Axos Financial(AX) - 2021 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Axos Financial reported a record net income of $54.8 million for Q2 2021, a 32.7% increase from $41.3 million in Q2 2020 [8] - Pre-tax pre-provision income rose to $86.5 million, up 38.1% from $62.7 million in the same quarter last year [8] - Diluted earnings per share increased by 35.8% to $0.91 compared to $0.67 in Q2 2020 [8][11] - The efficiency ratio improved to 40.45% from 43.81% year-over-year [11][26] Business Line Data and Key Metrics Changes - Ending loans and leases increased by approximately $684 million, representing a 25% annualized growth from Q1 2021 and a 14.5% year-over-year increase [9] - Total loan originations for Q2 2021 were $2.04 billion, up 14.2% from $1.79 billion in the same period last year [12] - The gain on sale mortgage banking group generated $10.7 million in income, significantly up from $2.2 million in the corresponding quarter last year [13] Market Data and Key Metrics Changes - The net interest margin for the banking business was 4.11%, compared to 3.91% in the previous quarter and 3.94% in Q2 2020 [15] - Interest-bearing checking and savings deposits were at 45 basis points, with an overall cost of interest-bearing deposits at 85 basis points, a 6 basis point improvement from the previous quarter [10][28] - Total client deposits at Axos Clearing were $773 million, up 14.9% from the September 30 ending balance [28] Company Strategy and Development Direction - The company aims to continue organic loan growth, reinvest in growth initiatives, and pursue opportunistic buybacks and accretive M&A [27] - Axos is focusing on enhancing its digital banking platform and integrating various financial services to improve customer experience and retention [33][32] - The company is optimistic about the long-term growth potential of its mortgage banking and digital consumer banking segments [14][65] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding potential headwinds in loan growth due to seasonal trends and market uncertainties [39][40] - The company remains confident in its credit quality, with no loans in forbearance and a low percentage of delinquent loans [19][20] - Management anticipates maintaining a net interest margin between 3.8% and 4% in the near term, despite competitive pressures [75] Other Important Information - The company has a strong capital position with a Tier 1 leverage ratio of 9.08% at the bank, well above regulatory requirements [12] - The allowance for loan losses was $136.4 million, representing approximately 1.17% of total loans and leases [22] - Axos Clearing is set to launch a self-clearing model, enhancing scalability and product offerings [31] Q&A Session Summary Question: Loan growth outlook and potential headwinds - Management indicated that while the pipeline looks strong, there are uncertainties regarding warehouse lending and seasonal trends that could impact growth [39][40] Question: Concerns on credit quality - Management noted that most issues are unique to specific borrowers and that overall credit quality remains stable [42][43] Question: Mortgage segment growth and internal limits - Management confirmed that there is an internal limit for the mortgage segment, but it allows for growth beyond current levels [48][49] Question: Impact of recent market events on trading and clearing services - Management discussed the strategic importance of integrating trading and banking services, emphasizing the growth of digital financial services [53][54] Question: Update on lender finance portfolio - Management expects the lender finance portfolio to stabilize and potentially grow, focusing more on real estate and hard asset opportunities [58][59]