on XX, XX, or the deposit cash XXXX. a Port at and impact in interest a to basis XXXX liquidity leverage making use deposits decrease the position Tier to The adversely the March point XXXX. in resulting balance primarily when acquisition Reserve quarter the while of or in decline XX, million with ended the Federal in cash yielding decline the sheet EAS Bank's all in June XX the at to rates XX, XX, and September to all some at $XXX.X deposits March room was to points

provide the an updated closes. impact EAS on will We all full the of when acquisition financial it

related costs compensation and acquisition. expense XXXX, or due $X.XX million $X.X ended following basis, compensation to XXXX. by from million impact costs The detailed quarter was any and operating discussion X.X% excludes linked XX, on to March for EAS up primarily the XX, quarter Moving June Salaries estimates. the production a the expense loan quarter million, $XX.X adjustments to to favorable non-interest future linked from related declined other ended

would salaries increase the increased level. to City quarter we on quarter, one-time back to basis, office with linked space. quarter expect million a due associated Next third $XXX,XXX New costs charge York subleasing the $X.X Occupancy to primarily

expect of data customers, that occupancy $X.X decrease not and quarter, and basis, adjustments. processing the declined quarter product $X.X FDIC million, into FDIC project-related due in primarily initiatives on would next approximately a legacy was and regulatory costs other expected, costs increase by million network to move quarter. have insurance million. equipment processing the by impacted costs to Next growth we to $X.X linked cloud. to as been basis Data quarter increased On fees will approximately linked formula recur $XXX,XXX a enhancements,

expect forward, next quarter. Going this we approximate to costs quarter's

quarter down time large tax market there RSU is vesting. fourth at vesting quarter, book of more if in portion for the our price. is our the taxes, vesting the is for income divest or common issued the If effective true, impact grant, stock reverse date at the favorable at June ended price stock the Moving common points from driver tax previously is the A rate. XXXX. stock the of scheduled employee our fourth price June depending of of XX, rate XXXX was is lower common on of XX.XX%, fiscal time making of vesting the our year the our of RSU common year, and rate the the than ended rate XX The during income to price the XX, tax that largest price at The the effective effective the RSU XX.XX% the year date. rate tax tax stock on stock basis timing the is the a higher changes book our in the our of volatile

Lai. With For XX.XX% call this quarter rate tax over back ended year a favorable was that, tax fourth last effective effective while June XX, the XX.XX%. quarter the rate our to for the I'll was turn XXXX, Johnny

Johnny Lai

Thanks, take are ready Kevin, we to questions. Andy.

Operator

question Thank from coming Sandler. first today from Andrew Instructions] you. Our is Leisch Piper [Operator

is now line live. Your

Andrew Leisch

the for good bringing here guess quarter, Hey, size asset detail at everybody. afternoon, near was of causing I base and than what the line, margin a Thanks look higher of securities the here? how should also And that average lending may been recently. was flows new then quarter, earning -- higher and the anything the on the deposit at is for quarter. been be here from of transactions EAS, end But the of has run much it end some it the last can on this explain we borrowed absent rate

Greg Garrabrants

average Sure, growth continue programs. to up. creep that lending to think are we to have yeah. stock I expecting strong continue And in we No, our of

not a is bad start. as to run rate, place it So a

Andrew Leisch

Okay, quarter. it. can is it this then looks there that's is reduced bring EAS? interest -- here be you liquidity guys to bearing from start been to then still of share mean, determined? Or on like like some expect I you do you intra on to had deposits, this have quarter first it anything just with got And the what

Greg Garrabrants

change of Andrew, we'll that that excess call operative think quarter. mix no, as liquidity make a I thing, Yeah, is basis final throughout is, closer. yielding XX even points. we But get course, may And is the only we the that

capital use manage it ability to and will the So deposits strong get our from for down be better bank. used the effective the to the use

Andrew Leisch

it. Got

Okay.

you're ahead these that margin the for you've XXX assume less managing of margin closing out of should deposits this fourth this a with the sitting from for the liquidity with quarter, of level? It's to some the had if deal. here of So safe rise the

Greg Garrabrants

sense. makes that Yes,

Andrew Leisch

Thanks for taking I'll helps back. step That the All a Okay. lot. question. right.

Operator

Thanks.

today is from from question coming Backer Marla Sidoti. next Our

live. now line Your

Marla Backer

that. Thank you. about Sorry Yeah.

and what I'm was very a quarter on for I see, potential do end? you've a you guess the to where obviously wondering So some certain strong you quarter just seen based growth categories see there perhaps subsequent where continued

Greg Garrabrants

Sure.

jumbo So to loan the stable book a prior the unsecured side, dragged very going has single I The family, it down lot on than The and C&I or That's C&I good. either good. quarter. the lending definitely obviously think in been down side, be less is was which CRISIL in growth, has been the also strong [ph] side looks looks including side. auto

So warehouse stable. lending really more will be

Now, rates is stronger I a think come slight may little a a little stronger, there mortgage bit be And down have given a back little it's pop, but that not stronger, bit. there. maybe banking bit substantially

it's loan rate is prepays, credit, normalization, that see enhanced our side, of perspective, tightening a of the I to prepay refinance the a what side, drops, are it's concern the and you loosening might which or the this to from because to little you down looks have you early. when like you post a COVID think and might So, see, growth happened hard still tell, generally but kind these of COVID hard still it's have it know, expect slowing bit, month, of normalization, prepays

in very There's way. more going then single up say family, it we think the is it's I growth, won't helps side banking a up, so as Mortgage stable. absolutely average just grow but that to it's -- business, you've in loan probably been are effort a going And I'd an think will been lower continuing rates but think rate I than So also the expand I want say be the are quarter. to lot loans, have our warehouse, we should it's also, were. materially, say I positive reduction, incredibly be through. I side, we're from categories it's the pipeline be much general on in and to we level too production there with loan quarter. are adjustment about on certainly forecasts, it's got on lower rates challenges because obviously that fair to same the side, that same has good, the But have CDs, very that a they in loan obviously, margin that's going this -- I to PPP on strong, wouldn't having to chance to don't -- with grow the I some -- -- be up, the margin we forecasting autos C&I careful probably that had come of think, strong, run-offs,

fourth there's I watch So to EAS have continues on lot that security make and to then expect the you think we close business efficient opportunity to obviously, more to side, there. and And grow business grow, that the that quarter, a of to there it.

and because going lot really to time some to is efficiency quarters do an operating a that's to in client we a and that go take good of realize activity have discipline, minimum, activity, take there going but We add to to several at a to that. have able be

humming are able to it's it to So more that is be that going still happen that's going months. really -- contribution there, going should you go year it materially a to almost I to the take get really -- creative but this those that could, be a don't to way of be this and creative in think that all through the next six know, frankly

Marla Backer

Okay. that for color. Thanks very much

Greg Garrabrants

you. Thank

Operator

Thank you.

Davidson. with from D.A. can Next Tenner question is Gary we

line now live. Your is

Gary Tenner

It's good Tanner. Gary Hey afternoon.

line? talking One point a Are income you questions. being fee the of making, just Greg, of mortgage those in a you just made odd. couple terms potentially about clarified of

Greg Garrabrants

banking banking. Mortgage fee. Mortgaging Yeah.

wouldn't. bucks and could think a Yeah, I million be could million half. that look it up be it I a like or something

are more going there's too. not a yeah, little little compressed -- this mean be to I to So where back was. it's maybe But also but a it activity, margins

So.

Gary Tenner

Yeah. Got you.

Just clarify, referencing. that's wanted you're to what

Greg Garrabrants

Yeah.

Gary Tenner

you other the to period it from In talked in the terms about XXX terms the half that aspects get guys balancing further kind deposit in or number, quarter, me expect is cut broker stands balance of EAS bit in deposits million deposits activity loan that the from broker the of off coming end but deposits stand as year-over-year, sheet? a kind about give growth or some deposit you little in broken even the additional the mentioned and of you of work when you the of

Greg Garrabrants

Yeah.

So I is think, you million let's know, broker about of CDs. XXX a rounding good portion deposits, say is the

So clearly, script, CD billion next Gregg got over that's repricing, the where the forward of coming dollar we've the looking off in he number billion part was we're that year. $X said, to

So portion above perspective, rate well a good that is that -- from X%. a of

deposits, entirely that bring we So favorable. that'll is effective. that's on the in other product possible, liquid pricing still very Whether as still time be from to you broker time know, that

on it. we needs, to in expect using the a little But depending or around So general, down, might then CDs non-CDs come bit. and maybe the consider same the up our be

Andy Micheletti

I as we have out, more demand liquidity which higher than of this And them half acquisition. without, be liquidity. enough at those to other know, of off-balance part sweeps deposits, which of rate But -- even sheet half of that we amount when But a I from broker deposits. that obviously, them relatively for de broker lot them that more think the we have you than think, non-brokered a have we because this is that have could of others, were demand termed than right. And institutions of minimis are some

that sometimes that market. think use may favorable interest are the to of we lending, deserve that look in at So certain types and we we out rates think term and brokered deposits rates,

even that So, are over into over We deposits. EAS there's but a about to liquidity we business those an fee clearing we good up the the liquidity income, rates that that as if think business, without of how of to grow some convert of and time in extended significant it, period obviously years, also opportunity can willing position. a a if pay only lot for still are and rise, banks that's doesn't -- the very

Gary Tenner

else Or in appreciate? Thanks color. fiscal broker that fee Then a didn't sequentially for dealer the from kind seasonality pushed from of third there Is question number line to business the income is me, lower that last quarter? fourth on I anything perhaps quarter that that there lower?

Andy Micheletti

stock loan, stock market Part not spread are is of borrow terms to Sure. It pricing, number with all the of side, regard that. of transactions on depends things. equal it in on a

deposits factor so side fee a from but Obviously, deposits, off into be that sheet can during slightly balance came that it. income that those factors in the period, for the weigh that. are down that So our that primary less

Gary Tenner

Thank you.

Operator

you. Thank

Next question from today Perito from coming Michael KBW. is

Your now line live. is

Michael Perito

good guys. questions. afternoon, Thanks my for taking Hey,

Andy Micheletti

Thank you.

Michael Perito

that that I wanted does the exactly? made hopping comment that to hop time like more back -- Is you updating side? maybe Is or curious you what about revenue those that per and guys work base about some on was bit to aren't just expand, a a earning And side, efficient. there's maybe of to bit a Is more your I se, little on the expand what that blend making could little deposits know but numbers, been posts I like might putting on just asset on you look that. if or a look just just cost EAS close?

Greg Garrabrants

Yes.

of institution get broadly. the to do around operational focuses processing. are team we there. straight on of the needs our through great enough have ticketing that with have things consulting was and in We bring platforms, interaction types the essentially, perspective, in with operations internal banking all we the core we kind And customer all applications just of advisors team those our our a way automations, technologies use that systems, Morgan and work lot Stanley efficiencies then and robotic in let that from process existing a that a kind

that nature core operational there's the quickly. we're opportunities think after going I And real pretty it So get just business. improve to to of

bring product result without cost. adding to we advisor may there, the to And I reduce the but application that. touch Well, highly disclosure check, process mean, They the the cost shift is client. but do, be me, going happy, up and touch ability think, right? So synergies kind it's customer want to client a right? advisor So, take can shifted right? will of send don't it touch over So, this things, to about a a have banking picture is opening the of it's a just the don't right? that, there's to then The and application, our going check, mails mails not have want it don't automated of advisor lets doing of rocket the not the mean, also there or turnover more out right? advisor value to business. make it that like significant it activities, money on one can what to an an sure if check we the that grow So an extent science, to from that added -- I we right? more And then the check, it, that to somebody incremental it's a automated, and the and making you overnight, change everybody's very doesn't and believe It's gets but the want the the rolling way is service. management none sort needs assets mail do able -- system, us if in development be those account to is process very tangible, can the that there check, app into of like it time. check, a a of the to customer technological customer works market be, -- I hooking experience we in there's lot that So, the should not activities to meaningful be it's

Michael Perito

mean, enter and low perhaps on it, us I But comment the rate, it stuff be can know that give see business a higher but And around and pretty that just -- remain if a rates my confirm about environment, be to would how or commercial react days. was that's interest question, cost, that, other securities might Andy it's would would be the higher you hunch stupid pretty the wondering, we helpful? would anyone's want rate a deposits any lending and a arising helpful. increase, have positive, a if just parameters Greg but guess in you, Very I I brief these will

Greg Garrabrants

right. that's think I Yes,

at we this, Whatever or clearing it know. right, I that three I something. Fed expect we were saw it's, three three? We don’t deposits and Axos It's it's think frankly, when tell was the basis I don't funds -- from rate know, today, on points, XXX. do the

small. really a something, very promise the want right? there's -- But essentially to these to So or it's businesses, And don't bottom it's -- zero revenue. direct very, it's is line this beta I of sort of

our the when -- -- pure that's rise, -- not yet, get to that I when profit these So then not run far essentially, And a there away. businesses quite businesses all these have we there. can goal cost. those think deposits rates we're valuing business, it's to they at no is make We're but

on of there's a there, can So lot that that's just over then to while. to frankly, there. -- and purely growth operational opportunities time, it's take and revenue going get a I efficiencies think we obviously And

for any it have and yes, I potential banking Andy, then or very So related in going environment. negative any would you we think operate let's creates that comments? have say, impacts rates a something. down higher from institution broadly the And favorable profile swaps income mortgage to, do

Andy Micheletti

will in of ability the be whole to where favorable. I choices well put terms it as point deposits. we is, will think increase our no, No, It make

favorable. clearly it's So

Greg Garrabrants

choice, goal on places, which environment. That's in push growing then fee decision is environment securities becomes a good deposit lever. rate is rate continue it and to a low or that are our then we cost long-term well higher much our need, That how hard Yes, how very much much was all should really and to a doing other more business -- growing, businesses, high core and deposits. we Right. tangible place income

Michael Perito

Got really helpful it. that's And then color. --

even and of you of mean, here, taken too this piece aspirations but you're grand there a broke be? a standpoint, of a you're just big obviously, willing effort business? of the any comfortable pie. questions little kind business or let the ask ERM I portion to just any mean, I me I think imagine Just Greg just the with around you kind for it anyway. securities early, guys it loop as could a you growth how have of the which mean, closed parameters today, being from like is great, this terms lot get thoughts Axos on is thoughts general on I big the Any like probably it's Or in of but of it’s How a I But of that. that? in

Greg Garrabrants

for that's an seamlessly into margin EAS not now, intend those a that I perspective, -- there, that or Look, opportunity integrate frankly, Block offering were business. do for products safe because Yes. they Lending. right they S is business, dealer those really didn't business broker incredibly I I mean, the to interesting since lending those another a RIAs. is think compliant customers, the lending that from mean, We what's

advisor. that These high significant in And I why? not a think the just advisor the business net gives the with high sticky is And we're here's risk reducer overall. us to is of this advisor, are sticky a us. The It customers. advisor. steady general helping for competing to we're customers their net business worth source worth

Block needs want loan, a Stanley that account, -- don't that. if off if looking an S things, that's have If they the mortgage. an they we one-touch keep asked they an with those All pretty app, advisor hey, the loan a car the need loan, mortgage, advisor, checking too, So a they S advisor’s assets good Morgan right? safe. and integrated the customer comes need block they're for Well, of really and for need

will out things loans selling it's short different. is are the of that. So risk The margin, like will risk safe. and come clearing little associated -- a around S very Block business really that operational this with be those It's the

aspects. respect we very limits So have defined those with to

way I have the be size they're business, there's as to the way about think shape. And business we when business limits after weeks gone that we ones that specific us. we right to those made lot ranked, access the two and risk, the pay to can the wrong right had there have something. those think didn't bought the managed. it and hierarchically attention had about like think And to to risk specific think I of you it are it And I risks one much within think we've about we've bite the business in better a it's in done and overall we issue that controls or think a So when that and business, sure of is, And to And we've absolutely any risks -- was job. good EAS. that we

mean, and is we would So have, demand positive points of average even pretty and good then excess liquidity we our you of that look, this of have to I now If right? a though liquidity have this on years have all a excess ago, had XX growth. loan let's said, forming banks, would really thing. and three we you deposits really, all overall deposits, cost we're face out that predicting these it, basis are

that institution. that's to think how overall of I another reduces risk example the it the

it's So And with really -- a really it's different. exercise. that's management just any nothing to risk do all, sizes. it's not It's the but overall

Andy Micheletti

the grower primary And not just broker books obviously assets on that which under Mike a is clarity, is the of point of custody, dealer. the

can under and assets grow sheet it $X all. rapidly, at not it custody it's cause will So some growth, but for $X balance

balance us sheet off gives a leverage lot it So

Michael Perito

taking Greg Thank guys for questions. and Andy. you Really my it. appreciate Got color, all that

Greg Garrabrants

thank Yes, you.

Operator

Thank you.

question Moss from Next Securities. Riley Steve from B. coming is

line live. is now Your

Steve Moss

Greg mentioned afternoon. were lower. that earlier Good rates

curious, of purchases kind were you lower how seeing Just much loan these days?

Greg Garrabrants

Yes.

I too, a the family. think, -- just with the tell carry think, I said in things a it's lower I basis as around, the probably certain And -- discussions, right? of the side of are around. we I can by think rate. more an look, Maybe side, competition then low basis -- sort maybe fives all use like mean, nature we there's it depends, think the in, -- I I as fee points I on moving somewhere XX But And that to over the average areas. points auto is on think I C&I XX I I it was like before, single think reasonable. I'd in

we So I adapt reasonable that's, to have that, continue to but think, to color.

Steve Moss

Okay, that's helpful.

Andy Micheletti

Yes.

I ahead. NIM the to think the X.X% guidance our range. no, just in I X% just on still -- – is go to --

our But I we're feeling that it. have So NIM continue rate we're still I ability could about just good grow. to to to perspective. some think, we cautious that's, think low keep We're pressure our a and from

Greg Garrabrants

lending reason And warehouse that the when went you lower the one has it that -- the of bank. a the up part the that probably quarter, was saw in business over loan fact because the average rates Remax rates of was

that shrunk when move kind bit. around so of And it that a little

as think quarter. don't I should would that that carry idea you indicative of the use So forward next

Steve Moss

Right.

businesses Okay. That's and little more [ph] CRISIL color these helpful. properties And of maybe C&I terms on of days? then just are the in types a that and growth driving

Greg Garrabrants

self-storage, lot that. a of some a of construction, repositioning, multifamily, lot And of it. primarily It’s Yes. that's -- that's

Steve Moss

questions of my Okay, Thank you. been other great. Most answered.

Greg Garrabrants

Thank you.

Operator

Thank you.

Next from Coffey Tim is question today Janney. coming from

Your line is live. now

Tim Coffey

afternoon, Good you. Thank Great. gentlemen.

Greg Garrabrants

afternoon. Good

Tim Coffey

Hey, I -- same that Greg, the originations looking at around you quarter, said And the origination activities in the the quarter. was think as are pipeline, for quarter quarter-over-quarter. level there about XX%

more participation to with seeing for ecosystem of are greater liquidity? you excess wondering, I'm clients? that kind your drive home find a of So this is Or a by general

Greg Garrabrants

You that, want to take Andy.

Andy Micheletti

going be little think both. of to bit it's I a

ensure level I think, at at that can we cover to clearly, originations a payoffs. we're looking

work to And has you when higher levels so harder. have machine, origination the of payoffs frankly,

customers, looking have through go lot we're a at of we wise, -- as targeting So our we options.

to We provide bases need touch will with where existing we who customers, on our all be. of of us guidance course,

Greg Garrabrants

right, is order if in loan that originations have to the look, grow originations steady, I up math pre-pay Yes, the your to loans. book, go, your think go to just is as as have rate where far the bigger

So has higher every targets. one the I think that of businesses

those think lending And fairly dunks. they're can diverse targets, of slam set a I we but have good platforms. not hit they possibilities there's

So, real priced to full warehouse is, those none bear the much. other platforms the right, have of burden side the element than lending higher up tend this. And to when we went of of lines. lending The we of so some it, be

there's So a agency loans, for particularly on side. in mortgage we we're demand know when the refinance fall going reduction to

going So we knew happen. was that to

be happened lot plans. perfect are growth quarter really of but the all what making of of that happened. that saw really thought we credit, pipeline plan some -- lot. to really happened, We then we have COVID a business. had I have them. in really of those stabilize we that grow think this family things I a back able It do some pulled is in back. I I we've are and side. and pretty high, but single progress, tightened a a seeing We had key lots a of there's seems to for depends up things sales we’re got really we when didn't when And -- we enough do grow happens the originations prepayment we assessment to and expansion. time get sales be this shape been up, force sure We're And doing to lot on that had we and with reached we pulled is of mean, can down a bit, higher. the But do it don't it that. good, can time And it to what good spending to don't We we things, the business, part immediately, that good we intended some the slowing initiatives a the that. think because a other really is basically we some we have in

needed came little so single I when we strongly, to strategically. back with think so what be And a we the were footed family flat market doing

righted now. that we've think I ship

how through? just us, now long were and gotten place. we this had example, Well, were how really those where, have take for might frustrated that leave originator So now, more this was the good things right this flow we And all and when goes. to to does well, okay, markets for sort decided we'll conservative, wasn't see it the we have that for said, that of just

things frankly, gee; where going came were I expected. be market think that there said, don't you the and than they more March Obviously, have So, looked back home I Clearly, would think to people XXXX. if in quickly like are that. we prices are sitting

more be be that to it take But we're get won't slightly it'll close, another plan as going slightly in It there? range. possible. That's there. that slightly growing is that be So, quarter. where this, I be think I Does I down, direction. previously, But we prior to in maybe, than will I stable it right said either have good definitely more Everything's this think, quarter the down. going think a

Tim Coffey

I It's might, that. And Okay. Thanks. appreciate right. if about this, know, it good thinking I'm then me let color.

One all that benefits EAS And from of gives things one the you that lower whatever this? or into great of right rise. to show year bringing optionality of on definitely, is you beta, it in big about can is year, deposits it Is the and your a cash these -- to rates is more funding think next things to your the when lot do side? it's sure up going going next way deposit for likely going about and and that

Greg Garrabrants

Yes, absolutely.

Tim Coffey

questions. Okay, great. Those Thanks. my are all

Greg Garrabrants

Thank you.

Operator

Thank you.

is Hirons Securities. coming Wedbush from Next question today David from

now is line Your live.

David Hirons

detailed guidance, gave pretty you expense about Hi, guidance. thanks. the ask to I clarification wanted question a

the mentioned EAS $XX that's for So salaries you includes instance, that and quarter, third the gave? expense other you about of in I'm inclusive million the items assuming

Andy Micheletti

It is not.

So EAS. was all of my without guidance

David Hirons

it. Got

Greg Garrabrants

would, sufficient look to we're So -- will whether we're guidance release we I provide like to make that presentation will will a that about reasonable what think that EAS, estimates going to close going yeah, use when it there. information

Andy Micheletti

original our go We've to given back you presentation. early estimates, if

operating up will move expenses significantly. So

EAS these so to relative typically. once numbers are just yeah, we So small add

David Hirons

you No. much what was than higher Yep. had That I sense, makes modeling, mentioned. because

third is. of on still replace XXX? board the that here in was the deposit mix seems And I here clearly kind Is and what stable-ish, almost that that just step around a quarter. trend, way given then to with of coming it the decline saw, ratio to how balances of loan good was could in that about things, the side maybe And deposit so kind new think So the it somewhat there the thing deposits it be is down on we clarification. those would why a of that's the essentially asking as declining seems based the if the on shift deposit like much improving of which

Andy Micheletti

there's so pieces. moving yeah, So number a of

is think One you chance loan is pieces on deposit to there's grow. we grow kind much where quarter. the giving of guidance think how we next ratio of we we just are, Greg the a on

instantly million level from other and have with filling that the that we the obviously current decline million, of growth XXX So be -- grow hole, can will deposits filled will with XXX deposits.

we So, deposits to expect clearly, grow.

closing. EAS the after know, You

Greg Garrabrants

Yeah, I right. this, think with to that respect

low So good businesses the moving cost. commercial very deposit pieces in are, got momentum we've our at

So they have continues business to small nice pipelines, grow.

clearing. that growth the organic obviously of we deposit deposits side, So have access we have

We actually EAS with will to have growth. the have for even positivity access --

So, the question we those, from good with is do there's rates other institutions. what demand at

to and in got that over that them we bringing may and period institutions and look looks what of figure placing then end other take a we've decide up them So out that months. may at several sheet, on balance like time that thoughtfully

at. those So -- variables be looking are the we'll you know, those are that

David Hirons

Thanks makes very much. That Yes. sense.

Operator

you. Thank

Our Edward next Shaker Investments. question is coming from Hemmelgarn from

live. now is live Your

Edward Hemmelgarn

and Yeah, Greg, Andy.

Greg Garrabrants

Hey, Ed.

Andy Micheletti

Hi, Ed.

Edward Hemmelgarn

How you Good. doing?

Do there? the reach? you from do kind for potential EAS view margin you're what lending of know, you You What expect?

Greg Garrabrants

into yet to first that there's operating really, the to the now. that and I that actually factors doing of doesn't several have want I mean, lending. foremost, we right to system business, of I capability have Because assess don't speculate have play. margin come on core

we're that, who been through we a have and still through EAS precluded of they either but ability, have And working we with the timing working it's in basically data margin talk been does, Now team. them from there's we existing to because s-block system or have mimicked lending. then the IRAs - that that didn't the sales definitely

come they the product. they would before, product an by fact never that don't if of get represent the come, nature clients opportunity that those if so have very the won't they the And clearly

clearing also I to just like on what look with although share. that about helpful, But side. rate X.X% sufficient that's IBDs, that it's there's -- like I -- for have and don't say feel there looks a if can things will other and So, a think again, sharing that, rate don't respect what for the like, the and

I we part may discussions things end know, so, up things think profitability the clients of and And those you that. of it's also like of board when being it's, look, -- sorts overall that

wait to on -- before, it's think have So know really to enough we we that. I give just guidance before

Edward Hemmelgarn

existing Okay. to into merge Do you expect business EAS? your

Greg Garrabrants

sorry. I'm

Edward Hemmelgarn

business EAS. the Merge

Greg Garrabrants

Axos is this Okay. that The buying actual that, clearing transaction is business.

but that guess I So think mean that's, what I that? that's you by

Edward Hemmelgarn

a But lot larger. mean, it's, Yeah. I EAS

of yes? be surviving going in is would terms and there's And the expected, institution assume would I clearing so stuff assume is I

Greg Garrabrants

be period teams to we're have things, pile maybe is what you're of things together transition and Well, revenues, I actually we businesses, going You all were the I number business. clearing know, Yes. business all you think guess, things. this quite this $XX how they the think. the to stock big and mean, going it? we work lending. that there. then lending, together? -- billion, so if the well, and of and to There going to and incredible more careful. for it's we how, say, an I diverse looks? comparing there's has But are And got these technology plans getting you you're, different also lines billion that do not as side. do have of margin to and have Number There's for let's XXX the They do So you -- new say right? EAS side different And in are those might as XX and assets go There's, of were these where clearing on of place billion asking people, them. how obviously

you're yeah, that's going. So, think I maybe where

Edward Hemmelgarn

one businesses it's road? location, operating realized do mean-- of immediately. I just I'm it also out -- envision do two you the just -- mean, So I guess asking, down I can't I'm But I

Greg Garrabrants

intend office that that, Colorado think place we No, the to all. who and, -- we no. has like we and the We to just Centennial. No, folks talent, good a of think frankly, are that location, lot a are familiar good a office. offices envision There's also to close that EAS pool don't it's live Omaha then business location. Schwab is custody It's a of with I right securities at maintain that in favorable

over But that's more don't to So reduce on. respect we I'm there's we're to intend going. get should I can in there. you think the I business. we business. maybe then where And about, to time. no, that hopefully, will to this grow pipelines clearly what grow think have focus opportunities And thinking technologically as that we And have not And, we what the occur do with is -- operating with costs leverage

Edward Hemmelgarn

what's you've a experience -- your since -- guess, percentage you're I mean, that? Then, customers this? vice introduced like things lastly, to what and now it's of opportunities software really customer that existing have bank. have What's the some cross-selling over like been mean, from now, and real seen enhanced I at seen you to loans deposits I what Okay. EAS, been has versa? the year or benefits making you -- the

Andy Micheletti

I looking of the mean, to it. closer off the that benefit your say, that the are and as by banking assisted be this. get wave we're a, best-in-class we're not that run to customers services, our Clearly, CDs, deposit we of at as approaching made, have see with Well, funds when the then who the to going cost simply going we mortgage But ability significant to closer sort I'm end say, you're obviously, rather -- getting in to very than customers, of yet. we that we're let have, numbers. was cross-sell here respect obviously, interest very, was is you -- And the income valuing to incredible rate that your and

from Now, is The and the mortgage checking retail from and money. they checking in I a it and are the were at with side. very what we products and made was product right, customer refinanceable very were high consumer The look think that you really right? that lot have that mortgages one problem focused, if in both good. account. a was are that, cross-sell really So, mortgage coming customers nature, And developed. very one-time us both the that mortgage on That of a sides, account getting is

really account checking customers is long many with what….. accounts know, many these customers who But these, things. sell it mean, advisory our is. we'll question that have, to then, and trading love all [Abrupt So all you obviously term over determine is, respect many how to many we'll how s-block have an product we working that eventually loans strategy as have, and, incredibly many think it products well. know, I and this End] out, you I to development roll have will on account as will and checking checking should time the offerings, trade and know, Robo you those we're have accounts of trading where go how The how very worked and customers self-directed how very,