Axos Financial(AX) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company generated over $700 million in net loan growth linked quarter, with a 19% year-over-year increase in book value per share [4][8] - Net interest income was$ 275 million for the quarter, up 5.3% from $262 million in the prior year period [5] - Net income was approximately$ 105.2 million for the quarter, compared to $104.7 million in the previous quarter [8] - The return on average common equity was 16%, and the return on average assets was 1.8% for the quarter [4] Business Line Data and Key Metrics Changes - Fund finance, equipment leasing, and lender finance showed strong originations and net loan growth this quarter [8] - Net annualized charge-offs to average loans were 9 basis points, compared to 7 basis points in the corresponding period last year [6] - Total non-accrual loans declined by$ 66.5 million linked quarter, improving the non-accrual loans to total loan ratio from 1.26% to 0.89% [7][16] Market Data and Key Metrics Changes - Total on-balance sheet deposits increased by 5.4% year-over-year to $20.1 billion [5][10] - Average loan yields for the quarter were 7.99%, down from 8.37% in the prior quarter [9] - Ending deposit balances were$ 20.1 billion, up 1% linked quarter and up 5.4% year-over-year [10] Company Strategy and Development Direction - The company is focused on maintaining a high net interest margin, targeting a range of 4.25% to 4.35% [13] - There is an emphasis on growing lower-cost deposits and cross-selling across selected lending businesses [13] - The company is actively investing in technology, including AI, to enhance operational efficiency and reduce costs [20][85] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in maintaining loan growth despite headwinds from high levels of repayment in the jumbo single-family and multifamily mortgage business [9] - The company anticipates loan growth to be in the high single digits to low teens range on an annual basis [14] - Management noted that the economic environment remains uncertain, but they do not foresee significant deterioration in credit quality [15][17] Other Important Information - The company repurchased approximately $28 million of common stock in the quarter and continued to buy back shares in April [5][62] - The effective tax rate for the quarter was 29%, with potential changes in California tax laws that could impact future rates [23][24] Q&A Session Summary Question: What areas is the company being cautious in regarding loan growth? - Management indicated caution in certain C&I segments due to potential administration changes and has shied away from logistical deals [28][30] Question: Can you clarify the increase in fee income this quarter? - Management noted that the increase was due to mortgage banking impacts, auto insurance recoveries, and additional loan fees, with no significant one-time items [34] Question: How does the company plan to maintain its efficiency ratio? - Management aims to keep the efficiency ratio stable by leveraging technology and controlling personnel expenses [40][42] Question: What is the outlook for net interest income in the next quarter? - Management expects net interest income to increase as average loan growth is anticipated to rise [44] Question: Can you provide insights on the improvement in special mention substandard loans? - Management explained that improvements were driven by payoffs and sales of loans that were previously classified as substandard [51][52] Question: How does the company view its capital position and buyback strategy? - Management believes there is excess capital and sees current stock prices as a good opportunity for buybacks while maintaining strong loan growth [62][63]