Financial Data and Key Metrics Changes - The company generated $1.6 billion of net loan growth linked quarter, including $1 billion from the Verdant Commercial Capital acquisition [4] - Net interest income was $291 million, increasing by approximately $11 million linked quarter, or 15.6% annualized [5] - Net income was approximately $112.4 million, up from $110.7 million in the previous quarter, with diluted EPS at $1.94 compared to $1.92 [7] - Adjusted net income and adjusted EPS were $119 million and $2.06 per share, respectively, for the quarter, a 7.3% increase from the linked quarter [7] - Non-interest expenses were approximately $156 million, up by $5.6 million from the previous quarter [21] Business Line Data and Key Metrics Changes - Total originations for investment, excluding single-family mortgage warehouse lending, were over $4.2 billion, representing an increase of 11% linked quarter, or 44% annualized [8] - Average loan yields for the quarter were 7.99%, with non-purchase loans at 7.66% and purchase loans at 15.81% [8] - Non-interest income increased by approximately 13% year-over-year due to higher banking service fees and mortgage banking income [6] Market Data and Key Metrics Changes - Total on-balance sheet deposits increased 6.9% year-over-year to $22.3 billion [6] - Demand, money market, and savings accounts, representing 94% of total deposits, increased by 9% year-over-year [9] - Ending non-interest-bearing deposits were approximately $3.4 billion, up by approximately $350 million from the prior quarter [9] Company Strategy and Development Direction - The acquisition of Verdant Commercial Capital is expected to add $150 million to $200 million of net new loans and operating leases per quarter at attractive spreads [12] - The company is focused on increasing productivity and implementing operational improvements, including the use of artificial intelligence across various departments [18] - The company aims to maintain loan growth in the low to mid-teens range annually, supported by strong originations from commercial lending businesses [25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the credit quality of the loan book, with historical and current net charge-offs remaining low [13] - The company anticipates that the Verdant acquisition will be accretive to earnings per share by 2% to 3% in fiscal year 2026 and by 5% to 6% in fiscal 2027 [17] - Management remains vigilant regarding potential risks in the credit market, particularly concerning deal structures and fraud [28][29] Other Important Information - The company issued approximately $200 million of subordinated debt in September 2025, which has a fixed annual interest rate of 7% for the first five years [10] - The current regulatory environment is seen as favorable for additional strategic M&A transactions [18] Q&A Session Summary Question: What is the company's perspective on credit risks in the current environment? - Management noted that they have turned down several high-profile deals due to problematic structures and remain cautious about credit quality [28][29] Question: Were there any one-time factors affecting fee income this quarter? - Management confirmed that there were no one-time factors affecting fee income, and they expect a few million dollars from Verdant in non-interest income going forward [31] Question: How does the company view its capital ratios in relation to loan growth? - Management expressed comfort with current capital ratios, indicating that they have excess capital relative to needs and are focused on maintaining strong profitability [37] Question: What are the company's plans for future acquisitions? - Management is actively looking for acquisition opportunities that fit strategically and culturally, similar to the Verdant acquisition [41]

Financial Data and Key Metrics Changes - The company reported over $700 million in net loan growth linked quarter, with a stable net interest margin of 4.78%, down five basis points from the previous year [5][6] - Net interest income increased to $275 million, up 5.3% from $262 million in the prior year period [6] - Book value per share increased by 19% year over year, with a return on average common equity of 16% and a return on average assets of 1.8% for the quarter [5][6] Business Line Data and Key Metrics Changes - Fund finance, equipment leasing, and lender finance experienced strong originations and net loan growth, contributing to the overall loan growth of $700 million [9] - Average loan yields decreased to 7.99%, down from 8.37% in the prior quarter, with non-purchased loans yielding 7.66% and purchased loans yielding 14.32% [10][11] - Total non-accrual loans declined by $66.5 million linked quarter, improving the non-accrual loans to total loan ratio from 1.26% to 0.89% [9][17] Market Data and Key Metrics Changes - Total on-balance sheet deposits increased by 5.4% year over year to $20.1 billion, with demand money market and savings accounts representing 96% of total deposits [7][11] - Client cash sorting deposit balances were volatile, peaking at over $1.2 billion during a market sell-off before ending the quarter around $900 million [12] - Non-interest bearing deposits remained approximately $3 billion, consistent with the prior quarter [11] Company Strategy and Development Direction - The company is focused on maintaining a high net interest margin and is targeting a range of 4.25% to 4.35% for the consolidated net interest margin excluding FDIC loan purchase accretion [15] - Strategic initiatives include the development of Axos Professional Workstation to enhance client service and operational efficiency [20] - The company is leveraging artificial intelligence to improve software development and operational efficiency, aiming for better cost management and productivity [21][89] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in loan growth despite headwinds from high repayment levels in the jumbo single-family and multifamily mortgage business, expecting loan growth to be in the high single digits to low teens range annually [16][27] - The credit quality of the loan book remains solid, with no significant deterioration observed across lending categories [18] - Management is cautious about certain C&I segments due to potential economic changes but remains optimistic about overall loan growth [32][34] Other Important Information - The company repurchased approximately $28 million of common stock in the quarter and continued to buy back shares post-quarter [6] - Non-interest expenses were managed well, with total non-interest expense increasing by only 0.6% from the prior quarter [8][23] - The effective tax rate for the quarter was 29%, with potential changes in California tax law that could impact future tax rates [25][26] Q&A Session Summary Question: Loan growth and areas of caution - Management indicated caution in certain C&I segments but sees good opportunities for loan growth despite market volatility [31][32] Question: Fee income increase - The increase in fee income was attributed to mortgage banking impacts and additional loan fees, with no significant one-time items affecting the results [36] Question: Investment opportunities and efficiency ratio - Management aims to maintain the efficiency ratio at 48% and is focused on leveraging technology for operational improvements [43][44] Question: Net interest income outlook - Average loan growth during the quarter was lower than net loan growth, but management expects net interest income to increase in the next quarter [46] Question: Special mention substandard loans - Improvements in credit grading were driven by payoffs and sales of loans, with no significant loss content anticipated [54][55] Question: Allowance for loan losses - The increase in the allowance for loan losses was influenced by external economic factors and the CECL model, not solely by the loan portfolio performance [83][84] Question: IT and data processing spending - Increased spending on IT and data processing is aimed at leveraging AI and improving operational efficiency [87][89]

Financial Data and Key Metrics Changes - The company generated over $700 million in net loan growth linked quarter, with a stable net interest margin of 4.78%, down five basis points from the previous year [5][6][7] - Book value per share increased by 19% year over year, with a return on average common equity of 16% and a return on average assets of 1.8% for the quarter [5][6] - Net interest income was $275 million for the quarter, up 5.3% from $262 million in the prior year period [6][7] - Net income was approximately $105.2 million, compared to $104.7 million in the previous quarter, with diluted EPS of $1.81 [9] Business Line Data and Key Metrics Changes - Fund finance, equipment leasing, and lender finance showed strong originations and net loan growth, while net growth in non-purchased loans for investment was $700 million, an increase of 3.6% linked quarter [9][10] - Total non-accrual loans declined by $66.5 million linked quarter, improving the non-accrual loans to total loan ratio from 1.26% to 0.89% [9][16] - Average loan yields for the quarter were 7.99%, down from 8.37% in the prior quarter, with non-purchased loans yielding 7.66% and purchased loans yielding 14.32% [10][11] Market Data and Key Metrics Changes - Total on-balance sheet deposits increased by 5.4% year over year to $20.1 billion, with demand money market and savings accounts representing 96% of total deposits [7][11] - Client cash sorting deposit balances were volatile, peaking at over $1.2 billion during market sell-offs before ending the quarter around $900 million [12] - Non-interest bearing deposits remained approximately $3 billion, consistent with the prior quarter [11] Company Strategy and Development Direction - The company is focused on maintaining a high net interest margin and is targeting a range of 4.25% to 4.35% for the consolidated net interest margin excluding FDIC loan purchase accretion [14] - There is an emphasis on growing lower-cost deposits and cross-selling across selected lending businesses [14][15] - The company is actively investing in technology and AI to enhance operational efficiency and reduce costs, with a focus on developing proprietary platforms for client services [20][21][86] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in loan growth despite headwinds from high repayment levels in the jumbo single-family and multifamily mortgage business, expecting loan growth to be in the high single digits to low teens range annually [15][26] - The credit quality of the loan book remains solid, with no significant deterioration observed across lending categories [16][17] - Management is cautious about certain C&I segments due to anticipated economic changes but remains optimistic about overall loan growth [30][32] Other Important Information - The company repurchased approximately $28 million of common stock in the quarter and continued to buy back shares post-quarter [6][65] - Non-interest expenses were approximately $146 million, with a focus on managing expenses to maintain operating efficiency [22][24] - The effective tax rate for the quarter was 29%, with potential changes in California tax laws that could impact future tax liabilities [24][25] Q&A Session Summary Question: Insights on loan growth and areas of caution - Management indicated caution in certain C&I segments due to potential economic changes but sees good opportunities in other areas [30][32] Question: Clarification on fee income increase - The increase in fee income was attributed to mortgage banking impacts and additional loan fees, with no significant one-time items affecting the results [34] Question: Future efficiency and cost management - Management aims to keep the efficiency ratio stable and is focused on leveraging technology and AI to control costs [40][41] Question: Expectations for net interest income and margin - Management expects net interest income to increase in the next quarter, with some margin compression anticipated due to lower loan spreads [42][44] Question: Credit quality and allowance for loan losses - Management noted that the allowance for loan losses is influenced by external economic factors and models, not solely by current loan performance [81][82] Question: IT and data processing spending - The company is investing in IT and AI to enhance operational efficiency, with specific projects aimed at improving software development processes [86]