Axos Financial(US:AX)2020-11-01 05:10Financial Data and Key Metrics Changes - Axos Financial reported a record net income of $53 million for Q1 2021, a 30% increase from $40.8 million in Q1 2020, despite a $9.1 million increase in loan loss provisions [8][11] - The pretax pre-provision income rose to $87.6 million, marking a 47.6% increase compared to $59.4 million in the same quarter last year [8] - Earnings per share increased by 33.3% to $0.88 per diluted share compared to $0.66 in Q1 2020 [11] - The return on average equity for Q1 2021 was 17.26%, with a book value per share of $20.80, up 14.7% year-over-year [9][11] Business Line Data and Key Metrics Changes - Ending loans and leases increased by approximately $294.1 million, up 11.1% annualized from the previous quarter and up 11.7% year-over-year [9] - Total loan originations for Q1 2021 were $1.78 billion, essentially flat from $1.79 billion in the year-ago period, with significant contributions from multifamily and commercial specialty real estate [12] - The gain-on-sale mortgage banking group generated $19.6 million in income, a substantial increase from $2.8 million in the corresponding quarter last year [12] Market Data and Key Metrics Changes - The net interest margin was reported at 3.84%, up 7 basis points from 3.77% in Q1 2020 [10] - Consumer deposits represented approximately 46% of total deposits, with checking, savings, and money market balances increasing by almost $2 billion from September 30, 2019 [16] - The mortgage warehouse portfolio increased by $249.1 million or 52.5% from the previous quarter, benefiting from record low interest rates [13] Company Strategy and Development Direction - The company aims to maintain an annual net interest margin within a range of 3.8% to 4% while reducing excess liquidity on the balance sheet [35] - Axos Financial is focused on enhancing its digital banking capabilities and plans to roll out new features and product enhancements over the next 12 months [37] - The company continues to explore opportunities in the commercial specialty real estate sector while maintaining conservative underwriting standards [62] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to sustain profitable growth despite uncertainties in the economic environment [37] - The outlook for mortgage banking remains strong, with a solid pipeline of single-family agency mortgages and robust demand for refinancing [13][32] - Management noted that while credit quality remains strong, there are concerns regarding certain commercial real estate loans, particularly in densely populated areas [54] Other Important Information - The company adopted the CECL accounting standard, which resulted in an increase in the allowance for loan losses by $53 million [27] - The effective income tax rate for Q1 2021 was 30%, up from 28% in the prior year [44] Q&A Session Summary Question: Margin outlook and cost of funds - Management indicated that the cost of funds is expected to decline further, particularly as higher-rate CDs mature [46][48] Question: Credit quality concerns - Management acknowledged an increase in special mention and substandard loans but emphasized that the risk of loss is limited due to conservative underwriting [51][52] Question: Housing market outlook - Management noted that while the housing market has performed well overall, there are concerns in specific areas like New York City [54] Question: Specialty commercial real estate opportunities - Management highlighted a focus on multifamily and industrial segments, maintaining a conservative loan-to-value ratio [62]