Axos Financial(AX) - 2026 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company generated $1.6 billion of net loan growth linked quarter, with a 19 basis point increase in net interest margin, and a 23.3% year-over-year increase in earnings per share [4][6] - Net interest income was $331.6 million for the quarter, increasing by approximately $41 million linked quarter, or 14% [6][8] - Net income was approximately $128.4 million, up 22.6% from $104.7 million in the prior year's second quarter [8][24] Business Line Data and Key Metrics Changes - Total originations for investments excluding single-family warehouse lending were $5.6 billion, representing an increase of 35% linked quarter [8] - Non-interest income increased by approximately $21 million quarter-over-quarter due to higher banking service fees and broker-dealer fee income [7][25] - Verdant contributed approximately $18.9 million in non-interest income for the quarter [7][25] Market Data and Key Metrics Changes - Ending deposit balances were $23.2 billion, up 44.3% linked quarter and up 16.5% year-over-year [9][10] - Average non-interest-bearing deposits were approximately $3.5 billion, compared to $3 billion in the prior quarter [10][11] - Total assets under custody or administration increased from $43 billion to $44.4 billion [16] Company Strategy and Development Direction - The company is focused on organic growth and has identified opportunities to deepen relationships with existing vendors and accelerate growth in various verticals [13][20] - The integration of artificial intelligence across various business units is expected to enhance operational efficiency and innovation [18][19] - The company aims to maintain strong loan growth while managing credit performance and interest margins [14][22] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in generating loan growth in the low to mid-teens on an annual basis, supported by strong demand across various lending verticals [13][14] - The company anticipates a potential decline in net interest margin due to robust loan demand and expects to manage this through strategic growth [32][33] - Management highlighted the importance of maintaining a balance between growth and operational efficiency to sustain long-term success [56][58] Other Important Information - Non-interest expenses were approximately $184.6 million, with Verdant contributing $7.8 million in salaries and benefits expenses [24][25] - The company recorded $25 million in provisions for credit losses, reflecting robust loan growth in commercial lending categories [26] - The acquisition of Verdant is expected to contribute to EPS accretion in fiscal 2026 and 2027 [21][22] Q&A Session Summary Question: What is the outlook for net interest margin? - Management confirmed a normalized level of 4.72% and expects a 5-6 basis point decline due to robust growth [32][33] Question: What is the average remaining life of the FDIC purchase loans? - Management indicated it is approximately three to four more years [34] Question: What is the pipeline for team liftouts? - Management noted they have completed several team liftouts and are focused on developing those teams further [35][36] Question: What is the growth outlook for the loan portfolio? - Management expects balanced growth across various segments, with a strong contribution from commercial lending [42][43] Question: How will fee income be impacted by Verdant? - Management indicated that fee income from Verdant is expected to be consistent, with potential for small growth as originations increase [45][46] Question: What are the synergies expected from the Qualia partnership? - Management sees significant opportunities from the partnership, particularly in the escrow space, which could enhance deposit growth [81][82]