Axos Financial(US:AX)2022-04-29 04:17Financial Data and Key Metrics Changes - Axos Financial reported a net income of $61.8 million for Q3 2022, with diluted earnings per share of $1.02, representing a year-over-year growth of 15.3% [9] - Book value per share increased by 17% to $26.58 compared to the previous year [9] - The efficiency ratio for the banking business was 39.79%, showing positive operating leverage due to strong net interest income growth [11][43] Business Line Data and Key Metrics Changes - Total loan originations for Q3 2022 were $2.5 billion, up 57% from $1.6 billion in the same period last year [14] - Ending loan balances increased by 3.9% linked-quarter to $13.1 billion, with strong growth in auto, commercial real estate, and C&I lending [9][14] - Mortgage banking income was $5.7 million, up from $4.6 million in the previous quarter, but down from $9 million in the same quarter last year due to lower refinancing activity [15] Market Data and Key Metrics Changes - Noninterest-bearing deposits increased by approximately $287.8 million from December 31, 2021, representing 33% of total deposits at March 31, 2022, up from 23% a year ago [10] - Total client deposits from custody and clearing businesses were approximately $2.9 billion, with $2.1 billion kept on Axos Bank's balance sheet [21] - The weighted average demand and savings deposits cost decreased to 22 basis points from 38 basis points year-over-year [20] Company Strategy and Development Direction - The company is focusing on improving operational efficiencies and scalability in its securities business, with a target to reduce costs by approximately $1 million annually through the conversion to self-clearing [73] - Axos Financial aims to leverage its diverse lending and deposit businesses to position itself favorably in a rising interest rate environment [22][25] - The integration of Axos Advisory Services is progressing well, with expectations of improved profitability in the securities business over time [31] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving the higher end of the loan growth target for fiscal 2022, supported by strong demand across multiple loan categories [30] - The company remains cautious about the economic impact of interest rate increases on aggregate loan demand and is monitoring credit quality closely [66][70] - Management highlighted the importance of maintaining a strong capital position to support organic loan growth and potential acquisitions [33][45] Other Important Information - The company raised $150 million in subordinated debt to augment its capital ahead of anticipated rate increases [33] - The total allowance for credit losses was $143 million, representing 1.1% of total loans, which is approximately 22 times the annualized net charge-offs [29] Q&A Session Summary Question: What is the scalability of the AAS business and expected efficiency ratio? - Management acknowledged ongoing opportunities for process improvement and efficiency in the AAS business, with a target for positive income despite interest rate dependencies [48][49] Question: How are new clients responding to Axos Securities and market volatility? - Management noted that market volatility could act as a catalyst for RIAs to switch custodians, emphasizing the unique service offerings and technology integration provided by Axos [54][55] Question: What are the trends in new loan yields and competitive landscape? - Management indicated that new loan yields are expected to rise, particularly in the single-family sector, as the securitization market stabilizes [60][62]