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Axos Financial (AX)

Participants
Johnny Lai Senior Vice President-Corporate Development and Investor Relations
Greg Garrabrants President and Chief Executive Officer
Derrick Walsh Executive Vice President and Chief Financial Officer
Andy Micheletti Executive Vice President-Finance
David Feaster Raymond James
Andrew Liesch Piper Sandler
Gary Tanner D.A. Davidson
Edward Hemmelgarn Shaker Investments
Michael Perito KBW
Call transcript
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Operator

Greetings. Welcome to the Axos Financial, Inc. Q3 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 your Development host will Investor now Vice to the turn Corporate I Senior over President Johnny Lai. Relations, and of

begin. You may

Johnny Lai

for Good your everyone, Kyle. Thanks, and interest Axos. afternoon, in thanks

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

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

that, I website. would on to can his the All call over the for like be Greg documents Axos turn found of to With Financial these remarks. opening

Greg Garrabrants

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

fee exceeding net challenging net based a high Our balanced strong margins, Axos months Axos end across deposit for diluted turmoil. and our Securities $XX.X to interest consumer per banking of and were and interest income March results income three broad by and XX.X% the XX.X% headwinds respectively. income despite of and client with caused balances share growth our the industry target of accounts ended reported increased quarter for macroeconomic due Earnings the geopolitical third quarter of million representing XXXX. XX, $X.XX net and growth year-over-year segments.

include XX% XXXX auto, was pending expected more single-family annualized, March in or for and various our offset X.X% warehouse real linked-quarter XXXX. loan loan XX, value lending highlights per $XX.XX commercial quarter at C&I loan estate, book of our share in up decline The up mortgage an this types ending XX, Our billion originations balances $XX.X March strong from XX.X% than loans.

interest interest points third Business margin Banking X.XX six loan quarter the XXXX ended basis X.XX% the ending balances XXXX. warehouse margin linked-quarter. for quarter the by in mortgage for up single-family and jumbo Net December and down from XX, the from X.XX% was points March increased in quarter a basis XX, X.X% single-family nine our ended Excluding X.X% target the of of December the XXXX. quarter strong successfully first to in ended margin March most net annual XXXX in to of maintained interest quarter generated end XX, through Counter higher loan was growth the months XX, towards we X.XX% XXXX. ended X.XX% our fiscal compared the and and have Net peers,

mix steady a our Noninterest-bearing make deposits with XXXX, March XX% deposits noninterest-bearing a December a year well to improvements from in ago. us noninterest-bearing XX, funding XX% at environment. XXXX. corresponding $XXX.X of our deposits rising increasing continue million We approximately significant a XX, positions improvement represent by of deposits steady in approximately period in rate total from The growth

XX.XX% a – million interest $X.X XX.XX% prevision and Business ended offset income The in strong was share months which than the year-over-year March quarter year-over-year, XXXX. increase to segment loan quarter efficiency Banking in for positive XX% focus pre-tax second in more is managing the year the XX.XX% the third in our continuous in earnings our net from on business operating a costs. of as ratio income or ratio leverage of Business operating Our for was were the up of quarter growth $X.XX ago Banking provision our banking in XX.XX% compared quarter. result XX, growth XXXX, the of three Strong our per XXXX efficiency XX% second versus for $X.XX for XXXX Diluted losses. the

the XX.XX% X levels We continue and Tier a of with generate assets ratio remain company, company subordinated and equity on returns capital. Capital strong strong holding X.XX% leverage augment in X.XX%. of a debt at well million In our raised excess generated holding the the We we regulatory third at $XXX at a to further maintaining XX.XX% return bank the above return to requirements. while of of capital. on February, quarter both our

provision the million average annualized net X of ended fiscal year with ago ago. points originations million March quarter the Loan period. XX, from basis XXXX $XXX at XXXX XX, $X.X versus quarter XX third loss $X.X strong XX% the March to investment loans for increase quarter $X.X XXXX. $X.X $XXX times quarter our strong a originations growth. charge-off over an billion, credit billion of loan third follows. We were to billion representing losses QX annualized million and our this originations X.X% added remains net our for XXXX loan of quality charge-offs Total XX% total in basis up Total the of loans. C&I X ending were balances as and points was approximately allowance single-family a million year C&I and were million agency to million. loan million of in support credit Our million gain loan auto decreased mortgage commercial correspondent on $X sale for from production, and ended loan a multi-family December $XXX million on normalization $XXX $XXX XX, $XXX correspondent million when We of sale production to billion quarter $XXX of of production, in approximately production, in XXXX $XXX resulting linked single-family quarter quarter record consumer of loan gain across in the the ending net margins $X.X of portfolio unsecured was production, to down to industry. $X.X year generated compared jumbo income activity in high banking million $X.X while XX% increase Originations production, in by refinancing real a near single-family estate due levels. of million mortgage last were

$X.X a partially reduced refinancing. lower MSR interest sale quarter, since the future We rapid gain demand for a rates in foreseeable generated mortgage of valuations anticipate this offset in the MSR gains rates end valuation by XXXX. from mortgage mortgage benefiting gain as Our million banking increase on rising

mortgages agency $XX Our pipeline X/XX/XXXX. was single-family million of at

appears while XXXX generated stabilized. offsetting to million prepayments; balances mortgage XX, million the our at secondary repricing location rates single-family have in jumbo Our jumbo We a sold up. of business reduced the quarter. during prime market by to loans $XXX we ending elevated single-family this jumbo With $XX of production result loan loan March market expect mortgages share were we as gain for loan

had tremendous billion pipeline X/XX/XXXX. reflecting commercial quarter. Loan C&I was asset-backed million lending growth specialty lending and Our real single-family strong another $X.X originations $XXX jumbo lending. mortgage construction estate across at approximately were

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

strong be million $XXX able $XXX standards. $XXX lending from at growth balances to mortgage XX, December sustain warehouse our confident our have XXXX. down in across our We and balances remain verticals were while C&I yield positive loan and million that multiple in momentum loan credit million Ending we'll portfolio maintaining net

continue ways to our single-family look business customers. to new opportunistic grow for and We warehouse with existing

good on an while returns structure. efficient maintaining continue generating focus to operating We

Our to core continues leverage. generate banking business strong positive and operating

was efficiency and Our X/XX/XXXX. business ratio three ended the months XX.XX% and banking XX.XX% for nine

unit more mature. savings will that efficiencies business security We cost grow as and becomes in series result of a each across have our business operational we

of clients March XXXX. and business the trading, Since continue strategically and as incremental of and on we to maintaining tech through billion with grew nine quarter. Additionally cost with grew the faster compared incur then, representing cost across XX market operating such points while We initiatives, customer XX, balancing checking, best-in-class securities accounts. at in ago March XXXX of securities focused investments efficiency bank. deposit enhancements consumer-direct by we've and the increasing of savings broad-based $XX.X in feature share deposits in commercial in closing of the to carefully weighted consumer were AAS bank banking. consumer XX, products wallet at months relationships average related banking quarter, infrastructure total XX% and half at XX of deposits as the Checking and the and linked of adding and of acquisition. growth expenses crypto the are quarter savings, representing basis demand upgrades deposits our We'll comprised of consumer deposits business, Consumer be savings The advance deposits new our growth new money for affiliate points reprised the to a our X.X% total basis deposits. cross-sell. X/XX/XXXX commercial, existing ratios marketing on X.X% to small at future at and deposits increasing accounts end We clip by linked our

December to cost came or Clearing on- we and to off-balance Growth banking commercial business at were able XX, noninterest-bearing and securities XXXX, competition fund their holdings generate deposit put on granular We as $X.X in percentage flexibility client at advisors March XX, billion cash as sheet. clearing loan billion businesses. generate keep from of client generate these Axos for or $X.X XX, deposits noninterest-bearing bigger other at reaction organic cash sheet will $X.X XXXX. sheet in $X.X $X.X solid advantage balance Bank’s up deposits deposits Our banks interest to from Average continue treasury The an of providing to assets were support growth, Axos XXXX businesses billion to deposits our low to and balance Bank’s growth. management Total deposits loan approximately sheet. deposits increased and cost in billion even custody low-cost our billion volatility. from Axos to increase. March were the our fee rates off-balance elevated growth from income that on when continues low rise market small and deposit stock a deposits be businesses kept

as deposit positions rate rising Our portfolio and diverse well securities lending for businesses a and modest interest environment.

broke securities the are floating of is March than with of years. balances our only is at securities ending of half XX, million XXXX. rate assets and less duration approximately our Our total average About securities $XXX portfolio X.X X% of

rate was five Our XXXX total X/X it XX% of loan outstanding jumbo loans March and years. was in These billion after much adjust portfolio the $X.X our and single-family outstanding XX, and of and XX% at as ARMs $X.X multifamily than prior loans billion loan are approximately lower what cycle. representing principle

points other years With the jumbo fixed for quarter than year rate less and mortgages multi-family prime our loans the multi-family jumbo on XX and from months April into remains average on over in CRA single-family or mortgages We purposes, basis up jumbo March biggest the XX, raised multifamily and three XX jumbo XX years. of sheet. rates approximately loans $XX the originated in contributor originated the up purchased two and XXXX C&I the The we single-family solid. sheet basis past respectively exception we down we rates for mortgages prior been respectively. single-family our agency jumbo and were X.XX% weighted no growth and our loans balance points quarter. and three several our newly mortgages, four have balance last X.XX%, of and single-family ended originated our basis million to X/X multi-family overall on C&I loans X.XX% Note demand of loans have were duration loan

March ended XX, to linked of quarter the by $X.X loans $XXX outstanding. loans C&I XXXX, For representing billion our gross nearly quarter increased half million

are of a loans of SOFR, equipment be March of finance $XXX XX, and At other rate. variable XX% adjustable are points points rate XXXX, will up. to floor our million to will LIBOR of the loans their above of their XX loans XXX C&I and adjust exception basis AMERIBOR approximately other loans the XX% all other C&I XX% With above C&I floor our up indexes. our of basis their be loans above floor and our C&I XX% at with another XXX adjust

competition high quality loans from While well C&I remain for secured elevated. borrowers

on pressure continue on rise, upward as pricing further rates expect loans new We non-bank to competitors. putting

We loan our growth banking securities and the about our good have since from of cycle a feel robust ability transformed variety to franchise upgrade last deposit our commercial with businesses. fund and our deposits consumer

state of easy to checking the consumer use art, app fees. access and mobile core Our accounts continue no tremendous to with value offer a

mortgage accounts of an our customers products. our for opting and jumbo checking consumer customers pay cross-selling new mortgage agency and our with progress with bill deposit further made have direct percentage and savings increasing We to deposit

and offering for API cash operating that market winning accounts branch customer location. Our are a without service management superior clients for digitally integrations teams are middle treasury the already need by transacting and

Our to sticky, continue services add deposit groups, Axos HOA deposits. cost fiduciary specialty and including no

funds rise billion in and $XXX of flexibility held additional reprice for with due deposit lower services competition our granularity of increases beyond XX diversity were million the are prior customer-centric meaningfully to partner approximately partner average will deposits What we billion our model. approximately deposit $X.X deposit with points, earning banks half back $X.X changes businesses of banks, custody and have basis another be to betas XX% cycle to they billion expect $X.X an rate deposits our of and the our months. calendar XX% the clearing in at tech is XXXX three security We deposits of immediately fed the the while within funding from repriced betas and fed enabled of in tightening than

December Net adverse XX March economic low asset decrease for points us Non-performing remains a our quarter had at the makes healthy. an credit estimated current March and Our XXXX. basis the non-performing losses, points LTV to ended the XX.X% XXXX charge-offs, XX, based non-performing to basis single-family assets our loan ended remain we’ve are from approximately mortgages XX.X% XX total loans at XX% very best XX.X% single-family first XX, our in value XXXX mortgages credit XX% or total realized XX, below was quarter about Of loan to lending comfortable quality of are low historically loans, had even of approximately and where below our our extremely scenarios. outlook assets for values. low of current estimates

loans. mortgages, losses material low on on Given vast single-family our the do the of to values we loan anticipate occurring delinquent our majority not

loan changes of $X.X with million mix loan up primarily from loss million, total Our $X.X a provision higher percentage quarter and a loss was by which our auto in accounting provision greater increase loans. up this for reflects loan is and in last year-over-year. $X.X quarter million The the C&I

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

XXXX, remain million low $XX Our target pipeline unsecured of remains end at real of on higher months solid sale small real commercial of estate loans. loan range billion across our growth categories auto we loans and mortgages, loans, loan mortgages of $XXX million April achieving consisting in and approximately With loans multi-family $XXX growth C&I commercial agency single-family fiscal pipeline from of XXXX the consolidated target $XX and single-family and XX, loan of demand above the of gain with term million our confident first million in $XXX million of of estate balance team’s specialty $X.X nine XXXX. for our and healthy consumer in multiple loans, fiscal jumbo

flex continue This a us eliminate consolidate per lending and more and custody will Advisory in as automate with operating by access processes; approximately of profitability time opportunities the $X Morgan revenue deck. meaningful for to business Axos to months March over the are from were Services, year. to Overall by and flexibility costs We volume. of to this declines clearing scalable Axos more business we efficient, systems, integration improve based security converted progress average industry-wide see ago. and million due text trading redundant lower profitability quarter. making reduce to impacted with RIA at clearing acquired margin from XXXX manual of transition balances successfully our workflows we the access advisory services approximately lower more access eight provide We transaction negatively good Securities JPMorgan We Stanley

have that future on track implementation. or of fiscal to and clearing our operational are We slight secretion businesses rate in funds AAS of dozens without generate We in fed for efficiency custody increases. of for the with phases benefit remain the various initiatives acquisition XXXX

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

access to the advantage took $X.X borrowing, excess raise of March have the We through outstanding had of to liquidity third end billion We our million. window of conditions billion FHLB fed approximately we in we as of of at the $XXX quarter; subordinate discount $XXX $X.X the billion Furthermore, available market favorable million debt in capital had XX, February. XXXX. augment of $X.X

deploy our remain to M&A. using capital emerging priorities and in access accretive buybacks growth, existing with and opportunity loan unchanged capital support capital for on a organic focus our Our businesses reinvest and

income from non fee fee expenses merger assets depreciation year, and of due with amortization Axos quarter increased cash corresponding XX, the dealers deposit billion broker our assets next business quarter markets a reduced $XX underlying activity. relationships client eight from impacted quarter the the in the and XXXX as had Our based Broker Clearing reduced to initiatives. our approximately negatively Axos new the AAS addition balances the lower with to March and period of slightly ended and pivoted administration, administration growing income in of transaction third and acquisition, higher Clearing in we custody the and and under related cost the lending fees volumes income Total AAS equity for to securities billion conversion $XX margin XX.X% clearing assets were of assets dealer acquisition $X.X of and activity the under client compared broker including million With generated of accounts lending approximately lower introducing clients. us, ago, dealer and securities under and to Axos the third and ended We for quarter quarter of assets variety third up strategic XXXX were of last client completed down pre-tax by excluding Clearing business. overall, a under custody months making billion risk. one-time progress were securities for clients RIA decline XXXX. in transaction $XX due clearing focus good a self existing we’re tactical new have behind on assets

a custodian a model capital strong with high a As touch and service centric non-competitive base.

RIA custodian. We adding communications dozens with in active to access firms are their about of

in with the financing mortgage tech advisors small, advisors management and In services for or integration would end and conversations banking, clients banking, to we’re integrated and other Second, important, or expanding benefit capabilities dealers investor succession lending investing value-added we practice to their third party wealth large and have are providers, into M&A and heard and that necessary clients. that their end broker add clients. service their lending, RIAs services our infrastructure

RIAs last strategic of access relationships scalability. using implementation. and Axos the our is parties of One benefits clearing multi-pronged banking process for improve We It’s are introduce infrastructure stage initiative incremental core advisors a interested to each number multi-year will for we Securities generate upgrading custody are with our third and who the flexibility have important that in over clearing their and expanding to needs.

business as impact While securities clients. our they the term, as business, may our opportunities well those our adversely market volatility of tremendous and present for turmoil in short

months initiatives, product more Colorado at a and their As and look partner to Investor of business. plan single-family opportunities securities perspective, Block technology to market jumbo clients the XX access to overcome to sharing grow Day security reassess we see [ph] forward H&R and pressure in multi-family bank becoming months their details gain next periods our Centennial, share revenue help and competitor our We’ve scale. scaling exciting by by we have successfully businesses our commercial for in on loss our and to XX next week building navigated banking on services. and need implement underway and clients the and strategic related other and from of We driven over through

to diversity loan margin double-digit generate to X% the a resiliency business model. of ability maintain a interest Our growth our and and net is testament

time help invest technology crypto in short-term with such cause make and competitive more modern these only but Clearing and that a competitive X.X will Universal continue trading, more to will become as benefits, our us in perspective. Bank and Digital a from non-bank We initiatives retail, payments real other competitors. us Axos they’ll initiatives commercial FinTech and for product scale differentiated Not are even generate core

capital to we of accelerate see our will excess position deploy when and resources to these profitability well take strong advantage aggressively opportunities growth. market to be us dislocations ability nimble Our

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

Derrick Walsh

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

December XXXX, due removing by fund mortgage for I’ll XXXX fiscal primarily annual acquired covering with benefit Division, QX past this that from recognized well next QX million the million a when interest was $X.X deposit products to our from balance consistent sheet IRA for million our banking, we the addition non-interest as $X.X in MSR $X.X to fees mutual was performance. highlighted per income expect from quarter our XXXX of and some not for movements. bank quarterly non-interest quarter, movements summer. of Overall fiscal once tracks fiscal recognized our in fees up the Turning income. quarter certain that to do year start Greg the rate generally which income off as valuation fee and sweep AAS QX this recur custody

efficiency small for ended of Next a that growth, when bank was when XX, for compared efficiency ended XX.XX% XXXX for strong three the business change significantly XX.XX% March a months compared to is ended The December last XXXX. prudent highlight and I’ll the and the model. XX.XX% three to quarter our ratio our improved management, months ratio XX, loan in reflection March XXXX expense scalable XX,

XXXX non-interest of AAS for the million XX, March due to million is $XX.X staffing and personal. in the December, taxes behind quarter quarter $XX and XXXX. the ended related million the due ended ended and from the XXX(k) and quarter the Salaries in increase $XX.X million linked-quarter ended addition March up reset from Over year the due $X related XXXX up million in quarter $X.X $XX.X Our the from the salaries million $X.X is and the costs million ended XXXX ended increase March, which in December increase XX, levels, and million March XXXX. million is from ended the $X.X $X XXXX, linked-quarter the reason to March The in expenses million of expense XXXX operating was primary to to XX, quarter the related costs calendar including of contributions. quarter to payroll $XX.X increased increase the

on to like I’d Lastly, touch capital.

have shifts capital in weighted risk due our past to loan in growth. periods ratios declining Our been

opportunities weighted single-family raise in commercial conjunction risk performance X% origination closely and weighted quarter, This of market subordinate successfully million and with monitor rate loan rate data looking fed timing interest backward we March our $XXX determined assets. other the our capital from just a our raise away risk at As indicators, XXX% levels capital increase. various regulatory a debt on return including key XX% assets a completed was towards average equity. for moved We ahead appropriate past the a and

I’ll basis capital contributed to risk portion increased weighted XX, Financial that from back XXXX. our of from and December a turn XX.XX% the XXX at Johnny. Bank XX.XX% the XXXX March Axos XX, a to result, XX.XX% As total increased XXXX. March total points at XX.XX% Axos over at at We ratio December XX, at XX, to its to ratio call capital XXXX With capital

Johnny Lai

Thanks Derrick. ready to we’re Kyle, questions take

Operator

[Operator Our Feaster with from Raymond first question question. your proceed is Please with Instructions] David James.

David Feaster

good everybody. Hi, afternoon,

Greg Garrabrants

Hi, David.

David Feaster

guys to the most business. have I what expenses there’s take done, AAS more ton it of like out to of that You would’ve able but been thought you have a guys of still come. would’ve realized savings been just given sounds

you think what efficiency scalability clients business of and the how curious, you Just about new growth onboard to and activity a this is to continue good the operate increases see and this expense just, business ratio that as we might for as you that. continue

Greg Garrabrants

you. first Right. Well, thank of all, so

long efficiency. lot it been I on improvement so a opportunity as of much time We’ve opportunity. and bank think in of done process lot working good a a job there’s you’re there’s a at and the for the right, There team its opportunity has is at increasing in still custody and well. clearing

I like to of, interest I’ll it’s and think it’s with try risk with respect rates. back look what the term, bit longer over to little the disaggregate to up a should bound it efficiencies kind

going extra to balance not point and that’s is have out or get billion It’ll we you say $XX that pre-tax you let’s the to securities like transfer So you cost of to that’s take but What assuming off look and and but years whole, project opportunities. on, look sheet, the don’t an of $X generate to number. core collective should I’d be to the but three at could basis you ratio, the XXX a million AA, whatever, modern million pricing a out it. side. And as while, that say do some target efficiency increase, if at fully million that’s to having be It’s ongoing to business impacting you anything. positive and income, of and we a some deposits $X and the on take actually two really take take some that’ll that business, probably have the securities think, have able of of there $X that just working require and I’d I it’ll way little we’re that some there’s, that, investments, obviously you that a on that business like goes income that’s obviously and interesting

a really It’s system of to different little clients It’s that, some a automated manual. just, of differently, work using that’s processes. to it’s because It’s training lot very though, and lot us benefit. related elements with together. it’s going there’s take a interact portals time So

more cost. And scalability having can So kind cost sort a that it done, commensurate lot of, well, grinded to lot add in a stuff think sort stuff, I that of out kind approach without business you gets and is of grow. it’s to a of but there a that, is levels clients of a there’s it take opportunity of really that to once out then yes, as

levels almost to this if but the efficiency you think is the putting rates, answer, dependent an different efficiency so rate you at I on issue to don’t all it of right? paper, having of, without I know, is have interest different ratio, peg get ratio is, to have So, really Derrick a kind business interest that

Derrick Walsh

Right.

make there business say lot lot basis good You’d much efficiency plans ratio carving the that have be it we’re as as won’t have of would points. be to today to strategic your expenses XXX as point, up But a more and the efficient. a out of to regardless of that

Greg Garrabrants

of our to able stack been that on. we And a just tech folks are and is is stuff. really something exciting useful And we’ve those There’s that for just businesses. lot it’s manual have it’s implement really so focused that that

David Feaster

in or for of the differentiator all for how the to of you play they just stick – volatility within might Yes. what some opportunity really a clients accelerate just would that business, between a are conversation I them No, market market new that here? as, the into volatility are to And the the your the does key just you color. then clients and with seeing, the curious then some create these curious securities on AES competitors, Where going? hopeful is that RIAs was make driving they that’s change and growth. as an how make catalyst are

Greg Garrabrants

think I wanted Yes, on to make I advisors TD from sort custodial. of They catalyst are weighing think heavily a is acquisition folks of a the really lot them of on some then There’s standpoint because behemoth. change, multi choices into custodial lot to that firms respect And the pushes when with gets really relationships. that smaller purchased of a are really then that focused grow. a their not TD firms the

often firms AAS you history so is which the brought smaller all of is those grew of facilitation they have in together, grew helpful businesses over and why look products sort at groups And full if to of grow. the that time those the financial

kind out together, interesting There’s to stuff full folks office, business to instead system trying the an do allows tech So, can it it their itself glue that they’re of all your I have to as an very and reporting, now effectively. sort have think they elements excited a comes that of RIA differentiator performance lot right of of are having that sub is where integrations for that run really of box this the package key the other about. some on and you

up You can kind caught run industry. a There’s functionality single is haven’t account. in that unique and models a multiple bunch that in of the of others

there’s ability that, a just with to big, and is just so levels every when, through relative to swabs the having swab through go obviously in is the have advisor to be service really go to a it and to get that difficult. what naturally, business they think on to I able that going So, client that also smaller concentrate

think is it the I all it’s hard a a So lose part it’s of about that butt these it’s a to pain because in to good – clients businesses switch. is real

to these things. all deal The part a They lot papering, to got big is kind do of work. tougher rep someone do is for switch. to of have a You’ve it

the has been – in we’re implemented And structure get place there. because It’s to put Axos it our able tend be XX to there. we serve maybe important there’s there core to And the doing cycles to business think us good that work plan will that make it’s Clearing a for lot cost. including cool I but On be take So us to And very by it’ll historically cost really very roadmap a going of sales there’s in time. in needs dominated bit months, be tech FinTech And be And industry. over have the a others it’s going partly there. a these we that to definitely of have AAS. a that. competitive long. That’s to market

as who’s APIs, And is want about position think business that’s So anybody exactly broker don’t of there’s banking FinTechs the are to think. hybrid, becoming you also deliver not be you folks thing too. they and also that traditional a the I that of I I most an in who potential want only that rise see that know the else area see securities Yes, APIs that’ll way. interesting if a position obviously

are those things now. of so, on we’re working And the right some

David Feaster

That’s you’re exciting. obviously landscape shifting competitive. to I more then and banking it. just seeing, appreciate to That’s broadly competitive side, pricing’s And just what maybe the great color. the

Just know curious how being about were, willing loan more pricing you yields compete I trending. new on we talked to drive growth. to are

front. or competitive terms curious, you’re of at the structure more standards to loan competitors, on how about and or see are talked mortgage least trending from anything. you start you new just seeing increases just yields or landscape, like terms Sounds pricing loan – in growth aggressiveness Like in the whether

Greg Garrabrants

been single-family market, the has the it disruption helpful. really the has Well, on been securitization which and side, significant,

be this we’re nicely. growing single-family So, with we taken actually certainly certain, And think back significantly. quarter book, probably pretty to the up we’ll having rates essentially

going year I the So, fives, in let’s be of first originations mid fiscal calendar think say quarter to in XXXX. new fiscal the that of are

So September quarter. that the June

up a – We’ve bit. tighten a significant that’s So, standards we increase.

all market the mean, kind stuff I those of things, the, markets is the had that of back. it you’ve securitization competing been but coming think pull those of I sort and was of with kicking conduits seen conduits those just back rough out. on some

and us. benefiting And there definitely disruption so that’s there is

and and couple we’re XX really be where doubled out competitive last sell securitization XX a our having year rates getting because we were. conduit lot year growth between This position in year. go at ultimately only think of wasn’t were of was a never to deteriorate, year back We We which would because, get We toe really loans the be from five I difference rate, million about to XX a wanted enough of We our had to looking excited low made were, sense. real years to the there market up a paper. a started We single-family now less over ended watching where the So, to was stuff due had it. some it. that strategically worth and we $XX frankly lot year fixed balance XX those they great gain, a sheet. on the a were to,

our other side, good reprice. about the I feel ability we to on think

to lines lots to a to the done we’ve so we think I no that have say ability across loans. many capacity add

definitely go case, think result deterioration want I I rates of the our of, margin So, material I will any that’s a upside. predicted, don’t don’t to some kind to think net of see as the I don’t because be, but up going we’re kind

the, of gap the I bit think a a little of in floor gap in we’re, we have some rates. that

was I Johnny? the on think it it XX% was what

Johnny Lai

XX.

Greg Garrabrants

be of our points and rate the will XX% assuming XX then variable XX%, in basis the next, another will the adjustable one. XXs increases fed after it’s loans with hit, So

the one going a last one not I side, be, think in little loan but cycle were that I hybrid if good and too And be on So I the and at what get rate there’s bad. then, it a will look here before the at to gap have it, team we’re okay prepays on we’re given we for to side, and going mean, the you the I growth. we looking happened too, think okay think

David Feaster

That’s I’ll Thanks. Analyst helpful. you great all That’s forward Thank next look to color. at week seeing you. Day. the

Greg Garrabrants

you. Thank

Derrick Walsh

David. Thanks,

Operator

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

Andrew Liesch

Good afternoon. guys. Hey

Greg Garrabrants

Andrew Hey afternoon.

Andrew Liesch

side, commercial on things Thanks But like firing for outlook. the there jumbo the seems the all commentary it in on are cylinders.

what disrupt seems can momentum guess but your this I it can guidance, beat disrupt growth, the The loan it that? So, if now? should what like should question easily is right

Greg Garrabrants

made also the what’s Look the this plays and of it’s cylinder, Capital, good about what individual as the are with across the back how for loan lending are to side. obviously that’s good other with Axos obviously a interesting I is it’s rate of a that aggregate maybe guess it’s, things, pretty economy how Look I And what think looking reacts And good et to decisions banks respect things repricing. on coming loan do sort for to increases a single-family cetera. and respect question with Right. demand out engine.

will We are even are really will duration argue banks want that the gets roll obviously but we stuff fed be in the though cautious wherever to getting so of next to about to seeing good, some positive that’s stuff, year. start or ahead here, over signs some maybe after,

economics been in really a with more for Right. mean, have it’s think I how I time. economy respect to takes what long I really good. We’ve interest rate think and about environment, the and we’ve think just at, I that’s aggregate is look aggregate to interest effectively low it’s probably very So, and something demand but a rates. we

pretty things think growth the side I loan on looking are are good.

Andrew Liesch

then Good, you you credit just concerning good. right And at now? out anything on question concern are does there seeing quality. the quick but great, a numbers Are all anything

Greg Garrabrants

that as It’s in right? lot be concern years portfolio I think lowering me, of based interest a rates. nothing cap we’ve look; that but disposition, low a just should I of concerned. that think every lender specifically of had on there’s No, always our rates

flows valuations just, our caution but loan quite continued is it’s change home through is think to warranted. respect and with the I very that right and we’re think also are I going appreciation is that to place single-family you’ve home you so going interesting And aggressive, be that, values been had how high. to in low, just Obviously but that that, to appreciation,

how deep individual is respect are about your transactions ask questions many respect any to you to prices are. have to market where with with how occurring And so always

just be would or been a moderate, to started for So, lenders least price home lot there’s obviously perspective I it a of at growth because from better that. if stabilized, think

all those are there. So, things that are

I to loan values. we’re about we look think, cautious our are –

think that. rates. on a I focused to do always reprice have and higher assets potential though, We’re do

Andrew Liesch

Thanks it. Got questions. back. for I’ll step taking the

Greg Garrabrants

you. Thank

Operator

you. Thank

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

Gary Tanner

want I security to Hey, ask just on a segment. question Thanks. Good clarifying afternoon. the

that will annual that I mentioned a Did I think correctly? was? hear think million. again can lower state I And just you what Greg, you process about had that a by expenses $X

Greg Garrabrants

the conversion. was Yes, that JPM

when of closed as a reminder, months. matter of deal that the was brought four AAS little winning that So bid deal over months we of part a we in less than four

that, their brought over with So, clearing but JPM. firm we

So clearing we the to self side have business. for from JPM of the the now conversion AAS completed

– at expected the the forward. going that’s So completed save of to approximately That end million a in the March. pre-tax dollars for was

Gary Tanner

with is know get to client? initial I swap the hikes, bank. ultimately the where of the terms in benefits not the accrued Okay, case. the what’s on great. threshold those, to on there And then interest shared with fees generally the But Yes, the cutoff the upward fee threshold those to where an what’s the is deposits that’s or the, the

Greg Garrabrants

number, will usually pretty getting but significant movements kind some, that but start digit of direct smaller side. point the There’s triple see of is that kind you even to on basis as no start you

customers dependent various any it’s than So significant. of one on into upward million then still start as deposits XXX, beta, early to up. to bring on is different can here, really it be start type getting we going but and don’t negotiation of bring your If overly going might significant to that be points bring certainly rates small $XXX XXX, amounts, one deposits. with level a XXX to basis expect degree And then, space us. can especially it’s they not because the million some that Right move any that beta of become $X to that we

Derrick Walsh

frankly I if in this would’ve all I partially pricing also, mean, think to, raised AAS, I it this. is related look, yes we for wasn’t

at was trade wasn’t environment. first mechanism. They, in we did the this, making XX And I’ll a Right. they $X rate a a and million. did each lose they say they they, they this well, yes of it, a it business $XX time made So that there, through looked million took lot months

was one them worth through So in hurting of It’s a discipline ways. pricing really detailing. not variety of

in paid just we time to be is services. this because, need frankly So for our

So in accounts the This but look, that interest clients, is securities. for of this but there, of the is in levels what for with the providing sort change pricing overall not is probably environment, a investment cash little not has to we’re low goal rate the of there this is it’s savings the providing for people.

So that that rates. higher is we and so… rates raise becoming this and if And and we bear profitability to then lower fees we rates way deal, part and is lower the, deal higher if the of lower the stops have profitability get business And, works. the the

Gary Tanner

driving about question in prior been doesn’t or terms lot anything getting to you there mean, it could’ve of look little that at Greg, now. drove just more you anything XXX guess question team kind chunk rate gotten Is as that kind I end The of towards zero – well? you the this are Okay. rates and of a out environment think evaluations timelines? big have that’s CRESL a conservative bit, of this I maybe of of models [ph] estate – talks projects, seeing real are growth, by is, at at the any projects as a end a but business, higher you that better would’ve things like the flow cash would maybe or that you more you – seeing looking quarter, the gives as your are growth of, pause

Greg Garrabrants

can’t And even think some, in significant head able of out didn’t stabilization times a don’t increases of to part – buildings, XX% lenders really us – COVID in type these it’s not I type that, perspective. all the would case. have anybody with we obviously or the bases for to But there’s are there’s I I touched think sub rate now from York that in covered are a No, and they’re get the stuff increases and lease the not get more, at have loans prior got the mass back. loss mean, definitely who that guys this the our New rate of stack to three and to on capital there. of Yes. be and we’re respect really two like certainly are clearly the I and the equity happened – the leverage very that. That’s of low their they positions, of to

we this, for don’t factors. let’s I but office see that of or interest I’d So, I say say do to connected building you, New it’s Like, you think the second rates. and to in tier were say that’s there’s you stuff that connected a bought it going not a it’s of going around. let’s lot rehab something, directly a to York variety we and you’re equity that. wouldn’t say

areas we do You’re the still it’s, premium I money no, sponsors. robust for and do And that and and they’re lenders stress stuff. take outside Right. market’s it’s But the high the and are your getting back. that we really, demand don’t projects, projects really anything not And think really. with testing great very really there’s on

concern anything cause that there. And not be seeing so for we’re would

Gary Tanner

much. very Thanks

Greg Garrabrants

you. Thank

Operator

proceed from question. is with question Edward Hemmelgarn next your Our Investments. Please Shaker with

Edward Hemmelgarn

thoughts talk has and capital Greg, of buybacks of now? offering – lot. I share Just Can fallen the Hi, little your raising, its a a wonderful on done a stock debenture a you’ve bit job couple mean, you price about

If repurchases anything, can share share you share here. thoughts on your

Greg Garrabrants

things board. view out. we always a I earnings And look, whatever the want But of talk to equity make outflows I lot be about valuation, I Obviously I obviously have the we that we’re at And – I to to think know like trading is doesn’t against so of Look my think been it price me. things there’s is times stock one first equity, across I, I lot at, but obviously a of that I sense rule right? loan growth. doing to balance Yes. don’t evaluate definitely that. raising

committal we you mean, can that saying, I any ago, lot that look, things more arsenal. one wasn’t And to long it’s thought in be you a wouldn’t So were yes, it’s of our except say we about, that I faster. the too grow loans on think

So, I’m properties I over here, think, have I and we’re you, we’re it’s I teasing some look, think but teasing loan-to-values consistency to – rates. think, a you, flexible I have yes, look, with fairly quarter-to-quarter single-family I’m a not, forward great looking revival and at in at, low but we’re of good at

We’re looking business. our spent of a diversifying time and we’ve effort lot at

So it. that we up do have there there’s with We certainly, company we always, can there’s is a the sitting – always if stuff capital do that to at decide holding look, do possibility. can

Edward Hemmelgarn

Okay.

pick will some sync your you expect, repriced that, benefit and but of any can give do Certainly The for other mean, wondering, grow to opportunity or, your you do was your you loans how increases from here? clearly up try I indicated, sensitive, keep rates mean, go that you lower so you up, I much asset or that – stay as with deposit so pretty… to there or me is you’re cost in you it will one I can be rising do you you rate feel expect more rates rates you to loan is

Greg Garrabrants

I way loan from yes, range I everyone’s is it’s, to I think at comfortable question X%, that here’s whatever that that’s is, range, think Is or million going the, know teens think mean, see low-to-mid don’t from upside a there we think also we or could but us in growth allows of say. the within sort target, we And downside that, behave. it, Yes. do then really good can look, good just be NIM potentially, it to I some because teens because that, it. to question what high-to-mid there dollar how I about that feel the $XX think, that’s think our I we I million what that, grow know I

else. So at which banks speed it everything on and other the depends adjust

we’ve Right. you quick I people, to We So, want look, your pretty candidly. we’ve don’t no, Fine, for go. for our to rates up, just lock. pipelines, lock, been you reprice a told – been a pay lock? to pay you Oh, to there want want quite

that So other that done not banks exactly way. have may

time. So production that that not some in may we’re we’re loan result We great. good at pipelines are certain through. I, seeing getting Frankly, lower in points now. pull

don’t want right. on a and of borrowers that No. still still I No that but to I Well, who’ve there X.XX%. some off and at And our we now borrowers, that, about some it, say, okay. it’s it we’ve want it they We’ll we stuff who, we But we are, these now. et that sheet in well, balance X%. deals five-year sources of there’s making balance No, and So good let’s side wanted, give guys clearly lot you all are X.XX%. multifamily have Well, decisions all fine. real we’re the had want we is cetera. of and that, feel, say long-time time. stuff deposit have Well, don’t looking those feel are

this need time it, and folks think sitting right? they a bit of adjust this. they’re takes to then and some and I it of kind of So, to there that little So, is psychological for

will so this think, about I it. feel have I pretty good see, And it’s

rate we do that bit we’ve percentile XXth right, back better years lag, we’re we little are at that, next had in sense floating only position. the have I even four to think a I we that And not greater to if much have XX% We we’re much ever get going in a fully in ago. than you then XX, something. first of which take then think the XX, but got went is percentage insignificant that of a

are that So the marginal look, cost idea because want of well, side, it, we way NIM say, on excited I to don’t what going where know and don’t deposit I be as the we’re the get start right. everybody think about get also is to above obviously too to the to we well,

lower So, have cost obviously here. deposits we these

great, we’d as rate, Now, their year frankly, end I out, in three we service I months, said, rate higher you good say, bit no, bank’s those grow, you the the all they’re a great going to say we no, them for give I of up ask would may to deposits ago other going for bet to bank and a APIs, leaving, feel a that you going your rates rate. who for stuff if rate. ask what, about because say have they’re their would’ve say, deposits, I’m I’ll your going pay not and you’re commercial maybe a because having as to And you’re betas a at little look love give client you they know a getting now

about all that. that’s So

we have dynamic. And out play competitive let that so. to just Just

Edward Hemmelgarn

than repricing that Yes, industry given deposits at the in rate move of more what of the a wouldn’t right you, loan I feel repricing? excess mean, amount the now, mean, do that you slower deposits way I banking than loans will probably

Greg Garrabrants

existing absolutely. that, think for deposits, I I think

and there’s you’re an be growing move higher going to think inducement cost deposits, on the the to margin need papers that think and is I if and for get to to grow I people always deposit everybody’s loans reading everybody. you

absorb deposits, loan on have may you those excess mean don’t of it. if as also those deposits. banks increases Right. rate Now, you’ll It with some aggressively excess It’s push too.

So all And they different of ways. out those different in factors play are there.

elements think all that and a that have been So, long we for time. that’s together, those of guidance of right think it’s I kind why we

to I probably good it. stick think with it’s

Edward Hemmelgarn

And you good Very next Thanks. right. All Okay. quarter. quarter. see I’ll

Greg Garrabrants

you. Thank

Derrick Walsh

Ed. Thanks,

Operator

is question Michael with question. from Perito with KBW. next your Please proceed Our

Michael Perito

you one. ability just was I my UDB. quick for briefly and I trading remarks, think of Greg, there a you taking Hey, kind us mention the Hey, there crypto heard I good update launch prepared whatnot? was the any the on something questions. the curious guys. on if just about afternoon could in Thanks more provide

Greg Garrabrants

stuff. the I make we’re there, front plumbing right. to have and beta lot that probably out around think, this done a that. of We Yes, a end actually at just We the get end and got probably calendar the of year for around, on

self-directed is that’s the the customers, different it just this So, trade I because incredible, platforms I said of customers they timing that to And crypto. trading interesting, it about to was study it. at specifically of looking new these think was and coming number were

actually it’s platforms. to the So draw these biggest by far

it’s it important And part bringing an so of on.

yes. So

of So there – there’s pre-work but a lot that’s done. been

sort and some you it it’s really And going cohesive or and platforms, a so look the doesn’t nice – UDB pretty to it in go the off and you essentially it well partly, software with of it to is look how is the trading because how do a about to have but different of can kind jump now, interface of integrated.

timeframe and on look that’s so of – been I user through at. working much reasonable we’ve of we’re integrated we want kind think before how fully to launch sure think really do we’re to of trying to is that, So, make focus experience the of exactly, questions I if sort a we the And it?

Michael Perito

have do kind thoughts share or terms flat That’s touched I it’s or can’t kind but bit I launched make second platforms little how trading this, of will for the that can fairly yet, guys a other be to any views is even the these you a launched but trading the rate have on that thoughts work in just, just decent probably you? of for a of, of been guess you part some you of question, work know how you driver around then economics helpful. digital that just the And hasn’t any going And profit. on any the will economics piece? about predictions of crypto

Greg Garrabrants

think still actively it. I we’re debating

wouldn’t mind I we And our to something say change on. want that might so

have think competition it’s through looking process and think the closely of comes the particularly and your they’re areas that good profitable take, you’re seeing you carefully deposit don’t security it’s looking think and a I I there’s we’re I that’s, There’s And side doing the of sure. that who’s your think, so at it done been and direct into how anybody though, I going can think of more bank the we don’t linked ability are for at a integrating bank, to one it. it just just do your, I of right. your business also, – the job in. have

you do that invest, you If can want to away. right

a to basics of think just or and come big right opportunity to our And of good get get more more if have some of focused as driver market perspective out it of these wallets there’s we’ll over on other that’s, that with time out before – stuff. a getting their be that, look, the clearly letting does it, comes out. they’re that’s think it debate, respect in do to the be from people, get so even people get can I we and right, and it, of it, kind it [indiscernible] all XXX(k)s buy tighter it’ll there folks make crypto But – and how I kind

– sure. mean, So of for think it’s potential it’s an think but I going it’s I much asset mainstream to class, a become more I yes, interesting

Michael Perito

I UDB a is mean, digital a of they’re That’s average a the points what end betas kind of bigger helpful. the but expectation on Great. this kind you to right. balances. above And with how view a, who just strategy, like an of checking about bifurcate super Thanks. types of And I I Right. you you And qualified right? little picture of from do bit example we consumer that I how get think with, on just paid, have, kind are you’re going you on Because of then talked but question. platform, those overall platforms mean, for consumers competing lot to basis do think it earlier offering question, XXX guys rate.

Right. are it And of fact putting marry the force, competitive guys for lack it. you cycle, I guess, better a of as of in do of guess, but to how not a position, take way funding kind so kind of I guys to needy that really last relative you

like trying more the any, better fact any just just you’re was there? this be or much position dynamic that today curious, more to you’re thoughts on versus slow rates on so raising And competitive to I balance deposits. competitive

Greg Garrabrants

so to all to that order direct with which deposits. you Axos that in need that get Securities accounts have Invest Yes. balances, and checking need of Well, some account certain you account, to account Axos have checking is rewards the

month, a don’t your the bank, coming be that’s you’re investment us. going certain So to things, need account you that, you basically, your want in customer, do if You any every primary you of number transactions right? to have of those earn right? and with you So, have to we’re if

that with and disclosed. your can is rate clearly very it’s investment great product. that have of the of your a least You certain reality account, sense yes, at In you’re get still that securities different. But one getting that, have rate us accounts a you a So at dollar securities, you amount; certain right? the

think just your You’re need order direct you, telling those all just do you for that’s once power the that do of you platform, to in you do I these accounts, – you And we’re once look all part of open Right. deposit, things that to stuff. that, all happen. the because

doing You’re are certain transactions. a of debit number

You’re bill move – right, you making to, your of better that and lot kind all going think those account, to you pay And from work says, done shut give those this that’s if perspective. using well, are you accounts, of all down sort on I all on stuff. X.XX% even else of that platform I’ll everything. somebody a think comes together Are going a think products, of we’ve I sort so I of job out

that’s important. really think I so And

own And then, right. They’re on are competitors HOA, let’s business, right? depends banks, to It going and go further. the dynamic, have other so then HOA the right? their

term custody its in back. union we clearing of own do own operate we going banks a business, those someone, businesses we of describing. higher do and of for capacity us there, environment, side in Smartstreet The There’s are office say did Derrick think then lot that’s they’re platform. the they, in owns it’s to low There’s dynamic old who going trustees nice where work do the we a different also to take one – And on and PacWest that. agreements bit are that rate that’s that of I that job a back CIT software entire would where, [indiscernible] that. very to The they’re platforms essentially in has different that had I do that that. for why a environments rate little good an these long what that traditionally, based a bankruptcy one So

extent then, well, been, to all growth. So, us you’re to somewhere. they think right do to than with I clearly, all we we who’s is say, the to said, consumer the to that depend with it’s And really on that as the each the I it’s even a And to stuff maintain so going different acquisition, think is I can when position grow, trying side, to these trying somebody get Right. way out. then of want about these it. kind each I to And the stuff chased and and out name. and trying be move. better dynamics I done so do also together, now, think I that’s of chase think all bother different we’ve rates I that’s think go right loan maintain in that that say, and you’re bring of we’re just together think we that I mean, to we’ve And other our that and you look, We think really thing you. blend you’re I and also, that can people why

for in a long rate rates ago. we’ve We anything really we in top you’re really If a a chaser have not been Right. the long in XXXX been time have, – because time.

So the side, business small whatever.

that think value. about just I to continuing add it’s So,

going course, we’re do how crypto you trading going longer you is that is high give and you us be so not, bank trying the interest rate. account be term thinking your us to a to in should And as, thinking to of we’re is, be and of someone together platform shouldn’t as convenient the great to, over your what of

growth, obviously, miss want tool you a certainly don’t with cetera. that’s associated if there’s and et dynamics that you loan And Now, to and on, there’s that. have profitable it’s available out

have So together. out play to all those things

Michael Perito

for others Thanks all looking and sense. call – that makes That reiterate all next Greg, seeing you to forward week.

Greg Garrabrants

you. Thank

Derrick Walsh

Thanks.

Operator

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

Johnny Lai

Advisor Centennial, directly. me in for are any Great. your Axos. we several have Investor to interested Services in times Well, you. Wednesday, thanks questions interest been May Xth, our alluded if you contact Day in Colorado attending, Axos hosting are office next has and Thank And our please in

Operator

at may disconnect lines This concludes you participation. today’s time. conference, and your Thank your you this for