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Axos Financial (AX)

Participants
Johnny Lai Vice President, Investor Relations & Corporate Development
Gregory Garrabrants President & Chief Executive Officer
Andrew Micheletti Executive Vice President, Finance
Derrick Walsh Executive Vice President & Chief Financial Officer
Andrew Leisch Piper Sandler
Steve Moss B. Riley Securities
Michael Perito KBW
Call transcript
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Operator

0:09 Greetings. Welcome to Axos Financial, Inc. Q2 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 the to Corporate your I and will Johnny over turn now of X:XX host, conference Lai, IR. Development VP Thank you.

You begin. may

Johnny Lai

us everyone. X:XX Good financial results Inc.'s And today XXXX for call. thanks second Thanks, quarter today’s afternoon, for Alex. conference Financial Axos joining

provided press located and conference Litigation for the will contained will Safe announcement President remarks answer section performance. are response protection from results Derrick, in a days. in are statements President, statements and and the Derrick Officer, and current Securities Relations at and of Before will Walsh; Reform I and for XXXX. review could the Executive forward-looking call Harbor Chief the there Vice remind Greg that available of and Chief risks website to Garrabrants; financial would us are available and today call call to forward-looking today’s results in for of statements be the on prepared prepared December result and company this management call implied statements additional XX Private events and in the the future Officer, pertaining to differ Joining the subject Executive basis Andrew the questions. six assumptions XX, uncertainties, materially replay in and or forward-looking of claims Financial I axosfinancial.com on Greg, contain Micheletti. may Finance, your Andy questions company’s those made the company's we that regarding earnings were the risks as operating Details this forward-looking begin, on management X:XX expressed of remarks. and Executive Vice views President being like such ended audio comment make made And release. months and XXXX. on These be and This Actual is Act statements an that forward-looking three to Therefore, may uncertainties. to webcast the Investor after listeners

the All earnings are our for to X:XX I'll and XX-Q With turn documents, opening of now these over it that, available website. relations remarks. Greg including supplement investor on an

Gregory Garrabrants

X:XX And joining Thank of afternoon, you, I'd Good Financial’s call everyone December you for to everyone. the for to Johnny. welcome fiscal us. ended loan thank XXXX. had year conference quarter XX, second your XXXX like interest Axos value and per excellent I book Financial in originations, net We share. X:XX per quarter Bank. for thank growth share earnings double-digit you an and income, in Axos with Axos

is were direct-to-consumer earnings per our which BXB business, for results target custody and security, the clearing sweep of net with XX, months growth of of XXXX, balances, income securities, strong $XX.X year-over-year net XX% diluted the quarter and assets X:XX representing for growth share reported interest across three commercial ended quarter exceeding manage and and X.X% and of banking income securities banking second challenging of net-interest respectively. industry. deposit and end segments. Our the despite a maintain million Axos December high trading business, income margins fee consumer balance and based our the portfolios, broad comprised our solid and $X, client

December family lending loan up XX, C&I and from billion, for loan to decline our ended the and on X.X% XX, from X.XX% this following. XX, XXXX. XX XX, at various September Our the down XXXX, quarter interest and XX.X% X.XX% quarter balances in ended September The quarter Net December $XX.X in Ending margin second points up for compared were ended quarter X.X%, X.X% the include XX, December or linked a from auto annualized. quarter, interest banking was XXXX mortgage quarter, Strong per business the XX, ended was of for Net more in our than lending X:XX offset book basis X.XX% value types, quarter X.XX% was business. $XX.XX XXXX. warehouse loan the share in small margin single XXXX. XXXX in XX.X% December originations highlights the the

the strong We our target end months and have our XXXX. net-interest toward successfully of maintained of generated a loan annual fiscal growth margin the higher six through first

$XXX We million X:XX improvements XX, XXXX, bearing in approximately from funding the of period improvement max, XX% XX, bearing XXXX. a by increasing with in continue our steady Non-interest a from deposits total at make significant to represented non-interest deposits XX% corresponding December September our ago. deposits approximately year

managing three the was quarter XXXX. in ended growth segment ago XX, on achieve up focus We the operating year, earnings of as strong XX.XX% of year for in for second share the $X for the in The income XXXX ratio of first the efficiency X:XX first compared quarter. Diluted positive ratio efficiency continuous XX.XX% banking quarter operating of was business December of or and leverage $X.XX from year per the quarter XX.XX%, net-interest our XXXX. a XXXX costs. our Our XX.XX% over banking XX% months to in result was business

a of regulatory X.XX%. X return second of strong of on quarter, Tier above the per strong year-over-year. merger remain share return operating the generate for holding with excess increase equity continue bank capital. $X.X and Capital maintaining X:XX and three XX.XX% We both while XX/XX/XXXX generated depreciation on months returns XX.X% of of We diluted levels at and X.XX% to XX.XX% company, leverage one-time the our Excluding and and costs amortization assets was a requirements. expenses, in well ended non-cash related our the earnings

million charge-offs, investment on loans. refinancing. family a sale quarter We from gain strong were next of and C&I income banking net last by ended XXXX. were billion December rising XXX ago while the in consumer loan approximately loss year unsecured mortgage average XX% follows, basis year annualized annualized of December loan basis remains gain ending was mortgage quality to million quarter lower as quarter for across XX, the credit gain for $X XX Total the December lending portfolio for for this Total XXX sale times our period. $XXX XX% generated reduced of of Originations the X XXX charge million strong of in million. estate quarter due loans quarter auto offs XX X.X% resulting $X.X XX, the production, gain from million growth. ago. production of compared billion and production, X:XX billion Our down down production, production, Mortgage Loan ended industry. $XXX.X to and anticipate in XX provision losses production, margins few second X:XX demand originations decreased XXXX, million XXXX the net point second total corresponding linked $XXX single mortgage on million XX to $XX.X the net multifamily our market family real as quarter to $X.X representing million, of commercial originations credit or allowance support jumbo of We in loan to the balances million loan million loan in the year. were banking million the our $X.X single of increase of family XX.X% in quarter from at XXXX, $X $X.X points to interest on and the QX rates billion sale with million, added a in C&I in of on corresponding normalization agency and XXX sale XXXX quarters single increase originations loan approximately $X.X fiscal

loan pipeline offsetting $XXX the was X:XX million generated XXXX. families of loan prepayments. Our Ending mortgage December Our to at at Demand business at expectations. XXXX. million XX, of solid, mortgages stable. jumbo pipelines We continues flat continues with single reflected January our single were transactions family single elevated XX, XXXX family balances approximately jumbo, agency as million XX, $XXX purchase be in for January $XXX production to line be in mortgage

generate initiatives a X:XX the commercial on jumbo real family had billion, lender calendar C&I working quarter, are income half lending. finance in reflecting in of XXXX. across and estate that a business, could were our tremendous $X originations growth our potentially single lending second strong lending construction the loan business We specialty few

structuring knowledge steady track and and production in at with a geographies, balances. relationships, of that expansion million Demand January and record of and a in remains execution backlog loan $XXX types have resulted approximately loan strong Our across XXXX. XX, strong

size a few were balances. the million for loans, and loan X:XX versus can September $XX warehouse Given and average ending on large our mortgage outsized have at and loan $XXX Ending lenders, our family non-bank single $XXX XX, million balances impact from down an jumbo, in portfolio competition XXXX. million, multifamily C&I deals from C&I banks our

on focus existing to customers. family Our new business continues single warehouse with and growing

refinancing. While balances for underlying will on demand fluctuate mortgage based

this We business. continue in to generate strong returns

have and incubating our operational members in investing technology, new leadership efficiency team businesses. maintained We while upgrading and infrastructure,

banking With business increases benefit calendar around be expenses efficiency few Our in will the based salaries years. XX.X benefits we X.X% and up three with in in six ended and Salary for were the likely what and a the in was seen and line additional XXXX, we've the X.X% ended merit segment and months XX XX.X% six expenses and months for XX:XX XX/XX/XXXX. three up December ratio XXXX. staffing prior range, to points hiring X% X% expenses in anticipated increase year-over-year

cost across initiatives savings unit that we series grow, businesses a more and result of have each become as We mature. will in efficiency various business operational

and savings Axos $XX.X service cross representing at as of at accounts. efficiency sunset, deposits savings December points quarter the of increasing acquisition. clearing billion kept average at clearing other enhancements an new XX, linked XXXX, quarter. We at deposit our our Once business flexibility expect our meaningful ended of transition XXXX. that to XX:XX and demand service securities Additionally, fee $X.X December our and grew infrastructure and and increasing XX focused Direct demand of clients Checking The clip deposits loan banking is total these deposit small optimistic new December deposits are and XX:XX and sheet. Growth linked then, off non-interest down marketing advance growth XX% of deposits representing and expenses and low conversion consumer XXXX. savings be support will business, business, was $X.X and and XX share to billion September what basis continues to or we more by billion of contribute non-interest in incremental billion from in came and banks, through integration cost client of Axos’ the to balance keep approximately Since make banking ended UDB rates low tech by we're were put on weighted we've deposits we XX, redundant businesses. including $X.X access deposits upcoming deposits in interest deposits self-clearing, further management of portfolios existing meaningful X.X% overall from from improvements money security rise that Axos sheet. and Our basis deposits. generate income Advisory generate Consumer to banks XX/XX/XXXX, small and related in our advantage Axos’ release generate compared consumer We and – the at market costs December on and online XX, treasury Total the for specialty to with on deposits affiliate features balance to of consumer and the that deposit points XX, $X.X XX/XX/XXXX able We advisory deposit off were additions X Consumer in of We're quarter deposits growth to The comprised clearing self-directed balance on continue XX:XX the of even broad-based business. checking from and billion product the custody XX, XX% trading points that increases. continues repriced $X.X X.X% up to was relationships cost basis XX of sheet modernization bearing cost low workflows, more the and we Services managed billion total in sell. our wallet commercial deposit ago core the commercial fastest closing with we mobile months consumer adding platform, business. to X.X, Average strategically business growth including related quarter will when XXXX, our bigger incremental growth. or to securities deposits competition commercial sheet and XXXX. complete business our on custody XX:XX incur balances. bearing grew across balance to our approximately fiduciary the calling

loans our model to Yield reducing commercial C&I We in originated We low ended ended to pricing December rated lending to equipment and C&I across adjust portfolio and demand opportunistically in and sensitive XX:XX credit the the jumbo, loans last new arms, single five X.XX%, cost our lending a cost changes slightly XX months compared to We terms banking commercial interest with the family, remain in service leverage from X.XX% continue of X%, the changes most loans tactically loan three on of that attract rates underlying quarter, to our our one loans categories. our our branch competitors. of X.XX% index customers high $XX high hire Approximately acid month. base million average X.XX% funds. rate. team quality the in years, three to our our rates. of Competition on average our reduced respectively while have success yield just maintaining of opportunities exception remains leasing multifamily with standards in and duration our that of and are were in given second bankers XX% high all XXXX,

deposits our billion we're deposits. our loan ability end high than XX:XX limited push of and at currently XX, more deposits and year X.X flexibility year exceed competition, organic our Our bring will internal our seeing have loans or securities Non-performing million XX, to the interest XX. XXXX we for XXXX. not or we our particularly quarter for assets those in basis was basis XX:XX same funding modeling our September was interest our on north to remains the slightly the to more of Currently more it funds the For trade-off We banks, point quarter. a successive basis each with average increase, growth as off to fiscal ago, increase of the at $X.X maintaining Fed quality top funding net meaningful start held charge of we XXXX. first off annualized any six when a for XX rate our net full that With balance full changes to strong new from on rate be approximately December continue of Depending evaluate first With of loan as to was September X.X from ended and assume healthy costs incremental funding $X.X quarter loan our a continue partner deposits healthy, are average are the additional our have and our interest a fiscal confident growth of rate we businesses billion assets XXXX, of We clearing beta $XXX reducing the the XX%. the on year While above net sheet deposit of that points custody will same between XX earning ended decide banks. deposits. XXXX, may higher benefit margin periods the our portfolio. end margin in an strong XX:XX is one upon of target. costs in rate to range months a growth purposes, credit bank's partner of marginal points. total

XX, are below or and losses, had where value. approximately family at mortgages. value family XX.X% of single to have did approximately current XX.X% we've at We Our the loans incurring on XXXX, value We loans anticipate on losses a single best very loan our December an no XX:XX forbearance loan of mortgage low loan XX% material family family Given below historically XX, low current in realized our not non-performing are vast XX% December single estimated loans first of single delinquent to non-performing of our at XX.X% majority mortgages, our to estimate had loans. XXXX. at

of million is as quarter from this quarter in loan in of decrease quarter adjustments loss provision and changes provision XXXX. million Our ended quarters two XX:XX one our reflect loss of provision reflects which XX, the loan $X loan loan factors past by last from impacting in the September macroeconomic in and led balances down the provision loss The X credit ago lending. the XXXX revision December The million year models. XX, portfolio of loss $X in ended million, the max loss $X was and growth the for loan strong loan loan overall our same each C&I

XXX December approximately annualized in ended Our total the losses of total XX, loans XXXX. months point net our X.X% allowance our XXXX, December for approximately X loan three and times at XXX million was total charge-offs XX

loan $XX solid and $X.X specialty loans, across XXXX. family confident We of and mortgages, $XXX loans. healthy consumer jumbo million achieving categories XX, our with range C&I the teens in of real million and as growth months XX:XX and of Our auto loan gain on commercial approximately With and of $XXX the of our above balance $XXX multifamily single $XXX in agency billion sale small of commercial target in for fiscal growth estate pipeline for estate multiple loans real million remain fiscal consisting mortgages, pipeline loans, loan family XXXX. remains first of million loans XXXX, consolidated January of six million low demand unsecured single

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

Morgan see lower Stanley three impacted negatively for by good based ended over Axos Securities from for December Due revenue profitability processes, workflows the remain efficiency lower XXXX we five for Axos volume. manual efficient, to respectively. opportunities approximately trading lending We XXXX. on balances as security improve transition average making overall acquired a into systems, profitability the declines Advisory accretion transaction ratios eliminate was margin clearing. XX:XX the of to scalable time XXXX, automate redundant and we with progress December infrastructure. Our industry and business custody RIA wide AAS are in overall and ago. and more quarter the track to banking XX:XX generate of integration our business months slight XX, We're tech business XX.X% meaningful more fiscal acquisition and and months Services, XX.X% the We to Axos consolidate

to of approximately leverage billion we to excess in Axos Tier-X with X.XX% Federal XX.XX% million, borrowing, of available Axos strong, at Furthermore, discount at Home XX:XX $X.X remain end we and $X.X at billion the window we of of ratios capital adjusted holding have Loan $XXX billion bank, XX, of second assets company, XXXX. Our had of Fed the the outstanding of December as liquidity the have quarter. Bank $X.X

deploying Our our excess capital capital existing opportunistic growth, businesses emerging a capital unchanged in on focus remain using to organic priorities for and M&A. creative and buybacks support with our loan reinvest and

administration, quarter XXXX. broker when billion lower assets assets pre-tax rebranded approximately under acquisition excited clearing combined We negatively AAS fiscal of long-term XX:XX depreciation the expenses Advisory of under volumes or with XX, benefits and clearing by approximately one-time ago we with Our We Services. we're assets four corresponding the a clients acquisition compared client completed assets second Axos about million deposit fees in the the Broker from including margin see for $X.X were lending. custody which period business financial and custody the of quarter the XXXX grow and custody the December Transaction five as XXXX addition opportunity ended dealer this of business. second next Axos $XX cleaning increased strategic business. custody quarter, had security clearing of and Axos merger amortization. securities of under months introducing to and related quarter income clearing fee XX:XX billion ever balances last dealer Axos to trading in generated impacted lending. administration from the the XXX.X% and to the higher quarter RA primary and ended fees excluding business, first based stable Axos and transaction $XX income of for $XX billion reducing income lower the and under fee from year non-cash

we and wallet share to First, than today. Axos declare existing RAs another or assets dealers some other see broker significant custody with all their from custodian of gain opportunity

our succession provide expand management committed see Competition advisors. strategic integration and we tech systems opportunities activity more integrated a RIA set base an clients As were clients. to a XX:XX touch and by needed and to help costs, serving free their about and providers, of operating end to active custodian self-clearing. and custodian. dozens systems activities. XX:XX to laying deferred example custodian Second, and service both. to is integration adding volatility. product and for it's Axos during other make service XX:XX their is market Doing lending retain back to add practices. of some of eliminate revenue RIA their third processes streamlining of and advisors One banking, important or the teams processes and and advisors capital and and custody grow of communication extreme redundant the clients. our and we’re wealth high services potentially will the for a completing Axos capital clearing Finally, can business a banking, required clearing integrated is dealer operations or M&A Advisory non-competitive Whether conversion broker comprehensive financing with a and so model opportunities reduce for up and banking, Axos with advisors firms and end foundation Third, centric the Services as to mortgage our custody services fears we conversion will a strong to become particularly times party lending clearing run advisory

Services or it a Axos operated historically because not lending custodian. as bank For offered example, has margin trading Advisory options

margin technological and trading. operating we to make the as dealer investments custodian, a broker necessary to clients enable that option to we're Now Axos intend custody

over six enhancements roll out We the that to pipeline of four have quarters. technology healthy we next intend and to product a

and add bank. our as multi-owner, we universal signer Business enrollment features convert the banking business intend platform such Banking, multi Small digital small to for to digital First, new

And integrate and hope will experience new consumer UDB, trading portfolio to transition to fee by products. lending, XX:XX dredger exploring would further and it accounts through making few back sell the deposit end UDB. user new Second, open refining businesses front ourselves We and into end trading generate processes manage we're of increase and a incremental income. cross easier we that

As single non-agency I mentioned offset for gain add on mortgage agency mortgages. we're lending incremental business. in sale earlier, normalization capabilities expanding our family will generate banking securitization This and help our the to mortgage expected fee in income agency and

account. open these to individuals the separate and confidence in crypto is by interested either in are and which application. a product in customers understanding brokerage number cryptocurrency trading wallet cryptocurrency a digital limited trading private or Axos an their yield owning service, the Another from Trade under the diversifying secure the assets funds a account. there, development and our holding lack while exchange quickly hosted retail cryptocurrencies allow lack from Many of They and trading Axos Find security account. of open easily fearful XX:XX a hold bank in a and And will all transparency assets, to values complexity transferring wallet. positions in of benefits see cryptocurrencies. Axos account Axos digital and invest they're and

the clients. months. two We the launching three our XX:XX crypto costs for trading and anticipate initial will in cryptocurrency crypto to Our retail friction direct-to-consumer trading associated complexities next and retail offering reduce with owning

our dealers building progress RAS. making label solutions good and Finally, broker white out for banking we're introducing

at channel the about we time performance further the opportunities business. low app dealers by Axos, is the easy and powered mortgages vision high advisors, net will we've their provide Consumer with Our and enable savings, products reps grow digital mass others banking through of offer checking, to securities, cost banking worth to our acquisition and affluent clients proud excited consumer to and achieved to have commercial is an consumer a Bank. and new the same to use us that our broker for I'm

in We focus navigated a teams periods enable various platforms, maintaining regulatory positive multiple have on our near user strike cycles, turn interest foundation our policy and processes long-term and continue I'll by that competition, successfully technology and credit through consistent generate behavior of in team, tech for rates benign shifts depend and call details results. efficiency financial intense and future and model and our development, invest we product that optimal operational who'll will Derrick the operating that provides season our strategic and a includes ability operational Thailand and The the success news productive in is growth. additional strong human XX:XX on great Our to have initiatives management. execute a leverage. manner. changes, potential We'll average to XX:XX and management businesses above returns, a term provide balance to between over Now profitability on the capital diverse

Derrick Walsh

XX:XX Thanks, Greg.

select were some by today through I'll details. with website our and will through release, SEC income. of brief press available axosfinancial.com. our release So and our to few Edgar start, or I'd press SEC XX:XX the topics. comments and an a our online like our Please areas on performance, supplemental non-interest focusing our Turning XX-Q on to with to additional schedules highlight filed quarterly that provide to our in addition start I X-K refer for filings are

up income $X.X XX, XXXX. Our XX, $X.X XXXX. quarter prepayment from the for ended penalty fee up the was September for XXXX, December for million million ended December quarter An quarter ended million $X from this linked XX

This quarter marked us. high for a point

in for dealer structures and $XX.X ended December category, we million also September XX:XX the XXXX. increase fee continue grow ended likelihood activity. XX, million broker upon this million fee quarter the $XX.X will the XXXX prepayment dependent our lending Next, our to to in commercial to income fluctuations of dealer Compared linked As XX, quarter increased $X.X

reason the for to September increased two due Depreciation primarily $X.X Salaries million expense constituted the million linked operations and completing ended the quarter an fee primary decreased the IRA which business December $X.X increased ended XX in merger linked basis. December September December compared As September banking to in quarter with from due revenue XXXX. costs contractual of quarter quarter, XXXX, to asset amortization following and the production In quarter the Our at and XX, related had management, assets up dealer in was the December quarter million ended service at the and the annual is million Quarter. interest rates for $X.X down related for full from quarter's certain last related full fees broker quarter earn non-interest August from from over XXXX. expense and ended which $X.X months our was ended quarter recur fees, years this of the quarter. a $X.X income increase XXXX the The commitments Operating December XX:XX to of the million, operational in impact in added of we to to Acquisition. the expense million only million from the advisor at increased of outsourcing. was not sensitive H&R of majority The XX, expenses HRV. that in December and improved million block decrease on for quarter AAS expense The behind exit are and increase year's income December XX XXXX. products the X.X% increase the XX:XX was million the operating interest AAS increased from This quarter, $X.X the is XXXX the ended in from XXXX. due Advisor XX:XX the quarter to We line addition points $X.X to the XXX shock we Shifting of our months. asset – up, linked quarter. In the $X.X few Moving quarter. recognized that parallel has income first the relationships as of net first of in advertising reasons. in in primarily over December $XX formerly from had due XX:XX XXXX December the rate This XXXX. linked income to shows our of XX, well-positioned last due year-over-year December XX for and XXXX $XX is did December sensitivity basis us Services the million, XXXX, quarter. September efficiencies for to generates tangible XX,

high and been average at added core, with time rate they've the basis of deposits savings we've bearing accounts First, interest an basis XX points, lowest and XX demand have points. combined quality, ever that are

businesses added levels significant advisor years, deposits, business non-interest in provides that business. clearing bankruptcy bearing including have of we our Second, recent trustee business, and

the level Third, back jumbos rates Adjustable And monthly duration the to family our family of increased I'll turn single Johnny. over and an shorten commercial lastly, of on portfolio. the prepaid growth our loan With products. XX:XX brings higher call single our lending that, Rate

Johnny Lai

you, Thank we're take Alex, and ready to XX:XX Derrick questions.

Operator

Our [Indiscernible] your of XX:XX Thank comes Piper Leisch first question you. please question. Sandler, from with proceed line Andrew the with

Andrew Leisch

Greg, My for everyone. you. XX:XX afternoon, good Hey, question,

XX%. about marginal you hikes by mentioned think the the of that? to the slightly I benefit from beta north what Are Fed rate you you there? Or first talking deposit mean did

Gregory Garrabrants

was about we deposits he the keep other the Yeah, the that sheet partner at XX:XX talking off banks. balance

little at a have of those deposits, banks. sweep advisor and partner we clearing the which million sit that's that $XXX over So

recognized income, as non-interest income. So that's fee

So those of as receive that data move north expect move up, as as good to good chunk a increases we forward. XX% rates we

Derrick Walsh

a XX:XX yeah, with floor Right. Andrew, Yeah. we And have obviously, think that, we question, and various we to that have rate loans floating they now rates. looked at, your lot I of respect

the side just but the for that's, you're that making first floors, about to about, about bucks million on would on had we So that's And be and second for the XX increase, that's and any $X And a $X net hitting interest obviously, such income, for we say and the tried be. that's we pricing portfolio. so income then assumptions point basis on then the of annually, looked guidance thoughtful benefit what summer it, the XX couple the increases even it increase that's, points and floors, the not there, million another basis variable there increase. then, prevent that, once first some roughly, just was levels floors and side, at deposit are XX

Andrew Liesch

are clarification accounts XX:XX in you what’s sheet on too. a Got that it? What you the, Okay. deposit funds beta modeling, a Thanks assuming that, your with for the deposit with for there balance the what much I'm the last rates than balance beta versus was just that your then? be less it's now you're upcycle. sheet? My on going the using what have back to is And curious sense

Gregory Garrabrants

sheet think a that meaningful that, you balance have off some, those given think by to with would I that one have deposits. sheet to balance that offset good know, respect be to six deposits about hopeful we can could deposits. it XX:XX we We're way be and grow get those off we

know of we're be don't if But, give the couple in a We lot a specific better. hikes. I be have I lot prepared now it number. a of, we're to going really to doing don't. to movement I don't you first right think of expect rate to

deposits, their XXX, deposits, – So on and for deposits. those were were basis were rates zero when bankruptcy the and for securities points they all X the we rates

happens we competition. all depends it commercial we've So on to the think going on to of that's a stay, lot somewhat the done what side,

business We nature. very on with savings base have the very checking and checking side, transactional small accounts, a great gauge in account diverse

we'll pretty So to, think but might darn difference. also have reacts see I I how in good that a shape, to think market the make we're

Andrew Liesch

right. on happened that C&I or period can the larger And have you a few in effect that Right, is XX:XX size deals the quarter just or on mentioned just what so… that they an ending here this balances have, then they that growth,

Gregory Garrabrants

that's XX:XX It's, I in I that think think there.

well, doing see, a I balances this a growth I loans caveat was quarter. really were, very I the across see actually don't, there C&I think that's variety in of as wide I that spread don't there

production was the in different board across So number great of the and a businesses.

looking more there's a way at a more in that's that variability just little about that of think growth. that, I forward-looking

be quite we Given pencil quarter. variability. another that's loan say to don't those growth that growth expect more And next the think just good. way say. of I easier Maybe There's to size million of is laws, maybe to still the $XXX this in

Andrew Liesch

Thanks XX:XX We'll Yes. right. sense. step Makes back. questions. taking for the All

Operator

you. Thank XX:XX

question question. proceed Moss Please with with your next of Riley comes Our Securities. line a Steve from

Steve Moss

just just following Maybe is afternoon, here. up. Good XX:XX following up on loan growth

guide the number. kind north seems and to of Guys here teens for is curious, about XX% to think little loan low on are year the curious that think kind that bit conservative I a upside about growth, of growth. fiscal maybe of

Gregory Garrabrants

think be will upside to there I that Yeah, XX:XX number.

don't guidance is numbers to that, I don't it this and to we don't and, Look, somewhere, expect we give things the I it be, range put exact on commentary conservative. with, in be this. it where way. between I I, let's think XXX a it there's expect expect obviously, it's, give But If to – we don't it I be moving of lot don't I a expect it to those with be XXX. either. to around. was

higher it year. obviously be we So six there'll one that would fiscal upside perform any think the but we the move, a expect for in what months, given this six first remaining teams I certainly do can from at quarter of to we've months the level done

Steve Moss

XX:XX same building Okay, ongoing. the cost you appreciate different but the investments expenses, think comp growth, business. then time number duplication was just the that. hear made size, for on about has And There's XX% to securities but and I of I more talked the, in on maybe be a earlier, specifically

where business, for Just of just, different how to curious, stepping about, drivers, expense protect maybe growth you that were now? that we movie kind guys for also from back expenses and and overall think meant

Gregory Garrabrants

I Yeah, think… XX:XX

Derrick Walsh

the One going security there's, transactions. to sir, the clearing are going pullback humming, a based SEC areas different be lending reduce side transaction margin on Yeah, borrow, a a couple can those little by lot reduces fees we up a couple Gregory, couple the the markets of to different and see little so activity of all side, SEC that. market, higher. and less are be a reduce a transaction and driven lending, we'll areas, definitely in the I XX:XX will so we're take base bit the that fees, is that If when something considerations there. market bit clearing

one on integration on that the aspect. the that has So impact on fees

some lower from So where expense, expensive be of a significant kind sense and but there's that from you'll and of manner, integration but some nothing because over where see have numbers we standpoint, significant capitalize to be going to starts of we the we periods have kind a those fits have we software in doing. higher lot periods nothing there'll and are be may part from time will able that development are then stabilized you'll a a

growth significant business be as grow swings we that look in necessarily in by expect forward as summarize we So, means. – of it. that expenses the don't business, incremental any of to we There'll kind

Gregory Garrabrants

I business there's, that's think, that, that over XX:XX to right, long-term, think the efficient. much there's opportunity Yeah, so make more I

the by knocking we know, the the opportunities, where is out, short-term are have lot and balances it's driven it's But hundreds sunlight, up there bank there it an hanging business then for, just more environment. driven getting to we've it's at securities at just more business to operating costs, so time, makes volatile there's a been the it's don't, over and getting at really, to access good, I going don't labeled it this out there's deposit something additions there's, down short structure technologies, the improving the to is straight I shot of also operational taken much be and available, and there's low interesting, benefits the we've you costs so In explanation much example, disciplined more from is of if is to ability in by the the that If get through us very that opportunity, and the across fruit. And, it's the as deal that tools, white that in XX:XX business, look driven a together that staff, we're with cheaper, shake UDB make been it because clients, than to really, Derrick’s it's there's efficient, and is quite decreases market decade, operations I and and increase people expect the immediately, processing, the which our much longer-term. to opportunities short-term increases their so because makes so better experience a by in you or because we shorter-term, to opportunity quite our at, the business for and and right. their board, but a think, bit term, all reality

we go deposits cash, cost low So that or are zero. when from benefit essentially to extremely people those

we that well, be it upon higher if off, as So, and that'll helpful how we're a that's depending well. bringing environment, that and use money an offset as it's rate

our us So, business and cost, the be going continuing power in to much seeing the to pricing so it deposit are own across grow sheet we're because potential more backstop have deposits that that portfolio, loan our benefits and more those and we and lot off also lower businesses, commercial are we organic it, gives long-term we can balance that for use power do a aggressively, were growth. consumer that already have of our deposits, because there. We price to

Steve Moss

higher the and, with liquidity drivers, beta, up to that sheet. the the support X% your lower that's off from obviously, X% Okay, NIM It of moving you to helpful have guidance deposit to new range about, you kind XX:XX have formally any balance thought level?

Gregory Garrabrants

they NIM, portfolio where have so we loans, are get that rates that it. with from still originating the extent to on and wanted think why and think to the growth we little if the in that interest a that decided rate on price bit. between increase is to basically I better loans the I don't be we will that guidance difference a you the not on on, that that, rates stable we I average think there's quarter. No, reason up the did, average it's think rates stick you increases be increase this stave the that But to were loans loan saw XX:XX look and loans, numbers And we the you gave our the at we we will I

that. Given

more in our and too. quibbling over probably XX always So having we share I interested basis is frankly, we than we, do taking where we here is pricing also but of we're growth think, important, I our loan and important obviously can, fair although share, quibbling points look – do there, good –

Derrick Walsh

XXXX. little that clarify XX:XX to because What to be expect this X.X% fiscal or me that our X% bit bifurcate to north of And X%. do X.X% for that long-term is a let we guidance

But year. six will north a that of So for been point X% we've be slightly see we year, months in obviously, to kind of the this expect that given don't the we changing where individual mark.

Steve Moss

Right. XX:XX

Okay. much. you color. all very I Thank appreciate the

Operator

you. Thank XX:XX

from comes KBW, line with Perito proceed a of question please next question. with your Michael Our

Michael Perito

on we XX:XX wanted quarter this, securities to the AAS Hey, on the business. taking If for at good you questions. I afternoon. $XX.X about guess, follow guys full about look is the the the going been here has Steve's to forward grow Or that segment as of guys of kind of up that Thanks you investments obviously, scale, those I expense income we you and just on $XX.X but expect think going because business the making move question impact you have more pretty million XX-Q reporting figures to clear, grow in as non-interest non-interest I grow, is about the million expense, revenue or guess, expect they're elevated? piece, on figure. expense that is the of the but to level are outpace down rate out revenue you it side just moderate room to growth, there, that, making for

Gregory Garrabrants

lot, like volumes and It's it's Think it but just personnel really to we branch for software going the the investments is just there's over They're it's is and that. basically big on making it's, opportunities right. some business maintain be for, it massive. has and really it take the bank are materially are it because like there, say, things slightly big. opportunity inefficient then months, let's six, most processing up exists that it's but real increase of it that structure to we relatively I it's XX:XX level that think side, gonna to make through like, not involves like straight taking opportunity time. what a what that efficient. the But But it involves, and but the nine then there, complicated, two, to and six to, more

which changes teams not operational we some charges, we term stuff that. need there's which they're And they timeframe we, those experience to cool that self-clearing really they like also and had not plans and have behavioral there's things don't just lot like to big. were third of changes, acquisition like the and also do. changing are we time in And the quite but we're to to it's have things there's processing they're so as there. want – want customers it's workflows, on area, how doing a efficiencies. lot, pieces And those duplicated short even how thing. massive, only three core a there's increase side, happen, it's driving and about a clearing that we there's mentioned So of and I to are not interact, time, as months to this We so shorter obviously, two things significant. then and there, fault And, processing to not how to firm, customer fast not lot on, the because It's But are it's, are those just, But lot those, is not, don't technology really a of it's have, close those a but spend efficiencies a used opportunities didn't the going a to right? a the there's the way there's, lot those take six years there, we're resulting those they're as in businesses a way, we have – be in out, have so about things like it It's, we opportunities can. capabilities that paying those the great, which and that. longer-term, there party don't very some that are

such now like it gonna the investments offset the we're increases, just in take biggest work. I pencilling – it's you've make this we to in making is this going the big and next were wouldn't just savings have, happen, or think some and year, some for make just, obviously, So term. to a just big right really benefit time shorter to stuff And, going that's be And that's got to that I the there's of And, we we we've able get but to that. better be a ever generate way higher that, out the great you position liquidity been. and sell. talking, of the than fi group excited clients. be in as individuals ought integrated this we have, right we're to to able know, know, cross all well a services XXX,XXX, to everybody's get worth high to going is and banking then can about you net platforms It's But

an for it's So future exciting sure.

Michael Perito

products those just guys add on offer and of of about you X.X side, strong. ability pudding. far I XX:XX a AAS, banking where that is things will scaling, sales and investments think, nature, just you. you you building but Helpful, making, group on XX, an guys next lending you phase as of UDB of And, thank kind the to And think that general it's obviously, in know about I guys guys how the head out? that platform. of of do kind cross AAS you the mean, lot the that then not think of customers of XX out kind you the kind type proof the effort? and the if how do Are in pretty months? you in constantly marketing is think there the But to selling, and next

Gregory Garrabrants

further system there clearing our think I our have think of opening version some different of with account we XX:XX our are than beta it pieces we in that have, I clients. are

into efficient, of the UDB, labeled be white touch. right, accounts clearing sort on is opening probably little that clearing that going and The is get and but, probably they adoption, year that something dealers can a is has them this that along integrated you custody is this which of core, to a a into So have those a nobody's an Right? maybe label helps then done that this account a because UDB helps exercise, means the be the broker pretty system in be also lot to yet. But efficient, and like more Axos through ways. example different us give on so then pretty, well that really example. helps be than think. the synergies benefits bit obviously interesting It a So see go lot a because and two be created. it system, to right Pretty I more uptake. simple you've through, manual a it's one, is good of with custody, client got a strategy. and there's it's further I can clearing, you we're clear that of white require it's that And, That's mean, obviously, to a very don't those real offered just things. a

So, trying to a into right? use happens is you market, is that's their can account There's right at they're that's and a say, immediately, bank our say, your mailing forwarding you're wire Right? and you sending, if are very a to account, and they're if that make the check and third make for that somebody to have check simple right? a that to you're a and integration, sense. so instantaneous out to using cutting us. process somebody that the to want then sending manually right, that processed, kind much clear wants and without disbursement machine what's better that, you engine look our it risk for and often has instantaneously, complicated a cheque, of board, to a they that sending XX:XX as take using more to right? So filling get But When by project now, party stuff an and mean, check when out of, cheque, RIA, or opposed a make none customers across that they let's take cheque I check, disbursement, a RIA don't should an be the a check that money you IA RDC want doesn't transfer. be a UDB,

on cross And individual activities, you just side down the, on break side. there when like the, there's operation much many you just so the all things the and see there's sell synergy the So so that.

and So yeah, it see a the but is, and lower that I mean, meaningful lower will franchise really very low focus everything the costs, else, partly and amount – right the deposit benefit in, ends see deposit having from you in way, you with those up bearing something it a as we that's we've that beta, think just with, gonna non-interest way that be see, deposits and transformed can and of continued businesses. really you the

Michael Perito

on relative, average just on just right, it, missed one me, else talking anything going curious mean, for last apologize. But mixing there And guys securities versus you that. then remarks. Were the still risk drove if cap I like right if ratios. that for was it the, significantly helpful. reg Thanks. pretty through question down balance assets that capitalist regulatory curious, what the something just that of XX:XX there, on looks obviously, looking for, like on were was sheet variance? some That's, Thanks up the capital the I'm going on a quarter-on-quarter the there's and I it kind that's C&I it prepared some in movement loans. this of side, up based were in re kind obviously, at but look lower were on that I

Gregory Garrabrants

that I in mean, single family Jumbo asset I we grow. Yeah, the stable, category, XX:XX growth think the mostly. had, didn't was XXX%, was And but risk-weighted

is increased you requires and know, multifamily C&I the or is capital obviously, does risk we sort that less weighted to efficient of, pretty question capital, commitments, it only to have of, qualified loans. bring XXX% part this you're if which over which that assets, or then quarter, did some So, than single business, and you of which bear the growing parcel much longer-term the

,So ratios to and, just the still are the business obviously, we're well on be we pay you an as we're capitalized, to, leverage something that's keeping So great. have to. something and eye shifts focused as very said, But So that that's that like have on. way, the attention

Michael Perito

you guys, Great. it. XX:XX appreciate Thank

Gregory Garrabrants

XX:XX Thank you.

Operator

call the XX:XX have for over the Ladies turn to session. and remarks. question-and-answer I gentlemen, now we closing will reached Lai the Johnny of end

Johnny Lai

your us. interest for joining and everyone Thanks, Great. XX:XX for

next We Thank you will you. quarter. talk to

Operator

and for at today's time. Thank day. your lines XX:XX conference wonderful may you you have this participation disconnect This your and concludes a