Axos Financial(US:AX)2024-01-31 01:18Financial Data and Key Metrics Changes - The company reported net income of $152 million and earnings per share of $2.62 for Q2 2024, representing year-over-year growth of 86% and 94% respectively [6] - Non-GAAP adjusted earnings per share increased by 15.7% year-over-year to $1.56 [7] - Tangible book value per share was $33.45 at December 31, 2023, up 25% from December 31, 2022 [7] - Net interest margin was 4.55% for Q2 2024, up 19 basis points from the previous quarter and up 9 basis points from the same period last year [8] Business Line Data and Key Metrics Changes - Ending loans for investment balance net of discount were $18.5 billion, up 8% linked quarter or 32% annualized [7] - Growth was broad-based with increases in real estate and non-real estate lender finance, equipment leasing, and fund finance, offsetting lower origination volumes in single-family warehouse [7] - Broker-dealer fee income increased 27.6% year-over-year due to higher interest rates and increased client activity [8] Market Data and Key Metrics Changes - Total deposits increased by approximately $638 million linked quarter, with a total deposit growth of $1 billion from June 30, 2023, or 12.6% annualized [18] - Non-interest-bearing deposits were approximately $2.8 billion, relatively flat quarter-over-quarter [19] - The company had approximately $550 million of deposits off balance sheet with partnered banks and another $750 million held at other banks by software clients [21] Company Strategy and Development Direction - The company is focused on widening its lead relative to competitors by investing in systems, processes, and talent to generate attractive future returns for shareholders [30] - The company is actively recruiting across various commercial deposit, lending, and business verticals to build and accelerate strategic initiatives [29] - The FDIC loan purchase is expected to provide incremental net interest income and after-tax income over the next several years [9][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to grow loan balances organically by high single digits to low teens year-over-year for the next few quarters [33] - The company anticipates that the pace of cash sorting at Axos Advisory Services has stabilized, representing 4% of assets under custody as of December 31, 2023 [20] - Management noted that the market dislocation and corporate restructuring among competitors have created significant opportunities for growth [29] Other Important Information - The company completed the purchase of two performing commercial real estate and multifamily loan pools from the FDIC with a combined unpaid principal balance of approximately $1.25 billion at 63% of par value [9] - Total noninterest expenses increased by $1.3 million or 1.1% to $122 million in Q2 2024 compared to the previous quarter [31] Q&A Session Summary Question: Margin outlook excluding FDIC loans - Management confirmed that the net interest margin guidance of 4.25% to 4.35% will still hold for the calendar year of 2024 [37] Question: Expense growth details - Management indicated that expense growth generally aligns with the loan growth rate of high single digits to low teens, with some seasonal increases expected [39][40] Question: Loan loss provision increase - Management explained that the higher loan loss provision included aspects related to the loan purchase and unfunded commitments, with a total of $13.5 million for the quarter [46] Question: Specifics around loan loss provision - Management detailed that the loan loss provision was based on a loan-by-loan analysis considering various economic scenarios and attributes of the loans [50]