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Axos Financial (AX)

Participants
Johnny Lai Vice President, Investor Relations & Corporate Development
Greg Garrabrants President & Chief Executive Officer
Andy Micheletti Executive Vice President, Finance
Derrick Walsh Executive Vice President & Chief Financial Officer
Michael Perito KBW
Andrew Leisch Piper Sandler
Gary Tanner D.A. Davidson
Tim Coffey Janney
David Chiaverini Wedbush Securities
Edward Hemmelgarn Shaker Investments
Call transcript
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Operator

Greetings. Welcome to Axos Financial, Inc.

First Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. this being note Please Instructions] conference recorded. is [Operator conference Johnny and Lai, will Development. now President to the turn Relations I Vice over of Corporate Investor Thank you.

You may begin.

Johnny Lai

Thanks Axos. Thank your afternoon, [ph]. you, everyone. Sherin interest in Good for

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

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

also issued Greg, in earnings this for release an that we call. over addition I’d remind earnings to it press handing and to the to supplement XX-Q, Before like our listeners

I'll documents over the Greg. be these that, turn it found website. With of on to All can Investor Relations

Greg Garrabrants

level afternoon, joining share. XXXX you, interest reported for increased XXXX, $XX.X of I Axos basis diluted per net fiscal for representing you double-digit We September three Axos Good earnings September quarter fiscal for and thank Bank. excellent year-over-year year interest Financial’s XX, had and I'd an Johnny. to Thank trend a everyone you share the our net margins everyone. earnings growth XXXX. in and on with originations a Axos respectively. like XX.X% thank to conference of call ended and the XX.X% in industry and growth start loan our consolidated on to welcome And and the first income, for XXXX year-over-year net us. the Financial We income interest at months of $X.XX, XX, bank. ended and linked million quarter of Axos quarter per bucked first your

balances September were highlights or was Our annualized. $XX.XX includes the lease up this quarter, loan Ending XXXX. linked September per following. XXXX, quarter XX, XX.X% $XX.X from share up XX.X% book value The and XX, billion, X.X% in

points. our reduced X.XX% in first quarter deposits XX margin interest Our warehouse, quarter. XX, X.XX% the basis of in interest We was various quarter over X.XX% fiscal basis quarter basis and fourth XXXX loan September business a in X variety production bearing was was of the lending types. of and yields auto, XXXX. XX, the Net quarter of first our up for Net linked and the for at comparable categories the prior interest X.XX%, strong June single-family compared mortgage, points loan points banking C&I XXXX, and X.XX% ended points including to quarter by XX maintained across the ended X.XX% to from the XXXX, basis cost XX years for X.XX% single-family up up margin from quarter,

in continue our now consecutive from approximately overall improvements September Non-interest significant second to a make for We XX, in to total ago. deposits bearing increasing mix approximately June quarter. of by represent improvement our XX% Securities steady XXXX. deposits XX% XXXX, the funding corresponding with deposits bearing at from year XX, $X.X earnings a billion contributed non-interest a period Axos

Excluding custody the acquisition, of accounting for income. expenses clearing and which associated custody the depreciation with and $X.X E*Trade million the Services Axos related Advisory and includes our expenses pre-tax acquisition. Both businesses, even were one-time non-cash associated the Clearing, merger amortization with after generated businesses profitable clearing

Our year efficiency of ratio earnings XX.XX% Diluted quarter XX.XX% XXXX, $X.XX growth. share for XXXX, in quarter of ratio XXXX strong fourth net per segment in a business result ago first of XXXX. to $X.XX, quarter versus the for banking compared quarter. the of the interest efficiency income XX.XX%, was the up The XX.X% XX.XX% fourth the XX, three months as from for in ended was the was September the

this to rate Our increased of quarter. fourth in the corporate tax from XX.X% quarter XX% XXXX

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

June average with quarter assets. XX, loan no quality billion, X basis up from non-performing credit down annualized September were of to basis XXXX, X.X loans represented year the X.XX% first X period. in to points offs strong, point, Net in remains Total ago XX, ended the XX% billion quarter loans forbearance Non-performing of and in total a from X.X loans XX, compared first loans in at XXXX. fiscal for originations at September was XXXX. the XXXX, charge X.XX% Our decline

compared of multifamily real year. $XXX $XX million as The The quarter basis quarter million XXX quarter, sale and production, portfolio $X.X follows: XXXX production, banking to income, sale in from generated of the of loan billion decreased XXXX. lower $X.X [ph] were production, $X.X consumer of jumbo XXX quarter with for Mortgage the gain family corresponding on CRISIL in of single expected by in increased approximately lending million, in Originations fourth on gain million on last and million XXXX million on margins. mortgage a gain commercial stable $XXX fourth first auto production, solid to linked fourth to of slightly $XX.X balances. sale C&I and fiscal of gain points basis of net the points $XXX production, from quarter banking remains family agency million while originations XXXX million outlook resulting pipeline a sale of of $XXX and million banking margins single of production, mortgage increase and million $XXX $XXX XX.X% estate unsecured quarter

Our pipeline single family of mortgages XXXX. XX, was agency million $XXX at October

loan allow and billion, was commercial or as assets mortgage next Loan solid lower The Our $XXX combination stabilize under for quarter, new loan single-family jumbo balances. had in strong production prepayments business XX $X.X quarter. jumbo back to good seeing growth C&I of our origination decline originations lending. good pre XXXX. the strong million and pays slightly at We're September and million very us prime had a a resulted million. lending a loan risen since $XXX CRISIL, high were to construction has reflecting loan September our $XX ending XX, should balances demand net single-family jumbo in pipeline of slightly product, across

$XXX at steady $XXX approximately in XXXX. million up selective XX, a Our execution from a XX, Ending knowledge XXXX. track mortgage a and loan production have remains were net warehouse as million new of $XXX resulted of growing strong million, on portfolio relationships, some of structuring pricing and in and with June balances. loan our expansion record adjustments and balances backlog September and Demand deals at $XX million in

our single-family from our on will new is opportunistically warehouse demand with customers. grow refinancing, based and While existing goal to underlying fluctuate balances mortgage

deposit XXXX to XX rate make linked bearing prior capabilities. money by market XX, XX, of transactional points points replaced XXXX. XXXX, were customer to Of basis XX, down with total non-core XX investing service September accounts. of weighted as quarter higher and product of XXXX, in cost Ending ended continue and this million average savings, $XXX.X in in consumer, securities in our XX million checking, next months. up $X.XX quarter XX September deposits, billion sheet, XX, XX, $X.X front were non-interest the September representing approximately XX.X% compared bearing is year-over-year, a XXXX September from will back-end as certificates in franchises deposits. consumer and deposits XX, bulk demand We our of September lower $X cost of a our average approximately Consumer $XXX September points deposits expected deposits on technologies, savings deposits XXXX, Average of with non-interest time the demand points XX down deposit of by as comprised commercial was and the improvements quarter. direct billion at basis the the as approximately CDs at and basis The weighted we occur billion balance and costs XX% as to the runoff mature basis next months, of six of of

custody on those Axos' of million RIA million closed first balance on competition from that the of lower keep of Our of sheet sheets to from Axos' placed be cost Axos' banks partner contribute generate our XXXX acquisition approximately fiduciary will to deposit to fee small businesses client our rise business clearing income at were which increase. end low deposits. off service flexibility or at deposits The to growth balances including the on them $XXX even place advantage specialty, business, We X, businesses, other of interest rates ending cost E*Trade our had continues to an for cost The XXXX, generate loan the deposits to management $XXX deposits quarter commercial Advisory approximately banks. core cash when and billion deposits added balance treasury able at continue Services to $X Axos or balance sheet. and September XX, and banks support to which off August and put low were bank. clearing bigger

net are from Our a benefited several few transitory nature. QX are of interest structural in margin that some XXXX factors, and which

the fourth excess liquidity significantly of quarter $XXX other XXXX. our average $X.X deposits in did declines quarter institutions to in of our billion $X.X from anticipate financial we excess in reduced by first with not the dropping going XXXX forward. approximately We First, meaningful billion million and liquidity

side, loan On relatively held steady the loan have we several past yields the quarters. successfully over

the However, on C&I in groups lending in reduced were in new order and high started be more our respectively X.X%, in loans slightly quality multifamily ended terms last price X.XX% quarter prudent on competitive X.XX%, yield deals. more loan average pricing standards to maintaining loans while success X.XX% to and first first for originated that we Yields on of compared to feel reducing jumbo, it's deals, have to our three X/XX/XXXX, certain at competitively single-family our month. and the months funds. our and We cost just quality high given credit

With more traditional coming new that be in franchise we of custody each and the dramatically fiscal our our past at in in of of much RIA across in bank. the businesses bearing have first of have basis transformed anticipation deposit cost of XX commercial over we cost over with billion access funding our consumer $X XXXX, year from Lastly, deposits points deposit acquisition. quarter line to reduced consumer low commercial interest deposits to having

funding was the all these our will such, our of interest are to ago. that ability at is it high-end full you that confident XXXX. above slightly consider When X.X more our fiscal we As margin be our reducing net year X.X factors, continue limited in or to range a year costs than

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

Given a vast loans. low foreclosure in XX, of the our single-family losses loans not We had of as loan September material anticipate to majority values mortgages, we no delinquent did on on our XXXX. incurring

quarter quarter, Our this in million in loss September quarter provision loan the million, loss and XX, the loan balances. June $X.X ended $X supports increase sequential million provision The $XX.X compared XXXX. the to was loan in increase lending XX, XXXX $XXX million in

Our total loans leases, which for approximately our approximately loan XX, at total in offs charge three and losses million net represents times September allowance September $XXX.X our annualized which total XXXX. of XXXX, months XX, XX was X.XX% is ended the

commercial and multiple in XX healthy loans, unsecured in of mortgages, multifamily solid fiscal the $XXX $X.X in With remain prepayments. across as in low-teens with loans, balance high single-digit million loans We of achieve single XXXX. of estate loans consumer consolidated deceleration million approximately September categories, mortgages, of on Our of small the ability XXX to agency of demand specialty loan estate million with consisting and loan to loans in $XXX of a the billion pipeline. single-family growth million real confident and C&I commercial for remains XXXX, real and slight pipeline auto jumbo gain family loan million sale pipeline our $XXX XX,

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

since various the to banking the the identified closed XX ratio additional XX in custody two for and the months three clearing, ended in to efficiency opportunity Services XX.XX% XXXX, have synergies business already XXth, and September the E*Trade from procedures. acquisition, efficiencies point retail Our quarter we processes to Advisory the short quarter, dozens we streamlining for was of segment last We months. by cost see next compared securities operating generate XX.X% our and

systems, further and processes As we integrate personnel.

of Tier leverage with bank. to Our of capital strong adjusted ratios XX.XX% of access X holding remain and the assets X.XX% company,

approximately X.X first the X.X quarter. the XXth discount We at million have we excess to two September of in FHLB XXX of access Federal the billions window liquidity XXXX. at billion of Reserve outstanding as available borrowing, of billion we had Furthermore, of end have

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

increased net dealer strong the the Broker business fee has to income first the excellent due last growth XXX.X% from quarter EAS an with the in securities Our corresponding period compared and income. addition income quarter year, acquisition. and interest fee income to of fee

registered partner at quarter. FDIC XXth million to XXX the Axos June at income, of million million insured first Axos million first clearing custody million, in billion Excluding their with XXXX plan XX% re-branded Axos team XX QX banks business EAS, approximately from Axos acquisition XX this custody We XXX,XXX, tremendous was held one-time deposits Services X.X lending expenses including clearing Advisory and serve us a XXX.X RIA in provides billion custody XXX assets billion banks. Advisory investment up approximately business completed bank, $X.X XXX of XXX professionals independent under assets with by team who past Integration administration business. the the under cash Xnd, complex XX see approximately very the I clearing Services. or under of technology team pre-tax experienced the on end from of year-over-year including Axos XXXX the to with custody, deposits. assets key billion rigorous clearing, and of and Axos worth quarter August of and around banking margin acquisition custody of want merger we an advisors months billion the and XXXX. vibe bank billion were held of the of generated held deposits XXX under client XXX the X.X help By ended fiscal Axos had to members deal become them. to of billion Advisory thank over XXXX, XX of million and successful. total balances fiscal with more E*Trade business services of administration, which platform, approximately to and of related increased opportunity million Securities The and partner quarter and and while assets tirelessly client We execute advisors X work stock Plan. some lending clients at XXX and transition successfully increase in several who the by scope growing

advisory those significant services, synergies short those revenue a medium security will As cost of becoming over part longer Axos and and term. provide

bank IRA converting to and custody platform, dealer a additional clients. margin able to lines based as be and platform by example, trading offer the custody will products new lending, broker to from such of existing business we securities For credit a options,

streamline further implement the group to meet further identified it improve that, the on intend scalable. become the across control able login our help various we limited various application. and products to services convenience and the have of and and deliberately and mobile to simplicity access guidance businesses. will investment months, exceed transact more amount We marketing of platform next to accretive launched track rollout online clearing at be share. We on to or earnings focus clients, a months offering and business fiscal process our advisory started platform our self XXXX custody prior directed per We trading end our self the In to for existing levels X the June. Version slightly value banking XX the to access our the or being remain improvements directed slightly thought who efficient see one through of and trading and workflow XX will to services, systems Axos be advisory customer and We integrated that and service will of campaigns.

phase over initial our client this the directed the account, of is certain team business profitably. open business Axos to banks perfect and from and organic time. Axos technology lending earn the growth and account invest are order robo our acquisition investing including funds cost to revenue adding over in launching Once lowered like and under trading development our significantly by service, open scope crypto grow other based several of a which bearing infrastructure in months. workflows. self We developing The our clients we trading products trading lot once example retail in an that customer platform investments our fee generated invest institutions retail will expand flexibility bank allow We the easily talented cross and commercial made will we loan our terms opportunities trade. advisor. placing will this customers of we in retail servicing generate the the meaningful a securities fee that We're including deposits based directed see an our crypto as investments operating and and from to trading reach six self bearing trading crypto quickly a During access and experimenting start trade account a next larger additional have consumer in making both in currencies an transferring controlled of their deposit our number interest members sell deposits, One provided to non-interest various base across acquisition is strategic with cost Axos in more through our onboarding and of firm and have limited trading product significant as anticipate securities we shareholders. cheese and to across will and of organic businesses, of and each a did in crypto funding that clients deposits additional and order all years business and the businesses past positions banks from Investments values application. see have incremental tool business crypto quarter. financial One our our accounts growth rewards of well

accelerate of we continued We the revenue from and line opportunity expertise bottom top and growth. to cost businesses further As our synergy each and leadership leverage see implement and initiatives.

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

Andy Micheletti

Greg. Thanks,

financial, Walsh. access who to our over more which September As on CFO who of we're to has have more I'm Axos Chief will recently announced as already than six to transitioned Derrick for proud quarter's Accounting XX, the have of XX my the Bank been and Many after Derek, additional Financial with years than points the years, of Chief Officer. I Axos met you mic Officer eight Derrick, on turn cover some results. years role

Derrick Walsh

our to available will today To through release, details. schedules or highlight website and with press addition Please axosfinancial.com. and X-K our start our and online additional on that like brief to SEC or Thanks, in filings I'd were press with filed to for are our at few EDGAR release supplemental Andy. I our the through SEC a provide comments some refer XX-Q topics.

mentioned, ago million of from three in As from was ended a The quarter September provision for advance year to mix in XX, linked September The X.X down ended for and in quarter up provision quarter increase from million quarterly linked our primarily XX, Greg the a XX.X XX, ended XXXX. credit XXXX X.X the ended the $X losses as this the refund for June loans XXXX. September to non-recurring million and the due was due September the for loan XXXX types million loan XXXX. XX, was in balances quarter the for of months current XX, quarter the decrease increase reserve

and as conditions economic between and September favorable well XXXX September As XXXX. changes XX in business XX,

loan year, we loan the over growth. the loss expect we with forward the next balance additional generally provisions to As look to loan move ending growth

non-interest to Moving expense.

in and the the XX, fiscal to beyond. expense early and is the addition reason rebranded Axos primary in AAS, August XXXX quarter XXXX. AAS linked impact behind advisor XX, due increase of expected X.X% or is was second June operations September from XXXX and up full Advisor Salaries services Services of ended expenses was in e-trade decreased and linked of addition businesses. $X.X Banking our on to primarily related in AAS XXX costs increased by primarily the September million due XX, a at employees and million completion to Securities, the employees acquired XX growth quarter. new amortization to amortization the X.X basis, due and expense of acquired of the ended to June $X.X of $XX.X Depreciation at XX, or X.X quarter business from million quarter XXXX operating the million operating support million of For software the line. during June million the the X.X acquisition previously quarter The both

addition fourth depreciation With costs of one-time level. assets the quarter charge XX, to York office associated subleasing AAS, the due primarily for incurred June in the intangible the expense XXXX amortization with and amortizing would space. quarter that New a we back decreased on a increase to Occupancy City million $X.X expect million was quarter linked to basis, $X

capital Finally quarter grow from Despite increased a addition tangible $XX.XX able as book tangible June of September to our to quarter of share portion $XX.XX turned into the value capital. we XX, at deploying XXXX. still are through at excess during AAS, XXXX capital per this the XX,

with a over turn to and ratio call at financial. X the With at XX.XX% remain of capital Our leverage ratios that, I'll Johnny. Tier Axos X.XX% Axos back bank strong

Johnny Lai

we ready Derrick. Operator, questions. take Thanks, are to

Operator

proceed. question Perito is first with from Our Instructions] Please [Operator KBW. Michael

Michael Perito

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

Greg Garrabrants

Michael. Hey,

Derrick Walsh

Mike. Hey,

Michael Perito

to cost want with second through just on the you stuff that here. ran I you for Derrick, stick a

kind came like of little I about, a on figure quarter $XX two some secondly, and the know, how how guess, I bit of some the you rate to trading slightly about growth guess more expense much the than here ballpark is should normal expenses, up expenses much crypto that So question. EAS run amortization talked through out Greg like is more just of part One, was retail, balance to we in kind core roll the layer XXXX related it the there out how and the a higher million had than you to start sounds lower initiatives, EAS as thinking actually I of then of others? we're things for into from fiscal that for we quarter. merger expense adjusted with be of that the maybe look come as over like

Derrick Walsh

Sure, EAS the we'll that I amortization so August. as early with acquired depreciation back highlighted the a see And reminder intangibles kind return the increase, you'll and then on more and in of amortization of of the the expense, front. QX – to we level

of the So only quarter had in really about expenses September XX. we two-thirds those for

So you forward that those take basically going that to of could QX to the project take numbers run generally take from the as increase that's – approach QX one-third safe to a how and rate. expense

Michael Perito

at around or of of pressures there, guys on terms process in mean, And on there the else, maybe the I the you can going beyond any bank you of ratio some – the have or…. maybe thought something looking guide initiatives efficiency the upward from is some that. us to whether it's

Derrick Walsh

the well, – the of those crypto come the security really think I business. will through side

there. other well, that our of remember some won't three will bit likely. going a really so to have from it's a those. be ratio capitalized And related period bank expense not initiatives into also a lot thing the which those over is necessarily. other year to it to the is growth increase and But be expense There additional a efficiency standard impact rate. But may substantial most then And little amortized growth the on be will baked development there as be

So to couple those ways about standpoint. that think from are of it a

Michael Perito

in the mean, all now the with evolve and could me, of some also most on I fiscal for that things short the in just lending is roll Greg, that a business, of products margins to be you'll then consumers? that that talked out, year-on-year, other decent you need the kind guess the about improvement of EAS board. think continue crypto see trading XXXX there competitive? here have. was the just secondly I suite to here And you're you side helpful. there's or opportunities for about And that's guys assuming is think product you Is relative to the retail fairly Understood, that of it think probably that full business, to kind do on what to you term of going of and fair

Greg Garrabrants

including it's a probably think lot lot to the fiscal technology of lot work to is a event. we a that side businesses. that securities need linked. we of what need going is need to There's have do, – reengineering improvement, do type to of do. process those more into those XXXX we that, UDB we that's why say And have significant take reason to are we I going on things The integrating I to think be

So mailroom and a to manually them we through depositing words, other into that UDB, happen right. needs accounts, right, opening, in checks have

this get clients, charging business work customers -- achieved lower, we zero those a that. get better this is rate our makes that is that. whenever can competitive we're there's not go is be can able And at time, costs a to going more efficiencies, be So increase we we'll But you because then for What new and not get price to to aggressive better. goal, – -- we've already environment. and price will we're the business, think be pipelines good. look when will goal, you which a through to essentially work one in make really this pricing, interest obviously, But need to I our the

a we're paying Now, you were that points today. was though, we clearing, on when to and were XX couple there basis a points have rates basis couple remember, -- paying to always

is balance a debate it it points, To rate every drop But, million the XXX obviously, line, how given for right bottom some is some a you this the that's off. $XX there. on of that think about of sensitive sheet, obviously, business. basis of is some you can So

it the great are sensitivity these helps it I but asset side, know, also, So then us, think you on customers.

there's do, And to is this high that a need happen. that this which there's year. rolling of And banking so that platform, and to worth then, net lot quarter access million single the and we'll doing to it work making yet. customers exist be work and year we out, getting about next in doesn't able for there next were a all adoption And products, be

for good great, volume a businesses, operationally, just working also time. we're where at lot grow of but reduce we improvement, businesses the have from they these can they're which same relative we room costs at look you a if think and because maturity So is essentially perspective,

Michael Perito

that step And higher like the on EAS and see the short the pointing the the put if end balance tells forma and Helpful. over of curve sheet post I But of start how you some else have we numbers at on done about positioned just here for kind can and might feels just I just quick last you back, two rates, any much maybe movement, better last NII looking on mean, alone guys sensitivity mix that If the everything one it out follow-up around the certainly deposit sheets mean, pro story. it's to initial balance here. the this try some curious just thoughts react. years.

Greg Garrabrants

Yeah.

And side, I from which they're too short-term the I and bearing the don't gets cash never movements, move bankruptcy securities, that rate think interest much the given rate from side, deposits in paid think like non-interest deposits the will we which paid will security commercial, have that those probably those other rate. -- behave commercial industry. some the and doesn't and be get then

see deposit little to question the I growth, is, towards right move think balances. with move to -- a a continue I mean, tightening. it's now little of I bit market do of as we respect the

and are for be still but I growing, think a paying rates we going up if so we're would more those clients. bit little And

which Online a they things possibly beating can't we why never I I Got obviously benefits, and environment? that But But together, it results event, a if package there, Best things right open -- better a then finally think they case security deposits right. rate straight, then no idea we if in balance And sorts trying the have you collectively often enhanced us, account, think there. well. but it know invest a an very higher can in any just we a Bank, -- trading deposits I've the account, got case that also we've we're raise interest lot to now. be clearly for I cycle all I through then accounts, lower you haven't Magazine's are Ally, been one been playing of those through the for -- rate And is others growth, of whether we paying of right? in open we're should obviously, pick the we Ally. in shape. do, have good stickiness. Money we're result sheet finally those -- won Will with obviously have off at as cost so. those got So, of with

Michael Perito

talking a consumer we of programs out of together-- basically there reward you're right those be that you like -- doing to find about kind -- just type you're like of lot some FinTechs And when like clear, where see Right. the things

Greg Garrabrants

-- and they -- there been loan all Yes, done much ton a Yes, right. I is checking and the account? programs is have are really and that's think well are on showing someone no. but I those at I franchise think growth between -- type the always numbers. But lot transformed Right. as a answer things do subscription companion we'll of correlation Obviously, self-trading think they pretty as I rate-sensitive obviously deposit look, they're say rates. where on a probably. But up there's are Right. deposit getting our and is research, we

Michael Perito

let jump for the insights. else you Great. to appreciate Thank I'll it. someone

Greg Garrabrants

Sure.

Operator

Leisch next Piper Sandler. Our from Andrew question proceed. is with Please

Andrew Leisch

afternoon everyone. good Hey,

Greg Garrabrants

Andrew. Hey

Andrew Leisch

making book further and some much the the looks on you're moved warehouse growth it keep with stabilized the moves business help to to Certainly up jumbo Question the guidance the declining from is the loan teens. low high here, rate at like competition. of end to some

you at trip quarter have year, up know So, loan only you the and there? a we're I be but low that into trip growth end? what what the could fiscal could up

Greg Garrabrants

are the good the There's Prepayments are part those pay great in part bad and C&I credit -- quality, crestal. is very quickly. loans is off they

happen looking we That reasons. would -- one that'd cut So, book Look can prices. one I jumbo that be think be sorts and better have for is area. all our of

are and the loan to about happen on the reductions that talked done pipeline rate books. as versus definitely we're we've rates trying growth some defend -- So, that in current that the when order in the we rates what make to

about. I good pretty gets could quarter be high number higher, a We in prepaid much I little feel and to the could you're that doesn't -- of it that I lower. mean about as a that's being in pipelines talking good are I said would think low individual that as pickups but not know it about take meet conservative single-digits I book quite move it. bit a the any probably, look, said, be way good, we it. So, but feel pretty teens larger

Andrew Leisch

Got short Do the its rate it. movements. Helpful. here And at maybe at until again, margin topped then something -- XXX with LIBOR think the out here, Fed moves higher? least you up does of the on some with end the

Greg Garrabrants

Yes.

a I that's assumption. good think

Derrick Walsh

Yes, – are some we, see loan turns deposit flowing do little given runoff. you that'll But rates loan rates in the quickly I some what our between And through. on. start benefit coming think from yes, did we have difference that book how

yeah. Great. Yeah, So.. I'll Thanks. back. flip

Operator

Riley from Steve with proceed. B. is Our [ph] Securities. Morris Please question next

Unidentified Analyst

afternoon. Good

Greg Garrabrants

Steve. Hi,

Derrick Walsh

Steve. Hi,

Unidentified Analyst

here. maybe just the following just Maybe loan up on pricing

here. I up in little prices of kind Krusell way you of But bucket? any within or [ph] size, of you're different competitive just terms change loans loan mean, also moving CNI a the it curious, maybe pursuing of are kind pushing has environment, Just you just terms to cut in and curious, obviously -- some of been the

Greg Garrabrants

really. Not

doesn't, fees. know, pretty raid. on the steady. that's been that's just Right, think Derek? include you It side I And a CNI doesn't that

really want know, think we where can what I the it's get. know, which should that, there's for that things pretty, changed. of, you you you But be into we I no, amortized think result raid fees we business I So and hasn't boosted. mean, max just is business and know, our like know, the think you It's, we the get, obviously that deals

Unidentified Analyst

Okay. up And here. on maybe then following just expenses

I terms investments you capitalized those guys in of hear and some know, investments being You the of here.

million of million quarter, off sounds just kind off an, the type that to the Just of of we range think do think of curious that's how know, expense it for kind $XX how like call year? growth of the $XX expense the for third rest you kind --

Greg Garrabrants

of, at again, some to I think the mean, so as salaries look you things -- benefits. and The

and the the So than idea you going so employees had months two been internet and around of around probably roughly. two of of hair, and data a little quarter, range lease quarter part processing that months for it's the in only assumed less equipment, those then that drive the an be in on that's as the of a acquisition, last months. only up The of we so to XXX hit of office a occupancy AAAs space of Denver the that market where to quarter a going this coming couple and same is

kind that's of run So been recently. the rate

Derrick Walsh

mean, we this salaries, with to was respect that And I probably raised

Greg Garrabrants

on A we excluding base drop increase a X% to this X% did.. as AAS salary

Derrick Walsh

Correct.

Greg Garrabrants

coming then around but us it …for evaluations annually we in, where in and raised is, the.. do it where our

Derrick Walsh

September. of End

of hit So not the September quarter. a during much

acquiring how are So take-off with incur as on see increase we market in been charges from broker kind how flowing and in from -- and increase QX. clearing a the amortization from that depreciation, will through or you'll QX. then hot you'll that one-third we increase. about dealer the see a from some There's depending more talked many that. of And the movement, regards of Same to charges markets obviously, portion are transactions idea

Unidentified Analyst

great. very Okay, you Thank much, very helpful. Good guys. That's quarter.

Greg Garrabrants

Thank you.

Derrick Walsh

Thank you.

Operator

Tanner question proceed. Please next Gary is D.A. Our from Davidson. with

Gary Tanner

Thank you. Good afternoon.

Greg Garrabrants

Gary. Hi,

Gary Tanner

sheet of billion. heard that the heard Hey, deposits, the the in terms off total in I billion end? I what I or Is number quarter around think $X balance at $X.X

Derrick Walsh

million million. we sheet, have $XXX about balance $XXX to Off

Gary Tanner

Okay.

that right you're of thinking on other you deposits terms getting the Greg, the cheaper you're bank. sheets now, by what than balance incremental sounds paid could about saying volatility like deposits, So, get it of in

this terms Are So a needs question modeling the of cash period as an maybe in committed, are over daily or the for off is issue it's you or a decision, balance of a sheet some…? time in sweet the environment, not current work you deposits? there's actually sheet, but they modeling balance really

Greg Garrabrants

is there essentially those, that. more with in our the it's but that respect and There a part terming generally some get in are too term promising -- aren't for some as bit work rate process money the the commitments essentially the that. in some extent of we to But the and cases people generally of to to that planning were then out waterfall way long, get we're can liquidity waterfall little terms participate

deal? not the but It's short, pretty longest there's what's right? yeah, So

Derrick Walsh

It's longest just rate couple is but to, need -- can a we it adjusted. gets is, if the it’s deal, pull back our we default -- years the it tied to

And rate falls so back. that, so the higher

basis pull does take that if can does which awhile to willing set move we even option so more, But Gary, need more allocate the do are that, of we that on but system. banks the do that. that into adding we're on, XX interested. the money to banks we than XX So part depends banks a we we it daily have around It to them to to require up money are process we to and have still have look But as to partner at flexibility step to up.

Gary Tanner

related on talk regular costs way Q, your to I amortization the highlight press in then all least And just you intangibles. in the you. the associated past, the includes at thank about E*Trade. partially of the way your with in Okay, that clarify release know that cost one-time acquisition

ongoing amortization So of just non-recurring of is actual of related cost? that how much $X.X the million intangibles costs that highlighted, acquisition are versus of

Derrick Walsh

was it was one-time three There to costs. XXX,XXX about that bulk around of intangibles. is The amortizing –

Greg Garrabrants

of investment banker. being your own benefit The

Gary Tanner

All thank right guys, you.

Operator

from from is Tim next proceed. question Our Coffey Janney. Please

Tim Coffey

afternoon, everybody. Good Thanks.

Greg Garrabrants

Tim. Hi

Tim Coffey

in Greg, you into yield, better of points. basis lending, think securities item any there's balances kind Hey, do going than wondering, a about you balance, forward? the I'm visibility and those X% Q, margin have a XX is average – XXX about million obviously spiral which talk, line I the

Greg Garrabrants

the attention on you know, markets, maybe about think tend doing more they borrowing. feel I good to focus Yeah, people little a when that

it'll demand some -- of a be more reflective think sort in I because market There variable this over year, that borrow, simply stock driven And base, time. going think that some you the going of So, other for we be is level. -- lending margin and of at the however, interesting, general, pretty They of -- AAS of by think e-trade which see to And because is rate, be to opportunity, in to where bank. from a make over just all. didn't I happen. lot the to stock. don't that's we're there. has broker be a this different it's But is, going this that's that sustainable that's time, Obviously, dealers. slowly customer part actually was we lending. do it's of didn't They it margin growing, have there's

under a that there's to wants assets with set with whole of do $XX So of us custody billion margin RIA’s lending.

So the that. system right now doesn't accommodate

have and happens. are So to When it's fiscal like strategy. part demand the through that But that. margin self And on something to a of that be we that's other how is. We'll the not lending, there is see working impactful. from platform, block going things us touch ability then it's XXXX quick much -- not do also the directed to one

Tim Coffey

And it. the what's rate dependent those, on on? on that got Okay,

Greg Garrabrants

much It's going And how to negotiating keep -- clients much going and dealer we're their negotiated keep. XX it. they're firms, what them. determining Plus customers, going with and jointly rate our to broker working we're on bring to how are there's they're who with they're to independent We're

Tim Coffey

liquidity, equivalents, need target cash or schedule, basically, terms rate of forward? operate a cash Okay. Great. that you balance there And then is your staying or on basis in percentage going bank to and that

Greg Garrabrants

just flock always to we've in kind depending They we XXX them come this of mean, around million, don't flux some or quarter that to on delayed consistent. the timing of by those. come million, we're deposit and and XX expect XX is at It'll that think, -- quarter, XXX XX this second They come in. they may got XX by average to exactly inflows Yeah, of when outflows the where I may we in probably balance days, I days. get had earlier

take a a reasonable see million, yeah, you'll or this is that will flux, where couple XXX but be that's probably that give So average, quarter that

Tim Coffey

Okay.

Derrick Walsh

at about but sheet the place the of a have, we balance provide not securities of they particularly but We think of well, off you liquidity. liquidity, type to really that an below, about they're course, on additional thing go know, balance X% We but is don't as as where sort want as deposits at available interesting when do count those there a component sheet. that a source, they're

Tim Coffey

Okay. a feel appetite next hold with next maturity that real or to the the lower you on of rates, at the there and six those is like XX to months, the -- your months, do And more on in some strong liquidity… obviously sticking point, over CD portfolio

Derrick Walsh

I because much rates, are -- We to of things about, third Sure. and and basically places a a they're mean not go know, people do other at do. lot those, just we of renew to lower do you there's sticking,

that extent know, talk that options conversations have each about in for them. they're you We with doing other interested to it's, the person to

And so the so get a in We frankly, that there's don't market. maintained. percentage yeah, rates highest have, the

So competitive, something rate we're so but we if somebody's more very to more going to able we But sensitive -- very, do and them. to suited retain focused, -- they're find be a we little portion.

Tim Coffey

questions. Okay, you. Thank my those great. appreciate Well, I were

Derrick Walsh

Thank you.

Operator

Our with next David Please question proceed. from Securities. Wedbush Chiaverini is

David Chiaverini

you squares are payments, App? directed to way months. For guys question. on within features to missing? six peer building on aspire I even the question in taking any app, products something your for do The banking you investments trading and had crypto because savings, save with is, Thanks like you Is next Hi. that Cash question it well peer self development, to there you're to? the compete super can and seems a a

Derrick Walsh

your have universal and able talk can enrollment, robust. lot to of much through personal for next build your say to think be Well, to open trading better, we're what I more that with have business squares done extent crypto, we'll to have a right? able out by cash that, -- a think we time that a to y'all going it your accounts -- I about you'll securities do doing, we're small we think Robo sit accounts right your yeah, we're I advisor, I be build think I square things mean, would like frankly, the that, that the I I much I mean, are example, think

just, let's example, about for a Robo just for Let's, let's example. talk

So with have, they have store. Management what we in AX, Model a

what really models So Robos our simplistic store. while can are choose, be most built ARC will you Robo into about

in more lot through a order have to will money could side. that they choices model client the So, manage the Robo use their

I data planning just algorithms functionality -- then there's tab -- all that to on, do happen. -- think features a works help development have that is those that. has through just finances, that yeah, things and we would essentially market So is to a and like X.X we of clients then plan suited UDB that need be variety make and pieces products there's the most And to their based to people a specific

any but they're So, do yeah, of time. unburdened companies at for lot interesting making a squares, accounts very I money think like they're often they that have small Right. -- the they not from have particular they They them. and --

Frankly, much functional more we're much be when So definitely than I robust theirs. think should done. more our app

David Chiaverini

Great color. going Thanks for a shifting that. the rates then talk housekeeping can about to tax And forward? you item,

Derrick Walsh

roughly relates a price as result XX% go street be on years. benefit with the the ago, generally This we been quarter a last There's through it a where we've from builds rate shoots tax the equity, where is the a few rather accounting stock XXXX, few built time-to-time, XXXX of of That's into have where somewhat years than things a around the I usually period it familiar the the where rate. stock been at awards this some nuance as comp, of best before. we over might used assume there's to they And if hearing have up. tax that

what right we've and where around really to XX be. rate. expect But has generally that's can that will been shift So

David Chiaverini

Got it. Thanks much. very

Operator

is question proceed. Edward final our Hemmelgarn And from Please Investments. with Shaker

Edward Hemmelgarn

question. Yes. I one just quick got

clearing been would expect talked the by go have the revenues would right, up equivalent, You according another about I expect be -- from you no? to could month, expenses

Greg Garrabrants

course. correct. Yes, Yes. That's that's right. Yes, Yes. Yes. Yes. of Yes.

Edward Hemmelgarn

the prior more all will How one more, a broader just audience? the were that things -- And to go you does. would about caller, mark allow with the your square to do and talking to one capital you Okay. about

Greg Garrabrants

square square primary essentially Well, merchant the right. is -- I remember, is mean, business acquiring,

uses is we is we the not if clear of clear they I'm amazing an revenue So mean, don't related because most business. I business, great Cash mean, -- I business. But of, Cash speak this that that is that actually. App what that don't business to mean, I to sort I business a but a more example do. on and even that's that's for for frankly, a for want I they great side what -- of core so them. know App, of them. disclose

And so base we're that. amazing familiar consumers, But and what like some this things volumes I have the acquiring obviously this of because massive that anyway, think merchant have they they with business.

we provider products really two that perspective. answer broadly will technological One primary who integrated more the need RAs a is and will be are a this by integrated an market. think service to that be for great that to trying I there from mechanisms BDs,

own to services network, broker custody And not Robo those customers our the those we're size, and are clients arrangements refer need are via network. our the accumulation to of not of network. going So that extent businesses our an because to services, clearing gets RIA we're out own RIA we're the running that referral non-competitive, any running

through now all cross-selling that marketing, acquisition we of is And customers. third-party there's then of and there's customers, acquisition get to do direct first-party the things So which customers.

the of selling checking of money the if a right you as And think account, I real the acquisition. you're a pay differential cost customer, a certain on so can is, amount

that and can of value loans when allow lifetime marketing reflective and greater more and broader be acquisition you're If and set done that cost even securities checking be cost customer you're efficiency the of a of product accounts acquisition. selling and then a measuring products, to

the also then customer So the acquisition acquisition particular the the run which what becomes I that. happen, you out best and has consumer balance that make and that on which models trick really think has lowest you and costs And cross-sell the like. to that's product can one looks

Edward Hemmelgarn

great execution on And Okay. acquisition.

Greg Garrabrants

you. Thank

Derrick Walsh

Ed. Thanks,

Operator

to over to for reached have end of turn We session. question-and-answer our closing the management back remarks. would like the conference I

Greg Garrabrants

do out talk We'll Andy everyone. next Thanks the And still doing be finance. to next All you, Derrick you Andy, of deep Bye. you will most hanging No? Thank right. care. Take and everybody. will Bye. All about quarter. talking. right. be

Operator

today's concludes This you. conference. Thank

your And disconnect lines at may You time. this you thank your for participation.